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Hong Kong*:  June 1 2011

A Hong Kong dentist helping to reveal the hieroglyphs beyond a mysterious shaft inside the Great Pyramid of Khufu in Giza, has had to stop work due to the Egypt uprising. Ng Tze-chuen, 58, is founder of Djedi, an international team of 10 scientists tasked with finding out what is in the secret chamber, described by Zahi Hawass, Egypt's minister of state for antiquities affairs, as the last great mystery of the pyramid. The mass protests have delayed the release of the team's first report in the official Annales du Service des antiquites de l'Egypte. Because of the protests, Hawass has told the team to put off their exploration for safety reasons. But the Causeway Bay dentist for 30 years said he could not wait to get inside and resume work on the project of his dreams. "I'm not afraid of protesters .We'll be working inside the very secure pyramid anyway," he said. "We've been on the project for nine years and I really can't wait to find out and show the world what's behind it." Rare images sent back from Djedi's endoscopic camera showed hieroglyphs written in red paint and lines in the stone that could be marks left by stone masons when the chamber was being carved. If these hieroglyphs can be deciphered, they may give clues as to how the part of the pyramid was built and maybe what the shafts were for. Egyptologists have said painted numbers and graffiti were common around Giza. They could be numbers, dates or the names of the gangs. The team's next task, scheduled for September, is to check whether the second door is a solid block of stone by bouncing balls off the wall. They will calculate its thickness from the frequencies given by the impacts. It will help gauge how long the drill has to be to penetrate the second door. Two previous expeditions into the shafts in 1993 and 2002, by German and then American scientists, hit brick walls when their robots were blocked on their way up the shaft of the Queen's Chamber. Hawass said something might be hidden in the pyramid. His theory is based on an ancient story that the magician Djedi met Khufu, who was looking for the god Thoth so he could discover the secret of the pyramid.

Boost for trade as accountants agree to co-operate - Global expansion by mainland companies, and Hong Kong companies' penetration of the mainland, received a boost with an agreement signed yesterday. The agreement was between the Hong Kong Institute of Certified Public Accountants (HKICPA) and the Beijing Institute of Certified Public Accountants (BICPA), which signed a letter of intent to boost co-operation among small and medium-sized accounting firms in both cities. The expectation is that better co-operation between accounting firms will help their client companies too. "The small and medium accountancy firms of both cities will expand co-operation, train human resources, exchange knowledge and clients," said Winnie Cheung, HKICPA chief executive. This is the first agreement between the HKICPA and a mainland counterpart, said Cheung, who expressed hope that more mainland accountancy institutes would sign agreements with the HKICPA. Currently, Hong Kong accountancy firms are not allowed to establish branches on the mainland. This agreement will enable Hong Kong accountancy firms to partner mainland accountancy firms to win business in the mainland, Cheung said. BICPA President Guo Wenjie said: "Hong Kong companies are expanding into the mainland. Hong Kong accounting firms follow Hong Kong companies. This agreement will help mainland small and medium enterprises expand abroad." Although the number of mainland SMEs venturing abroad is currently small, more will go overseas in future, which will create a demand for accounting services for their international operations, Guo said. "Chinese companies are expanding overseas. Chinese accounting firms will follow them. "This is an inevitable trend."

Myanmar's trade with China's Hong Kong hit 1.7 billion U.S. dollars in the fiscal year of 2010-11 ending in March, a sharp increase of 79 percent year on year, according to Myanmar's monthly economic indicators Friday. Of the total, Myanmar's exports to the Hong Kong Special Administrative Region amounted to 1.69 billion dollars, while its imports from the region took 4.7 million dollars. Hong Kong stood third in Myanmar's trading partner line-up after Thailand and Chinese mainland, according to the figures. In 2009-2010, Myanmar-Hong Kong bilateral trade was registered at 949 million dollars, with Myanmar's exports to the region at 938 million dollars and its imports from the region at 10.9 million dollars. According to Chinese official figures, China-Myanmar bilateral trade hit 4.44 billion U.S. dollars in 2010, a 53.2-percent increase over the previous year. For the first quarter of 2011, it has broken a figure of 1.6 billion dollars, increasing by 70 percent correspondingly.

 China*:  June 1 2011

New Chicago gov't eyes more cooperation with China - Former White House Chief of Staff and Chicago mayoral candidate Rahm Emanuel waves to the audience as he prepares for a televised debate against Democratic rivals Gery Chico, Carol Moseley Braun and Miguel del Valle in Chicago, Illinois February 17, 2011. Following the steps of his predecessor, newly elected Chicago Mayor Rahm Emanuel said he plans to strengthen the third-largest U.S. city's long-standing cooperation with China. "I am committed to nurturing and expanding the relationships between Chicago and China and fostering new opportunities to collaborate on educational programs, business initiatives and tourism," he told Xinhua in an interview on Friday. Emanuel, the former chief of staff to U.S. President Barack Obama, succeeded Richard M. Daley earlier this month, who has been forging strong ties with China during his 22-year tenure in a bid to make Chicago "the most China-friendly" city in the nation. "We applaud the effort that Mayor Daley made to establish Chicago as the most 'China-friendly city in the U.S.,'" Deputy Mayor Mark Angelson, also chairman of the city's economic, budgetary and business development council, told Xinhua. "You have a mayor who has the unique ability to have our city of Chicago be a leader in the overall United States effort to build bridges between the U.S. and China. That is, in part, because of his service as White House chief of staff," he said, referring to the new mayor. According to Angelson, Emanuel plans to welcome more Chinese technology and manufacturing companies to set up operation in Chicago. Such an infusion into the U.S. economy would be crucial as the city government faces a budget shortfall of more than one billion U.S. dollars, a foundering school system where only half the students graduate from high school, and an economy rocked by unemployment.

Chinese lured by great views, low taxes in Switzerland - Good schools and an appreciating currency are among the other draws highlighted by realtors - The scenic Swiss capital of Bern, a popular tax haven. A growing number of Chinese buyers are being lured to the Swiss property market, not only due to the country's beautiful scenery, but also because of its good-quality education, strong currency appreciation, and low tax rates. "In the past two years we sold a lot of properties to Chinese buyers because of one important point - education," said Natalie Mik, head of luxury and international markets for real estate agency de Rham Sotheby's International Realty in Switzerland. "Many Chinese bought properties in Switzerland because of its good public and private schools, to which they have sent their children for education. They can live in the properties when they visit their children," she said. Mik, who was in Hong Kong this week for a road show about investing in Switzerland, said the agency closed 14 holiday-home transactions involving Chinese buyers in the past two years - triple the number of previous years. The deals ranged from the purchase of modern apartments to ski chalets. Under Swiss law, foreigners can only buy holiday homes in designated cities with net floor space of no more than 200 square metres. They may not live in the home for more than six months a year and may rent out the property when they are not occupying it. Since the designated locations are usually holiday resort areas, rental return is high because accommodation in Switzerland is expensive during the holiday seasons. Mik said rental income for six months might be enough to cover the tax for buying the property as well as the mortgage payment for the entire year. This fits the requirements of Chinese investors well, as they are looking for properties with high investment returns and price growth. "Chinese like properties that are modern, with a view of the lake and off-plan, or still under construction, because they think the price of such properties will go up," she said. Her colleague Thomas Geiser, who oversees the market in Montreux on Lake Geneva, said the city was the most popular holiday-home location for Chinese people. Home prices had risen by 20 per cent to 30 per cent in the past three years despite the global economic recession because of foreign demand. The property agency said a quality 200 square metre apartment in Switzerland cost at least 2 million Swiss francs (HK$17.61 million), while a ski chalet might cost upwards from 4 million Swiss francs. Yves Jeanrenaud, a partner at legal firm Schellenberg Wittmer in Geneva, said that the Swiss government offered about 1,500 new permits every year to foreigners wanting to buy a holiday home in the country. The property market in Switzerland was first opened to foreign buyers in 1997. Jeanrenaud said one of his Chinese clients from Hong Kong started buying office and retail buildings in Switzerland in 2005 after investing in other big cities such as London. "It's a very stable investment in Switzerland since the currency has started to get stronger," Jeanrenaud said. The Swiss market also allowed investors to diversify their portfolio and risks, especially since the London market had been struggling. Clifford Krause, a consultant in the Geneva office of consultancy DTZ, said Swiss property provided "an important form of protection for investors, as the Swiss franc appreciated about 32 per cent last year". Total rental returns on commercial properties in Switzerland were about 14.5 per cent last year in terms of Hong Kong dollars, DTZ said, of which 7.8 per cent was due to currency appreciation, 1.8 per cent from capital growth, and 4.9 per cent from income return. Krause said more Chinese companies were setting up offices in Switzerland because of low tax rates and the country's renowned pharmaceutical and watch industries. The industries boosted demand and supported rents and prices of commercial properties, which have a vacancy rate of no more than four per cent. Rental yield for commercial properties was about six per cent, higher than the 2.5 per cent in Hong Kong, Krause added. "In China, people are more interested in the US, Australian and the UK markets because they are familiar with them. But Switzerland is more stable and offers a higher return." DTZ said rents of grade-A offices in Switzerland were no more than 975 Swiss francs per square metre per annum.

Jeans may be standard wear for university students but for many at Beijing's prestigious Tsinghua University, naming a campus building after an Australian jeans brand was just a bad fit. Jeanswest's name appeared on Tsinghua's No4 teaching building on Monday, sparking heated debate. While many said they understood that naming university buildings after a company or a person was common around the world, some students and teachers said it was the kind of company that mattered. "We all feel it [the `Jeanswest Building'] sounds very weird. It's too commercial. Plus, it's a clothing maker, which has nothing to do with academic studies," second-year Tsinghua student Pang Ziyang said. But Tsinghua already has several buildings named after companies, including the "Yuyuan Building", named after a Taiwanese shoemaker, and the "Hongmeng Building", named after an advertising group. Dr Xiong Bingqi an education expert at Shanghai Jiao Tong University, said the real issue was what kind of company a school should choose when searching for sponsorship. "You may need to consider whether the values and morality of this company are in line with the school's spirit. Also which industry does it belong to? As well as its reputation, technology..." he said. A consultation mechanism for the sponsorships was also important. "If this issue had been open for public consultation and information about how this money would be used had been announced, there wouldn't be such criticism today," he said. The controversy intensified when the plate introducing the company beside the metal characters "Jeanswest Building" was missing on Thursday morning. According to Xinhua, campus staff removed the plate after angry students painted it white on Wednesday night. Xinhua quoted the Tsinghua publicity department as saying the university would not restore the plate, but it would keep the Jeanswest Building name. The Education Ministry said it would not intervene because naming school buildings in return for commercial sponsorship no longer required ministry approval. A Jeanswest staff member said it had sponsored many education-related projects before and many companies had done similar things in the past. "It's just that our company's name is the same as our products' brand name and therefore it's more eye-catching," she said. Tsinghua plans to raise more than 750 million yuan (HK$899 million) from companies by offering naming rights to 14 of its buildings, research centres and colleges, according to the website of its education foundation.

Photo taken on May 28, 2011 shows the luxury passenger liner Yangtze River Golden One in southwest China's Chongqing Municipality. The liner that cost an investment of over 100 million Yuan (approximately 15.2 million U.S. Dollars) made its maiden voyage on the Yangtze River here on Saturday.

Hong Kong*:  May 31 2011

I've the energy for the job, says new arts hub chief - Michael Lynch appears with a walking cane but says he's ready for his HK$21 billion challenge - Michael Lynch shares a light moment with Chief Secretary Henry Tang at a briefing yesterday. Newly appointed arts hub chief Michael Lynch greeted the media for the first time yesterday, asking people to ignore his age - and the cane he was leaning on - and to insist that he has the energy to drive a HK$21 billion project. "If they think I'm going to fall over, this is not the case. Sixty years old is not too old, I don't think," the Australian arts veteran joked, addressing public fears that the second chief of the West Kowloon Cultural District Authority in a year may leave, citing health reasons like his predecessor Graham Sheffield. "I assure you that I can still dance and sing and do all the things you expect of a chief executive," said Lynch in response to repeated questions about his health. "Do I look that bad?" he asked, explaining that he needed a stick because of the effects of polio, which he contracted when aged three. The new chief, whose previous jobs included leading the Southbank Centre in London and the Sydney Opera House, pledged that he would defend the city's freedom of expression in arts and culture. He said the immediate task of his three-year term was to turn the ambitious conceptual plan of British architect Norman Foster into reality. Briton Sheffield quit earlier this year on the grounds of ill health after just five months in the job but was employed by the British Council as arts director within two months. Chief Secretary Henry Tang Ying-yen, the authority's chairman, said Lynch underwent a health check as part of the authority's risk management, adding that the contract terms had been revised to ensure fairness to both sides. Lynch said: "I'm unclear whether there are sanctions on the contract. I'm not really interested and at my point in life I'm not interested in taking on other roles in other places ... this is the job that I want to do for the next number of years." He said he would stay for at least three years - the length of his contract. Despite his confidence, there are challenges with rising construction costs and development of the 42-hectare site. A person close to Foster's architectural team said complicated planning details had yet to be sorted out. Apart from integrating a cross-border express railway terminus into the arts hub, the team must also ensure that access to emergency services will not be undermined by predominant pedestrian networks at ground level and underground traffic arrangements.

I won't shy away from controversy, says Lynch - Will the arts hub authority steer clear of controversial artists such as Ai Weiwei ? New chief Michael Lynch says no. "The thing that characterises Hong Kong is its freedom of expression," he said yesterday. "Being able to express ourselves artistically should maintain a defining characteristic of Hong Kong arts organisations and artists. That's what I'll be interested in doing. "Ai Weiwei, for instance, is an artist of established international reputation. There's absolutely no reason why we wouldn't be looking at that sort of work." Lynch, 60, is said to have been the best of about 40 candidates to lead the multibillion-dollar arts hub. The project is expected to be constructed in phases, with the first to open as early as 2015. "We should have hired Mr Lynch last time, but he withdrew because of some family affairs. So, we chose Mr [Graham] Sheffield," said one board member. Explaining why he turned down the same job in 2009, Lynch said: "Personal circumstances meant that it wasn't possible for me to contemplate leaving Australia, having just arrived back, so I withdrew myself from contention." Asked if it would happen in the future, he said, "No". The authority's chairman, Chief Secretary Henry Tang Ying-yen, said Lynch impressed him at a 2009 forum organised by businessman David Tang Wing-cheung on the arts hub project. He declined to disclose Lynch's annual salary. But Lynch said he would be "reasonably compensated for one of the most complex jobs in the world", and later revealed that the rumoured amount of HK$5 million a year was "pretty close" - some HK$1.25 million more than Sheffield. The official appointment yesterday ended a global headhunt exercise triggered in January after the abrupt departure of Sheffield, who quit on grounds of ill health after about five months in the job. Lynch has been involved with the arts community and the film industry for over three decades, and was appointed Australian Broadcasting Corporation director in 2009. He was the head of the Sydney Opera House from 1998 to 2002. From 2002 to 2009, he was chief executive of London's Southbank Centre, where he was responsible for the transformation of the area's cultural precinct. Experienced arts administrator Ting Yu hopes the new chief will speak regularly with art groups, in particular with Cantonese opera groups. Legislator Cyd Ho Sau-lan, a member of a Legislative Council group monitoring development of the West Kowloon Cultural District, urged the authority board to give Lynch a freer hand to work out plans for the cultural hub. But she noted that Lynch might lack knowledge of local or Chinese culture. Lynch conceded that his experience with Chinese art forms was limited, but said he was familiar with the city. "I first came to Hong Kong when I was 13. I've been here many times over the course of the past 45 years. "I actually sailed into the harbour in 1963. And I now have an office looking out over the harbour. From my point of view, I think that I can certainly say I have enough understanding of what it's going to be like," he said. His wife, Chrissy Sharp, who runs the Wheeler Centre for Books, Writing and Ideas in Melbourne, will live with him in Hong Kong from around September. His three children, who all work in the arts and film industries in Australia, would visit at various times, he said.

Bureau seeks new bids to develop Haw Par Mansion - New round of tendering opens for historic building after bidder fails to meet development chiefs' criteria - A visitor to Haw Par Mansion inspects renovation work during one of the three open weekends held at the site late last year. The future of Haw Par Mansion remains unclear after the only bid to redevelop the historic building was rejected. The Development Bureau invited tenders again yesterday after revealing the sole bid did not meet some of the mandatory requirements. The bureau declined to identify the bidder or indicate which requirements were not met. The first round of bidding for the grade one listed mansion in Tai Hang Road ended last month. The bureau required bidders to have capital of at least HK$120 million. They would have to agree to provide a reasonable degree of access for the public and to pay for the restoration and renovation of the 76-year-old property. The bureau said there were no changes in the requirements in the new round of tendering. If no successful bidder comes forward again, the mansion will be revitalised under other schemes. These could include the Revitalising Historical Buildings Through Partnership Scheme, under which charity organisations are invited to take part. "Although response was lukewarm, we believe that given the uniqueness of this project, it may be worth another attempt to test the market," a spokesman for the Commissioner for Heritage's Office said. The new tendering period will end in August. Under the bureau's plan, the mansion was to be transformed into a heritage landmark sustained by business operations on the site. Property giant Cheung Kong (Holdings) (SEHK: 0001) said in February it was interested in filing a bid with original owner Sally Aw Sian, the former Sing Tao Group chairman, in the first tendering period. The company would not comment yesterday on whether it was the bidder mentioned by the bureau. Peter Li Siu-man, a campaign manager for the Conservancy Association, said the inconvenient location of the building might limit its future development. "It's not a prime site," he said. "Transport to the area is not convenient." He also said the amount of capital required by the bureau had limited the bidding to property tycoons. "It's time for the bureau to rethink the system for revitalisation," he said. The residence, along with the Tiger Balm Garden, was built by businessman Aw Boon-haw in 1935. The garden complex was sold by his daughter Sally Aw to Cheung Kong in 1998 for redevelopment. Cheung Kong cleared the garden in 2004 to develop the residential project Legend and surrendered the mansion to the government.

Price set for MGM China offering - Surging Macau revenue has casino giant chasing up to HK$11.6b in the year's fourth-biggest HK listing - MGM China Holdings will fetch a maximum HK$11.66 billion in its Hong Kong listing amid robust growth in Macau gaming revenue. It is the fourth largest initial public offering of a gambling concern on record, and the fourth biggest new listing on the Hong Kong stock exchange this year, according to data from Dealogic. The shares were priced at HK$15.34 per share, the top end of the initial price range of HK$12.36 to HK$15.34 per share. Brokers said the offer was well received by the market. Philip Securities, for example, reported that HK$500 million worth of margin investment was made through the brokerage firm. Applications exceeded the shares on offer by 19 times. "This reflects the market's reaction to the stellar earning reports by Macau's casinos and the strong growth momentum in gaming revenues," said Philip Mok, a research analyst at Philips Securities. But Mok cautioned investors to watch price corrections in the near term, since the offer price had already absorbed these upside factors. Ng Huei-suen, a gaming sector research analyst at CLSA, said gaming revenue in Macau grew 58 per cent year-on-year last year, though that was expected to slow to about 35 per cent this year. He said the sector would remain attractive to investors as top-line gaming revenue remains strong. Ng said the valuations of casino stocks did not appear to be stretched as they reported strong earnings and robust earnings growth. Demand and supply could be further boosted by the recent opening of Galaxy Macau, he added. A gaming analyst, who wished not to be named, said it could be an advantage for MGM China to become a subsidiary of the Las Vegas group as it could gain further leverage from the international brand image of its parent company. MGM China was previously a 50-50 joint venture between MGM Resorts International and Pansy Ho Chiu-king, daughter of Macau casino magnate Stanley Ho Hung-sun. The Hong Kong listing involved Pansy Ho selling 20 per cent of her stake to the public and 1 per cent to MGM Resorts, which then became the controlling shareholder of MGM China. The listing also made Ho the richest woman in Hong Kong. "MGM China used to be a joint-venture business, and sometimes partners may have conflicting views," said the analyst. "Now that it has become a subsidiary of the parent company, a lot of management issues can be avoided." He also said the gaming sector in Macau should continue to be boosted by the spending of Chinese visitors, despite the increases in interest rates on the mainland.

The MTR Corp will earn HK$200 million from a 2.2 per cent fare increase to take effect on June 19. But the corporation says nearly 80 per cent of its passengers will pay no more than 20 cents extra for a ride. The increase will coincide with a series of discounts and promotions that the corporation said would cost HK$1.7 billion. "Fares for 79 per cent of all passenger trips will change by no more than 20 cents, including six per cent not experiencing any fare increase at all," MTR general manager of marketing Jeny Yeung Mei-chun said. For other trips, fares will rise by no more than 30 to 50 cents. One of the biggest fare increases will be for a trip from Wan Chai to Yuen Long, which will cost HK$22.90 by Octopus or HK$24.50 by single-journey ticket, compared with HK$22.40 and HK$24 at present. Octopus users normally pay less than people buying tickets from vending machines. But under the new fares, smartcard users will pay 10 cents to 20 cents more than single-journey ticketholders on about 30 trips, such as Kowloon to Sha Tin. The corporation said this was because the new single journey fares were rounded off to the next 50 cents while Octopus fares were being rounded off to the next 10 cents. As the rounding off might mean an excessive charge for some of its shorter, cheaper journeys, the corporation has waived the increase for such trips on single-journey tickets. This means that these journeys will become more expensive for passengers using an Octopus card. The operator said the trips involved were fewer than those under its fare rise last year, when 100 of its 40,000 journeys or fare combinations were affected. New promotions include one offering a single-journey ticket to anywhere on the MTR domestic network to adult Octopus cardholders who spend HK$100 on MTR fares from Monday to Friday in one week. The "Ride $100 for Free Ticket" promotion will run from July 4 to December 30. New interchange discounts with five outlying island ferry routes and three green-top minibus routes in Kwun Tong as well as enhanced discounts in Tung Chung will also be introduced later this year. All these promotional discounts will be worth HK$1.7 billion. The company's net profit last year was HK$12.06 billion.

 China*:  May 31 2011

Locke breezes through Senate hearing - US Commerce Secretary Gary Locke (right) testifies during his Senate Foreign Relations Committee confirmation hearing as his wife Mona Lee (center) and daughter Mona Lee Locke (left) listen on Capitol Hill on Thursday in Washington DC. US Commerce Secretary Gary Locke, the nominee for United States ambassador to China, waltzed through his Senate confirmation hearing on Thursday as he told the panelists that balancing the trade deficit and reaching out to the Chinese public will be his priorities. If confirmed by the Senate Foreign Relations Committee, Locke will become the first Chinese-American to serve as ambassador to China, where his parents were born. The committee is expected to confirm Locke soon, but the date for a vote has not been decided. The news about Locke's possible confirmation is popular with the general public in China. With his Chinese ancestry, Locke has an advantage in performing his mission as ambassador to China, which, however, should not be overly emphasized, analysts said. It was expected that Congress might use the opportunity to press the Obama administration on issues such as currency, but the envoy-to-be did not receive tough challenges from the Senators. With his whole family, wife Mona and three children Emily, Dylan and Madeline, sitting behind him during the hearing, Locke stated his understanding of the new position and the bilateral relationship as well as his goals. "Should I be confirmed, I will work to build the positive, cooperative and comprehensive relationship that President Obama and Chinese President Hu have agreed our two countries should aspire to," he said. Locke said he will maintain a commitment to promote commercial cooperation with China as he has been doing for more than a decade. Improving the investment environment in China, strengthening intellectual property protection and enforcement and seeking more collaboration in clean energy are on his agenda. More mutual trust and understanding are vital to move the Sino-US relationship forward in important areas such as trade, said Niu Xinchun, a scholar on US studies at the China Institutes of Contemporary International Relations. "I hope to be an able messenger of the Obama Administration's policies for the Asian-Pacific region generally and to the Chinese government specifically, if confirmed," he said in his prepared statement. Noting that an ambassador is a "bridge" informing two sides of each other's situation and not a "decision-maker", Niu said "it is hoped that Locke also lets the US know why its concerns exist in China and take a long time to resolve". Issues such as trade deficit and intellectual property rights, which are connected with the two countries' different consuming, producing and social systems, which are unlikely to be solved soon, said Niu. Another priority for Locke is to be more engaged in public diplomacy and to reach out directly to the Chinese people. He hopes that he can continue the blog set up by the US embassy and make appearances on radio and TV shows in China. Locke's "Chinese looks" may make him popular among the Chinese people, but "Locke is an American citizen and stands for American interests", Niu said. Recently, the commerce secretary has publicly expressed his grave concerns on the commercial environment. Before the third round of the China-US Strategic and Economic Dialogue earlier this month in Washington, he again raised concerns about China's intellectual property protection and a series of discriminative policies against foreign companies. He urged for a more transparent decision-making process. The panelists gave Locke a list of things he must work on, such as human rights, the Taiwan issue, trade deficit and protection of the environment. "The relationship between the United States and China is vital to get right," said Senator John Kerry, the committee's chairman. "We must avoid falling into the trap of zero-sum competition. We need to forge a mutually beneficial relationship based on common interests." 

The US Treasury Department said in a report released on Friday that China was not manipulating its currency. "In China, since the authorities decided in June 2010 to allow the exchange rate to appreciate in response to market forces, the renminbi (RMB) has appreciated by a total of 5.1 percent against the dollar in nominal terms through the end of April 2011, or at an annual pace of approximately 6.0 percent," noted the semi-annual report on international economic and exchange rate policies. The Treasury said that as inflation in China is significantly higher than it is in the United States, the renminbi has appreciated more rapidly against the dollar on a real, inflation-adjusted basis, at a rate of around 9 percent per year. The delayed report, which was originally scheduled to be sent to the Congress on April 15, finds "no major trading partner of the United States" manipulated its currency during the period covered in the report. The Treasury added that it will continue to "closely monitor" the renminbi appreciation pace. The report also noted that the US economy is recovering from its deepest recession in the post-war period. "While recent growth is encouraging, the economy still faces significant challenges," said the report. The number one challenge is still in the labor market. The US unemployment rate, currently at 9.0 percent, is not expected to fall significantly this year. Besides, housing market and long-term fiscal position are " unsustainable," according to the report. In recent remarks, Treasury Secretary Timothy Geithner stated that China is the fastest growing market for US exports. In 2010, US exports to China grew at a pace that was 50 percent higher than the rest of the world.

China Southern, one of China's leading airlines, will receive its first 787 Dreamliner aircraft from the Boeing company in the fourth quarter of this year, Boeing chairman and CEO W. James McNerney said on Thursday in Beijing. The aircraft will be the first of its kind to be used in the Chinese market, according to McNerney. McNerney did not give a specific timetable for the delivery of the aircraft, only saying that it would be delivered "on time." The CEO also said that Air China, another major Chinese air carrier, will receive its first Boeing 777-300ER airplane in the middle of this year. Boeing's 787 Dreamliner aircraft are designed to use 20 percent less fuel than other aircraft of similar size, according to a profile on Boeing's official website. The aircraft can carry as many as 290 passengers on journeys of more than 15,000 kilometers, according to the profile. The company's 777-model aircraft are also more fuel-efficient than other comparable aircraft, thanks to their improved wing design and lighter structure, according to the company's website. 

Walt Disney Co.'s Chinese government-owned business partner, Shanghai Shendi Group Co., has agreed on a syndicated loan for an undisclosed amount with 12 Chinese banks for the construction of Shanghai Disneyland, the official Xinhua News Agency reported Friday. Xinhua said the lead arrangers are China Development Bank Corp., Shanghai Pudong Development Bank Co., and Bank of Communications Co. Co-lead lenders are Industrial and Commercial Bank of China Ltd. Agricultural Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd. Other participating banks are Export-Import Bank of China, Bank of Shanghai Co., China Citic Bank Corp., Hua Xia Bank Co. and Shanghai Rural Commercial Bank Co., Xinhua said. Disney's first theme park in mainland China will be part of a bigger $4.4 billion Disney resort that is to include hotels, restaurants, retail shops and other amenities. The deal to build the resort, recently approved by the Chinese central government, gives 43% of the project to Disney and 57% to a trio of state-owned businesses, collectively known as the Shanghai Shendi Group. The project's costs--and profits--are to be divided along those proportions. Disney is to operate the theme park, which broke ground in April and is expected to take five years to complete.

More surveillance cameras to ensure safety - A surveillance camera is seen in Pudong, Shanghai in this file photo taken on April 16, 2010. The municipality will install 50,000 such cameras in five years to better ensure safety for the public, according to the first China Security and Surveillance Forum held in Shanghai May 27, 2011. So far, the city has already had 50,000 such cameras. 

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Tibet's first five-star hotel opens in Lhasa - The lobby of the Lhasa St Regis Hotel, the first five-star hotel in China's Tibet autonomous region, May 28, 2011. China's Tibet autonomous region opened its first five-star hotel on Saturday, a move targeting the region's tourism industry. Lhasa St Regis Hotel, opening in the region's capital Lhasa, is a high-end property in the tourism market, said Guo Yan, chairman of Yungao International Hotel, the hotel's investor. Wang Songping, deputy chief of the tourism bureau of Tibet, said construction of the Shangri-La Hotel and InterContinental Hotel would start this year. According to the region's five-year plan, there will be five five-star hotels in the region by 2015, Wang said. Wang said Tibet has abundant tourism resources but is short of elite tourism facilities, but the international hotels coming to Tibet will help promote tourism in the region. Tibet envisions 15 million tourists arriving per year by 2015, generating a total tourism income of up to 18 billion yuan ($2.68 billion), according to the 12th Five-Year Plan (2011-2015) of the region.

AB InBev to increase Chinese investment - A billboard advertising Budweiser beer in Shanghai. China consumes about 40 billion liters of beer annually, accounting for nearly one-quarter of the global beer consumption. Anheuser-Busch InBev NV (AB InBev), the world's largest brewer by sales, will dramatically increase its investment levels in China this year, in a bid to expand its footprint in the country, according to the company's top executive. "In 2010, AB InBev recorded impressive growth in China, the largest and fastest-growing beer market in the world. Thus we plan to invest several hundred million dollars this year," said Carlos Brito, chief executive officer of the Belgium-based company. China, along with the United States and Brazil, are three top-priority markets that will drive the volume growth of the global industry for the foreseeable future, said Brito. Yang Qingchun, director of the public relations department at the Shenzhen-based market research company Societ Insights and Decision Co Ltd, said the Chinese now consume approximately 30 liters each every year. Currently, the country consumes some 40 billion liters of beer annually, accounting for nearly one-quarter of global consumption, according to industry experts. On Thursday, AB InBev launched its first brewery in southwest China to tap into the fast-growing potential of the region. "With an investment of 650 million yuan ($100 million), the new brewery, located in Ziyang, Sichuan province, aims to better serve the 200 million consumers in the southwestern region," said Miguel Patricio, president of AB InBev Asia Pacific. According to Patricio, the Ziyang brewery, which covers an area of 136,000 square meters, is expected to produce 300,000 tons of AB InBev's two beer brands - Budweiser and Harbin - annually in its first phase. The major construction work is now finished, trial operations have been run, and production is scheduled to start in August, he said. The brewery will ultimately achieve an annual production capacity of 1 million tons when its second and third phases are completed. The Ziyang facility will serve not only consumers in Sichuan province, but also the entire southwestern region, namely, Yunnan province, Guizhou province, the Tibet autonomous region and Chongqing municipality, said Patricio. In recent years, AB InBev has expanded its presence in the world's largest beer market by establishing new production bases as well as acquiring Chinese local breweries. The company set up breweries in Henan and Fujian provinces last year.

Anti-triad hero steps up as deputy mayor - Promotion of Chongqing police chief Wang Lijun after crackdown on crime bosses consolidates the power base of rising political star Bo Xilai - Chongqing police chief and anti-triad hero Wang Lijun has been promoted to become a deputy mayor of the western municipality, the power base of rising political star Bo Xilai. Wang, who was brought to the city from Liaoning province by Chongqing party secretary Bo, was endorsed as deputy mayor by the local people's congress yesterday, the municipal government said in a report posted on its website. The two worked together when Bo was Liaoning governor between 2001 and 2004. Wang was parachuted into Chongqing in July 2008 to steer Bo's anti-triad crackdown, which started in June 2009, 18 months after Bo, a member of the powerful Communist Party Politburo, was sworn in as party chief of Chongqing. Bo, a well-known princeling as the son of a former senior party leader, won both praise and criticism for the campaign. Some people accused him of using the publicity to boost his image in preparation for next year's party reshuffle, when President Hu Jintao , Premier Wen Jiabao and many other top leaders are set to hand over power. Human rights activists also criticised the crackdown for violating laws and human rights. Nevertheless, Wang's promotion suggests that Bo has further consolidated his power base in the city. Wang was elected unanimously by the local legislature after the municipal government, in its proposal recommending the promotion, gave him credit for his courage and ability in leading the anti-triad crackdown. "The broad masses of cadres and ordinary citizens praise him as an anti-triad hero and police model," the government document said. The 10-month crackdown led to the arrests of more than 3,300 people, including billionaire businessmen, government advisers, crime bosses and senior law enforcement officers such as Wen Qiang , a former deputy police chief and head of the city's judicial bureau who was later executed. Four bureau-level and 14 county-level judicial officials were sacked or implicated. Shortly after wrapping up the crackdown, Wang launched a major shake-up of the municipality's scandal-ridden police force. All mid-level management positions were declared vacant and the posts filled through open recruitment. Wang was among six prominent individuals named as "heroes of the Chongqing people" for their contributions to the crackdown. Under his stewardship, 377 underground cells were crushed, 4,999 violent criminal cases unearthed and 5,983 criminals arrested, the People's Daily said in a report on its website yesterday. Earlier this year, Wang, as a newly elected deputy to the National People's Congress, proposed a law with severe punishment for crimes endangering the safety of food and medicine. The bill was widely supported.

Hong Kong*:  May 30 2011

Burberry checks out Hong Kong for an IPO - British fashion house may become the latest luxury brand to list in city as it looks to grow in China - British luxury goods group Burberry may follow Prada, Samsonite and Coach as the next big brand seeking a listing in Hong Kong. The company has consulted a couple of investment banks about an initial public offering in the city, a Hong Kong newspaper said. But it had not decided whether the listing would be secondary or by way of introduction, the Hong Kong Economic Journal reported yesterday. The raincoat and handbag maker, best known for its camel, red and black check pattern, is listed in London with a market value of around £5.5 billion (HK$69.9 billion). It operates 57 shops on the mainland and in Hong Kong and plans to increase the number to more than 100 in three to four years, the paper said. Burberry Group did not comment on the report yesterday. "The story behind [the IPOs of luxury brands] still sounds attractive today, although investors' passion for these companies may diminish one day in case their pricing is over-high," said Ben Kwong, chief operating officer of KGI Asia. A number of local and international luxury goods companies have raised funds in Hong Kong or are planning IPOs. Second-hand luxury goods seller Milan Station, which listed in Hong Kong on Monday, said it aimed to raise HK$200 million to expand its sales network across the border. Fashion house Prada and luggage maker Samsonite plan to raise around HK$15 billion and HK$11 billion respectively in the city next month. American brand Coach is also interested in listing in Hong Kong. All hope to raise brand awareness on the mainland and benefit from a higher valuation in the city. "Investors would be selective if there were more operators of the same sector emerging in the market. They will see which one is really popular in China and how fast they are growing," Kwong said. Jerry Pang Gangxiang, apparel analyst for Guotai Junan Securities, is optimistic about the prospects for luxury brands companies' stock. "One single company cannot attract much attention. But more operators will be different. It would be easier for investors to understand more about the industry and compare the companies," he said. Earlier this week, Burberry reported a rise of 25 per cent in revenue to £1.5 billion for the year to this March. Net profit was £208 million, compared to £81 million a year earlier.

Hong Kong has no immediate plans to lift a ban on food imports from five prefectures in Japan affected by the Fukushima nuclear crisis, Commissioner for Food Safety Dr Constance Chan Hon-yee said on Friday. Chan was speaking at a Legislative Council panel meeting discussing food safety measures. Representatives from local restaurants and the catering industry at the meeting, urged the government to lift the ban. Food from the five prefectures remained on sale in Japan and there had been no reports of people falling ill after eating it, they said. But Chan said Hong Kong would have to wait for more detailed assessments from the World Health Organisation and International Atomic Energy Agency before lifting the ban. “For the time being ... we will maintain our ban,” she said. Hong Kong has banned imports of a range of food imports from Fukushima, Ibaraki, Tochigi, Gunma and Chiba prefectures. This was after radioactive chemicals were detected in food stuffs produced in those locations following the earthquake, tsunami and subsequent nuclear crisis in March. The banned food includes milk, vegetables and fruits. Health certificates are required for imports of meat, eggs and seafood from the five places.

MGM China prices IPO at top end of range - MGM China Chairperson and Executive Director Pansy Ho flanked by Co-chairperson and Executive Director Jim Murren, left, and CEO and Executive Director Grant Bowie at a press conference for the company's IPO on Thursday May 19. Macau casino MGM China Holdings has priced shares in its US$1.5 billion initial public offering (IPO) at the top end of their expected range, reflecting optimism over the world’s biggest gambling hub. The firm, a tie-up between Las Vegas-based MGM Resorts International and Pansy Ho, a daughter of Macau gambling tycoon Stanley Ho, said the stock would be sold at HK$15.34 (US$1.97) per share, according to company documents filed at the Hong Kong stock exchange on Friday. MGM, which previously said the shares would be set between HK$12.36 and HK$15.34, is offering 760 million shares for sale with its Hong Kong listing set for June 3, the documents said. Macau has become key profit source for several US companies operating in the city, the only place in the mainland that allows casino gambling. The territory raked in a whopping US$23.5 billion in gaming revenue last year, outpacing the Las Vegas strip by at least four-fold, with the city’s April revenue figures showing a nearly 45 per cent year-on-year increase. MGM’s high-end pricing may be partly due to the firm luring several high-profile cornerstone investors to buy into the share sale, including US hedge fund giant John Paulson and gaming billionaire Kirk Kerkorian. Paulson made billions of dollars after being one of the few investors to predict the collapse of the US sub-prime mortgage market in 2007 that led to the global financial crisis. Cornerstone investors are given the option to buy vast portions of stock in an IPO if they agree to hold the shares for a certain length of time. MGM will have a 51 per cent stake – and management control – in the listed joint venture. New Jersey gaming regulators, in a report released last year, told MGM Resorts to cut its business ties with Pansy Ho after deeming her “unsuitable” because of her father’s alleged organised crime links, or risk losing its state gaming licence. Stanley Ho has long denied rumours he allowed triads to operate in his Macau casinos. In response MGM said it would instead leave New Jersey by selling a 50 per cent stake in an Atlantic City casino-resort so it could keep its casino-hotel in Macau. In March, Stanley Ho said he had ended a bitter legal feud with family members – including Pansy Ho – whom he accused of trying to steal his vast gambling empire and a fortune worth at least US$3.1 billion.

 China*:  May 30 2011

US lawmakers launched a drive on Thursday for Congress to make an official statement of regret for the 1882 Chinese Exclusion Act, which restricted immigration along racial lines for decades. After years of grassroots campaigning by Asian Americans, members of Congress from both major parties unveiled a bill saying that the United States “deeply regrets” the Exclusion Act and discrimination against ethnic Chinese. The 1882 act banned immigration by Chinese workers and their naturalisation as US citizens, marking the first time the United States explicitly closed its borders to a particular nationality. The law severely complicated life for the more than 100,000 ethnic Chinese already in the United States. Many had been recruited to build the transcontinental railroad but faced racism from white workers. Representative Judy Chu of California, who heads the Asian American caucus in Congress, said that the Chinese Exclusion Act “engendered hatred, bigotry and prejudice in the minds of Americans” against ethnic Chinese. “For a generation of our ancestors, including my own grandfather, who were told for six decades by the US government that the Land of the Free wasn’t open to them, it is long past time that Congress officially and formally recognises these ugly laws and expresses sincere regret,” she told reporters. Chu, a member of President Barack Obama’s Democratic Party, put a top priority on approving the resolution but waited until enlisting members of the rival Republican Party, which won control of the House last year. “I think Asian Americans are probably the least understood minority in this country,” said Representative Mike Coffman, a Republican from Colorado who supports the bill. “Most Americans are not familiar with the Exclusion Act – which wasn’t repealed until 1943 – and the extraordinary levels of discrimination against Asian Americans,” he said. Activists note that when Congress repealed the act, the United States was in the throes of World War II and was primarily concerned that Japan was citing the law in propaganda questioning China’s alliance with Washington. After the act’s repeal, the United States still let in only 105 Chinese each year. The United States opened up to large-scale immigration by non-Europeans under a landmark 1965 law championed by then senator Ted Kennedy. Many Asian American campaigners had sought a full-fledged statement of apology for the Chinese Exclusion Act but showed a willingness to compromise in hopes of seeking the bill’s passage. Chu argued that a statement of regret was more appropriate when considering a congressional decision more than a century ago, saying: “You can only apologise for what you did yourself.” All Asian Americans in Congress are Democrats. Republican supporters of the resolution acknowledged the issue was not on the leadership’s radar but hoped for passage in the current Congress if Asian American voters drum up momentum. Representative Judy Biggert, a Republican who co-sponsored the House resolution with Chu, said that her constituents in suburban Chicago persuaded her to take up the issue. “I think this is an important thing – that we are a country where everyone is equal and gets equal rights,” Biggert said. “We have to keep that in front for future generations, because otherwise it will happen to someone else in a similar way.” In the Senate, Republican Scott Brown and Democrat Dianne Feinstein introduced a parallel resolution. The state legislature in California apologised for the Chinese Exclusion Act in 2009. But such statements at the national level are rare. In a landmark apology, President Ronald Reagan signed an act of Congress in 1988 regretting the wartime internment of 110,000 Japanese Americans. Survivors each received US$20,000 and a letter of apology. Congress has also apologised to African Americans for slavery and to native Hawaiians for the 1893 overthrow of their kingdom.

China, Myanmar forge partnership, ink deals - Myanmar's president Thein Sein (L) shares a toast with President Hu Jintao after a signing ceremony in the Great Hall of the People in Beijing May 27, 2011. China and Myanmar on Friday upgraded their relationship to strategic partnership and inked economic agreements, the latest sign of stronger ties between the two neighbors. "Once again I congratulate you on becoming the first President of Myanmar," Chinese President Hu Jintao told his Myanmar counterpart U Thein Sein Friday afternoon. Thein Sein arrived in Beijing Thursday for his first state visit since assuming presidency in March. "This is my first talk with you since the new Myanmar government was installed. Hopefully your visit will cement mutual understanding and friendship," Hu said at the start of talks. During their hour-long talks, the two leaders reviewed the growth of China-Myanmar ties since the two countries forged diplomatic relations in 1950. Hu said China-Myanmar ties had held firm against the backdrop of changes in the international arena and enjoyed broad prospect for development. Thein Sein said Myanmar was satisfied with the way the bilateral ties were developing, citing frequent high-level visits, smooth cooperation in politics and the economy as well as deeper friendship between the two peoples. Hu called on both sides to work out a program so economic cooperation between the countries could be better planned and coordinated. Hu and Thein Sein agreed on working more closely in the areas of energy, transportation and agriculture. They underscored their commitment to boosting bilateral relations, agreeing to establish a comprehensive strategic cooperative partnership. Under the partnership, the two countries will maintain close high-level contacts, continue to build bilateral relations between the parliaments, government, judicial departments and political parties. The two sides will work more closely to enhance the size and level of economic cooperation and trade. In another meeting with Thein Sein earlier Friday, Premier Wen Jiabao said China would like to continue providing assistance to Myanmar's economic development. China is Myanmar's largest investor with an investment totaling $12.32 billion in 2010, according to Chinese government statistics. Wen appealed for the smooth implementation of infrastructure projects, including oil and gas pipelines, hydroelectric power and transportation. China-Myanmar trade soared by 53.2 percent to $4.44 billion last year, according to Chinese statistics, making China Myanmar's second-largest trading partner behind Thailand. At the end of the talks, Hu and Thein Sein witnessed the signing of a series of economic agreements.

Miners prepare for work at a coal mine in Yanzhou, Shandong province. According to, a major coal trading information and service website, thermal coal prices in main harbors around the Bohai Sea have been increasing for 10 weeks, reaching 832 yuan ($128) a ton on Wednesday, five yuan higher than last week. China's coal production and traffic volume has maintained double-digit growth, and the national coal reserves stood at 200 million tons by the end of April, helping the nation meet the increasing demand for coal, officials said. China produced 1.12 billion tons of coal by the end of April, an increase of 11.1 percent year-on-year, according to a report Wednesday by the China National Coal Association (CNCA). The association said major domestic power generation companies have 16 days of coal reserves, seven to 10 days more than in 2004, when China experienced a severe power shortage. The price of thermal coal at Qinghuangdao port, a major port in Hebei province, reached 800 yuan ($123) to 810 yuan a ton, 30 yuan higher than the previous month. According to, a major coal trading information and service website, thermal coal prices in the main harbors around the Bohai Sea have been increasing for 10 weeks, reaching 832 yuan a ton on Wednesday, five yuan higher than last week. The higher cost of coal production has been driving up prices, said Jiang Zhimin, vice-president of CNCA. "The high coal prices have greatly frustrated power generation stations because they might have to spend more money to produce electricity," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. According to the China Electricity Council, the coal-fired power plants of five major power generation groups in China took a loss of 10.57 billion yuan in the first four months this year, 7.29 billion yuan more than the same period in the previous year, and the main cause of the loss is the rapidly rising price of coal. Many provinces - including Zhejiang, Guangdong, Hunan, Jiangxi and Guizhou - have been suffering from power shortages since March, and many experts attributed the power shortages principally to the coal prices. However, Dai Bing, a senior analyst at the online coal trading website, said the current power shortage in southern China has several causes and that coal prices are not the biggest reason. Dai said that the drought in South China is impeding hydropower production, reducing the power supply for the grid. "If the water level rises in Hubei and Jiangsu provinces, the power shortage in South China will be effectively eased," said Dai. "The coal prices might even become lower for five to 15 yuan a ton if the water power plants are put back into production." He added that some coal traders are holding on to stocks in high season, so the price rise, but the coal supply in Shanxi province is not a problem and the production capacity is stable.

Coffee maker Illy banks on China - A customer chooses coffee at an exhibition in Beijing. Illycaffe SpA will launch three to five new stores in 2012 in big cities. The coffee manufacturer and distributor Illycaffe SpA is banking on Chinese consumers' strong demand for coffee from Chinese consumers by opening boutique shops to gain brand recognition and bring in more sales. Andrea Illy, chairman and chief executive officer, said the demand for high-end consumer goods and a developing coffee culture in China provide solid ground for the Italy-based company to expand its presence in the country. The first Illy store is scheduled to open its door in Shanghai by the end of 2011 and will sell coffee machines, coffee products and tea from its sister company. Plans are afoot to launch three to five new stores in 2012 in larger cities such as Beijing and Guangzhou where Illycaffe expects to have strong market penetration. Coffee consumption has undergone a huge surge in China in recent years. The consulting firm Euromonitor International said that revenue from the Chinese instant coffee sector reached 5.1 billion yuan last year. Illycaffe estimates that the annual consumption of coffee in China has increased at a rate of 12 percent to 15 percent in past decade. Revenue generated from the hospitality sector accounts for 75 percent of Illycaffe's total revenue in the Chinese market, according to the company. Illy said the annual growth rate for Illycaffe in China is about 30 percent and he estimated this rate would double in the next three years. The company has 16 sub-dealers in China and its network has covered more than 20 major cities. Eyeing the large consumption base and increasing market demand, international coffee retailers and manufacturers are accelerating their expansion plans in the market. The Australia-based Gloria Jeans said it plans to open 50 stores in China in the next three years and coffee retailer Starbucks plans to open 1,500 stores before 2015. As one of the largest coffee manufacturers in the world, Illycaffe has operated and managed a string of cafes around the world that have allowed customers to consume coffee in a variety of locations. "It is about food services and supply chain management. We will develop a plan when we find the right partner. This is a project and it is geographically important. We will suffer losses if we do not have control over operations, so we must find the right partner," said Illy. Gloria Jeans has appointed Dash Brands Limited as its partner to expand development in the north and east of China. Starbucks also had partnership with three partners including Uni-president when it entered the Chinese market in 1999. The targeted customers for Illycaffe boutique stores are high-end Chinese aged between 25 and 35 years. "International travelers and people with the interest to learn about coffee culture are our target customers too," said Illy. Illycaffe entered the Chinese market in 2001 and has expanded through the establishment of close relationships with luxury hotel chains and restaurants.

Hong Kong*:  May 29 2011

MGM China Prices at Top of Range in Hong Kong - Reflecting investor optimism about Macau's gaming industry, MGM China Holdings Ltd. priced its Hong Kong initial public offering at the top end of its indicative price range, 15.34 Hong Kong dollars (US$1.97) a share, the company said Friday. MGM China, a casino joint venture between Las Vegas-based MGM Resorts International and Pansy Ho, a daughter of Macau gambling tycoon Stanley Ho, raised US$1.5 billion ahead of a June 3 listing on the Hong Kong stock exchange by selling 760 million shares, according to Dow Jones Newswires' calculation. The prospectus put the indicative price range at HK$12.36 to HK$15.34. The pricing comes weeks after the Macau government reported another record-breaking haul for April. Statistics released in early May show US$2.56 billion in gambling revenue last month, 45% more than a year earlier, putting the Chinese territory on track to generate five times the gambling revenue of the Las Vegas Strip this year. The prospect shows in the share prices of casiono operators Wynn Macau Ltd., up more than 50% in 2011, and Sands China Ltd., up more than 20%. "That MGM China locked in influential cornerstone investors also boosted investor confidence in the company," said Ben Kwong, associate director of KGI Asia Ltd. MGM China secured a total of US$190 million investments from four cornerstone investors, led by U.S. hedge-fund firm Paulson & Co. The others: investor Kirk Kerkorian; property developer Asia Standard International Group Ltd., which is controlled by Hong Kong businessman Poon Jing; and a company owned by Hong Kong real-estate developer Walter Kwok's family trust. Mr. Kwok was formerly chairman of blue-chip developer Sun Hung Kai Properties Ltd. Cornerstone investors are guaranteed large allotments in an IPO in exchange for agreeing to hold the shares for a certain length of time. They are commonly sought out in Hong Kong as a means of attracting other investors and creating a sense of scarcity for the remaining shares. The listing plan for MGM China follows the March settlement of a months-long family feud for control of Stanley Ho's multibillion-dollar gambling empire. The fight burst into the open earlier this year when Mr.Ho accused the children of his second wife, including Pansy Ho, of colluding with his third wife, Ina Chan, to steal a company that held the bulk of his assets. They denied his accusations. The dispute was eventually resolved, and Mr. Ho dropped his lawsuit against his family members. The other casino operators in Macau, the only city in China where gambling is legal, are Melco Crown, Mr. Ho's SJM Holdings Ltd. and Galaxy Entertainment Ltd., controlled by the family of Hong Kong tycoon Lui Che Woo. J.P. Morgan Chase & Co., Bank of America-Merrill Lynch and Morgan Stanley are global coordinators and bookrunners on the deal, while BNP Paribas, CLSA Asia-Pacific Markets, Deutsche Bank AG, Royal Bank of Scotland Group PLC are bookrunners, the prospectus said.

Hongkongers have become the biggest buyers of newly built homes in central London for the past six months. Research by Knight Frank shows that Asian buyers, for the first time, accounted for the majority of new home purchases in the area between November 2010 and last month. Asians accounted for 59 percent of buyers in that period, up from 48 percent between November 2009 and April 2010. About 24 percent of the Asian buyers were from Hong Kong, followed by 12 percent from Singapore and 10 percent from the mainland. The London-based real estate broker said Asian buyers were particularly interested in homes within the price range of 400,000 (HK$5.08 million) to 1 million. They snapped up 120 million worth of London property in March and April, Knight Frank said. A weak pound, the red hot property market at home, and educational needs of their children were the main drivers of Asian demand. According to another survey released by Knight Frank last December, an estimated 350 million of London property was sold through Hong Kong between mid-2009 and the end of last year. Also, Asian investors are shifting upmarket. The broker noted that in 2007, exhibitions in Asian cities were focussed on smaller, more affordable units, but now demand has risen for two-or-three bedroom apartments costing between 400,000 and 800,000. Hong Kong homebuyers, before mid- 2009, paid an average 250,000 to 500,000 for central London property. Now, appetite has grown for apartments priced at more than 500,000. It cited a development in King's Cross. Each unit cost over 1 million but was sold out in days at exhibitions held in April in Hong Kong and Singapore.

April visitor arrivals were up 20 percent from the same month last year, driven by mainlanders traveling under the Individual Visit Scheme. More than three million people visited the city last month with mainlanders accounting for more than half, according to the Hong Kong Tourism Board. The Individual Visit Scheme, launched in 2003, allows residents of 49 cities across the border to visit Hong Kong on an individual basis for up to seven days. In general, Hong Kong saw a rise in tourism from countries across the board, with South Korea and Singapore standing out in the short-haul markets and business-related visits bringing travelers from Europe, Africa and the Middle East in the long-haul markets. South Korean arrivals in April went up by just under 15 percent, while visitors from Singapore rose by nearly a fifth. Visits from countries in the long-haul markets rose almost 10 percent. According to the board, the rise in arrivals is in part due to the rigorous promotion of Hong Kong culture and travel opportunities worldwide. Last year saw increased emphasis on television exposure, with the board featuring Hong Kong locations in popular South Korean, mainland and Western television shows. Plans to cooperate with more television programs this year are already in place, the tourism board said in its annual work plan. The board also plans to branch out into social networking sites such as Facebook and Weibo. The strengthening of various currencies against the Hong Kong dollar also contributed to the rise, as did increased flights to Hong Kong, in particular from Singapore. This year, the board is drawing attention to Hong Kong's role as a "world city" in its marketing.

Parents hoping to get kids into Harrow International School Hong Kong when it opens in September next year will have to have deep, deep pockets. The Tuen Mun branch of the posh British school, which has produced world leaders and poets, will charge fees ranging from HK$106,600 to HK$145,000 a year - and parents will have to pick one of three expensive packages to help pay for the project. The options include buying a HK$3 million individual capital certificate, which can be transferred among parents, and buying individual debentures worth HK$600,000. Both are non-interest bearing and can be refunded if the child fails to win admission. The debentures, but not the certificates, are also refundable six years after the pupil starts school. A third option is to pay an annual capital levy of HK$50,000 - for up to 13 years. In comparison, the Hong Kong International School at Repulse Bay has annual fees of up to HK$195,500 in Grade 12. Harrow School in London - motto Stet Fortuna Domus or "Let the Fortune of the House Stand" - has fees of nearly 30,000 (HK$381,600) a year. At Tuen Mun, if parents go for buying certificates or debentures, the school will ask them to pay before children sit the exams. The foundation stone of the school was laid yesterday. "Our project is totally self-funded," said executive headmaster Mark Hensman of Harrow International Schools. "The reason that we have issued debentures is to contribute to the cost of constructing the school." The school said the first batch of certificates and debentures are already fully subscribed, but refused to disclose numbers. The levy is charged only when a child is enrolled. Parents are asked to pick the packages to help finance construction, acquisition of facilities and equipment, and their enhancement, the school said. So far, the school has received more than 1,000 applications and selected about 300 for interviews and the entrance examination. There will be 1,500 places. The school expects at least half the students will be nonlocal, including children of overseas families coming to Hong Kong for work. There will be boarding facilities to cover 440 students in the first phase and a further 120 in the second phase. "There is a genuine demand for quality international schools across Asia amidst rising aspirations of parents for their children to pursue English learning and to gain qualifications that will facilitate access to western universities," Harrow's Hong Kong headmaster Mel Mrowiec said. The Hong Kong branch is the third in Asia. The others are in Beijing and Bangkok. Officiating at the ceremony, Chief Executive Donald Tsang Yam-kuen said: "The government strives to meet the needs of growing numbers of overseas families coming to Hong Kong for work or investment. We will continue our dialogue with the international schools, consuls general and the business sector to ensure an adequate provision of school places." Meanwhile, Henderson Land Development vice chairman Peter Lee Ka- kit donated an undisclosed sum to the school for scholarships for local students.

About 700 pregnant Chinese mainland women use Hong Kong's public hospital accident and emergency services per year and the number is expected to increase, the city's Hospital Authority Chief Executive Leung Pak-yin said on Thursday. If mainland pregnant women come to Hong Kong for delivery without antenatal check-up, the potential health risk would be high, he said, reminding Mainland expectant mothers to consider the safety of their babies carefully. Meanwhile, he said Hong Kong's Hospital Authority posted advertisements to recruit overseas doctors last week. Inquiries about recruitment procedures have already been received. The recruitment exercise will run for four weeks. Leung said the authority has 200 vacancies and he wants to recruit 20 doctors in the first phase of the exercise.

Public consultation on a controversial HK$80 billion third runway at Hong Kong International Airport is set to get under way next week. The start of the consultation - confirmed by people with a knowledge of the situation - will see battle lines drawn for a fresh clash between conservationists and proponents of big-spending capital projects to fire economic development. Chinese white dolphins, pollution, project costs and a reclamation area of up to 650 hectares - the second-largest in Hong Kong history - are expected to be some of the major issues fought over. A 2030 master plan for the airport is expected to be tabled at the Executive Council on Tuesday, followed by a public consultation seeking views on a third runway. With the airport's capacity expected to reach saturation in the next decade, there have been mounting calls for expansion over the past year. A think tank headed by former government officials, as well as various senior aviation industry officials have all said a third runway was necessary if Hong Kong was to stay ahead of competition in the region. However, while the community has questioned the need for the project, which will cost even more than the controversial HK$66.9 billion high-speed rail line to Guangzhou, a person familiar with the plan said the costs would only be discussed if the project secured the support of the majority of Hong Kong people. Funding could come in many forms, such as a direct injection by the government, or government loan resembling the case of Disneyland, issuance of retail bonds, or by imposing a surcharge on passengers. Sensitive to the controversy that such projects provoke, executives and officials began lobbying with fishermen and councillors from the five most affected districts six months ago. Sources said the authorities even contacted groups such as Roundtable, the Hong Kong Federation of Youth Clubs and the 30s Group - some of whom protested against the high-speed rail project - in a bid to smooth the path. However, environmentalists warned that even if the runway had majority support, chances are that it would not pass an environmental impact assessment.

Chaoda's share price hammered after new doubts are raised over 'unbelievable' costs - Chaoda claims to be the mainland's leading fruit and vegetable producer. But doubts have been raised over the company's operating costs. Shares in Chaoda Modern Agriculture (SEHK: 0682) plummeted by as much as 25 per cent yesterday as investors took fright over a Hong Kong tabloid article alleging the fruit and vegetable grower had overstated the size of its land bank.
In a brief stock exchange statement, Chaoda called the Next Magazine report "factually inaccurate" and said it "reserved the right" to take legal action. The company's shares plunged to as low as HK$3.48 from Wednesday's close of HK$4.64, their biggest fall in eight years. The stock has tumbled 40 per cent this year after research analysts questioned its high spending on new land and equipment. "I do not see any positive value in the stock," Nomura analyst Emma Liu said. "The capital expenditure seems too high to be true." Liu said Chaoda's capital expenditure, which includes spending on irrigation systems and greenhouses, was 20,000 yuan per mu, twice the industry average. One mu is 667 square metres. "But I don't see a big difference in the quality of Chaoda's infrastructure or production facilities and that of its peers," she added. The company has also announced plans to double the amount of farmland it leases over the next five years, from what it states is currently 664,000 mu. Macquarie analyst Jake Lynch has doubts about that scheme as he believes Chaoda has a large surplus of idle land. In a research note in March, Lynch wrote that Chaoda already had an "enormous" land bank that was not producing revenue. The company had a large collection of "forestry plantations, livestock grazing grounds and mountain land of vague value", he said. Chaoda, which claims to be the mainland's largest fruit and vegetable producer, has raised US$571 million in stock and bond sales over the past two years. It cancelled a proposed US$250 million bond sale earlier this month due to lack of interest. Chaoda chairman Kwok Ho, the son of a People's Liberation Army officer, bought 1 million shares in the company yesterday. That marks a reversal of strategy for Kwok, who has gradually sold down his stake in the business since it joined the Hong Kong stock exchange in 2000. Kwok owned 31 per cent of his company at the beginning of 2007, but now owns less than 20 per cent, even after taking yesterday's share purchase into account. Chaoda also has a history of swapping auditors. PricewaterhouseCoopers resigned as its auditor in 2003. Baker Tilly and CCIF then stepped down in June 2007, a few days after Kwok sold a large chunk of Chaoda shares. Nomura's Liu said she was unsure whether Chaoda's current accounting firm, BDO Ltd, had sufficient resources to do proper due diligence on the farmland. BDO Ltd is part of the BDO International network, the world's fifth-largest accounting network. A spokesman for the Hong Kong practice said "we are not in a position to comment on any specific cases", and declined to answer questions on how many staff were employed in the Hong Kong audit team. Chaoda's shares ended yesterday's session down 22 per cent at HK$3.62.

Rita Fan Hsu Lai-tai has described the thorny issue of national security legislation as an "unavoidable challenge" for the next government, sparking suggestions that she is trying to sweeten up Beijing ahead of an attempt to become chief executive. At the same time Fan, the former Legislative Council president and a member of the National People's Congress standing committee, dropped another strong hint that she is running for the top job. "It's the government's responsibility to enact Article 23 [of the Basic Law] that covers national security legislation," she said, referring to legislation shelved by former chief executive Tung Chee-hwa after 500,000 protesters took to the streets. "I think the next government cannot avoid tackling this issue." Speaking after the inauguration of a health centre run by the Breast Cancer Foundation, of which she is honorary president, she declined to say if she would run for chief executive but said she would not declare yet if she was, as her expenses would then count against her election budget. On Article 23, Fan acknowledged that many Hong Kong people were worried, but she insisted it was "a monster as imagined by many". Democratic Party chairman Albert Ho Chun-yan said he saw Fan's remark as an attempt to seek the central government's blessing for her possible candidacy. "She is trying to solicit Beijing's support, not Hongkongers' support," Ho said. But Wong Kwok-kin, a local deputy to the NPC, said Fan would have plenty of chances to tell Beijing what she thought. Her remark could help gauge public sentiment on the measure, he added.

 China*:  May 29 2011

Home Inns eyes Shanghai stake - A Home Inns hotel in Beijing. Home Inns & Hotels Management Inc is set to buy Morgan Stanley's 59 percent stake in Shanghai Motel Management Ltd. Home Inns & Hotels Management Inc, China's second-biggest budget hotel operator, is close to an agreement to buy Morgan Stanley's 59 percent stake in Shanghai Motel Management Ltd, according to two people familiar with the matter. The Nasdaq-traded Home Inns is in advanced talks with Morgan Stanley and other shareholders and may sign an agreement as early as next week, the people said, asking not to be identified because the discussions are private. The deal may value Shanghai Motel Management at as much as $500 million, they said. Morgan Stanley is selling control of the budget hotel chain five years after its real estate fund first invested in the company. Non-star, non-rated hotels accounted for 95 percent of China's lodging industry at the end of 2008, making the business ripe for consolidation, said Credit Suisse Group AG in January. Home Inns reported its net income fell 30 percent to 32.5 million yuan ($5 million) for the first quarter this year. On May 12, China's second-biggest branded budget hotel, 7 Days Group Holdings Ltd, reported that net income for the first quarter fell 25 percent to 4.3 million yuan from the same period last year. Shanghai Motel Management operates Motel 168, China's fourth-biggest branded budget hotel chain in terms of number of rooms with a 7.3 percent market share, according to Credit Suisse. The company also runs the Motel 268 premium brand. The number of branded budget hotels in China jumped by an average 82 percent a year from 2000 through 2008, and their overall market share may rise from 0.9 percent at the end of that period to 5.5 percent in 2015, Credit Suisse said. Noel Cheung, a Hong Kong-based spokeswoman at Morgan Stanley, declined to comment. Early last year, Morgan Stanley planned to sell its stake through a public offering and decided to find a strategic buyer instead around autumn due to market volatility, one of the people said. Selling shares to the public may have also limited the amount it could offload, the person said. Morgan Stanley received up to a $1 billion non-binding bid when it first started the sale process late last year, the person said. The offers in the March bidding round came in lower as share prices of the Nasdaq-listed Chinese hotels fell, two people with knowledge of the matter said in April. China Lodging Group Ltd, which operates the Hanting Inns & Hotels chain, also submitted a bid at the time, the people said.

China Development Bank confirmed Friday it plans to buy a minority stake in San Francisco-based private equity fund TPG Holdings, but said the deal requires government approval. China Development Bank Capital Corp Ltd., a wholly owned unit of CDB, has made arrangements to purchase the stake, but the deal is still pending regulatory approvals from relevant Chinese government agencies, the company told The Wall Street Journal in a statement. Founded in August 2009, the CDB unit has focused on private equity, direct investment and investment consulting, among other businesses. Buying into TPG would boost its capacity in direct investment, the bank said. CDB didn't disclose an exact size of the deal or financial details.

Taiwan's financial regulator said it plans to expand the scope of offshore yuan business for the island's banks in a bid to get a larger slice of the yuan business as China progressively internationalizes its currency. Under current rules, only Hong Kong units of Taiwanese banks can participate in yuan-based business, including retail lending and trade finance. However, loans can be extended only to Taiwanese companies operating in China and non-Chinese companies or individuals outside Taiwan and Hong Kong. The Financial Supervisory Commission proposed Thursday to expand that to all overseas units of Taiwanese banks and to all companies and individuals, a move analysts see as positive for Taiwan, which already has growing ties with China due to increasing investment flows across the Taiwan Strait. "If we don't allow offshore units and overseas branches of Taiwanese banks to conduct yuan business, they are likely to lose their customers as foreign banks are already operating yuan business," said Lee Jih-chu, chairwoman of the Financial Supervisory Commission. "We have to create a level playing field for Taiwanese banks to compete with foreign banks," Ms. Lee said, adding the regulator will likely further relax rules on cross-strait banking, but she didn't elaborate. Taiwanese banks welcomed the proposal, which will need to be approved by the Cabinet before it becomes final. Alan Lee, spokesman of Cathay Financial Holding Co., said his firm welcomed the announcement, as it would benefit its customers. Cathay Financial is Taiwan's biggest financial conglomerate and has overseas branches in Hong Kong, Shanghai, the U.S., Singapore, Malaysia, Vietnam, the Philippines and Thailand. Jesse Wang, an analyst at Nomura, said Taiwanese companies and individuals have likely accumulated "solid bases" of yuan-denominated assets due to increasing trade with China. She said the proposed rules are "a game changer," as the Taiwanese banks will then be able to absorb the massive yuan into their deposits through their overseas branches. Tigr Cheng, an economist at Polaris Securities, added that the proposed rules will "allow Taiwanese banks to catch up with what other international banks are already doing. The new policy will help the Taiwanese banks to maintain their client base, but the real profit will lie in conducting business in yuan, such as giving out loans and further cross-strait banking investment cooperation."

Confidence in mainland food safety was dealt another blow this week as the nation's largest processed-meat supplier was accused of recycling expired ham in its products. Yurun Group issued a statement yesterday morning denying the accusation, saying the incident in question was caused by a mechanical failure on its automated production line. But shares in the Hong Konglisted firm fell 2.24 per cent to HK$26.15 against a rising market. The questions arose when a chef at a five-star hotel in Hefei , Anhui province, found plastic packaging and two metal buckles in the middle of a piece of Yurun ham he was chopping on May 19, the People's Daily reported on Tuesday. A label on the packaging said it had been manufactured by the Maanshan Yurun Food (SEHK: 1068) company on April 8, 2011. The usual expiration date for cold-storage ham is one month, the report said. Two regional managers from Yurun went to the hotel to inspect the ham and apologised for the incident. They said the packaging had been mixed into the ham because of a production line malfunction. But the chef was not convinced, and told the newspaper that materials were found deep inside the ham, and the way it was mixed looked more like they were already in the meat before the packaging process. The newspaper also quoted an unidentified source with many years' experience in the food industry as saying that it might be a careless mishap caused when removing the packaging of expired ham for reprocessing after disinfection. The mainland's food industry is struggling to restore confidence after a string of scandals that, in the most recent cases, involved bean sprouts treated with a carcinogenic chemical compounds and recycling old buns treated with sweeteners and dye to make them seem fresh. Two months ago, meat processer Shuanghui was exposed for using pigs fed with clenbuterol hydrochloride, which makes hogs grow leaner but is toxic to humans. The Yurun managers had offered to pay cash compensation of 2,000 yuan (HK$2,400) or replace products of equivalent value to the hotel, but the offer was declined. They later offered compensation of 5,000 yuan in cash or products. "We decided to suspend the production line and recall products of the same lot number and suspend the duties of the staff involved," the company's website said. But the response did not win much sympathy from internet users, some of whom sharply criticised the company. "It was Shuanghui before, and now it's Yurun," one user on wrote. "How can we ordinary citizens trust you companies? The authorities must act tough and crack down hard on these dishonest businesses."

While Xu Baoguo strenuously paddled towards shore, he had no idea when he could return to his houseboat on the Honghu Lake, which has almost completely dried up due to a persistent drought. Xu was among many fishermen who have been forced to leave their homes after the drought severely impacted their livelihoods in central China's Hubei and Hunan provinces. In Xu's hometown, a fishing village named Yuye in Hubei, 217 of the 229 people have abandoned their houseboats on dried-up Honghu Lake, the country's seventh-largest freshwater lake. The lake is suffering the worst drought to hit it in 70 years, having received only 144 millimeters of rainfall from January 21 to May 21 this year, according to Chen Gang, chief engineer of the flood control and drought relief headquarters of the city of Honghu. This amount of rain is just 21 percent of the amount recorded during the same period last year, Chen said. "I was farming 20 mu (about 1.3 hectares) of fish and crabs. They all died. We are struggling to survive," said Xu, while packing his bags. On Wednesday, the 29-year-old fisherman and his family moved out of the houseboat where they had resided for six years. Most of the fishermen in the village used bank loans to fund their aquaculture farms, Xu said, adding that these fishermen will almost certainly bear huge economic losses this year. All 1.16 million mu of Honghu's aquaculture farms have been affected by the drought, Chen said. The drought has already caused economic losses of 530 million yuan (about $81.7 million), according to Chen. A dozen fishermen who refused to give up their homes on Honghu Lake have had to go without drinking water, as the lake has shrunk to a tiny 20-centimeter-deep and four-meter-wide stream, Xu said. "Nobody dares to drink the muddy water in the stream," he added. Further, the government of the township of Luoshan, which administers the village of Yuye, has established a temporary resettlement center in a nursing home to accommodate fishermen who have fled their homes. The government has provided fishermen with drinking water and food, as well as 100 yuan each in subsidies, said Gong Yuqing, deputy head of the township. "That's all we can do." It would take at least 10 years to repair the lake's ecological environment that has been ravaged by the drought, even if the lake was filled by water soon, said Wang Xixin, the town head. "The drought killed fish, waterweeds and algae, which are crucial to cleaning the water," Wang said. In neighboring Hunan Province, some fishermen living near the Dongting Lake, China's second largest freshwater lake, have had to seek jobs outside their hometown after the water level in the lake plummeted to a record low of 21.74 meters two weeks ago. Similarly, the water volume in the Poyang Lake, the country's largest freshwater lake, once shrank to 740 million cubic meters, only 13 percent of that recorded in the same period in previous years. The long-lasting drought has plagued the Yangtze River, China's longest river, with the lowest levels of rainfall seen since 1961. The drought has affected parts of Hubei, Hunan, Jiangxi, Anhui, Jiangsu and Zhejiang provinces, which are located near the middle and lower reaches of the river. These areas have seen 40 to 60 percent less rainfall than usual. From May 25 to June 10, China will discharge more water from the Three Gorges Dam on the Yangtze River to alleviate the drought in the downstream provinces, increasing the water flow from the previous 10,000 cubic meters per second to 11,000 to 12,000 cubic meters per second. In Honghu, no rain is forecast for the following 10 days. In the resettlement center, fisherman Wang Xingui told Xinhua that he often had a nightmare in which the Honghu Lake disappeared amid the drought and he could not feed fish any longer.

Royal Philips Electronics NV has elevated China's status to that of a "home market", as it decentralizes management and encourages regional markets to learn from China how to obtain higher growth, according to a top company executive. Frans van Houten, chairman, president and chief executive officer (CEO) of the 120-year-old company, said his first priority after taking the helm in April is to "create a sense of acceleration" in the Dutch company. China, with a growth rate of 20 percent last year, has become a model for the company's global operations. "For the headquarters, you have to be more enabling, rather than controlling," said Van Houten, during his visit to China, which came less than two months after he took up his new role. In the first quarter of 2011, China became Philips' second-largest market, with sales of 478 million euros ($673 million), higher than the 344 million euros registered in Germany and equal to one-third of its sales in the United States. Philips has become the latest Fortune Global 500 company to adjust its management structure to tap opportunities in the emerging markets. Intel Corp announced on Tuesday that Sean Maloney, one of its two executive vice-presidents, will be based in China as chairman of its operations in the country, which is set to overtake the United States to become the world's largest semiconductor market. In November, the US industrial conglomerate General Electric Co (GE) appointed its vice-chairman John Rice to head its global growth and operations unit in Hong Kong. For Philips in the current situation, strong growth is crucially important. The company's stock price on the Euronext exchange has fallen 20 percent in the 12 months, while the AEX index, composed of Dutch companies that trade on Euronext Amsterdam, rose by almost 10 percent during the same period. The company aims to raise the contribution from emerging markets to 40 percent in 2015 from 32 percent in 2010. China, one of its fastest growing markets, has become key to that ambition. As a result of the strategy, Philips moved the global headquarters of its domestic appliances unit from Amsterdam to Shanghai in January. The unit is expected to have more than 100 staff members, including those who transferred from the Netherlands and local recruits in Shanghai, but there are still some posts unfilled at present. Van Houten said the unit actually enjoyed a good profit margin because it focuses on the premium segment, but when he asked his colleagues "Do we want stagnant growth with high profits or high growth in a bigger market", they all chose the latter. "A global company has complicated structures and is slow in decision-making, but we want to empower and delegate so that we can move as fast as local companies do," he said. The company is also planning that its kitchen appliances category will report to management in Shanghai, relocate its water and air category to the city, and install all end-to-end business capabilities under one roof in China. Almost three years ago, Philips also made its Chinese operations a separate profit-and-loss center as a trial of its ability to develop in emerging markets, so the China-based team had their say on budgets, human resources and other decision-making capabilities. The company, which competes against GE and Siemens AG in healthcare products and solutions, established a value-segment business unit in Shenzhen in April to develop and sell quality medical equipment at affordable prices to cost-sensitive customers, after acquiring a local medical equipment maker, Shenzhen Goldway Industrial Inc, in 2008.

InterContinental Hotels Group (IHG) has signed an agreement with state-owned developer Poly Real Estate Group to develop and manage more hotels on the mainland. IHG, the world's largest hotel group by number of rooms, yesterday said Poly Real Estate would invest more than US$565 million in six hotels with a total of 1,773 rooms. The hotels, to be completed between 2014 and 2015, will be managed by three of IHG's brands. "One of our strategies to continue and accelerate our quality growth in China is to partner with large-scale and influential real estate developers like Poly Real Estate," said Keith Barr, CEO of IHG Greater China. The move is expected to strengthen IHG's presence in emerging second- and third-tier cities and resort areas that have huge potential for development. The six new strategically located hotels in Guangdong and Jiangxi will consist of three InterContinental hotels, two Crowne Plazas and one Holiday Inn. IHG signed three hotel management contracts with Poly Real Estate in 2007 that involved the InterContinental Foshan, Crowne Plaza Chengdu Poly Garden and Crowne Plaza Chongqing Poly Garden. IHG said the local hotel market was poised to enjoy huge growth in rooms in the coming years as domestic tourism picks up as a result of the nation's robust economic growth and urbanisation. The growing prosperity (SEHK: 0803, announcements, news) is also likely to boost leisure travel, particularly to resort areas. "As part of the rapid expansion in China, one in four hotel rooms that IHG opens in the next five years will be in China," the group said. IHG now has 148 hotels in more than 50 cities under five brands - InterContinental Hotels and Resorts, Crowne Plaza, Hotel Indigo, Holiday Inn and Holiday Inn Express - and nearly 150 more are in the pipeline. International hotel chains have been shifting focus from the Western market to China. US hotel group Marriott International has said it will double the number of hotels in China to 90 by 2015.

Hong Kong*:  May 28 2011

’3-D Sex and Zen’ Is Headed to U.S. - The 3-D erotic film that broke Hong Kong box-office records is headed to America. China Lion Film Distribution announced it bought the North American rights to “3-D Sex and Zen: Extreme Ecstasy” at the Cannes Film Festival, which ended May 22, according to an Associated Press story. The company, which specializes in distributing Chinese movies (“Aftershock,” “A Beautiful Life”), says a release date has yet to be determined. “We’re looking at as wide as possible a release,” China Lion Chief Executive Milt Barlow told the Hollywood Reporter. Billed by its producers as the world’s first 3-D erotic film, “Sex and Zen” has attracted the masses. Opening-day ticket sales in Hong Kong beat that of “Avatar,” becoming the city’s biggest first-day box-office release to date. Hundreds flocked from China, where the movie is banned, to Hong Kong to watch the skin flick – even tour groups were organized. The movie has grossed more than US$6.2 million globally since it opened April 14, US$4.9 million coming from Hong Kong. Reviews haven’t been quite as enthusiastic as sales. The film — a remake of a 1991 Hong Kong movie of the same name, which was loosely based on the 17th-century novel “The Carnal Prayer Mat” – follows a Ming Dynasty scholar who has difficulties in the bedroom. “The film goes on for too long, and gets darker as it does so,” writes Sukhdev Sandu of The Telegraph. “The 3D is mostly a marketing gimmick.” “Perhaps the most important revelation…is that ‘3D porn’ is still a long way from a must-see,” Andrew Ramadge writes on The 25 million Hong Kong dollar (US$3.2 million) film is directed by Christopher Sun and produced by Stephen Shiu, who produced the 1991 version, and his son, Stephen Shiu Jr. In addition to Hong Kong, it has been released in Taiwan, South Korea, Australia and New Zealand.

Hutchison unit enters China's premium infant milk market - A visitor at a dairy product exhibition in Beijing. Hutchison China MediTech Ltd will cooperate with Hain Celestial Group Inc, a leading US natural and organic products company, to tap the Chinese infant formula milk powder market. Hutchison China MediTech Ltd, the pharmaceutical arm of Hutchison Whampoa Ltd owned by billionaire Li Ka-shing, announced on Tuesday that it will enter the Chinese infant-formula milk powder market through cooperation with Hain Celestial Group Inc, a leading US natural and organic products company. By launching Earth's Best and Zhi Ling Tong co-branded organic infant formula in China, the companies are targeting the country's premium market through a 50-50 joint venture, Hutchison Hain Organic Holdings Ltd. The new product has obtained an organic certificate from the China Organic Food Certification Center and will be produced in Switzerland, according to Hutchison China MediTech. "We will focus mainly on the premium infant-formula market in China," said Christian Hogg, chief executive officer of Hutchison Hain Organic. "In the next five years, the company will strive to gain 2 percent market share, which equals some 800 million yuan ($123 million)," Hogg was quoted as saying by the China Business News on Tuesday. According to Hogg, China's infant-formula market is projected to reach around 44 billion yuan this year. Chen Lianfang, a senior dairy industry analyst at Beijing Orient Agribusiness Consultant Ltd, said that the country sees 15 million newborn infants every year, thus the market potential of baby milk powder is huge. After the melamine-tainted milk powder scandal that swept the Chinese dairy industry in 2008, there is a growing trend for milk powder makers, both from home and abroad, to focus on China's premium infant-formula market. "Because Chinese parents now are more concerned about the safety of baby milk powder, lots of companies started entering the premium market," said Tang Zhiqing, an industry analyst at Shanghai Yiyan Business Consulting Company. For example, Hangzhou Wahaha Group Co Ltd, one of China's largest beverage manufacturers, launched its premium infant formula last year with an annual production capacity of 100,000 tons. Currently, global brands, including Mead Johnson, Dumex and Wyeth, account for more than 85 percent of China's premium milk powder market, according to industry analysts. Hutchison China MediTech reported a loss of $6.9 million last year, while its revenue rose 21 percent year-on-year to $134.5 million, according to the company's 2010 annual financial report. The New York-based Hain Celestial Group said in early May that the company's net income hit $16.8 million in the third quarter of 2011, more than six times the net income for the same period last year.

There is a geographical mismatch between international school places and pupils, the education chief says. More than 4,000 international school places are available in all of Hong Kong, but there are not enough of them on Hong Kong Island, Secretary for Education Michael Suen Ming-yeung said yesterday. The mismatch is difficult to solve, due to a shortage of land on the island, he added. "It's hard to find vacant space on Hong Kong Island," he said. "The government will do what it can to assist schools' expansion and redevelopment plans." The chief was responding to lawmakers who said they had received complaints from business executives about the lack of primary school places on the island. A previous survey, by the British Chamber of Commerce, found that more than 90 per cent of expatriate parents would like their children to attend primary schooling on Hong Kong Island. Many would not consider sending their children to Kowloon or the New Territories. In the last allotments of greenfield sites for building new campuses, in 2009, all four international school operators, including Harrow International School, were given sites in Kowloon or the New Territories. School places are still available if parents relax their requirements: among all 47 international schools in the city, 1,900 secondary school places and 2,200 primary school ones have yet to be filled. Cheung Man-kwong, the lawmaker representing the education sector, suggested the government could allocate land outside the island to popular schools so they can relocate their secondary school campuses. Then they could have a bigger primary section across the harbour. Suen said the government would consider his suggestion, but the wishes of schools and parents would have to be taken into consideration. Over the past two years, nine international schools applied to the government for vacant school premises as temporary campuses under tenancy agreements. All applications were approved. Expansion at four existing schools added more than 500 places in the 2011/12 school year.

Hawkers shunted aside for 'progress' - Newspaper vendors at roadside stalls are being forced to move on, the victims of a system that favours the rights of developers and building owners - Chan Tsing-hong faces eviction from the Mong Kok stand where he has sold newspapers for a decade. Already squeezed by convenience stores on almost every corner, traditional roadside news-stands are being forced off their decades-old pitches - and in some cases out of business - by red tape and "urban renewal". More shop owners - in front of which the news-stands ply their trade - are submitting plans for emergency exits and disabled access that require the news-stands to move. As this trend gathers pace, the number of licensed newspaper stands has dropped by 16 per cent in just five years - from 670 stalls city-wide in 2006 to 558 last year. Many of the displaced stand owners are left in limbo, being forced to operate at licensed temporary locations. These temporary licences must be renewed monthly and then operators are dragged into a web of officialdom as they argue over a new, permanent licence. In some cases, the impasse lasts for years, driving the operator out of business. New permanent locations need approval from seven or eight government departments, making the chances of getting approval for a desired spot extremely difficult. The Coalition of Hong Kong Newspaper and Magazine Merchants has this year been trying to negotiate permanent pitches for four displaced hawkers who have been using temporary pitches for up to seven years. The coalition is also handling three other cases facing the same fate. Coalition chairman Liu Sair-ching said the cases were only "the tip of the iceberg" because many hawkers tended to keep their problems to themselves. "The different government departments may all have different concerns, and when six departments do not have objections to the new location but just one does, the application will not be approved," Liu said. He said moving away from their original neighbourhoods meant losing regular clients. The Food and Environmental Hygiene Department, which is responsible for issuing these licences, admits that hawker-related regulations are inadequate to protect their rights to remain in their spots because they often clash with building or renovation plans aimed at upgrading a neighbourhood. "Hawker licences and the rules that govern their operation are a product of history - regulations are outdated and inadequate for dealing with the rapid changes in Hong Kong," said Wong Ka-wai, senior superintendent of the department's hawker and market division. Liu criticised the government for approving plans to alter buildings that end up displacing newsstands. "Building owners tell the department about their approved plans to renovate," he said. "They ask the department to temporarily move the news-stands that are in front of their stores. But most of these turn out to be permanent relocations because the renovation work includes an emergency exit or something where the news-stands used to be. "The way the government is dealing with these cases is unacceptable. It feels like - even with a licence - we can still be uprooted and stripped of our security at any time." According to Wong, all fixed-pitch hawker licences include a clause requiring the owner to vacate their stall within 15 days "if the government needs the space". "The government has the power [to ask the hawkers to leave]," said Eric Cheung Tat-ming, assistant professor of law at the University of Hong Kong, referring to the 15-day notice period. "The possibility of legal intervention is limited and depends on the case. But the courts can only determine where the action is legal or not; they cannot say whether the situation is correct." Liu said hawkers were beign treated unfairly because of outdated hawker-licensing and management rules and the fact that the interests of developers and building owners were being put first. He urged the government to update the regulations, saying most hawkers would be willing to move if they were guaranteed a new permanent licence in a location where they could get enough business to survive. Wong agreed hawkers had it tough. "The streets are getting busier, so finding suitable places for hawkers to earn a decent living without causing an obstruction is difficult," he said. Wong conceded the rules could be hard to follow and the department had to look at individual cases.

 China*:  May 28 2011

Shiseido, Japan's top cosmetics firm, is aiming to expand its Chinese cosmetics business faster than the market and is considering boosting the use of Chinese raw materials to cut production costs. "I want Shiseido to surpass the overall growth rate in the Chinese market and to reach the mid-to-high teens," Hisayuki Suekawa, Shiseido's president, said. One of the world's oldest cosmetics companies, Shiseido relies on China, where it has 5,000 stores, as a growth engine as its profits slip in Japan. But Shiseido, with its namesake line of cosmetics and others such as Maquillage cosmetics and Cle de Peau Beaute prestige products, has grappled with higher wages and increased competition, prompting it to lower costs. "When we brought the production technology over from Japan, the [supply] deals came as well, so much of the raw materials used still come from Japan," Suekawa said. "The focus previously was [on procurement from Japan], but we have made a list of local Chinese suppliers and are now trying to match our needs to them." Suekawa said just over half of the raw materials used at its two Chinese factories come from China. Shiseido forecast a 40 billion yen (HK$3.7 billion) operating profit for the year that started in April, a 10 per cent decline from its previous year due to expectations of weaker consumer demand in Japan and increased marketing investment. To help it offset sliding demand at home, the company, which began as Japan's first Western-style pharmacy in 1872, was looking overseas for profit growth and aimed for multiple global brands that exceed a scale of 50-100 billion yen a year in sales. In a three-year strategic plan announced in April, Shiseido said it planned to spend an additional 20 billion yen, 13 billion of which was marked for use overseas this year Suekawa also said the company, which competes with France's L'Oreal and Estee Lauder in sales of high-end cosmetics, would look into acquisitions for growth. Last year, Shiseido bought US cosmetics firm Bare Escentuals for US$1.7 billion. Earlier this month, Shiseido was outbid by Spanish perfume maker Puig to buy a 45 per cent stake in French fashion house Jean-Paul Gaultier from Hermes.

China has emergence as the world’s biggest consumer of gold needs to be considered alongside a lesser appreciated fact: The country is also the biggest producer of the yellow metal. This week, the World Gold Council said in a quarterly report that Chinese buyers overtook Indians as the globe’s biggest purchasers of gold in the first three months of this year. Despite producing nearly 351 metric tons of the metal in 2010, China’s gold demand last year hit 700 tons, meaning the country may continue to absorb bullion imports. “It’s sort of like sending oil to Saudi Arabia,” James R. Steel, a New York-based metals analyst for HSBC Holdings Plc told a group of reporters Wednesday.

Nasdaq-listed Home Inns & Hotels Management Inc. (HMIN) is close to buying the company that owns China's Motel 168 chain from Morgan Stanley (MS) and other shareholders for about US$500 million in a cash and stock deal that will fetch around half what the owners originally sought, according to three people familiar with the transaction. Morgan Stanley will be selling its 59% stake in Shanghai Motel Management Co. to Home Inns, China's biggest budget hotelier, while the other shareholders in Shanghai Motel will be exchanging their stakes for shares in the combined entity, one of the people said. He said Home Inns will be paying for the Morgan Stanley stake from a US$300 million loan it is raising at the moment, as well as its own cash. As of March 31, 2011, Home Inns had cash and cash equivalents of CNY2.29 billion. Talks have been exclusive between Home Inns and Shanghai Motel for several weeks and the parties are now in advanced discussions about terms, another person said. Shanghai Motel is the fifth-largest budget hotel chain in China by number of rooms, according to analysts, and buying it would help market leader Home Inns further expand its pole position. Home Inns, the largest budget chain operator in China by number of rooms, had gone head to head against China Lodging Group Ltd. (HTHT), the fourth largest budget hotelier, for the stake in Shanghai Motel. Morgan Stanley controls 59% of Shanghai Motel Management Co. through one of the investment bank's real estate funds. It, as well as the other two shareholders of Shanghai Motel, had put the company up for sale in February, expecting it to fetch up to US$1 billion as foreign and domestic hoteliers scramble to buy into the country's travel boom. But worries that Shanghai visitor traffic will fall from last year, when the city hosted the Shanghai Expo, and the opening of a record number of new hotels in China last year, have hurt Chinese budget hotel shares this year. So far this year, shares of U.S.-listed Home Inns are down 11%; China Lodging is down 12%; 7 Days Group Holdings Ltd. (SVN), China's second-biggest chain, is 11% lower; and Shanghai International Jin Jiang Hotels Development, the third-biggest economy-hotel operator in China, has fallen 16%. Analysts said this was a good deal for Home Inns, despite integration costs from a merger of the two sides. "If Motel 168 is valued at US$500 million, that would put the value per room at about US$11,400, which is about 2% less than Home Inns' current Enterprise Value per room of $11,671, based on Home Inns current stock price," said Noah Hudson, research analyst at Guotai Junan (Hong Kong). "That's good for Home Inns because Motel 168 has about 37% of its hotels in Shanghai, where properties are more valuable, compared to Home Inns, which has about 9% of its hotels Shanghai." Earlier this month, Home Inns posted a 42% drop in first quarter net profit on higher hotel costs and operating expenses, while the Chinese economy-hotel chain's adjusted earnings missed analysts' expectations. It reported a profit of CNY32.5 million ($5 million), or CNY0.06 (a U.S. penny) a share, down from CNY46.1 million, or CNY0.54 a share, a year earlier. Excluding stock-based compensation and other impacts, adjusted earnings fell to CNY0.39 (6 U.S. cents) from CNY0.65. Analysts polled by Thomson Reuters expected a profit of 14 cents per American depositary share.

Lenovo Net Profit More Than Doubles - Lenovo Group Ltd. said strong corporate demand helped more than double its fiscal fourth-quarter net profit from a year earlier, as the Chinese computer maker continues its push into mobile devices with plans to launch a tablet device in the U.S. this summer. The results come as personal-computer makers benefit from a wave of computer-hardware replacement by businesses. Lenovo has also benefited from growth in its business in China and other emerging markets, and it is seeking to offer more "mobile Internet" products such as smartphones and tablet computers to boost margins. Lenovo's net profit for the three months ended March 31 was $42 million, up from $13 million a year earlier and above the average $34.6 million forecast of six analysts surveyed by Dow Jones Newswires. Revenue rose 13% to $4.88 billion from $4.32 billion, below the average $5 billion forecast in the poll. In March, Lenovo started selling the LePad tablet device in China to compete with the likes of Apple Inc.'s iPad, which dominates the global tablet market. Lenovo Chairman Liu Chuanzhi, speaking at a news briefing Thursday, said he is confident the LePad's market share in China can reach 20% since the tablet caters to Chinese-language users. Lenovo will launch a version of its tablet outside China around June, and it will launch a tablet for corporate users around August, Lenovo Chief Operating Officer Rory Read said. Lenovo, which bought International Business Machines Corp.'s PC business in 2005, is China's largest PC maker by shipments. It is the world's fourth-biggest PC maker behind Hewlett-Packard Co., Dell Inc. and Acer Inc. Lenovo has aimed to steer away from reliance on mature markets such as the U.S. for overseas growth. The company refocused on China and emerging markets in 2009 after struggling with weak consumer sales and declining market share. Lenovo "will continue to actively look for inorganic growth opportunities within the PC industry," it said in a statement. Mr. Read said Lenovo will look at acquisition opportunities that can increase the company's scale or that align with its efforts in the mobile Internet area. In January, Lenovo said it would invest $175 million to form a joint venture with Japan's NEC Corp. Lenovo, which said it would hold a 51% stake in the venture, said the deal would let it leverage its low component costs with NEC's premium pricing in Japan for higher profits. For its last fiscal year, Lenovo's net profit more than doubled to $273.2 million from $129.4 million a year earlier. Full fiscal year revenue rose 30% to $21.6 billion from US$16.6 billion.

London Luxury Quarter aims for rich Chinese - Flags for luxury brands hang in New Bond Street, in London. China is the world's second-largest consumer of luxury goods, after the United States, according to Bain and Company. London Luxury Quarter (LLQ), a new luxury shopping district promoted by United Kingdom-based New West End Co, is targeting rich Chinese to support future growth. Chinese consumers are expected to spend 260 million pounds ($421 million) in the LLQ in 2011, boosted by the recent royal wedding and the annual birthday celebrations for Queen Elizabeth II. Sales are expected to increase 30 percent from last year. LLQ said its annual growth rate is projected to hover around 30 percent in the next five years. "Chinese retail tourists play an integral part in maintaining a buoyant retail economy in the West End. The offer on Bond Street, Regent Street and the surrounding area is a huge draw for international visitors and we expect tourist numbers to peak in 2012 when London will host the Olympics and the planned celebrations of the Queen's Diamond Jubilee," said Jace Tyrrell, director of LLQ. LLQ plans to offer tour services including hotel arrangements and exclusive shopping tours to Chinese consumers. For exclusive services, a tour guide will be assigned to groups of up to four people. Tyrrell said that Chinese consumers spent about 600 pounds for each transaction in LLQ in 2010, a 155 percent increase from 2009. LLQ was established in 2010 to support the growth of New West End. LLQ covers the key areas of Bond Street, Mount Street, Jermyn Street and Savile Row to bring together 300 retailers into a new luxury-shopping district. It was intended to be one of the largest retailing districts in the world. The increasing purchasing power of Chinese consumers has boosted the global development of the luxury industry. Figures from Global Blue, a company specializing in providing services for international shopping and spending, suggested that Chinese consumers contributed 300 million pounds to the UK economy in 2010, a 10-fold increase from 30 million pounds in 2007. The growing purchasing power of Chinese consumers hasn't gone unnoticed. The British media coined "Peking Pounds" to describe the Chinese buying power. China is the world's second -largest consumer of luxury goods, after the United States, according to the consultants Bain and Company.

CNOOC to explore the depths - The launching ceremony on Monday in Shanghai for China National Offshore Oil Corp's drilling platform 981. It is nearing completion after more than three years of construction and is expected to begin operations in the third quarter of this year. China has taken a step forward in its efforts to explore deep-water oil and gas, with the announcement that two advanced pieces of deep-water equipment capable of operating at depths of 3,000 meters are near completion. The sixth-generation deepwater semi-submersible drilling unit will begin commercial operations in the South China Sea in the second half of this year, according to Wang Yilin, chairman of China National Offshore Oil Corp (CNOOC), the main designer and builder of the drilling platform. The drilling unit, named 981, is nearing completion after more than three years of construction in Shanghai, the company said on Monday. The 136-meter-high drilling platform, which cost CNOOC 6 billion yuan ($923 million), is expected to begin commercial operations in the northern South China Sea in the third quarter, following testing that will begin within days in Zhoushan city in Zhejiang province, Jin Xiaojian, general manger of CNOOC's Engineering Department, said earlier. The unit was co-designed and constructed with China State Shipbuilding Corp, and will be operated by China Oilfield Services Ltd, one of the listed arms of CNOOC, the country's largest offshore oil producer by capacity. The project's completion marks the Chinese marine oil and gas industry's important move advancing its "deep-water strategy", said Wang, who was appointed to his current position in April to replace Fu Chengu, the State-owned company's longest-serving president, who joined CNOOC in 1982. Before the deep-water drilling platform, China was only able to explore, develop and produce offshore oil and gas at depths of up to 300 meters. Fu said last year that CNOOC aims to produce 50 million tons of oil equivalent from the deep-water field by the end of 2020, after reaching its first 50 million tons of oil equivalent from the sea last year. The platform is expected to reach dynamic break-even within 12 years, in accordance with international practices, Jin said. He added that there are around 20 such deep-water semi-submersible drilling units in operation or under construction around the world. CNOOC also announced on Tuesday that China's first deep-water crane vessel, which can lay pipes 3,000 meters below the surface, is expected to be completed in October. The vessel, like the drilling platform, was one of five types of vessels that CNOOC decided to build with a 15 billion yuan total investment for deep-water exploration during the 11th Five-Year Plan (2005-2010). Construction of the pipe-laying crane, in which CNOOC invested about 2.8 billion yuan, commenced in September 2008 in Nantong, Jiangsu province, in eastern China. The vessel, named 201, is expected to start commercial operations in the Liuhua oilfield in the eastern South China Sea late this year, and is set to work in the Liwan 3-1 deep-water gas field next year, according to Xu Wenbing, deputy general manager of the project. The Liwan 3-1 deep-water gas field is the country's first deep-water and biggest offshore gas field. It was discovered in 2006 and has contingent reserves of up to 170 billion cubic meters of gas. CNOOC's subsidiary Offshore Oil Engineering Co will operate the vessel.

Citic to sell off stake in mutual fund manager - Partial sale of CAM may deliver multibillion-yuan pay-off but also push down per-share earnings. Citic Securities will sell a 51 per cent stake in China Asset Management (CAM) to meet regulatory requirements, in a deal that could bring the mainland's biggest brokerage a one-time gain of 6.5 billion yuan (HK$7.7 billion). The Beijing-based company said the asking price of the stake would be at least 7.56 billion yuan, or 14.8 times the fund house's earnings last year, when it posted a net profit of 1 billion yuan. Citic Securities owns 100 per cent of CAM, the mainland's largest mutual fund manager. The total investment into the asset manager, the mainland's largest, was valued at 2 billion yuan in 2007 - when it bought CAM - or 1 billion yuan for the stake it now seeks to sell. Despite the one-off gain, Citic's per-share earnings will be negatively affected due to the sale of the profitable asset. The China Securities Regulatory Commission stipulates that a firm can own up to 49 per cent stake of a domestic fund management firm and more than half in a Sino-foreign joint-venture fund management firm. "The fact that Citic Securities has voluntarily chosen to reduce its own holding to 49 per cent suggests that it was unable to find a willing foreign buyer," fund consultancy Z-Ben Advisors said. Z-Ben predicts the 51 per cent stake will be sold to a clutch of investors, each taking a small part of CAM. CAM had a market share of 9.38 per cent at the end of March, up from 9 per cent at the end of last year. On the mainland, its star fund manager Wang Yawei is believed to have Warren Buffett-style wizardry and is closely watched by retail investors. Citic said in March that it would launch an initial public offering in Hong Kong, seeking to raise US$2.7 billion by offering 15 per cent of its enlarged capital, in a move to improve its international profile. It is likely to become the first mainland brokerage to list on an overseas market. Citic reported a net profit of 12.1 billion yuan last year, up 20.3 per cent from the previous year. Last month, Shanghai-based Haitong Securities also announced plans to list in Hong Kong, hoping to use the proceeds for overseas expansion. The company said it would float 1.2 billion shares, or 15 per cent of its enlarged capital, which is likely to raise up to HK$14 billion.

University graduates venture on funeral service - Graduates perform a funeral ceremony in Chengdu, Sichuan province on May 22, 2011. A total of seven university graduates in the city set up the funeral company featuring a Western-style service where the deceased's personal life is reflected in a eulogy.

China's Fengyun-3B (FY-3B) weather satellite will go into official operation on Thursday after finishing a six-month trial period. The transfer of the satellite to the China Meteorological Administration (CMA) means that China's weather satellite system is now at an "advanced level," according to a statement from the State Administration of Science, Technology and Industry for National Defense said in a statement. The satellite, launched on November 5 last year, was designed with a lifespan of three years, the statement said. The FY-3B will join the FY-3A, another Chinese weather satellite, to create a comprehensive weather satellite system, according to the statement. According to the National Satellite Meteorological Center, the deployment of the FY-3B will enhance China's ability to monitor the Earth's weather and environment.

Microsoft Corp's research and development headquarters for the Asia-Pacific region began operations on Wednesday, reported. The building is located at Zhongguancun in Beijing, dubbed China's Silicon Valley, and is the company's biggest R&D center outside the United States. The software giant invested 2.8 billion yuan ($431.5 million) for the R&D headquarters. Microsoft Chief Executive Steve Ballmer attended the unveiling ceremony on Wednesday. The building founded in 2008 covers 150,000 square meters housing more than 3,000 Microsoft employees.

Hong Kong*:  May 27 2011

The Hospital Authority plans to hire 1,720 nurses and 330 doctors this year to cope with strained manpower in public hospitals, Secretary for Food and Health Dr York Chow Yat-ngok said at a Legislative Council meeting on Wednesday. The authority would create more positions and strengthen professional training with a view to improving staff retention and boosting staff morale, he said. Doctors and nurses have complained about the heavy workload in public hospitals caused by a shortage of manpower, an increasing demand for services caused by an ageing population, and an influx of mothers from the mainland choosing to give birth in Hong Kong. The authority would extend an existing pilot scheme to hire part-time doctors in obstetric and gynaecological services to other areas of medical work in 2011-12, in order to increase supply in the short term, Chow added. The next few years would also see an expanded pool of nurse graduates who would fill vacancies, the health secretary pointed out. About 2,000 nurses each year would be available for recruitment in the next few years. These would include graduates from local universities, authority nursing schools and local private hospitals. “We are particularly concerned about the working environment of our health care staff,” Chow said. “The authority has been endeavouring to relieve the workload of its frontline health care workers by re-engineering work processes, streamlining work procedures and recruiting additional supporting staff.” “The Hospital Authority will continue to step up its recruitment efforts to meet the service demand,” he added.

Sundaram Tagore Focuses on Hong Kong - Sundaram Tagore Gallery on Hollywood Road in Hong Kong - It wasn’t long ago that Hollywood Road in Hong Kong was just a quiet stretch of antique shops. “When we first opened people were really surprised,” said Sundaram Tagore, who built a contemporary art space on a corner of the thoroughfare in 2008. “They were excited that they were going to see something new.” At the time, Mr. Tagore was one of the first international gallery owners to open a space in the city. Since then several foreign galleries have followed, including Gagosian Gallery and Ben Brown Fine Arts. “Hong Kong has become an important artistic center,” said Mr. Tagore. “There is an audience here that has a voracious appetite for art.” Mr. Tagore, a former director of New York gallery PaceWildenstein, now runs his own establishments in New York and Los Angeles. He is known as an active player in the art-fair circuit — he shuttles between as many as 14 fairs a year. Lately, however, the gallery owner is turning his attention toward Hollywood Road. He plans to relocate to Hong Kong this summer and make it the nerve center of his organization. This month, it will host an exhibition for the Brazilian photographer Sebastião Salgado. Later in the year the Hong Kong space will unveil work by Canadian photographer Robert Polidori.

Kazakhmys Digs For Hong Kong Investors - Women walk on the bank of the Ishim River in Astana, capital of Kazakhstan. Kazakhmys PLC, an LSE-listed natural resources group with its main assets in Kazakhstan, has filed to list in Hong Kong by the end of June. This is aimed at raising its profile in the region, which accounts for almost half of its revenue. With no new money to be raised and no shares to be sold, the deal itself will do little for investors but there may be action for bankers, including M&A and financing deals, down the line. Kazakhmys’ secondary listing is being sponsored by no fewer than three major houses: Citi, China’s CICC and JP Morgan, whose Vice Chairman for European Investment Banking, Lord Renwick, sits on the board and which previously sponsored the group’s listing in the U.K. It’s hard to believe that these banks would invest a significant amount of time, effort and cost in a simple listing by introduction, without significant corporate finance business also being lined up. Kazakhmys’s strategy includes acquisitions and it also intends to raise both debt and equity. Net borrowings of only $350 million (with total equity of $8.2 billion) leaves Kazakhmys with plenty of room for maneuver. Chairman Vladimir Kim owns 27.9% while 26% is held by the Kazakh government. Kazakhmys is one of the world’s largest integrated copper producers. Active in silver, gold, zinc and coal, it holds strategic stakes in Eurasian Natural Resources Corporation PLC (ENRC) (26%), also listed on the LSE, and in Ekibastuz GRES-1 (50%), Kazakhstan’s largest power plant. Floated in London in 2005, it now has a market capitalization of $10.4 billion. It’s also a member of the FTSE 100 index–which separately also includes Eurasian. It’s easy to understand the attraction of a secondary listing in Hong Kong for Kazakhmys. Following in the footsteps of Vale S.A. and Switzerland-based Glencore, a listing in Asia is seen as boosting its profile with China, the world’s largest and fastest-growing copper market. In 2010, 48.6% of the company’s revenue was attributable to China, one of the key drivers behind the almost 30% annual growth in global consumption and production of refined copper over the last decade, driven by the building industry as well as electrical and electronic products. In 2009, Kazakhmys secured a $2.7 billion loan facility from China Development Bank, and it signed an MoU for a joint venture last year with Jinchuan Group Ltd, China’s largest producer of nickel, to develop its copper deposit in Aktogay. Although formally incorporated in the U.K., Kazakhmys would be the first company from Kazakhstan to list in Hong Kong. Kazakhstan shares a long border with China, but Kazakh companies have traditionally chosen London for their offshore listings, with 10 groups from the Central Asia nation quoted there. While its share price has taken a hit this year as commodity plays have been rattled, Kazakhmys has still posted a 440% valuation jump since 2009. What the listing would do for investors is less obvious. Kazakhmys is planning to list in Hong Kong without raising capital or offering shares to investors. Brazil’s Vale, which listed depositary receipts in Hong Kong in the same fashion in December 2010, now achieves an average daily trading volume in Hong Kong of less than $250,000–a pitiful amount for a company capitalized at more than $155 billion–and only 0.02% of its shareholders are recorded in Hong Kong. London is where Kazakhmys’s trading volume is and will remain. It may have to dig for a while to secure shareholders in Asia, but do expect Kazakhmys to unearth more value, not least for investment banks.

Minimum wage may not pay off for some - John is 75, a wiry wisp of a fellow. Despite a slouch, he works 12-hour nightshifts as a security guard in Sham Shui Po, Kowloon. He has been doing it day in, day out, for 15 years. He gets HK$4,200 ($540) a month, provided he does not take holidays or days off. All his salary goes to pay for medical care and expenses for his wife, who lives in Shenzhen and has breast cancer. Sometimes John takes a day off. He pays somebody to fill in so he can cross the border and spend the day taking care of his wife. John depends on his HK$1,000 old age allowance for his own expenses, living on salted fish and preserved bean curd. John's wages work out to about HK$13 an hour. But on May 1 the Hong Kong Special Administrative Region introduced a minimum wage of HK$28 per hour. John's monthly income should have shot up to more than HK$10,000. It didn't. "My employer told me, without any vagueness, that he simply cannot afford HK$28," said John, who insisted on anonymity and declined to give even a vague location of the building where he works. He was afraid he might be fired if the property management company finds out he talked to a reporter. "I am 75 years old. I have no bargaining chip whatsoever. And I don't want to take the risk and take a toll on my wife." What might happen - Perhaps John fell into the worst-case scenario pertaining to the wage ordinance, which was intended to prevent workers from being exploited by unscrupulous employers. Many in the work force will see their wages shoot up, in some cases by several thousand dollars a month. Some will be sacked by companies that cannot afford the minimum wage or refuse to pay it. Some local small and medium-size enterprises will be unable to afford the increased costs and will wrap up operations. The rest of the city's hourly workers will see their raises offset by withdrawal of previously paid benefits. The Provisional Minimum Wage Commission, which was appointed to advise the city's chief executive on the amount of the minimum wage, estimated in 2010 that some 274,000 employees would benefit from the ordinance. It also estimated that about 40,000 people could lose their jobs if they worked for marginally profitable companies operating on the edge. About 1,700 enterprises were expected to fall from marginal profit into red ink. "We knew that the least productive employees would risk being sacked because of the minimum wage, but that cannot dilute the fact that a larger number of employees will see their insulting wages being increased," said Ng Chau-pei, chairman of the Hong Kong Federation of Trade Unions. The beneficiaries, Ng said, are mainly security guards, catering workers and cleaners, who usually earn HK$4,000 to HK$6,000 a month working more than 10 hours a day. Their occupations are widely considered to be the lowest-paying. Ms Pong, an immigrant in her 40s who would not give her full name, works 10-hour days at one of Yau Ma Tei's most popular alfresco Cantonese restaurants. Her pay is going from HK$25 an hour to HK$28. "I am surely very happy. I used to buy three buns, which altogether cost only HK$5, for lunch. Now with an extra HK$30 a day, I can have some better lunch." She giggled as she sat in front of piled-up dishes containing food remnants in a dark alley behind Temple Street. The ordinance has even drawn some retirees back to the work force. Lee Tak-cheung, 65, is a night shift security worker at a residential building in Pak Kung Street, To Kwa Wan, one of Hong Kong's oldest districts and a place where seedy private tenement buildings abound. He said he had been retired for a few years and started working again on May 1, the day the ordinance took effect. The salary stated in the contract is HK$8,000, compared with a previous offer of HK$5,000.

Luxury retreat must come down - Tycoon Francis Choi denies owning the sprawling hideaway in a Tai Po nature reserve that occupies government land and has privatised a public road - A company with close links to toy tycoon Francis Choi Chee-ming has been ordered to demolish an unauthorised luxury home with gardens that encroach on a vast piece of government land in a Tai Po nature reserve. The three-storey, 11,000 sq ft colonial style house in Tsung Tsai Yuen is masked by trees and bushes. Over 20,000 sq ft of government land has been illegally occupied by the development, which began last year and comprises a fountain, landscaped gardens and retaining walls, a land surveyor said. The public access road has been privatised by the site owner. The government has known about it since January last year, but it took until December for it to issue orders that the owner demolish the residence and related structures. Public land records show, the site – covering 13 private agricultural lots – is owned by Charm Fair Limited, a company registered in the British Virgin Islands. But according to correspondence between the company and the government seen by the Post, the firm has been represented by staff of Early Light International Holdings, which is held by Choi and his family. The correspondence mentions Choi as a buyer involved in the site's transaction, which was completed in August 2009 for HK$91.8 million. According to lease conditions of the site, redevelopment or new houses are only allowed with permission from the Lands Department, although part of the site is zoned for low-rise residential use. Choi denied he owned the site. He told the Post: "I already have three large houses in Kau To Shan. The site was bought by my cousin. I have never lived in that house. I don't want to be kidnapped." He declined to disclose his cousin's identity, saying only that he is a mainland businessman dealing in property sales. He said Lam Hung, a director of Charm Fair who signed the sale and purchase agreement of the site, is his cousin's wife. Choi denied the house was a new development. He said it had existed for more than 60 years and he just sent staff to help renovate it for his cousin. "I've already asked him to suspend the renovation work." Choi was appointed a Justice of the Peace in 2005 and received the Gold Bauhinia Star in 2009. He serves as a member of the National Committee of the Chinese People's Political Consultative Conference. The government has come under increasing pressure lately to deal with illegal structures in the New Territories, especially those involving village houses, after several public figures were found with unauthorised additions to their homes. The breaches came to light after the ombudsman criticised the government for turning a blind eye to illegal structures in rural areas while cracking down in urban areas. On a site visit to the house in the Tai Po Kau Nature Reserve on Monday, work was being carried out on the roof and facade. The second floor was surrounded by bamboo scaffolding and work tools could be heard. A security guard said he understood that Choi owned the house. He said public figures often visited in the evening, including Macau casino tycoon Stanley Ho Hung-sun and entertainment giant Alan Tang Kwong-wing, who died in March. "I believe it is a place for them to gather for fun. You can see Rolls-Royces parking here at night." A spokeswoman for the Development Bureau said the house and outdoor structures were built without permission from the Buildings Department. The District Lands Office had removed part of the fence wall and erected a government land notice board on the government land. Meanwhile, Secretary for Education Michael Suen Ming-yeung admitted yesterday he had not been "sensitive enough" in dealing with illegal structures at his flat. They have not been removed despite building orders being issued in 2006.

TVB actresses to give evidence in trial - Five stars called as prosecution witnesses in station manager Stephen Chan's corruption and fraud case - Five TVB (SEHK: 0511) actresses will give evidence against the station's general manager, Stephen Chan Chi-wan, in his corruption and fraud trial. Charmaine Sheh Sze-man, Tavia Yeung Yi, Sharon Chan Man-chi, Skye Chan Sin-yeung and Shirley Yeung would be called as prosecution witnesses, prosecutor Alain Sham Chung-ping said after a closed-door pre-trial review in the District Court. The five actresses were named as victims in a charge stemming from the launch of a book written by Stephen Chan at the Olympian City shopping mall. It is alleged that Stephen Chan, 51, and co-accused Tseng Pei-kun, 28, Chan's former assistant, conspired to defraud the five women by asking them to attend the book signing session free of charge. The two accused allegedly concealed from the five that organiser Idea Empire Advertising and Production Company - of which Tseng was a director - received HK$300,000 from a sponsor and deprived the five of their reward. Stephen Chan, Tseng and Wilson Chan Wing-shuen, 63, the head of business development for TVB's marketing and sales division, face a total of five charges in relation to alleged bribery and fraud. The trio were in court yesterday when lawyers dealt with facts that they could agree on. The three were released on HK$100,000 bail, on condition that they do not contact, interfere with or influence the witnesses in relation to the case. Stephen Chan was represented by Joseph Tse Wah-yuen SC. The trial is set to start on June 1. About 30 witnesses, including managerial staff at TVB and artists, will be called to testify. Stephen Chan faces three charges of receiving HK$112,000 from Tseng to participate in a show entitled Be My Guest as part of a New Year's Eve countdown at Olympian City. Tseng and Wilson Chan jointly face a charge of conspiring to defraud TVB of HK$550,000, arising from a HK$5.2 million contract between Melco Crown hotel in Macau and TVB between September and December 2009.

Rising street-front shop rentals in Hong Kong are forcing retailers to look for cheaper upstairs outlets - a trend that has allowed landlords to increase their rental income by converting former office buildings into "Ginza-style" retail complexes. Among the high-profile victims of the trend is Agnes b. le Pain Grille, the first restaurant opened by the French fashion brand four years ago on the ground floor of 111 Leighton Road in Causeway Bay and will now move upstairs into the 15th floor at Cubus, according to agents. "Rents of street-level shops are now at least HK$70 per square foot in general. In prime locations, they would be a couple of hundred dollars per square foot," said Barry Ho, a director at property firm Capital Strategic Investment. "But the profit margin in the food and beverage business is usually less than margins earned by other retailers - and they also have to face a few months of low season, particularly after the Lunar New Year. "So it's not easy for them to afford such expensive rents," added Ho. These cost pressures were forcing lower-margin food and beverage operators to move into commercial buildings renovated to take advantage of rising retail rents, where they could rent space for HK$20 to HK$40 per sq ft - a process that is transforming them into a retail mix similar to Tokyo's famed Ginza district. "Many landlords expect rents could increase from more than HK$10 per sq ft to HK$30 per sq ft after they convert their office buildings into Ginza-like commercial buildings," said Helen Mak, a director of retail services at Colliers International. Mak said Henry House in Causeway Bay was an example of the successful development of a Ginza-style commercial building. Average rents in the building are now about HK$60 per sq ft in terms of lettable area. If it were leased as purely office accommodation, the average rent would be only HK$30 per sq ft. Capital Strategic Investment has developed a number of such Ginza-style commercial buildings. Its latest development, H8 in Hau Fook Street, Tsim Sha Tsui, is now leased to various restaurants at rentals ranging from HK$30 to HK$35 per sq ft. Occupancy rates have reached about 80 per cent. Barry Ho of the firm says landlords can get more rental income from developing commercial buildings. "Office rents at Ashley Road in Tsim Sha Tsui are about HK$22 or HK$23 per sq ft. But you could generate a rental income of more than HK$30 per sq ft if you leased to tenants in the food and beverage business," he said. Small developer Wang On Group is one of the newcomers in the market. The company bought Hon Ying House, an old residential building in Mong Kok, last year and planned to redevelop it into a 20-storey Ginza-style commercial-retail building. "We had thought about renovating the building into a serviced apartment," said Wang On assistant manager Moni Yeung Kwai-ling. "But the investment cost was large and we decided to develop it into a commercial building at the end." The influx of mainland shoppers had pushed up revenues of local retailers and allowed it to raise rents of street-level shops in Causeway Bay and Mong Kok, Yeung added. "This forced many tenants to relocate to high-rise buildings. But demand for retail buildings is strong and rents in retail buildings in Mong Kok now range between HK$20 and HK$30 per square foot," she said. But developing such Ginza-style retail buildings was not a sure-win formula, Mak of Colliers said. "It doesn't mean you can generate higher rental income simply by converting the office building into a commercial building. You have to put more effort into marketing and picking the suitable tenant mix. "You can't expect rental income to increase immediately. You have to get the right market position." Ho at Capital Strategic echoed this point. "We would choose experienced food-and-beverage operators as our tenants only. And we would seek to provide various cuisines in our buildings - if you always change the tenant mix, customers will lose confidence in your building," he said. Location also affected the leasing of commercial buildings. As demand for grade-B office space was limited previously, the 23-storey DBS Building in Central was renovated and converted in the middle of last year into The L Place - a commercial building intended to target retail tenants. However, a sharp increase in office rents followed and the owner decided to allocate 10 floors in the building to office space, which was leased for HK$40 per sq ft, similar to the commercial floors. Mak of Colliers said office buildings in Tsim Sha Tsui and Causeway Bay were suitable for conversion. "The site areas of office buildings in Causeway Bay are usually small. The owners could generate higher rental income by conversion," she said. Ho of Capital Strategic Investment estimated that rents in Ginza-style commercial buildings had increased by 8 to 12 per cent over the past 12 months. "The rent differences between street-levels shops and commercial buildings are narrowing," he said. "But the potential rental growth of commercial buildings is limited, compared with that of street-level shops."

Chris Lane and his wife, Karen, are keen to buy a property in Hong Kong to prepare for their return from Japan, where they've been working in the ski resort town of Niseko. They recently added a baby daughter to the family, and would like to come back to the town of Karen's birth. But they're expressing the kind of caution that's increasingly common in the Hong Kong property market at the moment. If they do buy they'd like to get a bank loan, but are worried interest rates will rise. They also wonder if the market may be in the first lurch of a downward turn. "I want to buy a place to live in and I don't want to pay someone else's mortgage," said Lane, who has been working in Japan as a property broker. "But I'm worried that prices will drop within a year. Would it be better to rent for a year and buy at a 30 per cent discount in a year?" They are not alone in their hesitation. With banks making their mortgage terms less attractive, and interest rates moving off their all-time lows, the cost of borrowing is on the rise. Uncertainty over the direction of the market after such a bull run is also putting people off - a shift in sentiment from a strong start to the year. "Market momentum has changed from the first quarter," said Sharmaine Lau Yuen-yuen, the chief economic analyst with mortgage brokerage mReferral. "The primary market was selling at quite a good pace but since April the atmosphere has turned around quite a bit." The mortgage brokerage reports that mortgage applications dropped by 11.6 per cent in April compared with March. The decline mirrored similar trends in the number of property transactions, with 7,635 residential units changing hands in April - down 27 per cent compared with March and 38 per cent from the same month last year. That's sure to spill over into bank lending. "We believe the May figures are going to drop further," Lau said. "For the mortgage market, another drop of 5 per cent to 10 per cent could happen." Banks have made terms less attractive on mortgages based on the Hong Kong Interbank Offered Rate (Hibor), which dominate the market. Until recently it was possible to get a mortgage at Hibor plus 0.8 per cent. But in early March, HSBC (SEHK: 0005, announcements, news) led the way in offering less attractive terms - now at Hibor plus 1.0 to 1.5 per cent - and others soon followed suit. Hang Seng took the most drastic step, effectively ending its Hibor-based loans. "Interest rates have been too low for too long a period, so the banks are trying to increase their profit margins, and increase the interest rates a little bit," Lau noted. Hibor loans may have peaked in their popularity. Having reached a record high of 92.2 per cent of all new loans issued in January their share fell to 91.7 per cent in March. Though the decline is a small one, the change in direction is significant given that this form of borrowing has soared in popularity from just 3.8 per cent of the mortgage market in early 2009. Prime-based mortgages dominated at that time but now amount to only 7.4 per cent of new loans - though that's again on the rise. Paul Carter, senior finance consultant at mortgage broker Complete Ltd, a subsidiary of IP Global, notes that prime- and Hibor-based loans now have similar effective starting rates, with Hibor-based plans working out at an interest rate of around 1.7 per cent and prime-based plans around 2.0 to 3.0 per cent. Banks have been offering better incentives on prime-based plans in terms of cash-backs on signing a mortgage, however, and Hibor is also more volatile in times of crisis and may move higher, faster. "Hibor is going to rise as soon as the United States starts raising rates," said Carter. But because Hong Kong banks have not cut their prime rates below the present range of 5.0 to 5.5 per cent, while US interest rates sank close to zero, "there is room for the banks to hold prime steady". Fixed-rate mortgages, which have been virtually forgotten for long periods of time in Hong Kong, are meanwhile making headway, driven by the strong likelihood of higher interest rates over the next year or so. The last time fixed-rate plans showed any traction in Hong Kong was in early 2004, during the rebound from the severe acute respiratory syndrome health scare, when the recovering economy made a rise in rates likely. Indeed, fixed-rate loans went on to peak at 15.4 per cent of new mortgages at the time but have only seen a couple of blips in popularity since and now account for less than one per cent of new loans. Complete Finance says it can arrange fixed-rate mortgages at between 2.5 and 3.0 per cent for the next three years, while mReferral cites a fixed rate of 2.38 per cent for three years. While more expensive than current Hibor or prime-based rates, fixed-rate plans offer security if the US economy shows unexpected strength and the Federal Reserve gets more hawkish. "We know interest rates are going to start to rise, whether that's at the end of Q4 this year or start of Q1 next year," Carter said. "I like fixed rates; I like to know what my mortgage is going to be for the next two, three, five years - for however long you can fix it for. "But there are a lot of gamblers in Hong Kong. People like a gamble out here." Standard Chartered and Citibank are both offering fixed-rate plans, with the tenure normally set at 36 months, and penalties for early termination. "The gamble is that the US doesn't raise interest rates for an extended period of time," Carter said. "You are really betting on the US economy not recovering as quickly as expected." Lane, originally from the US, is more worried about a bubble building and bursting in Hong Kong. Though he feels long-term prospects for property are good, he is afraid of buying at the peak of the market. "The Hong Kong market is such a hard market - it's more like an equity index than a property market," said Carter, who is keen to buy a home in Clearwater Bay in the next year or so. "If buying for yourself, you're looking to pay your mortgage off in 25 or 30 years. It's a long-term investment."

 China*:  May 27 2011

Bayer AG broke ground for a new polyurethane plant in Qingdao on Tuesday, underscoring the commitment of the German pharmaceutical and chemical producer and its local partners to China's sustained development of the building industry. The polyurethane project, located in Qingdao's Economic and Development Zone, will involve a total investment of between 200 million yuan ($30.75 million) and 250 million yuan. The project is part of Bayer's plan to invest 110 million euros ($155 million) by 2012 to build five downstream facilities in China. Polyurethane - commonly used for flexible foams in upholstery, mattresses and earplugs, as well as chemical-resistant coatings and packaging - is an organic material increasingly being applied as an insulation on the outside of buildings. According to Azita Owlia, senior vice-president of Bayer MaterialScience's polyurethane unit in the Asia-Pacific region, buildings are responsible for 40 percent of energy consumption and almost one-third of greenhouse-gas emissions worldwide. A Bayer Group logo in Shanghai. The group plans to build five downstream facilities in China, an investment worth a total of 110 million euros ($155 million). Bayer AG broke ground for a new polyurethane plant in Qingdao on Tuesday, underscoring the commitment of the German pharmaceutical and chemical producer and its local partners to China's sustained development of the building industry. The polyurethane project, located in Qingdao's Economic and Development Zone, will involve a total investment of between 200 million yuan ($30.75 million) and 250 million yuan. The project is part of Bayer's plan to invest 110 million euros ($155 million) by 2012 to build five downstream facilities in China. Polyurethane - commonly used for flexible foams in upholstery, mattresses and earplugs, as well as chemical-resistant coatings and packaging - is an organic material increasingly being applied as an insulation on the outside of buildings. According to Azita Owlia, senior vice-president of Bayer MaterialScience's polyurethane unit in the Asia-Pacific region, buildings are responsible for 40 percent of energy consumption and almost one-third of greenhouse-gas emissions worldwide. "With China's construction expenditure rising at 9.1 percent annually through 2014, sustainability is our business model, and we are committed to helping shape China's environmental future," Owlia told China Daily. She said that the saving potential in the building sector is huge and necessary, considering the high standards set in the country's 12th Five-Year Plan (2011-2015) to reduce carbon dioxide emissions. "We have a very large portfolio, anywhere from rural development to urbanization, and from footwear to Apple Inc iPads," she added. The 1,000-square-meter office complex at the Qingdao polyurethane plant will have a number of environmentally friendly features such as solar energy, geothermal systems and LED lighting to reduce energy use, and water-recycling capability. Michael Voigt, head of Bayer MaterialScience's eco-commercial building unit in China, said the Qingdao building will be the fifth such structure developed by Bayer globally and its first in China. As the world's largest construction material manufacturer and consumer, China has a large potential for saving energy in construction, Voigt said. The Qingdao plant, scheduled to start production in 2012, will serve customers in diverse industries including automotive, construction, furniture and thermoplastic polyurethane. It will have state-of-the-art production equipment. "There is significant manufacturing activity in northern China, and the new plant will provide greater proximity to our customers. It will also enable us to meet the strong growing demand for polyurethane in China, which is expected to grow between 7 percent and 10 percent on a yearly basis until 2014," Owlia said. Bayer's five downstream plants include three polyurethane plants, a new polycarbonate sheet facility and a polycarbonate color compounding and design center. The three new plants will be located in Shanghai, Qingdao and Chongqing. The polycarbonate color compounding and design facility is in Chongqing and the polycarbonate sheet plant will be established at Guangzhou. China has become Bayer's largest single market in the Asia-Pacific region by sales. Bayer China achieved 2.9 billion euros of sales in 2010, to which Bayer MaterialScience contributed 1.8 billion euros.

Market puts the boot into troubled Li Ning - Shares take another tumble after sportswear giant reveals resignations of three key staff - A shopper browses the shelves in a Beijing Li Ning store. The company says orders for the third quarter of this year have dropped 17 per cent. Shares in China's largest sportswear maker, Li Ning (SEHK: 2331), slumped more than 8 per cent yesterday, a day after the company revealed the resignation of three senior executives. The development has triggered further concern in the market over the company, which has already reported a decline in orders for two quarters in a row. Li Ning shares dropped 8.43 per cent to close at HK$13.90, their steepest fall in more than two months. The stock has shed 44 per cent in the past year, making it the third-worst performer in the MSCI China Index. In a formal statement last night, the company said the three resigned in the past two months to pursue "personal career development", adding that their leaving would not have any impact on company operations. Analysts said the resignations were most likely related to the structural changes the company has been making since last year. "Whatever the reason, investors will not take it as a good sign if three senior executives resign within such a short period," Bocom (SEHK: 3328) International Group analyst Albert Yip said. Li Ning, founded by gymnast Li Ning, is struggling to maintain its top spot in the mainland's highly competitive sportswear market. Earlier this year, the company said orders for apparel and shoes for the third quarter had dropped 17 per cent and the total value for orders had fallen 8 per cent. That followed a decline of 7 and 8 per cent in apparel and shoe orders respectively in the previous quarter. By contrast, its major local rivals Anta Sports Products, 361 Degrees and Xtep all recorded double-digit growth in orders for the same period. Though the company expects a better performance in the fourth quarter, some analysts don't believe a turnaround is imminent. Yip said it would take two to three years for Li Ning to streamline its distribution system, which is less efficient, with too many small operators. The company has said it has 90 distributors and 2,700 retailers across the country. About 55 per cent of these retailers operate only one store. Forrest Chan, a consumer researcher at CCB (SEHK: 0939, announcements, news) International Securities, said Li Ning had been losing its edge as it had positioned itself as a premium brand compared with other homegrown operators and now faced competing against stronger international rivals Nike and Adidas. He said the sportswear industry was also feeling the heat of inflation as prices of raw materials soared last year. But with cotton prices plunging 30 per cent in the past two months, he expected sportswear companies would be able to raise their profit margins in the second half of this year. Li Ning's net income rose 17.4 per cent to more than 1.1 billion yuan (HK$1.3 billion) last year, while revenue grew 13 per cent to 9.48 billion yuan.

Hong Kong*:  May 26 2011

Milan Station (1150) made a spectacular trading debut, soaring nearly 66 percent to HK$2.77 from an offer price of HK$1.67. The second-hand luxury bag retailer yesterday chalked up the best Day1 performance by a Hong Kong listing this year after testing an intra-day high of HK$2.96. The accumulated wealth of Yiu Kwan-tat, the chairman of Milan Station and who holds a 75-percent stake, soared by HK$536 million. His wealth rose by HK$76.6 million for every hour of trade. Each board lot of 2,000 shares brought a paper gain of HK$2,200. Also in style, Italian luxury brand Prada kicked off pre-marketing for floating 423.28 million shares - 86.1 percent of it secondary stocks and the rest new shares. High-end British shoemaker Jimmy Choo was acquired by European privately held luxury group Labelux for over 500 million (HK$6.27 billion) from TowerBrook Capital Partners, the Financial Times reported. It is not known if German group Labelux, owners of the Bally brand, will still proceed with Jimmy Choo's Hong Kong listing plan. Staying with luxury, Chow Tai Fook Group appointed Goldman Sachs, HSBC (0005) and JPMorgan for its local listing to seek up to US$3 billion (HK$23.4 billion). The jewelry retailer owned by New World Development's billionaire chairman Cheng Yu-tung plans to launch a dual-currency IPO - in Hong Kong dollars and yuan - as early as the fourth quarter. In other action, MGM China opened its retail books and locked in HK$560 million in margin financing orders - 48 percent of the IPO size - according to four brokerages. Dragon Crown restarted its IPO to raise up to HK$385 million. The fund-raising size has been slashed by 31.7 percent from its first attempt to list locally last December.

Chow Tai Fook hires banks for jewellery IPO - Cheng Yu-tung's group plans Hong Kong listing for the fourth quarter, and could raise up to US$4 billion - Billionaire Cheng Yu-tung's Chow Tai Fook Group has hired Goldman Sachs, HSBC (SEHK: 0005) and JPMorgan Chase for an initial public offering (IPO) of its jewellery retail unit that may raise as much as US$4 billion, sources said. The jewellery chain controlled by Cheng, chairman of New World Development, plans to start trading in Hong Kong as early as in the fourth quarter. The company has more than 1,000 outlets in mainland China, Hong Kong, Taiwan and Malaysia and plans to double its number of stores by 2020, according to Chow Tai Fook's website. "It is an attractive IPO," said Ben Kwong, chief operating officer of KGI Asia, a Hong Kong-based brokerage. "Chow Tai Fook is a long-standing brand in Hong Kong and investors like China-related consumer stocks." The jewellery unit has annual revenue of more than HK$30 billion, according to the company's website. Chow Tai Fook executive assistant Fanny Yu declined to comment on any potential IPO. Companies have raised US$7.8 billion in IPOs in Hong Kong this year. HSBC, which helped manage the first yuan-denominated IPO in the city last month, is the top-ranked underwriter, followed by Goldman Sachs. JPMorgan is in ninth place. The tally for underwriters is poised to jump in coming months as Prada, Samsonite, Glencore and China Guangfa Bank complete share sales in Hong Kong. Prada started gauging investor demand yesterday for an IPO, according to a term sheet obtained by Bloomberg. The sale may raise about US$2 billion, sources have said.

'Taipan' Cheng retires from HSBC's heights - The home-grown banking success story steps down as executive director on Thursday, after rising from childhood poverty to the elite of the industry - HSBC Group executive director Vincent Cheng retires on Thursday, more than three decades after he started work at the bank. When Vincent Cheng Hoi-chuen got into a lift on his first day at Hongkong and Shanghai Banking (SEHK: 0005, announcements, news) Corp in 1978, a colleague politely asked him to get out - he was in the "taipan" lift, for the chairman's exclusive use. Little did he know then that he had taken the right lift, only 27 years too early. Cheng became the first Chinese taipan of the bank in 2005. Though the bank had dispensed with the chairman's lift by then, Cheng was the first local to move into "Taipan House" at 19 Middle Gap Road, where he lived until last year. Cheng, 63, now an executive director of HSBC Holdings, will call it a day on Thursday, after 33 years at the bank. As the city's most well known and respected local banker, he was a home-grown success story. As a boy, his family had to share housing with eight families, days which Cheng remembers as "happy and fun" because "it was like camping every day". The same positive approach helped him overcome a polio-induced disability at the age of six and drove him to fight for the rights of the underprivileged during university. While doing his master's at the University of Auckland in New Zealand, he was so poor that he could not afford a proper meal until he started washing dishes at a restaurant. Returning to Hong Kong in 1978, he had two job offers right away - one, as a bond trader and the other, as an economist at HSBC. His girlfriend, now his wife, urged him to take the HSBC job for the low mortgage rate the bank staff then enjoyed. "I loved working at the bank. When I first started, there were separate towels with each of the officers' names on them in the washroom. I felt so privileged!" Cheng went on to become the chief economist in 1986 and vice-chairman and chief executive of Hang Seng Bank (SEHK: 0011, announcements, news) from 1998 until his appointment as the first Chinese chairman of Hongkong and Shanghai Banking Corp - the group's Asia-Pacific arm - in 2005. He was made the group's executive director in 2008. Once mired in poverty, Cheng had a salary of US$2.41 million last year and owns 674,565 shares in HSBC, which he plans to keep for the long term. "I believe in the strategy of [chief executive Stuart] Gulliver so I'm a long-term HSBC investor." On his time at the bank, he said he learned a lot from former chairman William Purves, who was "very disciplined, very demanding but also a very fair boss". "When I first joined the bank, Mr Purves once bumped into me in the corridor and apologised profusely even though he was the chairman and I, a very junior staff member," he said. Cheng says he took the same approach to staff and did not lay off people, even at the height of the Sars crisis in 2003. A keen karaoke singer, he has sung to raise funds for the community chest and played table tennis with underprivileged children to help charities working with them. "After retirement, I would like to do more community work," he said. "There are many books I want to read and many movies I would love to watch. And of course, there'll be more time for karaoke."

Property tycoon Ronnie Chan Chi-chung has been named as the first Asian to lead the Asia Society, the influential New York-based institution promoting ties between Asia and the United States. He will share the leadership with Henrietta Holsman Fore, a former US government official, as co-chairmen. It is the first time the society has appointed two chairmen since its establishment in 1956. Despite its name, the society has always been dominated by western businesspeople, top officials and academics. Chan and Fore will assume new posts on June 10, as incumbent Charles Kaye steps down. "Asia Society is one of the first organisations of its kind, if not the very first, to create an internal structure that recognises the true partnership between the two sides of the Pacific Ocean," Chan said. "The institution's focus covers more than 50 countries and territories. It is imperative that we understand and connect peoples and cultures so political and economic co-operation can deepen." Chan, chairman of Hang Lung Properties (SEHK: 0101), has a keen interest in international relations. He has been vice-chairman of the Asia Society's board since 1998 and is also the chairman of its Hong Kong centre. Well-known in Hong Kong for his outspoken views on local politics, the property developer has also criticised the US and the West in general. In an article in the Financial Times in January last year, he questioned the Western world's moral authority in the global financial market. He pointed to "America's apparent financial irresponsibility" and argued that a power shift was taking place to "rebalance" the international financial system from West to East. The decision to appoint co-chairmen from Asia and the US aimed to "reflect the rise of global interdependence and growing regional partnerships", the organisation said. "The creation of a joint chairmanship is the latest in a series of milestone changes for the Asia Society as it implements its ambitious expansion plan," it said. The institution is planning new offices in Hong Kong, a project which will involve the conservation of four former British military buildings in Admiralty. The new centre will be open to the public to educate people on the Asia-US relationship. The non-profit organisation, founded by John D. Rockefeller III of the prominent family of US industrialists, has Asia-Pacific centres in Hong Kong, Shanghai, Manila, Melbourne, Mumbai and Seoul, as well as five in the US. The institution runs education and culture projects, and organises events for exchanges on political and economic topics across Asia and the US. In January, President Hu Jintao visited a high school run by the society in Chicago.

Hong Kong and Taiwan are ready to sign a new civil aviation agreement that is expected to increase daily flights between the two places. It is the first deal between them since the handover in 1997. The travel industry hopes the deal will help Hong Kong to see off competition from mainland cities and attract more Taiwanese visitors. Cathay Pacific (SEHK: 0293) Airway's chief executive John Slosar said last week that the airline was interested in one or two more daily flights in addition to the current 108 round-trip flights. The deal comes after protracted talks which have seen the two sides overcome long-standing political obstacles. The existing agreement, which regulates the routes and number of flights between Hong Kong and Taiwan, was first signed in 1996 when the city was a British colony. It has been extended eight times since. Cross-strait ties have eased since Ma Ying-jeou became Taiwan's president in 2008, and Taiwanese travellers now enjoy more direct cross-strait flights. Hong Kong faces competition for mainlanders, with Taiwan receiving individual travellers from across the strait next month. Hong Kong and Taiwan wanted to upgrade the old agreement, but political sensitivities limited official contact after the handover and negotiations started only last year. A Taiwanese government official familiar with the negotiation said a new agreement would probably be signed "by the end of this month". In the past, aviation agreements between the two were handled by commercial organisations: Cathay Pacific for Hong Kong and Taipei Airlines Association for Taiwan. This time it was done by the local Hong Kong-Taiwan Economic and Cultural Co-operation and Promotion Council (ECCPC) and its Taipei-based counterpart Taiwan-Hong Kong Economic and Cultural Co-operation Council (ECCC), two semi-official agencies established last year. A Hong Kong person with knowledge of the negotiations said the city was following the model set out in cross-strait negotiations between the mainland and Taiwan: both sides were represented by government officials but the negotiation was held through semi-official agencies. "Their transport ministry has an official holding the capacity as a director of the ECCC [Administrative Deputy Minister of Transport and Communications Kuo Tsai-wen] and our transport bureau also has an official [Permanent Secretary for Transport and Housing Francis Ho Suen-wai] sitting on the ECCPC. The deal will be signed using the names of the two councils, but in fact the two governmental bodies are the ones in charge," the person said.

The Hong Kong Tourism Board welcomed a new civil aviation pact with Taiwan, saying it could bring more tourist dollars to the city. This could mean at least a 10 per cent growth in overnight vacations in Hong Kong by Taiwanese tourists," said Winnie Shyu, the Taiwan director of the board. Of the 2.16 million visits made by Taiwanese people to Hong Kong last year, 470,000 were for overnight stays at weekends. "Of course, it will also mean a busy time for us later this year," she said, referring to a series of planned promotional activities. Michael Wu Siu-ieng, chairman of the Travel Industry Council of Hong Kong, also anticipated the demand for passenger flights between Hong Kong and Taiwan in both directions would grow this year. This was despite the rising number of cross-strait flights between Taiwan and the mainland. "Although the number of transit passengers has been on the decline, those travelling for leisure from both sides have increased in number," he said. "The tourism promotion bodies on both sides have also been actively targeting visitors." With the number of weekly flights increasing from the current 340 to a reported 410, many travel agencies in Taiwan expect airlines to further cut air fares. This would, in turn, encourage more Taiwanese to visit Hong Kong and vice versa. Taiwan residents made a total of 2,164,750 visits to Hong Kong last year, up 7.7 per cent from 2009. Meanwhile, Hongkongers made 648,298 trips to Taiwan, representing a 9.5 per cent increase, according to official statistics of the two sides. The number of Hong Kong people going to Taiwan increased four per cent to 134,823 in the first three months of this year. But the number of Taiwan visitors dropped by 5.5 per cent during the same period. The Hong Kong Tourism Board now wants to focus on promoting summer family travel and overnight breaks to attract Taiwanese visitors. Hong Kong travel chiefs said the city needed to step up its promotion efforts after Taiwan and the mainland launched direct flights between them in 2008, allowing travellers to skip Hong Kong as a transit stop. With Taiwan and the mainland set to increase their cross-strait flights soon, Shyu said she expected a further drop of about 2 per cent in visits to Hong Kong by Taiwanese businessmen. Shyu said a lot of effort was made to minimise the impact of the direct cross-strait flights, which began after mainland-friendly Ma Ying-jeou became Taiwan president in 2008. She hoped the new pact could allow more regular flights between Hong Kong and other Taiwanese cities. Currently, there are regular flights between Hong Kong and Kaohsiung, Taiwan's second largest city. But there are only chartered flights to Taichung, the third biggest city. "I am hoping for scheduled flights between Taichung and Hong Kong," she said.

A gold statue and a dragon gold bracelet are displayed at a jewellery shop in Hong Kong May 23, 2011. The luxury goods industry has rebounded strongly after the sharp downturn of 2009, with analysts forecasting 2011 to be another record year, particularly for watchmakers, luxury hotels, fashion and leather goods groups. 

Secretary for Education Michael Suen Ming-yeung had failed to remove an illegal structure from his Happy Valley house - despite a Building Department order to remove it in 2006, he admitted on Tuesday. The department had to freeze Suen’s tenant registry on the house in June 2006 after he ignored a removal order on two illegal additions to the ground floor, Suen told reporters. The education minister is the second senior government official caught breaking the law by erecting illegal structures on their property in recent weeks. Four lawmakers had also been implicated. The irregularities were first revealed by the media. They came to light after the government was criticised by the ombudsman for turning a blind eye to illegal structures in rural areas while cracking down on those in urban areas. Suen’s breach happened when he was secretary for housing, planning and lands. He held the position between June 2002 and June 2007. He explained he disregarded the department’s order because he considered “the structure was small and safe”. “I must admit that I should have taken an initiative to deal with the problem earlier. This is especially true as I served as secretary for housing and I should set an example of abiding by building regulations. I should have been more sensitive towards this issue,” Suen said. Suen said he had hired a contractor to remove the structure and works were expected to start on Wednesday. The former housing secretary said that the structure already existed when he purchased the property in 1994 and that he did not know it was illegal.

Security was tight as several hundred of Hong Kong's movers and shakers enjoyed drinks aboard the American aircraft carrier USS Carl Vinson last night. The cocktail reception, hosted by the carrier strike group which operates the vessel, was organized by the United States consulate general. The body of al-Qaeda leader Osama bin Laden was buried at sea from the ship earlier this month after he was killed by US Navy SEALs in Pakistan. Security was tight yesterday afternoon as a crowd waited for clearance outside Fenwick Pier. Consulate spokesman Matthew Dolbow said the guest list could not be disclosed for security reasons but added it was "a cross section of people from Hong Kong." Sailors coming ashore said they knew nothing about what was happening on board except that "important people are coming on." Those invited included US citizens, dignitaries, American war veterans and members of the American Chamber of Commerce. Officers of the People's Liberation Army were also on board. A British businessman, who only wanted to be known as Smith, said guests were taken on a tour of the carrier before the cocktail reception. There was an increased police presence around Fenwick Pier and in Wan Chai. Two marine police patrol boats were seen close to the pier, along with a police van and many police motorbikes. The additional security comes after reports of the unconfirmed death of Taleban leader Mullah Omar, as well as a militant attack on a Pakistani naval base. Police said Hong Kong's terrorist threat level remains "moderate" and that "there is no specific intelligence to suggest that the visiting US ship will become a target of terrorist attacks."

The World Health Organization has honored health chief York Chow Yat-ngok for his efforts to help curb smoking. Chow was awarded the WHO Director-General's Special Recognition Award for his "leadership and political courage" in directing tobacco-control programs. It also cites the role of the secretary for food and health in pursuing legislation that includes creating smoke-free environments in outdoor public areas. It says Chow's commitment to curb smoking is a strong example to political leaders in China and other countries. Previous recipients include Turkish Prime Minister Recep Tayyip Erdogan and King Abdullah of Saudi Arabia. WHO Western Pacific regional director Shin Young-soo will present the award to Chow at a World No Tobacco Day ceremony in Hong Kong on Sunday. A spokeswoman for the health bureau said the government is honored at receiving the award and will continue to devote more resources to protecting public well-being. University of Hong Kong School of Public Health director Lam Tai-hing said the official has received "one of the most prestigious awards." He underlined Chow's contribution by referring to a recent study carried out by the university's medical faculty, which showed a rise in tobacco duties in 2009 resulted in a 51 percent drop in the number of youngsters taking up the habit. "Hong Kong's success also gave the mainland authorities the confidence to curb tobacco use," Lam added. The Ministry of Health this month issued the country's first nationwide ban on indoor smoking at public venues. Sixty-four-year-old Chow, an orthopedic surgeon, took over the bureau in 2007.

 China*:  May 26 2011

ICBC launches dual-currency credit card in global drive - The world's largest commercial bank ICBC launched its bid to promote its dual-currency credit card outside China on Monday - with international investor Jim Rogers among the first holders.

China's yuan weakens 40 basis points to 6.5038 per USD Tuesday - The Chinese currency Renminbi, or the yuan, weakened 40 basis points to 6.5038 per U.S. dollar on Tuesday, extending the weakness to the second straight trading days, according to the China Foreign Exchange Trading system.

China's ban on unauthorized golf courses failed to stem a record 14 percent increase in such facilities last year as developers circumvented rules aimed at halting the erosion of farmland. The mainland added 60 18-hole courses last year, taking the total to 490, said Forward Management Group, a golf tour organizer in China, in a report. Only 10 of the nation's golf facilities are licensed, as operators sometimes register them as country parks or greenbelt areas. The Ministry of Land and Resources banned construction of golf courses in 2004. The ban continues until new rules are introduced, said Gan Zangchun, deputy land inspector at the ministry. "It goes without saying how important it is to comply with the government's farmland threshold policy to ensure grain security," said Zhou Li, a professor at the School of Agricultural Economics and Rural Development of Renmin University of China. Farmland shrank by 8.33 million hectares in the past 12 years. Beijing in 2007 set a threshold of 1.8 billion mu, or 120 million hectares, of farmland as needed to feed the nation's 1.3 billion people. Last year 274,500 mu of farmland was used illegally for projects such as golf courses. The government failed to effectively curb the construction of the courses partly because of local government interests, the land ministry has said without elaborating. Local governments made 2.7 trillion yuan (HK$3.23 trillion) last year selling rights to farmland for non-agricultural purposes, with total land sales constituting 60 to 70 percent of revenue.

China will be the major investment destination for French tiremaker Michelin SA in the next three years, with plans of expanding production and enhancing research and development (R&D) capabilities, said the company's top executive. "We are planning a 1.6-billion-euro ($2.26 billion) investment in emerging markets in the next few years, including China, Brazil and India, as we see huge potential there to further drive our future development," said Michel Rollier, general managing partner of Michelin Group. "And we have already decided to use $1.3 to 1.4 billion of the investment for production facilities in Shenyang, Liaoning province," he added. According to Rollier, as their business develops in China and the city of Shenyang expands, "we need to relocate and build a new factory in the city". The new facility, which is expected to be finished in the next three years, will be used to produce truck and passenger vehicle tires to meet the rising demand from the Chinese market. "We are also in talks with Shanghai Huayi (Group) Co and its subsidiary Double Coin Holdings Ltd about establishing a new joint venture to produce tires," said Rollier. However, he told China Daily that the project is still in the initial phase and declined to disclose further details. China's automobile industry has boomed in the past two years, making the country the largest vehicle market in the world with 18 million units in total sales last year. The country has also been on the radar of multinational tire manufacturers as a future business engine. The world's top 10 tiremakers have all established manufacturing bases in China. Last week, the German tiremaker Continental AG opened its first Chinese plant in Hefei, Anhui province, with a total investment of 185 million euros ($262 million), to produce tires for passenger cars. It will launch another factory in Jinan, Shandong province this week. To maintain Michelin's leadership amid fierce competition, Rollier also said that the company is considering setting up regional R&D facilities in China in the near future. "Obviously we need it in China, as we see the importance of the Chinese market and its consumers. We need to be close to them, and provide products to meet their specific requirements," said Rollier. Michelin also plans to expand its retail network for passenger vehicle tires in China. It currently has more than 3,000 dealerships across the country. "The next challenge is to expand our distribution and service network into smaller cities and inland cities," said Rollier. When compared with the United States in terms of the number of tires produced for passenger vehicles, China is a relatively small market, accounting for about one-third of the US market. However, "China is one of our fastest growing markets, and that's why we need to heavily invest here," said Rollier.

China backs French Finance Minister Christine Lagarde as a candidate to head the International Monetary Fund, the French government's spokesman, Francois Baroin, said Tuesday. "A European consensus is being elaborated. We must have a European. The Chinese are favorable to the appointment of Christine Lagarde," Mr. Baroin told French radio Europe 1. "Given circumstances and the fact that there is no national pride in this matter, France doesn't have to position itself first." Mr. Baroin, who is also French Budget Minister, added that the French government doesn't want to make any gesture that may be interpreted as "contemptuous" or "arrogant" toward emerging countries. IMF member countries have to appoint a new managing director to replace Dominique Strauss-Kahn, who resigned last week amid allegations he sexually assaulted a maid at a hotel in New York. He was indicted Thursday. European countries are expected to support a European candidate, with Ms. Lagarde the likely contender if she decides to run. But several developing countries have said they would rather see a non-European holding the top job at the IMF. Officials at the People's Bank of China, the nation's central bank, hadn't answered written questions about the subject as of Tuesday evening. Asked about the French claims at a briefing Tuesday, a Chinese Ministry of Foreign Affairs spokesman referred to previous comments by PBOC Gov. Zhou Xiaochuan. Mr. Zhou said May 19 that "senior management should better reflect changes in global economic patterns and represent emerging markets." But that comment offered no insight into Beijing's preference for the top job: Zhu Min, a former PBOC vice governor, is already a member of senior management as a senior adviser to the IMF's managing director and was expected to be promoted to deputy managing director before the Strauss-Kahn scandal started.

Intel Corp. informed employees Monday that Sean Maloney, one of the company's best-known senior executives, is moving from Silicon Valley to China to oversee the chip giant's operations there. He will assume the new position of chairman of Intel China, a move that reflects the company's belief that the country is on the verge of becoming the world's largest market for personal computers. "It's an unprecedented move for Intel to place one of our senior executives in China," said Chuck Mulloy, an Intel spokesman. "It underscores the importance of that market going forward." Mr. Maloney has held a series of positions at Intel and at times has been mentioned as a possible successor to Chief Executive Paul Otellini. He has most recently served as an executive vice president for what the company calls the Intel architecture group. He suffered a stroke in early 2010, but returned to the company in January and has gradually been increasing his responsibilities. Mr. Mulloy noted that Maloney is "mentally and physically back to normal and doing very well," and is scheduled to deliver a keynote speech at the upcoming Computex trade show in Taiwan. Mr. Maloney will move with his family to Beijing for two or three years, Mr. Mulloy added.

First expressway bus lane helps shorten commute - A bus travels on a bus lane on the Beijing-Tongzhou Expressway in Beijing, May 24, 2011. The Chinese characters painted on the road read "buses only". The bus lane is the first of its kind on Beijing's expressways and is expected to shorten the present 20-minute commute between Baliqiao and Sihuidong by eight to 10 minutes. 

UN cultural body UNESCO has named opera star Zhang Jun as an “artist for peace” envoy, it said on Monday. The honour recognises Shanghai-born Zhang’s “long-term commitment to promoting intangible cultural heritage, especially the Kunqu Opera,” a form of opera and dance dating to the 14th century and classified by UNESCO, it said. “As UNESCO Artist for Peace, Zhang Jun will help raise national and international awareness of the importance of intangible cultural heritage and its safeguarding, including Kunqu Opera,” it added in a statement. He was due to be invested for the two-year role at a ceremony on Thursday.

Top Chinese legislator starts visit to South Africa - China's top legislator Wu Bangguo arrived in Cape Town on Tuesday, starting an official good-will visit to South Africa.

Hong Kong*:  May 25 2011

Italian luxury fashion house Prada will make its market debut on the Hong Kong stock exchange on June 24, in a highly anticipated offering aiming to raise up to US$2 billion. In the latest move by high end fashion companies to tap the huge China market, the family-owned giant plans to start book-building for institutional investors on June 6 and start its public offering eight days later. The firm will price its deal on June 17, Dow Jones Newswires quoted a term sheet as saying, and it is planning to use proceeds to expand its sales network, increase floor space, repay bank loans and supplement working capital. Prada in Hong Kong could not be reached for immediate comment. The Milan-based group reportedly received approval from Hong Kong’s market regulators last week for its plan to sell 20 per cent of its shares. The move would value the group at up to €8 billion (HK$88.12 billion). The group, which includes the Prada, Miu Miu, Church’s and Car Shoe brands, is 95 per cent controlled by the Prada family and executives. Prada announced in January it would make its first public listing on the Hong Kong bourse in a sign of Asia’s growing appetite for designer goods, especially to capitalise on the cash-rich mainland Chinese markets. China is the world’s fastest-growing market for luxury goods. It is forecast to be the world’s top buyer of products such as cosmetics, handbags, watches, shoes and clothes by 2015, according to consultancy PriceWaterhouseCoopers. Prada will join a slew of other luxury fashion brands also eyeing a listing in Hong Kong, including US upscale handbag maker Coach and luggage maker Samsonite. Prada’s listing plan comes as second-hand luxury handbag retailer Milan Station made a successful debut in Hong Kong on Monday, with its shares soaring as much as 77 per cent after its initial public offering was oversubscribed by more than 2,100 times.

Inflation in Hong Kong rose 4.6 per cent year-on year in April, slightly higher than the 4.4 per cent increase in March, government figures released on Monday showed.

Marine police had seized electronic products worth HK$5 million from two mainland-bound boats in Hong Kong’s northeastern waters early on Monday, a spokesman said.

Professors want to work past age of 60 - Academics at four universities want the current 'ageist' policy repealed, so they can retire at 65 like their CityU, Lingnan and HKUST colleagues - Professors and staff associations at four leading universities are calling for senior management to end the "ageist policy" of forced retirement at 60. Staff at the University of Hong Kong, Chinese University, Polytechnic University and Baptist University want their institutions to follow the lead of three other universities, where retirement has been raised to 65. "This ageist policy is leaving a nasty taste" says Dr Sam Winter, an HKU associate professor. City University, Lingnan University and the University of Science and Technology already have a retirement age of 65. Professors at government-funded universities with a retirement age of 60 can ask for a contract extension, but staff say the process is arduous and often results in substantial pay cuts or changes in titles and duties. The exact details of an extended contract are "not a case of a negotiation - it is a decision", said an associate professor at HKU who recently went through the procedure. "I asked for a three-year extension and I was given a one-year extension and my status was changed to teaching fellow," the professor said. A former HKU professor, who had been earning HK$104,000 a month, was offered only HK$74,000 on extension. "I decided that this was just due to the uncaring indifference of HKU to its staff," the professor said. A PolyU professor told a similar story. "After I turned 60 in 2007, I got an entirely different contract. Before my retirement I got a salary of HK$75,000 a month; now it is half of that and my title has a `visiting' prefix." The staff association had written to management asking for a higher retirement age but the professor said it was like "talking to a brick wall". The association has been asking for an extension of the retirement age since 2008, when it presented senior management with a survey of 492 members. Association chairman Dr Joseph Lee Heung-wing said the request was ignored even though "we found that 76 per cent of academic staff, when given the choice, picked 65 as the ideal retirement age". Anthony Kwok Wai-leung, president of the staff association at Chinese University, says it has made a similar request. "People are getting older and healthier, and should have the option to extend their working limits." This is especially true in Hong Kong, a city that has a life expectancy of 82.2 years, the second-highest in the world. Baptist University staff association chairman Dr Mark Li Kin-yin said he had spoken to the dean about a higher retirement age. He said academic staff should be allowed to choose to work to 65 "because they are not firefighters, they do not have to lift boxes or do physical exercise. Their trade is their mind and their wisdom". HKU staff association president Stephen Chan Chit-kwai said the association had written to senior management to ask for the retirement age of all staff to be increased to 65. A Chinese University spokesman said that "terms and salary will not be renegotiated" for a contract extension for professors. Representatives of the other three universities said any such changes depended on budget constraints, and would not happen in all cases.

HKUST tops Asian rankings - Clear Water Bay campus edges out HKU to gain No1 spot because of its research productivity - Hong Kong University of Science and Technology has pipped the University of Hong Kong to be ranked Asia's best in the QS Asian University Rankings. It is the first time HKUST, which is celebrating its 20th anniversary, has claimed the top spot in the rankings. Last year it was second, behind HKU. This year's league table assessed 1,114 institutions in the region and published a list of the top 200. The city's Chinese University surrendered its fourth place to University of Tokyo, both behind the National University of Singapore. Professor Tony Chan Fan-cheong, the HKUST president, said the university was delighted to learn of the "highly encouraging" result. "To ensure continued success, we will put in even greater effort in recruiting excellent faculty and students, and we encourage entrepreneurship. We will leverage on China's rapid economic growth and investment in science and technology," he said. HKU vice-chancellor Professor Tsui Lap-chee congratulated HKUST, but said his university had been ranked the best in Asia in other reputable rankings. A Chinese University spokesman said various league tables might produce different results and it was more important for the institution to strive for excellence in teaching and research. The QS study was based on various criteria, including academic peer review, student to faculty ratio, and the level of internationalisation and research capabilities. QS research head Ben Sowter said HKUST, which trumped HKU by just 0.2 marks on an overall 100-point scale, had the edge in research productivity. "The overall scores in 2011 are extremely close. The area where HKUST appears to have the edge is in research productivity as denoted by papers per faculty," he said. "This may be facilitated by HKUST's focus on technical disciplines and the gap has widened in 2011 due to an increase in faculty numbers reported by HKU, perhaps in preparation for the introduction of four-year degree programmes in 2012." The rankings are the third Asian university rankings prepared by QS, the company that compiled the Times Higher Education/QS World University Rankings previously. City University and Polytechnic University clung to last year's position, at 15th and 30th respectively, while Baptist University slipped slightly to 49th place. Lingnan was ranked just outside the top 150. Meanwhile, 40 universities on the mainland entered the top 200, including Peking University at 13 and Tsinghua University at 16.

The Transformation of a 'Cultural Desert' - Art Hong Kong Director Saw City's Potential; Show Now Hosts Over 260 Galleries From 38 Countries - Growing up in England as the son of two archaeologist parents meant that Magnus Renfrew spent much of his childhood in museums. "At first I was dragged in kicking and screaming," he says. "Then the kicking and screaming stopped." Mr. Renfrew—the director of Art Hong Kong, the city's largest annual art fair, now in its fourth year—says he doesn't remember a time when art hasn't impacted his life. It even played a part in meeting his wife, who like Mr. Renfrew was an art history major at the University of St. Andrews in Scotland. "On the first day of class, the professor said, 'look around you, your future husband and wife could be in this room,' " he says. Mr. Renfrew—who now lives in Hong Kong with his wife and son—shares the moment when he realized Hong Kong's potential in the art world. It all started for Chinese art in 2006. It was Sotheby's first sale of contemporary Chinese art in New York. At that auction a Zhang Xiaogang [Yunnan-born painter] painting sold for six figures. In an industry that was so focused on European artists, this put China on everyone's radar. I was holding in my hands two of the four known paintings by [Spanish Renaissance artist] El Greco. Of course, I had to have white gloves on. That was during the seven years I spent working at Bonhams auction house, where I had the opportunity to see anything from old masters to contemporary works of art. In June 2006, I put together Bonhams first Asian collection, and that opened up my eyes to China and the East. My first impression of China was shock. I spent the year from June of 2006 to 2007 in various cities, from Kunming to Chongqing, to source art for Pearl Lam [a curator, dealer and collector of Chinese art]. It's just so big and vast. Even when you try to the leave the cities and go to a quieter place like Hangzhou, that's still got a population of a couple million people. One of the strangest works I saw that year was an artist who had built these Gaudi-like buildings that were a system of interlocking ant hills made from bricks in the middle of nowhere. The term "cultural desert" came up in every conversation about Hong Kong at first. I moved to Hong Kong in June of 2007. The idea of this ultramodern city, where you can walk from one end to another completely air-conditioned, like a space hub, was so intriguing. But people were quite down on the city from a cultural and artistic point of view. In a place with such bright lights and busy people, it's really hard to get people to stop and pay attention to art. The first year for Art HK took me on 40 flights in six months. We didn't have an established reputation and so it took being there face-to-face. Manila, London, Paris, Melbourne, New York, Miami, Beijing, Shanghai—the list goes on. We managed to sign on 101 galleries from 19 countries. This year, it's more than 260 galleries from 38 countries. We've come a long way. I'll never forget the first gallery we signed. We were in Shanghai and the owner signed up on the spot. There was a pretty obvious case for why Hong Kong could be a major art hub one day. It's one of the only places where Westerners and Asians feel just as much at home. And with tax and bilingual-language advantages, it had so much potential. I dabbled in painting in my youth, but the last time I painted was Christmas of 2010. Our company went out together and did an art jam. My work was…abstract. I'm most looking forward to all the stands being up for Art HK. We work on it for 51 weeks of the year, but only in our imagination. Those 24 hours when all the stands are built, and then the 24 hours afterwards when everything is placed in—it all becomes real then.

The road to rich pickings - Chief Secretary Henry Tang has no time for the notion that property tycoons unfairly rule the roost in Hong Kong, saying that they should be held as inspirations - Henry Tang Ying-yen rejects the idea that property tycoons unfairly dominate Hong Kong. On the contrary, the chief secretary thinks Hong Kong's most successful people should be held as inspirations. Instead of complaining about the wealth and power of the city's richest man, Tang says, young people should ask themselves: "Why can't I become the next Li Ka-shing?" Tang's remark was made in response to growing discontent with developers among people unable to afford their own homes because of surging prices. For them, "end property hegemony" has become a catch phrase. Hundreds of people marched last Sunday to protest about the issue. Asked if he thought such hegemony existed, Tang said: "No." "I would not use the word `hegemony'. I would only say Hong Kong offers free and open opportunities for people to create their universe and realise their dreams," he said. "Hong Kong is a fair and open society. It is full of opportunities for those who are prepared to capture them." Tang said the developers started small and deserved the rewards of their efforts. "Li Ka-shing, Lee Shau-kee, Kwok Tak-seng - all came from very humble beginnings," he said in reference to the founders of the Cheung Kong (SEHK: 0001), Henderson and Sun Hung Kai property empires. "It's not as if they were born with billions ... So Hong Kong has rewarded them for their hard work," said Tang, whose family runs large textile businesses. Property developers were not the only people to get rich in Hong Kong, the chief secretary said. "I believe property developers have a role to play in our economy ... They are just, I use the word `just', part of the business community. They have been very successful, I agree. Previous government policies have contributed to foster the build-up of very large companies. It is a fact of life. "It is not just the property developers who are doing very well here. We have traders ... we have people who run entertainment." Tang went on to cite examples. "Lan Kwai Fong is not a property development project per se ... imagine if Allan Zeman decides to take his company public, that'll probably do better than Milan Station, which was 2,100 times oversubscribed. Milan Station is not a property developer. We have a lot of successful businesses out of their innovation, out of their hard work, and they are prepared to take risks with their investment and they become successful." What about young people's increasing complaints about a lack of social mobility? "That's a very pessimistic view of their own future," Tang said. "Bill Gates was very young. He did not even complete his college education. He became very wealthy by being innovative. Steve Jobs became very wealthy, also first-generation wealth ... We have people who can accumulate wealth if they are innovative, work hard and take risks." Tang said every young person who complained about the success of Li Ka-shing should ask the soul-searching question: "Why can't I become the next Sasa? What can't I become the next Milan Station? Why can't I become the next Li Ka-shing?" His comments mirrored a controversial public speech he gave in January. Speaking on the theme "Dissatisfaction of the post-'80s generation", he criticised young people for simplifying social problems by claiming government-business collusion, and warned that excessively radical protests could backfire. Acknowledging there was a widening wealth gap in Hong Kong, the chief secretary said education and integration with the mainland economy were two keys. "If you measure the top 10 per cent versus the bottom 10 per cent, it is widening. The reason is that we are becoming more and more of a knowledge-based economy. We have to continue to invest in education so that those who are less competitive in a knowledge-based economy can become more competitive. And we can also mitigate by further integration with the mainland." Tang, who heads the new Community Care Fund which aims to expand assistance to the needy with government money and business-sector donations, added that the city had a safety net to ensure those most in need were taken care of. "I believe that the nature of a net is that how many are left out depends by how tight the weave is ... I believe our safety net is becoming tighter and tighter, meaning we are helping more and more people, less and less people are dropping off the edge."

Power cuts run deep for HK firms - Companies based in the Pearl River Delta are in trouble as everything from no electricity three days a week to rising costs puts their backs to the wall - Hong Kong manufacturers in the Pearl River Delta are battling to maintain operations in the face of power shortages which are disrupting production and pushing up costs. Some have complained of power cuts of up to three days a week in Shenzhen and of two days in Dongguan, a production hub, forcing them to resort to dirtier and more expensive diesel generators, and disrupting production schedules. Key industry bodies have predicted that increasing difficulties in the delta, dubbed the world's workshop, will force more factories out of business. Sources close to the Hong Kong Economic Trade Office in Guangdong said the number of Hong Kong factories dwindled to about 35,000 at the end of last year from 39,000 at the beginning of the year and from the 2007 peak of 80,000. Hong Kong Small and Medium Enterprises Association chairman Danny Lau Tat-pong said manufacturers "had their backs to the wall" because of a series of challenges, including power shortages, rising wages and raw material costs, a state policy of upgrading industries, a rising yuan and Middle East political turmoil. "It is not just difficult," Lau said. "It is extremely, extremely difficult." A manufacturer producing high-fidelity equipment and amplifiers in Shenzhen queried the situation on one social networking site, saying: "How can we survive with suspension of electricity two days a week!" Ricky Yeung, a manufacturer of high-end cooking utensils under the "Siliconezone" brand, said electricity at his factory in the Boan district of Shenzhen had been suspended every Tuesday, Thursday and Saturday since the start of this month. The mainland looks set for its worst power shortages since 2004 owing to limited coal supplies. Yeung said the power cuts were also caused by maintenance work at some power plants, and the Shenzhen municipal government had ordered factories and power plants to cut emissions to clear the air before a sports gala for university students in August. However, these initiatives would not work, because manufacturers, including Yeung, would use diesel-fuelled generators. "I have no choice but to turn them on," Yeung said. "I don't want to because it costs about 1.5 times more than electricity from the power plant." Yeung said the power situation was worrying, with the peak production season looming next month. Lau, who runs a factory near Dongguan producing curtain walls for skyscrapers, said he was faring better, with power cuts only a once a week. The cuts come as manufacturers are already reeling from a rising yuan. Spot yuan strengthened against the US dollar at 6.4926 on Friday from Thursday's 6.5039. The yuan has now appreciated 5.14 per cent since it was de-pegged from the greenback in June 2010, and 1.47 per cent since the beginning of this year. Economists with brokerages such as Morgan Stanley, UBS, Deutsche Bank and Goldman Sachs have predicted that the currency will rise by 5 per cent to 6 per cent this year. Another blow for manufacturers has been the government's policy of boosting minimum wages, which are expected to grow by at least 13 per cent annually in the next five years, to drive domestic consumption as the mainland shifts away from exports.

 China*:  May 25 2011

Shanghai plans to allow residents to invest directly offshore, in a small but significant step toward liberalizing strict controls over China's capital account and easing inflationary pressure from the nation's mounting foreign-exchange reserves. Shanghai's proposal still needs approval from the central government, which may not be given any time soon. But the plan could be an indicator that other cities will follow. Xu Quan, a deputy director of the Shanghai municipal government's financial service office, said at a forum Saturday that Shanghai has submitted the plan to the State Council, the country's cabinet, which is gathering opinions on it.

The proposed international stock board will be denominated in yuan, reiterated an official with China's securities supervisor on May 21 during a forum in Shanghai. Tong Daochi, head of the Department of International Affairs of the China Securities Regulatory Commission (CSRC), made the remarks at the Lujiazui Forum when responding to a question about whether the international board will conflict with the B shares in China. The international board on the Shanghai Stock Exchange will allow foreign companies to list their shares in China. This is the second time that CSRC officials released information about the international board at the forum. The launch of China's international stock board will occur soon, said Shang Fulin, chairman of the CSRC, at the Lujiazui forum on May 20. Prior to the statements by these two officials, Wang Jianjun, deputy-head of the General Office of the CSRC, revealed in Shanghai on May 17, that the time is fast approaching to launch the proposed international board. B shares are overseas-invested stocks issued domestically by domestic companies with face values denominated in yuan, but are subscribed and traded in foreign currencies.

Radical reforms at China Eastern - Airport personnel load a China Eastern Airlines Co Ltd passenger airplane at Beijing International Airport. When he entered the room, Liu Shaoyong, general manager of China Eastern Airlines Group and chairman of China Eastern Airlines Co Ltd, was 10 minutes earlier than he was expected. "All of our time pieces, whether worn on the wrist or kept in the office, are set 10 minutes in advance," he said. "We dare not be behind. What decides our fate is the attitude toward difficulties." In China Eastern, everyone is required not to waste time and make preparations in advance. It is partly because of this state of attentiveness and vigilance that the airline has moved from being near the edge of bankruptcy to becoming a high earner. In 2010, China Eastern Airlines Co Ltd realized a total profit of 5.84 billion yuan ($898 million), a record since its establishment. The company paid taxes of nearly 4 billion yuan, revealing explosive growth in the carrier's profitability. However, two-and-a-half years ago, China Eastern was in the red. In 2008, it lost 13.8 billion yuan, and its debt-to-asset ratio was as high as 115 percent. In Liu's words, what brought the airline back to life was the outcome of three battles - the need to survive, the need to restructure and the World Expo Shanghai 2010. The consequent success story enabled the company to grow even after the expo ended. Liu said the rising demand of air transportation in the country will continue to benefit the airline's robust growth this year, despite the increase in the cost of fuel and domestic competition from high-speed railways. He added the company's transportation capacity will increase 8 to 10 percent in the form of a new fleet of 25 aircraft this year to meet the expected growth of 20 percent in the country's air passenger volume. Next month, China Eastern will officially join the global SkyTeam Alliance in order to be further integrated into the global market and expand its international presence. With renewed and added destinations including London, New York and Rome to lure more international and domestic travelers, the carrier is expected to enhance its routes connecting major cities between North America and Shanghai. In the domestic market, the airline is looking to build Shanghai as its regional hub for passengers in Eastern coastal provinces. Efforts such as setting up marketing centers in East China to further consolidate resources and markets in neighboring key areas including Zhejiang, Jiangsu and Anhui provinces, will be on the agenda to compete with high-speed railways. The high-speed railway networks are believed to have a bigger effect on routes that are less than 800 kilometers. Looking back, as "a phoenix is reborn from fire", said Liu, who landed his current position at the end of 2008, the fast strengthening of today's China Eastern business, brand image and competitiveness drives the Shanghai-based carrier forward. At the end of 2008, China Eastern Airlines, suffered from the international financial crisis. Thanks to strong support from central government, the new leadership of China Eastern was able to undertake 256 measures in a radical reform. Take check-in service as an example. The 10 minutes of pre-service inspection and preparation enable staff to possess more accurate flight information in order to better improve the service of seat reservation, meal checking and passenger requirements. Waiting time has been shortened and communications have been improved. Feedback from passengers has been acted upon. As a consquence, passengers are experiencing a change for the positive in the company. China Eastern Airlines topped the flight punctuality rankings of 2010 with 79.04 percent, more than 3 percentage points higher than the industry average, according to the Civil Aviation Administration of China. It was the third year in a row that China Eastern ranked first for punctuality. China Eastern used to have an unsatisfactory network structure and lack of transfer abilities. With 3,000 new flights, the situation has been improved. The restructuring of Eastern Airlines and Shanghai Airlines in 2009 eliminated unnecessary competition within one city and generated efficient integration. The merger between the two reduced operating costs and enhanced profitability. Through the integration of resources, 315 million yuan in costs were saved and 680 million yuan in redundant investment was cut. Currently, China Eastern flies to 105 domestic cities and 47 overseas destinations. China Eastern has suffered from rising oil prices. Ma Xulun, general manager of the company, works on the principle of profits from tiny margins. That means attention to detail, optimizing flight routes, adjusting the fleet structure and reducing fuel consumption. Nine McDonnell Douglas MD-90 aircraft were replaced with new energy-saving models. China Eastern Airlines has increased or restored several international routes and improved services to attract more international clients. Employees are encouraged to work to the motto: "We strive to do what passengers expect. We fight for unexpected goals. We will send you to wherever you want". As a State-owned enterprise, China Eastern says it seeks to look after staff, customers, shareholders and the wider community equally.

Qi Baishi painting auctioned for record $65m - Chinese painter Qi Baishi's work that was sold for 425.5 million yuan on Sunday night at a Beijing auction. A painting by contemporary Chinese artist Qi Baishi was sold by Beijing-based China Guardian on Sunday for 425.5 million yuan ($65 million), a record high for contemporary and modern Chinese paintings and calligraphy. The high auction price was, in the history of the Chinese mainland art market, second only to ancient calligrapher Huang Tingjian's hand scroll "Pillar Ming," which was sold for 436.8 million yuan in 2009. The work of Qi, entitled "Eagle Standing on Pine Tree with Four-character Couplet in Seal Script," consists of a painting measuring 266 cm by 100 cm and a pair of calligraphy scrolls each measuring 264.5 cm by 65.8 cm. It is said to be Qi's largest work. Qi was born in 1864 in central China's Hunan province and died at the age of 93. Although he relished the portrayal of small things, such as birds, fish, fruit and vegetables, Qi was also known as an outstanding calligrapher. The auctioned work, according to the signature on the scroll, was finished in 1946 when the painter was 86 years old. "Qi Baishi is the most influential artist in China's contemporary and modern art history. This work, with its high price, marks a new era for the market of contemporary and modern Chinese artworks," said Guo Tong, general manger of the contemporary and modern Chinese painting and calligraphy department under China Guardian. The high-profile sale came amid the exponential growth of the Chinese fine art market in recent years. According to a report released earlier this year by, China soared from the ninth place to first in 2010, becoming the world's largest auction marketplace for fine art, overtaking the United States and Britain. The spring auction at China Guardian runs from May 21 to 25 and includes categories such as Chinese painting and calligraphy, porcelain, jewels, stamps and coins, Chinese oil paintings and sculptures, rare books and manuscripts.

A couple choose to marry following the rituals of China's Han Dynasty (206 BC - AD 220) in Lanzhou, capital of China's Northwest Gansu province on May 22, 2011. The couple, surnamed Ma and Yuan dressed in traditional Han wedding clothes, walking side-by-side, slowly entering the ceremonial hall. Unlike a western wedding host, a well-respected elder was chosen as the master of the wedding ceremony. Instead of vowing "till death do us part", the couple vowed Taoyao from The Book of Songs, a Chinese literature classic. The whole wedding ceremony followed Han Dynasty rituals exactly, with all guests sitting down on their knees, creating an air of majestic, divine nobility. "Compared to a westernized wedding ceremony, we wanted to make the wedding as authentic Chinese as possible, and as solemn as it can be", said the bridegroom Ma. This is believed to be the first Han-style wedding ceremony in Lanzhou, local media reported. 

Drought strands 1,300 boats on Grand Canal - Ships stranded due to low water levels are seen near the Zaozhuang section in east China's Shandong province, along the famous Beijing – Hangzhou Grand Canal on May 22, 2011. About 1,300 boats were stranded in the section as of 1 pm on Sunday. 

Hong Kong*:  May 24 2011

The bugle's call - US Army Band and the Military Band of the People's Liberation Army are set to create history - Applications for permanent residency in Hong Kong more than doubled in the four weeks after the government announced its controversial HK$6,000 handout plan. The figure for March represented a 123 per cent increase on the number of applicants in February. The huge rise in applications prompted officials to say they will be "as lenient as possible'' when deciding on a cut-off date to qualify for the handout, announced on March 2 after a budget U-turn by Financial Secretary John Tsang Chun-wah. Official figures reveal that 9,291 people applied to the Immigration Department for permanent residency, more than double the 4,167 who did so in February. Since January 2007, the average monthly figure has been 4,994. A figure for last month is not available. Immigration officials have chosen not to link the increase to a dash for cash. But a spokesman for Tsang said a rise in applications had been expected. "We thought there might be some increase so we have taken that into consideration. "We are confident that the Immigration Department can cope with the expected increase in such applications," the spokesman said. But he stopped short of drawing a direct link between the cash handout announcement and the surge in applications, saying: "That may well be the case, but you will have to ask the Immigration Department if that's abnormal or not." An Immigration Department spokesman said: "We look at trends, but from an operational level - not for release to the media. We can see the trend. It's none of our concern.'' Tsang's spokesman said there would be a cut-off date. "We plan to submit the plan to the Legco financial affairs panel sometime in June so that we can hopefully get the money approved by the finance committee before the summer recess. We will try to be as lenient as possible." Ivan Choy Chi-keung, a lecturer in the Chinese University of Hong Kong's department of government and public administration, described the increase as quite natural. He said: "It will not bring too heavy a burden to the government and it is small compared to the total expenditure." Democratic Party vice-chairwoman Emily Lau Wai-hing, who heads the Legislative Council's finance committee, said of the spike in applications: "If people are legally qualified, of course they should get it. They now know there's money and it's legal. I have no problem".

All That’s Golden Is Good By Amy Ma - The waitstaff at the new Hong Kong restaurant g.e. – it stands for gastronomy extra|ordinaire — will have to be extra careful not to break any plates. One set is made almost entirely of gold. Each gold plate weighs close to five kilograms, and together, the entire 20-piece set is the most expensive thing in the kitchen. Monocromo in Gold at g.e. restaurant in Hong Kong - The plates inspired chef Gianluigi Bonelli, formally of the Kee Club, to create a dish called “Monocromo in Gold.” In it, the chef combines more than nine ingredients with the color gold as his inspiration. Scampi: The focal point of the dish is two pieces of fresh scampi, or prawns, which are marinated first in white miso for an hour. Then, one piece is steamed while the other is battered and fried, tempura-style. “Playing with a duo of textures is something I often do,” says the chef. Sea urchin and corn: Plump tongues of sea urchin, imported from Japan, come close to being gold in color, says Mr. Bonelli. The sweetness of the sea urchin adds another layer of flavor: He serves some tongues raw in the dish, and he uses another portion of tongues to make a sauce with corn water (the juice of fresh corn). Avocado: Sea urchin and avocado make for a “divine combination,” says the chef. He prepares the avocado two ways – one as a light mousse, and the other is made crispy by freezing it in liquid nitrogen. Nasturtium flowers: The leaves and flowers of nasturtium have a bitter and briny flavor; both are edible. “Of course, the petals are gold in color,” adds Mr. Bonelli. The petals are closer to a yellow-orange shade. Carrot: Using carrots three ways – in a sorbet, pickled and baked as chips – Mr. Bonelli adds golden shades of yellow and orange onto the plate. The varying textures of the carrot also affect the taste of the vegetable — from the sweet sorbet to the tart pickles to the savory chips. Gold “loop”: The chef makes a thin piece of gelatin out of scampi stock and gold leaf. The semi-transparent film is then laid over the entire dish to bind all the ingredients together. Virgin olive oil: Premium Italian olive oil, with its golden hue, is drizzled over the entire plate. Price: 250 Hong Kong dollars (US$32) g.e, 2/F Luxe Manor, 39 Kimberly Rd., Tsim Sha Tsui, Hong Kong. Tel: 852-3763-8803

US aircraft carrier arrives in HK on 4-day visit - US Navy's USS Carl Vinson aircraft carrier is seen anchored off the Manila bay, west of Manila May 15, 2011. The American aircraft carrier, USS Carl Vinson, sailed into Hong Kong sea waters Sunday morning on a four-day visit after winning the approval from the Chinese central government. The nuclear-powered supercarrier, from where al-Qaida leader Osama bin Laden's body was buried at sea, was escorted by three ships. Altogether they formed Carrier Strike Group 1, carrying a total of about 7,000 crew members. During the stay, sailors on the ships are expected to enjoy the sights of Hong Kong. "A four-day port visit gives every sailor an opportunity to go out and experience the warmth, the fabulous food and friendship from Hong Kong," said Rear Admiral Samuel Perez, Commander of Carrier Strike Group 1, while addressing media on USS Carl Vinson. Perez also saw the trip to Hong Kong a sign of sound relationship between the United States and China. "The fact that we are coming into this port signals the warm relationship we have between our militaries and our nations." The visit by USS Carl Vinson, which was commissioned in March 1982, caused concerns among Hong Kong citizens given its involvement in the US operation leading to the killing of bin Laden. But Secretary for Security of Hong Kong Special Administration Region government Ambrose Lee said earlier that the threat of terrorist attack on Hong Kong is currently "moderate." "The Hong Kong government has provided us very strong assurance that they would keep our ships and sailors safe," said Perez. "We feel very safe in Hong Kong." U.S. Carrier That Buried Bin Laden Visits Hong Kong - The aircraft carrier that handled Osama bin Laden's burial at sea visited Hong Kong on Sunday, providing a public glimpse of the ship after U.S. military forces killed the al Qaeda leader. Military personnel aboard the USS Carl Vinson were instructed not to discuss the ship's role in Bin Laden's burial during a closely guarded tour open to the press, but a top naval official said the ship routinely conducts sea burials. Scenes aboard the USS Carl Vinson, the ship from which the body of al Qaeda leader Osama bin Laden was buried at sea. The U.S. aircraft carrier is spending four days anchored off Hong Kong. When asked how morale has been on the ship since the disposal of Bin Laden's corpse, Rear Adm. Samuel Perez, commander of the carrier strike force said "I can't talk about the morale on the ship since Osama bin Laden or anything about Osama bin Laden. But I will tell you that there [are] 5,000 sailors on board this ship, and they are some of the most amazing Americans that we have in our nation." A sailor who wasn't authorized to speak publicly about the operation said "that thing that makes us notorious, I can't talk about it." Asked if the ship conducts sea burials often, Adm. Perez said "as a matter of fact, we do…We did conduct burials at sea this deployment for a group of sailors who requested to be buried at sea." He refused to say where on the ship burials take place. The White House said this month that bin Laden was buried at sea May 2 after religious rites were read on the deck of the Carl Vinson. The aircraft carrier and several smaller naval ships are spending the four-day visit anchored within sight of Hong Kong Disneyland, placing symbols of America's "hard" and "soft" power close together. A steady stream of massive cargo ships piled high with Chinese goods steamed by during a driving rain Sunday. U.S. naval visits to Hong Kong were once commonplace in this former British colony. Since China took control of Hong Kong in 1997, visits have continued but have been blocked by Chinese officials during periods of tension between the U.S. and China. U.S.-China military relations have thawed in recent months, culminating May 17 in Washington with the highest level meetings among military officials in seven years. "The fact that we are coming into this port, the fact we have the ties we do, signals the relationship we have, the warm relationship we have between our militaries and our nations," Adm. Perez said. China is working to get into the aircraft carrier game as well, a fact that has caused concern about how it will change the balance of power in Asia. The U.S. Navy's 7th Fleet has been the dominant power in the Pacific since the end of World War II. "Whether or not it's a challenge, that remains to be seen," said Adm. Perez. "I'm very excited for them to try to participate in this area of naval warfare and anything that contributes to regional stability we're big fans of," he said. The 31-year old Carl Vinson is powered by two nuclear reactors and travels at more than 30 nautical miles per hour. It houses more than 5,000 sailors. The deck, which was festooned with fighter jets and helicopters, covers 4 ½ acres. It is named for Carl Vinson, a Georgia congressman and advocate for budget appropriations in the 1930s that paid for the construction of the Pacific Fleet. 

Hong Kong is a city of excess and waste, but a small charity is turning this to its advantage. Foodlink takes leftover food from hotels and restaurants and delivers it to non-government organisations that deal with the poor and needy. Robin Hwang is carrying on the work of her mother, Vanessa, who came up with the idea in 2001. And it's a simple plan that has proved tremendously effective. "We used to only have two beneficiaries that we'd deliver food to, but now we have 13. We also only used to have three sponsors that would give us food and now we have 23," Robin, fundraising director for Foodlink, said. "We've also a waiting list of hotels and clubs who are prepared to give us their food, so we've grown significantly." The outbreak of Sars in 2003 brought the Foodlink venture to a halt just as it was gaining some momentum. But Robin's sister, Charlotte, started it up again in 2009 and before long Robin was involved, too. It was a struggle at first, but when the likes of the Island Shangri-La, the Grand 8Hyatt and Maxim's Catering came on board it was obvious the enterprise had a big future. A Hong Kong registered charity, Foodlink, has six full-time volunteers, two advisers and one full-time driver. Leftover food is collected from the hotels' breakfast and dinner buffets. It's a Monday to Saturday operation with morning and afternoon collections and deliveries. Foodlink matches the organisations donating the food and the charities to which it will be delivered on the basis of need and location. It tries to get the food delivered as quickly as possible to ensure freshness. The group promotes strict 8hygiene and safety procedures and special containers are used to store the excess food, which is refrigerated until delivery. Foodlink tries to organise a regular rota of pick-ups and deliveries to enhance the efficiency of its operations. Robin works in real estate, 8although Foodlink is taking up more and more of her time. "We all pitch in whenever we can. It can get tough, but it's very rewarding," she said. At the moment the organisation operates on Hong Kong Island and at Tsim Sha Tsui, but that may change soon. "What we're hoping to do is get one more van and driver, so we can spread out our operation into 8Kowloon to the likes of Sham Shui Po, where the poverty levels are even higher," Robin said. For more details contact Foodlink at 

Hong Kong is struggling to keep up with developments on Wikipedia as the world's biggest and most popular internet reference site becomes more sophisticated. That is the view of Charles Mok, the chairman of the Hong Kong Internet Society, who fears that the growth of Chinese content on Wikipedia may be limited by a lack of experienced writers and editors. The problem is that since 2006 the number of contributors in the city and on the mainland has dropped because all that can be added to a subject these days is very specific 8details that only a few people in a particular field would know - more general information has already been gathered. As the need for highly specialised information grows, those managing the sites are increasingly less experienced. In Hong Kong and on the mainland, Wikipedia editors are mostly teenagers and undergraduates, who have a lot of spare time to manage the site. Mok said: "I don't think it is a problem as far as inaccurate content is concerned, but it does limit the growth of Chinese Wikipedia content if the profile of the editors and writers is not diverse enough. "The impact on the scope and 8variety of the pages created will be more severe than the worry of 8inaccurate content, as there are still editors all over the world who can come in and correct things when there are errors made." Launched in 2001, Wikipedia is promoted as "the free encyclopedia that anyone can edit". More than 18 million articles (3.6 million in English) have been written collaboratively by volunteers around the world, and 8almost all the articles can be edited by anyone with official access to the site. The policies of Wikipedia strongly espouse verifiability and a neutral point of view, but critics of the site 8accuse it of bias and inconsistencies. They also say it favours consensus over credentials in its editorial processes, and that it focuses too much on popular culture. The site's reliability and accuracy are also targeted. Mok believes that what is needed is to develop a more sharing culture, not just on the internet but in society as a whole.

Former head of the Monetary Authority Joseph Yam Chi-kwong says property prices will continue to rise and that one way to relieve pressure on the market is for developers to release more land. He rejected a recent suggestion that mainlanders should be banned from buying flats in the mass market to stop prices climbing too high. "The increase in asset prices is quite a clear trend," Yam said at a forum yesterday. "It is reasonable. The property market is now not a market for seven million people, it's for more than one billion people." Yam said the trend might not be affected by the end of the second round of quantitative easing - the US Federal Reserve's economic stimulus policy. Some commentators fear that without such liquidity injections share prices in Hong Kong and Asia could sink. "The exit sounds very scary in a sense that [people fear] the tightening [of monetary policy] will cause the market to plunge. But actually this is not the case. The exit just means the monetary policy returning to normal," Yam said. Recent statistics show that property prices have surpassed the peak set in 1997. Yam said the government faced a dilemma - how to make housing more affordable while avoiding disrupting the market. "As a government, there may really be a responsibility to make sure citizens can make home purchases." Yam - executive vice-president of the China Society for Finance and Banking, a think tank linked to the mainland's central bank - said one way to increase the supply of flats was to ask developers to reduce their huge land reserves and build more properties. Meanwhile, Executive Council convenor Leung Chun-ying urged the government to step in to help people afford flats. "Housing is the most pressing problem in Hong Kong. We do not need to drag down property prices to suit people's buying power. But we need to subsidise to fill the gap," he said. Leung reiterated his support for subsidised housing, such as the Home Ownership Scheme, which was launched in 1978 to help people squeezed out of the private property market to buy flats. It was scrapped in 2003. He said reviving the scheme would not hit property prices.

Civil servants in the upper salary bands are set to receive the biggest pay rise since the handover 14 years ago. The Pay Trend Survey, conducted over 12 months from April last year, showed civil servants in the upper, middle and lower salary bands can expect increases of 7.24 percent, 6.16 percent and 5.16 percent, respectively. In 1997-98, those in the upper band received a pay boost of 6.9 percent while those in the middle and lower bands received 6.81 and 6.38 percent, respectively. Civil service unions generally welcomed the findings. The vice chairman of the Senior Government Officers Association Philip Kwok Chi-tak said the figures are acceptable since they exceed the inflation rate of about 4.8 percent. "I believe this will be a good year for our colleagues since they were not satisfied with the pay changes in the past few years. Staff morale may improve," Kwok said. Committee member Ngai Sik-shui, who represents the Disciplined Services Consultative Council, said the figures "fulfill the staff's expectations" and "can boost staff morale." The staff side chairwoman of the Model Scale I Staff Consultative Council, Li Wai-yee, who represents the lower salary band, said she still hopes the increase percentage can be equal to that of the middle band. But some people were shocked, saying the pay rises, saying the pay rises are much higher than in the private sector. "It's too much, and it should not exceed 4 percent," a netizen said in a discussion forum. "Civil servants are getting pay much higher than the market rate," another netizen said. "If they get a big pay rise again, it will widen the gap." The pay trend survey involved 87 large and 29 small companies, covering a total of 184,350 employees. The Pay Trend Survey Committee met civil service unions yesterday to release the findings. "The committee hopes to reach a fair and transparent result that could be passed on to the government as a reference," the committee's alternate chairman, Barry Cheung Chun-yuen, said. The committee will submit its findings to the government on Thursday and civil service unions will make their request on the pay trend on Friday. The final adjustment will be examined in the Executive Council next month. It will consider other factors such as the state of the economy, the government's fiscal position, changes in the cost of living, pay claims of the staff sides and civil service morale. The increase may mean that the lower salary ceiling of HK$15,875 a month will climb to HK$16,694. Salaries of those in the middle band such as junior police and disciplinary force officers earning between HK$15,875 and HK$48,670 a month will go up to between HK$16,853 and HK$51,668. Senior engineers now earning between HK$48,671 and HK$96,885 a month can expect between HK$52,194 and HK$103,899 a month.

Hongkong and Shanghai Banking Corporation will very likely become the territory's second yuan clearing bank soon, HSBC Asia Pacific chief executive Peter Wong Tung-sing said yesterday. BOC Hong Kong (Holdings), a unit of Bank of China (3988), is currently the only yuan clearing bank in the SAR. "We are experienced as a US dollar clearing bank. We have a high chance to be another yuan clearing bank in Hong Kong," Wong said. Yuan deposits in Hong Kong rose to 451.4 billion (HK$539.35 billion) at March-end from 407.7 billion yuan in February, amid appreciation hopes. Meanwhile, HSBC Holdings (0005) chief executive Stuart Gulliver warned the lender's stock price may drop further as strategies outlined last week may take a couple of years to implement. HSBC unveiled plans to cut costs by up to US$3.5 billion (HK$27.3 billion) by 2013 and to be stricter on how it deploys capital amid global requirements for big banks to boost reserves. "The cost savings are likely to come from places outside Asia, although I am looking to the Asian team to manage their non-staff costs reasonably aggressively," Gulliver said yesterday after an informal shareholders' meeting. "There are some parts of the world that need sorting out, and it's not Asia." Gulliver said the lender will increase staff in Asia despite the annual wage inflation in many regional markets standing at a staggering 10 to 15 percent. The UK-headquartered bank earlier said it plans to hire at least 2,000 employees in China and Singapore over the next five years. The lender moved its chief executive's office to Hong Kong from London last year. HSBC may decide to move its headquarters back to Hong Kong by the end of this year amid uncertain tax policy and regulations in Britain, chairman Douglas Flint said.

 China*:  May 24 2011

China Recruiting Gets Harder - As Local Firms Prosper, Foreign Companies Alter Strategy to Find Chinese Managers - As foreign companies increase their presence in China, some are finding that local companies' growing success is making it harder to attract Chinese managers. Phoenix New Media CEO Changle Liu, second from right, after the Chinese firm's NYSE debut this month. In the past, foreign or multinational companies often hired expats from the company's home country for China-based management roles. But now many companies are opting for local talent who speak the language, know the culture and understand the market. At the same time, the prosperity of Chinese companies is heating up competition for talent, forcing foreign companies to alter their recruitment strategies and work harder to match salaries. "In the past, there was a lot of flow from one multinational to the next. Nowadays you see the interflow of executives from multinationals into the domestic companies," says Grace Cheng, country manager for executive-recruiting firm Russell Reynolds Associates Inc.'s Greater China division. In the first quarter, China had the highest number of initial public offerings world-wide, with 110 deals accounting for 38% of total deals globally and 52% of global funds raised, according to Ernst & Young LLP. Last year saw a spate of large Chinese IPOs from the Agricultural Bank of China Ltd., E-Commerce China Dangdang Inc., and AIA Group Ltd. The trend continued with Renren Inc., Phoenix New Media Ltd. and others following suit this year. As Chinese companies go global, their appetite for managers with international experience has grown, making employees at multinational companies prime targets, says Ms. Cheng. A recent survey by executive search firm MRI China Group of over 2,200 employees in mainland China found that 64% had received at least one offer from another company in the last 18 months. John Stroup, chief executive of cable manufacturer Belden Inc., based in Richmond, Ind., says his company has had a harder time lately recruiting and retaining Chinese employees. Chinese managers "are beginning to realize that multinational corporations are not their only option," he says. Mr. Stroup's company has also had to pay more to compete with local businesses, he says. "It's not uncommon for people to have offers from other companies in your category with pretty sizable increases in pay," he says. Belden has 1,900 employees in China, of which 80 are middle and upper management. In order to keep a steady pipeline of qualified managers, Belden changed its recruiting strategy: For the first time last year, it began taking on entry-level staffers it plans to groom into managers. The company formed partnerships with about 30 Chinese universities, from which it recruited a pool of about 1,000 students that it narrowed down through a series of tests and interviews that measure language competency, technical skills and other functions, says Mr. Stroup. In June, Belden hired 10 of those candidates. Information-services firm Wolters Kluwer NV says it doubled its Chinese head count to 200 employees over the last five years. The Netherlands-based company also added a regional C-suite of top corporate officers in China. However, "we do have people leaving Wolters Kluwer, and going to larger, Chinese companies," says China CEO Shasha Chang. To make itself more attractive to Chinese managerial candidates, the company last year launched a rotational program allowing its Chinese employees to spend two weeks to a month working with Wolters Kluwer employees in one of its more than 45 locations world-wide. Ms. Chang says this helps attract Chinese talent, who are eager to gain international experience. This year, the company also is spending 50% more on its talent-management program, says a company spokeswoman. She declined to provide dollar figures. PricewaterhouseCoopers LLP has more than 10,000 employees in mainland China—having hired 1,000 since last June—working across its tax, audit and consulting businesses. China is one of PwC's fastest-growing markets, says its international chairman, Dennis Nally. But as "the state-owned enterprises start to compete much more on a global basis than they did in the past, they are becoming much more attractive for the Chinese," he says. PwC recruits talent from within China, and also targets Chinese expats working in the U.S., U.K. and other parts of the world to work in China, says Mr. Nally. Over the last two years, the number of long-term assignees placed into China has grown by 10%, says the company. Brent Saunders, CEO of U.S. eyecare manufacturer Bausch & Lomb Inc., says that more competitors entering the market in China are driving wages up. In response, Bausch & Lomb evaluates its pay practices in China quarterly, rather than once a year, which it does in most other countries, he says. Four or five years ago Bausch & Lomb only had to compete against other multinational companies for talent; today it is state-owned and local companies as well that are making competition harder, says Mr. Saunders.

Yuan Funds May Be More Illusion Than Oasis - Many private-equity funds are convinced that investing in China with the country's own currency will help them crack a market long on promise and short on deals. They may yet face disappointment. For the last few years, funds denominated in yuan, also called the renminbi, have become all the rage in China's private-equity scene. Goldman Sachs Group Inc. and Morgan Stanley are the latest players to jump into the fray. Goldman recently signed a deal with the Beijing government for a five billion yuan ($770 million) fund. Last week, Morgan Stanley opened a 1.5 billion yuan fund with a partner in Hangzhou. They join TPG, Carlyle Group and Blackstone Group LP, which have all announced yuan funds of their own. One of the biggest attractions of yuan funds is that, in theory, Beijing treats them like domestic investors. They hold domestic currency sourced from domestic institutional investors and wealthy individuals. That frees them from the red tape and other restrictions that bedevil foreigners who set their sights on a Chinese company. Altogether, yuan funds are in the process of raising some $25 billion worth of capital, estimates Bain & Co., the consulting firm. "We're inundated with this work," says Larry Sussman, managing partner at O'Melveny & Myers LLP in Beijing, who works with private-equity funds in China. "Everyone is coming in and setting up." Most firms are still in fund-raising mode, and very few if any have actually put any Chinese money to work. But already, firms that manage dollar funds and are setting up yuan funds, too, are grappling with a conundrum: How do you convince your foreign investors—referred to as limited partners, or "LPs," in the private-equity world—that you are keeping their best interests at heart while you scour China for deals to invest in with renminbi? Foreign LPs already had reason to worry that things weren't going in their favor. When it involves foreigners, approval for an investment in China can take 18 months or longer. Also, more and more companies in China are reluctant to take foreign money because doing so complicates their ability to go public in Shanghai or Shenzhen, thanks to arcane Chinese listing regulations. That's a problem when you consider that new foreign dollar funds focused on China announced plans to raise $60 billion last year, according to Bain, yet existing funds managed to invest only around $11 billion. Piles of money seeking returns from China are building up, and much of it is going nowhere. One solution is to bring foreign LPs into the yuan funds, aligning their interests with those of the domestic LPs. Earlier this month, Shanghai authorities announced a pilot program designed to allow just that. Carlyle and Blackstone are among the five firms participating. There's a catch though. Yuan funds that take money from foreign investors are treated, well, like foreigners. That means they will be subject to foreign investment regulations and restrictions, says Yong Ren, a lawyer for Mayer Brown in Beijing. A deal to invest in a Chinese company, for example, would need sign-offs from China's Ministry of Commerce and the National Development and Reform Commission. In other words, you sacrifice one of the main attractions for setting up a yuan fund in the first place. What's worse, a Chinese LP putting money into the same fund might resent the fund being hamstrung because of its foreign taint. That's why some firms with yuan funds say they would rather remain "pure." Even for those, it remains to be seen whether the ones owned and run by non-Chinese fund managers will be treated on par with the locals when it comes to doing deals or receiving support from state-owned LPs, like the big life insurers or the national social-security fund. Private equity wouldn't be the only industry in which Chinese officials promoted local champions at the expense of foreign rivals. It's not all so grim for the foreigners. Some have wrangled profitable deals before, and some will find smart ones in the future, despite the obstacles. Many Chinese firms will still seek out not just the funds with fat wallets, but those with expertise in management and restructuring, says Vinit Bhatia, a partner in Bain's Asia private-equity practice. So will the firms that want help building a presence overseas. Does it hurt to have a renminbi fund? Some of the biggest names in Western private equity have already concluded that, on balance, it can only help—just maybe not as much as they would wish.

Japan, China, South Korea Eye Trade Pact - The leaders of Japan, China and South Korea pledged Sunday to speed up laying the ground work for a possible three-way free trade pact, in a step to revitalize discussions in light of the economic damage from the massive earthquake and tsunami that struck Japan on March 11. "We decided to complete joint studies among industry representatives, officials and academics on a Japan-China-South Korea free-trade agreement this year, and to follow up by accelerating other joint studies after that," Japanese Prime Minister Naoto Kan, Chinese Premier Wen Jiabao and South Korean President Lee Myung-bak said in a joint statement after a summit in Tokyo. While the path to any actual agreement on a trade pact remains fraught with difficulties, the agreement among the leaders reflects a renewed willingness to mull closer economic ties despite recent diplomatic spats. China temporarily curbed exports to Japan of rare-earths—a key material in many high-tech products—late in 2010 following a flare-up in the countries' longstanding territorial dispute over the islands known as Diaoyu in China and Senkaku in Japan. The leaders said they are now pushing to step up talks toward a trade agreement given a shared desire to "strengthen cooperation to boost the region's vibrancy and dynamism and lead Asia's strong growth." China, Japan and South Korea account for around 20% of the world's total economic output, a fact major business and trade lobbies from the countries cited in asking the leaders to conclude a free-trade agreement as soon as possible. The business communities in each country will work together to promote "industrial and regional recovery in Japan" following the devastating 9.0-magnitude quake and tsunami, the Japan Business Federation (Keidanren), China Council for the Promotion of International Trade and the Federation of Korean Industries said in a joint statement issued to the countries' leaders at a business summit in Tokyo on Sunday afternoon. "We reaffirm the importance of Northeast Asian supply chains to the global economy and collaborate to restore and maintain their smooth functioning," the statement added. Speaking at a joint press conference after the summit Sunday morning, South Korea's president alluded to the challenges of pursuing closer economic ties despite long-standing historical issues and despite the countries often vying as economic and political rivals. "There have been some inconvenient situations," Mr. Lee said. "However, overcoming these inconvenient situations we are showing an attitude of cooperation to move forward." Mr. Lee said he expects progress toward a pact to speed up, while Mr. Wen said he supports launching negotiations on an agreement next year. The leaders also called for greater cooperation on nuclear safety and disaster preparedness and reaffirmed the importance of nuclear energy, after the March 11 earthquake and tsunami set off the worst nuclear disaster since Chernobyl at the Fukushima Daiichi nuclear plant northeast of Tokyo. China and South Korea will apply lessons learned from Japan's nuclear accident and the three countries will discuss how to quickly exchange information and analysis of air currents when nuclear accidents occur, they said. While affirming the continued importance of nuclear energy, they also called for cooperation on renewable energy and energy efficiency. Mr. Wen and Mr. Lee arrived in Japan on Saturday, paying their respects to victims of the March 11 quake, tsunami and nuclear disaster in the country's northeast before meeting Mr. Kan for talks. In Fukishima City, around 60 kilometers from the Fukushima Daiichi reactor complex, the leaders ate local farm products, in what Mr. Kan billed as "the most effective way to demonstrate to the world that Japan is safe and that Japanese food is safe." Japan won some concessions on what it sees as overly stringent restrictions imposed on its food products due to radioactive contamination concerns. Mr. Wen said Sunday that China will reduce the number of Japanese prefectures from which it bans food imports from 12 to 10, and will stop requiring radiation inspection certificates for some products, according to the Japanese Foreign Ministry. China will still require certificates for vegetables, dairy, fishery and other products. Noriyuki Shikata, a spokesman for Mr. Kan, said late Sunday that more needs to be done to protect Japanese exports from damage inflicted by what he called "unscientific reasons." While primary industries—the segment of the economy that includes agriculture, fishery, forestry and mining—represent just 1.5% of Japan's economy, the government is eager to burnish Japan's tarnished image as a producer of high-quality, safe food products. Meanwhile, Mr. Kan said he expressed concerns during the summit about North Korea's uranium enrichment. The three leaders agreed it's important for North Korea to show sincerity before six-country talks on its nuclear program can resume and agreed to induce North Korea to take appropriate action on the nuclear issue, Mr. Kan said. Mr. Wen said he was happy to see the situation on the Korean Peninsula has eased somewhat. Tension between North and South Korea ran high late last year after North Korea attacked the South's Yeonpyeong Island with artillery fire that killed two South Korean soldiers and two civilians. The leaders also called for cooperation to root out terrorism and said they will boost efforts to combat common threats, such as piracy near Somalia.

Wen pledge on Japanese produce - Premier vows to import more food from quake-hit country as he meets survivors and sees devastation - Premier Wen Jiabao (right) and South Korean President Lee Myung-bak sample locally grown cucumbers at a shelter in Fukushima yesterday. China will import more agricultural products from Japan as part of measures to help its earthquake-hit neighbour recover, Premier Wen Jiabao said as he started a two-day visit yesterday. Immediately after his arrival, he visited a devastated area in Yuriage, eastern Japan. He went on to shelters for evacuees in Sendai and Fukushima. He was accompanied by South Korean president Lee Myung-bak, with whom he will today attend a summit with Japanese Prime Minister Naoto Kan. Speaking at a fish market in Yuriage, Wen said China would buy more Japanese agricultural products, but added that food safety would not be compromised. China has banned imports of food from dozens of Japanese prefectures for fear of radioactive contamination from the Fukushima Daiichi nuclear power plant, crippled by the 9.0-magnitude quake and huge tsunami that struck the northeastern coast of Japan's main island, Honshu, on March 11, killing tens of thousands. To show he was confident of the quality of Japanese food, he and Lee sampled locally grown vegetables, including tomatoes, cucumbers and strawberries, in Fukushima. "They are delicious," he said. "I believe the radiation leakage can be contained, and people's lives and food safety can be protected." Two Chinese delegations, one focusing on post-disaster reconstruction and the other on trade and investment, will soon visit Japan. Beijing will also step up co-operation in disaster prevention, research on alternative energy and nuclear safety, and foster tourism between the two countries. "I believe Sino-Japanese ties will be improved with the post-disaster reconstruction work," Wen said. He and Lee also visited the area near the damaged power plant. "I come here not only to pay tribute to the dead, but also to see the survivors. I hope they can live better," he said. "Natural disasters may collapse our homes, but they can never defeat the determination of the people." As well as the three-way summit, Wen will also hold bilateral meetings with Kan and Lee, Xinhua reported.

Pimp film revives Chinese cinema's rebellious streak - Former fashion designer skirts censors in echo of the once-defiant spirit of mainland directors at Cannes - Time was when China was represented at the Cannes Film Festival by films the leaders in Beijing detested. From the late 1980s to early this century, directors such as Chen Kaige and Zhang Yimou defied censors to bring their politically sensitive work to the French Riviera, winning sympathy and awards. Since then, those once-blacklisted directors have returned to Cannes with films that have Beijing's blessing. But just when the cultural apparatchiks thought the rebellion was over, along comes a former fashion designer with an unlicensed film about pimps - characters that are off-limits in the mainland's official cultural conversation. "It's always been about taking risks," says Zou Peng , the director of Sauna on Moon, which premiered on Wednesday at International Critics' Week, an annual programme alongside the main festival. "I've long expected that this film will not be released back in mainland China. This doesn't really affect how I create films. As long as I can stick to my ideals, it's not a question for me at all." It's not the first time that the 40-year-old native of Harbin , Heilongjiang province, has sneaked past mainland censors and brought his work to a major international film festival. His directorial debut, A Northern Chinese Girl, featured in Berlin and Hong Kong in 2009. While his first film was somewhat controversial - it centres on a 19-year-old woman entangled in Harbin's underworld - Sauna on Moon explores a profession that the government readily condemns. Set in Macau but mostly shot in Guangdong, the film follows the struggles of a brothel owner to keep his business afloat peddling the services of young women seeking a fortune that a factory job can't provide. Zou said his film offered a look into how people tried to keep abreast of massive social changes as the mainland lurched towards a market economy over the last 20 years. "I came to Guangdong in 1991 and only left in 2005, so this is also my story," he said. "I worked in cities like Shenzhen and Dongguan and saw first-hand what economic development brought about." Zou studied design in Beijing and developed fashion labels in Guangdong, but returned to Beijing in 2005 to study film-making. Graduating in 2008, Zou spent 2 million yuan (HK$2.39 million) of his money to finance A Northern Chinese Girl. Sauna on Moon cost him twice that amount, but he was backed this time by a mainland businessman who did not interfere with his work. "He even said it's better for me not to tell him what I'm doing," Zou said. His next plan is to shoot a story about the lives of gangsters.

Hong Kong*:  May 23 2011

Lucky three share Mark Six jackpot - Record frenzy of ticket buying equal to a HK$50 gamble by every man, woman and child in the city - The record Mark Six jackpot that sent the city into a ticket-buying frenzy was finally shared by three lucky winners last night - each one scooping HK$44.5 million. After the longest jackpot rollover in more than 30 years, the huge pot resulted in unprecedented queues at Hong Kong Jockey Club outlets across the city. The record turnover of HK$343 million represented an almost HK$50 gamble for every man, woman and child in the city. The winning numbers were 13, 15, 18, 30, 32 and 48. The extra number was 8. The second prize of HK$1.39 million was won by 11.5 tickets, while 481.5 tickets claimed the third prize of HK$88,440. Queues at Jockey Club outlets grew steadily during the past three days with turnover passing HK$300 million at about 7pm yesterday. In the afternoon, the queue for tickets at a branch in Jaffe Road, Wan Chai, extended 10 metres into the street. Many office staff sneaked out from work to place their bets. Anna Wong Chun-yan, 24, spent HK$120 and said she hoped to buy flats if she won the first prize. "The property price is so high now. It's difficult for us to earn enough from working to get a flat," she said. Crooks also tried to cash in on the act, with a fraudulent website claiming to know the winning numbers and seeking thousands of dollars to reveal them. In a video on the website, six people claiming to be members of the Hong Kong Monetary Authority each picked a number from a laptop computer. A Hong Kong Jockey Club spokeswoman said the website was a scam and the club had reported it to the police.

Hong Kong Art Week: What to See - Zhang Huan’s ‘Three Heads, Six Arms’ — seen here in San Francisco — will be on show in Tsim Sha Tsui until June 30. The Hong Kong International Art Fair -- Art HK for short -- opens Thursday, but it's just one of a weeklong series of events that include outdoor happenings and sales by more than a dozen auction houses. Hong Kong’s international art fair — Art HK — opens Thursday, but it’s just one of a weeklong series of events that include outdoor happenings and sales by more than a dozen auction houses. Of course, Art HK is the main draw, writes Alexandra A. Seno in an article for Weekend Journal Asia. Big dealers are flying in from New York or London, showcasing what some mischievously call “The Greatest Hits” — high-priced works by art-world stars. Some of the Art HK treats will include pieces by artists currently beloved on the international circuit but rarely seen in Asia, among them South Africa’s William Kentridge, Olafur Eliasson from Denmark and the late French-American sculptor Louise Bourgeois. But the fair will also feature plenty of art that speaks local: Of the 250 galleries at Art HK this year, 22 will be from Hong Kong, the most in the fair’s history. Here are excerpts from the Weekend Journal story, highlighting the top 10 picks for Hong Kong and Chinese art exhibits and happenings around the city during art week.

 China*:  May 23 2011

Beijing closer to taking yuan international - Bank of China governor says rules being drawn up to promote use of the currency in cross-border foreign direct investments - Beijing is drawing up a rule to allow foreign investors to use yuan for cross-border direct investment on the mainland, taking a substantial step forward in internationalising the local currency. The policy is likely to materialise in several months, according to Hong Kong's Secretary for Financial Services and the Treasury, Chan Ka-keung. The liberalisation follows a pilot scheme in July 2009 when Beijing allowed companies to settle trades in yuan. Zhou Xiaochuan (pictured), governor of the People's Bank of China, told the Lujiazui Forum in Shanghai yesterday that Beijing would cautiously promote the use of the yuan in cross-border financial transactions to support the real economy. "It is a brand new topic," Zhou said. "After all, it creates a new and tremendous opportunity." Currently, overseas investors convert foreign currencies into yuan for direct investment on the mainland, known as FDI (foreign direct investment) projects, subject to regulatory approvals. The yuan is not convertible under the country's capital account, and Zhou said the process to make it fully convertible would be "gradual". By allowing FDI investment in yuan, Beijing would widen overseas yuan deposits' access to the mainland as investors look to profit from the growth in the world's second-largest economy. The liberalisation is part of Beijing's efforts to raise the yuan's international profile as it widens the currency's usage. In Hong Kong, yuan deposits have jumped to about 450 billion yuan (HK$537.3 billion) from about 89 billion yuan a year ago, Chan said. Yuan trade settlements in Hong Kong hit 370 billion yuan last year, from only two billion yuan in 2009. Policy-makers in Beijing are studying how to monitor fund flows before liberalising cross-border yuan investment, Chan said on the sidelines of the forum. "Hong Kong, as an offshore yuan centre can help raise yuan before they are transferred back to the mainland for investments," he added. An offshore trading centre allows non-Chinese companies, institutions and residents to trade the yuan since it is not fully convertible. Beijing is expected to launch a long-expected pilot programme under which the Hong Kong subsidiaries of mainland brokerages will raise yuan funds for A-share investments. The so-called mini qualified foreign institutional investor (QFII) programme is technically ready, Chan said, without giving a clear timetable. Cross-border yuan investments would help Hong Kong consolidate its role as a dominant offshore yuan centre amid growing interest from foreign investors in mainland-based projects. But Beijing would probably move slowly on the liberalisation amid worries of worsening domestic inflation. Premier Wen Jiabao's cabinet is facing an uphill task, seeking to tame stubborn inflation this year while still avoiding a hard landing. An influx of fresh funds could exacerbate inflation. China is seeking a wider use of its currency to reduce reliance on the US dollar as Beijing is worried about its massive holdings of US dollar-denominated assets. The central government attempted to develop Shanghai as the second offshore yuan centre last year but backed off after just a few months. Shanghai, the mainland's financial capital, is now focusing on fine-tuning its capital markets by launching more trading tools to attract foreign investors. The Shanghai Stock Exchange is likely to open its international board this year where foreign firms such as HSBC Holdings (SEHK: 0005) will be traded. NYSE Euronext chairman Jan-Michiel Hessels said yesterday that the exchange operator was interested in listing on the international board. "That's a distinct possibility," he said. "We are strongly interested."

President Hu Jintao yesterday saluted Pakistan's prime minister as an "old friend" of Beijing, extending more warm words to Islamabad as it faces US pressure after Osama bin Laden's killing. Yousuf Raza Gilani has spent much of his visit to China lauding Pakistan's close ties with Beijing, as pressure mounts following the raid that led to bin Laden's death and US lawmakers demand a review of aid to Islamabad. "Our all-weather friendship and strategic co-operative partnership has stood the test of time and the changes in the international and regional situation," Gilani said in a speech at Peking University on Thursday. "We have stood by each other at all times and under all circumstances," he said, a message that has permeated the four-day visit. Yesterday, before their talks at the Great Hall of the People, Hu said Gilani's visit would "certainly give a strong boost to the good neighbourly friendship and mutually beneficial cooperation" between the two countries. Islamabad, always close to Beijing, has highlighted that relationship in the wake of the May 2 killing of the al-Qaeda leader by US special forces on Pakistani soil, an operation that has thrown US-Pakistan ties into turmoil. US Senator John Kerry and US special envoy Marc Grossman were both in Islamabad this week to try to stem the damage done to relations that are key to a decade-long US-led fight to end the Taliban insurgency in Afghanistan. Lawmakers have called for a review of US aid flowing into Pakistan, saying Islamabad must do more to combat extremists and explain how bin Laden could have lived in a Pakistani garrison town, apparently for years, undetected. In Beijing, Defence Minister Chaudhry Ahmed Mukhtar announced Pakistan hoped to take delivery within six months of 50 JF-17 fighter jets built jointly with China, Pakistan's main arms supplier. Each plane is believed to cost about US$20 million. "We think there is a good deal," Mukhtar told reporters. Pakistan's air force has a fleet of Chinese aircraft, including F-7PGs and A-5s, but also US F-16s and French Mirages. The neighbours began developing the JF-17 together in 1999 and Pakistan has said it wants 250 of the jets. In November last year, Islamabad said it would buy Chinese missiles and flight systems for the jets, Chinese state media reported. The two countries also have growing commercial links - two-way trade totalled US$8.7 billion in 2010, up 27.7 per cent year on year, according to Chinese data - and have collaborated extensively in the energy sector. Gilani on Thursday urged Chinese business leaders to invest in the sector. Power shortages in Pakistan have cut production to about 80 per cent of the country's needs. China, meanwhile, needs Islamabad's help in stemming potential terrorist threats in its far-western mainly Muslim region of Xinjiang , which borders Pakistan. "China is willing to strengthen the security dialogue and cooperation with Pakistan to jointly fight the `three forces' [of terrorism, separatism and extremism]," Hu told Gilani.

Chinese Premier Wen Jiabao on Saturday showed support for Japan's work to recover from a powerful earthquake and tsunami in March by travelling areas in the tsunami-ravaged northern areas of Japan, ahead of a summit with Japanese Prime Minister Naoto Kan and South Korean President Lee Myung-bak in Tokyo. Touching on the contentious topic of China's stance regarding Japanese imports, Mr. Wen said the country is willing to continue importing agricultural and other products from Japan as long as they are certain to be safe, China's Securities Times reported Saturday. China banned certain food and agricultural imports from Japan after the earthquake amid concern about possible radioactive contamination. Last month China expanded the ban to include edible agricultural products and feed from 12 areas of Japan, including Tokyo. The Chinese government and people are willing to continue supporting the Japanese people's relief and post-disaster reconstruction work," Mr. Wen said while visiting Japan's Miyagi prefecture, the state-run Xinhua news agency reported. The move marks the first time that foreign leaders have visited Fukushima City, located close to the stricken nuclear power plants. Both China and South Korea were critical of Japan's decision to release radioactive water into the ocean. Further details emerged Saturday on past releases of radioactive water into the sea, when Tokyo Electric Power Co., the operator of the stricken nuclear power plant, said a water leak from a storage pit outside the No. 3 reactor of Fukushima Daiichi resulted in about 100 times the annually permitted level of radioactive material, following a much larger leak from the No. 2 reactor. But Tepco said the leak from the No. 3 reactor was largely contained in an area immediately around the site, with containment fences keeping the contamination from entering the broader ocean. The leak is believed to have started on May 10 and lasted for 41 hours, releasing 250 cubic meters of contaminated water into the sea, a company spokesman said at a news conference. Mr. Wen's visit follows a period of tense relations between China and Japan after a flare-up last year in their longstanding territorial dispute over the islands known as Diaoyu in China and Senkaku in Japan. The visit could help further smooth ties after China sent a rescue team, fuel supplies and 30 million yuan ($4.6 million) in humanitarian aid to Japan in the days after the quake. Mr. Wen spent about a half hour at the Tatekoshi Elementary School in Natori, where the school gym is serving as a shelter for 123 people. He sat down with four families and spoke through an interpreter. He gave out gifts, including stuffed pandas, wind-up flashlights and radios, according to Kyodo news. South Korea's Mr. Lee also visited Miyagi on Saturday to offer flowers and voice support for Japan's recovery, Kyodo reported. Messrs. Wen and Lee were next to scheduled to meet Mr. Kan in Fukushima City, about 60 kilometers from the troubled Fukushima-Daiichi nuclear reactor, and to travel to Tokyo for a dinner meeting followed by talks Sunday on topics including disaster preparedness and nuclear safety. 

Chinese, US army bands join forces to play at UN - The United States Army Band "Pershing's Own" and the Military Band of the People's Liberation Army (PLA) of China perform a joint concert at the United Nations General Assembly Hall in New York, May 20, 2011. 

Sandvik still sees opportunities in nuclear power - A worker for Sandvik AB's mining and construction unit in Jiading, Zhejiang province. Since 2009, the Swedish industry group has provided parts to Shanghai Electric Nuclear Equipment Co Ltd and Harbin Electric Nuclear Equipment Co Ltd. The international engineering group Sandvik AB still sees the development of nuclear power as one of its important business opportunities in China, according to the company's president and chief executive officer. That's in spite of the nation's current suspension of approvals for nuclear projects. "I personally believe nuclear can be a very good and safe energy source for China to reduce its development costs in the long term," Sandvik's Olof Faxander told China Daily on Thursday. Sandvik provides steam generator tubing and nuclear fuel cladding tubes for both pressurized and boiling water reactors for nuclear stations. Since 2009, the Swedish industry group has provided parts to Shanghai Electric Nuclear Equipment Co Ltd and Harbin Electric Nuclear Equipment Co Ltd. Those deliveries will be concluded by 2013 and are valued at more than $300 million. China's State Council suspended the procedure for nuclear project approvals on March 16, five days after an earthquake and tsunami triggered a nuclear crisis in Japan. owever, Japan's nuclear facilities are old and use technologies developed in 1960s. Modern technology has moved on since they were built, providing safer power plants. Last month, Lin Chengge, a senior expert at the State Nuclear Power Technology Corp Ltd, told China Daily that new nuclear power projects may soon be approved, probably in August, when the nation's nuclear safety plan is issued. Regarding the suspension, Faxander said: "I think the good thing is they (the Chinese government) will have a project safety review on current projects." He added that nuclear power will be important for China's future. According to the China Electricity Council, China had a total of 10.82 gigawatts (gW) of nuclear capacity at the end of last year. It's expected that the nation will add 12 gW every year in the near term, despite Japan's recent experience. Sandvik's annual sales growth in China was more than 26 percent on average over the past eight years. Its sales in the country exceeded 5 billion yuan ($769 million) last year, accounting for 6.8 percent of the group's global business. This made China the fourth-largest market for Sandvik. The largest market, the United States, accounted for 12.1 percent of the group's total sales. "For continuous growth, we will look for opportunities, and we'll find new ways of growing in China," said Faxander. In addition to nuclear power, Sandvik is also acting as an upstream provider for China's wind- and solar-energy companies. "Economic growth drives urbanization in China, and enormous numbers of people are moving into the city," said the CEO, adding that the demand for energy will be high, which will support development of the engineering industry.

Hong Kong*:  May 22 2011

Li Ka-shing won't be drawn on who will be next chief - Asia's richest man says he will back any capable candidate in next year's poll for the city's top job. Asia's richest man Li Ka-shing yesterday shied away from speculation about who the next chief executive will be, saying he would support any capable candidate who had the trust of Beijing and the Hong Kong public. Asked whether Rita Fan Hsu Lai-tai would be the city's next leader, he said: "She is a friend of mine." Fan, the former Legislative Council president, is seen as the dark horse in next year's chief executive election. She is also the only Hongkonger who sits on the National People's Congress Standing Committee. Li was speaking after the Cheung Kong (Holdings) (SEHK: 0001) and Hutchison Whampoa (SEHK: 0013) annual general meeting, where he was also asked to comment on the Community Care Fund. The HK$10 billion fund, in which the government is to match a HK$5 billion contribution from the business sector, was unveiled in Chief Executive Donald Tsang Yam-kuen's policy address in October, but so far only HK$680 million has been secured from the city's tycoons, with another HK$1.12 billion pledged. Li said half of his HK$500 million donation to the fund would come from his group's three listed firms - Cheung Kong, Hutchison Whampoa and Power Assets Holdings, formerly Hongkong Electric (SEHK: 0006) Holdings. The remaining HK$250 million would come from the Li Ka Shing Foundation, he said. "Shareholders' benefits are always my top priority," he said. "When we committed our donation to the Community Care Fund, my foundation contributed half. I think everyone should be happy to ... do something for the community." The second round of the "Love Ideas, Love HK" campaign funded by Li's foundation had received more than 900 proposals, he said.

Five companies, including Italian fashion house Prada SpA, are seeking more than $9 billion from Hong Kong investors in the next two weeks, according to people familiar with the situation, suggesting the window for fund raising in the city has reopened after a hiatus following the earthquake in Japan. Prada received regulatory approval Thursday for its plan to launch a Hong Kong initial public offering that could raise up to $2 billion, a person familiar with the situation said Friday, joining U.S.luggage maker Samsonite Corp., which is seeking to raise $1 billion, to list on the Hong Kong stock exchange in June. Meanwhile, Huaneng Renewables Corp., which started pre-marketing its relaunched IPO Thursday, plans to raise $988.2 million ahead of listing in Hong Kong on June 10, another person familiar with the situation said Friday. Other companies seeking to tap funds in Hong Kong in the next few weeks include casino operator MGM China Holdings Ltd., which aims to raise up to $1.5 billion, and Australian mining firm Resourcehouse Ltd., which is raising up to $3.6 billion. These deals are testing the market just days after Glencore International PLC successfully raised $10 billion in a London-Hong Kong listing in the world's largest IPO this year. The latest listing flurry follows a lull immediately after the March 11 quake in Japan during which deals such as Chinese curtain walls maker Yuanda China Holdings Ltd. and Perth-based lithium concentrate miner Galaxy Resources Ltd. were scrapped amid volatile markets. Yuanda China has since come back to the market and successfully raised funds. Prada, which aims to begin book-building for institutional investors in the second week of June, is among a growing band of global brand names seeking a Hong Kong listing. Brand-name companies are keen to raise their profiles in Asia so they can sell more products to the region's growing ranks of affluent consumers. They are also looking to tap the increasing amount of Chinese capital flowing across the border into Hong Kong, bankers said earlier. Hong Kong was the world's biggest IPO market last year, with $57.7 billion raised from 87 listings. Prada, which has failed several times over the past decade to list its shares, booked record sales of €2.05 billion ($2.9 billion) in the fiscal year ending Jan. 31, 2010, up 31% from a year earlier, when sales totaled €1.56 billion. Earnings before interest, taxes, depreciation and amortization, or Ebitda, reached €535.9 million, up 85% from a year earlier. Prada, which is planning to sell a 20% stake in the family-run firm, owns the eponymous luxury label as well as the younger Miu Miu fashion line and upscale Church's shoe brand, and is 95%-owned by designer Miuccia Prada, her husband, Bertelli, and other family members. Intesa Sanpaolo acquired a 5% stake of Prada in 2006, paying €100 million and valuing the entire company at €2 billion at that time. Huaneng Renewables, the wind-power unit of China Huaneng Group, plans to offer 2.486 billion shares in a tentative price range of HK$2.32-HK$3.09 each in a second attempt at a Hong Kong IPO, the person familiar with the deal said Friday. The price range may change and the final price will be subject to prevailing market conditions, the person said. The wind-farm operator, which scrapped a plan to raise up to $1.28 billion in a Hong Kong IPO in December, is scheduled to start book-building for institutional investors May 27 and list on the Hong Kong stock exchange June 10, according to a term sheet seen by Dow Jones Newswires on Thursday. Separately, U.K.-listed Kazakh copper miner Kazakhmys PLC has decided to list in Hong Kong by introduction without raising funds, a person familiar with the situation said Friday. The person didn't give a reason for the company's decision and the new timetable for the listing. Kazakhmys had earlier considered raising around $200 million by issuing shares or by introduction, the person said. The company Monday announced its intention to pursue a secondary listing of its ordinary shares on the Hong Kong stock exchange, adding that it considers that this will provide the company with an additional channel to raise capital in the future and gain access to a wider range of institutional and retail investors. Goldman Sachs Group Inc., Intesa Sanpaolo unit Banca Imi, Unicredit SpA and Crdit Agricole SA are handling Prada's IPO. Morgan Stanley, China International Capital Corp., Goldman Sachs Group Inc. and Macquarie Group Ltd. are handling Huaneng Renewables' IPO. Citigroup Inc., China International Capital Corp. and J.P. Morgan Chase & Co. are on the Kazakhmys' deal.

Lottery Fever Heats Up Hong Kong - Hutchison Whampoa Ltd. Chairman Li Ka-shing fielded a personal question at a news conference Friday in Hong Kong: “I’ve never bought lottery tickets before. For one I don’t really know how to buy, and…if I win I would have to donate the money back to society!” While Hong Kong’s richest man isn’t interested in the lottery, he may be in the minority as the jackpot for a single winning ticket reached 100 million Hong Kong dollars (US$12.9 million). Lines of eager gamblers spilled out of Hong Kong Jockey Club branches across the city to throw their hats into the ring for the Mark Six lottery drawing to take place at 9:30 p.m. The Hong Kong Jockey Club, which manages the city’s popular horse races, also operates the Mark Six lottery and soccer betting programs, donating its surplus to charity. All other types of gambling are illegal in this former British colony. The Jockey Club got its start managing Hong Kong’s horse-racing industry. “Horse racing in Hong Kong commenced in 1841 with the arrival of the British, who immediately set about draining a malarial swamp to form a racetrack at Happy Valley,” according to the Jockey Club’s website. “With the exception of a few years during World War II, the track has seen non-stop action ever since,” it added. In the 2010 financial year, the club generated US$2.72 billion in betting and lottery revenue. The Stanley Street Jockey Club branch, in the city’s downtown Central district, was particularly crowded as ticket-buyers said it was the luckiest branch, historically yielding the most top prizes. Local media showed footage of children tugging on security guards’ uniforms, as they waited for their parents at the door. Kids aren’t allowed in the betting branches. The frenzy in Hong Kong shouldn’t be entirely unexpected–the popularity of gambling in Asia is perhaps nowhere more evident than in neighboring Macau, the only place in China where casino gambling is legal. Gambling revenue in Macau has risen 43% over the previous year as of the end of April. It is on track this year to reach US$30 billion–or five times the gambling revenue of the Las Vegas Strip, formerly the world’s gambling capital. Casino operators in the Chinese territory expect the May 15 opening of Hong Kong-listed Galaxy Entertainment Group Ltd.’s new $2 billion casino complex will bring more bets yet. Analysts predict nearby Singapore, which welcomed its first casinos last year, could overtake the Las Vegas Strip’s gambling revenue this year. But, if you’re in Hong Kong, you can forget about Baccarat. Lotteries are one of the few ways to try your luck.

While some bury the hatchet, others have an ax to grind - It seems some stars who fall together and then burn with animosity for each other are willing to let bygones be bygones. It has been three years since the oh-so naughty photos of Edison Chen and Cecilia Cheung were accidentally released - and then accidentally released again. On May 8, the two found themselves in the first-class cabin of the same flight to Hong Kong from Taiwan, Hong Kong's Apple Daily reports. But while this seemingly chance encounter might have lead to the spitting of venom - Cheung publicly accused Chen of "shedding crocodile tears" after the scandal broke - neither bared their fangs. Instead, Cheung reportedly asked the stewardess to let her swap seats so she could sit next to Chen, who chivalrously offered her his window seat. They chatted and laughed until the plane touched down. Passengers said Cheung was visibly gleeful during the conversation. The starlet allegedly gestured wildly and spoke loudly enough to be overheard by other passengers. Cheung also reportedly snapped a photo of them together with her mobile phone, and they appeared to exchange numbers. Cheung was in Taiwan to attend the May 7 wedding of singer Christine Fan, while Chen had traveled there to promote his fashion brand. Chen had publicly revealed ahead of time that he would be hopping an afternoon flight that day, fueling speculation the two staged the reunion. While Cheung and Chen seemed to have made amends, vitriolic writer Li Ao appears to be out to make enemies. A-class model Lin Chi-ling has become the latest casualty of his march on the warpath, Xinhua reports. Li used a TV talk show appearance to expand on his earlier comments about the 36-year-old belle, saying, "a beauty like her is too simple and lacks profundity". He didn't deny she is indeed a looker - who could? - but says, "she should retire now". Li seemed to be looking for double trouble when he took shots at Lin and another person of a certain age, letting them both have barrels. "Ma Ying-jeou's problem is the same as Lin's - both were attractive but are too old now," he said, citing the bags under Ma's eyes to support his theory. Lin's agent responded, saying: "She is trying hard to transform herself. Give us some time, and we'll present some good work from her."

 China*:  May 22 2011

Chinese investors are snapping up gold bars and coins, buying more than ever before in the first quarter of 2011 and overtaking Indian buyers as the world's biggest purchasers of the metal. A growing middle-class in China is raising the appetite for gold there. China's investment demand for gold more than doubled to 90.9 metric tons in the first three months of the year, outpacing India's modest rise to 85.6 tons, the World Gold Council said in its quarterly report on Thursday. China now accounts for 25% of gold investment demand, compared with India's 23%. The report underscores the rising appetite for gold among the growing middle-class in China. Fears of the country's soaring inflation, as well as a search for new investments, is luring investors to gold, and marketing of the precious metal has also increased in recent months. "I think people will be surprised by the strength in the Chinese demand, but we think this is a trend that is set to continue," said Eily Ong, an investment research manager at the gold council. Historically, India has been the largest investment market for gold. In 2007, just before investing in gold began to take off globally, India's physical gold demand accounted for 61% of the world's total. China's was 9%. In terms of total consumer demand, which also included jewelry, India is still a bigger consumer of gold than China, taking in 291.8 tons in the first quarter, compared with China's 233.8 tons. Still, the voracious appetite shown by Chinese buyers prompted the gold council to increase its forecast for the nation's demand. "In March 2010, we predicted that gold demand in China would double by 2020; however, we believe that this doubling may in fact be achieved sooner," said Albert Cheng, the World Gold Council 's managing director for the Far East. "Increasing prosperity in the world's most populous country coupled with their high affinity for gold will serve to drive demand in the long term." Aside from having more money, Chinese investors are also focused on using gold as a protection against rising consumer prices. Unlike paper currencies, gold retains its value when prices increase. That has prompted many Chinese investors to flock to the precious metal. Gold also is favored by savvy investors as an alternative investment vehicle to assets like shares and real estate. Chinese stock markets have been a disappointment recently, and the government has pledged to clamp down on housing speculation. Many banks and jewelry stores in China have added outlets to sell gold bars and coins in recent months. "Those new outlets have not only created demand but also required a starting stock," which has an impact on total gold demand, said Philip Klapwijk, chairman of GFMS Ltd., a London-based metals consultancy that compiles the data for the gold council's report. Investment demand is one part of a broader base of buying. Jewelry demand remains another large source of gold purchases, the segment that India continues to dominate. India's jewelry sector took in 206.2 tons in the quarter, well above China's 142.9 tons. Still, China is catching up there, too. Its jewelry demand rose 21% in the quarter, faster than the 12% rise in India. Demand for gold in the Chinese technology sector is also buoyant, with the country becoming an increasingly important center for electronic-component manufacturing and assembly, the gold council said. The surge in overall buying came at a time when gold prices took a rare breather from their relentless march higher. Gold prices fell about 8% in late January to about $1,300 an ounce. Since then, prices have risen to $1,492.20 an ounce on Thursday and the metal is up 5% for the year so far. Global gold investment demand increased by 52% to 366.4 tons in the first quarter, helping offset a 56-ton outflow from exchange-traded funds, which are popular investment tools in the West. In developed countries, some investors have switched into physical gold holdings from ETFs. Demand in Germany and Switzerland both more than doubled, while the U.S. had a 54% jump to 22.5 tons during the quarter. As the world's largest gold producer, China churned out 350.9 tons in 2010, but it wasn't enough to sate total demand— including bullion, jewelry and technology uses—of more than 700 tons, according to the gold council's report. As demand continues to outpace supply, analysts expect China to import more bullion. Thursday's report covers only private-sector demand, but one wild card for the world's gold market is how much gold China has been adding to its foreign reserves. Governments tend to announce their purchases after they buy.

China to Fast-Track Jets for Pakistan - Deal Signals Beijing Could Fill Aid Vacuum if U.S. Retreats - China agreed to provide 50 more JF-17 fighter jets to Pakistan on an "expedited" basis, a spokesman for the Pakistani Air Force said, one of the most concrete illustrations yet of how China could fill the vacuum if the U.S. scales down its aid to Pakistan following the raid that killed al Qaeda leader Osama bin Laden. Chinese Premier Wen Jiabao, right, with Pakistani Prime Minister Yousuf Raza Gilani, at Beijing's Great Hall of the People on Thursday. The agreement to accelerate supply of the jointly developed jets, the first 50 of which are being assembled in Pakistan, came as Pakistan's Prime Minister Yousuf Raza Gilani held talks in Beijing during a visit that he has used to portray China as an alternative source of military and civilian aid. The air force spokesman, a high-ranking officer, said the deal had been reached during Mr. Gilani's four-day visit to China, which concludes on Friday following a meeting with Chinese President Hu Jintao. "We're getting the 50 jets, on top of the ones we already have. Something has been agreed in Beijing, so they'll be expedited," he said, declining to give further details. Mr. Gilani's visit was arranged long before bin Laden's death raised questions about Pakistan's efforts to hunt down the al Qaeda leader. Mr. Gilani's trip is ostensibly to mark the 60th anniversary of bilateral relations on Saturday. But as political pressure mounts in Washington for a review of aid to Pakistan, Mr. Gilani has used his visit to highlight his country's long and increasingly close relationship with China, which he described Tuesday as Pakistan's "best friend." China is Pakistan's biggest arms supplier and its third-biggest trading partner. The JF-17 is a potent symbol of the two countries' friendship, and a key part of Pakistan's plans to upgrade its aging fleet of American-supplied F-16s and French-made Mirages and to try to match the air power of neighboring India—its archrival. The U.S. has repeatedly delayed delivery of F-16s to Pakistan, and has insisted that they not be used against India, with which Washington is now cultivating a strategic partnership to counterbalance Beijing's clout in Asia. China and Pakistan began developing the relatively cheap multipurpose fighter in 1999 and Pakistan, which has said it wants 250 of them altogether, inducted its first squadron of JF-17s last year, and a second earlier this year. The air force spokesman said he didn't know whether the second batch of 50 jets would be assembled in Pakistan or delivered whole from China. He also declined to discuss whether they would be the basic so-called Block I models, like the first batch, or an upgraded Block II version, which military aviation experts say could include radar-evading stealth technology—potentially giving Pakistan that capability for the first time. Questions also remain over the new jets' engines. The first batch were all fitted with Russian ones, but Russian officials have expressed reservations about supplying more of those engines as Pakistan and China have been marketing the JF-17 in many of Russia's traditional markets. China has been developing its own engine, but it is still undergoing tests, military aviation experts say. The Pakistani Embassy declined to provide further details about the deal, and a spokeswoman for Mr. Gilani didn't respond to repeated phone calls. China's Foreign and Defense Ministries both declined to comment, as did China's air force and the Chinese company which jointly produces the JF-17 with Pakistan. China has hailed the strength and longevity of the relationship this week, praising Pakistan's efforts to combat terrorism, and supporting its response to the U.S. raid. Wen Jiabao, the premier, said China and Pakistan would remain friends "forever" when he met Mr. Gilani on Wednesday. However, Beijing's rhetoric has been more reserved than Pakistan's, reflecting a desire not to antagonize the U.S. or India or to become too entangled in Pakistan's domestic and international problems. Nonetheless, diplomats and analysts say that China sees an opportunity in the aftermath of bin Laden's death to enhance its economic and military influence in Pakistan with a long-term view to containing India's rise, and opening new trade routes to Central Asia and the Middle East. China and Pakistan are also discussing plans for Pakistan to buy China's more advanced FC-20 fighter, also known as the J-10, Ahmad Mukhtar, Pakistan's defense minister told reporters Wednesday. Pakistan's efforts to showcase its close ties with China are causing consternation in the U.S. During a hearing of the Senate Foreign Relations Committee Tuesday, Republican Sen. Jim Risch of Idaho expressed frustration at Mr. Gilani's statement that China was Pakistan's "best friend" despite billions of dollars of U.S. aid over the last decade. "It just—it just doesn't make sense....Because, frankly, I'm—I'm getting tired of it, and I think Americans are getting tired of it as far as shoveling money in there [to] people who just flat don't like us," he said, according to a transcript. At a hearing of the House Foreign Affairs Committee last week, congressman Michael McCaul (R., Texas) raised particular concern about whether U.S. military aid had been diverted into the JF-17 program.

'Drones' key to fighting terrorism - Police officers look at a model of a police helicopter on display at the fourth China (Beijing) International Exhibition and Symposium on Police Equipment and Anti-Terrorism Technology and Equipment on Thursday. More unmanned aerial vehicles, so-called drones, are likely to be used for security purposes in future, supplementing the anti-terrorism work that currently relies on cars and other ground-based equipment. Three types of domestically developed unmanned aerial vehicles and one that was imported attracted a lot of attention at the fourth China (Beijing) International Exhibition and Symposium on Police Equipment and Anti-Terrorism Technology and Equipment on Thursday. "The anti-terrorism concept has evolved. In the past, anti-terrorism efforts depended on things like individual equipment and armored cars. Nowadays, unmanned aerial vehicles and helicopters are more frequently used," said Ma Tenglong, a marketing manager with the Aviation Industry Corporation of China (AVIC). In anti-terrorism operations outside China - including the recent killing of Osama bin Laden by the United States - unmanned aerial vehicles and helicopters have played an important role in reconnaissance and also carry out air-to-ground attack missions. "Unmanned aerial vehicles and helicopters will play a bigger role in anti-terrorism missions in the future, both at home and abroad," Ma said. At present, drones have not been used domestically to strike terrorists, said Li Wei, director of the anti-terrorism research center at the China Institutes of Contemporary International Relations. "Armed police and other anti-terrorism forces have enough capability to handle terrorists inside the country nowadays," he said. "But unmanned aerial vehicles will be useful for reconnaissance along border areas, where natural conditions are inhospitable, so that terrorists trying to sneak into the country can be found and stopped." AVIC, the country's largest aircraft manufacturer, displayed three types of drone at the exhibition for the first time. One of them, named Pterodactyl, can be used for both surveillance and reconnaissance as well as air-to-ground attack missions. It can be used for 20 hours straight and fly at up to 5,000 meters. Xia Tian, a member of the marketing staff at AVIC's Chengdu Aircraft Design and Research Institute, said the vehicle is "one of the world's most advanced". The Beijing municipal public security bureau, which co-sponsored the exhibition, told reporters it is considering buying unmanned aerial vehicles for use in emergencies, for the monitoring of traffic and the pursuit of suspects. The bureau said infrared detectors on the drones would be especially useful in locating suspects at night. The capital now has four helicopters and a number of small reconnaissance drones. Because the city's airspace is under strict air traffic control, unmanned aerial vehicles also have the advantage of being subject to less air traffic control than helicopters, Jia Wensheng, a bureau official, was quoted as saying. In addition to aircraft, more than 200 exhibitors displayed other anti-terrorism technology and equipment at the exhibition, including a fast detector of liquid explosives and face-recognition technology. Li Wei said face-recognition technology could have a broad application in China because it can work with widely installed security cameras and would help with the locating of wanted terrorists and suspects.

Russia will finalize the sale of 34 transportation helicopters to China by August, the Interfax news agency reported Friday. The Mi-171 helicopters are being built in a plant in Russia's Buryat republic. The plant is a part of the Russian Helicopters holding. The plant's CEO, Leonid Belykh, said the contract for building the helicopters was signed in 2010. "This is not the first and hopefully not the last contract with our Chinese partners," he said. Belykh said that Russian helicopter builders have been gradually shifting their cooperation with China from direct shipment to joint projects. Russia and China have been negotiating on a joint venture for localization of assembly of the Russian helicopters, he said. The Mi-171 can be used for both commercial and military purposes, depending on modifications.

Hong Kong*:  May 21 2011

Japanese auction house shifts spring sale to HK - Est-Ouest relocates annual event to placate bidders deterred by fallout from Japan's March 11 disasters - A canvas by Takeo Yamaguchi on display in Admiralty, where it will be offered for sale this month. Every year Japan's Est-Ouest Auctions holds a spring sale in Tokyo, offering fine art, jewellery and watches to collectors from all over the world. For 2011 the auction house will not be setting up shop in the Japanese capital, but instead shift almost 2,900 kilometres away, to Hong Kong. The spring sale was originally scheduled for the end of March - barely three weeks after the earthquake and tsunami in east Japan. Fears of aftershocks in Tokyo, broken infrastructure and reluctance of foreign bidders to go to Japan have meant that the Tokyo and Hong Kong spring auctions will be combined. That will put twice as much fine art under the hammer - some 1,000 pieces worth around HK$80 million - on May 27 and 28 at the JW Marriot hotel in Admiralty. "We have many Chinese, Taiwanese and Korean customers. Before the earthquake they said they'd come to the auction, but afterwards everyone was scared to come to Japan," said Takashi Seki, president of Est-Ouest Auctions. Broken telephone lines would also have hindered bids from overseas, he said, effectively shutting out many foreign buyers. In Hong Kong, works by Takeo Yamaguchi, Damien Hirst and Rene Magritte will be auctioned alongside vintage Patek Philippe watches, katanas from the Edo period and chinchilla coats. The pick of the lot is a 1960s Infinity Nets piece by Yayoi Kusama. Expected to fetch up to HK$4.5 million, it's the most valuable piece on sale, featuring Kusama's signature repetitive crescent patterns. Some HK$500,000 to HK$700,000 - 15 per cent of the hammer price - raised from the sale of 31 European works will also be donated to a fund implemented by the Japanese government to support children orphaned by the earthquake and tsunami in Iwate.

Pansy Ho Chiu-king is set to become the richest woman in town on May 26 thanks to MGM China Holding's pending Hong Kong stock market listing. Ho's sale of part of her stake in the Macau casino operator via a public offering will net her a US$1.21 billion to US$1.5 billion cash windfall, catapulting her to a net worth of about US$5.1 billion, based on a South China Morning Post (SEHK: 0583) analysis of her holdings. At 48, the divorced daughter of Macau gaming magnate Stanley Ho Hung-sun will be the youngest among the city's 20 richest people. The amount would rank her in the top 10 of the Forbes list of Hong Kong's 40 richest people published in January - her father came in at 13th. It would also place her among the 10 wealthiest on the mainland, where she serves on political bodies, and in Canada, where she has citizenship. The MGM China offering will see Ho sell 20 per cent of her stake to the public and 1 per cent to MGM Resorts International, giving the Las Vegas firm a controlling 51 per cent of the Macau business. Based on a mid-point pricing of HK$13.85 per share, the listing will net Ho HK$10.53 billion cash and value her remaining stake at HK$15.26 billion - she retains up to 29 per cent in MGM China after the listing. Ho also has indirect, effective stakes in Shun Tak Holdings (SEHK: 0242) (11 per cent) and SJM Holdings (2.1 per cent) worth a combined HK$13.97 billion based on yesterday's closing prices - for a total net worth of US$5.1 billion.

Monitise, the wireless payment system company, and the Joint Electronic Teller Services (Jetco) network of banks plan to expand mobile commerce in Hong Kong in a tie-up with communications giant PCCW (SEHK: 0008). Starting in the second half of this year, customers of PCCW's mobile communications unit can recharge, or "top up", their prepaid voice or data SIM cards directly through their accounts with any of Jetco's 30 member banks, using an application on their smartphones. "It's immediate, efficient and responsive - a service that reflects the energetic, on-the-go nature of the people in Hong Kong," Richard Midgett, managing director of PCCW's wireless business, said. According to Monitise, it will allow Jetco member banks to generate more revenue from their customers, who would otherwise buy a new SIM card from a convenience store or other retailer. "Convenience and simplicity are at the heart of the innovative and collaborative approach we pursue in entering new markets with leading local partners," Alastair Lukies, the chief executive of London-listed Monitise, said. "And this deal forms a firm foundation for other payment and commerce services to come in Hong Kong." The so-called "Mobile Money" system developed by the British firm, whose backers include Standard Chartered Bank and Visa, enables customers of multiple banks and wireless network operators to conduct secure banking and payment transactions directly from their internet-ready smartphones. Monitise processes more than 10 million transactions a month in Britain. PCCW Mobile and Jetco are the first partners in Hong Kong of Monitise Asia Pacific, a 50-50 joint venture set up in April last year by Monitise and privately held First Eastern Investment Group. "Half of the mobile market in Hong Kong is prepaid," Monitise Hong Kong managing director Lam Wai-yee said. "This equates to 6.5 million prepaid SIM cards requiring some method of topping up." She said the Monitise system worked in real time, meaning users would have immediate access to the topped-up air time or data plan. Users could also top up the prepaid voice and data plans of their friends and family. Darren Sugden, chief executive of Monitise Asia Pacific, said he expected smaller Jetco member banks to use its information-technology infrastructure to launch mobile-banking services that are competitive with those of larger banks. Juniper Research forecasts the number of mobile banking users worldwide will reach more than 150 million this year. "We are pursuing separate discussions with HSBC (SEHK: 0005, announcements, news) , Hang Seng Bank (SEHK: 0011) and other mobile network operators in Hong Kong to bring our solution to their customers," Sugden said. "We intend to offer a very broad range of mobile payment and shopping capabilities in Hong Kong, Macau and the mainland."

Chief Executive Donald Tsang Yam-kuen on Thursday afternoon accused some lawmakers of using environmental impact reviews as a tactic to delay government infrastructure projects. Chief Executive Donald Tsang Yam-kuen on Thursday afternoon accused some lawmakers of using environmental impact reviews as a tactic to delay government infrastructure projects. Speaking during a Legislative Council special question and answer session, Tsang said legal challenges brought by “some politicians” against large government projects could hurt Hong Kong’s development. “Some political parties and politicians use legal proceedings as a ploy to hold up large government infrastructure projects,” he said. “They disguise their pursuit of political interest in the name of environmental conservation. They are hurting Hong Kong’s long-term interests,” Tsang said. His comments come as the government appeals a court decision to quash an environmental impact study for a section of the Hong Kong-Zhuhai-Macau bridge. The court decision might delay the project for several months. The ruling was made after a Tung Chung woman launched a judicial review challenging the department’s approval of the project. She said the department’s permit for the bridge work did not meet World Health Organisation standards. The Civic Party was said to have backed the resident in the legal challenge. Tsang said he was concerned Hong Kong might lag behind other Asian cities, such as Beijing, Shanghai and Singapore, when developing large infrastructure projects.

Huaneng Renewables Corp., the wind-power unit of China Huaneng Group, plans to raise about $1 billion in its relaunched Hong Kong initial public offering ahead of its June 9 listing, a person familiar with the situation said Thursday, reflecting growing demand for wind power following the Japan nuclear power crisis in March. Huaneng Renewables is set to join China's two largest wind farm operators in listing shares in Hong Kong, and the company's second attempt to list shares on the territory's bourse comes as several mainland Chinese and foreign companies are preparing to list on the Hong Kong stock exchange, suggesting the window for fund raising in the city has reopened. The wind farm operator had planned to raise up to $1.28 billion in a Hong Kong IPO in December but joined other companies in scrapping its listing plan due to market volatility. Huaneng Renewables, China's third-largest wind farm operator by capacity, started pre-marketing for its relaunched IPO this week—when a company and its bankers gauge investor interest in an IPO and come up with a price range for the deal—the person said. Huaneng Renewables joins several other clean-energy producers in looking to float shares in Hong Kong to tap growing demand for clean energy after the crisis at Japan's Fukushima Daiichi nuclear power plant. Other clean-energy companies lining up to list in Hong Kong in coming months include Shun Feng Photovoltaic International Ltd. and Beijing Jingneng Clean Energy Co., people familiar with the situation said Thursday. Shun Feng, a photovoltaic battery manufacturer, plans to raise $100 million-$200 million in an initial public offering ahead of a listing on the Hong Kong stock exchange June 13, a person familiar with the situation said Thursday. Jiangsu province-based Shun Feng will start its roadshow Wednesday and launch a retail offering May 31, the person said. The roadshow is the official bookbuilding period when a final price is set. Shares of Longyuan Power and Datang Renewable—China's largest and second-largest wind farm operators by capacity—have climbed more than 14% since the March 11 earthquake and tsunami In Japan sparked a nuclear crisis, as investors digested the dangers of nuclear power and warmed to the idea of safer sources of renewable energy. "The nuclear radiation crisis in Japan alarmed the Chinese leaders about the safety of nuclear power generation and the original aggressive development plan for nuclear power has to be reviewed," Core Pacific Yamaichi analyst Lee Yuk Kei said. "We expect the development of nuclear power to give way to other renewable energies such as wind power," he said. Wind power, along with hydroelectric power and solar energy, is considered by many countries as a better option to help fill future energy supply gaps than coal or oil because it doesn't produces greenhouse gases. China has been rapidly expanding its use of clean power as it moves to reduce its dependence on coal and crude oil, widely blamed for making Chinese cities among the most polluted in the world. China plans to source 15% of its energy requirements from renewable sources by 2020 and is encouraging investments in wind, solar and nuclear power. At the end of last year, China had total an installed wind power capacity of 41.83 gigawatts, the largest in the world, according to the Chinese Renewable Energy Industries Association. China is expected to add 15 to 20 gigawatts of wind-power generating capacity annually in the next decade, the association said. Morgan Stanley, China International Capital Corp., Goldman Sachs Group Inc. and Macquarie Group Ltd. are handling the deal, the person said. U.S. luggage maker Samsonite, Australian mining firm Resourcehouse Ltd., Swiss commodities trader Glencore International PLC and Kazakh copper miner Kazakhmys PLC are all preparing to list on the Hong Kong stock exchange, and a person familiar with the situation said Thursday Citic Securities Co. is set to submit an application to the Hong Kong bourse to list in the city in early June. Citic Securities, China's largest securities firm by market value, could raise up to $2 billion via its Hong Kong initial public offering. CCB International (Holdings) Ltd. and BOC International Holdings Ltd. are handling the deal, another person familiar with the situation said earlier.

Leighton Wins Rail Contracts in Hong Kong - Leighton Holdings Ltd. said Thursday it won two contracts for the South Island Line rail project in Hong Kong, worth about 547 million Australian dollars, or roughly US$580 million, in total. Construction is set to begin this month on the South Island Line, connecting the north side of Hong Kong island with communities in the south, pictured in foreground above. One of the two contracts was awarded to a joint venture between Leighton Asia and John Holland Pty. Ltd. The South Island Line will cover about seven kilometers from Admiralty station to South Horizons on the south side of Aberdeen Harbour on Ap Lei Chau island. The South Island Line is designed to provide railway services for communities in the south of Hong Kong island and to ease traffic at critical bottlenecks such as the Aberdeen Tunnel and central business district. Construction is scheduled to begin this month and end in 2015.

Swiss commodities giant Glencore said on Thursday it had raised about US$10 billion through its initial public offering on the London and Hong Kong stock markets, an operation that it described as a success. The stock market listing values the Baar-based group at approximately US$59.2 billion and marks the biggest IPO so far this year. “Glencore’s offer has seen substantial interest from investors around the world and was significantly oversubscribed throughout the price range, providing Glencore with a high-quality, diverse and geographically spread investor base,” said Ivan Glasenberg, Glencore’s chief executive officer. Admission and full dealing in the shares will begin on May 24 in London and May 25 in Hong Kong. Glencore, the world’s biggest commodities trader by revenue with US$145 billion last year, has secured US$3.1 billion from so-called cornerstone investors, including sovereign wealth funds in Singapore and Abu Dhabi, asset managers and private banks, according to media reports. The company has confirmed that it had reached agreements with “certain cornerstone investors” who have already accepted to subscribe for 31 per cent of the shares on offer, worth US$3.1 billion. The group has said it would use funds raised by the listing to pay down debt, boost its stake in Kazzinc, a zinc producer with core operations in eastern Kazakhstan, and finance other projects to expand its business. The sale comes as commodity prices soar amid huge demand from Asia, particularly China and India, for resources to power their economies. Founded in April 1974 by trader Marc Rich, Glencore operated initially out of an apartment in central Switzerland’s Zug canton before quickly emerging as a major player in commodities trading. From metals, minerals and crude oil, the group moved into agricultural goods and started to expand from simply trading third party commodities to acquiring ownership of resources in the late 1980s by purchasing its own mines.

 China*:  May 21 2011

The average monthly income for mid-level People's Liberation Army officers has grown to 5,373 yuan (HK$6,413), 2.6 times the amount they earned five years ago, according to a survey conducted by PLA headquarters. The average monthly income of the families of the 10,000 officers interviewed, ranked from commander to second lieutenant, was at least 8,000 yuan in December, the PLA Daily reported yesterday. The survey found that 37 per cent of the officers had bought their own homes, and nearly 43 per cent had savings accounts. About 17 per cent owned their own cars, and 85 per cent had computers. Officers in southern provinces are richer than those in the west, as the survey indicated half of army officials from a Guangzhou unit had private cars, much higher than the average. Families spent an average 2,703 yuan per person a month, 60 per cent of it on food and daily expenses. Authorities attribute the income growth to linking the military salary system with the system for public servants, which is much higher than average residents' income. The survey, conducted between October and March, did not question officers on "grey", or illicit, income. In March, Beijing announced a 12.7 increase in the defence budget - which rose 7.5 per cent last year. The increase would be used for "appropriate" hardware spending, training and salary increases for the 2.3 million-strong People's Liberation Army. The PLA announced a pay rise for its rank and file of up to 40 per cent earlier this year.

Hit pirates on land, says top China general - Chen Bingde supports the deployment of a combined international force 'beyond the ocean' to strike at piracy lairs along Somalia's anarchic coast - General Chen Bingde, pictured with Admiral Mike Mullen. A top PLA general has called for combined international attacks on pirate bases on the Somali coast to end the dangerous and expensive scourge of Indian Ocean piracy. The comments by General Chen Bingde , chief of the PLA's general staff, are being seen as a significant possible expansion of China's historic deployment in the Indian Ocean as well as a reflection of behind-the-scenes discussions among international navies. "For counter-piracy campaigns to be effective, we should probably move beyond the ocean and crash their bases on the land," Chen said during his visit to Washington for the most important Sino-US discussions in seven years. The two sides also discussed possible joint maritime exercises, including in the Gulf of Aden. "It is important that we target not only the operators, those on the small ships or crafts conducting the hijacking activities, but also the figureheads," Chen said. "The ransoms, the captured materials and money flow somewhere else. The pirates [on ships] ... get only a small part of that," he added, apparently echoing earlier US calls for tougher action against the multimillion-dollar industry financing piracy. Ransoms have risen from an average of US$150,000 in 2005 to more than US$7.5 million, figures that are fuelling a surge in the number of pirates and increased violence. A spokesman for the European naval forces - one of the largest in the area - confirmed broad international discussions on a tougher line against pirates, saying Chen's comments "reflected the fact that no options have been taken off the table". Wing Commander Paddy O'Kennedy added that co-operation with China over piracy "had never been higher", both at sea on a daily basis and in regular planning meetings chaired by the EU, Nato and the US-led Combined Maritime Forces. In this year's first quarter, 117 ships have been attacked on shipping routes linking Asia to Europe and the Middle East, with seven crew killed and 338 taken hostage. The PLA Navy has been rotating three-ship deployments around the Horn of Africa since December 2008 - its first naval foray in centuries into potential conflict beyond home waters. While it runs convoys and has opened fire on pirates to repel attacks at sea, it has not yet taken the fight to Somalia's lawless coast, despite two Chinese-owned vessels being captured and held for several months before ransoms were paid. Even though some navies have killed pirates, most of the nations have taken a similar line to China's. Military officials warn that heavily armed pirate lairs present tricky targets, particularly given the anarchy in Somalia, a failed state. Gary Li, a PLA watcher at the London-based intelligence firm Exclusive Analysis, said Chen's remarks were "very interesting indeed", showing an increased comfort-level with China's first major international military engagement. "I think China will be very careful to still ensure they act only under an international umbrella so they stay within existing foreign policy," he said. "But it does show they are keen to be seen by the nationalists at home, and internationally, to be willing to get things done."

The World Gold Council said it expects China will continue outpacing most other countries in its desire for gold, with the growth in demand expected to be as much as 30 per cent this year. The mainland's jewellery sector purchased a record 142 tons of gold in the first quarter, up 21 per cent year on year, the council said. Investors bought 90.9 tons of the precious metal, more than double the amount last year. Demand in the global market totalled 981 tonnes during the period, an increase of 11 per cent. "The growth [in China] is faster than what was expected by almost everyone in this industry," said Albert Cheng, the council's Far East managing director. The council said the mainland could break the threshold of 1,000 tonnes of annual demand by 2013. Gold prices climbed 25 per cent in the first quarter and reached a record 10,147 yuan (HK$12,110) per ounce this month. "There's still room for the price to go up as long as the robust demand shows no sign of decline," said Cheng. The global demand for gold has been driven by investors, who use the metal as a way to store value while inflation rises. According to the National Bureau of Statistics, the consumer price index on the mainland was up 5.3 per cent last month from a 32-month high of 5.4 per cent in March. The metal is even more sought-after in China since there are limited investment options available for wealthier people. The property market has been tightened by the government to curb soaring housing prices. Meanwhile, the stock market has been sluggish and interest rates set by the central bank are at a low level. In addition to bars and coins, jewellery is another sector that saw strong growth. Cheng said many domestic gold jewellery manufacturers have received more orders from retailers since the Lunar New Year, traditionally a low season for the industry. "This is a situation that has only happened in China in the early 1990s, when the country's CPI growth rocketed to more than 10 per cent," said Cheng. In the first quarter of this year, India and China combined accounted for 63 per cent of the total gold jewellery demand in the world. During that period, Hong Kong had the fastest growth in the global gold jewellery market, with a sales volume of 7.3 tons.

Ex-Nasa official to help China's space program - Hubble team leader Charles Pellerin to advise the nation's lunar project on management systems - Charles Pellerin left Nasa in 1993 to join the University of Colorado's business school as a professor. A former top Nasa official and scientist will help China implement a new leadership system for its space program. Charles Pellerin, who is in Hong Kong for a management consultants Evans & Peck, said he would provide China with management expertise rather than technical know-how. He was referring to his "4-D management system", which has been used by 700 Nasa teams since 2003 after he developed this from his experiences with the Hubble telescope project, which he called "the biggest screw-up in scientific history". The China Aerospace Science and Technology Corporation (CASC), a key player in the mainland's moon-landing program, has adopted Pellerin's management system. "I wanted to take the lessons I learned from the mistakes of Hubble and apply it to all teams," said Pellerin, a physicist who served the National Aeronautics and Space Administration for 30 years, as an engineer, director of its astrophysics division and a member of the Hubble team. Launching the Hubble telescope in 1990 changed Pellerin's attitude towards leadership. The telescope failed to work due to a faulty mirror soon after it was deployed in space. After the incident Nasa conducted a failure review board. "That named the root cause a leadership failure, and I was the leader of the team," said Pellerin, who eventually led the team that repaired the telescope. The importance of good leadership stayed with him and became his sole focus after leaving Nasa in 1993 to join the University of Colorado's business school as a professor. Pellerin believes that the main problem with Hubble was the high pressure, which meant key personnel failed to communicate properly. He said better communication among project members not only enhanced worker productivity, but helped avoid major mistakes before they occurred. His program identifies behaviour to monitor. "[These] are based on universal human needs, like feeling appreciated", he said. Pellerin gave a talk at the Hong Kong Space Museum yesterday on his experiences in repairing the Hubble telescope. "China is going to lead the world within five to 10 years, it's inevitable. I am trying to help establish Chinese companies in a good leadership role before this happens." China has sent two probes to the moon, and plans to land a robotic rover in 2012 and an astronaut before the end of the decade.

Chinese General tells Pentagon: you are safe from P.L.A. - China's top general offers reassurances on visit to United States but warns that the friendship will cool if Washington sells arms to Taiwan - Chief of the PLA general staff General Chen Bingde with his US counterpart, Admiral Mike Mullen. A top Chinese general rejected growing American concerns about China's military build-up, telling audiences at the National Defence University and the Pentagon that the People's Liberation Army is no threat and has no intention of challenging the US military. "The world has no need to worry about, let alone fear, China's growth," said General Chen Bingde , chief of the PLA general staff, in a rare address to a packed room of US military officers and faculty at the National Defence University. But the reassurances by Chen during his high-profile visit to the United States were also accompanied by fresh, stern warnings against any future US arms sales to Taiwan, which underscored the fragile nature of the relationship. When asked by a reporter if US weapons sales to Taiwan would affect military ties between the two economic powers, Chen said: "My answer is affirmative. It will. "As to how bad the impact will be, it will depend on the nature of the weapons sold to Taiwan," he added. The general said the arms sales amounted to US meddling in the "domestic" affairs of another country. Chen went on to deny during Wednesday's speech that Beijing had missiles on its southeast coast targeting Taiwan, merely defensive troops. Taiwan's Defence Minister Kao Hau-chu yesterday questioned Chen's interpretation of where the coast ended. He said the PLA "does deploy ground-to-air missiles" on the mainland coast. "Anyway, in military terms, as far as the range is concerned, there is no need for ballistic missiles to be deployed along the coast in order to hit its target." National Security Bureau Director Tsai Teh-sheng said that the missiles deployed in coastal areas targeting Taiwan had been "increasing in both quantity and capability, rather than decreasing". "Whether these missiles are posing a threat to others is a matter of perception, but no nation in the world would agree that the PLA poses no threat to Taiwan," Tsai said. Flashing an occasional smile at his audience, Chen quoted US presidents, including Franklin D. Roosevelt's famous line: "The only thing we have to fear is fear itself." The general said there was still "a 20-year gap" between China's military and Western powers. "To be honest, I feel very sad after this visit, because I think, I feel and I know how poor our equipment is and how underdeveloped we remain," Chen said. At a joint news conference at the Pentagon with Admiral Mike Mullen, the chairman of the Joint Chiefs of Staff, Chen added: "I can tell you that China does not have the capability to challenge the United States." Anthony Wong Dong, President of the International Military Association in Macau, said: "The PLA's present combative capacity is more or less at the same level with that of the American troops during the Gulf War in early 1990s." General Chen went on to say it was "very strange" that questions were raised about his country's military build-up when the same concerns were not voiced about the United States. The military chiefs, in a statement issued a day after talks were held on Tuesday, said they had agreed to communicate through a US-China telephone hotline and to hold joint counter-piracy exercises in the Gulf of Aden. The two officers also pledged to hold more military exchanges.

An enormous Louis Vuitton advert in Shanghai may be destroyed after the city government launched a crackdown on advertising that violates its regulations, the Shanghai Daily reported on Wednesday. The advertisement, which stands 20-metres tall and 4-metres wide, was built last year to conceal renovation work. However, the huge advertisement violates city regulations, which limit the size to 9 metres tall. District officials launched the crackdown on Tuesday and promised to demolish offending advertisements within seven days, if they were not modified. Louis Vuitton told the newspaper that the company has all the necessary permission but will modify the advertisement if required. Residents in the area complained that the huge advert is a danger to public safety because it takes up too much sidewalk space, and forces pedestrians to walk on the road, the paper reported. Shanghai’s citizens among the most brand-conscious in the country. Luxury brands such as Louis Vuitton, Hermes and Prada are in high demand. The Louis Vuitton advert has spurred copycats, with other luxury brands preparing to build huge advertisements around that space, the paper reported earlier in the week. In March, the authorities in Beijing banned advertisements that promote hedonism and advocate lifestyles of “emperors and the nobility,” in a nod to growing public discontent over social inequality.

Half of a damaged antique painting will soon start on a trip to Taiwan to be reunited with its other half, fulfilling a wish long held by Premier Wen Jiabao. After being separated for as much as 359 years, the two halves of Dwelling in Fuchun Mountain will be rejoined and displayed at an exhibition at the Taipei Palace Museum from June 1 to Sept 5. TV image grab shows a worker checking a half of the damaged antique painting Dwelling in Fuchun Mountain in Beijing on May 18 before it is delivered to the Taipei Palace Museum.

Scandals haunt top-level execs - Wang Gongquan(L), a partner of CDH Investments, announced Monday via Sina micro blog that he plans to elope with Wang Qin(R), the founder of Jiangsu Zhongfu Science and Technology Industrial Group Co. The message soon attracted major attention on the country's micro blog sites. CDH issued a letter saying that Wang "is taking some time off and that both the venture and private equity fund were operating normally." CDH manages over $5.5 billion from more than 100 international and domestic institutional investors, including China's National Social Security, a sovereign wealth fund, according to information on the company's website.

China gears up for 1st national tourism day - Photo taken on Dec 26, 2002 shows beautiful scenery of the Forbidden City in Beijing, capital of China. From offering ticket discounts to organizing activities, China's cities and provinces are gearing up for the country's first national tourism day, which falls on May 19, 2011.

TCL to delay Taiwan IPO - Customers selecting TCL Televisions at a store in Beijing. A source says TCL Communication Technology Holdings is likely to postpone its Taiwan listing plan and may also reduce the size of any subsequent offer. The Chinese mainland handset maker TCL Communication Technology Holdings will put its Taiwan listing plan on hold amid recent poor market sentiment. The company may also reduce the size of any offer, a source told Reuters on Tuesday. In December, TCL announced a plan to issue up to 217 million Taiwan Depositary Receipts (TDRs). In March it said the issue would be the equivalent of up to 10 percent of its outstanding shares, with an application to the regulators around May. The source said on Tuesday that the company remains interested in a TDR listing, but is waiting to see how market conditions turn out before making a final decision. Any future listing was likely to be around 5 percent or less of its total outstanding shares, he said. The source declined to be identified because he was not authorized to speak to the media.

Hong Kong*:  May 20 2011

More pressure over illegal NT structures - Environment undersecretary Kitty Poon Kit calls in contractors to clear unauthorised additions at her Tai Po home after exposure in media reports - Bamboo scaffolding surrounds balconies on the second and third floors that have been enclosed to enlarge living areas at Dr Kitty Poon Kit's home at Tai Po. The government is under more pressure to deal with illegal structures on New Territories village houses after several public figures were found with unauthorised additions to their homes. In the latest such case, politically appointed environment undersecretary Dr Kitty Poon Kit has called in contractors to clear illegal structures from her house in Tai Po after they were highlighted in media reports. Four lawmakers have also been implicated. Questioned by legislators yesterday, Secretary for Development Carrie Lam Cheng Yuet-ngor said everyone would be treated fairly. "We will inspect the cases and take action according to the existing policy," Lam said. "[The owners'] immediate action to clear the illegal structures after receiving our advisory letter will be welcomed by the public." The breaches came to light after the government was criticised by the ombudsman for turning a blind eye to illegal structures in rural areas while cracking down on those in urban areas. Poon said yesterday that her house at Sha Lan Villas, Tai Po, had illegal structures and she hired a contractor to review the situation. The house has a glasshouse and a solar water heater on the rooftop while balconies on the second and third storeys have been enclosed to enlarge the living area. Workers were seen around the outside of the house yesterday. Poon declined to say if the illegal structures existed when she bought the house in 2009. "The problem of my residence is my responsibility," she said. "Whenever it started, it is my responsibility." A growing number of lawmakers have also admitted having unauthorised structures at their village houses, including Heung Yee Kuk vice-chairman Cheung Hok-ming together with Chan Kam-lam and Wong Yung-kan of the Democratic Alliance for the Betterment and Progress of Hong Kong. Leung Yiu-chung of the Neighbourhood and Worker's Service Centre, living in a high-rise in Yau Ma Tei, was also found to have an illegal structure on his rooftop. Cheung said yesterday he had applied to the Lands Department for a permit to reconstruct his house in Ping Long village, Tai Po, where an illegal glassed area and a canopy were built on the rooftop. He would demolish the house and rebuild because there would be water leakages if he only removed the illegal parts. He estimated the new house would cost more than HK$1 million. "As a public figure, I find I should correct it to clear public doubts. I will ensure every part of the newlydesigned house complies with laws and rules," Cheung said. Lee Wing-tat of the Democratic Party said 400,000 illegal structures had been demolished in urban areas in the past decade, but little had been done to clear those at rural village houses. Some legislators also questioned why villagers should be allowed to keep their illegal structures under a rationalisation plan. Lam said the rationalisation was a measure recommended by the ombudsman in 2004 after an investigation found the problem in rural areas was too extensive for enforcement. "New structures under construction will still be banned. Only existing structures that are safe will be tolerated," she said. "I must clarify that rationalisation is not equivalent to legalisation of unauthorised structures. Those structures will be accepted only when the cases have sufficient grounds," she said. Lam did not say whether a glasshouse, a transparent rooftop structure that enlarges a living area, would be accepted. But she said structures exempted from prosecution in urban buildings, like canopies and supporting frames for air conditioners, would be considered exempted in village houses.

US brokerage revises its approach to Hong Kong - Intero attempts to sell foreign properties to wealthy Chinese buyers after failing to break into local market - A failed attempt to enter Hong Kong's brokerage market has not deterred US property agency Intero Real Estate Services from seeking a foothold in the city to sell local properties. In February this year the Califorinia-based property agency opened for business in an office in the International Finance Centre. But instead of selling Hong Kong homes, it will be using its new Hong Kong base to lure wealthy Chinese into buying homes in the United States and elsewhere. "We don't have our eye on the local [Hong Kong] market," said Kenny Lo, general manager of Intero HK. That was not the original intention, which was to seek a Hong Kong partner to operate under a franchise agreement and open agencies under the Intero brand, selling properties in Hong Kong. But the plan was called off after it failed to find a local partner. With more than 60 per cent of market share controlled by two local property agents - Centaline Property Agency and Midland Realty - muscling into Hong Kong's tightly held property brokerage market is not easy, noted Samson Law Lai-choi, who speaks from experience. Centaline and Midland's businesses cover the entire residential spectrum, from mass housing to luxury, said Law. Law last year secured a 25-year master franchise agreement to develop the Sotheby's brand in Hong Kong. He said Intero had approached him on the possibility of forming a partnership, but he finally picked Sotheby's instead. "Everyone knows the name Sotheby's," Law said, but Intero was a company with a relatively short history. Despite the failed attempt, Lo of Intero said the company still wanted to open a local brokerage in Hong Kong, but in the meantime would sell US and South Asian properties by aiming to tap buyers among affluent Chinese in Hong Kong. "Hong Kong is an important market to promote the company's brand. We plan to organise five to six project launches a year," said Lo. "There are many properties in London and Australia being sold in Hong Kong, but not too many choices when it comes to other overseas properties. We have room to expand." By the end of this month, the company will have teamed up with HSBC (SEHK: 0005)'s US office to organise a seminar about US property market in Nanjing and Shanghai and this practice will continue. Intero Real Estate Services was founded in 2002. With its fast expansion, the Intero family now includes over 1,800 agents in 40 offices in a number of countries such as the United States, the UK and Vietnam. In January this year, the company signed a franchise agreement with partner to establish its brand in Shanghai.

A new commodity exchange has begun its first day of trading in Hong Kong as the city attempts to challenge established markets in Europe and the US. Trading began at 8 am on Wednesday on the Hong Kong Mercantile Exchange. So far the only product available to trade is a gold futures contract for 1 kilogram of gold. But, there are plans for other products covering precious and base metals, agriculture, energy and commodity indices. Exchange officials say that Asian countries have been driving demand for global commodity prices and the new exchange is aimed at helping the region have a bigger say in setting prices.

Shenzhen showcase puts HK in picture - Exhibition space offers businesses a cheap stepping stone to reach mainland customers - The Shenzhen municipal government and several local trade groups are helping Hong Kong exporters break into the robust mainland consumer market by renting out exhibition space at cheap rates. Hong Kong businesses are being offered incentives to showcase and distribute their products at a newly established trade hub called "PRD Hong Kong Products Sales Centre" at China South City mega distribution complex in Shenzhen. Federation of Hong Kong Industries chairman Cliff Sun Kai-lit said the offer was "a low-cost and low-risk option" to enter the market. Spurring domestic consumption and raising consumer spending power are top priorities for the central government, according to the mainland's 12th five-year plan from 2011 through 2015. The state policy also encourages Hong Kong exporters to upgrade to higher-value products and develop their own brands. China South City Holdings co-chairman Ricky Cheng Chung-hing said about 40,000 square metres, or about 1 per cent of the total floor area, at the China South City complex was earmarked for leases to Hong Kong exporters under special terms. Exporters are being offered a five-year rental contract, with the first two years rent free, except for a 15 yuan (HK$17.91) per square metre monthly management fee. For the remaining three years, the rent will be charged at 38 yuan per square metre. In contrast, Cheng said, the average rent per square metre in other exhibition areas within the complex was 100 yuan. So far, about 20 Hong Kong exporters have rented a total of 3,500 square metres of floor area. "It is a trade show that never has its curtains lowered," Cheng added. Hong Kong Small and Medium Enterprises Association chairman Danny Lau Tat-pong said about 20 members of the association would visit the Shenzhen complex to examine the offer. "It is a low-risk alternative to test the waters," Lau added.

The government has provided the MTR with two residential sites to help the corporation finance its HK$17.7-billion extension projects, Secretary for Transport and Housing Eva Cheng revealed on Wednesday. Cheng said the two plots were located in Wong Chuk Hang and Ho Man Tin, as she announced the Executive Council’s approval of the plan. The properties would be used for residential development by the MTR to help it offset construction costs for the South Island line and Kwun Tong extension, she said. The South Island Line – which will run from Admiralty to Ap Lei Chau – is estimated to cost HK$12.4 billion. The Kwun Tong extension will connect Yau Ma Tei and Whampoa and is expected to cost HK$5.3 billion. The two lines were likely to be completed in 2015, Cheng said. The transport minister said the scale of the two developments had been reduced in response to public consultation. The Wong Chuk Hang site would be used to build small- to medium-sized flats to meet demand in the district, she said. At the Ho Man Tin site the maximum height of buildings will be lowered to address public concerns over the so-called wall effect of tall buildings, she added. “In the Wong Chuk Hang development, there will be three air corridors and galleries to [satisfy] public expectations of good ventilation and open views. We also lowered the buildings’ height in response to wishes expressed by residents in the district,” she said. “The plot ratio of the Valley Road site has been reduced from nine to five, meaning that [only buildings with] no more than 20 storeys are allowed on the site. This is a response to public concerns about the ‘wall effect’,” she added. The wall effect refers to high-density, high-rise and compact buildings in Hong Kong that block air flows and have a negative effect on the ventilation of nearby dwellings.

HKMA reports strong rise in yuan trade settlement - A woman inspects a sculpture featuring a yuan banknote. Demand for the currency in Hong Kong will grow even further, analysts say. Yuan deposits, trade settlements and bond offerings in Hong Kong increased substantially in the first quarter, according to the Hong Kong Monetary Authority (HKMA). Bankers expect the trend to continue as investors and traders try to gain from the appreciation of the currency. Yuan deposits in Hong Kong reached 451.4 billion (HK$538.99 billion) at the end of March, up 12 per cent from a month earlier and eight times the year-earlier amount, according to a paper submitted by the HKMA to the legislature yesterday. Yuan trade settlements conducted in Hong Kong stood at 310.8 billion yuan in the first three months this year, an amount close to the 369.2 billion yuan for all of 2010. Companies have raised a total of 18.5 billion yuan by issuing yuan-denominated bonds in the first four months in Hong Kong, compared with 35.8 billion in yuan bonds last year, according to the HKMA. Hong Kong banks were first allowed to take yuan deposits in 2004 but they really only took off in the second half of last year, when Beijing relaxed the rules to allow more companies to conduct yuan trade settlements and issue yuan bonds, yuan shares or yuan funds. Companies that accepted the yuan from their trade settlements could deposit the currency in Hong Kong banks. The first yuan-denominated initial public offering, Hui Xian Real Estate Investment Trust, raised 10.48 billion yuan last month. However, the share price dropped 9.35 per cent on its debut trading on April 29. The Hong Kong Mercantile Exchange, which will start its first day trading of US dollar gold contracts today, plans to launch a yuan-denominated gold product by year end. The Chinese Gold and Silver Exchange Society, which now trades gold in Hong Kong dollars, also plans to introduce yuan-denominated gold spot-trading contracts this year. "The expectation of further appreciation of the yuan was the driving force behind these new yuan products and yuan deposits," said Andrew Fung Hau-chung, head of treasury and investment at Hang Seng Bank (SEHK: 0011). The yuan has risen more than 20 per cent against the US dollar since 2004 and many expect it will further appreciate by 3 to 6 per cent this year. Fung expected yuan deposits in Hong Kong will reach 800 billion to 1 trillion by the end of this year, while total yuan trade settlements in Hong Kong could reach 1.2 trillion this year. "Yuan trade settlements and yuan investment products will grow in Hong Kong as there is real demand," Fung said. "Companies that are doing business with China would like to use the currency to do settlements, while companies with projects in China would like to raise funds in yuan."

Li & Fung Shuffles Top Ranks - Hong Kong supply-chain manager Li & Fung Ltd. on Wednesday named Bruce Rockowitz group president and chief executive as part of a reshuffling of top management, which it said was part of a long-term strategy. Bruce Rockowitz, president of Li & Fung Ltd., left, and William Fung, managing director, announcing the company's annual results in March. The company, which sources products for U.S. retailers such as Wal-Mart Stores Inc., Abercrombie & Fitch Co. and Kohl's Corp., also named group managing director William Fung executive deputy chairman and said his older brother, Victor Fung, would resign as group chairman by the next annual general meeting in 2012, at which time William Fung would assume the chairmanship. "Li & Fung has reached a size and scale that requires a new organizational structure," Victor Fung said in a statement. "These arrangements are designed for Li & Fung to manage even more effectively our diverse and fast-growing business across the world." The company is one of Hong Kong's oldest trading firms and is controlled by the Fung family. In 2000, Li & Fung bought Colby International Ltd., a large Hong Kong buying agent co-founded by Mr. Rockowitz. "We don't think the management shuffle is a significant event for investors. Though Bruce has a reputation for being a bit optimistic, investors have a high degree of confidence in his ability to execute the company's strategic vision," said CLSA analyst Aaron Fischer. Mr. Rockowitz, who has been an executive director of Li & Fung since 2001 and president of Li & Fung (Trading) Ltd. since 2004, will lead the implementation of the group's new three-year plan and the development of the company into three global networks—trading, logistics and distribution—the statement said. Nine newly promoted presidents will report to Mr. Rockowitz, it added. Under the plan, Li & Fung has set a goal to reach US$1.5 billion in core operating profit by 2013, with its trading, logistics, and distribution businesses expected to contribute a respective US$700 million, US$100 million and US$700 million. The company's 5.66 billion Hong Kong dollars (US$728.1 million) 2010 core operating profit, despite rising 42% from 2009, fell short of the US$1 billion target set under its last three-year plan for 2008-2010, which Mr. Rockowitz said was roiled by the global economic crisis. Now Li & Fung is facing rising inflation pressures, which could complicate its business strategy. The company itself declared in March that the world was "entering a new era" of sourcing. "With the entry of China as a major supply market from 1979, the world has basically been in a low supply cost era for the last 30 years," it said in a statement accompanying its 2010 results. At the time CLSA's Mr. Fischer said inflation would affect the company's businesses differently. "Rising prices are positive for their trading business as they charge a commission to their customers on the ex-factory price, but they're negative for their onshore business, as the increased cost of raw materials will cut into margins," he said. Victor Fung will continue as a nonexecutive director of the board of Li & Fung and as chairman of its risk-management and sustainability committee. He will focus on developing other Fung family holdings, including Trinity Ltd. and Convenience Retail Asia Ltd., as well as privately held Toys (Labuan) Holding Ltd., the statement said. He will also devote more time to the family's charitable foundations, it added.

Macau casino operator MGM China Holdings has lined up a billionaires' row of cornerstone investors for its Hong Kong public offering, which could raise as much as US$1.73 billion for Pansy Ho Chiu-king, who is selling part of her stake. Four deep-pocketed investors, led by US hedge fund billionaire John Paulson, have combined to kick in US$190 million to MGM China's initial public offering, according to a draft prospectus circulated by the company yesterday at an investors' luncheon that was seen by the South China Morning Post (SEHK: 0583). The cornerstone investors - who include US billionaire Kirk Kerkorian and Hong Kong property tycoons Poon Jing of Asia Orient Holdings and Walter Kwok Ping-sheung of Sun Hung Kai Properties (SEHK: 0016) - will be guaranteed shares representing as much as 15.7 per cent of the initial public offering and 3.1 per cent of the company. Paulson will invest US$75 million in the offering via his Paulson & Co. He is the second-largest shareholder of New York-listed MGM Resorts International, which, following the listing, will control MGM China with a 51 per cent stake. Tracinda Corporation, the investment vehicle wholly owned by MGM Resorts' 93-year-old controlling shareholder Kerkorian, will invest US$50 million in MGM China. Given their existing, combined 36 per cent stake in MGM Resorts, Paulson's and Kerkorian's decision to act as cornerstone investors in MGM China suggests they are keen to double down on Macau. "They probably figure that among MGM's casinos globally, this is the one that will be the growth driver," said one gaming analyst. Their investment "suggests MGM China is a better buy than the US-listed company", he said. MGM China is currently 50 per cent owned by MGM Resorts and Ho, daughter of Macau gaming magnate Stanley Ho Hung-sun, and operates the US$1.2 billion MGM Macau casino hotel. The share offering will see MGM Resorts gain control of the Macau unit with a 51 per cent stake after Ho sells a 20 per cent stake to the public and, via a side deal, another 1 per cent to the US firm. An over-allotment option could see Ho sell another 3 per cent stake to underwriters of the deal, lead by Bank of America Merrill Lynch, JP Morgan and Morgan Stanley - leaving her a 26 per cent stake in MGM China, if exercised. Rounding out the list of MGM China's cornerstone investors are Asia Standard International, controlled by Asia Orient managing director Poon Jing, with a US$40 million commitment, and Sun Hung Kai non-executive director Walter Kwok's private Dornbirn Inc. Companies seeking public offerings often line up banner names as so-called cornerstone investors in order to guarantee a certain level of investment and raise the profile of the deal among smaller institutions and retail investors. MGM China's offering will see Ho raise US$1.209 billion to US$1.501 billion by selling 760 million shares, or a 20 per cent stake, at HK$12.36 to HK$15.34 per share, according to the term sheet. The over-allotment option for Ho to sell 114 million additional shares would raise another US$224.58 million if priced at the top of the range. The indicated price range of the deal values the company at US$6 billion to US$7.5 billion, compared with a market value of US$7 billion for MGM Resorts. MGM China kicked off its roadshow yesterday. The public offering runs from May 23 to 26 with pricing due to be announced on May 27. The shares are set to begin trading on June 3 under stock code 2282.

 China*:  May 20 2011

Beijing's Top General Says U.S. Overstates China Threat - China's top military officer warned that America's tendency to "hype" the threat from Beijing could thwart better U.S.-China military relations. In a speech Wednesday at National Defense University in Washington, Gen. Chen Bingde, the People's Liberation Army chief of general staff, said China's economic rise and recent military-modernization efforts had "unfortunately aroused unfounded suspicion and exaggeration of China's defense and military development." Overstating the threat posed by China's military, he said, "not only distorts China's strategic intention, and tarnishes our international image, but also pollutes the political environment for Sino-U.S. [military-to-military] relations." Gen. Chen is leading a Chinese military delegation to the U.S. this week, a visit the Pentagon is billing as an important trust-building exercise. But the visit by China's top military brass comes amid concern within some U.S. national-security circles about Beijing's growing military prowess. Asked about Gen. Chen's criticism, Adm. Michael Mullen, chairman of the Joint Chiefs of Staff, said the talks this week are about both countries "making adjustments" and are vital to prevent miscalculations. "We have talked about a peaceful future…that does not include a conflict between China and the United States," Adm. Mullen said. Earlier this year, for instance, the Chinese military conducted a test flight of its new J-20 stealth plane, a move that sparked concern about potential for a new arms race in the Pacific. American officials said the test flight, which happened during a visit to Beijing by Defense Secretary Robert Gates, was meant to telegraph China's growing military confidence. In addition to the debut of the stealth fighter, China has made strides in developing a carrier-killing ballistic missile that—in theory—could put U.S. naval vessels in the Pacific at greater risk. Other China watchers have expressed concern about China's ability to wage "asymmetric" warfare through cyberattacks, antisatellite weapons or other means. In a news conference with Adm. Mullen, Gen. Chen was asked about the J-20 test and whether it was a provocative act aimed at the U.S. Gen. Chen said the test flight was routine, adding that China didn't have the capability to threaten the U.S. "We do not want to use our money to buy equipment or advanced weapons to challenge the United States," he said. In his speech, he said his visit to the U.S. underscored the "gaping gap" between Chinese and American military capabilities. In a question-and-answer session after his speech, Gen. Chen said the gap was particularly visible with regards to China's naval fleet. "To be honest, I feel very sad after visiting, because I feel and I know how poor our equipment [is] and how underdeveloped we remain," he said. Both countries' militaries have gone through periods of suspicion and mistrust of the other. Gen. Chen's visit comes a decade after a midair collision between a Chinese fighter plane and a U.S. surveillance plane over the South China Sea, an incident that sparked a diplomatic row. U.S.-China military relations hit a low last year after Washington approved a $6 billion arms-sale package to Taiwan. American support for Taiwan has been a perpetual irritant in relations between Beijing and Washington. Rep. Mike Coffman (R., Colo.), a member of the House Armed Services Committee, said Beijing's goal was to develop "anti-access" military capabilities that would limit the U.S. military's ability to project power in the region. Mr. Coffman recently visited China as part of a U.S.-China Working Group delegation, a visit that included a dinner with Gen. Chen. Mr. Coffman said Chinese military officials "didn't seem very interested" in pushing for a genuinely closer military-to-military relationship. Gen. Chen's meeting Tuesday with his counterpart, Adm. Mullen, was the first such face-to-face meeting in the U.S. between the top uniformed U.S. and Chinese officials in seven years. The Chinese delegation also was scheduled to meet with senior Obama administration officials and members of Congress. The Chinese delegation was scheduled to tour several U.S. military installations, including stops at Fort Irwin, Calif., site of the Army's premier desert training center, and a major naval base in Norfolk, Va.

Taiwan says it will allow 500 individual mainland tourists from Beijing and Shanghai to visit the island every day, starting next month, in a further sign of warming cross-strait ties. The new measure, expected to be implemented before the end of next month, would not only help increase the number of visitors to Taiwan, but would also give the island's tourism a boost, Taiwanese Premier Wu Den-yih said in Taipei yesterday. "Initially, the [daily] ceiling limit will be set at 500, and hopefully they will be able to come visit before the end of June," Wu said in delivering the government's cross-strait policy during a press conference marking his third year in office. Mainland tourists are allowed to visit only in groups, with the cap raised in April from 2,000 to 4,000 a day. The group policy went into effect in July 2008, two months after mainland-friendly President Ma Ying-jeou took office and adopted a fence-mending policy with Beijing, once Taipei's political rival. Wu said officials from Taiwan and the mainland reached a consensus on general terms during talks this month, and all that remained were minor issues, such as what other mainland cities should be included in the agreement. "Some people have suggested that Chongqing , Chengdu , Guangzhou, Hangzhou and Xiamen be included," Wu said, adding that officials were still discussing that option. From July 2008 to April, more than 2.2 million mainland tourists visited the island, generating about NT$110 billion (HK$28.9 billion) in revenue. The tourists have so far been allowed to visit only in groups over fears that they might overstay their visas and work illegally. Wu said the opening up to mainland tourists had resulted in investors spending about NT$160 billion on building or expanding hotels. Local tourism operators have also bought about 1,500 new buses.

China, Pakistan reaffirm all-weather friendship - Pakistan's Prime Minister Yusuf Raza Gilani (R) and China's Premier Wen Jiabao (C) inspect honour guards during a welcome ceremony at the Great Hall of the People in Beijing, May 18, 2011. Chinese Premier Wen Jiabao and Pakistani Prime Minister Yousuf Raza Gilani Wednesday reaffirmed the two countries will maintain an all-weather friendship. Wen held talks with Gilani at the Great Hall of the People in Beijing on Wednesday afternoon. They are expected to witness the signing of a number of cooperative documents between the two countries. Before the close-door talks, Wen held a welcoming ceremony for Gilani, who arrived in Shanghai Tuesday evening for a four-day visit to China. Wen first welcomed Gilani to China, adding that his visit would enhance the China-Pakistan friendly cooperative relationship. According to Wen, the two sides had in-depth exchanges of views on bilateral relations as well as important international and regional issues."We have reached a broad consensus," he said. "I want to stress that no matter how the international situation changes, China and Pakistan will always be good neighbors, friends, partners and brothers," Wen added. Gilani thanked Wen for his warm welcome and hospitality and talked warmly about the 60th anniversary of the establishment of China-Pakistan relations. "People and government institutions of the two countries are celebrating this year by organizing a series of activities. I still recall your visit to Pakistan during which we made important decisions to take our defence, economic and cultural ties to new heights," said Gilani. The two sides signed three cooperative documents during the signing ceremony, including an agreement on economic and technical cooperation between China and Pakistan, Amendment to the Memorandum of Understanding on Crisis Management between the China Banking Regulatory Commission (CBRC) and the State Bank of Pakistan, and Addendum No. 2 to Lease Contract Sanduck Copper-Gold Project for Extension between Metallurgical Corporation of China Ltd and Sanduck Metals Ltd. Liu Mingkang, chairman of the CBRC said the amendment between the bank and the State Bank of Pakistan is a very important agreement, as it allows the two sides to strengthen coordination, exchange information and make joint efforts to tackle crises together.

Argentina’s New Hot Export? Polo Boots for Chinese Women - A ceramic female polo player, from northern China, Tang Dynasty, first half of the 8th century, made with white slip and polychrome. A long-simmering trade dispute between China and Argentina may be finally settling down thanks in part to some highly unlikely common ground: the sport of polo. For most of last year, South America’s second-largest economy and Asia’s largest economy have not been playing nicely. Argentina was raising restrictions on a range of Chinese manufactures. China, in retaliation, slammed the door on Argentinian soyoil, of which the South American country is the world’s largest exporter and, until the spat, China’s largest supplier. Argentina used accounted for 77% of the Chinese soyoil market in 2009. Last year, its share plummeted to 12%. Lately, the situation has begun to improve, with a deal to resume soyoil shipments announced last week. The arguably more surprising development, however, has to do with another Argentine product. In Beijing for a high-level trade mission this week, the secretary of Argentina’s Footwear Industry Chamber Horacio Moschetto told Dow Jones Newswires that Argentine shoe makers had managed to tie up orders from China. And while he wouldn’t say precisely how many shoes were involved, he did let on that a big part of the deal involved polo boots. Arguably better known for Eva Peron and the tango, Argentina has been a bastion of polo since the sport was popularized there by British settlers in the 19th century. China’s history with the sport goes back even farther: By some accounts, polo was the bees’ knees as far back as the Tang Dynasty (618 – 907 AD), except only imperial types played it. Fast forward a millennium or so: The imperials are gone but polo is making a comeback in China, thanks to the country’s new luxury-loving aristocracy. Last winter, a six-day snow polo tournament was held just outside Beijing, hosted by the Tianjin Goldin Metropolitan Polo Club, which was started by a Hong Kong-listed property developer. There’s even a governing body of sorts, called China Polo Clubs, set up to “develop and manage polo clubs in China.” And while the ranks of China’s new rich are dominated by men, Mr. Moschetto revealed an interesting detail: A lot of the polo boots to be shipped to China from Argentina are for women. Possibly because the sport has only recently been revived in China, there are no statistics that break down the country’s polo players by gender. But the idea that Chinese women might jump on a horse and join in the fun is not without historical precedent. Among the Tang Dynasty terracotta statues archaeologists have uncovered, several appear to depict female polo players, suggesting that the 21st century isn’t the first time the sport found gender equality. The China deal marks another step in the recovery of Argentina’s shoemakers, who have been battered by a series of ruinous economic crises and only begun to rebuild what was once a venerated national industry. Still, they face a tough challenge in trying to compete in a market well know for its ability to produce knock-off footwear. Mr. Moschetto, for his part, seemed confident his cobblers would be able to compete. “China is a demanding market, but the quality of Argentina’s leather is very high,” he said. Coincidentally (or perhaps not?), China Polo Clubs is largely staffed by Argentinians and has an office in Argentina too, according to its website. There’s at least one customer the South American boot-makers can count on.

The Internet conglomerate Tencent Holdings Ltd has bought a 16 percent stake in an online travel company in China with the goal of expanding its portfolio and fueling growth. Tencent paid $84.4 million for the stake in eLong Inc, China's second-largest online travel company by market share, according to a joint statement on Tuesday. The purchase means that Tencent is now eLong's second-biggest shareholder, behind Expedia Inc, the world's biggest online travel agency, which owns 56 percent of eLong. Tencent's share price in Hong Kong fell 2.74 percent on Tuesday to close at HK$213.2 ($27.42). On Monday, eLong rose 12.77 percent on the Nasdaq to close at $16.96, before the announcement of the deal with Tencent. Tencent is accelerating its pace in exploring different services and applications this year, after it set up a 5-billion-yuan ($769 million) fund in January to invest in areas such as online games, social networking, and e-commerce.
"We have entered a new phase of investment, during which time we will make important investments relating to our current platform and new strategies," the company said in its financial report earlier this month. Tencent aims to provide multiple services for "online life" on the basis of its instant-messaging software, QQ, said the Chief Executive Officer Pony Ma earlier. QQ, the largest client software in China, had 674 million active user accounts in the first quarter of this year, according to Tencent. "Tencent is going to combine its resources with services providers in different niche markets to maximize its own value," said Hu Yanping, general manager of the Beijing-based research company Data Center of China Internet. He said Tencent is also engaged in other acquisitions in the online travel market, which it hasn't disclosed. The deal with eLong implied that e-commerce is a "viable monetization approach" for Tencent's platform, though that has not been reflected in Tencent's share price, Credit Suisse said in a research note. The investment bank also reiterated its "outperform" rating on Tencent on Tuesday. Earlier this month, Tencent said that it had invested 450 million yuan for a 4.6 percent stake in the Shenzhen-listed media group Huayi Brothers Media Corp, in order to explore areas such as movies, television, and new media. This came after Tencent took its first steps in the group-buying market when it unveiled, which came online in late February. The site is jointly funded by Tencent, Groupon Inc and Yunfeng Fund, a venture capital company. Tencent and eLong will develop online travel products and distribute eLong's hotel services to Tencent's users, according to the statement. The travel website has links with more than 150,000 hotels worldwide through its connection with Expedia's systems.

Baidu buys into - Richard Liu, chairman and chief executive officer of, said Baidu's Robin Li invested in his company last year, taking a stake of less than 1 percent. Robin Li, founder and chief executive officer of the search engine company Baidu Inc and the richest man on the Chinese mainland, has invested in, a company that started by mainly selling computers, communication and electronics over the Internet. When measured by its market share, is the biggest website selling directly to consumers in China. Li is the latest in a series of famous investors who have wanted to own part of, a company valued at about $10 billion at the end of last month. Among the others are the Walton family, which controls Wal-Mart Stores Inc, and Digital Sky Technologies, the Russia-based Internet investment group that owns stakes in Facebook Inc and Groupon Inc. Both took part in's third round of financing, in which it raised $1.5 billion. "Robin Li invested in us last year, taking a stake of less than 1 percent," Richard Liu, chairman and chief executive officer of said at a news briefing in Beijing on Tuesday. The announcement surprised many, especially since Liu has complained about Baidu Inc's decision to sell to competitors the brand name "Jingdong", the Chinese name for Liu even hinted in his micro blog in April that might cease advertising on Baidu because of what he deemed to be the company's unethical behavior. "We have worked with Baidu for years and hoped the search engine giant would bring traffic to," Liu said. He said Robin Li called him in protest. "Although Robin is my investor, I will still criticize wrong practices," Liu laughed. Founded in 1998, has seen its annual revenue increase by more than 200 percent in the past six years. It brought in annual revenue of 10.2 billion yuan ($1.6 billion) in 2010 and that figure is expected to climb to between 24 billion and 26 billion yuan this year. In 2010, the company grabbed 32.5 percent of the Chinese market for goods sold directly to customers over the Internet. It's followed by and the New York Stock Exchange-listed, similar websites that each have 9.2 percent of that market, according to the consulting firm iResearch. The listing excluded, the largest online retail site in China measured by sales, which runs a website that sells directly to consumers and also allows consumers to sell to one another.'s direct sales to consumers have about three times the value of those made through to consumers, said Chen Shousong, an analyst with Analysys International. "The competition between and is becoming increasingly intense," he said. On Tuesday, announced it will cease cooperating with within a week. Analysts said might no longer want to work with a company associated with, which, along with, is owned by Jack Ma, the founder and CEO of Alibaba Group Holding Ltd. "Richard Liu said Alipay charges high transaction fees, but I don't think that is the deep-rooted reason," said Zhang Meng, an analyst with Analysys International. plans to list in the United States no later than 2012, and hopes to raise $2 billion from the capital markets, according to Liu.

Stolen relics returned to Palace Museum - Photo released by Beijing police on May 17, 2011, shows six pieces of relics recovered and returned to the Palace Museum. Another three pieces are still missing, a spokesman for the Beijing municipal police said at a press conference on Tuesday. Nine pieces of art from an exhibition in the Palace Museum were stolen at midnight on May 8. It was the first theft in 20 years at the heavily guarded former home of emperors, also known as the Forbidden City. The nine pieces - all small Western-style gold purses and cosmetics containers covered with jewels and made between 1920 and 1945 - were missing from a temporary exhibition.

China Limits Manufacturers' Power Use - As Yangtze Runs Low, Tone of Officials Turns Shrill; Factories Feel the Pinch. Chinese authorities are hitting manufacturers with restrictions on electricity usage that they say will continue in coming months, as low river levels and high coal prices threaten the country's worst seasonal power shortages in several years. China's mighty Yangtze River is running so low that hydropower production is slowing, shipping traffic has been curtailed and agricultural output has been reduced. Across central China, dry conditions that have persisted for months are now being described in shrill terms in state media and government reports. Power shortages lead to factory shutdowns most years and drought warnings are common in China this time of year, often to be replaced by flood worries a few months later. But the tone of officials underscores how the impact is being felt earlier in the year and raises the possibility it will become a more widespread problem for the country's manufacturing sector, a key driver of China's growth. Manufacturers say are they feeling the pinch as local authorities mandate tougher limits on electricity use. Analysts say Beijing may soon encourage power-plant operators to produce more electricity with the first electricity tariff increase since 2009, allowing them to pass rising coal prices onto consumers. Some factories in Taizhou, a large manufacturing city in eastern China's Zhejiang province, for example, were told to halt production one day a week in March, two days a week starting in April and this month are forced to close three out of seven days, according to Zheng Ding, a sales manager at auto-parts maker Zhejiang Zhengshi Machinery Co. To complete certain orders, the company is powering its facilities using generators, said Mr. Zheng. "But this method can't be used to deal with long-term production." China's state-run Xinhua news agency reported that the China Electricity Council, a research arm of the central government, could raise its estimate for power shortages at peak times during 2011 by a third, to 40 gigawatts from 30 gigawatts, which the news agency said would be China's largest shortfall since 2004. Analysts anticipate electricity shortages in China each year and it's unclear yet whether possible adjustments upward now could have any meaningful impact on broader output in the world's second-biggest economy. In 2004, China's economy expanded more than 10% despite that year's power problems. Electricity usage has been watched by some analysts as a proxy for economic growth in China. But the picture is increasingly muddled by tightening official controls on electricity use, for instance requirements by factories to power down every few days or switch work to night shifts. When measures started almost 10 years ago, they typically applied during the peak summer months when air conditioning tends to drive up demand. These days, manufacturers in some cities face power limits year round, some driven by Beijing's clean-air goals. A recent American Chamber of Commerce in China report cited "unintended consequences" of the rationing, including how it prompts use of diesel power generators that are "more polluting than many other forms of electricity generation." The government plans more alternative-energy production, but according to Citibank Inc., coal-fired plants produced around 84% of China's power in April, followed by 11% from hydropower. Nuclear and wind generated only about 2% each of the country's electricity. To alleviate the immediate concern of drought in the middle reaches of the Yangtze, the world's largest hydropower producer, China's Three Gorges Dam, was discharging water at 9,500 cubic meters a second, or over three times more than the water flowing in, Xinhua said, a practice clearly unsustainable for long. Five months without rain have rendered a cotton-producing region known as "land of a thousand lakes" near the central Chinese city of Wuhan so dry that more than 1,300 mostly small reservoirs can't be used for irrigation, according to Xinhua. Its report, blaming the drought in part on the La Niña weather pattern, said the region's entire wheat crop had failed and that fire trucks were delivering water to villagers in the area. Last year, dire government warnings of drought in May gave way to worries by July that torrential rains and flooding were putting the Three Gorges Dam to its biggest test since becoming fully operational in 2009. Just the same, this year's drought is a reminder of what experts say are long-term risks posed by China's big population and poor conservation, particularly in the parched north around Beijing. There hasn't been a substantial drop-off in the growth of power generation fueling China's growth. Citigroup analyst Pierre Lau said in a report this week he has seen "moderate slowdown," which he attributed partly to coal-burning plants producing less electricity because of high coal prices that he said could lead to a hike in tariffs. According to Mr. Lau's numbers, power production grew 12.6% in the first four months of this year compared 13.4% during the same period of 2010. In addition to power shortages in eight provinces, including Zhejiang near Shanghai, Mr. Lau cited "deceleration" in demand from big users like chemical and steel makers. Lower water levels on the Yangtze River are also starting to disrupt tours of the region's rocky ledges around the famed Three Gorges, according to Blinda Bi, a tour operator in Chongqing. Last week, Ms. Bi said, "For some parts of the trip, we had to arrange bus trips because there was not enough water for large ships."

Hong Kong*:  May 19 2011

More banks have lifted their HIBOR-based mortgage rates in line with Hong Kong's two major lenders - HSBC (0005) and Bank of China (3988) - who raised their rates last week. Standard Chartered Bank (2888) increased its rates to HIBOR plus 1.5-2 percent from HIBOR plus 1-1.5 percent. The cash rebate has been slashed to 2 percent from 5 percent. The new rates are effective from May 31. This is the second time in a month that StanChart has raised mortgage rates. With the latest rise, a homebuyer who borrows HK$2.1 million to buy a HK$3 million flat will have to pay an additional HK$481 to HK$496 per month over a 20-year period. Wing Hang Bank (0302) and Chong Hing Bank (1111) also raised their mortgage rates to between HIBOR plus 1.3 percent and HIBOR plus 1.7 percent. The one-month Hong Kong interbank offered rate stood at 0.19 percent yesterday, while the three-month HIBOR was 0.26 percent. "A rate of HIBOR plus 2 percent has already shot over most prime-based mortgage rates," said Sharmaine Lau Yuen-yuen, chief economic analyst of mReferral Brokerage Services. The rate increases will probably end the dominance of HIBOR-linked mortgages and shift preference back to prime- based mortgages, Lau said. Wong Wing-wai of Pan Asian, a mortgage advisory company, said current HIBOR-based mortgage rates look reasonable. But Buggle Lau Ka-fai, chief analyst of Midland Realty, warned higher mortgage rates will weigh on transactions. In the primary market, Kerry Properties (0638) sold four flats at its Lions Rise project in Wong Tai Sin yesterday. Chinachem launched the first batch of 32 flats at Residence 228, its new project in Sham Shui Po. Each flat is priced at at least HK$7,575 psf, or an average of HK$8,306 psf. Flat sales will start on Saturday. The project - with a total of 88 flats, sized from 445 sq ft to 783 sq ft - is expected to cash in HK$490 million to HK$500 million.

Almost 100,000 people rushed to get their hands on Milan Station, making the firm's initial public offering the hottest ever in Hong Kong. The retailer of secondhand luxury handbags was 2,100 times oversubscribed, breaking the previous record of 1,702 times set by Tianjin Port Development in 2006. Milan Station was seeking just HK$275 million but it froze up a staggering HK$58 billion in margin financing orders. Nearly 700 applicants sought to subscribe to 50 percent of the issue's retail tranche - the maximum allowed, sources said. Massive demand for the shares kicked in a clawback mechanism dividing the offering into equal halves - 50 percent each for institutions and retail investors. Initially, the retail portion accounted for just 10 percent of the offering. "The size of Milan Station is rather small and it could draw capital easily," said Ricky Tam Siu-hing at Champlus Asset Management. "But the most important fact is that the brand is well known to locals as well as mainlanders, making it very attractive." But Tam warned the stock will be the subject of heavy speculation in the short term before its price stabilizes. Wing Fung Financial Group head of research Mark To Kwok-bun credited China Merchants Securities (HK), the issue's sole sponsor, with doing a good job promoting the firm. "This is a signature deal for CMS," To said. CMS (HK) has been a sponsor of five IPOs since 2006. The lukewarm sentiment prevailing in the stock market also helped Milan Station as investors opted to subscribe to IPOs rather than buy listed stocks, To said. He expects Milan Station to climb 30 percent on its trading debut on Monday and those who hold the stock to sell quickly if they want to enjoy profits in the short term. The volatility in the general market is bound to adversely affect the performance of Milan Station, he said. First Shanghai Securities chief strategist Linus Yip Sheung-chi expects the stock to shoot up right away. "The real performance, however, can only be seen after the first week, when the excitement dies down," Yip said. Meanwhile, the firm clarified that selling existing shares will not increase the liquidity. Chief executive Byron Yiu Kwan-tat previously said that selling existing shares as part of the IPO can boost liquidity of the stock.

Earnings at The Hong Kong and Shanghai Hotels (HSH), owner of the Peninsula chain of luxury hotels, could suffer a setback next year when nearly half of the guest rooms at its most profitable Hong Kong unit are due to be renovated. The group, which saw a 26 per cent jump in underlying profit to HK$408 million last year, enjoyed persistent growth during the first quarter of this year as revenue per available room in Hong Kong, Asia and the United States rose between 12 and 19 per cent from a year ago. However, Japan's March 11 earthquake is casting a pall over the second quarter, with the occupancy rate plunging from an average of 65 per cent last year to its current level of between 30 and 40 per cent. The group has launched promotional packages to lift the rate back to between 45 and 50 per cent. The group's director and chief operating officer, Peter Borer, said staff at The Peninsula Tokyo had been told to take annual leave and unpaid leave, and some had been transferred to other hotel operations for up to eight months to save wages. "We are also looking at energy saving ... we try to streamline operating hours, closing floors," Borer said. One analyst said the quake was not a major problem, because The Peninsula Tokyo had not contributed much profit anyway since its opening in 2007, but the partial closure of its flagship, The Peninsula Hong Kong, in 2012 was of far greater concern. "We believe the renovation plan could cut the group's year-on-year net profit by some 15 to 20 per cent in 2012," the analyst said, speaking on condition of anonymity. "But we project a 40 per cent surge in its bottom line this year, due to increased room rates and a strong performance in Hong Kong and mainland hotels." The analyst projections for 2013, after completion of the HK$450 million renovation scheme, were bullish, reflecting better rates from the new rooms. The group's chief executive, Clement Kwok King-man said Peninsula Hong Kong would be closed in phases to mitigate losses from the renovations. "More of the earning disruptions will happen in 2012 when work starts at the tower," he told shareholders at a meeting yesterday. "But our hotel did not have 100 per cent occupancy so we can always redirect guests to the remaining rooms of the hotel." The 314 rooms at the Hong Kong hotel were 70 per cent full on average last year - the second-highest rate among the group's eight other hotels around the world. Up to 148 rooms will be closed in 2012. Kwok said he did not expect the group's HK$731 million three-year renovation programme of its Repulse Bay complex to drive out tenants. Despite growing corporate interest in the yuan market, Kwok said the company had no plan for a second listing in Shanghai, because it did not need funds, and Hong Kong's stock market had already provided a good fund-raising platform.

A veteran journalist who resigned from ATV in 1994 over its refusal to broadcast a documentary about the Tiananmen Square crackdown is expected to be appointed director of broadcasting. A person familiar with the hiring said the interviews with shortlisted candidates had been completed and the announcement of Timothy Jim Sui-hing as the new RTHK chief was likely to be made next month. Jim, 59, managing director of Sing Tao Overseas Operations, is among 20 candidates for the post vacated by Franklin Wong Wah-kay. Wong announced in November he would not renew his contract when it expired in February, citing health problems. The open recruitment exercise closed on January 18. Wong was selected in a similar exercise three years ago when then director Chu Pui-hing sought early retirement after an embarrassing incident involving a karaoke hostess. Jim, who graduated from Baptist University's department of communication, worked as a reporter at the South China Morning Post (SEHK: 0583) in the 1980s. Assistant director of broadcasting Tai Keen-man, who applied for the job and is understood to be one of the shortlisted candidates, said he had yet to receive any news, "but I'm not optimistic that I will eventually get the job. I will continue to serve RTHK in whatever post I occupy". In May 1994, Jim resigned as ATV's assistant chief executive in the wake of the refusal of the station's senior management to broadcast a Spanish documentary about the 1989 Tiananmen Square crackdown. Jim had bought the documentary for broadcast in a slot reserved for news at the free-to-air station. The incident sparked the resignation of six other ATV journalists and aroused concern about management's interference infringing on editorial independence. Jim had been credited with raising the profile of the station, particularly with documentaries on the Chinese channel and the talk show News Tease, which featured co-hosts Albert Cheng King-hon and Wong Yuk-man. The government is looking for someone with at least 15 years' media experience to lead RTHK on a three-year contract with a monthly salary of HK$165,350. Doubt over RTHK's future was removed when the government decided in September 2009 to ignore recommendations that it set up an independent public service broadcaster from scratch. RTHK would, instead, be strengthened and continue as a government department. The administration proposed pumping fresh resources into RTHK, moving it to a new site at Tseung Kwan O costing HK$1.6 billion and developing digital broadcasting, including high-definition TV programs. An 11-member advisory board - appointed by Chief Executive Donald Tsang Yam-kuen in August - was set up under a new RTHK charter that defines the roles and missions of the broadcaster. The charter requires the director of broadcasting to explain to the board when he chooses not to take its advice on editorial principles, program standards and service improvements - a clause that critics say amounts to interference.

Secretary for Security Ambrose Lee Siu-kwong said on Tuesday the threat of a terror attack in Hong Kong remained “moderate” despite plans by the American warship, USS Carl Vinson, to make a port call here. The crew of the aircraft carrier recently buried the body of Osama bin Laden at sea after the al-Qaeda leader was killed by US special forces during a raid into Pakistan two week ago. The Foreign Ministry is now considering a request by United States officials for the ship to visit Hong Kong. Al-Qaeda has since threatened revenge attacks. Two suicide bombers attacked a paramilitary centre in northwestern Pakistan last week, killing at least 80 people in retaliation for bin Laden’s death. Lee said officials understood fears had been raised that the visit might increase the risk of a terror attack in Hong Kong. “We are assessing the situation round-the-clock. Up to now, the threat of a terror attack remains moderate,” he added. Lee stressed that Hong Kong remained a safe city, saying police had strategies to prevent terrorism. “Terrorists tend to launch attacks on places with insufficient preparation. Hong Kong has a professional police force which has long averted terrorist activity... Hong Kong is relatively safe,” he said.

Macau's SJM Posts 85% Profit Increase - Macau casino operator SJM Holdings Ltd. said Tuesday its net profit rose 85% in the first quarter, lifted by rapidly rising gambling revenue in the Chinese territory. A car reflecting Macau's Casino Lisboa stops in front of Grand Lisboa (in background), the two major casinos of SJM Holdings founded by businessman Stanley Ho. Casino mogul Stanley Ho's SJM said its net profit for the three months ended March 31 rose to 1.41 billion Hong Kong dollars (US$181.3 million) from HK$760 million a year earlier. Revenue jumped 43% to HK$18.27 billion from HK$12.76 billion. Government statistics show gambling revenue in Macau overall also rose 43% for the same three-month period from a year earlier. SJM continued to account for the largest share of the market with 29.6% of the pie as of the end of April, according to CLSA.

Two leading telecom companies are refusing to budge on their use of the term "unlimited" to describe data roaming services in the face of criticism from the Consumer Council of such plans. The council said yesterday the use of the term "unlimited" was misleading. It cited the case of a woman, who bought such an "unlimited" plan at HK$120 a day only to be slapped with a HK$16,000 bill for using the service when she traveled to Switzerland and Israel in November. The council said the fine print in her agreement showed the service did not cover these two countries. The telecom company halved the payment following mediation and allowed the user, identified only as Kwok, to pay in three installments. She was among 56 people making complaints in the first quarter - a 60 percent surge compared with the same period last year. Most of the complaints involved charges or roaming services being activated without the subscribers' knowledge. The council's survey covered plans provided by six carriers that allow users "unlimited" data roaming services, when overseas, at rates ranging from HK$68 to HK$168 a day. The council's vice chairman of publicity and community relations committee, Ron Hui Shu-yuen, said their use of the term deviates from consumers' expectations and can lead to disputes. "As a matter of fact, services are not, as claimed, unlimited, for some of the carriers have restrictions on the amount and types of data," said Hui. In one instance, the data service was confined to sending and receiving e-mails and web browsing, with users paying a higher rate for file downloads and other functions like audio and video streaming. PCCW Mobile and China Mobile Hong Kong said they will not make any amendments as the limitations are clearly stated in their contract terms. The council urged the government to set guidelines for service providers that offer data roaming facilities.

 China*:  May 19 2011

Beijing police reach bottom of the bottle - Police in Beijing have detained 11 people and confiscated more than 10,000 bottles of fake foreign liquor destined for use in bars and nightclubs in the capital. The haul included bottles of whisky labeled Chivas, Johnnie Walker and Jack Daniel's and was from raids on six Beijing area manufacturing outlets last week, the Global Times said. According to investigators, the fakers use cheap bulk liquor and even toxic industrial alcohol such as methanol. The average bottle of phony liquor costs about 10 yuan (HK$12) to produce, so there are huge profits as clubs sell it for up to 580 yuan a bottle. "Some fake liquor is adulterated whisky and some just mixtures of erguotou [a cheap grain alcohol] and green tea," said Li Jin, a nightclub employee. But fake booze is common, Li added, and up to 90 percent of customers cannot tell the real from the fake. A wave of tainted food scares has renewed fears about safety despite an action pledge from the government following a 2008 tainted milk scandal that took the lives of at least six infants and sickened hundreds of thousands. Tainted pork, toxic milk, dyed buns and other dodgy foods have surfaced in recent months, making consumers ill and highlighting the government's apparent inability to oversee the food industry.

China's aggressive drive to close the gap with the West in stem-cell research is paying off after five years of heavy investment in a branch of science free of the tight regulatory constraints and intense debate over moral issues that hamper experimental work elsewhere. A decade ago, China had 37 stem-cell research papers published by reputable journals. By 2008, it was 1,116, the China Medical Tribune said. It now ranks fifth in the world in both the number of stem-cell patents filed and research papers published. And its numbers are growing faster than in any other nation. While research into embryonic and fetal stem cells sparked public controversy in the West, Beijing is charging ahead at a full speed. The government has poured billions of yuan into the research hoping to find innovative cures to chronic and deadly illnesses such as heart disease, liver failure and Parkinson's disease. "China is aggressively investing in biomedical sciences in general, and particularly stem-cell research. Not only will it serve as a way to flex its muscle as a technological powerhouse but also a means to ultimately bring forth a knowledge-based economy," said Professor Ronald Li, director of the Stem Cell and Regenerative Medicine Consortium at the University of Hong Kong. "As in other scientific disciplines, the quality of stem-cell research in China varies quite significantly. However, there are high-quality works being done and some have been published in high-profile international peer-reviewed journals. Overall, the trend is clearly on an upward trajectory." Although the trend is encouraging, the fever for stem-cell research and treatment also has problems. Many mainland hospitals are not waiting for clinical approval. They are offering stem-cell injections for diseases such as cerebral palsy and amyotrophic lateral sclerosis, sometimes called Lou Gehrig's disease. The ballyhoo is attracting thousands of desperate foreigners ready to pay for treatments that are untested and successes are sketchy at best. And then there is the moral issue. Unlike in the West, few people ask where those stem cells are from. Many mainland researchers and doctors profess not to know the source. But a reading of articles in mainland journals leaves little doubt that many cells are from induced abortions, harvested from fetuses aged from five weeks to six months.

Foreign direct investment rises 26% in China in first 4 months - Foreign direct investment (FDI) in China grew 26.03 percent year-on-year to reach 38.8 billion U.S. dollars during the first four months of this year, the Ministry of Commerce (MOC) said on Tuesday.

GDP growth target too low: PBOC adviser - Consumers line up outside a Gucci store in Sanya, Hainan province, after a duty-free shopping policy took effect in the island province in April. China's economy could grow by 9 percent on average in the next five years, a central bank adviser said on May 16, 2011. The Chinese economy is likely to expand by 9 percent on average in the coming five years, according to the central bank adviser Li Daokui on Monday. Li warned that the government's growth target of 7 percent is "way too low" to satisfy the investment hunger in the country's less-developed regions and to create enough jobs. "The Chinese economy still has great potential to grow very rapidly," Li told the CLSA China Forum in Beijing. "The 7 percent target is not enough to satisfy the investment hunger of the inland areas and to create enough jobs for 6.8 million new college graduates every year." Li said that China's ongoing process of urbanization, continued infrastructure investment and huge consumption potential will be the major forces driving economic growth in the coming five years. "It has been estimated that for every 1 percent increase in our urbanization ratio, there will be 1.5 or 2 percent GDP growth," he said. Li also said policymakers should continue to raise interest rates to curb high inflation and to eliminate negative real interest rates, a situation that occurs when inflation is higher than interest rates. "We have to prepare for relatively high inflation in the coming decade and that's why monetary policy has to be relatively tight," he said. Li predicted that inflation will be kept below 5 percent this year, a level slightly higher than the government's 4 percent target. China has raised the reserve requirement ratio for banks eight times and interest rates four times since last October to tame the country's stubbornly high inflation. While adopting a tight monetary policy to guard against asset bubbles, the government should be very cautious in managing capital inflows, especially speculative money lured by higher interest rates, he said. Li also urged the government to adopt a relatively loose and aggressive fiscal policy to increase public expenditure and to improve social welfare in order to ease mounting social tension. In the meantime, Li forecast that China's trade surplus will drop to about $100 billion, accounting for 1.5 percent of GDP, which will help ease the pressure for yuan appreciation. "The political pressure on forcing the renminbi to appreciate will come down and should come down," he said. China had a trade surplus of $11.4 billion in April as exports soared while commodity imports eased. The nation posted an unexpected trade deficit in the first quarter. Vice-Minister of Finance Zhu Guangyao said earlier that China will still likely achieve balanced trade with a modest surplus this year.

China to increase trade with Latin America - An employee works on a computer-controlled embroidery machine, manufactured in Jiangxi province and soon to be exported to Brazil. China mainly exports electronic goods, machinery, garments and shoes to Latin America. While China is seeking to stimulate domestic consumption to spur its economy, it plans to import a greater variety of goods from Latin American nations in an attempt at balancing its trade with foreign countries, said a high-level official from the China Council for the Promotion of International Trade. Wan Jifei, chairman of the trade council, told China Daily that the country is willing to encourage more Chinese businesses to invest in Brazil, Peru and other prominent Latin American countries. The money will be spent mainly in the consumer product, agriculture and mining industries. The goal is to induce Latin American countries to export more to China and elsewhere. Wan's remarks came after Chen Deming, China's minister of commerce, encouraged Latin American countries to open their markets further and to be more welcoming to foreign investment. Doing so, he said during a trip to Argentina, will let more Chinese companies gain a presence and help such countries export more to China. "China could import more agricultural by-products, infrastructure-related goods and chemical goods from Latin America," Wan said. "And the value of imports will undergo a sharp rise." By the end of 2009, the annual value of trade between China and Latin American countries had risen for three consecutive years to more than $100 billion. China regularly runs trade surpluses with the region. "Although bilateral trade rose rapidly, the scale could have been much larger," said Harold Forsyth, the Peruvian ambassador to China. According to estimates, China's trade with Latin America accounts for only 5 percent of its total foreign trade. China has signed free trade agreements with Chile, Peru and Costa Rica in Latin-America. What's more, China is the largest importer of goods and services from Brazil and Chile, and the second-largest from Peru, Argentina and Cuba. "There is big potential for the growth of Chinese imports from the Latin-American nations," Forsyth said. China mainly exports electronic goods, machinery, garments and shoes to Latin America. Meanwhile, Latin American countries, the most prominent being Brazil and Argentina, mainly sell China agricultural products and minerals and other raw materials. "China thinks Latin American countries could export more, and export more value-added goods in particular, to China," Chen said. "We can take a series of measures to make that happen." Brazil is the largest trading partner China has in Latin America. In 2010, the value of trade between the two countries increased by 47.5 percent from the previous year, rising to $62.5 billion. "In the next five years, the value of the annual trade could exceed $100 billion," said Jim Liu, officer of Economic and Trade Section of the Embassy of Brazil in China. China now runs a trade deficit with Brazil, amounting to $20.28 billion in 2010. China imports large amounts of Brazilian iron ore, soybeans, sugar and aircraft. But Liu said China should do more to induce Chinese companies to invest in Brazil, to encourage trade between the countries and pave the way for Chinese imports to Brazil. "Many Latin American nations are emerging economies, which expand quickly," Wan said. "This leaves various investment opportunities to Chinese companies. "The rich mining resources that Latin American countries have are also attractive to Chinese companies." By the end of 2009, China's investment in Latin America had risen to $30.6 billion, accounting for 12.5 percent of China's total outbound direct investment. Latin America is the second-largest destination for Chinese outbound direct investment, following the Asia-Pacific region. In Latin America, most of the money goes to Brazil, Peru, Venezuela, Mexico and Argentina. During the past few years, Chinese companies have invested heavily in Latin America's energy and mining industries and more business opportunities are arising.

Pakistani Prime Minister Yousuf Raza Gilani begins a visit to Beijing on Tuesday with China looking more attractive after the US killing of Osama bin Laden strained Islamabad's ties with Washington. The sentiment is mutual, with China now in the process of shoring up its relations with Islamabad, Afghanistan and several other Central Asia states in step with the expected diminished US presence as it winds down military operations in Afghanistan. For Pakistan, Beijing represents an uncritical friend ready to provide aid, investment and military assistance. To the leaders in Beijing, ties with Pakistan and other countries in its neighbourhood offer a bigger diplomatic footprint, better access to resources and a larger stable of allies to challenge US supremacy. Although Gilani’s four-day visit starting on Tuesday was planned well in advance, it comes at a critical time for his country’s relations with the US, which have been thrown into crisis over the American raid on May 2 that killed bin Laden in the northern Pakistani town of Abbottabad. Pakistan has called it a violation of its sovereignty and threatened to retaliate if there are any similar operations in future. While American politicians served up withering criticisms over Pakistan’s failure to find bin Laden’s hide-out – or the possibility that officials were protecting him – China offered welcome reassurance. “The Pakistani government is firm in resolve and strong in action when it comes to counterterrorism,” Foreign Ministry spokeswoman Jiang Yu told reporters at a news conference on May 3. Days later, Gilani made Pakistan’s appreciation clear, singling out China in a testy speech on May 9 to parliament as Islamabad’s “all-weather friend.”

Hong Kong*:  May 18 2011

Budget carrier Hong Kong Airlines is set to launch offshore yuan-denominated bonds, a report said on Monday, amid huge demand for yuan-based products as China tries to internationalise its currency. The size, tenor and coupon for the issue are yet to be determined, according to Dow Jones Newswires, quoting the company’s term sheet. It said the proceeds will be used as working capital and for general corporate purposes. The report did not say when the bonds will be launched. The second-largest Hong Kong-based airline by fleet size is likely to be the first airline to tap into the so-called “dim sum” bond market. The move will come after heavy equipment maker Caterpillar and fast-food giant McDonald’s each issued yuan-denominated bonds in Hong Kong, the first such sales by non-financial foreign firms in the city. Hong Kong is acting as a test bed for the internationalisation of the mainland’s currency, as Beijing seeks to broaden the use of the yuan in the city after approving its use to settle cross-border trade in 2009. “Issuers from industries new to the [dim sum] market are likely to be welcomed by investors, as fund managers seek to diversify portfolios from Chinese property developers and finance institutions,” Raymond Gui, senior portfolio manager of Income Partners Asset Management, told Dow Jones. Hong Kong Airlines could not be immediately reached for comment. The budget carrier along with its sister airline, Hong Kong Express Airways, flies to 30 cities in Asia and Europe.

Glamorous opening for US$2b Galaxy Macau casino - The Galaxy Macau casino opens in a blaze of light on Sunday - Flanked by long-legged models adorned in peacock feathers, Hong Kong property and construction tycoon Lui Che-woo was all smiles as he opened the doors to his new US$2 billion casino, the Galaxy Macau, on Sunday. Lui, chairman of Macau casino operator Galaxy Entertainment (SEHK: 0027) – around 20 per cent owned by private equity group Permira – is the only operator to open a casino this year in Macau, the world’s largest gaming market, where revenues surpass Las Vegas four-fold. Designed as an Asian-style palace, the 550,000-square-metre property is the third casino to open on the developing Cotai strip, Macau’s version of the Vegas strip and which authorities hope will transform Macau from a pure gaming destination into a renowned tourist and leisure destination. “It doesn’t feel like a casino, it’s so beautiful” said Wer, a 30-year-old man visiting from Zhuhai. “People can come here to relax, bring their families. It feels comfortable.” Like gilded ice-cream cones, Galaxy Macau’s gold-embossed turrets glow against the Macau skyline, magnifying the glitz of billionaire Sheldon Adelson’s Venetian property and Melco Crown Entertainment’s City of Dreams, all situated within walking distance of each other. Macau has been trying to upgrade its image with Michelin-starred dining options and vast luxury retail outlets, all in a bid to woo the mainland’s rising middle class. While around 70 per cent of gaming revenue still comes from the high-rolling VIP sector, Galaxy Macau is allocating two-thirds of its 450 gaming tables to the mass market, confident of delivering returns in the mid to high teens to investors, chief financial officer Robert Drake said. Galaxy’s new 2,200-room property, which incorporates international hotel brands Banyan Tree and Japan’s Okura, is hoping to creating a “super industry” of gaming and tourism in the former Portuguese colony, said Galaxy vice-chairman Francis Lui. “If you merge Phuket in Thailand together with Macau it would create a new-dimensional kind of market. The example of Galaxy Macau is to bring this tropical mood to Macau,” said Lui, also a committee member of the Chinese People’s Political Consultative Conference (CPPCC). With its 350-tonne white sand beach, simulated wave pool and Southeast Asian resort-style spa facilities, Galaxy is hoping to create a niche market in the former Portuguese colony emphasising the health and well-being of its visitors. But it remains to be seen whether the chain-smoking, hard-core gamblers that flood from into Macau from the mainland will have significant interest outside the heaving baccarat tables. “The casino is great; I am going to come regularly,” said 27-year-old Edwin. Dressed in a tight white T-shirt and fitted trousers, he shrugged and said: “I haven’t seen the pool yet – maybe later.” Galaxy Macau is following in the footsteps of rivals Melco Crown and Sands China in targeting the mainland’s mass market, betting that improving infrastructure and rising consumption will help propel demand. “Galaxy’s opening is also good for us – more people will come here,” said a waiter at Adelson’s Venetian. “It is exciting. We have been waiting three years for the opening. It is not a threat, just friendly competition.” Galaxy shares have surged more than 300 per cent over the past 12 months, compared with the Hang Seng Index’s roughly 17 per cent gain. Analysts remain bullish on the firm’s prospects. “We think the property has potential to exceed revenue and cash-flow expectations,” said Union Gaming in a note. Galaxy’s new project only covers around a third of its available land space on the Cotai strip. It plans to develop the rest of its land bank over the next seven to eight years. Wynn Macau, casino mogul Steve Wynn’s Macau unit of Wynn Resorts, MGM Resorts International and SJM Holdings, are the three other licensed operators yet to start construction on the strip. “We could build three more of these if we wanted to,” Drake said.

Galaxy throws open doors and aims to be the star - It was at least six years in the making and the doors opened three years later than originally planned. But when the first bets were finally placed on the baccarat tables shortly after 5pm yesterday, the timing couldn't have looked better for Galaxy Entertainment (SEHK: 0027) to open its HK$15.5 billion Cotai casino resort. With 2,200 hotel rooms, 50 restaurants and tourist-friendly amenities such as a rooftop wave pool with 350 tonnes of sand on an artificial beach, the Galaxy Macau aims to transform the company controlled by the family of property and construction tycoon Lui Che-woo into a major player on Cotai alongside Sands China's Venetian Macao and Melco Crown Entertainment's City of Dreams. "We are determined to reshape Macau's hospitality scene and build a new momentum not driven by gaming culture," Lui said yesterday. Those comments may be ahead of their time. Gambling accounts for more than 85 per cent of revenue at each of Macau's six licensed casino operators. And casino revenue has continued its storming growth this year, driven by credit-backed high-stakes turnover despite Beijing's efforts to curb liquidity. Macau's VIP baccarat revenue soared 95.8 per cent in the first quarter to 42.6 billion patacas (HK$40.63 billion), accounting for 72.7 per cent of all casino revenue. The cash-based mass market, by contrast, grew a more modest 30.9 per cent to 15.95 billion patacas. Galaxy's Cotai complex broke ground in 2005 on a plot of land that faces both the headquarters of Macau's People's Liberation Army garrison and the rival Venetian Macao. Construction of the Galaxy Macau was originally targeted for completion in 2008. It stalled during the financial crisis before work resumed at full speed last year, when the company secured HK$9 billion in new debt financing.

For HSBC (SEHK: 0005) chief executive Stuart Gulliver, the challenge of containing costs in other parts of the global bank will keep him from making Hong Kong his home. Although HSBC moved the office of its chief executive from London to Hong Kong in January last year, the suite of offices at the headquarters in Central has been mostly empty for the past four months. Gulliver, who took over the helm from Michael Geoghegan in January, has decided he does not need to spend too much time in the city. Nor does he think he will be staying in Taipan House, the bank's HK$500 million mansion on the Peak and the chairman's traditional home. "It is a naive idea to think that the job as chief executive of HSBC would mean spending 50 weeks a year in Hong Kong," Gulliver said. He admitted that in the past four months, he had spent only a few days in Hong Kong. However, that does not mean he did not take the city seriously. "The Hong Kong business is excellent. If I stay in Hong Kong, I could have tea at the Mandarin [Oriental], go to the club house for a drink and then have a swim. It's easy but that is not the way to enhance profit for the bank," Gulliver said. Over the past four months, he has split his time between Asia, Europe and the United States. "It is the US and Europe that have the cost problems and I have to be there to sort out the problems," he said. "Hong Kong has no such problem and I don't think I need to spend time there to be a hero," he said. This stance has not been welcomed by some customers. Edward Chow Kwong-fai, chairman of Hong Kong-listed CIG Yangtze Ports Capital, a long-standing HSBC customer, is not happy that the bank's top boss is not in the city. "The bank says its chief executive's office is here but Gulliver has been in London and other parts of the world," Chow said. "The bank now likes to use the internet to serve customers. It has closed branches with tellers and replaced them with machines. There is no personal touch when you enter the bank. In contrast, the mainland lenders and other Hong Kong banks are more keen on personal relationships and contact with customers." Allan Zeman, chairman of Lan Kwai Fong Holdings and Ocean Park, a shareholder of HSBC, supports Gulliver's approach. "It doesn't matter if Gulliver is in Hong Kong or not. It is more important if he can make money for the shareholders," Zeman said. HSBC's decision to bring its chief executive back to Hong Kong was seen as a sign of confidence in China. When Geoghegan returned to Hong Kong last year, he was greeted by hundreds of staff at the bank's headquarters in Central. He posed for photos in front of the iconic lions, met key clients for lunches, visited local branches and watched the horses at Happy Valley. Local customers praised his meet-and-greet efforts. Gulliver, for his part, prefers a low profile and has said he will not visit local branches as that would be the job of Asia-Pacific chief executive Peter Wong Tung-shun. "The only reason I would go to a bank branch is to trade foreign currency," Gulliver quipped. He also confirmed that he would not be living at Taipan House at 19 Middle Gap Road. Instead, Wong will be the lucky resident. "Since I won't be here 50 weeks a year in Hong Kong, there's no justification staying in Taipan House as it will be empty most of the time," Gulliver said. Instead, his trips to Hong Kong will see him in another HSBC property on the Peak at Pollock Path where he used to live when he was based in the city. "This is the house I lived in before and I like it very much," he said. Its most recent occupant was Sandy Flockhart, former Asia head of the group who is now chairman for Europe, Middle East, Africa and Latin America. Born in England and educated at Oxford University, Gulliver joined the bank in 1980 and held senior roles in Tokyo, Kuala Lumpur, the United Arab Emirates and Hong Kong before moving to London in 2003 after being in Hong Kong for 18 years. Before taking over the chief executive's role, he had been in charge of HSBC's global investment banking and trading businesses since 2006, turning the unit into one of the lender's most profitable.

 China*:  May 18 2011

The government in Beijing said on Monday it would levy anti-subsidy duties of up to 11.19 per cent on imports of EU potato starch, in apparent retaliation over Brussels’ decision to apply taxes to fine art paper manufactured in the mainland. The commerce ministry said in a statement that importers of potato starch will have to pay a deposit from Thursday based on the alleged European Union subsidy rates of 7.7 to 11.19 per cent of the import price. French starch producer Roquette and AVEBE of the Netherlands are among the companies affected by the decision, the statement said. The taxes are to be imposed on top of anti-dumping duties of 12.6 to 56.7 per cent, which the ministry started to levy from last month. On Saturday, the European Commission announced its final ruling to impose countervailing tariffs, in the 4-12 per cent range, and anti-dumping duties, of eight to 35.1 per cent, on coated fine paper. The move “severely hurt the interests of Chinese enterprises,” commerce ministry spokesman Yao Jian said on Saturday in a statement. “China is strongly discontented with the EU’s wrong decision and firmly opposes it.” “China … reserves the right to take relevant actions according to the law to protect the legitimate rights and interests of Chinese enterprises,” he said. EU-China trade has exploded in recent years, making the EU the top destination for exports from the mainland while China is Europe’s second-biggest trade partner after the United States. The two sides have been at loggerheads over a string of issues ranging from metal fasteners to modems to ceramic tiles.

Resort manager to double business - Locals crossing a bridge outside Banyan Tree's Ringha facility in Shangri-La in Southwest China's Yunnan province. Banyan Tree Holdings Ltd, a Singapore-based manager and developer of luxury resorts, hotels and spas, is seeking to double its hospitality business by 2015, with a majority of new openings to be built in China, a senior manager said. "We expect growth of about 20 percent every year for the next five years, with more than 30 projects currently in the pipeline under the names of Banyan Tree and Angsana brands, which will double the total number of resorts by the end of 2014," said Luca Deplano, vice-president of marketing with Banyan Tree Hotels & Resorts. He added that several of the new openings will be in China by the end of this year, including Banyan Tree Riverside, Shanghai, and other developments in Tianjin and Hangzhou. Others in Chengdu, Chongqing and Guilin will open after 2011. The move indicates China is an increasingly popular destination for both international and domestic travelers. The company believes international travelers want to see more than just Shanghai and Beijing. They also want to visit places such as Lijiang and Ringha in Southwest China's Yunnan province. The newly-added developments are expected to be even more popular among local travelers. "There is a belief that Chinese consumers have a growing interest in finding holiday destinations within China," Deplano said. "They want to explore their own country after having been abroad. They want convenient destinations where they don't need to fly eight hours to get to, yet have hotels offering the same luxury experience with a local flavor." Citing his own habit of seeking out a cup of espresso coffee, the Italian director said he believed the Chinese would want some good congee when they travel. "Something still sophisticated but more in tune with their own culture." The profile of Chinese customers is changing as fast as China itself. Phuket and Bali remain popular overseas destinations while Sanya is a very well subscribed domestic seaside resort. Chinese tourists now make up the biggest group visiting the Maldives. Eighteen percent of all visitors to Indian islands are Chinese and the ratio is around 30 percent at Banyan Tree properties in that region. "It surprised us," Deplano said. Only a few short years ago, many were told that Chinese travelers would not be interested in going to distant seaside resorts just to spend time idling on a beach like their European counterparts. Now the Chinese love spending time on the beach and scuba diving. "It has changed very fast," Deplano said. "You have to be quick in adapting to the different patterns." The major push for the expansion of Banyan Tree properties in China comes as a result of a recent investment drive by which wealthy Chinese investors put money into the Banyan Tree China Hospitality Fund to develop property in China - a drive that collected almost 1.07 billion yuan ($165 million). "It is a strong indication that people here trust the brand and they are confident that the brand will grow very quickly in this region," Deplano said, adding the confidence in strengthening its presence in China comes from the nature of the brand. "Compared with other international hospitality brands, as a Singaporean company we know the Chinese consumers better because Asia is very much in our DNA," he said. "There is an Asian feel at every single corner of our properties. "Local consumers are more comfortable demanding an experience closer to their own culture. We are well positioned to serve sophisticated Asian travelers." But the company is not at all Asian in its business strategies. Known as a bold first mover, the company has been comfortable in taking the risk of being the first hotel to open at a location. In Phuket, the company acquired an old and abandoned tin mine, cleaned up the site and converted it into the now-flourishing and renowned Laguna Phuket, the first integrated resort development on the Thai island. "We are looking at locations that are not fully discovered where we can be at the best location," said Deplano. In addition to the growth in terms of property numbers, the group is looking to expand its VIP membership club in China, where the number of billionaires and millionaires has soared in recent years. Banyan Tree Private Collection, offering perpetual and transferable membership, is designed for "really top customers", said Deplano. "The member will be able to enjoy one week at any villa that is part of this program, with extreme flexibility of when and where to go and enjoy his stay."
With a one-off joining fee from $150,000 and annual subscriptions from $3,150, the membership provides access to a portfolio of luxury villas and apartments for seven nights a year. A two-week stay in a two-bed villa on a yearly basis has a joining fee of $220,000 and annual dues of $6,300. Deplano said the type of villas in this program are of the highest category, with two-room villas that can host families rather than the smaller type of villas found at hotels. Deplano sees the product as an investment in a lifelong lifestyle. "It is a convenient way to travel to a variety of top destinations without purchasing and maintaining the entire villa," he said. About 20 percent of its total membership is from China. "They are young entrepreneurs, aged between 35 and 45, married, mostly with children," he said. "They are at this stage of their lives where they are ready to settle and want holiday destinations that can accommodate themselves and their families and that they can pass on later to their children as well."

Singapore's Lee Kuan Yew meets Chinese defense chief - Singapore's Minister Mentor Lee Kuan Yew (R) meets with visiting Chinese State Councilor and Defense Minister Liang Guanglie in Singapore on Monday. Singapore's Minister Mentor Lee Kuan Yew met with visiting Chinese State Councilor and Defense Minister Liang Guanglie here on Monday. They had frank discussions on bilateral relations and issues of common concern. Lee said that Singapore is happy to see the sound development of bilateral relations and the cooperation in fields such as trade and economy, education and culture, and that Liang's visit will help push forward the relations between the militaries. Going forward, Singapore is hoping for the two sides to boost their cooperation including that in defense, he said. Lee spoke highly of what China's achievements made in its modernization efforts through reform and opening up to the outside, saying that China has helped drive world and regional economy. Lee reiterated that Singapore will adhere, as always, to the one-China policy. Liang said China and Singapore have close relations and productive cooperation. China appreciates Singapore adhering to the one-China policy and is hoping that Singapore continue to lend its support to China's reunification efforts and play an active role in the promotion of development of cross-strait ties. Liang said that China saw great potentials in the friendly cooperation between China and Singapore, and that it is willing to work with Singapore to boost the bilateral friendship and defense relations. Liang is visiting Singapore at the invitation of Singapore Deputy Prime Minister and Defense Minister Teo Chee Hean. Separately, he also met with Teo and Singapore Prime Minister Lee Hsien Loong on Monday. Singapore is the first leg of Liang's Southeast Asian tour that will also take him to Indonesia and the Philippines.

Business magazines eye China growth - A Beijing newsstand featuring some Chinese magazines and Chinese editions of foreign magazines. Ask Thomas Gorman, the chairman and editor-in-chief of Fortune China magazine, which article he's most proud of and he'll say the cover story of the December 2010 issue. It was an exclusive interview with Jim Collins, the acclaimed business guru and writer, who spoke to Chinese chief executive officers about leadership. Released in 2001, Collins' business book entitled Good to Great was a hot item around the world, including its Chinese language edition. Since the launch of the book, Gorman noted the number of Chinese mainland companies on the Fortune Global 500 list has increased from 10 to 42, in addition to an estimated 60 percent growth to 2,000 of Chinese companies listed on China's stock exchanges. "Aside from distinguishing best practices to Chinese CEOs, we see such a story as engaging our readers and being relevant," he said. Fortune China is circulated to senior managers in Chinese and international businesses and selected government officials in trade, finance and investment. Engaging readers and being relevant seem more essential especially in an attractive market such as China, where the marketplace for magazines has grown exponentially. Recalling when Fortune China was launched in 1996, Gorman said there were three business magazines then. "Today there are 150 (business) magazines."

Japan's tourism recovery pins hope on China - Tourists from China stand outside a Laox Co shop in the Akihabara district of Tokyo. Chinese shoppers in Akihabara outspend all other overseas shoppers, according to the local tourism body, parting with more than four times more cash than their US counterparts. The district's stores are hiring Mandarin and Cantonese speakers and putting up two-meter tall billboards to bolster tourism. 

China's top economic planer has issued a notice asking local governments to upgrade their rural power grids in a bid to boost the nation's rural power infrastructure and improve the lives of rural residents in the next five years. Rural power grids should be rebuilt to meet rural residents' demands and agricultural production demands during the 12th Five-Year Plan period (2011-2015), said a notice from the National Development and Reform Commission (NDRC) on the website of the central government, Meanwhile, the same pricing of electricity will be realized between rural and urban areas, the notice said. Further, the central government will add more funds to support these projects, the notice said. The central government will shoulder most of the funding for upgrading power grids in the western and central rural areas, the notice said. China launched the renovation of rural power grids in 1998 and effectively cut costs for rural power use, the notice said. But problems still exist in rural electricity grids and some rural areas reported difficulties in satisfying residential and agricultural production demands, the notice said.

Report: China’s Young Billionaires Educated Elsewhere - Over the past decade, the number of people with some form of college education in China has jumped 147%, according to the National Bureau of Statistics, which revealed in its 2010 Census results that 8,930 people out of every 100,000 Chinese people has attended university. Over the same period, those completing high school grew by 26%. Chinese university freshmen queue up to register as they arrive at Beijing’s Tsinghua University, often described as “China’s MIT.” Barbie Moves into Mobile Home as China Dreamhouse Shutters - China’s leaders are quick to tout the country’s educational figures, which seem to point to impressive improvement in recent years. Yet other numbers tell a different story about China’s schools. Of the 56 yuan billionaires under the age of 40 identified in a new report on China’s young and wealthy released by Hurun over the weekend, half were educated in the U.S. or Europe. And four out of five of them said they would consider sending their children overseas for better education. Last year, 128,000 Chinese students went to the U.S., making China the country with the highest number of overseas pupils in American universities, according to a 2010 report from the Institute of International Education. The number of Chinese undergraduates in the U.S. climbed 50% to 40,000, more than four times the 2005 number. One reason for the mass exodus is that wealth is climbing in China, making overseas education more attainable for many. Yet money hasn’t been the only reason parents have sought schooling beyond China’s borders. While on the surface, China is undergoing a secondary education boom, the country’s education system has long struggled with what critics say is a dangerous reliance on rote memorization and rigid testing. More and more Chinese people may be collecting degrees, the critics say, but they are not being trained in analytical and creative thinking. Education in China also routinely suffers from funding shortages, disparities between urban and rural regions, and limitations for children of migrant laborers. The quality of Chinese schools isn’t only a problem for the elite. With the country hoping to overhaul its industrial landscape and move in to high-tech production, many companies say they face a looming shortage of skilled labor. And that will likely worsen as analysts predict a decrease in the labor force in the next year or two due to a rise in the aging population. The government realizes it has a problem on its hands, according to Jiang Xueqin, deputy principal of Peking University High School. In an op-ed written last year for the Wall Street Journal, Mr. Jiang wrote: “Both multinationals and Chinese companies have the same complaints about China’s university graduates: They cannot work independently, lack the social skills to work in a team and are too arrogant to learn new skills.” To be sure, reform is already in the works. Beijing launched a decade-long plan to boost the quality of education last year, and according to Mr. Jiang, some schools are already promoting diversity and individual thinking. Reform appears to have come too late to convince the current generation of young billionaires to educate their kids at home. The question then becomes, where will their kids’ kids study?

Shanghai dog owners rushed to license their pets at the weekend as the city imposed a new one-dog policy, state media said on Monday.

Hong Kong*:  May 17 2011

Red hot property prices have hit Lamma Island - a top-floor village house of 700 square feet sold recently for a whopping HK$3.3 million. The top unit of the two-story village house near Yung Shue Wan pier was sold to an unidentified buyer a couple of weeks ago, a source said. It fetched about HK$4,700 per sq ft, the highest psf price recorded on the island, even dwarfing some real estate in the New Territories and urban areas. The property was earlier estimated by banks to be worth about HK$2.8 million. The transaction in the village house cluster at Po Wah Yuen, popular among expatriates, has rattled the tranquil island. "Things are no longer the same," a property agent on the island said. "It is difficult to find a cheap flat in Po Wah Yuen now." There are nearly 100 houses of two and three stories in Po Wah Yuen, which is more than 30 years old. Situated near the pier, houses there are generally priced about a quarter more than those further away. Agents said home prices on Lamma largely depend on their proximity to the pier rather than their age and view. They said at present there is only a 450 sq ft ground-floor flat with two bedrooms and a sea view for sale, with the owner asking HK$1.8 million. That means a psf price of around HK$4,000. An American who identified himself as Richard moved to a 700 sq ft seaview flat on the island six years ago. The apartment was then worth about HK$1.5 million, he said. "Are you kidding?" said Richard, who appeared surprised when told about the price of the latest transaction. He said a property agent told him last month that home prices on the island were stable. He fears people who want to settle on Lamma may now find it more difficult to buy a dream home. A Mrs Chan, who has lived on Lamma for more than 40 years, said it is not possible to stop skyrocketing property prices from spreading to the island. She expects people may have to opt for Cheung Chau if they want to buy cheaper flats. A couple surnamed Cheung, who live in an urban area and were visiting Lamma, found the price "a bit too expensive." They joked they had planned to spend their retirement on Lamma but this now appears difficult.

Cannes entry may get US release in autumn - Distribution deal would see Peter Chan's detective story marketed as 'Dragon' in American cinemas - Director Peter Chan (fourth from right) and cast members from his movie Wu Xia in Cannes on Saturday. Peter Chan Ho-sun's Cannes Film Festival entry Wu Xia could be released in the US in the autumn, the director said after the film's premiere at Cannes over the weekend. Speaking to the South China Morning Post (SEHK: 0583) after the film's world premiere at the Cannes festival on Friday, Chan said Harvey Weinstein - whose Weinstein Company acquired the US distribution rights in a deal at Cannes last week - told him Wu Xia could open in America "in October or November". It was a tentative schedule, Chan said. "Everything will be up to the exhibitors and distributors down the road." The Weinstein Company will release Wu Xia in the US with the English title Dragon. Set in Yunnan province in 1917, the film stars Takeshi Kaneshiro as a detective investigating the violent death of two robbers during a hold-up at a grocery store in a remote village. As he learns more about the case, he begins to suspect the person who was in the store during the robbery, a bumbling papermaker played by Donnie Yen Ji-dan, is more than he appears to be. During the film's official festival press conference on Saturday, Chan said he was still editing Wu Xia in Thailand a week before the reels arrived in Cannes for the screenings. Two minutes were trimmed from what should have been the final cut, he said, to make the film shorter for the festival's midnight slot, as viewers might be too tired or jet-lagged to appreciate the longer take. He would restore the cut footage for the film's normal release, he said. As an out-of-competition entry, Wu Xia will not be competing for the festival's coveted Palme d'Or. As of yesterday, British director Lynne Ramsay's We Need to Talk About Kevin was seen as the frontrunner among films already screened. The film stars Tilda Swinton as an American mother making sense of her son's murderous shooting spree in school. The odds might change as the festival enters its second week and much anticipated films from other festival heavyweights get into the fray. Among them are Terrence Malick's The Tree of Life, Lars von Trier's Melancholia and Pedro Almodovar's The Skin I Live In. The main competition's two Asian entries will also be screened this week. Naomi Kawase's village-life story Hanezu No Tsuki is hotly tipped as a prize winner, while Takashi Kiike's Hara-Kiri: Death of a Samurai has made history as the first 3-D film to compete for the Palme d'Or. The festival ends on May 22.

In a sign of growing integration with the mainland, the Hong Kong government is doubling its program for civil servants' education on China - from its laws and political structure to its economy and environment. About 6,000 civil servants would take classes and seminars on the mainland and in Hong Kong this fiscal year, a big jump from the nearly 3,000 tutored each year over the past four years, the principal assistant secretary for the civil service responsible for training and development said. The government was spending HK$17 million on the program, compared with HK$10 million in past years, Anthony Mak Chi-yuen said. "Hong Kong is part of the country," he said. "Citizens can get to know about developments on the mainland through work or leisure travel. Our training aims to provide civil servants with the latest knowledge about our country in more depth. "Hong Kong is increasingly integrated with the mainland, especially with the Pearl River Delta. It is natural for our colleagues to understand more about national development." Some civil servants from Hong Kong - and Macau - will be going to a 200-million-yuan (HK$239 million) training centre soon to open in Beijing at the Chinese Academy of Governance, the country's official training institute for middle and senior government officials. The 12-storey centre will house classrooms, living quarters and sports facilities. The initiative has raised some eyebrows. But one veteran civil service leader said there was no cause for alarm. "There are some Hongkongers, including civil servants, who tend to worry about possible effects on our autonomy whenever they hear something about the mainland," So Ping-chi, the head of the Hong Kong Senior Government Officers Association, said. "In fact ... what's wrong with doing things in accordance with the nation's development? The central government helps Hong Kong. Why don't we help ourselves?"

Cantonese opera degrees on the way - The Academy for Performing Arts is to launch a four-year programme - a world first - as part of a drive to preserve the traditional art form. Planning for the Cantonese Opera syllabus at the Academy for Performing Arts is under way and student recruitment will begin in 2013. Hong Kong will launch the world's first Cantonese Opera degree as part of its efforts to preserve the traditional art form. The Hong Kong Academy for Performing Arts will start the four-year tertiary degree programme from 2013. This follows international recognition of the form by Unesco, which granted Cantonese Opera the status of an intangible cultural heritage in 2009, says academy spokesman Herbert Huey. Among its future students is Jeremy Huang Hangqin, 23, who has just received the academy's annual scholarship for his excellent performance in the art form. "Cantonese opera is worthy of preservation. I believe I can contribute to introduce this amazing art form to more teenagers," he said. Deeply influenced by his father, an actor in Peking Opera, Huang left his home in Harbin at the age of 13 to study in Guangdong to pursue his dream of becoming a Cantonese Opera actor. He was 17 when he came to the city to join the academy in 2007 as a diploma student. One of his key roles is playing the lead character in the musical Monkey King inspired by the mythological legend Journey to the West. To hone his acting skills, he sometimes observes the monkeys in Kam Shan Country Park - or Monkey Hill - home to many macaques. "I can't let go of the role as I sometimes feel like I'm a monkey in daily life," Huang said, as he scratched his chest in a particularly monkey-like way. He said he most resembled the character's never-say-die attitude and never lost faith when working on his craft despite the art form's shrinking place in the world. The academy will apply for funds to the Home Affairs Bureau. The planning of the syllabus is under way and student recruitment will begin in 2013. Huey said the academy had been offering two-year Cantonese Opera programmes at certificate, advanced certificate, diploma and advanced diploma levels. Meanwhile, the academy offered more than 450 scholarships exceeding HK$11 million this year to full-time undergraduate academy students from six disciplines: dance, drama, film and television, music, theatre and entertainment arts and Chinese traditional theatre. One of the recipients is Rachael Cheung Wai-ching, 19, who has been offered a full scholarship for a master's degree at Yale School of Music. She started playing piano when she was four and joined the academy at the age of nine. Another is 22-year-old stage management student Joanna Ko Wai-ching who is president of the students union and winner of the outstanding student award.

Take mainland sting out of housing market, Exco member urges - An influx of mainland property buyers has become a structural problem that needs to be solved to stop Hongkongers' discontent rising further, an Executive Council member warned yesterday. Anthony Cheung Bing-leung said the government should stop worrying that building subsidised flats for sale would cause the market to plunge. It should restart the Home Ownership Scheme, under which flats were built for subsidised sale to families not wealthy enough to buy private flats. Property prices recently passed their previous peak, set in 1997, and Cheung told a radio programme the city's housing market had now become a national market. Ever-rising prices had made it increasingly difficult for local people to buy homes, he said, with family income not keeping up with the market boom. Flat prices rose by 9 per cent between December and March. Demand from mainland buyers is blamed by many for the pace at which home prices are rising. Legislator Lee Wing-tat said that to make sure local people could afford to buy homes, the government should consider banning non-locals from buying mass-market homes. Mainlanders and foreigners could be restricted to the luxury market. "They [can] spend money on buying luxury flats, commercial units, industrial estates freely. But if it involves the mass market, should there be some kind of restrictions," he asked, pointing to those in place in countries such as Australia and Singapore. Cheung said the suggestion could be discussed but the issue was complicated. "If the demand is huge, the focus will fall on the luxury market when there are restrictions. If the prices surge in the luxury market, it may have an impact on small and medium-sized flats too," he said. Other issues might also arise, such as where to draw the line and whether or not such a policy would affect Hong Kong's free-market reputation, he said.

A population explosion in one of Hong Kong's fastest-growing areas has prompted a call for more police officers there. Sai Kung district councillor Christine Fong Kwok-shan says more of her constituents have expressed fears about rising crime in the rapidly expanding area of Tseung Kwan O. Independent councillor Fong has put up banners that proclaim "Expand police provisions to stop rise in crime" to highlight what she says is a growing problem. "We need to upgrade Sai Kung and Tseung Kwan O into a regional police force. At the moment there is only a small district force for Sai Kung and Tseung Kwan O. The crime rate has been climbing all the time in recent years," Fong said. "In Tseung Kwan O and Sai Kung there are over 430,000 residents, which will rise to 520,000 by 2016-17. There is a total of 250 police officers for these two areas, which works out at one police officer per 1,600 people. That's nowhere near enough." Sai Kung and Tseung Kwan O already had small police stations, Fong said, but if a regional force was created it would assuage many people's fears. "There is also supposed to be a small police station built in Lohas Park. There are 30,000 residents in this area already and this figure will rise to 80,000," Fong said. "But when will this station be up and running on a daily basis?" Regarding the proposal to upgrade the Tseung Kwan O Division to a police district, a police spokesman confirmed they were conducting a study on the re-organisation of the Kowloon East Police Region. This will also include the distribution of manpower and facilities in the region to cater for the integrated policing needs concerning major housing and infrastructural developments in the region such as the Kai Tak development plan, the housing development at Anderson Road and the Kwun Tong Town Centre redevelopment project. Fong said that a rise in gang-related crime, particularly teenage gangs in Tseung Kwan O, had her constituents most concerned. Earlier this month, an 81-year-old man fought off a gang of teenagers who tried to rob him while he was walking in a tunnel near Fu Ning Garden. "These robberies are happening more often and the worry is that we do not have the police support to deal with them," Fong said. "Because of shift work, days off and holidays, you are only talking about 30 or 40 people patrolling the streets of Tseung Kwan O and Sai Kung." Law and order in Tseung Kwan O and Sai Kung is currently maintained by the Tseung Kwan O Division of the Kwun Tong Police District and the Sai Kung Division of the Wong Tai Sin District respectively in the Kowloon East Police Region. "We have been closely monitoring the crime situation and policing needs of the districts. Adequate police strength has been deployed to Tseung Kwan O and Sai Kung to maintain law and order with reference to its community development and population growth," a police spokesman said. In the past 10 years, the number of frontline police officers in the Tseung Kwan O Division had more than doubled from 118 to 255 officers, the spokesman said. In addition to the Tseung Kwan O Division's resources, the Kowloon East Police Region has more than 2,900 officers who would be redeployed where necessary to meet operational needs within the area. "The enforcement capability in Tseung Kwan O or other districts will not be restrained by the administrative boundaries of the police districts," the spokesman said.

There are two things Hongkongers love, and both are fuelling the internet's growth as an inseparable part of the city's financial DNA: shopping and smartphones. In a report commissioned by Google, Hong Kong's internet-based economy was valued at 5.9 per cent of the city's gross domestic product or HK$96 billion in 2009. Online shopping was found to be a key driver and will continue to do so, according to the report. By 2015, the internet economy is expected to be worth HK$146 billion or 7.2 per cent of GDP, but this was a conservative estimate using data that found online shopping grew 15 per cent in 2009 from 2008. A more optimistic forecast would see the internet economy accounting for 8.2 per cent of GDP or HK$167 billion, with HK$15 billion from online shopping. These figures bode well for online shopping sites Taobao and eBay. Taobao, a unit of Alibaba (SEHK: 1688, announcements, news) Group, launched in Hong Kong in 2005 and the city is its only office outside the mainland. It has more than 370 million users and last year, US$60 billion worth of goods were sold worldwide. While Taobao no longer releases user numbers by country, it did confirm the site had 150,000 Hong Kong users in 2009. Justine Chao, a manager of international corporate affairs at Alibaba, said the number of Hong Kong users doubled last year from 2009. This meant Hong Kong is home to about 300,000 Taobao users. Chao said it had taken a few years for Taobao to find its footing in the city. "When Taobao first came on the market in 2005, its focus was more on helping Hong Kong businesses establish a presence and sell into China," she said. "A few years later, Hong Kong consumers were found more interested in buying from Taobao, and the focus then shifted. "The most popular products are clothing and shoes, and people like looking for bargains and things that they can't find in Hong Kong." Maternity and baby items were also popular, Chao said. Taobao's Hong Kong office now employs 10 people and there are plans to raise the brand's profile in the city this year. "Hong Kong is a fast-growing buyer market but it's still relatively in its infancy stage when compared with mainland consumers," Chao said. One strategy has been to sell vouchers in Circle K stores that are then used as cash online to buy goods on Taobao. Previously, buyers had to use a mainland credit card. EBay entered the Hong Kong market in 2003 and does not have a direct presence on the mainland. It has 95 million users worldwide. The company declined to disclose the number of Hong Kong users. Collectibles such as stamps and coins were the most popular items traded by Hong Kong users. EBay operates on the mainland through a joint venture with Tom Online called eachNet, which allows mainland sellers to list their goods on eBay's 40 sites around the world. It refers to this as cross-border trade where China is a market with "huge potential as the world's factory", said an eBay spokeswoman. She said eBay did not view Taobao as a competitor because they both focused on different markets. With more than 50,000 registered sellers on the mainland, she said eBay's operations in the region, which included Taiwan and Southeast Asia, was the fastest growing. "The mainland alone has been developing with a double-digit growth." Both Taobao and eBay also have applications allowing smartphone users to buy without access to a computer. In Google's report, Hong Kong is described as an "always on" city where a combination of high-speed broadband, more than 13,000 wi-fi hotspots and 83 per cent of households with web access creates a highly engaged population of netizens.

Casino rivals watch closely as Galaxy Macau opens - Rivals in the world's largest casino market are watching closely as Macau's biggest casino in two years opens its doors today. The HK$15.5 billion Galaxy Macau - owned by Hong Kong property and construction tycoon Lui Che-woo's Galaxy Entertainment (SEHK: 0027) - will be only the third property to open on the Cotai Strip and is launching with 450 gaming tables, 150 of them high-stakes VIP tables. "A good thing is occurring," Wynn Macau chairman Stephen Wynn said yesterday. "Macau is getting a better product and as long as what's built here is good, Macau will in the long run be a better place to come to and we'll get our share off the top. If a bad place opens - another one of those casinos in [converted] office buildings - that doesn't do us any good." But Wynn (pictured), who toured the expansive 2,200-room Galaxy property yesterday morning, was cautious about the near-term impact of an anticipated injection of casino credit into the already red-hot high-stakes gambling segment. "If it grows [right away], it's going to be growing with the junket operators, with credit," he said. Junket operators are the middlemen who dominate Macau's VIP gambling segment. Junkets bring players to casinos, advance them credit for gambling and collect their debts - all in exchange for hefty commissions from the casino operators that typically exceed 40 per cent of casino winnings. Macau's credit-driven VIP casino revenues soared 95.8 per cent in the first quarter to 42.6 billion patacas, accounting for 72.7 per cent of all casino revenue. The cash-based mass market, by contrast, grew a more modest 30.9 per cent to 15.95 billion patacas. To help boost revenue, most of Macau's bigger casinos will advance credit to their VIP junket operators equal to around one month's worth of commissions. That gives the junkets more capital, allowing them to extend more credit to customers, which ultimately increases winnings for the house by driving play at the VIP tables. Wynn said he was anticipating the added injection of credit into the VIP segment, and as a result he would pay extra close attention to credit issues in the coming months - including the possibility that some junket groups or high-rollers could overextend themselves and fail to settle debts on time. "Things slow down, or somebody doesn't pay, what the hell happens?" Wynn said. Galaxy executives have meanwhile stressed that the focus of their new Cotai property is on the more profitable mass market. While the company's five-year-old StarWorld casino hotel on the Macau peninsula overwhelmingly relies on junket-driven VIP revenue, the new flagship property is nearly five times larger and features more tourist-oriented amenities like a 4,000 square metre rooftop wave pool with 350 tonnes of white sand. By tapping the mass market, where the casino doesn't have to hand over 40-plus per cent of winnings to junket agents, Galaxy is aiming to boost overall profitability. Chief financial officer Bob Drake said the goal at the Cotai property was not simply to boost the company's market share, which stood at about 10 per cent last month according to Citigroup. "We are more focused on profitability than we are concerned about market share." The new property will employ some 7,600 staff on opening day and includes a 1,500-room Galaxy branded hotel (700 rooms will be ready on opening), a 260-room Banyan Tree hotel and a 500-room Hotel Okura. Some 50 restaurants and food outlets and a "1930s Shanghai-themed" nightclub round out the offering, with a nine-screen, 3-D cinema scheduled to open this year. Galaxy has purchased a fleet of 70 new shuttle buses to ferry punters between the property and Macau's border with Zhuhai. Rival Cotai operators including Sands China's Venetian Macao and Melco Crown Entertainment's City of Dreams, which opened in 2009, are also chasing the rich mass market. While the front page of yesterday's Macau Daily Times was covered with an advertisement from Galaxy, the back page was taken over by one from Sands China. "Congratulations to the grand opening of Galaxy Macau," it said. "And a warm welcome to the neighborhood."

 China*:  May 17 2011

Officials get black mark on record for food scandals - National crackdown strengthened by making local response a factor in assessment of job performance - Food safety authorities appear to be taking a more aggressive approach to combating the rising number of problems involving tainted food nationwide, as the issue is reportedly being factored into assessments of local officials' performance. So far, at least Beijing, Shanghai, Guangdong and Zhejiang have incorporated their local food safety situations into evaluations of officials' work, while also ordering strengthened and co-ordinated food safety supervision at city and county levels, Xinhua reported yesterday, citing an unidentified official with the Office of the Food Safety Commission under the State Council. The revelation came weeks after the cabinet urged lower levels of government to take responsibility and be accountable in the crackdown on the illegal use of non-food materials and the abuse of food additives. "The key officials [of administrations of county level or above] should personally oversee the crackdown, and the official in charge of the matter should take direct responsibility," a notice by the State Council said last month. In Beijing, the municipal government has pledged to specify the supervisory responsibilities of relevant departments, saying the administration and a mechanism of assessment will be drafted to evaluate the district or county government officials. And those who fail to meet the target will be removed from office, according to Beijing Mayor Guo Jinlong , who spoke last month at a nationally televised conference on the blitz on illegal food additives. Last week, the Organisation Department of the Communist Party of China's Central Committee and the Executive Office of the Food Safety Commission organised the first minister-level training on food safety management and briefed them about the "severe situation". A total of 92 officials, including provincial deputy governors in charge of food safety, attended the seminar, according to Xinhua. Making food safety a key issue in the political careers of local officials is expected to bring the food safety crackdown to a new level. Academics have long criticised the excessive number of players regulating food safety, as health authorities, food and drug officials and commerce administrations all have a hand in the process, with no agency taking the lead. Despite repeated government pledges in recent weeks to crack down on the problem, China has been hit by a wave of stomach-churning food scandals that reignited fears of events three years ago when six children died and more than 300,000 children were made ill by what had become a widespread practice of adding an industrial additive, melamine, to milk to boost its protein reading. And just last month, 286 villagers in Hunan had to seek treatment for food poisoning after eating pork believed to have been tainted with clenbuterol, an additive that makes meat leaner. Before that, a Shanghai company was found to be recycling expired buns, a staple food in the north, by dying them or lacing them with colour agents to mislead customers. And in March, the country's largest meat processor, Shuanghui, was found to be using pigs fed clenbuterol. Aware that the food problems have caused them to lose face, while residents lose confidence, state officials are rushing to curtail the problem. Last month, Premier Wen Jiabao lashed out at unscrupulous food producers, saying: "These virulent food safety incidents have revealed a grave situation of dishonesty and moral degradation."

The mainland plans to introduce a program soon to let its financial companies in Hong Kong start yuan funds that will invest in mainland stocks, an official at the securities regulator said. The plan forms part of a so-called mini-QFII program, said Wang Lin, the director-general of the department of fund supervision at the China Securities Regulatory Commission, referring to the qualified foreign institutional investor. "By now, the relevant systems have taken shape," Wang said in Hong Kong yesterday. "We are working with other agencies on refining them and introducing the service as soon as possible." Beijing allows only approved overseas institutional investors to buy yuan-denominated stocks and bonds under the QFII program. The combined approved quota is US$30 billion. The nation's two exchanges have a market capitalisation of US$3.9 trillion, second in the world to the United States' US$16.6 trillion. Wang said Beijing approved 13 domestic fund-management firms to set up branches in Hong Kong. Nine had won asset-management licences in the city, while three were managing publicly raised capital. The CSRC has had in-depth discussions with its counterpart in Hong Kong and with the city's stock exchanges on sources of funding for mini-QFIIs, product structure and investment execution, Wang said. The mainland is likely to allow more stocks to be shorted and is working on starting a central agency for short selling, Zhang Yujun, the president of the Shanghai Stock Exchange, said in Hong Kong today.

Beijing hits back at Clinton's criticism - Remarks on human rights 'inappropriate' - Beijing has hit back at remarks by US Secretary of State Hillary Rodham Clinton that China is on a fool's errand and its human rights records is deplorable. In the first official response to the remarks, Foreign Ministry spokeswoman Jiang Yu said it was inappropriate for anyone to compare China to countries in western Asia and North Africa facing turmoil. "Any attempt to direct the Middle East turmoil to China and change the development path chosen by the Chinese people will be futile," said Jiang. The ministry's response came three days after Clinton lashed out at China's human rights record in an interview with The Atlantic magazine, published on Tuesday. Clinton said: "We don't walk away from dealing with China because we think they have a deplorable human rights record," before adding that Beijing feared that the protests in the Middle East would spread to China. "They're worried, and they are trying to stop history, which is a fool's errand," she said, referring to the detention of activists by authorities in recent months. Clinton and US President Barack Obama separately raised concerns about human rights with Chinese delegates during a two-day strategic and economic dialogue between the two sides in Washington last week. The Foreign Ministry did not comment on Clinton's remarks immediately after the interview was published. Yuan Peng , director of the Institute for American Studies at the China Institutes of Contemporary International Relations, said this was because China did not want to affect the sentiment of the strategic and economic dialogue, which saw agreements reached on various issues, including increasing sales opportunities for US firms in China and strengthening military ties. Jin Canrong , deputy director of the School of International Studies at Renmin University, said Beijing was used to downplaying criticisms on human rights. However, a strong reaction by mainland internet users and the media pushed the Foreign Ministry to respond. "The Foreign Ministry is under pressure," Jin said. "They are responding not only to the US, but also to mainlanders." The state-run Global Times newspaper reported that 16 out of 20 Chinese foreign relations experts it interviewed on Thursday said Clinton lacked diplomatic etiquette, and 12 said Clinton should offer an explanation for her remarks. An online poll conducted by the newspaper said 86 per cent of internet users believed Clinton's remarks were inappropriate. In an editorial entitled "Hillary's China censure a fool's errand", published on Friday, the paper said: "It is unacceptable to hear Clinton, as the US secretary of state, insulting the Chinese delegation to their face." Meanwhile, US lawmakers and activists urged more pressure on China to end its crackdown on dissent, fearing authorities are trying to permanently narrow the boundaries of criticism. Members of the House Committee on Foreign Affairs called a hearing to spotlight human rights. Both Yuan and Jin said the human rights disputes would not affect the long-term Sino-US relationship.

EU president seeks closer ties with China - The most senior official of the European Union (EU) on Sunday started his first official visit to China, on a mission to seek closer trade and political ties with Beijing needed for a stronger Europe. "I come here as a friend of China with respect and trust, and a strong conviction in honest dialogue," said Herman Van Rompuy, president of the European Council. "I see China's rapid economic development and rise on the global scene as a major window of opportunity for Europe and for elevating our strategic relations to a new level," he said in an op-ed article targeting the Chinese media. The president wrote the article entitled "Managing change in an interdependent world" as a response to interview requests from Xinhua. He did not take any interviews on the trip, according to his press office. "Interdependence is the political reality of today. Managing this interdependence is one of the great challenges of our young century," he wrote, urging the EU and China to become intimate partners in adapting to global changes. Van Rompuy, the first long-term and full-time president of the European Council since 2009 under the Lisbon Treaty, was scheduled to visit Chengdu, capital of China's southwestern province of Sichuan, on Sunday after arriving in Beijing earlier in the day. In Chengdu, he would visit the EU's bamboo project in the earthquake reconstruction zone and the project of "Save the Children" plus a meeting with Liu Qibao, secretary of the Sichuan Provincial Committee of the Communist Party of China, according to a press release by the council on Friday. The president, hoping to see "the different angles of contemporary China," was also scheduled to visit Beijing and Shanghai to hold talks with Chinese President Hu Jintao, Premier Wen Jiabao and Vice President Xi Jinping. "This visit underscores the strategic importance the European Union attaches to our relationship and the political investments at its highest level," Van Rompuy said in the article. Seeking support for the Euro - As the EU's top leader that represents the bloc's 27 member states including the 17-nation euro zone, Van Rompuy was expecting something more pragmatic from his China visit than just putting icing on the cake of rosy China-EU relations. The EU is pinning hope on China to shore up its market confidence as Beijing keeps buying distressed European debts to help stabilize the euro zone's finance that has been dragged down by the sovereign debt crisis for 18 months. "China has been supportive to euro area countries facing difficulties experimented by the euro, just as the EU supports China's stable development with investment and technology," Van Rompuy said. "We are becoming part of the solution of the other side's challenges." Statistics show that China is now the EU's second largest trading partner, and the EU is China's largest trading partner and export market. China-EU trade in goods was valued at nearly 400 billion euros ($564 billion) last year, up over 30 percent from that of 2009, while trade in services and foreign direct investments has also been growing. China's foreign currency reserves in the first quarter reached $3.05 trillion, among which the euro was the primary alternative to the dollar. The president, in an apparent attempt to boost the confidence of Chinese investors, stressed that the euro is "a sound, strong and healthy currency." Producing more than 20 percent of the world's GDP, Europe is "a single market and clearly a good place to invest and to reach out 500 millions of consumers," he said.

Attendants welcome guests inside Galaxy Macao, the latest resort in Macao, during its opening May 15, 2011. Some of the world's biggest casino operators are betting that Chinese moms and pops who like to gamble and also want to shop and dine will turbocharge growth over the next few years at Macao, the world's biggest gambling destination. Macao has so far relied heavily on mainland's young and wealthy for casino revenues, which totaled about $24 billion in 2010 -- well above what Las Vegas earned. Employees walk inside the "High Limits Area" of a casino on the opening day of Galaxy Macao, the latest resort in Macao May 15, 2011. Some of the world's biggest casino operators are betting that Chinese moms and pops who like to gamble and also want to shop and dine will turbocharge growth over the next few years at Macao, the world's biggest gambling destination. Macao has so far relied heavily on mainland's young and wealthy for casino revenues, which totaled about $24 billion in 2010 -- well above what Las Vegas earned.

Hong Kong*:  May 16 2011

Overseas doctors recruited to work in public hospitals without having to pass the local licensing examination will be given only one-year contracts and will receive the same pay as local doctors. The recruitment exercise is the first of its kind to be introduced by the Hospital Authority to tackle its manpower shortage. It is aimed mainly at overseas-qualified Hong Kong people who are practising abroad. Cantonese proficiency is stipulated for posts requiring frequent contact with patients. The scheme has had modifications introduced to make it more acceptable to local doctors, who have hotly opposed it. It will go before the Hospital Authority board for approval on Monday. "We understand that a group of Hong Kong people practising in the UK or Australia, for example, are keen to return," a person familiar with the scheme said. "The positions can offer them an opportunity to work here while they can prepare for the local licensing examination to get a full licence." The overseas doctors, employed on "limited registrations", will be exempted from the Medical Council licensing examination and a one-year internship, but will be allowed to work only in public hospitals and clinics. The authority had previously planned to hire plastic and cardiothoracic surgeons from overseas first, but under the modified plan the posts will cover all specialities. The person familiar with the plan said the authority needed doctors with at least three years' experience and postgraduate qualifications recognised by the Hong Kong Medical Council, such as diplomas or certificates. "The authority does not want to hire doctors for senior posts at this stage, as the local public doctors may see it as affecting their promotion prospects," he said. "There will also be no difference [in salaries] between overseas and local doctors." Salaries for the medical officer grades open for overseas recruitment range from about HK$49,000 to HK$100,000. Cantonese proficiency does not apply to candidates for posts with less direct contact with patients, such as radiologists and anaesthetists. The person said some small clinical departments, such as plastic surgery, had only two medical officers on call. "To these small departments, hiring one or two more doctors can significantly share out the workloads," he said. Frontline Doctors' Union council member Dr Ernie Lo Chi-fung said the plan was acceptable as the overseas doctors would not be given any preferential treatment. "But I don't see the plan as being attractive to those overseas doctors at all," he said. "Some are working just 44 hours a week, while workloads at Hong Kong public hospitals are much heavier." Public Doctors' Association president Dr Loletta So Kit- ying said the union did not support the plan, saying the licensing examination must be passed to safeguard standards. Some members of the Medical Council have vowed to reject applications for limited registration from doctors brought in under the scheme saying they fear that the lack of examination assessments will compromise quality of care. The authority wanted to hire 500 doctors in the last financial year, but was able to employ only 320. Some medical departments are suffering up to 20 per cent wastage, with public doctors frustrated at long hours and heavy workloads.

Amid heavy criticism inside and outside the chamber, the Legislative Council approved the government's HK$5 billion cash injection into the Community Care Fund. Of the 46 legislators attending the finance committee meeting yesterday, 27 voted in favour of the funding, while six were against and 12 abstained after a three-hour debate. The chairman does not vote. The ballot should have been cast on May 6 on the government's share of the HK$10 billion fund - which was supposed to be matched by the private sector - but was deferred because too many lawmakers questioned the private sector's shortfall. Ministers said last week that only HK$680 million had been secured from the business sector so far, with another HK$1.12 billion pledged. "Why should we give you the HK$5 billion now? It was expected to be a matched fund but you only have HK$680 million now," People Power lawmaker Wong Yuk-man said. Echoing the stance taken by the Democratic Party and Civic Party, accountancy sector lawmaker Paul Chan Mo-po said he had not supported injecting the full HK$5 billion in one go. "Now that we have handed over all the money, the committee will not be able to vet projects initiated by the fund," Chan said. The committee must approve all funding for government projects involving HK$10 million or more. Many lawmakers also criticised the fund's planned schemes, especially one involving HK$165.9 million that would give up to HK$3,000 each to 240,000 poor children for study travel. "There are a lot of things that can be done with HK$3,000. Using the money to buy a computer or attend private tutorials are more reasonable ideas," education legislator Cheung Man-kwong said. Jeffrey Lam Kin-fung of the pro-establishment group Economic Synergy, who supported the funding, said an overseas study tour was a good way to use the money. "These study tours allow children to widen their vision and see how people in other places live and do their jobs," he said. "There are many things that you cannot learn in classrooms and through the internet," Outside the chamber, Liberal Party honorary chairman James Tien Pei-chun said lots of companies were reluctant to donate as they knew little about the fund. "Companies want to get involved, or at least know where their money is going when they make a donation," he said. Director of the Society for Community Organisation Ho Hei-wah, a non-official member of the fund, said it was sad to see lawmakers politicising the alleviation of poverty.

 China*:  May 16 2011

Chinese tourists seek a new place in the sun - The Pacific Islands and African countries are looking to claim a share of China's lucrative tourism market, after the 2010 Shanghai Expo opened a window of opportunity for them. By sending executives and marketing officials to attend this week's Eighth World Travel Fair in Shanghai, the countries are hoping to draw visitors away from traditional destinations, such as the United States and Europe. The four-day fair, which began on Thursday, is expected to attract exhibitors from 45 countries and regions, and pull in more than 8,000 trade visitors and 30,000 members of the public. Apart from regular participants, such as the US, Europe and Japan, the fair has for the first time welcomed representatives from Papua New Guinea, the Seychelles, Tunisia, Brunei and Mauritius, resulting in foreign tourism professionals and Chinese tour operators meeting, discussing and signing contracts for the upcoming tourist season. "The fair provides an important link between the rapidly growing Chinese travel market and the global tourism industry, including countries such as the Seychelles and others, which are adding tourism to their traditional industries," said Jean-Luc Lai-Lam, a marketing executive for the Seychelles Tourism Board. Nebil Hedhiri, chief representative of the Tunisian National Tourist Office in Beijing, said his country reaped great benefits from last year's Expo after gaining exposure in the Chinese market. "We have seen a sharp increase in the number of Chinese visitors. The numbers have risen by 50 percent in each of the past three years," Hedhiri said. Around 10,000 Chinese tourists visited Tunisia in 2010 and Hedhiri is optimistic that the number will double in the coming years.

Superconductor cables pave way for the future of transmission - The use of copper power transmission lines on the mainland could be relegated to history if superconductor cables become commercially viable. Towering copper electricity transmission lines could one day become a thing of the past for utilities as they are gradually replaced by underground cables made of "high-temperature superconducting" materials. The speed of the transition depended on how fast material costs dropped and how quickly scientists could increase the thickness of the cables, said Lin Liangzhen, a researcher at the Chinese Academy of Sciences' Institute of Electrical Engineering. "Mass commercialization could come in a decade, or it could come earlier, depending on the pace of scientific development," Lin told a conference on the development of smart power grids. The so-called high-temperature superconductors with zero electrical resistance allow power to be transmitted with no loss, compared with a loss of about 6 per cent in conventional copper lines on the mainland. However, this only happens if the superconductors are cooled to certain temperatures, usually below minus 169 degrees Celsius. They are called "high-temperature" superconductors because they experience zero electrical resistance at relatively high temperatures compared with other superconductors. They consist of superconducting cables wrapped around a central tube filled with liquid nitrogen, which provides the cooling function and are capable of transmitting three to five times as much electricity as conventional copper cables, which translates into big space savings. After accounting for the energy spent to cool the superconductors, the transmission loss is around half that of copper lines. Lin said the costs of superconductors would still need to be cut to less than 10 per cent of their prices now for mass commercialisation to make economic sense. "The other way is to increase the thickness of the material three- to four-fold, which will also enable mass deployment," he said. In the US, China and Japan, pilot schemes have been built to pave way for commercialisation, which will start with transmission capacity expansion projects in densely populated areas where land is expensive and little is available for traditional power lines. Superconductor power lines can be installed in narrow trenches, making them less disruptive to lay in populated areas. They are also better protected against severe weather such as strong wind, freezing rain and heavy snow compared with elevated copper wires. Superconductors can also be used in transformers, energy storage devices, motors and power generators to enhance their effectiveness and capacity. American Superconductor has targeted a 2014 launch of its superconductor wind turbine generator that has higher output capacity and is less than half the weight of traditional turbines, Lin said.

Companies in the United States and China have complementary advantages and should co-operate to bring down the high costs of making the world's electricity grids "intelligent" via information technology upgrades, according to industry executives. But they are not doing so due to competitive and regulatory reasons. "Both sides want to be industry leaders, so they don't want to share their intellectual property," said ML Chan, Smart Grid executive director at the non-profit organisation Joint US-China Collaboration on Clean Energy (JUCCCE). "But the market is so big and no single company can meet all the customers' needs in the entire supply chain cost efficiently," Chan said on the sidelines of the International Smart Grid Congress in Beijing. While American firms excelled in the provision of technology at the customer-servicing side of the industry chain, mainland firms were good at making products at the transmission and distribution side cost-efficiently and with quality, said Chan. Electricity providers around the world are eyeing investments worth trillions of US dollars in the next decade to install so-called smart power meters and power grid monitoring devices so that they can collect and use data on demand and supply to cut down operating costs. Smart-grid technology brings power grids into the digital telecommunications age, connecting together smart meters in households and businesses to central monitoring systems that allows utilities to detect and repair outages and overloads in an instant. Such automation provides utilities with significant savings when not having to physically send staff to read meters and repair networks. It also provides real-time data that can be used to determine electricity pricing, so that some peak-hour demand can be shifted to non-peak periods. As a result, fewer power plants are required to meet the same total demand. Smart grids also allow more clean energy like wind and solar, whose production varies a lot during the day, to be handled by the distribution system. Lorenzo Colovini, manager of Asia Pacific network technologies development for Italy's dominant utility Enel, said the firm cut its transmission and distribution cost per unit of power sold in 2009 by 46 per cent compared to 1996. A pioneer in the mass deployment of smart grid technology, it invested €2.1 billion (HK$23.19 billion) to install 30 million smart meters in Italy between 2001 and 2005. If US and Chinese firms work together, they have the potential to cut the costs of smart meters for the global market from more than US$100 each to less than US$30, which would make investing in them much more attractive and economically justifiable, Chan said. He saw opportunities for US firms to form joint ventures with mainland industry leader Nanjing-based Nari Technology Development, a unit under regional power distribution monopoly State Grid Corporation, that would speed up global deployment of smart grid technology. Besides intellectual property concerns, factors deterring co-operation include different product and technical standards that need harmonising among different nations, as well as differences in regulatory and market environment. For example, US utilities are regulated locally and many are allowed free market electricity pricing, while their mainland counterparts are subject to central government regulations on pricing and new plant development. Little reform has been achieved in power price deregulation on the mainland, which means consumers would not benefit as much from smart grid technology. Tu Rongjiang, vice president at Beijing Guozhiheng Power Management Technology, which has co-operated with California-based OSIsoft since 2005 to tackle the mainland market, said that although the mainland has peak and non-peak electricity pricing, the differentials are too small and inflexible to change consumer behaviour effectively. "The biggest challenge is that we can't link our products to the electricity market. If grid operators and customers can't see the benefits, how can they invest in smart meters and related systems?" he said. OSIsoft provides the software technology, while Guozhiheng sources the hardware globally and integrates them. So far they have completed more than 20 projects for State Grid, but they are primarily infrastructure upgrades on power distribution networks that do not reach the end-customers. Colovini of Italy's Enel, which is trying to sell its smart grid technology and solutions to other nations, said it has done a feasibility study for Shanghai Power Grid to install a full suite of smart grid system. "But since they are a subsidiary of State Grid, which has come up with their own product and technical standards, we had to drop the business," he said.

Vatican gives China expert key overseas mission - In a move seen as a bid to rekindle ties with Beijing, this week the Vatican appointed China expert Archbishop Fernando Filoni head of the body overseeing the church's development in more than 100 countries. Filoni's appointment as pro-prefect of the Congregation for the Evangelisation of Peoples on Tuesday makes him the key person overseeing missionary work in countries where Catholicism is being developed. Filoni spent nine years in Hong Kong as an unofficial envoy for the Vatican between 1992 and 2001. He was credited as acting as a link between the Holy See and both the underground and state-sanctioned churches on the mainland. His new role includes supervising the appointment of bishops, which has been a key obstacle to establishing diplomatic relations with China. The Vatican has had no diplomatic representative in Beijing since 1951, nor has Beijing sent any ambassador to the Holy See. Moves towards establishing those ties froze in November last year following the ordination of Joseph Guo Jincai as bishop of the Chengde diocese in Hebei without the Vatican's approval. A month later Joseph Ma Yinglin - who was also ordained without approval - became president of the Chinese Catholic Bishops' Conference, a body the Vatican does not recognise. "His expertise on China church affairs is probably the best in the Vatican. It is a very strong point for him," Anthony Lam Sui-ki, executive secretary at the diocese-founded Holy Spirit Study Centre in Hong Kong said. Michael Yeung Ming-cheung, vicar general of the diocese in Hong Kong, said: "To appoint a person that knows China better, to have someone who can help to enhance the dialogue, I think this is something the Holy Father wants to do." Referring also to the appointment of Hong Kong-born Savio Hon Tai-fai last December as Filoni's deputy, Yeung said: "Both of their appointments show the Holy Father is very concerned about the normalisation of the diplomatic relationship between the Vatican and Beijing." Anthony Liu Bainian, honorary president of the state-backed Chinese Catholic Patriotic Association and the Chinese Catholic Bishops' Conference, refused to say whether Filoni's background was beneficial to Sino-Vatican ties. "I can only say I hope he can make some contributions to the relationship between the two sides," he said. The main barrier to full diplomatic relations remains the ordination of bishops. The pope issued a letter seeking reconciliation with the mainland in 2007, saying it would no longer ordain bishops from underground churches. Between 2007 and November 2010 there was regular dialogue and Beijing did not ordain any bishops without Vatican consent. Guo's appointment was described in a recent message to mainland Catholics released by the Holy See as a "sad episode" where "there remains a grave wound, perpetrated on the ecclesial body". Lam said the Ministry of Foreign Affairs had made it clear it was eager to open dialogue with the Vatican, despite the ordination. "Nobody knows exactly why [Beijing went ahead with the ordination]," he said. But Liu - the most powerful Catholic on the mainland - said that the Vatican was informed of Guo's appointment three years ago, but it did not say whether it agreed with the mainland church's decision. "It was only after the ordination the problem was raised," he said. "It is the politically-motivated action by the Vatican that is to be blamed." A source close to the Vatican said that relations between the parties were very sensitive. "If we start a dialogue again, if we can reach an agreement and sign it, it will help our church and it will help the Chinese government," the source said.

Yum! seeks bigger mainland market in Little Sheep deal - US food company offers HK$4.4b to take over hotpot chain -  Little Sheep Group operates more than 450 restaurants, including this hotpot outlet in Causeway Bay. The takeover offer values the company at HK$6.7 billion. Yum! Brands, the operator of KFC, Pizza Hut and Taco Bell restaurants, has stepped up efforts to reach a wider mainland audience by buying hotpot chain Little Sheep Group. The United States fast-food company plans to spend HK$4.4 billion to increase its holding in Little Sheep to 93.2 per cent from 27.2 per cent and take the Hong Kong-listed company private. It is offering HK$6.50 per share in a deal that values the hotpot chain at HK$6.7 billion. "Yum! will help Little Sheep explore the untapped breakfast and lunch markets," said Nicolas Wang, an analyst with Daiwa Capital Markets. "Hotpot food, unlike traditional Chinese food, doesn't involve complicated cuisine. It is easy for Yum! to understand and manage Little Sheep." The buyout will need the approval of shareholders and the mainland government. Little Sheep shares closed at HK$5 on April 21, the last trading day before Yum!'s takeover bid was officially unveiled yesterday. The stock yesterday rose 24.5 per cent to HK$6.14. Some analysts have raised concern about the buyout. "An office table can be moved from the east to west, but a different management style won't be easily imported," said Jing Linbo, a professor at the Chinese Academy of Social Sciences. "But the two companies seem prepared for potential frictions since they have spent a long time on the deal." Zhang Gang, the chairman of Little Sheep, said the privatisation would fuel the firm's growth as it would bring in Yum!'s management skills and financial support in the cut-throat mainland catering sector. "We are determined to make Little Sheep the mainland's most successful hotpot brand," Zhang said in a conference call. "Further co-operation will be carried out to make Little Sheep bigger and stronger." The company runs more than 450 restaurants, including those franchised, across the mainland. Its plan to open 40 new outlets this year remained unchanged, said Zhang, who, along with the top management, will stay on with the company after the buyout. Yum!'s bid for Little Sheep adds to evidence that foreign food giants are salivating over the potential of the Chinese restaurant business. Global rival McDonald's aims to increase the number of mainland outlets from 1,300 now to 2,000 by 2013. Yum! runs 3,200 KFC and 520 Pizza Hut restaurants on the mainland. It plans to open 500 new outlets annually in the next three years. "Yum! has confidence in China's market," said Sam Su Jingshyn, the chief executive of Yum!'s China operations. "We'll take a cautious stance in expanding the brand in the domestic market." Mainland restaurants reported sales of 1.76 trillion yuan (HK$2.1 trillion) last year, up 18 per cent from 2009, according to the National Bureau of Statistics. The mainlanders' rising affluence has made the catering sector a bright spot for investors. Yum!'s offer to acquire China's largest hot-pot food company followed a botched deal by Coca-Cola in 2009 when the US soft-drink giant's bid for China Huiyuan Juice Group was rejected by Beijing amid monopoly concerns. "It doesn't look like there will be a monopoly concern in this deal," said Yang Chen, a lawyer with the law firm Jincheng & Tongda. "China's catering sector is mammoth and any single player such as Yum! will still have a small market share overall." In the first quarter, the mainland contributed 54 per cent of Yum!'s total profit of US$264 million. Sales on the mainland rose 18 per cent to 32.5 billion yuan last year.

Beijing's Forbidden City is embroiled in another scandal days after artefacts were stolen from the former imperial palace. The Palace Museum, which manages the five-century-old site, has been accused of renting out one of its best imperial-era halls and turning it into a private, members-only club for billionaires from around the world. The allegation, which state television anchorman Rui Chenggang posted on a popular micro-blogging site on Wednesday, quickly attracted public attention and news coverage yesterday. Although museum spokesman Feng Naien issued a denial yesterday, few were convinced. Hundreds of people voiced their outrage in chat rooms and on the Sina Weibo microblog service amid debate over the management on one of the mainland's most important world heritage sites. Photos purportedly of a business banquet involving Chateau Margaux, a wine estate from Bordeaux, France, and website links to ads promoting the hall as an exclusive venue for events were also posted. The new controversy has dealt another blow to the palace management, already widely blamed for security loopholes in Sunday's burglary - the museum's first in two decades. Rui said Jianfu Hall, which was burned down in 1924 and rebuilt in 2005, had been rented out by the museum managers to an exclusive club to make money, with 500 membership cards on sale to the world's richest people. "A foreign tourist guide told me proudly that he has arranged a family dinner at the palace for an American billionaire. It is not a big deal if we lose several artefacts, but I am afraid we are losing something more valuable," he wrote. He did not provide further proof supporting his allegation. In a statement posted on Sina Weibo yesterday, the museum said the hall has been reserved for diplomatic and cultural exchange events since the restoration. A senior cultural heritage official close to the museum said the allegation was inaccurate because the hall had mostly been used by the government and the museum to host foreign dignitaries and state guests. "I don't think it is hard to understand that for a palace like the Forbidden City, they need an exclusive and beautiful place for important events as long as they do not do any harm to the heritage itself," he said. But Ma Zishu , of the China Culture Relics Protection Foundation, told The Beijing News that the museum managers were playing with fire by renting out part of the world heritage site for events such as private dinners. Four years ago Rui campaigned against the first Starbucks in the imperial palace and the coffee shop was forced out. Beijing police said they retrieved six artefacts stolen from the museum. They did not give further details about the three pieces that are still missing. Police arrested a suspect on Wednesday.

Hong Kong*:  May 15 2011

Work on MTR link delays Kai Tak projects - Restoration of historic stone walkway is unlikely to go on public display until 2020 - Lung Tsun Stone Bridge was used by Qing Dynasty officials as a walkway to Kowloon Walled City. A stone bridge used by Qing dynasty officials to reach the Kowloon Walled City will be preserved where it lies at Kai Tak - but it could be a decade before the public can gain access to it. People also face a long wait to use the planned vehicle-free waterfront along the former airport runway, the first section of which will not be opened until 2016. "We are making good progress on the Kai Tak development," Kai Tak Office head Stephen Tang Man-bun said. "It's just the related infrastructure that takes time to complete," Tang said, giving details of the Lung Tsun Stone Bridge conservation plan and the waterfront promenade. The office will seek more than HK$1 billion next month from the Legislative Council to proceed with related works, including the treatment of contaminated sediment in the Kai Tak channel and Kwun Tong typhoon shelter and construction of a fire station and ambulance depot. The office decided to preserve the Lung Tsun Stone Bridge after a year-long public consultation last year. But Tang said yesterday it could not go on public display until 2020 as the bridge area would be part of the construction site for the MTR's Sha Tin-Central Link, due to get under way next year more than two years behind schedule. The 200-metre bridge, which served as a landing pier for Qing officials and led to the walled city, was built between 1873 and 1875. The bridge and the walled city were the only places kept by the Qing dynasty after Kowloon was ceded to Britain in 1898. The bridge was found along with some foundation stones of a pavilion by the Antiquities and Monuments Office, which has recommended monument status for the site. Tang said the public would not be allowed to step on the bridge because most of it was not intact. But it would not be enclosed and the design would allow people to appreciate the historic scene up close while protecting the structure from damage. A pedestrian subway designed with heritage elements will be built to connect the bridge site and the Kowloon Walled City Park. "The site will become a nice sitting-out area and a free space for different activities like street performances," Tang said. As the bridge area will be surrounded by two commercial sites and a residential site, developers will be required to comply with a set of design guidelines so that the buildings do not affect the historic ambience of the area. The design of the waterfront along the runway has been improved by re-routing the roads originally planned there and leaving the promenade vehicle-free. The office is considering building a cycling track along the 11-kilometre waterfront and introducing environment-friendly transport. The waterfront will be opened in three phases. While the first section near the planned cruise terminal will be completed no earlier than 2016, no completion date has been fixed for the second and the third sections at the metro park and Kai Tak Nullah. Tang said this will hinge on how the government tackled water contamination in the polluted area. Public housing at the north apron and the cruise terminal will be the earliest projects finished, in 2013.

Hong Kong's economy grew 7.2% in the first quarter from a year earlier, accelerating from the previous quarter's 6.4% expansion on robust domestic and external demand, the government said Friday. The first-quarter growth rate was higher than the median 5.3% forecast of nine economists polled earlier by Dow Jones Newswires. On a seasonally adjusted basis, the city's gross domestic product in the first quarter grew 2.8% from a quarter earlier, higher than the fourth quarter's 1.5% expansion. It was the eighth consecutive quarterly expansion. Given the continued expansion in the first quarter, the government raised its full-year GDP growth forecast for this year to 5% to 6% from its previous forecast of a 4%-5% increase. Last year, Hong Kong's GDP grew 7.0%. It raised its forecast for the consumer price index to a 5.4% rise this year from its previous expectation of a 4.5% rise. The price index rose 2.4% last year.

Three sites offered by the government yesterday fetched a staggering HK$5.7 billion in one of Hong Kong's most heated land auctions. Sun Hung Kai Properties (0016) snapped up the 158,231-square-foot site of former Lingnan University on Stubbs Road for HK$4.49 billion - near the top end of an estimated range of HK$3.09- HK$4.55 billion. The final sale price is equivalent to HK$24,829 per buildable square foot - the third highest ever paid in the city. Sun Hung Kai Real Estate Agency executive director Victor Lui Ting said the developer will invest HK$8 billion on the site, which has a maximum buildable floor of 180,835 sq ft. "We won the plot at a reasonable price, as [Stubbs Road] rarely has land put up for sale," Lui said. Centaline Surveyors director James Cheung King-tat expects the completed homes to sell for as much as HK$40,000 psf, due to the rising cost of building on a slope. The competitive bid war finished in just 11 minutes with 33 bids among five bidders. To the surprise of many, the Yuen Long plot drew the most aggressive bids. It was sold after receiving 81 bids from 12 bidders in less than 20 minutes. Cheung Kong Holdings (0001) won the 252,739-sq-ft Ngau Tam Mei plot for HK$662 million - also at the upper end of the estimated range of HK$400 million to HK$700 million. The accommodative value - the land price per square foot - of HK$6,548 psf marked the fifth highest for the New Territories. "It's very rare to have a site where you can have low density development," executive director Grace Woo Chia-ching said. Cheung Kong plans to build 60 detached houses. They are expected to sell for more than HK$10,000 psf, given the construction of HK$5,000 psf. Bidding was most modest for the Kowloon Tong plot. China Overseas Lands (0688) won the 30,247-sq-ft plot at 62 Begonia Road near Yau Yat Chuen for HK$578 million, or HK$15,715 psf - the third highest average for Kowloon. "We plan to invest HK$85 million to build 10 houses, each sized between 3,000 to 5,000 square feet. They are expected to be sold at HK$26,000 psf," said managing director Yau Wai-kwong. The plot price was estimated between HK$406 million to HK$768 million. Lands Department deputy director and auctioneer Graham Ross said he is satisfied with the results. He denied that he tried to heat up the auctions by lowering the bid increment. AG Wilkinson & Associates director Ringo Lam Chun-chiu said the results indicate developers' confidence on government measures to cool flat prices not dampening demand for luxury homes. Kerry Properties (0683) executive director Chu Ip-pui said the auction showed that there is no room for home prices to fall. But he said the company has no plan to raise prices at Lions Rise - its latest project in Wong Tai Sin. Nan Fung Development managing director Donald Choi Wun-hing said any price changes will follow the market.

Model Ana.R shows jewellery designed by Swiss stylist Suzanne Syz during an exhibition held at Ben Brown Fine Arts Gallery in Hong Kong, south China, May 12, 2011. A personal jewellery exhibition of Suzanne Syz kicked off here on Thursday. 

Bank of China (Hong Kong) (2388) and DBS Bank (Hong Kong) have raised their HIBOR-based mortgage rates, the second increase in a month for both lenders. The new Hong Kong interbank offered rate at BOCHK, the second- largest mortgage provider in the SAR, takes effect today. The rate is now HIBOR plus 1.3-1.7 percent with a cap at prime minus 2.65 percent. That is up from the HIBOR plus 1-1.5 percent capped at prime minus 2.7 percent set in mid-April. The new rate is the highest in the industry, with market leader Hongkong and Shanghai Banking Corp asking for HIBOR plus 1-1.5 percent with a cap at prime minus 2.8 percent - the same as that at Standard Chartered Hong Kong. One-month HIBOR stood at 0.18893 percent as of yesterday. Assuming a homebuyer borrows HK$2.1 million, or 70 percent of the price of a HK$3 million flat, over 20 years, the new rate means he will have to pay an additional HK$196.48 to HK$286.95 a month. The rate-hike decision was made "considering the market situation and the higher capital cost," a bank spokeswoman said. Before the last change on April 15, BOCHK's rate was HIBOR plus 0.9 percent to 1.2 percent. DBS (Hong Kong) also raised its rates to HIBOR plus 1.3-1.7 percent, but its cap remains at prime minus 2.8 percent. It is also offering a cash rebate of up to 5 percent. The new rate takes effect on Monday. The rate hikes reflect the impact of increasing capital costs, with lenders marking up lower-priced loans, Hang Seng Bank (0011) executive director William Leung Wing-cheung said. Standard Chartered earlier projected the HIBOR-based rate will test HIBOR plus 1.75-2 percent. Bank of East Asia (0023) has left its rates unchanged after raising it to HIBOR plus 1.5 percent from HIBOR plus 1.3 percent just over two weeks back.

The SAR's 157,000 civil servants will find out on Thursday the results of a survey, which, they hope, will pave the way for a pay rise this year. Unions are hoping for increases of up to 6 percent in the wake of an improving economy. The Pay Trend Survey Committee, comprising civil service union representatives, met yesterday, with members briefed about the sampling of the survey. The survey has taken into account the pay adjustments of private companies since April last year. As well as considering its findings, before finalizing any pay adjustment the government will weigh up the state of the economy, the fiscal position of the government and changes in the cost of living. Demands of the staff sides and civil service morale will also be considered. Financial Secretary John Tsang Chun-wah expects inflation to reach 4.5 percent this year. Despite speculation that any pay increase may not match the rate of inflation, alternate committee chairman, Barry Cheung Chun-yuen, refused to disclose details. Speaking after the meeting, Cheung said: "There is a mechanism to determine what the pay increase should be. You have to wait until next week's report. "Again, we shouldn't pass judgment before the report is finalized. "So, whatever anyone says now is pure speculation." He said the atmosphere of the meeting was "harmonious." Cheung said the meeting was "part of our effort to increase transparency," and to finalize the selection of companies within the survey field. "Hopefully, by agreeing on the field, when the results come out next week, there will be no controversy surrounding the results," he said. Committee member Ngai Sik-shui, who represents staff on the Disciplined Services Consultative Council, said like last year, more than 100 companies were polled, with about three-quarters of them of a larger scale that have at least 100 employees. Ngai called for a 6 percent increase for all civil servants. So Ping-chi, chairman of the Hong Kong Senior Government Officers Association, hopes those in the upper salary bands will see 5 percent added to their pay checks. Leung Chau-ting, chairman of the Federation of Civil Service Unions, wants workers in middle and lower salary bands to see at least a 4 percent increase in wages.

Cafe de Coral chairman Michael Chan Yue-kwong complained last year that the minimum wage law would make expenses rise as sharply as 50 percent, cutting profits by half. He even worried about having to issue a net-loss warning. Later, following inquiries by the Hong Kong stock exchange, he clarified that the warning was not really necessary. Increases in expenses may be offset by passing them onto consumers or increasing revenue and cutting costs, thereby keeping the impact to a minimum. In fact, although large enterprises employ a lot of workers, the impact of the minimum wage law on them is not as great as that on small and medium-sized enterprises. For big enterprises that are highly profitable, larger costs only spell smaller profits - not losses. Even if no steps are taken to increase revenue and reduce costs, big firms will not immediately close. They are highly competitive and if they want to pass increased costs onto consumers, they do not need to order increments in line with those of SMEs. They also find it easier to optimize staff quality and increase competitiveness. Their considerably more financial resources and larger scale allows for replacing manpower with machines. For example, with the introduction of the ticket vending machine, Cafe de Coral can cut staff numbers. Hence, even if the minimum wage really affects large enterprises, the effect is temporary. In the long run, because their SME rivals are weakened or even forced to close shop over the lack of a competitive edge, their volume of business may increase. I do not believe there will be big enterprises issuing net-loss warnings because of the minimum wage legislation. Even if there are, they may only be exploiting the issue. But SMEs may find the going a lot harder. A friend of mine runs a small trading company from home. Even before the implementation of the minimum wage, he was barely breaking even. And after it came into effect, costs inevitably increased. As his company was not competitive enough, the cost increase could not be passed onto customers. And as his is not a big company, there can be no more manpower cuts. He is in great distress and not sure if the company can stay afloat. Eighty percent of Hong Kong employees work for SMEs. The minimum wage implementation has actually helped the big firms by further narrowing the room for survival for SMEs. Media guru KK Tsang, CEO of GroupM, takes a candid look at life.

 China*:  May 15 2011

Packets should list all additives: ministry - An official from the administration for industry and commerce in Guiyang, Southwest China's Guizhou province, inspects food additives in a market on May 5. China's health authorities on Friday urged all food producers in the country to clearly list on packets any additives used in their products. "All additives should be listed on the package and the contents should be precise, understandable and should not include any words to imply disease prevention or treatment functions of food products," said Chen Rui, deputy director of the food safety coordination and health supervision bureau of the Ministry of Health. The name of a product ought to present what the food is and should not mislead customers. And warnings that additives in products may cause an allergy should also be clearly stated on the tag, he said. Fan Yongxiang, a food safety expert with the Chinese Center for Disease Control and Prevention, said, as an example, that fruit-flavored drinks which are made up of edible pigments and flavors cannot be tagged as fruit juice. "The revised regulation will ensure customers' rights to know and choose," Chen said. The Ministry of Health also released on Friday a revised rule that establishes national standards for the use of 2,314 additives, which include those used in food processing as well as flavoring. Some new types have been added to the original list that dates back to 2007, and some outdated additives such as benzoyl peroxide, calcium peroxide and formaldehyde, which are no longer necessary in food processing techniques, have been deleted from the list. The rule also states that additives should not be used to disguise rotten or damaged food. "Most food additives listed in the rule have been widely used around the world. And the very small number of additives developed in China tested safe," said Yan Weixing, director of the nutrition and food safety institute at the Chinese Center for Disease Control and Prevention. The public has become anxious about food safety after scandals involving melamine-tainted milk and clenbuterol-tainted pork. But Yan said the public should understand that food additives are different from those illegal inedible chemicals. Meanwhile, the ministry is working on a blacklist of illegal additives. Persons or companies must not use such additives in their products, or they will face criminal charges or closure, officials said. In the latest effort to tame abuse and the illegal use of food additives, Nanjing, in East China's Jiangsu province, now requires those buying additives to show their ID cards and record contact details at retail outlets.

Yum Brands Inc. made a formal bid to acquire Little Sheep Group Ltd. in a deal that values the Chinese restaurant chain at more than $860 million, a purchase that would mark a significant expansion for the U.S. company in its most profitable market. Yum and Little Sheep said in a joint statement Friday that the offer to Little Sheep shareholders would be 6.50 Hong Kong dollars, or about 84 U.S. cents, in cash per share to increase Yum's stake in the company to 93.2% from 27.2%. Yum would pay US$570.5 million to US$586.3 million for that additional two thirds stake, depending on whether certain share options in Hong Kong-listed Little Sheep are exercised, the statement said. Yum, which is based in Louisville, Ky., announced preliminary plans to buy Little Sheep on April 26 without spelling out the terms of the offer. Friday's offer represents a 30% premium over Little Sheep's closing share price of HK$5.00 on April 21. Shares of Little Sheep were suspended on April 26 after a four-day Easter holiday weekend in Hong Kong and resumed trading Friday. They ended Hong Kong trading up about 23% at HK$6.14 each, still below Yum's offer price. Yum has built one of the most successful operations of any foreign company operating in China, with nearly 4,000 KFC, Pizza Hut and other restaurant outlets in the country. China accounted for 37% of Yum's $2.4 billion in world-wide revenue in the quarter ended March 19 and 54% of its $401 million in operating profit in the period. Little Sheep had 458 directly owned or franchised restaurants across China as of the end of last year and another 22 overseas. Its restaurants specialize in Mongolian hot pot, in which diners dip meat and vegetables in communal cauldrons of bubbling broth. Little Sheep's revenue jumped 23% last year to 1.9 billion yuan (US$292.4 million), while profit rose 21% to 187.8 million yuan. The two companies said in their statement that part of their goal would be to expand Little Sheep overseas. The Yum acquisition "should leave us well-positioned to develop into an internationally recognized restaurant chain," said Little Sheep Chairman Zhang Gang. Yum said privatization of Little Sheep through its proposed transaction also would enable the Chinese company to "achieve a more economically viable business model in the market and to better tap its potential opportunities." Yum bought a 20% stake in Little Sheep in 2009 and increased its stake to 27.2% last year. If its new offer succeeds, 6.8% of the company will be left in the hands of Little Sheep's founding shareholders. The offer is conditioned on approval by China's Ministry of Commerce and other regulators, the companies said.

The State Forestry Administration (SFA) and the National Tourism Administration signed a framework agreement on Wednesday to promote the development of forestry tourism. The move was also aimed at launching new tourism products, protecting forestry resources and promoting ecological civilization, said an unnamed official with the SFA. The two administrations will jointly draw up guidelines and development plans on the country's forestry tourism industry, and establish a work team and an office. They would also host forestry tourism festivals and finance the construction of infrastructure and public facilities in state-level forest parks and natural protection areas, as well as staff training. Social capital is also encouraged to invest in the forestry tourism sector, the two administrations said.

It's economics, not politics - A wind turbine blade manufactured by China's Tang Energy Group is unloaded at the Port of Long Beach, California for delivery to the Tooele Army Depot in Utah. China and the United States must make the most of their economic relations and guard against politicizing economic issues, Vice-Premier Wang Qishan said on Tuesday and Wednesday in his meetings with 20 US lawmakers and Ben Bernanke, chairman of the US Federal Reserve. The two sides need to "depoliticize" economic issues, or else they will miss a great opportunity for bilateral economic cooperation, Wang was quoted as saying in a statement released by the Chinese Foreign Ministry. It is common that tensions will arise as China and the US expand and deepen their economic activities, but the two countries should avoid politicizing economic issues, increase communication and enhance understanding, Wang told lawmakers, including Dave Camp, chairman of the US Ways and Means Committee, Charles Boustany and Rick Larsen, co-chair of the US-China Working Group. Wang told the US legislators that China is not pursuing a trade surplus with the US and is willing to increase imports from the US, but it will benefit both countries if the US eased restrictions on high-tech exports. China believes that economic collaborations between China and the US will benefit not only both countries but also the world, Wang told Bernanke, adding that China is willing to increase cooperation with the US in trade, investment, finance and infrastructure construction. While hailing a fruitful third round of the China-US Strategic and Economic Dialogue on Tuesday, he said that ensuring a strong global economic recovery is a top priority. The two countries must increase their cooperation within the G20 and gradually advance the reform of international economic rules and increase the representation of emerging markets and developing economies. Agreeing with Wang, Bernanke said that cooperation between China and the US is essential in bringing about a stable recovery of the global economy. Also on Wednesday in his meeting with Luis Alberto Moreno, president of the Inter-American Development Bank (IDB), Wang said China and Latin America should boost financial, economic, trade and investment cooperation by vigorously promoting economic and trade relations between China and Latin America. The IDB has been acting as a bridge in the process, making its contribution to Chinese-Latin American economic cooperation, Wang said. Moreno said China's development offers an important opportunity for Latin America and the Caribbean region, and the IDB would like to deepen its cooperation with China to promote mutual development. The Washington-based IDB is the main source of multilateral financing and has expertise in sustainable economic, social and institutional development in Latin America and the Caribbean.

Robot fever hits Shanghai - Visitors look at a robot at a company's booth during ICRA 2011 in Shanghai Monday. More than 900 researchers on robotics around the world gathered in Shanghai Monday to share their recent findings at the 2011 IEEE International Conference on Robotics and Automation (ICRA 2011). The event is organized by the Institute of Electrical and Electronics Engineers (IEEE). It’s the first time for China to hold the world's top conference of its kind, which will last from May 9 to 13.

Chinese pair Zhang/Cao win mixed doubles title at table tennis worlds - Chinese pair Zhao Chao and Cao Zhen overcame teammates Hao Shuai and Mu Zi 4-1 to clinch the title in mixed doubles at World Table Tennis Championships on Friday.

Drought on China's Yangtze river has led to historically low levels that have forced authorities to halt shipping on the nation's longest waterway.It was barely three meters near Wuhan, the Chang Jiang Waterway Bureau said yesterday. A day earlier, the bureau closed a 228-kilometer stretch above Wuhan to sea-going vessels, fearing ships would become stuck on the bottom. Further up the river, the massive Three Gorges Dam, the world's biggest hydroelectric project, has discharged more water to alleviate the drought conditions down river. It was not immediately clear if the measures would be effective as the drought in areas around the middle reaches has levels at the lowest point in five decades, the China Daily said. At least two ships have just been stranded, with that part of the river cut to an average width of about 150 meters. According to Wang Jingquan of the Yangtze River Water Resources Committee, slowing the Yangtze with the controversial Three Gorges Dam has aggravated the drought by diverting flow to the lower reaches. The 6,300-kilometer Yangtze is indispensable to the economies of many cities along its route.

Hong Kong*:  May 14 2011

Intricate brain surgery on Manila bus hostage survivor Jason Leung Song-xue is not the hardest part of the job for Dr Dawson Fong To-sang. Neurosurgeon Dr Dawson Fong says doctors need the "three Es": enjoying work, empathy and EQ or emotional quotient. Much more difficult, the Tuen Mun Hospital neurosurgery chief says, is dealing with media hungry for details of the teenager's progress. "The media loves sensational things, but in medicine, there are not many sensational cases," he said. "I need to strike a balance between public interest and patient privacy. Sometimes I do feel that I have overstepped the mark a bit by sharing too much information." Fong was speaking before receiving a Hospital Authority outstanding staff award, one of six handed out this year. He said he hoped the award was not given to him simply because of Jason's high-profile case. "Jason is still on his way to recovery. If the homework has not been submitted, why would the teacher give a grade for it?" Jason suffered severe brain damage in last August's shooting that killed his father, two younger sisters and five other Hongkongers. Fong, who began his career in 1979 and has worked in Tuen Mun Hospital for decades, said the workload in the hospital was especially heavy and he had thought about switching to private medicine. "Sometimes I feel happy about my work, sometimes I feel down. It is normal," he said. "But I am not an adventurous person. Leaving the public sector has too many unknowns." Fong said doctors would be happy if they had "three Es"- enjoying work, empathy and what he termed EQ or emotional quotient. He said the Hospital Authority would be able to retain more doctors if it could provide an environment that provided these ingredients, adding: "I know it is trying hard." One of Fong's most memorable cases was that of a construction worker who had a steel bar through the top of his head. "When he was admitted, he was still awake and could chat with us. We all thought he was going to make it." But the man's situation deteriorated quickly and he died in 20 minutes. "It was the bloodiest case I have ever dealt with," he said. Fong is running for the Medical Council against private paediatrician Alvin Chan Yee-shing, and the result is expected today. Fong said he had a 50-50 chance, but even if he lost, his effort had raised awareness among public doctors, as the council was "traditionally slanted towards private doctors". He hoped more public doctors would run for a council seat and vote.

Fierce bidding for three luxury residential sites at yesterday's land auction suggests government efforts to cool the overheated property sector are failing to make an impact. Sun Hung Kai Properties (SEHK: 0016) outbid four others to win the former Lingnan College site on Stubbs Road, the most anticipated land lot in the auction, for HK$4.49 billion or HK$24,829 per buildable square foot. It represents the third most expensive residential site auctioned in the city in terms of price per square foot. Victor Lui Ting, executive director at Sun Hung Kai Real Estate Agency, said the firm planned to invest HK$8 billion on a low-density residential project on the site. Bidding for the two other sites was hotter than expected. The Ngau Tam Mei land parcel in Yuen Long was won by Cheung Kong (Holdings) (SEHK: 0001) after 81 offers from 12 bidders. The winning HK$662 million bid, equivalent to HK$6,548 per sq ft, was significantly higher than most market forecasts, which ranged from HK$410 million to HK$525 million, although one firm forecast HK$700 million. "It's a valuable site and has great potential," said Grace Woo Chia-ching, an executive director at Cheung Kong. "It's very rare to have a site where you can have a really low density development with houses that have their own gardens." The developer is planning to build more than 60 detached houses, with a construction cost of about HK$4,000 to HK$5,000 per sq ft. China Overseas Land (SEHK: 0688) and Investment won the site on 62 Begonia Road at Yau Yat Chuen in Kowloon Tong for HK$579 million after a battle between five bidders submitting a total of 89 bids. The price of HK$15,742 per buildable sq ft was the third highest selling price per square foot in Kowloon. Most surveyors had not expected the site to fetch more than HK$15,090 per sq ft. "We are looking for a selling price of HK$26,000 [per sq ft for the completed flats] in future so ... the land value of about HK$15,000 per sq ft is very reasonable," said China Overseas Property Agency's director Tony Yau. The developer plans to build 10 houses between 3,000 sq ft and 5,000 sq ft each. The entire development would cost about HK$850 million. Cusson Leung, an analyst at Credit Suisse, said the results sent a strong signal many developers were optimistic about the property market outlook. "The three sites are located in different areas. But they were acquired by three different developers who bid aggressively for them. It is not just a single transaction. It shows how the developers feel about the market," Leung said. "The average selling price of the Stubbs Road project has to reach HK$34,000 per sq ft in order to reach reasonable profit. But selling prices for second-hand flats in the area range between HK$25,000 and HK$26,000 per sq ft. That shows that the developer expects property prices to rise," he said. Despite the government's move to release more sites for sale in recent months, Savills Valuation managing director Charles Chan Chiu-kwok said the increased supply was failing to cool the market. "They don't have long-term planning for land supply and they have cut the development density of the sites. That's why developers are willing to bid aggressively. They're worried about a possible shortage of valuable sites in future," he said. Auctioneer Graham Martin Ross said he was content with the results. The government would not just concentrate on one part of the market, but would also sell land for the mass residential market. Data from Jones Lang LaSalle showed that luxury residential prices grew 8.3 per cent in the first quarter.

A US nuclear submarine is due to visit Hong Kong early next week - the first such port call by one of the American navy's most sensitive and strategic assets in three years. The USS Hampton will enter the harbour flanked by Guam-based submarine tender USS Frank Cable. The visit comes ahead of the arrival later this month of US aircraft carrier Carl Vinson - the ship used last week to bury Osama bin Laden at sea. Monday's visit will come as PLA General Staff chief General Chen Bingde arrives in Washington for a week of meetings with senior military and civilian leaders in the administration of US President Barack Obama - sessions that are expected to see China's concerns about ongoing US naval activity off its coasts given a strong airing. Beijing has given approval for the Hampton's visit, according to Washington-based military officials, but it has yet to be officially announced. "Hong Kong is a favourite port call for US sailors, and we appreciate the opportunity to make regular visits to the city," a US consulate spokesman said. "We have no announcements to make at this time with regards to future visits." The last US submarine to visit was the USS Asheville, which arrived in mid-July 2008. The San Diego-based Hampton is part of the Pacific Fleet, which has had an expansion in submarine forces in recent years as part of a long-term shift in the Pentagon's emphasis from Europe to the Western Pacific, in large part driven by China's rise. While aircraft carriers represent the most visible projection of US force in the region, its submarines are among the most sensitive. Los Angeles-class submarines, like the Hampton, routinely carry Tomahawk cruise missiles and torpedoes but are also equipped for a range of intelligence-gathering operations close to coastlines, from surveillance to the undersea release of special operations teams. As such, submarine deployments are rarely discussed publicly but are among the most closely scrutinised by regional militaries. The US submarine forces' Pacific expansion from bases in Guam, Hawaii, and the US mainland, comes amid China's own build-up of both conventional and nuclear-powered submarines. While local PLA officials are expected to be invited to parties aboard the Carl Vinson, it would be unusual for them to go aboard the submarine or its tender, given that sensitivity on both sides. The visits appear to reflect the ongoing thaw in relations after the chill that descended on the Sino-US military relationship last year following a fresh package of US arms sales to Taiwan. The Carl Vinson, for example, is the first carrier to visit since the USS Nimitz in February last year. Its visit has yet to be approved but it is seen as a fait accompli. But officials on both sides make clear that many differences and suspicions remain. While the US pushes for more transparency and communication at all levels, from PLA strategists to captains in the region's increasingly busy seas, China is angry at "discriminatory" laws and wary of the US military presence in East Asia. In an interview with the China Daily ahead of Chen's visit, Qian Lihua, director of the Foreign Affairs Office in the National Defence Ministry, warned that wide-ranging and high-intensity detection by US warships and planes near the coast of China was the main source of maritime danger and seriously harmed China's security interests. "It seriously affects military mutual trust and may cause accidents while this problem remains unsolved," he said. The US insists that the International Law of the Sea gives countries the right to freedom of routine military activity inside another state's economic zone - an interpretation challenged by the PLA, which insists that surveillance is not acceptable.

Retailers might be allowed to pocket a plastic bag levy they collect from shoppers under a revised scheme being considered by the Environmental Protection Department. The plastic bag levy has had an unintended result, with an increase in the disposal of reusable bags - many of them the so-called environmentally friendly shopping bags. Environmentalists said this might enable the department to net as many retailers as possible by eliminating the need to return the levy to the government, but it might create enforcement problems, too, because of the vast number of retailers. "How can they enforce the law and make sure retailers collect the levy they are asked to? What if a retailer offers a rebate in the price of their products to offset the levy?" said Dr Man Chi-sum, chief executive officer of Green Power. At present, only about 3,000 retail outlets are required to collect the 50-cent levy, most of them being large supermarket chains, personal care stores or convenience stores. They account for only 4 per cent of total retail outlets. Last year, these 3,000 outlets collected HK$24.9 million in the levy from shoppers, far less than the HK$200 million that was originally anticipated. Another thorny issue in expanding the levy scheme is to what extent exemptions should be given. There is little dispute over giving an exemption to cooked food or wet items. But whether an exemption should be granted to wet markets as a whole or small operators could be a controversial issue. Caroline Mak Sui-king, chairwoman of the Hong Kong Retail Management Association, said the department should clearly spell out what the "discriminatory use" of plastic bags, as stipulated in the levy law, meant before proposing any exemptions. "Keep as few exemptions as possible. I am fine with giving out bags for cooked food but if you give wet markets an exemption, please give us it, too," said Mak who has accused the existing levy scheme of being biased against some retailers. Mak said the department had not had any dialogue with the association over the past six months regarding the next step in the levy. "We feel like we are being treated like a transparent plastic bag," she said. Michelle Au Wing-tze, a senior environmental affairs officer for Friends of the Earth, said the government should give wet markets an exemption since most of the retailers were just small vendors. Au said the government should also expand the levy scheme in one go, instead of in phases as that would create more confusion among shoppers. Angus Ho Hon-wai of Greeners' Action, which was the first group to launch a "No Plastic Bag Day" before the levy law came into place, said there should only be an exemption for wet items.

 China*:  May 14 2011

China could raise its nuclear-generating capacity by more than six-fold by the end of the decade despite Japan's earthquake and tsunami-induced crisis in Japan causing a re-think about the sector's future. China Nuclear Energy Association vice secretary-general Xu Yuming told the China Nuclear Energy Congress yesterday that he believed the nation would be able to expand installed nuclear power capacity to at least 70 gigawatts by 2020, up from 10.8GW at the end of last year. A gigawatt can power up to one million homes. About 34 reactors with total capacity of 38GW have received approval to be constructed or are being built, accounting for about 40 per cent of the world's new nuclear projects. Xu said the industry's long-term development would not be affected by Japan's nuclear accident although projects scheduled to start construction in the past two months had been delayed and approval of new projects had been suspended. "It actually provided the opportunity to cool down over-zealous sentiment to build new plants," he noted. "Now areas that do not have the pre-requisites will have to give up on their nuclear ambitions and new project development will be safer, more efficient and orderly." After the Fukushima disaster, Beijing ordered a thorough safety inspection of all operating nuclear power plants and projects under construction, and reviewed the sector's long-term development. Overseas lobby groups have stepped up pressure on some countries' governments to close old plants and curtail new plants. Local governments in most mainland provinces, including many in less-developed inland ones, have in recent years flagged plans to build nuclear plants. Power generators have also been doing feasibility studies in cities across the country. In 2006, Beijing set a target to have 40 GW of nuclear power capacity by 2020, a figure it has not officially revised despite rapid development. Xu said more than 70 billion yuan (HK$84 billion) annual investment was needed in the sector this decade. The target is expected to be reached five years earlier in 2015, under Beijing's 2011-15 economic development blueprint announced in March. Industry researchers and insiders have in recent years suggested 2020 capacity targets ranging between 70GW and 100GW. University of South China nuclear engineering professor Zhou Shuliang said the upper end might not be realistic due to shortage of qualified engineers. "While our universities have enough capacity to churn out the graduates needed, each engineer needs to be trained on the job for five to eight years in order to be properly qualified," Zhuo said. "We are lagging behind the pace of plant development." Despite media speculation that Beijing will in August complete reviewing safety standards and resume approving new nuclear power projects, Xu said he had not heard confirmation of the timeframe. Zhou said he believed it would take some months for the review to be completed but added new standards would mostly likely come into force before the end of the year. The existing standards were created in 2008, but were broad guidelines, with the detailed rules still being ironed out, Xu said.

The Singapore-based property developer CapitaLand Ltd will double its investment in China's commercial real estate and serviced apartments sectors within three to five years, despite the government's rigorous measures to cool the property market. "We will increase our malls to 100 within five years, from the existing 53 across 34 cities," said Lock Waihan, deputy chief executive officer (CEO) of CapitaMalls Asia (China), a member of CapitaLand China. As one of the largest property developers in Singapore, CapitaLand currently has 250 billion yuan ($38.4 billion) in assets under management, 36 percent of that figure is in China. "We may increase China's proportion to around 45 percent in the future, but we will keep it under 50 percent, ensuring a balance among our three major markets: Australia, Singapore and China," said Lim Mingyan, chief operating officer of CapitaLand Ltd, and CEO of The Ascott Ltd, a CapitaLand subsidiary. While strengthening exploration in the commercial property sector, the company will also boost its presence in the serviced apartment sector through Ascott. "We plan to double the number of serviced apartments from 6,000 to 12,000 within three to five years," said Lim, adding that China will be Ascott's fastest-growing market. Ascott now has three product lines in the country - Ascott, Somerset and Citadines - targeting different groups of customers. "We'll serve more domestic clients along with rapid business expansion of private enterprises at home," said Lim. In 2010, China was the biggest contributor to CapitaLand's pretax profit, as its unit CapitaLand China Holdings reported a 240-percent surge in pre-tax earnings to $532.6 million. The company sold property worth $858.6 million in China last year. Though the Chinese government has rolled out a slew of measures to curb surging price increases in the residential sector, Lim said the company will not change its business strategy in the market. "I believe the situation will be clearer in the second half of the year, and more merger and acquisition opportunities will also arise in the coming six months," Lim said. In January 2010, CapitaLand acquired a 100 percent stake in Orient Overseas Developments Ltd for $2.2 billion, doubling its property portfolio in China from 1.4 million square meters (sq m) to 2.8 million sq m. "The sales of the seven projects we took over from Orient Overseas Developments are better than expected," said Lim. Among those seven projects, five are in Shanghai, one is in Tianjin and the other is in Kunshan. Although Chinese lenders have largely tightened loans to property developers, Lim said the company's business expansion in the country is unlikely to be affected because the net debt-to-equity ratio is only 0.18 percent. In China, CapitaLand's business mainly involves residential (40 percent to 45 percent), commercial (40 percent to 45 percent) and serviced apartments (10 percent). "The business portfolio will remain stable despite tightening measures in the residential sector," said Lim.

China has raised the reserve requirement ratios (RRR) for banks for the fifth time this year to restrain price rises. The move, which came on Thursday evening, underscores the risk that tightening measures will cause a slowdown in the world's second-biggest economy. Reserve ratios will increase by 0.5 percentage point from May 18, the People's Bank of China, the central bank, said on its website. That will boost RRR levels for the nation's biggest lenders to a record 21 percent. The central bank moved after reports on Wednesday showed inflation and lending exceeded economists' estimates in April, with consumer prices rising more than 5 percent for a second month. Premier Wen Jiabao aims to tame inflation while sustaining growth amid signs the economy is cooling after an expansion that peaked at 11.9 percent last year. "Controlling inflation will definitely entail a slowdown in growth and the authorities understand that," said Wang Qing, chief China economist at Morgan Stanley. "The slowdown we've seen so far doesn't indicate there is a risk of a hard landing, that's why the policy priority at the moment is still to control inflation." Besides raising interest rates and reserve requirements, and guiding banks to limit credit growth, the yuan broke 6.5 a dollar for the first time since 1993 on April 29. A stronger yuan helps to reduce import costs. Weaker growth in industrial production, detailed in Wednesday's report from the statistics bureau in Beijing, came after a manufacturing index declined in April, signaling that growth may be cooling after a 9.7 percent expansion in the first quarter. Power shortages in some provinces may also have affected the output numbers. The reserve requirement move locks up about 370 billion yuan ($57 billion), according to Barclays Capital. It may have been triggered by the extra cash entering the financial system from maturing central bank bills, according to Royal Bank of Scotland Plc. Inflows of so-called "hot money", or speculative capital, may also have been a factor, said Lu Ting, a Hong Kong-based economist for Bank of America Merrill Lynch. The central government aims to prevent increases in food and housing costs. Consumer prices jumped 5.4 percent in March, the most since July 2008. In April, the gain was 5.3 percent. Higher commodity costs, inflows of capital, and the extra cash in the economy, from a stimulus program started in late 2008, have added to inflation risks, analysts said. The nation's foreign-exchange reserves exceeded $3 trillion for the first time in March.

China is likely to achieve its target of 70 gigawatts (gW) in nuclear capacity by 2020 despite its freeze on approving new nuclear projects since Japan's nuclear crisis, Xu Yuming, vice-secretary general of the China Nuclear Energy Association (CNEA), said on Thursday. "China will reach at least 70 gW in nuclear capacity by 2020," Xu said. "Eighty gW is also possible." The country could attain 50 gW of nuclear capacity by 2015, with projects totaling 40 gW of capacity under construction now, Xu said. As of the end of 2010, China had 10.8 gW of nuclear capacity, according to the National Energy Administration (NEA). Japan's nuclear crisis has no impact on the long-term development of China's nuclear sector, Xu said, though the enthusiasm for building nuclear reactors has diminished. The sector has been growing at the rate of six to eight new reactors a year. However, new projects in their preliminary stages or waiting for approval will remain on hold for some time owing to the suspension of new approvals of projects on March 16 because of the Japanese crisis. In addition, the country has initiated a program of safety inspections. Nevertheless, preliminary work on China's first inland nuclear project, the Taohuajiang Nuclear Power Plant, is still in progress, according to the Hunan-based nuclear expert, Zou Shuliang, of the China Atomic Energy Authority (CAEA). That project and two other inland nuclear power plants, in Hubei and Jiangxi provinces, were expected to receive approval and start construction in 2011. Review groups, consisting of 60 to 70 experts each, have concluded the safety inspections on the nuclear power plants at Daya Bay in Guangdong province, Qinshan in Zhejiang and Tianwan in Jiangsu. The reports will be issued by the end of May. The government will then begin conducting safety reviews of the projects already under construction. China will adopt third-generation AP 1000 technology in all new projects starting around 2015, when it is expected to complete assimilating and localizing the technology designed by US-based Westinghouse Electric Co LLC, said Xu. Another 10 reactors, including six inland units, will adopt the third-generation technology earlier, according to the original plan, in 2011, said Zhu Shutang, director of the large advanced PWR project office of the State Nuclear Power Technology Corp (SNPTC). The SNPTC, which introduced the technology in China, already started preliminary work on third-generation technology for the inland nuclear power plants in Hubei, Hunan and Jiangxi provinces. Shortages of personnel and uranium supply remain issues that must be resolved as the nation heads toward becoming the largest developer of nuclear power plants. "We have only six to seven schools training professionals for the nuclear industry," said Zou of the CAEA. "We will be understaffed if China achieves the target of 70 gW by 2020." Meanwhile, a professional emergency rescue team and system should be set up soon, Zou added. China's annual consumption of uranium will rise sharply, reaching 20,000 tons by 2020, the World Nuclear Association said. China imported 17,136 tons of uranium last year, three times the amount of the previous year. Despite questions about securing an adequate uranium supply for the expansion plans, Xu, of the CNEA, said China will without doubt have enough for 80 gW of nuclear capacity.

Hong Kong*:  May 13 2011

Thousands braved the scorching heat in Cheung Chau for the bun festival yesterday, with several needing medical attention. The temperature reached 32.9 degrees Celsius as 30,000 enjoyed the annual festival of floats, jokes and the big bun scramble. The temperature at noon was the highest this year, the Observatory said. Three people fainted, with two - aged 22 and 43 - needing attention at Cheung Chau Hospital. The other was treated in an ambulance. The highlight was the parade of floats in which local children, dressed as mythological figures and deities, passed through the island's narrow alleys. The two-hour parade included sarcastic themes on the government's budget and the HK$6,000 handout to adult permanent residents. Four-year-old Chan Hok-man masqueraded as Chief Executive Donald Tsang Yam-kuen, complete with bow tie. He stood beneath another child pretending to be Financial Secretary John Tsang Chun-wah who distributed fruit candies to the crowd. On another float, a child dressed as a soldier sprinkled water to help reduce radiation in Japan, while another joked about people rushing to buy salt for protection from radiation. The festival's highlight - the bun scrambling competition - began at midnight. Cheung Man-cheung and Lisa Cheng Lai-sho were crowned the bun- scrambling king and queen, respectively, as they grabbed the most buns from the 14-meter tower. Early visitors were disappointed at the reduced number of buns for sale after the Food and Environmental Hygiene Department warned bunmakers Kwok Kam Kee Cake Shop at 46 Pak She Street and Grand Plaza Cake Shop at 91B Praya Street not to stamp fortune messages on the buns outside their designated areas. Kwok Kam Kee pulled down its shutters in protest, but Grand Plaza ignored the warning. "We made 70,000 buns this year - 30,000 fewer than last year - so each person is only allowed to buy four buns at HK$7 each, up HK$1 on last year," shop owner Kwok Yu-chuen said, urging the government to be more lenient next year "to retain tradition." First-time visitor Cheung Choi-yuk, 25, said she was "very disappointed" with the department's regulation. "We had to spend a long time queuing up and our purchase was restricted," Cheung said. Souvenir shops selling bun phone straps, soft plastic buns and cushions printed with the word "peace" did brisk business, as did those who sold iPhone4 cases printed with "peace" at HK$98 each. "We imported 100 iPhone cases and sold 10 in the first 15 minutes," said a Praya Street shop owner surnamed Yeung. Another shop owner, Patrick Lau, said though costs were up 30 percent, he cleared a fifth of his stock in the first 30 minutes.

Hongkong Land retail head David Martin says the company saw the need for a men's shopping destination in Central, and the basement of The Landmark was a great location. Landmark targets men to keep its style crown Level conversion aims to make centre unique. An entire level of The Landmark in Central is being converted into a shopping destination tailored specifically for men in a bid by owner Hongkong Land to keep the centre's status as one of the city's leading upmarket malls. Ninety per cent of the old tenants in the basement level will be replaced in the makeover. The 60,000 square foot retail space will not just offer fashion, but will include outlets offering a variety of male-focused merchandise. "Men are excited by having a variety of shopping options available, not just fashion," Hongkong Land retail department head David Martin said. But luxury branded men's fashion will still be prominent in the new tenant mix. The basement will also have a bookstore tailored to men's interests, an audio and electronic outlet, an expresso bar and a "grooming" outlet that will offer hair cuts as well as skin-care treatments. "We've already made 10 tenant changes since the end of last year. We want to create a unique destination in Hong Kong," Martin said. "Retail rents in the basement have grown slightly but we are aware that whenever you change concepts, tenants need a little time to grow their business," he said. Previously, the tenants in the basement were mixed, offering merchandise targeted at both men and women and including the most luxurious brands and middle-priced brands. The makeover has provided an opportunity for the landlord to create a new shopping environment. "We run regular focus groups and do surveys and have discussions with our tenants and recognised that male shoppers are spending more on clothes, grooming and lifestyle," Martin said. The proportion of men among visitors to the mall, particularly among mainland visitors was also quite high, he added - not surprising since Central is the city's core business district and has a high concentration of well-paid male executives. "We felt there was an opportunity to create a men's shopping destination in Central. And we identified the basement of The Landmark as the area in which we could do that," Martin said. Hongkong Land is facing increasing competition in the retail market, as many landlords are expanding into the high-end market following the increase of high-income mainland visitors in recent years. "We worked closely with brands. They offer different collections in our malls. We also host many events such as Boutique Boulevard," Martin said. Boutique Boulevard is a shopping fair running from Friday to Sunday. Seventy branded suppliers in Hongkong Land's retail portfolio will support the fair by preparing special displays and offering workshops and lucky draws to lure shoppers. Martin said he was optimistic about the outlook for the retail property market due to the strong growth in visitor numbers to Hong Kong. "On the supply side, there aren't any new big shopping malls coming up. And many international brands are more willing to invest in Asia and in the mainland in particular," he said. "The market in Hong Kong is mature and will benefit from the continuous growth on the mainland. Many brands are talking about expansion. We see a healthy demand for space in Central." Mainland visitors have become the key source of retail sales growth and Martin said they represented about 30 per cent of the shoppers at Hongkong Land's retail outlets. "The mainland customers that we are targeting are the top 20 per cent [in terms of incomes]. They are increasingly showing the same shopping and lifestyle characteristics as our Hong Kong customers,'' he said. "They travel internationally. They have large disposable incomes and they are sophisticated and knowledgeable about fashion. They are looking for big international brands. They are also looking for something new." Hongkong Land therefore aims to offer its shoppers international brands that are not distributed widely in Hong Kong or the mainland. "We also provide the added attractions of Central such as food and beverage outlets and hotels. It is not only about shopping," Martin said.

Chun Wo denies making low bids for bypass project - A delay of eight years in the Central-Wan Chai bypass project led to the costs increasing to HK$28 billion from HK$8 billion. Chun Wo Development Holdings denied claims that it and its partners won more than HK$4 billion worth of contracts in the Central-Wan Chai bypass project by bidding below cost. The HK$28.1 billion bypass - a road and tunnel project along the north shore of Hong Kong Island - was delayed for at least eight years because of environmental protests and a judiciary review. Construction began in December 2009 and the bypass is expected to be commissioned in 2017, according to the Highways Department. Sources said it was unrealistic for Chun Wo to make a profit from the project without claiming compensation because its bid was low. However, Chun Wo managing director Clement Kwok Yuk-chiu said the gross profit margin for his company's three contracts for the bypass was "approaching two digits". Commenting on the allegations, Kwok said: "I'm surprised to hear that because we put in reasonable margins for the jobs." Chun Wo won three contracts worth HK$9.7 billion for the bypass, which will connect Central with North Point with a 4.5km road and a 3.7km tunnel. In January, a consortium led by Chun Wo won a HK$4 billion contract to build a road and tunnel in North Point. The other members of the consortium are China Railway Group (SEHK: 0390), a state-owned rail construction company, and its subsidiary, Major Bridge Engineering Group. In February last year, Chun Wo and China Railway won a HK$3.4 billion contract for the eastern Wan Chai section of the bypass. At about the same time, Chun Wo, in a 50-50 joint venture with Leader Construction Group (a subsidiary of Build King Holdings), won a HK$2.3 billion contract to build a tunnel in Wan Chai. The HK$4 billion contract won in January was HK$1 billion below those of other bidders, while a joint bid for another bypass contract was HK$400 million less, an infrastructure executive said. "Even if Chun Wo says it can make money, which I don't believe, it is bad business because its prices should be higher," the executive said. "The talk in the market is Chun Wo must absolutely lose money. "In a project of HK$4 billion, if you are HK$1 billion below the next tenderer, it is very difficult to be profitable. Most tenders are priced at a 5 per cent profit margin." In government construction projects such as the bypass, the contracts contained provisions to compensate the contractor for escalating costs of raw materials, Kwok said. He said Chun Wo had no need to excessively lower its bids because the three contracts it won had fewer bidders than some other projects. With so many contracts from other projects such as the government's 10 major infrastructure projects, Chun Wo is in a stronger bargaining position for better profit margins, he said. "I cannot find the logic to go below cost to get a job. There are so many jobs going on," he said. The delay of at least eight years in the bypass project led to costs soaring from HK$8 billion to HK$28 billion, Kwok said. In 2003, protesters lodged a judicial review to block the project, saying the planned reclamation was against the Protection of the Harbour Ordinance. The case went to the Court of Final Appeal, whose ruling in January 2004 allowed the project to proceed provided the reclamation of Victoria Harbour was scaled down. The Highways Department said the bypass was necessary to reduce traffic congestion in Central and Wan Chai.

The corruption story that’s making front pages all over Hong Kong isn’t about the many millions embezzled across the border by a former mayor of Shenzhen. Instead, it’s an investigation by the city’s antigraft agency, which uncovered a number of bribery scams regarding the sale of milk powder at local supermarket chains. Milk powder has become a hot-button topic in recent years as local mothers fight tooth-and-nail with mothers from the mainland coming to Hong Kong to secure supplies of what they see as safer, as well as cheaper, formula after the melamine scandal dented confidence in dairy products in China. Fears of radiation-contaminated Japanese food imports also sparked a frenzy for what people believed could be the last supplies of safe Japanese formula in the aftermath of the earthquake. The Independent Commission Against Corruption, or ICAC, said on Monday it conducted a series of operations, codenamed “Sunshine,” that resulted in the arrests of 15 people. Those arrested include staff of supermarkets and health and beauty retailers, as well as parallel goods traders. The ICAC said it seized more than 1,000 cans of milk powder from these traders. The supermarket chains could not be reached as Tuesday is a public holiday in Hong Kong. Parallel traders typically buy cans of milk powder from stores and give a cut to store employees in the process, then resell the products to customers on the mainland. Local media reports say the employees made a cut of about HK$20 (US$2.60) to HK$30 (US$3.90) per can. Supermarkets in Hong Kong have enacted safeguards such as limiting each customer to no more than three cans of formula at a time. Supermarket chain Wellcome said in March it found that staff members in one of its stores on the border with the mainland had violated company guidelines by selling more than the allowed amount. A spokeswoman for Pfizer Inc. in Hong Kong, which produces the Wyeth Gold line of milk powder, said the company is in close communication with retailers to monitor supply, and if there’s any sign of product shortage the situation should be resolved in two days. Customers can also call a hotline to check the stock available at retailers around Hong Kong.

Coach Inc. said it plans a secondary listing of its shares in Hong Kong by year's end, the latest luxury brand seeking to use a presence on the local exchange to boost its profile among China's fast-growing affluent class. Coach's shares are already traded on the New York Stock Exchange, and it doesn't plan to raise extra capital via the issuance of Hong Kong depositary receipts, underscoring that the exercise is more about marketing than finance.

Mass-Market Retailers Head to Hong Kong - Mass-market retailers are flocking to Hong Kong, one of the world's top luxury shopping cities, driving up rents for retail space in their effort to market themselves to mainland Chinese consumers. Abercrombie & Fitch will pay more than double the previous rent for a store in Hong Kong's Pedder Building, above. Abercrombie & Fitch Co., Gap Inc., Apple Inc., Forever 21 Inc. and American Eagle Outfitters Inc. are the latest retailers to open outlets or plan openings in Hong Kong. In a sign of the times, Abercrombie is moving into a prime spot in the historic Pedder Building in Hong Kong's Central district, replacing the long-time tenant, Shanghai Tang, a Chinese-styled luxury retailer now owned by Cie. Financiere Richemont SA of Switzerland. Abercrombie will pay seven million Hong Kong dollars (US$900,000) per month for a 25,000-square-foot store, more than twice what was paid by Shanghai Tang, according to a report by real-estate firm Cushman & Wakefield. Neither Savills, the real-estate firm that worked on the deal, nor Abercrombie would confirm the figures. In recent years, luxury stores such as Prada, Louis Vuitton and Gucci have been among the big sellers in Hong Kong. But commercial-real-estate insiders say an influx of foreign retailers geared to the mass market is pushing up store rents in the city's most desirable locations. The average annual rent for retail spaces in the Causeway Bay shopping district has risen 34% in the past two years to US$1,849 per square foot, says Michelle Woo, a senior director at Cushman & Wakefield. While retail sales in North America and Europe have been hit hard by the global economic slowdown, sales in Hong Kong have been growing fast. Retail sales in the city rose 20% in the first quarter of 2011, compared with a year earlier, according to the city's Census and Statistics Department. A significant factor is the uptick in the number of mainland Chinese tourists visiting Hong Kong. In the first four months of this year, 6.5 million Chinese tourists came to the city, up 17.5% from last year. Many are drawn by Hong Kong's prices, which can be as much as 40% lower than they are over the border because Hong Kong doesn't tax retail sales. American brands are following in the footsteps of European retailers, according to Nick Bradstreet, head of leasing at Savills. "The Europeans trailblazed first," he says, pointing to the plethora of luxury brands in the city, as well as Zara and H&M, which came to Hong Kong in 2004 and 2007, respectively. "Europeans are more comfortable crossing borders than Americans are. For a German company going to Spain, it's not a big deal. But in the U.S., the domestic market is so big. They haven't always had to go overseas to grow." Real-estate agents say Abercrombie fought off tough competition from several parties to secure the lease. Shanghai Tang, which has been in the Pedder Street location since it was founded in 1994 by David Tang, declined to comment. "We love iconic buildings, which we think we got with the Pedder building," says Eric Cerny, Abercrombie's manager of investor relations. He adds that the company was scouting locations for a new Hong Kong store for three years. The nine-story building was built in 1923 and its neoclassical arches and columns make it stand out in a city dominated by skyscrapers. The building was the headquarters of Hong Kong trading firm Jebsen & Co. from 1926 to 1992. Kevin Lam, a director at real-estate agent DTZ, says some new entrants to Hong Kong may be willing to pay more for a good spot because it will help them advertise their brand to Chinese shoppers. "One of the major elements of their flagship stores is huge signage and signage is part of the marketing tool to advertise their brand awareness," Mr. Lam says. "I know some brands would like to allocate their marketing budget with their rental figures. It makes the rent look more reasonable." Abercrombie is following in the footsteps of American Eagle, which opened an 8,500-square-foot space in the busy Tsim Sha Tsui district of Hong Kong in March. The store is the brand's first in Asia, though more openings are planned. American youth fashion line Forever 21 is slated to open a 50,000-square-foot store, costing HK$11 million per month, in the Causeway Bay district by the beginning of next year, while Gap plans to open its first store in Hong Kong this year. The 20,000-square-foot store will command rent of HK$5 million per month, says Cushman & Wakefield's Ms. Woo, who worked on both deals. The trend isn't confined to clothing. Apple, whose products have previously been available in Hong Kong through licensed resellers, is also moving into Hong Kong. The company announced in February 2010 that it would open 25 stores in China and Hong Kong over a two-year period. One of the new Apple stores will open later this year in a two-story space in the mall at the International Financial Centre, according to people familiar with the matter.

'Politicians' on parade at Cheung Chau - Floats on show send messages expressing people's discontent with ministers' actions - Splashes of colour liven up the procession of children dressed as a king (top) and an opera performer (bottom) while others flying the flag for a kung-fu school were among the characters to adorn floats in yesterday's Piu Sik Parade at the annual Cheung Chau Bun Festival on the island. A heavily made-up boy dressed as the Chinese god of fortune with HK$1,000 banknotes at his feet was perched on a pole above another boy dressed as Chief Executive Donald Tsang Yam-kuen handing out candy. Another boy, made up as Financial Secretary John Tsang Chun-wah with gold, an abacus and tea at his feet, stood above a girl dressed as a wealthy woman. As they rode on floats through the streets of Cheung Chau yesterday they carried a non-too-subtle message to the large crowds on hand to watch the island's annual bun festival parade. The floats were among several taking aim at the government's HK$6,000 handout to everyone, a main theme of the traditionally political parade yesterday. The god of fortune is often used to represent the finance minister and a designer of that float, Leung Kwok-ming, said the message was that Donald Tsang was behind the decision to give the cash handout and John Tsang was doing what he was told. A designer of the other float, Kent Yeung, said they wanted to tell the government to manage its wealth better. "We want them to drink some tea and calm down before making any decisions," he said. "Handing out money is not the best way to manage its wealth. Better management is the only way to sustain wealth." Environment chief Edward Yau Tang-wah was another target because of plans for an incinerator on nearby Shek Kwu Chau. On one float, a boy wearing glasses stood on a rock which had a bag of crabs tied to it, illustrating a Chinese saying for a lack of consultation. Organising committee members said they wanted to complain about not being properly consulted over the incinerator plan. Elsewhere, shops selling souvenirs stamped with the lucky bun pattern were doing brisk business. One trader said he sold 10 per cent of his stock of 100 iPhone cases in the first 10 minutes. At the Grand Plaza Cake Shop, one of the two official stores selling the lucky buns, staff were stamping them outside even though the Food and Environmental Hygiene Department said it would prosecute anyone who did. Owner Kwok Yu-chuen said he had too little space inside, where they made about 70,000 buns yesterday. The department later said it would follow up on the matter.

 China*:  May 13 2011

ABB benefits from green policy - ABB Group is poised to invest $100 million in China this year as it sees abundant opportunities arising from the government's policy to increase energy efficiency in the country's 12th Five-Year Plan (2011-2015), said ABB's top executive. A production facility for wind power equipment in Nantong, Jiangsu province. The Switzerland-based ABB Group plans to invest $100 million in China this year, as it has done in each of the past seven years. "We look at any type of power resources in China to find opportunities that support China's transition to a low-carbon and high-efficiency economy in its 12th Five-Year Plan," said Joe Hogan, chief executive officer of ABB, a Switzerland-based power and automation technology conglomerate. "Thus, the investment in energy efficiency and renewable resources sectors will be our emphasis." According to Hogan, China will be the major generator and consumer of power globally in the next few years, accounting for 40 percent of the global growth in power consumption by 2035. The nation's total power consumption this year is expected to grow by 10 percent from last year to 4,600 terawatt hours. Moreover, "we're happy to see the Chinese government's strong commitment to energy efficiency in its ongoing policy, with the first target for carbon intensity reduction by 2015," said Hogan. The central government said that it aims to cut the country's energy use by 16 percent for each $1,000 of GDP. By 2015, carbon dioxide emissions will be reduced by 17 percent by each $1 of GDP. Hogan said the conglomerate will maintain its annual investment of $100 million in China this year, as it has done in each of the past seven years. The investments will benefit ABB's manufacturing facilities, refining and expanding designs, and localizing new technologies and products. About 85 to 90 percent of ABB's product portfolios were introduced to the Chinese market, Hogan said. As part of the company's investment plan, it will recruit 2,000 new engineers to support research and development and service, and in addition establish a regional energy management hub in China this year. ABB said it has seen a strong start in China this year, its biggest market, as orders in power and automation sector from the country surged 70 percent in the first quarter. In March, ABB reported robust 2010 earnings with revenues of $4.5 billion, representing a 10 percent year-on-year increase. According to the company, its exports market saw a 50 percent growth. Domestic demand for energy efficiency, grid reliability, renewable energy "will drive our business for the rest of the year", Hogan said. China's steady industrial demand and power transmission is another strong contributor to ABB's growth. He said the new energy sectors such as wind power, hydropower, solar power and charging facilities for electric vehicles will be the conglomerates' major growth engines over the next five years.

The rate of increase in China's consumer prices eased slightly in April to 5.3%, though the government was widely expected to continue its campaign of raising interest rates and boosting bank reserve requirements to try to contain inflation.

Virginia is for Lovers, China is for Matchmaking - They say Virginia is for Lovers. Now the state’s top gentleman caller has come to China with courtship in mind. Virginia Gov. Bob McDonnell, visiting China this week, tells China Real Time he is hosting Chinese manufacturers, shippers and other business people at dinners, lunches and wine tastings in hopes of encouraging a brand-name Chinese company to think of “Old Dominion” as its U.S. home. He didn’t sound hopeful his brief visit would land an investor for Virginia, noting that relationships take time. While presidential trade missions to China have an established past, local American politicians are quickly playing catch up in the courting game. More than half of U.S. states already have business development offices in China. Mr. McDonnell opened Virginia’s on Wednesday in Shanghai. The top goal of the visit and the new office, explained an aide to the governor, is to lure a Chinese company with cachet. “We’re looking for that anchor Chinese company that will bring other Chinese companies with it,” said Paul Grossman, director of the state’s international department. China is Virginia’s No. 2 export market after Canada – largely forestry and agriculture products – but the world’s most populous nation isn’t on the top 10 list of the state’s major foreign investors. China Telecom Corp. has an office in the state and Virginia also boasts a Chinese lawn products company as well as a paper group. “We have so much missionary work to do,” the governor said. It’s been easier for Virginia to draw in investors from places like Japan — camera maker Canon Inc. has a manufacturing center north of Norfolk – in part because of politics. The governor, a Republican who took office in January 2010, downplayed the political risks of welcoming investment from China but said the strategy isn’t as universally popular among constituents as winning business from some other nations. “There’s no question that the established relationships in Japan and Korea and the fact that both are representative democracies makes all the dealings easier,” said Mr. McDonnell. “But 60 years ago we were at war with Japan. Now they are one of our best allies. I think over the course of history things change. And often trade and cultural exchange is the avenue to improve relationships.” Japanese camera maker Canon has a major manufacturing center in Norfolk. Suitors make promises, and Mr. McDonnell is no exception, tempting potential Chinese partners with the deepwater port at Norfolk. Manufacturers will like the port, he said, because it is the only one on the east coast already able to take the bigger ships that will be able to pass the Panama Canal when it is enlarged in 2014. “We’re really selling the port,” said the governor. “We’re going to have a great opportunity to do more Norfolk-to-Shanghai trade.” Mr. McDonnell said he is prepared for the possibility his first visit to China as governor won’t seal a deal. “It’s going to be a long while before there’s complete, open, fair trade and the level of trust that people would like to see between the two economic superpowers of the world,” said the governor. “Like any new relationship it takes time.”

Diamond Princess, one of the world's 15 largest cruise ship, visited Qingdao Port on May 8. Nearly all of the 3,000 passengers on board landed on Qingdao and visited Qingdao Pier, the city's famous tourism spot, and left for South Korea at 6 pm. This is the fourth time Diamond Princess has paid a visit to Qingdao Port and it is the last stop of this year's China tour. The 1,337-room ship is 290.4 meters long, 48.2 meters wide and 62.5 meters high with a gross tonnage of 116 kilotons and a capacity of 3,000 including passengers and the crew. Nine hawsers are needed to anchor the large cruise ship. 

Vice-Premier says US views on China are 'simple' - Dai Bingguo and Wang Qishan with Hillary Rodham Clinton in Washington. Vice-Premier Wang Qishan has described US views of China as "simple" and said a Middle East-style democracy uprising would not erupt against Beijing. Wang, in a rare foreign television interview during high-level talks in Washington, said that most US media did not cover China much and showed a bias when they did. "It is not easy to really know China because China is an ancient civilisation and we are of the Oriental culture," Wang told The Charlie Rose Show on public television, according to a transcript. "The United States is the world's number one superpower, and the American people, they're very simple people," he said. "If they're asked to choose to understand a foreign country, their first choice would be the European countries, and the South American countries may come second." Rose interviewed Wang and US Treasury Secretary Timothy Geithner after the first day of the US-China Strategic and Economic Dialogue. Wang said China's Foreign Ministry had often contacted the US State Department to explain its position on protest movements. "I don't think it is possible for events like [the] Arab Spring to take place in China." Jin Canrong , vice-director of the School of International Studies at Beijing-based Renmin University, said he was quite surprised by Wang's remarks. "Wang knows diplomacy well. Such remarks might lead to a bad impact," he said. "But on the other hand, it is a reflection that Chinese officials are more confident in expressing themselves. They probably would not make such a comment several years ago." There has been a frustration in China about being misunderstood by overseas countries and their media, which Jin said sometimes portray a "generalised" and "simplified" picture of the country. "By stressing China is a big place with long history, Wang was trying to deliver a message to an overseas audience that China is a complicated country that should not be perceived by a fixed set of ideologies," he said. "[He was trying to convey] Beijing believes it has endured such a misconception for so long, and it is time to articulate what it thinks." Ni Lexiong , a professor in the politics department of Shanghai University of Political Science and Law, said China's phenomenal economic growth emboldened officials. "As the US is looking at China to [facilitate] its economic recovery, mainland officials feel more bold to speak out," he said. Li Haidong, assistant professor with the Institute of International Relations at the China Foreign Affairs University, said Wang's remarks showed that bilateral relations between Beijing and Washington had deepened. "You wouldn't tell each other what you truly feel and want unless a certain level of mutual trust has been established," he said. Geithner, in the joint interview with Wang on The Charlie Rose Show, said: "We have to recognise we come from different political traditions. "As you heard the vice-president and the secretary of state say today, and you've heard the president say in the past, we convey our concerns on these issues as you'd expect us to do," he said. "But our part of these discussions are about the broader economic and financial challenges facing the global economy." Geithner, who has lived throughout Asia and speaks Putonghua, politely disagreed with Wang's characterisation of Americans as simple. "We took on this huge role in the world well ahead of the understanding of Americans about what's happening in the world, and that's changing now," Geithner said. "You're starting to see a much greater investment by Americans in understanding, you know, not just China but all the countries that are so important to our interests." President Barack Obama and top members of his administration raised pointed concerns on Monday about Beijing's recent security crackdown on democracy advocates during the first day of the talks. The president "underscored his support for the universal human rights of freedom of expression and worship and of access to information and political participation", the White House said in a statement after Obama's meeting with Wang and State Councillor Dai Bingguo. Obama's comments came after US Vice-President Joe Biden and Secretary of State Hillary Rodham Clinton had argued earlier on Monday that China's security crackdown, the largest in years, threatened the country's long-term stability. Dozens of writers, lawyers and other perceived critics have been rounded up in recent weeks amid the wave of pro-democracy uprisings in the Middle East. Foreign Ministry spokeswoman Jiang Yu said yesterday that Beijing was willing to discuss human rights issues with Washington only on the basis of mutual respect. "China and the US have different views on human rights because of developmental differences of two nations," she said. "We believe we can enhance mutual trust with each other via more communication and dialogues." Geithner and Wang are leading their delegations for the economic part of the two-day talks, while Dai and Clinton are meeting on the political side.

US Treasury Secretary Tim Geithner (4th L) and Chinese Vice-Premier Wang Qishan shake hands after participating in a signing ceremony for a "US-China Comprehensive Framework for Promoting Strong, Sustainable and Balanced Growth and Economic Cooperation", during the US-China Strategic and Economic Dialogue at the Treasury Department in Washington May 10, 2011.

CHINESE Vice Premier Wang Qishan and United States Treasury Secretary Timothy Geithner yesterday signed a broad pact setting out a framework for future cooperation on trade and investment. A Treasury officials said the document covered four areas that the two countries regard as priorities for cooperation, on macroeconomic issues, financial services, trade and investment and international cooperation. Wang and Geithner signed the document on the final day of the Strategic and Economic Dialogue talks in Washington. The annual two-day round of talks brings together leaders on economics, foreign policy and security. US President Barack Obama met the Chinese delegation after Monday's deliberations. He encouraged China to implement policies to support "balanced global growth as well as a more balanced bilateral economic relationship." Geithner praised China's efforts, which include a decision last June to resume allowing the yuan to rise in value against the dollar after freezing the currency's value for two years during the height of the financial crisis. The yuan has risen by about 5 percent against the dollar since last summer. Geithner still urged China to allow its currency to appreciate at a faster rate. China's Commerce Minister Chen Deming, however, blamed US policies for the ballooning trade gap. He said at a news conference that China's currency appreciation was being carried out in a "very healthy manner," and the US needed to change its own policies on high-tech sales and investment as a way to spur American manufacturing. Chen took aim at the US screening of Chinese foreign investment proposals, contending it was neither fair nor transparent. Most recently, the Committee on Foreign Investment in the US rejected a takeover by private Chinese technology giant Huawei of a small computer company, 3Leaf, on national security grounds. "We hope the United States can treat Chinese investment, including by state-owned enterprises, in a fair manner," he said. 

A high-speed train is pictured leaving Shanghai for Nanjing yesterday. A month long trial of the high-speed route between Shanghai and Beijing begins today with 24 pairs of bullet trains running between the two cities. The 215 billion yuan (US$32.5 billion) rail line is due to begin regular operations on June 9. It will cut the current travel time by half to less than five hours, running at speeds of around 300 kph. China aims to have 3,000 kilometers of high-speed rail lines in place by the year's end.

Apple is the world's top brand, according to the latest research, but 12 mainland companies have significantly increased their name recognition globally, with China Mobile (SEHK: 0941, announcements, news) becoming the first mainland company to crack the top 10 at No 9. The dozen mainland firms, collectively dubbed "Brand China" by consulting firm Millward Brown Optimor, which conducted the survey, accounted for 11 per cent, or an estimated US$259 billion, of the total value of the world's top 100 brands. Apple led this year's list, ending the four-year reign of Google at No 1. The 12 mainland brands in the new study are up from seven brands last year and only two in 2006, when the BrandZ rankings were first released. "The expanding presence of Chinese brands in the BrandZ Top 100 reflects the transformation of China from a centre for low-cost production to a nation capable of product innovation and marketing originality," Millward Brown Optimor said. The brand consultancy, a unit of London-based advertising and marketing firm WPP, released its sixth annual "BrandZ Top 100" study on Sunday. It said the combined value of all the ranked brands grew 17 per cent to US$2.4 trillion, from US$2.04 trillion last year. It valued the brands by estimating their future earnings, then discounting them using a present-value calculation. The five mainland brands that joined the top 100 this year were: 33rd-ranked China Life (SEHK: 2628) Insurance, Agricultural Bank of China at No 43, mainland internet industry leader Tencent Holdings (SEHK: 0700)' QQ social network at No 52, Ping An Insurance (SEHK: 2318) at No 83 and fixed-line network giant China Telecom (SEHK: 0728) at No 91. In addition to China Mobile, the mainland brands that have continued in the top-100 included Industrial and Commercial Bank of China (SEHK: 1398) at No 11, the world's largest by market capitalisation; China Construction Bank (SEHK: 0939) at No 24, the country's second-biggest; Baidu, the leading Chinese-language search provider and Asia's fastest-growing brand, at No 29, according to the study; Bank of China at No 37; PetroChina (SEHK: 0857) at No 79, the country's leading oil producer; and China Merchants Bank (SEHK: 3968) at No 97, based in Shenzhen.

An unspecified number of artefacts owned by a private Hong Kong collection were stolen during an exhibition in the Forbidden City. In its official microblog, the Palace Museum of the Forbidden City confirmed that the missing artefacts were part of the collection of Hong Kong's Liangyi Museum, a private collection, which was co-organising the exhibition. The Palace Museum said the 20th century artefacts were stolen on Sunday and police were investigating, China Central Television reported. A Beijing Public Security Bureau spokesman confirmed yesterday that it had received a report on Monday that some modern handicrafts in the exhibition were missing and they were investigating. The police said the lost artefacts were owned by a Hong Kong private museum, but would not provide more details. It is not known how many artefacts went missing, nor how they were stolen. Staff members at the Palace Museum were not available for comment yesterday, and the phone at the Liangyi Museum went unanswered. The exhibition at the Palace Museum, Contrast and harmony: selected vanity cases and Chinese furniture of Liangyi Museum, has been open to visitors to the Forbidden City from April 29, and was scheduled to end on June 27. The exhibition featured 130 artefacts including 19 pieces or sets of century-old Chinese-style furniture made of yellow rosewood or padauk, as well as 111 Western powder cases and handbags. Rosewood furniture has been increasingly in demand from some mainlanders in recent years. A set of rosewood sofa and chairs can cost around 150,000 yuan (HK$179,000) and 2 million yuan, depending on the material used and the level of craftsmanship, the China Daily said early this year. The market peaked around 2007, but prices nosedived in the aftermath of the 2008 financial crisis. The report said prices of certain types of rosewood had since resurged to their 2007 levels, but analysts said this time it was not a speculator's market.

Hong Kong*:  May 12 2011

Hong Kong households and businesses pay as little as one tenth the telecom charges in six other cities, a tariff benchmarking study shows. The others in the Office of the Telecommunications Authority study are Shanghai, Singapore, Tokyo, Copenhagen, London and New York. Hong Kong has maintained its position as the least expensive for fixed and mobile voice services, leased lines and pay-TV services since 2003, according to three similar studies over the years, including the latest one by Teligen Division of Strategy Analytics in September. The average monthly charge of the three lowest-priced mobile voice providers for a residential user in Hong Kong is HK$60, or 10-48 percent of that paid by people in the other six cities. The variation of the overall costs between the lowest priced and the most expensive city is significant, with Tokyo 2.8 to 6.3 times more expensive than Hong Kong. For a retired, low-income couple who only require a fixed-line telephone, Hong Kong users pay HK$54 a month while in Tokyo it is five times more at the equivalent of HK$336. The SAR benefits from competition. There are five mobile operators and 14 firms licensed to provide fixed carrier services in the territory. But complaints to OFTA over mobile services saw a 72-percent leap in 2010, to 3,023 cases from 1,754 during the previous year. The study also finds that Hong Kong businesses generally pay the lowest telecom charges - 12-32 percent of those in the other cities. Telecom costs of trading companies in Shanghai and Tokyo are 13 and eight times more expensive, respectively, than their Hong Kong counterparts, mainly because of high international call charges. The only category in the research that has the SAR in the higher half of the price range is broadband services for business and mobiles. Besides scoring high marks for low charges, Hong Kong - with more than 180 licensed internet service providers - ranked second in a global broadband leadership table compiled by the University of Oxford last year. That study compares a city's throughput, latency, connections for specific internet applications and broadband penetration. A spokesman for OFTA said that higher broadband charges "have been offset by the low fixed-voice tariff and competitive charges of the leased lines, contributing to an overall low-cost telecom environment for the business sector in Hong Kong."

Blessing-seekers line up for Cheung Chau buns stamped with the "peace" character. Stocks will probably not suffice for today's festival. What's a bun festival without buns? Some attending today's Cheung Chau Bun Festival might find out. The annual festival's two official bakeries cut back dramatically on their production of buns stamped with peace messages after the Food and Environmental Hygiene Department warned against the shops' longtime practice of stamping the buns outside their premises. One of the two bun-makers reacted to the government "reminder" by closing the shop from Saturday until today. The other cut its bun production by 30 per cent. "There will be a shortage of buns for sure, which is such a shame because the buns symbolise blessing and peace - a centrepiece for the festival," Cheung Chau Bun Festival Committee chairman Yung Chi-ming said. "What the government did was unnecessary and disappointing." For more than 20 years, the bakers have made special white buns with different fillings and a big "peace" stamp in Chinese characters on each one. Sold for just four days each year, the buns carried religious and cultural significance, Yung said. "Of course I'm worried about the lack of buns," Yung said. "It's how people take part in the festival." The Kwok Kam Kee Cake Shop would make buns to fill advance orders, but would not sell buns to the public today, an employee said. The other bakery, Grand Plaza Cake Shop, said it made about 108,000 buns for last year's festival but because of the government's warning and lack of space, was making 32,400 fewer this year. A spokesman for the Food and Environmental Hygiene Department said last week it had issued "reminders" to the bun-makers after receiving eight complaints in three weeks. The spokesman said the department's officers had not seen either bun-maker violating the law. Kwok Yu-chuen of the Grand Plaza Cake Shop in Praya Road said: "We received the warning on May 5 - when the government told us to make sure all production procedures were indoors. We only had a few days, and a lot of buns to make." Kwok said the government warning had caused problems partly because it came so late. "It's hard because we have so little space. We usually stamp the buns outside here - which we've been doing for so many years," Kwok said, pointing to a covered area just outside the front of the shop. Yung said: "What [the government] did was not good - not good for business, not good for the whole atmosphere of the festival." The buns have traditionally been attached to towers for the festival highlight, the bun-scrambling competition, but have been replaced by plastic ones for hygiene reasons. The festival committee will be handing out free buns for blessing-seekers today at 9am - buns made before the department's hygiene warning. The day-long festival will start with a unicorn and kung fu performance at 10.30am followed by the festival parade at 2pm. Parade participants will spoof current issues, including this year's HK$6,000 government handout and the plan to build a waste incinerator on Shek Kwu Chau. The bun-scrambling competition will take place at midnight.

Anita Mui's mother, Tam Mei-kam, centre, and brother Peter Mui Kai-ming leave the Court of Final Appeal after Tam lost her legal fight over the singer's will. The mother of late singer Anita Mui Yim-fong lost a protracted legal battle at the Court of Final Appeal yesterday involving her daughter's fortune. Tam Mei-kam, 87, who has been challenging the validity of her daughter's will, lodged her attempt to overturn previous rulings against her at the top court, but the court dismissed her application after hearing her counsel's arguments. It has reserved the reasons for its decisions, and its order on who should foot the legal costs. Samson Hung Kin-man, Tam's barrister, said yesterday at the top court that Mui had lacked knowledge of how trustees worked. It was under such circumstances that HSBC (SEHK: 0005, announcements, news) International Trustee came to handle her estate. Bu the court disagreed. Mui died in 2003 of cervical cancer. Before her death, she made a will and set up a trust, the Karen Trust. The will - witnessed by Doris Lau, a director of HSBC International Trustee, Mui's godmother, Sheila Ho, and a doctor - said Mui's assets would go to the Karen Trust. The trust's beneficiaries included Tam and four of Mui's nieces and nephews. The balance after Tam's death would go to the New Horizon Buddhist Association. The Karen Trust provided Tam with a HK$70,000 monthly allowance. HSBC International Trustee was appointed trustee of the will and the Karen Trust. Mui also suggested several properties be left to her fashion designer, Eddie Lau Pui-kai. The Court of First Instance and Court of Appeal had ruled against Tam, who, at the time of a previous judgment in March, had spent almost HK$6 million trying to overturn the validity of her daughter's will. The earlier judgment also revealed that Tam received a monthly allowance of HK$120,000 from the trust. Tam had still not paid HK$2 million in legal fees. Tam previously argued at the Court of Appeal that the fact her daughter had praised her for saving up to HK$3 million contradicted criticism that Tam had managed her finances poorly. Mui was diagnosed with cervical cancer in 2001. By July 2003, the disease had become incurable, and her doctor advised her to make a will. In November 2003, she fell ill while working on a commercial in Japan. She died in December 2003 at the Hong Kong Sanatorium and Hospital from liver complications. Yesterday's hearing was before Mr Justice Kemal Bokhary, Mr Justice Patrick Chan Siu-oi, Mr Justice Roberto Ribeiro, Mr Justice Henry Litton and Lord Justice Millett.

Galaxy's Starworld casino in Macau. Companies with a mainland focus prefer issuing yuan bonds. Galaxy Entertainment (SEHK: 0027) yesterday vowed to stop using rating agencies after Moody's withdrew rankings issued to the Macau-based gaming operator, the latest sign agencies are struggling to grab business from the growing yuan debt market. Moody's said the withdrawal of its rating of Galaxy was related to "its own business reasons", a statement that attracted a denial from Galaxy that the rating agency was the first to cut off the relationship. In a statement yesterday, Galaxy said it had not "renewed" its arrangements with Moody's and Standard & Poor's after the early redemption of its 2010 and 2012 US dollar-denominated bonds. The gaming giant had no intention of raising capital right now, Galaxy Entertainment's vice-president for investor relations, Peter Caveny, said. "We don't have any outstanding US dollar bonds," he said. "There's no shareholder value to pay for that rating." The company also had sufficient capital to keep its current projects going, according to Caveny. Galaxy in December raised 1.38 billion yuan (HK$1.65 billion) in an unrated yuan-denominated bond issue and in June also closed a club loan of HK$9 billion. An increasing number of Hong Kong-listed companies with mainland businesses have successfully sold their bonds to international investors in the offshore yuan bond market without a rating as a result of the strong appetite for exposure to the currency. Hopewell Highway Infrastructure, a subsidiary of Hopewell Holdings (SEHK: 0054), said yesterday it would issue 600 million yuan bonds due in 2014 to institutional investors. Bond issuers such as Galaxy with a strong focus on the mainland have found the yuan bond market more favourable than the US dollar market because the interest rates it pays to bondholders are likely to be lower. The size of the yuan debt market was now US$3.83 billion, according to data from Dealogic, and the majority of the deals are not rated. To tap investor interest in yuan, borrowers such as highly geared mainland developers have also used so-called synthetic bonds, which pay interest to investors in US dollars but the payment is linked to the yuan exchange rate, effectively giving bondholders exposure to the currency. Offshore investment-grade yuan bonds have persistently low yields, often just slightly higher than deposit rates, driving yield-hungry investors to riskier names. However, Kristine Li, Singapore-based chief financial credit strategist for Asia excluding Australia at the Royal Bank of Scotland, warned investors about overlooking credit risks in such offerings. "It's not normal to go by without a rating,' Li said. "A rating helps investors to differentiate borrowers and to price." Mainland-based borrowers often don't have track records or tend to be highly geared and are likely to get a lower rating from the agencies and therefore would have to pay investors high level of interests. Established companies such as Galaxy and Hopewell would choose to circumvent the rating agencies because they were able to raise yuan debt in the offshore market accessible to international investors without paying for a rating. Standard & Poor's recently launched a new rating system to target yuan bond borrowers.

18 arrested over milk-powder bribery ring - Supermarket and store workers paid to help mainland traders stock up, ICAC alleges - Part of the graft-buster's haul of milk powder, which is in short supply locally. The ICAC has arrested 18 people in suspected bribery scams involving supermarket workers over the sale of milk powder to traders who resell the products on the mainland. In the latest operation, codenamed Sunshine, officers from the Independent Commission Against Corruption arrested 15 people, including six workers from four branches of a supermarket chain in Kowloon and the New Territories. This followed another operation last month in which the store manager of a supermarket chain and two goods traders were arrested. People familiar with the investigation said the arrests involved workers from ParknShop, Market Place by Jasons and Watsons. Wellcome supermarket staff had been invited to assist the ICAC investigation. The scams allegedly involved bribing workers from supermarkets and a health-and-beauty retail chain so traders selling baby formula on the mainland would know about their involvement and make purchases in large quantities. "During the operation, ICAC officers seized over 1,000 cans of milk powder from the parallel goods traders," an ICAC spokesman said in a statement last night. The city began to experience a shortage of milk formula at the start of the year as local mothers competed with mainland women and traders who had been flocking to Hong Kong to buy the products Many mainlanders have lost confidence in milk powder over the melamine scandal and the poor safety record of mainland food products. The latest operation began last Friday. In addition to six supermarket workers, three serving and two former staff members at a heath-and-beauty chain store, and four goods traders were also arrested. The supermarket and chain-store employees were alleged to have accepted bribes from the goods traders as a reward for telling them about the availability of milk powder, and helping them in buying the milk powder in bulk. The alleged reward for the workers was HK$20 to HK$30 per milk powder can. Many of the seized products were from Mead Johnson, a popular choice among Hong Kong and mainland parents. Because of the shortage of supply, many supermarket chains have issued internal guidelines which allow each customer to buy no more than three cans of milk formula at a time. In the operation last month, the supermarket store manager allegedly accepted bribes from the traders to sell them the milk powder in bulk. A spokesman for ParknShop and Watsons declined to comment on the operation yesterday. Wellcome and Market Place by Jasons said they had not been contacted by the ICAC. The graft-buster said that the supermarkets and the health retail chain concerned gave their full co-operation during the investigation. Those arrested have been released on bail. "Members of the public are urged to lodge reports with the ICAC when they come across suspected corruption in the sale of milk powder. All reports made to the ICAC will be kept in the strictest confidence," an ICAC spokesman said. The ICAC's 24-hour hotline is 2526 6366.

Pansy Ho Chiu-king's non-compete agreement with MGM China Holdings will let her keep her directorship and minority stake in the parent of rival Macau casino operator SJM Holdings, according to a stock exchange filing. Ho, daughter of gaming magnate Stanley Ho Hung-sun, is a director of Sociedade de Turismo e Diversoes de Macau (STDM), which owns 55.7 per cent of SJM. Following a March settlement that ended a bitter family feud over control of her father's casino empire, Pansy Ho holds an indirect 3.77 per cent stake in STDM, MGM China said yesterday in a stock exchange filing. Ho is also the co-chairwoman and an executive director of MGM China, her Macau joint venture with Las Vegas casino operator MGM Resorts International. She is selling between 20 per cent and 23 per cent of her MGM China shares in a local stock market listing that could see her reap up to US$1.5 billion in listing proceeds, a source familiar with the deal said, while retaining a 26 per cent to 29 per cent stake in the firm. MGM China, which will be 51 per cent controlled by MGM Resorts following the planned listing, said Ho would exercise discretion when it came to her competing interests. "As Pansy Ho is a director and substantial shareholder of the company, she does not intend to participate in board decisions of STDM which concern the exercise of rights attaching to its indirect majority shareholding in SJM," MGM China's draft listing document said. MGM China said the family dispute earlier this year over ownership of Stanley Ho's controlling stake in STDM, almost all of which was ultimately transferred to other family members, was not an issue. "The company is of the view that neither the dispute nor the settlement of the same has had or will have a material impact on its management or business," MGM China said. Under the terms of a complicated non-competition agreement signed between Ho and MGM Resorts, Ho and her associates can own shares in STDM as long as they do not directly or indirectly control the firm, and so long as STDM's Macau casino investments are confined to publicly listed SJM. Any breach of the non-compete agreement by Ho that is triggered by the activities of STDM, SJM or Shun Tak Holdings (SEHK: 0242, announcements, news) - where she serves as managing director and owns an indirect 11 per cent stake - would give her 30 days to resolve the situation. The agreement gives Ho three options: undo such a breach of the agreement, sell down her stake in MGM China to below 20 per cent, or sell down her stake in Shun Tak, STDM or SJM to a level that "no longer causes a breach". MGM China started pre-marketing its public offering yesterday and aims to raise US$1 billion to US$1.5 billion, the source familiar with the transaction said yesterday. Pricing of the deal is currently targeted to be set on May 27 and trading to begin on June 3. Bank of America Merrill Lynch, JPMorgan and Morgan Stanley are the joint global co-ordinators of the offering.

Orient Overseas Container Line will expand its fleet with four more 13,000 teu (20-foot equivalent unit) container ships that will be deployed on routes between Asia and Europe. Parent company Orient Overseas (International) (SEHK: 0316) Ltd has agreed to splash out US$544 million on the ships from South Korean shipbuilder Samsung Heavy Industries. The latest deal, confirmed yesterday, came nearly seven weeks after OOIL said it ordered six similar sized vessels for US$816 million from the same shipbuilder. About 70 per cent of the cost of the vessels will be financed by bank loans while the remainder will come from the company's internal resources. The 10 ships will be the biggest in the OOCL fleet when they are delivered in 2013 and 2014. The new order means OOCL will be able to operate all 10 vessels on a single service. This will make capacity planning and scheduling easier. With just the six ships in the initial order, OOCL would not have had sufficient owned capacity to operate a weekly schedule on a 70-day round trip calling at ports in Asia and Europe using similar sized tonnage. As a result it would have had to charter vessels of about 13,000 teu or its own smaller tonnage of about 8,000 to 9,000 teu, which could have caused a capacity crunch on some legs of the voyage. The Asia-Europe route is OOCL's third-largest trade lane in terms of revenue and container volumes behind transpacific and intra-Asia services. The company has been affected by increased competition from rival box lines and sluggish economic conditions in Europe. This resulted in marginal revenue growth in the first quarter of this year despite an 8.3 per cent increase in container volumes to 196,174 teu. While the container shipping market remains competitive, analysts have forecast a potential shortage of shipping capacity from next year. The latest order for four ships takes OOCL's total vessel order backlog to 17 ships, including seven 8,888 teu boxships on order at Hudong-Zhonghua Shipbuilding (Group). The shipping company had eight vessels on order at the Shanghai-based shipbuilder at a total cost of US$724 million, but the first in the series, OOCL Beijing, was delivered at the end of last month. The new ship has been deployed on a service between Asia and the Middle East. The company has about 85 vessels in its combined fleet of owned and chartered ships.

Dubai aims to be the busiest global passenger airport in the world by 2015, leapfrogging the top three in London, Paris and Hong Kong. Paul Griffiths, a former senior executive of Dragonair and now chief executive of fast-growing Dubai Airports, warned yesterday that Hong Kong faces losing its leading trade and aviation role if it failed to invest in a third runway at Chek Lap Kok airport. Griffiths, who was also instrumental in launching direct flights between Hong Kong and London for Virgin Atlantic Airways, said if growth was constrained then Hong Kong could lose traffic to other hubs - regional cities including Singapore and Seoul and global aviation centres such as Dubai. He said a failure by Hong Kong to invest in additional infrastructure, including a third runway, to meet projected demand would likely lead to a shift by airlines and passengers away from Hong Kong. This in turn would hurt the city economically. Carriers "would go somewhere else and go somewhere else permanently", he said. Cathay Pacific (SEHK: 0293) had developed into a good, home-based carrier with an enviable brand, but if growth was constrained "it can't be good for the company or the region". "People will vote with their feet and go elsewhere. I think for Hong Kong there is a lot of danger of that happening," Griffiths said. Several other senior figures in the aviation world have backed building a third runway. They include Martin Broughton, the chairman of British Airways, and Giovanni Bisignani, director general and chief executive of the International Airline Transport Association. Both warned Hong Kong could lose its economic competitiveness and international connectivity without a third runway. Pointing to the growth of Dubai airport, Griffiths said: "Over the next decade, passenger traffic will climb 7.2 per cent annually to 98.5 million, while cargo volumes will increase at an annual average of 6.7 per cent to 4.1 million tonnes. "This year we will handle 50 million passengers. We will be overtaking Hong Kong for the No 3 spot in a year or two." He said Dubai would go on to beat London and Paris to become the busiest international passenger airport by 2015. To cope with the forecast growth, Dubai will expand the existing airport to 90 million passengers by 2018. It will build the world's largest airport - Dubai World Central - 35 kilometres from the existing airport over the next 20 years. Explaining the reasons for such expansion, Griffiths said: "It's the alignment of national ambition, coupled with liberal government policies and a lack of intervention in the commercial operations of the companies in the sector that has created the environment for tremendous growth." He said there were similarities between Dubai and Hong Kong: both were major trading centres and while Dubai had India as its biggest market, Hong Kong had the mainland. Griffiths said he understood in-depth discussions surrounding the proposed third runway at Hong Kong were about to begin in earnest. He urged the balance of benefit and impact be carefully considered when making a decision.

Hong Kong Exchanges and Clearing (SEHK: 0388) has hired electronic trading system operator Chi-X Japan's representative director Joseph Meyer as its chief administrative officer. This move has led brokers to speculate the local bourse may consider launch its own version of the so-called "dark pool". Dark pools, which are popular in the United States and Europe, allows investors to trade large blocks of stocks via an electronic trading platform without disclosing their identities, price or volume. Kenny Lee Yiu-sun, chief executive of First China Securities, believes the HKEx may want to follow Singapore Exchange, which in November teamed up with a dark-pool operator, Chi-X Global, to launch the first exchange-backed dark pool, Chi-East, to trade Singapore, Hong Kong, Japanese and Australian shares. "The new appointment may reflect the fact that HKEx wants to consider stepping into dark pool operations,'' he said. At Chi-X Japan, Meyer was responsible for the launch of an alternative trading system for trading listed equity securities in Japan. Traditional exchanges worldwide have been building faster networks in response to competition from alternative platforms such as dark pools and other electronic channels which are eroding their turnover. However, local laws require that any dark pool in Hong Kong must be a member of the exchange, so competition pressure is less severe here. Meyer, who has 30 years of experience in the financial industry, is expected to start working at the HKEx in late June. HKEx chief executive Charles Li Xiaojia said Meyer would oversee several major projects at the exchange including introducing the clearing of derivatives products traded in Hong Kong's over-the-counter market, a move which is aimed at reducing market risk. Meyer will also be responsible for upgrading the exchange's IT system and to complete the next generation data centre.

 China*:  May 12 2011

U.S., Chinese Firms Sign Solar-Power Pact - First Solar will assist China Power to find investment opportunities in the U.S. and elsewhere. Above, a First Solar solar photovoltaic array at Intel's campus in Folsom, California. First Solar Inc., a leading U.S. solar-panel maker, and China Power International New Energy Holding Ltd., a unit of China Power New Energy Development Co., said Tuesday they will collaborate on solar-energy projects in China, the U.S. and other markets. First Solar is trying to gain access to China's solar sector, as it and other producers are facing uncertainty over an expected fall-off in business in Europe, the world's leading solar market. "[China Power International] has a tremendous advantage and strength in operating in China and we have a tremendous advantage and strength in technology but also in building utility systems," said Kevin Berkemeyer, First Solar's China representative. "So we really want to bring those two together." Under the agreement, the companies initially will explore opportunities within China, and First Solar will assist China Power to find investment opportunities in the U.S. and elsewhere, leveraging the Chinese company's 2 gigawatts of projects planned for the domestic market and First Solar's expertise and its 2.4-gigawatt business pipeline in North America. "We are very pleased to build an extensive and in-depth relationship with First Solar, a global leader in solar photovoltaic technology," said Li Xiaolin, China Power International chairwoman. "This cooperation leverages our advantages in the domestic solar-power industry, and helps First Solar further expand its business presence in China." Uncertainty over the future of European governments' feed-in tariff programs are among the challenges facing First Solar and other firms selling to Europe. The continent accounted for more than 80% of solar-panel demand last year. "We're interested in diversification," TK Kallenbach, president of First Solar's Components Business Group said at the briefing, "but we're also interested in working with countries to help them develop more sustainable long-term policies." He described a series of "boom and bust" cycles in Europe in recent years, where unsustainable feed-in tariffs eventually hampered solar-industry growth. First Solar warned earlier this week that potential cuts in European government solar subsidies could bring lower demand and prices for solar products. It reported first-quarter earnings fell 33% from a year earlier, citing lower solar-panel sale prices, higher costs, and a slowdown in European demand. The company said prices for its panels fell 14% from a year earlier. In January, First Solar signed a memorandum of understanding with China Guangdong Nuclear Solar Energy Development Co. to build a solar plant in northern China's Inner Mongolia. First Solar executives said Tuesday that project negotiations continue, but they declined to provide a specific timeline on when construction would begin. Solar-power firms are increasingly looking to China as a potential growth market. The Chinese government has reiterated in recent months its wish to cut its reliance on imported fossil fuels—which the government views as a threat to national security—and to reduce pollution as well. In its 12th five-year plan released in March, the government said it planned to raise its renewable-energy target to 15% by 2020. In its previous five-year plan, the government fell short of reaching a renewable target of 10%. Nonfossil fuels currently account for 8% of the country's total energy use. Global demand for solar panels more than doubled last year to about 17 gigawatts, according to analysts' estimates, and is likely to grow 10%-12% a year to 21 gigawatts in 2012. Recent budget belt-tightening by European governments has cooled demand in Europe. To cope with lower demand from Europe, Chinese solar manufacturers such as Suntech Power Holdings Co. Inc., Trina Solar and Yingli Green Energy Holding Co. are also having to adjust and focus on the home market.

Obama meets with co-chairs of China-U.S. dialogue - U.S. President Barack Obama on Monday met with China's Vice Premier Wang Qishan and State Councilor Dai Bingguo, who were attending the China-U.S. S&EDs.

Chinese Vice Premier Wang Qishan and US Vice President Joe Biden shake hands during the third annual US-China Strategic and Economic Dialogue (S&ED) at the Department of the Interior in Washington May 9, 2011. China and the United States have far more shared interests than differences, and nothing can hold back the momentum of cooperation, Vice-Premier Wang Qishan said on Monday. He made the remark at the opening of the third round of the China-US Strategic & Economic Dialogue in the US capital. The Chinese team is led by Wang and State Councilor Dai Bingguo. US Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton lead the US team. The focus will be on trade, investment and finance during the two-day talks, as well as foreign policy. Both sides hope to build on the progress made during President Hu Jintao's state visit to Washington in January. That visit helped smooth relations that had been strained last year over issues such as US arms sales to Taiwan. "With vision and foresight, the two presidents opened a new page in China-US relations," Wang said. Leaders from both sides sounded upbeat on the talks, emphasizing trust and common ground while trying to narrow differences. Geithner said that sound China-US relations will benefit not only the two countries, but also the world economy. "Our ability to work together is important to the overall health and stability of the global economy. "Thanks in no small part to the actions of the US and China, we have put out the worst of the financial fires and the world economy is growing again," Geithner said. Clinton said the annual talks aim to build a stronger relationship, "to weather through disagreements when they arise, and narrow areas where our interests diverge". But she noted "success depends on translating good work in talks into action". "We need to better understand each other, build trust to work to avoid misunderstanding and miscalculation." She did not refrain from mentioning obstacles in relations, as "some in the US see China's growth as a threat, while some in China worry America seeks to constrain China". "A thriving US is good for China, and a thriving China is good for the US," she said. US Vice-President Joe Biden said the two sides "have to be honest with each other and find common ground, including on sensitive issues, to avoid miscalculation". He welcomed Chinese investment in the US and the more than 50,000 jobs it created. Both Biden and Clinton acknowledged that the two countries have differences over human rights. Dai made an evocative speech highlighting that cooperation between the two countries will benefit future generations. "I am standing here addressing you as a 70-year-old man, an age when I should enjoy the company of my children and grandchildren ..."I am doing this (attending the meeting) to implement the consensus of our presidents for the achievement of one lofty goal, to make our two countries and people forever good friends and good partners, and to enable our children and children's children to live in peace and happiness. Could we ever let them down? The answer is a definite no." Both sides, for the first time, brought top military leaders to the talks in an effort to defuse tension following US arms sales to Taiwan last year. After the opening session, the two sides will break into separate discussions on the economy and foreign policy. The US and Chinese leaders were also scheduled to meet US President Barack Obama on Monday. The talks wrap up on Tuesday. America's massive trade deficit with China, currency rates and human rights concerns are expected to be on the agenda. Meanwhile, China, as the biggest foreign creditor, wants assurances that its $1.2 trillion in US Treasury holdings are safe despite the impending congressional debate over raising the government's $14.3 trillion borrowing limit. "The Chinese are astounded that the US government would let the debate get to the stage where there is even a remote possibility of a default," said Eswar Prasad, a China expert at Cornell University. The higher debt limit is needed to make sure America can keep paying the interest bill on the debt to China and other investors. While Geithner said last week that the US would press China to accelerate efforts to revalue the yuan, he had sounded a conciliatory tone prior to the talks. He noted that the yuan had risen in value by 5 percent since last June, and even faster once inflation was taken into account. Sun Zhe, director of the Center for US-China Relations at Tsinghua University, said the US is mainly concerned about the yuan exchange rate, innovation, intellectual property rights and government procurement. China's concerns include the US ban on the export of high-tech products and the granting of market economy status. Sun said as the coming three to five years are an important period for both countries, "how to enhance their communication and drive the world economy with their own development will be major themes in the talks". Senior Colonel Li Jie, a researcher at the Chinese Navy's Military Academy, told China Daily that future high-level military talks, maritime security cooperation, and regional security will probably dominate the first military dialogue. Beijing has repeatedly protested against surveillance by US military planes and ships in waters near China. Discussions between senior military representatives will "help reduce the chances of conflict", Li said.

Current maximum tax rate of 32.2% is too high, Chinese say - China's recent proposals for the reform of the income tax system has prompted a nationwide debate about whether wage earners are paying too much to the government. For most Chinese, the answer is an absolute "yes", according to a recent research by the Central University of Finance and Economics, a top financial college. Released on Sunday, the report said that China's current tax burden is heavier than many middle-and upper-income countries. The conclusion of the research was that the government should reduce tax rates while increasing input in crucial areas such as healthcare and education. "In 2009, the average income for each person in China was only $3,700 and the current tax burden is too high," the report said. The research said that a country's tax burden should be in line with the level of its economic development. According to a previous survey from the World Bank, the most suitable tax rate (the percentage of taxation revenue accounts in a country's overall GDP) for low-income countries (where the average annual personal income is below $260) should be 13 percent. For middle-income countries, where average annual personal income is $2,000, the suggested tax rate is 23 percent. With an average personal income of $10,000 in high-income countries, the proposed tax rate is 30 percent. However, studies of China's tax burden revealed a lack of accuracy. In August 2010, the Ministry of Finance told the media that China's tax rate was 24 percent in 2007, 24.7 percent in 2008 and 25.4 percent in 2009. However, a report from the Chinese Academy of Social Sciences indicated conflicting data, showing that the tax rate was 31.5 percent in 2007, 30.9 percent in 2008 and 32.2 percent in 2009. Since economic reforms in 1978, the government has gradually reduced subsidies in crucial areas such as healthcare, education and housing, where the Chinese population had previously enjoyed full coverage from the government under the planned economy. However, the country has failed to establish an alternative system, including revision of the taxation system to protect the interests of the low-income groups. Last month, the Chinese Cabinet proposed raising the annual personal income tax threshold from 2,000 yuan ($306) to 3,000 yuan, in a bid to boost domestic demand and reduce the burden on wage earners. The proposal is now open to suggestion from the public. Commenting last week, Li Daokui, an adviser to the People's Bank of China, dismissed the proposal as "silly". He said the current tax system has failed as an instrument for effectively dealing with income disparity. Jia Kang, head of the Research Institute for Fiscal Science, which is affiliated to the Ministry of Finance, said the amendment to the tax law is the government's response to growing public concern over inflation.

Mainland companies have been warned that the red packets routinely handed out at press conferences could become an international embarrassment if the practice spreads to Hong Kong and beyond. Press kits prepared for journalists often include a red envelope containing cash. They are a traditional way to express good wishes or gratitude. But their use by companies seeking positive media coverage, while common on the mainland, rings alarm bells elsewhere. A coupon worth HK$1,000 was attached to a mainland company's invitation to a media briefing about a Hong Kong marketing campaign that was sent to the South China Morning Post (SEHK: 0583, announcements, news) recently. Eugene Sun, a Beijing-based public relations consultant, says mainland companies should follow international marketing practices in their overseas campaigns. They must realise that "paid news" is unacceptable in countries with legal systems governing corporate behaviour. "It can be counter-productive to a company's branding power and a downright embarrassment to China," he says. Hong Kong Journalists' Association chairwoman Mak Yin-ting says the practice has been a serious problem for some time - and the amount of money involved is increasing. "Hong Kong journalists used to not accept such red packets," Mak says. But many mainland companies now describe the cash given to journalists as "transportation fees". Mak says some mainland companies have started offering Hong Kong journalists valuable souvenirs after discovering they are reluctant to accept red packets. Li Datong, an editor at China Youth Daily, says it is not the companies that are to blame. "The culprit is the Chinese system, which makes journalists do this or that, following orders from above and depriving them of their sense of honour and their self-esteem," he says. Because the mainland media can operate without worrying about the quality of its reporting, and journalists can advance their careers without making any effort to protect public interests or expose corruption scandals, "the system has rendered society's moral values useless, and who would care about them any more?" From time to time, the propaganda authorities and the mainland's official journalists' association issue rules banning paid news and another mainland media phenomenon - paying journalists not to report bad news. But Li says that banning such practices is easier said than done because the system has become a social phenomenon. Li Hong, a columnist on the People's Daily web site, says there is also an economic reason for paid news. When the economy boomed in the 1990s there were many new companies with goods and services to sell but only a small advertising industry and an even smaller public relations industry. The door had not been opened up to international marketing companies and their practices. "What else could the local companies do when they wanted to sell things?" Li Hong says. "They knew only one magic bullet. You gave a bundle of cash to whoever could help sell your stuff, and that's it." The result: paid news, paid press conferences and paid press tours. Another reality is that journalism was, and still largely is, a low-paid profession on the mainland, partly because of a lack of competition. There are still many reporters in their 30s and early 40s who make 5,000 yuan (HK$5,970) or less a month. Li Hong says only a few media organisations, with strategic investors from outside the state sector, rigorously clamp down on red packets while paying their reporters more, based on the quality of their work. Wang Zhuo remembers being given a red packet on her first assignment during her internship. "I was stunned by what I saw in the envelope," she says. "I thought it was ugly. And it happened right inside the Great Hall of the People. I'd never learned about that at school. I was told by an older reporter to just take it. He said that if I gave it back, it would make all the other reporters feel bad." Now making 8,000 yuan a month, Wang says: "Maybe it's right to give some travel allowance to reporters, considering that a taxi trip in Beijing can easily cost 80 yuan, if not more." Fan Hai says he needs the money to pay for his fuel. "I sometimes get three or four press events a day," he says. "And petrol prices climb almost every month. How can anyone like me keep working and go without those little red packets?"

Mainland soprano Song Zuying during a dress rehearsal for her concert that was held at the Taipei Arena on Sunday night. It was the most lavish show ever staged at the venue. Mainland soprano Song Zuying has thrown a lavish free concert in Taipei, sparking speculation of a cultural united-front ploy by Beijing. The Grammy-nominated star was the second singer from the People's Liberation Army to perform in Taipei, after Chen Sisi. In addition to her gifted voice, which conquered the audience, Song's Sunday night performance was described by Taiwanese media as the most lavish in the Taipei Arena's six-year history. The concert's organiser, the Taipei Artist Agency Association, said a team of more than 300 from the mainland helped set up a huge stage - 62 metres wide, 21 metres high and 23 metres deep - the biggest ever set up in the Taipei Arena. All the stage facilities, including for sound effects and lighting, came from the mainland in nine containers. Four of the six dresses Song wore were specially designed for the concert. According to the Taiwanese edition of Hong Kong-based Apple Daily, each new costume cost more than HK$500,000. The Taiwanese organiser was reluctant to say what the free performance cost, but local media estimated NT$70 million (HK$19 million). Tickets were given away to 1,000 members of the public, and the rest to local organisers, celebrities, lawmakers and senior government officials, including Taipei Mayor Hau Lung-bin and his father, former premier Hau Pei-tsun. Asked where the funds for the concert came from, the local organiser declined to comment. Local media noted that the major sponsor was the Beijing-based Chinese Musicians' Association and the co-sponsor was the Jiuzhou Cultural Centre, one of the business agencies under the Taiwan Affairs Bureau of the Mainland State Council. While some opposition pro-independence supporters criticised the government of mainland-friendly Taiwanese President Ma Ying-jeou for allowing such a performance, saying it was just another ploy to woo Taiwanese, mainland internet users also lashed out at Beijing for spending too much taxpayers' money on just one performance in Taiwan. One wrote: "People on the mainland have to pay for a concert but people on Taiwan are able to go free of charge. Does that mean it's `one country, two systems?" The Communist Party's united-front department seeks to bolster its rule by making common cause with other organisations.

Hong Kong*:  May 11 2011

HSBC Cautions on U.S. Recovery - The halt in home foreclosures will result in the U.S. economic recovery taking longer than was anticipated just several months ago, HSBC Holdings PLC Chief Financial Officer Iain fourth quarter of 2010 and up from 49.6% a year ago. The jump was due to investment in fast-expanding markets and staff costs in competitive environments such as Asia and Latin America, the bank said. Management has said that its target for the cost-to-income ratio is about 52%. The results underscore the strategic challenges new Chief Executive Stuart Gulliver faces as he seeks to refocus the bank's operations with a strategic plan to be rolled out this week. The performance of HSBC's U.S. division is often seen as a bellwether for the U.S. housing market. The bank was among the first to call the U.S. subprime crisis in early 2007. It has since racked up $40 billion in charges in its U.S. consumer-finance business, the former Household International Inc., most of which is now being wound down or sold. Citigroup analyst Ronit Ghose said the results were "a mixed bag." "They've got strong capital and strong revenues in emerging markets. There's just costs they have to get under control," he said. He also pointed to a $47 billion influx of new deposits in the quarter as "a big positive." Growth was strongest in Asia, Latin America and the Middle East. On Wednesday, Mr. Gulliver is expected to deliver an update on strategy that will detail plans to cut costs and retreat from sagging markets and business lines, as well as laying out the bank's intentions for investments in areas in which it sees longer-term opportunity. One big question is plans for the U.S division, parts of which analysts said don't fit into the bank's focus. HSBC is winding down most of its U.S consumer-lending business, but it still possesses a credit-card business and a retail network of 470 branches in the U.S. HSBC operates in about 87 countries. "I don't think we are at an ideal business mix," Mr. Gulliver said during a conference call Monday. "I want to see a shift in revenue in the group toward the emerging markets, but I don't want to do that simply [by] making less in the developed world." Mr. Mackay also said Monday that the euro-zone debt situation "is still evolving." "Sensible actions have been taken [by European ministers] and need to be allowed to work through the system," he said. In London, HSBC's shares fell 0.5%, to 648.20 pence ($10.63). Asia-focused banking giant HSBC (SEHK: 0005) said on Monday that net profits surged 58 per cent to more than US$4.15 billion in the first quarter on lower taxes and bad debt charges. However Europe’s biggest bank added that the group’s pre-tax gains were pushed down by rises in other exceptional costs, including money set aside to compensate customers in Britain who were mis-sold payment protection insurance. Europe’s biggest bank said that profit after tax for the three months to March 31 rocketed to US$4.153 billion from US$2.631 billion in the first quarter of last year. Adjusted pre-tax profit fell to US$5.5 billion from US$6.01 billion. It was also below analysts’ expectations of about US$6 billion, according to a survey by Dow Jones Newswires. “Underlying profits held up well against a strong first quarter [of] last year,” HSBC’s new chief executive Stuart Gulliver said in an earnings statement. “We were profitable in all regions and customer groups, profits increased in each of our faster-growing regions and credit quality improved. “There was double-digit revenue growth in many of our businesses in the faster-growing regions. We continued to increase customer lending in all regions, except North America, with strong growth in Asia and Latin America,” Gulliver added. HSBC said that provisions set aside for bad loans dropped 37 per cent to US$2.4 billion in the quarter. However its cost-income ratio, or costs relative to income, rose to 60.9 per cent, well above the group’s target. The rise reflected US$440 million set aside to compensate clients mis-sold payment protection insurance, as well as changes in the value of HSBC’s debt. The bank, which on Monday said costs would have been flat without the exceptional charges, wants to reduce the ratio to 52 per cent or less within two years. In reaction to the results, shares in HSBC dropped 1.60 per cent to 641.3 pence (HK$81.5) on London’s benchmark FTSE 100 index, which was down overall in morning trade. “The update is something of a mixed bag, allowing investors’ attention to move on to the strategic update later in the week,” said Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers. HSBC publishes a key strategy review on Wednesday and analysts have said that Gulliver, who took over the helm of Europe’s biggest bank in January, could use the event to announce major cost-cutting measures. There have also been persistent reports in the British media that the lender has been looking at the possibility of switching its headquarters to Hong Kong from London to reduce the group’s tax burden. However, The Daily Telegraph newspaper reported on Monday that HSBC had delayed a decision on any potential move until next year. Gulliver, HSBC’s former head of investment banking whose hiring was announced last September, replaced Michael Geoghegan, who stepped down after he reportedly lost a boardroom battle for the chairman’s job.

Designer-bag business makes dreams come true - Byron Yiu, chairman and chief executive of Milan Station in Causeway Bay, is floating his outlet in a HK$270 million initial public offering. Since its colonial days Hong Kong has never ceased to be a "city of dreams" for those who aspired to wealth and success. In the minds of many Hongkongers there's a belief - unshaken by the passage of time and the great changes that have occurred - that anyone can make a fortune in the business-friendly city regardless of where they come from and what their qualifications may be. Byron Yiu Kwan-tat is living the Hong Kong dream. The 42-year-old former hawker and waiter is floating his outlet for second-hand designer handbags, Milan Station, in a HK$270 million initial public offering that is scheduled to be launched on Wednesday. Looking trendy in a neat grey suit with white leather shoes in one of his busiest branches in Causeway Bay, Yiu smiled and greeted customers. "You're the boss? Congratulations," said a customer in the Percival Street store after finding out about Milan Station's listing plan. "Thank you. You've come to buy my handbags, and now you can buy my shares," Yiu quipped. Milan Station resells previously owned bags. But it is not the usual designer-for-less store offering old and outdated products. In its outlets you can find the latest "in" or "limited-edition" bags, and they may find their way on to its shelves even before they can be found in their primary outlets. That ready access to bags that original owners may have to line up to order means that prices for some of the bags in Milan Station are even higher than at their designer outlets. Since it has no dealings with the designers who make the bags, Milan Station is in essence a free trader. Its assets are backed mostly by its inventories - unused and second-hand bags from designers such as Hermes, Louis Vuitton and Chanel. The business, therefore, requires a fast turnaround to generate regular cash flows to cover rent and staff expenses. On average the bags sit on the shelves for just 52 days, and Yiu relies on his contacts, "mainly the rich `tai-tais' who live in the Mid-Levels", to sell him the stock. "We don't make bags. If a certain brand becomes unpopular we'll just switch to another. The important thing for us is to have sufficient stock. People know who we are and they'll bring in their bags to sell to us." Yiu was in the fashion business collecting second-hand clothing from local celebrities long before he started focusing on handbags 10 years ago. More than 80 per cent of the bags in stock are from the public, including Yiu's close-knit network of socialites and so-called trophy wives - many of whom are Hong Kong VIPs and celebrities and are likely to get their bags first while everyone else has to be on the waiting lists. Because of Yiu's network, Milan Station has always had an association with the entertainment industry and high society. He has since become a celebrity himself, with his whereabouts regularly reported in tabloids and glossies. He is a member of the exclusive Jockey Club and owns a horse named Super Brand that he bought for HK$2 million. "I have always liked horses," he said. "I like riding and I like putting down a few bets." But it's the handbags that attract the headlines for Milan Station. The outlet recently sold a Hermes Himalayan Birkin crocodile-skin bag with diamond finishings for more than HK$2 million, a record-breaking price. Hermes bags have been fetching good prices at auctions and there are keen collectors. Last year, at a Christie's International auction of Hermes bags, a Russian client paid £42,050 (HK$534,600) for a 2010 Bleu Abyss crocodile-skin Birkin. A black crocodile-skin Birkin handbag went for £49,250 at another Christie's sale. Not every Hermes bag owner sees the bags, which come in a price range of US$7,000 to US$150,000, as collectibles. "What's the point? The value of the bag would not go up. They are not gold or silver. If you have bought a new mobile phone, would you keep your old one? You'll sell it. It's same with bags," Yiu said. Hongkongers are easily bored with what they have and Milan Station offers them a platform to trade off bags that they don't want, he said. The outlet has successfully captured the consumer culture of Hong Kong, which is preoccupied with buying the newest products. Its revenue last year was a staggering HK$730.3 million, up 19.5 per cent from 2009. Net profit grew 38.5 per cent to HK$54.3 million from 2009. Sales to mainland tourists have gone up significantly since 2003 when the Individual Visit Scheme was introduced allowing travellers from the mainland to visit Hong Kong and Macau more freely. Consumerism is catching up among wealthy mainlanders, and Yiu wants to build his business empire there with the same concept. Milan Station plans to set up 24 new outlets in Beijing, Shanghai, Guangzhou, Chengdu, Hangzhou and other mainland cities in the next two years. Asked what his favourite bag is, Yiu pointed at the Hermes collection in the store. "What is better in the world now than bags?" he chuckled.

Hotel's green efforts stop when shark's fin surfaces - With Victoria Harbour far below him, the president of Marriott International, Arne Sorenson, is top dog at Hong Kong's Ritz-Carlton, the highest hotel in the world. Marriott International, which has just opened Ritz-Carlton Hong Kong, the highest hotel in the world, has cut down the water usage in its mainland hotels by 17 per cent as part of its green campaign - but shark's fin soup remains on the menu. Marriott, the largest hotel chain in the US and the mainland, plans to open an extra 30 hotels in China by 2015. It currently has 60. It also has ambitious targets of reducing energy and water consumption by 25 per cent by 2017. "We are well on track to achieve this across all of our hotels worldwide, which represents an enormous amount of energy and water savings over some 3,500 hotels," said Arne Sorenson, president and chief operating officer of Marriott International. Guests staying more than one night now decide whether bed linen and towels are changed daily, low-flow shower heads and toilets have been installed, and energy and water use has been reduced in the kitchens. Between 2009 and 2010, the measures reduced water usage by 17 per cent. "It is very evident that guests like greener products," Sorenson said. "They have been increasingly paying more attention to green measures adopted by hotels when they choose where to stay. Any green measure would need the support of customers. If we stopped providing hot water, that would save a lot more energy but I do not think customers would accept it." Several green features also mark the city's new 312-room Ritz-Carlton, which occupies floors 102 to 118 of the ICC, making it the world's highest hotel. It is the latest addition to Sun Hung Kai Property's Kowloon Station development and the newest in Ritz-Carlton's global portfolio of 75 luxury hotels, 16 of which are in Asia. Sorenson said the goal was to make Ritz-Carlton Hong Kong an environmentally responsible structure with energy-saving features. "In the guestrooms, we use a room control unit which is operated by a motion detector. If it does not detect anybody in the room for 45 minutes, it turns off the services in stages to save energy," Sorenson said. But in terms of food, Marriott has ignored the environmentalists' call to do away with shark's fin soup. Sorenson said the hotel has to respect the local food culture. He claimed steak and beef were not the most environmentally friendly of foods but they had to be provided in most of its hotels because of demand. He said there was a policy of encouraging customers to make environmentally conscious choices when they order. A year ago it launched a programme called FutureFish under which the number of shark's fin dishes was reduced and special discounts on them were withdrawn. The Marriott also boasts that 65 per cent of the seafood at the group's hotels now comes from sustainable sources. Sorenson said neither governments nor pressure groups have influenced these efforts. "We do it because it's good business management and it's good for the environment, which we all rely on." Linda Ho, chief executive of the Green Council, a non-profit organisation in Hong Kong that approves green labels for products that meet international environmental standards, said green targets are set for hospitality industries in Australia, Canada and South Korea. "Hong Kong should do the same," she said. "Since we don't have any industry-wide benchmarks, hotel groups usually implement only those green measures that help them save costs." With the Green Council launching the Hong Kong Green Awards for hotels this year, she called for more government action. "The Hong Kong government does not have many incentives to encourage hotel sectors to be more environmentally friendly. We would also like to see the government encourage the hotel sector in this aspect," she added. The Hong Kong government, however, argued that it had done its part. A spokesman for the Environmental Protection Department said the Hong Kong Awards for Environmental Excellence was launched in 2008 to encourage organisations to adopt green measures. This award covers the hotel sector, among others, and 19 hotels in the city have received awards under this category since 2008.

Yuan-denominated gold products in HKMEx pipeline - Exchange to start trading in US dollar-gold contracts soon - Barry Cheung, chairman of the Hong Kong Mercantile Exchange. Cheung says he is optimistic that the new exchange will achieve an impressive turnover. The soon-to-be launched Hong Kong Mercantile Exchange, which cost HK$500 million and took three years to establish, is to introduce yuan-denominated gold products by the end of this year after the US dollar-gold contracts start trading next week, says chairman Barry Cheung Chun-yuen. Delayed for more than two years originally scheduled, HKMEx was finally granted the approval by the Securities and Futures Commission (SFC) last week and will start trading on May 18 for US dollar-gold futures contracts for physical delivery in Hong Kong. Investors can pay a minimum deposit of US$1,600 to one of the 16 broker members and trade future contracts via an electronic system. The minimum investment for each lot is 32 troy ounces. Based on today's gold price of about US$1,400 per ounce, the value would be about US$45,000. Investors would also have to pay 50 US cents per contract and 25 US cents for a clearing fee. Cheung said he wanted later to introduce another product with the quoted price in yuan but settled in US dollars. He hoped to gain approval for this by the year end. He also wanted the exchange to trade in silver and other precious metals but no timetable had been set for this. Cheung, a veteran oil executive, announced the plan to set up the exchange at a press conference in mid-2008 during which a video was shown of Financial Secretary John Tsang Chun-wah giving his blessing to the commodities project, even though the SFC had not yet granted its licence. At this time, Cheung said the HKMEx was originally envisioned as a platform to trade fuel oil and come on stream in July 2009. It eventually received approval from the SFC last week to start trading on May 18. The products to be traded had also changed substantially to those planned for 2009. Cheung has said he had dropped the plan to trade fuel oil contracts and replaced them with gold futures contracts. Cheung said that, during preparations, it had been discovered from potential traders there was little demand for oil contracts. "After a better understanding of the investors, we changed our plan with the market demands. We consider there is a strong demand in gold, silver and other precious metals," he said. Cheung denied the delay in launching the exchange had been caused by difficulties in obtaining funding during the global financial crisis. He said that time was needed to establish and test the electronic trading system. "We had to establish the HKMEx from scratch. We also had to conduct a lot of system testing to make sure the trading would work smoothly. I do not think three years to set up a new exchange is too long," he said. Despite the financial crisis, he said the HKMEx still received support from investors such as Industrial and Commercial Bank of China (SEHK: 1398), Cosco, Russian firm EN+ and a local shipping merchant, who each took a 10 per cent stake in the exchange. Cheung and other investors took the rest. They had spent HK$500 million establishing the electronic platform for the exchange and the rent and cost for the offices in the International Commerce Centre on top of Kowloon Station. Included in the costs was the expense of hiring about 100 staff, which Cheung expected to increase to 150 after trading started. The HKMEx is likely to face an uphill battle recouping its initial investment and operating costs. It will have to compete with Hong Kong Exchange and Clearing Ltd that trades in gold futures and averaged 178 contracts a day last month. The Chinese Gold and Silver Exchange Society is also involved in gold trading in Hong Kong dollars and is planning to launch yuan-denominated trading. There are many gold trading shops in Hong Kong while overseas exchanges in London, Singapore and the US also trade in the precious metal. A membership fee will be paid by the 16 brokers - which has not yet been disclosed. Cheung is confident of getting decent turnover. "We are not trading the same products as the HKEx (SEHK: 0388, announcements, news) which does not have physical delivery. Our product is also different from Chinese Gold and Silver Exchange Society, which is a spot market. "I believe we are in a complementary role instead of being competitors," he said. "The overseas exchanges' products may not fit the need of Asian investors." When HKMEx debuts, its members, including BOCI Securities, ICBC International Futures, Interactive Brokers, Morgan Stanley Hong Kong Securities and OSK Futures Hong Kong, will trade 1kg gold bar futures in US dollars through the electronic trading system, with physical delivery in Hong Kong. It will be open 15 hours each weekday from 8am, allowing simultaneous trade with commodity markets in Europe and the US. The three clearing members of the HKMEx are Interactive Brokers (UK), MF Global UK and Morgan Stanley & Co International. All transactions will be cleared through London-based LCH Clearnet. Cheung said by using an independent clearing house, it meant the HKMEx did not need to bear clearing risks. He hoped to attract local retail and global institutional investors.

Mainlanders swamp schools near border - Education authorities urged to plan more resources because of cross-border baby boom - The number of cross-border children in Hong Kong schools and kindergartens has doubled in the past five years as more mainland women give birth in the city. The increase has brought calls from teachers for the government - which has been trimming classes and shutting schools because of shrinking rolls - to make sure it is prepared for the growing influx. While there are enough teachers and places overall to cope with the present numbers, a squeeze is already being felt in kindergartens and primary schools close to the border. The number of children living on the mainland and going to school in Hong Kong was 9,899 last year, more than double the number five years ago, the Education Bureau said. In kindergartens, the number rose almost fivefold from 797 in 2006 to 3,786 last year. Primary schools had a 59 per cent increase and secondary schools 48 per cent. In the decade since 2001, the number of babies born to mainland women without a Hong Kong husband rose sharply from 620 to 32,653. More than 60 per cent would eventually stay in Hong Kong, the Census and Statistic Department says. A teachers union urged the government to make a more systematic estimate of how many of these children would come to study in Hong Kong and when they would come. "The government knows they will come, but it just cannot predict when they will come and at what school level they will be admitted," Professional Teachers' Union president Fung Wai-wah said. "This could cause chaos in the education system." There would be an extra 3,000 Primary One pupils in September, but they would not pose an immediate burden on the education system because there were still enough teachers and places, Fung said - but the government should start planning for the future. Babies born in the city are entitled to subsidised pre-primary education, followed by 12 years of free schooling. Wan Mei-ching, a mother of three who used to live in Tai Po but was recently allocated a public flat in Sheung Shui, the town closest to the border, said she had looked in vain in the area for several months for a kindergarten for her eldest daughter. Eventually she gave up and sent her back to a Tai Po kindergarten. "Every day she has to wake up at 7am, much reducing her sleeping time," she said, attributing it to the number of mainland children. "Not only school places, it is very hard for me to buy milk powder," she said. Sheung Shui Pui Yau Kindergarten had filled all its places in December for this year's intake in September and has nearly 200 children on the waiting list. Principal Too Siu-fung said many mainland parents tried every means to get a place. Some had offered gifts to the school, while others said they were willing to bring their own desks and chairs. "I am really surprised," she said, adding that mainland parents tended to think schools in Hong Kong were better at teaching English and moral education. Yan Chai Hospital Wing Lung Kindergarten closed its admissions in February but principal Lai Fung-ha still receives many calls a day seeking places. She said more than half the applicants were mainland children. "In the last two years there were even groups of mainland parents who gathered on the internet and visited my kindergarten during long vacations," she said. A mainland mother, whose husband is not a Hong Kong resident, said they had planned to have their children study in Hong Kong even before she was pregnant. "My husband and I both think the Hong Kong education system is better. So we came to Hong Kong for the births and chose a kindergarten which is close to the border," she said. With more children progressing from local kindergartens, a shortage of Primary One places has also emerged in North District. The Education Bureau said that in 2009 and last year, there were not enough Primary One places in Sheung Shui for allocation to children living in the same district. Some 110 and 250 places from schools in Fan Ling and Tai Po were "borrowed" for pupils in Sheung Shui in the two years. The bureau said it had already explored various ways to increase the number of school places in North District and would seek possible sites for building schools to meet demand if necessary.

It may have been designed to represent a welcoming entrance but the public walkways between the new government headquarters at Tamar and Central and Admiralty differ sharply from those in the original plan. The design by Hong Kong architect Rocco Yim Sen-kee - which he dubbed "The Door" to symbolise government openness - included four footbridges across the busy roads that block pedestrians from the towering arch-shaped building. But the bridges have been reduced to two and the access is less direct. Under Yim's contest-winning design, three pedestrian connections would have stretched across the six-lane Harcourt Road linked to the Far East Finance Centre, Admiralty Centre and Harcourt Garden. Another would have crossed Tim Mei Avenue to Citic Tower. All were to have connected directly to the buildings at each end to provide all-weather access and convenience for the disabled. The two to Harcourt Garden and the Far East Finance Centre have since been discarded. While the bridge to Citic Tower is still a direct link, the one to Admiralty Centre has been split in two and ends in Harcourt Road, instead of entering the shop and office building that is linked by a pedestrian network to other offices and shopping malls along Queensway. "We are concerned about the impact of a sudden increase in pedestrian flow in the areas," Central and Western District Council vice-chairman Chan Chit-kwai said. "We did hope the linkage would be direct and barrier-free." The HK$5.5 billion project was awarded to a joint venture of Gammon and Hip Hing. A government spokeswoman said the missing connections were not included in the tender as they involved technical problems and their marginal benefits did not justify the cost incurred. For example, a direct link to the Admiralty Centre, managed by the MTR Corporation (SEHK: 0066), would involve substantial cost and time as the centre had more than 500 individual owners. It would also cause disturbance to the centre's users and worsen congestion at peak hours, she said, adding that the present arrangement was better as it provided easy access to the MTR station and nearby transport interchange. Hong Kong Institute of Urban Design president Bernard Lim Wan-fung asked why the government, as the major shareholder in the MTRC, could not negotiate a better link with the Admiralty Centre. "The developer does not want to sacrifice shop areas for the bridge of course but the current design is unsatisfactory," he said. Lim partly blamed the "design-and-build" model adopted for the project for the reduced accessibility. He said the model, led by the contractor instead of the architect, was budget-oriented and unsuitable for large projects requiring flexible arrangements and updated technology. "The contractor will only comply with the tender specifications. It has no incentive to think about planning in a holistic way," he said, adding the model allowed little monitoring by lawmakers as they were required to approve the budget in one go. Pedestrian access is important for the site, cut off to the south by Harcourt Road and to the north by a bypass, another six-lane road, limiting access to cars and taxis. While an MTR station will be built to the north of the site as part of the North Island Line, this will not happen until 2016 at the earliest. Town Planning Board members expressed concern over the heavy reliance on one crossing over Harcourt Road when they approved a design four years ago. They said pedestrian flow for the walkway across the road would be substantial, urging the government to consider spreading the flow at the detailed design stage to avoid overloading the walkway. But the Planning Department said building a subway connection would require partial closure of Harcourt Road and would delay the headquarters project.

Safety put on hold for 'deadly' Nathan Rd - Plan to cut traffic shelved despite high accident rate - Nathan Road remains the city's most dangerous place for traffic accidents despite a government study, commissioned in 2002, leading to proposals that could have improved its safety dramatically. The tourist landmark area is peppered with black spots and last year had more accidents than any other road in Hong Kong, with Mong Kok its most dangerous section. There, the accident per kilometre rate in 2010 was 113 - 44 per cent higher than the figure for the section between Tsim Sha Tsui and Jordan. According to government figures analysed by the South China Morning Post (SEHK: 0583) the Mong Kok section accounts for a third of all traffic accidents on Hong Kong's deadliest road. Nine years ago, the government commissioned a study - The Nathan Road Safety Improvement Plan - that was released for public consultation in 2005. It spelled out four plans to make the road safer, including one to make the entire stretch a bus-only corridor with widened footpaths, a measure it estimated would cut the accident rate by up to 40 per cent, with 25 per cent less traffic passing through. However, the proposals are lying dormant on the Transport Department's web page for public consultations despite a November 2005 deadline for replies. In effect, the plan appears to have been quietly shelved.

About 280,000 foreign domestic helpers are in line for a pay rise this year, says labor minister Matthew Cheung Kin-chung. But how much is still being decided. Bosses want the minimum allowable wage to rise just HK$80 a month, while helpers want HK$120 to HK$400. The minimum for domestic helpers has been frozen at HK$3,580 a month for two years. Helpers have been agitating to be included in the minimum wage regime of HK$28 an hour that came into force on May 1. Cheung said the government is waiting for an outcome from the "established mechanism" for reviewing helpers' pay. It will study figures and indicators, while meeting unions and employers' representatives to collect views. "In view of the economic situation and rising costs, there is a possibility that the level may go up this year," Cheung said. "As to the extent, we have to wait for the outcome of our study." Representatives from several helpers' unions have met officials to press their call for a higher minimum wage, with one group asking for a HK$400 increase to HK$4,000. Joseph Law, chairman of the Hong Kong Employers of Overseas Domestic Helpers Association, said while he agrees an increase is necessary after a salary freeze of two years, it should be no more than HK$100 and the demand as high as HK$400 is "unrealistic" as it would deter employers from hiring. "Apart from salary, an employer has to pay for insurance, accommodation, food and air tickets and the average cost of hiring a domestic helper per month is around HK$6,000," Law said. "We have conducted surveys of employers and found 2.3 to 2.4 percent is acceptable - an increase of HK$80," he said. However, Leung Hing-ki, of the TKI support group for Indonesian maids, said an increase of around HK$120 - about the equivalent of a day's salary - is appropriate as the minimum wage is still behind the level of HK$3,860 in 2007. Dolores Balladares, chairwoman of United Filipinos in Hong Kong, said a HK$400 increase was not unjustified. "Fifteen years ago, you could eat out for HK$20 or HK$25. Now it is HK$40 or more," Balladares said. She said the increase would not deter employers from hiring helpers. "They are needed for the employers to take care of their children and elderly family members," she said. "It would be more economical than the employers giving up their jobs to do the housework."

Corporate donors to the Community Care Fund should have more say on how their money will be used, a Liberal Party stalwart said, following the lackluster response to a key policy plan of the chief executive, Donald Tsang Yam- kuen. The Legislative Council Finance Committee will vote on Friday whether to support the government's HK$5 billion injection for the fund after a shocking revelation by officials that they have obtained a paltry HK$680 million from the business sector, out of the promised HK$1.8 billion donation. Under the Community Care Fund proposal, both the government and the business sector were to each contribute HK$5 billion. James Tien Pei-chun, the honorary chairman of the pro-business Liberal Party, said one of the three main reasons for the poor response is donors fail to have a say on their donations. Tien also said the business sector generally believes the fund should not be used to solve social problems such as medical services, education and housing - which should be dealt with by the government.Earlier, he said the donation is like paying tax and believes the business sector should not be double- taxed. It is the public's perception that the proposal is conceived to alleviate the underprivileged who are left out of the safety net and is part of a collusion on the part of the government to return favors to the companies that donate money, Tien added. The government should make good use of its multibillion-dollar reserves and the Exchange Fund instead of using the Community Care Fund, he said. It should clarify why the fund is not a matching fund, as believed by many when it was announced in the Chief Executive's Policy Address last year. Legco was to vote last Friday but this was deferred as many lawmakers were unable to speak within the allotted time. The government asked lawmakers to endorse funding to ensure the fund had enough money to operate for three years. Pan-democrat lawmakers expressed skepticism but the funding is expected to be passed with the support of pro- establishment lawmakers.

The government on Monday earmarked HK$200 million to hire additional nurses this year to ease a manpower drain in public hospitals caused by heavy workload, acting Secretary for Food and Health Gabriel Leung said. Leung told a Legislative Council meeting that the fund would allow the Hospital Authority to hire an additional 1,720 nurses this year. Leung also said that there would be a review of the authority’s training and promotion system, to help it retain more of its nurses. The pledge of extra resources came after legislators criticised the government for failing to retain nurses. Last year 5.3 per cent of the nurses in public hospitals resigned, Leung said. That was up from 4.1 per cent in 2009, and the highest in five years. Health services functional constituency legislator Dr Joseph Lee Kok-long said that when the government had provided extra resources to the Hospital Authority in the past, management had used it to offer new services – effectively increasing nurses’ workload. “Instead of improving working conditions for nurses, it spent the new resources on opening new services. Now, one nurse has to handle three tasks. “When you open new services, one [nurse] has to deal with five or even six [new tasks]. Sooner or later the [nurses] burn out, and their only option is to quit,” he said. Lawmaker Cheung Man-kwong, of the education functional constituency, said nurses in public hospitals were under increased pressure because of their larger workload, caused by an influx of pregnant women from the mainland giving birth in Hong Kong. Many nurses had deserted the public sector in favour of private hospitals, which pay better, he said. Cheung said the problem stemmed from a lack of restrictions on the number of mainland women allowed to give birth in the city. “If you don’t think about how many mainland mothers-to-be Hong Kong can admit, and continue to allow private hospitals to increase their admissions, the rate of losing [nurses] will keep rising without an end.” he said.

 China*:  May 11 2011

Wages are rising in China, heralding the possible end of an era of cheap goods. For the past 30 years, customers would ask William Fung, the managing director of one of the world's biggest manufacturing-outsourcing companies, to make his products—whether T-shirts, jeans or dishes—cheaper. Thanks to China's seemingly limitless labor force, he usually could. Now, the head of Li & Fung Ltd. says the times are changing. Wages for the tens of thousands of workers his Hong Kong-based firm indirectly employs are surging: He predicts overall, China's wages will increase 80% over the next five years. That means prices for Li & Fung's goods will have to rise, too. "What we will have for the next 30 years is inflation," Mr. Fung said. "A lot of Western managers have never coped with inflation." The issue is likely to hover behind talks Monday, between Chinese and U.S. leaders in Washington at their annual Strategic Economic Dialogue. Currency and debt issues are expected to dominate the agenda. But there are signs that the low labor costs—and cheap currency—that led to China's huge trade surplus with the U.S. could be reaching a tipping point. This comes amid pressure from rising wages as China's working-age population begins to decline. For decades, plentiful Chinese labor kept down costs of a range of goods bought by Americans. Even as politicians in Washington accused China of hollowing out the American manufacturing sector, cheap DVD players, sweaters and barbecue sets were a silver lining for consumers who grew accustomed to ever-lower prices. China also kept down the value of its currency, giving domestic exporters a competitive edge. "Inflation has been damped pretty dramatically in the U.S. because it exported work to China and other places at 20% or 30% of the cost," said Hal Sirkin, a consultant at Boston Consulting Group. The years of dramatic reductions in costs are over, the firm says. Li & Fung traces the start of rising wages to the "Foxconn Effect." Foxconn is the trade name of Hon Hai Precision Industry Co., maker of iPads for Apple Inc., and computers for Hewlett-Packard Co., among others. After a string of worker suicides last year at one of its China plants spurred Foxconn to defend its treatment of employees, the company raised wages 30% or more in a bid to improve worker conditions. That raise came as workers at other factories, including staff at a Honda Motor Co. parts plant, went on strike for higher pay. Since then, the Chinese government has supported higher wages in part to address labor unrest, but also as way to boost domestic consumption and reduce reliance on exports to expand the economy. The rising wages affect both foreign and domestic companies. Other factors besides rising wages are pushing up the price of goods. Chinese workers, for one, are starting to buy more with their higher salaries. That's contributing to higher prices for commodities such as cotton and oil, which are already climbing in part because of a weaker dollar. Rising living standards in developing economies like China will keep prices of natural resources high as demand outpaces supply. China's move to let the yuan slowly appreciate in value—something eagerly sought by its Western trading partners—adds fuel to the fire. A stronger yuan makes it cheaper for China to import the raw materials it needs, such as iron and soybeans, helping tame domestic inflation. But it makes its exported goods more expensive for other countries to buy. "This idea that we have moved from an era of easy deflationary environment to one of inflation is correct," said Jeffrey Sachs, economist and director of the Earth Institute at Columbia University. During China's 30 years of economic growth, hundreds of millions of factory and urban jobs soaked up surplus rural farm labor. In the past three or four years, he says, that extra labor has been exhausted. Many analysts predict that China's vast labor force will begin declining in the next year or two, the result of family-planning policies. Others say there's already a shortage of the most active members of the factory floor, workers aged 15 to 34. That group has been steadily declining since 2007, according to Jun Ma, Deutsche Bank's chief economist for Greater China. A shrinking work force will need higher salaries to support an expanding population of elderly. There's some debate about the impact and extent of these wage increases on foreign markets. The pace of inflation for U.S. imports is running around 7% this year, but it doesn't account for a big enough portion of spending to significantly affect overall low inflation rates of about 1.6%, Morgan Stanley's China strategist Jonathan Garner said. Still, with real wages stagnant for decades, many Americans who have grown dependent on cheap imported goods such as polo shirts or power tools could see their purchasing power decrease. China still has cheap labor in its interior, away from its developed coastal cities, and productivity gains could mitigate higher wage costs. For example, Foxconn announced it was expanding operations to inland areas near Chengdu, Wuhan, and Zhengzhou, away from its coastal base.Li & Fung is encouraging its suppliers to invest more in their factories to increase worker productivity and raise the quality of goods. There are limits to what those measures will achieve. Some analysts say that the wage increases will sharply outpace any productivity gains. Moving inland means lower wages, but higher transportation costs on China's crowded highways and railroads. Furthermore, locating the factories in China's hinterland puts them in a better position to service China's growing domestic consumer market instead of exporting to consumers in the U.S. and elsewhere. Faced with rising wages within China, some companies are shifting resources elsewhere to keep costs down. Yue Yuen Industrial (Holdings) Ltd., the world's biggest shoe maker, has started moving manufacturing of low-cost shoes from China to countries such as Bangladesh and Cambodia. Li & Fung has been hired a prominent Chinese sneaker brand, Li Ning Co., to help it search for cheap production outside China. But the wage gap between China and other developing countries will shrink, said Mr. Fung, echoing views shared by Boston Consulting Group, because "China was the thing that kept the price low," he says. "China was the benchmark. With the China price rising, everyone else wants to raise prices." As factories relocate to other countries, local wages will rise faster than they did in China because the potential pools of surplus labor are smaller. In addition, because no other country can replicate the massive scale of China, logistics will become a larger part of costs as companies are forced to slice up their manufacturing over several countries, analysts say. "Things will be more expensive and people will buy less," Mr. Fung warns. That means that the West will have to adopt new consumption trends.

China's clean-tech pace beats all, says report - Denmark earns the biggest share of its national revenue from producing windmills and other clean technologies, the United States is rapidly expanding its clean-tech sector, but no country can match China's pace of growth, according to a report. China's production of green technologies has grown by a remarkable 77 per cent a year, according to the report, which was commissioned by the WWF and which will be unveiled today at an industry conference in Amsterdam. "The Chinese have made, on the political level, a conscious decision to capture this market and to develop this market aggressively," said Donald Pols, an economist with the WWF. Denmark, a longtime leader in wind energy, derives 3.1 per cent of its gross domestic product from renewable energy technology and energy efficiency, or about €6.5 billion (HK$72.45 billion), the report said. China is the largest producer in money terms, earning more than €44 billion, or 1.4 per cent of its gross domestic product. The US ranks 17th in the production of clean technologies with 0.3 per cent of GDP, or €31.5 billion, but those industries have been expanding at a rate of 28 per cent per year since 2008. "The US is growing substantially, so it seems the policy of [President Barack] Obama is working," Pols said. But the US cannot compare with China, he said. "When you speak to the Chinese, climate change is not an ideological issue. It's just a fact of life. While we debate climate change and the transition to a low-carbon economy, the debate is passed in China," Pols said. "For them it's implementation. It's a growth sector, and they want to capture this sector." The report gathered data on 38 countries from energy associations, bank and brokerage reports, investor presentations, the International Energy Agency and a score of other sources. It measured the earnings from producing renewables like biofuels, wind turbines and thermal equipment, and energy efficiency technology such as low-energy lighting and insulation.

Big plans for 'Beijing' brand cars - BAIC plans to roll out a mid-sized sedan by the end of the year. The nation's fifth-biggest carmaker Beijing Automotive Industry Corp (BAIC) has laid out a blueprint to join the ranks of the Fortune 500 and the world's top 15 automotive companies by 2015, it announced at the recent Shanghai auto show. The ambitious goal will be bolstered by its own-brand cars, which is the "most important" of its business plan over the next five years, the company said. The first passenger car under the company's own brand Beijing will hit the market in the next two months. The subcompact model - code named BC301 - will carry a 1.3-liter or 1.5-liter engine and will be available with manual and automatic transmission options.

Hello Kitty comes to Zhejiang - The launch ceremony for the Hello Kitty theme park in Hangzhou, Zhejiang province is held on May 8. A Hello Kitty theme park will be built in Anji, Zhejiang province, making it another major tourist attraction at the Yangtze Delta following the Shanghai Disneyland. Construction of the 60-hactare park will start during the second half of 2011 and is expected to be completed in 2014. The theme park is a joint project between Zhejiang Yinrun Company and Japan's Sanrio Company Ltd, the owner of the famous cartoon image.

Organic food sales growing - Customers examine organic food products at a recent food expo in Beijing. Despite the rise in sales, China's organic food market is still facing an uphill challenge in a country where farmers are used to pesticides and chemical fertilizers to boost production. A tiny sector in China - organic and natural food - is benefiting from the middle- to upper-income, health-conscious consumer and overseas returnees but misinformation, lax regulations and questionable business practices are proving to be major stumbling blocks. At LohaoCity Organic Store, sales have been growing at an average rate of 35 percent year-on-year. There are eight outlets in Beijing, six in Shenzhen, four in Chengdu and one each in Guangzhou and Tianjin. Plans are afoot to set up more outlets in different parts of China but it's a daily challenge to ensure all produce from its suppliers is free from chemical and other life-threatening ingredients. "Our position is clear: We require our suppliers to be certified by the central government agency (China Green Food Development Center). We do not accept certification by municipal or provincial governments," said Terry Wu, general manager at LohaoCity Organic Store. Foods from suppliers are put through stringent quality control by LohaoCity's purchasing department, which will also ensure clear labeling in accordance with local and international standards. A clause in the purchase contract also ensures suppliers sign a guarantee to comply with China's organic regulations. "If they (the suppliers) can carry out this commitment, we'll stand beside their products. As retailers, we have to be responsible to our consumers," said Wu. "In a nutshell, it's really about trust. If there's no real policy at the national level, where should consumers go? Retailers, suppliers and consumers have to develop trust. And consumers need to educate themselves to make wise decisions. There's hope, however." Wu spoke about a recent trip to Germany where he attended a food safety conference at which there was a sizable presence of Chinese companies involved in organic farming. "There will always be a few bad eggs but that shouldn't stop good work," he said. Food safety scandals, where industrial oils, acid, cancer-causing chemicals and heavy metal ingredients were found in some food products also help to divert more sales to organic and natural produce. Despite the rise in sales, China's organic food market is still facing an uphill challenge in a country where farmers are used to pesticides and chemical fertilizers to beef up production and to keep weeds at bay, which usually means less hard work. While there is demand for organic, natural food, it is still uncommon to find it in the marketplace and the difficulty in locating reliable organic farmers or suppliers affects supply and demand. Community-supported agriculture (CSA), in which a farmer offers a certain number of "shares" to the public, is seen as a workable idea. Membership involves receiving a box of seasonal vegetables every week for a year. Based on the CSA model, Little Donkey Farm, which is Renmin University's demonstration project, has successfully cultivated quality foods with the support of the public. In 2010, Little Donkey Farm had 500 "shares". This amounted to 5 kilograms of vegetables a week for each shareholder. It costs 1,500 yuan ($273) for a year's subscription. Shareholders also pay for seeds, tools and irrigation. According to Shi Yan, a representative from Renmin University who is involved in Little Donkey Farm, the challenge is to get more small farmers to adopt the CSA model. "Consumers should be better informed about seasonal food. The natural way of growing food means there will be certain foods that will not be available in certain seasons such as winter, when it's difficult to grow tomatoes," she said. Vegetables from Little Donkey Farm cost between 10 and 15 yuan a kilo. Organic vegetables in supermarkets are priced between 30 and 40 yuan a kilo. Non-organic vegetables can cost anything from 5 to 10 yuan a kilo, according to Shi. While debates rages on how best to make a profit from organic farming, Shi said the natural method of farming yields more benefits in the long term. "At the beginning, farm production will decline when farmers switch to organic fertilizer. However, three to four years later, farmers will find the quantity will increase and there will be no need for fertilizer by then," she said.

A salesman demonstrates how to operate the Beidou navigation system for drivers at a trade market in Ningbo, in East China's Zhejiang province. As part of its efforts to establish an independent satellite navigation system, in 2000 the Chinese government launched the first Beidou system, which is to offer services to customers across the Asia-Pacific region by 2012 and globally by 2020.

Beijing push for a level playing field in America - Beijing's delegation to the strategic and economic dialogue in Washington is expected to push the US to remove restrictions on Chinese companies doing business in America. The issue is a major one for Chinese officials as more mainland firms eye overseas expansion. The companies complain that they face legal and institutional obstacles in the US, according to mainland analysts. The dialogue will be co-chaired by Vice-Premier Wang Qishan and State Councillor Dai Bingguo and their respective US counterparts, Treasury Secretary Timothy Geithner and Secretary of State Hillary Rodham Clinton. One of the key sources of trade friction is that China says the US imposes restrictions on mainland companies entering its market, citing national security concerns. China has said it would buy more from the US if controls on hi-tech goods were not so restrictive. US Commerce Secretary Gary Locke, on the other hand, has urged China to make its market more open for US companies, complaining that American firms are shut out of some industries on the mainland because Beijing procurement policies favour domestic companies. He said the US market was open to Chinese companies, except for a few cases that involve national security concerns. But Finance Vice-Minister Zhu Guangyao said at a press conference on Thursday that the Chinese delegation would ask the US government to provide a level playing field for mainland companies. Chinese firms see investing in the US as being more attractive, according to a report issued by the US-based Asia Society's Centre on US-China Relations. The report said Chinese investment in the US was more than US$5 billion last year. Chinese overseas investment is expected to reach US$1 trillion by 2020, and the US will get a major share of it. However, the path for mainland companies to invest in the US, especially in the hi-tech industry, is not smooth. Shenzhen-based Huawei reluctantly abandoned its US$2 million purchase of 3Leaf Systems, a server-technology company, to comply with a ruling made by the US Committee on Foreign Investment, an agency that reviews national security implications of such investments. ZTE (SEHK: 0763), China's second-biggest maker of phone-network equipment, also failed to secure a Sprint Nextel cellular upgrade contract last year, also for security reasons. The companies complained and commentaries in the state media described the rulings as a reflection of cold war ideology. "The Chinese companies have long been demanding equal treatment with their US counterparts in the US," said He Maochun , director of the Research Centre of Economy and Diplomacy at Tsinghua University. "Both sides want to conduct business in each other's countries on an equal basis." Zha Daojiong , a professor at Peking University's School of International Studies, said many mainland companies were worried how far the US committee would go in blocking Chinese investment. For the first time, military officials will take part in the talks, a move observers say is useful in building mutual trust, to minimise misunderstanding and address issues ranging from anti-terrorism to regional stability. On the trade side, US officials would continue to push for reform of the Chinese financial sector, Geithner said last week, and would urge China "to increase the return to savers in China and dismantle the set of protections that are now designed to lower the cost of capital to state-owned enterprises". The US also indicated it would continue to raise concerns on the yuan. Zha said it was unlikely that major economic issues would be settled during the dialogue because the disputes were deep-rooted and the US economy was being restructured. "The impact of the dialogue from an economic aspect is going down," he said. The meetings are the first high-level bilateral talks since popular uprisings in the Middle East. Kurt Campbell, the top US diplomat for Asia, said at a briefing on Thursday: "I think it will be important to hear what Chinese interlocutors and friends have to say about what's transpired there, and what potential impact they feel those developments might have on their own society." Beijing's current crackdown on dissent appears to be related to a fear of similar political strife at home. US officials have been outspoken in criticising the detentions and disappearance of Chinese activists in recent months. A recent human rights dialogue in Beijing yielded little information about specific cases, but US officials indicated they would continue to raise these cases despite objections by Beijing. Analysts do not expect any concrete achievements from this week's dialogue, even though sentiment between the countries has improved. The relationship soured last year over a series of spats, including US arms sales to Taiwan. However, ties improved after President Hu Jintao's visit to the US in January. Shi Yinhong , an international relations professor at Renmin University, said the controversy concerning currency reform would not affect the dialogue, as the yuan had appreciated by more than 5 per cent since last June. He expected that the talks would be similar to last year with consensus reached only on minor issues. Twenty-six agreements were reached in last year's dialogue in Beijing, but they touched on issues such as energy, customs and health co-operation instead of tackling major disputes. Chu Shulong , a professor at Tsinghua University's School of Public Policy and Management, said a succession issue for the central government in the coming two years meant it was less flexible concerning policymaking. "Stability will be the main focus of the Chinese government, and this means there will not be major policy changes," he said.

Wen's calls for reform signal subtle evolution within party - On the surface, mainland politics has not changed since the crackdown on the pro-democracy movement in 1989, despite the country's dramatic economic evolution since then. But underneath one-party rule, subtle changes are occurring, as evidenced by a top state leader's advocacy of the ideals pursued by students and other protesters 22 years ago. Premier Wen Jiabao's repeated calls for Western-style political reform in the past year makes him the most outspoken state leader since 1989. And while he might appear to be a lonely voice among the Communist Party leadership, Wen's daring has raised a lot of questions. Is he cultivating his personal public image or playing a role to balance the Communist leadership's conservative image? Do his comments suggest a rift in the leadership ahead of next year's power transition, or has he chosen to make his frustration with the pace of reform public before his retirement in less than two years? The party has pledged bold reforms for all aspects of life except its monopoly on power - but the fact that Wen can dwell on the most politically sensitive topics at some length could suggest that something has changed.

WHILE Denmark earns the biggest share of its national revenue from producing windmills and other clean technologies, no country can match China's pace of growth in the clean-tech sector, according to a new report. China's production of green technologies has grown by 77 per cent a year, according to the report commissioned by the World Wildlife Fund for Nature, which is being unveiled today at an industry conference in Amsterdam. "The Chinese have made, on the political level, a conscious decision to capture this market and to develop this market aggressively," said Donald Pols, an economist with the WWF. Denmark, a longtime leader in wind energy, derives 3.1 percent of its gross domestic product from renewable energy technology and energy efficiency, or about 6.5 billion euros (US$9.4 billion), according to the report. China is the largest producer in money terms, earning more than 44 billion euros, or 1.4 percent of its gross domestic product, the report said. The United States ranks 17 in the production of clean technologies with 0.3 percent of GDP, or 31.5 billion euros, but those industries have been expanding at a rate of 28 percent per year since 2008. "The US is growing substantially, so it seems the policy of President Barack Obama is working," Pols said. But the US cannot compare with China, he added. "When you speak to the Chinese, climate change is not an ideological issue. It's just a fact of life. While we debate climate change and the transition to a low carbon economy, the debate is passed in China," Pols said. "For them it's implementation. It's a growth sector, and they want to capture this sector." The report was prepared by Roland Berger Strategy Consultants, a global firm based in Germany. It gathered data on 38 countries from energy associations, bank and brokerage reports, investor presentations, the International Energy Agency and a score of other sources. It measured the earnings from producing renewables such as biofuels, wind turbines and thermal equipment, and energy efficiency technology such as low-energy lighting and insulation. "Clean technologies are really growing fast, but China is responsible for the majority of that growth," said Ward van den Berg, who compiled and analyzed the data for the consultancy firm. Until recently, Chinese massive production of solar cells was aimed at the export market, but they are now making solar systems for the home market, as they have been doing for several years in wind energy, Van den Berg said. Following Denmark and China, other countries in the top five clean-tech producers, in terms of percentage of GDP, are Germany, Brazil and Lithuania, the report said.

Hong Kong*:  May 10 2011

Kerry Properties upbeat on key weekend home sales - About 400 units of Lions Rise will be available for sale tomorrow and Kerry Properties (0683) is confident they will all sell, allowing it to pocket HK$5 billion. Executive director Chu Ip-pui said yesterday 350 to 400 units will be put on the market, representing 40 percent of the total number of 968 units spread over five towers in Wong Tai Sin. Prices for the units, released on Wednesday, ranged from HK$9,998 per square foot to HK$14,942 psf. Most of them are two- and three-bedroom units of between 640 and 1,276 square feet. So far Kerry has attracted more than 10,000 people to its showrooms. Ip said market response will determine whether prices go up. "We should be able to cash in HK$10 billion when all the units are sold," Ip said. He expects the 80,000 sq ft shopping arcade in Lions Rise to fetch HK$4.8 million a month in rent and around HK$60 million for the whole year. Kerry Properties is in talks with a Japanese supermarket over the possibility of it becoming an anchor tenant. Meanwhile, the company will put on the market two new projects this year. One is in Des Voeux Road West with 146 units of between 660 and 2,000 sq ft each. The other one is in Shan Kwong Road in Happy Valley with 126 units of around 2,000 sq ft each. The developer expects to pocket HK$2.5 billion and HK$5 billion, respectively, from the two projects. Further, Ip said Kerry will bid for the Stubbs Road site in Thursday's land auction on its own. He expects bidding to be intense as all three sites up for grabs are for luxury homes. The other two are 62 Begonia Road in Kowloon Tong and Ngau Tam Mei off San Tam Road in Yuen Long. The government is set to net at least HK$5 billion, with the Stubbs Road site fetching HK$3.26 billion.

iPods and iPhones are being modified for use in the war on people trafficking in an ingenious initiative driven by executives from some of Hong Kong's top companies. In their first project, members of the Mekong Club - executives drawn from top law firms, banks, accounting firms and telecom companies to combat trafficking - are creating iPods and iPhones that can communicate with trafficking victims. Software installed on the devices will show the flags of the six Mekong countries and then go through a list of questions in the victim's own language to establish if they are being trafficked and need help. If trials are successful, the Mekong Club hopes to see the devices used by law enforcement officers across the region to communicate with victims of trafficking. The modified iPods and iPhones are expected to be particularly useful in dealing with trafficked people on board so-called "slave galleons" - ships manned by trafficking victims from different countries that operate in Southeast Asian waters. Trials are due to start in the coming weeks and the Mekong Club, set up to help the estimated 9.5 million victims of human trafficking across Asia, hopes to have the devices in use across the region by next year. The idea for the device came from the United Nations Inter-Agency Project on Human Trafficking (Uniap), which set up the Mekong Club to tackle trafficking in six countries - China, Thailand, Vietnam, Laos, Myanmar and Cambodia. "An iPod or smartphone can be a fantastically important device in law enforcement," said Uniap's regional project manager, Matt Friedman, whose team works closely with other UN agencies. "Two years ago you wouldn't have thought of this as an option because the technology wasn't there. Now, how couldn't you think of it as an option? "It will take two months to do the field testing. We have a donated iPod. We have the application built into it by one of the board members' companies. We just need to get down there and test it." The Mekong Club will later seek private funding to distribute the devices. "Even a simple donation of an iPod or an iPhone will be a heroic thing," Friedman said. "It will get into the hands of a police officer and he can use the donation to take on the bad guys." The initiative comes ahead of the Mekong Club's first board meeting later this month when executives from some of the city's top companies - operating under a necessary cloak of anonymity - will commit themselves to the anti-trafficking battle. "The private sector has really demonstrated a significant interest in wanting to be a part of this process," Friedman said. "Two or three years ago there was a certain amount of hesitancy. Now they get the idea that we all share the same world and in this world the problems belong to all of us and the private sector has not only an option but a responsibility to be involved." The Mekong Club aims to draw on the business acumen of its members to come up with initiatives to tackle trafficking and Friedman said members' input was already proving invaluable. "The private sector is where human trafficking plays out. It just happens to be the ugly side of the private sector - but businesses know best how to fix these things," he said. "I've been doing counter-trafficking work for almost 20 years but it's almost like on a totally new lane. We are getting suggestions from people and I'm saying `Wow, why did I never think of that?' It gives us a completely fresh perspective and I see it as a new frontier in how we address the issue of human trafficking."

The government is to appeal against a controversial court ruling which threatens to delay the construction of the massive Hong Kong-Macau-Zhuhai Bridge. A person familiar with the situation said the legal challenge would be lodged next week at the earliest. The government has considered all the options, the person said, and believes an appeal against the ruling is an appropriate move given the far-reaching implications of the ruling on existing and future projects. Alan Wong Hok-ming, a lawyer representing the elderly Tung Chung woman who launched the judicial review, said they had not received any news about an appeal. One of the uncertainties created by the ruling was that it left a vacuum for environment officials to fill over how the environmental acceptability of projects should be assessed, if the court ruling is to be followed. In the ruling handed down last month, the Court of First Instance rejected the environmental chief's approval of the construction within Hong Kong's boundaries. It also questioned the validity of the current approach to assessments, comparing it to a process of continually filling up a bucket of water as long as it does not overflow. It is not known how long the appeal will last, but it will probably involve months of hearings after it gets the legal go-ahead to proceed. Given the uncertainty over the outcome of an appeal, the MTR Corporation (SEHK: 0066) has already withdrawn three environmental impact assessment reports for the Sha Tin-Central rail link from the government for review. "Now that the government is appealing against the ruling pf course we have to withdraw the reports," said Raymond Chien Kuo-fung, chairman of MTR Corp. "We will come up with a decision later when things get clearer." Chien said it was difficult to forecast whether the rail link, scheduled for full completion by 2020, will be delayed. But it might take MTR Corp more time to prepare more data in the reports if required by the court, he said. The director of the Environmental Protection Department, Annisa Wong Sean-yee, is also running out of time since she must decide within a matter of weeks whether to grant an environmental permit to the waste incinerator on an artificial island off Shek Kwu Chau. She has not issued study brief for at least four projects since the ruling.

 China*:  May 10 2011

With the government's ongoing and persistent efforts to cool the red-hot property market, Chinese property developers are struggling to sell properties while becoming more encumbered with debt. The debt of the country's property developers rose 41.27 percent year on year to 1.05 trillion yuan (about 161.53 million U.S. dollars) by the end of March, the Wind Information, a Shanghai-based financial data provider, said in a recent report. Of 113 listed property developers that had filed their first-quarter reports to Chinese stock exchanges, 25 reported profit losses and 42 registered slower profit growth rates from January to March. Most of them are small and medium-sized property developers. The country's top three property developers including China Vanke, Poly Real Estate Group Co. and the Gemdale Corp. also saw moderate declines in profit growth during the period. "The recent government control over its property market has restrained half of the demand. Small property developers will first feel the pinch," said Zhang Dawei, an analyst with the Beijing-based Centaline Property.

Seventh cross-Strait forum concludes, 19 joint proposals adopted - The 7th Cross-Strait Economic, Trade and Culture Forum closed Sunday, with the adoption of 19 proposals for the promotion of cross-Strait co-op in various fields. Jia Qinglin (R, front), member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, and Kuomintang (KMT) honorary chairman Wu Poh-hsiung (3rd L), attend the conclusion ceremony of the Cross-Strait Economic, Trade and Culture Forum, a regular forum between the Chinese mainland and Taiwan, in Chengdu, capital of southwest China's Sichuan Province, May 8, 2011. The seventh Cross-Strait Economic, Trade and Culture Forum closed Sunday in Chengdu, capital of southwest China's Sichuan Province, with the adoption of 19 proposals for the promotion of cross-Strait cooperation in various fields. Participants from the Chinese mainland and Taiwan urged authorities of from both sides to seize the opportunities brought about by the mainland's 12th Five-Year Plan (2011-2015) and Taiwan's "golden decade" blueprint (2011-2020) to further improve economic cooperation and seek common development and prosperity. They further urged the two sides to actively implement the cross-Strait Economic Cooperation Framework Agreement (ECFA) and its early harvest program, which took effect last September and this January, respectively, and make substantial progress in related follow-up discussions to gradually realize normalization and liberalization of cross-Strait economic ties. Participants also suggested the mainland and Taiwan improve cooperation and exchanges in nuclear power safety, share related information, increase cooperation between professional institutes, and have in-depth exchanges on nuclear power emergency management and security technology, according to a document released after the forum concluded. Additionally, Participants also called on the two sides to further push forward cooperation in such sectors as culture, finance, agriculture, investment, education and youth exchanges. Jia Qinglin, member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, spoke highly of the forum when addressing the closing ceremony. "The forum again shows the importance of the exchange platform between the CPC and the Kuomintang (KMT)," said Jia, also chairman of the National Committee of the Chinese People's Political Consultative Conference. Jia said this year will be crucial for the development of the continuing cross-Strait ties. Efforts should be made to steer cross-Strait ties in the right direction, Jia said, urging the mainland and Taiwan to continue safeguarding the political foundation of jointly opposing "Taiwan independence" and sticking to the 1992 Consensus, increase mutual trust and remain good interaction, in a bid to creating sound conditions for the peaceful development of cross-Strait ties. The two sides should value the fruitful cooperation in these three years, and try to achieve new agreements during future negotiation on cross-Strait issues, using facts to prove that the relations were improving and enjoyed great potentials, Jia said. He urged compatriots from both sides to remove various types of interference and create better conditions for future development of cross-Strait ties. KMT honorary chairman Wu Poh-hsiung said when addressing the ceremony that Taiwan and the mainland should expand cooperation to maximize benefits for both sides. "We should cement mutual trust, seek common ground while reserving differences, and treasure the hard-won peaceful development of cross-Strait ties," Wu said. The mainland's Taiwan affairs chief, Wang Yi, said at the ceremony that the proposals adopted at the forum would help people from both sides, especially those at the grassroots level, benefit from the peaceful development of cross-Strait ties. Wang, director of the Taiwan Work Office of the Communist Party of China (CPC) Central Committee, said the forum played a guide guiding role in pushing forward the relations between the mainland and Taiwan. The two sides should keep policies stable and safeguard the general situation of the peaceful development of cross-Strait ties, he said. About 450 representatives and experts from both sides attended the two-day forum.

Hong Kong*:  May 9 2011

At weekends in Times Square it has become more common to hear Putonghua than Cantonese since Hong Kong launched its individual travel scheme for mainlanders. But the city faces competition for attracting mainlanders - Taiwan will start receiving individual travellers from across the strait next month. Limits have been imposed: only a maximum of 4,000 mainlanders a day - including individual travellers and tour members - can visit Taiwan. The individual travel scheme covers visitors from only three cities: Beijing, Shanghai and Guangzhou. "A critical factor is how fast mainland authorities will open up its market," Jack You, chief executive of the travel website ez Travel, said. The Taiwanese website, which has 2.2 million users, has finished preparations to embrace the change. Travel packages and hotel bookings targeting mainlanders will be available on its own website or on the pages of its strategic partner on the mainland,, which has up to 40 million web users. Individual travellers tended to spend more than those joining tours, You said. They chose costlier hotels in prime locations and ate in better restaurants, making their daily spending nearly double that of tour members. However, they tended to spend less time at a destination. With the launch of the scheme, mainlanders have an additional destination to choose from. But Taiwan and Hong Kong were not substitutes and travellers would not abandon one for the other, You said. "The mainland market is huge. Hong Kong and Taiwan are both must-go destinations for visitors." Economic growth and appreciation of the yuan prompted a record high of 122,893 mainlanders to visit Hong Kong on April 30. The three-day Labour Day "golden week" holiday saw 303,637 arrivals. For the time being, the website has yet to offer a tour including stops in both Hong Kong and Taiwan because different entry permits are required for each destination. Taiwanese tourists have greater flexibility as they can go to both Hong Kong and mainland cities on the same permit. Hong Kong is now a top destination for Taiwan outbound tourists. Last year, 720,000 stayed overnight and 66 per cent remained in Hong Kong throughout the trip. Of the remaining 34 per cent more than half went to Macau after Hong Kong. The Hong Kong Tourism Board was exploring with tour agencies in Taiwan the inclusion of stops in the Pearl River Delta, especially Shenzhen, in trips to Hong Kong, said Winnie Shyu, its director in Taiwan. Cathay Pacific (SEHK: 0293)'s marketing manager for Taiwan William Ling Wei-chien said flights between Hong Kong and Taiwan could increase. After the launch of direct flights between the mainland and Taiwan in 2008, the number of Taiwanese transiting in Hong Kong dropped. But the number of flights between Hong Kong and Taiwan had returned to previous levels this year, he said.

Hong Kong touted as risk service hub to tackle piracy - The growing menace of piracy on the high seas, including the Gulf of Aden and the Indian Ocean, could give Hong Kong the opportunity to develop as a special risk service and insurance hub for Asia. Steve Vickers, a former senior detective who heads two risk-management companies, said Hong Kong, with insurers, financiers, a trusted legal system and fully convertible currency, already had the makings of becoming such a hub. What was missing was the "element of joined-up thinking" to make it possible, he said. "The government needs encouragement to support and promote the special risk hub concept in a similar fashion to Hong Kong's arbitration hub status," he said. "To date, Hong Kong has not capitalised on our unique capabilities." Aside from maritime piracy, Vickers said special risks included kidnapping and ransom and product extortion and contamination. He thought there had been an increase in extortion threats against companies producing food and other products in southern China, Taiwan and elsewhere. Vickers said Asia's wealthy also preferred to sign kidnap and ransom insurance policies in Hong Kong rather than their own countries because levels of personal secrecy and security were higher. "Regional players have historically been willing to purchase their legal, insurance and crisis response capabilities in Hong Kong," Vickers said. "These special risks require experience, cohesion and an integrated response involving risk and crisis response, insurance, public relations, legal and related areas." Vickers said 18 Hong Kong-registered ships were attacked by pirates last year, as were 40 Singapore-flagged ships, based on International Maritime Bureau figures. He pointed out that 16 ships managed by Hong Kong firms were hit by pirates last year, as were 54 vessels managed from Singapore and 23 from Japan. While the focus has been on pirate attacks in the Gulf of Aden and Indian Ocean, Vickers said there had also been ship boardings and robberies in the South China Sea as ships sailed east of Singapore. He thought the situation would get worse. The International Maritime Bureau had already reported 142 attacks worldwide in the first three months of the year, including 97 by Somali pirates compared with 35 in the same period last year. A dry cargo ship managed by the Hong Kong subsidiary of China's largest shipping company added to these statistics last Thursday when it was boarded by pirates 450 nautical miles off Mumbai, India. The 24 crew on board the Cosco HK Shipping Co bulk carrier Full City issued a distress call after locking themselves in a secure room on the vessel. An Indian navy patrol aircraft made low passes over the ship, which scared off the pirates to a waiting dhow being used as a mother ship. Three US and Turkish warships, including the guided-missile cruiser USS Bunker Hill, headed to the area and a boarding team from the cruiser destroyed weapons, a skiff, fuel and other equipment found on the dhow. SaveOurSeafarers, a lobby organisation supported by maritime industry groups including shipowners and the International Transport Workers' Federation, estimated that more than 800 seafarers were being held hostage off the coast of Somalia. The privately funded group Oceans Beyond Piracy estimated the global economic cost of piracy was between US$7 billion and US$12 billion. This included up to US$3.2 billion in additional insurance costs, ransom payments last year of US$268 million, the cost of naval anti-piracy operations and higher fuel costs as vessels travelled via the Cape of Good Hope to avoid pirate-infested waters further north. Maritime industry groups, together with the military, have drawn up best-management guidelines for owners in case their ships are attacked, boarded and hijacked. As part of its special risk hub role, Vickers thought Hong Kong could provide training and specialist guidance for shipowners and managers. Unless razor wire was properly wound round a ship's railings to prevent pirates boarding, it could easily be ripped off by attackers wielding a grappling hook tied on a long length of cord to a bucket thrown in the ocean to act as a sea anchor. He questioned whether existing insurance cover was adequate and thought there was a need for specialist maritime kidnap and ransom insurance cover. "An insurer that doesn't pay swiftly or a policy that is unclear or open to interpretation can lead to disaster in such circumstances," Vickers said.

The highest salaries-tax payer last year had a bill for HK$50 million. While that may seem a lot, the top tax bill was the smallest for five years. Based on the standard 15 per cent tax rate, that single taxpayer earned at least HK$333 million. The next biggest tax bill was HK$41 million - on earnings of HK$273million. In total, the top 10 salaries-tax payers of 2010 were billed HK$274 million, 25 per cent less than in the previous year. However, profits taxes were up, with the highest-paying corporate- tax payer getting a bill for HK$3.1 billion. The top 10 profits-tax payers handed over HK$14 billion between them, a 27 per cent increase on 2009. Lawmaker for the accountancy sector Paul Chan Mo-po said the drop in salaries tax was probably because of the gloomy stock market last year. "Most top taxpayers are investment bankers and their incomes mainly consist of bonuses. But the stock market was not doing well last year, so they got fewer bonuses." The change in banks' bonus systems also played a part, he said. "After the collapse of Lehman Brothers, banks are more careful about giving out bonuses. Instead of giving staff a one-off bonus, they now intend to spread it over a few years." Chan said the healthy environment for property and retail markets had probably led to the increase in profits tax paid.

Yacht exhibition opens in HK - Visitors board onto Accelera 98, an exhibited yacht in 2011 Gold Coast Yacht Country Club (GCYCC) in Hong Kong, south China, May 7, 2011. The annual GCYCC opened here on Saturday, with over 80 exhibitors from some 60 countries and regions bringing their yachts on show, including the first made-in-mainland one, Accelera 98, showcasing in Hong Kong. 

Hongkongers can look forward to an extra-long break over Easter and three extended weekends next year, thanks to the way public holidays fall, and the travel trade can rub its hands at the prospect of business. An extra-long weekend results from a clash between the National Day and Mid-Autumn Festival public holidays, both on October 1. Workers will get an extra day off, meaning a potential break from Saturday, September 29 to Tuesday, October 2. The other two long weekends result from the compensation days to be given for New Year's Day on January 1 and the handover anniversary on July 1, both Sundays. As usual, Lunar New Year in January and Christmas in December remain the two main breaks. But with Ching Ming - the grave-sweeping festival - on April 4 next year coming almost on top of the Easter holidays starting on April 6, employees can, by taking just a day's leave on April 5, give themselves a six-day break to April 9. Travel Industry Council executive director Joseph Tung Yao-chung said the arrangements, particularly the potential six-day break in April - long enough for an overseas trip - were likely to boost outbound travel. "Five or six days are enough to visit Australia," Tung said. "Some travellers may even take a couple more days off to join a tour to Europe, which usually takes eight to 10 days." He could not say whether the extra time off would help renew interest in travel to Japan, a popular destination until the radiation scare triggered by damage to a nuclear power station following a huge earthquake and tsunami in March. "We are aware that many Hong Kong travellers are still hesitating to visit Tokyo, which used to be one of the most popular cities among Hong Kong travellers," he said. "Many people are still monitoring the situation there, and they will take some time to overcome concerns over the radiation scare."

Mid-sized mainland-listed banks are poised to come to Hong Kong with capital-raising issues in the next few months, but local investors may have little stomach for buying shares at a premium to the price of their home-market shares, experts warn. Shanghai-listed China Everbright (SEHK: 0165) Bank received approval from the China Banking Regulatory Commission this week to launch a public offering in Hong Kong. While the bank has not specified how much it aims to raise, it said in a document issued in April that it planned to issue no more than 12 billion shares. China Everbright is among a number of banks that have voiced the need to raise extra capital because their capital adequacy ratio has narrowed. (The ratio measures the extent of their capital cushion against risk-bearing assets.) Based on the bank's share price, it could raise as much as 45.24 billion yuan (HK$54.08 billion). The bank's shares closed down 0.53 per cent at 3.77 yuan per share yesterday, after a Chinese-language newspaper cited an unnamed source in the fund management industry saying the bank planned to raise about US$7 billion in July, pricing its H shares 1.5 times higher than its A shares. The bank declined comment. Companies' H shares usually trade at a premium to their A shares, but Louis Tse Ming-kwong, a director of VC Brokerage, said a premium of 1.5 times might be too aggressive. "Right now the sentiment in the market doesn't want issuers asking for too much," he said. Victoria Mio, senior portfolio manager at Robeco Group, which has US$200 billion of assets under management, said big - so-called tier one - banks' H shares typically trade at 1.2 times the price of their A shares, which are traded in yuan on the Shanghai or Shenzhen stock exchanges. H shares are stock of a company incorporated on the mainland but listed in Hong Kong. Shares of tier-two, or mid-sized, banks had a much smaller premium, and their H- and A-share prices were very close. "In the middle of the tightening cycle on the mainland, investors find big banks more appealing, as smaller banks face more liquidity constraints," Mio said. China CITIC Bank (SEHK: 0998, announcements, news) said it planned to raise 26 billion yuan in fresh capital through a rights issue in Hong Kong and Shanghai next month. China Merchants Bank (SEHK: 3968) said in April it needed to raise funds for expansion and growth, while making sure its capital adequacy ratio met regulatory requirements. But it did not say if it would list in Hong Kong. Second-tier banks might be less appealing to investors in Hong Kong because they have to borrow more frequently from the volatile interbank market, due to their higher loan-to-deposit ratios and lower liquidity, said Sheng Nan, an analyst at UOB-Kay Hian.

 China*:  May 9 2011

It's currency reform, but at Beijing's pace - Little sign of faster appreciation of the yuan ahead of Sino-US strategic dialogue - A senior finance official says China will continue to push forward with currency reform but gave no sign that it would accelerate appreciation of the yuan. Deputy Finance Minister Zhu Guangyao also told a press conference yesterday, ahead of a strategic and economic dialogue in Washington next week, that China does not seek a large trade surplus. US Treasury Secretary Timothy Geithner will meet Vice-Premier Wang Qishan to discuss economic issues in Washington, while State Councillor Dai Bingguo will meet US Secretary of State Hilary Rodham Clinton. US President Barack Obama will also meet the Chinese delegation. Representatives from 16 US government agencies and about 20 Chinese agencies will join the dialogue. Military representatives from both nations will also be involved for the first time since inception of the strategic and economic dialogue two years ago to discuss issues that "have the potential for miscalculation and inadvertence", US Assistant Secretary of State Kurt Campbell said. Among issues to be discussed are climate change, the impact on the global economy of the Japanese quake-tsunami and unrest in the Arab world. But currency reform is expected to top the US agenda. "We are going to press China to let its exchange rate adjust at a faster pace to correct its still substantial undervaluation," said US Treasury senior co-ordinator David Loevinger. Zhu said currency reform would continue but how it did so was up to China to determine. The yuan has appreciated by more than 5 per cent since June when Beijing decided to allow it to trade more freely against the US dollar. It broke the symbolic 6.50:1 ratio against the greenback for the first time last week. "The US is more concerned about the range of the appreciation," Zhu said. "But Wang has told Geithner that currency reform is used for economic structural change and the sustainable economic development of China. "We are willing to communicate with the US in this regard." Wang told Geithner about China's stance on currency reform after Geithner expressed concern on Tuesday. Zhu also stressed that China does not intentionally seek a large trade surplus with the US. The US trade deficit with China widened to US$273.1 billion last year, up 20.4 per cent. Zhu said he expected a trade balance or slight surplus this year. The Chinese delegation would demand that the US provide a level playing field for Chinese companies in the US, he said. US Commerce Secretary Gary Locke said on Wednesday that American companies were frequently shut out of some industries on the mainland. "We have heard a lot of complaints from Chinese companies concerning obstacles to entering the US market," Zhu said. "We hope the US can provide good legal and institutional conditions for Chinese companies entering its market. We hope the US will not discriminate against Chinese companies. Our stance in this matter is similar to the US government's concerns about their companies entering China." Zhu also said China was concerned about the size of America's debt and its fiscal deficit, calling on the country to adopt effective measures to address those issues. China is America's largest creditor, holding US$1.15 trillion of US debt at the end of February. Deputy Foreign Minister Cui Tiankai told the same press conference that a strategic security dialogue co-chaired by Deputy Foreign Minister Zhang Zhijun and US Deputy Secretary of State James Steinberg would kick off during the strategic and economic dialogue. Tao Wenzhao , a researcher at the Institute of American Studies at the Chinese Academy of Social Sciences, said the inclusion of military personnel in the dialogue was a reflection of both countries' desire to restore military ties after a series of spats last year. Campbell said the US would raise human rights concerns, after talks in Beijing last month made no progress. But Cui said: "We hope the US will not devote too much energy to individual cases or cases that involve violations of Chinese laws."

China says stronger yuan does not hurt forex reserves - A rising yuan will not cause heavy losses to China's 3-trillion-U.S. dollar foreign exchange reserves, the nation's forex regulator said on Friday, refuting some media reports that a stronger yuan against the U.S. dollar had led to heavy losses of the huge forex reserves.

China successfully launched a space environment-monitoring rocket Saturday morning from the southern island province of Hainan as part of the nation's key "Meridian Project." The rocket was sent into space at 7 am from a launch site in Hainan, said a statement from the Center for Space Science and Applied Research of the Chinese Academy of Sciences (CAS). "The successful launch test will play an important role in the country's research on the independent monitoring of the space environment and safeguarding the security of space activities," it said. The rocket is the first of its kind for the "Meridian Project," which is a ground-based network program to monitor the solar-terrestrial space environment and has been supported by the Chinese government. The project consists of a chain of ground-based observatories with multiple instruments, including magnetometers and various radar. The chain is mainly located in the neighborhood of 120 degrees East Longitude and 30 degrees North Latitude. The statement said the project would enhance the country's innovative capabilities in space technology. Saturday's launch used the Tianying-3C rocket, provided by the Academy of Aerospace Solid Propulsion Technology under the China Aerospace Science and Technology Corporation. Other systems were developed by the CAS. Scientists are currently analyzing data received from the rocket.

Successful test of China's 'V750' pilotless helicopter - Photo taken on May 7, 2011 shows the "V750" pilotless helicopter during a test flight in Weifang of east China's Shandong Province. The 757-kilogramme helicopter has a maximum load capacity of 80 kilogramme. The V750 helicopter, with a max speed of 161 kilometers per hour and max range of 500 kilometers, can be remotely controlled as well as self-controlled by stored program within a range of 150 kilometers in radius and 3000 meters in ceiling. 

China's religious community on Friday rejected a US commission report accusing China of religious freedom violations, saying its "finger-pointing" practice and "irresponsible remarks" are not in conformity with a religious spirit. The section with regard to China included in the report is "strongly subjective, full of prejudices, and not true to reality", according to a written consensus released after a joint meeting of the secretary-generals from China's five major religious groups -- Buddhists, Taoists, Islam, Catholics and Protestants. In an annual report on religious freedom released on April 28, the United States Commission on International Religious Freedom, an independent, bipartisan US federal government commission, attacked China, saying it found violations of religious freedom in the country. "What has been described about China in the report is entirely different from what we have observed and experienced," the consensus said. "Members of the US commission had exchanges with us previously. However, the views in the report are totally different from what they said to us face-to-face in China." "The practice of saying one thing to a man's face and another behind his back is perplexing," it noted. "China is is a country under the rule of law and its citizens fully enjoys the freedom of religious beliefs. The development of various religions in China is now better than ever," it said. "Religious people in China have not been suppressed nor been restricted from normal religious activities," it added. Religion has a positive image in China and what religious people have done has been recognized and widely respected, according to the consensus. However, a handful of organizations and individuals, under the guise of religions, have committed crimes, disrupted social order, and undermined ethnic unity, in their attempt to split the motherland and threaten state security, it added. "Evil cults that are against society and humanity are a desecration to religion. Separatist activities under the disguise of religions have nothing to do with religious freedom," it said. The Chinese government has dealt with evil cults and cracked down on separatist forces according to law, and such actions are in line with the aspiration of the Chinese religious community, it read. "We are willing to conduct further exchanges on issues of common concern with people from the religious community in the United States on the basis of equality, friendship and mutual respect," the consensus added.

Bird's view of Int'l Horticultural Expo in Xi'an - This bird eye view shows the park of the International Horticultural Expo in Xi'an, capital of northwest China's Shaanxi Province, April 30, 2011. The expo opened here on April 28 and was scheduled to end on Oct. 22.

Bona reports Q1 profit surge - Bona Film Group Ltd was the first Chinese film company to list on the Nasdaq. The company distributed 13 films in 2010, taking 9 percent of the total domestic box office receipts. Bona Film Group Ltd, China's largest privately owned film distributor by distribution numbers, said on Friday that its first-quarter net profit rose 76.7 percent year-on-year to $2.4 million. "We exceeded our guidance in the first quarter as we continued to leverage our vertically integrated film distribution business model to execute our growth strategies," said Yu Dong, the company's founder and chief executive officer. The first Chinese film company to list on the Nasdaq reported net revenue of $19.3 million for the three months ended March 31, a year-on-year increase of 146.7 percent from $7.8 million. Revenue from film distribution reached $11 million, including sales from distributing films overseas - 4 million yuan ($615,600), which accounted for 57 percent of the total revenue. "In the first quarter, we completed principal photography on three film projects and distributed four films, which is in line with our goal of distributing between 16 and 20 high-quality films by the end of this year," Yu said. Those four films grossed about 430 million yuan in box office receipts, accounting for 16 percent of the total domestic box office gains for the period. Bona's theatre business contributed 24.2 percent to total revenue, with a gain of $4.7 million. Film production contributed 18 percent. Figures from the State Administration of Radio, Film and Television showed that the Chinese film industry earned a record 10.17 billion yuan in box office receipts in 2010, up 64 percent year-on-year. It is expected to reach 20 billion yuan by the end of 2012, according to the Entgroup Consulting Group, a leading Chinese research and consulting company, which specializes in the entertainment industry. Bona distributed 13 films in 2010, taking up 9 percent of the total domestic box office receipts, and anticipates that the figure will rise to 15 percent, sustained on a yearly basis. The company aims to own 30 to 40 movie theatres in principal cities nationwide by a process of acquisition and construction, and will expand its distribution network to cover 300 cinemas by the end of 2014. "Our strong fundamentals and favorable macro trends, such as the rise in disposable income, the low penetration rate of cinemas in China and the growing demand for high-quality movies, will help us develop our business," said Yu. The company will also set up production companies overseas to establish a better partnership with film makers Hollywood. "The first one will be located in Los Angeles sometime this year," said Yu.

Coke's 20/20 vision for China - Coca-Cola displays its environmentally friendly bottles at an international green technology exhibition in Beijing. China is Coca-Cola's third-largest market, after the United States and Mexico. For Coca-Cola Co, a brand that has a presence in more than 200 countries worldwide, one thing remains: vision. And after 125 years, the beverage company continues to expand its presence globally. A few days ahead of Sunday's anniversary, President and CEO, Muhtar Kent, shared the company's 20/20 vision with more than 100 journalists. In 2008, Kent met 45 top global bottlers and created a roadmap for his company. A number of key goals were outlined for the company to achieve by 2020, including doubling its system revenue while increasing system margins. Kent said an additional 1 billion people are expected to enter the global middle class by that time.

Hong Kong*:  May 8 2011

Rising MTR profits to bring bigger dividends, MTR says - Railway operator buoyed by fare rises, property sales - MTR chief executive Chow Chung-kong, seen here with New York mayor Michael Bloomberg last year, says bidders would be sought for the site above Tai Wai station soon. MTR shareholders can look forward to better returns. Hong Kong's only railway operator says it will steadily raise its dividend to reflect rising profits. Yesterday, the MTR applied to for planning permission to convert a planned hotel at Tsuen Wan West station on the West Rail line into a purely residential development. A 2.2 per cent fare rise due come into effect in June and good sales from the second phase of an MTR property development in Tai Wai, Festival City, last year are also expected to add to the bottom line. However, MTR chairman Dr Raymond Chien Kuo-fung told shareholders at the company's annual general meeting that increased payouts would be introduced gradually as it needed cash for rail projects in the city and on the mainland. "We have to strike a balance between shareholders' interests and the health of our debt-to-equity ratio." MTR pushed its net debt-to-equity ratio to a five-year-low of 12.8 per cent last year in preparation for a surge in capital expenditure required for construction of the West Island and South Island lines. Its dividend has risen 31 per cent over the past four years to 59 HK cents last year. Underlying profit ranged between HK$8.19 billion and HK$8.66 billion over the same period despite a sharp downturn in 2009. According to its application for the TW5 project in Tsuen Wan, the company has given up plans to build two 13- to 17-storey hotel blocks on the site and now intends to build three additional residential towers. The project would comprise fourteen 17- to 57-storey residential blocks with 3,326 flats. It will also provide more small flats. About 55 per cent of the flats will be no bigger than 538 square feet, compared with 42 per cent under an earlier plan. The residential and commercial project at another West Rail station, Nam Cheong in Sham Shui Po, will also come up for tender this year. The company yesterday submitted an application to cut the project's development density. Based on its latest plan, the company has cut the number of blocks from 18 to 14. The gross floor area has also been cut by 19 per cent to 2.64 million square feet. The project will comprise fourteen 13- to 53-storey residential buildings with 3,313 flats. About 75 per cent of flats would no bigger than 538 square feet. MTR put the project up for tender last year, but the high land premium levied kept most developers away. The company had to withdraw the project from tender and reschedule it for this year. In an update on the four sites which MTR will tender out this year, chief executive Chow Chung-kong said bidders would be sought for the one above Tai Wai station within two months.

Top Swiss event organisers buy 60pc of HK art fair - The city's thriving art market has risen to a new international level through the takeover of the young Hong Kong International Art Fair by a company that runs two of the world's most important art shows. The organiser of Art Basel and Art Basel Miami Beach has signed a deal to buy 60 per cent of Asian Art Fairs, organisers of the Hong Kong fair that is better known as Art HK. Arts figures generally welcomed the news, saying it would put Hong Kong on the world art map. But some said they hoped the fair's Asian focus would not be affected by the change of ownership. Katie de Tilly of 10 Chancery Lane Gallery, an Art HK exhibitor, said the news put an emphasis on Asia as an arena for artists and collectors. "I appreciate overseas art galleries coming to Hong Kong, but I hope Art HK won't just bring more [Western] art galleries and can maintain the strong Asian presence, which is the driving force for the future of the fair." The modern art show has become Asia's leading fair just four years after it started in 2008. Rumours of the takeover had been circulating but it was not confirmed until yesterday, when Asian Art Fairs said MCH Swiss Exhibition (Basel) had signed the purchase agreement on July 1. The MCH Group said it had the option of acquiring the remaining 40 per cent in 2014. The prices were not disclosed. Art HK director Magnus Renfrew, who will stay in his job, said the acquisition would take the fair to a completely different level. "It will only help what we've already built, increasing the cultural significance as a major fixture in the art world." This year, Art HK will run from May 26 to 29 at the Convention and Exhibition Centre, but next year's event will be moved to February 2 to 5 to space out the three fairs: Art Basel is staged in mid-June in Switzerland and Art Basel Miami Beach in early December. In the medium term, MCH said, it hoped Art HK would be developed under the Art Basel brand. Renfrew said he expected more participation from international galleries and the arts community. Apart from sales of artworks, he said, he hoped education would remain a major focus of Art HK. "In Asia, things move very quickly. Education and accessibility is the core of the art fair," Renfrew said. "[Art Basel and Art Basel Miami Beach] have great cultural significance and they have strong educational events. It's a real draw for top curators and museum directors." Art critic Oscar Ho Hing-kay said the takeover was likely to attract more visitors to the city. "The art market in Asia is booming, with lots of collectors who are rich ... And because of these credible organisers [of Art Basel], more established names will come ... But there's a risk of fewer alternative works being showcased." Artist Chow Chun-fai said the deal showed the importance of the Hong Kong art market, but he did not expect much impact locally. "Most of the participating galleries were not dealing with Hong Kong art, though the local arts sector's participation in non-commercial activities have increased over the years."

Hong Kong remained the most competitive city in China – but its lead over other cities was narrowing, according to a survey released on Friday by a leading mainland think tank. For six years in succession, Hong Kong has been named first in the annual survey conducted by the Chinese Academy of Social Sciences. However, the academy said Shanghai and Beijing – which came second and third respectively – were catching up. The survey said Hong Kong retained the edge in human resources, governance and financial management. But its measured level of happiness dropped 73 places to 271 among the 294 cities surveyed, with a widening wealth gap having the potential to undermine social stability. The survey also said Hong Kong was slow in restructuring its economy, and needed to increase research and development in technology. “Technological innovation is the core element of competitiveness in today’s world. In Hong Kong, some people think it is a must to pursue the development of high-end technology but some do not. This thinking may weaken its competitive edge,” the report said.

Liang Weimin, holding his son in his arms, becomes the 100 millionth visitor of Ocean Park in Hong Kong on Feb. 18, 2011. TripAdvisor, the world's biggest travel website, released the results of the "2011 Travelers' Choice World Destinations" poll recently. Chinese Hong Kong, which garnered more than 1 million votes from travelers, has been listed as one of world's best tourism destinations in 2011. It is also the only Asian city named on the list. The world's top ten best tourism destinations in 2011 are: 1. Cape Town, South Africa; 2. Sydney, Australia; 3. Machu Picchu, Peru;4. Paris, France; 5. Rio de Janeiro, Brazil; 6. New York City, United States; 7. Rome, Italy; 8. London, United Kingdom; 9. Barcelona, Spain; 10. Hong Kong, China. 

The Lands Department of Hong Kong Friday announced that two pre-sale consents to sell residential units in uncompleted developments were issued in April. The two consents involved residential developments in Tseung Kwan O and Wong Tai Sin, comprising a total of 1,996 units, which are estimated to be completed in March and September next year. At the end of last month, 22 applications for pre-sale consent for uncompleted residential units and four applications for pre- sale consent for uncompleted commercial developments were being processed. The applications for uncompleted units being processed involve a total of 10,275 flats. Two applications for consent to assign, involving a total of 2, 784 residential units, and one application for consent to assign for a commercial development, are being processed.

 China*:  May 8 2011

Soho China (SEHK: 0410), one of the largest commercial developers on the mainland, has acquired a retail and office building in Shanghai for 3.2 billion yuan from New World China (SEHK: 0917). The latest acquisition brings the developer's total investments in acquiring three projects this year to more than 7.3 billion yuan. All the projects are located in Shanghai and it is now halfway to reaching its targeted investment in new acquisitions for the year of 15 billion yuan. The firm previously focused on Beijing's commercial market. But it began to diversify in Shanghai in 2009 and has since acquired seven projects in the city for 14.7 billion yuan. Chairman Pan Shiyi yesterday said the company was optimistic about the outlook for the Shanghai commercial market. "We have seen office rents rise substantially in recent years, while occupancy rates have also stayed at a high level," Pan said, adding that the firm would continue to acquire projects in prime locations of Beijing and Shanghai. The developer yesterday announced it had signed a deal with New World China to buy Shanghai New World Changning Commercial Centre on Zhongshan West Road in the city's Changning district. It comprises two office buildings and retail space with an office floor area of 100,199 square feet and retail space of 12,664 sq ft. The project will be renamed "Soho Zhongshan Plaza" after the acquisition is completed. Soho President Yan Yan said the company planned to sell the project to individual investors by strata title in July or August at an average price of 50,000 yuan per square metre. The price of retail space would be higher than that for office space, and the developer should generate an attractive profit from the resale, based on an acquisition cost of about 28,353 yuan per square metre. The project is newly completed and has not yet been released for leasing. Soho China will help buyers seek tenants. Despite the fact that Soho has 20 billion yuan cash in hand, Yan said it would raise syndicated loans outside the mainland in the next few months. This would give it more flexibility when acquiring new development projects, she said. Pan said the company planned to launch Wangjing Soho in Beijing next month. The project provides a total gross floor area of about 500,000 square metres and will be the developer's major source of income this year. It is scheduled for completion by 2014. "We are also selling the remaining units at Galaxy Soho in Beijing. Our projects ready for sale in 2011 and 2012 will also come from Beijing," he said. The company was also trying to secure pre-sale consent to launch Hongqiao Soho in Shanghai as soon as the end of next year. The commercial project has a total gross floor area of 300,000 square metres, which will be completed in 2013. Shares in Soho China rose 2.01 per cent yesterday to close at HK$6.59.

China reiterated on Friday that it is not deliberately seeking to generate a trade surplus with the United States, Vice Finance Minister Zhu Guangyao said, days before talks with the United States. “China’s position is clear – that we are not deliberately pursuing a large trade surplus. This is a mutually beneficial, win-win economic relationship,” Zhu told a news briefing ahead of the annual Strategic and Economic Dialogue in Washington that begins on Monday. Zhu also said the two sides agree on the general direction for yuan reform but have differences over the rate of reform and said there was a need to enhance further understanding. He repeated Beijing’s position that the exchange rate issue was a matter of sovereignty. Zhu added that managing China’s growing foreign exchange holdings was “challenging”. A key cause of friction between Beijing and Washington is the US trade deficit with China. Despite a pledge by both countries to work together on overcoming global imbalances, the deficit rose to US$273.1 billion last year, a 20.4 per cent increase in the shortfall in 2009.

According to analysts, the popularity of tablet PCs will have a negative effect on the e-book-reader industry. The market growth for e-book readers in China this year will be 1.05 million units, below previous estimates, while sales of tablet PCs will reach at least 4.5 million units. Having boasted in May 2010 that its aim was to overturn Apple Inc's dominance in the Chinese tablet PC market, the nation's leading maker of e-readers and tablet PCs, Hanvon Technology Co Ltd, has posted a first quarter loss of 40 million yuan ($6 million). By contrast, the company it planned to overtake, Apple, registered a profit of $6 million for the same period. At the time of its claim, Hanvon seemed to be on top of the world. In 2009, full-year sales revenue from its e-readers increased to 580 million yuan, from 200 million yuan in 2008. Following the release of the results, Liu Yingjian, Hanvon's founder and chairman, admitted that the loss was the result of the appearance of more tablet PCs in the Chinese market. Only 280,000 e-book readers overall were sold in the first quarter of this year, a decline of 7.41 percent quarter-on-quarter, while tablet PC sales reached 1.04 million units, a 32.5 percent quarterly increase, according to the Beijing-based research company Zero2IPO Group,. At its peak in 2009, Hanvon held 80 percent of the e-book market. The company listed on the Shenzhen Stock Exchange in March 2010. Its share price skyrocketed to 175 yuan just a few days after its IPO, but had fallen to 23.90 yuan at the market close in Shenzhen on May 5. The market growth for e-book readers in China this year will be 1.05 million units, below previous estimates, according to data from the IT research company, Analysys International. Meanwhile, despite arriving on the market later than e-book readers, sales of tablet PCs will reach at least 4.5 million units. This year, a number of international companies will launch new tablet PCs in China, including Hewlett-Packard Corp, Dell Inc, Acer Inc and ASUSTeK Computer Inc. Apple's iPad 2 goes on sale in China on May 6, in tandem with a price reduction for its earlier first-generation iPad. "Last year, our N800 e-book reader cost 3,400 yuan - 500 yuan less than an iPad," said Hanvon's Liu. "However, we were forced to cut the price of the N800 to 2,900 yuan in response to the price reduction of the iPad 1." Inc also lowered the price of its Kindle e-book reader to $114 in response to the iPad price cut, but without sustaining a loss, according to its financial report. "Unlike the United States, Chinese e-book producers haven't formed a cohesive business chain that integrates devices, applications and e-book copyrights," said analyst Sun Peilin from Analysys International. "The profit margin from selling hardware has become increasingly narrow due to intense competition." Chinese e-book producers need to cooperate with publishers to develop software for the device, because they won't survive by only providing hardware, said Sun. Liu said Hanvon will place more emphasis on developing software, such as an e-book online sales platform, in the hope of rescuing its full-year sales revenue. has more than 810,000 e-books available through its website, while Hanvon has only about 100,000. According to Zero2IPO, the popularity of tablet PCs will have a negative effect on the e-book-reader industry, but "the effect has been limited so far", said Zhang Yanan, an analyst at the research firm.

The first buyer of an iPad 2 holds up his device at an Apple flagship store at Xidan in Beijing, May 6. Apple's iPad 2 went on sale on the Chinese mainland on May 6. Apple's iPad 2 (Wi-Fi only) went on sale on the Chinese mainland Friday, the Southern Metropolis Daily reported. Prices for this generation of devices are lower than iPad 1, with 16GB model being sold for 3,688 yuan ($568), 32GB model for 4,488 yuan, and 64GB model for 5,288 yuan, the newspaper confirmed with the tablet maker. The lower prices, better function and sufficient stock will squeeze the profit space of scalpers and other tablet computer makers, the report said. According to the latest survey by Nielson, Apple's iPad took the largest share (82 percent) in the US tablet market, split between Wi-Fi only models (43 percent) and 3G+Wi-Fi (39 percent). Samsung, Dell and Motorola came after Apple -- with 4 percent, 3 percent and 2 percent, respectively, in the market.

Chinese President Hu Jintao met with Austrian Federal Chancellor Werner Faymann here on Friday, vowing to further boost bilateral cooperation and exchanges in various areas. Hu hailed the remarkable progress of China-Austria relations since the forging of diplomatic ties 40 years ago, citing frequent high-level visits, expanded trade cooperation and cultural exchanges. "We appreciate the Austrian government's adherence to the one-China policy, and its focus on developing relations with China," he said. There are no fundamental differences standing in the way of China-Austria relations, he said, adding that both sides advocate the diversity of civilization and share aspirations to boost cooperation in various areas. He called on both countries to take the 40th anniversary of diplomatic ties as an opportunity to further expand exchanges and cooperation in all fields, enhance consultation on global and regional issues and to build a bright future for friendly, cooperative China-Austria ties. In response, Faymann said his government was satisfied with the great achievements made through bilateral ties over the past 40 years. Austria is willing to make joint efforts with China to cement substantial cooperation in areas such as trade, renewable energy, environmental protection, technology, culture and education, he said. Faymann also pledged to enhance dialogues with China on international and regional affairs and to boost new progress of bilateral ties. At the invitation of Chinese Premier Wen Jiabao, Faymann arrived in Beijing on Thursday for a three-day official visit to China.

Chinese President Hu Jintao met with Austrian Federal Chancellor Werner Faymann here on Friday, vowing to further boost bilateral cooperation and exchanges in various areas. Hu hailed the remarkable progress of China-Austria relations since the forging of diplomatic ties 40 years ago, citing frequent high-level visits, expanded trade cooperation and cultural exchanges. "We appreciate the Austrian government's adherence to the one-China policy, and its focus on developing relations with China," he said. There are no fundamental differences standing in the way of China-Austria relations, he said, adding that both sides advocate the diversity of civilization and share aspirations to boost cooperation in various areas. He called on both countries to take the 40th anniversary of diplomatic ties as an opportunity to further expand exchanges and cooperation in all fields, enhance consultation on global and regional issues and to build a bright future for friendly, cooperative China-Austria ties. In response, Faymann said his government was satisfied with the great achievements made through bilateral ties over the past 40 years. Austria is willing to make joint efforts with China to cement substantial cooperation in areas such as trade, renewable energy, environmental protection, technology, culture and education, he said. Faymann also pledged to enhance dialogues with China on international and regional affairs and to boost new progress of bilateral ties. At the invitation of Chinese Premier Wen Jiabao, Faymann arrived in Beijing on Thursday for a three-day official visit to China.

China has increased its target for solar power capacity to 50 gigawatts by 2020 – more than double its original figure – state media revealed on Friday, as the government in Beijing steps up efforts to boost clean energy sources. The increased target follows the massive earthquake and tsunami in Japan that triggered a nuclear crisis and fuelled worldwide debate about the safety of atomic power. China hopes its installed solar power capacity will reach 10 gigawatts by 2015 and 50 gigawatts by the end of the decade, the Shanghai Securities News said, citing Li Junfeng, deputy director of the energy research arm of the National Development and Reform Commission (NDRC). The country’s current capacity is less than one gigawatt, the official China Daily said last month. Li said the government will soon publish a five-year blueprint and other supportive policies for the solar power industry. Officials at the NDRC, China’s top economic planning agency, were not immediately available to comment. Beijing has ordered safety inspections of the country’s nuclear plants and “temporarily” suspended approval of new and proposed projects following the disasters in Japan, but has said it will continue to develop the technology. China – which in November admitted it is the world’s biggest greenhouse gas emitter – has some of the globe’s worst air and water quality after three decades of unrestrained growth and resulting pollution. The government plans to invest hundreds of billions of dollars developing clean energy over the next decade as it seeks to meet a target of generating 15 per cent of its energy from renewable sources by 2020. the mainland currently relies on coal-generated power stations for 70 per cent of its energy needs.

Hong Kong*:  May 7 2011

Travel website TripAdvisor rates Hong Kong as the top Asian destination in the Travellers' Choice awards. The city ranked 10th in the worldwide choice of top destinations, the highest of any Asian cities. It beat Kyoto in Japan which ranked 11th. The website compliments our food. It says: "Hong Kong's a great city for an adventurous eater. Stop at a street vendor for fish balls on a stick or stinky tofu, or opt for as much dim sum as you can eat. If you're tired of local and regional Chinese specialties, check out upscale offerings from some of the world's top chefs, like Joel Robuchon and Alain Ducasse. Victoria Peak, Ngong Ping 360 and the Star Ferry rate as must-sees. South Africa's Cape Town, Australia's Sydney and Peru's Machu Picchu are the top three destinations.

HK scientists find new way to spot fetal abnormalities - Pioneering DNA chip can give notice of severe disabilities - (From left) Professor Lau Tze-kin, Professor Leung Tak-yeung and Professor Richard Choy Kwong-wai show off the DNA chip. Hong Kong researchers have produced a pioneering technology that allows pregnant women to find out in just one week if their unborn child has chromosome abnormalities that would result in severe disabilities. The Fetal DNA Chip, developed at the Chinese University, adapts a technique used in screening tumours to track chromosome changes in the unborn child. Known as comparative genomic hybridisation it can spot abnormalities that are invisible to the conventional approach, karyotype analysis, which uses microscopes. First used in 2009 at the prenatal genetic diagnosis centre of the university's department of obstetrics and gynaecology, it has since been used in 281 cases before being introduced to the public yesterday. "We developed this chip because we wanted to introduce a more comprehensive search for genetic abnormalities with small DNA regions," Professor Richard Choy Kwong-wai, an associate professor in the obstetrics department, said. The centre is the only place using the technology in a clinical setting. It was developed after researchers found that an indicator for Down's syndrome - an increase in fluid under the skin in the nuchal area at the back of the baby's neck - could indicate the presence of other abnormalities too tiny to be detected by a microscope. The Hospital Authority has offered free Down's screening since July last year. This uses ultrasound to measure the fluid, known as a nuchal translucency (NT) test. If an increase is found, fetal karyotyping is recommended to confirm the condition. Using the new technique, the university's researchers tested 48 samples and found that 8.3 per cent of fetuses with a nuchal translucency of 3.5mm or above carried chromosomal aberrations that were either fatal or associated with severe congenital abnormalities, that would have otherwise been missed. They found that more than 100 diseases were associated with an increased NT. "Think of DNA as string tightly wound together," said Professor Lau Tze-kin, an honorary professor with the department. "What we are looking for is when chunks of this are missing. We are looking for smaller deletions or additions of chromosomes that are not as noticeable as Down syndrome, which can result in conditions like Digeorge syndrome." Digeorge syndrome can cause recurrent infection, heart defects and distorted facial features. The test involves taking a sample of fetal DNA from the womb. DNA segments known as props are then hybridised from the corresponding DNA sections in the sample, along with the a sample from a person with no chromosome abnormalities. "We scan these into a computer," Lau said. "On the genomes where we have put a prop there is a high resolution ... the software recognises this and shows us which of the DNA segments are balanced, which have extra chromosomes and which have fewer than there should be." In the case of an abnormality, "we explain the relevant disorder to the parents [and] advise them on the financial and development implications," Lau said. "We will never say whether to carry on or terminate the baby." The new method is also faster, yielding results in seven days while the microscope method can take three times as long. But it is more expensive at HK$7,900, compared to HK$2,000 for karyotype analysis. Private obstetrician Dr Kun Ka-yan, who was not involved in the research, said the test should be applied but that money was a concern. "The Hospital Authority will not pay for it, so to do it, the client will have to pay," Kun said.

Learning to appreciate China will become a core part of a reformed curriculum which seeks to make national education a compulsory subject for all schoolchildren in Hong Kong, starting as early as next year. While the authorities say lessons in moral and national education will promote individual development, critics say such lessons could turn into political brainwashing and promote the Communist Party. Chief Executive Donald Tsang Yam-kuen has promised to improve Hong Kong pupils' knowledge of the nation in successive policy addresses, following remarks by President Hu Jintao during a visit in 2007 on the importance of giving Hong Kong children a better understanding of China's development and identity. Under proposals released yesterday, which are subject to a four-month consultation period, schools would have to spare up to 50 hours a school year, or about two lessons a week, for the new subject. In what is described as an identity-building approach, schoolchildren will learn, according to their age, to sing the national anthem, attend national-flag-raising ceremonies, understand the Basic Law, support national sports teams, and appreciate and understand Chinese culture. They will also learn about the development of China through studying current affairs. The subject will also incorporate civic education and personal development, such as learning to be polite and to keep promises. There will be no examinations in the subject, but performance will be assessed based on the views of teachers, parents and classmates. Assessment will be based on criteria including whether pupils feel happy to be Chinese, or consider the needs of the country when planning their future. Chairman of the moral and national education ad hoc committee under the Curriculum Development Council, Professor Lee Chack-fan, said the subject "aims to provide pupils with systematic learning objectives, focusing on developing positive values and attitudes to enhance their personal and national qualities". The subject would be introduced in primary schools next year and secondary schools in 2013, according to the committee. Democratic Party legislator Cheung Man-kwong, who represents the education sector, warned of possible political brainwashing. "It is more important to give students a comprehensive and true picture of China," Cheung said. "National education should not be teaching students to toe the Communist Party's line, but to understand universal values." Ho Hon-kuen, vice-chairman of Education Convergency, which represents school administrators, also cast doubt on the plan. "If it is not an open examination subject, students will not take it seriously," Ho said. Chief curriculum development officer Dr Cheung Wing-hung rejected the criticism. "The design of the curriculum is to encourage students to look at an event from different perspectives before building up their own values," he said. "Teachers are free to discuss any topics in class." The Hong Kong Professional Teachers' Union feared the introduction of a new subject would increase teachers' workloads. Some parents also questioned the timing. "Teachers are already tied up by the launch of the new secondary curriculum," said Wong Yam-wah, of the Federation of Parent-Teacher Associations in Tai Po District. The consultation will run until August 31.

Insurer gives two hostage crisis victims HK$1m 'donation' - Two seriously injured survivors of the Manila hostage crisis have finally secured a one-off HK$1 million donation from an insurance fund. After months of talks, the pair have agreed not to pursue legal action against the company Chartis, which provided travel insurance to the Hong Kong tourists held by sacked policeman Rolando Mendoza last August. The deal marks an end to a long-running dispute. The insurer stressed that the pay-out was not compensation, but a special fund set up just to help Joe Chan Kwok-chu, who was shot in the hands, and Yik Siu-ling, whose lower jaw and fingers were shattered by flying bullets. Both parties and the two lawmakers who helped them yesterday refused to disclose details of the deal, including the total amount of the fund. But a person familiar with the situation said Chan would immediately receive HK$400,000 while Yik would receive HK$600,000. Chan, who previously said justice had not been done, said: "I had previously misunderstood the whole incident, including the insurance policy and [insurer's] responsibility ... now I look back, it has nothing to do with justice." Chan also made an earlier statement saying the insurer had not shown "corporate responsibility", but yesterday said "it has shown its responsibility all the way". His friend Yik had removed her mask to reveal her damaged lower jaw to Chinese media and had accused the insurer of not giving enough compensation. Paul Wong Fu-tat, senior vice- president of Chartis, who appeared with the two survivors for the first time, did not answer directly if his company had bowed to public pressure. "We set up the fund and made a donation because we really want to help the two victims," he said. Wong also said the insurer had given out nearly HK$7 million to 11 other hostage victims or their family members. But he said the money for Tracey Wong Cheuk-yiu and Jason Wong Ching-yat, who lost both parents in the ordeal, had not yet been paid as the court had not decided who were their custodians. The insurer set up two trust funds last month to provide HK$350,000 to Yik and HK$150,000 to Chan in 24 instalments to subsidise their medical and daily expenses. Yik would have received HK$12,000 a month and Chan HK$6,000 a month, but these have been cancelled. Upon receiving the HK$1 million, the pair can now use the money for whatever they choose, including a potential legal action against the Philippine authorities. Chan said the dispute had ended satisfactorily and he and Yik wanted to get back to their normal lives. Insurance sector lawmaker Chan Kin-por said the terms on current travel insurance policies in Hong Kong were rather narrow. That was why Chan and Yik were not entitled to compensation as they were not "completely disabled", according to the definition on the policy they had brought. Chartis is putting forward a new type of travel insurance next month and expanding its coverage area. Chan said he hoped other insurers would follow suit.

 China*:  May 7 2011

Rio Tinto, the world's third-largest miner, expects global markets to remain volatile in the short term, but says strong demand from China has offset any temporary loss of sales to Japan after the earthquake and tsunami disaster. The company says it has seen little real impact from the crisis in Japan, its second-largest customer. "We've seen some impacts to individual shipments of some of our products, but they have almost entirely been offset by continued strength in the Chinese markets," chief executive Tom Albanese said after the group's annual meeting. Supply of equipment, such as trucks or parts, made by Japanese companies had been disrupted, but Rio was able to get around that. "While there have been areas where we've seen some short-term impacts, they have not been material and they have not had a material impact on the business," Albanese said. Rio still saw financial markets as fragile due to economic and financial imbalances, chairman Jan du Plessis (pictured) said. "However, our pursuit of operational excellence and our strong balance sheet put us in a positive position to weather this short-term volatility." After struggling through the financial crisis and paying down US$40 billion in debt that it took on for its ill-timed acquisition of Alcan in 2007, Rio recently secured an upgrade in its credit rating from Standard & Poor's to single A, following an upgrade from Moody's. Following a record profit last year, Rio launched a US$5 billion share buyback, of which it has bought back about US$1.3 billion worth of its UK-listed shares so far. Du Plessis said a buyback of its Australian shares was unlikely in the near term as the Australian shares were more expensive than its British shares. With low debt and soaring cash flows, Rio is back on the hunt for acquisitions, but has made clear it is interested only in small- to mid-size deals, worth less than US$10 billion, to avoid stretching its balance sheet. "That's a low-risk, sensible way to add value," he said. Albanese dismissed speculation which roiled the market on Tuesday that Rio was lining up a bid for top North American aluminium maker Alcoa, saying it would not fit with the smaller size of deals it would look at. "I've seen some what I'd call `trader chatter' over the past day or two and it sort of disappeared as quickly as it emerged. I thought that spoke for itself," he said. Albanese and du Plessis declined to comment on whether Rio had held any talks with state-owned China Guangdong Nuclear Power (CGNPC) about its planned bid for uranium explorer Kalahari Minerals. Kalahari's main asset is a 43 per cent stake in Extract Resources, which owns the Husab uranium project in Namibia that Rio is looking to develop. Rio owns 14 per cent stakes in both Kalahari and Extract. CGNPC trimmed its planned bid for Kalahari this week, but was blocked by British regulators from going ahead as the bid was lower than initially proposed in March. Investors have said Rio Tinto may be willing to work with CGNPC, given it has been building closer ties with the Chinese.

Faced with a credit squeeze by Beijing, which is trying to curb the rising property market, more mainland developers will raise capital in Hong Kong through stock flotations, according to Richard Ho of Deloitte, the accounting firm. "At least 10 to 12 mainland companies are either studying the possibility or are in the process of seeking a listing in Hong Kong," said Ho yesterday as his company announced the latest edition of its China Real Estate Investment Handbook 2011. "Some are our clients," he added. The handbook said mainland developers needed proper funding plans, alternative funding sources and flexible strategies to handle the challenges posed by the uncertainty of government policies. "Bank financing in China seems to be impossible," said Ho. Developers have been looking at different fund-raising channels, such as bonds, he said. For the second time this year, one-year deposit and lending rates were raised by 25 basis points last month. The benchmark one-year deposit rate rose to 3.25 per cent and the five-year and above lending rate was 6.8 per cent. Bank lending to the property industry on the mainland was 195.4 billion yuan (HK$233.4 billion) in March. But that was only 28 per cent of developers' total source of funds during the month, the lowest level since 2011, according to property consultant DTZ. National development loans shrank to 115.8 billion yuan in March, down 13.6 per cent from the January to February average, DTZ said. Ho said finding funds through stock flotations was also an option for developers. "We will see mainland developers seeking listings in Hong Kong in the fourth quarter of this year or in the first quarter of next year," he said. Because of the combined effect of the central government's austerity measures and tightened liquidity, new home sales dived in the first quarter. Sales fell an average 25 per cent, while home prices rose 0.4 per cent last month from March, according to Soufun Holdings, the nation's largest real estate website owner. The slowdown in the property market also led Midland Realty to close all but one branch in Shanghai. But Ho said there was no obvious sign of a price correction in the mainland market, despite the government's cooling measures. Nancy Marsh, capital providers leader of Deloitte China, said new tax rules had been released on the mainland and property developers should study the recent developments in tax law and the regulations. She said the State Administration of Taxation had issued circulars which clarified settlement and collection of land value appreciation tax. "Mounting pressure for the government to control property prices and readjust its housing policy will prompt more tax changes, including the potential introduction of property tax in China on a nationwide basis," Marsh said.

Avon Products, the world's largest door-to-door cosmetics merchant, has fired four executives over bribes to officials in China, it said in a regulatory filing. The US company said it was also investigating possible corruption in other countries. The company suspended the four in April 2010 as part of an internal investigation into its compliance with the US Foreign Corrupt Practices Act. The executives included the general manager and finance chief of the company's China unit, which generates 2 per cent of Avon's revenue. Other employees could be affected, according to Tuesday's filing. The fired executives are SK Kao, the former general manager; Jimmy Beh, the China chief financial officer; CQ Sun, the former head of corporate affairs for China; and Ian Rossetter, the former head of global internal audit and security, The Wall Street Journal reported yesterday, citing an unidentified person. "The firing is likely to be part of the company's strategy in hoping to reach a settlement with US authorities in respect of any criminal charges," said Richard Chalk, head of Freshfields Bruckhaus Deringer's Asian disputes practice, who is not involved in the case. He is working for clients on two cases involving the act. Avon is conducting compliance reviews "in a number of other countries selected to represent each of the company's international geographic segments". The reviews and internal investigation are focused on expenses for, among other items, entertainment and gifts "in connection with our business dealings, directly or indirectly, with foreign governments," according to the filing. As part of the investigation, Avon has discovered millions of dollars in questionable payments to officials in Brazil, Mexico, Argentina, India and Japan, the newspaper reported. The cosmetics seller made US$229 million revenue in China last year, 35 per cent lower than in 2009. Avon had US$10.9 billion total sales.

Renren soars on NYSE as social media start listing - Chinese giant's IPO a trailblazer for other social networks. Renren's chairman and chief executive Joseph Chen on the floor of the New York Stock Exchange. The social network's shares rose 28.64 per cent to close at US$18.01 on their debut. Chinese social-networking giant Renren saw its shares soar in their first day of trading in the United States, heightening anticipation ahead of expected initial public offerings (IPOs) for Facebook and other major social media players. Renren's shares yesterday rose 28.64 per cent to close at US$18.01, after hitting a high of US$24 in their New York Stock Exchange debut. The Beijing-based company, which trades under the ticker symbol "RENN", earlier raised US$743.4 million from its initial public offering of 53.1 million American depositary shares, priced at US$14 each. It became the first major social-networking site operator to go public, and its listing turned the spotlight on Facebook, which many speculate will list next year. "There is no doubt this just adds to the allure to a potential Facebook IPO," said Bill Buhr, an IPO strategist at the investment research firm Morningstar. Renren shares were trading at slightly more than 80 times annualised sales for the second half of last year, according to estimates by Francis Gaskins, the president of market research service That is well above Facebook, valued at 35 times last year's sales in grey market trading. "If you like Renren, you'll love Facebook," Gaskins said. Facebook investors include Li Ka-shing, the chairman of Hutchison Whampoa (SEHK: 0013) and Cheung Kong (Holdings) (SEHK: 0001). The city's richest man bought a stake in Facebook in 2007 through his namesake charitable foundation. Investors' attention has also been fixed on the listing of other popular social media players. LinkedIn, the business-oriented social-networking service, is already preparing for its IPO later this year on the New York Stock Exchange. US social discount-shopping site operator Groupon, which started operations on the mainland in March this year, is planning an IPO for the second half of 2011. Microblog pioneer Twitter has dismissed rumours of a listing, but speculation has continued over the company being an IPO candidate next year. For the moment, the social media industry's spotlight is on Renren. Chairman and CEO Joseph Chen yesterday said the company would soon become profitable. Chen founded Renren in December 2005 when it was called Xiaonei, translated as "Inside Campus", and designed as an online social networking site for college students. It has since expanded to a general audience, with a market-leading 117 million registered users, and generates 45 per cent of revenue from online games and 42 per cent from online advertising. Michael Clendenin, the managing director at mainland research and consultancy firm RedTech Advisers, sees red flags. "There is substantial risk that Renren will not deliver the kind of significant revenue growth required to justify its stratospheric valuation," Clendenin said. He pointed out that games would remain a huge part of Renren's business, but it must strive to grow online advertisements and, its Groupon-like discount-buying service, to stay competitive against main social media rival Kaixin100 or larger internet players such as Tencent Holdings (SEHK: 0700), Baidu and Sina. "Increasing competition and stagnant growth in its games unit is a drag on Renren's top line," he said. Renren last year posted a net loss of US$61.2 million and revenue of US$76.5 million. Clendenin said: "Renren needs to prove it can accelerate growth, so investors won't think it is just cashing in while China IPOs are hot."

Hong Kong*:  May 6 2011

The government has been criticised for failing to nurture a significant part of Hong Kong's wealth after a study found the internet-based economy is worth almost HK$100 billion - or 5.9 per cent of gross domestic product. Commissioned by Google Hong Kong and the first of its kind in Asia, the study found the dollar value of the internet in the city was HK$96 billion in 2009, a figure that is likely to be higher now. Its report, "The Connected Harbour: how the internet is transforming Hong Kong's economy", included input from more than 500 small to medium businesses and was independently researched and written by the Boston Consulting Group. Samson Tam Wai-ho, lawmaker for the information technology sector, said Chief Executive Donald Tsang Yam-kuen was short-sighted when it came to technology. "I don't think he will do something really exciting or special. I want to see the coming government, not the existing one, create a new bureau: technology and innovation," he said. "Then the new chief executive can use this bureau to show their commitment and build more partnerships. If the government takes this action, Hong Kong in five, 10 years will boom more on the internet." In some cases, small to medium businesses might not be "big or intelligent enough" to keep up with technology so the government had to ensure these companies did not get left behind, which Tam said would happen under the existing system. Charles Mak, chairman of the Hong Kong chapter of the Internet Society advocacy group, agreed there needed to be more meaningful discussion. "I think the government should be doing more but the `what' is more important than the `more'." Chief government information officer Stephen Mak said the report showed the vibrancy of the city's digital economy and acknowledged government investment and policy aid for internet infrastructure. Mak said the government was committed to helping its e-commerce and data centres grow and bridging the digital divide, and that the city, which ranked 12th in the World Economic Forum's global information technology report, was usually "consistently high" in terms of internet capabilities. The figure of 5.9 per cent of GDP compared well to leading European internet economies, the 40-page report showed. Nordic countries and Britain recorded 6 to 7 per cent and France and Spain 2 to 4 per cent. The city's share was predicted to grow by 7 per cent a year - faster than forecast GDP growth of 4 per cent - and contribute 7.2 per cent by 2015. The report's methodology looked at several GDP factors and broke down the HK$96 billion valuation into the following categories: consumption (HK$31 billion), private investment (HK$20billion), government spending (HK$12 billion) and net exports (HK$33 billion). It also looked at contributing factors not captured by the GDP figure, such as business-to-business e-commerce, goods bought offline after online research, and productivity gains through e-banking and e-brokerage in the finance sector. The report also evaluated Hong Kong's internet economy through an index developed in-house called e-Intensity, which looked at three factors: enablement, expenditure and engagement. For enablement, defined as broadband subscriptions, smartphone adoption and average download and upload speeds, Hong Kong ranked third in the region behind South Korea and Japan. For engagement, the city ranked fifth behind Australia, New Zealand, Singapore and Japan. The report found that just 50 per cent of local businesses had a website. For expenditure, which included online purchases and group-buying sites such as Groupon, Hong Kong was sixth, behind Singapore and Korea and below the Organisation for Economic Co-operation and Development average. Overall, the index ranked Hong Kong just ahead of Singapore, on par with the US and Luxembourg but behind the leading internet economies, which were identified as the Nordic countries, Korea, Japan, Britain and Germany. Daniel Alegre, Google's president for Asia-Pacific operations, said the internet's growth was fuelled, in part, by exports. "Asia-Pacific is an export-driven region with markets like China, Japan, Korea, Singapore, Hong Kong. What the internet has been able to do is level the playing filed for exporters. "In the past, only large companies which had access to the trading shipping lines and representatives in other countries could access consumers outside the local market." But now, smaller, family-run businesses could tap into the global market through a website or online advertisement, he said. Hong Kong has 4.8 million internet users out of a population of seven million and broadband penetration has grown to 82 per cent of households.

The government has admitted asking the public if finance chief John Tsang Chun-wah should quit over this year's budget fiasco - and said it was not the first time it had polled people on the performance of top officials. But in a move that has drawn fire from lawmakers, it has refused to disclose the polls, saying to do so would hurt its ability to run future polls. Officials will only say that the controversial poll, carried out in March by the government's top think tank, the Central Policy Unit, was to "collect public views on the budget". Lawmakers criticised what they described as the increasing secrecy of the taxpayer-funded CPU, arguing it has become a tool for the government to manipulate public opinion. "[The CPU] has commissioned an institution to collect public views on the 2011-12 budget and their response to some incidents in the community," acting Chief Secretary Stephen Lam Sui-lung told the Legislative Council yesterday. "The results were for government's internal reference only." Asked if the CPU had previously conducted polls on whether an official should resign, Lam said: "The CPU has conducted opinion polls on similar subjects before." A South China Morning Post (SEHK: 0583, announcements, news) request for the findings of the CPU's budget poll made under the Code of Access to Information was turned down by the administration "to ensure objectivity of the surveys". "Survey results are not made available to the public ... so as not to influence the public over their attitudes ... Such disclosure would also prejudice the proper and efficient conduct of operations of the CPU," a letter from the administration said. The phone survey, which came to light in March, asked if respondents agreed with the finance chief's budget U-turn to give a direct HK$6,000 handout to all holders of permanent ID cards aged 18 and over, and if the government was facing a crisis of governance. The survey, conducted by Chinese University's Centre for Communication Research, then asked: should John Tsang resign over the budget controversy? CPU head Professor Lau Siu-kai has disclosed the "internal" survey findings to substantiate his viewpoints during media interviews from time to time. In an interview with the South China Morning Post in March, when talking about the city's participation in the 12th national five-year plan, Lau said: "About 70 per cent in our polls said they wanted Hong Kong to take part and hoped the central government would state clear support for particular development items relating to Hong Kong." Civic Party lawmaker Tanya Chan questioned the CPU's selectivity over survey disclosures. "The CPU surveys are funded by public money so the public should have the right to know," she said. "There is no check and balance on the CPU when their works are kept secret." Democratic Party lawmaker James To Kun-sun said the CPU was increasingly serving the administration's own purpose. Citing an anonymous "former survey conductor", To said previous CPU surveys had asked such self-serving questions as "Do you think [former legislator] Martin Lee Chu-ming is a traitor?" and "Do you think [former chief secretary] Anson Chan Fang On-sang suddenly turned democratic?"

Hong Kong's minimum wage ordinance takes effect from Sunday, as a milestone for protection of the grass-root labor rights in the city. According to the ordinance, wages payable to an employee in respect of any wage period, when averaged over the total number of hours worked during that time, should be no less than the statutory minimum wage rate of 28 HK dollars (US$3.6). Employees are covered by the statutory minimum wage, regardless of whether they are monthly-rated, daily-rated, casual or part-time, and whether or not they are employed under a continuous contract as defined in the Employment Ordinance. The minimum wage applies to the disabled, but is not applicable to live-in domestic workers, student interns and work-experience students. Matthew Cheung Kin-chung, Secretary for Labor and Welfare of the Hong Kong Special Administrative Region government, said on Sunday that he is quite sure that with everybody working together, statutory minimum wage should be successfully implemented in Hong Kong. The Labor Department of the HKSAR government stressed that employers and employees should negotiate on the issue, while critics said that is not really reasonable because the employers have all of the power. "Our message to the employers is loud and clear", Chung said on a radio show, "Given the new situation, employers should engage in candid, frank and sincere dialogue with the employees in order to iron out any differences. It is only in their own interest to have a workforce with high morale, high productivity and commitment." The ordinance was passed by the city's Legislative Council on July 17, 2010, to form a statutory minimum wage regime that strikes a balance between forestalling excessively low wages and minimizing the loss of low-paid jobs while sustaining Hong Kong's economic growth and competitiveness. The Labor Department has released the Statutory Minimum Wage Reference Guidelines for Employers & Employees. Inspectors will explain to employers and employees the requirements of the law and distribute leaflets on the statutory minimum wage for their reference. The employment conditions of workers will also be checked and follow-up action taken if necessary.

Property developer Shimao Property Holdings (SEHK: 0813) said on Wednesday that it is eyeing a spin-off of its hotel, tourism and leisure property business on the Hong Kong Stock Exchange, but no formal application has been submitted. “The company is making preliminary enquiries with Stock Exchange of Hong Kong on the possibility of a separate listing on the main board of the stock exchange of its hotel, tourism and leisure property business,” the developer said in a filing to the Hong Kong bourse. Shimao said no formal listing application had been submitted and no decision had been made on the timing or the funds to be raised. It gave no further details. Shimao shares fell as much as 1.9 per cent to HK$10.28 on Wednesday, the lowest since March 21, before regaining some ground in afternoon trading.

Mainland Tour Groups, Visitors Seek Out ‘Sex and Zen’ - Hong Kong’s box office continued to boom as visitors from mainland China flocked to the city to watch “3-D Sex and Zen: Extreme Ecstasy” over the May Day holiday. Box office sales for the three-day weekend totaled 2.8 million Hong Kong dollars (US$360,900), helped in part by viewers from the mainland, where the movie is banned for its explicit content. One viewer, a 26-year-old assistant from China’s Guangdong province who gave her name only as Pei Pei, traveled to Hong Kong to watch the 3-D film at the Pacific Place AMC Theater Saturday. Dubbed by its producers as the world’s first 3-D erotic movie, the film has brought in US$6.7 million globally since opening in Hong Kong on April 14, when tickets sales beat out “Avatar” as the biggest opening day in the city’s box-office history. “I’ve heard so much about this movie and I’m curious,” Pei Pei said. “It should be a unique experience.” Ahead of the long weekend, Chinese online forums were abuzz about the movie. Some savvy marketers cashed in by organizing tours to Hong Kong to see the film. Guangzhou-based Tower Group — which sells discounted services at a group rate, similar to Groupon – was one such company. It charged 288 yuan (US$44) per person, which included the movie ticket (at HK$100), a round trip same-day bus fare from Guangzhou and travel insurance. The site increased the price to 288 yuan from 268 yuan a person this past weekend – not because of higher demand, said a salesman, but because of increased bus expenses over the holiday. Registration for the tour was closed by the Thursday before the weekend. The company said it sold roughly 200 tickets for each day, including the Monday holiday. Indeed, China’s popular Weibo microblogging site was filled with chatter about the 3-D porn film. “I really want to go and check out this Sex and Zen. Who would like to go with me? I want girls, no guys” wrote user Yang Qingfu. “I’m going to work on my Hong Kong and Macau pass [visa] tomorrow!!!” wrote someone named Gu Yue Mu Mu Chyuan. On an online forum for the city of Xiamen, one user tried to organize a group trip to Hong Kong that ranged from a 1,500 yuan round-trip ticket for just the movie to a 3,000 yuan two-day itinerary that included not only the movie, but trips to Hong Kong Disneyland and Ocean Park. (It wasn’t clear whether the group trip went through with it.) This isn’t the first time a flesh flick in Hong Kong has drawn crowds. In 2007, mainland Chinese visitors flocked to Hong Kong for the full-length version of Ang Lee’s “Lust, Caution.”

Galaxy Macau plasters MTR station with ads - New casino buys all the advertising space at Tsim Sha Tsui for a month - Galaxy Macau, the new five-star casino resort, has bought up all the advertising space in the Tsim Sha Tsui MTR station - nearly 10,000 square metres in all - to promote its opening 12 days from now. "This is the largest metro station-wide advertising campaign in China, if not the world," said Amy Chan, the managing director at JCDecaux Transport Hong Kong, the sole agent for advertising in the six Hong Kong MTR train lines. The campaign, whose price Galaxy Macau declined to disclose, began yesterday and will run until the end of this month. The ad blitz overwhelms the busy station's exterior and interior with the branding, images and promotions for Galaxy Macau, owned and operated by Hong Kong-listed Galaxy Entertainment Group (SEHK: 0027). The ads include exterior billboards, wrap-around graphics on the pillars, stickers on the floor and platform screen doors, posters and graphics on the wall and ceiling, a 3-D exhibition space on the concourse, digital panels and multimedia spots using the trackside and concourse television displays. There are up to 20 different advertising formats, according to Chan. The displays at Tsim Sha Tsui, an area popular with mainlanders as well as international tourists, include images of the exterior and interior of the resort - casino, restaurant, spa, hotel rooms - with text in both Chinese and English. A spokesman for Universal McCann, the media agency for Galaxy Macau, said multilingual promoters would be at the station's concourse on the weekends to answer any questions about the resort from commuters, including tourists from the mainland and other markets. More than 97 per cent of Macau's nearly 25 million visitors last year were from Asia, according to Macau Government Tourist Office statistics. Opening on May 15, the 550,000-square metre Galaxy Macau complex on the Cotai Strip will include more than 2,200 rooms, suites and villas at its three accommodation providers: Singapore-based Banyan Tree Hotels and Resorts, Japan's Okura Hotels & Resorts and the Galaxy Hotel. Peter Caveny, head of investor relations at Galaxy Entertainment Group, declined to provide the exact cost of the four-week MTR station campaign, but pointed out that the marketing budget was included in the HK$15.5 billion total investment in Galaxy Macau. "We wanted to make a significant impact on the marketplace and get our message across to the 2.7 million passengers who pass through that station everyday," Caveny said. Jennifer Ma, the sales and marketing director at media-monitoring firm admanGo, said Galaxy Macau would certainly have paid a premium to launch such a major campaign in one of the city's busiest train stations. According to JCDecaux Transport Hong Kong, it accepted no other booking at the Tsim Sha Tsui station for this month and suggested clients run their campaigns in other MTR stations. Chan said it took four months to plan and execute the Galaxy Macau MTR station campaign. "It also took nearly two weeks to install everything at the station," she said. Galaxy Entertainment Group, which is controlled by the family of property and construction tycoon Lui Che-woo, has more campaigns planned for Galaxy Macau after its MTR station project. "We're going to escalate our marketing dramatically over the next few weeks," Caveny said. "We'll complement the MTR station campaign with wrap-around advertising on buses and taxis, print media advertising, television commercials and advertising on popular internet portals." Data from admanGo showed the Galaxy Group was ranked sixth last year in advertising spending among casino industry players, with campaigns worth HK$1.02 million.

Front of old shophouse saved in hotel development - Part of this 1925 shophouse in Prince Edward Road West in Mong Kok is to be preserved during the development of a 13-storey hotel on the site, after the developer accepted incentives offered by the government. A developer will preserve part of a 74-year-old shophouse in Mong Kok after being offered an incentive by the government. The front portion of the grade-three historical building at 179 Prince Edward Road West, built by a top manager of the China Motor Bus Company, will remain while a 13-storey hotel rises behind it. The preservation was made possible when the government said it would relax plot ratio restrictions on the site, allowing a slightly more intensive development. Edwin Leong Siu-hung, chairman of developer Tai Hung Fai Enterprise Company, said he had been looking at demolition in 2007, but changed his mind after the government approached him with the incentive. "It would be a pity to see the whole building disappear and be replaced by a concrete block. So we decided to do something for the Mong Kok district, where we've had a long-term investment history," Leong said. Government officials called the decision a success. But a leading conservationist lamented that preserving only the facade appeared to have become the norm for grade-three buildings, the lowest level on the heritage register, which have no legal protection from demolition. Leong said construction of an ordinary 50-room hotel on the 250 square metre site would have cost in the tens of millions of dollars but the preservation work would double the sum to about HK$120 million. As a condition for approval for the project, the second floor of the shophouse will be open to the public free as an exhibition gallery, featuring old photographs of the building and Prince Edward Road. The other two floors will be restaurants. The shophouse and one next door were built by Wong Yiu-nam, whose father Wong Wong-choi was a co-founder of the bus company. Along with 10 shophouses across the road being conserved by the Urban Renewal Authority, they are the few remaining examples of middle-class residences built in Prince Edward Road in 1925, between richer Kowloon Tong and working-class Sham Shui Po. Built in art deco style, they contain features such as a veranda, balconies, curved corners, pediments and a timber staircase. Leong said it would have been better if his company had been able to buy the neighbouring shophouse from owner Kwai Hung Realty, which carried out its own renovation. "We offered to buy it several times but in vain," Leong said. Kwai Hung could not be reached for comment. Conservancy Association campaign manager Peter Li Siu-man said grade-three buildings were always a headache for conservationists. "Given this case and the example of the Wan Chai Market, it seems it has become a norm that keeping the facade is enough for a grade-three. But it shouldn't be the case. Total preservation and renovation could also enhance the rental value of a historic building," he said. A better example was 190 Nathan Road in Jordan, a grade-three shophouse preserved and renovated as a luxury mall, Li said.

The US carrier from which Osama bin Laden was buried in the Arabian Sea is seeking permission to visit Hong Kong this month. However, Beijing had yet to give permission for the visit, security officers familiar with the situation and Washington-based diplomats said. A visit by the USS Carl Vinson would be the first visit by a US carrier to Hong Kong since February 2010 after a freeze in ties between China and the US over arms sales to Taiwan. The US Consulate yesterday said it did not announce ship visits until 24 hours in advance of arrival. "Hong Kong is a favourite port call for US sailors, and we appreciate the opportunity to make regular visits to the city. We have no announcements to make at this time with regards to future visits," a spokesman said. The nuclear-powered USS Carl Vinson was commissioned in 1982, and, at 332 metres long, is one of the largest in the US fleet. For decades carrier strike groups have been the ultimate symbol of US military primacy in East Asia - and regular visitors to Hong Kong since the 1960s. The USS Carl Vinson last visited Hong Kong in 2003. Another carrier, the USS Ronald Reagan, was expected to visit Hong Kong in the spring. However, it has been redeployed to Japan for a humanitarian mission after the March 11 earthquake and tsunami. US officials said bin Laden's corpse was "eased" into the Arabian Sea after a ceremony in which a military officer read prepared religious remarks.

Glencore International has set the price range for its London and Hong Kong initial public offering as the company looks to raise US$10 billion, at the mid-point of the range, three sources said on Wednesday. The world’s largest diversified commodities trader set a price range of 480 to 580 British pence per share for the IPO, which would value Glencore at US$48 billion to US$58 billion before the proceeds of the IPO were included, said the sources with direct knowledge of the plan. They declined to be identified because the terms were not yet public. Switzerland’s Glencore, seeking to boost its firepower for deals amid a boom in commodity prices, is due to release a prospectus for the offering with an indicative price range and other details later on Wednesday. Company officials declined to comment ahead of the publication of the prospectus. Research from two banks underwriting the commodity trader’s IPO last month said it is already worth as much as US$69 billion, with its earnings set to double in two years. The long-awaited listing, which could be London’s largest to date, will push Glencore into the public eye and will turn publicity-shy executives including chief executive Ivan Glasenberg, a former coal trader, into paper billionaires. The company could raise up to US$8 billion from the sale of new shares in a primary offering, while its partners planned to raise about US$2 billion in a secondary sale, the sources said. That would value Glencore at about eight to 10 times estimated 2011 earnings, based on the average forecast of the three banks underwriting the IPO. The base offer excludes a 10 per cent, or US$1 billion, over-allotment option. Including that greenshoe over-allotment option, Glencore had been aiming to raise up to US$12.1 billion, according to its intention-to-float document release last month. Twelve cornerstone investors had agreed to buy US$3.1 billion worth of Glencore stock, just above 30 per cent of the total, one source said. Such investors back many Asian listings, committing to take large, guaranteed stakes and hold them for a minimum period of time. Abu Dhabi’s International Petroleum Investment Co will be the biggest cornerstone investor, with the Government of Singapore Investment Corp, US fund manager BlackRock, and Credit Suisse Group and UBS private banks also taking part of the group. Glencore has also signed up hedge funds Och-Ziff Capital Management Group, Eton Park and York Capital. Founded in 1974 by trading sensation and later US fugitive Marc Rich, Glencore has until now held on to a fiercely prized tradition of public discretion, so investors will be poring over its prospectus for details on the company from its existing investors to its risks and details on its trading. Glasenberg has never disclosed exactly how much of the firm he owns, though he is expected to be shown in the prospectus to be the top shareholder. Reports have put Glasenberg’s stake as high as 15 per cent. It will also become clear whether former chairman Willy Strothotte retains a major stake or not. The prospectus is also expected to include details of Glencore’s trading in the first three months of the year, along with details of gross fees paid to its advisers – the first indication of how much the commodities giant will pay its bankers in one of the biggest paydays for the sector this year. Citigroup, Credit Suisse and Morgan Stanley are the joint global co-ordinators for the offer. Conditional trading of shares is set to begin on May 19, according to a term sheet seen last month. Glencore is expected to be fast-tracked into the FTSE 100 bluechip index at close of business on the first day of trading, given its size and share of the FTSE all-share index. It will be the first company in 25 years to make the leap and only the third ever, after BT and BG.

 China*:  May 6 2011

US Commerce Secretary Gary Locke said May 4 that the US welcomes foreign direct investment from China. Locke delivered a speech at the Woodrow Wilson Center, during which he said China's direct investment will help create job and business opportunities in the US.

Beijing has stepped up its push for transparent government spending, requiring central to local government agencies to publicly disclose spending on foreign trips, official cars and often lavish lunches and dinners. Premier Wen Jiabao said when delivering his government work report to the National People's Congress in March that the government should disclose more budget details and "let the people know how much money it has spent and what it has been spent on". By mid-April, only one ministry had disclosed its expenditure on trips, cars and meals - often seen by the public as officials' perks. A State Council statement issued after its meeting yesterday said: "Budget transparency work is not balanced and detailed enough. There remains a gap with what the public expects. "[We] must advance budget transparency and improve the disclosure mechanism by including more areas and disclosing more details." In the statement, the State Council said that the central government and its ministries must reveal to the public how much they spent on official cars, overseas trips and government banquets last year and how much they plan to spend this year. Local governments will now have to follow suit and make public the budget approved by the local people's congress and release details of government spending on the three items. Beijing, aware of taxpayers' growing concern about the way that public money is managed and growing demands for increased transparency of government finances, started to release the approved central government budget and spending in 2009, with 75 of the central government's 98 agencies announcing budgets. This year all 98 will need to report budgets and spending to the public. Past disclosures have been widely criticised for being obscure and excluding sensitive items such as spending on cars, banquets and overseas trips. Some agencies put such spending under "miscellaneous" in their budgets. In a speech at a State Council anti-corruption meeting on March 25, Wen said the government would curtail overseas business trips and reform the official car system. During the annual sessions of the National People's Congress and Chinese People's Political Consultative Conference in March, more than 200 deputies and political advisers raised proposals calling for government spending plans to be made public, especially plans that deal with official cars, overseas trips and official banquets. Last month, the Ministry of Science and Technology became the first central government agency to release a budget showing its plans for spending on government cars, receptions and overseas travel. It said it would spend 40 million yuan (HK$47.82 million) on government cars, receptions and travel this year. The General Office of the National Committee of the Chinese People's Political Consultative Conference announced during its annual sessions that its 2010 annual session cost 59 million yuan. It was the first time such spending figures had been released to the public.

Conditions are not ripe at present to freely float the yuan, Chinese economists said on Wednesday after US Treasury Secretary Timothy Geithner again pressed China on reform of its financial system. Vice-Premier Wang Qishan and State Councilor Dai Bingguo will co-chair the third round of the Strategic and Economic Dialogue (S&ED) with US Secretary of State Hillary Clinton and Geithner in Washington on May 9-10. China's monetary policy and the further opening of its financial markets to US institutions are expected to be high on the agenda. "It would be inappropriate for China to let its currency float freely at present, given the ongoing second round of quantitative easing initiated by the US and the resulting excessive liquidity," said Chen Daofu, policy research chief at the Financial Research Institute of the State Council's Development Research Center. The US will continue to press for a faster appreciation of the yuan during the annual talks, analysts said. Geithner said on Tuesday that China must improve its financial system, open up its capital market and level the playing field for all players, including foreign firms, if it wants to achieve balanced growth. "Through the S&ED, we are encouraging China to allow markets to determine interest rates and the allocation of credit, to develop a more diversified financial system, with deeper bond and equity markets, and to make it easier for foreigners to make portfolio investment in China and for Chinese citizens to make portfolio investment abroad," he said. Some Chinese economists have also urged the government to let the yuan float freely as a way to reduce the country's immense foreign-exchange reserves and to ease inflationary pressure. Yu Yongding, a former adviser to the People's Bank of China, the central bank, said that China should allow its currency to strengthen against the dollar to fight inflation. It should also stop piling up dollar assets to avoid losses as the US currency weakens, he said. Hu Xiaolian, deputy central bank chief, said in March that China will gradually open its capital account by achieving a major breakthrough in full convertibility of the yuan over the next five years. Chen said that China should accelerate the full convertibility of the yuan in trade and direct investment. But policymakers, he added, should remain cautious about trading in financial markets, especially those that involve high-leveraged derivative products, to avoid drastic fluctuations and irregular cross-border capital flows. In previous meetings, Washington focused on the Chinese currency's exchange rate, intellectual property rights and access to the Chinese market. China, meanwhile, asked the US to grant it market economy status and more investment opportunities for Chinese companies, and to ease control on technology exports to China. Geithner said that China's current financial system, which favors State-owned enterprises, makes it tough for foreign companies to compete in China and fuels tension among trade partners. The US wants to see a "more fair and efficient allocation of credit and capital" in China, he said. But Chinese officials have defended the country's stance, saying that it has been steadily reforming its economic systems to provide a level playing field for all market players.

Australian Foreign Minister Kevin Rudd pressed for a global effort to bring China into institutions, saying the future of the world economy depended on it. The China expert said bodies such as the Group of 20 and the East Asia Summit could put Beijing on the right path as its power grew. "Continued regional and global economic growth will depend on maintaining for the next 40 years the sort of strategic stability in the East that we have seen over the last 40 years," the Putonghua-speaking former prime minister said in an address at the Brookings Institution in Washington on Tuesday. "And this will not be an easy thing to do." Rudd acknowledged myriad concerns abroad about Beijing - from growing assertiveness to human rights to environmental pollution - but said it was crucial also to look at Chinese leaders' own interests and way of thinking. Rudd said the United States and its allies should talk to China in the terms of its philosophical tradition - such as the concept, often cited by Beijing's leadership, of creating a "harmonious world". He pointed to the G20 - a collection of the world's largest economies borne of the 2008 financial crisis - as an area where China has had a "positive", "forward-looking" role. "The Chinese recognised, particularly at a time of potential global economic implosion, that they had huge interests at stake in preserving the order," he said. Rudd also stressed the importance of the East Asia Summit, an annual forum created in 2005 and which will include the US president for the first time this year when Barack Obama attends the talks on the Indonesian island of Bali. Rudd welcomed the calm on one issue that has long raised tensions, Taiwan, but hinted at concern next year when Beijing-friendly president Ma Ying-jeou stands for re-election.

Volkswagen's luxury brand Audi will add shifts to ease waiting times for models as a growing tide of wealthy Chinese opt for its models. Chief executive Martin Winterkorn told VW's annual meeting yesterday that revenue and earnings before interest and tax will increase this year as demand rises in China. VW's Chinese joint ventures, which are not included in the group's operating profit, contributed an additional €557 million (HK$6.4 billion) in first-quarter earnings, the carmaker said last week. "2011 looks set to be a good year despite the economic uncertainties, both for the automotive industry and for Volkswagen," Winterkorn said. Audi plans additional weekend work this month at its two main German factories to increase production, chief financial officer Axel Strotbek said. "The extra shifts are required by the good order book," Strotbek said. "The delivery times of several models are higher than we'd like." Demand for Audi vehicles fuelled a surge in VW's first-quarter earnings before interest and taxes, which more than tripled to a record €2.91 billion. BMW, Daimler's Mercedes-Benz and Audi are targeting their highest-ever sales this year, lifted by growing wealth in China and a rebound in spending in the United States. BMW, the world's leading luxury carmaker, said in March it may add production capacity in Brazil - even as it expands in China and India - to keep pace with demand. Chief executive Norbert Reithofer said that handling the level of orders has been a "tour de force" for the production team. "Demand for luxury cars is being driven by China, the US and Europe," said Daniel Schwarz, a Frankfurt-based analyst at Commerzbank. "Although we're at historical levels, it doesn't look like we have hit the peak yet." VW's plans to add factories and models will ensure "profitable growth" at Europe's biggest carmaker in coming years, Winterkorn said yesterday at the annual shareholders' meeting in Hamburg. "We're now laying the foundations for profitable growth in all segments and business fields," Winterkorn said. "VW moved into the fast lane in 2010 - that's where we intend to keep the company in coming years." VW will introduce 30 models and vehicle upgrades in the coming months, he added. It also aims to merge with Porsche SE to strengthen its position in luxury cars and overtake Toyota as the world's biggest carmaker.

The Industrial and Commercial Bank of China, the country's largest asset lender, said Tuesday that its international settlement volume rose 44% year on year to reach 1.06 trln USD last year.

For years celebrated Chinese filmmaker Li Yu fought a running battle with mainland censors. Now her firebrand days are behind her and all she wants is a break - Mainland director Li Yu: ''I've heard of so many gifted directors who couldn't cope with it and decided to become businessmen.'' - A still from Li Yu's ''Buddha Mountain'', starring (from left) Fei Long, Fan Bingbing and Bolin Chen - The phrase "acts against humanity" brings to mind images of horrific deeds committed by genocidal tyrants and fundamentalist militias - not the first draft of a screenplay by a 37-year-old independent filmmaker. But that's exactly how the mainland's film censors described Li Yu's rough draft for her fourth movie when she submitted it to the authorities. "Maybe it's because of the story being about some kids planning to derail trains," Li says. "But the film's more than just that. The kids are thinking of doing it because they feel neglected by society; they see on the news how [President] Hu Jintao visits the sites of train wrecks, so they think they can get the attention they crave if they manage to get a train off the rails. "It's pretty strong stuff, my original premise - but it's so obvious it's not a film praising terrorism," Li continues, sighing. "And they had to say my film would be inhuman or something." Such overreaction probably stems from Li's track record of making films that tackle social taboos and then taking these films to international film festivals without official approval. Her rocky relationship with the authorities came to a head four years ago when she defied official instructions and insisted on screening an uncensored version of her last film, Lost in Beijing, at the Berlin International Film Festival. It was shown complete with scenes deemed inappropriate by the mainland authorities, including one in which the film's protagonist is raped by her drunken employer. The film caused a furore and led to her being branded a "troublemaker". "That film has surely landed me on their blacklist," Li says. "The censors have been coming down on me pretty hard since then. While other filmmakers can just submit a synopsis to get approval for shooting, I have to send in a complete script. And even then they comb through it so many times ... I've been scrutinised on a different standard. But that's probably what you have to put up with if you want to be a filmmaker on the mainland these days. Now I want to transcend these barriers rather than confront them head-on." Li says she's now a more reconciliatory figure than the firebrand who made waves with Lost in Beijing. Her new strategy, she says, is to create sugar-coated stories - and the result is her rewriting her "anti-human" treatise into Buddha Mountain. It's a seemingly heart-warming drama about the growing friendship between the bitter middle-aged Peking Opera actor Shang Yuqin (played by Sylvia Chang Ai-chia) and the three unruly but kind-hearted youngsters who rent rooms in her flat in Chengdu. The derailing element in the original script has been reworked; instead, the young rebels (played by Bolin Chen Bo-lin, Fan Bingbing and Fei Long) are seen joyriding on trains to escape the mundane and socially oppressive existence they lead at home and work. What brings these characters together is their shared feeling of alienation from their surroundings - and such ennui could be interpreted by censors as a danger to society. While the film's title and its penultimate sequence - in which the four protagonists gleefully help rebuild a dilapidated temple - suggest an arrival at inner peace, their world-weariness does anything but conform to mainstream doctrines of social harmony.

Public will lead green drive, says EU official - Climate chief sees big opportunities ahead - Pressure from a growing middle class would encourage China's leaders to push ahead with cleaning up the environment, the European Union's climate action commissioner said yesterday. Beijing also acknowledged the need to combat climate change and saw big business opportunities in green energy projects, Connie Hedegaard (pictured) told a briefing during a visit to South Korea. China, the world's second-largest economy, is the top producer of carbon emissions blamed for climate change. But it is also the world's green investment leader, according to a survey by the Pew Charitable Trusts. Hedegaard cited its latest five-year plan, which envisages major pilot projects to test market-based "cap and trade" emissions control systems. "I believe China has realised there is a limit to how much it can grow its economy without taking into consideration energy considerations, environmental considerations, air pollution, water quality. "In the end it's also about social stability, because when China now has some 400 million citizens entering the middle class, they also demand clean water and air their children can breathe." She said China had for the first time introduced a carbon target "because they can see it's necessary, but it's very much because they can see it benefits their own economy". The country already held half of the global wind power market, she noted. Mainland analysts agreed that worsening degradation and other environmental woes had cast a long shadow over the dazzling economic success, fuelling public discontent about Beijing's self-claimed progress in reining in widespread pollution. Li Yan , a climate campaigner for Greenpeace China, said that on top of mounting international pressure, Beijing had also felt the heat of the looming environmental crisis, which had become a source of social frustration and even unrest. "Environmental issues have become so pressing that they affect the livelihoods of almost everyone - not just the middle class in urban areas, but also people in the vast countryside," she said. Authorities have said the mainland's costly clean-up effort has yet to stop the overall environment from deteriorating. Li said the government had little choice but to heed public concerns, as social stability as well as the country's sustainable development were at stake. "But it remains to be seen if the government can win back public support because environmental considerations have yet to be fully integrated into decisions concerning economic and energy planning." Hedegaard said her visit to South Korea was partly aimed at discussing "cap and trade" emissions trading schemes that were pioneered by Europe and were becoming more popular internationally. "What was only recently more or less a European thing, where the whole idea originally was to make a global system and a system where we have a global price on carbon dioxide, now [this] actually seems to be moving forward," she said. In Europe, gross domestic product and manufacturing output had been increasing while emissions had been decreasing, "actually rather dramatically", and more than three million green jobs had been created. "We [Europe] really believe that pursuing this green growth strategy is the way to create growth in the 21st century," she said.

Chinese companies are in negotiations to make substantial investments in Chile, with some potential deals worth as much as US$1 billion, according to an official from the resource rich country. Three or four Chinese companies are in talks to invest in mining, energy and infrastructure projects, said Matias Mori, executive vice-president of the foreign investment committee of Chile. "The interest we're perceiving for each deal ranges from US$100 million to US$1 billion," he said. "Most of the Chinese companies that contacted us are involved in capital-intensive projects. They are not looking for small operations. They are looking for big moves of capital." The companies include state-owned and private firms, Mori added, saying the potential mining deals under negotiation include iron and copper mines. "Most of the Chinese companies are looking at owning mines and trading." Chile is the world's largest copper producer, accounting for over 35 per cent of global production and holding about 30 per cent of known global copper reserves. Infrastructure investment opportunities were included in a four-year plan launched by the Chilean Ministry of Public Works last year, Mori said. Under this plan, US$8 billion was earmarked for projects such as roads and hospitals to help rebuild areas hit by the earthquake in central Chile in February, 2010. Chinese firms had expressed interest in investing in electricity projects. "Our electricity consumption is growing 4 per cent per year. By 2020, we need to build 66 electricity power projects and 11 transmission lines to satisfy internal consumption," Mori said. "We need to grow our GDP by 6 per cent a year to be the first developed Latin American nation by 2018. Investment is critical. This is the first Chilean government pushing towards Asia. No other Chilean government has made that effort." China accounted for only 0.1 per cent of the US$74 billion in foreign direct investment in Chile between 1974 and 2010. The US is the biggest investor, with 26 per cent. "We've reached a point in which international trade between Chile and China is very robust. We're entering a second stage where we will see more foreign direct investment between both countries," Mori said. "Foreign direct investment from China is in sharp contrast with trade." China overtook the US to be the biggest trading partner of Chile in 2010, when Sino-Chilean trade reached US$17 billion, said Chilean Trade Commissioner Guillermo Garrido. Copper is Chile's biggest export item to China. One reason for the strong growth is the free-trade agreement signed between both countries in 2005, Garrido said. Next month, Vice-President Xi Jinping will visit Chile, said Luis Schmidt Montes, the Chilean ambassador to China. Last December, Hong Kong Financial Secretary John Tsang Chun-wah led a Hong Kong trade delegation to Santiago, where a memorandum of understanding was signed on wine-related business. Chile sees China as an important market for its large wine industry.

China's business travel bounces back - Chinese airlines, including Air China Ltd, at the Hong Kong International Airport. Chinese business travel expenditure grew from $18 billion in 2000 to $62 billion in 2010, according to a statement from the World Travel and Tourism Council. China's economic growth fuels transportation demand recovery - The volume of Chinese business travelers rebounded in 2010 after a slump during the financial crisis, but travel managers are feeling more pressure from soaring inflation, a report said. The rapid expansion of China's economy, which saw a GDP increase of 10.3 percent in 2010, has fueled the growth of business travel, following a decline caused by the economic contraction in many foreign countries, said a report released by AirPlus International Inc, a Germany-based global provider of solutions for business travel payment and analysis. But growing inflationary pressure - fueled by soaring oil and food prices as well as wages - has raised prices of hotels and transportation, shifting travel managers' attention toward cost control, according to the report. Chinese business travel expenditure grew from $18 billion in 2000 to $62 billion in 2010, according to a statement from the World Travel and Tourism Council. The council also predicted that the travel expenditure of Chinese companies could reach about $277 billion in 2020, and that the country is likely to become the second-largest business travel market, after the United States, by the end of that year. In the first quarter of this year, the number of business trips worldwide rose by 9 percent, the AirPlus report said. "Worldwide business travel started to climb demonstrably in the second quarter of 2010. The flight ticket spending of our international customers in 2010 was 12 percent higher than in the previous year," said Patrick Diemer, chief executive officer of AirPlus, a subsidiary of Deutsche Lufthansa AG. As travel service providers charge higher prices, more travel managers in Chinese companies are reconsidering their budgets and seeking professional cost-control services to better withstand the inflationary pressure, Diemer said. The AirPlus report was based on a survey of 1,705 travel managers around the world. Forty-four percent of the Chinese travel managers surveyed said they felt increased cost pressure from the recession that came after the global financial crisis. In 2010, AirPlus' sales revenue increased by 315 percent in China, higher than the average level of the Asia-Pacific region, according to Diemer. The company's service for travel arrangements in China - a cooperative venture with Air China Ltd and China Merchants Bank Co Ltd - saw its revenue increase by about $125 million to $160 million last year. "AirPlus aims to double its revenue in China this year, compared with last year, because China's business travel market is expanding at a faster pace," said Lucy Wang, general manager of AirPlus International China. The company plans to strengthen its strategic cooperation with Air China and China Merchants Bank, to accelerate the expansion of its travel cost-control business in the world's second-largest economy, Wang said.

A new specialized center for giant panda rescue and disease prevention broke ground for construction on Wednesday in Dujiangyan city, Southwest China's Sichuan province. Twin pandas Po and De De play at the Madrid Zoo & Aquarium - Upon completion, the facility will be the world's only center for disease prevention and control for giant pandas, according to Zhang Hemin, chief of China Conservation and Research Center for the Giant Panda. Apart from undertaking the mission of rescuing giant pandas living the wild and carrying out research on disease prevention and control for the endangered species, the facility will also provide a comfortable residence for the aged ones, said Zhang. Located at Shiqiao village of Qingchengshan township, Dujiangyan, the facility will cover an area of about 51 hectares and will cost 210 million yuan ($32.3 million) to finish. The financing of the project will be covered by Hong Kong, including 130 million yuan provided by the Hong Kong Special Administrative Regional Government. The project is expected to be completed by the end of 2012. It will be able to accommodate 40 pandas upon completion. Chinese experts have seen remarkable achievements in breeding giant pandas over the past two decades and the number of China's giant pandas has reached 315. Experts say that research on infectious diseases remains weak, though risks of such diseases have been increasing. "The facility will not only separate pandas' breeding and disease treatment, but also prevent cross infections of pandas and human beings, because we sometimes have to take them to human hospitals for treatment," said Zhang, who is also head of the administration for Wolong Nature Reserve (WNR). Wang Pengyan, executive deputy chief of WNR administration, said special facilities and researchers were needed to establish panda disease monitoring and prevention systems. "As the Hong Kong invested facility is located near WNR and the provincial capital of Chengdu, it will be convenient to utilize rich medical sources in Chengdu and gather special experts for emergency cases," said Wang, who added that the project would also serve as a nursing home for aged pandas after it is finished. Giant pandas are among the world's most endangered species. Statistics from the State Forestry Administration show that about 1,600 pandas live in the wild, while another 300 live in captivity in zoos around the world.

Rare fish costs almost as much as a car - A red dragon fish, costing almost as much as a BMW, is available at a shop in Chengdu, Sichuan province. The fish, which comes from Indonesia, is 55-centimeters long and weighs 1.5 kilograms. Its scales and fins are pepper red, which is rare, as most dragon fish are usually yellow or silver. If any fish fans are interested, the price is 360,000 yuan ($55,400). The rare fish is also high maintenance, costing more than 300 yuan per month to keep.

Carlsberg aims to double profits worldwide - Beer tests in a laboratory in Hami, in the Xinjiang Uygur autonomous region. China has seen a steady expansion of its beer industry in recent years. The Danish brewer Carlsberg Group, one of the world's premium beer makers, plans to double its global profits by 2015 in part with its expansion in the Chinese market, senior company officials said. The brewing company registered profits of $1 billion in 2010, and increase of 49 percent year-on-year. To cater to the increasingly expanding Chinese market, it recently introduced the Carlsberg Light brand in the Chinese market, part of its repositioning plan announced in April. "The launch of Carlsberg Light is an important part of our new global market strategy, and it heralded our expansion in China's food and beverage market," said Stephen Masher, chief executive officer of Carlsberg China. In line with its repositioning strategy, the Danish brewer will roll out its new packaging across more than 140 markets worldwide. Its new strategy in China has been spurred by the steady growth of the beer industry in the country in recent years. China's beer production rose by 6.28 percent year-on-year in 2010 to reach 45 million kiloliters thanks to the robust economic growth and the increasing popularity of beer in the world's most populous nation, according to the China Alcoholic Drinks Industry Association (CADIA). However, beer consumption stands at only 33 liters a person annually, far from that of the United States and Europe, which points to the great potential of the already big market, analysts said. CADIA data show that China's beer industry has recorded profit growth of up to 494 percent in the past five years, and the burgeoning market is attracting investment from foreign brewers. Carlsberg bought a 12.25 percent stake of Chongqing Brewery Co in November for 2.39 billion yuan ($369 million), making it the leading shareholder of the domestic brand with 29.71 percent shares. The booming market has also benefited domestic players. The gross profit rate of eight listed brewing companies in China is expected to reach 40 percent this year, and the sales revenue to increase 30 percent year-on-year, according to an industry report released in March by AJ Securities Co Ltd. The Shanghai-listed Tsingtao Brewery Co, one of China's leading breweries, announced profit of 1.52 billion yuan in 2010, up 21.6 percent year-on-year. Its revenue increased by 26.7 percent year-on-year to 5.25 billion yuan in the first quarter of this year. Sales of another major brand, Yanjing Beer Group Corp, reached 5.03 million kiloliters in 2010, up 7.71 percent year-on-year, and it expected another increase of more than 10 percent this year in terms of sales.

Hong Kong*:  May 5 2011

The taxman has hit the jackpot to swell government coffers by a record HK$209 billion. The windfall comes thanks to a strong economic recovery which drove up stamp duty revenue as well as income from salaries and profits tax. The tax bonanza represents a 17 percent increase on the previous 12 months ending March 2010. It is 25.7 percent more than last May's official estimate, but 1 percent less than February's revised estimate. In the fiscal year ending March 2011, revenue from salaries tax hit an all-time high of HK$44.26 billion. Betting duty was also a record at HK$14.759 billion. Stamp duty revenue rose 20 percent to HK$51.007 billion, which was 70 percent more than last May's HK$30 billion estimate. But the taxman has given a "prudent" forecast for the year ending March 2012 - a 22 percent drop in stamp duty revenue to HK$40 billion and a 4 percent slip in total tax revenue to HK$200.99 billion are expected. But tax experts shrugged this off as too conservative. Commissioner of Inland Revenue Chu Yam-yuen said: "The largest items of revenue are profits tax and salaries tax, and the revenue from both these tax types increased substantially over last year." He said the increase in profits and salaries taxes is partly due to economic recovery and development. Profits tax jumped 22 percent to HK$93.186 billion, while salaries tax increased 7 percent to HK$44.26 billion. The previous high of HK$200 billion in total tax revenue was in 2007-08. The increase in stamp duty revenue was due to the "bullish property market and stock market," prompted by the influx of hot money, low interest rates and optimism on the markets, Chu said. The department cannot predict whether or not the trend will continue this financial year, so it put the estimate at HK$40 billion, he said. Last November, Financial Secretary John Tsang Chun-wah proposed measures to cool the property market, including levying additional stamp duties between 5 and 15 percent for flats sold within two years of purchase. The additional duty is pending approval from the Legislative Council. Chu said the number of confirmor sales of flats - resales before transactions are completed - fell by half to a monthly average of 145 in the first quarter of this year from a monthly average of 310 last year. Meanwhile, he attributed the 16 percent jump in betting duty revenue to the football World Cup and more local race days. Bernard Wu Tak-lung, president of the Taxation Institute of Hong Kong, expects tax revenue this financial year to remain high because of the thriving property and retail markets, but believes the rate of increase may slip.

Adult video actress Saori Hara of Japan prepares for a take during filming on the set of ’3-D Sex and Zen: Extreme Ecstacy’ in Hong Kong in August 2010. A pioneering Hong Kong 3-D erotic comedy has powered ahead at the box office, bringing in US$6.7 million globally. Publicist Carmen Wong said Tuesday that “3-D Sex and Zen: Extreme Ecstasy” has earned $4.1 million in its home market, $1.75 million in Taiwan and $870,000 in Australia, where it is screening in three cities. The movie, which cost $3.5 million to make, opened in Hong Kong on April 14. It has drawn audiences with its novel mix of 3-D visuals and the moral tale of an ancient Chinese scholar who loses himself in a duke’s harem. In Hong Kong, ticket sales were boosted by tourists from mainland China, where the lack of a ratings system has ruled out a release. “Sex and Zen” is to be released in South Korea on May 12 and in France, India and Italy in June.

World's highest hotel opens in Hong Kong - The Ritz-Carlton Hong Kong, a luxurious hotel located on the top of the city's tallest building, held its opening ceremony on Tuesday, claiming its title as the world's highest hotel. The 312-room hotel, occupying the 102 to 118 floors of International Commerce Center (ICC), a 490-meter high building developed by Sun Hung Kai, the largest property developer in the city, is the 75th in a series of Ritz-Carlton's globally growing luxury hotels, and the 16th in Asia. The opening of the Kowloon-based hotel marks the comeback of the Ritz-Carlton in Hong Kong, after the group closed operations in its former location in the Central in February of 2008. With the return of the Ritz-Carlton, guests and visitors could have a bird's-eye view of the stunning city scenes, said John Tsang, financial secretary of the city government, while addressing in the opening ceremony. Room price of the hotel starts from 6,000 HK dollars ($771. 3) per night for a deluxe suite, while the presidential suite will cost about 100,000 HK dollars per night, the hotel said. The Ritz-Carlton Hotel Company is currently running 7 hotels in the Chinese mainland cities of Beijing, Shanghai, Guangzhou, Shenzhen and Sanya. ICC, the 118-floor skyscraper sitting in West Kowloon, was completed in 2010. As the fourth highest building in the world, ICC contains a observation deck on the 100th floor, called "Sky 100", which opened to the public in April this year.

Sky's the limit as world's highest hotel is opened - Financial chief John Tsang, SHKP's Thomas Kwok, Peng Qinghua of the Liaison Office and Marriott president Arne Sorenson at the opening. Sun Hung Kai Properties (SEHK: 0016) yesterday held the grand opening for its Ritz-Carlton hotel, the highest in the world, saying the company was upbeat about the prospects for the hospitality industry in Hong Kong. Speaking at the 490-metre-high hotel in the International Commerce Centre building in West Kowloon, Sun Hung Kai Properties said it planned to continue building its hotel portfolio, believing demand for rooms would be driven by mainland visitors flocking to the city. "We are interested in applying to trigger land auctions for hotel sites [on the government's application list]," said vice-chairman and managing director Thomas Kwok Ping-kwong. He declined to identify the sites, but said "we are particularly interested in those in prime locations in Kowloon". The developer owns five hotels in Hong Kong and another two in Tseung Kwan O, which are due for completion next year. The 312-room Ritz-Carlton occupies floors 102 to 118 of SHKP's ICC, making it the world's highest hotel. This is the latest addition to SHKP's Kowloon Station development and the newest in Ritz-Carlton's growing global portfolio of 75 luxury hotels, 16 of which are now in Asia. "The Kowloon Station project is one of the largest private developments in Hong Kong's history and Sun Hung Kai Properties is proud of its leading role," said Kwok. "It includes grade-A offices, high-end shopping, luxury residences and serviced apartments in Hong Kong's new commercial, cultural and transportation hub." The ICC is the tallest building in Hong Kong and stands on top of Kowloon Station. The structure took nearly five years to build. In a nod to popular Chinese culture, the building is called the Dragon's Tail because of its shape and the cladding which resembles scales. The opening ceremony started with a spectacular dragon dance performed by 118 dancers in a 178metre-long dragon. Building the dragon and choreographing the dance took over six months. The new Ritz-Carlton may be the world's "highest" hotel, but the ICC is still not the world's highest building. That honour belongs to Dubai's 828-metre Burj Khalifa. However, its signature hotel, the Armani Hotel, is no higher than its 39th floor. The Ritz-Carlton also boasts the highest bar in the world, Ozone, on the 118th floor. From many rooms, hotel guests get a panoramic view of the harbour. Each room has its own telescope. The rack rate for a standard room is HK$6,000 a night, and rates go up to HK$100,000 for one night in the presidential suite on the 117th floor. A basic room is 540 square feet, while the presidential suite is 3,920 square feet.

The Hong Kong government approved increases of as much as 15% to the minimum fare charged by taxis, underscoring the price pressures in a city that saw inflation hitting its highest in more than two-and-a-half years.

Hong Kong Airlines is giving mandatory kung fu training to flight attendants, as part of a publicity effort meant to add some steam to the company's ambition to file an IPO next year.

Columbarium wins green award - The Diamond Hill columbarium is designed as a place for worshipping ancestors and for leisure. A public columbarium has won a merit award in an architectural competition for its green design that seeks to tackle problems often associated with urns. The HK$105 million facility at Diamond Hill was designed by the Architectural Services Department with "sensitivity in the urban context" and a "skilful balance between functional requirements and spiritual ambience", a jury for the Institute of Architects said in announcing the merit award in the annual contest. The department also won another merit award for the Siu Sai Wan Complex, a municipal services building containing a 1,000-seat arena, a swimming pool and a library and public open space. The institute awarded merit prizes to a luxury development for the top management of Jardine Matheson on the Peak and the clubhouse of Valais, a private residential estate in Sheung Shui. The highest honour, Medal of the Year, was not awarded this year. The six-storey columbarium, with 18,500 niches, has been fully subscribed since it was completed in 2008. Government architect Michael Li Kiu-yin said yesterday the project was intended to be a place not just for worshipping ancestors during Ching Ming Festival but also for leisure. "Traditionally, a columbarium is a gloomy place and doesn't look very welcoming. And it is often a smoky environment during Ching Ming, and traffic jams are serious. We want to make this a public place so people can come any time," Li said. Unlike some commercial columbariums that are often enclosed, the structure comes with large openings on the walls to facilitate air ventilation. Climbers are planted on the rooftop and hang over the walls. There is a landscaped sitting-out area.

McDonald's has become embroiled in the minimum wage row following a complaint that a handicapped worker was asked to work fewer hours. A caller to an RTHK program said although the hourly wage of her mildly mentally handicapped son is HK$28, his working hours were cut from four to 1 hours a day after the minimum wage was introduced on Sunday. "He only worked for an hour and a half and then was asked to leave," she said. McDonald's had allegedly also refused her son's request for a productivity assessment. Hong Kong Polytechnic University applied social science professor and former legislator Fernando Cheung Chiu-hung said employers are entitled to terminate the contracts of employees if they do not agree with the result of the productivity assessment, under the Bill of Rights Ordinance. Cheung said this is discriminatory and he is considering a legal challenge to the ordinance. He said if the employee's productivity is assessed under 100 percent, employers may adjust the hourly wage below HK$28. "The aim of the minimum wage is to protect the low-income groups regardless of race, sex or ability. But this case shows those with disabilities are put into undesirable positions," he said. The Catering and Hotels Industries Employees General Union criticized the cut, saying it is inappropriate and unreasonable. The union's organizing secretary, Suzanne Wu Sui-shan, said it is apparent the fast-food restaurant was trying to press the employee to resign. "What can a restaurant employee do in such a short time? McDonald's is waiting for him to resign," she said. "They are bullying those with disabilities." Assistant Commissioner for Labour Mabel Li Po-yi said the Labour Department has sent about 40 officers to inspect small and medium-sized enterprises over the past two days. Li said they found no cases of the minimum wage being abused. She said the government will investigate cases in which workers have lost their jobs since its introduction and advises affected workers to seek help from the department. McDonald's responded in a statement that the employee has been working in the restaurant for 20 years. The company will continue to provide the welfare and salary which meet the legal requirement for the employee and other staff.

The University of Hong Kong has been ranked among the top 50 universities in psychology, biological sciences and medicine in a league table of 200 tertiary institutions worldwide. It is the only local university to make it into the top 50 in the three disciplines in the QS World University Rankings. HKU was ranked 30 for psychology, 45 for medicine and 46 for biological sciences. The Hong Kong University of Science and Technology came in the 51 to 100 bracket in biological sciences, and Chinese University was ranked within 101 to 150 in the subject. It is the first time that QS, which has compiled the Times Higher Education/QS World University Rankings for the past six years, has ranked universities in the three specific disciplines. Only the top 50 are given a specific rank, with the remaining 150 placed into three brackets - 51 to 100, 101-150 and 151 to 200. Chinese University was ranked 101 to 150 in medicine. For psychology, Chinese University was ranked 51 to 100, with City University ranked 151 to 200. For the whole of Asia, only five places - Japan, Hong Kong, Singapore, the mainland and South Korea - made it into the top 50 for the three disciplines. The University of Tokyo was the best performer across Asia, with its biological sciences programme ranked 15, psychology 18 and medicine 20. The National University of Singapore saw medicine ranked 18, the top in Asia. Its biological sciences discipline was ranked 28 and psychology 22. Peking University is the only mainland university to make it into the top 50, with its biological sciences ranked 43 and psychology 25. The rankings take into account a series of factors including the views of employers and academics and number of papers published in journals. A University of Hong Kong spokeswoman said its Li Ka Shing Faculty of Medicine was delighted with the ranking. "The faculty thanks colleagues for all the hard work," she said. "The faculty will continue to pursue the best and strive for higher achievements in teaching, scientific research and clinical services." A Chinese University spokeswoman said different rankings were the result of the different criteria used by various league tables. Harvard University was ranked number one in all three disciplines. Harvard and Cambridge in Britain were the only two to make it into the top three in all three disciplines.

 China*:  May 5 2011

Australia's Foreign Minister Kevin Rudd appealed on Tuesday for a global effort to bring China into institutions, saying that the future of the world economy depended on it. Rudd, a Mandarin-speaking expert on the mainland and former prime minister, said that bodies such as the Group of 20 major economies and the East Asia Summit could put Beijing on the right path as its power grows. “Continued regional and global economic growth will depend on maintaining for the next 40 years the sort of strategic stability in the East that we have seen over the last 40 years,” Rudd said in an address in Washington. “And this will not be an easy thing to do,” he said at the Brookings Institution think-tank. Rudd acknowledged myriad concerns abroad about Beijing – from growing assertiveness to human rights to environmental pollution – but said that it was crucial also to look at China’s leaders’ own interests and way of thinking. Rudd said the United States and its allies should talk to China in the terms of its philosophical tradition – such as the concept, often cited by Beijing’s leadership, of creating a “harmonious world”. The former Australia prime minister pointed to the Group of 20 – a collection of the world’s largest economies borne of the 2008 financial crisis – as an area where China has had a “positive” and “forward-looking” role. “The Chinese recognised, particularly at a time of potential global economic implosion, that they had huge interests at stake in preserving the order,” he said. Rudd also stressed the importance of the East Asia Summit, an annual forum created in 2005 and which will include the US president for the first time this year when Barack Obama attends the talks in Bali. The expanded East Asia Summit largely follows the lines of the “Asia-Pacific Community” concept that Rudd proposed as prime minister. But Rudd said that China’s track record remained mixed and highlighted its assertiveness on territorial disputes in the South China Sea and the East China Sea. He called China’s defence of North Korea even after the sinking of South Korea’s Cheonan warship “problematic,” but said that Beijing had shifted on Iran and Sudan and noted that it did not block the UN resolution on Libya. China, which sees itself as “at last resuming its proper place in the global community,” was also strongly concerned about domestic stability, Rudd said. “Tiananmen in 1989 has left a searing impression on the current generation of Chinese leaders. Hence their reaction to any migration of the sentiments associated with the current Arab spring,” he said. China has launched its biggest crackdown on dissent since the 1989 Tiananmen Square revolt, rounding up scores of critics including the prominent artist Ai Weiwei in the wake of the wave of democracy protests sweeping the Middle East. Rudd welcomed the calm over one issue that has long raised tensions – Taiwan. But he hinted at concern next year when the island’s Beijing-friendly president, Ma Ying-jeou, stands for re-election. “The Taiwan Straits remains mercifully stable, although the stability that we see now remains hostage to Taiwanese domestic electoral processes in the year ahead,” he said. Rudd, who has spent much of his life studying China, said he saw a “third way” in relations in which nations work on common interests with Beijing but are open about their disagreements. “The arid dichotomy between being characterised as either pro-Chinese or anti-Chinese has to be consigned to history,” he said.

China's Hawtai Motor becomes latest white knight to rescue Saab - Hawtai Motor has become the second firm in as many years to throw a cash lifeline to troubled Swedish luxury carmaker Saab. Little-known Chinese carmaker Hawtai Motor Group has come to the rescue of Sweden's Saab, only a year after Dutch niche carmaker Spyker bailed out the Swedish marque by buying it from General Motors. Money-losing Saab veered towards collapse in recent weeks after running out of cash. Several suppliers stopped delivering parts, halting production for most of last month. Spyker said yesterday that Hawtai would invest €150 million (HK$1.73 billion) in return for shares, providing funds for Saab to pay overdue bills and resume production. The move marks the second time a mainland company has invested in a top Swedish carmaker. Zhejiang Geely, the parent of Hong Kong-listed Geely Automobile Holdings (SEHK: 0175), bought Saab's Swedish rival Volvo Cars from Ford Motor last year for US$1.3 billion in cash and a US$200 million note issued to Ford. The Hawtai deal is one of several pulled together to stave off Saab's collapse. Spyker also raised funds from shareholders - who include Russian businessman Vladimir Antonov, a Middle Eastern fund and a Lithuanian investment group. Hawtai makes SUVs and passenger cars, and has production capacity for 300,000 clean diesel engines, 450,000 transmissions and 350,000 vehicles, according to its website. It plans to build up its capacity to make one million vehicles, diesel engines and transmissions a year by 2015. It was founded in 2000, with plants in Rongcheng, Shandong province, and Ordos, Inner Mongolia, and has total assets of about 12 billion yuan (HK$14.3 billion). Spyker, which wants to boost sales and explore production in fast-growing emerging markets, including China and Russia, as well as Brazil and India, said yesterday that Hawtai would pay €120 million for a 29.9 per cent stake in the firm. It has agreed to pay a further €30 million convertible loan with a six-month maturity and a conversion price of €4.88 per share. Saab said the transactions were subject to approval from certain Chinese government agencies, the European Investment Bank and the Swedish National Debt Office. It is unclear whether the deal will gain Beijing's approval, an issue that contributed to the failure of the bid by the mainland's Xinmao for Dutch cable company Draka in January.

US Department of Defense Tuesday hailed the "positive momentum" in the US-China military-to-military relations, saying building a long-term relationship between the two armed forces is in the interest of both countries. A senior defense official, who briefed reporters on background, said the momentum followed successful visits to China by US Secretary of Defense Robert Gates in January, and Chinese President Hu Jintao's visit to the United States later that month. "Building a healthy, stable, reliable and continuous military to military relationship is in the interest of both countries, the region and the entire international community," said the official, who is speaking on the conditions of anonymity. The two countries held their 7th defense ministry working level meeting in Beijing on April 11. In order to further military ties between China and the United States, both sides agreed in the talks to maintain dialogue and communication at all military levels and to strengthen exchanges and cooperation in non-traditional security sectors. Chinese Defense Ministry announced last week that at the invitation of Chairman of the US Joint Chiefs of Staff Mike Mullen, Chen Bingde, chief of the General Staff of the Chinese People's Liberation Army, will visit the United States from May 15 to 22.

Premier Wen Jiabao on Tuesday urged Chinese youths to work hard and be persistent in achieving their goals while he spent more than two hours chatting with young people on the eve of China's Youth Day. Wen showed a group of young people around the office and apartment where late Chinese Premier Zhou Enlai once worked and lived at Zhongnanhai, the central leadership compound in downtown Beijing, before sitting down and talking with them. During the chat, Wen urged young people to inherit and promote the spirit of patriotism, progress, science and democracy imbued in the May Fourth Movement. The movement is an important cultural and political campaign started in 1919 to fight imperialism and promote democracy and science in China. Wen urged the young Chinese to set lofty ideals and work for a prosperous, democratic, civilized and harmonious China. A nation is not guaranteed with a bright future if it has no energetic and promising young people, Wen said. The premier urged the country's youth to be studious and motivated so as to achieve greater progress. When commenting on an English major's personal understanding of learning and research, Wen spoke of the importance of learning about both traditional Chinese culture and foreign civilizations. Wen encouraged young people to master foreign languages as they have, he said, become increasingly important in making connections between China and the outside world. In response to proposals put forward by a writer on China's literary creativity, the premier asked young writers to do more research in real life so as to create more classics. When talking to a bus driver, Wen underlined the importance of developing public transportation to meet public demand. Wen called for policies that give more support to bus manufacturers, help bring down ticket prices and improve the welfare of people working in the public transportation sector. Also on the eve of China's Youth Day, the Central Committee of China Communist Youth League issued a notice, urging grass-roots youth leagues to carry out activities that promote young people's love for the country, the Communist Party of China (CPC) and for socialism. Youth leagues across China are also urged to mobilize young people to develop the economy and start their own businesses. The leagues should as well teach young people useful job skills. Also according to the notice, youth leagues are urged to show greater love and care to children of migrant workers. The Central Committee of China Communist Youth League and All-China Youth Federation jointly honored 25 young people across China with "May Fourth Medal," for their excellent performance in their work.

Hundreds of thousands of catering industry employees in Wuhan, capital of Central China's Hubei province, may soon receive more pay because of a contract recently signed by members of a local labor union and their employers. If the agreement wins the approval of local government officials, about 450,000 workers in the industry will receive a monthly minimum salary that is 30 percent higher than the minimum wage paid in the city. They will also be able to expect at least a 9 percent increase in their wages within a year, according to the contract signed on April 23. The contract sets a record for the largest number of employees to be affected by collective bargaining in China's history. It sets the pay of employees in downtown Wuhan at no less than 1,170 yuan ($180) a month and that for their counterparts in suburban areas at no less than 975 yuan a month. The current minimum monthly salary for city residents who work in urban areas is 900 yuan, while that for those working in suburban areas is 750 yuan. The contract also sets minimum salaries for chefs, waiters, dishwashers and seven other types of employees. And it stipulates that workers should not work more than an hour of overtime a day unless special circumstances create an urgent need for their labor. Even then, they should work no more than three hours of overtime a day and should never be asked to do something that would put their health at risk. The contract also says workers should not have more than 36 hours of overtime in a month and should enjoy at least one day off each week. "The negotiation over this contract is historically significant because it would give nearly 500,000 employees in the catering industry in Wuhan a foundation for the protection of their rights," Zhou Guohua, deputy head of Wuhan Labor Union Federation of Trade, Finance and Tobacco, who represents the catering workers, was quoted by Guangzhou Daily as saying. Some in the catering industry had little to say about the negotiations. "I've heard about the news but have not received any notice from the local labor authority," said a woman surnamed Li, who runs Yongchang Restaurant in the city. Others thought their businesses would be harmed. "The prices of supplies are now rising and I will feel even greater pressure if I have to pay more money to my employees," she said. Liu Guoliang, head of Wuhan Catering Association, who represents employers, said union officials submitted the contract to the Wuhan bureau of human resources and social security on April 23 and are now waiting for an approval. Liu Qixin, deputy head of Wuhan Federation of Labor Unions, said there are nearly 40,000 catering businesses in the city, 84 percent of which are small or medium-sized. Such businesses tend to pay employees as they see fit and do little to protect workers' rights. In Wuhan, workers in the catering industry earn wages that are low when compared with the pay that goes to workers in other industries. As a result, the industry finds itself having to cope with a serious labor shortage, he said. Liu Guoliang said some restaurant owners at first strongly opposed the contract because they could not get comfortable with the thought of paying the wages demanded by workers. Both sides in the negotiations later agreed to compromises, he said. Liu said about 40 percent of the large and medium-sized catering businesses in Wuhan pay wages that are higher or equal to the amounts called for by the contract, while the rest will have to pay more if the agreement is approved. "In the short run, some small enterprises, around five percent of the total, which pay low wages to their employees and are prone to business risks, would possibly close down," he said. "But the contract would go far to improve the management of the industry and alleviate the labor shortage." Authorities with the local labor union said they will carry out spot checks to ensure the terms of the contract are being abided by. They said the names of violators will be placed on a blacklist. During the next three years, the All China Federation of Trade Unions plans to bring collective bargaining over wages to all businesses in the country.

April CPI likely to remain at high level - China's Consumer Price Index (CPI) is likely to remain at a high level with April's figure rising to at least 5 percent from a year earlier, according to analysts. Meanwhile, they warned that stubbornly high inflation may compel the government to maintain its tight monetary policy. April CPI, a main gauge of inflation, may increase to between 5.2 percent and 5.5 percent year-on-year, Peng Wensheng, chief economist at China International Capital Corporation Limited (CICC), wrote in a report. The National Bureau of Statistics (NBS) will release the April figure on May 11. Peng said that the People's Bank of China, the central bank, is likely to raise the required reserve ratios for banks - that's the proportion of money banks must set aside as reserves - for the 11th time since the beginning of 2010, and increase benchmark interest rates again during the second quarter, aiming to tame inflation. "Soaring non-food prices may lift the figure to about 5.4 percent, the same as in March," said Peng, who predicted non-food prices are likely to have increased by between 0.2 percent and 0.4 percent from a month earlier. In March, food prices, which account for about 30 percent of the CPI basket, jumped 11 percent year-on-year, boosting the inflation indicator to 5.4 percent from a year earlier, the fastest growth since July 2008, according to the statistic bureau. A statement from the NBS showed that the price of 59 percent of the types of food surveyed decreased in 50 of the nation's largest cities between April 11 to April 20. Vegetables prices declined the most, by 7.56 percent on average. Lu Zhengwei, the chief economist at Industrial Bank Co Ltd, said that food prices are likely to decrease slightly in April, which may ease the inflationary pressure to some extent. "However, surging non-food prices, including those of oil, accommodation rental and industrial products, drove up CPI in April," said Lu. Lu predicted that the increase in bank lending may have exceeded 700 billion yuan ($107.7 billion) in April, indicating continuing strong GDP growth. "The hot economic growth may continue to lead to high consumer prices and drive CPI to a new peak between June and October," said Lu. In the first quarter, GDP rose 9.7 percent year-on-year, showing the potential for overheating. Economic growth in the second quarter may decrease slightly, but still remain solid at about 9.5 percent, said Lu Ting, an economist at Bank of America Merrill Lynch, on Tuesday. The government may further tighten money supply in the second quarter to soak up excessive liquidity, said Li Huiyong, chief analyst at Shenyin & Wanguo Securities Co Ltd. Further tightening policies, intended to cool the real estate market and curb consumer prices, may be introduced in the second half, according to Li. China has raised the benchmark interest rate twice since the beginning of the year and the reserve requirement four times over the same period.

US study backs China in the great rice debate - These Guangxi farmers are following an ancient tradition: rice was first farmed in China, not India, about 10,000 years ago, a US study has found. A row has flared after a study by US genome researchers found that the first rice was cultivated in China's Yangtze River valley about 10,000 years ago. Using modern computer algorithms, new modelling techniques and a pool of more than 600 gene fragments from various wild and domestic rice species, the researchers concluded that wild rice was domesticated at one place, not several; and that place was China, not India. The study was a collaborative attempt to pin down the exact origin of rice, involving a dozen researchers from New York University's Centre for Genomics and Systems Biology, Stanford University's genetics department, Washington University's biology department and Purdue University's agronomy department. Their paper, Molecular evidence for a single evolutionary origin of domesticated rice, was funded by the US National Science Foundation, and was published online by the Proceedings of the National Academy of Sciences of the United States of America on Monday. It has generated fierce debate in China and India. While Chinese researchers embraced the study and called it the "final judgment", Indian researchers insisted that previous studies had provided stronger evidence that rice originated in India. While Chinese researchers called for the renaming of indica and japonica - the two main subspecies of Asian rice - based on the latest study, Indian researchers insisted there was no need for change. The US researchers took three key steps. First, they used the newest computer algorithms to analyse datasets examined in previous studies, and found that species previously thought to have originated independently in various locations actually came from one ancestor. They then resequenced 630 gene fragments from wild and domesticated rice species with new techniques recently applied in human gene analysis. Those results also showed there was only one ancestor. Finally, they used the "molecular clock" in rice genes to determine when the first domesticated rice appeared. The time fell between 8,200 and 13,500 years ago, almost exactly when rice domestication began in the Yangtze River valley, according to archaeological excavations. "As rice was brought in from China to India by traders and migrant farmers, it likely hybridised extensively with local wild rice," Professor Michael Purugganan, a New York University biologist and one of the authors, was quoted by as saying. "So domesticated rice that we may have once thought originated in India, actually has its beginnings in China." Professor Ding Yanfeng , from Nanjing Agricultural University, said yesterday that the US study had confirmed the mainstream view among mainland rice experts that rice originated in China. "We have been debating it with our Indian colleagues for decades," Ding said. "It's good to have some unbiased opinions from the US." Mainland researchers had been uncovering evidence of rice's Chinese origin since the early 1950s, Ding said. Some scholars traced the ancient pronunciation of the word "rice" in various languages, including Hindi, to early Chinese pronunciations such as tao, tu and dau, still widely used in southeastern China. Excavation sites along the Yantze River such as Hemudu in Yuyao , Zhejiang , provided the earliest evidence of the growing, storage and cooking of rice. Carbon dating shows rice was already the main staple in China more than 8,000 years ago. The world's academic circles not only ignored those findings but named the two main subspecies of rice indica and japonica - as if rice originated in India and Japan - instead of shien and keng, as proposed by Chinese experts. "Indica and japonica are scientifically incorrect," Ding said. "They are politically misleading. They are the biggest mistake in rice research that we Chinese scientists have been trying to correct for decades but nobody listened." Professor Zhu Zhen , deputy director of the Chinese Academy of Sciences' Institute of Genetics, said molecular evidence is the "final judgment" when evidence from other areas, such as linguistics and archaeology, conflicts. "Genetic evidence is the most precise and objective evidence." But Dr T.K. Adhya, director of the Central Rice Research Institute in Cuttack, India, said it was too early to rule out Indian roots for rice. Some previous studies, such as one led by Professor Susan McCouch of Cornell University in 2007, suggested that rice was domesticated in the warm and humid plains at the southern foot of Himalayas, Adhya said. "The study is very good and supported by many scientists," he said. It was unnecessary to change the existing names for rice subspecies, he said. "People have already got used to them. People have already named names after them. So why bother?" Dr Xie Fangming, a senior scientist researching hybrid rice at the International Rice Research Institute at Los Banos, in the Philippines, agreed with Adhya. "Previous studies have accumulated solid evidence of rice's Himalayan origin," Xie said. "One new study may not be sufficient to overthrow the past."

Hong Kong*:  May 4 2011

Li Ka-shing, Hong Kong's richest man, is launching the second round of a campaign calling for creative philanthropic proposals from the public. Those chosen will be funded by the Li Ka Shing Foundation. In the first round, in September, 177 charity projects were selected from more than 1,000 proposed by 74,000 people. The foundation eventually gave out about HK$28 million. "Our spirit of generosity defines the essence of our community. It is wonderful to make a difference together," Li said. The second round of the "Love Ideas, Love HK" campaign will accept proposals from today until May 16. Applicants seeking grants can submit their proposals on the campaign's website,, saying why they deserve funding. The charity foundation will invite the public to vote for projects during the three weeks from June 13. The results will be announced on July 7, and the winners will receive grants within a month. Grants are divided into five categories: HK$25,000, HK$50,000, HK$100,000, HK$200,000 and HK$300,000. As in the first round, only the first category will be open to individuals and the rest mainly to educational institutions and charitable organisations. Most winning projects in the first round were under way, a spokesman said. In the first round, a project to help stray or abandoned animals won the most votes in the HK$300,000 category, while a project to restore the hearing of deaf people was the winner in the HK$200,000 category. The billionaire hand-picked 12 ideas in that round that he found innovative and moving and allocated an extra HK$2.15 million for them. Among the projects Li selected, four also received a winning number of votes. As a result, they received twice the amount they applied for. Li has pledged a third of his assets to the foundation. Most of the HK$12.1 billion in donations it has made have gone to the Greater China region. Li's flagship company, Cheung Kong (Holdings) (SEHK: 0001), has attracted the ire of young protesters, some grass-roots organisations and the more radical lawmakers because of its market dominance in such sectors as property and utilities.

MTR to study parallel subway for Island Line - North Island Line and Northern Link examined - Hong Kong's next big railway project could be the proposed North Island Line - a controversial HK$10 billion backup subway parallel to a busy section of the MTR's Island Line. Or it might be a new route that makes a loop of the East Rail and West Rail lines in the New Territories, by connecting the latter's Kam Sheung Road Station with the former's Lok Ma Chau. Both could go ahead, or neither. These are the big questions facing Aecom Asia, the firm that has been given two years to update the city's railway-development strategy and review the feasibility of several proposed rail projects, including cross-border trains linking Hong Kong and Shenzhen airports. Some planners believe that the so-called Northern Link in the New Territories would yield the most benefits for the least money. It would greatly improve mass transit for people from Yuen Long, Tuen Mun and Tsuen Wan, while being built on mostly uninhabited land. It would be more difficult to create the 3.5-kilometre North Island Line - which would connect Hong Kong station with Fortress Hill, and Tin Hau directly with North Point, all in parallel with the existing Island Line. And it would be a more difficult sell to the public. But insiders say the North Island Line is the project that MTR officials are more eager to pursue. A railway expert close to the study said the North Island Line was needed as a backup in case of breakdowns on the 26-year-old Island Line. "No one wants to see another Yau Ma Tei incident, especially when the impact on road traffic could be much worse if it's the Island Line breaking down," the expert said. He was referring to a power failure in October at Yau Ma Tei station that brought chaos to tens of thousands of commuters. It forced 7,000 to take buses for part of the trip from Tsuen Wan to Central. The added bus traffic, in turn, clogged Nathan Road from Tsim Sha Tsui to Sham Shui Po. The expert added that the Island Line, now working at about 80 per cent of capacity, would become saturated by 2026. "It may sound like a long time away," he said, "but if we want it on schedule it's about time to start planning." The North Island Line would also relieve mounting pressure on North Point as a main interchange station for East Kowloon and Hong Kong Island, the expert said. A planner familiar with the Aecom Asia study said the North Island Line, passing through Central, would be the more profitable, but the Northern Link in New Territories would be the more important. "The Northern Link is more important in terms of its strategic function, if you ask me," the planner said. "But of course, Chau Tau is still a rural area with few passengers, while Hong Kong Island is a prime business district." Apart from fares from passengers, a busy station on Hong Kong Island would yield more rental and advertising income than a station in the New Territories. But the Northern Link would be a boon to people from Yuen Long, Tuen Mun and Tsuen Wan, who now mainly take buses and coaches to get to the Lo Wu and Lok Ma Chau checkpoints at the border with Shenzhen. The Northern Link would cut their journey times by two-thirds. "Construction of [the Northern Link] would be easier, given that the land there is largely uninhabited," another person involved in the study said - adding the caveat that "obstacles may become bigger when the place is brought under development in the future". The North Island Line would be controversial, the person said, not only because it would play havoc with traffic during construction, but also because commuters from Hong Kong East might protest. Passengers from Tai Koo and Quarry Bay stations would no longer enjoy a direct ride to Causeway Bay and Central. The North Island Line would connect Hong Kong station with Fortress Hill through two new stations, Tamar and Exhibition. Meanwhile, an extension from the Tseung Kwan O Line's North Point station would link it directly with Tin Hau. The plan would give passengers from Kowloon East, including those from Tseung Kwan O and the new MTR development Lohas Park, direct access to the business centres at Admiralty and Central. But westbound passengers from Chai Wan, Tai Koo Shing and Quarry Bay would have to switch at Fortress Hill, or end up at Tamar and Hong Kong station. "It may be a bit inconvenient for Island East commuters going to Admiralty, Causeway Bay and Central stations, but East Kowloon has a population of 300,000, while Hong Kong East has only about 200,000," the railway expert said. A similar reconfiguration occurred with the 2009 opening of the Kowloon Southern Link. Tsim Sha Tsui East station was removed from the East Rail Line to become part of the West Rail Line, and East Rail passengers who used to enjoy a direct ride to Tsim Sha Tsui now must change at Hung Hom. The consultancy firm is due to submit an interim report in about a year. Officials want to hear public opinion at an early stage, as they hope to avoid the kind of controversy that ensnared the HK$66.9 billion high-speed rail link to Guangzhou. The consultants will also be looking at the proposed Hong Kong-Shenzhen Western Express Line - which would connect Hong Kong and Shenzhen airports via Qianhai on the mainland and Hung Shiu Kiu in Hong Kong. The pace of that project, however, will depend largely on Qianhai's development. A port rail link, which was proposed in the last railway study, in 2000, is expected to be dropped, given a decline in rail cargo business.

Shanghai Pharmaceuticals, China's second-biggest distributor of pharmaceutical products, has secured US$550 million from four cornerstone investors for its Hong Kong public offering this month, according to a person familiar with the matter. Temasek Holdings is said to be investing US$300 million, Guoco Group (SEHK: 0053) US$150 million and Pfizer and Bank of China Group Group Investment US$50 million each. The lock-up period, when the investors will not be able to sell the shares, will be one year. The shares will be sold to the cornerstone investors at HK$21.80 to HK$26 per share, the person said, adding that the institutional investors might buy up to 95 per cent of the shares, leaving the remaining 5 per cent to Hong Kong retail investors. Shanghai Pharmaceuticals declined to comment. The company, which manufactures, sells and distributes health-care products, starts its roadshow in Hong Kong today. Shares will be open for sale to retail investors from May 6 to May 12. The company will begin trading on the Hong Kong stock exchange on May 20. Shanghai Pharmaceuticals plans to issue about 664 million shares in Hong Kong, with around 99 million available in case of oversubscription. Upon listing in Hong Kong, it will gain access to international investors and will be required to operate with more transparency. The company said in September that it planned to raise at least 8 billion yuan (HK$9.5 billion). But based on its A-share price as of Friday, it could raise as much as 15 billion yuan with the offering. The company is expected to use a large part of the proceeds to repay a bridge loan it took during a 3.56 billion yuan acquisition of Citic Pharma, a pharmaceutical distributor in Beijing, in April. The acquisition significantly expanded the company's operations and market share in northern China. Another part of the proceeds might be used to repay the company's debt for acquiring the antibiotic business operations from its mother company, Shanghai Pharma Group, for about 1.49 billion yuan in December. The company has hired Credit Suisse, Deutsche Bank and Goldman Sachs to handle its listing. According to its pre-listing document, it is China's second-largest distributor of pharmaceutical products and was the country's third-largest pharmaceutical company in terms of revenue in 2009. Shanghai Pharmaceuticals underwent a restructuring from 2009 to early last year and has been aggressively expanding through acquisitions since then. The restructuring was partly brought about by the national government's efforts to consolidate the fragmented pharmaceutical industry. China's pharmaceutical industry is expected to grow by a compound annual growth rate of 13.7 per cent from 2009 to 2014, according to the company's pre-listing document.

People's Liberation Army (PLA) Hong Kong Garrison is seen during an open day in Hong Kong, south China, on May 2, 2011. The PLA Hong Kong Garrison was open to the public on Monday in celebration of the International Labor Day, which attracted thousands of people from Hong Kong.

 China*:  May 4 2011

Tata Steel Limited - the world's 10th-largest steel company by production and a subsidiary of Tata Steel Group - will increase investment in China by 5 percent in 2012, as it seeks to maintain market share according to the company's managing director. In an exclusive interview, Hemant Madhusudan Nerurkar told China Daily that the company will not make any major investments in its rolling mills, located in the cities of Wuxi in Jiangsu province and Xiaman in Fujian province, this year, "But next year there will be some changes," he said. Currently, the company's problem in China is overcapacity, which means production far exceeds real demand, said Nerurkar. He added that capacity will gradually decline as the government encourages more energy efficiency in the industry. "Infrastructure investment in China is still very high, and there is still great demand for steel. As Chinese industry becomes more and more self -sufficient in raw materials, I'm sure it will turn out well." Meanwhile, rising demand for more value-added products, such as coated steels, electrical steels, and products for the aviation industry will provide opportunities for the company, said Nerurkar. He said the Chinese steel industry has developed very well in the last 10 years at an "admirable" speed. He also expects the company's business in China to grow at the same rate as the country's steel consumption growth, by 5 to 7 percent increase year-on-year. Currently revenue from China contributed no more than 3 to 4 percent to the company's total revenue in the latest fiscal year, said Nerurkar. Apart from local demand, Tata Steel also expects to export more products from its Chinese mills to Europe and Japan, both markets that require external supplies. At present, the company isn't considering entering into partnerships with Chinese steel players, said Nerurkar, although it hasn't ruled out the possibility of developing downstream partnerships at some point in the future. "Possible cooperation with Chinese companies also involves issues such as energy conservation, climate change, and some energy-saving products." In December 2006, a subsidiary, Tata Refractory, opened a factory in Yingkou, a city in Northeast China's Liaoning province. Later, Corus Ltd, later renamed Tata Steel Europe, was acquired in early 2007. It also has a trading business in China. Established in 1907, Tata Steel has an existing production capacity of 30 million tons annually, and a presence in more than 50 European and Asian markets, with manufacturing units in 26 countries worldwide. Nerurkar said Tata Steel will continue to look for coking coal and iron ore assets for acquisition in areas such as Africa, Canada and Brazil, to secure raw materials and counter fluctuating prices for coal and iron. The industry is facing severe price fluctuations, and 70 percent of costs come from iron ore purchases, said Nerurkar, when he spoke at the Boao Forum for Asia in April. He suggested that iron ore suppliers and steel companies should return to an annual pricing mechanism to avoid frequent price fluctuations for raw materials based on quarterly negotiations between the two sides. In common with the rest of the steel industry, raw material prices will inevitably affect Tata Steel's profitability, said Nerurkar.

Chinese prefer mobile over fixed-line phones - More Chinese are disconnecting their fixed-line telephone service and turning to mobile phones, according to China's Ministry of Industry and Information Technology (MIIT).

'Hawaii of China' lures tourists with rebates - Tourists enter the tax-free shop in Sanya, South China's Hainan province, May 1, 2011. The offshore tax-free scheme for mainland shoppers officially kicks off on May 1, after a ten-day trial operation. The policy will prevent mainland visitors from paying various types of taxes on up to 5,000 ($770) worth of imported goods bought at selected duty-free stores on the tropical islands province, long known as the Hawaii of China. Only travelers who are 18 or older will avoid paying import duties, and the mainland visitors to Hainan can only buy goods duty free at the shop twice a year, while island residents can only once a year. Permission to buy goods duty-free in Hainan had been extended to foreign and non-mainland travelers before, but never to mainland visitors. About 18,000 people enter the tax-free shop in Sanya every day since April 20, when the trail operation of the tax rebate scheme starts. 

The ocean monitoring agency in the mainland says it is adding ships and personnel to beef-up enforcement of the country's vast maritime claims. China Marine Surveillance says it will add 1,000 officers this year to raise staff levels to 10,000 and will purchase 36 new ships over the next five years. The official China Daily reported on Monday that the agency presently has 300 vessels of all types, along with 10 aircraft. The newspaper reported that the increased capacity is needed to deal with a rising number of disputes involving the mainland and other countries that share overlapping claims to waters and island groups in the South China and East China seas. The Philippines said in March that it plans to acquire patrol ships, aircraft and an air defence radar system to assert its own claims.

Hong Kong*:  May 3 2011

Keep our farms to protect against shortages, says retiring market boss - Hong Kong should keep its farms to provide food security in a crisis, says the outgoing chief of the city's oldest vegetable wholesale market. Edward Lai Kwok-yan also warned that Hongkongers would have to pay more for better quality food amid rising demand from an increasingly affluent mainland. But he believed the impact of this could be lessened by the faster flow of goods and information that the city enjoys. "It is really a matter of perspective as to whether farming is a sunset industry. But it is a must that we keep some farmland here to protect us against possible future food shortages, and we don't know when it will happen," said Lai, the general manager of the Vegetable Marketing Organisation, who will step down next month after 36 years. Lai said that if all mainland vegetable imports were stopped, Hong Kong's farms could maintain a supply for only about a week. The city consumes 660,000 tonnes of vegetables a year but local producers supply only 16,000 tonnes, just a third of production compared with 1999. That means up to 98 per cent of vegetables are now imported, mainly from the mainland. A thriving international trade and an efficient transport network enable Hong Kong to feed its 7 million people on imported food. Concerns about food security following the second world war prompted the colonial government to set up the marketing organisation. By establishing a government- supervised distribution and sales channel for farm produce, the organisation aimed to protect the incomes of food producers and prevent exploitation by middlemen. In return, the organisation - now a statutory body responsible for its own finance and management - collected a 10 per cent commission to cover its operations. Any surplus supported local agricultural development, such as introducing pesticide tests and vegetable quality labels. But local market gardening has dwindled significantly over the past six decades, giving way to rising imports. According to the organisation, Hong Kong farms produced about 85 per cent of its sales of 66,000 tonnes in 1978, before the mainland's economic reforms. By 1995, the share had shrunk to 14 per cent, even though the agency's sales rose to 234,000 tonnes. For Lai, the change was a natural development, partly due to the geography of Hong Kong that limited farming development but also because of economic changes on the mainland after 1979. "Many mainland farms scrambled to sell their produce to us as they desperately wanted to earn foreign revenue, but it also created a problem of oversupply," he said. The oversupply issue came back to haunt the organisation a few years later after it was forced to dump unsold vegetables in bulk, sparking public outrage at the waste. Rapid urbanisation of Hong Kong since the 1970s, when new towns swallowed up massive areas of farmland on the urban fringes, also set the scene for the decline of agriculture. Only 19 square kilometres of land is still being farmed in Hong Kong, comprising just 0.13 per cent of the city's area. There are now about 4,700 farmers. Although Hong Kong benefited from large-scale vegetable production on the mainland, Lai said the era of relatively cheap food imports might soon be over because of rising affluence across the border. "There is growing demand for quality vegetables on the mainland, and competition for quality food will inevitably push up prices," he said. Over the past two decades, the average price per kilogram of vegetables sold through his organisation has doubled from HK$2.50 in the late 1980s to more than HK$5 in 2009. In the past five years alone, the price has risen 20 per cent for imported vegetables. However, Lai said future price rises would not be too drastic as vegetable production on the mainland had expanded to virtually every corner of the country, from Hainan to Ningxia , and from Guangdong to Beijing. Many farms were also owned and managed by Hong Kong farmers, who transferred and expanded their operations to the mainland. "We now have a much faster and transparent information flow through the internet and through mobile phones. Whenever and wherever a good price is being offered, the producers will send their vegetables there," he said. Lai said most extreme price rises were triggered by the weather. The wholesale price of a catty of flowering cabbage could soar from a few dollars to HK$18, but in normal circumstances prices fluctuated only by a few dollars. Regarding the organisation's future, Lai said that despite an eroding market share, it was worth keeping as an independent, non-profit and trustworthy body serving the interests of local farmers. "If it is privatised, even the slightest help available to local farmers might be gone."

Pound Lane favored route for second escalator - Pound Lane has been proposed as the best route for a second Mid-Levels escalator. A study by a consultant to the Central and Western District Council says it is a better route than nearby Shing Wong Lane. According to the latest study, the 880-metre system, comprising one- or two-way escalators and footbridges, will serve Western District, starting at the top from Conduit Road, joining Robinson Road, Bonham Road and Hospital Road and running the whole length of Pound Lane to join Queen's Road West. The path will continue to Sheung Wan Municipal Services Building and connect to the footbridge leading to the Macau ferry terminal. The escalators will connect to new and existing footbridges and upgraded pavements. A detailed design will be drawn up after a government technical feasibility study. "The idea of a second Mid-Levels escalator link was initiated many years ago," Democratic Party councillor Cheng Lai-king said. "Some people think it would help to serve schools and Tung Wah Hospital and provide more access to the future MTR station on Bonham Road. "But we also understand that some residents are against it for they are worried the escalators will turn the area into another SoHo and end the quiet atmosphere in the neighbourhood." She said the council would discuss whether it would go ahead with the recommendation and apply for funding from the Transport Department. Her party would conduct a survey to collect residents' views. Cheng said transport officials had suggested confining the system to running between Bonham Road and Hollywood Road. A spokeswoman for the Transport Department said it was consulting relevant departments on the proposed Pound Lane route. The feasibility study was expected to be done by the middle of the year. The Pound Lane alignment was suggested after the original scheme proposed at Ladder Street, a grade-one historic site, was turned down because of public objections. According to the study, the population in the Central and Western District will decline by 26 per cent to 255,603 by 2016. But the consultant said the opening of the MTR's West Island Line in 2014 and academic reform, which would bring more students to the University of Hong Kong, would help attract more people to the area. Central and Western Concern Group member John Batten has written to transport officials opposing the plan. "I would personally be affected by the building of an escalator along Pound Lane as the current peace and quiet of the area would be seriously compromised," Batten, who lives in Po Hing Fong, on the corner of Pound Lane, said in the submission. He said the group was not against the building of the MTR line but argued for a holistic approach to be developed for transport in the area, with particular emphasis on rationalising bus schedules and routes. The group doubted the need for a new escalator, saying the future MTR station on Bonham Road, about 250 metres from the proposed escalator, should also be giving public escalator access to Queen's Road. "We believe that there is little public support for another hillside escalator ... The demography of the area has changed substantially in the past four years, with younger, single people moving in. They have chosen to live in the area precisely because it is quiet and a low-rise area," he said.

Canto-pop star arrested after crashing Bentley - Canto-pop star Remus Choy Yat-kit was arrested for suspected drink-driving after he crashed his car in Pok Fu Lam yesterday. The 44-year-old singer and dancer with the group Grasshopper was driving a black Bentley uphill on Sassoon Road at about 7.50am when he lost control of the vehicle. The car hit a postbox and fire hydrant at No 8 Sassoon Road and crashed into a fence at the junction of Sassoon and Pokfulam roads, near Queen Mary Hospital. The car was seriously damaged, with the right headlight smashed, and police found a long trail of broken glass on Sassoon Road. The car's airbags were deployed. Choy suffered a minor injury. He was treated by ambulance officers at the scene and declined being taken to hospital. There were no passengers in his car at the time of the accident. Police said Choy failed a breath and was arrested and taken away for questioning. He was later released on HK$5,000 police bail and was required to report back to police later this month. Police declined to say what Choy's blood-alcohol level was at the time he was tested. Choy did not respond to questions by journalists waiting outside his Pok Fu Lam home. According to police figures, 1,146 drivers were arrested for suspected drink-driving last year, up from 1,024 in the previous year. Tougher drink-driving penalties and a new offence of dangerous driving causing grievous bodily harm, which carries a maximum penalty of seven years in prison, have been introduced since the legislature passed amendments to laws governing road safety last year. The new offence and tougher penalties came after public concern over a January 2009 accident in Lok Ma Chau, in which six men were killed by a truck driven by a man who had been drinking. The new law instituted a three-tier penalty system, with the period of disqualification from driving growing with the blood-alcohol level. Grasshopper is a trio comprising Choy, his brother Calvin Choy Yat-chi, and Edmond So Chi-wai.

Perfumes make cents for HK companies - Headmistress Coco Wong has replaced the smell of bleach with the scent of green apples at her Mong Kok kindergarten. Next time you walk into the Mira hotel in Tsim Sha Tsui, prepare to be assaulted - through your nose. The lobby is filled with the smell of baby powder and fresh floral essences but it's not by accident - the hotel has enlisted the help of Sky Work Design, a new scent-marketing company that opened in Hong Kong in February. Marketing director Daniel Fong is hoping to bring this trend of aromatic branding to the city, and while he is hoping to move into the casino market, before that he's got his eyes and nose set on local businesses. Coco Wong, headmistress of the Little Academy kindergarten in Mong Kok, is one such client. She started using a green apple scent at the school a few months ago after the school switched to chemical-free cleaning products and some parents were questioning the cleanliness of the school because it no longer smelt of bleach. "We think it gives that refreshing smell and it's very easy to recognise. It also projects a healthy image because as a school we want our students to be healthy," Wong said. "So far, we haven't had any negative comments from parents, students or staff. Some people also say it's nice for the staff to have their work environment slightly scented." Kenneth Chan is another convert to the green apple scent. He sells Apple computer-related products and used the scent at his booth at a recent electronics trade fair in Wan Chai. "Many people said they were very surprised and came over to ask why we had the apple smell, so it did attract more customers," he said. Fong said that before a client chose a scent to use in their branding campaign, staff would discuss the company's objective. A pleasant smell in a retail setting can create a nicer shopping experience. "If you are relaxed, you will stay longer in the shop and decide to buy something and feel good about it," he said. "Scent marketing has been popular in Europe, the US and Japan for 15 years. Now seems like a good time to bring it to Hong Kong." Fong said local clients included a chiropractor and dentist, and that another major city hotel was trying out one of his scents. The company hoped to expand into the mainland, Korea, Malaysia and Indonesia, but Hong Kong was the focus for now, Fong said. All the scents are approved by the International Fragrance Association and it costs HK$3,000 to HK$5,000 a month for the perfumes and a machine that dispenses the aromas.

Police smashed two drug trafficking syndicates following the arrest of two men and the seizure of 147 kilograms of cocaine yesterday. The haul, which police said had a street value of around HK$153 million, was the largest drug seizure so far this year. Chief Superintendent John Ribeiro, head of the Narcotics Bureau, said the arrests were the result of a month-long investigation. Acting on information, bureau officers conducted thorough investigations and intercepted two men, aged 29 and 53, in Ma On Shan, Sha Tin, at around 3pm yesterday. The two men were searched and were found to be carrying one kilogram of cocaine, Ribeiro said. The men were then taken to a flat in Tsim Sha Tsui, which police suspected was being used as a warehouse to store the drug. They discovered 146 kilograms of cocaine stored inside the flat. Ribeiro said the 29-year-old man from Venezuela and the 53-year-old from Hong Kong were the core members of two drug trafficking syndicates. "Our investigation found that the Venezuelan was responsible for guarding the warehouse and for distributing the drug stored there to buyers," he said. The Hong Kong man was a buyer representing another syndicate who was dealing with the Venezuelan. Ribeiro believed that the Venezuelan man started operating his syndicate at the beginning of this year. He said a small amount of drugs distributed by this group might have entered the market already. The two men who were arrested would be charged and would appear in court tomorrow. The latest case highlighted authorities' concerns about growing recreational drug use, Ribeiro said. He added that police would liaise closely with their counterparts on the mainland and overseas to combat this drug problem.

Wan Chai landmark closes after landlord pulls lease - One of Wan Chai's landmark watering holes has closed its doors for the first - and last - time. The Bridge in Lockhart Road, which was open around the clock, closed last week after a dispute between the landlord and the bar's owners. Police said the landlord had had enough of some of the more "colourful" behaviour alleged to have gone on in the early hours of the morning. "We carried out a serious drugs case there - an undercover officer was sold cocaine," a police source said. "When this happens on the premises we put a notice on the landlord, so if another incident happens within the next 12 months, the magistrate will close the premises. "It will also mean that you'll not be able to use the premises for the next six months, and we would actually close it and seal it off. The landlord was worried that his premises was being used for purposes he wasn't happy with and there was a dispute with the people leasing it." Once a drugs case occurs, a magistrate can issue an order to the landlord, which serves as an official warning to the landlord that under the Dangerous Drugs Ordinance, if a drug offence happens again the place can be closed down. "The landlord just said enough is enough, and did not want to continue the lease," the police source said. Recently the bar's licensing conditions had also changed from being open 24 hours to serving alcohol on the premises until 4am. An insider with knowledge of the situation said it was this combination of things that forced the management to close the bar, but that they were leaving with a big smile on their face. "They have made plenty of money from the Bridge and could have walked away sooner if they wanted to," the insider said. "The lease was not up until January and they were not losing any revenue. They still run Bar 109, which is just two doors down from the Bridge and is a popular bar as well. It's not like they'll be that worried about what happened." For nearly eight years the Bridge has long been a haven for all things that go bump in the night. Depending on what ungodly hour revellers went there, they could be greeted with the thumping sounds of techno music or a scene from Michael Jackson's Thriller video - sometimes both. Either way, they'd probably be too full of beer to care. However, things took a turn for the worse as alleged tales of drug use and prostitution became known. In February the Post was contacted by four drinkers who said they had been drugged and robbed while in Wan Chai; each one said they had visited the Bridge in the early hours before later blacking out. The Bridge was a huge fixture of Wan Chai nightlife and its demise will be mourned by many. Its closure follows that of other well-known watering holes in the area, such as the Laguna Music Club and Bar on Fenwick Street, which closed in September. That place, where for 10 years some of the city's domestic helpers let their hair down on a Sunday afternoon, was bought by the group that owned the nearby Escape (formerly Fenwick's) and Traffic nightclubs. It is understood the deal involved between HK$50 million and HK$60 million.

 China*:  May 3 2011

Drinks boss defends his stand on charity - Wahaha chief 'creates wealth for society' - Zong Qinghou, founder and chairman of Wahaha, says he will always be looking, listening, studying and thinking. When Bill Gates and Warren Buffett visited Beijing in October last year to encourage the mainland's wealthiest citizens to donate their fortunes to charity, Zong Qinghou, chairman of Wahaha Group and one of the richest men in China, was on top of the invitation list. But the soft-drink tycoon did not accept the invitation, saying he had to attend a business forum in Australia. His absence triggered media speculation that he was reluctant to respond to the American billionaires' call. "I always support charity causes," said Zong, ranked by Forbes and the Hurun Rich List as one of the wealthiest men on the mainland with a net worth of US$6 billion to US$12 billion. "But I do think charity is more about creating wealth for society rather than simply giving money." In recent years, a number of the world's super-rich - including Microsoft founder Gates, investor Buffett, mainland recycling king Chen Guangbiao and Hong Kong businessman Yu Panglin - have promised to donate their entire fortunes to charity after their deaths. "I never thought of an all-out donation," said the 65-year-old entrepreneur. "I believe wealth should be in the hands of those who know how to create more wealth." And Zong is certainly one of those. Born in Jiangsu province, Zong was the eldest son in a family of five children. He began bringing money home after graduating from secondary school, working on a salt farm and earning only 28 yuan a month. During the following two decades, he took different jobs in factories and remained a common worker and salesperson most of the time. It was not until Zong was 42 that he set up his first business - a small shop selling ice lollies in a school in Hangzhou in 1987. His first big success came the following year when he launched Wahaha Oral Liquid, a nutritional drink to improve children's appetites, a product that was well received nationwide. Wahaha is pinyin, with wa meaning a young child and haha indicating laughter. According to Zong, Wahaha was also in the lyrics of a popular children's song in the 1980s. He thought the three words were cheerful and easy to remember. In the next few years, Zong acquired a loss-making state-owned cannery and tapped into the bottled water market in the '90s. As one of the mainland's first generation of entrepreneurs, Zong is viewed as a smart, hard-working businessman. "The key to making money is to make sure other people can make money by doing business with you," said Zong, who added that he has modelled himself after Hong Kong tycoon Li Ka-shing. "Never transfer your cost to others." Luo Jianxing, who worked as a marketing director for Wahaha in the '90s, described Zong as a rare business talent in his book Zong Qinghou and Wahaha - an in-depth report on a famous enterprise. Luo said Wahaha was the first company in the country to adopt a pre-payment system. The company encourages distributors to pay for goods before they are delivered. In return, Wahaha pays interest on the pre-payments at a better rate than available at banks. The system helped Wahaha establish a sales network covering almost every corner of the country in a few years. "This is very well received by distributors," said Luo, a marketing instructor with the Zhejiang University of Media and Communication. "They think their money is safe and they are happy to be able to earn an extra amount." As Wahaha expands, Zong's authority over the company is also growing. The company has no deputy general manager; the 100-plus middle-management staff report directly to Zong, the board chairman and general manager. "The good thing is the decision-making process can be very efficient and can respond quickly to the market," Luo said. "The bad thing is there's little room left for younger managers to grow and it could be hard to find a proper successor for Zong." In 2007, Zong and Wahaha were in the spotlight over their battle against French food giant Group Danone, then a stake owner in their joint ventures, over control of the Wahaha brand. The legal fight, which made headlines globally, ended in 2009 with Danone agreeing to sell its 51 per cent stake in the joint ventures to Wahaha for an undisclosed sum. "It was a big lesson," Zong said. "But we will keep an open mind on working with foreign partners and bear in mind that the relationship must be on the basis of equality and mutual benefit." Under Zong, Wahaha has grown into the third-largest beverage maker in the country. It sold 55 billion yuan (HK$65.8 billion) in mineral water, soft drinks and canned and packaged foods last year and earned 6.7 billion yuan in net profit. In a crowded Beijing market, ZhuangHua, a mother of two children, said Wahaha Nutri-Express, a milk drink, is always on her shopping list. "My kids love its taste and they drink it almost everyday," said the 35-year-old housewife. "I remember when I was a child, my parents often bought me a tasty drink by Wahaha. It always has something nice for kids." Despite being one of the wealthiest men in the country, Zong said he leads a simple life. "I am really not good at enjoying life," he said. "Everyday, I arrive in my office at 7am and leave at 11pm. I have my lunch and dinner in the canteen and seldom go out for social engagements. My biggest spending is on cigarettes and tea. They are helpful to ease the pressure of work. Yet they are both cheap." Zong said he smokes two packs of cigarettes daily at a cost of 12 yuan per pack. His attitude towards money is reflected by his company. Wahaha has never borrowed from banks and relies on its own capital to support growth. By the end of last year, the company held 13 billion yuan in deposits. Instead of giving to charity, Zong said he prefers to help the poor by building factories in remote and underdeveloped areas. Education is another focus. The company often organises volunteers to go to rural areas to conduct classes for local children. "Providing job opportunities for poor people and helping them get financial independence - this is the true sense of charity," he said. "It's easier but also useless to give a million dollars to a lazy person who may use it up overnight." Yang Sheng, an administrative employee at Wahaha, recalled that just before Lunar New Year last year, Zong travelled to eight of the company's factories to give lai see to workers there. The company has also built several apartment buildings for its workers and offered an average pay rise of more than 10 per cent annually in recent years, he said. Wahaha accounts for about 20 per cent of the bottled water market in China, second only to Taiwan-based Tingyi (Cayman Islands) (SEHK: 0322) Holding, whose brands include Master Kang, and Uni-President China Holdings. But Zong said he has no intention of becoming No1. "The profit margins [in this industry] have become thinner and thinner," he said. "A bottle of mineral water is only around one yuan. You'll lose money fast if you're not careful about controlling costs." To raise the margins, Wahaha has improved its product mix and put more resources into the production and advertising of higher-priced milk drinks. However, last year was still a difficult one for the drink maker. Despite a sharp 27 per cent gain in sales revenue, Wahaha recorded a fall of 23 per cent in net profit, mainly because of price increases for sugar, raw milk, packaging and labour. Expecting a high level of inflation this year, the company earlier lowered its profit target to seven billion yuan from up to 10 billion yuan for this year. The veteran businessman said he feels it is the time to look for new growth opportunities. "We need to diversify our business if we want to go faster," he said. Zong has identified retailing, mining and baby formula markets as possible targets. Wahaha first ventured into retailing in 2002 with a range of children's clothing, also named Wahaha. His daughter, Zong Fuli, is now in charge of the business. The company said earlier it plans to open 100 supermarkets and shopping centres under the Wahaha name in second- to fourth-tier cities on the mainland over the next few years. "If it goes smoothly, the retailing business will be bigger than our soft drink business," Zong said. "We may list it on the stock market when the opportunity is right." Meanwhile, he said he was also interested in buying copper and other rare metal mining projects in foreign countries. With such a busy schedule, Zong has no plans to retire. "I never stop looking, listening, studying and thinking," he said. "I will be very careful in making every business decision. But once I decide, I will act quickly."

Brilliant night view of Int'l Horticultural Expo in China's Xi'an - International Horticultural Exposition 2011 witnessed a tourist flow peak of more than 100 thousand visitors on Sunday.

Alcohol lovers beware: New law in effect - A driver holds his head in his hands while waiting to be questioned by the police after he is caught drunk driving in Beijing May 1st, 2011. The man had a blood-alcohol level of 159.6 mg per 100 milliliters. China's newly amended Road Traffic Safety Law took effect on Sunday and stipulates that drivers who have at least 80 milligrams of alcohol per 100 milliliters of blood in their body should be considered drunk. According to the new law, drivers found guilty of drunk driving will have their licenses revoked and have to wait five years to apply for a new one. 

Wen pledges aid to boost regional trade links - Premier Wen Jiabao waves to an audience in Jakarta. China will speed up the development of transport connections with Southeast Asia, building roads, telecommunications and power links as it seeks to boost trade, Premier Wen Jiabao said yesterday. Wen, speaking in Jakarta before wrapping up his two-day visit to Indonesia, said China would give financial support through credit aid and investment, to provide for better exchange of commodities, capital and people. "In the next 10 years we will speed up the inauguration of land transport routes between China and Asean," said Wen in a speech in Jakarta, adding Beijing will also provide funds for air and sea transport. "Today we witness the rise of Asia." He said China would unconditionally help underdeveloped countries in the Association of Southeast Asian Nations, which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Asean has sought to highlight the potential for greater connections between its frontier markets and Asia's biggest economic power. Indonesia is seeking US$100 billion of private investment to develop its own dilapidated infrastructure, seen as a hurdle to attracting foreign firms and to gaining a sovereign investment grade rating that would cut government borrowing costs and put it on a par with the so-called BRICS nations (Brazil, Russia, India, China and South Africa). Wen's schedule for infrastructure development in Jakarta looked ambitious: tropical downpours yesterday flooded roads and jammed traffic. Wen promised Indonesia US$9 billion worth of loans for infrastructure on Friday, after meeting his Indonesian counterpart, President Susilo Bambang Yudhoyono. Asean's plan to link new and existing rail, road and sea routes with China and allow better travel within a free trade area of 1.9 billion people is ambitious. But analysts say there is huge trade potential between Asean and China and better links could encourage Japan and South Korea to forge a closer relationship with the group. Japan has already pledged more than US$50 billion in infrastructure investment. China, Asean's biggest trading partner, is seeking to double trade with Indonesia and get access to resources from a country that is a leading exporter of natural gas, palm oil and coal. Wen said China was firmly against any threat of use of force in settling territorial disputes in the region, and that Beijing's foreign policy was free, independent and peaceful. "China's development will not disturb any countries and will not be a threat to other countries," Wen said, adding China still faced daunting tasks in its own development. Southeast Asian countries have clashed with China over rival claims over potentially oil- and gas-rich islands in the South China Sea which is seen by China as its backyard, while many see the United States as a buffer against a dominant China. Earlier in his two-day visit, which followed a trip to Malaysia, Wen sought to build trust and cultural links between two countries historically suspicious of each other, telling students at a Muslim university he had read the Koran.

Hong Kong*:  May 2 2011

Dog that guided visitors to Ping Chau gently bows out - Ping Chau villagers Cat Tang Chi-ching, Nicole Tang Suet-man and Siu Lok-man say goodbye to Wong Tsai. He's had a long life for a dog - 20 years - but time has run out for Wong Tsai, last permanent resident of one of Hong Kong's most remote islands and regarded as a mascot by villagers and tourists alike. The "tour guide dog of Ping Chau Island", named for his habit of meeting tourists at the pier and accompanying them on walks around the scenic island, said his last goodbyes to visitors at the SPCA in Wan Chai yesterday before he was put down. A veterinarian said it was the only way to end his suffering from bone cancer. Former Ping Chau resident Chow Lan-heung, who still owns a store on the northeastern island near the mainland border in Mirs Bay, brought Wong Tsai a can of his favourite beef-flavoured dog food. "He loves taking people around his home, like he's really proud of his island," Chow said. "He is also very gentle and he listens when we talk to him." Older sister Chow Tai-tai said the old native dog was part of the family. "I've known him since he was a tiny puppy, and, in turn, he watched my daughter grow up." Hidy Tsang Ho-yee, who has visited the island regularly since 1998, recalled her first meeting with the dog. "He was just there, waiting for us visitors at the pier," she said. "My friend went up to him and asked him if he was male or female, and Wong Tsai let my friend lift his back-leg to check. It was quite funny and Wong Tsai was really nice about it." Tsang said Wong Tsai, who seemed to understand human feelings, was the reason she got over her fear of dogs. "He would let me pet him, and he never barks at people." Wong Tsai's former owner, Mo Shui-ching, who died in 2009, signed a letter of consent with the Society for the Prevention of Cruelty to Animals for euthanasia if the dog ever had an incurable and painful disease. "[Mo] wanted to make sure that Wong Tsai wouldn't suffer. It is an extremely hard thing, but one of the best things we can do for our pets," the SPCA's chief veterinary surgeon Dr Jane Gray said. "No animal should go through unnecessary suffering." She said the dog was in pain that was kept at bay with heavy doses of morphine-based painkillers and his health was deteriorating quickly. "Wong Tsai has lived a full and beautiful life compared to many other animals we see here [at the SPCA]," Dr Gray said. "He is loved and cared for, and we should always remember to let animals go with dignity. We just want to give him a chance to bid farewell to his family." The SPCA has been keeping an eye on the old free-roaming dog since he developed a non-malignant lump on his left cheek in 2009. A passing policeman noticed he had a serious limp last week and notified the SPCA, which sent a team to check on him and found he had bone cancer which had crippled his right hind leg. Yesterday he could only limp for a few steps before collapsing. The Agriculture, Fisheries and Conservation Department dubbed him the "friendly local guide" of Ping Chau Island, which is part of the Hong Kong National Geopark and listed by the government as a "site of special scientific interest". Ping Chau has had no full-time residents since 1971; islanders return at weekends to cater for tourists or go fishing. Some former villagers wanted to take Wong Tsai back to Ping Chau, but the SPCA said the journey would be too painful.

Almost 70 percent of employers say they are prepared to increase manpower in the second quarter this year - a record high when compared with previous years. But a survey by human resources firm Hudson also reveals that nearly the same percentage of bosses find recruitment of talent a tough job as potential workers have raised expectations on rewards. Hudson interviewed 550 executives in banking and finance, IT, legal services, retailing and manufacturing during March. In the second quarter, 69 percent plan to hire versus 66 percent in the first. Main recruitment areas are legal with an 88 percent hiring intention, IT (79 percent) and banking and finance (73 percent). Hudson executive Mark Carriban sees more incentives because of the competition for staff. Many international firms "are under intense pressure" to step up business in Asia. But 65 percent of bosses say finding the right people is tougher than 12 months ago.

Pregnant mainlanders will need special certificates from the Department of Health under new measures to control the flood of women who come to Hong Kong to give birth. And Secretary for Food and Health York Chow Yat-ngok warns he will clamp down hard on doctors in cahoots with mainland salesmen who arrange for the women to give birth in local private hospitals. Also among seven new measures is setting up a working group to determine the number of mainland mothers to be allowed into the territory each year. Publicly at least, private hospitals welcomed the moves and claimed that local women will continue to be given priority in using obstetrics services. But Chow told doctors at private hospitals to behave as professionals and refuse kickbacks from mainland agencies amid a shortage of maternity beds. He also mentioned that he had reports of doctors changing dates of delivery to fit the tight schedules of hospitals. The revelations and the new hard line came after a meeting between officials and interested parties over the surge of pregnant mainlanders, which doctors warn is straining the health-care system. And with private hospitals unwilling to cut down on the lucrative business, the government may take back the power from them on how many mainlanders can give birth in Hong Kong. Already in the works for an introduction next month is a move to empower the Department of Health to issue health certificates to expectant mothers to prove the babies will be safe. Such a certificate will be required for a pregnant woman to be admitted to a Hong Kong hospital. Other action includes a review of guidelines for health checks on expectant mothers as well as a study on birth complications and the use of intensive care units. Doctors and administrators at public hospitals have complained there is a serious shortage of intensive care beds because of the soaring birth rate. A crackdown on agencies which profit from the shortage of maternity beds is also in the works. Some agencies tout around private hospitals and charge mainlanders for arranging a birth in Hong Kong. On that, Chow claimed to have learned that some private doctors are involved. Agencies introduced patients to doctors, he said, "and during the process the doctors may have received benefits. This is against professional conduct." On doctors changing delivery dates to fit hospital schedules, Chow said: "In cesarean-section births, we found there may be premature labor. This is professionally unacceptable." Baptist Hospital and Union Hospital welcomed the initiatives.

Father, son, daughter vie for HK$8m purse - Entrepreneur Siu Pak-kwan finds Queen Elizabeth II Cup has become a family affair - The Siu family - (from left) daughter Connie, father Pak-kwan, elder son Edmond and younger son Martin, photographed yesterday at the Hong Kong Jockey Club - anticipate a thrilling battle between their horses Destined for Glory (top left), Irian (top right) and Semos for the prize money in the Queen Elizabeth II Cup on Sunday. A HK$14 million international horse race on Sunday will be a family gathering for entrepreneur Siu Pak-kwan, with family members owning three of the horses vying with 11 others, including three from overseas. The horses owned by him, his son and his daughter will race for the top prize of almost HK$8 million in the Audemars Piguet Queen Elizabeth II Cup, an international group one event at Sha Tin racecourse. It would be the first time in Hong Kong's professional racing history that so many horses owned by one family have competed in a race, a spokesman for the Hong Kong Jockey Club said. Property, finance and manufacturing tycoon Siu said he was surprised that Irian - one of his four horses - would be in the same race as horses owned by a son and a daughter. His younger son Martin Siu Kim-sun also owns horses, but none has qualified for the race. "On top of the fact that three of us are in the same race, the competitiveness of this race is also remarkable," the father said. "I'd say the standard is historically unprecedented." He would bet on his own horse on the day, as he usually did. "Of course we bet on our own horses. That's how we profit more from our wins." But he would also support elder son Edmond Siu Kim-ping's four-year-old Semos and daughter Connie Siu Kim-ying's Destined for Glory, also four. "It'd be absolutely ideal if our horses could snatch the top three spots," he said. "No way. I'm kidding." The winner of the race will get HK$7.89 million, second place about HK$3 million, and the smallest prize, HK$280,000, will go to sixth place. The three said they were confident in their own horses, though wary of strong opponents, including casino tycoon Stanley Ho Hung-sun's eight-year-old Viva Pataca, the cup's reigning champion. It clinched Ho's second win of the cup last year and became the highest earner in the history of Hong Kong racing, with total prize money of more than HK$80 million. "But regardless of the result, to be able to compete against such strong horses will really be an honour for us all," the elder Siu said. Siu's family has nine horses in Hong Kong and more than 30 overseas. Money won by the horses had been enough to cover their daily expenses, he said. Irian alone had won about HK$9 million in 12 races so far. Siu's passion for racing took off when he bought a farm six years ago near Newcastle in the Australian state of New South Wales. "It's about a two-hour drive away from Sydney and when I bought it I saw it more as a property investment than horse training and breeding," he said. "Now it's also an up and running business serving horses there and is already making a profit." The German-bred Irian was a colt with a potential stud future last season, but Siu rolled the dice and had it gelded to make it a racehorse. "It proved the right decision to geld him, although I wasn't sure at the time because by doing so his worth would be at least halved," he said.

The Liberal Party appealed for a six- month "buffer period" during which employers will be spared immediate prosecution if they inadvertently pay less than the HK$28 an hour minimum wage, which comes into force on Sunday. But the proposal was immediately rejected by labor minister Matthew Cheung Kin-chung, following a meeting yesterday between party members and business representatives. But he told the delegation the government will not prosecute indiscriminately. At another function, Cheung said: "To the government, there is no buffer period. Please don't have any misunderstanding. We don't have any buffer period. In the initial period, many people may not know about the law very well. When enforcing the law - not only the minimum wage law, but also other laws - we are rather practical. "What matters most is to get to know the employer's intent, whether it was an inadvertent mistake. If he has made wrong calculations [on the wages] due to misunderstanding, and it was an inadvertent mistake, we cannot prosecute him without sufficient evidence. If we have sufficient evidence, we will definitely act in accordance with the law." Cheung said when carrying out inspections after the minimum wage takes effect, Labour Department officers will hand out leaflets to explain the law to both workers and employers. Liberal party chairwoman Miriam Lau Kin-yee said in the proposed buffer period, management and workers may mediate if there is any conflict on wages, perhaps due to wrong calculations. Lau said the party is not demanding a delay in implementation of the law. Federation of Trade Unions president Cheng Yiu-tong opposed the proposal, calling it unrealistic and unwise. Cheng said it is even more ridiculous if proposed by a lawmaker. Meanwhile, an alliance of cleaning companies has put off threatened industrial action aimed at forcing the government to provide contractors with more subsidies in view of the increase in costs the minimum wage will bring. Catherine Yan Sui-han, convener of the Environmental Services Contractors Alliance, said action was canceled as the group does not want to spark anger. Yau noted the government refuses to back down, rejecting the group's demands for contractors to be allowed to terminate current contracts without awarding any compensation. Authorities will also not give them subsidies to cover increases in costs in such areas as premiums for labor insurance, long-service payments, and paid meal breaks. Some companies without sufficient cashflow may close, Yan said.

Vision and guts are key to the success of Hang Seng Bank (0011) chief executive Margaret Leung Ko May-yee, the first local woman to lead the male- dominated world of finance. Wearing a blue suit embellished with glittering threads and a classic Rolex, Leung looks like any other chief executive one may run into in Central. But once she starts speaking, her authoritative tone and fast delivery make you realize how she has come to rule this 78-year-old local bank. One of the boldest moves of Hang Seng Bank was to slash its HIBOR- based mortgage plan offering in February even though it is far from being the dominant mortgage lender in the territory. In response, lenders including leaders HSBC (0005) and BOCHK (2388) increased their loan rates. "If you take the lead to do something [such as hike the HIBOR-based mortgage rate], you need to prepare for the consequence including the worst-case scenario," said Leung. Everybody has to be a multitasker these days, the combative banking industry veteran noted. "You can't take it for granted as a CEO. It's not like just going to the office and checking the deposit and loan amount," she said. "You need to have a holistic view of future development. We need to be well-rounded - understand government policies and the competition." April 22 marks the second anniversary of Leung's joining Hang Seng Bank and she has two more years to go before retirement. Despite her resolute persona, Leung was anxious when she left HSBC for the Hong Kong-based lender. "The world was reeling from the financial tsunami when I assumed my post," said Leung, whose last post was group general manager and global co- head of commercial banking at HSBC. "Although I said earlier that one has to be forward-looking but at the time I didn't know how to perceive the world. Some said it would be like the Great Depression of the 1930s." " 'How will my clients react? What will the bank be like? Will we need layoffs?' - a series of questions came to my mind," said Leung. "But of one thing I was certain, I needed to keep up morale and training." This was her objective of 2009. To make the business stable was her target of 2010. To turn more profit is the goal of 2011. Hang Seng Bank's net profit rose 13.5 percent in 2010 to HK$14.92 million, after falling 6 percent to HK$13.22 billion in 2009. But like all other firms, Hang Seng is also facing problems like manpower shortage amid the economic recovery. "Manpower is indeed very tight. We planned to have 1,000 openings but it is unlikely that we can fill it as other companies are also looking for staff with similar backgrounds. "We then adjusted the target to 700. "Everything is tight - be it labor, resources or capital. We have to optimize the balance sheet this year. We expanded our market share in 2010 so this year we can be selective." This explains why the lender dares to offer HIBOR-based mortgage plan only to selected clients now. The loss is expected to be offset by other premium businesses such as wealth management, forex, and yuan bond. Leung is also eyeing the mainland market. "The number of middle class families has been growing in mainland China, but equity markets there are small. They want to invest in Hong Kong stocks and derivatives." Hang Seng opened its first representative office in Shenzhen as early as 1985. It took a strategic shareholding in Industrial Bank in April 2004 and currently holds a 12.8 percent stake. On 29 March, Hang Seng Bank signed a memorandum of understanding for closer cooperation with IB. Since IB does not have any branch or subsidiary in Hong Kong, their clients can use Hang Seng as a platform. "Besides IB, there are still many mainland banks which do not have outlets in Hong Kong. They need local banks with a good reputation to help their clients in Hong Kong," Leung noted. Hang Seng Bank (China) started operations in 2007, and Leung said it will continue to open mainland branches. "Cross-border financing flows both ways. We help local clients to go to the mainland and also help those from the mainland to come to Hong Kong. Despite the opportunities, competition in the banking sector is keen." Amid the central government's tightening measures and a larger cross- border interest rate gap, Hang Seng foresees loan growth from mainland companies. And Leung notes opportunities in small and medium-sized enterprises on both sides of the border. "If you help a company when it is small and struggling for survival, a relationship can be established - just like with human beings. We have been forging ties with local universities, hoping the students will be loyal to us even after graduation." Perhaps it is the "local color" of Hang Seng that helps it gain trust among mainland counterparts. "We started as a simple money- changing shop in Hong Kong in 1933. Although Hang Seng is a very successful brand, we are still a locally based bank. All our staff are Chinese. "You see even the decor of my room is in Chinese style. This is something we are proud of and we can leverage on," said Leung, who started her career with international lender HSBC, the parent company of Hang Seng.

 China*:  May 2 2011

Visiting Premier Wen Jiabao on Friday broke into an Indonesian folk song after he was greeted with a warm "ni hao (hello)" from students of Al Azhar University in the country's capital. While visiting the university's Chinese Language Center, Wen said exchanges of young people are the foundation and future of the friendship between the two countries. Premier Wen Jiabao sings an Indonesian song called Ayo Mama with students who study Chinese literature at Al Azhar University in Jakarta on Friday. "We welcome students to come to China and learn with their brains, hearts and feet so as to be the bridge of the Sino-Indonesian friendship," Wen said. After about 20 Indonesian girls presented Wen with a well-known Chinese poem of Tang Dynasty - Sailing Early from Baidi Town, the premier began to sing the traditional Indonesian song Ayo Mama to demonstrate that he was familiar with several aspects of Indonesian culture. "I had come to know this country when I was very young and could hum the tune of such famous Indonesian folk songs as Buteh and Ayo Mama," Wen told Indonesian reporters ahead of his Southeast Asian tour. Zuhal Abdul Kadir, president of the university, said the Chinese Language Center would be managed to enhance the mutual understanding of the two peoples. As a partner with a number of Chinese universities, Al Azhar University set up the Chinese Language Center last year to provide Chinese language and culture courses. China and Indonesia on Friday signed an agreement to boost Chinese-language education in the country, where the language had been censored for over 30 years during the rule of the second Indonesian president, Suharto. Former president Abdurrahman Wahid began to lift the ban on Chinese culture right after taking office in 1999. Xu Lin, director-general of Chinese Language Office, said more Indonesian young people, impressed by China's rapid economic growth, rushed to establish commercial contacts with Chinese businessmen. "They are proud of doing business with Chinese and we have sent more than 100 Chinese teachers every year to Indonesia in the past five years but still cannot meet the demand of the local learners," Xu said.

For citizens and tourists to Hangzhou in eastern China, it is good news they don't have to go as far as Holland to get lost in the clouds of colorful tulip flowers. In the city's Taiziwan park, blooming tulip flowers decorated the river banks and stretching grass lawns during March and April. Every year since 1992, the park will hold a tulip exhibition to celebrate its rich resources of the plant.

2011 China Nanjing Int'l Auto Exposition kicks off - More than 400 vehicles of nearly 60 brands were displayed at the 2011 China Nanjing International Auto Exposition which kicked off Saturday.

Beijing's municipal government plans to invest in retail vegetable markets to strengthen its ability to stabilise prices. The government will buy 10 vegetable markets and invest in another five in each of the city's 16 districts in an effort to "fundamentally solve the problem of government control over vegetable retailing", the city's commerce commission said. Farmers on the city's outskirts and elsewhere will be able to sell their vegetables directly to designated community markets in inner-city areas so that a simplified supply chain can keep prices low and guarantee farmers' interests, it said. The commission did not detail the size of the stake the city intends to hold in each of the new markets, who the other investors might be or the estimated cost of the scheme. The Chinese Academy of Social Sciences' Professor Weng Ming, who has studied farm-produce trading, said: "Experience has proved that the market economy cannot solve all problems. For instance, we have seen rampant food safety problems and speculation in the food market. The government can have a bigger say in pricing if they invest in markets." State-owned vegetable markets could probably contain high prices in the short term, he said, but that did not mean they would be able to provide good service in the long term. "I don't think things can improve if there are more Jingkelong (SEHK: 0814) stores, which, like many others, soak apples in water to make them heavier," he said, referring to a leading state-owned supermarket chain in Beijing. Wang Wanli, , a vendor at the Jinying vegetable market in Beijing's Tuanjiehu community, said government intervention on prices was unrealistic because "everybody has to obey the market. They can't ask us keep prices low when the purchase price is high." Stall rent in his market has risen to 2,970 yuan (HK$3,542) a month, up from 2,300 yuan in December and 1,700 yuan in 2009, increases which he said made it impossible for him to continue selling vegetables. Urban consumers have had to cope with soaring prices for farm produce in the past year, but farmers have failed to benefit, with multiple layers of traders playing a major role in mark-ups. The issue hit newspaper headlines again recently after a poverty-stricken farmer in Shandong killed himself after hearing that cabbage prices had slumped due to oversupply. After the agriculture and commerce ministries ordered local departments to help farmers sell vegetables last week, the Ministry of Finance said on Thursday that it was setting aside 700 million yuan to build farm produce bases for big and medium-sized cities in the north. Monitoring by the Ministry of Commerce has found that vegetable prices have fallen by 20 per cent in the past four weeks. But despite the seasonal drops, Lu Ting , an economist with the Bank of America Merrill Lynch, said long-term prices would "still trend up at a pace faster than perhaps any other consumption items". Analysts say the inflation rate is expected to remain above 5 per cent in the next few months.

Plans for overseas yuan centres - Premier Wen Jiabao inspects an honour guard yesterday ahead of his talks in Jakarta with Indonesian President Dr Susilo Bambang Yudhoyono. Premier Wen Jiabao has confirmed Beijing is setting up yuan settlement and clearing centres with other countries, a development some fear may undermine Hong Kong's hopes of a niche role. But Wen also said such a development would not affect Hong Kong's status as the yuan's offshore hub and as a centre for international finance and asset management. Speaking yesterday in the Indonesian capital Jakarta, Wen said that more yuan settlement and clearing centres with other economies were needed for trade and investment growth. Last week, Singapore's Senior minister Goh Chok Tong, who is also chairman of Singapore's central bank and a former prime minister, said in Beijing that Singapore would join Hong Kong as an offshore trading centre for the yuan, the Straits Times reported. But Goh also said Singapore would not try to rival Hong Kong as a yuan trading hub. Singapore is the latest centre lining up to compete with Hong Kong to become acknowledged offshore yuan trading centres as lenders in New York and London begin offering yuan products and services. Meanwhile, Wen announced China would give US$9 billion in loans to support Indonesia's infrastructure development, and a further US$10 billion in export credits. Not to be outdone by US President Barack Obama, Wen broke into song during a meeting with students at a university in Jakarta on the second day of his state visit. Obama wowed Indonesian students with flourishes of local language and reminiscences of his childhood days in Jakarta during a visit in November. Going one better, Wen launched into a version of traditional Moluccan folk song Ayo Mama (Let's Go Mama), which he said he remembered from his youth. "I had come to know this country when I was very young and could hum the tune of such famous Indonesian folk songs as Butet and Ayo Mama," he said. At the business end of his visit, Wen held talks with Indonesian President Dr Susilo Bambang Yudhoyono and signed four agreements to deepen social and economic ties. "I led a delegation for trade and investments which will sign commercial agreements worth US$10 billion," Wen said without elaborating. Indonesian officials say Jakarta wants to renegotiate its part of the landmark free-trade pact between China and the Association of Southeast Asian Nations, of which Indonesia is the biggest member. But Wen cited the pact as a key plank in Beijing's plans to forge stronger economic links with Indonesia, which has a population of 240 million.

Australia will host more Chinese warships and increase live-firing and other defense exercises in an attempt to improve ties. Wrapping up a North Asia tour, including her first visit to Beijing as leader, Prime Minister Julia Gillard said yesterday she discussed greater military co- operation during "friendly" talks with President Hu Jintao. "[We] indicated a preparedness to keep discussing defense co-operation, and are open to ships visiting Australian ports. There's some prospect of such visits before the end of the year. "It's a few small steps on a journey to better understanding each other's military perspectives." The United States and its allies are concerned over the motivation behind China's military buildup and want greater transparency. Australia's 20-year defense plan, released in 2009, saw China on track to becoming Asia's dominant military power "by a considerable margin." It warned that the "pace, scope and structure" of its expansion may create tensions. Beijing was troubled by the assessment, which was echoed in a poll in Australia this week that found 44 percent of respondents believe China will become a military threat in the next two decades. Of those, 87 percent said Australia would be drawn into any conflict with China as a US ally. Gillard said increased military transparency is key to combating tensions by helping to "build understanding about people's military methods and military protocols." Defense cooperation is already being boosted, she added, "taking the form of discussions between counterparts. It is also taking the form of some shared exercises, including live firing exercises. "The best way of working through these issues is to engage in increased co- operation and links." China is Australia's largest trading partner, buying mostly raw materials such as coal and iron ore that are crucial to its rapid industrialization.

Hong Kong*:  May 1 2011

Establishing a new statutory body to regulate Hong Kong’s travel agencies and tour guides is among the options put forward in proposed industry reforms, Tourism Commissioner Philip Yung Wai-hung said on Friday. Yung unveiled four options for reforming the Travel Industry Council and for regulation of the tourism industry as a three-month public consultation period on the proposals began on Friday. The 32-year-old council is currently self-regulated and one of its main functions is to discipline tour agencies for malpractice and poor service. Recently, however, it has been criticised for operating under a conflict of interest, because it is made up of tourism companies. Yung said two of the proposed options would retain the council’s status only as a trade organisation, while a government department or a new statutory body took on responsibility for regulatory functions. The tourism commissioner said any newly-established statutory body would oversee the operation of travel agencies and tour guides and become responsible for licensing operators. Two alternative proposals aim to make the council more transparent – in a bid to dismiss conflict-of-interest accusations. One suggests that the council’s disciplinary board be open to the public – not just to travel industry operators, Yung said, while the other advocates a new committee would be set up under the council to handle malpractice complaints. In recent months, conflicts between tour guides and holidaymakers from the mainland over forced shopping trips has prompted the government to seek new ideas for reform. Acting Secretary for Commerce and Economic Development Greg So Kam-leung said the present self-regulatory framework had been pushed to the limit. Government officials hoped reform could improve quality of service, he added. “The present regulatory framework has been in place for more than 20 years. It needs reforming in the face of increasing numbers of mainland visitors [arriving] in recent years. We hope this review will lead the industry to a healthy and sustainable direction,” he said.

Local interest rates will rise in response to strong demand for loans and also rises in benchmark interest rates in the United States, prompting capital outflows from Hong Kong, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam warned yesterday. Chan's comments came after US Federal Reserve chairman Ben Bernanke hinted that rate rises in the US were some months away. But Chan warned that Hong Kong rate rises might pre-empt increases in the US. "US monetary conditions may start to move gradually towards normalisation from June," Chan said. "I would like to remind the public that Hong Kong dollar interest rates may rise even before the Fed rate hike ... Hong Kong dollar interest rates are also affected by changes in the demand [for] and supply of Hong Kong dollars in the local banking system." According to HKMA figures, the loan-to-deposit ratio of local banks reached 81 per cent in January, up from 71 per cent at the start of last year, as growth in Hong Kong dollar loans outpaced growth in Hong Kong dollar deposits. "Since the Hong Kong dollar loan demand is likely to remain strong, local banks' Hong Kong dollar interest rates may face further upward pressure," Chan said. Anticipating a gradual outflow as HK$640 billion in inflows between late 2008 and 2009 began to reverse in response to an expected rise in US dollar interest rates, Chan warned the public to be prepared for the interest rate risk and avoid overstretching their bank loans. Stanley Wong Yuen-fai, from ICBC Asia, expected banks' loan growth to ease to less than 20 per cent this year as banks sought to maintain their liquidity ratios, and cut loan-to-deposit ratios. HSBC (SEHK: 0005) said it would not change its best lending rate, which is at 5.00 per cent.

Money-mad Hong Kong all heart, says expert on Confucius - Professor Daniel Bell, an expert on Confucianism, speaks at the University of Hong Kong. Confucius prized frugality, humility and spirituality. But one of his leading contemporary exponents yesterday credited capitalist Hong Kong for being materialistic without turning to hedonism and its people for having a heart for charitable causes. Professor Daniel Bell, a leading specialist in the new political Confucianism on the mainland, described Hong Kong as having an "obvious materialism without hedonism". "In Hong Kong, I always throw aside the sports and politics sections of the paper and go straight to business - you can't understand Hong Kong politics without reading the business and financial news," he said at a lecture at the University of Hong Kong yesterday. The Tsinghua University philosopher said Hong Kong people may care for money but money was used with a purpose. He cited Hong K