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Hong Kong*:  July 31 2011  Share

Chief Executive Donald Tsang Yam-kuen yesterday brushed aside criticism that the SAR's civil servants are weak in long-term planning. His remarks came two days after Hong Kong and Macao Affairs Office director Wang Guangya said in Beijing that local civil servants are not bossy enough. Wang urged the government to work more on long-term planning. On his Facebook page, Upper Albert Road, Tsang said: "The team of the SAR government, be it political appointees or civil servants, has long been working for Hong Kong's long-term interests. We set out policies together. "In the policy address to be delivered in October this year, we hope to put forth feasible short-term, mid-term and long-term measures to handle housing and home ownership problems, ease the income gap, raise the living standard of grassroots people, improve retirement protection schemes and provide better support for the elderly." Tsang said in the past few years many of the policies introduced involved long-term planning, including the launch of major infrastructure projects, developing six industries, the minimum wage and putting forth political reform. These, he said, pushed Hong Kong's development in the political, economic and social arenas. The government will launch a joint consultation for this year's policy address and next year's budget which will help ensure policies set out will be financially supported, he said. Meanwhile, Executive Council convener Leung Chun-ying disagreed with speculation that Wang's remarks were aimed at the chief executive. "The central government has been supporting the chief executive's governance according to the law," he said. However, Leung did not say who Wang may have been referring to in his comments to a group of SAR university students in Beijing. Leung, tipped as a contender in next year's chief executive election, praised civil servants as professional, capable and diligent, and had adapted to changing times according to the needs of society. He said effective governance relies on long-term planning and professional execution along with understanding of social phenomena and structural conflicts such as poverty and economic development. "In the past it was the British who mapped out the planning that was executed by Hong Kong's civil servants. Since the handover, it was Hong Kong people governing Hong Kong," Leung said. "Hong Kong people need to plan as well as execute [policies]." Leung said civil servants have faced a greater workload since the handover with the same manpower, as society has become more politicized.

As the largest harbor in China and one of Hong Kong's greatest assets, Victoria Bay makes Hong Kong one of the world's busiest. The harbor is a jewel that people from all over the world come to see. The harbor is famous for its stunning panoramic views. At night, myriads of lights twinkle from more than 40 Hong Kong's skyscrapers on Hong Kong Island and Kowloon Peninsula.

Swire Pacific (SEHK: 0019) says it will sell its Festival Walk shopping and office complex in Kowloon Tong for a record-breaking HK$18.8 billion, a move analysts say is the fastest way for the company to raise capital to fund its aggressive mainland expansion. In a statement filed with the stock exchange yesterday, Swire said it had entered a sale and purchase agreement to sell 100 per cent of the 13-year-old Festival Walk to Mapletree Investments, a unit of Singapore's Temasek Holdings. It would be the most expensive property transaction in the city's history, outside of land sales. The conglomerate said it would record a HK$1.63 billion profit from the sale of the 1.2 million square foot complex, one of three major retail projects in Swire's 15 million sq ft investment portfolio, which also includes offices and hotels in Hong Kong. "Swire has been trying various methods for some years [including selling Festival Walk through] real estate investment trusts and spinoffs [its property arm] to raise money," said Lee Wee Liat, regional head of property at Samsung Securities. "But tapping capital from the market subjects them to lots of market uncertainty, especially now when the global economic outlook is so uncertain. I think they have run out of time to wait. This is especially so when the number of commercial projects they have in China is getting larger and larger. I guess this method provides the fastest way to get capital." In 2009, Swire Pacific said it planned to spend HK$13 billion over the next five years to expand its investment property portfolio to 24 million sq ft by 2013, of which 8 million sq ft would be on the mainland and 16 million in Hong Kong. Festival Walk, which opened in 1998, comprises 980,089 sq ft of shopping space and 228,665 sq ft of office, as well as 923 car parking spaces. The HK$18.8 billion price tag represented an estimated HK$18,000 per sq ft for retail space, HK$8,500 per sq ft for office and HK$200,000 for each car parking spot, according to people familiar with the deal. Last month, Sing Tao Daily reported the deal would be for HK$22 billion. After the sale of Festival Walk, Swire's Hong Kong retail portfolio will be cut by 35 per cent to 2.2 million sq ft in Hong Kong. The group, which controls Cathay Pacific Airways (SEHK: 0293) also owns the 711,000 sq ft retail complex in Pacific Place in Admiralty and the 1.1 million sq ft Cityplaza in Taikoo Shing. In addition to shopping centres, it also holds 10.49 million sq ft of office space in Pacific Place, Island East in Quarry Bay and 743,000 sq ft of hotels and 461,000 sq ft of residential rental properties in Hong Kong. Eric Yuen, head of research at brokerage house GuocoCapital, expects Swire will probably abandon its plan to spin off Swire Properties since it will have raised capital from the sale of Festival Walk. In May 2010, the group shelved its spin-off plan for Swire Properties, which was to raise HK$20.84 billion in an initial public offering, due to a downturn in the market. Opened during an economic downturn in 1998, Festival Walk comprises 980,089 sq ft of shopping space and 228,665 sq ft of offices. It was jointly built by Swire and Citic Pacific (SEHK: 0267) for HK$5 billion. They paid HK$2.85 billion for the site at a government land auction in 1993. One of its big early attractions was the Rainforest Cafe, a restaurant with a jungle theme. Swire has owned 100 per cent of the property since it bought the 50 per cent stake from Citic Pacific for HK$6.18 billion in January 2006. Swire Pacific, which also owns Pacific Place mall in Admiralty and Cityplaza mall in Taikoo Shing, had looked into spinning off Festival Walk into a real estate investment trust in 2007, but no plan was finalised.

The government's first inflation-linked bond defied expectations to rise 6.7 per cent on its trading debut on the Hong Kong stock exchange yesterday after just 150,000 investors subscribed to the product. The minimum investment was HK$10,000 and so the bond was potentially available to up to one million Hong Kong residents. The iBond is designed to counter inflation from soaring food and property prices in the city, which have hit savers. The tax-free government bond, which matures in 2014, pays investors at least one per cent interest every six months. If inflation is higher than 1 per cent, the bond will pay a rate linked to the composite consumer price index, a measure of inflation. But the AAA-rated Hong Kong government had mixed success getting retail investors interested. Its last attempt to sell bonds to the public generated only HK$7.5 billion. Financial Secretary John Tsang Chun-wah said he was satisfied with the iBond's reception. He expected inflationary pressure to continue, driven mainly by rents and food prices. According to a filing with the stock exchange this week, 155,835 valid applications were received for iBonds worth HK$13.16 billion, meaning the HK$10 billion offering was oversubscribed. Brokers said some retail investors had not been keen on the issue because they thought the return was low and the bonds seemed less attractive than shares. "A lot of investors thought they would have been allocated just the minimum so the bond didn't appeal to them," said Alvin Cheung, associate director at Prudential Brokerage. Cheung said: "The bond market is not expected to be as volatile as equities." The bonds, which were issued at HK$100, closed at HK$106.70, gaining 6.7 per cent. Turnover was HK$159 million, which analysts said was better than expected because there had been concerns that secondary-market liquidity would be too thin for investors wanting to sell their allocation on the first day. Brokers still have reservations about whether retail investors will show much interest in the secondary market for iBonds. Inflation in Hong Kong over the next six months is expected to hover around 5 per cent, so with a minimum investment of HK$10,000 bondholders will collect HK$500 in the first interest payment in January. VC CEF Brokerage director Louis Tse Ming-kwong believes there is little room for short-term gain on the bond, whih will discourage those retail investors who prefer trading to long-term buying and holding. HSBC (SEHK: 0005) said iBonds account for less than 0.5 per cent of cash deposits in Hong Kong.

Limited-edition figures draw speculators - Games fair network paying students to queue for comic collectables, which can be sold for big profits. A teenager is flanked by Taiwanese model Huang Yui-yui (left) and Japanese porn star Maria Ozawa during a free hugging session at the Ani-com and Games Fair yesterday. Speculation in limited-edition comic figures is so profitable that a group of buyers is paying students and others more than the statutory minimum wage to queue up for them at a fair that provides a once-a-year chance to snap up the colourful figurines. Buyers of popular figures can make instant profits of double to five times what they spent to acquire them, depending on whether they resell the items in Hong Kong or on the mainland, where demand is higher. One company, Hot Toys, saw all its 1,800 figures sold out within 2 1/2 hours of the five-day Ani-com and Games Fair opening yesterday. Some people had queued outside the venue, the Convention and Exhibition Centre in Wan Chai, for nine days. Hot Toys saw widespread speculation in its products online. The company said it was unhappy about the situation but there was little it could do. "We never wish to see speculation," spokeswoman Emily Leung Oi-yee said. "What we hope is that real fans can buy the figures they desire. We'll consider new policies to curb resale activities next year." The buyers' network said it paid students and South Asians more than the minimum wage of HK$28 an hour to queue. Money was seen being handed to people in the queue on the opening day as they approached the sales booth, including students and a group of South Asians. Three sought-after figures - Iron Man 2, Batman and Shadow Predator - sold for HK$1,380 each at the fair, but the bidding prices for these items on online markets, such as Yahoo! Hong Kong and the mainland's Taobao website, ranged from HK$3,000 to HK$7,000. A spokesman for the fair said neither speculators nor the people hired by them would be barred from queuing as long as they observed the rules. Despite the organised buying effort, not all the figures went to speculators - and not all customers paid the full price. For instance, a 15-year-old Form Four pupil who pitched camp on July 20 - nine days before the opening - and was first in line at the U1 Technology booth was allowed to buy a HK$1,980 figure for just HK$1. A veteran figure collector who was not part of the buyer's network also bought a sword collection after queuing for nine days. Meanwhile, 40 people - some men and some teenagers - went up a stage at the Gameone Group booth sheepishly to get hugs from Japanese porn star Maria Ozawa and two teenage models, from Taiwan and Hong Kong. "Hong Kong fans are young and very shy," Ozawa said, noting the embarrassed looks on the faces of most of her visitors. Sze Ling-ling, general manager of the online games company, said they had targeted people over 18 but most of those who turned up were younger. "The free hugging session helps youngsters widen their social circles, as they can make friends with other participants," Sze said. Sonic Lok, 16, said: "It was my first close-up contact with girls, and I regret that I didn't hug them tightly." By 8pm, 115,000 people had visited the fair. The spokesman said that was 4 per cent fewer than on last year's opening day. The 13th Ani-com and Games event will continue until Tuesday. The admission fee is up from HK$28 to HK$30.

Comic book fairs, like the recently wrapped Comic-Con International in San Diego, attract diehard fans dressed in everything from Batman to Princess Leia. But Thursday afternoon, there wasn’t a costume in sight amid the throngs of people waiting to get in to Ani-Com, Hong Kong’s fair for comics, animation, games and toys. Some had been waiting for days outside the venue, which opened Friday morning. Ani-Com is known for its valuable special collector’s editions, which turn the opening minutes of the fair into a race to scoop up as many as possible. Fanboys grumbled that the front was taken up by profiteers who didn’t even know what they were in line for. “Some people pay money to them to wait for eight days,” said Michael Lee, 17, who was attending his fifth Ani-Com. He said he planned to buy some T-shirts once he got inside. “People at the back are so disappointed,” said Kevin Chan, 17, who was waiting to purchase a three-piece set of limited edition Iron Man figures. Although he’d been in line since Tuesday, he and his friends were far from the front. He wasn’t disappointed because he’s an Iron Man fan — he hoped to resell the figurines at a tidy profit. “Some people will charge to line up, but they’re not following the rules,” he said. “It’s so unfair.” Mr. Chan estimated that the set he wanted would cost 6,000 to 8,000 Hong Kong dollars, or roughly US$770 to $1,025. “This happens every year,” said Felix Poon, an Ani-Com spokesman. “We have some exhibitors that offer special editions, and those items are all collectibles. The market value is quite good, and some people will collect, some will sell.” The fair, which continues through Tuesday, is expected to attract some 680,000 people, according to Mr. Poon. The costumed attendees are expected to make their appearance this weekend.

The Hong Kong government plans to name lawyer Ashley Alder as the new head of the city's securities watchdog, a person familiar with the situation said Friday, filling a position critical for the regulation of China's capital markets. Mr. Alder, currently head of Asia corporate at U.K. law firm Herbert Smith in Hong Kong, will take up the top job at the Securities and Futures Commission as scrutiny of accounting practices and allegations of fraud at some overseas-listed Chinese businesses rise with trading of several U.S.-, Hong Kong- and Toronto-listed Chinese companies suspended amid claims of improprieties. Questions about accounting and corporate governance at Chinese-listed companies are crucial in Hong Kong, where China-related securities account for more than 70% of the trading volume on the Hong Kong exchange. Mr. Alder is set to replace Martin Wheatley, who left as chief executive of the SFC in June after six years to take up another regulatory job in his native U.K. On his last day at the regulator, Mr. Wheatley warned investors against rushing headlong to buy shares in Chinese companies, calling China "the new dot-com" of the investment world. His comments were perceived as bold and indicative of the challenges that lie ahead of his successor. During his time in Hong Kong, Mr. Wheatley, a former deputy chief executive of London Stock Exchange Group PLC, earned a reputation as a proactive enforcer, combating insider trading and other market misconduct, as well as boosting the commission's standing in Hong Kong and abroad. In 2009, the SFC under his direction upset the business dealings of Richard Li, the son of Li Ka-shing, one of Asia's wealthiest businessmen, alleging that a shareholder vote to approve a buyout deal had been rigged. An appeals court ruled in favor of the SFC, scuttling the transaction. Market participants had wondered if the next appointee would be someone likely to perpetuate Mr. Wheatley's enforcement style, which was more aggressive than his predecessors'—or move in another direction. Some praised Mr. Alder's qualifications for the role, including a previous three-year appointment as executive director of corporate finance at the SFC and his capital markets work at Herbert Smith including involvement in many Chinese listings. Mr. Alder, who received his law education at University of Cambridge, didn't return requests to comment. The SFC declined to comment. Hong Kong shareholder activist David Webb called Mr. Alder an "excellent choice" for the job. "He's an independent person and won't be afraid to stand up to the pressures of government and tycoons," said Mr. Webb, a member of the SFC's Takeovers and Mergers Panel since 2001 who worked with Alder during his stint at the organization. John Kuzmik, a partner at Baker Botts LLP, said he has known Mr. Alder for several years and cited his "solid credentials, international perspective, and deep local experience." Like other high-profile government positions in Hong Kong, the head of the SFC has been well-compensated by international standards. Mr. Wheatley earned 9.09 million Hong Kong dollars (US$1.17 million) in 2010 according to the SFC's annual report. Fai Hung Cheung, a partner at Allen & Overy, said: "The appointment of an international lawyer is an important development given the rapidly increasing complexity of the financial sector and the cross border regulatory issues to which this gives rise." Mr. Alder's planned appointment was first reported by The Financial Times earlier Friday.

 China*:  July 31 2011  Share

Shaanxi Yanchang Petroleum (Group) Co equipment. Yanchang Petroleum is one of only four qualified Chinese oil companies that hold domestic oil and natural gas exploration rights. Shaanxi Yanchang Petroleum (Group) Co, China's fourth-biggest oil producer by output, is planning to strengthen its petrochemical division and cut the weighting of its oil and gas unit in its total portfolio, after its oil resources were squeezed by China's top three oil companies. Yangchang Petroleum will reduce the proportion of sales by its oil and gas division to 60 percent of the group's total sales by the end of 2015 to 120 billion yuan ($19 billion), Zhang Jiyao, general manager of the company, which is based in the northwestern province of Shaanxi, told China Daily. The sector accounted for approximately 80 percent during 2006-2010. Meanwhile, the company expects the petrochemical sector, including its coal chemical division, to account for 40 percent of the group's sales, equal to 80 billion yuan, Zhang said. The past five years have seen the petrochemical division provide around 20 percent of total sales. Yanchang Petroleum said earlier that it aims to double its sales to 200 billion yuan in five years from the 100 billion yuan recorded in 2010. The increased role for the petrochemical division is part of the company's solution to a shortage of crude oil supplies. Yanchang Petroleum will instead exploit alternative resources, such as coal, to maintain growth, said Wang Jintao, an analyst at, an online information provider for the petrochemical industry. Yanchang Petroleum is one of only four qualified Chinese oil companies that hold oil and gas exploration rights in China, and the only outfit among the four to be owned by a provincial government. The other three, including China National Petroleum Corp (CNPC) and China Petroleum & Chemical Corp (Sinopec), are directly owned by the central government. At present, CNPC and Sinopec control the majority of crude oil supplies in China. For Yanchang Petroleum, the development of the company's operations that are heavily reliant on crude oil and gas has been hampered by the shortage of resources,said a fund manager based in Beijing, who declined to be named. "We'll make full use of the abundant coal resources we have and find our own way for growth," Zhang said, adding that the company will use 150 billion yuan of its total 260 billion yuan corporate investment between 2011 and 2015 to develop projects that integrate coal, oil, gas and salt. At present, Yanchang Petroleum produces 3 million tons of coal tar annually. That figure is expected to double within five years. In addition, Zhang said that the company is set to raise its annual refining capacity by 5.14 percent from 2010 to 13.5 million tons this year. It also plans to invest about 14 billion yuan to expand its network of gasoline stations by 700 within five years, bringing the total number to 1,000. Currently, most of its 300 existing stations are situated in the provinces of Shaanxi and Sichuan. "We're preparing to establish some in Shanxi province," Zhang said. "The planned stations will include some jointly established with Shell," said Zhang, who declined to reveal specific figures.

China Daily opens its door to readers - Qu Yingpu (front), the deputy editor-in-chief of the China Daily attends the China Daily Readers Club Open Day in Beijing, July 29, 2011. Entitled "Fine Wines and Sweet Nothings," the Friday afternoon event aims to boost interactions between readers and China Daily editors. 

Hong Kong*:  July 30 2011  Share

The Hong Kong Monetary Authority on Thursday relaxed some restrictions on local banks' yuan trading, a change bankers say could boost liquidity in the offshore yuan forwards market and aid development of related derivatives products. Yuan deposits in Hong Kong have been growing rapidly since mid-2010, fueled by Beijing's efforts to boost the use and circulation of its currency offshore. Those deposits came to 550 billion yuan ($85.4 billion) at the end of June, six times the year-earlier total. Trading in the yuan outside mainland China has also grown at a brisk pace, with activity centered largely in Hong Kong. But the monetary authority, the city's de facto central bank, in December imposed a limit on banks' net open positions in the yuan—bets on the currency's future movement—to 10% of their yuan-denominated assets or liabilities. Analysts said the limit was likely aimed at controlling growth in yuan trading and keeping speculators from taking advantage of the new market. The cap raised funding costs for banks purchasing yuan through China's foreign-exchange market, limiting their ability to offer currency futures or other derivatives that many have seen as a source of future revenue growth. Under new guidelines unveiled Thursday, the monetary authority kept the 10% limit but changed the calculation: In figuring their net open position, local lenders can now exclude their market-making activities in the yuan bond market and their actual investments under China's Qualified Foreign Institutional Investor program, which allows foreigners to buy yuan-denominated assets in mainland China. More important, according to some bankers, net yuan deliverable forward positions taken by banks won't count toward the 10% limit. Deliverable forwards include derivatives contracts such as currency swaps. Unlike nondeliverable forwards, they are settled in yuan. Frances Cheung, senior strategist at Crédit Agricole in Hong Kong, said the relaxed rules will boost yuan-trading liquidity in Hong Kong. "I see the refinement…as a relaxation," she said. "There are now items that can be used to offset a bank's forex position." With the changes, bankers say, currency traders at local lenders can hold larger foreign-exchange swap positions than before, because forex swap positions should no longer change a bank's net open position. They also said the changes will help boost the deliverable forwards market and related derivatives products. In a note to clients Thursday, HSBC described the changes as "another game-changing development" in the offshore yuan market.

Banking group HSBC Holdings (SEHK: 0005) may cut more than 10,000 jobs as part of its plan to slash costs by up to US$3.5 billion a year, Sky News reported on Thursday. New HSBC Chief Executive Stuart Gulliver in May announced a far-reaching plan to cut costs and revive flagging profits by exiting dozens of countries and refocusing on its areas of strength. Gulliver did not say how many jobs would go as part of the cuts, but analysts expect the bank to axe thousands from its 300,000 global workforce. Sky, citing people close to the bank, said on Thursday the plans had not yet been finalised. HSBC declined to comment. The bank could provide an update along with its half-year results on Monday, although analysts said costs are likely to have remained high in the first half of this year as the restructuring is a multi-year plan. “There was a lot of talk about streamlining going on at the last strategy day, so I suppose this is a function of that,” one top 10 HSBC shareholder told reporters. “It is a quite sprawling bank, and I wouldn’t be surprised if it has got a bit bloated here and there,” he said. Europe’s biggest bank faces an urgent need for action as more than two-fifths of its businesses are not delivering their cost of capital. “We clearly have a cost problem,” Gulliver said in May. HSBC said it will also sell, shut or slim down retail operations in 39 markets, where operations are sub-scale and unprofitable and is looking to sell its US credit card arm and shrink its network of 475 US branches. HSBC’s move would be the latest in a wave of cuts announced by the global financial industry, which has been hit by market volatility and lacklustre profits. Swiss bank Credit Suisse said on Thursday it would cut about 2,000 jobs. Standard Chartered, Lloyds , Goldman Sachs and UBS are among banks that have announced job cuts in recent months, hit by rising costs and weak revenue growth. State Street Corporation, one of the world’s biggest institutional investors, said earlier this month it would eliminate as many 850 jobs from its technology unit as it tries to curb costs. HSBC has already cut 700 jobs in its UK retail banking arm in June this year out of its staff of 55,000 in the country, one of many banks that have said they will cull jobs to save costs as lenders grapple with off a limp economic recovery.

Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings (SEHK: 1038) (CKI) posted a 96 per cent rise in first half net profit on Thursday, outstripping expectations, after stellar gains in its newly acquired UK operations. The utility giant’s net profit for January-June was HK$3.98 billion (US$510 million), compared with HK$2 billion a year earlier, outperforming estimates of HK$3.3 billion from two analysts. The surging growth was a result of earnings generated by the additions of Seabank Power and UK Power Networks, two businesses acquired last year, CKI said. Profit contribution from the US$13 billion firm’s UK infrastructure business leaped 770 per cent to HK$1.9 billion. “In particular, UK Power Networks represents a major capital investment in a sizeable electricity network business which has significantly expanded the group’s earnings base,” the firm said in a statement to the Hong Kong exchange. Analysts mostly bullish on the stock were surprised by the strength of CKI’s interim results. “It was much better than the street estimate and my estimate as well. I think the key reason is the UK business, it is much better than expected,” said Chris Chan, analyst at Samsung Securities in Hong Kong. Li, Hong Kong’s richest man, has been expanding his business empire by buying into regulated infrastructure and utilities assets in developed countries. Li, estimated by Forbes to be worth US$24 billion, lost out to US Power firm PPL Corporation in March in his attempt to buy German utility E.ON UK power networks. The tycoon’s eldest son and CKI chairman, Victor Li Tzar-kuoi, has said the company is looking at more than 20 investment projects as it expands its portfolio. Shares in CKI jumped over 5 per cent after the results. They have gained 26 per cent since the start of the year, surging some 22 per cent in the past two months alone as the octogenarian made a takeover approach to British water utility Northumbrian Water. Li Ka-shing is widely known for his savvy deal making, which earned him the nickname of “superman” in local media. A high-school drop out, the spry, bespectacled Li went on to build a plastic flower business into a global empire with 26,000 employees in 55 countries. Eight anlaysts have a “strong buy” or “buy” rating on shares of CKI, with four opting to “hold,” StarMine data shows. There are no sell ratings. Li Ka-shing’s power unit, Power Assets Holdings, formerly Hongkong Electric (SEHK: 0006) Holdings, posted a 47 per cent gain in net profit on Wednesday. CKI and Power Assets are both under the billionaire’s ports-to-telecoms conglomerate Hutchison Whampoa (SEHK: 0013).

Executive Council convenor Leung Chun-ying said on Thursday Hong Kong’s civil servants had been required to have vision when formulating long-term policies since the 1997 handover. Leung, a hotly-tipped candidate for the post of chief executive next year, said the civil service had been given a stronger role in planning the city’s policies because of the high degree of autonomy it had been given after the handover. His remarks, delivered at a luncheon, came after the mainland’s top official in charge of Hong Kong affairs, Wang Guangya, was quoted by Chinese-language newspapers as saying the city’s civil servants were good at executing orders, but lacked the ability to take command. Wang, the director of the State Council’s Hong Kong and Macau Affairs Office, was as quoted as saying that British colonial rule had trained civil servants to “listen to the boss” but that they still “don’t know how to be a boss and how to be a master”. Political analysts said Wang’s remark targeted Chief Executive Donald Tsang Yam-kuen, who served for a long time as a civil servant under the colonial administration, and other senior ministers with similar backgrounds. Leung said he did not know whether Wang’s comments were aimed at Tsang, or at any particular person.

 China*:  July 30 2011  Share

China will press ahead with diversification of its US$3.2 trillion in foreign exchange reserves, the State Administration of Foreign Exchange (SAFE) said on Thursday, adding it does not intentionally pursue large-scale foreign currency holdings. Officials have long pledged to broaden the mix of the country’s huge reserves – as much as 70 per cent of which are now in US dollar assets, according to analysts’ estimates – but the process has been gradual. “We will continue to diversify the asset allocation of our reserve assets and continue to optimise the holdings based on market conditions,” the foreign exchange regulator said in a statement, responding to questions about its reserve management from the public. It did not mention the US debt debacle. Top Republicans and Democrats worked behind the scenes on Wednesday on a compromise to avert a crippling US default and potential credit rating downgrade. Xia Bin, an adviser to the central bank, told reporters earlier this month that China should speed up reserve diversification away from dollars to hedge against risks of the US currency’s possible long-term decline. SAFE pledged to make its reserve investment more transparent but it cautioned against giving too much information to international speculators trying to profit from any changes in China’s reserves holdings. The exchange said the rapid build-up of China’s reserves, the world’s largest that swelled by US$152.8 billion in the second quarter, was “not a direct” cause of inflation, which hit a three-year high of 6.4 per cent in June. The central bank has been using various tools, including the rise in banks’ reserve requirement ratios and open market operations to sterilise capital inflows, it added. “We don’t purse large-scale reserves and don’t pursue long-term surplus in international balance of payments,” the exchange said in a statement. It added that China needs sufficient reserves to maintain its debt repayment ability to fend off risks and safeguard the country’s financial safety. But as a long-term goal, the country needs to adjust its economic structure and change its economic model, which will “fundamentally” ease capital inflows, SAFE said. Beijing has repeatedly vowed to restructure its economy, cutting its reliance on exports and investment, and promoting domestic consumption in their place. China’s exports may grow 20 per cent this year and imports may rise 24.5 per cent, narrowing the annual trade surplus to US$157 billion from last year’s US$183 billion, the State Information Centre said in a report published on Thursday. Exports rose 17.9 per cent in June from a year ago, slowing from a 19.4 per cent rise in May and pointing to the weakness in overseas demand that has seen exports and new orders soften across most of Asia. SAFE also pledged to widen the channel for capital outflows and take gradual steps to make the yuan convertible on the capital account. That will help counter capital inflows into China fanned by ultra-loose monetary policy in developed countries, it added.

Boston Scientific Corp said it will invest $150 million in the next five years to build manufacturing and training facilities in China and hire 1,000 more people in 5 years. Boston Scientific expects these investments to result in revenue of more than $500 million by 2016. The company estimates that its target market in China currently exceeds $1 billion and is growing about 20 percent annually.

Sanya sees surging tourism - Tourists walk under sunset in Sanya city, south China's Hainan province, July 20, 2011. China's southernmost costal resort of Sanya in Hainan province has seen over 5.12 million tourist arrivals in the first half year, according to statistics released by the the city's tourism committee on Thursday. Sanya is the only tropical coastal tourism city in China. The city has generated a total tourism revenue of 8.766 billion yuan in the first half year, according to the statistics. The overseas tourist arrivals to Sanya has reached 250,000 in the first half year, which was an 18.5-percent increase year-on-year. In recent years, Russian tourists have become the majority of foreign visitors to Sanya, which enjoys financial subsidies for direct international flights from five cities in Russia to Sanya. Russian tourists to Sanya have exceeded 100,000, a 44.7-percent increase year-on-year. China has made it a strategy to build the Hainan island into an international tourism destination. The central government has offered a series of preferential policies to the island province, such as visa-free entry for travelers from 26 countries and the April opening of a duty-free shop in Sanya.

China helps US automakers on the road to Recovery - Joe Hinrichs, chairman and chief executive officer of Ford China, speaks about vehicle sales in China during the North American International Auto Show (NAIAS) in Detroit, Michigan, in the United States in January. Ford is planning to bring 15 new models to the China market in the next five years. China's booming automobile market over the past two years has not only led it to overtake the United States as the world's biggest, it has also enabled US car makers to weather stagnant domestic sales caused by the financial crisis. General Motors Corp, which recovered from bankruptcy protection in 2009 thanks, in part, to its prosperous business in China, has seen the country become its biggest market globally since 2010. Last November, it became the first global automaker to sell 2 million vehicles in China in a single year. In the first half, the US automaker continued its growth momentum with 1,273,502 vehicles delivered to the Chinese market, up 5.3 percent over last year. Sales of Shanghai GM, its passenger-car joint venture with China's biggest auto conglomerate, SAIC Group, grew 25 percent year-on-year to 600,002 units. "The sales data show that General Motors' passenger car venture in China is still reaping rewards for the US automaker, prompting it to strengthen its production capacity in the country," said Namrita Chow, senior analyst with consulting firm IHS Automotive. Having already garnered rich results, and predicting even more from the China market, General Motors announced a five-year plan in April, saying that it will invest $5 to $7 billion over the next five years in its biggest vehicle market, aiming to double its sales to 5 million units by 2015. The aggressive plan for continued success also includes introducing more than 60 new models and major product upgrades, with nearly half coming from its two mainstream brands, Buick and Chevrolet. "To support our strong growth, we will expand our annual investment in China from the current $1 billion to at least $1.5 billion for every year to come, with a total investment of $5 to $7 billion in China's 12th Five-Year Plan (2011-2015) period," said Kevin Wale, president and managing director of General Motors China. Another US automaker, Ford Motor Co, also reported positive sales in the first half as it seeks to significantly increase market share in China, aware of its increasing importance for the company's global growth. "Ford is becoming aggressive in its plans but it still has to win market share from very strong players such as General Motors and Volkswagen in China," said Chow of IHS. According to IHS, Ford wants to sell 8 million vehicles globally every year by 2015. By 2020 it expects 32 percent of its global sales to come from the Asia-Pacific region, more than double the current level. "China will play an increasingly important role in Ford's global strategy," said Chow. Chrysler Group LLC, the only "Big Three" US auto maker with no local production currently in China, is relying on surging local demand for sports-utility vehicles (SUVs) this year for good returns. It is importing new SUV models under its Jeep brand. Although Chrysler only sold close to 9,000 imported vehicles in the first quarter, the 90 percent of year-on-year growth during the period indicates the company has started to recover its Chinese business. It aims to increase its annual sales in China from last year's 23,428 to 40,000 units in 2011. Zheng Jie, president of Chrysler China, said the company is going to introduce more SUV models in the coming years in an attempt to make Jeep the brand with the widest product line-up of SUVs in China. The company also plans to add 50 dealerships in the next two to three years and double the number in the next five years. China's passenger vehicle sales reported a favorable 5.3 percent year-on-year growth in the first half, as the market in June picked up after the sector experienced its first year-on-year sales drop in April since 2009. The increase dismissed analysts' previous worries that the country would report the first negative year-on-year growth in the industry for the whole of 2011 and reinforced China's significance for global automakers.

Hong Kong*:  July 29 2011  Share

Consumer stocks top buyer's shopping lists - Mainland hypermarket operator Sun Art Retail wins investor approval and achieves 40pc surge in stock values after high-priced debut - Sun Art Retail Group's executives (from left) executive director Bruno Mericer, chairman Cheng Chuan-tai and executive director Huang Ming-tuan at the listing ceremony. Mainland hypermarket chain Sun Art Retail, one of the most richly priced initial public offerings this year, surged 40.56 per cent on its debut, benefiting from a strong investor appetite for consumer stocks. The trading on the bourse was delayed for two weeks because Sun Art failed to disclose up-to-date earnings per share figures in its listing prospectus after a stock split that took place on June 27. Sun Art yesterday closed at HK$10.12, 40.56 per cent above its top end offer price of HK$7.20, giving the hypermarket chain a valuation of 31 times estimated earnings this year, higher than the offer valuations of Prada and Samsonite International, which also listed in Hong Kong. Hong Kong offerings have performed poorly recently, meeting sluggish investor demand for new shares. However, Sun Art's strong debut yesterday signalled that investors were willing to pay a premium for exposure to the growing mainland consumer market, said William Tang, managing director and head of consumer and retail group at HSBC (SEHK: 0005) Global Banking, one of the advisers in the Sun Art offering. Mainland consumer stocks were particularly popular with Asian investors who were more likely to pay higher valuations, Tang said. According to a stock exchange filing, the international portion of the offer constituted 81.3 per cent of the total number of shares available, less than the usual 90 per cent. Orders from retail investors, who are usually allocated 10 per cent of the offering, made up the remaining 18.7 per cent of the shares sold. "Many investors are into consumer stocks," said Kenny Tang Sing-hing, a general manager at AMTD Financial Planning. "As a result of the rising demand, many of the stocks in the consumer sector are now trading above a price-earnings ratio of 20." According to its listing prospectus, Sun Art was the largest hypermarket operator in China in terms of sales last year, with a market share of 12 per cent. It leads Wal-Mart Stores in the United States, state-owned China Resources (SEHK: 0291) and France's Carrefour. However, some analysts said Sun Art was overpriced because the hypermarket business could face consolidation after years of rapid growth. The market share of the top five operators jumped to 45.1 per cent last year, compared with 34.8 per cent in 2005. Sun Art raised a total of HK$7.97 billion in the offering to repay bank loans and boost store numbers. It operates 197 hypermarkets across 21 of China's 33 provinces.

Causeway Bay landlord wants 'arbitrary' limits review - The Lee Theatre Plaza (left) and the Leighton Centre, both in Causeway Bay. Developer Hysan says the Town Planning Board acted unlawfully when it decided to restrict the height of the buildings to 130 metres, while nearby Times Square has no such limit. The Hysan (SEHK: 0014) Group, a big landlord in Causeway Bay, has filed a writ accusing the Town Planning Board of making an "arbitrary and irrational" decision to impose restrictions on two of its buildings when adjacent Times Square has no such limit. The writ says the board acted unlawfully when it decided to include in the Wan Chai outline zoning plan a height restriction of 130 metres on two of its buildings - the Leighton Centre and Lee Theatre Plaza - while nearby Times Square had no such limit. It was also unhappy that under the draft plan, both buildings would be rezoned from commercial and residential use to purely commercial use. It says the decision was wrong and the board did not give due consideration to Hysan's written arguments for the restrictions to be relaxed. Hysan is seeking permission to launch a judicial review of the board's decision of April 26. It wants the court to quash the decision and stop the draft plan being put into effect. According to its application, there was no height restriction on buildings in Wan Chai until the draft outline zoning plan was passed by the board. It called the restriction "disproportionate interference" in its property rights and said this contravened the fundamental right of private ownership of property as enshrined in the Basic Law. "It is Hysan's position that the restrictions imposed ... are contrary to encouraging good design and urban development and have the effect of stifling Hysan's private initiatives including by restricting future development to the design and form of existing developments," the writ reads. It is the second time that Hysan has sought to take the Town Planning Board to court. In March, it also applied for a judicial review of building restrictions imposed on several of its buildings under the draft Causeway Bay outline zoning plan. It is asking the court to deal with the two applications together.

Preliminary discussions have begun over Bejing's interpretation of the Basic Law as it affects state immunity, in response to the first such request by a Hong Kong court. The 12-member Basic Law Committee, which advises the National People's Congress Standing Committee on Hong Kong's mini-constitution, has met once, and is due to have further talks early next month. Lau Nai-keung, a Hong Kong member of the Basic Law Committee, said the meeting was attended by officials from central government agencies including the Hong Kong and Macau Affairs Office. Hong Kong's highest court, the Court of Final Appeal, asked the Standing Committee for the interpretation on June 8, the first time it had done so. It submitted four questions arising from US-based fund FG Hemisphere Associates' attempt to force the Democratic Republic of Congo to repay more than US$100 million it owed. The court ruled that the debt was not enforceable, but the case raised questions about differing policies on sovereign state immunity in Hong Kong and on the mainland. Secretary for Justice Wong Yan-lung forwarded the court's letter of referral to the Hong Kong and Macau Affairs Office for transmission to the Standing Committee. After the Standing Committee receives such a request, it will issue documents to the Basic Law Committee and the Legislative Affairs Commission for discussion and give its interpretation of the Basic Law clauses in question after consulting the two committees. A Hong Kong expert familiar with the Basic Law said the interpretation was not likely to go beyond the four questions set out by the court. It could be issued as soon as the end of next month, when the Standing Committee next meets.

Exit Lane Crawford, in comes Burberry - British luxury brand to establish its regional flagship store in Pacific Place, counting on continued affection for the brand among mainland tourists - Burberry reports retail sales climbed 36 per cent this year. Earnings from sales now represented 64 per cent of total revenue. British luxury brand Burberry plans to take over a major part of the space that speciality department store Lane Crawford currently occupies in Pacific Place in Admiralty. Swire Properties, a wholly owned subsidiary of Swire Pacific (SEHK: 0019) which owns the mall, said Burberry had committed to take up about 21,000 sq ft over two storeys for its flagship store. It is expected to open in the second half of 2012. "It will become the Burberry brand's biggest outlet in Hong Kong," a person with knowledge of the deal said. The store will carry a full range of fashion lines for men, women and children, and have a cafe. It will be Burberry's flagship store for Asia and its second-biggest in the world. Lane Crawford will close its Pacific Place branch when its lease expires in February 2012. It currently occupies about 50,000 sq ft in the mall. "I believe that Burberry will target mainland shoppers," said another individual. "It is not the hottest brand among Hong Kong shoppers, but it is a darling of mainland Chinese." Burberry prices have steadily increased and are now comparable to those of top-end luxury brands such as Chanel and Louis Vuitton, said an industry observer. But Burberry still generated strong sales, especially across the region, and this has prompted the company to expand rapidly, she said. Burberry delivered strong results for the year ending March 31, with retail revenues up 36 per cent and now representing 64 per cent of total revenue. Burberry opened seven stores this year in the region, of which five were in Hong Kong. The company has said it would emphasis flagship openings and refurbishments in high-profile locations, including Hong Kong. Property consultants said international retailers and local jewellery brands have been competing for prized space in Hong Kong, pushing rents to new highs. A watch and jewellery shop will replace Staccato, a shoe store, at a 1,000 sq ft spot at Melbourne Plaza in Central and will pay rent of HK$1.6 million a month, according to Jeannette Chan, Jones Lang LaSalle's head of retail for Hong Kong and southern China. The landlord initially sought a rent of HK$1.2 million, but strong demand pushed up the price. Retailers were willing to pay the steep rents because of robust sales and tourist spending, Chan said. Retail sales grew at an annual 27.8 per cent to HK$33.1 billion in May. In the first five months of the year, retail sales were up 23.6 per cent year on year. According to the Tourism Board, visitor arrivals in the first five months of the year increased 14.5 per cent over the same period in 2010. The number of mainland arrivals rose 65.5 per cent, while those coming under the individual visit scheme increased 32.6 per cent. Chan expected local consumer confidence to remain strong and tourist spending to remain a key driver for retail revenue growth. The stronger yuan was also likely to continue to support demand for luxury goods in the foreseeable future. This positive outlook is likely to see retailers' rents continue to climb but at a slower pace throughout the second half of the year, according to Joe Lin, senior director of retail services for CB Richard Ellis. In one of the largest leasing transactions so far this year, clothing brand Abercrombie & Fitch leased several floors in the Pedder Building in Central for about HK$7 million a month. The past few months have also seen luxury car dealers signing up for new retail spots. Rolls-Royce, Maybach, McLaren and Bugatti have all committed to establishing new shops on Hong Kong Island. LVMH (Watch) will replace Great Shanghai Watches & Jewellery and rent a 600 sq ft shop in Russell Street, Causeway Bay, paying HK$1.5 million a month, and Taiwan's Eslite Bookstore will open a 50,000 sq ft store in Hysan (SEHK: 0014) Place, Causeway Bay. But CBRE's Lin said a hidden threat to Hong Kong's retail property market might be Beijing's plan to cut the mainland's import tax on luxury goods - a move aimed at spurring domestic consumption and restoring trade imbalances, key objectives of the nation's five-year plan to 2015. Such a cut would hurt retail sales in Hong Kong, he said.

The trial of TVB (SEHK: 0511) top executive Stephen Chan Chi-wan heard yesterday that he would never have broken the law for the mere HK$112,000 he allegedly pocketed. "Mr Chan is a public figure. Will he knowingly break the law? Would he have broken the law for merely HK$112,000? We say no," said Wong Ching-yue SC, lawyer for Chan's former personal assistant and co-defendant Edthancy Tseng Pei-kun. And marketing chief Wilson Chan Wing-shuen, a third defendant, was a man of good character who would never have cheated the television station where he worked for 33 years, said his lawyer, Osmond Lam Kwok-fai. The claims came as the defence lawyers finished their final submissions in the District Court. Stephen Chan, 51, is accused of conspiring with Tseng, 28, to accept a "secret commission" of HK$112,000 from a shopping mall for hosting a show bringing in the 2010 New Year. The prosecution argued it was illegal for Chan to receive the money because the show was produced by TVB and Chan had failed to obtain the broadcaster's prior consent. Wong said if the court could not find Chan had committed the crime, the court should also acquit his client, because it takes two to conspire. Chan, Tseng and 63-year-old Wilson Chan, former head of business development for TVB's marketing and sales division, face a total of five charges in relation to alleged bribery and fraud. Wong submitted that Stephen Chan did not need to get approval from TVB before taking up an outside job, such as hosting the New Year's Eve show, as he had an executive employment contract with the television station and not an artist-management contract. Wong said Mark Lee Po-on, TVB Group general manager and Stephen Chan's supervisor, had been wrong to say that a clause in Chan's employment contract meant Chan needed his supervisor's consent before taking outside jobs of any nature. He said representatives from the shopping mall had affirmed in court that they invited Chan as an "artist" to participate in the show. Wong said it was widely known that Tseng was Chan's manager and personal assistant. He questioned how a manager giving money to an artist for his work could be considered a bribe. Wong said prosecutors failed to prove beyond reasonable doubts that Tseng had conspired with Chan to defraud TVB and five actresses by asking the artists to show up for free to lend their support at the launch of Chan's book. The prosecutor alleges that the pair concealed a contract with Ma Belle Diamond under which Idea Empire, run by Tseng, would earn HK$300,000 if the five actresses showed up. Wong said Tseng had no knowledge of the contract because it was signed by his subordinate. Wilson Chan is accused of conspiring with Tseng to defraud TVB of HK$550,000 during the organisation of the All Singers for TVB Anniversary Special 2009 at the Melco Crown hotel in Macau. The two denied they misappropriated the sum in question from a HK$5.2 million sponsorship paid by the hotel to TVB. Lam said the money was for Idea Empire for recruiting the hotel as a sponsor and for its logistics service. Lam said his client did not conceal any contract, as all the receipts were issued by TVB's accounts department and legal department. The documents clearly showed that TVBN would earn a net income of HK$4.5 million and the rest would go to Idea Empire as an agent's commission. Judge Poon Siu-tung will deliver the verdict on September 2.

Boom in illegal factory flats - Conversion of industrial blocks into 40 rooms per floor can fit 50 people who are desperate for shelter - Li Hung-ha and her nine-month-old son Li Ngo-hin live in a subdivided flat in a factory converted into illegal housing in Tai Kok Tsui. Old factory buildings are being illegally converted into subdivided housing - and the trend is on the rise. Each of the city's older factory areas - such as Kwun Tong, Tai Kok Tsui and San Po Kong - hold at least 10 to 20 such buildings and many are dangerous, according to the Society for Community Organisation (Soco). But officials said their hands were tied as they had difficulty getting into private premises to conduct checks. Soco said it had seen an increase in the number of illegally subdivided factories in the past two to three years, and expected more as rents continued to soar and public housing supply remained inadequate. "[Factory-turned illegal housing] is even cheaper than subdivided flats in old residential buildings. But many of them are even more dangerous," said Soco organiser Chan Siu-ming, who works on problems arising from subdivided flats. He said there was an increase in demand for these tiny dwellings, but the supply was declining as many old buildings converted into subdivided flats were being demolished for redevelopment. "I've tried looking for a decent one-room place, but with the welfare [my son and I] are receiving, it's just not possible," said Li Hung-ha, who has been living in a factory-converted room in Tai Kok Tsui with her nine-month-old son Li Ngo-hin. Li said the same rent in another building would provide her with a room a third the size of her factory-converted room. They are in a long line waiting for public housing. Chan said that while homes in converted factories tended to be bigger, many had serious safety problems. Two buildings visited by the South China Morning Post (SEHK: 0583, announcements, news) in Tai Kok Tsui were built in the 1950s and '60s, and are restricted to industrial purposes, according to government records. One factory in Larch Street had one floor divided into three levels and partitioned into 35 to 40 rooms, housing 40 to 50 people in an area limited to 36 factory workers. Inside the rooms, wires for air-conditioning, lighting and all electrical outlets are stapled onto the walls, completely exposed. Hallways and the rooms the Post saw were scrubbed clean, but nothing could disguise the crumbling and flaking walls, the water-stained ceilings and flimsy wooden stairs connecting the three floors within the factory unit. "It gets harder here in the summer. Fleas have been biting my baby - he's been feeling unwell for the past few weeks now," Li said. But she added that at least the rooms were big with room for her son - just learning how to crawl - to move around. The second location in Bedford Street had a "workers only" sign hanging on the rusted industrial iron door. The compartments inside were smaller than in the first one but had central air conditioning. Rents in both buildings are from HK$1,500 to HK$2,400, including electricity. "This is the only place I can afford," said a 57-year-old tenant, who would not give his full name. He agreed that the place was expensive if calculated per square foot, but the sum was all the money he had. He said there was no contract involved in renting the place, and neighbours often did not know each other because of the high turnover rate. Soco activist Sze Lai-shan said most of the tenants were willing to move out into legal housing - if they could afford it. Many of the flats breach the building ordinance, land lease agreement and fire safety rules, but the government says it is hard to monitor the situation, let alone control it. A Buildings Department spokeswoman said: "Everything happens behind closed doors. The government is not authorised to infringe on private property laws for the sole reason of checking whether there are illegally set-up rooms for rent." Sze said: "If the government cannot control illegal housing from spreading into factory buildings, it should act and convert the land-use of empty factory buildings into feasible housing for the poor to alleviate the problem."

Hong Kong became the world’s third largest recipient of foreign direct investment (FDI) last year, according to the latest World Investment Report published by the United Nations and released on Wednesday. This is the highest place Hong Kong has ever been ranked in the yearly report compiled by the UN Conference on Trade and Development. Last year, FDI in Hong Kong reached an all-time high of US$68.9 billion (HK$536 billion) inflow – a 31.5 per cent increase over 2009. It made the territory the second largest recipient of foreign investment in Asia after the mainland. The report said global foreign direct investment had not yet bounced back to the levels seen before the 2008 financial crisis because of perceived risks and regulatory uncertainty in the world economy. But it forecast FDI in Hong Kong would recover to pre-crisis levels over the next two years. The report also said developing economies had absorbed close to half of global foreign investment inflows for the first time last year. Simon Galpin, director general of InvestHK – the government department responsible for FDI, said: “Hong Kong’s status within the global economy is reflected in its record high ranking.” Hong Kong reached the fourth place in 2009 and the ninth place in 2008.

Dressing up and counting down - The queue for the annual celebration of action heroes and gaming is 100-strong, with two days left to go - Samantha Ko (left) and Vanko Wong, named cosplay goddesses by TVB, were out and about in Wan Chai yesterday ahead of the festival. It is a test of endurance worthy of the best comic superheroes: queuing for days outside the Hong Kong Convention and Exhibition Centre for a chance to get limited-edition toys or comics. Oh, and one exhibitor at the Ani-Com and Games Hong Kong fair is promising its first visitors the chance to hug a Japanese porn star. The queue for the event began on Friday when a 15-year-old Form 4 pupil surnamed Wong pitched camp. He now has more than 100 people lined up behind him, most of them pensioners and teenagers. And they still have two more days to wait until the doors open on Friday. "I'll spend about HK$2,000 on the limited-edition figures," said Wong, adding that unlike most people in line, he wanted to keep the toys, not resell them at a profit. Indeed some of those in the queue were being paid to reserve a spot for others. "I will get HK$1,500 for lining up here for three days," said a primary school pupil who arrived yesterday morning. "It's quite a good sum of money for me to spend in the summer holidays." The five-day festival, in its 13th year, is set to be the biggest ever, said Leung Chung-poon, chief executive of the exhibition. All 500 stalls had been booked and about 170 companies would take part, despite a 10 per cent increase in stall rental, he said. The cost of entry is up, from HK$28 to HK$30, but Leung said that he still expected about 680,000 people to attend, more or less the same number as last year. The exhibition also includes an annual Cosplay contest, where diehards dress up as their favourite characters, and the Hong Kong Figure Design Competition. Hong Kong and Japanese singers will be making live appearances on stage. Internet game company Gameone is offering the first 40 customers to their booth the chance to hug one of the three "sexy" female models on stage, said Sze Ling-ling, the firm's general manager. "The girls include a Japanese porn star and two models from Taiwan and Hong Kong. A good mix for all tastes," she said. "Last year we saw that the customers were very shy onstage and did not dare do anything improper. It was the girls who seemed a lot more comfortable." The fair will be open from 10am to 9pm from Friday to Monday, and until 8pm on Tuesday, the last day.

Beijing’s man in charge of Hong Kong affairs on Wednesday described local civil servants as “strong in execution, but weak in planning”, blaming their training under the British colonial system for rendering them incapable of managing the city, according to media reports. Wang Guangya, director of the State Council’s Hong Kong and Macau Affairs Office, was quoted by three Chinese-language newspapers as saying local civil servants were good at executing orders but lacked the vision for long-term planning, The remarks were made in Beijing while Wang was speaking to a group of visiting Hong Kong university students on Tuesday, according to the reports. He said colonial rule had trained civil servants to “listen to the boss”. “Now they have become the boss, they still don’t know how to be the boss,” he was cited by Mingpao as saying. Wang praised Hong Kong civil servants for their high quality, according to the reports, but also said: “Britain is responsible for both success and failure” in their training. The reported remarks have stirred controversy locally. The Senior Government Officers’ Association (SGOA) – a senior civil servants’ union – asserted in response that politically-appointed officials should be the ones responsible for long-term planning. SGOA chairman So Ping-chi said on Wednesday he believed Wang’s remarks referred to politically-appointed officials, rather than to civil servants. “Under the current political environment, politically-appointed officials often just deal with immediate problems, such as when to give out the HK$6,000 [cash payments to all permanent residents] and where to get beds for pregnant women to give birth. These are not issues of long-term planning,” So said. But legislator and former security secretary Regina Ip Lau Suk-yee said she agreed with Wang. Ip said Hong Kong’s civil service had long been known for its ability to execute orders rather than its vision. “Our system only asks civil servants to take orders,” she added.

Civil servants, under fire from a senior mainland official who says they lack the ability to take command and plan for the long term, have hit back. They say the criticism should have been directed at their political masters. The response from the Senior Government Officers Association came after Beijing's top man on Hong Kong affairs, Wang Guangya , was quoted as saying that colonial rule had trained civil servants to "listen to the boss" but "now they have become the boss, [they] still don't know how to be a boss and how to be a master". Association chairman So Ping-chi said yesterday that Wang should have referred to politically appointed officials rather than civil servants. "Under the current political environment, politically appointed officials often just deal with immediate problems, such as when to give the HK$6,000 [payment to permanent residents] and where to get beds for women to give birth, which are not issues of long-term planning." Wang, director of the State Council's Hong Kong and Macau Affairs Office, was quoted by three Chinese-language newspapers as having made the remarks to a group of visiting Hong Kong university students in Beijing on Tuesday. While praising the quality of civil servants, he said "Britain is responsible for both the success and failure" of their training. Former chief secretary Anson Chan Fang On-sang said Wang's remarks were groundless and "gross interference in Hong Kong's autonomy". "His remarks show a total ignorance of how the civil service actually functioned before 1997 and afterwards. It was after the introduction of the political appointment system in 2002 that the responsibility of policy formulation was removed from civil servants and given to political appointees. Mr Wang's remarks are unfair to both the civil service and the previous colonial power." Under the political appointments system, permanent secretaries are no longer tasked with policy formulation. Veteran politician Allen Lee Peng-fei, who served on both the Executive Council and the legislature before the handover, said: "Beijing can't blame Britain because it's their fault for failing to fix the problem 14 years after the handover." He believed Wang's criticism primarily targeted Chief Executive Donald Tsang Yam-kuen, a veteran civil servant, and other civil servants who had become ministers. "Beijing is not happy with Donald Tsang's inclination to only focus on the immediate future." New People's Party chairwoman Regina Ip Lau Suk-yee, who served as a civil servant and a minister, shared Wang's view. "My own reading is that Mr Wang is saying the model for Hong Kong will be a `civil servants plus' model," she said. "The current system led by civil servants has proven a disappointment. You need leadership, vision and long-term commitment." Former secretary for the civil service Joseph Wong Wing-ping believed Wang was not targeting civil servants. "It was more likely he was referring to civil servants-turned-ministers," he said. Wong said Hongkongers had high expectations of long-term policy planning after the handover. "But the current administration has failed to address some issues which affect Hong Kong's long-term development, such as housing and an ageing population." A government spokesman declined to comment on Wang's remarks, saying it was unsuitable to comment on quotes in the press.

Scores of movie fans swarmed the Hong Kong Convention and Exhibition Centre on Tuesday night for the local premiere of director Peter Chan’s $20 million martial-arts thriller “Wu Xia.” Stars Donnie Yen, Takeshi Kaneshiro and Tang Wei joined Mr. Chan, along with co-stars Jimmy Wang Yu and Wai Ying-hung, on stage for the opening. Mr. Chan and his cast also rolled out a huge birthday cake in honor of Mr. Yen, who turns 48 years old on Wednesday. Mr. Chan has spent the past several weeks traveling around Asia for the film’s premieres in China, Taiwan, Singapore and elsewhere. “It’s good to be home again — finally,” he said just before Tuesday night’s screening. “Wu Xia” is a cat-and-mouse thriller set in rural China in the early 20th century, with Mr. Yen playing a repentant killer hiding out from his ruthless clan and living a seemingly simple village life with his new wife and two young sons. But his past eventually catches up with him as he’s pursued by both a persistent big-city police inspector and the leader of his vengeful clan. The film offers one of Mr. Yen’s most complex roles in recent years. It also marks the return of Mr. Wang, the legendary 1960s Shaw Brothers martial-arts star, after an absence on screen of nearly two decades. Mr. Kaneshiro plays the detective, while Ms. Tang — who gained stardom four years ago in Ang Lee’s film “Lust, Caution” — plays Mr. Yen’s wife. Rounding out the cast is famed martial-arts actress Ms. Wai as a brutal warrior. Unlike most martial-arts movies, “Wu Xia” explores in vivid scientific detail the physical effects of kung fu on the human body — and the physics behind an accurately placed lethal blow. The film opened July 4 in mainland China, where it has earned 169.10 million yuan ($26.2 million) through July 24, according to Beijing-based media-research firm EntGroup. Mr. Chan told Scene Asia that he wasn’t “entirely satisfied” with the mainland Chinese box-office tally so far, but that his expectations were “probably too high.” He described the film as “experimental” in a traditional market. The U.S. release of “Wu Xia” is expected later this year under the title “Dragon” and will be distributed by the Weinstein Co.

Ailing gambling tycoon Stanley Ho has sold another chunk of his property-and-transport flagship, Shun Tak Holdings Ltd., to his eldest daughter by his second wife. Pansy Ho's purchase from Stanley Ho raised her stake in Shun Tak to 12.67%. Shun Tak said Monday that its managing director, Pansy Ho, bought 36,285,523 shares of the company from her father at market price on Thursday, raising her stake in the company to 12.67% from 11%. The purchase is valued at HK$177.4 million (US$22.8 million), according to a Dow Jones Newswires calculation based on Shun Tak's closing price of HK$4.89 a share on Thursday. Shun Tak said Stanley Ho remains group executive chairman and will continue to lead the board, while Ms. Ho will continue as managing director responsible for the overall performance of the company and its subsidiaries. It added that the share purchase won't "have any impact on any aspect of the affairs of the company." In November, Stanley Ho cut his stake in Shun Tak to 8.72% from 20.27%. The off-market transfer of 250,936,160 shares to a company controlled by Mr. Ho's children, including Pansy, was valued at HK$1.22 billion, according to a Dow Jones Newswires calculation. Earlier this year, a family dispute burst into the open when Stanley Ho, who is 89 years old and in poor health, accused the children of his second wife of colluding with his third wife to steal the holding company that held the bulk of his assets. They denied his accusations. Mr. Ho said the dispute was settled in March. Shun Tak has an 11.5% effective interest in Sociedade de Turismo e Diversoes de Macau, which in turn owns 55.7% of Stanley Ho's SJM Holdings Ltd., according to Shun Tak's 2010 annual report. SJM is one of six casino-license holders in Macau, the only place in China where casino gambling is allowed.

Chinese financial services firm Sun Hung Kai & Co. is considering various options for its unit SHK Financial after receiving offers from potential suitors, a person familiar with the situation said. The offers to buy the unit prompted Hong Kong-based Sun Hung Kai, which counts private-equity firm CVC Capital Partners among its investors, to review SHK Financial's future. Discussions are still at an early stage but may result in the sale of a stake in the unit or a partnership with another firm, the person said. SHK Financial has a net book value of about HK$4 billion (US$514 million), he added. SHK Financial's core businesses are corporate finance, asset management, wealth management and broking. Together these businesses contributed roughly half of the parent company's revenue in 2010, according to its annual report. Hong Kong-based equity brokers face stiff competition, particularly from China's large commercial banks, which are seeking to augment income from low-margin lending. As a result, many are looking to revamp their businesses. SHK Financial, whose wealth-management and brokerage division posted a drop in revenue and pre-tax profit in 2010, has been expanding its products distribution networks to compensate. Potential buyers may be particularly interested in SHK Financial's corporate-finance business. For two years running, Hong Kong has been the top destination for companies seeking to make initial public offerings of their shares, and last year SHK Financial helped a number of mainland Chinese corporations list shares there. Last year, private-equity firm CVC Capital Partners invested in mandatory convertible notes and warrants issued by Sun Hung Kai. A spokeswoman said in an emailed statement that as a listed company in Hong Kong, Sun Hung Kai is obliged to and will make appropriate announcements if there are any developments related to mergers and acquisitions. She added, "Management will continue to explore opportunities to expand our business operations for the benefits of the shareholders."

Hong Kong Exchanges and Clearing (SEHK: 0388) chief executive Charles Li Xiaojia has issued a 10,000-word public letter hitting back at criticism from local brokers of his reform plans. The reforms, which include a move to cut brokers' lunch break to one hour from March next year, are unpopular with some brokers. Li, however, said they are necessary to maintain Hong Kong's competitiveness and to capture business opportunities related to the internationalisation of the yuan. "Hong Kong is no longer the only listing platform for mainland enterprises, as other markets are competing for these companies," Li wrote. "The HKEx is also facing an increasing number of competitors, such as the new electronic trading platforms known as dark pools. "Hong Kong's market has a lot of weaknesses in its infrastructure and unless we carry out the reform plan we will lose out to the others." The letter signals Li's determination to push through the reforms despite the street protests of hundreds of small brokers two weeks ago that urged the exchange to abandon its reform plans. The top complaint is about the extended trading hours. In March, the market's opening time was brought forward by half an hour, while the traditional two-hour lunch was cut by 30 minutes. From March next year, the lunch break will be cut to one hour, matching that of international markets. Most major markets, such as New York and London, now trade between six and eight-and-a-half hours a day without a lunch break. Hong Kong's five hours of trading is among the shortest in the world. Brokers are also worried that their dinner break would be similarly shortened. The HKEx is also proposing to add a six-and-a-half hour evening futures trading session from 4.45pm to 11.15pm to match international practice. Large brokers support the plan but small players complain that it will increase costs. "The local brokers and their frontline staff are the most hard hit by the extension of trading hours," Li acknowledged. "The fact that they are dissatisfied and disgruntled is understandable and we will continue to listen to their concerns." Li, however, showed no indication that he was backing away from the proposed reforms, including investing HK$2 billion to upgrade the data and technology platform of the exchange. Although small brokers said the upgrade would be too expensive, Li argued it was needed to compete with international bourses which have systems to handle higher trading volumes and are faster than Hong Kong's. Also, Li said he insisted on reforms to increase reserve funds and introduce a new margin fund. Both reforms are intended to provide a safety net in the event that a brokerage collapses. "The stock market turnover increased by seven times between 2000 and 2008, but the size of the reserve fund has contracted. The global financial crisis has resulted in regulators around the world shoring up their risk management measures and HKEx is no exception to that," Li said. Li said he agreed more time is needed to study other controversial proposals such as relaunching the closing auction system and narrowing the trading spread by adopting the international practice of not displaying brokers' names during trades. He said these reforms would also benefit Hong Kong, but they are not as urgent as the others, so there could be more time for discussion before implementing them. Legislator Chim Pui-chung said the proposed reforms favour mainly international players and neglect the difficulties of local brokers. "Maybe the exchange could open 30 minutes earlier from March next year so it can extend trading hours without cutting short the lunch hour," Chim said.

Macau police have smashed a mainland syndicate that allegedly swindled casinos out of more than HK$24 million using camera-embedded card shuffling machines, arresting seven men. Detectives are also investigating whether dealers may be involved, but would not reveal the names of the casinos. The modified card machines were first discovered in January but it was not until March 28 that the alleged culprits were identified. The seven, including two alleged masterminds, were nabbed at hotels or at the border crossing when they attempted to return to Macau this month. Aged between 37 and 46, they are mostly from Yunnan, and one hails from Jilin. They are believed to have placed their modified machines in casinos and analyzed the filmed card shuffling sequence before laying down bets on baccarat tables. The modified devices appear to be the same as the ones used in casinos, but each was fitted with a micro video camera and infrared transmitter. Mirrors were also installed to reflect images of cards to a video camera. Police allege the footage was transmitted to a center outside the casino where the ring took one to two hours to compute the maximum possible probability of winning at baccarat. The gamblers then reserved VIP rooms and placed bets according to the analyzed results. Suen Kam-fai of the Macau Judiciary Police said syndicate members relied on distractions during the machine switches. The alleged masterminds are named Liu and Yang. Two others are said to have criminal records for cheating at card games in casinos in 2005. The scam came to light in January when technicians carried out regular maintenance of shuffling machines at a casino. Officers with the gaming-related and economic crimes investigation department later launched an investigation and found other machines in Macau casinos. Police seized HK$1 million from the seven and are still calculating the total amount involved in the swindle.

 China*:  July 29 2011  Share

China's pork prices dropped 0.2 percent for the week ending July 24 from the previous week, the Ministry of Commerce (MOC) said Tuesday. The previous week-on-week drop occurred in the week ending April 10 with a 0.1-percent decline, according to reports listed on the MOC website. High pork prices have become a big concern for the nation as the consumer price index, the main gauge of inflation, shot up to a three-year high of 6.4 percent last month, driven by surging food prices. Data from the National Bureau of Statistics showed pork prices in June surged 57.1 percent year-on-year. Meanwhile, 18 types of vegetables underwent an average price drop of 1.5 percent last week from the previous week. Eight types of aquatic products climbed 1.4 percent in wholesale prices week-on-week. Prices of mutton and beef rose 1 percent and 0.6 percent, respectively. Egg prices also climbed 0.6 percent.

Tommy Hilfiger is setting itself up for a major move into Asia. The brand, known for its rugby shirts and loose jeans, hopes it can grow its sales in the region to one-third of global revenue, up from just over 10% now. In August, Hilfiger will be taking over the right to sell its own brand in China, where it was previously distributed through a licensing agreement. And it said today that it poached John Ermatinger, who until recently was the president of Gap Asia Pacific, for the newly appointed role of Asia Chief Executive for Tommy Hilfiger. Fred Gehring, CEO of Tommy Hilfiger Group, spoke with Scene Asia about the firm’s Asian strategy, its expansion plans in China and how the region’s preferred color palette differs from Europe’s. The following interview has been edited.

China Says Aircraft Carrier Only for Research, Training - China's Defense Ministry said its first aircraft carrier would be used for "research, experiments and training" and would not affect its defensive naval strategy, in an apparent attempt to ease regional concerns that the vessel could be used to enforce Chinese territorial claims. Senior Col. Geng Yansheng, a Defense Ministry spokesman, also confirmed for the first time that Chinese pilots were training to operate from the carrier, which is based on an empty hull bought from Ukraine, and which is due to start sea trials this summer. But he said it would take a long time to become fully operational. "Building an aircraft carrier is extremely complex and at present we are using a scrapped aircraft carrier platform to carry out refurbishment for the purposes of technological research, experiments and training," Col. Geng said, according to a Chinese transcript of a monthly Defense Ministry news conference published on its web site. Asked about media reports that the vessel would be launched on Aug. 1, China's Army Day, he said: "There is not a question of when this ship is launched, because it has been in the water all along. As for the precise timetable for the ship beginning sea trials, it will be decided according to the schedule of the refurbishment project." He also dismissed a question suggesting that China's sudden relative openness about the carrier was linked to recent tensions in the South China Sea, where China has conflicting territorial claims with Vietnam, the Philippines, Taiwan, Malaysia and Brunei, and has warned the U.S. to stop reconnaissance operations. "To construct and use a carrier requires the integration of various types of weaponry, and requires synergy in every area," Col. Geng said. "This will be a long and slow process." A Chinese company purchased the empty hull of a carrier called the Varyag from Ukraine in 1998, on the understanding that it would be used as a floating casino, but it was later towed to the northeastern port of Dalian, where it has been undergoing refurbishment ever since. China's plans to reactivate the carrier for its navy have been known for years. The vessel is easily visible from parts of Dalian and photographs and video footage of the refurbishing have been published online. But China did not officially confirm its plans until earlier this month, when Gen. Cheng Bingde, the Chief of General Staff of the People's Liberation Army, spoke about it at a news conference after meeting Mike Mullen, the U.S. chairman of the Joint Chiefs of Staff, in Beijing. Gen. Chen did not, however, say how China planned to use the carrier. The vessel is significant as it will give China, for the first time, the theoretical ability to project air power far from its shores, as well as providing crucial experience for developing its own, larger indigenous carriers, the first of which some defense experts say is already under construction. It would take China several decades to match the U.S.'s current carrier fleet of 11, but Beijing only needs a few to enhance its ability to deny U.S. forces access to waters around China in the event of a regional conflict, or to protect its shipping lanes and other perceived national interests overseas. To be effective, at least two or three carriers are required, so that at least one can remain active while another undergoes repairs, and each active one requires its own carrier group including several other vessels, according to Chinese and foreign defense experts. For the moment, therefore, they say the Varyag—which has yet to be renamed—will likely be used mainly to test equipment and train personnel, especially pilots who must learn to take off from and land on the carrier while it is moving. Some also say that it could be used for limited patrols around China's territorial waters, as well as visits to foreign countries to try to enhance military relations and help them grow accustomed to China's newfound naval strength. Col. Geng said that a carrier could be used for offensive or defensive purposes as well as for disaster relief, and that China was pursuing its carrier program "in order to increase its ability to protect national security and world peace." "China's firm adherence to a defensive national defense policy will not change because of the development of advanced weapons," he said. "China's naval strategy of inshore defense also has not changed." Col. Geng declined to provide further details. But the state-run Xinhua news agency quoted Cao Weidong, a researcher with the PLA Navy's Academic Research Institute, as saying that China's first carrier was a conventionally-powered medium-sized carrier equipped with indigenous Chinese engines, ship-borne aircraft, radar and other hardware.

Senate Confirms Locke as U.S. Ambassador to China - The U.S. Senate on Wednesday confirmed Gary Locke, the former Commerce Department secretary, as ambassador to China, making the one-time advocate for U.S. business the diplomatic liaison to a major trade partner. The confirmation occurred under a fast-track process that avoided a roll-call vote. Mr. Locke succeeds Jon Huntsman, who resigned to run for the U.S. presidency in 2012. Mr. Locke's confirmation comes at a delicate time in the U.S. relationship with China, which last year surpassed Japan to become the world's second-largest economy. U.S. companies complain that they are frequently shut out of Chinese markets or forced to share technologies in order to gain access–but at the same time many large companies are increasing sales in the fast-growing economy. In a recent speech, Mr. Locke indicated that he would not let the prospects for sales outweigh other U.S. concerns, warning that China has backtracked on its promises to make the country more friendly to foreign businesses. The new ambassador, the first Chinese-American to serve in the post in Beijing, has no direct business experience. He is a former governor of Washington state, home to Boeing Co.,Microsoft Corp. and Starbucks Corp.

Xinhua, China's state-run news agency, will take over one of the highest-profile advertising locations in New York’s Times Square starting from Monday, in what is perhaps the most visible step in its recent American expansion. Xinhua is leasing an 18-metre high by 12-metre wide sign on the north end of Times Square, hoping to reach the estimated half a million people that pass through the area every day. Xinhua’s signage will replace that of HSBC (SEHK: 0005) Bank, whose lease expired last month on the space at 2 Times Square, which also plays host to ads by Coca-Cola and insurance company Prudential. Xinhua’s US expansion is seen as an effort to burnish the country’s image and build its brands. A Pew Research Center poll earlier this year found that 43 per cent of Americans saw China as a “serious problem”. “This is all part of the process of China becoming global. They want to say to America, ‘Look we’re not just taking your jobs – we’re much more than that,’” said China expert Paul Markowski, president at Global Strategies-Analysis Group. It is unclear though, what impact it will have in changing Americans’ perceptions, he said. “People will become more aware of what Xinhua is,” he said. “Beyond that, I don’t know.” Xinhua, which has had a presence in the United States since 1971, moved its North American headquarters from the New York borough of Queens to Times Square in May. Last year, it launched a 24-hour English-language television network called CNC World. Xinhua officials were not immediately available for comment on the Times Square lease. Last year, in the run-up to US congressional elections, some politicians aired campaign ads portraying China as a threat. US lawmakers accused China of keeping its exports artificially cheap and taking American jobs. Bob Brunette, 60, from Wisconsin, sitting at a Times Square plaza, said he had never heard of Xinhua and didn’t care if it began advertising here. “It’s a free country,” he said. Daniel Woo, 43, from New York welcomed the advertising initiative – especially, he said, in a tourist area. “Some people in the US are biased against China, but that is because some people are ignorant,” he said. Last January, China paid for a promotional video to appear on six giant screens in New York’s Times Square and on CNN to coincide with President Hu Jintao’s state visit to the US. Xinhua called it a “public diplomacy campaign”. Sherwood Outdoor, which leases the signs on 1 and 2 Times Square, has targeted Chinese companies for a number of years, its president, Brian Turner, said in an interview. He said he hopes the Xinhua lease will be the start of more Chinese brands advertising in Times Square. “American companies have been going into China with their products and growing abroad and we anticipate that the reciprocal effect will take place,” he said. Once companies lease signage space in Times Square, they tend to stick around, Turner said. Coca Cola has been there since the 1930s, Samsung since the mid-1980s and Prudential since the early 1990s, he said. “Once they get there, they stay,” Turner said.

China launched its ninth navigation satellite on Wednesday, Xinhua news agency reported, citing sources at the launch centre. A rocket carrying the “Beidou”, or Compass, navigation satellite orbiter blasted off from the Xichang Satellite Launching Centre in southwestern Sichuan Province at 5.44am, it said. The satellite is one of 35 that China is putting into orbit to form the Beidou navigation system, a global positioning system completely developed by Chinese technology, Xinhua said. China started building its satellite navigation system to break its dependence on the US Global Positioning System (GPS) in 2000. The network is expected to provide global services by 2020, the report said.

China's offshore financial assets rose 7 percent in the year to March to $4.4 trillion, primarily propelled by rising foreign-exchange reserves. According to the nation's balance sheet of foreign-exchange assets and liabilities, also known as the International Investment Position, offshore financial liabilities increased 5 percent to $2.5 trillion as of the end of March. That resulted in net assets of $1.9 trillion, according to a statement on the website of the State Administration of Foreign Exchange (SAFE) on Tuesday. It was the first time that SAFE, manager of China's $3.2 trillion in foreign reserves, updated the figures on a quarterly basis. Previously, the balance sheet was only released annually. "China's overseas financial assets and liabilities have increased constantly over the past few years, boosted by increased foreign-exchange reserves and overseas investment," said Lu Zhengwei, chief economist with Industrial Bank Co Ltd. "It is a result of China's increased forays into international markets." The International Investment Position reflects a country's stock of financial assets and liabilities to outside nations. Combined with the balance of international payments, it shows a country's complete international trade and investment flows. China's current-account surplus - the broadest measure of trade with the world - narrowed 21 percent to $28.8 billion in the first quarter, according to SAFE's revised figures published in May. The capital-account surplus, which measures the net capital inflow, widened 41 percent from a year earlier to $86.1 billion during the same period. Reserve assets, including foreign-exchange reserves, gold and special drawing rights, remained the biggest portion of the $4.4 trillion in financial assets, or 71 percent, unchanged from the end of 2010. Reserve assets increased $201.4 billion in the first quarter, including $197.3 billion in foreign exchange reserves, to $3.1 trillion. "Foreign-exchange reserves are still the main channel through which China's overseas financial assets increase," said Ding Zhijie, dean of the School of Banking and Finance at the Beijing-based University of International Business and Economics. China's foreign reserves, now the world's biggest, have surged in recent years, supported by long-term capital- and current-account surpluses. Ding added that judging from SAFE's figures, the country has done a good job in investing its foreign reserves in the first quarter. Out of the $197.3-billion increase in foreign reserves in the first quarter, $138 billion was generated from net capital inflows, Ding said.

Firms recruiting top students will be an area of intense competition between China and the US, reports Zhang Yuwei in New York. Li Yang, a PhD marketing student at Columbia Business School in New York, faces a tough choice when he graduates next year - whether to stay in the United States or return to China to look for a job. "Several years ago, the answer would have been simple. Of course, I'd prefer to stay in the US maybe long enough to enjoy some immigration benefits. But now China offers equally competitive opportunities for overseas returnees, which many will consider and accept," said Li, 28, who has been studying in the US for more than six years. In 2008, the government launched the Thousand Talents Program to improve China's capacity for innovation in the next five to 10 years. It hopes to boost the recruitment of talented people who are willing to return to China for top salaries. A follow-up initiative, the Thousand Young Talents Program, was set up last year to recruit about 2,000 jobseekers from abroad over the next five years to work in the natural sciences and engineering. Under the National Medium- and Long-term Talent Development Plan (2010-20) released in June, the government will adopt favorable policies in taxation, insurance, housing, children and spouse settlement, career development, research projects, and government awards for high-caliber overseas Chinese who are willing to work in China. Li is encouraged by the programs. "More Chinese students and young professionals around me are considering returning to China. The program is a good start and it shows the government has recognized the role these overseas returnees can play. "There is not much difference between China and the US in terms of employment opportunities now," he said. "That's where it makes the choice difficult." More Chinese students have returned home in recent years - 134,800 from the US last year, a 25 percent increase from 2009, according to the Chinese Ministry of Education. While many returned because of the difficulty in obtaining a non-immigrant work visa, it is thought that the better employment prospects in China also played a role. Shaun Rein, managing director at China Market Research in Shanghai, said most of the people his firm hired in the past two years had gone abroad for business school and returned to China. Some are benefiting from favorable policies set up by the government, Rein said. "This is a very positive development for China. We need these top-flight students to return home." The United States, meanwhile, is trying to keep the foreigners. Speaking in El Paso, Texas, in May, President Barack Obama said an overhaul of US immigration laws is needed to secure highly skilled and high-tech foreign talent. "So we don't want the next Intel or the next Google to be created in China or India," he said. "We want those companies and jobs to take root here." In May, the Obama administration extended the Optional Practical Training program to allow students graduating from programs in several dozen additional disciplines, including soil microbiology, pharmaceuticals and medical informatics, to be able to find a job or work up to 29 months (instead of 12) after graduation. The move was intended to address the shortages of scientists and technology experts in some high-tech sectors. New York City Mayor Michael Bloomberg said recently, at a Council on Foreign Relations event in Washington, that "the one thing" that can spur job growth is to encourage more legal immigration to the US. He said the changes should include allowing foreign graduates from US universities to obtain green cards (permanent residency), ending caps on visas for highly skilled workers, and setting green card limits based on the country's economic needs, not an immigrant's family ties. About 15 percent of all green cards go to employees and their dependents, while the rest go largely to immigrants, families and relatives, Bloomberg said. Last year more than 70,000 Chinese applicants obtained permanent residency in the US, placing second behind Mexican applicants, according to the US Department of Homeland Security. "That American dream cannot survive if we keep telling the dreamers to go elsewhere," Bloomberg said. "It's what I call national suicide - and that's not hyperbole."

China's high-speed rails under construction may cost up to 849.1 billion yuan ($131.79 billion), a brokerage firm estimates, after a train crash triggered financial concerns over the sector. About 26 high-speed rail lines, including the Nanjing-Hangzhou, Beijing-Shijiazhuang and Harbin-Dalian routes, are currently being constructed, said a report released by GF Securities on Tuesday. The railways ministry has spent 589.8 billion yuan in building 13 high-speed rail lines that are currently in operation, with another 23 more lines awaiting construction, according to the report. "The outlined investment scale is hard to achieve, so there might be a reduction," said an analyst who didn't want to be identified. According to the Ministry of Railways, it plans to expand its investment for railway construction to 745.5 billion yuan this year, while its debt stands at 1.8 trillion yuan. "The train accident will undoubtedly increase the financing difficulty for the sector, and there's a risk of the cash chain being ruptured," said Zhao Jian, a professor with Beijing Jiaotong University. But Cheng Zhou, a fund manager with the Guotai Jinma Sustaining Return Fund, said the growing pace of the sector's investment may slow in the short term, but the plan to develop high-speed trains won't be called off. "In the long run, the government still needs to develop the sector but will raise standards for the construction, safety and supervision," Cheng said. During the past two trading days, 33 railway-related stocks listed on the Shanghai Stock Exchange lost 60 percent, or 37.6 billion yuan of their total market value. A high-speed train rear-ended another Saturday evening in the eastern province of Zhejiang. The accident, which has left at least 39 dead, has raised public doubts on transportation safety, sinking the ministry into a deep trust crisis.

Hong Kong*:  July 28 2011  Share

Book Fair Talk Turns to E-Books and Apps - As book buyers lugged suitcases of hardcovers and paperbacks at the Hong Kong Book Fair, a few industry insiders said that the scene could soon look different: Gone will be the traditional book-browsing experience. Handheld Culture, which buys digital-publishing rights to books in traditional Chinese, along with the Hong Kong Trade Development Council, which puts on the fair, and publisher Sino United, created a “Future Bookstore,” to show what shopping for books will be like a few years from now. One idea: creating your own book by taking pages from different volumes and combining them into one. For instance, take a few recipes from different books to create a customized cookbook, and pay by the page, much like paying for a selection of songs rather than a whole album on Apple’s iTunes. Consumers at the Future Bookstore could also browse and order books at a kiosk and have them downloaded directly onto mobile devices. E-books and digital reading are a growing focus of the fair, which attracts about 1 million visitors a year. Thirty-two electronic book and e-reading-device exhibitors set up booths this year, up from 21 last year. The fair features 520 exhibitors and closes Tuesday. The shift to e-books has been a painful one for many booksellers. Borders, the second-largest chain in the U.S., said last week that it will shut its doors for good. Despite the e-book buzz, however, most fair attendees were still browsing for traditional books, which booths were selling for as much as half off. Fiction, children’s books and genres such as architecture and lifestyle were popular among shoppers. Anita Lam, a senior shop assistant at Page One, a bricks-and-mortar bookseller, estimated that as of Friday, sales at her booth were up around 10% over last year. Meanwhile, Handheld Culture, which calls itself the “world’s Chinese eBookstore,” is encouraging the e-reading trend. In Asia, where big online retailers such as and Barnes & Noble have limited e-book offerings in Chinese, there are many opportunities, said Howard Kwong, Handheld Culture’s chief technology officer. “We want to reach out to Chinese readers, so that they become part of the e-reading culture,” Mr. Kwong said. “There is no established player in this market.” With Chinese-language readers around the world, “It’s hard to get the new releases, so 50% of our users are not even in Hong Kong,” said Bonnie Chan, chief executive of Handheld Culture. The company recently announced a partnership with the National Library of China, which has granted it digital rights to release some of its titles outside of China for the first time. Another Chinese-language e-book publisher, 24Reader, showcased its app at the fair. It costs 38 Hong Kong dollars (about US$5) a month and offers unlimited access to 1,500 books and 400 magazines such as Marie Claire and Capital CEO. Another 1,500 books are available for online purchase for an additional fee. With 50,000 users signed up, about 10,000 to 20,000 books are downloaded every month, according to Carlos Cheng, 24Reader’s CEO. “In the last two months, we’ve had a 200% to 300% increase,” Mr. Cheng said. “And since the beginning of the book fair on July 20, we’ve had a 10% increase in our normal traffic.” Alex Huang, a book fair attendee visiting the Handheld Culture booth, said he’d recently discovered e-books and liked cutting down on the bulk and weight of carrying hard-copy books. “I don’t want to buy a physical book anymore, unless it is for sentimental value,” he said.

US Secretary of State Hillary Clinton said Hong Kong is "a perfect example" of an open, transparent, free and fair economy, and urged Asian countries to spend more domestically to help stabilize the global economy. "The US is in the middle of a transition," Clinton told the American Chamber of Commerce at a luncheon yesterday during her last stop on a 12-day trip. "We must save more and spend less. And we must not only save more and spend less, we must borrow less as well," she said. In veiled criticism of China, Clinton called on US partners in the Asia-Pacific to meet "this change with changes of their own." "There is no way around it. Long-term growth requires stronger and broader-based domestic demand in today's high-saving Asian economies." Clinton also said that she is confident US lawmakers will reach a deal to avert a debt default, which has been on the minds of many leaders she met during her tour. "I am confident that Congress will do the right thing and secure a deal on the debt ceiling and work with President Barack Obama to take steps to improve our long-term fiscal outlook." After the Amcham address, Clinton was whisked off to Shenzhen for talks with her mainland counterpart, state councillor Dai Bingguo. Earlier in the day at Government House, Chief Executive Donald Tsang Yam-kuen thanked Clinton for her visit and told her that he would attend the upcoming APEC summit. Clinton also had a closed-door meeting with Democratic Party chief Albert Ho Chun- yan, Democratic Alliance for the Betterment and Progress of Hong Kong vice chairwoman Starry Lee Wai-king, former Civic Party leader Audrey Eu Yuet-mee and Liberal Party vice chairman Tommy Cheung Yu-yan. Clinton told Ho the United States will continue to maintain dialogue with the mainland on human rights. Ho noted she steered clear of political developments in the mainland or Hong Kong.

Guosen Securities, the top-ranked arranger of initial public offerings on the mainland, has more than doubled the workforce at its Hong Kong unit this year as Chinese investment banks challenge Goldman Sachs and Morgan Stanley outside their home market. Guosen Securities (HK) Financial Holdings has about 200 employees, up from less than 100 at the end of last year, chief executive Lu Xiaoning said. The firm plans to add 500 square metres of office space to the 1,500 it occupies at One Exchange Square and Li Po Chun Chambers in Sheung Wan, he said. The expansion comes as competition for arranging share sales squeezes fees in Hong Kong, while rivals including UBS have said rising banker compensation is eroding margins. Average fees for IPO underwriting in Hong Kong this year fell to 2.2 per cent of the funds raised from 3.5 per cent in 2001. "Hiring isn't easy but people are seeing the bright prospects of Chinese companies," Lu said. "There are many Chinese companies looking to sell shares in Hong Kong or invest outside China. These are massive opportunities that we'd like to grab." Guosen Securities, based in Shenzhen and controlled by the city's government, has worked on 18.7 billion yuan (HK$22.53 billion) of IPOs on the mainland in 2011, more than any other bank. Fees for those deals averaged 4.6 per cent of funds raised. The Hong Kong unit, which received a licence to underwrite share sales in April, has not managed any equity offerings in the city so far. Guosen Securities planned an initial public offering on the mainland as early as this year, Lu said. After the listing, the company may consider selling shares in Hong Kong. Guosen Securities posted profit of 3.1 billion yuan in 2010 on revenue of 7.8 billion yuan, according to its website. Guosen Securities hired Cheng Gang from HSBC Holdings (SEHK: 0005, announcements, news) last year to head its Hong Kong investment banking, Lu said. The executive said he expected his Hong Kong business to be profitable this year, while declining to give a forecast for hiring. "We are working on a number of IPO deals and are in talks with some companies about issuing dim sum bonds," Lu said. "Our parent company has four million clients in China and we can offer services they need when they seek funding or invest abroad." Guosen stood to benefit from its ties with companies over the border as it might bring them to Hong Kong for a listing, he said. Dim sum bonds refer to yuan-denominated notes issued in Hong Kong. Goldman Sachs, the biggest underwriter of IPOs in Hong Kong, is among global investment banks cutting jobs as trading revenues stagnate and stricter capital rules curb profitability. At the same time, Chinese securities firms are vying to steal a march on foreign rivals by advising local companies on stock offers and acquisitions abroad. Haitong International Securities Group was increasing its 75-person Hong Kong investment banking team by at least half this year, chief executive Lin Yong said in April. Lin said he would "pay what's needed" to hire senior executives. ICBC International Holdings, the securities unit of the world's largest bank by market value, has hired 10 managing directors or executive directors from global rivals this year, deputy chief executive Mary MacLeod, who joined the firm from Deutsche Bank in January, said earlier this month. Guosen Securities' state ownership limited its ability to lure bankers with big pay packages in Hong Kong, Lu said. "That could create too wide a gap" with the company's mainland operations, he said. "Bankers are professionals so they can judge whether we are the best platform for them to progress."

'Launch water taxis for arts hub shows' - Temporary events are unlikely to succeed at the West Kowloon cultural site in the absence of direct transport, a town planner warns - A bumper line up of 300 artists will descend on the arts hub for the 4th Hong Kong International Jazz Festival in October. A town planner is warning that interim cultural programmes planned for the West Kowloon arts hub will not succeed without improved access to the venue. Town planner Pong Yuen-yee said the government should consider supporting a water taxi to the site, "instead of just relying on the remote MTR station". "It can be an additional service introduced by the Star Ferry whenever there are special events," Pong said. One such event, scheduled on October 1 and 2 as part of the annual Hong Kong International Jazz Festival, would be ideal. Local jazz icon Ted Lo, vocalist Justin Lo Ting-wai, five-time Grammy-winning trumpeter Terence Blanchard and percussionist Poncho Sanchez will be among 300 artists from 24 countries performing a broad range of genres, including Jewish wedding songs, gypsy swing, Moravian folk, Afro-Cuban, a cappella and Brazilian jazz. The West Kowloon Cultural District Authority announced yesterday that the two-day festival would be held on the vacant land where the multibillion-dollar arts hub will be built. Vocalist and band shows around the square stage will cost HK$580 to HK$1,000 for a two-day pass. Some mobile stage and marching band performances, and a children's jazz and poetry workshop will be free. "Although the arts facilities in West Kowloon will not be completed for a few years, we hope we can give the public a taste of what it will be like - the atmosphere of our future arts hub," said Louis Yu Kwok-lit, the authority's performance arts executive director. The harbourfront site has been largely unused while awaiting the HK$21 billion project - a complex of arts venues, a piazza, visual-arts museum and exhibition centre to be completed in late 2015 or early 2016. Yu said he was optimistic about promoting the cultural hub to a worldwide audience despite the remoteness of the location. "People will come as long as there are quality shows," he said. "We hope more people will get into the habit of visiting West Kowloon for arts and cultural events." He said the authority intended to build a traditional bamboo shed for a Cantonese opera show during the Lunar New Year. The Tourism Board will hold the 3rd Hong Kong Wine and Dine Festival at the West Kowloon waterfront promenade from October 27 to 30. In related news, the arts hub's new chief executive, Michael Lynch (pictured), reported to work yesterday, stepping into a job that had not encouraged longevity. After arriving in Hong Kong on Sunday, Lynch said his first task was to meet stakeholders to "move things forward". "Getting to know the people of Hong Kong will be one of the priorities," the 60-year-old Australian, the hub's third chief - its second within a year - said. "I hope I've got lots of solutions. What I'm interested in is that we start moving West Kowloon as fast as we can - and forget about the difficulties in the past ... I'm confident." With his Tsim Sha Tsui office located just off the construction site of the future arts hub, he said: "Now I'm staying almost next door. I can actually look at it day and night." Lynch, former chief executive of the Sydney Opera House and London South Bank arts complex, signed a three-year contract with the authority in May to fill the vacancy after the abrupt departure of Graham Sheffield, who cited health reasons.

Public hospitals may soon be able to recruit overseas nurses under a limited registration system because of a severe staff shortage - which has reached a stage that each nurse has to take care of an average of more than 60 patients. Overseas nurses may be allowed to work at Hong Kong's public hospitals before passing the city's licensing examinations, said Secretary for Food and Health Dr York Chow Yat-ngok. "We hope to discuss with the Nursing Council to see if we can let overseas nurses work in Hong Kong under special conditions, just like doctors," he said. The Hospital Authority is still short of 1,000 nurses to maintain services, despite having spent HK$200 million to recruit 1,600 nurses in recent years. The shortage is comparable to the doctors' staffing problem. The authority earlier announced it was planning to hire overseas doctors under limited registration. These doctors do not need to sit for the medical council's licensing examination and can be exempted from the one-year internship. In exchange they can only work in the public sector. Professor Thomas Wong Kwok-shing, who stepped down as the chairman of the Nursing Council last month, said this was the direction the licensing committee was looking to solve the nurse shortage problem, but details have not yet been finalised. "It is still very preliminary. The committee is still working on the regulations, such as who would qualify, and what posts would they be allowed to take up," he said. But Association of Hong Kong Nursing Staff chairman Joseph Lee Kok-long, who is also a Legislative Council member, said recruiting from overseas was not a good solution. "Our situation is different from that of doctors," he said. "Doctors lack specialists in certain departments and overseas recruits would help. But there are many specialist nurses in Hong Kong. They just left the HA because they were not promoted." Lee said nurses from Southeast Asia had been recruited in 1992 to 1993, when the authority was first established and lacked manpower. But he said most left after their contract was over due to the comparatively heavy workload in Hong Kong. "In Singapore, a nurse takes care of 40 patients. In Hong Kong, we often face 60 to 70 patients at one time," he said. Authority chairman Anthony Wu Ting-yuk said he welcomed overseas nurses coming to work in public hospitals who fulfilled Nursing Council requirements. "If there are Hong Kong nurses who emigrated to Australia or Canada and want to come back, we always welcome them," he said. Wu said overseas recruitment was just one of the many measures to ease staff shortage. Other measures included creating more senior posts and expanding nursing schools. According to authority statistics, public hospitals lost 4.91 per cent of registered nurses and 3.54 per cent of enrolled nurses in the year 2009-10. Of the 637 nurses who left, about 340 had at least 10 years' experience. Chow said relief was already on the way. "The worst time is over. In the past we had 1,000 new nurses every year. Next year we will have 2,000 as more students graduate."

HK spending reaches record levels - Banking, tourism and entertainment sectors lead the way as business enjoys a positive market - Outdoor advertising is everywhere in Causeway Bay and played a big part in the city's record ad spending in the first half of this year. Advertising spending in Hong Kong reached a record high in the first half of this year, lifted by campaigns in the banking, tourism and entertainment industries. Media-monitoring firm admanGo estimates that total spending from January to June rose 16 per cent to HK$16.56 billion, from HK$14.29 billion a year earlier, as a result of positive market conditions. "Marketers were encouraged to boost their investment because the Hong Kong economy stayed robust during the first half," Jennifer Ma, director of sales and marketing at admanGo, said. More than 90 per cent of the first-half advertising involved campaigns on television, newspapers, magazines and outdoor media. Advertisers in the banking and investment services sector remained at the top of the league, with a 19 per cent year-on-year increase in campaigns for a total of HK$1.73 billion in the first half. The biggest chunks of their advertising spending were for promoting credit and charge cards, at HK$349.14 million, as well as personal loans and financing, HK$326.03 million. Ma, however, pointed out that marketing for Mandatory Provident Fund (MPF) schemes had the most significant growth, at 500 per cent year-on-year to HK$20.51 million in the first half. The MPF, which covers about 2.5 million Hong Kong workers, is a compulsory retirement programme that requires employers and employees to pay 5 per cent of salaries each into schemes run by banks, insurance firms or fund companies. HSBC (SEHK: 0005), Hong Kong's leading MPF scheme provider, also was the overall biggest advertiser in the city during the first half, with HK$132.73 million in spending. The other top-ranked banking advertisers were Citigroup, with HK$102.10 million; DBS Bank, HK$84.52 million; Promise Finance, HK$79.74 million; and Hang Seng Bank (SEHK: 0011), HK$78.87 million. Among the industries tracked by admanGo, the travel and tourism sector recorded the highest increase in advertising spending during the first half - up 31 per cent year-on-year to about HK$670 million - in response to greater market demand. The sector's top five advertisers were Hong Thai Travel Services, with campaigns totalling HK$60.56 million; Evergloss Tours, HK$42.45 million; the Miramar Group, HK$41.88 million; Jetour Holding, HK$38.37 million; and China Travel Service, HK$30.84 million. According to the Hong Kong Tourism Board, visitor arrivals from the mainland reached 10.8 million in the first five months, 20 per cent up on a year ago. It estimates that more than 20 million mainland tourists now visit the city each year. The entertainment sector, which includes movie distributors and gaming enterprises, also showed strong advertising spending growth in the first half, rising 13 per cent year on year to about HK$630 million. Its top five advertisers were Intercontinental Film Distributors (HK), with campaigns worth HK$53.58 million; Warner Bros, HK$37 million; 20th Century Fox, HK$29.18 million; Hong Kong Jockey Club, HK$28.89 million; and Edko Film, HK$27.48 million.

 China*:  July 28 2011  Share

Nissan Motor Co.'s China joint venture will invest 50 billion yuan (US$7.76 billion) by 2015 to expand its auto-production capacity in the world's largest auto market, it said Tuesday. Dongfeng Motor Co., a joint venture between Nissan and Dongfeng Motor Group Co., aims to increase its annual sales to 2.3 million units by 2015 from 1.3 million units, the company said in a statement Tuesday. It didn't say if the 1.3 million figure is a target for this year or an actual result from last year. The company's products include Nissan-brand vehicles manufactured in China. Its goal is to secure a 10% share of China's passenger- and commercial-vehicle market within five years, the company said. It plans to launch 30 new models, it added without providing details. The company aims to become one of China's top three auto makers by passenger vehicle sales by 2015, and to lead in heavy and medium-sized commercial vehicles by that year, Dongfeng Motor President Kimiyasu Nakamura told a news conference Tuesday. The company will build new engine plants at Huadu, Guangdong province, and Zhengzhou, Henan province, to increase supplier localization, Mr. Nakamura added. The capacity expansion at Dongfeng Motor comes as Nissan attempts to implement a six-year growth strategy unveiled in Japan last month. The Japanese firm said the plan will increase its global market share to 8% within the period from 5.8% in the fiscal year ended March 31, 2011. Nissan also plans to double sales of its premium Infiniti brand in China this year, Nissan President and CEO Carlos Ghosn Tuesday. Nissan imports Infiniti vehicles for sale in China. Mr. Ghosn played down the effect of production disruptions caused by this year's earthquake and tsunami in Japan. "Most of the impact, if not all, of the earthquake is behind us. Supply for Nissan is normal now," he said.

General Electric Co. said it is moving its X-ray business headquarters to China to accelerate sales in the country's fast-growing health-care market, the latest sign of China's growing importance to the giant U.S. conglomerate. The X-ray unit will be the company's first business to be based in China. A magnetic-resonance-imaging device under assembly at a GE production facility in Beijing on Friday. The business has already begun the move—which includes the unit's chief executive and three other members of its executive team—and expects to complete the process by year end, said Anne LeGrand, vice president and general manager of GE Healthcare Global X-Ray. The senior leadership team's move to Beijing is aimed in part at helping develop more medical equipment specifically for the Chinese market, Ms. LeGrand told a news briefing Monday. GE said it doesn't expect the move to result in any job losses in the U.S., where the unit has been based in Waukesha, Wis. The Wisconsin X-ray division has 120 employees. The company also said it is too early to say how many employees it will hire for the unit's new Beijing headquarters. "As the company grows more global, it's increasingly important for us to become close to our customers," Ms. LeGrand said, adding that she expects 20% to 25% of GE Healthcare's X-ray products to be developed in China during the next three to five years for sale around the world. As China's market has boomed for a range of products, a small but growing number of companies have moved senior executives to the country or sent them for extended stints. Intel Corp. in May said Sean Maloney, one of its best-known senior executives, would move to China from Silicon Valley to oversee the chip giant's operations here. Bayer AG unit Bayer Healthcare moved its general medicine headquarters from Germany to Beijing in March, and Starwood Hotels & Resorts Worldwide Inc. of the U.S. temporarily moved its headquarters to Shanghai for five weeks starting last month. GE has long placed high hopes on China, with CEO Jeffrey Immelt in 2008 calling it the company's "second home market." In January, the company finalized a deal with state-owned Aviation Industry Corp. of China to inject much of GE's civilian avionics business into a 50-50 joint venture based in China. The U.S. conglomerate has struggled to achieve its growth ambitions in China, though. GE's revenue in the country totaled $5 billion last year, down from $5.3 billion in 2009 and short of the $10 billion the company had targeted for 2010. The company expects its health-care revenue in China to rise 20% annually through 2015, from about $1 billion in 2010. Ms. LeGrand declined to disclose revenue figures for GE Healthcare's X-ray business in China or globally. GE Healthcare, known largely for its diagnostic equipment such as CT scans and magnetic-resonance-imaging machines, has been increasingly focused on growth in emerging markets such as China, where governments are spending to beef up medical care. In China, where it employs some 700 engineers, it is focusing on developing more affordable products aimed at inland and rural community health clinics. Last year, GE invested a total of $2 billion in China, $500 million of which was allocated to what it calls customer innovation centers. Ms. LeGrand said most of that chunk was for the X-ray business. GE Healthcare last year launched the Brivo CT, a scaled-down CT scanner for use in China's less-developed primary-care hospitals, and in 2009, it rolled out a lower-cost digital X-ray device called the Linglong for China. China's central government increased its budget for spending on public health by 16% this year to $26 billion. In March, it allocated 76 billion yuan ($11.78 billion) to improving health-insurance coverage and increased insurance subsidies to 200 yuan a person, up from 120 yuan.

A Chinese manned submersible successfully reached a depth of 5,038.5 meters during a test dive conducted Tuesday in the Pacific Ocean, the State Oceanic Administration (SOA) said. The test dive started at 3:38 a.m. Tuesday, with the submersible Jiaolong carrying three people to the depth of 5,038.5 meters in an international area of the ocean. Such a depth means Jiaolong could reach over 70 percent of the seabed in the world, said the SOA. The SOA said the submersible is expected to have a 7,000-meter test dive in 2012. The Jiaolong is the world's first manned submersible designed to reach the depth of 7,000 meters below sea level, according to Xu Qinan, chief designer of the submersible. Xu said Jiaolong's equipment was state of art and its digital underwater communication systems and undersea mobility systems allowed the craft to "move back and forth easily under the sea." The home-manufactured Jiaolong, named after a mythical sea dragon, dived to a depth of 4,027 meters with three people aboard in about five hours on Thursday. But its attempt to reach 5,000 meters in another dive on Friday was postponed due to unfavorable sea conditions. The craft completed 17 dives in the South China Sea from May 31 to July 18 last year, with the deepest reaching 3,759 meters with three crew members on board. China, initiating the Jiaolong project in 2002, is the fifth country to send a man 3,500 meters below sea level, following the United States, France, Russia and Japan.

A second runway opens at Shenzhen airport today but limited airspace and air routes mean that it will boost the airport's capacity by only 10 per cent initially. China's air force, responsible for airspace over the mainland, has agreed to open 10 routes from the new 3,800-metre runway. That will raise the airport's aircraft movements from an average of 34 to 40 an hour - raising doubts that a proposed third runway for Hong Kong International Airport would be necessary. The Civil Aviation Department had said that officials from Hong Kong, Macau and Shenzhen had reached a consensus over opening up the airspace boundary among the three - a prerequisite for any new runway within the Pearl River delta area. A third runway at Hong Kong, which would cost HK$136.2 billion, would boost airport capacity from 68 movements an hour to 102. An expert said it would take time to reach full capacity. "In the first year, it will probably just reach about 80 movements an hour. It takes time for demand to sink in," he said. In Shenzhen's case, only two scheduled flights an hour will use the new runway. Li Haitao, general manager of Hainan Airlines' Shenzhen branch, said that limited air routes were the main obstacle restraining Shenzhen airport's development. "Also, aircraft that use the second runway will have to [go] through the existing one, and this limits the number of aircrafts using the second runway," he said. China Aviation Administration said earlier that new measures that would double existing air routes might be implemented before the end of this year. An Airbus A330-300 from China Southern Airlines will be the first to take off from the new runway at 3:30pm today en route to Beijing. Shenzhen now has more than 600 scheduled flights every day and the existing runway has long been running at maximum capacity. The airport recorded passenger traffic at 14 million in the past six months, and its annual volume is expected to reach 27.5 million by December.

Beijing will set tough conditions for companies seeking to list on its planned international stock exchange - risking accusations of hypocrisy after blocking the US regulator from investigating frauds by mainland firms trading in New York. The detailed rules, which include asset and earnings requirements, have been drawn up by the China Securities Regulatory Commission and the Shanghai exchange, although a timeframe has yet to be worked out. The information came from two people informed on the issue. The conditions, which are subject to final approval from the State Council, will mean that only big-name global corporate giants would qualify for listing. "There will certainly be a high threshold, and the fact is we presently welcome only large-size, quality companies," said a securities company executive close to the China Securities Regulatory Commission. It has been speculated that a foreign company would have to report a combined net profit of 3 billion yuan (HK$3.6 billion) in the past three years, with the net earnings in the past fiscal year exceeding 1 billion yuan, before filing an application. The applicant must be a public firm traded overseas with a market capitalisation of no less than 30 billion yuan. The CSRC could not be reached for comment yesterday. A Shanghai exchange official, who spoke on condition of anonymity, said asset and earnings requirements had not been set yet, admitting that the first batch of listings on the board would be global "profit stars". Beijing unveiled its plan to establish an international board back in 2009 to reinforce Shanghai's efforts to become a global financial centre. It would allow foreign companies to float yuan-denominated initial public offering shares in a market that is currently off-limits to overseas firms. "The regulator is very cautious about the board and will open the market to foreign firms at a slow pace," said Haitong Securities analyst Zhang Qi. "Consequently, foreign companies seeking A-share IPOs won't get fair treatment on the mainland market, since it will still be a market off-limits to outsiders." Dozens of mainland firms traded abroad have been embroiled in accounting scandals recently. However, the US Securities and Exchange Commission has been unable to take legal action, as the CSRC prevented its investigations into domestic bank accounts and other documents on the grounds it could violate China's sovereignty or national interest.

Respect our interests on Taiwan and Tibet issues, Beijing tells Clinton - US Secretary of State Hillary Rodham Clinton and Chief Executive Donald Tsang share a light moment at Government House yesterday. State Councillor Dai Bingguo yesterday urged the United States to respect Beijing's interests when dealing with Taiwan and Tibet issues, amid rising tensions between the two sides after US President Barack Obama met the Dalai Lama this month. Dai, who is in charge of China's foreign policy, made the remarks when meeting US Secretary of State Hillary Rodham Clinton in Shenzhen following her visit to Hong Kong. The meeting was not included in the original itinerary of her current tour. Xinhua described it as informal with the two sides exchanging views on bilateral ties and issues of common concern. CCTV reported that the two discussed Taiwan, Tibet and AsiaPacific issues. It said both sides stressed the importance of respecting the interests of each other, as well as enhancing mutual trust, without elaborating on the details. Beijing strongly condemned the meeting between Obama and the Dalai Lama, which took place on July 16, saying the US had severely interfered in China's internal affairs. The meeting between Dai and Clinton came as the Obama administration is considering whether to sell Taiwan 66 F-16 jets - a decision that will be made by October 1. Taiwan is trying to buy F-16 C/D model jets, but reports indicate that the US may only allow for the upgrade of F-16 A/B models, in order to minimise damage to Sino-US ties. The US-Taiwan Business Council said it did not expect the sale of new jets to go through. Beijing is likely to react furiously to any US arms sales to Taiwan. Overseas media earlier reported that Wang Yi , director of the State Council's Taiwan Affairs Office, was due in Washington yesterday for talks concerning the arms sale. His office refused to confirm the report. Dai and Clinton also pledged to promote peace and stability in the Asia-Pacific region, amid rising tensions in the South China Sea. Xinhua said they also discussed the Korean Peninsula. Before going to Shenzhen, Clinton met Chief Executive Donald Tsang Yam-kuen and held a 40-minute discussion with four Hong Kong lawmakers. Democratic Party chairman Albert Ho Chun-yan said Clinton expressed concerns about China's human rights lawyers, who are often suppressed by authorities, and she recognised lawyers' importance in contributing to a jurisdiction's rule of law. "She was pretty skilful in stopping short of mentioning things that would otherwise be perceived as interfering in Hong Kong's and China's politics," Ho said. Starry Lee Wai-king, of the Democratic Alliance for the Betterment and Progress of Hong Kong, said: "She said it was good to see China's continuous economic development but she hoped for more openness in its economy and politics." Civic Party lawmaker Audrey Eu Yuet-mee and the Liberal Party's Tommy Cheung Yu-yan also attended the meeting. With Clinton was Assistant Secretary of State Kurt Campbell, the White House's National Security Council Asian director Daniel Russell, and US consul general Stephen Young. Clinton also gave a speech to Asian business leaders. She played down fears of a possible US debt default, saying Americans should change their consumer culture. "We in the United States are in the middle of a necessary transition," she said. "We must save more and spend less. And we must not only save more and spend less, we must borrow less as well. Our partners must meet these changes with changes of their own."

China will launch the ninth orbiter into space in "coming days" as part of its indigenous satellite navigation and positioning network. The "Beidou," or Compass, navigation satellite will be launched on a Long March-3A carrier rocket, said an unnamed spokesman for the Xichang Satellite Launch Center in southwest China's Sichuan Province Monday. The satellite and rocket are now in good conditions, according to the spokesman. The satellite is scheduled to join eight others already in orbit to form a network, which will eventually consist of 35 satellites. The network will provide satellite navigation, time and short message services for Asia-Pacific regions by 2012 and global services by 2020.

Hong Kong*:  July 27 2011  Share

The Hong Kong Monetary Authority (HKMA) is planning to buy US$500 million worth of office properties in London and Paris as part of a drive to increase its investment in Europe, the The Times reported on Monday without citing sources. The newspaper said that HKMA will increase its exposure in the two European capitals through the Exchange Fund, an investment vehicle HKMA manages. The HKMA declined to comment on the report. “We do not comment on the specifics of the investment operations of the Exchange Fund because of the market-sensitive nature of the information,” a spokesperson for the HKMA said. The newspaper said the fund purchased its first building in London’s City financial district this year, while JP Morgan Asset Management’s 260 million pound (US$424 million) acquisition of 10 Aldermanbury Square was on behalf of HKMA’s investment portfolio. The paper said it believed that other potential investment advisers and fund managers have been approached to help the fund to secure further office investments. Last week, HKMA said the total assets of the Exchange Fund, which is used to back the Hong Kong dollar, amounted to HK$2,433.2 billion (US$312.23 billion) at end-June this year, an increase of HK$88.2 billion from the end of last year.

Chinese hedge fund Springs Capital is expanding its presence to Hong Kong as it looks to strengthen its expertise on H-shares and win more offshore clients, a top executive said on Monday. The firm, managing about US$700 million, is setting up trading and investment desks in Hong Kong and looking to add 2 research analysts this year to step up coverage of Hong Kong-listed Chinese firms or H shares, Managing Director Jenny Tian said. Springs Capital, one of the few A-share focused asset managers in China’s hedge fund space, has seen 15 per cent growth in assets of its offshore China long/short hedge fund and expects it to grow to US$100 million from US$69 million now in the next one year, Tian said. Beijing-based Springs Capital was founded in 2007 by seven people who previously worked together at China’s second-biggest mutual fund firm Harvest Fund Management.

White Cube’s New Gallery a Bid for Asian Buyers, Artists - White Cube Gallery in London (pictured) is expected to open in Hong Kong in May 2012. Hong Kong’s aspirations to become an art hub took another step forward when White Cube Gallery, best-known as the London home to artists such as Damien Hirst and Tracy Emin, revealed plans to set up shop in the south China metropolis. The news confirms rumors that were swirling in Hong Kong’s relatively small art scene. “We’ve tried to be discreet, but it’s hard to do things discreetly in Hong Kong, and we’ve been looking for space concretely for about a year,” Tim Marlow, director of exhibitions at White Cube, said in an interview from London. The new gallery will take up two floors at the new office tower designed by architect Robert A.M. Stern at 50 Connaught Rd. in Hong Kong’s Central neighborhood. The main exhibition space is on the ground floor, which has 6-meter (20-foot) ceilings. The second floor has an additional 4,000 square feet of space, Mr. Marlow said. “The timing is because only right now the right space has opened up,” he added. “Finding space in Hong Kong is extremely difficult. If you don’t have good gallery space to put ambitious shows on, it’s not worth looking at from our perspective.” Mr. Marlow said he just signed the lease last week and that he expects to open in May 2012. He has already been in discussions with artists to begin programming for the gallery but declined to say who they were or what the opening exhibition would be. While many artists on White Cube’s roster are already represented in major markets like New York, few have gallery homes in Asia, and Mr. Marlow said they’re eager to sell in the region. Already, White Cube has been a participant in the Art HK fair and sold a work by the Chapman Brothers titled “Dass Kapital is Kaput? Ja? Nein! Dummkopf!” to an Asian collector for £525,000 ($821,000). Nearby China’s art boom is a major factor. Its art market has grown rapidly, surpassing London to become the world’s second-largest market, according to a study by the European Fine Art Foundation. Earlier this month, Christie’s said its sales in Hong Kong so far in 2011 were up 60% from 2010. “The fact that White Cube is choosing Hong Kong as the location for its first overseas gallery (over New York, for example) reflects the growing consensus that the balance of economic power is tipping eastward,” said Magnus Renfrew, director at Art HK. “The art market is still very young in Asia and there is a great deal of work to do in engaging with potential collectors…having a major presence in Hong Kong will provide an important base for their pan-Asian engagement.” White Cube isn’t the first Western gallery with its eyes on Hong Kong. Gagosian, which operates in New York, London, Paris and other major cities, opened in Central early this year with a Damien Hirst exhibit. Planning is also underway for the M+ gallery, a new contemporary art museum slated to open in the soon-to-be-developed West Kowloon Cultural District. Already, the museum has hired Lars Nittve, former head of London’s Tate Modern. Mr. Marlow said that having an operation in Hong Kong could help White Cube discover Asian — especially Chinese — artists that it hasn’t exhibited in the past. When asked which ones it is interested in, Mr. Marlow said it’s too early to tell. “We’re here to discover,” he said. “We’re here to look and develop and find out more. It’s not who we’re interested in right now, it’s what we’ll discover once we’re there.”

Clinton, in Asia, Says U.S. Will Find Debt Solution - Secretary of State Hillary Clinton took aim at economic policies associated with China while reassuring investors the U.S. would find a solution to the debt ceiling impasse. In remarks to the Hong Kong business community, Mrs. Clinton said she is "confident that Congress will do the right thing and secure a deal on the debt ceiling," and that the intense political wrangling is "how an open and democratic society ultimately comes together to reach the right solutions." Mrs. Clinton, at the end of a swing through Asia, with stops in Turkey, India, Indonesia and Hong Kong, used her visit to this financial hub, former British colony and special administrative region of China to underscore the Obama administration goal of solidifying the U.S.'s presence in Asia as a counterweight to a rising China. "We are a resident power in Asia—not only a diplomatic or military power, but a resident economic power. And we are here to stay," she said. Mrs. Clinton outlined several principles for economic progress tied to openness and fairness in market competition that seemed aimed at China's state-directed economic system. She highlighted hot-button business issues that often irk foreign businesses operating in China such as intellectual property, trade barriers and state support of corporations. She said Asia and the U.S. should strive to cultivate an atmosphere where "ideas, information, products and capital can flow unimpeded." Without mentioning China, Mrs. Clinton took specific aim at massive state-owned corporations, a cornerstone of China's economic system. Critics say these state-owned companies, which operate in businesses as diverse as mobile phones to commodities, benefit from unfair government support. She said efforts should be made to ensure "that state-owned companies and enterprises compete on the same terms as private companies." She referred in her speech to nations that are "wealthy in aggregate but often poorer per capita," a description that fits China, now the world's second largest economy after the U.S. Because of China's large population, individuals are substantially poorer than U.S. counterparts. Mrs. Clinton said "some nations are making short-term gains" to bend principles of open and free markets. And that these nations "might even think the rules don't apply to them." She cited companies that are "forced to trade away their intellectual property just to enter or expand in a foreign market, or when vital supply chains are blocked. These kinds of actions undermine fair competition, which turns many off from competing at all." The U.S. has battled with Beijing over its foreign-exchange policy, which the U.S. says has kept China's currency undervalued against those of its major trading partners. A cheaper currency keeps a country's products more competitive. China has also restricted exports of critical raw materials including rare earth metals used in high tech products such as solar panels and hybrid cars. She called on the creation of new international trade agreements and institutions to further open markets and hold bad actors accountable to unfair economic practices. Citing the World Trade Organization's success eliminating trade barriers, which accelerated when China joined in 2000, Mrs. Clinton said "we need institutions capable of providing solutions to new challenges—from some activities of state-owned enterprises to the kinds of barriers emerging behind borders." One aspect of the U.S. effort to plant deeper roots in Asia's economic scene is the expansion of the Trans Pacific Partnership, a proposed free-trade area around the Pacific Rim. Mrs. Clinton said President Barack Obama would present an outline of the partnership in November when the U.S. hosts leaders of the 21-nation Asia Pacific Economic Council in Hawaii. Mrs. Clinton said the U.S. supports "norms and rules" and a "code of conduct" for sovereign wealth funds in how government invest savings across the globe. Cross-border investments from sovereign wealth funds or state-owned companies often raise national security concerns in areas of energy, defense and technology. China has amassed over $3 trillion in currency reserves, some of that it has dedicated to a sovereign wealth fund for acquiring companies and investments especially in the area of natural resources. The bulk of the $3 trillion is invested in government bonds in the U.S. and Europe.

 China*:  July 27 2011  Share

Shenzhen exporters and importers will face tougher restrictions on the movement of cargo starting next week as a result of the World University Games that begin on August 12. The measures aim to restrict the number of vehicles on Shenzhen roads during the Games. Critics say the restrictions could cause significant problems because some firms are still in the dark about the details and there is a lack of information about how long the controls will remain in force. "A lot of shippers are concerned that the restrictions will disrupt their operations," said Jacques Chan, regional general manager for global logistics group BDP International. "Nobody can give a firm answer on the restrictions on a particular day. We will watch the situation on a daily basis," he said. Under current plans, trucks and cars will be banned from Shenzhen roads on alternate days, depending on whether they have odd or even numbers for their registrations. These restrictions will start on August 4 and continue to August 24 even though the Universiade will last less than two weeks from August 12-23. Chan said that as a result of the odd-even registration restrictions, exporters and freight forwarders may have to limit the use of their trucks. "They may have difficulty getting their cargo to port and they may have to look at alternative methods," he said. More restrictive controls on vehicles will be imposed on the opening and closing days of the Games. The aim is to keep around 800,000 vehicles off the roads to allow easier access to events for officials and athletes. In addition, all trucks carrying dangerous goods will be banned between 7am and 8pm. Airfreight shipments from Shenzhen International (SEHK: 0152) Airport also face tougher controls, with customs officials placing a special focus on the transport of powders, liquid and lithium batteries. The State Council has also approved additional public holidays for Shenzhen from August 11-14 and August 22-24. Chan was unsure how extensive the traffic restrictions would be in Shenzhen and whether they would be city-wide from Shekou or Baoan in the west to Yantian in the east, or more on a district level or only affecting certain roads. A day-long rehearsal on Saturday for the opening ceremony at the Shenzhen Bay sports centre in Nanshan involved an estimated 20,000 people and 500 vehicles and led to three hours of traffic restrictions on the route between the sports centre and the Games village. Some 11,260 people - comprising 7,557 athletes and 3,703 officials from 141 countries and regions - have registered to attend the Games, according to figures from Shenzhen city officials last Thursday. A total of 63 venues throughout the city will be used for Games events including basketball, weightlifting, judo and athletics. FedEx, the air express shipment company, was also unclear on how long the tightened security procedures would last. The company, which has its Asian cargo hub at Guangzhou's Baiyun International Airport as well as extensive air cargo operations at Shenzhen airport, said in an advisory notice to customers: "We have yet to receive notification of when the precautionary measures will end. "We will honour the regulations that are in place with regard to the Universiade 2011 deliveries and we are working to ensure that we provide our customers with the best service possible during the Universiade in Shenzhen." UPS has its Asia-Pacific hub at Shenzhen's Baoan International Airport. Sunny Ho Lap-kee, executive director of the Hong Kong Shippers' Council, which represents exporters and manufacturers, said the restrictions were likely to be similar to those imposed in Guangzhou during the Asian Games and in Shanghai during last year's World Expo. He said some shippers may move their goods to ports in Guangzhou or Hong Kong to overcome potential difficulties in getting cargo to Shenzhen ports. Shenzhen authorities began an operation earlier this year to expel more than 80,000 migrants deemed to be a security risk ahead of the Games.

Shandong-born charmer Wendi Deng Murdoch who went on the offensive - Not unlike her husband's, the career of Rupert Murdoch's third wife has been built on brains, guts and guile ... and some measure of ruthlessness - The British phone-hacking scandal may have left Rupert Murdoch's reputation in tatters, but his Chinese-born wife's stock has soared on the back of her rapid reflexes and killer slap-down. Wendi Deng Murdoch became an internet sensation around the world after she lunged to defend her 80-year-old husband from a protester in London last week. Comedian and activist Jonathan May-Bowles, known as Jonnie Marbles, disrupted a British parliamentary hearing into the scandal to throw a paper plate of shaving foam in Murdoch's face. In true Charlie's Angels style, Deng leapt instantly to her feet and landed an overhead slap square on May-Bowles' nose - despite there being another woman between them. The group tumbled to the floor in a heap, but Deng - conspicuous in her shocking-pink jacket - was back on her feet in a flash and, without skipping a beat, reached back to the table to fling the remains of the faux custard pie at her husband's attacker. Video of the altercation became an internet sensation, earning the mother of Murdoch's two youngest daughters the nicknames "tiger mum" - nabbed from Amy Chua - and "guardian angel", while Chinese internet users are hailing her as having redefined the image of the assertive Chinese woman and wife. Commenting on the incident on US satirical news programme The Daily Show, comedian Jon Stewart drew attention to the fact that Deng is 38 years younger than her husband. "I am not a big proponent of the four-decade marriage age gap," he said, "but if ever there was a situation where it would pay dividends, it would be an ambush like that." Glamorous, intelligent, hugely ambitious and about 180cm tall, Deng was already well known as the woman on the media baron's arm. They married 11 years ago. "Study well. Only then will you be able to get a good husband," she told the Yangcheng Evening News in a recent interview ahead of the release of her film company Big Feet Productions' latest movie, Snow Flower and the Secret Fan. She was speaking from experience. Her journey from ordinary girl in a Chinese backwater to the wife of one of the world's most powerful men is a tale of hard work, determination, and a dash of ruthlessness. Deng was born in Jinan, Shandong province, in 1968, the third of four children in the family. Her factory manager and Communist Party member father named her "Wenge" (Cultural Revolution) after the ultimately disastrous mass movement that had begun two years earlier. The family moved to Xuzhou , in Jiangsu , shortly afterwards, and stayed there until Deng had almost completed high school. Deng was a keen volleyball player at school until advised by teachers to focus on her studies. Little could she have guessed the innovative use she would find for her well-practised spike technique decades later and half a world away. The family moved again before Deng finished high school - this time to Hangzhou , Zhejiang province - but at 16 she was already out to make her own way in the world, heading south to Guangzhou Medical College. While in her third year, in 1987, Deng befriended an American couple, Jake and Joyce Cherry, who were in China to set up a refrigerator factory. Joyce tutored Deng in English and they formed a bond. The next year the Cherrys sponsored Deng for a student visa to the US, and she dropped medicine for economics at California State University, Northbridge, where she was said to be in the top of the class. But Deng's bond with Joyce Cherry wasn't strong enough to stop her stealing her sponsor's husband, 30 years older than her. The older man had put a ring on Deng's finger by 1990, but it wasn't to last. Cherry later said they only lived together for four or five months, though the divorce didn't come through until more than 2-1/2 years after the wedding. By that time, Deng had her green card and was treading her own path. After California State, she moved on to Yale School of Management, where she graduated with an MBA in 1996. Deng has said in interviews that she waited tables at nights in a local Chinese restaurant to put herself through school. Fate - in the guise of another older man - smiled on Deng again when it came to her next move. According to a well-reported version of events, she found herself on a plane sitting next to Bruce Churchill, an executive with Murdoch-controlled Fox TV. Whatever they discussed on the flight certainly impressed the experienced television executive as, before they landed, Churchill had offered Deng an internship with Star TV in Hong Kong. In an article on Deng that appeared in Australia's The Monthly magazine in 2007, some of her fellow interns at Star TV described her strategy for success. While everyone else was trying to learn as much as they could as fast as they could, Deng strode into the offices of the station's most connected executives and brazenly introduced herself. The charm offensive worked - at the end of her internship, she gained a full-time position and that in turn led to her biggest break ever. It was at a company party in Hong Kong the next year that she met her boss and husband-to-be. According to folklore, Deng spilt a glass of red wine over Murdoch. An alternative version events, however, has it that Deng was assigned as Murdoch's interpreter for a trip to Shanghai. Another is that Deng used her old trick of bursting into his office unannounced with an irresistible business plan. By early 1998, their affair was an open secret within the office. Murdoch himself told Vanity Fair in October 1999 that the relationship began after he took Deng to dinner while she was visiting London the previous year. That was shortly after he had split with his second wife, Anna Maria Torv, whom he had married in 1967. Just 17 days after their divorce came through in June 1999, Murdoch married Deng on his luxury 48-metre yacht in New York. Deng gave up her post at Star TV shortly after the wedding - Murdoch jested later in the year that her new job was "as a home decorator" - but nobody was expecting Deng to retire to the kitchen baking cakes. Rumours quickly surfaced about the boss' wife's growing influence behind the scenes at News Corporation. There was also talk of power wrangles with Murdoch's two sons and two daughters from his previous marriages. The youngest son, James, sat giving evidence beside his father at last week's parliamentary hearing but was noticeably slower to go to the aid his father than his stepmother, just four years his senior. The family picture became even more muddled when Deng's own daughters came along, Grace in 2001 and Chloe in 2003. The girls are said to accrue stock dividends from the family's stake in News Corporation, but unlike their elder siblings have no voting rights as yet. Not everything Wendi Deng touches has taken on the Midas effect. Three years ago, Murdoch appointed his wife chief China strategist for MySpace, the social networking site News Corp bought in 2005 for US$580 million, her first formal post in the company since leaving Star TV. The company was already past its prime by the time Deng came on board, but she was paid a reported US$300,000 to oversee its continued decline, including an estimated US$35 million to US$45 million in investments in China that generated few returns. News Corp sold the site to Specific Media and Justin Timberlake - reportedly for just US$35 million, or slightly less than that ill-fated mainland investment. Friends of the couple have said Murdoch, for all his reputation as the fearsome corporate tyrant, treats Deng as an equal in the marriage, rather than a trophy wife. Reputedly a vegan, Deng keeps a tight rein on ageing Murdoch's diet and exercise regime. If her advice is as good as her Kill Bill fly-swatting technique, the mogul may be around some time yet - his own mother, Elisabeth Murdoch, is still running committees and chairing charity meetings at the ripe old age of 102.

A huge container vessel has departed on its maiden voyage from a port in Jiangsu province. The SCL Mercury is a 14,100 TEU (twenty-foot equivalent unit) container vessel, with a length of 366 meters, width of 51.2 meters, and deadweight of 155,470 tons. China Shipping (Group) Company, the ship's owner, has eight 141,000 TEU vessels in use or under construction. The SCL Mercury leaves on its maiden voyage from Lianyungang Port, Jiangsu province, on July 21, 2011.

North Korea’s system for accepting foreign investment appears to be modeled after China’s, a group of Americans who are exploring long-term economic development there has determined. Choson Exchange, which has previously concentrated on academic avenues into North Korea, this week published a report on the legal framework North Korea has developed for accepting foreign direct investment. It resembles China’s structure to a large degree, including requiring that outsiders work with a local business to make an investment and are subject to review by a special commission and potentially other government bodies. The 14-page report is based chiefly on research from a recent trip to Pyongyang. There, they listened to government officials explain the structure they’ve set up and the places they’d most like to see be developed by foreign investors.

Hong Kong*:  July 26 2011  Share

No time for marriage blues as Nicholas Tse displays cheerful stoicism - Camera batteries must have died out quickly at the ORIS event in the W hotel on last Thursday, at which heartthrob Nicholas Tse Ting-fung was the official ambassador for the Swiss mechanical watchmaker. Ulrich Herzog, the Switzerland-based executive chairman of ORIS, was present through a three-minute video conference call. He also shared the behind-the-scenes footage of the promotional campaign Tse starred in. The event really livened up when Tse saved himself the trouble of walking the stairs by jumping onto the stage to take the floor. Seemingly unaffected by his unravelling marriage, Tse was in good spirits and posed for the cameras while highlighting the ORIS wristwatch he wore. The press conference was pushed to a new high after ORIS presented two watches as gifts to its ambassador and Tse's father Patrick Tse Yin. Tse, who preferred the diving series among the four subsections of the wristwatch brand, chose to represent ORIS because he felt comfortable with its slogan "real watches for real people". "It also coincides with my personal philosophy," he said. Although he does not have a habit of collecting watches, he said: "Men all love hi-tech mechanics." Asked about the reason for his insistence on not using stand-ins in filming, he said he would not use them as long as he could perform the stunts himself. He also said his hardworking ethic was part of his nature.

A new teaching hospital in Shenzhen will create an "overwhelming demand" from both mainland and Hong Kong patients. Leong Che-hung, council chairman of the University of Hong Kong, was speaking about the new 2,000-bed University of Hong Kong Shenzhen Hospital, due to open by the end of this year. It will charge a fixed price of 500 yuan (HK$602) per day for patients on the public health-care scheme, covering everything including the cost of the bed, medicine, doctors' fees and operations. Leung is confident it will also attract many private patients looking for high-quality services, including senior mainland officials. The hospital is being built and funded by the Shenzhen government and it will be HKU's second teaching hospital after Queen Mary Hospital in Pok Fu Lam. The project is supported by the Ministry of Health and is seen as a groundbreaking move that will be at the forefront of the mainland's health care reform. HKU is in the final stages of working out details of the collaboration with the Shenzhen authorities. Talks will be held on the governance of the hospital, its financing and the appointment of senior management. Leong said the hospital would be governed by a board that will include members from both the university and Shenzhen hospitals. HKU has the authority to appoint the hospital chief and senior managers, including department heads. About 60 per cent of beds will be set aside for the public, with the rest for private patients. The hospital will focus on five areas for which HKU Medical School is traditionally renowned - organ transplants, spinal and joint surgery, assisted human reproduction, cardiology and oncology. It plans to hire more than 100 doctors, some of them from the mainland. HKU will also send senior doctors to the hospital in a teaching capacity. Leong said: "The HKU will not invest any money into this project, and will not take any profit. "Our role is to provide professional services and the management of the hospital." He said he understood concerns that the project may compromise Hong Kong public services by diverting medical expertise to Shenzhen. But he added: "While the Shenzhen hospital buys our services, we can use that money to hire more doctors in Hong Kong. "This will not affect our services in Hong Kong. Our senior doctors will be teaching in Shenzhen. They can teach our HKU students there." As the HKU has no hospital management experience, retired senior executives from the Hospital Authority in Hong Kong will help run the Shenzhen hospital. The hospital is expected to break even in five years. Leong admitted that the project is not being launched "at the best time", as Hong Kong is struggling with a severe shortage of doctors. But he said the plan would benefit local students in the long run and it would allow the university tap into the mainland's research resources. HKU vice-chancellor Tsui Lap-chee earlier said the Shenzhen hospital would be "run in a HKU way". The university promises to introduce clinical audits and other quality assurance plans for the Shenzhen branch. Leong said the hospital would pay doctors a fixed salary and would not allow them to receive bonuses from drugs sales - a common practice at mainland hospitals. Mainland doctors are normally on very low salaries and make money mainly from drugs sales or receiving bribes from patients. Leong pledged to impose a stringent audit system to weed out such practices. The president of the Hong Kong Medical Association, Dr Choi Kin, said some HKU doctors had expressed reluctance to join the project. He said: "Some worry about the continuity of care for mainland patients. If a Shenzhen hospital patient develops complications after an operation, the doctors worry that they may not be able to take care of the patient because they have to come back to Hong Kong."

Smaller mainland caps spur growth in HK IPOs - Proceeds from initial public offerings double in 2010 as firms tap international capital markets for cash but not all of the new floats perform as well as hoped - World Wide Touch Technology chairman Kelvin Wong (left), senior operations director Tony Tan (centre) and chief financial officer Victor Cheung at the firm's listing debut. Growth in initial public offerings in Hong Kong has exploded over the last few years, led by the capital-raising issues of the mainland's fast-growing smaller firms. According to financial data company Thomson Reuters, 68 small to mid-sized companies with market capitalisations of between US$500 million and US$10 billion were floated last year, double the 34 that went public in 2009. The proceeds from these IPOs also doubled the 2009 total, bringing in US$9.4 billion, compared with US$4.7 billion a year earlier. This means small- to mid-caps made up seven out of 10 Hong Kong IPOs last year, raising 18 per cent of the total US$52.1 billion in IPO proceeds. But, not of all these new floats delivered the strong results that investors had hoped for. Mainland truck-component manufacturer Changfeng Axle (China), which was listed in Hong Kong last year, is the latest newly listed firm to report a decline in profits, saying sales volumes slumped in the first-half due to weak demand. Notebook computers and cellphone touchpad maker World Wide Touch Technology, which also went public last year, is also expected to post a decline in earnings, amid a change in product mix, an increase in production costs, and the appreciation of the yuan. Getting a listing in Hong Kong helps smaller mainland firms tap international capital markets for cash, albeit at a high cost. Hong Kong banks rarely lend to non-state-owned companies with short track records, leaving cash-strapped mainland firms to seek debt investors who often ask for much more than the interest that banks charge. "They [Chinese banks] need to learn to lend to the private sector better," Francis Cheung, head of China-Hong Kong strategy for brokerage CLSA, said. Notwithstanding their disappointing financial performances, mainland small- to mid-caps have also been under the spotlight of late over corporate governance concerns. Investors are also wary of small companies, which are often not covered by analysts and advised by second-tier securities firms. What's more, Hong Kong-listed mainland small firms are valued at 20 times forecast earnings, twice the valuations placed by investors on their counterparts in other Asian markets such as South Korea. Together with high valuations, small firms' poor records in cash flow management have failed to make an impression on equity investors. Linda Csellak, head of Asia-Pacific equities at Manulife Asset Management, said the fund manager recently invested in South Korea small cap IPOs, which were priced at a discount compared with Hong Kong IPOs. How companies managed their cash flow was a key to filtering out the weakest links, she said. "When you see these companies coming into the market in choppy waters, it's a warning sign," Csellak said. So far this year, 19 small- and mid-caps have floated, according to Thomson Reuters, although a number of floats were pulled last month.

US Secretary of State Hillary Clinton flew in for a whirlwind visit last night and will meet Chief Executive Donald Tsang Yam-kuen, a handful of legislators and give a luncheon talk at the American Chamber of Commerce before heading to Shenzhen this afternoon. Most of her meetings are closed-door affairs and details have not been announced for security reasons. But it is believed she will meet Democratic Party leader Albert Ho Chun-yan, Democratic Alliance for the Betterment and Progress of Hong Kong vice chairwoman Starry Lee Wai-king, the Civic Party's Audrey Eu Yuet-mee and the Liberal Party's Tommy Cheung Yu-yan, among others. At the chamber lunch, which is by invitation only and for which participants will be screened, Clinton will deliver a talk underscoring US economic leadership in the Asia-Pacific region. After the lunch, she will go to Shenzhen, where she will meet state councillor Dai Bingguo. Hong Kong is the fourth destination on Clinton's 12-day Asian tour. It will be her first trip to Hong Kong since 1998 when she accompanied her husband, then President Bill Clinton, for a stopover during a tour of China. 

Hongkong and Shanghai Banking Corp has admitted a flaw has been found in the design of its new HK$100 bank note. The note has for its theme the flag-raising ceremony of the SAR Establishment Day. The image shows a band playing in front of the Golden Bauhinia Square, where the national flag and regional flag of Hong Kong are flying. The bauhinia symbol on the regional flag is reversed. HSBC, together with BOC HK (2388) and Standard Chartered Bank, revealed the latest designs of their HK$20, HK$50 and HK$100 bank notes on Friday. They are scheduled to be put into circulation between November and January 2012. "HSBC has immediately proceeded to redesign and reprint the faulty banknotes, with a view to putting them into circulation early next year as scheduled," the bank said in a joint statement with the Hong Kong Monetary Authority and the government's administration wing. This is to ensure that people can get these new notes before Chinese New Year for their red packets. HSBC was responsible for the design of the notes, while the HKMA reviewed the design before revealing it to the public. The administration wing also reviewed the banknotes for approval. "The three parties had not detected the issue," the statement said. "We sincerely apologize for the incident." Legislators slammed the bank and the HKMA for the mistake, which they termed as unacceptable. "It is a joke," said Wong Kwok-hing, lawmaker of the Hong Kong Federation of Trade Unions. "The notes, fortunately, have not yet been put into circulation." Civic Party lawmaker Ronny Tong Ka-wah said he is concerned about the way the HKMA handled the whole matter. "`The HKMA is supposed to take care of our money. Officials have to be extremely careful," he said. "The incident showed how careless it has been." HSBC will bear all relevant costs for revising the design, remaking the plates and printing the new notes. The lender is the most prolific banknote issuer, with its notes representing more than 60 percent of those in circulation. The cost of producing each new note is about 60 HK cents.

Hong Kong's Consumer Price Index (CPI) in June climbed to 5.6 percent from a year ago, higher than the 5.2 percent rise in May, mainly due to the enlarged increases in private housing rentals, as well as the charges for household services and the prices of pork, the city's statistics department said here on Thursday.

Physicists at the Hong Kong University of Science and Technology have proved Albert Einstein's theory that nothing travels faster than light is correct - showing that time travel is only possible in science fiction. Research team leader Du Shengwang, 36, assistant professor of physics, said his study should "close a decade-long debate about the speed of a single photon (a unit of light)". Einstein famously stated in his special theory of relativity that nothing, under any circumstances, can travel faster than light, since according to his theory of relativity, faster-than-light would literally mean going back in time, and anything that attempts this type of travel would have negative mass. Yet the travelling speed of photons has been a subject of debate for scientists and science-fiction writers for years. Du's team of six, including postgraduate students Shanchao Zhang, Jiefei Chen and Chang Liu, and fellow professors Michael Loy and George Wong, showed that a single photon cannot travel faster than the speed of light in a vacuum. Their study, which took three years, was published last month in Physical Review Letters, one of the most prestigious journals in physics, with the title, "Single photons obey the speed limits". Du said he hoped to change how people think. "The results add to our understanding of how a single photon moves. They also confirm the limit on how fast information travels with light," he said. "By showing that single photons cannot travel faster than the speed of light, our results bring a closure to the debate on the true speed of information carried by a single photon." The prospect of possibly being able to travel back in time excited the world when 10 years ago scientists found superluminal - or faster-than-light - movements of optical pulses in some specific medium. It was later found to be a visual effect, but the physicists began a debate about the single photon's speed limit. Believing Einstein was right, Du decided to measure the ultimate speed of a single photon with controllable waveforms. In the experiment, the team separated the optical precursor, which is the wave-like propagation at the front of an optical pulse, from the rest of the photon wave packet. They did it by generating a pair of photons, and then passed one of them through a group of laser-cooled rubidium atoms with an effect called electromagnetically induced transparency. For the first time, they successfully observed optical precursors of a single photon. Du said the findings could help scientists get a clearer picture of how to transmit quantum information, for instance in cryptography, "so they can only use the fastest method". Loy said: "We have made it very difficult for others to doubt if there's anything which travels faster than single photons. The results were shown very cleanly and clearly." He added: "Some people may still have doubts, but the majority of them will see this as an answer." University of Hong Kong associate professor of physics Chau Hoi-fung applauded the researchers' efforts in developing the experimental technique. "The highlight of the experiment, I think, is how they went about doing it instead of the result, because it was very difficult to do," he said. He said the question of whether anything could travel faster than light was not in itself important to scientists. They knew the answer was that nothing could. The difficulty was in proving it. Chau said scientists "must question what people think of as fundamentals" from time to time. For instance, scientists might ask whether the result will hold true under changing environments, he said. "There are still people who question if 1+1=2, and we need those people," said Chau. "We never know what results they will get in the end. But of course, the question this study asked is not as fundamental as that." Although Einstein's theory of special relativity was produced in 1905, Chau said scientists would be proving or challenging his ideas for some time yet. "As we know more about the world and do experiments better, we should question what we already know. It's a long process," he said.

Hong Kong's solicitors yesterday launched an a website offering free legal advice to people in need. More than 90 law firms have signed up to offer services on the Law Society's new web page, Visitors to the site can consult a list of firms specialising in the areas in which they need advice, and contact them by phone to arrange up to 45 minutes of free legal consultation. Users who leave their leave their contact information could expect return calls within one or two days, the society said. "A person may need to consult a lawyer on how to claim compensation if water has dripped from a residential unit above his home, or when if he is injured at work," said Melissa Pang, a Law Society council member. Pang said the site would "serve as link between service providers and prospective users". The service was open to all, she added. While the primary aim was to assist the underprivileged, the Law Society, which is the professional body representing Hong Kong solicitors, said it would not set any eligibility requirements on those seeking help as it was not feasible to screen people over the phone. "According to government statistics, in 2008 about 37 per cent of solicitors participated in pro bono services," Law Society vice-president Dieter Yih Lai-tak said. "Through organised pro bono service projects, we hope to let our members better understand the needs of grass-roots residents and give them suitable legal support. "We would also like the public to know that Hong Kong lawyers are dedicated to serving the community outside work." The society yesterday staged a roving exhibition on its free services at Olympian City, Kowloon. It will be at Youth Square, Wan Chai, from tomorrow until August 12.

Construction of private housing accelerated in the second quarter as the government came under pressure to release more land for residential development. Analysts said completions of private-sector flats would rise gradually over the next few years as the government moved to cap fast-rising prices by providing more land. Sound economic growth, inflation and a low-interest-rate environment were unlikely to lead to a big drop in housing prices, they said. "A big correction is unlikely unless there is a sudden deterioration in the external economic environment and unexpected housing measures from the government," Knight Frank's Thomas Lam Ho-man said. According to Transport and Housing Bureau data, construction started on 4,700 homes in the second quarter, bringing the first-half total to 7,500. "For a six-month period, this is the highest number since the second half of 2007," Centaline's Wong Leung-sing said. A rise in construction starts should mean more flats coming onto the market in two to three years' time. Benedict Ma, from CB Richard Ellis, said that given the pace of construction, building starts this year would likely surpass the 13,400 units begun in 2010. "We are looking at the potential future residential supply pipeline and foresee potentially noticeable increases in new completions from 2014-2015, based on government residential land sales and MTR-related developments in the New Territories," Ma said. Government statistics show the number of flats completed in the second quarter dropped to 1,200, from 3,300 in the first quarter. That brought total completions to 4,500 for the first half of the year. Centaline's Wong said more projects would be finished in the second half of the year, meaning around 10,700 homes would be completed this year. The projects to be completed in the second half include the second phases of Festival City in Tai Wai and the Lohas Park development in Tseung Kwan O. The projected figure is below the 13,400 homes completed in 2010, but is sharply higher than the 8,800 homes completed in 2008 and the 7,200 completed in 2009. Midland Realty chief analyst Buggle Lau Ka-fai said the government's steps to stabilise the market by increasing land supply had started to have an impact on the market. Last month, the government announced a plan to release eight sites for sale over three months. They include the site of a former government supplies depot site in Oil Street, North Point, and the West Rail property development project at Nam Cheong Station. Lam of Knight Frank estimates annual demand for homes is around 19,000. Despite a potential increase in new supply, Lau of Midland Realty said economic growth and low interest rates would continue to support home prices. But there were uncertainties. The market might take a blow if global economic conditions deteriorated or if Chief Executive Donald Tsang Yam-kuen announced tougher measures against speculation, analysts said.

 China*:  July 26 2011  Share

The death toll in the mainland's first bullet train collision rose to 35 yesterday, with a further 192 injured, as the central government sacked three senior railway officials and ordered an "urgent overhaul" of national rail safety to assuage public anger. The worst accident to hit the country's high-speed network since its 2007 launch also raised doubts over the safety of the rapidly growing rail network. Authorities suspended 58 trains yesterday and halted high-speed connections between Shanghai and Wenzhou in Zhejiang province for five days after the D-class bullet train rammed into a stationary train on the same line on Saturday night, derailing six carriages and sending four tumbling off a bridge. Among 35 people killed in Saturday's accident were two foreigners, whose nationalities had not yet been established. Xinhua later said that eight more bodies were found yesterday in damaged train cars, although it was unclear if some of those eight were included in the toll of 35. The disaster claimed its first political casualties yesterday, with state media reporting that three top officials at Shanghai Railway Bureau - the operator of one of the two trains involved in the crash - had been stripped of their posts on the spot. Xinhua reported that Long Jing, director of the Shanghai bureau, Li Jia, the bureau's Communist Party committee secretary, and Long's deputy He Shengli had all been fired. The dismissals came with the cause of the crash still unclear and official attempts to blame the weather were met with scepticism. The accident occurred when the southbound D301, travelling between Beijing and Fuzhou , Fujian province , collided with the rear of the D3115 Hangzhou-to-Fuzhou train on the outskirts of Wenzhou at 8.24pm on Saturday. Together, the trains were carrying 1,630 passengers. Rail ministry spokesman Wang Yongping said an initial investigation blamed "equipment failure caused by lightning strike". However, in a chaotic press conference, Wang, facing heated questions from emotional journalists, avoided giving direct answers. Much of the wreckage had been cleared from the site by yesterday afternoon. Vice Premier Zhang Dejiang was at the scene to help out in the relief work and investigation, Xinhua added. President Hu Jintao and Premier Wen Jiabao also called for all-out efforts to rescue passengers. Hours after the accident, the central government launched an "urgent overhaul" of rail safety, which has been the subject of concern before the collision. Zhou Yimin, a retired deputy chief engineer and head of the railway ministry's science and technology department, warned in June of exaggerating the technical capabilities of Chinese-built trains. The collision comes in a month in which the newly introduced Beijing-Shanghai high-speed link has been dogged by extensive stoppages, one of which was similarly blamed on lightning strikes. Witnesses at the scene confirmed there had been a heavy lightning storm shortly ahead of the crash, and it had cut the electricity supply to the cluster of houses directly beneath the rail bridge. "It was really scary," said Yi Wei, a local resident. "The lightning came straight down directly on to the rail bridge. I looked up a moment later and saw a train was stopped there with all its lights off. A few moments later there was a great noise followed by a bang and I saw another train go up in the air and carriages coming tumbling down from the bridge. I have never seen anything like it."

The Zhejiang train crash could put railway builders under pressure, while some airlines may benefit as travelers choose to fly instead. China Railway Group (0390) and China South Locomotive and Rolling Stock Corp (1766) - whose subsidiaries were involved in the construction of the rail line involved - will face sell-off pressure in the longer term, analysts said. China Railway Construction Corp (1186) and Zhuzhou CSR Times Electric (3898) may also feel a knock-on effect. The four railway firms have already fallen 10 to 43 percent since February, when former railway minister Liu Zhijun was arrested over corruption charges. "Revenue will plunge sharply when over 50 rail lines are temporarily stopped [as a result of the crash]. Even without any interruptions, travelers would be concerned about the safety of railways," Champlus Asset Management director Ricky Tam Siu-hing said. Tam noted that Beijing may restructure the sector in the aftermath of the accident as well as previous reports of shoddy management and corruption. "It could help bring the industry to positive territory after matters settle," he said. KGI Asia chief operating officer Ben Kwong Man-bun, however, said Beijing announced plans to cut investments inhigh-speed railways even before Saturday's tragic accident, triggering mounting cash flow pressure on related firms. China CREC Railway Electrification Bureau, a unit of China Railway Group, built the power system for the ill-fated rail line, while two other units of the group laid the tracks. The two trains were built by CSR Qingdao Sifang Locomotive, a unit of China South Locomotive. Meanwhile, Tam noted that China Eastern Airlines (0670) - with its heavy focus on the domestic sector - will benefit as travelers choose to fly as an immediate fallout of the train crash. But carriers like Air China (0753) and China Southern Airlines (1055) will not be able to enjoy the same advantage due to their international focus. Tam expects the Hang Seng Index to find solid support at 22,000 before seeing an upside again. "The sentiment has turned better this month, as many fund houses are switching to long positions for local stocks," he said. Fulbright Securities research director Kingston Lin King-ham said corporate earnings reports starting next month may help buoy the bourse again.

Nokia is not just losing mobile-phone market share to iPhone maker Apple, but is also seeing its dominance in China being eroded as prices sink. The Finnish company's second-quarter handset shipments in China fell to 11.3 million, less than half the previous quarter's number and 41 per cent less than a year earlier. That, combined with a 30 per cent drop in European sales, contributed to a heavier-than-estimated 20 per cent slump in its handset sales around the world. Michael Schroeder, a Helsinki-based analyst with FIM Bank, said Nokia was racing to meet its year-end target of releasing its first phone based on Microsoft Windows Phone software. The company also needed to halt the decline in China, as models based on Google's Android software have fallen below €100 (HK$1,100) and have started cutting into Nokia's lower-end feature-phone sales. "They've been a clear market leader for many years, but now it seems that era is coming to an end," Schroeder said. Nokia chief executive Stephen Elop said yesterday that he had taken steps to address the build-up of inventory at mainland resellers that helped trigger a profit warning in May. He also replaced managers in China and has named the company's global sales chief Colin Giles as the interim head. Nokia's market share in China was 19.1 per cent in the first quarter, compared with 23.5 per cent a year earlier, Gartner estimated. Operators such as China Mobile (SEHK: 0941) and China Telecom (SEHK: 0728) were playing a bigger role and Nokia needed to "worry about market share", " Elop said. Nokia yesterday reported a wider-than-expected net loss of €368 million, its second quarterly loss in two years.

China Resources Enterprise (SEHK: 0291) has bought a beer brewery in Henan in its latest move to grab a larger slice of the competitive drinks market. The red-chip company, which runs supermarket chains CR Vanguard and Suguo and brews Snow beer, said yesterday it had taken over Henan Shangqiu Lanpai Beer, one of the largest breweries in the province, for an undisclosed price. This is the group's third acquisition in Henan in 15 months. China Resources Snow Breweries (China) general manager Wang Qun said the deal would immediately bolster its exposure in the mainland's central region. China Resources Enterprise chief financial officer Frank Lai Ni-hium said two months ago that mergers and acquisitions - using net cash of about HK$3 billion - would be key to the company's development strategy in the rest of this year. The group would also start building new brewery facilities at Shangqiu, a railway and road transport hub, Wang said. Henan Shangqiu Lanpai Beer is one of the largest breweries in Henan, with an existing capacity of 150,000 kilolitres, and commands 60 per cent of the beer market in Shangqiu and outlying cities. China Resources said a capacity of 200,000 kilolitres would be added to bring the total to 1 million kilolitres. The Shangqiu Lanpai deal followed two other acquisitions in Henan: Aoke Beer, the province's second-largest brewery with three factories in Zhengzhou, Luohe and Anyang, in January; and Yu Quan Beer in Zhumadian in April last year. In the east, China Resources spent 870 million yuan (about HK$1 billion) last week for a 49 per cent stake in Jiangsu Daifuhao Breweries, which sells BBoss beer, and 100 per cent of Shanghai Asia Pacific Brewery, which sells REEB beer. The deals aim at strengthening China Resources' position in the eastern coastal market. The company said it had cornered 21 per cent of the mainland beer market. Some analysts said acquisitions were necessary because the market was competitive and faced soaring costs from rising wages and barley prices. They said beer retailers found it difficult to raise marked prices, which the National Development and Reform Commission has discouraged due to fears of inflation. China Resources shares gained 35 HK cents, or 1 per cent, to HK$34 yesterday.

Robots perform dance moves at the 13th National Robotics Championship in Hailin, Northeast China's Heilongjiang province, July 24, 2011. Up to 50 teams from the country's colleges participate in the three-day competition which challenges students' creativity.

Hong Kong*:  July 25 2011  Share

Competition Takes Off in Asia's Budget-Airline Market - Competition in Asia's budget-airline market is heating up as rival carriers raise more money and launch services to take on Malaysia's AirAsia Bhd., the undisputed heavyweight of low-cost flying in the region. A decade ago, AirAsia was the upstart, bringing the no-frills airline model to Asia after it succeeded in Europe and the U.S. Although some doubted it would work in Asia, where many residents don't earn enough to fly, AirAsia took off. Now Asia's other carriers are fighting back more aggressively. Airlines such as the Philippines' Cebu Pacific have raised hundreds of millions of dollars over the past year to expand their fleets, while several of Asia's biggest flagship carriers have announced plans to start low-cost carriers in recent months. Singapore Airlines Ltd., Thai Airways International PCL and Japan's All Nippon Airways Co. have all unveiled intentions to back new budget carriers recently. Last week, the low-cost Jetstar Airways unit of Australia's Qantas Airways Ltd. said it will spend $500 million on its Singapore operations by buying seven additional aircraft by year's end and will add 40 weekly flights by then. Analysts aren't convinced all the efforts will be successful in a crowded market. Still, the success of AirAsia and Asia's other big low-cost carriers has proven that the budget-airline model can earn money in Asia. This has given AirAsia's rivals more confidence and fueled an aggressive push by the best-funded among them to grab as much of the Asian-Pacific region as they can. "The demand for air travel will grow further," said Rusdi Kirana, president director of Lion Air, Indonesia's largest airline, which is waiting for delivery of 134 new aircraft. Although new carriers will emerge, "we believe that with our strong presence we will be able to face the competition as we have in our 10 years of operation," he said. The battle for frequent frugal fliers in Asia—home to more than four billion people and the world's fastest-growing economies—is expected to keep rates low and traffic growth high in the region and possibly decide the leading global airlines of the future. In the five years to 2014, the number of people flying in Asia will rise by 360 million to one billion, according to International Air Transport Association estimates. While many details of the new budget carriers are still unclear, ANA-backed Peach Aviation is expected to start flights by March 2012, with fares on short-haul international routes targeted at 50% below current prices. Singapore Airlines' new budget airline is expected to handle medium- and long-haul routes starting sometime over the next year, while Thai Airways is expected to start its low-cost carrier by the second quarter of 2012. AirAsia says it believes the market is big enough for a few large competitors—but it intends to fight hard to remain on top. "We opened up a huge lake of demand in Asia. People wanted to travel but couldn't afford it," said AirAsia founder Tony Fernandes. "We estimate that we could have up to 500 planes." The no-frills-flight model was first attempted in a big way in Asia by AirAsia. Back when it first took off as a budget carrier a decade ago, it had to struggle with regulators who were suspicious of a newcomer and hoping to protect their state-run flagship carriers. Using publicity, politics and a bit of pushiness, Mr. Fernandes has now become a big dog of the Asian skies. AirAsia now has a fleet of 100 planes and earlier this month placed orders for an additional 300.

Long-distance love blossoms into a back-garden proposal - Despite their often long-distance relationship, same-school couple finally marry in Toronto and then celebrate with friends and family in HK - Stephanie Kwan and her husband Ricky Chan have known each other since high school. Back then, he was a popular lad who just loved his Toyota Supra, and she was the shrinking violet. "I always used to think that he was too loud for me, and that we couldn't be a match," Stephanie said. On May 21, 12 years later, Stephanie, 26, a teacher turned freelance writer, and engineer Ricky, 28, tied the knot at Richmond Hill Christian Community Church in Toronto, where they first met. Almost 500 guests attended the ceremony. Another banquet was held at Hong Kong's InterContinental hotel in Tsim Sha Tsui on June 11 to celebrate with about 200 friends and relatives. Stephanie, a Toronto native, met Hong Kong-born Ricky at the church in 1999, but they never really talked until they went to the same university. "I noticed that he'd changed." she said. "He was more down to earth and mature. So we started going out as friends." Their first date was far from magical; Ricky took her to a car show. "I'm probably the last person you'd expect to see at a car show, but Ricky loves cars. So we went to the show to look at cars that I knew nothing about," she said. Love blossomed on their second date, when they shared banana and chocolate crepes at a dessert shop. "He always makes fun of me about that date because he did all the talking and I was so shy that I barely said anything," Stephanie said. "I think he brings out the wilder and more outgoing side of me, and we balance each other in that way." Although they started dating in 2004, they have spent half of their time as a couple living in different cities. While Stephanie was at college in Kingston, Ontario, Ricky was an intern in the provincial capital, Toronto. Ricky returned to Hong Kong after graduating in 2006, and when Stephanie finally moved to the city a year later, he had made plans to work in Beijing. Ricky had decided to quit his engineering job to teach English to mainland athletes for the Beijing Olympics. But Stephanie was soon to realise how much they meant to each other. "At first I was like, I've just moved here from afar and you're going away again!" she said. "But he checked with me first and said he wouldn't go if I wanted him to stay. "I realised we were both very important to each other. And out of love, I had to let him go." Last October, not long after Ricky returned from Beijing, he prepared a surprise proposal for Stephanie while she was back in Toronto. He had planned to to visit, and sent Stephanie a fake itinerary. He arrived a day earlier than she expected and asked her parents for permission to marry her. He also asked Stephanie's friends to take her out for lunch while he prepared his proposal at her parents' home. When Stephanie got home, Ricky had set up seven poster boards in the house featuring photos of them from their seven years. He led her to the back garden to propose. "He knew my favourite place in the world was the backyard garden of my parents' house," she said. Her friends and relatives were waiting upstairs. When she finally said "yes", they came down to the garden and each gave her a rose. "He's my first and only love, and there was no reason to think twice. He's the one person in the world who can always make me laugh, a lot. We share the same values and he's so caring."

Gold and silver prices are tipped by analysts for another bull run as investors seek a safe haven amid global economic uncertainties. Catherine Raw, director and portfolio manager of BlackRock Natural Resources, said the fear factor in the market continued to prompt nervous investors to invest in gold. "If you are looking at the financial system, it's in disarray," Raw said. "If you are looking at the governments, they are running around like headless chickens trying to work out what to do. "When you have complete lack of faith in the financial system, what would you do? Buy gold. It is the last resort. It is the last safe haven you know that even the government can't manipulate." She said central banks, including the People's Bank of China, were buying gold to diversify their foreign reserve portfolio as the US dollar weakened. Gold equities, which have been lagging the growth in gold price, are also widely expected to catch up as investor risk appetite adapts to changing market conditions. Spot gold reached US$1,610.70 per troy ounce on July 19, the highest this year. Richard Leung, resources analyst with brokerage firm CLSA, predicted gold would at least reach US$1,800 an ounce in the next 12 months as a result of currency devaluation. The European debt crisis, along with a weak US economy, would continue to drive gold prices up, Leung said. Silver is also expected to gain. Spot silver has dropped to below US$40 per ounce in the last two months since reaching its historic high of US$49.79 on April 25. Making a debut on the Hong Kong Mercantile Exchange yesterday, silver futures reached 1,138 lots yesterday. Silver futures for September delivery were traded at US$39.25 per ounce in the HKMex. Fung Chi-kin, a former banker and legislator who now runs his own financial consulting firm, said silver was an attractive alternative to gold, considering the lower cost and growth possibilities. He said he was upbeat on precious metal prices because of a weakening US dollar and the debt crisis.

An alliance of 48 trade associations and a group of small and medium-sized enterprises has called on the government to scrap a proposed competition law, which they say is ambiguous. Benny Kong Bing-to, spokesman for the Joint Committee of Business Federations and Chambers of Commerce, said: "The two conduct rules in the draft bill are unclear, and legislators are turning their responsibilities over to a competition commission, which we hardly know anything about." The government said that the bill had to have flexibility to allow it to deal with different cases. "Such an approach allows the competition authorities to enforce the law having regard to the facts of each case, the dynamic changes in market circumstances and the relevant case law in overseas jurisdictions," said a spokesman for the Commerce and Economic Development Bureau. "Given the variety of commercial practices in different shapes and forms, it would be difficult to provide for all scenarios and every detail in the law on what is prohibited and what is not." Steven Kwok Chun-pong, president of the Hong Kong Small and Medium Enterprises Association, echoed criticisms that the bill was too vague. He said: "What is the definition of `market'? What extent of the market share should my company hold before being exposed to the risk of prosecution?" The draft bill contains two legally non-binding conduct rules, which cover concerted practices and abuse of market power. A competition commission to be set up would be responsible for drafting detailed guidelines and defining key terms and illegal conduct. The criticisms were rejected by Civic Party lawmaker Ronny Tong Ka-wah. "The government has done two consultations on the bill and [taken] years to publish a report," he said. "There are a lot of laws in Hong Kong that are passed in principle. It is impossible to list every single detail before passing it. The race discrimination bill was passed before the specifics were ironed out," said Tong. Kong's committee also accused pan-democrats of double standards over legislation. "Why did the pan-democrats oppose the by-election ban proposal but are supporting the competition bill when it's similarly being pushed through quickly? Are their industry's interests at stake?" Kong, who has 20 years of legal experience, says the passing of the bill would bring good business for lawyers. Tong said that the proposed laws are no different to those that already operate in 120 countries.

New notes pay tribute to heritage and hopes - Hong Kong's three note-issuing banks present fresh designs inspired by the city's traditions and future - A Bank of China employee shows some of the new banknotes that will be in circulation from November. The city's three note-issuing banks have each designed new sets. Technology, festivals and green power all have one thing in common: they are part of the new designs of HK$20, HK$50 and HK$100 notes released by the Hong Kong Monetary Association yesterday. While keeping some traditional and "signature" elements, Hong Kong's three note-issuing banks drew on various aspects of the city for inspiration for the new incarnations of the banknotes. The HK$500 and HK$1,000 notes were unveiled in December and are already in circulation. This new batch of banknotes will be released in November. "These [banknotes] are used in day-to-day transactions and are deeply entrenched in life in Hong Kong. We want the designs to reflect the city's budding evolution," HKMA chief executive Norman Chan Tak-lam said. Standard Chartered Bank (Hong Kong) chief executive Benjamin Hung Pi-cheng said: "We hope the banknotes reflect Hong Kong's heritage and history, but also [the city's] commitment to be at the forefront of innovation." Standard Chartered blended heritage with cutting-edge technology in its design - the HK$100 note features a Sung dynasty seal but has an electronic circuit board in the background; the HK$50 note has a traditional combination lock with a modern bank vault; the HK$20 note has an old abacus and a binary-system pattern. All the notes have traditional Chinese mythical creatures on the reverse. Jennings Ku, who leads the design team for HSBC (SEHK: 0005, announcements, news) 's new banknotes, said the theme of local festivals - the Hong Kong Special Administrative Region Establishment Day on the HK$100 bill, the Lunar New Year festival on the HK$50 note and the Mid-Autumn Festival on the HK$20 note - was chosen to represent the vibrant local culture of Hong Kong. The set took more than four years of work for the team in Hong Kong and Britain. Notes issued by the Bank of China have images of city scenic spots. "We love all the beautiful and unique scenic spots of this city, and we hope that together, we will work towards a greener future to preserve these beautiful spots for years to come," bank chief He Guangbei said. Lion Rock is on the bank's HK$100 note, with Tung Ping Chau and Repulse Bay embellishing the HK$50 and HK$20 bills respectively. "Banknotes are redesigned and reissued every few years because we have to keep on top of counterfeiters. These notes will probably last for another seven years," Standard Chartered's Julian Fong Loong-choon said. An exhibition on the new banknotes will start on Wednesday at the IFC mall in Central.

China CNR Corporation Limited said its subsidiary had signed a deal worth HK$1.401 billion ($180 million) to sell subway trains to Hong Kong's MTR Corporation. Changchun Railway Vehicles Co Ltd under the China CNR, a major Chinese manufacturer of locomotives, will deliver the trains to MTR from this month to June 2015, the group said in a statement to the Shanghai Stock Exchange Friday night. The statement did not say how many trains are included in the contract.

Director Peter Chan (R), actors Jimmy Wang Yu (2nd R), Donnie Yen (C), Takeshi Kaneshiro (3rd L), Tang Wei (2nd L) and a production member arrive for a news conference for the film "Wu Xia" in Taipei July 21, 2011.

 China*:  July 25 2011  Share

Shanghai has started to feel the pinch of slowing infrastructure construction following the 2010 World Expo, threatening the city's role as the mainland's growth engine. Fixed-asset investment between January and June was 197.6 billion yuan (HK$238.76 billion), a drop of 5.8 per cent from a year earlier. This is the first time since 1999 the city has reported a decline in fixed-asset investment, according to Cai Xuchu, chief economist of the Shanghai Statistics Bureau. "The decline was a result of a capital crunch after the World Expo," Cai said yesterday. "A drop in investments does have a negative impact on the economy." The city government spent US$95 billion on infrastructure, including the metro rail network, in the two years before the six-month World Expo, according to real estate firm Jones Lang LaSalle. Analysts said the scale and pace of infrastructure construction, a major component of fixed-asset investment, in Shanghai in the run-up to the expo was unprecedented. Fixed-asset investment, along with exports and consumption, has long been the major driving force for the mainland economy. In the first half, Shanghai's investment in infrastructure projects declined 31.3 per cent from a year ago to 46.7 billion yuan. Cai said the slowdown could last up to three years. Shanghai is grappling with difficulties in financing infrastructure construction. Shanghai Rainbow Investment Corp recently asked for an extension on its bank loans as it was unable to repay short-term loans of several hundred million yuan. Rainbow Investment is a government-backed financing vehicle responsible for raising funds and overseeing the construction of a transport hub in the city. The city's gross domestic product expanded by 8.4 per cent in the first six months, making it, according to Cai, one of the slowest-growing province-level regions in the country. The city's year-on-year GDP growth in the same period last year was 12.7 per cent. Shanghai's first-half GDP growth this year was 1.2 percentage points lower than the national figure. "Shanghai's status as the country's economic locomotive is history," said Xu Mingqi, a researcher at the Shanghai Academy of Social Sciences. "The city's efforts to shift focus from manufacturing to services means its economy will be growing at a slower pace for many years." Shanghai is striving to transform itself into a global financial and shipping centre. Since 2009, its economic growth has lagged domestic rivals amid a slowdown of the manufacturing sector. Last year, the city's GDP grew 9.9 per cent, compared with the national figure of 10.3 per cent. Export growth, however, remained on a fast track in the first half. Outbound shipments rose 17.6 per cent to US$98.2 billion. Retail sales topped 2.1 trillion yuan, up 19.9 per cent from a year earlier.

China and ASEAN 'can solve disputes - Foreign Minister Yang Jiechi speaks with US Secretary of State Hillary Clinton before a meeting on the Indonesian island of Bali on Friday. China and the Association of Southeast Asian Nations (ASEAN) have the ability and wisdom to settle the South China Sea disputes, Foreign Minister Yang Jiechi told US Secretary of State Hillary Clinton on Friday. Yang, speaking on the sidelines of the ASEAN Regional Forum to be held on Saturday on the Indonesian island of Bali, said the Chinese side is committed to maintaining freedom of navigation and security in the area. Clinton said the United States understands that the South China Sea issue is complex and the US side takes no position on the issue. She added that Washington supports measures conducive to the settlement of the disputes, and has no intention of getting involved or making it a problem in China-US relations. But Clinton was set to make a speech on Saturday to her Asian counterparts in which she would emphasize that the US had a "strategic stake" in the South China Sea. A US official traveling with Clinton said she would make a "very detailed statement" at the ASEAN forum about the importance of the South China Sea to US and global commerce. China and ASEAN countries recently reached agreement on the guidelines of implementing the Declaration on the Conduct of Parties in the South China Sea, which lays a foundation for cooperation in the area and demonstrates that China and ASEAN countries can solve the disputes on their own, Yang said. Yang and his ASEAN counterparts approved the guidelines on Thursday. The US recently conducted joint naval drills with the Philippines and Vietnam in the South China Sea, which China called "inappropriate". The Philippines, Malaysia, Brunei and Vietnam - all ASEAN members - have competing claims of sovereignty over some islands in the South China Sea, which have historically been Chinese territory. Washington also irritated Beijing by declaring it has a national interest at stake in ensuring freedom of navigation and trade. "The White House would never like to see China's dominance in the area, but it will not allow either the Philippines or Vietnam to misunderstand its intentions and get involved in any military actions," Niu Xinchun, a scholar on US studies at the China Institutes of Contemporary International Relations, told China Daily. "So the declaration of conduct is in the interests of both China and the US," Niu said. Washington's support of some countries does not mean the US supports them provoking China or even starting a war with China, but is aimed at the balance of power in the region, said Niu. "Since last year, Washington's high-profile engagement has actually affected Sino-US relations. But it is not in the interest of both countries to lock bilateral ties in a standstill. So we can see the Americans now have cooler heads to deal with the South China Sea issue," Yuan Peng, Niu's colleague, told China Daily. In their talks, Yang also focused on Sino-US cooperation on a range of issues including efforts to bring the Democratic People's Republic of Korea (DPRK) back into the Six-Party Talks on its nuclear program. The disarmament talks have been stalled since 2008, when the DPRK walked out to protest international criticism of a prohibited long-range rocket launch. They also reached consensus on cooperation in such areas as food security, urban search and rescue, and disaster relief. Clinton reiterated that the United States adheres to a one-China policy and respects China's sovereignty and territorial integrity. Clinton will fly on Sunday from Bali to Hong Kong and stop by the southern Chinese city of Shenzhen on Monday for a meeting with State Councilor Dai Bingguo. She is due to give a speech in Hong Kong on Monday that will emphasize the US view of economic ties with China.

Hong Kong*:  July 24 2011  Share

The Hong Kong Exchanges and Clearing (0388) is seeking to merge with the London Stock Exchange, The Independent reported, citing market sources. The move would be in line with the vision of HKEx chief executive Charles Li Xiaojia, who earlier this year said the bourse operator would "consider international opportunities for alliances, partnerships and other relationships." The HKEx did not comment on the report. Market sources speculated China would support the HKEx in a possible bidding war against the Stock Exchange of Singapore or SGX for a merger with the LSE. Some traders said the HKEx would offer more than 1,500 pence per share - a 45.63 percent premium to Wednesday's close at 1,030 pence - the UK newspaper said. LSE chief executive Xavier Rolet said this week it is open to discussing any opportunity, especially if it opens doors to Asian markets. He did not comment on the speculation concerning the HKEx. "A merger will help lower the costs as well as improve the variety of products," Rolet said. Earlier this year, the LSE was forced to pull out of a deal with TMX - the parent group of Toronto Stock Exchange and Montreal Derivatives Exchange - as it failed to win enough support from shareholders of the Canadian firms. Talk has emerged in recent weeks that LSE's American rival, Nasdaq, is making its third attempt to merge with the UK bourse operator.

Despite sluggish market sentiment, Sun Hung Kai Properties (0016) has priced a Shau Kei Wan project even higher than its sister estate sold two months ago. The developer introduced 30 flats at i.UniQ Grand with average price tags of HK$14,398 per square foot, or from HK$5.81 million to HK$12.68 million. The one- to three-bedroom flats are sized between 420 and 850 square feet, with a usable rate of around 78 percent. The batch is expected to fetch HK$240 million, while the whole 79-flat project will likely generate HK$700 million. "The average price of all 79 flats at the project is expected to reach HK$14,500 psf," Sun Hung Kai Real Estate Agency project director Amy Teo said. "We will put more flats on the market according to the response." The price is around 7 percent higher than the first batch at i.UniQ - a sister project in the same area which saw 117 flats sold out within days in May. The average price of the first batch of 20 flats at i.UniQ was HK$13,388 psf. Sun Hung Kai has received more than 4,500 inquiries on i.UniQ Grand. Of these, 20 percent are from mainland buyers and 60 percent from local end-users living on Hong Kong Island. The rest are end-users from Kowloon and the New Territories. Similar flats in the area, such as those at Grand Promenade in Sai Wan Ho, are priced from HK$15,000 to HK$18,000 psf. Show flats open for viewing on Tuesday, with sales to start at 4pm. Meanwhile, the developer yesterday introduced another 70 flats at Imperial Cullinan. Sixty are sized between 1,136 and 1,222 sq ft and priced at HK$12,566 psf. The other 10 are of 1,188 sq ft and priced at HK$15,076 psf. On Wednesday, it put on the market a batch of 54 flats at the project, which is atop Olympic MTR station. Those are 1,188-1,353 sq ft and cost HK$16,168 psf. Since June 26, over 300 of the project's 650 flats have been sold, generating around HK$8 billion. "Half of the available four-bedroom flats are sold, and almost all specialty flats are gone too," said Sun Hung Kai Real Estate Agency executive director Victor Lui Ting.

Retail landlords have increased their marketing budgets and pinned their hopes on cartoon characters to get more shoppers into their malls in the expectation that consumer spending is set to rise. Shopping mall MegaBox in Kowloon Bay will spend close to HK$10 million on marketing this summer - up 10 per cent from a year ago; and Sun Hung Kai Properties (SEHK: 0016) (SHKP) has its eye on luring young lovers to get married in its cartoon playground at Sha Tin's New Town Plaza. SHKP, which is targeting the vast young couples' market in Hong Kong and the mainland, has renovated its Snoopy's World themed playground to provide an alternative venue for weddings. "We're going to provide young people who don't want to have a very formal wedding with an alternative. Such an option will be popular among mainland couples too," said Henry Lam Ka-keung, general manager of leasing at Sun Hung Kai Real Estate Agency. Couples can book the wedding venue online and it will be made available free of charge. But they will need to pay HK$2,800 for related services such as air-conditioning, lighting and staff. Lam said the new service is one of the summer promotions SHKP has launched and it is expected to help boost mall customer traffic and sales revenues by 10 per cent and 12 per cent respectively. The developer has teamed up with the Shenzhen Municipal Women's Federation to arrange for mainlanders to cross the border and take wedding photos in Hong Kong. It has also lined up some restaurants at the mall to offer daytime wedding banquets at prices ranging from HK$1,500 to HK$3,000 for a table of 12 people - or about half the prices they charge for evening banquets. Czarina Man Ching-chi, general manager of MegaBox, said the shopping mall's HK$10 million marketing budget was up 10 per cent on a year ago and would be used to organise interactive activities for children with Disney cartoon characters, in a bid to attract families. "We forecast that the number of visitors and their spending will rise by 20 to 30 per cent this summer," she said. Man is upbeat about the retail market because of the healthy local economy, and she expect mainland group tours to increase by one-fifth to more than 20, involving at least 1,000 tourists, this summer. The apm mall in East Kowloon is investing HK$6 million on summer promotions, up 20 per cent from a year ago. The mall is expecting 21 million visitors this summer and expects them to spend at least HK$590 million, up 20 per cent from last year. Vernon Ma Wai-lock, promotions and marketing manager at Times Square, said the mall in Causeway Bay had also increased its marketing budget by 10 per cent this summer. Apart from displays and activities featuring the latest Harry Potter movie, it has also joined hands with credit-card issuer China UnionPay to offer mainlanders discounts and gifts on shopping. "We see more mainland customers coming to shop in Hong Kong because the summer sale period has started. With the Chinese yuan appreciating and the discounts, it's more attractive for them to come and shop here," he said. Customer traffic through the mall is expected to rise at least 10 per cent during the period.

The Exchange Fund, the reserve that backs the city's currency, reported profit of HK$46.3 billion in the first half of the year, thanks to earnings from bonds and foreign currency markets. The result compared with a HK$1 billion loss a year earlier, but analysts warned of volatile markets ahead. Investment income between April and June was 8.6 per cent lower than the first three months of the year as domestic and overseas stock markets were hit hard in the aftermath of the Japan earthquake in March as well as the deepening European sovereign debt crisis. The benchmark Hang Seng Index dropped 3 per cent in the first half of this year. "The investment income reflects the weakness of the stock markets in the first half of this year, particularly the second quarter," First China Securities chief executive Kenny Lee said. "The outlook for the second half of this year is bumpy as the European sovereign debt crisis shows no signs of a quick solution. The US economy also has not signalled a significant recovery." The fund, with a reserve of HK$2.43 trillion as of the end of June, is managed by the Hong Kong Monetary Authority and invests in various asset classes, including bonds, stocks and foreign currencies. Growth in the first half of the year was driven mainly by a profit of HK$14.5 billion from bonds and HK$22.2 billion from appreciation of foreign currencies against the US dollar. Other overseas stocks earned a profit of HK$9.5 billion, offsetting a loss of HK$1 billion in Hong Kong equities. This is better than the first half of last year when the fund suffered losses in foreign currencies as well as Hong Kong and overseas stocks. The government deposits its reserves with the Exchange Fund and its profits and losses form an important part its annual income. The government will receive HK$18.3 billion from the Exchange Fund for the first half-year, according to a pre determined fixed rate. In the same period last year, the government received HK$16.9 billion. HKMA chief executive Norman Chan Tak-lam said asset markets were volatile in the first half of the year. The Exchange Fund achieved strong gains in the first quarter as the US stock market performed strongly as a result of the second round of the country's quantitative easing policy. "However, global equity markets have been affected since May by the deterioration of Greece's sovereign debt crisis," Chan said. "Investors' risk-aversion heightened, resulting in marked declines in the global equity markets, almost offsetting the gains since the beginning of the year." Chan (pictured) added that the Hong Kong equity market underperformed the global markets in the second quarter, wiping out the gains recorded in the first quarter of the year. Looking ahead, Chan warned of uncertainty in the markets, with the US economic recovery more subdued than expected, the sovereign debt crisis of Greece, Portugal, and Ireland continuing and emerging markets adopting measures to crack down on inflation. "Against the backdrop of these global economic and financial imbalances, foreign exchange, equity and bond markets are likely to remain volatile," Chan said. "This in turn will affect the investment performance of the Exchange Fund in the second half of the year. "As before, the HKMA will continue to manage the Exchange Fund in a vigilant and prudent manner."

The government on Friday unveiled four options on the way future Legislative Council by-elections could be held in Hong Kong. A two-month consultation on by-elections was also launched as officials released a consultation paper. This comes after weeks of often angry debate over the government’s attempts to scrap by-elections. Announcing the options, Secretary for Constitutional Affairs Stephen Lam Sui-lung reiterated there was a need to stop lawmakers deliberately triggering by-elections by resignations. Lam said when briefing legislators on the consultation paper that there was a large body of public opinion that believed the legal “loophole” that allows lawmakers to do this should be plugged. The four options offered in the consultation paper are: Barring legislators who resign from vying for re-election to their former seats during the same term. Filling vacancies with candidates from the same party list used during the last election. If the list is exhausted, or no one wishes to take the seat, the next-best candidate will fill the vacancies, regardless of political affiliation. This option is what the government proposed in its earlier plans. Filling vacancies using the second option, but seats left vacant by death or serious illness could be excluded. By-elections would then be held in these cases. Filling vacancies using the second option, but if there is no one on the list, the seats will be left vacant for the rest of the term. The consultation paper also asks the public whether Hong Kong should retain Legco by-elections. It says that maintaining the status quo – which is not among the four options – will lead to “an unnecessary and significant drain on public funds”. In May, the government proposed eliminating Legco by-elections altogether to stop lawmakers resigning early to trigger by-elections that they wanted to use as a platform for votes on controversial issues. But these initial proposals were controversial. Critics said they took away people’s rights to vote and ignored public concerns. This prompted officials to delay voting on a bill containing the governement’s original proposals and to launch a public consultation. On Friday, pan-democrat lawmakers condemned the government’s latest plans. Democratic Party leader Albert Ho Chun-yan said the consultation paper was “biased”. He said the government was trying to induce people to support options that would ultimately abolish by-elections. “I also don’t understand why last year’s by-elections are described as wasting public funds in the document. Such wording is very misleading. I wonder why they are not described as a display of democratic rights in Hong Kong,” Ho added. Civic Act-up lawmaker Cyd Ho Sau-lan said the public consultation was not a sincere attempt to gather people’s views, “because maintaining the status quo is not one of the options”. “So according to this consultation document the government apparently wipes out the option of safeguarding people’s right to vote,” Ho told local radio. “Another thing is the government has not responded to the criticisms by the Bar Association,” she said. The Bar Association ejected the government's argument that a proposal to scrap Legislative Council by-elections was lawful. The Basic Law did not give Legco the authority to impose "unreasonable restrictions" or "unjustifiably deprive" permanent residents of their rights to stand for office or to vote for their representatives, the association has said. The government decision to change by-election rules came after five pan-democrat lawmakers resigned in January last year. The lawmakers hoped the by-elections they triggered would be seen as a de-facto referendum on swifter democratisation. The five were voted back into office last May without opposition. But Lam said large amounts of public funds would be wasted if similar "sham elections" were triggered in future. “Next year we have five new super seats. Our costs will be even higher. If lawmaker resigns from one of these seats, we will have to open 520 poll stations for voting by 3.2 millions citizens. We will have to spend more than HK$100 million,” he said. The five so-called super seats will be introduced into Legco next year.

Hong Kong rail operator MTR Corp. Ltd. said Friday it has named the head of New York's Metropolitan Transportation Authority, Jay Walder, as its new chief executive with effect from January 2012. It is the government-controlled company's first nonlocal hire for the top job in more than 16 years. Mr. Walder, 52 years old, will take the helm of the city's sole rail transit system at a time when the company is aggressively expanding outside of Hong Kong, particularly in mainland China and Europe. MTR opened and manages a subway line in Beijing and signed concession agreements for subway services in Chinese cities, including Shenzhen, Shenyang and Hangzhou. Mr. Walder will join the company for an initial term of 30 months, MTR said. His annual base salary will be 7.2 million Hong Kong dollars (US$924,060). He is paid a base salary of US$350,000 at MTA. Mr. Walder brings a wealth of rail-operating experience to the blue-chip company, whose core operations are rail even as the bulk of its profits come from property development. MTR has the right to develop commercial and residential properties above some of its train stations in Hong Kong, with the earnings from sales helping to offset heavy capital outlay on rail projects. The company—which is 77%-owned by the Hong Kong government—reported a 25% jump in 2010 net profit to HK$12.06 billion, thanks to rising commercial property prices, making the rail operator one of the world's most profitable. Mr. Walder has led the New York MTA as chairman and chief executive since October 2009 and has "overseen an agenda of change that included the most aggressive cost-cutting initiative in the history of the MTA" at a time of major revenue shortfalls, according to that company's website. The MTA operates the largest mass-transit system in the U.S. His cost-cutting earned the praise of many, including politicians and advocates for commuters. Mayor Michael Bloomberg said that the appointment of Mr. Walder was one of the best decisions Gov. David Paterson made during his brief time in office. Mr. Walder, a New York native, started his career at the MTA in 1983, rising to become CFO and executive director before leaving in 1995. He returned in 2009 after working at London's transit system and becoming a partner at McKinsey and Co. "It is a bittersweet moment for me personally," Mr. Walder wrote in a letter to MTA board members informing them of his resignation. "I believe that we have accomplished quite a lot in a short period."

Hiring armed guards to protect ships and crews in pirate-infested waters could expose civilian captains to risks and responsibilities they are not trained to handle, a veteran mariner said yesterday. As Hong Kong and mainland shipowners plan to arm their ships and hire guards to fend off pirates, questions have been raised about crew safety and how to manage the guards. Reverend Stephen Miller, senior chaplain at the Mission to Seafarers in Hong Kong, said while the ship's captain is responsible for the crew and the vessel, armed guards are the responsibility of the shipowner, under Marine Department rules. But in theory, if the unexpected did happen and crew members were hurt, the captain would bear the ultimate responsibility. This could lead to criminal charges against the captain under the United Nations Convention on the Law of the Sea. The pastor, who gained first-hand experience of the impact of piracy when he headed the seafarers' mission in Dubai before moving to Hong Kong, said: "My biggest concern is the safety of seafarers." He said there had already been 480 cases of seamen being tortured by pirates, and 62 seafarers had died in the last couple of years. Quoting shipping industry figures, the pastor said 8 per cent of the world's shipping in tonnage terms was travelling through the Indian Ocean at any one time. These ships had on board about 100,000 crew members, out of the 1.2 million seamen employed on ocean-going vessels worldwide. He said some kind of certification of personnel was needed to ensure the guards had sufficient experience and were legitimately able to be armed. So far there are no regulations governing security standards, although the Security Association for the Maritime Industry, based in Britain, has been formed to identify reputable companies providing armed guards. Several Hong Kong and mainland shipping companies insist on using firms employing former British Royal Marines or special forces troops. One Hong Kong shipowner said ex-marines were preferred because they had sea-going experience and were more able to get along with the ships' crew. In a two-page letter sent to shipowners, operators and ship managers earlier this year, the Marine Department said "thorough due diligence" must be done "on the security consultants, as there is no established organisation to vet such companies". This condition was one of six it imposed before allowing arms to be carried on board ship. Among the others was that "the weapons are possessed by the master, or by a person who is authorised by the owner or person in charge of the vessel to have such possession". The lack of proper accreditation of security companies meant some ship insurers in Hong Kong had been approached by shipowners either to recommend or vet security companies or deal with contractual issues over the use of armed guards, but they denied using a so-called "white list" of preferred security companies. Miller said the guards' working hours also needed to be clarified. He pointed out that under maritime rules seafarers must have 77 hours of rest a week, but there were no such controls on armed guards at sea. As a result they could be tired when they join a new ship, having just finished an earlier transit. A typical voyage between the Indian Ocean and the Gulf of Aden takes four to five days. Miller said Hong Kong and other flag states should at least make a recommendation about the number of armed guards that should be placed on board ship. He said: "Piracy is not going to go away until a solution is found on land. If there was no safe place on land to take the ship, the whole business model [of piracy] would fall apart."

 China*:  July 24 2011  Share

Beijing has connected an experimental nuclear reactor that produces less radioactive waste than existing generators to the electricity grid, marking a key step towards its goal of developing fourth-generation atomic power plants. State media hailed it as a breakthrough in the mainland's plan to use home-grown technology to develop the country's first commercial-scale demonstration fast reactor. Fast reactors, known as fourth-generation nuclear power generators, are believed to be safer and more fuel-efficient as they burn uranium 60 times more efficiently than current designs and cut the total radio-toxicity and lifetime of nuclear waste. Xu Mi , chief engineer of the experimental fast reactor programme at the China Institute of Atomic Energy, said the 65 megawatt fast-neutron reactor near Beijing was connected to the grid at 40 per cent capacity. "The next step for us is to increase the generating capacity of the reactor to 100 per cent while connected to grid," Xu said. "After that, we can use the technology to build our own commercial fast reactors." The mainland plans to start construction of a one-gigawatt fast reactor at Sanming city in 2017. Xu said that in the aftermath of Japan's nuclear crisis, fast reactors showed an edge on safety. Although Beijing stopped approving new plants, pending safety reviews following the Fukushima incident, the government continues to promote the development of nuclear power, according to directives issued by the National Development and Reform Commission on April 26. The experimental fast reactor achieved "criticality", or started controlled and sustainable generation, one year ago. According to Xu, it took about 2.5 billion yuan and more than400 scientists to build it, making China the eighth country in the world to acquire the technology. Analysts said China used to lag behind many other countries, including India and Japan, in the development of fast reactors, but had markedly accelerated its efforts in recent years due to a power-hungry economy. Xu said China's home-grown technology met the safety and technical standards for fourth-generation reactors and would be ready to be used in commercial reactors after a series of further tests. The technology reduces radioactive waste compared with existing operational designs by using most of the fuel during the nuclear reaction, thus extending the usable life of the world's uranium resources. The country, keen to expand the use of atomic energy to fuel the rapidly growing economy, is also in talks with Russia to buy fast reactors. China National Nuclear Corporation, the nation's biggest operator of atomic plants, planned to start building two 800 MW fourth-generation reactors using Russian designs around 2013 or 2014, Xu said. The reactors will also be at Sanming. China started its first commercial nuclear plant in 1994 and has the highest number of atomic facilities under construction.

Spring Airlines aims to raise more than $1.2 billion in an initial public offering in the first quarter of 2012 as China's sole budget carrier wants to double its fleet size in the next four years, its president said on Thursday. Spring Airlines' IPO plan was progressing, Wang Zhenghua told Reuters at the company's headquarters in Shanghai. The 67-year-old, who founded Spring Airlines from a travel agency six years ago, said the IPO aimed to purge "the element of rule by people" at the company, referring to a theory of governance implied by Chinese philosopher Confucius and opposed to rule by law in western countries. "I started out as a small businessman. I like to be in control of everything ... I see that in my CEO too," said Wang. "If we want to grow the business, it's not going to work to depend on just a few people," he said. Spring Airlines hired UBS to help with the IPO and sent a notice to the China Securities Regulatory Commission, the stock market regulator, local media reported earlier this year. If it takes place, the IPO will make Spring Airlines China's fifth-listed carrier, after bigger rivals Air China, China Eastern Airlines Corp, China Southern Airlines Co and Hainan Airlines Co. Spring Airlines will raise more than 8 billion yuan ($1.2 billion), a figure estimated by one investment bank in 2006 when the idea of floating the company on a stock exchange first surfaced, Wang told Reuters. The airline is at the right size to go for a listing as most successful budget carriers went for a listing when their fleet size stood at 15 to 20 aircraft, said Wang. Spring Airlines hopes to grow its fleet to 60 aircraft from 24 over the next four years, he said. A shortage of experienced pilots has choked growth of Chinese airlines. Of the world's expected 800 million new travelers by 2014, about 181 million new passengers will come from China's domestic air routes, while another 33 million will be passengers flying to or from the country via international routes, the International Air Transport Association (IATA) said. "We are not growing as fast as we would want to. We had initially wanted to have 100 aircraft by 2015," said Wang. Spring Airlines wants to expand its international routes to countries nearby such as Japan, South Korea and Southeast Asia, as China's booming inter-city bullet train system erodes airlines' traditional markets. Earlier this month, China launched a new Beijing-Shanghai high-speed train, which cuts travel time on the 1,318 kilometer route to under five hours. The line is designed to carry 80 million passengers a year, providing heady competition for the airlines on a route notorious for delays. The Shanghai-Beijing high-speed train "will definitely have a big impact on the airline industry. I see the impact to be profound in three to five years time," Wang said.

China's monthly surplus is expected to "widen" in the coming months though export growth will "decelerate", probably causing some factories to close, said the Ministry of Commerce on Thursday. As domestic and global business conditions deteriorate, some manufacturers and exporters might struggle in the months ahead, with even some going bankrupt, said Zhang Ji, director-general of the ministry's department of mechanical, electronic and high-technology industries. According to the General Administration of Customs, first-half exports increased by 24 percent year-on-year to $874.3 billion, compared with 35.2 percent growth during the same period of 2010. Overall foreign trade expanded by 25.8 percent to $1.7 trillion. Year-on-year export growth rates declined as the months passed during the first half, dropping to 17.9 percent in June from 37.7 percent in January. "The export situation is getting worse, although there is still double-digit growth. The slowdown will continue in the second half," said Zhang. "Factors like rising costs for labor and raw materials, yuan appreciation and tighter monetary policy are and will be hurting Chinese exports." Yao Jian, spokesman for the ministry, said at a recent press briefing that the government will take steps to stabilize exports, including tax rebates, financing and credit insurance, in the belief that exports will slow during the rest of the year. Media reports have said that some textile factories closed recently as operating pressures intensified. The strains will squeeze their profits and "some of them will probably die out, but the majority will survive", said Zhang. It is time for them to enhance their competitiveness." 

Air China, the country's biggest international carrier, received its first Boeing 777-300ER Thursday afternoon, which is also the first such aircraft for the Chinese mainland. Air China will introduce 19 such aircrafts in the future, the company's vice president He Li said at the reception ceremony in Beijing. The first aircraft will fly on routes between Beijing and Guangzhou, and Shanghai and Shenzhen, he said. The second will be used on routes between Beijing and Frankfurt, and London and Paris, and will replace Boeing 747-400 planes currently used between China and North America, he said, without saying when the company will receive the second Boeing 777-300ER. Air China will increase the proportion of wide-bodied aircrafts in its flight team in the next five years, he added.

A federal court in Ottawa ruled late Thursday to uphold Chinese fugitive Lai Changxing's deportation order, paving the way for his return to China after he stayed here for 12 years. The verdict, made after more than three hours of court hearings, putting an end to all legal proceedings related to the deportation case. According to the law, the deportation should be executed soon after the court made a decision. But Canadian border authorities said they can't disclose the date of Lai's repatriation for the moment, citing security and confidentiality reasons. Lai, one of China's most wanted fugitives, is the prime suspect in a smuggling case in the Chinese city of Xiamen and has been sought by law enforcement for several years. The fugitive arrived in Canada in 1999 on a tourist visa. Since then, he has fought his deportation in one of the country's longest extradition cases. Chinese Foreign Ministry spokesman Ma Zhaoxu said in a statement shortly after the verdict that China welcomed the Canadian court's ruling to deport Lai. "The Chinese government's position is very clear that Lai should be deported to China and put on trial," Ma said.

Hong Kong*:  July 23 2011  Share

The private banking arm of HSBC (SEHK: 0005) will stop offering services to United States citizens resident outside America as a crackdown on offshore tax evasion makes the regulatory burden of banking around the world increasingly onerous. "After a review of services that can be provided to US clients from locations outside of the US, we believe that US clients will be better served by our private banking teams in the United States," the bank said yesterday. A team of advisers will help affected clients through the transition, HSBC said. An HSBC staffer said the decision was voluntary and not in response to action against it by US authorities. Last week, the US Internal Revenue Service said it would give foreign financial institutions another six months to start complying with a new law to prevent offshore tax evasion by Americans under a phased-in schedule of compliance. Under the deal, institutions now have until June 30, 2013, to reach agreements with the IRS on co-operation. These agreements previously had been expected to be concluded by the end of 2012. Planned new rules will oblige non-US financial institutions to disclose details of wealthy US clients or face a withholding tax on their US assets, effectively putting the burden of disclosure on the bank rather than the client. Critics in the banking industry argue the rules are likely to prove complex and costly because of the difficulty of identifying who is a US person, a category that takes in citizens, residents and Green Card holders among others. A number of banks have recently found themselves under the scrutiny of US authorities looking to track down assets hidden from the tax man offshore. Swiss bank Credit Suisse revealed earlier this month it was the target of a US Department of Justice (DoJ) probe, part of its broader investigation into banks suspected of helping Americans evade taxes. The DoJ also announced recently it was looking into whether HSBC in India may have been used by some Americans to keep undeclared assets. UBS, Credit Suisse's main Swiss rival, paid a US$780 million fine in 2009 and agreed to hand over information about nearly 5,000 secret accounts held by US citizens to settle US charges that it aided tax evasion.

The Exchange Fund reported investment income of HK$46.3 billion in the first half of this year, the Hong Kong Monetary Authority said on Friday. The amount includes a HK$14.5 billion return from bonds, an exchange valuation gain of HK$22.2 billion mainly as a result of the appreciation of other currencies against the US dollar, a HK$9.5 billion gain from shares and a HK$1.1 billion from other investments. The Exchange Fund is managed by the Hong Kong government, and it contains most of the territory’s fiscal reserves. HKMA chief executive Norman Chan Tak-lam said the fund had benefited from a rise in global share markets in the fourth quarter of last year and the first quarter of this year. This came after the United States launched the second round of quantitative easing policy of monetary police and some fiscal measures. But Chan said the Hong Kong sharemarket underperformed in the second quarter, almost wiping out gains recorded in the first three months. Investments in Hong Kong shares reported a loss of HK$1 billion in the first six months. “The global equity [share] markets have been affected since May by the deterioration of Greece’s sovereign debt crisis. Investors’ risk-aversion sentiment heightened, resulting in marked declines in the global equity markets, almost offsetting the gains since the beginning of the year,” he said. Chan said the investment environment would remain difficult in the second half of the year. He said financial markets could be volatile due to very low interest rates, excess liquidity, the slow pace of the US economic recovery and Europe’s sovereign debt crisis.

Another triumph for Diocesan schools' choirs - After success at a competition in Germany, the government is urged to promote the music style - Singers from Diocesan boys' and girls' schools have again scaled the height of success. They have just won three gold medals at an international competition in Germany, following on winning two categories and the top Musica Sacra award at the World Choir Games held in Shaoxing , Zhejiang last year. At the 7th International Johannes Brahms Choir Festival and Competition, a biennial event held in Wernigerode, the Diocesan choirs joined 40 choirs from 17 countries, one of the biggest international choir competitions in recent years. Diocesan Boys' School choir won gold in the male choirs with compulsory piece category while Diocesan Girls' School choir won gold in the youth choirs of equal voices category. They combined to win gold in the mixed youth choirs category. Amid the success, Diocesan Boys' School principal Terence Chang Cheuk-cheung said the government could do more to support choir music in the city. "The government could set up a university choir. Hong Kong is a very good place for developing choir music because of its mixed culture context. Given enough time and professional training, choirs in Hong Kong would reach a higher standard," he said. The effort in Germany by the choirs did not come cheap. Chang said the trip cost about HK$20,000 for each of the 64 pupils in the boys' choir. "It is expensive, although the school board sponsored about half of it," he said. Ronnie Cheng Kay-yen, deputy principal and head of the music department at Diocesan Boys' School said the choirs amazed the judges because of their successful expression of pieces from different cultures. "Hong Kong is a special place. We have our own local arts but we are also compatible with other cultures, which makes us sound authentic, whatever we sing," he said. Jenny Wong Ching-yee, a music teacher and conductor of the Diocesan Girls' School choir, said: "The students showed great comprehension. When everyone worked together for the same goal, the cohesion and power they generated was immense." The songs chosen resonated with the pupils own emotions, Wong said. "The whole choir would cry because they were so moved by a song. You might hear sobbing on the stage even before a song began."

Beijing's man in charge of Hong Kong affairs, Wang Guangya , had been prepared to meet all 60 lawmakers during his first official visit to the city last month, the Legislative Council president said. Had Wang done so, it would have been the first meeting between the entire legislature and a head of the State Council's Hong Kong and Macau Affairs Office (HKMAO). "I conveyed the strong wish for all lawmakers to meet Wang," Tsang Yok-sing said. "I then heard Wang was willing to meet the whole Legco. But the plan was foiled." Tsang said he did not know what had prevented such a meeting. He made the disclosure in his review of the legislative year. Wang, the new director of the HKMAO, visited the city for three days. The closest he got to a meeting with all legislators was a lunch with more than 40 of them - the chairmen and vice-chairmen of Legco's panels and committees. Lawmakers who attended complained they didn't have a chance to speak to Wang. While radical pan-democrats have a track record of unruly behaviour, one of them, "Long Hair" Leung Kwok-hung, was among the first to suggest a formal exchange with Wang - and had promised not to disrupt the occasion - Tsang said. "`Long Hair' suggested Wang come to the Legco chamber and give a formal speech, and he swore not to throw objects at him," he said. Radical lawmakers have been expelled from the chamber several times for throwing objects at speakers, including the chief executive. When Tsang, of the Beijing-loyalist Democratic Alliance for the Betterment and Progress of Hong Kong, sought election as Legco president three years ago, one of his pledges was to foster better relations between the legislature and Beijing. As he prepares for the final year of the legislative term, he promised to strive once again to achieve the goal. "I will try my best to increase the chances for Legco to communicate with Beijing ... I also promise to persuade the officials to issue home-return permits for every lawmaker," said Tsang. Some pan-democrats have been denied the permits, without which they cannot enter the mainland. While Chief Executive Donald Tsang Yam-kuen said last week that Legco's plummeting popularity was partly to blame for the public's low opinion of his administration, Tsang Yok-sing suggested the government's woes were having an impact on the public's view of Legco. "When the government has bad popularity ratings, those for Legco cannot be high," he said. The latest tracking poll by the University of Hong Kong's public opinion programme shows Donald Tsang's rating at 45.6 out of a possible 100, which the programme's director, Dr Robert Chung Ting-yiu, defined as a "near-critical level". It released another survey earlier that showed only 10 per cent of those polled approved of Legco's work.

Hong Kong's inflation rate rose to an almost three-year high in June – and was expected to rise further, the Census and Statistics Department said on Thursday. The year-on-year increase in the Consumer Price Index last month reached 5.6 per cent last month, figures released by the department showed. This was the highest level in the almost three years. The city’s inflation had peaked at 6.3 per cent in July 2008. Last month’s figure was also larger than the corresponding increase of 5.2 per cent in May. The underlying inflation rate – the rate of increase in prices after netting out the effects of all government’s one-off relief measures – was 5.5 per cent last month. This was larger than that in May, which posted a 5.1 per cent increase. On a seasonally-adjusted basis, the average monthly increase in the CPI for the three-month period from April to June was 0.6 per cent. A government spokesman said private housing rentals and food prices were the two major driving forces for last month’s increases in commodity prices. They accounted for about 70 per cent of the increases. The spokesman said inflation was likely to increase further in future. “While global food and commodity prices are likely to stay elevated, domestic cost pressures may also increase as a result of the brisk expansion of the local economy since early 2010,” he said.

 China*:  July 23 2011  Share

U.N. Approves China Sea-Floor Plan - As China's first manned deep-sea craft prepared for a landmark dive to 5,000 meters, or 16,400 feet, surpassing current U.S. capabilities, a United Nations body approved Beijing's plan to explore a swath of ocean floor between Africa and Antarctica for metal deposits. In the first of four planned dives, the Jiaolong submersible reached 4,027 meters at 5:26 a.m. Thursday, Beijing time, according to China's State Oceanic Administration. State media said it would make another attempt at 5,000 meters early Friday. The Jiaolong is diving at a site between Hawaii and the North America mainland, where China was granted rights to explore for minerals in 2001 by the International Seabed Authority, a U.N. body that oversees mining in international waters. ISA, meeting at its headquarters in Jamaica, said it had approved on Tuesday applications from China and Russia—the first from any countries—to explore relatively newly discovered deposits called polymetallic sulphides that form around volcanic vents in ridges on the seabed. ISA also approved applications from private companies sponsored by members states—the Pacific islands of Tonga and Nauru—to explore seabed mineral deposits in international waters. That was a first; it had previously accepted applications only from states and state entities. China's application, made last year, was for a site in the Southwest Indian Ridge, which bisects the ocean between Africa and the Antarctic. Russia, which also has a deep-sea submersible, applied to explore a Mid-Atlantic Ridge site. U.S. scientists in the submersible Alvin discovered polymetallic sulphides, which contain base metals that include copper, lead and zinc, as well as gold and silver, in 1979 when they found vents spewing superheated fluids on the ocean floor off the west coast of Mexico. But U.S. investment in such research has declined over the past two decades, even as some resource-hungry emerging economies stepped up their efforts to develop the technology to explore, and ultimately exploit, resources under the oceans, which cover roughly 70% of the Earth's surface. "The U.S. is on the brink of losing adequate infrastructure, human resources, and corporate knowledge necessary for success in exploring the submerged majority of our own planet," said Rachel Haymon, a research professor at the Marine Science Institute of the University of California, Santa Barbara. "Those of us who specialized in this type of thing are rapidly retiring now, a process accelerated by lack of funding, and, sadly, there are too few to follow in our footsteps," added Prof. Haymon, who was among the researchers who discovered the vents off the Mexican coast in 1979. Another obstacle for the U.S. is that it is hasn't ratified the 1982 U.N. Convention on the Law of the Sea, and so isn't a full member of the ISA. It has only observer status. China, which has ratified the convention and is an ISA member, has been active in deep-sea exploration since 2002, when it launched a program that included developing the Jiaolong. If the Jiaolong's current mission is successful, it will surpass the Alvin, the only active U.S. sumbersible, whose maximum depth is 4,500 meters. An upgraded version capable of reaching 6,500 meters is slated to be ready by 2015. The Jiaolong is designed for a maximum depth of 7,000 meters, and plans call for it to attempt that next year. That would put it ahead of Japan's Shinkai, the world's deepest-diving active submersible, which can go down to 6,500 meters. The British journal Nature Geoscience published a paper this month in which Japanese researchers claimed to have discovered vast deposits of rare-earth minerals—used in a variety of high-tech products—on the ocean floor east and west of Hawaii at depths ranging from 3,500 meters to 6,000 meters. The only other submersibles capable of exploring below 3,500 meters are France's Nautile and Russia's Mir, which planted a Russian flag on the seabed beneath the Arctic in 2007. Chinese experts hailed the Jiaolong's mission and the ISA's approval as milestones in China's deep-sea exploration program. "China's economy is developing, and the central government finally realizes that it's not nearly enough only to develop mining on land," said Prof. Wang Pinxian, head of the State Laboratory of Marine Geology at Shanghai Tongji University. "The ocean is rich with resources. So this is a big step that we are starting to pay attention to exploring oceanic mineral exploration." He added that he was leading a 150 million yuan ($23 million) research project next year that would use the Jiaolong to explore a volcanic site in the South China Sea, where China is locked in territorial disputes with Taiwan, Vietnam, the Philippines, Malaysia and Brunei. The Jiaolong planted a Chinese flag on the floor of the South China Sea last year, fueling fears in the region that China could use its newfound technology for commercial or military purposes in disputed waters. Chinese officials say the Jiaolong is for civilian use only. The China Ocean Mineral Resources Research and Development Association, whose application was approved by ISA on Tuesday, didn't respond to a request for comment about its plans to explore the seabed between Africa and Antarctica. But according to new rules on polymetallic sulphides adopted by ISA last year, its next step is to sign a contract with the ISA to explore up to 10,000 square kilometers over the next 15 years, although the area will be halved after eight years.

Apple's sales in China grow sixfold - Apple Inc needs to improve its Chinese market strategy to match its surging growth in the country, industry experts told China Daily. According to its recent quarterly report, the US-based company's third-quarter sales revenue in China surged sixfold year-on-year to $3.8 billion. In an earnings call on Tuesday in the United States, Apple's Chief Operating Officer Tim Cook said the company had huge growth in China for the past three quarters with total revenue from the country reaching $8.8 billion. Customers examine Apple Inc products at the company's official store in Shanghai. Despite surging sales, customers with broken products must make an online appointment and wait about a week to meet with service technicians because of the scarcity of official Apple stores. Cook said China was a main region in the company's total quarterly revenue, which increased 82 percent to $28.6 billion year-on-year. Sales momentum from iPhones in the Asia-Pacific region was particularly robust, quadrupling year-over-year. Emerging markets including China, Brazil, Mexico and the Middle East were a big component of iPhone sales this quarter, according to Credit Suisse Securities (USA) LLC. However, when Cook said he believes that the company is just "scratching the surface" of the Chinese market, domestic analysts warned the company to pay more attention to its sales channels and customer service. "Looking at Apple's long-term development in China, I have doubts about its sales sustainability," said Lu Libin, an analyst with domestic IT research company Analysys International. Lu mentioned that a scarcity of official retail outlets and limited support from telecom carriers will narrow Apple's official sales in China, leaving space for scalpers and gray market sales. "In the past, the US and European markets were Apple's priority. The Chinese market received Apple's newest products later than other countries," Lu said. The company's iPhone 3GS arrived in the Chinese market almost two years later than in the US, while the popular handset iPhone 4 had a nine-month delay. The release delay provided opportunities for scalpers. During the delay, an iPhone 4 could be sold for around 12,000 yuan ($1,858) in China's gray market without any warranty. Scalpers can be found hawking their wares outside Apple's Sanlitun store in Beijing. Apple's iPhones received a 7 percent market share in the first quarter of this year in China's smartphone market, which totaled 19 million units in sales. "The iPhone 3GS had a poor sales performance in China before," Lu said. He said the iPhones are targeting the high-end market in China rather than the low- and middle-end markets. The price of an iPhone 4 is 4999 yuan without a contract. The average salary in Shanghai was around 5,300 yuan a month last year. Customers with broken products must make an online appointment and wait about a week to meet with service technicians because of the small number of official Apple stores. Although Apple has labeled China as "key market", it has only four stores in the country, which accounts for one-tenth of the company's sales revenue. With 31 provinces, municipalities and autonomous regions on the Chinese mainland and a population of 1.3 billion, four times that of the US, there are only four Apple stores, while the United States has 236. "In the long run, Apple can likely increase its market share since it is gaining sales momentum by investing more resources into China, which it had not been doing previously. However, I think the company needs to implement a more solid strategy," said Kitty Fok, vice-president of the research company IDC Asia-Pacific.

Models of Transformers stand in a square in Jinan, the capital of East China’s Shandong province, July 21, 2011. Altogether three giant Transformers, made from components of used cars, were on display, with the tallest reaching 15 meters in height.

A manned Chinese submersible conducted its first dive to beyond 4,000 metres on Thursday, the government said, in the latest milestone for the country's deep-sea ambitions. The Jiaolong undersea craft – named after a mythical sea dragon – reached 4,027 metres with three people aboard during the dive in the northern Pacific Ocean, China’s State Oceanic Administration said in a statement. “The success of this test dive has laid a solid foundation for completing the mission of diving to 5,000 metres,” it said. The craft will attempt to surpass 5,000 metres in another dive on Friday. Chinese technical capabilities have grown by leaps and bounds in recent decades, exemplified by a fast-growing space program that in 2005 made China just the third nation to conduct manned space flight. The Jiaolong’s undersea range theoretically gives China access to nearly all of the world’s deep-sea areas, Chinese officials have said in the past. The craft is designed to reach a maximum depth of 7,000 metres and in a dive last year it made China only the fifth country to go deeper than the 3,500-metre mark, according to previous Chinese reports. The deepest dive ever conducted was by the US Navy, which reached the bottom of the Mariana Trench – the deepest point in the world’s oceans at 11,000 metres – in 1960 in a manned undersea craft. China has said its development of submersible technology is aimed at scientific research and the peaceful exploration and use of natural resources. The country has pushed hard in recent years to obtain oil, minerals and other natural resources needed to fuel its growth.

Ming dynasty comes to an end - The NBA star and three-time Olympian quits the professional game but announces that his decision is 'a comma not a full stop - Yao Ming announces his retirement as a professional basketball player, as his wife Ye Li and daughter Qin Lei look on in Shanghai. Yao Ming, one of China's first truly international sports stars, yesterday formally announced his long-awaited retirement from competitive basketball, but insisted the move was "a comma, not a full stop". "Today I need to make a personal decision as a basketball player," the NBA star and three-time Olympian told a packed press conference in his hometown of Shanghai that was broadcast live on national television and streamed on the internet. "I will stop my basketball career and retire." Yao, 30, has been plagued by injuries and only played five games for the Houston Rockets in the past two seasons. He had been widely tipped to retire after suffering a stress fracture in his left foot in December. "The past six months have been a very painful wait for me," he said. While Yao repeatedly mentioned plans for the future, he kept his cards close to his chest as what his next move would be. "I have been preparing for this day for the past 17 or 18 years," he said. "It has come fast, very fast, but I have been preparing for it." He stressed his commitment to youth causes, saying he hoped to use his ownership of the Shanghai Sharks - where he started his own career, and eventually bought in 2009 - as a platform to promote sport among young people. "Although I am leaving the court, I will not leave basketball," he said. The son of professional basketball players recalled receiving his first basketball at the age of four, playing his first tournament at nine, competing in youth basketball at 14, before finally "getting my first number on my back" with his debut for the Shanghai Sharks at 16. However, he skirted an invitation from a Dutch journalist to manage the Netherlands team. "As I know from my own coaches, coaching is not an easy job to do," he said. "It requires a lot of patience and energy, and they need to sacrifice a lot of their family time." He added that owning the Sharks was "already keeping me pretty busy". Dressed in a dark business suit and matching shirt spruced up with a silken bright-green tie, Yao remained largely calm and unemotional throughout. Throughout his seven-minute speech, Yao spoke almost entirely in Putonghua, but switched to English to give thanks to the Texan city that had become his second home. "Nine years ago I came to Houston a young, tall, skinny player," he said. "The entire city and team turned me into a grown man, not only a basketball player. Also I had my first daughter there. I feel like I'm a Houstonian, and will always be with you." And he ended by pitching a bone to the home audience, crying out, "Zha-zha nong" - thank you in the Shanghai dialect. Yao visibly lightened up during a later question-and-answer session, during which he joked with his American translator, who has been working with him since Yao moved to the NBA in 2002. Answering questions from overseas media in near-flawless English, Yao also demonstrated his colleague's usefulness had largely run its course. Yao's one-year-old daughter, Qin Lei, was predictably less composed. Several times during her father's speech she could be seen attempting to clamber onto the table in front of her front-row seat, and she doodled on a notepad with her mother, Ye Li , while Shanghai Municipal Sports Bureau director Li Yuyi paid tribute to the sports star. Asked if he had plans to launch his own line in sportswear, Yao jested that his various advertising deals could make that difficult. "I think I need to get my name back from others before I can think about starting my own brand," he said. Ahead of the press conference, Houston Rockets general manager Daryl Morey told CCTV he believed Yao was "obviously the most important player in the NBA" and "not replaceable" on the team. "What he has done to open up basketball to the world has been unmatched by anybody," he said. Given an opportunity to pose a question to Yao during the main event, Morey asked for some recruiting advice. "Are there any other good players in China that you can refer to us now that you are going to retire?" he asked his departing star. Unable to resist the chance to take an impish dig at his boss, Yao joked back in English that the club would need to agree his scouting fee first. "Then we can talk about players," he said, grinning.

With handshakes and smiles, China showed off the friendly face of its most high profile military unit to foreign journalists on Thursday in a bid to allay concerns about its military might, but officers deflected questions about modernisation efforts. Visits to Chinese military bases for foreign media are rare, although the government now tries to organise them once a year to assuage regional worries about the lack of transparency and growing prowess of its armed services. The Guards of Honour of the Three Services, chosen for this year’s trip, are an elite corps especially drafted for their discipline, tall stature and solid grounding in politics and who take part in all welcome ceremonies for foreign leaders. The unit is renowned in China not only because these ceremonies are always shown on state television’s main evening news: the guards of honour also appeared at the 2008 Beijing Olympics and the handover of Hong Kong from British rule in 1997. “This is a good way to show the world about China’s military development,” Defence Ministry Spokesman Geng Yansheng told reporters at the base, hidden behind a non-descript facade off a main road in Beijing’s western suburbs. “The aim of this type of event is to give reporters a chance to get up close with the soldiers and allow people to understand the thinking of the People’s Liberation Army,” he added. “We are proactively pushing this kind of opening up.” One of the unit’s senior colonels, Liu Shixu, said his goose-stepping soldiers – who have trained similar teams in Africa and marched in parades in Mexico, Venezuela and Italy –were in fact a sign of China’s peaceful intentions. “The People’s Liberation Honour Guard has shown people all over the world that we are a force for peace,” Liu said. Soldiers patiently answered questions about their training regime, whether they were allowed girlfriends and which foreign leaders had impressed them most, managing to maintain smiles despite the muggy heat and their heavy uniforms. “I’m very much impressed by every leader,” said the diplomatic Li Qiang, 31, whose high-pitched presentation of the honour guard, complete with ceremonial sword, is a centre point of official welcomes for foreign dignitaries. China regularly denies its military is for anything other than defensive purposes, and these highly choreographed visits are meant to underscore that. But defence spending is rising fast, sending jitters within Asia and beyond about the growing military might of the world’s second largest economy. In January, China confirmed it had held its maiden test flight of a stealth fighter jet and the country’s first aircraft, a former Soviet ship once destined to become a floating casino, could begin sea trials within weeks, according to state media, part of President Hu Jintao’s push to modernise the navy. Pressed on the aircraft carrier, spokesman Geng said he would not answer any questions apart from on the day’s visit. “Relevant details will be announced at an appropriate time,” he said, when asked when the carrier would be launched.

Hong Kong*:  July 22 2011  Share

HSBC Holdings PLC is moving to mollify federal authorities investigating how the banking industry has helped U.S. clients evade taxes. The global banking giant is cutting ties with wealthy American clients who bank offshore, as U.S. prosecutors turn up the heat on the bank to produce information about account holders who may be evading taxes, people familiar with the matter say. A spokeswoman said the global banking giant will "no longer offer wealth-management services to U.S. resident private clients from locations outside the U.S.," and that American clients "will be better served by our private banking teams in the United States." At issue are hundreds of clients with accounts totaling as much as $100 million, said a person familiar with the situation. U.S. clients need roughly $5 million in assets to qualify for an HSBC private-client account, another person familiar with the situation said. The extraordinary move comes as the U.S. Justice Department and Internal Revenue Service intensify crackdowns on offshore tax evasion and look beyond the world of Swiss banking for institutions that might be providing places to hide money. HSBC is ending the practice of serving wealthy American residents from locations outside the U.S. as a way of cooperating with the U.S. and avoiding the fate of rivals that were fined or threatened with prosecution for assisting tax scofflaws, the people familiar with the matter say. The Justice Department declined to comment. In a letter sent earlier this month to U.S. customers who have accounts with HSBC India, the bank said it is terminating "private banking services to US persons and certain trusts and non operating companies connected to US persons." Customers have 30 days to close their accounts, according to the letter. HSBC has been under Justice Department scrutiny since earlier this year, when U.S. prosecutors alleged HSBC India had helped U.S. residents get around paying federal taxes. HSBC's move to cut off wealthy U.S. clients represents a retreat for an institution that made a splash in the private-banking business in 1999 with the acquisition of Republic National Bank of New York. A new law taking effect in 2011 requires banks with U.S. taxpayers holding offshore accounts to meet stringent and expensive new reporting requirements. An HSBC spokeswoman said a team of advisers "will help affected clients through the transition process." HSBC's move could put its clients in a tough spot. It "presents a significant challenge for many investors and business executives, given the short notice of termination," said Brian Rowbotham, an international tax specialist in San Francisco. The HSBC move comes amid much broader government scrutiny on tax evasion. In 2009, Swiss bank UBS AG admitted to conspiring to defraud the U.S. government of billions in taxes by helping wealthy Americans hide taxes. As part of a "deferred prosecution" agreement avoiding criminal charges, UBS turned over the names of 4,000 U.S. account holders and paid a $780 million fine for its role as part of a settlement between the U.S. and Swiss governments. Credit Suisse Group AG said Friday that the Justice Department had notified the Swiss bank that it was a formal target of a criminal investigation into how Swiss institutions allegedly helped U.S. citizens avoid paying taxes. The bank said it was cooperating with the probe. Settlement talks between U.S. and Swiss governments aimed at resolving a wide-ranging U.S. investigation into the Swiss banking system are continuing. In January, prosecutors indicted a New Jersey businessman on charges he conspired to evade U.S. taxes by hiding offshore accounts in India maintained by HSBC. He pleaded guilty. And in late June, a federal grand jury indicted an HSBC client living in Wisconsin for allegedly filing false tax returns and hiding more than $8.7 million in offshore accounts. The client, a neurosurgeon and a U.S. citizen, pleaded not guilty. The Justice Department in April asked a San Francisco federal court to let the IRS serve a "John Doe" summons on the Indian unit of HSBC seeking information about possible tax fraud "by people whose identities are unknown." The status of the summons isn't clear. Federal authorities asked HSBC India to send letters to customers encouraging them to come forward to the IRS, and HSBC has complied with that request via a separate set of letters, said people familiar with the situation. The IRS is offering reduced but still stiff penalties for U.S. taxpayers with secret offshore accounts who voluntarily report them, but that program is to end Aug. 31. The government said it believed "many" of these clients "have hidden their accounts from the IRS."

Yuan exchange market proves the critics wrong - In just 12 months of trading, it has gone from being non-existent to become a major currency player in Asia - Rapid development of the yuan exchange market has dispelled fears that an offshore market in the currency would not be popular in Hong Kong. Barely a year after its creation, Hong Kong's yuan exchange market has exploded, brushing aside fears that an offshore market in the currency would not find favour in the city. The daily turnover of the yuan exchange market had already caught up with the yuan non-deliverable forward (NDF) market and would soon surpass it, said Daniel Hui, a senior foreign exchange strategist at HSBC Holdings (SEHK: 0005). Unlike the NDF market, which is a derivatives market open to offshore players and settled in US dollars, the city's yuan foreign exchange market is settled exclusively in yuan and is open to offshore participants and limited onshore parties. The Hong Kong Monetary Authority announced a year ago that the yuan would be permitted to be transferred between accounts in Hong Kong regardless of purpose. This gave birth to the offshore yuan foreign exchange market in the city. "The significance of this is that in a mere 12 months, the yuan foreign exchange market has grown from non-existent to a major currency market in Asia," proving wrong naysayers who worried that Hong Kong's offshore yuan market was just a policy experiment, Hui said. The yuan exchange market began trading in Hong Kong on July 21 last year, according to HSBC. This new market, together with the onshore yuan market on the mainland and the prevailing offshore NDF yuan market, create the entire gamut of yuan trading. In the past, it was hard for investors to invest in yuandenominated assets. The NDF market offered long yuan exposure but at the end of the day required a premium in exchange for owning a mere derivative, Hui said. The rapid development of the exchange market had also boosted the internationalisation process by supporting the increasing use of yuan, Hui said. Yuan deposits, yuan bonds and cross-border trade have all increased by leaps and bounds, HKMA figures show. The size of yuan deposits in the city jumped from about 64 billion yuan (HK$77 billion) from the beginning of last year to more than 540 billion yuan in May this year. About 70 per cent of this came from corporate clients and the rest from individual depositors, the HKMA said. Last year, 16 bond issuers raised 36 billion yuan in the offshore yuan bond market. This year it is likely to be even bigger, the HKMA says. Cross-border yuan trade settlement has also risen more than six-fold, with such trade accounting for 7 per cent of the total trade in the first quarter, from less than 1 per cent a year ago. HKMA chief executive Norman Chan Tak-lam said increased yuan-denominated trade settlement was just the first step of internationalisation of the yuan. Chan said the yuan needed to become a major reserve currency and yuan-denominated assets would have to be traded in larger volumes internationally.

The Hong Kong Book Fair opens today, with organisers hoping the focus will be on the exhibitors and not on pouting pseudo-models. The week-long fair at the Hong Kong Convention and Exhibition Centre features 526 exhibitors, a three per cent increase from last year. But the presence of the pseudo-models , or lang mo as they are known in Cantonese, is set to shrink. It was feared the models could tarnish the image of the fair after they turned up uninvited last year. The Trade Development Council received 13 applications from the models to hold autograph signing sessions last year and all of them were turned down. But the models arrived anyway, announcing their appearances to the media. This year, five applications were received and two have been approved, with the models saying they will maintain a lower profile. Benjamin Chau Kai-leung, deputy executive of the council, said outrageous promotions that didn't match the book fair's "cultural style" were not welcome. He said: "The book fair is open and free. We won't censor any content as long as it stays within the standard of category one publication." The biggest expansion at the book fair is in the area of digital publishing, which is 70 per cent larger than last year. Tech enthusiasts can try out new e-book kiosks, where they will be able to browse e-books on screen. They will be able to choose the parts they want and download 20 pages onto their smartphones. There will also be talks by 150 speakers, including British historian David Starkey, Taiwanese critic Li Ao, food writer Tom Parker Bowles, novelist Nicholas Coleridge and Chinese history expert Julia Lovell. Those interested in local writers can visit an exhibition which displays handmade crafts by Xi Xi, the fair's "author of the year". Xi made them with a single hand after she fell sick and her other hand became inflexible. A recent reading habit survey conducted by Democratic Alliance for the Betterment and Progress of Hong Kong showed that 40 per cent of the 643 respondents did not feel the annual event had contributed much to boost Hong Kong's reading habits. The survey also found that 70 per cent of the smartphone and tablet users interviewed - who made up about one third of all respondents - had never used their gadgets for book reading. But Chau said in response: "Why don't we look at it this way - e-book readership has already reached 30 per cent. It's a fair number for a burgeoning industry." About 2,000 mainland tourists in around 60 guided tours will visit, up from 1,835 last year. And current issues have provided inspiration for publishers. Sub-Culture, which publishes political comics, has made sure the recent controversy over the government's proposal to scrap by-elections is included in its latest book Hong Kong's Breakdown. It will give out key chains featuring tycoon Li Ka-shing and chief executive Donald Tsang Yam-kuen with devilish horns on their heads as free gifts for customers.

Wynn Macau is betting big on education - the casino operator has just announced a massive HK$1 billion donation to the University of Macau Development Fund. However, the donation took the shine off the company's earnings, with second quarter net profit falling 9.2 per cent as a result. Wynn Macau, 72.3 per cent-owned by Wynn Resorts, said the donation would be paid out in annual instalments until 2022, the year in which most Macau gaming licences are set to expire. It is believed to be the biggest single donation by a Hong Kong-listed company to date, with such gifts tending to be made by tycoons, such as Li Ka-shing and Stanley Ho Hung-sun, personally or through their charitable foundations. Denway Motors drew flak after its 2009 profit fell 8.2 per cent to 1.92 billion yuan following a 300 million yuan donation to Guangzhou's Asian Games organising committee. The company has since been delisted and its assets injected into newly listed Guangzhou Automobile Group. Wynn defies bottom line with US$135m donation - After a great second quarter, casino operator sets a record for a Hong Kong-listed firm with its huge handout to the University of Macau - Who says Hong Kong investors only care about profit? Shareholders in casino operator Wynn Macau swallowed a 9.2 per cent drop in second-quarter net profit after the company's board decided to make a massive US$135 million donation to the University of Macau Development Foundation. While it will be paid out in annual instalments until 2022, the year most Macau gaming licences are set to expire, the total sum appears to be the largest single donation made by a Hong Kong-listed company to date. Stripping out the effect of a one-off charge related to the donation, Wynn Macau's profit would have soared around 70 per cent in the second quarter to more than US$220 million. Revenue and cash flow both hit record levels on surging high-stakes gambling volumes. But as it stands, the company reported profit of US$120.33 million, down 9.2 per cent from US$132.52 million a year earlier. While Hong Kong tycoons like Li Ka-shing, Stanley Ho Hung-sun and the late Henry Fok Ying-tung have been known to make donations on a comparable scale, they have tended to do so either as individuals or via their charitable foundations - not via listed firms under their control. Annual donations in the tens - and in a few cases, hundreds - of millions of Hong Kong dollars are not uncommon among large locally-listed firms. Disasters like the 2008 earthquake in Sichuan can prompt additional one-off donations. Such donations by listed firms generally require the approval of the board of directors, but do not need to be put to a shareholders' vote. But locally listed firms seldom shell out hundreds of millions, let alone a cool HK$1 billion, even for the best of causes. One prominent recent exception was Guangzhou government-owned Denway Motors, which was criticised last year after its profit for 2009 fell 8.2 per cent to 1.92 billion yuan (HK$2.3 billion) following a 300 million yuan donation to Guangzhou's Asian Games organising committee. Wynn Macau's donation to the University of Macau includes a US$25 million payment made in May. That is to be followed by 11 annual payments of US$10 million each from next year until 2022. "With this commitment to the University of Macau Development Foundation, the board of directors of Wynn Macau and all of its shareholders in China and the United States are dedicated to the education of the people of Macau," company chairman Steve Wynn said at a May cheque presentation in Macau, according to a release on the university's website. The Hong Kong firm, which is 72.3 per cent owned by Nasdaq-listed Wynn Resorts, said yesterday its second-quarter net profit was affected by a one-off charge of US$107 million that represented the present value of the donation. Wynn is one of several casino developers including MGM China and SJM Holdings that are seeking land grants from the Macau government in order to establish a footprint on the Cotai Strip, where rival operators Sands China, Melco Crown Entertainment and Galaxy Entertainment Group (SEHK: 0027) are already operating gaming mega-resorts. "The land granting process is continuing," Wynn said yesterday on a conference call. "We're moving right along nicely and on schedule." Wynn said his plans for a Cotai property, which had been in the works for several years, call for a 1,500-room casino hotel with 500 gaming tables, restaurants, shops and a large theatre. "This project is going to justify the time it took to create it," he said. "It is a humdinger."

A fire last month in a rundown tenement that left four people dead highlighted the challenge of providing affordable housing in this city of seven million—and turned up the pressure on the government to fix the problem. The blaze swept through an eight-story building in the city's Kowloon section that consisted mainly of apartments subdivided into rental units as small as 100 square feet, a typical arrangement in older city districts. Even smaller "cage" or "coffin" units have as many as three beds stacked in a 30-square-foot space. Demand for subdivided flats has surged in the last few years as record-high home prices have squeezed low-income families into smaller quarters. But the crowding is posing public-safety and other risks. On Friday, responding to mounting public pressure, Hong Kong Chief Executive Donald Tsang reiterated a pledge to announce in October a major overhaul of the city's housing and land-use policy. Mr. Tsang is also under pressure from Beijing: The top Chinese official in charge of Hong Kong affairs said in June that the city's government should address its low-income housing problems. Average home prices in Hong Kong have jumped 76% since the end of 2008. The government said this year it needed to add about 20,000 private residential flats a year for the next decade to ensure a stable property market. "This is no place for humans," said Yang Lianchun, scanning the 150-square-foot subdivided unit she shares with her husband and two young children in the Sham Shui Po district in Kowloon. A stove, desk, refrigerator and bunk bed take up most of the space. One tiny window provides ventilation. Ms. Yang moved to Hong Kong several years ago from mainland China. Her family pays about 4,000 Hong Kong dollars, or about US$500, a month in rent, the bulk of their income. She said the difficulty of finding adequate housing turned her into an activist. She recently represented a grass-roots campaign for affordable housing in a meeting with senior government officials. With demand for housing so hot, landlords are scrambling to take advantage. Subdivided apartments aren't illegal in Hong Kong, but they are subject to structural and fire-safety regulations. Yet some landlords have turned fire escape routes into parts of their rental space, surveyors say, threatening tenants' safety. When last month's fire ripped through the building, some tenants couldn't find a way out and survivors complained of locked emergency exits. Another fire on Monday at the Chungking Mansions, a complex of shops, hostels and partitioned flats in Kowloon's key shopping district, resulted in no deaths. The best way to make housing more affordable, say some analysts, is to increase the land supply designated for housing. Less than 7% of Hong Kong's land is designated for residential use, according to official data. Woodlands, grasslands and wetlands constitute 67% of the city's 1,108 square kilometers. "Hong Kong isn't short of land," said Chau Kwong-wing, chair professor of real estate and construction at the University of Hong Kong. "Our land-use design has failed to catch up with the changes in society." The government has restricted land use to keep prices high so that it can collect more revenue when it sells tracts, said Alice Poon, a former executive at a Hong Kong real estate developer and author of "Land and the Ruling Class in Hong Kong." The government's "over-reliance on land-sale revenue for its fiscal health is the root problem of its land and housing policies," she said. Mr. Tsang acknowledged the problem on Friday. "I have always believed we must first tackle…market demand and land supply," he told lawmakers. "This is the only way to resolve our housing problem in the long run." Housing has been a major public-policy challenge for decades in Hong Kong, a densely populated city of mostly mainland Chinese immigrants and their descendants. The influx of migrants in the early 1950s prompted the government to develop one of the world's most comprehensive public rental-housing systems. About half of Hong Kong's residents live in public rental apartments, which enjoy much lower rents. But eligibility is restricted to permanent residents under a certain income level, however, and the waiting list can be as long as a few years. Compounding the supply problem are low interest rates stemming from the Hong Kong dollar's peg to the U.S. dollar. Last year, mortgage rates in Hong Kong dipped below 1%, adding fuel to the home-price surge. Since 2009 the Hong Kong government has introduced a series of measures to slow home-price growth, such as raising the minimum down-payment requirements, lowering loan-to-value ratios for mortgages and imposing an additional tax to curb speculation. But analysts and lawmakers say the measures, at best, might bring only a temporary lull in property sales. "Speculators and developers are only a small part of the housing issue," said Francis Lui, professor of economics at the Hong Kong University of Science and Technology. "The lack of government resources for identifying and developing residential sites is the ultimate root of the problem." There are some signs that prices are stabilizing, as local banks have begun to raise their mortgage rates to compensate for the tighter lending rules. Andrew Lawrence, analyst and head of Asia's property sector at Barclays Capital, said he expects that Hong Kong's mortgage rates, now more than 2%, will rise to 4% to 4.5% by the end of 2012. He said housing prices could fall by up to 30% by the end of 2012. But while that would be a big correction, he said, it would be only a minor blip for a market that has risen by 18% a year on average since 1983.

 China*:  July 22 2011  Share

Chinese Basketball Great Yao Ming Retires - Yao Ming announced his retirement, closing the book on the path-breaking career of China's first major international basketball star. Capping weeks of speculation that a history of injuries had finally caught up with the towering center, Mr. Yao on Wednesday told a packed ballroom at a Shanghai hotel, "I will end my career as a professional basketball player." Since the broken foot that ended his latest season in December, he said, "there has been tangle and twist in my heart." The 30-year-old center, who played for the National Basketball Association's Houston Rockets, spent more than a decade in professional leagues in China and the U.S., as well as in international amateur competition. His achievements on the court were impressive, including eight trips to the NBA All-Star game, but he is in some ways best known for his accomplishments as a marketing giant and his role as an informal ambassador—for China to U.S. sports fans, and for basketball to his native country. "Yao Ming has been a transformational player for the NBA and a testament to the globalization of our game," NBA Commissioner David Stern said in a video statement Wednesday. "His dominant play, his endearing demeanor, his extensive humanitarian efforts and really his great sense of humor have made him an international fan favorite and provided, by itself, an extraordinary bridge between basketball fans in the United States and basketball fans in China." Because of the NBA's current labor lockout, league officials weren't allowed to attend the announcement, though Houston Rockets General Manager Daryl Morey was given special permission by the league to be there. The absence of Yao on the court will likely sting the NBA and its corporate partners in China, but his success has lifted the profile of the entire league there. Indeed, American basketball players have grown so popular in China that in the past two years Yao's jersey hasn't been among the league's top 10 sellers. Yao, 7-feet-6-inches (2.29 meters) tall, was the Houston Rockets' first pick in the 2002 NBA draft, making him the first Chinese player picked in the draft's first round. Prior to his U.S. debut, he had played five seasons for his hometown Shanghai Sharks of the Chinese Basketball Association and won a league title there in 2001. He said Wednesday that he would return to the Sharks in a management role, with an eye toward possibly becoming general manager. He now owns the team. Yao's eight seasons in Houston—during which he averaged 19 points and 9.2 rebounds per game and was an All-Star each year—made him a global star. He led the Rockets to the playoffs four times, though the team advanced past the first round only once. He was also among the league leaders in endorsements, pitching for Nike Inc., Coca-Cola Co., McDonald's Corp. and Visa Inc. His face and wry sense of humor were as ubiquitous in the U.S. as in China, where he helped the NBA make inroads in a burgeoning market for the sport. Yao's physical gifts—he is the only child of two former basketball players—enabled him to reach his sport's biggest stage, but they weren't without limits. He was a force on the court when healthy, but his frequent foot and leg injuries caused him to miss 250 games over his final six seasons—including all but five games last season. He had hurriedly recovered from an earlier foot injury to headline the 2008 Summer Olympics in Beijing, where he carried the Olympic torch through Tiananmen Square and led the team, though China didn't win a medal. Zhang Weiping, a basketball commentator for state broadcaster CCTV and a member of the Chinese national team in the 1970s, told Chinese website that Yao's influence went far beyond the game he played, saying that he served as a platform for the West to get to know China, and that his personality made him a fan favorite in his homeland. "Chinese basketball fans loved Yao Ming because, despite his height, he was accessible," Mr. Zhang said. "His ability to touch people can be summed up in a single word: sincerity. That was what allowed him to go so far." Li Qiuping, Yao's former coach in Shanghai, said, "I'm not too shocked about [Yao's retirement]. Age matters to every player. It's natural for him to retire from the field." Chinese fans were vocal in lamenting Yao's departure. Zhu Yingsheng, an engineer in Shanghai, voiced a complaint often heard during Yao's career—that the rigor of the NBA schedule combined with his commitment to China's international tournament play wore down Yao's body. "It's a pity for Chinese basketball fans; we dreamed of seeing him win the NBA championship, but we understand the injury that has led to his retirement," Mr. Zhu said. "The back-and-forth between the NBA and China's national team destroyed his health. He bore too much hope and expectation, which is definitely not good for an individual." "Today is one of the darkest days for China's sports circle as well as NBA history," wrote blogger Neo on Weibo, the most popular of China's Twitter-like microblogging sites. "How many Chinese started watching NBA just because of Yao? It's impossible to calculate this number, he is a Chinese sporting phenomenon, he is China's name card."

Profits at state-owned enterprises rose 22.3 per cent in the first half of the year compared with a year ago, but their expenses also increased rapidly, the Ministry of Finance said yesterday. In the first six months, companies owned or controlled by Beijing and local governments reported a combined net profit of 1.13 trillion yuan (HK$1.36 trillion). During the period, companies under the direct control of the central government posted a total profit of 765 billion yuan, up 18.8 per cent year on year. Firms controlled by local governments saw a 30.5 per cent increase in profits to 360 billion yuan. The combined revenue of all the companies jumped 24.2 per cent to 17.4 trillion yuan, while expenses rose 24.5 per cent to 16.4 trillion yuan. The ministry warned company expenses had grown faster than revenue for three consecutive months. According to government statistics, financial expenses surged the most, up 29 per cent in the first half, while operating costs rose 14.2 per cent and administrative expenses 17.5 per cent. The sectors with the strongest profit growth include building materials, chemicals, nonferrous metals and coal, the ministry said, without revealing specific information for each sector. The real estate, steel, electricity and trading industries grew significantly in May and June, while postal services and telecommunications firms posted lower profits last month. The top five power-generating firms turned profitable since May, after incurring losses in the first four months of the year, the ministry said. State-owned firms have been growing rapidly in recent years. A record 61 Chinese enterprises made the Fortune 500 list of the world's top companies released last month, putting China behind only the United States and Japan for the number of companies on the list. Of the Chinese firms on the list, more than 90 per cent are state-owned. Energy giants Sinopec (SEHK: 0386), China National Petroleum Corporation and State Grid top the list. Analysts said more state-owned companies were outgrowing foreign rivals, thanks to the rapid growth of China's economy, the strengthening of the yuan, government backing and Beijing's encouragement of frequent acquisitions. But despite having grown bigger, many are not very profitable and have poor cost control.

Citic Securities, which recently took stakes in two Credit Agricole subsidiaries, added French broker CLSA, Bank of America Merrill Lynch, HSBC (SEHK: 0005, announcements, news) and Morgan Stanley to its list of underwriters for its planned Hong Kong listing that is expected to raise up to US$2.7 billion. Citic, the mainland's largest listed brokerage, said last month it had bought a 19.9 per cent stake each in CLSA and Credit Agricole Cheuvreux from French investment bank Credit Agricole. Large mainland brokers such as Citic and rival Haitong Securities are trying to raise their profiles with planned listings in Hong Kong, riding the mainland's rapid economic growth and its attempts to "internationalise" the yuan. Citic appointed a team of mainland institutions to handle its listing: Citic's Hong Kong unit Citic Securities International and four mainland banks' investment banking arms - CCB (SEHK: 0939) International, ICBC International, BOC (SEHK: 3988) International and BoCom (SEHK: 3328) International. Securities houses such as Citic, Haitong and Guotai Junan Securities have set up Hong Kong offices and have been advising mainland companies on listing in the city. While Citic chose to partner with a foreign institution to develop its international securities business, its competitor Haitong opted to buy a Hong Kong-listed broker that had an established network of investment banking and wealth management clients. Haitong bought Taifook Securities Group for HK$1.82 billion in 2009 and created Haitong International, which now manages fund products such as yuan bond funds targeting local and international investors. The Shanghai-based brokerage is to follow Citic Securities in floating in Hong Kong. Haitong said it planned to sell up to 15 per cent of its enlarged capital, or 1.2 billion shares, and raise up to HK$14 billion. Analysts said profits of mainland brokerage firms were highly correlated with the performance of the yuan-denominated A-share market, which had underperformed of late. This is because the firms mostly rely on trading commission from customers of brokerage services. Profits from investment banking and proprietary trading are not as significant. The mainland's stock market downturn in the first half of the year claimed some brokerage casualties. A record 15 securities firms posted losses, according to the Securities Association of China. Some 109 mainland brokerages reported a combined net profit of 26 billion yuan (HK$33.43 billion) between January and June, down 11 per cent from a year ago, association figures showed. "There are some selling points with mainland securities houses, especially the sizeable ones," said Kenny Tang Sing-hing, a general manager at AMTD Financial Planning. "But their businesses are relatively cyclical."

Apple Inc. is getting closer to offering the iPhone through China's largest mobile carrier, state-owned China Mobile Ltd., giving the company access to hundreds of millions of new customers. The effort is Apple's latest move in the risky Chinese market, which could play a central role in the company's growth plans. Apple, like other American companies, is walking a tightrope in China's state-managed economy. It has long used Chinese factories to assemble its gadgets. But recently, Apple has begun targeting China's growing consumer class, opening its first retail stores and marketing its products, from Mac computers and iPad tablets to its iPhone. Apple's role in China will expand greatly if China Mobile begins offering the iPhone. The iPhone has been available in China through the country's second-largest carrier, China Unicom (Hong Kong) Ltd., since 2009. But China Mobile, which is the world's largest carrier, has 600 million subscriber accounts, compared with fewer than 200 million at China Unicom. Still, many challenges face Apple, such as government technical requirements that phones use an unusual wireless Internet technology, and the huge market for gray- and black-market electronics, where users can easily buy modified iPhones from overseas as well as fake iPads. Tim Cook, Apple's chief operating officer, last month visited China Mobile's offices in Beijing. Both companies declined to comment on Mr. Cook's rare visit, but the carrier confirmed the two companies are in talks about the iPhone. An Apple spokeswoman said the Cupertino, Calif., company's strategy is to offer the phone to as many carriers as possible. Based in Cupertino, Calif., Apple has historically focused on its home U.S. market, with the Americas region generating 38% of the company's $24.7 billion of revenue in the March quarter. But Apple is again expected to post strong China sales Tuesday when it reports earnings for its June quarter. Indeed, China is already Apple's fastest-growing region in terms of sales, despite the fact that the company has opened only four Apple Stores in the region. Apple's push into China comes relatively late, a timing issue that has its costs. Other companies, from Hewlett-Packard and Dell to Nokia, Samsung and Motorola, have long been investing in China's booming mobile and PC markets. Apple faces strong competition from these companies, which already enjoy healthy brand recognition, as well as from other firms such as HTC, Huawei and ZTE. The latter two are making inroads with inexpensive smartphones that sell for less than $150.

Hong Kong*:  July 21 2011  Share

Gold rose above US$1,600 an ounce, a record high, as debt concerns in Europe and the US boosted demand for the metal as a protector of wealth. Bullion climbed to all-time highs in euros and pounds, and silver topped US$40 an ounce. Prices are up for an 11th day, the longest streak of gains since July 1980. President Barack Obama is pressing congressional leaders for a multitrillion-dollar agreement in deficit-cutting talks as negotiators near an August 2 deadline for raising the debt limit. A default would cause more panic than the collapse of Lehman Brothers Holdings in 2008, former Treasury Secretary Larry Summers told CNN on Sunday. Treasuries rose and the euro fell amid concern European leaders will fail to stop the region's spreading debt woes at a summit this week. "The market is showing concerns that the debt problem is not going away," said Bernard Sin, the head of currency and metal trading at MKS Finance, a bullion refiner in Geneva. "Investors are happy to accumulate and US$1,700 is not difficult to achieve" by the end of the year, he said. Immediate-delivery gold gained as much as US$7.25, or 0.5 per cent, to US$1,600.80 an ounce and traded at US$1,599.40 by 9.50am in London. Gold for August delivery was 0.6 per cent higher at US$1,599.90 an ounce on the Comex in New York after reaching a record US$1,601.20. Gold is up 13 per cent this year, heading for an 11th straight annual gain, the longest winning streak since at least 1920 in London. The MSCI All-Country World Index of equities gained 1.7 per cent this year, the Standard & Poor's GSCI Index of 24 commodities is up 9.5 per cent and Treasuries returned 3.5 per cent, according to a Bank of America Merrill Lynch index. Bullion jumped to a record €1,139.395 and £994.91 yesterday after European Central Bank president Jean-Claude Trichet reiterated his opposition to any restructuring of Greek debt. Euro-zone leaders will meet in Brussels on July 21 to discuss the "financial stability" of the region, European Union President Herman Van Rompuy said last Friday. The second summit in a month follows a worsening of the crisis that drove bond yields to euro-zone records in Europe's most debt-laden nations. "The situation in the euro area, as well as the proliferation of the debt-ceiling problem in the US, continues to be a very strong focus," Ben Westmore, a minerals and energy economist at National Australia Bank, said by phone from Melbourne. "It's difficult to see the problems and downside risk to global growth being less of a focus." Bullion almost doubled since December 2008 as the Federal Reserve kept interest rates at a record low and governments spent trillions of dollars to prop up the economy after the worst global recession since the second world war. The Treasury Department has warned the US debt ceiling must be lifted by August 2 to avoid default. Standard & Poor's and Moody's Investors Service are threatening to downgrade the government's credit rating if Congress does not act. Gold holdings in exchange-traded products rose 0.6 per cent to 2,101.9 metric tonnes on Friday, data compiled by Bloomberg shows. That is the highest level since December.

Citic Securities, China's largest publicly traded brokerage, added four global banks to a previously Chinese-only team to help arrange its planned US$2 billion listing in Hong Kong, IFR reported on Tuesday, citing three sources with knowledge of the plans. The firm hired Bank of America Merrill Lynch , Credit Agricole’s CLSA unit, HSBC (SEHK: 0005) and Morgan Stanley, said IFR, a Thomson Reuters publication. The Shanghai-based brokerage previously had an all-Chinese team consisting of its Citic Securities International unit, CCB (SEHK: 0939, announcements, news) International and ICBC International as joint sponsors of the deal, together with BOC (SEHK: 3988) International and BoCom (SEHK: 3328) International as joint bookrunners. Citic Securities will have to jostle with rival Haitong Securities and banks including China Everbright (SEHK: 0165) Bank and China Guangfa Bank that also plan large offerings in coming months to raise funds and bolster their balance sheets. People’s Insurance Company of China Group (PICC (SEHK: 2328)) and New China Life (SEHK: 2628) also plan listings in coming months, with about US$25 billion in share offerings in Hong Kong and China coming to the market over the next 12 months from insurers alone, Credit Suisse estimated in a report last week. Citic Securities had said it would sell up to 10 per cent of its enlarged share capital, or about 1.105 billion shares in the Hong Kong offering.

Hong Kong's largely unrated yuan bond market is growing fast despite concerns over poor corporate governance at mainland companies. The offshore yuan bond market came to a standstill last month following fears over the Greek debt crisis and a short-seller's report that Canada-listed Sino-Forest overstated its timber holdings. Yields on the bonds of Chinese companies, which are heavy borrowers in the international bond market, have risen since last month. Now there are signs that there has been more active trading in the usually wafer-thin yuan bond market, in which investors tend to hold the bonds until maturity. Trading volume shot up to 3 billion yuan (HK$3.63 billion) this month compared to just 200 million yuan in January, according to Deutsche Bank estimates. Investors such as private banks tend to hold the bonds, which typically have an investment term of just three years, until maturity, hoping to capture the gain in the currency. Banks which are responsible for underwriting bonds also tend to buy up to 95 per cent of what they sell, especially in the case of high- quality companies, leaving little choice in the secondary market. Liquidity has improved because the supply of bonds has also jumped, giving investors more incentive to sell when a better deal comes onto the market. Vishal Goenka, head of local currency credit trading for Asia at Deutsche Bank, expects liquidity to persist and yields to come down in coming months. New yuan bond sales were already up 140 per cent, reaching 85.32 billion yuan as of July this year from 35.68 billion yuan over the same period last year. While banks used to buy up most bonds, yuan devotees have now extended to fund managers, hedge funds which run global credit strategy and proprietary trading firms. Insurance companies prefers longer dated bonds. Goenka also expects more overseas firms to tap the offshore yuan bond market for capital, especially those from emerging economies. Deutsche Bank estimates that 250 billion yuan in bonds bonds will be sold by the end of this year, which has already seen yuan bond sales from Volkswagen and Unilever. The German bank also joined the parade of bond underwriters with a bullish view that mainland firms would increase their borrowing offshore as long as onshore credit remains tight. The yuan bond market remains relatively loosely regulated and companies with short track records and weak corporate governance have been able to raise capital in Hong Kong even without a rating. US-listed LDK Solar, a manufacturer of multicrystalline solar wafers, managed to borrow in the yuan bond market in February but failed to so in the Eurodollar bond market subsequently even after seeking credit ratings from all the major rating agencies, a report by HSBC (SEHK: 0005) pointed out.

Hong Kong’s unemployment rate stood at 3.5 per cent of the workforce in June — the same level as in May, the Census and Statistics Department said on Tuesday. A department spokesman also said total employment hit an all-time high of 3.61 million last month. This was up by 10,100 from May. Most new jobs created last month were in the construction and insurance sectors, while most job losses were reported in the wholesale, accommodation and food service sectors, the spokesman said. The under-employment rate, which measures the number of people unable to find more than 35 hours of work a week, also dropped to 1.8 per cent – down from 1.9 per cent in May. Secretary for Labour and Welfare Matthew Cheung Kin-chung explained that new jobs created last month were sufficient to absorb people who had had recently joined the workforce – pushing total employment up. But Cheung said the short-term outlook would remain uncertain. This was because the labour supply would grow in the next few months with the entry of fresh graduates and school leavers. “The extent to which these newcomers will be absorbed into employment will hinge on the number of new jobs created against the background of a vibrant economy,” he said. Cheung added that Eurozone debt crisis and weak growth in the United States could also lead to future economic uncertainty.

The initial student intake might have fallen short of its target, but the American art school operating in the former North Kowloon Magistracy, a heritage building, is confident it can reach its capacity of 800 to 1,000 within three years. Savannah College of Art and Design also said that despite having invested more than HK$250 million in the school's start-up and revitalisation of the 1960 building, which has grade two historic status, it had enough money to make a long-term commitment to the city. Of 1,000 applicants from 47 countries, the school took 141 students for its Hong Kong branch's inaugural term last year, fewer than half its initial goal of 300. But vice-president John Paul Rowan said that was well above the initial intake for its largest branch in Atlanta, which opened in 2005 with 77 students. "We have doubled that," Rowan said. He said that in just six years, the number of students at the Atlanta branch had jumped to nearly 1,800. The ultimate capacity of the Hong Kong campus was expected to be 800 to 1,000, depending on which majors the students chose. Rowan said the response for the next academic years had been strong, with applications from 31 countries, but would not say how many applications there had been or how many students the school planned to take for 2011-12. The school is the first of the Development Bureau's revitalisation partnership schemes to start operations. The chairman of the Advisory Committee on Revitalisation of Historic Buildings, Bernard Chan, said the committee was concerned it did not meet its goal of taking 300 students in its first year, as stated in its initial business plan. But he said more time should be given to the school, as it had been operating for just a year: "It's too early to tell." The school's degree programmes have been accredited by the Hong Kong Council for Accreditation of Academic and Vocational Qualifications as full-time, accredited, self-financing, non-local degree programmes. Local students can apply for government grants and low-interest loans. Rowan said the school had been collaborating with the city on community and commercial levels. Students had worked with Sham Shui Po District Council to design street lighting displays free of charge and had joined "real-world" projects with big brands and corporations from fashion to film and design, including Yves Saint Laurent, Shaw Studios and American Greetings. Some of the projects were commissioned by the companies, but the school declined to reveal which were paid projects. "We have a long-term financial plan," Rowan said when asked about the school's financial status. "Hong Kong [campus] is relatively small and we have a tremendous amount of resources available for Hong Kong." He said the school had handed out nearly HK$13 million in scholarships over the past academic year. On costs, Rowan said maintenance had not been much more than expected, as the school was experienced in the conservation of heritage buildings, but inflation, the minimum wage and staff had added to costs. The school will raise tuition fees in the next academic year. A bachelor's degree programme will cost HK$236,700 per year in the 2011-12 academic year, compared with HK$225,284 in 2010-11. A master's degree will cost HK$239,400 in 2011-12, up from HK$228,771.

Cashless taxi rides are set to become even more common, with hundreds of cabs kitted out to accept Octopus payments, in addition to several that already accept credit cards. Octopus Cards says it will team up with multimedia platform Motion Power to fit 300 urban taxis with an Octopus reader over the next four months. That will bring the total number of taxis accepting Octopus to 331, the rest being part of a pilot program launched in December. An enhanced iPhone application called TaxiGo, to be launched soon for free downloads, will list Octopus-enabled taxis nearby and allow the passenger to order one with a simple touch of the screen. "The [card] readers will save drivers time as they will not have to count the change," Octopus chief executive Sunny Cheung Yiu- tong said. "It is also safer as they won't need to handle much cash and can get the money in their bank accounts the next day." But some taxi drivers are concerned about higher operation costs, due to the administration fee of 1 percent for each transaction. "I prefer cash to Octopus because of the fee," a driver named Chan Wai-yip said. "But we have no say in it. It is not our choice but that of the operators and owners." Others fear Octopus use will affect tips as passengers who wish to do so will need to press a button on the reader HK$1 at a time. Passenger Gemma Harris welcomed the new payment method, saying it is more convenient as she need not carry too much cash. But she too feels tips may suffer. "Usually I give the change to the driver as a tip. [The new method] may see drivers get less tips."

 China*:  July 21 2011  Share

In Beijing's Caishikou Department Store, people are buying gold as if they are purchasing vegetables. And in the Shin Kong Place shopping mall, sales of luxury products such as Gucci and Prada are set to reach 400 million to 500 million yuan annually. And that, according to a top Beijing official, is why the time is fast approaching for tariffs on luxury goods to be lowered in the mainland. Such a move will boost sales and consumption and is in keeping with the 12th Five Year Plan, Zhang Guoqing, the deputy director of policy research at the Ministry of Commerce said yesterday. But he stressed the final decision and the timing rest with the Ministry of Finance and not the Commerce Ministry. "High tariffs on luxury goods no longer reflect the actual situation in China's economic development," Zhang said in an interview in Beijing with Sing Tao Daily, sister publication of The Standard. "It is generally accepted that an appropriate adjustment of tariffs on luxury goods is necessary and should be done ... if you don't adjust it, people will buy these goods overseas and help other countries' consumption." High tariffs are intended to discourage people from adopting a luxury lifestyle - but times have changed with the rise in incomes and people's aspirations to pursue a certain quality of life. When the prices of goods in the mainland are double or even higher than their cost outside the country, local money flows overseas, Zhang said. He believes that billions of yuan now going overseas will remain in the country if tariffs are lowered. Mainland consumers spent four times more on branded luxury goods in overseas markets than in the domestic market last year, due primarily to the large price differences, a recent World Luxury Association survey found. It was reported in June that tariffs on items including cosmetics, cigarettes and liquor will be among the first to be slashed by up to 15 percentage points, followed by jewelry, clothes, bags and watches. No timetable was given for when this will happen. Earlier, Ministry of Commerce spokesman Yao Jian said it is "inevitable" that the mainland will lower some tariffs on imported goods, especially mid to high-end products. If the Finance Ministry decides to go ahead with the cuts, Hong Kong retailers selling luxury goods and the tourism trade might be affected.

China's tax revenues in the first half of the year surged 29.6 per cent from a year earlier to 5 trillion yuan (US$773 billion), underscoring the government's ability to deal with any fallout from piles of local government debt. Tax revenue growth slowed from a 32.4 per cent rise in the first quarter of this year. Revenue from corporate income tax surged 38.3 per cent in the first half while personal income tax climbed 35.4 per cent and consumption tax rose 20.2 per cent, the Ministry of Finance said in a statement on its website. Receipts from customs duties rose 32.1 per cent and those from property tax rose 24.4 per cent, the ministry said. The ministry attributed the strong tax revenues in the January-June period to solid economic growth, rising corporate earnings as well as higher prices that boosted receipts. Stringent tax collection also helped, it added. China’s fast economic growth and hefty government revenues will help contain potential risks from swelling local government debt as a result of Beijing’s massive economic stimulus during the global financial crisis, analysts say. The national auditor said last month that local governments had chalked up about 10.7 trillion yuan in debt as of the end of last year, 4.97 trillion yuan of that being held by local government financing vehicles. Last week, China reported a fiscal surplus of 1.25 trillion yuan in the first half as steady economic growth and rising prices lifted government revenues. China’s economy, which grew a faster-than-expected 9.5 per cent in the second quarter, is expected to retain much of its momentum in the coming quarters despite policy tightening, according to the latest Reuters poll.

Baidu signs music agreement with studios - Baidu, China's largest search engine, said on Tuesday it has signed an agreement with major music studios for the licensed distribution of music through its mp3 search service. Baidu said in a statement it had signed the agreement with One-Stop China, a joint venture company whose shareholders are Universal Music, Warner Music and Sony Music. Under the terms of the deal, Baidu will remunerate music content owners on a per-play and per-download basis for all tracks delivered through its mp3 search service. "Baidu has always striven to provide the best possible experience to our users," said Jennifer Li, Baidu's chief financial officer. Baidu also confirmed the launch of its social music platform, ting!. The agreement caps off years of acrimonious legal wrangling between music studios and Baidu whom the studios accused of abetting piracy via its mp3 search that provided links for users to download pirated music. Baidu said in the statement that the agreement between One-Stop China was accompanied by a conciliation agreement endorsed by the Beijing High People's Court that ended outstanding litigation between all parties involved in the deal. "ting!" will be supported by advertising and One-Stop China will license to Baidu its catalogues and new releases which can be streamed or downloaded from Baidu's servers.

China is expected to be the second-largest market in the world for Siemens Ltd's healthcare sector over the next two years, driven by the company's new five-year plan focusing on the development of basic medical care. "During the next five years, Siemens' healthcare division will make great efforts to enter the medical care market in China's second- and third-tier cities and rural areas, in which our business growth will soon lift China to the division's second-largest market after the US," Wu Wenhui, sector cluster lead of North East Asia for the division, told China Daily. Wu said by 2015, revenues from the basic healthcare business will account for more than half of Siemens Healthcare's total income in China. China is currently the fourth-largest healthcare market for Siemens, and one-third of the sector's revenues come from the basic healthcare business, according to the company. "To achieve the new target, Siemens Healthcare plans to strengthen its efforts to develop new products tailored to the rural market," Wu added. In 2010, Siemens Healthcare introduced low-cost products in China. It will also develop new models of its X-ray machines, computed tomography units and ultrasound devices to meet the basic healthcare demand from community and rural hospitals over the next few years. At present, 11 percent of Siemens Healthcare's income is devoted to research and development of new products. Further, "Siemens Healthcare will increase its investment in China's rural areas where the development of healthcare requires more capital support," Wu said. Siemens has so far invested 11.9 billion euros ($16.7 billion) in basic healthcare projects. "Most county-level hospitals in China not only lack medical equipment but also require professional training in the use of equipment and treatment technologies, so we will try to become familiar with the basic healthcare market as much as possible and provide what it needs," Wu said. On Saturday, Siemens Healthcare donated equipment worth 1.9 million yuan ($293,930) to the Jinggangshan Traditional Chinese Medicine Hospital, which is the first stage of the "Siemens Healthy China" plan that aims to improve medical skills in China's rural areas. "Siemens will bring healthcare equipment and medical techniques to the People's Liberation Army's Long March areas like Jinggangshan, most of which are still undeveloped," Wu said. Wu said Siemens has spotted business opportunities in the basic healthcare field, as the Chinese government plans to improve rural medical care during the 12th Five-Year Plan (2011-2015) period. The basic healthcare sector is growing 16 percent year-on-year at present. Wu said the company's business growth in the basic healthcare field will be double that of the overall market.

A salesgirl shows gold bracelets at a shop in Qionghai, Hainan province, on July 13, 2011. The price of gold jumped above $1,600 an ounce for the first time Monday night. 

Air Tickets Regain Altitude as High Speed Rail Line Runs Late - While a series of glitches in China’s trophy high-speed rail route linking Beijing and Shanghai have been a headache for the country’s rail authorities, they’ve managed to make at least one group smile. No, it’s not Kawasaki and the other foreign bullet-train producers. Angry as they may be with China over what they describe as questionable intellectual property claims, problems with the new high speed line aren’t likely to help their cause much. Instead, it’s the airlines that offer service between Beijing and Shanghai. According to a report Monday in the state-run China Daily, airlines stopped giving deep discounts and started charging higher prices for air tickets between the two cities over the weekend, taking advantage of a string of delays caused by malfunctions on the Beijing-Shanghai high-speed train line last week. Based on information available on, an online travel service, China Daily said the cheapest price for a flight from Beijing to Shanghai in the following four days was 720 yuan ($111) before taxes and other surcharges. That amounts to a 36% discount on the full ticket price of 1,130 yuan. Most tickets were being offered at full price, and only a few came at a 20% discount, the newspaper said. In contrast, airlines were selling tickets as low as 360 yuan immediately after the highly-heralded high-speed train line opened on June 30. Passengers traveling on the line pay 555 yuan for a one-way, economy-class ticket between Beijing and Shanghai. The airlines’ move comes after a series of power failures last week led to stoppages on a few dozen trains along the Beijing-Shanghai line, leading China’s powerful Ministry of Railways to issue profuse apologies. The combination of speed and reliability promised by the new rail link was supposed to deal a major blow to air travel between Beijing and Shanghai, which has long been notorious for delays caused by everything from poor weather to the monopolization of large tracts of Chinese domestic air space by the military. On Thursday, Wang Yongping, spokesman for China’s powerful Ministry of Railways, expressed regret for those glitches during an online chat, which was later posted on the ministry’s website. Mr. Wang blamed the train delays on power outages and other malfunctions as he provided some technical details. “The malfunctions haven’t affected the overall safety” of the rail line, the rail spokesman said. “Our technology and equipment are still very advanced and qualified. China’s high-speed rail will show better performance in the future once the current spate of malfunctions is resolved.” The new line, he noted, was “still in a break-in period.” Mr. Wang’s apology last week followed an incident on July 13 during which service on the line was temporarily halted after one of the trains broke down, causing hundreds of passengers to have to transfer to another train to complete their journey.

Hong Kong*:  July 20 2011  Share

'Introduction listings' draw few investors - Despite weak trading, more firms use this route to raise profile without risking IPO price slump - The Hong Kong stock exchange, which itself listed by introduction. Forty-eight companies have taken the same path, including Brazilian mining giant Vale. Investors are not buying the string of companies listing in Hong Kong through a rare method involving a market debut without raising money. The method is technically known as "listing by introduction", though some use a different term. "Expensive marketing", is what one investment banker called it. Designed to raise a company's profile among investors and provide a head start for any future fundraising, the introduction listings have had limited success. Trading activity has been weak, with zero trades for a week in some cases. Four companies listed in Hong Kong by way of introduction in the past three weeks alone, compared with seven for all of last year. US-based luxury group Coach said it planned such a listing by the end of the year, while a local media report also put French banking group BNP Paribas as a candidate for an introduction listing. Unlike typical initial public offerings, companies listing stock by introduction raise no capital and issue no new shares, which can limit their appeal to investors. Listing by introduction has become popular among companies looking to build a brand in Hong Kong and the rest of greater China, where just about every major industry has seen massive growth during the past five years. Having a traded stock allows them to boost their profile among investors and the public in Hong Kong, the region's financial hub and the world's busiest IPO market for the last two years. It also allows a company to establish a presence without the risks of flopping an IPO in a volatile market. Since 2000, when Hong Kong Exchanges and Clearing (SEHK: 0388) listed by introduction, 48 companies took the same path. Last year alone, seven companies listed in Hong Kong by introduction, including Brazilian mining giant Vale. "The listing by introduction allows them to have a platform to raise money if they need to, without going through the IPO process again," said Kester Ng, head of equity capital and derivatives markets for Asia-Pacific at JPMorgan, which sponsored the Vale listing. "Placements can be done more quickly." The pace has picked up, with four listings since late June, including handbag maker Lee & Man Handbags, Singapore-based shipping company Courage Marine Group and circuit board maker Elec & Eltek International. London-listed mining company Kazakhmys, which originally planned a HK$200 million offering, opted instead for a listing by introduction because of a slump in global markets. "This listing will help raise our profile in the region's major financial centre and will support the future development of our business by providing access to a much wider group of investors," Oleg Novachuk, chief executive of Kazakhmys, said in a statement last month.

Japanese noodle bosses reach out to HK diners - Restaurant chains hit by earthquake and tsunami are aiming to expand in China to boost recovery - Bosses of ramen restaurants, including Kouji Tashiro of Menya Kouji (second left), visit Hong Kong. Several major ramen noodle chains whose business was impacted by the earthquake and tsunami in Japan are eyeing expansion in Hong Kong and the mainland to help make up for lost volumes back home. "We see a big opportunity in Hong Kong and China," Kouji Tashiro, managing director of the Menya Kouji restaurant chain, said yesterday at an event promoting six of the biggest ramen noodle franchises in Japan. Tashiro, whose company has more than 90 stores in Japan, said he is in talks with 10 potential Chinese franchisees, eight from Hong Kong and two from the mainland, with two noodle shops set to open in Dalian in October. He said a bowl of noodles at Menya Kouji's shops in Japan sells for between HK$45-$150, but prices could be cheaper in Hong Kong as wages were lower and the company would plan to source ingredients locally. They would also adapt the flavour slightly for local taste, using less oil, for example, because Hongkongers tend not to like oily noodle soups. Hong Kong has between 800 and 1,000 Japanese restaurants, according to Ryukou Abe, vice president of the Hong Kong Japanese Restaurant Association. He believes maybe 20 shops have been forced to close due to a downturn in business since the earthquake and tsunami. But Abe said new Japanese restaurants were opening at the same time, as Hong Kong remains an attractive market for expansion. "In the months since the earthquake we have seen some Japanese restaurant operators looking to overseas markets, including Hong Kong." Abe said the post-quake situation had impacted on restaurateurs in Hong Kong unevenly, with sushi and high-end shops bearing the brunt of the downturn as diners avoid raw food. By contrast, local ramen shops and izakayas remained relatively unaffected, and showed room for growth. He estimated the number of Japanese restaurants in Hong Kong would rise by around 10 per cent by the end of the year.

Web security firm outguns industry giants - Network Box won recognition from the Hong Kong government as the best in the business and is now working to make its innovation a global standard - Michael Gazeley says his company's protection costs HK$1,800 a month for a small company. Managed security services provider Network Box is looking to parlay its triumph at this year's Hong Kong Awards for Industries into further expansion of its domestic and international business. "We certainly hope so," said Michael Gazeley, the co-founder and managing director of Network Box. "We are obviously working hard." That expansion drive would include licensing its award-winning technology to more internet service providers (ISPs) and providing its managed services to more small and medium-sized enterprises (SMEs) in Hong Kong. On June 30 the Kwai Chung-based company received the technological achievement grand award, the highest distinction bestowed to its industry by the Hong Kong government for its "Z-Scan" system. A technology that sits in a digital hub on the internet, Z-Scan is offered by Network Box to all enterprises as a so-called cloud-computing service. Z-Scan was designed to reduce the time it takes to identify new malicious software, or malware, and automatically provide a defence against them. That includes so-called zero-day viruses, which are previously unknown malware for which a specific defence is not yet available. "The key advantage of Z-Scan is its speed," Gazeley said. "It is able to react to new viruses in about three seconds. That means it takes as little as three seconds from the time a new zero-day virus first appears on the internet till it is blocked by Network Box systems around the world." Gazeley estimated that performance was "about 4,200 times faster than what our fastest competition can accomplish". That is a far cry from the typical three hours to 20 hours that traditional anti-virus software providers take to protect their customers from new malware. "You need the 15 traditional anti-virus engines to deal with the estimated 6.8 million traditional viruses out there. But you also need Z-Scan to deal with the roughly 90,000 zero-day viruses attacking right now," Gazeley said. Founded in 2000, Network Box has established so-called security operations centres in Hong Kong, the mainland, Taiwan, Japan, South Korea, Australia, Malaysia, Indonesia, Thailand, Britain and the United States. "If you imagine the internet as a reservoir full of dirty water, Network Box acts like a professional water filter that sits between the mains supply and your kitchen tap, making that water safe to drink," Gazeley said. Network Box has started to license its technology to North American cloud services providers 6fusion, Artisan and E-ternity. "We have really taken off in the US and Canada," Gazeley said. "We would love to start working with ISPs and other cloud service providers in Hong Kong." Network Box has started approaching government-backed organisations, such as the Hong Kong Productivity Council, to reach more SMEs. Gazeley pointed out that more than 98 per cent of Hong Kong's businesses are SMEs, "almost all of which do not give any thought to cyber-security at all". Network Box's key managed security clients include luxury car maker BMW, video games giant Nintendo, British health care provider Bupa, United Asia Finance, Tradelink, Hong Kong's Applied Science and Technology Research Institute, Midland Realty, robotic consumer entertainment products developer WowWee Group, Ad-On Mobile Media, Centaline Property, children's clothing supplier Nicholas & Bears, and Chow Tai Fook Jewellery. Eric Lau, the chief operating officer at WowWee Group, said the cost of the Network Box system was "far lower than additional manpower dedicated to monitoring [network security threats]". "For a typical Hong Kong company of less than 25 people, the cost of being protected is just HK$1,800 per month," Gazeley said. "There is no hardware to buy. No additional people to hire. That's it." The importance for small companies to boost their network security can be gleaned by failed network protection in large organisations in recent months. Hacking groups Anonymous and LulzSec caused widespread and highly publicised mayhem in organisations such as RSA Security, the US Defence Department, the International Monetary Fund, the European Space Agency, Sony, Citigroup and Sega.

Macau's booming casinos are now more reliant on VIP gambling junkets and their high-rolling customers than at any point during the last six years, data released yesterday shows. The city's 34 casinos booked a record 74 per cent of their gambling revenue from the high-stakes VIP segment in the second quarter, more than at any time since regulators began releasing quarterly data in 2005, according to Gaming Inspection and Co-ordination Bureau figures. VIP baccarat revenue rose to 48.54 billion patacas in the April to June period, up 50 per cent from a year earlier. Mass-market revenue from public gaming tables rose a more modest 36.2 per cent to 17.07 billion patacas, while slot machine revenue rose 39 per cent to 2.83 billion patacas. Macau's growing reliance on the high-volume, low-margin VIP segment means the success of casino operators - and of the city itself - is increasingly susceptible to liquidity trends on the mainland, as most high rollers are brought in by junket agents and gamble on credit. The casino industry is Macau's biggest employer, and direct taxes on gaming accounted for 84 per cent of total government revenue in the first five months of the year. The rising prominence of the VIP segment increases regulatory risk for Macau's six licensed casino operators, as outsized growth of high-stakes revenue means they are growing even more dependent on the loosely regulated junket agents. Junkets are the middlemen who bring VIP players to casinos, issue them credit for gambling and collect their debts - often by resorting to extrajudicial measures in places like the mainland, where casino debt is not legally enforceable. Analysts reckon junket agents are responsible for 90 per cent or more of Macau's VIP gaming revenues. "It's very simple: the junket reps own Macau - period," Sheldon Adelson, chairman of Las Vegas Sands and Sands China, told a group of investors in January. In exchange for their services, and for shouldering credit risk, Macau's junket agents receive commissions from casino operators equal in some cases to more than 45 per cent of casino revenue. Much of this is passed on by junkets to players as a rebate on the amount gambled. The taxman takes 38 to 39 per cent, leaving the operators with 15 per cent or less of VIP revenue to cover the cost of building and operating the casino. Macau added 384 new gaming tables (an 8 per cent increase) in the second quarter, for a total of 5,237 units, following the addition of the HK$15.5 billion, 2,200-hotel-room Galaxy Macau casino resort on Cotai, which opened in May. In order to rein in the runaway growth of the gaming industry, the government has said it will cap the number of casino tables in operation at 5,500 units until 2013. Sands China plans to open its US$4.2 billion Cotai casino complex towards the end of this year or early next year. Executives said last year the property, which will have 6,000 hotel rooms, including 3,000 in a new Sheraton, would open with 670 gaming tables. Executives said at the time that about 400 of those tables would be new and the rest would either be traditional gaming tables relocated from its Venetian, Four Seasons or Sands casinos or electronic gaming tables, which are classified as slot machines. But the government's table cap implies there is now room to add only 263 new gaming tables in Macau between now and 2013.

Deutsche Bank launched an investable index tracking a basket of offshore yuan-denominated bonds on Monday, indicating foreign investors' growing hunger for such assets. The index will allow sizeable passive funds to enter the growing “dim sum” bond market and will be denominated in offshore yuan or “CNH”, US dollars and Hong Kong dollars, the European lender said in a statement. “Improving market access not only raises the profile of CNH bonds amongst investors globally but ultimately strengthens the market’s role as a reliable source of yuan financing by boosting secondary market liquidity,” said Vishal Goenka, head of local currency credit trading for Asia at Deutsche Bank. The product will attract flows from investors in Europe and the United States who want access to the market but don’t have enough resources to scrutinise every single credit, Goenka said. As of July this year, the index represents a total market capitalisation of 72.33 billion yuan (US$11 billion) with an average duration of 2.55 years and annualised index returns of 7.38 per cent in US dollar terms, the bank said. The index tracks CNH bonds and certificates of deposit with a minimum size of 1 billion yuan and at least 12 months to maturity. It will be calculated in CNH and rebalanced on a monthly basis, it said. Yuan deposits in Hong Kong have grown nearly six-fold in the past year to 548 billion yuan at the end of May as China’s ambition to spread the use of its currency, also known as the renminbi, in international trade has made the territory an offshore yuan hub. Nearly 90 billion yuan of bonds have been issued in the first half of the year compared with about 42 billion for all of last year. Secondary market liquidity in offshore yuan bonds has mirrored the pick-up in activity in the primary market, with monthly volumes rising to 3 billion yuan in July compared with about 200 million yuan in January, Deutsche Bank said. Bank of China (Hong Kong) and Citigroup offer roughly similar products though they are not investible. Goenka expects the performance of offshore yuan bonds to pick up in the second half as China is close to the end of its interest rate increasing cycle after a torrid performance in June due to economic fears and corporate governance problems surrounding Chinese forestry company Sino-Forest “Macro concerns will probably have a short-term effect. But what I believe from the global investors I’ve met is that the interest is still there and very, very visible,” he said.

The plastic-bag levy introduced two years ago has not helped protect the environment - in fact, the overall use of plastic has risen because of it, according to a manufacturers' group. Although the use of conventional plastic bags had been on the decline, that of reusable bags, wrongly thought to have less plastic, had soared, said the Hong Kong Plastic Bags Manufacturers' Association. The rise in the use of garbage bags, reusable bags - also called non-woven bags - and free plastic bags used in supermarkets for fruit and vegetables has increased overall plastic use by almost 30 per cent, according to the association's study. Its survey of plastic-bag companies last month found that although the use of conventional plastic shopping bags had dropped by about 70 per cent, that of almost all other bags, some wrongly thought to be environmentally friendly, had risen markedly. For instance, the use of garbage bags has increased by more than 60 per cent since the plastic-bag levy came into effect in July 2009. The association's vice-president Eric Lau Chi-leung said the increase in garbage bags was probably due to people no longer using plastic shopping bags for their trash, while the use of non-woven bags has almost. "These so-called environment-friendly, reusable bags are made of plastic. But the government has not done enough to inform the public about this," Lau said yesterday. "That's why although we now have had the plastic-bag levy in place for two years, the amount of plastic we have used in bags has in fact increased by 27 per cent," he said. "Yes, we have done more business and made more money because of this trend. But we cannot let money blind our care for the environment." Reusable bags contain about 30 to 50 times as much plastic as conventional ones, and are more difficult to break down, and hence are more destructive to the environment, he said. The association urged the government not to raise the current levy of 50 HK cents per bag to maintain its disincentive effect because that would fuel inflation. Lau suggested it should teach people to reuse the plastic bags they had. A spokesman for the Environment Bureau said that was already being done, and its landfill survey had found that only 0.4 per cent of bags were non-woven ones. He said 75 per cent of shoppers did not get plastic bags from registered shops, and since the levy most Hongkongers had supported the scheme and taken their own bags when shopping. "We are currently consulting the public on whether to expand the scheme so that a levy will be imposed when shops give away non-woven bags," he said. Before the levy's introduction at 3,000 registered stores, plastic-bag manufacturers had worried that the industry would be hurt. Instead they have found that making reusable bags is more profitable.

Goodbyes begin for old Legco site in Central - Ceremonies including the unearthing of a time capsule mark the upcoming move to Admiralty, but some criticise the design of the large new facility - The Legislative Council will move from the old building in Central to the new one in Admiralty (right) in September. The city's legislature will move in September to a new home three times the size of the old one. But only time can answer whether that means more space to engage the public or a greater distance away from them. After the Legislative Council building in Central served as the battleground of political debate for 26 years, a few hundred present and former lawmakers, officials, Legco staff and reporters bid farewell to it today. A time capsule containing mementos from members of the last colonial Legco - some directly elected but dismissed and replaced by a provisional Legco hand-picked by Beijing - will be unearthed at a ceremony tomorrow. The new Legco complex on the Tamar site in Admiralty is as different from the old one as it can be. It was modern in design and much bigger, with a 40,000-square-metre floor area, and was designed to engage the public better, Legco secretary general Pauline Ng Man-wah said. "We hope to let Hongkongers better understand the city's legislature," Ng said after the first media visit to the new headquarters, adding that public tours would be increased sixfold to 81 per week. The state-of-the-art building looks capable of achieving this goal. It has a viewing gallery, a Legco garden and so on, which the present building in Central does not have. A more spacious chamber that can hold a maximum of 134 members of the public and larger conference rooms mean more Hongkongers will be able to witness the city's political debates on the spot. The four protest zones surrounding the building can accommodate 2,000. But some say the design will not foster a closer relationship. Pan-democratic lawmaker Cyd Ho Sau-lan said the spacious design obstructed media access. "The new building is lawmaker- and official-oriented," said Ho, of Civic Act-up. "In the old building, legislators and officials must face the press whenever they enter or leave the chamber, given the press room is only an aisle apart. But after the move, they could easily escape from media bombardment." Many would remember unruly radical pan-democrats such as "Longhair" Leung Kwok-hung or Wong Yuk-man throwing objects towards officials as they protested against policies. That would be more difficult in a large chamber. Legislators will be more distant from officials in the wider and taller chamber, which could house a maximum of 120 legislators. Legco's tripled security force - from 30 to 90 - may also have an effect during protests. While members' offices are now located in the west wing of the central government offices, they will be clustered with the other Legco facilities in the new building. The present building is a few streets away from the power base of the administration, the so-called government hill, but the new infrastructure will be next to the future Chief Executive's Office and central government offices' high block. "Symbolically, this is against the separation of powers," Ho said.

A major obstacle to the proposed new third runway at Chek Lap Kok could be about to be removed with the opening up of airspace over the Pearl River Delta. The Civil Aviation Department said officials from Hong Kong, Shenzhen and Macau had finally reached a consensus on relaxing airspace boundaries after three years of talks. No formal agreement has yet been signed, but it is seen as a vital step if the three cities are to meet the demands of growing air traffic in the region in the next two decades. Airlines in the greater Pearl River Delta are expected to be carrying 240 million passengers a year by 2030. But the move could also be a deciding factor in winning approval for the new runway at Hong Kong International Airport. Without such an agreement, it would be impossible to fully utilise the HK$136.2 billion runway - a fact pointed out by the Airport Authority in its technical report. It states that "to fully realise the potential capacity gain of a third runway, the Pearl River Delta airspace will need to be redesigned to be able to provide ... a northern circuit at the Hong Kong International Airport, long final approach tracks and independent arrival procedures". The Civil Aviation Department said the three cities have agreed a series of measures to optimise the airspace structure and have agreed to jointly plan any future changes in airspace, air traffic management standards and flight procedures. While this will be welcomed by airports and carriers in the region, some critics have warned that without a clearly-written commitment, such a "consensus" may not materialise - as past experience has shown. Albert Lai Kwong-tak, of the Professional Commons - a community group that has campaigned against major infrastructure projects - said: "When Hong Kong bought a stake in the Zhuhai airport back in 2006 it was alleged that the mainland airspace will be rationalised. It never happened." Academics have also repeatedly questioned if the region's congested airspace could accommodate the traffic growth generated by a third runway. A person familiar with the situation said the Civil Aviation Administration of China has agreed "in principle" to obscure the airspace boundary that divides Hong Kong and Shenzhen by 2020. A former civil aviation officer explained that this would mean an extension of the "horizontal" boundary, with the "vertical" boundary being maintained. He said: "Hong Kong aircrafts can enter Shenzhen airspace as if they were still in local air, but that freedom is confined within a certain height. "It is like segmenting the sky into different storeys, with the third floor operated by Hong Kong and the fourth floor by China." And the so-called "third floor" will not extend indefinitely into the mainland. At some points, the aircraft would have to climb back into "the mainland floor". But such an arrangement would offer much greater flexibility than existing arrangements, where aircraft can enter a different airspace only at fixed handover points. "The handover points are usually located above airports, where traffic is busy," the person said. "[The new arrangement] could greatly increase the number of cut-in points for flights, which means the handover procedures could be conducted at much less congested airspace." Macau authorities were also said to have agreed to share airspace with Hong Kong to ensure the proposed third runway has a long-enough approaching track for incoming flights. Peter Lok Kung-nam, former director-general of civil aviation, said such measures would help boost airport capacity. But he asked: "Have they signed any memorandum yet? If not, these solutions could still very much be a plain concept, and any decision that is made on the [third runway] project based on `promises' is shaky." Sources close to the talks said they were very confident the opening up of airspace would be confirmed, because it is as important for mainland airports as it is for Hong Kong. One said: "It's not just about Hong Kong. Shenzhen's second and third runway cannot be fully utilised either without optimisation of the airspace. And the mainland has some 200 airports - they have much bigger interest in this than us." The Airport Authority says the 4,000-metre third runway at Chek Lap Kok is needed because the airport will reach full capacity by 2020. Last year Chek Lap Kok handled 306,500 flights, 50.9 million passengers and 4.1 million tonnes of cargo. With the third runway, the airport could cope with 620,000 flights, 97 million passengers and 8.9 million tonnes of cargo each year, the authority says. The public consultation period will end on September 2.

Fitch Ratings Inc. cited companies' use of Chinese accounting standards and their listings on the Shanghai Stock Exchange as "key weakness indicators" in a report on Monday screening 35 Chinese companies that it rates for governance stresses. The ratings firm had said on Thursday that "a spate of allegations" about Chinese companies had spurred it to review its Chinese corporate portfolio, making Fitch the latest ratings firm to weigh in on risks at companies from the mainland in a nervous investment climate. The report comes amid increased scrutiny of accounting practices and allegations of fraud at some overseas-listed Chinese businesses. Trading in several stocks of Chinese companies listed in the U.S., Canada and Hong Kong has been suspended amid claims of accounting irregularities and other improprieties. "Arguably, overseas investors are now undertaking the job that China's underdeveloped capital market has hitherto struggled to address: challenging Chinese management to adopt higher standards," said the ratings company. Fitch said it doesn't expect accusations and investigations of Chinese companies to slow down in the near term. Fitch said its ratings for Chinese corporates, which are generally around the BB level and below, and at investment-grade and above for state-owned and state-supported companies, "already incorporate the overall Chinese framework of an underdeveloped legal system and documentation standards, distinct business practices and weak corporate governance." Fitch didn't take any ratings action in the report and said that the rationale for its June downgrade of Toronto-listed China timber company Sino-Forest Corp., for which it last week withdrew its ratings, wasn't "indicative of likely pressure on other ratings." A representative for Sino-Forest last week declined to comment on the ratings action. Fitch's report highlights "key weakness indicators" regarding the company's choice of auditor, accounting standards and exchange-listing venue as well as its ownership and board composition. It also screens financial measures such as revenue growth, working capital, taxes and profit margins. "Companies which adhere to international financial-reporting standards (IFRS)—and the audit trail that lies behind such scrutiny—would have more difficulty in perpetuating fraudulent statements compared with domestic standards," wrote Fitch in the report. It added companies using auditors from the "Big Four" accounting firms (Deloitte Touche Tohmatsu, PricewaterhouseCoopers, Ernst & Young and KPMG) should inspire investor confidence. "Fitch understands that China's '2006 Accounting Standard for Business Enterprises' (ASBE 2006), used by some companies, is quite similar to IFRS GAAP with mainly reclassification issues," said the report. The report also noted some of the Big Four auditors have been cited in investor claims against Chinese companies suspected of fraud. Still, Fitch classified the use of ASBE standards and non-"Big Four" auditors as "key weakness indicators" for several companies. Stock exchange operator Hong Kong Exchanges & Clearing Ltd.'s decision last year to allow locally listed Chinese companies to prepare their financial statements using Chinese accounting standards and to permit mainland auditors to vet them raised some eyebrows. Those not in favor of the decision cited concerns that bringing mainland audit firms to Hong Kong could erode investors' confidence in the quality of Hong Kong's capital markets and that the new regime would reduce the regulatory power of Hong Kong watchdogs. The exchange defended the move saying at the time that China's accounting standards had improved dramatically in recent years and were on the road to convergence with international standards. Fitch also highlighted the Shanghai listings of several companies and Sino-Forest's Toronto listing as "key weakness indicators." It didn't elaborate on why these venues in particular pose risks, noting only that most of the Chinese companies it rates are listed on the Hong Kong Stock exchange. Fitch's report follows a controversial report by ratings company Moody's Investors Service last week warning of "red flags" at 61 rated Chinese companies, signaling governance and accounting risks. Shares of companies assigned a particularly large number of "red flags" saw heavy losses after the report was published. Hong Kong's Securities and Futures Commission said last week it was "looking into the matter" of the report.

 China*:  July 20 2011  Share

With supply unable to keep up with demand and the prospect of currency appreciation of as much as 5% a year, why would anyone want to sell dim sum bonds? That’s been the long-held view on the offshore yuan bond market, but according to Deutsche Bank AG, there’s ample liquidity in the secondary market, with many willing sellers. Speaking at the launch of a new tradable offshore yuan bond index in Hong Kong on Monday, Vishal Goenka, the bank’s head of local currency credit in Asia, said liquidity was thin initially but secondary trading volume in offshore yuan (CNH) bonds exploded to about three billion yuan ($464 million) in May. That’s some 15 to 20 times the amount traded in January, with clients putting in orders for as much as 100 million yuan per ticket, he added. Deutsche’s new index aims to further boost liquidity in the secondary market by allowing global investors to passively invest in the asset class in U.S. dollars. Increased supply in CNH debt has given a boost to secondary trading. CNH bond issuance in the first half of 2011 was up 89% from the year before at 83 billion yuan, according to Deutsche Bank figures. As the WSJ reports, the high-yield space has been particularly robust. Businesses with no credit rating, or ratings below investment grade, accounted for about 14% of the 138 billion yuan in total outstanding dim sum debt, according to HSBC Holdings PLC estimates. (Recall that the CNH bond market didn’t have its first high-yield issuance until December last year.) With more supply in the market, there’s more incentive to sell. While increased selling activity in CNH bonds certainly marks a healthy development for secondary-market liquidity, it also reflects what’s on almost every investor’s mind right now—Chinese credit risk. Mr. Goenka said Chinese forestry company Sino-Forest Corp., whose problems have thrust Chinese corporate governance firmly into the spotlight, is the “main reason” for the decline in secondary-trading volumes in dim sum bonds since May’s peak, depressing bond prices. Deutsche’s own head of global risk syndicate for Asia, Herman van den Wall Bake, told Dow Jones Newswires earlier this year that credit risk was a real worry in the CNH market: Although a minority, some CNH credits would have difficulty getting done in dollars or done with covenants that are materially weaker than in the dollar market. That’s an area where probably the buyers, or the people that are being targeted to buy, are at times not being thorough with their credit work. Or their near-term need for a view on the currency is overshadowing the type of concerns that they would normally have if they were buying a dollar asset. One corporate bond trader said that investors also want to reduce their CNH risk and sell because of growing worries over China’s local-debt problem, not to mention the volatile global macroeconomic environment. For Deutsche Bank, ever-bullish on the CNH market, the answer lies in more global issuers stepping into the fray, including high-yield issuers from emerging markets, taking advantage of the low funding costs. Mr. Goenka expects liquidity and volume to “shoot up again” when the market stabilizes.

Talent shortage a bottleneck for auto industry - For China's auto industry to become more advanced it must break through the talent shortage bottleneck to boost technological innovation, experts said at an auto expo being held in the northeastern province of Jilin. Despite the rapid growth of the auto sector in recent years, the country still lags far behind auto powers Germany, Japan and the United States in technology, development environment, innovation and talents, said Fu Yuwu, vice chairman with the Society of Automotive Engineers of China, while attending the eighth China Changchun International Auto Expo. "But the root cause of all the other three weaknesses is the talent shortage. The world's largest auto market has to solve the problem in order to transform from a big auto manufacturer to a strong one," Fu said. Speaking at a forum held during the auto expo, Zhang Xiaoyu, executive vice president of China Machinery Industry Federation, echoed his views, saying that independent innovation is the key to accomplish the goal. The 2011 International Forum on Advanced Vehicle Technologies and Integration (VTI 2011), focusing on technical discussions, is jointly held by Society of Automotive Engineers of China, China FAW Group and Jilin University from July 16-18 in Jilin's capital city of Changchun, the cradle of the country's automotive industry and one of the largest auto manufacturing centers. "That's why we hold the VTI 2011 during the auto expo this year, through which we hope to promote inter-industry technological exchanges," Zhang said. Despite being a pillar industry within 10 years' development, the country's auto sector still faces a series of problems, especially the technological gap with other leading auto-manufacturing countries, Zhang said. "The auto industry never lacks market and capital. What it urgently needs is technology, but the key to acquire the technology is the talent that masters the technology," Zhang said. According to Zhang, auto sales, which hit 18.06 million vehicles last year, are expected to reach 20 million units this year, 10 times that in 2000. "But we only have the superiority of scale without any technological strength," Zhang said. Due to the removal of government incentives, purchase limits in some cities and rising oil prices, auto sales registered a 3.25-percent year-on-year growth rate in the first half of the year after surging 30 percent in 2010 and 50 percent in 2009. Home-grown brands were badly hit as consumers turned to foreign brands for better quality and performances. Beijing created a car-quota system to combat traffic woes in January, allowing only 240,000 new cars to be registered in the city this year, compared with the 800,000 new automobiles that took to the streets in 2010. "It is a certain stage that the sector has to go through, though a difficult one," Zhang said. Guan Xin, dean of Auto Engineering School of Jilin University, was positive about the future of home-grown brands. "The country's auto market still fosters huge potentials as the demand is strong," said Guan, adding that the cause behind the drop is the backward technologies and the problem will be resolved as the sector makes technological advances. Meanwhile, Zhang suggested that home-grown brands should not rely on policies for growth as the country's auto market is a quite open one. "Industry restructuring is inevitable. Products and enterprises that fail to withstand the test of the market should be weeded out," Zhang said, adding that policy support should only be limited to technological research such as in the component sector.

As if tuned to the tempo of the conductor's baton, the orchestra of the world's top fashion houses is playing a crescendo of price increases with surprising gusto. The well-orchestrated move has shocked observers from New York to Shanghai, coming, as it does, at a time when demand for a pair of 3,600 yuan ($557) jeans from Prada SpA or a 9,600 yuan bag by Gucci SpA is widely expected to be doused by the unfolding debt crisis in Europe and the threat of a double-dip recession in the United States. As such, the orchestra should rather be playing diminuendo. However, the Chinese audience is crying out for a march. While consumers in Japan, the United States and Europe are scrimping on luxury goods, the swelling ranks of big spenders in China are taking in whatever the "haute" houses in Paris or Milan can serve up. With demand underscored by an army of Chinese consumers, luxury brands feel no constraint in boosting their prices to cover rising costs and foreign exchange losses. The price of an Amazona bag from the Madrid-based luxury clothing and accessories brand Loewe (a division of LVMH Group) soared to 22,000 yuan from 18,000 yuan in one week, a rise of more than 20 percent. And Loewe is not alone. Its French peer Chanel SA has come out with an even more stunning price list since April 28. The price for a classic Maxi flap bag, for example, has been raised to 41, 000 yuan from 31,500 yuan, up more than 30 percent. In Hong Kong, the price for the same bag has increased to HK$43,200 ($5,544) from HK$31,800, a rise of more than 35 percent. Known as "Jeweler to Kings, King of Jewelers", the Paris-based luxury jeweler Cartier SA assumed its role in this price-rise symphony as early as March 17. A gold ring from the company's Love series has seen its price surge to 6,800 yuan from 6,100 yuan, up about 11 percent. And while Cartier fans have not fully recovered from this unexpected price increase, it is now widely rumored that price will surge again this month. Indeed, almost all the big European luxury names, including LVMH Group (Louis Vuitton), Dior SA, Burberry Group Plc and Celine SA, have raised their prices by between 5 and 15 percent on average in the first five months of this year. The depreciation of the euro is considered one of the main reasons for these increases, according to a recent report released by the World Luxury Association (WLA), an international nonprofit organization that specializes in market research and the management of luxury brands. Between the beginning of 2010 and the end of May this year, the euro has depreciated by 20 percent against the yuan. Although the depreciation has brought these brands unprecedented high sales from overseas, the values of the brands themselves have shrunk severely. Therefore, raising the price of the products is a way of minimizing the losses from exchange-rate depreciation. Meanwhile, the report also pointed out that prices for luxury brands usually increase by between 10 and 30 percent on an annual basis. However, whether it's an increase or decrease, the prices are changed before new products are put on the market, or once every three months. Although it is normally believed that an increase in price may lead to a loss of customers, 95 percent of the luxury brand companies interviewed by the WLA, including Louis Vuitton and Gucci, have shown a positive attitude, because they believe that higher prices signal greater exclusivity and help with the growth of the brand. The luxury giants' confidence in the market has been boosted by sales in China. The Sweden-based tax reimbursement agent Global Refund Group recently released a report, showing that the total amount of tax-free products bought by Chinese tourists in France in 2010 totaled 650 million euros ($919 million) in 2010, far outstripping the second-most generous tourists, the Russians. The average consumption of Chinese tourists overseas had risen to 1,300 euros each in 2010 from 650 euros in 2005. The WLA studied luxury brands sales in the major business areas in France, Italy and the United Kingdom over the 12 months between March 2010 and March 2011. They found that 65 percent of those purchases were made by Asian tourists, 75 percent of whom came from China. What is even more stunning in the WLA's findings is that in 2010 Asian tourists in Europe bought luxury goods worth a total of $69 billion, $50 billion of which came from Chinese customers. "The amount that Chinese customers contributed to the European luxury market in 2010 was four times that of the domestic market, making the Chinese the biggest buyers in terms of overseas luxury-product consumption," said Andy Kline, a special researcher with the WLA. The organization has also discovered that the total consumption of luxury products by Chinese consumers - excluding private jets, yachts and limousines - amounted to as much as $10.7 billion last year, accounting for a quarter of the global market, and second only to Japan, which took up about 34 percent of the global market. The WLA estimates that China will overtake Japan and produce the largest number of luxury-goods consumers in 2012.

Lovely lotus blooms blanket park ponds - A boat operator rows tourists amongst lotus flowers in a Beijing park on July 17, 2011. The lotus blooms are at their best in midsummer.

Iraqi PM arrives in Beijing for 1st visit - Iraqi Prime Minister Nouri al-Maliki (centre L) walks with Chinese Premier Wen Jiabao after reviewing the Chinese military honor guard during a welcoming ceremony at the Great Hall of the People in Beijing, China, July 18, 2011. Iraqi Prime Minister Nouri al-Maliki arrived in Beijing Sunday night for his first official visit to China as a guest of his Chinese counterpart Wen Jiabao. During al-Maliki's stay in China from Sunday to Thursday, President Hu Jintao will meet with him, and Premier Wen will hold talks with the Iraqi prime minister, Chinese Foreign Ministry spokesman Hong Lei said earlier. China and Iraq share a traditional friendship, Hong said, adding that the two countries have witnessed smooth development of bilateral relations, steadily growing economic cooperation and increasing cultural exchanges. "China is ready to work with the international community and to continue to provide assistance for the Iraqi people to improve their livelihoods," said the spokesman.

Hong Kong*:  July 19 2011  Share

Target Marine S.A., a shipping company from Greece, plans to raise US$200 million to US$300 million in an initial public offering ahead of listing on the Hong Kong stock exchange in the second half of the year, people familiar with the situation said. Target Marine's planned listing will be the first by a Greek company in Hong Kong, the people said, adding the company has hired Nomura Holdings Inc. and J.P. Morgan Chase & Co. to handle the deal. Target Marine Chief Financial Officer Stamatis Tsantanis declined to comment on the listing plan. The planned Hong Kong listing comes on the heels of European peer Prada SpA's US$2.47 billion IPO in the city last month, and the Greek company joins a series of foreign companies seeking to tap the city's capital market over the next few months. Other foreign companies lining up to list in Hong Kong, one of the busiest markets for new listings in the past few years, include South Korean-listed casual wear concern Basic House Co. and Japanese clothing retailer Baroque Japan Ltd., which aim to raise as much as US$300 million each, as well as Canadian oilsands company Sunshine Oilsands Ltd., which plans to raise around US$1 billion in the fourth quarter, other people familiar with the situation have said. Target Marine, which was founded in 1986, owns more than 15 tankers and bulk carriers, one of the people said.

Taiwan's mainland affairs minister will preside at a ceremony to rename the island's de facto consulate in Hong Kong. The renaming is a milestone in the improvement of Taiwan-Hong Kong political ties. A source from Taiwan's Mainland Affairs Council said Dr Lai Shin-yuan would tour Macau and Hong Kong for "inspection of the council's business" from tomorrow to Thursday. Her itinerary will include ceremonies to unveil signboards for the newly renamed Taipei Economic and Cultural Offices in Macau and Hong Kong. Macau's ceremony will be on Tuesday and that in Hong Kong a day later. Until now, the Macau body has been called the Taipei Economic and Cultural Centre and the Hong Kong institution the Chung Hwa Travel Service, because Beijing did not want to give them official recognition. The change of name reflects a breakthrough in the relationship between Taiwan and the two special administrative regions. It is not yet known whether Lai will meet any Hong Kong government officials on her trip this week. In June last year, she made a low-profile tour to the city, which was seen as a step to test the waters for visiting the mainland. At the time, the Taiwanese side declined the Hong Kong government's offer to arrange a meeting between Lai and two senior local officials, Financial Secretary John Tsang Chun-wah and Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung, saying the purpose of her trip was only to visit Taiwan's agencies here. A Hong Kong official familiar with the government's exchanges with Taiwan said it was notified of Lai's visit some time ago, but was still making arrangements. Whether any Hong Kong official would meet Lai would depend on whether the Taiwan side made such a request, the official said. A spokeswoman for the Constitutional and Mainland Affairs Bureau said it had no information to provide regarding Lai's visit.

The government's bid to preserve the Ho Tung Gardens historic site had hit hurdles and might fail, Secretary for Development Carrie Lam Cheng Yuet-ngor admitted yesterday. Negotiations with the owner of the famous Peak Road mansion, while ongoing, had proved to be very difficult, Lam told a Legislative Council meeting. She admitted that there was a possibility that negotiations could break down and that preservation of the site might fail. "I cannot say for sure if we can achieve our aims, but we are striving to do so," she said. The mansion is owned by Ho Min-kwan, the granddaughter of late tycoon Robert Ho Tung, one of the island's icons in the colonial era. Lam was responding to a query made by legislator Tanya Chan on the project's progress. In January, the government declared the house, which was built in 1927 and designed in a Chinese Renaissance style, as a proposed monument and banned redevelopment there for 12 months. The owner is not permitted to deface or demolish any structure on the site while the monument status is in effect. However, the government cannot turn the site into a statutory monument without consent from the owner, who previously submitted a plan to build 11 blocks of four-storey houses yielding 60,000 sq ft of residential floor area on the land. The Buildings Department, confined to vetting only structural safety issues, approved the landlord's plan, but alerted heritage officials. The government then acted swiftly and in January declared the site a "proposed historic monument". But to date it has not indicated how authorities can convince the owner to make concessions over the property rights. Lam said yesterday that one of the reasons for the negotiation deadlock was the robust property market. "The land is very valuable," she said. She said officials were waiting for feedback from the site owner, adding that she would personally attend meetings if opportunities arose. "I have told the owner that whenever they want to talk with me, I am always available, to express my sincerity on this project," she said. In the past, authorities have provided owners of historically valuable sites with economic incentives, including buying back the site or offering alternative land in exchange, as in the case of King Yin Lei Mansion, in Stubbs Road, in 2008. Robert Ho Tung, who died at 94, was a businessman and philanthropist of Dutch and Chinese ancestry. Born in 1862 he was the first nonEuropean to receive permission to live on The Peak. Ho Tung Gardens, where his son Robert Ho Shai-lai lived from the 1960s to 1990s, is the only residence with direct links to him. His granddaughter has expressed disagreement about the site's historic value. She said in a letter to the government last year that her grandfather had not lived in the house and that the interior had undergone considerable alterations.

Urban beehives are a sweet success - If you thought the concrete jungle was no place to raise bees, the insects themselves will prove you wrong - A snow-covered Scandinavian forest is an unlikely setting for a budding beekeeper to find his vocation, but after one taste of the honey from his Swedish friend's hive, Hong Kong-based interior designer Michael Leung knew he was on to something good. Now, a year and a half after his first encounter with bees, Leung has set up 11 beehives in another unlikely place - the concrete jungle of Hong Kong. His hives are spread around the city in locations as diverse as a rooftop in Wan Chai, a balcony in Pok Fu Lam, the industrial area of Kwun Tong and rural Tai Po. Whereas the city's lack of flowers and trees might seem to present a problem, the bees have the answer. "You would be surprised at the places where bees can survive and thrive," Leung said. "They can fly up to five kilometres away from their hives to find pollen. They also have a natural GPS [Global Positioning] system and communication pattern that enable them to share news about where to find food. "It may take longer for bees [in Hong Kong] to fill their combs, but it's completely possible." High up on the rooftop of an old building in the heart of Wan Chai, British-born-and-educated Leung showed the Sunday Morning Post (SEHK: 0583, announcements, news) his bustling beehive - four 50-by-75-centimetre wooden frames where 10,000 bees build combs and store honey - which he set up in collaboration with independent bookstore and cafe ACO. He harvests his honey once a month, and the hive produces enough for the Hennessy Street cafe's needs. Apart from providing a natural, healthy source of food, Leung sees beekeeping as a way of spreading awareness of food issues in an increasingly globalised market. He says beekeeping and harvesting taught him the importance of local communities and local production in building a cohesive society. "Food becomes a means of connecting people," he said. "In a busy city like Hong Kong where people are growing increasingly isolated and lost, it's nice to build a community. I'd rather buy an egg from a local egg farmer who I know farms responsibly than one carrying an `organic' stamp from somewhere far away. "People also appreciate food more if they see where it comes from and take part in harvesting it." Leung's social enterprise, HK Honey, aims to promote local production and spread awareness and appreciation of food. It sells local honey, conducts tours of the beehives and runs workshops on honey harvesting and candle-making. He said beekeeping and honey harvesting "changed my perspective on the food on my plate". He also believes it is important to respect the bees. When harvesting his honey, he adopts the "Chinese" way - using no smoke to sedate the bees and wearing no protective clothing. "If we don't startle the bees, they are harmless and friendly," Leung said. And he always leaves half the honey behind for the bees to eat. This is only the beginning for the urban beekeeper. Leung hopes to introduce beekeeping into schools and even corporations with rooftops to spare. He also plans to apply to keep a dozen or more beehives in the new West Kowloon Cultural District, to promote local culture and farming.

Hong Kong investors in London have bought heavily in Canary Wharf, where rents rose 11.6 per cent over the past 12 months. Hong Kong owners reap British rental rewards - After dipping post-2007 due to the credit crunch and financial crisis, rents in London have racked up record highs, delighting landlords - If Britain has entered an age of austerity, London's landlords may want more of it, since rents in the capital are at record highs. And among the beneficiaries of those rents are Hong Kong investors, who have bought heavily in Canary Wharf in particular, where rents are rising strongly. Research from estate agency Savills shows rents in London's prime residential districts rose 10 per cent over the past 12 months, and now stand 4 per cent above their 2007 peak. Most growth has been in prime areas bordering central London. In Regents Park and St John's Wood rents are 20 per cent higher than four years ago. Across the board in all prime areas, rents for flats are now 4.9 per cent above 2007 peak levels, compared to 2.1 per cent for houses, reports Savills. Average yields for "des res" homes are flatlining at 3.8 per cent gross, as capital growth has kept pace with rent rises. The agency forecasts rents will rise 8 per cent this year. Hong Kong landlords benefited from rising rents. They bought one in 11 new homes sold in prime London areas over the past four years, Savills said. "With rents rising over the past 12 months and forecast to continue to grow, investors stand to see healthy yields in the future, as well as benefiting from positive cash flow, with mortgages currently being offered to foreign investors with low interest rates," said James Talbot, international sales director at Savills. According to Savills, one third of Hong Kong and Chinese investors in prime London areas bought in Canary Wharf between 2007 and this year, where rents rose 11.6 per cent over the past year, rebounding from a sharp downturn during the recession. The agency combines Hong Kong and Chinese buyers, because some mainlanders buy London property at sales exhibitions in the city. Kensington, Wapping, Chelsea, Battersea, and Clapham are other areas targeted. Marc von Grundherr, director at letting agents Benham & Reeves, said rents were rising because tenant demand outstripped supply. "We have 12 tenants for every property," said von Grundherr. "Tenants are extending their leases even with double-figure increases in rents because they hear how difficult it is to find new homes." Grundherr said rising financial services employment, increased immigration and frustrated first-time buyers needing to rent were all pushing up tenant demand, while low rates of house-building meant supply could not keep up. The lettings boom has spread to secondary markets like King's Cross, Stratford, and Southwark, said Neil Young, chief executive at letting agents Young London. Stratford has been popular with some Hong Kong investors. "We find that annual rental increases of 10 per cent upon renewal are not uncommon or confined to what is traditionally regarded as prime central London," said Young. Robert Hadfield, managing director of investment property management company Pineflat, said yields were higher and void periods shorter for secondary market rental properties in London. Young said a downside of the rental boom has been an increase in tenants not paying rent and letting agencies mismanaging properties. "Investors are warned that there has been a recent upturn in rent arrears and also complaints regarding lettings agencies to The Property Ombudsman Service," he said.

Infectious diseases may soon be diagnosed faster in Hong Kong. A lot faster. Hong Kong-based Hai Kang Life, the company headed by former University of Science and Technology professor Albert Yu Cheung-hoi, has unveiled a biochip that has the potential to diagnose emerging infectious diseases significantly quicker than comparable technologies. A biochip, sometimes referred to as a "lab on a chip", is a device that combines a chip and a chip reader to test for specific genetic material in DNA samples. Yu said his chip could identify a disease in about an hour, as opposed to the standard six hours. "For infectious diseases, time is very important," Yu said. "This is the breakthrough." The inspiration for this technology was partly a result of a void Yu saw during the 1997 Hong Kong avian influenza outbreak. "We had this H5N1 [flu virus], but we didn't have something sensitive and easy to use to diagnose this." So Yu, a neuroscientist, and Hai Kang Life set about developing his biochip and tests to analyse genetic content for disease information. Over a nearly a decade, the researchers came up with a compact chip that packs various functions into a single device. "We use a nanoparticle method, which makes this whole thing very easy. The whole device is very small," Yu said. Apart from disease detection, the chip will have other uses. "We'll also use it for blood screening," Yu said. "Later on we will probably extend into cancer diagnosis." University of Hong Kong biochemistry professor Julian Tanner said the technology could make various contributions to the biotech field. "Hai Kang Life's new chip technology is a major step forward, particularly in terms of speed of analysis," Tanner said. He also noted the technology's "low cost without a need for expensive specialised equipment". Professor Lok Si, scientific director of HKU's Genome Research Centre, said: "There have been many so-called `lab on a chip'[devices], but few have achieved the practical balance between cost, ease of operation, speed, mobility and sensitivity." Yu, who now teaches at Peking University, hopes his company's new biochip - which awaits testing - will help put Hong Kong on the map as a city at the cutting edge of biotech research. "We are working really hard. We are still behind," Yu said. "We do have a critical scientific community in Hong Kong." He estimated there were at least 300 Hong Kong companies working in biotechnology and related fields. Lok is enthusiastic about the future of biotech in Hong Kong, but not all share his enthusiasm. Professor Frederick Leung Chi-ching, of HKU's school of biological sciences, thinks Yu would have had more success outside of Hong Kong. "I believe the technology is sound and still requires clinical and market validation. In my opinion, Yu should have moved his invention out of Hong Kong and just maybe he would have his machine in the market by now," Leung said.

The Jockey Club is considering increasing its annual charity donations to HK$2 billion, chief executive Winfried Engelbrecht-Bresges says. While he did not say how long the club would take to hit the new goal, the underprivileged would remain key beneficiaries of the funds. Engelbrecht-Bresges made the remarks yesterday as he announced that the club's charities trust donated a record HK$1.62 billion last year. The sum included an emergency relief fund meant to provide rapid relief for victims of natural disasters, accidents and epidemics. It was set up after the club donated HK$1.6 million to 71 victims in the collapse of a building in Ma Tau Wai last year that killed four people and made dozens homeless. "There will be no upper limit for the fund. It will depend on the needs," Douglas So, the club's executive director of charities, said. Other than financial support, So said, they would look into providing disaster victims with the necessary services through various partners they had been co-operating with. They aimed to offer help within 48 hours after a disaster or accident, he said. Engelbrecht-Bresges said the club would like to keep the donation level of HK$1.6 billion, but whether it could achieve that or bring it to a higher level would depend on the sustainability of its business. He said that even when the economy was not good, they had tried to maintain the club's donation commitments because it was the time when society needs were the biggest. The relief fund has supported 167 cases so far. It gave HK$990,000 to 15 victims of the Manila hostage tragedy and their families, and HK$220,000 to two families who lost members in a fire on Ma Tau Wai Road last month. Other than the relief fund, the club has recently approved funding for the Innovation Tower at Polytechnic University's school of design, a new college building at the Open University and the new Red Cross headquarters in Wan Chai. The trust has helped in community services, education, sports and culture and health care.

It was a case of thanks for the memories yesterday as lawmakers looked back at life in the old Legislative Council building and forward to their new home. But it wasn't all plain sailing. True to Legco's fractious history, even in a motion bidding farewell to the Central building there was one vote against and two abstentions. For independent councillor Andrew Cheng Kar-foo, the stand-out Legco moment was forgetting to lock a toilet door, only to be embarrassed by a - judiciously unnamed - female legislator. But it is the transformation of the city's mini-parliamentary culture that has struck long-serving liberal party legislator Miriam Lau Kin-yee the most. "In the past, almost all meetings were held behind closed doors. Today, almost all are open to the public," she said. "In the past, seniority mattered. Longer-serving legislators formed the core. Today ... everyone is equal. No one cares about experience." After 26 years in the service of the city's top lawmaking body, the building is to return to its former function as the Court of Final Appeal - or the Supreme Court, as it was called under British rule. Pan-democrats said the move as tinged with regret. "The building served as our legislature for 26 years, but the functional constituencies still remain today," said labour activist Lee Cheuk-yan. The normally calm and collected Ronny Tong Ka-wah of the Civic Party became all emotional as he touched on Hong Kong's democratic progress over the years. "I dare not say the goddess of justice on the building's roof feels gratified. When the Legislative Council moves to the new complex," (Tong paused, sobbing), "I just hope..." (another few seconds of silence), "the new building can see the day of democracy." Then the time-counting bell rang, and he sat down. Tong's party colleague Margaret Ng Ngoi-yee was defiant to the last and voted against the farewell motion. "To enter the new building, we'll need to pass through the government's central complex, which is a breach of the independence between executive and legislative branches," the lawmaker for the legal sector reasoned. Veteran Democrat James To Kun-sun and relative newcomer from the Civic Party Tanya Chan abstained, expressing concern over the pace of progress towards full democracy in the city. But like it or not, these 60 honourable members will gather instead at the new Tamar site at neighbouring Admiralty from September.

 China*:  July 19 2011  Share

Starbucks, Ai Ni to turn Yunnan into coffee capital - Companies agree to set up joint venture to buy and export top-quality Arabica beans from the province - Starbucks, operator of the world's biggest coffee shop chain, has formed a new joint venture in Yunnan to help develop the province as a premier coffee-growing region. The Seattle-based company signed a memorandum of understanding on Thursday with the Ai Ni Group, a major operator of coffee farms and processing facilities in Yunnan. The agreement is to establish a business to buy and export high-quality, locally grown Arabica coffee beans. The joint venture, in which Starbucks will have operating control, will also run processing mills in the southwestern province, which was previously better known for its tea. Financial terms were not given. That followed commitments made by Starbucks in November to work with the Yunnan Academy of Agricultural Sciences and the government of Puer city to help local farmers abide by responsible growing practices and develop high-quality coffee. "Yunnan will play an important, strategic role in ensuring our long-term supply of premium coffee," said John Culver, the president of Starbucks Coffee International, the unit overseeing the chain's business in more than 50 countries. Planned initiatives under the firm's so-called Starbucks Yunnan Coffee Project include increased direct sourcing of Yunnan coffee and investment in coffee-processing facilities. Ai Ni Group founder and chairman Liu Minghui described the new joint venture as combining "Starbucks' global best practices and coffee expertise with Ai Ni Group's established coffee-farming model". The provincial government had earlier announced plans to invest 3 billion yuan (HK$3.6 billion) to expand green bean volume by 2020 to 200,000 tonnes from the current 38,000 tons. Coffee acreage will also be expanded to 100,000 hectares, from the existing 26,700 hectares, within the same period. According to Starbucks, its purchases of Yunnan coffee have "increased approximately 20-fold" since 2007. The company will also set up in Puer a wholly owned farmer support centre, which will provide so-called agronomy consultation services to coffee-farming communities across the mainland. The centre will advise the Ai Ni Group on the provision of coffee seeds for Starbucks-recommended coffee varietals; offer soil management and crop production support for the group's coffee farms; and provide technical assistance in building its coffee mill. Culver said the initiatives in Yunnan "will help fuel our continued growth as we seek to serve customers through more than 1,500 stores we expect to have in the [mainland] market by 2015". As of May this year, Starbucks operated about 450 stores in 35 cities. Strong competition is expected to come from Hong Kong-listed China Resources Enterprise (SEHK: 0291), which announced in October plans to open as many as 1,000 Pacific Coffee outlets on the mainland.

Coal-bed gas production to be doubled by 2015 - Workers check pipes at the Wuhan factory of China Petrochemical Corp. The nation's second-largest oil and gas producer has disclosed that the country aims to increase the annual output of coal-bed methane. China, the world's largest energy user, plans to more than double production of its coal-bed methane by 2015 to cut reliance on oil and coal. The country aims to increase its annual output to 21 billion cubic meters (cu m) by 2015 from 8.6 billion cu m in 2010, according to China Petrochemical Corp, the nation's second-largest oil and gas producer, in its online newsletter on Friday, citing a five-year plan. The fuel, also known as coal-seam gas, is a form of natural gas trapped in coal beds. China wants to triple the use of gas to about 10 percent of energy consumption by 2020. The country, which failed to reach a target for coal-bed methane production last year, will see a rapid development of the industry in the coming five to 10 years, according to Friday's statement from China Petrochemical, alos known as Sinopec Group. The country is likely to double the subsidy for the exploration of coal-bed methane to 0.4 yuan (6 cents) a cubic meter and increase government payment for power generated by coal-bed methane to 0.35 yuan a kilowatt-hour from 0.25 yuan currently, it said. The nation also plans to set up a fund for exploration of the fuel, it said, without giving details. China's production last year was below a target of 10 billion cu m. Low returns and difficulty in delivering the gas to users have dampened investment in the industry in the last few years, Hu Wenrui, chairman of the China Petroleum Enterprise Association, said in May 2010. The country aims to add 1 trillion cu m of coal-bed methane reserves by 2015 and 2 trillion cu m by 2020, according to Friday's statement. Coal-bed methane, gas in shale and tight gas, known as unconventional gas resources, may account for 30 percent of the nation's gas output by 2020, said Jie Mingxun, president of PetroChina Co's coal-bed methane unit, in May 2010. Annual shale-gas output in China may reach 20 billion cu m by 2020, according to Pan Jiping, a researcher at the Ministry of Land Resources, on June 30.

China wins 1st gold medal of world championships - China's Wu Minxia and He Zi compete in the women's 3m synchronised springboard diving final at the 14th FINA World Championships in Shanghai July 16, 2011. With her superstar teammate in retirement, Wu Minxia is poised to become China's new diving queen. Wu and new partner He Zi won the first gold medal of the world aquatic championships on Saturday, claiming the women's 3-meter synchronized springboard title. It was Wu's fifth gold medal in the event at worlds, tying her with Guo Jingjing, her former partner who retired in January after winning six Olympic medals and 10 world titles. Wu's first four gold medals in 3-meter synchro were won with Guo. Wu and He's victory got China started on a possible sweep of the 10 diving medals at the first world championships to be held in the country where diving is one of the most popular sports. China won seven of eight golds at the 2008 Beijing Olympics, and took seven of 10 events at the 2009 worlds in Rome. Wu and He led after each round of the five-dive final, totaling 356.40 points in front of Chinese fans who endured wilting humidity at the Oriental Sports Center's outdoor pool. Emilie Heymans and Jennifer Abel of Canada took the silver with 313.50. Australia's Anabelle Smith and Sharleen Stratton earned the bronze with 306.90. "We had to pull out a personal-best performance and really go for it," said Stratton, who had left shoulder surgery five months ago that kept her from training with Smith until just two months ago. Americans Christina Loukas and Kassidy Cook finished seventh.

Hong Kong*:  July 18 2011  Share

The size of the mainland's fashion market is expected to triple over the next decade to 1.3 trillion yuan (HK$1.56 trillion) as younger people spend more on clothing and as spending increases in smaller cities, The Boston Consulting Group says. "The profile of a typical fashion consumer in China is a middle-class person, aged 30 to 40, who lives in a top-tier city. But that will be very different in 10 years," BCG partner and managing director Vincent Lui said. Earlier this year, the management consulting firm interviewed more than 5,000 people aged 14 to 45 in 17 mainland cites. It found that a Chinese consumer's average spending on clothing - excluding pyjamas, children's wear, socks and accessories - was about 1,150 yuan annually. "That figure will be growing fast," said Lui, who compared the figure with shoppers in the United States and Britain, who buy more than 5,000 yuan worth of clothing per year. BCG estimates in a report that the number of middle-class consumers, who earn 74,000 yuan or more annually, will rise to 140 million in 2020 from the current 50 million. That will drive sales of the country's clothing market to 1.35 trillion yuan in a decade from 398 billion yuan last year. The report said people between 30 and 35 years old spent most on clothing. But those under 20 spent a larger part of their income - 46 per cent - on clothes, far more than other age groups. "People born in the 1990s are more familiar with fashion brands and more willing than older generations to dig deep in their pockets," Lui said. In addition, the report said more wealthy people would be moving to smaller cities, which meant high-end retailers would have to set up broader sales networks to maintain their exposure to their targeted customers. Lui said that in the past, "a big brand name", "a low-cost supply chain" and "fast expansion through franchising" were the keys to winning in the market. But in the future, consumers would look for the fashion brands that fitted their goals, such as their pursuit of career success, a wish to have a relaxed life or their desire to be a focal point in social occasions. Department stores still dominated retailing on the mainland, accounting for 35 to 40 per cent of sales in the fashion market last year, Lui said but in top-tier cities, more people had begun to tire of traditional retailing models and were turning to shopping malls and online shopping portals.

Top TVB (SEHK: 0511) executive Stephen Chan Chi-wan and two co-defendants have a case to answer on charges of bribery and fraud involving the city's biggest television station and five of its actresses, the District Court ruled yesterday. The ruling came after it was disclosed for the first time in open court that Chan, TVB's 51-year-old general manager, and his former personal assistant Edthancy Tseng Pei-kun, 28, were arrested together in Chan's apartment in an early morning raid by graft-busters. Lawyers for the pair and the third defendant, Wilson Chan Wing-shuen, 63, former head of business development for TVB's marketing and sales division, said after the ruling that their clients would not give evidence in court. Senior Independent Commission Against Corruption officer Howard Wong Kwok-kay had earlier told the court that he and a team of officers arrived at Stephen Chan's duplex apartment in Astrid Tower 1, Argyle Street, Mong Kok, at about 6.15am on the morning of the arrest. No one responded to the doorbell at first and it took Chan 10 to 20 minutes to answer the door, the court heard. When Wong's supervisor told Chan that they also wanted to find Tseng, Chan led them to the upper floor via an internal staircase, Wong said. Chan knocked at the door of a room next to the master bedroom, and said: "Someone from the ICAC wants to find you." Dominic Cheung Ka-yiu, another ICAC officer, told the court: "I think Tseng's room is a bedroom." The court heard that later in the day, Tseng told the graft-busters that he had his own flat in Ho Man Tin, which was under renovation. But he said he did not have the key because he had handed it to a decorator. ICAC officers searched the Ho Man Tin flat the next day and confirmed that it was under renovation. Judge Poon Siu-tong held that there was a case for the trio to answer on five corruption and fraud charges after hearing submissions on whether the prosecutors were pressing the right charges. Stephen Chan pleads not guilty to conspiring with Tseng to receive HK$112,000 in bribes and defrauding TVB. The pair also deny cheating the five actresses out of HK$300,000 in commissions, through a firm owned by Tseng, by denying them the chance to earn appearance fees. Tseng and Wilson Chan also deny defrauding TVB of HK$550,000. For Tseng, Wong Ching-yue SC, said prosecutors pressed the wrong charges against him under the Prevention of Bribery Ordinance in relation to the allegation that Stephen Chan had received HK$112,000 in bribes through a company run by Tseng for hosting a talk show during a 2010 countdown organised by TVB. He said the charges had been laid under Section 9 of the ordinance which was solely applicable to public servants. Wong said Stephen Chan could be regarded as a public servant only when he was working in his capacity as a general manager at TVB, a public authority under law. But he took part in the talk show Be My Guest using his other identity as a celebrity, and therefore the charges were not appropriate. He supported his argument by referring to TVB executives' evidence that they could not force Stephen Chan to host the talk show and that he was entitled to a nominal payment. "If hosting the talk show is part of his job then TVB would not need his prior consent," Wong said. He asked why Wayne Lai Yiu-cheung, who attended the talk show for HK$20,000, did not break the law when he was a TVB contract actor, but Stephen Chan did. Prosecutor Eric Kwok Tung-ming SC said Stephen Chan broke the law because he received the money without getting prior permission from his employer and that his act "influenced and affected" the affairs and business of TVB. Earlier, George Chan Ching-cheong, Stephen Chan's former supervisor, testified that it was a practice that Stephen Chan only needed to "notify" him via e-mail that he would take up outside jobs. George Chan said that except for the first time, he did not give written consent.

Tsang takes a swipe at 'negativity' - Chief executive slams attitude of lawmakers while standing firm by his team on Legco's last day - Donald Tsang Yam-kuen yesterday defended his government - widely ridiculed for repeated policy U-turns and poor showings in opinion polls - and hit back at lawmakers for what he said were negative and confrontational attitudes. The chief executive's remarks came in the final hours of Legco's last sitting before lawmakers move in September to the Tamar development in Admiralty. In a salute to their surroundings, lawmakers passed a motion marking the end of the Legislative Council building's 26 years as home to the legislature.The scene was not placid. As the chief executive and other top officials entered the 99-year-old building in the afternoon, protesters hurled hundreds of paper aeroplanes, scrawled with messages demanding the withdrawal of the bill to scrap by-elections and Tsang's resignation. At 9pm several hundred put on handcuffs and circled the building three times to protest at police actions. Tsang, in his final question-and-answer appearance before the summer recess, admitted the government and legislators had not always accurately assessed public opinion before launching new policies. People Power legislator Wong Yuk-man, with more of a statement than a question, called for Tsang to step down. The chief executive replied by noting recent opinion polls indicating a drop in trust in the government, legislature and the media. "Is a negative approach, which you often adopt, the way to get problems solved?" Tsang said. "Why can't you find a way out with a positive attitude? Hong Kong people will find more hope in the city if we do." Asked what he thought about recent remarks by Chief Secretary Henry Tang Ying-yen and Executive Council convenor Leung Chun-ying, Tsang said: "When those holding public offices comment on government performance during elections, Hongkongers can discern whether their comments are based on facts or intended to take political advantage." Leung said on Tuesday that social sentiment would have been quite different if the government had anticipated the seriousness of problems such as poverty and housing and had tackled them two or three years ago. On Wednesday Tang said certain policies needed to be amended in light of public opinion. Tsang added, though, that Tang's remarks were in line with the government's position.

Hong Kong people are gambling more money in Macau casinos than they spend with the Jockey Club at home for the first time, according to newly released figures. A detailed study by the Jockey Club has found that people from Hong Kong - who make up the second-biggest pool of Macau casino patrons after mainlanders - spent HK$22 billion in the world's richest gaming destination in 2009, compared with the gross revenue of HK$21.8 billion received by the club between July 2009 and June last year. That's about HK$3,000 for every man, woman and child in the city. "Hong Kong people are losing more money to the casinos in Macau than in Hong Kong," said Hong Kong Jockey Club chief executive Winfried Engelbrecht-Bresges. He said the club was not facing an immediate threat, but "severe competition" from Macau - with its lucrative combination of high-rollers brought in by junket operators who offer big lines of credit to gamblers, and mass market operations - was taking its toll. "It would be wrong to say that we cry foul and that we are in a crisis. This is a matter of competitiveness over a period of time," he said. He added that the club's ongoing charity donations - which reached a record-high HK$1.62 billion last year - would not be possible without a sustainable betting operation. The estimate of money lost by Hongkongers in Macau was based on exit interviews at gambling venues, casinos' annual reports, and investment bank reports on casinos. He said all three sources came up with similar figures. The study found the amount wagered by Hong Kong people in the former Portuguese enclave's casinos surged from HK$9 billion in 2005 to HK$22 billion in 2009. Meanwhile, the Jockey Club's gross revenue saw slower growth over the same period, rising by 13 per cent from HK$19.3 billion in 2005-06. Engelbrecht-Bresges said there was little it could do to reverse the trend as it is constrained by tax rules and regulations. It pays a 50 to 75 per cent tax on football betting and horse racing. Macau's 33 casinos pay 35 per cent of their gross receipts as direct tax to the government. The club takes bets on horse racing, football and lotteries and has no plans to expand. A Home Affairs Bureau spokeswoman said its policy was to restrict gambling to a limited number of authorised outlets, and not to encourage gambling: "We are open to any views that may enhance the overall competitiveness of the Jockey Club for ensuring its effectiveness in satisfying local gambling demand without compromising our ... policy." Wong Sing-chi, a Democrat on Legco's home affairs panel, said the club should not see Macau as a rival, as the industry there could be complicated by money laundering: "The club is an NGO. But it seems to me they see themselves as running a gambling empire." Hong Kong Gambling Watch spokesman Choi Chi-sum said the government should not do anything to encourage betting.

CE pledges to address housing and ecomonic issues in final year - Chief Executive Donald Tsang Yam-kuen admitted on Friday some of his government’s policies were unpopular – but pledged to do more to address key issues concerning the public.

A recently released financial index ranks Shanghai as the world's No 6 financial center, two positions behind Hong Kong. Experts said mature market regulations and more diversified investment channels are necessary to boost the city's competitiveness. It is the second year that the Xinhua-Dow Jones International Financial Centers Development Index (IFCD Index) has been published, and Shanghai moved up two spots from last year, surpassing Paris and Frankfurt. Beijing was ranked 14th and Shenzhen was 21st. The traditional financial centers of New York, London and Tokyo remained in the top three positions in this year's list. Michael Petronella, president of the Chicago Mercantile Exchange (CME) Group Index Services LLC, said he believed the results clearly reflect China's growing economic prominence on the world stage. In 2010, China overtook Japan as the world's second-largest economy. Goldman Sachs predicted that at its current rate of growth, China will dethrone the United States as the world's largest economy by 2027, and PricewaterhouseCoopers (PwC) said it could happen as early as 2020, Petronella said. "The capital market, particularly the stock market in Shanghai, will become the largest in the world soon," said Jiao Ran, director of the economic information editorial department of Xinhua News Agency. "The ranking mirrors the status quo of the world's major financial centers, particularly as the top three positions are still held by the traditional financial centers," said Liu Shengjun, deputy director of the Lujiazui International Finance Research Center, which is affiliated with the China Europe International Business School. "I agree with most of the index except for Tokyo's position," Lu Hongjun, president of Shanghai Institute of International Finance, told China Daily. "Owing to Japan's current economic status, its internationalization, and the recent earthquake and nuclear emergency, Tokyo is much less prominent in the global financial market," said Lu. Lu said Shanghai's rise is in line with the city's achievements over the past year. Qi Xiaozhai, director of the Shanghai Commercial Economic Research Center, said that the city's efforts to build a global financial center and shipping hub have been recognized by the world. However, he warned that the city is still a long way from challenging the dominance of the traditional financial hubs. "Shanghai should improve many sectors such as trade, industry, service, and education," he said. "In addition, market supervision and transparency still lags far behind some Western markets," said Liu of the Lujiazui International Finance Research Center. The list comprises 45 international financial centers. The top 10 are New York, London, Tokyo, Hong Kong, Singapore, Shanghai, Paris, Frankfurt, Sydney and Amsterdam. On the basis of 66 indicators and 2,073 questionnaires, the IFCD Index chose 45 famous financial cities as samples, and set up a comprehensive evaluation system. The objective indicator system rates international financial centers by five aspects - the financial market, growth and development, industrial support, service and the general environment.

 China*:  July 18 2011  Share

US Secretary of State Hillary Rodham Clinton will meet State Councillor Dai Bingguo in Shenzhen on July 25 at the end of an 11-day world tour, Washington said yesterday. The meeting with the top Chinese diplomat had not been announced in Clinton's original itinerary. It will follow a visit to Hong Kong. The US State Department said the two would set the bilateral relations agenda for the second half of the year and exchange views on regional and global issues of common concern. Chinese analysts said one issue topping Beijing's agenda would be the US debt instruments on its hands. China was holding US$1.153 trillion of US Treasury bonds by April. The talk will take place just days ahead of an August 2 deadline for America's US$14.3 trillion debt ceiling. "Serious trouble is pending if the debt ceiling agreement cannot be reached by August 2. The global financial market will undergo turbulence, which will affect China's foreign reserves and exports," said Professor Jin Canrong , an international studies expert at Renmin University. Jin said he believed China would raise the issue with the US. It would want to find out how bad the situation was and ask for assurances that its US assets would be protected. On Thursday, Foreign Ministry spokesman Hong Lei called on the US to protect "the interests of investors" after ratings agency Moody's placed America's top debt rating on a downgrade watch. Hong's remarks were followed by a warning from Standard & Poor's of a one-in-two chance of cutting the US rating if the White House and Republicans could not reach a deal on raising the government's debt ceiling. He Maochun , director of the Centre for Economic Diplomacy Studies at Tsinghua University, said: "China is in a passive position in the US debt crisis because China does not have much influence in the economic policymaking of the US. China is also a relatively new player in the international financial market." Analysts believe recent tensions in the South China Sea are also likely to top the meeting agenda. Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff, said after a Beijing trip that China and the US still had stark differences on military issues. "There is a long way to go," he said in Tokyo yesterday. The South China Sea issue is also likely to be raised when Foreign Minister Yang Jiechi meets regional foreign ministers from Thursday to Saturday in Bali, Indonesia. In October, Clinton flew from the 5th East Asia Summit in Hanoi, Vietnam, to meet Dai in Sanya, Hainan. Professor Wang Fan , from Beijing Foreign Affairs University, said he expected more Sino-US meetings ahead of possible leadership changes in both countries next year. "Some US politicians will use the leadership change in China to influence China's internal political system. The China issue will be a key topic during the US presidential election. But both sides want to maintain stable ties for their own benefits."

President Hu Jintao shares a light moment with US teachers and students from Chicago-based Walter Payton College Preparatory High School, at Zhongnanhai, the central leadership compound in Beijing, on Friday. During an unprecedented tour of Zhongnanhai, the seat of the Chinese central government, a group of American students was warmly greeted by someone whom they could hardly have expected to meet - Chinese President Hu Jintao. More than 20 students and teachers from the Walter Payton College Preparatory High School in Chicago, which President Hu toured during his state visit to the United States in January, came to Zhongnanhai on Friday, China Central Television reported on Xinwenlianbo, the most-watched news program in China. Hu invited the group to travel in China from July 11 to July 24. On Friday, CCTV's footage showed the students lining up to greet President Hu after they had been guided among various sights by Zhongnanhai workers. The cameras zoomed in to capture the president embracing each of the students. "Glad to see you again," said Hu, who was all smiles. "I am delighted to welcome you to Zhongnanhai." "We are very honored and very happy," the students said. Speaking in front of the Zhanxulou (The Pavilion of Placid Leisure), the students told Hu about their experiences in China and the feelings those had left them with. Of everything they had seen, they said, the Forbidden City left the deepest impression. CCTV's cameras showed the president guiding the students to Yingxunting, a traditional Chinese summerhouse inside the park-like government compound. As he went, he discussed the history of Zhongnanhai. Once indoors, the students presented Hu with a painting depicting a panda, the Great Wall and high-rise buildings in the US. On it were the words "Grandpa Hu, we love you" in Chinese characters. The president had learned earlier that Friday was the birthday of one of the students - a girl in the 10th grade - and seized the occasion at Zhongnanhai to give her a present. She responded with a look of astonishment, repeating the words "thank you" again and again, according to CCTV's footage. The students then read in Chinese a poem by the Tang Dynasty (AD 618-907) poet Meng Haoran, Visiting an Old Friend on His Farm, to express their gratitude for the hospitality they were being shown. "Preparing me chicken and rice, old friend, you entertain me at your farm," goes an English translation of the opening lines of the verse. "They kept reading that poem over and over again when they prepared for the show," said a Chinese student at the Beijing Language and Culture University who taught the poem to the students. "I can tell that they think it is a great honor to perform in front of the president." Finishing the poem, the students sang Welcome to Beijing, the theme song for the 2008 Beijing Olympic Games. Hu took the end of the meeting as an occasion to say he is convinced that cooperation between the peoples of China and the United States, including the young, will ensure the countries' relations with one another will "become deep-rooted in the people's minds and bear abundant fruits". About 100,000 US students will study in China in the next four years under an education program begun in January by President Hu and his US counterpart, Barack Obama.

Drugmakers, cement firm lead gains for equities - An outlet of Beijing Tongrentang Co at Beijing Capital International Airport. Shares of the retailer of traditional Chinese medicines, jumped 10 percent on Friday after the Shanghai Securities News said the government may announce a biomedical development plan by the end of the month. Stocks on the Chinese mainland rose on Friday, capping a fourth weekly gain. The advance came as drugmakers rallied on the prospect of increased investment in the industry and the nation's biggest cement producer estimated a three-fold jump in profit. Beijing Tongrentang Co, a retailer of Chinese medicine, jumped 10 percent after the Shanghai Securities News said the government may announce a biomedical development plan by the end of the month. Anhui Conch Cement Co climbed to its highest price since 2007 after saying first-half profit surged 200 percent. Poly Real Estate Group Co led declines for property developers after the Chinese authorities said smaller cities with excessive price gains should restrict the number of homes each family can buy. "The property curbs have reinforced worries about a slowdown in economic growth," said Li Jun, a strategist at Central China Securities Co in Shanghai. "Defensive stocks such as consumer and pharmaceutical companies with solid growth prospects are good havens amid a backdrop of economic uncertainty." The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 9.73 points, to 2820.17 at its close, the highest since May 20. The CSI 300 Index gained 0.4 percent to 3128.89. The Shanghai gauge climbed 0.8 percent this week after government reports showed that China's economy grew at a faster-than-expected 9.5 percent in the second quarter and industrial production rose more than estimated in June. The gauge has added 0.4 percent this year. Foreign direct investment in China gained 18.4 percent in the first half of the year, the Ministry of Commerce said in a report on Friday. Annual growth in drug sales may reach about 23 percent by 2015 and the medical industry's total output value may be about 1.25 trillion yuan ($193.4 billion) this year, the Shanghai Securities News reported. A gauge of 21 health-care stocks jumped 3.6 percent on Friday, the most among the CSI 300's 10 industry groups. Beijing Tongrentang surged by the maximum daily limit of 10 percent to 18.29 yuan. Yunnan Baiyao Group Co, a manufacturer of traditional Chinese medicines, rose 3.3 percent to 62.30 yuan. Guangzhou Pharmaceutical Co gained 3.1 percent to 17.27 yuan. Anhui Conch advanced 0.5 percent to 28.72 yuan, its highest close since October 2007. First-half net income may have increased 200 percent from a year earlier as the selling price of its products rose "significantly," the cement maker said in a statement on Thursday. The company's shares have soared 158 percent over the past year, spurred by the government's plans to build more affordable housing to limit gains in property prices and avert a bubble. Samsung Securities kept its "buy" rating on the stock, saying Anhui Conch should be able to maintain high margins. Huaxin Cement Co, the Chinese affiliate of Holcim Ltd, climbed 0.5 percent to 29 yuan. Gansu Qilianshan Cement Group Co gained 1.4 percent to 18.98 yuan. A measure tracking 34 property stocks on the Shanghai Composite slid 1.2 percent on Friday, the only decliner among five industry groups. Poly Real Estate, the nation's second-largest property developer, slid 2.8 percent to 10.60 yuan. China Vanke Co, the biggest, fell 1.8 percent to 8.43 yuan. China Merchants Property Development Co. lost 3.4 percent to 17.90 yuan. China is intensifying property restrictions nationwide after developers posted gains in first-half sales and housing transactions climbed 31 percent last month, even after more curbs were added earlier this year. The central bank announced on July 6 that it was raising interest rates for the fifth time since October. China will also curb gains in housing rents, a report from the State Council said. The government will ensure the construction of 10 million units of social or affordable housing begins by the end of November, according to the report. June home prices climbed 0.4 percent from May, rising for a 10th month, according to SouFun Holdings Ltd, the biggest real estate website. The increase was driven by smaller cities, while prices in larger ones, including Beijing and Shanghai, either posted slower gains or declines from May, it said. The chairman of the US Federal Reserve Ben Bernanke testified for a second day before lawmakers after saying a day earlier he's prepared to provide more stimulus if needed. Bernanke said on Thursday that inflation now is "higher" and "closer" to the central bank's informal target than was the case in August and that's one reason why the Fed won't immediately embark on a third round of bond-buying. The US may have its AAA long-term and A-1+ short-term credit ratings cut by Standard & Poor's Ratings Services (S&P), which said there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling. S&P put the ratings on Creditwatch negative, meaning there's a one-in-two chance they may be cut in the next 90 days.

A oil spill off the coast of China now covers an area around six times the size of Singapore, reports said on Friday, as the government said it may seek compensation for the leak.

Performers from Xilin Gol Song and Dance Theater perform "Tea dance" at the 8th China Inner Mongolia Cultural Festival in Hohhot, capital of Inner Mongolia autonomous region,on July 12, 2011.

Dancers perform the folk dance of the Xinjiang Uygur autonomous region at International Grand Bazzar in Urumqi. Xinjiang is rich in tourism resources with six tourism themes, including the Silk Road, special interest tourism, ecotourism, photographing tourism, folk customs tourism and ice-snow tourism. Xinjiang’s unique brands become attractive in both domestic and foreign markets.

Rare earths export quota unchanged - China, the world's largest producer of rare earths, maintained its export quota at almost the same level as last year, a move analysts said will ease global supply fears. The Ministry of Commerce said on its website on Thursday that rare earth export quotas for 26 companies in the second half year of 2011 will be 15,738 tons. That means the full-year export quota will be 30,184 tons, almost unchanged from last year's 30,258 tons. Minister of Commerce Chen Deming talks to European Union Trade Commissioner Karel De Gucht during a joint briefing in Beijing on Thursday. China and the EU have agreed to negotiate an investment treaty. The announcement was made as top trade officials from China and the European Union held talks in Beijing. A World Trade Organization (WTO) expert panel ruled, two weeks ago, that China's export restrictions on nine raw materials were inconsistent with its WTO obligations. The raw materials cited in the WTO ruling did not include rare earths. Some countries raised concerns about China's export restrictions on rare earths. The government has promised to keep the export quota at reasonable levels to conserve the precious resources and protect the environment. China produces more than 90 percent of the world's supply of rare earths, even though it has just 36 percent of global reserves. Rare earths, a group of 17 minerals vital for high-tech industries, are used in electronics, defense and renewable energy. Export quotas were reduced by 11 percent for the first batch of rare earths this year, after they were slashed 30 to 40 percent in 2010, in a bid to protect sustainable development. The country is committed to providing a stable supply for the international market, said Wang Caifeng, a former official at the Ministry of Industry and Information Technology and a key player in establishing a rare earths industrial association. She said the export quota is in line with the country's production plan. China produced more than 120,000 tons of rare earths last year, with 87,000 tons for domestic use and 34,600 tons for export. The production quota this year is expected to grow by 5 percent, she said. Su Xinying, deputy general manager of Belgium-based Arpadis Polyurethanes, a company that specializes in the supply and sale of raw materials, said: "China's export quota for rare earths has boosted our confidence." Although rare earths were not in the nine materials covered by the WTO ruling, analysts believed the case could serve as a precedent to take China's restrictions on rare earths exports to the WTO. European Union Trade Commissioner Karel De Gucht said on Thursday that the EU wants to see the principles that guided the WTO panel in making the judgment on raw materials also applied to rare earths. However, Chen Deming, minister of commerce, said at a joint news briefing with De Gucht that he was not concerned about possible WTO challenges to Beijing's policy on rare earths. The extraction of rare earths has caused environmental damage in China and rampant mining has diminished supplies. This led to the introduction of policies to guard against over-exploitation and since 2009 export quotas have been cut. Prices for the minerals on the international market have started to rise recently and "will remain high as demand is there", Wang Caifeng said. China's rare earth consumption stood at 87,000 tons in 2010, up 19.2 percent from 2009. Demand is expected to grow by at least 3 percent this year, she said.

Prada Woos Young Chinese With Edgier Sister-Brand - In China, Miu Miu is leading Prada’s growth and the brand accounts for 35% of net sales across Asia. Aiming to cash in on China’s bulging population of young fashion-lovers, Prada is turning its focus in the Chinese market to its frillier, funkier sister-brand Miu Miu. The Italian fashion house, which raised 16.7 billion Hong Kong dollars (US$2.15 billion) from its initial public offering in late June, on Thursday hosted a dinner runway show in Shanghai, where a slew of European, Russian, and Chinese models showed off Miu Miu’s fall and winter 2011/2012 collection while Hong Kong stars, including actress Cecilia Cheung and pop singer Sammi Cheng, feasted on lobster tail. Hoping to stir interest from younger consumers who are now propelling Miu Miu’s growth in China, company executives carefully calculated a more youthful guest list, which appeared to be on average a decade younger than the attendees at Prada’s January show in Beijing. Miu Miu, founded in 1993 by Prada designer Miuccia Prada, has struck a chord with China’s young luxury shoppers, who lavish in its frilly lace and its sparkling sequins and who—unlike consumers in some markets where Miu Miu has been less successful—don’t remember the era in which the brand was overshadowed by the Prada label. In China, Miu Miu is propelling Prada’s growth and the brand accounts for 35% of net sales across Asia, according to Prada IPO filings to Hong Kong’s stock exchange. Due to Miu Miu’s traction with high-end buyers, Prada plans to open Miu Miu stores at a faster rate in Asia than stores for its other brands, which include Prada, Car Shoe, and Church’s, according to company filings. It will double the number of outlets to 55 in the region by 2014, up from around 27 now. There are currently four stores in China’s mainland, seven in Hong Kong, and two in Taiwan. Despite the growing importance of the Chinese luxury market, Prada—unlike many of its competitors and others in the luxury sector—isn’t tailoring itself to local habits or taste. Hyper-connected Internet users in China won’t see Miu Miu on Sina Weibo, a Twitter-like service, or on China’s social media sites, where rival Burberry is building up its digital image and fan base. Clothing designs, for the most part, remain European-centric, apparent in the design and color selection Miu Miu’s fall coats and dresses, many of which draw on a 1940’s European era of boxy gray and black. “Chinese consumers know and research brands and they want designs that are unique,” Sebastian Suhl, Prada’s Chief Operating Officer, said in an interview.

Hong Kong*:  July 17 2011  Share

Expect the Shanghai International Board to be launched in the second half of this year, says Ernst & Young. Hong Kong-listed red-chips - mainland banks especially - are likely to be the first batch of firms listed, the accounting firm adds, but the board is unlikely to lessen the attraction of the SAR. Initial public offerings in Hong Kong during the first half of the year have raised HK$183.7 billion - up 264 percent year on the corresponding period in 2011. And E&Y tips offerings in the second half to better that, forecasting HK$400 billion for the year. In latest action by candidates, book printer and exporter 1010 Printing Group saw over half of its margin orders withdrawn, leaving it with HK$1.6 million. But the company said its international portion is fully covered. It will close its retail books at noon today along with Sino Harbour Property, which has failed to attract margin orders in three days. Another listing candidate, infant-care products maker Frog Prince (1259), starts trading today. It opened 7 percent higher yesterday over its offer of HK$2.60 in the gray market but closed at HK$2.53. That meant a paper loss of HK$70 on a lot of 1,000 shares. Debuts were mixed yesterday. Textile firm Golden Shield (2123) fell 11.4 percent from its listing price at HK$0.70 - a HK$320 loss on 4,000 shares. Shunfeng Photovoltaic International (3777) traded between HK$1.13 and HK$1.32, closing at HK$1.25 - up 4.17 from its offer price of HK$1.20. So investors made a HK$100 gain on a lot of 2,000 shares.

Rita Fan Hsu Lai-tai, widely expected to seek selection as chief executive next year, has once again played down her qualifications for the post, saying another "likely candidate" - Chief Secretary Henry Tang Ying-yen - has an edge in terms of administrative experience. "There is one thing I lack. My administrative experience is less than that of [Tang]," Fan said after a public event yesterday. She said that if she were to become the next leader, she was likely to serve only one five-year term. "Whether I can do two terms or not is not important to me," the 66-year-old said in an interview with Asia Television. "Instead, we should think about whether Hong Kong needs to have a chief executive who can lead for 10 years." Fan also said her family would not like her to take part in the election. Earlier this week, Wang Guangya , head of the State Council's Hong Kong and Macau Affairs Office, spelled out the criteria for the next leader: strong governing ability, wide public support and patriotism. Fan, a member of the Standing Committee of the National People's Congress, called those requirements "very correct". Fan, who earlier described her lack of economic knowledge as a weakness, said she would try to get experts to join her team before she decides to run. Fan, Tang and Executive Council convenor Leung Chun-ying are widely tipped as the main candidates for the election. So far, no one has confirmed participation. Legislator Regina Ip Lau Suk-yee, the head of the New People's Party, has hinted at interest in the job. Meanwhile, former chief secretary Anson Chan Fang On-sang, referring to Wang's remarks on the qualities needed for a chief executive, criticised Beijing officials for talking too much. "Who sets those criteria and how are they measured," she said in an interview with RTHK. The Basic Law only requires the chief executive be a Chinese citizen aged 40 or above, a permanent resident of Hong Kong without right of abode in a foreign country, and have lived in the city for at least 20 years. The next chief executive will be chosen by an expanded, 1,200-member Election Committee.

Winnie Tang Shuk-ming, the businesswoman at the centre of controversy over a government internet programme, broke her silence yesterday, saying all accusations against her were smear attempts - without saying who was behind them. The president of the Internet Professional Association (iProA) also refused to disclose whether she was involved in helping Chief Secretary for Administration Henry Tang Ying-yen prepare his campaign website for the chief executive election. "I do feel sad because Hong Kong society has become so much more politicised now even against welfare projects that benefit the public," Winnie Tang said yesterday. She was speaking at a news conference to announce details of the tender her association has won to co-host an internet learning programme with the Hong Kong Council of Social Service, through its affiliate, eInclusion. The details were announced as the latest attempt by pan-democrats to launch a formal inquiry into the tendering process was defeated. The democrats have been seeking to investigate whether senior government officials including the financial secretary had exerted political pressure on civil servants responsible for selecting the learning programme's implementers. A motion tabled by Democratic Party vice-chairwoman Emily Lau Wai-hing seeking to invoke the Legislative Council's special powers to probe the incident was voted down 21-28 at a full council meeting. Winnie Tang said Henry Tang had nothing to do with iProA's involvement in the internet programme and her organisation had never been involved in his website. "I have never, never talked with Tang about the learning programme," she said, and any such suggestions were just attempts to smear her reputation. But she shrugged off questions as to whether she was personally assisting Henry Tang's bid to become the next chief executive. Lau says she has submitted further questions about the case which she hopes will be pursued after the Legco recess. eInclusion won a contract to help run a HK$220 million internet learning project, which helps underprivileged children go online, along with WebOrganic, a group linked to the Council of Social Service. Former government chief information officer Jeremy Godfrey claims iProA won its share of the job because of an order issued at the top of the government - an accusation vehemently dismissed by officials. As a businesswoman and politician with no declared political affiliation, Winnie Tang is the chief executive officer of a company which has been appointed for a wide range of government IT projects, including the development of the discussion forum on the chief executive's official campaign website.

TVB executive put her faith in 'the boss' Chan - Production resources controller tells trial she wouldn't have approved appearance by actresses at event if she had known of commercial deal - TVB executive Virginia Lok Yee-ling outside court yesterday. She told the court Chan had demanded popular actresses attend his book-signing event. TVB (SEHK: 0511) executive Virginia Lok Yee-ling would have not approved an appearance by actresses at a book signing by general manager Stephen Chan Chi-wan had she known there was a HK$300,000 commercial deal involved, Chan's corruption trial heard yesterday. Lok, controller of production resources, told the District Court she accepted Chan's request immediately because she "deeply believed" in the general manager, who was her boss. "When I consented to artists' appearance in the booking-signing event, I thought it was solely for them to show their support," she said. Lok was testifying at the trial of Chan and two others, who are accused of defrauding the city's biggest television station. Chan, 51, and his former personal assistant Edthancy Tseng Pei-kun, 28, are also accused of cheating five actresses out of their commissions and concealing a commercial deal. Lok said she assigned five actresses to attend Chan's book signing on February 7 last year to show their support for "the boss". She drew up a draft artist list immediately after she was told of Chan's request. But Chan said the artists suggested by Lok were "not good enough" and demanded popular actresses Charmaine Sheh Sze-man and Tavia Yeung Yi, the court heard. Lok said that at that point, she had some reservations as Sheh and Yeung were tied up with drama shootings. Chan later asked executive producer Mui Siu-ching to free Sheh for the event but Sheh's manager told her that the award-winning actress did not want to take part, Lok said. "Sheh seldom takes part in `show your support' events. She normally devotes her entire concentration to the course of shooting and would not take up such a job even if she could earn some money for doing so," she said. "But I told Sheh's manager that as Chan had already made some scheduling arrangements, Sheh's absence would be embarrassing. So I asked Sheh to go. "I deeply believed in Chan [and believed] that he knew what it was appropriate to do. It's because he is my boss," Lok said. "I never doubted the event was different from the normal `show your support' events." Lok said that at that time she did not know that Idea Empire, a company run by Tseng, had entered into an agreement with jewellery chain store Ma Belle. The agreement stated that Ma Belle would pay Idea Empire HK$300,000 in what they called "sponsorship" if Idea Empire could secure the appearance of Sheh, Yeung and others, the court heard. Lok said it was improper for Idea Empire to have entered an agreement with a clause that TVB artists would show up at the event without prior consent from the station. The court heard that the contract was sealed on December 24, 2009 but Lok was not approached by Chan until mid-January last year. "I would not have allowed the actresses to show up to the event had I known that it involved promotion of a commercial products and money," Lok said.

Birth of a new idea for baby pioneer - Professor will again use own experience to develop a test for pre-eclampsia - Professor Rossa Chiu Wai-kwun of the Chinese University of Hong Kong with a DNA sequencing slide she used in her research into non-invasive diagnosis of disease in pregnant women. Her work, which will help diagnose Down's syndrome during pregnancy, won her two major academic prizes. A Hong Kong professor honoured for her work on pregnancy is now hoping to devise a way of testing for pre-eclampsia. And Rossa Chiu Wai-kwun, of the Chinese University, will again use her own experience as a mother of twins in her research. Chiu used samples of her own blood while expecting her babies to discover a non-invasive method of diagnosing Down's syndrome during pregnancy three years ago. She expects the process she devised to be practically applied in Hong Kong hospitals next year. Now she is turning her attention to pre-eclampsia, a condition caused by high blood pressure that can lead to miscarriage. She experienced the condition during her 35th week of pregnancy in 2005. She said: "I had to rest in bed for two weeks. My doctor was worried and I told him I would feel and check whether the babies were moving. "When patients tell me their worries with their pregnancy, I tell them I understand - and I mean it, because I've experienced it." Chiu, 36, who specialises in chemical pathology, has been researching diseases during pregnancy since 1999. Her breakthrough came as she tried to find ways of overcoming situations in pregnancy that prevented prenatal diagnosis of diseases. Previously, it was impossible to test for most diseases in twins as it meant using three sets of DNA instead of the usual two. Diagnosis was made more difficult because the DNA of the female foetus is too similar to the mother's. Her test for Down's syndrome was developed by sequencing foetal DNA from the mother's blood and can be used for babies of both sexes. Chiu said: "I feel it was pre-destined for me to have this experience. It prompted me to be more determined." Chiu received two international honours for her work in May. She was awarded the young investigator award by the International Federation of Clinical Chemistry and Laboratory Medicine, and the professors' prize endowed by the Association of Academic Heads of Clinical Biochemistry Departments in Britain.

 China*:  July 17 2011  Share

China's foreign direct investment (FDI) rose by 18.4 percent year on year to 60.89 billion U.S. dollars in the first half of the year, said Yao Jian, spokesperson of the Ministry of Commerce (MOC) on Friday.

Cheung Kong (Holdings) Ltd unveiled its latest development plans in Shanghai on Thursday. Analysts said the current purchasing restrictions on residential properties won't shake cash-rich companies and China's solid economic growth will ensure long-term investment in the property market. Hong Kong-listed Cheung Kong, chaired by the tycoon Li Ka-shing, announced developments in three projects in Shanghai. Upper West Shanghai in the Putuo district, will become an international standard commercial complex. The Oriental Financial Center in the Lujiazui Finance and Trade Zone in Pudong New Area, has been designed as a Grade A office building. Meanwhile, a project in the Jiading district will be a high-end residential complex. "The decision indicates Cheung Kong's optimism about the market over the next two to three years," said Joe Zhou, a local director with the real estate consultancy Jones Lang LaSalle in Shanghai. Cheung Kong bought the three plots several years ago and the company is now ready to develop them in terms of cash and planning, said Regina Yang, director of research and consultancy at Knight Frank, a global property consultancy company. "The Putuo plot is located in what will become the Putuo district's new commercial center by 2015. Meanwhile, the site at Lujiazui will be situated at a transport hub, with access to four metro lines in the future," Yang said. The fundamentals of the property market remain strong and although the residential market may be going through a slow patch at the moment, the mid- to long-term prospects remain good. "The new developments will take three to five years to complete, by which time the sentiment in the market is likely to be very different," said James Macdonald, head of Savills China research. The development of commercial complexes is the trend of the future. Not only will the different types of properties bring businesses closer together, but will also avoid a traditional weakness of office areas by attracting customers during their leisure time, said Yang. Since 2010, multinational corporations have become major lessees of offices, and their expansion demand will continue to rise in the next two to three years, said Zhou. "Since bottoming out in the third quarter of 2009, the average rent for Grade A offices in the city has soared 34 percent between the fourth quarter of 2009 and the second quarter this year," he added. Zhou also predicted a bright future for the retail sector. He said that another advantageous factor is that average national incomes and consumption will continue to rise at an annual growth rate of 10 percent, which will guarantee substantial returns from retail businesses across the country. "High-end residential property plays an important role as investment, especially as inflation continues to be major concern," said Albert Lau, managing director of Savills China. Although residential property transactions in major cities have recently hit a bottom, the performance of major domestic residential property developers across the nation in the first six months has been "quite outstanding," according to a report released in early July by China Real Estate Information Corp. The nation's top 10 property developers generated combined revenue of 332.3 billion yuan ($51.45 billion) in the first half of this year, up more than 80 percent over the same period in 2010. The report says that indicates that the major players are bucking the trend and consolidating their market dominance.

Lhasa completes 1st wastewater treatment plant - The first wastewater treatment plant in Lhasa, capital of Southwest China's Tibet autonomous region, July 14, 2011. Construction of the first wastewater treatment plant in Lhasa, capital of southwest China's Tibetan autonomous region, was completed Thursday, according to local authorities. The plant, located at the junction of the Lhasa and Doilung rivers, is designed to treat 50,000 tonnes of wastewater every day, said Gesang Puncog, director of the city's housing and urban-rural development bureau. The project cost 122 million yuan (about $18.9 million), and was funded by the Chinese central government, Gesang Puncog said. "We didn't have many examples to learn from in terms of building a wastewater treatment plant at such high altitude, with so low air pressures, low temperatures and scarcity of oxygen, such as Lhasa," he said. After five years' planning, the construction of the plant started last April, he said, adding that in the past, the wastewater in Lhasa was discharged into rivers without being treated. According to Gesang Puncog, the plant will be expanded in the future. By 2020, the daily wastewater treatment capacity of the plant will reach 180,000 tonnes, he said.

China's railways ministry has promised to fix problems with power outages and other malfunctions that have plagued the showcase new high-speed line between Beijing and Shanghai since it opened last month. Railways Ministry spokesman Wang Yongping apologised on Thursday in an “online chat” posted on the ministry’s website, acknowledging that the 1,318-kilometre line which began commercial operations June 30 has experienced several dozen power outages in the past week. He appealed for public understanding, saying that summer thunderstorms and winds have caused some of the problems. The Beijing-Shanghai line was opened to great fanfare on June 30, the eve of the 90th anniversary of the founding of the ruling Communist Party. Its problems are awkward given the trophy project’s purpose of demonstrating China’s prowess in advanced technology. The top operational speed for the line’s trains is 300 kilometres per hour. The speed was cut from the originally planned 350km/h after questions were raised about safety. On Wednesday, a high-speed train headed to Beijing broke down due to a failure of its transformers, dropping the speed to 160km/h and passengers had to change trains because of concern the slow speed would disrupt the entire line’s operations, Wang explained. “These malfunctions did not cause any major safety risks, but they have truly affected the railway’s operation,” he said. The railway will do its best to overcome the problems and operate the trains more smoothly, Wang said. Despite the troubles, the railway carried an average of 165,000 passengers daily from July 1 to 13, with a peak of 197,000 people, he said. Official plans call for China’s bullet train network to expand to 13,000 kilometres of track this year and 16,000 kilometres by 2020.

China yesterday called on the United States to protect "the interests of investors" after rating agency Moody's placed the United States' top debt rating on a downgrade watch. Days after reporting the highest inflation figures in three years, what worried Chinese officials the most appeared to be the US economy. Two government officials on two separate occasions yesterday urged Washington to "act more seriously and effectively" to protect investors in US Treasury bonds - of which China held US$1.153 trillion worth by April, according to US data. "We hope the US government adopts responsible policy and measures," Foreign Ministry spokesman Hong Lei told a briefing. Yu Bin, a senior official from the ministerial-level State Council Development Research Centre, said Beijing noted that the US economy was "worse than expected" and said; "The US economy is a worry." He said China, as the largest holder of US debt, "needs to carefully assess the risks and improve the structure of its foreign exchange reserves to mitigate" them. Moody's Investor Service warned on Wednesday it could downgrade the United States' triple-A credit rating because of growing risks the US debt limit will not be raised in time to avoid a default. US lawmakers are locked in a stalemate over deficit reduction plans, agreement on which is needed before President Barack Obama can raise the US$14.29 trillion debt ceiling so the US can meet its obligations. Following Moody's step, a Chinese rating agency yesterday said it was also putting US sovereign debt on watch for a possible downgrade. "Factors influencing the US government's ability to repay its debt are steadily worsening," said the Dagong Global Credit Rating Co. "If there is no substantive improvement in its repayment ability or willingness during the observation period, Dagong will appropriately downgrade the national rating of the United States." A downgrade could sharply raise US borrowing costs, worsening its already dire fiscal position, and send shockwaves through the financial world, which has long considered US debt a benchmark among safe-haven investments. China is also watching nervously if the US Federal Reserve will proceed with a new round of quantitative easing, or QE3. If it did, Yu said, the impact would not be small. "QE3 will cause the US dollar to depreciate and the commodities to rise in prices, adding fuel to China's domestic inflation." Yu said Chinese consumers would have to pay more for things made from imported materials if the Federal Reserve proceeded with QE3. Even the mention of QE3 has already pushed the yuan to a 17-year high against the US dollar - as China reported better-than-forecast growth in the first half of the year.

China will change its policy regarding the export of rare-earth minerals, after the World Trade Organisation ruled this month that the country has violated its trade obligations by imposing limits on exporting the raw materials, European Union Trade Commissioner Karel de Gucht says. The commissioner made the comment yesterday after meeting Commerce Minister Chen Deming and after China announced that it would almost double its rare-earths export quota for the second half of the year. The Ministry of Commerce announced the quota rise yesterday, saying it would total 15,738 tonnes for 26 companies, up from 7,976 tonnes during the same period last year. The WTO ruled on July 5 that export duties China imposed on certain raw materials were inconsistent with the country's obligations under the WTO's accession protocol, and that limiting the export quotas out of environmental concerns was not justified. The EU welcomed the decision, which China said it would appeal against. Speaking after the meeting with De Gucht, Chen said he was not concerned about any possible WTO challenge to Beijing's policy on rare earths - 17 types of mineral widely used in hi-tech manufacturing. "The issue has not entered the WTO stage," he said. "I am not worried because we have had some negotiation with the European Union." De Gucht said the EU preferred to negotiate a solution with China but the EU would not hesitate to take additional action if a negotiated solution could not be reached. "They have indicated that they are going to change the policy. They realised they have to change the policy. They gave only a general indication of that, but from the general indication they gave, I can conclude that they realised that they cannot have different policies with respect to exports and with internal consumption." China controls about 90 per cent of the world's rare-earths supply. It began reducing their export last year.

Ratings agency Standard & Poor's has warned there is a one-in-two chance it could cut the United States' prized triple-A rating if a deal on raising the government's debt ceiling is not agreed soon. Putting the US on negative watch, S&P warned that it could cut the rating as soon as this month if talks between the White House and Republicans remain stalemated. Any cut would be by one or more notches, it added. “Today’s CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the US within the next 90 days,” the agency said in a statement. The S&P warning comes just a day after Moody’s Investors Service warned the US may lose its top-notch credit rating in the next few weeks if lawmakers fail to increase the country’s legal borrowing limit and the government misses debt payments. The deadline to raise the ceiling is on August 2. The risk that the United States will lose its AAA credit rating in the next three months has risen considerably, even if lawmakers reach an agreement to raise the country’s debt ceiling later this month, an S&P official said on Thursday. John Chambers, chairman of Standard & Poor’s sovereign ratings committee, told reporters in an interview that “this is the time” for the White House and Republicans to reach a credible budget agreement to tackle the country’s long-term debt problems. “If you get a small agreement, that will lead to a downgrade,” Chambers warned. S&P revised in April its outlook on US credit ratings to negative, which traditionally signals a downgrade in 12-18 months. But “that horizon has shortened,” Chambers said, because it is very unlikely that Washington will be able to craft a meaningful budget agreement next year if it misses the chance now. S&P is the only one of the big-three agencies with a negative outlook on US ratings. Moody’s Investors Service on Wednesday placed US ratings on review for a possible downgrade to account for the risk – which it considers low albeit growing – that the US Treasury will miss debt payments in August if the debt ceiling is not raised. S&P on Thursday also placed US ratings on creditwatch, similar to a review for downgrade, because it also sees a growing risk of a ceiling-related technical default in August. Republicans rejected a deal at a White House meeting on Thursday that would have included a payroll tax-cut extension and a number of tax breaks for certain business sectors, a Democratic aide said. President Barack Obama had offered a spending cut of US$2 trillion for the coming fiscal year in White House budget talks, but that was far below the level sought by Republicans, Senate Republican Leader Mitch McConnell said on Thursday. So protracted has been the wrangling over the budget that S&P warned that even if there was a deal done on raising the ceiling, it might still cut the rating if it was not convinced it would stabilise the country’s medium-term debt dynamics. “If an agreement is reached, but we do not believe that it likely will stabilize the US’ debt dynamics, we, again all other things unchanged, would expect to lower the long-term ‘AAA’ rating, affirm the ‘A-1+’ short-term rating, and assign a negative outlook on the long-term rating,” said S&P. The market reaction in Asia was strangely muted, perhaps because Moody’s had already raised the possibility of a downgrade. Dealers said the market might also be hoping that the pressure from the agencies would jolt US lawmakers into doing a deal. “It’s eerily quiet so far,” said a trader at a local bank in Sydney. “People are counting on sanity breaking out in the US – the idea of default is just too scary to contemplate.” As a result, Treasury prices dipped only modestly, lifting 10-year yields to 2.97 per cent, from 2.92 per cent late in New York on Thursday. The euro was holding in a tight range around US$1.4255 in Asia, having earlier edged up from an overnight low of US$1.4115. The dollar eased slightly to 79.04 yen and slipped back to 0.8148 Swiss francs , uncomfortably close to its record low of 0.8080. Dealers added that the market was wary of buying the euro ahead of the result of Europe-wide stress tests on 90 banks due later on Friday which could force some to seek state aid.

Hong Kong*:  July 16 2011  Share

The upper crust of modern Asian design - Young visionary behind such spaces as The Upper House and Nadaman in Tokyo is at his happiest when taking complete ownership of a project - Next time you are in The Upper House, you may notice an elegantly dressed young man quietly observing the scene. For Andre Fu, the founder of AFSO Designs and the visionary behind this boutique Hong Kong hotel, likes to pop in occasionally to check on his creation. "My work is very much designed for people to be in," he says. "You understand much more when you see people in them. I notice things that need to be fine-tuned." It is a refreshing take in a profession where often the finished product is a kind of art gallery to be admired rather than a workable space to be lived in. Fu clearly understands the difference between the two - we are sitting in Ben Brown Fine Arts, an art space he designed in Central, where he is launching his latest venture. Although only 35, the Hong Kong-born designer is bringing out A Bespoke Journey, a coffee table book published by The Antithesis featuring highlights of his impressive portfolio to date. "When I was approached about the book by the publisher I'd been in the industry for 10 years. The timing was right for a small celebration," he says. "Part of the reason I wanted to do it was because I get asked a lot about how I would describe my design style and I always say I'm much more approach-driven. It's about conversations with the client, understanding the context, the location and the site - and then the design comes." Fu says he found it easy to choose the 12 projects in the book, which range from hotels and restaurants to a retail outlet (Agnes B), the aforementioned Ben Brown Fine Arts and a range of rugs for Tai Ping Carpets. Of the 12, the one he is most proud of, and which won him international acclaim, is The Upper House. "It was my first hotel project and the first one I've been involved with in the holistic sense. Literally, from the moment you leave your car ..." That is a reference to the stone entrance and driveway, designed by him, like everything else; he plays the role of architect, interior designer and art curator. "I'm architecturally trained but professionally I'm working on an interior design platform. I've recently been asked to create a 52-storey residential tower in Sheung Wan, though, so from that to a carpet collection, it's a broad spectrum." The Upper House, which opened in 2009, has a luxurious, modern Asian style that feels soothingly tranquil. You are greeted by striking charcoal-coloured stone and honey-hued wood - Fu's two favourite building materials. The air of serenity comes from both the hotel's proportions and a neutral palette: there is sandstone, marble, bamboo, nickel and bronze, with only an occasional flash of colour - mineral blue, tea green - introduced through fabrics. Although he says he doesn't consciously adhere to fung shui principles, Fu believes they are present in his work. "There's a degree of comfort in what I do that reflects some of the fundamentals of fung shui. It's my belief that good fung shui is a place where you go in and feel comfortable - it's a space that you want to be in." Fu himself seems as calm as the spaces he creates. He considers each question carefully before answering in a languid but precise way. He says he didn't grow up in a design- or art-focused family but was always drawing as a child. His concept sketches, some of which are included in the book, are exquisite: they combine precise architectural drawing with beautiful attention to detail. Fu knew from the age of 13 what career he wanted to pursue. Educated from the age of 14 at the prestigious London school St Paul's before going on to study for his architecture degree at Cambridge University, he has the polite manner and the look - smart jeans and shoes with open-collared checked shirt and blazer - of an English public school boy. He's aware there's an irony to his being held up as a poster boy for Asian design. "My understanding and knowledge of the West is probably much better than that of the East but I'm presented as someone with this Asian DNA," he says, smiling. "My time in the UK has definitely had an influence on me on a cultural level. Going to the Southbank art galleries was a weekend ritual for me. "Increasingly though I've been seen as someone who embodies Eastern understanding of design. The Upper House is a good example. It's not literally Eastern but the sensitivity is there." Indeed, the atrium, designed to mimic the mechanism of a Chinese umbrella, and the shimmering bamboo light pendants in the acclaimed Cafe Gray Deluxe restaurant, are some of those subtle Asian touches. And his consideration of local influences is also evident in his designs across Asia. From the intricate installations mimicking traditional Japanese paper art at Nadaman restaurant in Tokyo to the liberal use of bright silks at the Silipa Thai restaurant in Chiang Mai. It's something he'd like to build on in his future work. "I'm at a stage in my career when I want to be able to do something that better defines luxury in China. I hope that in my new projects I'm able to borrow some more elements of Eastern design." As well as the residential tower in Sheung Wan, due to open in autumn 2013, these include IFC Residences in Shanghai opening at the end of this year followed by hotels in Suzhou, Hangzhou and London slated to open in the second half of 2013. He's also transforming the shoe department at Lane Crawford's Canton Road store. Totalling 25,000 square feet, The Shoe Library will take up its entire ground floor. Still on his to-do list is a space for performing arts. He looks particularly engaged at the mention of this. Has he something lined up? "Not at present but you never know." Fu retuned to live in Hong Kong seven years ago and sees no reason to leave. "It's been good timing. There's definitely a greater awareness of design in the city and there's a market here that understands and appreciates design." Despite designing homes for several celebrities, including actress Michelle Yeoh Choo Kheng, he no longer takes on private residences. "My passion is on the hospitality front," he says. "It's much more interactive." With so many projects to juggle, when and how does he relax? It's the first time that he looks clearly uncomfortable. "That's a really difficult question." There's a long silence before he says, "I guess I just stop."

The United States is ready to ease monetary policy further if the economy as well as inflationary pressures weaken, Federal Reserve chairman Ben Bernanke warned last night - suggesting policymakers are actively mulling further stimulus. Stocks on Wall Street rose on the news, snapping a three-day losing streak. The Dow Jones industrial average was up 1.18 percent at 12,593.52 in late morning trade. First Shanghai Securities chief strategist Linus Yip Sheung-chi said Bernanke's words would provide an immediate boost for Hong Kong stocks today. In prepared testimony before the US House of Representatives Financial Services Committee, Bernanke warned: "The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support." Tellingly, Bernanke specifically noted Fed forecasts for June, which were already revised down significantly from an initial one made in April, had not incorporated recent data, particularly last Friday's dismal employment report. That data showed job growth essentially grinding to a halt in the past two months, pushing the jobless rate up to 9.2 percent. Minutes from the Fed's June meeting, released on Tuesday, showed some policymakers believe the Fed should stand ready to provide more support to the economy if the recovery flags, rekindling the threat of a debilitating downward spiral in prices and wages. Others on the policy-setting Federal Open Market Committee, however, felt inflation risks might force the central bank to withdraw stimulus sooner than is currently anticipated. Bernanke did not mention two key issues that are likely to come up repeatedly during the question and answer session before lawmakers: the fight in Washington over the US debt ceiling, and a European debt crisis that appears to be getting worse by the day. The Fed chief's outlook on the economy is cautious, and for good reason. After recovering from the steepest recession in generations beginning in the summer of 2009, the US economy has lost momentum in recent months. Gross domestic product expanded just 1.9 percent in the first three months of this year, and the second quarter does not look to have been much better. Bernanke held to the view that recent weakness was due in part to temporary factors like high energy costs and the effects on global industry from Japan's earthquake and tsunami. But he acknowledged the labor market remains weaker than the Fed would like. "The most recent data attest to the continuing weakness of the labor market," he said. Lawmakers are likely to grill Bernanke on the effectiveness of the Fed's second round of bond buying, a US$600 billion (HK$4.68 trillion) stimulus program that was completed at the end of last month. Bernanke argued in his testimony that the program was effective at keeping borrowing costs down and stimulating economic activity. Regarding inflation, Bernanke reiterated the recent rise in prices was mostly linked to transitory factors such as higher energy and commodity prices, and should trend back down.

Henderson Land, Hong Kong’s fourth most valuable property developer, said it will pick up the pace of selling flats in China in the second half, after a slow first six months that saw sales fall short of the halfway mark for its full-year target. Henderson Land Development (SEHK: 0012) planned to launch 4-5 residential projects worth 4-5 billion yuan (US$618.4-773.1 million) in various Chinese cities in July and August, Executive Director John Yip told reporters in an interview. For the first half of this year, Henderson, owned by Hong Kong tycoon Lee Shau-kee, posted contract sales of 1.4 billion yuan, Yip said. Analysts said the sluggish sales were due to a series of tightening measures to curb property speculation. Earlier in the year, senior executive had said the company aimed to sell 10 billion yuan worth of flats this year. Contract sales are recorded when buyers sign contracts to purchase apartments and are usually a good indication of what actual sales will look like months later. “The policies limiting purchases and loans have suppressed demand from some speculators and investors,” Yip, who oversees Henderson Land’s China operations, told Reuters in an interview. Henderson Land will launch residential projects in cities including Nanjing, Suzhou and Chongqing in July and August. “We will then have to see how our sales are looking in August and September,” he said from Henderson’s office overlooking Hong Kong’s dramatic Victoria Harbour. “I would say we are still confident of achieving the full-year target.” Yip said Henderson Land would see whether there was a need to adjust the full-year target at the end of the third quarter. But analysts said they doubted the developer would make the mark. “A large part is due to execution problems because they still have weak execution on the ground. Weak in the sense that it took a long time to launch and their construction program wasn’t up to speed,” said Samsung Securities analyst Wee Liat Lee. “It is not just because of the tightening.” Henderson Land, which has a market capitalisation of about HK$113 billion (US$15 billion), has a mix of retail, office and residential properties in China, the most prominent being the Beijing World Financial Centre. The company, which did not purchase any land in the first half, planned to spend 3-4 billion yuan to buy land in fast-growing provinces such as Jiangsu, Liaoning and Zhejiang later this year, Yip said. China’s real estate made up about 17 per cent of Henderson Land’s net asset value (NAV), while half came from Hong Kong residential, office and rental properties as of March, according to a report by JP Morgan. The central government, wary of inflationary pressure affecting the wider economy, has rolled out a series of tightening measures since late 2009 to rein in runaway home price rises and cool the red-hot market. While making it more difficult for people to buy multiple homes and increasing the cost of purchases, China is also speeding up efforts to build more government-subsidised housing. Lee said he did not expect more tightening measures. “There is a possibility that local governments will actually quietly relax some tightening because they need funding. They are running out of cash. Land sales have been pretty weak in the first half, down by 30-40 per cent,” he said, adding that the government would need funding for social housing. With the measures unveiled so far targeting the housing sector, property developers and investors view commercial property as a form of diversification to boost returns. Henderson Land, known for building Hong Kong’s towering landmark International Finance Centre with Sun Hung Kai Properties (SEHK: 0016) Ltd , has shopping malls and office towers in Beijing, Shanghai and other key mainland cities. However, Yip said it was too early to launch a China real estate investment trust (reit) with the properties just launched. In April, Hong Kong billionaire Li Ka-shing’s property operations launched the territory’s first yuan-denominated initial public offering with its Hui Xian reit, which packages the Oriental Plaza commercial complex in Beijing. “In the first year or so, developers usually give some incentives to secure anchor tenants and it’s not really reflective of what market rates are,” Yip said. “It will take two to three years before we start getting rents and rental yields to reflect the actual market situation.” Henderson shares, which have fallen by about 10 per cent this year, were down 0.21 per cent at HK$47.75 by the midday trading break on Thursday, faring slightly better than the Hang Seng Index’s 0.76 per cent loss.

Cheung Kong Infrastructure Holdings (SEHK: 1038), the infrastructure investment vehicle of Hong Kong tycoon Li Ka-shing, plans to raise about US$400 million in share placement, according to a term sheet seen by reporters on Thursday. The company is selling new shares in a range of HK$40.41-42.15 per each, the term sheet showed. Goldman Sachs Group is the sole bookrunner.

Legislators on Thursday rejected an attempt to launch an investigation into recent allegations of political inference over the awarding of a HK$220 million cyber-learning contract to a company with connects to the government and pro-Beijing forces. A motion put forward by Democratic Party’s Emily Lau Wai-hing was voted down by functional constituency legislators. Her motion had called for a special taskforce to be set up to investigate whether officials had exerted any pressure in the selection process of the contract’s winner. Whistle-blower Jeremy Godfrey, the government’s former information technology chief, earlier alleged he had been pressured by Financial Secretary John Tsang Chun-wah and former commerce chief Rita Lau Ng Wai-lan to appoint eInclusion, an affiliate of the Internet Professional Association ( iProA), to run the scheme. The project involved a subsidised internet-learning plan that included sending volunteers to help poor children in their homes. iProA has links to the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) – the city’s largest pro-government party. In a debate on Thursday, DAB vice-chairman Lau Kong-wah said the pan-democrats were using the issue to attack the DAB. “You cannot link this incident to the DAB simply because there are one or two DAB members in the company [iProA]. I don’t see any need to investigate further,” he said. But Civic Party lawmaker Ronny Tong Ka-wah said it was the job of Legco to investigate such matters. “There are people [here] who are stopping us from doing our job of monitoring the government,” he said. Secretary for Commerce and Economic Development Gregory So Kam-leung said there was no need for further investigation. He reiterated that Godfrey’s claims had been baseless. “The government has provided a large number of documents with details related to the project and lawmakers have scrutinised them,” So said. “All this information only showed there were differences in opinion between Godfrey and his seniors on procedural and planning matters. So said these differences in opinion did not mean there had been any political interference.

 China*:  July 16 2011  Share

Graig Group, the British shipowner, ship design and ship services firm, has ordered up to 26 feeder container ships from mainland shipbuilder Jinhai Heavy Industry, to take advantage of a boom forecast in intra-Asia trade. Chris Williams, commercial director of Graig Shipping, said that the initial order was worth about US$180 million for six of the newly designed Marlin 2000 Blue 2,000 teu containerships. Williams added that Graig had until later this year to declare options for a further 20 ships but these could be smaller or larger than the first six. The Marlin range of vessels, which have been designed by Graig in association with Wartsila Ship Design, have similar basic features but vary in cargo-carrying capacity between 1,100 and 4,000 teu and could be equipped with different fuel systems, including liquefied natural gas. Williams said that even using normal fuel oil, the vessels would be up to 30 per cent more fuel-efficient than conventional ships while carrying 20 per cent more containers. Graig has dubbed the Marlin 2000 ships Bangkok-max because of their shallow draft and narrow beam, making them suitable to sail into draft-restricted ports in Bangkok and other Asian ports. Williams said that these, together with the larger Marlin vessels, "have been designed with an eye on the intra-Asia trade". He believes Asia is set to become the biggest container shipping market in the next few years. Total cargo volumes in the region could top 80.4 million teu by 2015, which would be almost double the trade volumes on trans-Pacific and Asia-Europe trades, according to the UN Economic and Social Commission for Asia and the Pacific. Graig is still finalising charters for the first six vessels, which are being financed with the support of the Export-Import Bank of China. The first pair are due for delivery in August and September 2013, with subsequent vessels to be delivered in pairs every two and a half months. Hugh Williams, Graig Shipping chairman and chief executive, said: "Jinhai is part of the Hainan Airlines Group, a major Chinese conglomerate which also owns a leading logistics player in Grand China Logistics and there is the possibility of the yard's parent group owning or chartering Marlin vessels." The deal between Graig and Jinhai Heavy Industry also strengthens Graig's relations with mainland shipyards, where it is supervising the construction of 50 ships, of which about half are being built for Chinese owners.

Collision courses - Business banquets on the mainland are a minefield for the uninitiated, where a simple social blunder can ruin the evening and blow the deal - Clockwise from top left: Chinese waitresses dressed in imperial costumes serve dishes of the ''royal banquet'' at a hotel in Shenyang; a waiter stands next to a table prepared for an official banquet; late US president Richard Nixon inspects his food during a banquet in Hangzhou in 1972; a bottle of baijiu liquor; US President Barack Obama (left) with President Hu Jintao and US Secretary of State Hilary Rodham Clinton at a state dinner at the Great Hall of the People in 2009. Ever wondered what a cockroach-like insect tastes like when crunched between the teeth, whether boiled camel's paw is tender or tough, or if gulping back Chinese liquor guarantees a head-splitting hangover? A mainland-style banquet is the place to put these whimsical musings to the practical test, as shoving a plate or glass to one side with an expression of distaste is still considered the height of bad manners. A grateful guest, particularly one who wants to seal a business deal, will appreciatively nibble every one of the 10 or more dishes served and drink baijiu (grain liquor) with a beatific smile, not a curled-lip grimace. Moments in history have turned on foreign politicians' successful navigation of formal banquets. China may have changed radically in the past two decades, with its major cities boasting classy restaurants that serve the finest Western fare, but the traditional Chinese banquet remains the first choice - indeed, the only acceptable choice - for a deal-making dinner, or any other celebratory event. Suggesting an alternative venue would be a major faux pas that reveals immediately the would-be host's lack of understanding about the way things are done in the Middle Kingdom. The Chinese banquet, with its multiple courses and arcane rules for eating, talking and toasting, can be a minefield of etiquette blunders, especially when the brain is muddled by multiple shots of baijiu.

China on Thursday urged Washington to protect the interests of investors, after ratings agency Moody’s placed the United States’s triple-A debt rating on a downgrade watch. China is by far the top holder of US debt, with holdings at US$1.153 trillion in April according to US data. “We hope the US government adopts responsible policy and measures to ensure the interests of investors,” said foreign ministry spokesman Hong Lei. Moody’s Investor Service said on Wednesday it had placed the United States’ triple-A rating on a downgrade watch because of rising prospects the US debt limit will not be raised in time to avoid default. The announcement came as US lawmakers try to hammer out a deal that would allow President Barack Obama to raise the country’s debt ceiling to allow it to meet its repayment obligations. Republicans are refusing to lift the country’s US$14.29 trillion debt ceiling without deep government spending cuts, while they reject Democrats’ demand that tax increases must be part of any sweeping deficit reduction plan.

Cosco Shipping will spend about US$12 million on armed guards and other anti-piracy measures this year to protect its ships and crews against the threat of piracy in the Gulf of Aden and the Indian Ocean. The move signifies a change in attitude by both mainland and Hong Kong shipowners, who in recent months have shown a greater willingness to use armed force against threats when sailing through pirate-infested waters. Pacific Basin Shipping (SEHK: 2343), Wah Kwong Maritime Transport and Valles Steamship are among the leading Hong Kong owners that have expressed the view that armed guards have and would be used on board if necessary. Shanghai-listed Cosco Shipping, which owns around 80 ships - 20 registered in Hong Kong and 60 on the mainland and elsewhere - said the budget included the cost of bullet-proof vests for all crew and on-board equipment to both deter attacks and prevent pirates from taking control of vessels if they do board. Guo Jin, Cosco Shipping's chief operating officer, said if the firm's ships are unable to take alternative routes, such as via the Cape of Good Hope, and had to travel through high-risk areas, "then we will take some measures to defend ourselves ... Our ships are relatively small, they are not so fast - about 15 knots - so we have to employ armed security." Guo said the use of armed guards was a "difficult issue. We don't want to injure people ... but we have to protect ourselves." So far, the company has reported only one incident on its ships, in which an approaching skiff retreated when a guard fired a warning shot at a range of about 500 metres. Guo said the company favoured British security companies that use former Special Air Service troops or Royal Marines. "We are helping British employment," he quipped. Jan Rindbo, chief operating officer of Pacific Basin Shipping, said there were "relatively few times every year" that its ships passed through high-risk piracy areas in the Indian Ocean and Gulf of Aden. He said: "For every transit we do a risk assessment to determine appropriate anti-piracy measures in accordance with (shipping industry) best management practices". Rindbo said that aside from "hardening" the ships with barbed wire and other equipment "we are now also open to use armed guards on a case-by-case basis subject to our risk assessment. "The cost of these anti-piracy measures can amount to over US$200,000 per transit, but this is largely factored into the freight rate and thus passed on to the charterers," he said. Tim Huxley, chief executive of tanker and bulk carrier operator Wah Kwong Maritime Transport Holdings, indicated the company had and would use armed guards. "While placing armed guards on board is not a solution to the piracy problem in itself, they have proved invaluable as a further deterrent and are part of our plan to make our ships less attractive to attackers. Increasingly, charterers are willing to bear the cost of these security measures and so ultimately this is going to be passed on to the consumer." David Koo, head of tanker owner Valles Steamship, had been opposed to the use of armed guards because he thought it would escalate violence and that piracy needed a government solution. But Koo, a former chairman of the Hong Kong Shipowners' Association, said the industry had changed its view and was leaving it up to individual shipowners to decide whether to use armed guards. He said the use of armed security personnel "gave peace of mind for the crew". He added that while Valles ships had yet to cross the Indian Ocean "we would probably use armed guards" when it did so. Two Tung-family shipping companies, Orient Overseas Container Line and bulk company Island Navigation, declined to answer questions about their use of armed guards. Roger Tupper, director of the Marine Department, said the department had advised shipowners, ship managers and operators with Hong Kong flagged vessels earlier this year about the use of security personnel and on-board weapons. In the two-page advisory, the Marine Department said it "encourages the carriage of experienced security consultants to assist in following best management practice requirements as these are welcomed by the crew and give confidence to all onboard in case of pirate attacks". The department did not encourage the use of weapons, but dispensation would be given if the owners, operators and managers met six requirements, including vetting of the security consultants.

Budget carrier to add to routes in China - The Australia-based Jetstar Group, the largest Asia-Pacific budget carrier by revenue, will launch five new routes between China and Singapore in 2011, the group said on Wednesday. The five new routes include a daily flight between Beijing and Melbourne with a stopover in Singapore starting from Nov 24 and three flights a week between Ningbo, Zhejiang province, and Singapore starting from Sept 9. The other three routes are still in planning. A Jetstar Airways Airbus SAS A330-200 aircraft taxis at Changi Airport in Singapore. The budget unit of Qantas Airways Ltd aims to open more routes between China and Singapore. With its existing seven destinations, the five planned routes will bring Jetstar's total number of destinations in China to 12, most of which will be located in secondary cities, such as Shantou, Fujian province and Hangzhou, Zhejiang province. The other two budget airlines in Asia - AirAsia Berhad and Tiger Airways Singapore Pte Ltd - are also attracted to the Chinese market. AirAsia has 10 destinations in China. Tiger Airways has four destinations in the country, most of which are in southern Ccarhina. "Our rapid development represents our confidence in the Chinese market," said Chong Phit Lian, chief executive officer of Jetstar Asia. A report by research company CIConsulting said that about 70 percent of all routes inside China are suitable for budget airlines and predicts that 25 percent of domestic routes will be provided by low-priced carriers in 2013. In 2020, annual passenger capacity in China will reach 700 million people, said Li Jiaxiang, head of the Civil Aviation Administration of China. Spring Airlines, currently China's only budget carrier, occupies about 3 percent of the domestic civil aviation market, but its net profit was 470 million yuan ($72.68 million) in 2010, a 240 percent increase compared with 2009. "China is a key market for growth, but currently, we only have a very tiny share of the market," Chong said. He added that the difficulty in expanding in China is gaining recognition among local consumers. Budget airlines advertise low fares and organize activities and events for students, who are their target consumers. Many industry experts say Asia still has growth potential in the budget aviation sector. Low-cost carriers occupy 27 percent of the market share in the United States and 24 percent in Europe, but only 10 percent in Asia. Bruce Buchanan, CEO of Jetstar, said that at present, about 450 aircraft belong to budget airlines in the Asia-Pacific region and the number will increase to 2,000 in the next five years. Jetstar operates 2,400 flights a week to 54 destinations in 14 countries across Asia and the Asia-Pacific region with a fleet of 78 aircraft. The company will purchase 50 planes in the next five years to help meet market demand, Buchanan said.

Advection fog hovers over buildings as the sun sets in Yantai city, East China’s Shandong province, July 13, 2011. Advection fog occurs when moist air is blown over a cool surface and condensation in the form of fog occurs. It is common when a warm front passes over an area with significant snow.

A 3D, interactive fitting room is shown to the public in Hangzhou, Zhejiang province, on July 13, 2011. Using it, people can see how they look in a new outfit, without the trouble of having to take their real clothes on and off. As people move, the clothes will move with them. 

Could “Pleasant Goat” Be China’s Best Ambassador? China’s efforts to put its best face forward have ranged from a large advertisement in New York’s Times Square to a documentary channel by state broadcaster China Central Television featuring films about historical Chinese sites. But Jonathan So, senior adviser at Imagi, the studio that owns the rights to “Pleasant Goat and the Big Big Wolf,” a popular Chinese animated television series that is now being distributed by Disney in 52 markets around the Asia Pacific region, said that showing red flags and images of the Great Wall may not the best way to win audiences over. Mr. So –- whose cartoon about a family of goats and their adventures escaping from a wolf is now showing in places such as Australia, New Zealand, Malaysia, the Philippines and India with voiceovers in many different languages and dialects –- said as many as half of the fans of “Pleasant Goat” may not even know the cartoon originated in China. But for those who do, animation shows there “really are not too many boundaries” between cultures, he said. “You really don’t have to put a Chinese story, or to have the Great Wall in the scenery, or to wear something red,” said Mr. So, who started out as a toy manufacturer. “Pleasant Goat,” created in 2005, has a “sense of humor,” he said. “We put a lot of family elements in there, representing the Chinese family and how the kids are thinking, how they live their lives.” Marketing experts say that independently created cultural content may help China gain global cultural influence better than government efforts. Earlier this year, Ogilvy & Mather Worldwide Chief Executive Miles Young said Beijing should promote things “which are happening culturally and spontaneously” within the country, such as its vibrant art scene—something South Korea and Japan have done more successfully. Still, Mr. So said he believes the animation industry faces challenges. While filmmakers can earn returns from TV stations and box-office sales in the U.S. and other markets, Chinese animators have limited choices of broadcasting partners and their earnings come from government-awarded bonuses and toy sales, leaving less incentive to create original content, he said. Mr. So said “Pleasant Goat” was originally intended only for the China market, which he estimates is 130 million people. According to Imagi, “Pleasant Goat” programs occupied five of the top 10 ratings for animation programs in China based on prime-time viewership by children in cities between the ages of 4 and 14.

Hong Kong*:  July 15 2011  Share

Northumbrian Water Group PLC said Monday that Cheung Kong Infrastructure Holdings Ltd. of Hong Kong has made a nonbinding proposal valuing the U.K. utility at £2.41 billion (US$3.87 billion), as the Asian company edges closer to a takeover amid plans to expand its European footprint. Northumbrian Water said it received a cash proposal of 465 pence (US$7.47) for each of its shares from property company CKI, the first time a price tag has been disclosed for the potential acquisition. The utility, which is one of Britain's largest water-services companies, also said it agreed to grant CKI a limited period to undertake due diligence. On July 1, Northumbrian Water said it had received an indicative proposal regarding a possible offer from CKI, which is owned by billionaire Li Ka-shing, but it didn't disclose any details. On Monday, Northumbrian Water said CKI has reserved the right to make an offer at a price lower than 465 pence per ordinary share if the board of Northumbrian Water agrees and recommends an offer at the reduced price. The U.K. utility's shareholders will also remain entitled to receive the net final dividend of 9.57 pence a share for the year ended March 31, due to be paid on Sep. 9. Northumbrian Water said there is no certainty a binding offer will be made. CKI's profit from the U.K., its second-largest market after Hong Kong, nearly doubled last year to HK$1.18 billion (US$151.6 million), driven by acquisitions of electricity assets. In October, a consortium led by CKI and Hong Kong's Power Assets Holdings Ltd. bought Electricité de France SA's U.K. electricity-distribution networks for £5.78 billion. Northumbrian Water would provide CKI with a significant portfolio of clients in northeastern England, where the U.K. company serves 2.6 million people with water and sewerage services.

Forty-four Hong Kong-listed mainland firms have been given "red flags" by Moody's Investors Service on concerns about their accounting standards and governance risks. Shares of five of the firms slumped as much as 14 percent yesterday. The ratings agency screened a total of 49 mainland firms - with all getting at least one red flag in five categories: weak corporate governance, risky business models, fast-growth strategies, poor earnings quality and audit concerns. West China Cement (2233) shares closed 14 percent lower at HK$2.43 after being given 12 flags, the most among the screened firms. It fell as much as 26 percent during the day. Winsway Coking Coal (1733), which had 11 red flags, gave up 6.8 percent. China Lumena New Materials (0067), which plunged 9.9 percent, had 10 flags. Hidili Industry (1393), with nine flags, retreated 4 percent. Most of the 17 locally listed firms that got seven flags saw their shares fall 2-6 percent. Longfor Properties (0960) fell the most, 10 percent, to close at HK$12.34. Hang Seng Index constituent Citic Pacific (0267) fell 4.4 percent. Yuzhou Properties (1628) was given seven red flags with Moody's saying that the company has changed its auditor within the past three years. But the developer denied it, saying Ernst & Young has acted as its auditor since it was listed in Hong Kong in 2009. Shares of Yuzhou dipped 0.4 percent to HK$2.51. Steelmaker China Oriental (0581) was the only one to record a gain, which came to 1 percent. "It will be hard for investors to distinguish which Chinese firm is good and which is bad," said Ben Kwong Man- bun at KGI Asia. "They just avoided betting on these companies." The ratings agency said it is hard to value assets and reserves in terms of size, value or ownership rights. The most common governance weaknesses involved family ownership, which led to decision-making favoring the interests of some shareholders at the expense of bondholders and other creditors.

Asian stocks slumped on growing concerns the euro-zone debt crisis may spread to Italy and Spain. A Moody's report warning investors over corporate governance and accounting in some mainland firms also helped send Chinese firms to a lower level. The Hang Seng Index closed down 3 percent at 21,663.16 - the biggest fall in 14 months - with turnover expanding to HK$80.36 billion. The China Enterprises Index plunged 3.7 percent to 12,032.03. "A relatively stronger rebound came from an overreaction on Greece's bailout," said First Shanghai Securities chief strategist Linus Yip Sheung-chi. "The fact is that problems still remain in Europe." Yip said equity markets will continue to see sell-offs and he expects the gold price to shoot up to US$1,630 (HK$12,714) an ounce after moving sideways over the past three months.All Hang Seng constituents ended in negative territory, with financials seeing the worst of it. Heavyweight HSBC (0005) fell 3 percent to HK$74.75. In China, the Shanghai Composite Index gave up 1.7 percent - the most in four months, to 2,754.58. The yuan also plunged to a two- week low against the US dollar at 6.4722. The Nikkei closed down 1.4 percent, and the Kospi declined 2.2 percent.

Government can't see the wood for the trees, says Leung, urging change - Leave neighbourhood issues to the districts and focus on the big problems, Exco convenor says - Leung Chun-ying speaks at a conference yesterday. The government needed to anticipate problems, said the likely leadership challenger. Executive Council convenor Leung Chun-ying, widely seen as a candidate in next year's chief executive election, yesterday called for distict authorities to be given more power over neighbourhood issues to free the top echelon of the government to tackle more pressing matters. Leung told a gathering hosted by the Hong Kong Development Forum that the next government should focus on tackling burning issues such as poverty and housing, and try to anticipate conflicts before they blow up. "If we had anticipated the seriousness of problems such as poverty and housing and come up with measures to tackle them two or three years earlier, the social sentiment would have been quite different," he said. A society needed to undergo changes at a certain stage of development and a leader should have the determination to address problems facing the community," he said. "Sticking to old ways can't resolve our problems." His remarks came a day after Wang Guangya , director of the Hong Kong and Macau Affairs Office, spelled out the criteria for the next chief executive, including having a strong governing ability and wide public support. On Monday, Leung dropped his strongest hint yet that he would enter the chief executive race, telling a local television station he had "formed my own team". Yesterday Leung said the Hong Kong government was saddled with too many neighbourhood issues, such as falling trees. "The government should devolve powers to district authorities to handle these issues, so that the central authorities could have more time to address other pressing and long-term issues." Leung also suggested expanding the pool of political talent to help improve governance. He denied he had resigned from the Executive Council to pave the way for a run for chief executive. Leung, Chief Secretary Henry Tang Ying-yen, and Rita Fan Hsu Lai-tai, a member of the National People's Congress Standing Committee, are widely seen as the main candidates for next year's chief executive election. So far, none has confirmed an intention to run. Fanny Law Fan Chiu-fun, a former secretary for education and manpower and another speaker at yesterday's forum, said the current administration had taken a top-down approach to policymaking. She cited Chief Executive Donald Tsang Yam-kuen's decision in his policy address last October to establish the HK$10 billion Community Care Fund, to be financed equally by the government and business. She said political considerations had often trumped professional knowledge in government decisions, such as the decision three years ago to relaex the controversial requirement that secondary schools teach either in English - if their pupils are deemed able enough - or in Chinese. "The mother-tongue teaching policy was introduced on the basis of education research. But the government made the changes because of political pressure," Law said.

Business fears over lack of school places - Foreign chambers of commerce say difficulties finding international education for children is reducing Hong Kong's appeal as a regional centre. The lack of international school places in Hong Kong could undermine its long-term development as a regional business centre. Surveys carried out by the British and Canadian chambers of commerce said the city's competitiveness may suffer unless action is taken. It is understood that the American Chamber of Commerce has also commissioned a similar survey. The three chambers will use their findings in an attempt to strengthen their push for more international school places. The debate has been reignited by fresh discussions over funding for the English Schools Foundation. In the survey by the Canadian chamber (CanCham), which interviewed 114 members in March and April, 57 per cent said the lack of international school places is detrimentally affecting city businesses. Two-thirds said the problem had made Hong Kong less appealing as a regional hub. "The lack of access to high-quality international-school education for expatriates negatively affects businesses and is detrimental to the development of international companies in Hong Kong," the CanCham survey report said. An earlier British Chamber of Commerce survey found 75 per cent of its members felt that their businesses could be detrimentally affected by the lack of international school places. Allan Zeman, a member of the Commission on Strategic Development, an advisory body for the city's long-term development, described the problem as "pressing and urgent". He said: "It takes competitiveness away from Hong Kong as a place for high-level businesspeople." He said he understands the government has acknowledged the problem and is looking for ways to address it, while considering restrictions such as the lack of space. The CanCham survey quoted several anonymous businessmen who said they had to shift their operating base out of Hong Kong because they could neither retain good staff nor invite talented workers to Hong Kong. One businessman said: "The original plan of our company was to make the Hong Kong office the main office for all operations. Our company owner, who has three children, was, however, concerned about the higher school fees and lack of places in the international schools." Another said: "We had to transfer positions from Hong Kong to Beijing and Vietnam because staff couldn't get a place in an international school for their children or had to face huge fees [debentures] to secure a place." In September there were 36,000 international school places available in the city. Officials, who plan to increase the number by 5,000 over the next few years, said vacancies remain in many international schools. But there have been complaints that these places are not at top-tier schools.

 China*:  July 15 2011  Share

ConocoPhillips China ordered to stop operations of oil platforms - The main platform of CNOOC working in the Suizhong 36-1 oilfield in north China's Bohai Sea has cleaned up the spill that began early yesterday. The State Oceanic Administration today sent a helicopter to monitor the situation and ordered ConocoPhillips China to suspend the operation of its two platforms in the Penglai oilfield, also in the Bohai Sea, following two spill incidents. China's ocean authority today ordered ConocoPhillips China (COPC) to immediately suspend operations at two platforms in the Penglai oilfield in the Bohai Bay following two spills, saying that risks of new leaks still existed. The measures, mainly temporary and remedial, that COPC had taken failed to eliminate risks of new leaks entirely, after oil leaks were first detected early last month in platforms B and C of Penglai 19-3 oilfield, the State Oceanic Administration (SOA) said in a statement. The situation concerning the oil leaks in Penglai 19-3 oilfield, which is being operated by COPC under an arrangement with China's largest offshore oil producer CNOOC, had not been brought under full control by COPC yet, the administration said. Monitoring conducted recently through remote sensing satellites and inspectors' visits found that oil had continued to spill for days from around the oilfield's platforms B and C, the SOA said. Investigations found that there were still oil belts around the two platforms as well as signs indicating that oil leaks may happen again around platform B, the administration added. COPC was responsible for the leaks, which seriously polluted 840 km of sea area in the Bohai Bay, sending water quality ratings in the area to their lowest level, the SOA has said. Earlier, the leaks at the platforms B and C in Penglai 19-3 oilfield had reportedly been brought under control by COPC on June 19 and 21, respectively.

Hainan air targets 8b yuan in share sale - The mainland's fourth-largest carrier will use the money raised from the placement to finance the expansion of its fleet and repay bank loans - Hainan Airlines has 100 aircraft, most of them Boeing 737-800s, serving 90 mainland and international cities from nine bases. Hainan Airlines, the mainland's fourth-largest carrier, will raise 8 billion yuan (HK$9.64 billion) through a private share placement to help pay for a fleet expansion. It will sell 124,700 A shares to up to 10 institutional and individual investors at a price not lower than 6.42 yuan per share - a 10 per cent discount to the stock's average closing price over the previous 20 trading days. The carrier will expand faster than rivals Air China (SEHK: 0753), China Eastern Airlines (SEHK: 0670) and China Southern Airlines, with plans to increase it fleet 25 per cent to 125 aircraft by the end of this year. Over the next three years, the number of aircraft will increase 20 per cent each year. To finance its rapidly growing fleet - eight Boeing 787s will be delivered this year - Hainan Air has raised its total liability to 59.7 billion yuan, including a 5 billion yuan bond sold in May. Its debt-asset ratio rose to 81.5 per cent in May. The heavy debt has weighed on profits and turned the airline into an interest-paying company. Interest expenses topped 2 billion yuan last year, compared with profits of 3 billion yuan. Interest payments exceeded profit in 2009, with earnings at 334.7 million yuan and interest expenses at 1.45 billion yuan. The company posted a loss of 1.4 billion yuan in 2008 when interest payments amounted to 1.3 billion yuan. After the share sale, the debt-asset ratio of the company will drop to 71.36 per cent. About 6 billion yuan from the proceeds will be used to repay bank loans due between January and April next year. Grand China Airlines, which owns 41.6 per cent of Hainan Air, is also considering selling shares to finance its fleet expansion. The mainland aviation industry recovered strongly in the past two years following a downturn during the global financial crisis. The industry reported 43.7 billion yuan in profit last year, compared with earnings of 12.2 billion yuan in 2009. But competition from high-speed railway has intensified and threatened to lure passengers from the airlines. Airlines had to cut airfares on the once lucrative leg between Beijing and Shanghai by 15 per cent when the high-speed railway between the two cities started operation this month. Hainan Air is one of the operators on the golden route. Hainan Air has 100 aircraft at the end of last year, with most of them B737-800s. The airline serves 90 domestic and international cities and operates 500 routes from nine bases, including Haikou, Beijing, Xian, Lanzhou and Dalian. It also operates services to Europe and the United States, including Budapest, Zurich, Los Angeles, New York and Seattle.

China to leave US behind in the supercar sales race - Lamborghini purchases on mainland rise 60pc in first half of this year after 'explosion' in demand - Stephan Winkelmann in a Lamborghini Murcielago at the opening of the Macau dealership. China is set to overtake the US as the No1 market for Lamborghini's 350km/h supercars by the end of this year. The two markets are "battling month by month ... but there is a good chance that China is going to be the biggest by the end of the year", Automobili Lamborghini president and chief executive Stephan Winkelmann said yesterday. The Italian carmaker, part of Volkswagen's luxury Audi unit, sold 138 cars on the mainland in the first six months of the year. That is an increase of 60 per cent from the same period a year ago, Winkelmann said at the opening of a new dealership in Macau yesterday. Sales in the US, which for years has been the company's biggest market, were "about the same number" but grew only in single digits in the first half of the year. Lamborghini sold 206 cars on the mainland last year, 150 per cent of its sales there in 2009, after what Winkelmann called an "explosion" in demand. "This year we will get close to 300 cars, at the least," he said. That would represent growth of around 50 per cent. The company also sells around 50 cars per year in Hong Kong and expects sales at the new Macau dealership to average 10 to20 cars per year. "When our expectations were not as high as they are today, we were forecasting, over the long term, up to 500 cars per year in [mainland] China," he said. "I think we can do much more than 500 cars," he said. "I don't want to put a time frame on it because it's about building up demand. And it's always about producing less than demand." The soaring pace of growth on the mainland was all the more remarkable because this year's sales had relied solely on the Gallardo line of cars, which retail at a starting price of about 3.38 million yuan (HK$4 million) and were the "entry-level" model, Winkelmann said. Last year's sales also included the higher-end Murcielago, which was discontinued in May of last year and is being replaced by the new 12-cylinder, 700-horsepower Aventador. The end of production of the Murcielago saw Lamborghini's global sales slip 2.3 per cent to 293 cars in the first quarter of this year. The first batch of Aventadors is now in production and scheduled to begin deliveries to customers at the end of this year. The car is built around a carbon fibre shell. It accelerates from zero to 100km/h in 2.9 seconds, has a top speed of 350km/h and burns 11.3 litres of petrol per 100 kilometres during highway driving. Buyers placing orders for the Aventador must now wait 18 months for delivery and Winkelmann said the company already had about 200 orders from the mainland, where the vehicle sells for a minimum of 6.28 million yuan. Lamborghini is in the process of doubling its mainland dealerships from nine showrooms and service centres at the end of last year to a targeted 20 by the end of this year. The company currently has 14 mainland dealerships in operation, with new ones opening soon in the northwestern coal mining boomtown of Taiyuan, in Shanxi province, and Shenyang, in Liaoning province. And Winkelmann said they may open more in the future. "We will follow the wealth and if there is an opportunity we will go," he said. Mainland Lamborghini buyers are the youngest in the world, with an average age of about 35, Winkelmann said. "They are entrepreneurs, they are self-made men. They are very young but in China most of the money is young," he said.

US Admiral Mike Mullen talks to a Chinese pilot as he sits in the cockpit of a Russian-designed SU-27 fighter at a PLA Air Force base in Jining in the east yesterday. The chairman of the US joint chiefs of staff is on a visit to China, the first of its kind in four years, as Washington and Beijing try to improve military-to-military ties after various setbacks. 

China launches new data relay satellite - China blasted off a new data relay satellite "Tianlian I-02" on Monday at the Xichang Satellite Launch Center in southwest Sichuan Province.

Zhu Min nominated as Deputy Managing Director of IMF - The International Monetary Fund (IMF) announced Tuesday that its Managing Director Christine Lagarde has proposed the appointment of Zhu Min, currently Special Advisor to the Managing Director, to the position of IMF's Deputy Managing Director. Lagarde also proposed the appointment of David Lipton, a White House aide, to the position of IMF's First Deputy Managing Director to succeed John Lipsky, whose term ends on August 31, 2011. Zhu last year joined the IMF as a Special Advisor to the Managing Director from the People's Bank of China (PBOC), China's central bank. Lagarde has proposed that Zhu assume his duties in the newly created Deputy Managing Director position on July 26, 2011, working with the other three Deputy Managing Directors in support of the Managing Director. Zhu has "a wealth of experience in government, international policy making and financial markets, strong managerial and communication skills as well as an institutional understanding of the Fund, and I look forward to his counsel," Lagarde said in a statement. "As Deputy Managing Director, he will play an important role in working with me and the rest of my management team in meeting the challenges facing our global membership in the period ahead, and in strengthening the Fund's understanding of Asia and emerging markets more generally," Lagarde added. "I am looking forward to working closely with Min, David and my other team members,"said the newly-appointed IMF head at the helm. As Deputy Governor of the PBOC, Zhu was responsible for international affairs, policy research and credit information. Prior to his service at China's central bank, he held various positions at the Bank of China where he served as Group Executive Vice president, responsible for finance and treasury, risk management, internal control, legal and compliance, and strategy and research, noted the statement. Zhu also worked at the World Bank for six years, and taught economics at both Johns Hopkins University and Fudan University, said the IMF. Lipton, a national of the United States, is currently serving as Special Assistant to the US President and Senior Director for International Economic Affairs at the US National Economic Council and US National Security Council at the White House. Lipton will serve as a Special Advisor to the Managing Director, starting on July 26, 2011, before assuming his duties as First Deputy Managing Director on September 1, 2011. "David brings to the Fund extensive experience in policy-making, excellent communication and negotiating skills, and a very good knowledge of IMF policies and procedures," Lagarde noted. IMF's Managing Director selects and appoints the First Deputy Managing Director and Deputy Managing Directors of the Fund. These appointments require approval by the Executive Board of the IMF.

President Hu greets Taiwan performer - President Hu Jintao greets a Taiwan performer dressed as a popular folk figure in the Great Hall of the People in Beijing on Tuesday during a cross-Straits cultural exchange activity for young people.

Chinese Premier Wen Jiabao sounded a hawkish note on inflation ahead of key data expected to show slowing economic growth, emphasizing that the government will continue to make cooling prices its key priority. In a photo released by China's Xinhua News Agency, Chinese Premier Wen Jiabao, front right, chatted with a meat vendor in a supermarket in Xianyang in China's Shaanxi province on Saturday. Mr. Wen, whose government has taken a series of steps since last year to tighten the reins on the economy, said in a statement Tuesday that the "overall direction of policy" will remain unchanged. His comments came as the central bank reported a jump in new bank lending last month that underscored the continuing pressures driving inflation in the world's No. 2 economy. The remarks came ahead of the scheduled release on Wednesday of China's gross domestic product data for the second quarter, which economists predicted would show growth of 9.4% from a year earlier, down from 9.7% growth in the first quarter. Beijing has been struggling to balance its fight against inflation, which has fueled public discontent and potentially dangerous bubbles in housing prices, against fears that the economy—a major driver of global growth—could slow too sharply. After a series of government tightening measures, including five interest-rate increases since October, some analysts have speculated that the government might signal an easing of the economic brakes in the second half of the year. In his statement Tuesday, issued after a series of meetings with other officials on the economic situation, Mr. Wen nodded to concerns about a slowdown, saying the government seeks to avoid "big fluctuations" in economic growth, and aims to ensure that "lagging effects" of monetary policy don't have a big impact down the road. But the thrust of Mr. Wen's statement was continued concern about inflation. He reiterated several measures to cool prices, including controlling the money supply, encouraging the production of agricultural goods and increasing the supply of pork, for which prices have recently jumped. He also pledged to keep implementing restrictions on the property sector, which have already started to bring down prices in major cities. The People's Bank of China said Tuesday that financial institutions issued 633.9 billion yuan of new loans in the local currency in June, or about $98 billion, up 15% from the May figure and above economists' expectations of 595 billion yuan. A flood of bank lending in recent years has been one factor driving up consumer prices, which rose 6.4% in June, their fastest pace in three years. Economists generally expect that the central bank is done raising interest rates this year. But they expect the PBOC to continue increasing the share of deposits that banks must set aside, rather than lend, and many economists have said that further rate increases can't be ruled out—especially if inflation defies expectations that it will start declining in July.

Hong Kong*:  July 14 2011  Share

Hong Kong shares posted their biggest daily fall in 14 months on Tuesday and may extend losses with a worsening euro zone debt crisis and a Moody’s report reigniting fears over corporate governance in Chinese companies. Questions about China following controversies surrounding Sino-Forest have pushed investor tolerance to a low level, with weak global equity markets adding to the prevailing risk-off mood. “It’s not really much of a surprise, the lack of transparency is something you have to deal with when you trade Chinese shares,” said Kiu Ho, a trader with China Everbright (SEHK: 0165) Capital Management in Hong Kong. The Hang Seng Index finished down 3.1 per cent to 21,663.2 points, its biggest decline since the euro zone debt crisis first roiled markets last May. The Hang Seng may consolidate around 21,500, the June this year low, now seen by market players as a key support. Turnover on the day exceeded HK$80 billion, 14 per cent above the 20-day average investors dumped shares of companies mentioned in a Moody’s report warning about accounting and governance risks at dozens of small, largely non-state Chinese companies involved in the resources or property sectors. Longfor Properties tumbled more than 10 per cent in almost eight times its 30-day average volume, while West China Cement, which received 12 red flags from Moody’s, finished down 14.1 per cent, recovering from a more than 26 per cent plunge earlier in the day. The Shanghai Composite Index closed down 1.7 per cent at 2,754.6 points, its biggest one-day drop in four months, breaking below its 250-day moving average for the first time in more than a week in increased turnover. “Domestic factors usually drive the mainland A-share market, but the worsening Euro debt situation is now starting to factor because it now involves Italy and Spain,” said Cao Xuefeng, head of research at Huaxi Securities. “The euro zone is one of China’s largest trade partners.” Euro zone finance ministers promised on Monday cheaper loans, longer maturities and a more flexible rescue fund to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain. Heavyweight energy and financial plays were the largest drags on the Shanghai Composite, with PetroChina (SEHK: 0857, announcements, news) , China Shenhua Energy (SEHK: 1088) and Industrial and Commercial Bank of China (SEHK: 1398) losing 1.5, 3.7 and 0.9 per cent respectively. Domestic names, particularly those seen as having government support for investment, outperformed significantly on the day limiting the benchmark’s drop. Water resources names gained for a second straight session on comments by President Hu Jintao over the weekend that water sector reforms would be a cornerstone of national infrastructure priorities, which analysts said was unlikely to provide more than a short-term boost to stock prices. Anhui Water Resources Development was up a maximum 10 per cent, after a 5.1 per cent gain on Monday. China Gezhouba Group, operator of massive projects along the Yangtze river, gained 2.5 per cent in volume 2.6 times its 30-day average.

China Travel sees H1 net profit up - China Travel International Investment Hong Kong Ltd said on Monday that it was considering a spin-off for its hotel operations and expected its first half net profit to increase significantly. Its net profit for the first six months of 2011 was boosted by rising travel demand on economic recovery and a lower comparison base the same period last year, the company said in a statement. China's rapidly rising demand for business and leisure travels is expected to give travel agencies and airlines in the nation a boost in terms of revenue and profit. The company, which is engaged in travel, theme park, hotel, resort and other businesses, made a provision on its ferry business in the first half of 2010. Certain fixed assets in its resort operations were fully depreciated last year, it added. China Travel will announce its first half results in August. In a separate statement released earlier on Monday, China Travel said it was considering a spin-off of its hotel operations in a listing on the Hong Kong stock exchange. The company said it is also in talks to buy Qingdao Ocean Spring and invest in a project in Jiangsu province. However, the spinoff and acquisition plans were in the early stages and had yet to be finalised, it said in a statement. Trading in China Travel shares was expected to resume on Tuesday after being suspended on Monday pending the statement, it added. Shares of China Travel had gone up about 13 percent in the past three weeks but are still down nearly 20 percent from the end of last year. It has underperformed a 3 percent drop in the Hang Seng Index so far this year.

 China*:  July 14 2011  Share

U.S. shows 'bad timing' in South China Sea: General - American maritime exercises in the region come as China has difficulties and problems with other territorial claimants, says PLA chief - General Chen Bingde and Admiral Mike Mullen prepare to review an honour guard before their meeting. China's top military officer yesterday criticised the United States for its recent military drills in the South China Sea, calling this "bad timing" and not conducive to the peaceful resolution of the region's territorial disputes. Chen Bingde , the PLA Chief of General Staff, also told visiting US Joint Chiefs of Staff Admiral Mike Mullen that the US should reassess its policy of selling arms to Taiwan. That demand was repeated in Mullen's separate meeting with General Guo Boxiong , the vice-chairman of the Central Military Commission. In a sign that both sides are nevertheless committed to improving ties, Mullen was yesterday given a tour of the PLA's Second Artillery Corps, its missile force. The South China Sea remains a sensitive issue between the two superpowers, with Beijing frequently voicing frustration over US military drills in the region with Vietnam, the Philippines, Australia and Japan. "On various occasions, the US side has expressed that they have no intention of interfering in disputes in the South China Sea," Chen told a news conference after meeting Mullen, his US counterpart. But, "what we are observing is that, at this particular time, when China and other claimant countries have some difficulties and problems with each other, the US decides to hold large-scale exercises. At the very least, I think this is bad timing." Mullen said the US had a long-term commitment in the region, and he called the operations routine. But Chen said, "How big should the presence be? And as for the exercise, who is it targeting?" He insisted that the US put off such drills "if it is truly committed to making contributions" towards the peaceful resolution of the disputed claims. "I don't think it is realistic for some countries to think of using US support to address this issue." Yesterday's talks about arm sales to Taiwan follow a report last week which said US Vice-President Joe Biden will visit Beijing next month to explain the US decision to upgrade Taiwan's F-16 A/B jets but not to sell it advanced F-16 C/D jets. The report said the US will allow only the upgrades in order to minimise the damage to US-China ties. But Chen urged the US to reassess its Taiwan policy and to establish mutual trust between their two militaries. Referring to China's new missile system, the Dongfeng 21D, Chen said he had informed Mullen that the system was not yet operational, and that it was intended for only defensive purposes. Chen also dismissed concerns about China's military spending and replied that the US spent too much on its own military even as it struggled with an economic recession. "If the US could reduce its military spending and spend more on improving the livelihoods of the American people, wouldn't that be a better scenario?" he said. In a further attempt to strengthen ties, the commander of a PLA military region will visit the headquarters of the US Pacific Command later this year, while the US commander-in-chief of the Pacific Command will visit China before the end of the year. The two armed forces will also conduct joint drills on humanitarian rescues and disaster relief.

China's foreign exchange reserves soared to a record US$3.2 trillion at the end of June, threatening to worsen the country's inflation headache as bank lending and money growth expanded faster than forecast. Coming days after data showed China’s inflation hit a three-year peak in June, the US$153 billion surge in reserves in the second quarter argued for Beijing to keep monetary policy tight and leave its foot on the credit brakes. Worried that rising prices could trigger social unrest, Beijing has for months restricted bank lending. But Tuesday’s data suggests demand for loans stayed buoyant, adding to the case for more monetary policy tightening. Chinese banks extended 633.9 billion yuan in net new local-currency loans in June, up from 551.6 billion yuan in May, the central bank said. That helped outstanding yuan loans grow 16.9 per cent at the end of June from a year ago. Annual growth in China’s broad M2 measure of money supply quickened to 15.9 per cent in June from May’s 15.1 per cent. “Loan demand from the economy is still strong, which could reduce some worries about a hard landing,” Du Zhengzheng, an analyst at Bohai Securities in Beijing. “We expect the central bank to raise interest rates once or twice more this year.” The median forecast of economists was for foreign exchange reserves to climb US$175 billion in the second quarter to US$3.22 trillion; issuance of 590 billion yuan in loans in June; and a 15.2 per cent rise in M2 last month. Bank lending is a focal point in China’s monetary policy as it is controlled by Beijing through loan quotas to manage economic growth and control inflation. While loan restrictions have slowed China’s official bank lending in recent months from the extraordinary pace seen in 2009, critics argue that Beijing is far from beating inflation since it has yet to staunch the abundant liquidity in its system. Some economists say China’s ballooning reserves, far from being a symbol of China’s growing wealth, underscores Beijing’s problem of excess cash, which some analysts believe is the root cause of its inflation woes.

Nestle to buy 60% of Hsu Fu Chi for $1.7b - The purchase would be Nestle SA's largest acquisition in China, where Hsu Fu Chi's sales grew more than three times faster than Nestle's worldwide sales during the most recent fiscal year. Nestle, the world's largest food company, offered to buy 60 percent of Chinese candies and pastries group Hsu Fu Chi International for about $1.7 billion to expand in one of the world's biggest consumer markets. The Hsu family, which owns 56.48 percent of the Singapore-listed company, will sell a 16.48 percent stake to Nestle, but the family will retain 40 percent in the firm under a joint venture deal, Hsu Fu Chi said in a statement. The agreement would still require approval from China's Ministry of Commerce (MOC), Cayman Island courts, where the company is incorporated, and shareholders, Hsu Fu Chi spokeswoman Christine Sun said from Dongguan in China's southern Guangdong province. "If the MOC doesn't give approval, we won't be able to go ahead with the joint venture. Even if the shareholders agree to the delisting, we ultimately will still need the MOC's approval," she told Reuters. Nestle will also buy 43.52 percent from shareholders such as Baring Private Equity and asset manager Arisaig and together with the Hsu family will seek to delist the firm. The deal, which values Hsu Fu Chi at S$3.46 billion ($2.83 billion), comes a few weeks after British drinks group Diageo won approval to raise its stake in Sichuan Shuijingfang, China's fourth largest white spirits group. Nestle has no intention to make major changes to the business or cut jobs, Hsu Fu Chi said. Dongguan-based Hsu Fu Chi makes snacks such as peanut candies, pop jellies and sachima rice snacks. The company's shares were up 9.8 percent on Monday after a trading halt, which was in place since July 1, was lifted. Analysts have said in the past it would make sense for Nestle to buy a company in an emerging market due to sluggish sales at home. Nestle has been sitting on a pile of cash since it sold its remaining stake in eyecare group Alcon. In April, it said it planned to take a 60 percent stake in China's Yinlu Foods Group for an undisclosed price. Credit Suisse advised Nestle. The directors of the Singapore-listed company plan to appoint an independent financial adviser. 

China's new bank lending, an important indicator of the monetary policy, hit 633.9 billion yuan ($97.52 billion) in June, up from May's 551.6 billion yuan, the People's Bank of China said on Tuesday.

SAFE underscores stance on hot money - The State Administration of Foreign Exchange (SAFE) on Monday reiterated its tough stance on curbing hot money inflows, which threatens the nation's financial stability and triggers inflation.

Police dogs show off their skills - A police dog jumps rope with a policewoman at a police dog training base in Beijing, July 11, 2011. 

Is Volvo Car a Chinese company, following its purchase by China’s Zhejiang Geely Holding Group Co.? Or is it a foreign company since it’s still incorporated in Sweden? That appears to be a question China’s central government is grappling with, according to Chinese auto industry insiders, as its ministries and agencies weigh applications from Volvo to build manufacturing plants in China and run them independently, without a local Chinese partner. That issue has become a potential headache for Geely Holding, which last year bought the Swedish brand from Ford Motor Co. It raises a question about how quickly Volvo is going to be able to build vehicle manufacturing plants in China as it tries to significantly increase sales in the world’s biggest auto market. Under China’s current regulations and policies, foreign auto makers can produce cars in China only when their operations are jointly owned and run with Chinese concerns. Volvo wants approval to build factories in the southwestern city of Chengdu and the northeastern oil-field city of Daqing. The plan is an important part of Volvo’s strategy, announced earlier this year, to more than double Volvo’s global sales to 800,000 vehicles by 2020. Volvo and Geely expect half of that desired total–slightly more than 400,000 cars–would come from sales in China, where it sold just 30,500 cars in China last year. Manufacturing cars in China is essential to make that happen. If the government allows Volvo to produce cars in China on its own, it might risk complaints from other foreign auto makers, many of whom would rather manufacture and market cars in China without joint-venture partners, says one auto industry executive in China. If the government opts against them, Volvo could set up a joint venture with Geely, but some Geely executives believe mixing the Volvo and Geely brands could harm Volvo’s premium positioning in China and elsewhere in the world. Since China began opening up its auto market for participation by foreign producers in the 1990s, it has made no exception to the local-partner requirement for setting up manufacturing operations in the country. General Motors Co., for instance, which started its first joint venture in China in 1991, now runs 11 final assembly plants in China, alls with local partners. Michael Ning, a Volvo spokesman in China, acknowledges that if Volvo were allowed to set up wholly owned manufacturing factories within China as a Swedish-registered company, “it would definitely be the first time” the government has made such a move. But then, he points out, Geely’s acquisition of Volvo was also unprecedented: never before has a major foreign automaker been owned entirely by a Chinese company. Volvo’s argument is that the Chinese ownership makes it Chinese. Geely and Volvo are hoping the Chinese government would agree with them, Mr. Ning says. Still, “whether Volvo will be considered ultimately as a China brand or a foreign brand, it’s up to the government. We are working with relevant agencies… We have no idea when the government is going to approve our applications. It’s up to them,” he says.

China is developing cutting-edge satellites that will allow it to project power far beyond its shores and deter the United States from using aircraft carriers in any future conflict over its rival Taiwan, a report said. The piece in next month’s Journal of Strategic Studies, a UK-published defence and security journal, runs at odds with China’s stated opposition to the militarisation of space. But the report, an advance copy of which was obtained by Reuters, said that the rapid development of advanced reconnaissance satellites to enable China to track hostile forces in real time and guide ballistic missiles has become a key to the modernisation of its forces. While the United States used to be unrivaled in this area, China is catching up fast, it added. “China’s constellation of satellites is transitioning from the limited ability to collect general strategic information, into a new era in which it will be able to support tactical operations as they happen,” the report said. “China may already be able to match the United States’ ability to image a known, stationary target and will likely surpass it in the flurry of launches planned for the next two years.” Beijing has consistently denied it has anything other than peaceful plans for space and says its growing military spending and prowess are for defensive purposes and modernisation of outdated forces. But with the recent unveiling of a stealth fighter, the expected launch of its first aircraft carriers and more aggressive posture over territorial disputes such as one in the South China Sea, Beijing has rattled nerves regionally and globally. China’s space programme has come a long way since late leader Mao Zedong, who founded Communist China in 1949, lamented that the country could not even launch a potato into space. Since then, it has launched men into orbit and brought them home, sent out its first lunar probe and begun longer-term programmes to explore Mars and establish a space station. The successful missile “kill” of an old satellite in early 2007 represented a new level of ability for the military, and last year China successfully tested emerging technology aimed at destroying missiles in mid-air. US Defence Secretary Robert Gates warned earlier this year that advances by China’s military in cyber and anti-satellite warfare technology could challenge the ability of US forces to operate in the Pacific. China’s need to use satellites to up its military game became apparent during the 1995-96 Taiwan Straits crisis, when the US dispatched a carrier group after the mainland menaced the self-ruled island with war games, the report said. Beijing realised it could neither track nor respond to the US ships. The incident also led Beijing to realise it needed the means to keep Washington from using its navy to intervene in a war over Taiwan. Beijing regards the island as a rebel province. “The most immediate and strategically disquieting application [of reconnaissance satellites] is a targeting and tracking capability in support of the anti-ship ballistic missile, which could hit US carrier groups,” the report said. “But China’s growing capability in space is not designed to support any single weapon; instead it is being developed as a dynamic system, applicable to other long-range platforms. With space as the backbone, China will be able to expand the range of its ability to apply force while preserving its policy of not establishing foreign military bases.” More broadly speaking, satellites will be able to help China project power. “As China’s capabilities grow, with space reconnaissance as an example, it will be increasingly hard to reconcile the rhetoric of a defensive posture and a more expansive capability.”

Hong Kong*:  July 13 2011  Share

Credit-tightening on the mainland continues to prompt small and medium-sized companies to tap the Hong Kong market, with Sino Harbour Property Group the latest to plan an initial public offering. A developer of residential and commercial properties in Jiangxi province, the company is a spin-off from Pan Hong Property Group, a Singapore-listed developer. Sino Harbour plans to offer 300 million shares priced between HK$1.10 and HK$1.68 each, and expects to net up to HK$387 million if it manages a mid-range offer price of HK$1.39. The company had 210 million yuan (HK$252.46 million) of outstanding loans as of March, up from 150 million yuan in March 2010 and 100 million yuan in March 2009. Its cash position climbed to 137.2 million yuan, from 35 million yuan in 2010. Its gearing ratio is 13.3 per cent. Shi Feng, deputy chairman and CEO, said the company has a healthy cash position as sales were robust. He also pointed out that Sino Harbour's property projects in the second- and third-tier cities remained unscathed by the central government's cooling measures, which were mainly directed at first-tier cities. The company was generating better revenue despite a narrowing profit margin, he said, as it made 340 million yuan in revenue in March 2011, from 197 million yuan in March 2010. Feng said the main purpose of the share sale was not to settle debts, but to fuel the company's property projects. More than 90 per cent of the proceeds will go into funding new projects as the company has 3.2 million square metres of land in the central and southern regions. "If we continue our current pace of expansion, the land bank is enough for 20 years of property development," Feng said. "But this is not what we want. That's why we need the capital to accelerate our expansion." He said he was confident the company's share sale would do well as the group had a niche position in the property markets in second- and third-tier cities. VC CEF Brokerage director Louis Tse Ming-kwong, however, said the current market sentiment was not particularly favourable for listings by mainland property companies because of the ongoing cooling measures, credit tightening and market concerns over corporate governance of mainland companies. The stock market was already swamped with mainland developers, particularly those active in first- and second-tier cities, he added.

A system of fibre optics in lieu of conventional electronic sensors has been tested on the Beijing-Shanghai high-speed rail line and found to be effective in relaying track information to conductors, at a fraction of the cost of current technology. The result means the sensors could be installed on lines nationwide in the hope of improving the structural integrity and safety of the high-speed rail network. The system was built by researchers at Hong Kong Polytechnic University and two mainland universities - Southwest Jiaotong University and Dalian Jiaotong University. Professor Alex Wai Ping-kong, PolyU's vice-president of research development, said yesterday that: "Test rides done last month boosted our confidence in the system. We hope it will be used all across the mainland. And then all over the world." More than 100 optical sensors fitted on a rail can provide real-time information on vibrations, acceleration and temperature change for engineers, helping them monitor the conditions of tracks and trains, as well as the structural health of the rail foundations. "When we detect problems, we'll tell the train driver to slow down right away," said Professor Tam Hwa-yau of the department of electrical engineering, who developed the system and led the study. "The Beijing-Shanghai line has just begun to operate, so there should be very few problems. But given time, the rail will take a lot of wear and tear, and our system will scrutinise every small change at all times." Wai, also a leading professor of optical communications at the university, said that companies had shown an interest in buying the system, but tests and certifications would take at least three years. PolyU began researching fibre-optic sensing in 1994, when it was thought such technology could be used only to measure temperature. But the technology has improved radically and now lends itself to a wide range of fields, including sensing systems, life sciences and structural engineering. Under the PolyU system, hundreds of sensors are fitted along a single optical fibre as long as 100 kilometres to measure various parameters. This single system does the work of many conventional sensing systems, and at a "much lower" cost, Tam said. The sensors detect changes in wavelength, and their signal strength does not affect the sensing information, making it highly reliable, Tam said. The sensors are attached to tiny optical fibres and are also not affected by external interference such as bad weather. Wai said participation in mainland railway projects was usually limited to allied universities - such as the two collaborating ones - to protect technological secrets. Since PolyU pitched the idea to the two universities two years ago, it had faced some difficulties in winning the trust of mainland authorities, Wai said. "Big projects like this are highly coveted among mainland universities. It wasn't easy for us to get the opportunity to be a part of this," he said. "Now we've done it and we are very honoured."

Hong Kong’s Fickle IPO Investors - In the midst of the most choppy markets since the global financial crisis, companies seeking to list in Hong Kong have to deal with one more unpredictable factor: the retail investor. In May, Milan Station Holdings Ltd., a small Hong Kong company that sells second-hand luxury handbags, captured investors’ imagination—and money—with a US$40 million initial public offering whose retail portion was a record 2,179 times oversubscribed. The stock soared 66% on its debut, although it has given up nearly half of those gains since then. But only a few weeks later, retail investors didn’t take up all the shares made available to them in the US$2.47 billion IPO of luxury group Prada SpA, despite heavy promotional efforts that included a glitzy fashion show for the city’s elite. Shares barely rose on their debut but have since risen steadily and closed Monday up 13% from the HK$39.50 IPO price. Mom-and-pop investors are helping to make or break an IPO’s reputation as “hot” in Hong Kong, one of the busiest markets for new listings in the last few years and one that is increasingly attracting companies from outside the city and China. But their presence isn’t always welcomed by bankers, who say outsized demand and the tendency of those investors to quickly sell can make their job harder. “Retail investors could add more volatility to the deal; the majority of institutional investors tend to hold for a longer term,” said David Suen, co-head, Asia ex-Japan equity capital market of J.P. Morgan Chase & Co., one of the banks in charge of Tibet 5100 Water Resources Holdings Ltd.’s recent US$177 million Hong Kong IPO. Part of the power of the retail investor is because local regulators, uniquely, require that 10% of every IPO be set aside for the average investor, unless the issuer applies for a waiver to reduce that amount in favor of institutional investors like mutual funds, pension funds and hedge funds. In the U.S., by contrast, a deal could go entirely to institutional investors. Moreover, if demand from Hong Kong retail investors exceed certain levels, a rule known as a clawback requires that they be given a greater percentage of the offering. At its most extreme, if retail subscription is 100 times or more the number of shares offered to them, they must then receive half of the offering. According to Dealogic, 29 Hong Kong IPOs in 2010 and 2011 have had so much demand that the maximum clawback was triggered. Finally, Hong Kong investors have a reputation for being quick to flip stocks. One reason is that they often buy on margin, fronting just 10% of the value and relying on the brokerage to finance the remaining 90%. Investors who receive shares worth more than their 10% deposit may opt to sell shares to avoid stumping up more money. As a result, bankers say they have a harder time picturing how IPOs that get heavy retail demand will do after listing. In some recent IPOs, demand from retail investors fell short of the amount reserved for them. Some cited weak stock markets, which to some investors lessened the likelihood of a quick profit. Ironically, some say that has made it easier for banks to make sure offerings do well. Bankers hired for an IPO do more than advise the company and sell the shares. They also are supposed to “stabilize” the share price for the first 30 days—which means keep it from falling below the IPO price if possible. “It could be a challenge for underwriters to stabilize the share performance after listing if half of the offered shares are in the hands of retail investors, as there are a lot of day traders just looking for quick gains,” said West Riggs, head of Asia equity capital markets at Piper Jaffray Asia. His firm was a key banker on 17 IPOs for China-based companies in Hong Kong and U.S. over the past 18 months. Money managers, too, must assess how retail investors will affect the stock price, but say that doesn’t drive their investment decisions. “We focus more on the long-term competitive edge of a company rather than the short-term performance of a stock,” said Joseph Zeng, managing director of Greenwoods Asset Management HK Ltd, a Greater China fund management company in Hong Kong. “We feel that sometimes retail involvement into an IPO is primarily driven by the market sentiment during the offering period, which may not always reflect the fundamental of a company.” In the case of Lhasa-based mineral water firm Tibet 5100 Water, retail investors took up only 87% of their allocation. Nonetheless, shares jumped 23% on their debut and were up 48% from the HK$3 IPO price, closing Monday at HK$4.45. While Hong Kong’s IPO rules tend to favor the retail investor, “I suspect bankers would rather be in a position to allocate a greater percentage of a deal to their institutional clients if they think a deal is going to be profitable for investors,” said Chris Betts, Hong Kong-based capital markets partner at the international law firm Paul Hastings, Janofsky & Walker.

 China*:  July 13 2011  Share

South slope of Himalayas, China's Tibet - Photo taken on July 6, 2011 shows the wonderful scenes on the south slope of the Himalayas, southwest China's Tibet Autonomous Region.

American hotelier Starwood Hotels and Resorts expects to more than double its portfolio in China during the next three years, with plans to run 175 hotels in greater China in three years, up from the current 75, said chief executive Frits van Paasschen. Most of the new openings will be located on the mainland, the world's fastest-growing domestic and outbound travel market. New York-listed Starwood is especially looking at the mainland's second- and third-tier cities, which it says will represent 90 per cent of the company's future growth in China. "It's much more likely than not, given the past 30 years' experience, that China will continue to grow in a very strong pace," Paasschen said. "It's also more likely than not that Chinese demand for hotels and for our business will one day be larger than US [demand]." Starwood runs about 450 hotels in the United States. The American hotelier came early to the mainland, opening the Great Wall Sheraton in Beijing in 1985. It will open seven more Sheraton brand hotels in China before the end of September. The new openings will be spread across the mainland, including Beijing, Xian, Chongqing, Zhenjiang and Hangzhou. China has become a magnet for global hoteliers, who hope to profit from booming domestic tourism. InterContinental Hotels, the world's largest hotel chain by number of rooms, expects its greater China operations to surpass its US business by 2025. It said last year that its China portfolio of 137 hotels would more than double in five years. "There will be some turbulence along the way," Paasschen said. "But as we open hotels, we open with an eye towards their success over the 20, or 30 or 40 years we have in the management contract." Starwood predicted that the number of China's outbound travellers would almost double to 100 million by 2015. China's purchasing power has grown along with its economy. According to brokerage CSLA, the greater China region will become the world's largest market for luxury goods in the coming decade with an annual growth of 23 per cent.

Cessna, the leading light and mid-size business jet manufacturer, is in talks with Aviation Industry Corporation of China (Avic) to jointly develop the mainland market, as it bets an increasing number of buyers will see private jets as more than a high-altitude sports car. "The mainland is still an uneducated market," said Trevor Esling, Cessna's vice president for international sales. "Most of the purchases are trophy-buying." Although Cessna produces some of the best high-performance jets in the world, Cessna has failed to appeal to affluent buyers on the mainland who are looking for a "Porsche" instead of a "Honda". There are approximately 120 corporate jets registered on the mainland, with most private jet sales spilt between Gulfstream and Bombardier, which sell jets with larger fuselages that allow owners to add more luxury facilities on board. Cessna jets are often priced more affordably compared with rival jets. Esling said he believed the demand for small and mid-sized private jets would increase when mainland buyers realise business jets have value beyond being a luxury vehicle. "If a US$12 million private jet can carry you from Beijing to Shenzhen or Hong Kong, why bother to buy a jet for US$60 million?" he asked. He said talks with Avic to jointly design and produce private jets were at the preliminary stage, and it is believed that competitors - including Gulfstream, Bombardier and Embraer - were in talks with Avic as they eye the lucrative and undeveloped mainland market. Beijing is pressing hard to close the gap with western rivals in its aircraft manufacturing industry. As corporate jets are technologically more advanced than commercial jets, Chinese manufacturers need technological transference from international jet makers. "The PLA would be one big potential client for us," Esling said. However, Cessna cannot sell planes to the People's Liberation Army because the American government imposed sanctions on exports of high-technology products to the mainland military. Nevertheless, the joint venture with mainland partners might open a window for American jet manufacturers to sell their products to PLA, an industry veteran said. "But it still depends on the negotiations between the two governments," the person said. Cessna has already teamed up with Shenyang Aviation Industry Corporation to produce a two-seat trainer in the province of Liaoning. The production line of the Skycatcher in Shenyang is scheduled to make 100 aircraft this year. The Kansas-based aircraft maker, which started making small aircraft more than 80 years ago, was the first foreign company to sell private jets to the mainland. Two Citation jets, which were delivered to the Chinese Academy of Science in 1982, are still in use. They still get spare parts and maintenance from Cessna even though the aircraft model is no longer in production. Cessna's aircraft have been well received by government departments, such as the Civil Aviation Administration of China. The government owns about 10 of the 30 Cessna corporate jets on the mainland.

China's most populous province has asked Beijing for permission to pilot a province-wide relaxation of the mainland's controversial one-child policy, Guangdong's family planning chief said, marking yesterday's World Population Day. The special status would allow the province to become China's first, since the one-child policy was introduced in 1979, in which couples can have a second baby if either spouse is a single child. It could also help curb the number of pregnant mainland women seeking to give birth in Hong Kong, where no restrictions apply on having a second child. Voices calling on the central government to rethink its population policy have been growing. Many economists are worried that China's phenomenal economic growth could be slowed down by a rapidly ageing society, a dwindling labour pool and mounting pressure on the social security system. After 2000, several provinces began to allow urban couples to have a second child if both parents are single children. In an interview published by the province's official newspaper, Nanfang Daily, Guangdong family planning chief Zhang Feng said the province had tendered an official application to Beijing to run a pilot version of an adjusted one-child policy. "Allowing more couples in Guangdong to have a second child will have little impact on overall population growth," Zhang said. Guangdong's population reached 104 million last year, surpassing Henan as the nation's most populous province. Guangdong Academy of Social Sciences population expert Zheng Zizhen welcomed the proposal, saying: "This is the first of many steps for fine-tuning the birth controls. The ultimate target is for everyone across the country to have two children regardless of background. We could see this happening by 2020." The move might also help free up some of Hong Kong's public health resources by encouraging mainland women to give birth north of the border. The number of mainlanders giving birth in Hong Kong has surged since 2006, partly as a result of couples seeking to dodge the one-child policy. However, Dr Peng Peng, a Guangzhou Academy of Social Sciences researcher, said Beijing was unlikely approve a major shift away from a fundamental national policy. "The effectiveness of allowing couples where both parents are single children to have a second baby still remains to be seen," Peng said. "It's still very rare to see families having second children in the light of surging living costs such as housing and food prices unless the government introduces subsidies." He said he expected mainland women would still seek to give birth in Hong Kong even after a relaxation of the policy because they wanted to secure Hong Kong residency and other advantages for the child.

CNN apologize for “the most disgusting food” Cable News Network (CNN) has named the world's top ten disgusting food, preserved eggs, traditional Chinese food as the first. This egg prices triggered strong protests from China. CNN yesterday on was named the most disgusting food preserved eggs to apologize. U.S. CNN Go to this inscription file editor Andrew said in a statement: 'For any offense caused by this intention, we express our sincere apologies and we welcome and encourage any feedback for the article.' He also said that 'food is just iReporter each selected their personal feelings does not represent the views of CNNGo or CNN.' He also said he liked to eat the egg, 'than in my favorite favorite restaurants in Hong Kong where to eat plus a sauce of ginger preserved eggs. CNN explains: the text appears all these kinds of food from around the World iReporter are provided to express their personal feelings for these foods. 'The article mentions several different foods, including preserved eggs - in Chinese Culture and global Gourmet's eyes, this is a delicacy. paper first mentioned egg, but this is not a list, should not be misunderstood as a kind of ranking. 'Accordingly,' CNNGo using figures only for clarity to the article, and does not mean that the food order. China's egg business for Health food Co., Ltd. Hubei Shendan 3,000 employees and friends who protest, the United States told CNN: 'This is not our intention. Let us once again to clarify. The intention of this article is not meant to offend in any form Anyone - whether you like preserved eggs, do not like preserved eggs, are preserved egg manufacturers or related industry personnel, we have no intention to offend the Chinese culture. 

China launches new data relay satellite - China blasted off a new data relay satellite "Tianlian I-02" on Monday at the Xichang Satellite Launch Center in Southwest Sichuan province. The satellite was launched on a Long March-3C carrier rocket at 11:41 pm (Beijing Time), said sources with the center. Developed by the China Academy of Space Technology under the China Aerospace Science and Technology Corporation, the satellite is the country's second data relay satellite. China launched its first data relay satellite "Tianlian I-01" on April 25, 2008.

Hong Kong*:  July 12 2011  Share

Tram operator Veolia ready to shift up a gear - Managing director Bruno Charrade admits it's not been all plain sailing so far, but he sees improved service in HK and mainland expansion ahead - Bruno Charrade, managing director of Hong Kong Tramways, acknowledges it is taking longer to turn around the business than Veolia Transport anticipated. It has been a bumpy ride for Veolia Transport's adventure in the East during the past two years. When the French transport giant took over the operation of Hong Kong Tramways in April 2009, it was determined not just to turn the ageing yet iconic system into a more profitable business, but also to make it a showcase for expansion in China, where it saw vast potential in the public transport market. But neither its HK$200 million renovation plan for Hong Kong's tram network, nor its launch of a third bus service in Macau have progressed smoothly. In Hong Kong, tram ridership fell further this year and tram speeds on certain busy road sections declined. The government's approval of a fare rise of just 30 HK cents rather than the 50 demanded by the firm has also slowed its plan to modernise the fleet. "Things are taking more time than I thought," Hong Kong Tramways managing director Bruno Charrade said. "But I am not disappointed with what we were able to achieve in the first two years. It takes time to build up trust and relationships; and it takes time for people to understand your approach, as I believe ours is different from what was done before." Two years after Veolia's arrival in Hong Kong, Charrade looked back at some of the developments, and told the South China Morning Post (SEHK: 0583, announcements, news) they were not so bad. "To have the experience of managing a tram system in Hong Kong is very useful. We can rely on things already implemented here - such as training or operational tools - for our development elsewhere, especially in China. The same is true for our bus operation in Macau." Problems with finding enough drivers and suitable sites for a depot have delayed its launch of bus services in Macau, but Reolian - the operator of the bus service jointly owned by Veolia Transport and HN Group - will eventually open for business on August 1. In Hong Kong, a new control centre that will allow more efficient deployment of trams is expected to come into service in October. The company may also reach a number of breakthroughs in terms of traffic arrangements with government officials by the end of this year to boost the service's efficiency and reliability. Although Hong Kong is at present a benchmark for the world in terms of the efficiency of its public transport, Charrade said that in five years everyone would be looking at China for what a modern and green transport system should be. "Hong Kong still tops the world in terms of efficiency [in public transport], but no more in terms of innovation and green technology. It is important for Hong Kong to put effort into that or it will lose the position it has," he said. The mainland was set on developing tram services and at least eight cities had decided to build their own tram networks, compared to none five years ago, said Charrade. Veolia is now in final talks over some of these contracts and in light of improvements in the mainland's contractual rules and subsidising policies, the group is looking to gain at least two more contracts on metro services, two on trams, and several others on bus services before 2015.

HSBC Holdings, Europe's largest bank, said on Monday that it has appointed Peter Wong as chairman of HSBC Bank (China) with immediate effect. Wong replaced Vincent Cheng, who retired from the position recently, HSBC said. Wong was currently chief executive of Hongkong and Shanghai Banking (SEHK: 0005) Corp Ltd, group managing director of HSBC Holdings and a member of its group management board, it said. Wong, who joined HSBC in 2005, has held senior management roles including deputy chairman of HSBC China since April 2007. He was also chairman of the Hong Kong Association of Banks in 2001, 2004, 2006 and 2009.

Hong Kong and Macau Affairs Office director Wang Guangya said on Monday that the territory’s next chief executive would need to have three key qualities. Wang said that firstly the next chief executive would have to love both the mainland and Hong Kong. “Secondly, he or she should have high level of administrative ability to handle Hong Kong’s economic and social issues,” he said. “Thirdly, he or she should enjoy a relatively high degree of acceptance among the general public.” He was speaking at a meeting in Beijing with a delegation of Hong Kong Federation of Trade Unions. Wang paid his first official visit to Hong Kong last month after recently being appointed director.

Henry Tang gets nod from business - Industry leaders from the Liberal Party and Economic Synergy say they will support the chief secretary in a run to be the next chief executive - Athletes surround Rita Fan at a function in Kowloon yesterday for medal winners from the recent World Transplant Games in Sweden. Henry Tang Ying-yen, who has a strong background in economic and financial issues, is likely to receive more support from the business sector in the race for the city's top job. Business leaders said they had "good feelings" about the chief secretary and supported him to run for the chief executive's post in March. Their vote of confidence comes after Rita Fan Hsu Lai-tai admitted she was thinking about entering the race to be the city's next leader, but described her lack of economic knowledge as a weakness. Liberal Party honorary chairman James Tien Pei-chun said the business sector was not that familiar with Fan and would prefer Tang. "We have known Tang for many years ... he is familiar with economic and financial issues, so we have been supporting him for a chief executive bid," Tien said. Tang was a founding member of the pro-government Liberal Party. Economic Synergy lawmaker Jeffrey Lam Kin-fung struck a similar chord. "The sector knows Tang well and sees his deep understanding in finance and trade ... he also has good international vision," said Lam, a General Chamber of Commerce representative in the Legislative Council. Fan, an NPC Standing Committee member and former Legco president, said she would only consider forming her own team when she had enough confidence to run for the job. "I have to make sure I would not disappoint Hong Kong people before forming a cabinet. You all know that I do not have my own team," said 65-year-old Fan, a Beijing loyalist. Lacking a full policy plan was a reason why she seldom commented on public policies, she said. "It is not difficult to say something to please Hong Kong people, but the key is how to implement pledges. Another would-be contender for the top job, Leung Chun-ying, is a vocal commentator on livelihood issues, including openly supporting the revival of the Home Ownership Scheme. Leung, convenor of the Executive Council, said the next chief executive should not be conservative. "Hong Kong needs a chief executive with courage and commitment," Leung said in his blog. "We ... should not pick a conservative leader. Hong Kong is not facing smooth prospects ... we need a person willing to make sacrifices." Legislator Regina Ip Lau Suk-yee, who has hinted about a bid for chief executive, said it was too early to make a decision. "Some citizens have asked me to contest the job," said Ip, chairwoman of the New People's Party. "But it is too early to say ... the nomination period is so far away."

The next global fashion label to hit Hong Kong’s stock exchange comes from South Korea, with a footprint spanning the Persian Gulf to the Russian Far East. As Dow Jones Newswires reports Monday, The Basic House Co., a Korean retailer already listed in Seoul, plans to raise US$300 million in a secondary listing in Hong Kong this year, set to be the first listing by a Korean company in the city. The retailer markets products under brands including Basic House, Speedo and D’Urban in an eclectic list of countries including Kuwait, Saudi Arabia, Armenia, China, Japan, Mongolia, the U.S. and Russia, where it has a store in the Sakha Republic in the country’s frozen far east. Japan’s Baroque Japan Ltd., another clothing retailer, also plans to raise as much as $300 million in an initial public offering in Hong Kong in September, according to Dow Jones. A research note by Shinhan Investment Corp. predicts Basic House’s net profit to increase to 28.6 billion won ($27.1 million) this year, from 19.3 billion the year before, largely driven by its sales in China. UBS AG and Goldman Sachs are arranging the deal.

A new policy designed to plug loopholes that allow the notorious "destroy first, build later" approach in the New Territories is about to be tested as a landowner in Yuen Long seeks official approval to turn a site onto which it previously dumped earth and other materials into a plant nursery. First of all the landowner, King Cheer Limited, failed to comply with an order from the Planning Department to restore the dump site, in Hung Shui Kiu, to its original greenfield state by late May. For this it faces prosecution. However, last month the company filed an application with the Town Planning Board asking for approval to add almost a metre of "arable soil" on top of the debris to turn the site into a plant nursery. Green groups have been watching the case closely, particularly after the Town Planning Board last week endorsed a new policy that stated new applications submitted regarding sites that were under investigation for unauthorised development should only be processed after the probe was complete. Whether or not any reinstatement notice had been complied with would also be taken into account. Aikon Development Consultancy, hired by King Cheer, said in its application that the project would provide a "green environment to the locality". "The ultimate intention of the proposal is to [establish] the plant nursery, which should be encouraged by the community at large, especially as arable farming has been diminishing," the application said. The consultant also argued the project would bring visual and landscape improvement to the site and help prevent flooding as the soil would absorb surface runoff. It did not mention, however, that the site was already elevated by the previous dumping or that it was subject to enforcement action by the Planning Department. Peter Li Siu-man, a campaign manager for the Conservancy Association, said the board should force landowners to restore sites which had been dumped on before approving applications, in order to combat "destroy first, build later" tactics. "The board should make sure the landowner removes the earth materials before considering the application," he said. Li said the dumping had already lowered the ecological value of the site, potentially affecting the development of the planned Hung Shui Kiu new town. Last December, a large piece of agricultural land being used to grow vegetables was lost when hundreds of truckloads of earth were taken from a private housing construction site at Chinachem in Siu Lam and disposed of on a green belt area. The dumping, which affected an area of about 17,000 square metres, was halted after a news report by the South China Morning Post (SEHK: 0583). The Planning Department subsequently issued a reinstatement notice to the landowners concerned. Local villagers say, however, that the earth dumped on the site has not been removed since the illegal dumping was exposed. "The site is the same as it was six months ago," said one villager, who wished to remain anonymous. "The only difference is that hundreds of pineapple trees were planted on it about four to six weeks ago. They chose pineapples because these plants do not need much attention. The site still looks like a desert." Another villager said he had already stopped farming during the summer because the dumping had affected drainage and caused flooding in his fields. The dump site in Yuen Long is jointly owned by four companies and 13 individuals. It is at a strategic location in the future Hung Shui Kiu new town development. Public consultation on the planning application will end by July 15 and the board is scheduled to rule on it by August 5.

The Court of First Instance on Monday rejected a public housing estate tenant’s application for a judicial review of the government’s by-election proposals. Mr Justice Johnson Lam Man-hon said it was too early for a judicial review because the government’s bill was still at the public consultation stage and had not yet been enacted into law, local media reported. He said the court had no power to interfere in the legislative process unless the bill could lead to “irremediable consequences”. Lam added that in this case he believed there was very little possibility of this happening. The public estate tenant who filed the judicial review application was Cheung Tak-wing. Cheung, who represented himself in court, argued that the Legislative Council (Amendment) Bill 2011, which proposes changes to the way mid-term Legco vacant seats are filled, was unconstitutional. He asked the court to order the government to withdraw the bill. But a lawyer for the government said it was improper to rule on the bill’s legality because there was room for further changes during the two-month public consultation period – now underway. In the bill, the government is proposing to fill mid-term Legco vacancies in directly elected seats with the next-best-placed candidate on the same list as the former incumbent – instead of holding new by-elections. If the list is exhausted, the next-best-placed candidate in the previous election will fill the vacancy. A by- election remains the last resort. Secretary for Constitutional and Mainland Affairs Stephen Lam Siu-lung announced a last-minute decision to postpone voting on the bill in Legco. Lam launched a public consultation last week following large public protests on July 1.

 China*:  July 12 2011  Share

China's current account surplus plunged 21 per cent year-on-year in the first quarter, revised government figures showed on Monday – a much larger fall than previously announced. The current account surplus – the broadest measure of trade with the world – reached US$28.8 billion in the first three months of the year, the State Administration of Foreign Exchange said in a statement. That was US$1 billion less than the figure published in May, meaning the fall from the same period last year widened to 21 per cent from 18 per cent. No explanation was offered for the change. The net inflow of direct investment into China, the world’s second-largest economy, totalled US$44.8 billion in the first quarter compared with the US$42.6 billion announced in May. In last year, China’s current account surplus surged 17 per cent year on year to US$305.4 billion, according to the revised data, as US and European demand for Chinese exports recovered following the global financial crisis. While rising demand for Chinese goods boosts growth, it also means the central bank has to work harder to control the value of the yuan and to stem the flood of liquidity, which has been fuelling inflation.

President mobbed by female tourists at exhibition - His poll ratings may have plummeted, but mainland visitors to Taipei find 'Little Brother Ma' irresistible - Ma seemed happy to meet his mainland fans. Taiwan's president, Ma Ying-jeou, may be losing his magic touch among his own people, but he found new love from mainland tourists, who have been treating him like a rock star. Ma, whose photogenic looks prompted the island's media to call him "the world's most handsome president" three years ago when he won the election, was mobbed by a group of mainland visitors at Taipei's Sun Yat-sen Museum, where he happened to be attending an exhibition last week, the Taipei-based United Daily News reported. The easy-going president shook hands with mainland travellers and even agreed to have his photo taken with them. One female mainland visitor was quoted as saying: "Wow, this feels like dreaming and [he's] totally hot!" Another middle-aged female visitor got so excited upon spotting Ma that she broke through the crowds and tried to hug him round the neck before being dragged away by his security guards. Ma remained unruffled, but the sudden burst of affection put his bodyguards in cold sweats, according to the United Daily News. On July 6, it was reported, police detained a man who claimed to be planning to assassinate the president. Ma, whose Kuomintang (KMT) party won a landslide victory in the 2008 presidential election faces a hard battle in next year's election as the island grows anxious that his pro-Beijing policies could compromise Taiwan's political integrity. The latest poll shows he is locked in a neck-and-neck race against Tsai Ying-wen, chairwoman of the main opposition Democratic Progress Party. Three years ago Ma's looks were seen as playing a part in swaying voters. His many female fans fondly called him Xiao Ma Ge, which means Little Brother Ma. Standing at 175 centimetres, he has an athletic build, a chiselled face, dark hair and white teeth. He always appears at formal occasions in a dark suit and tie. His fans say his daily morning jog and swimming routine help him look 20 years younger than his 61 years.

A new form of urban development is fast taking off across China. Complexes of hotels, offices, parks, shopping malls, clubs and apartments, known as HOPSCA, are sprouting up as investment increases in commercial real estate. The HOPSCA-style Dameisha Outlets in Shenzhen, Guangdong province. The number of HOPSCA - complexes made up of hotels, offices, parks, shopping malls, clubs and apartments in China's big cities - is growing rapidly. They are being constructed in areas where communications and transport are good, often close to central business districts. After the government announced policies to limit the number of residential homes people can buy to cool down the market, commercial real estate has become the latest fad for developers. The number of HOPSCA in China's big cities, including Beijing, Shanghai, Tianjin and Hangzhou, is growing rapidly. Florentia Village, a complex of designer shops, was opened in June in Wuqing, a county between Beijing and Tianjin. Its location is in front of the high-speed train station, and it takes less than half an hour to reach both cities. The "village" consists of malls with restaurants, and recreational centers as well as shops amid Italian style architecture. There is even a canal running through the entire village with gondolas, fountains and bridges as well as an arena. "The aim for the project is to create a perfect destination for a shopping-day trip for families, friends and lovers with a lot of attractions within the village," said Jacopo Mazzei, chairman of the RDM Group, one of the joint developers of the project. Sun Jian, associate director at the research department with E-Commercial China, said that investors now thought more about the comprehensive functions of commercial real estate projects, including traffic, environment and recreation facilities, resulting in the concept of HOPSCA.

Girls practice basic ballet skills at a dancing school in Haozhou, East China's Anhui province, July 11, 2011. Many Chinese primary and middle school students choose to attend various interest-oriented classes during the summer vacation.

Chen Bingde, chief of the general staff of the Chinese People's Liberation Army (PLA), and his US counterpart Mike Mullen review the honor guard during an official welcoming ceremony in Beijing on Monday, July 11, 2011. Chen Bingde, chief of the general staff of the Chinese People's Liberation Army (PLA), held talks with his US counterpart Mike Mullen on Monday in Beijing. "We discussed four major topics, including the South China Sea, the attitude of some US politicians toward China, cyber security and China's military development," Chen said after a close-door meeting with Mullen. Both sides exchanged views on those issues in a candid manner, he added. "It's fair to say that we found a lot of common ground while we do have different opinions on certain issues," Chen said. Chen urged the two sides to implement the consensus reached by their heads of state to push forward the development of bilateral military relations. Mullen, chairman of the United States Joint Chiefs of Staff, arrived in Beijing Saturday night for a four-day visit to China. A welcoming ceremony was held earlier Monday morning ahead of his talks with Chen. Mullen is making the visit at the invitation of Chen, as a reciprocal visit for Chen's trip in May to the United States.

China’s top military officer on Monday called the timing of American naval exercises in the sensitive South China Sea “inappropriate”, after holding talks with his US counterpart in Beijing. Chen Bingde also urged the United States to be “more modest and prudent in words and deeds”, amid growing tensions over China’s territorial claims in the strategic and potentially resource-rich South China Sea. “On various occasions, the US side has expressed that it does not have the intention to intervene in the disputes in the South China Sea,” Chen told reporters after meeting Admiral Mike Mullen. “However, we are observing the latest joint exercises between the US and other countries for example the Philippines and Vietnam. “We acknowledge that those exercises were there in the past, however the timing of these joint exercises is inappropriate as we see it.” Vietnam and the United States are to hold joint naval activities this month, but the US Navy has said these were long-planned and are unconnected to recent tensions. The Philippines recently finished 11 days of naval exercises with the United States close to the South China Sea, although both sides also emphasised the event was an annual one aimed at deepening defence ties. Mullen is the first chairman of the US Joint Chiefs of Staff to visit China since 2007 and his trip comes as military ties between the two powers are tested by Beijing’s growing assertiveness in the South China Sea. Speaking after the pair met on Monday, Chen said they had “found a lot of common ground”, but that there were still “different opinions on certain issues.” “I sincerely and truly hope that our American friends will understand the underlying logic, and be more modest and prudent in words and deeds,” he added. “The key to developing healthy, stable and reliable military relations is mutual trust, and the pre-condition is mutual respect.” Beijing’s recent assertiveness over territorial claims in the South China Sea has raised tensions with neighbouring countries that Washington fears could spiral dangerously out of control. China, the Philippines, Vietnam, Brunei, Malaysia and Taiwan have overlapping claims to parts of the South China Sea, which is believed to have vast oil and gas deposits, while its shipping lanes are vital for global trade. Vietnam and the Philippines have in recent months accused China of taking increasingly aggressive actions in staking its claims in the disputed waters and its archipelagos. In response, China has insisted it wants to resolve territorial disputes peacefully but remains firm in its claims to most of the South China Sea, even waters within the Philippines’ economic exclusion zone. Speaking to reporters after arriving in Beijing on Sunday, Mullen said Washington was concerned about freedom of navigation, but expressed hope that the myriad disputes would be “resolved peacefully”. Mullen was also due to hold talks Monday with China’s vice president Xi Jinping, who is widely expected to take over as president next year.

Hong Kong*:  July 11 2011  Share

South Beauty chain may be eyeing listing in HK - Upscale Beijing-based food business fails to secure approval for Shenzhen IPO under tighter criteria - South Beauty's former premises in Causeway Bay. The firm faces stiffer IPO rules on the mainland. Beijing-based restaurant chain South Beauty Company may seek an initial public offering in Hong Kong next year after the China mainland securities watchdog shelved its application to list in Shenzhen under tightened IPO requirements. South Beauty had started to revise its fund-raising plan to pursue a Hong Kong listing next year, Thomson Reuters unit IFR Markets said late on Thursday, and that UBS Securities would be its global co-ordinator for the IPO campaign. The operator of more than 50 upscale Chinese restaurants filed its listing application to the China Securities Regulatory Commission in March. But the authority CSRC had recently tightened approval requirements for IPOs from companies in industries perceived as having a high risk of financial irregularities, including restaurants and chain stores, Reuters said. A spokeswoman for South Beauty refused to comment on the news. An analyst with DBS Vickers Securities, who asked not to be named, said the accounting practices of China's mainland restaurants were often murky and the risk of them reporting fake financial figures was high. ''In China, ''Restaurants usually do not offer invoices to customers unless people ask for them,'' he said. ''So outsiders can hardly get a clear idea about how they performed.'' First Capital Securities analyst Feng Jia said most restaurants in the country were run by private companies and many of them had loopholes in their internal management systems. Compared to fast-food companies, it was even harder for traditional restaurants such as South Beauty to raise funds in the capital market because it was more difficult to calculate sales revenue and profit, she said. Only two restaurant chains – Quanjude, which is known for Peking duck dishes, and upscale restaurant operator X.E.Flavour – have listed in the mainland’s A-share market. in China. In Hong Kong, local fast chains firms Cafe de Coral (SEHK: 0341) and Fairwood (SEHK: 0052) and mainland-based hotpot business Little Sheep are among the few listed restaurant chains. About two months ago, the CSRC raised the requirement bar for annual profits for restaurant operators seeking IPOs to 50 million yuan (HK$60 million) from 30 million yuan. ''The CSRC is mulling new rules on restaurant IPOs, but we don't know when this will be completed,'' Thomson Reuters IFR said, quoting one of its sources. ''During this period, a growing number of restaurant operators may have to turn to overseas markets.'' In addition to Besides South Beauty, several other restaurants, including Cantonese-cuisine establishments Shunfeng Group and Guangzhou Restaurant and several others also submitted IPO applications applied to CSRC early this year for listings. They have yet to receive approval.

Yuan picks up speed in unlocking door to world - Beijing is prioritising the globalisation of the currency after the financial crisis, but much is at stake for Hong Kong - The Chinese economy has been on a roll, finally overtaking Japan as the world's second-largest economy last year. Yet China's currency was scarcely used outside the country, unlike its more global counterpart the Japanese yen. But change is in the wind. Fallout from the 2008 financial crisis spurred Beijing to place the "internationalisation" of its currency, which is not easily convertible into other currencies, high on its agenda. Put simply, internationalisation means enabling individuals and companies outside the mainland to buy and sell yuan, also known as the renminbi. Beijing entered into some so-called swap agreements with foreign central banks in late 2008, flagging a bigger role for the currency in world affairs. Next, it stepped up a programme allowing Chinese companies to settle trade deals in yuan. Regulations were then relaxed on yuan deposits held in Hong Kong, and Chinese and foreign companies were allowed to issue yuan-denominated bonds in Hong Kong. That, in turn, fuelled the development of an offshore trading market, providing Beijing with a training ground to experiment with the development of the nation's currency. "There is no doubt that the renminbi is well on its way to becoming a major international currency," said Arthur Kroeber, managing director of GaveKal-Dragonomics, a Beijing-based research firm. That is "an inevitable consequence of China's emergence as a major economic and trading power". Still, he and others caution that the endgame of making the renminbi a truly international currency that is fully convertible and that central banks can hold in their reserves is, at best, a long way off. Moreover, there is little precedent for what China is trying to do. It hardly compares with the Eurodollar market, an offshore pool of greenbacks that grew rapidly in the 1960s and 70s, partly aimed at skirting interest rate ceilings imposed by the US Federal Reserve. Plus, in China's case, the whole process is hostage to economic circumstances and the political fortunes of the ruling Communist Party. Strict capital controls require approval of any funds transferred into or out of the mainland. That is partly an attempt to keep speculative inflows of funds at bay, and partly to keep Chinese depositors stuck in low-yielding bank accounts from spiriting their money offshore. "The yuan cannot internationalise without opening the capital account," said Andy Xie, an independent economist based in Shanghai. "Without political reforms, the capital account won't open." His advice in the meantime? "Don't get excited." Dai Xianglong, a former head of China's central bank who now chairs the National Social Security Fund, said in April that China was likely to need at least 15 years to make the currency fully convertible. "My estimate is not conservative," he said. When the renminbi was created in 1948, China envisioned it as strictly a domestic currency. In fact, before the 90s, foreigners travelling in China could not even use renminbi; they were required to change US dollars into "foreign exchange coupons". China, which has a gross domestic product of about US$5 trillion and conducts US$3 trillion worth of global trade a year, is responsible for 9 per cent of global trade. Most of it is conducted in US dollars, the dominant currency used in global commerce. The freezing of US dollar trade finance in late 2008 sent global trade tumbling and hit Chinese exports hard. That got Beijing thinking about ways to hedge against a repeat by allowing more trade to be settled in its own currency. In July 2009, it introduced a pilot scheme to let about 300 selected companies on the mainland use the renminbi for overseas trade settlements. But the rules were so restrictive that only 2 billion yuan (HK$2.27 billion) of trade was conducted in the first six months. The number of approved companies has since been expanded to 67,000. Then last year, Beijing allowed firms around the globe - provided they maintained a Hong Kong bank (SEHK: 0005, announcements, news) account - to use the renminbi to settle trade deals; currency volumes swelled to 506 billion yuan, according to the Hong Kong Monetary Authority. Of that, 73 per cent was transacted through Hong Kong; the rest was done through mainland banks. In the first quarter of this year, 7 per cent of China's trade was settled in yuan, compared with just 0.7 per cent in the entire first half of last year. The Monetary Authority says the cross-border yuan trade settlements done through Hong Kong overwhelmingly involve mainland buyers paying for imports with yuan, which eliminates their foreign- exchange risk. VST Holdings is one company that is reaping benefits from yuan-denominated transactions. Cao Ning, assistant to the chief executive of the Hong Kong-based distributor of hard disks and laptop computers, says 90 per cent of its trade is now settled in yuan. Cao says it collects yuan from its mainland customers and encourages Hong Kong clients to pay in yuan. Because the renminbi has been appreciating against the US dollar, it means VST can make gains on its yuan investments, then convert the earnings to pay its suppliers in US dollars. Analysts expect the renminbi to strengthen 3 to 6 per cent this year, after a 20 per cent rise since 2004. Mainland exporters, however, seem far less enthusiastic about settling accounts in yuan, partly for tax reasons. For instance, Ricky Tsang, managing director of construction material trading company CaSo (HK) Engineering in Hong Kong, says he has asked if his mainland suppliers want to be paid in yuan. "But no, they want to settle in Hong Kong dollars or US dollars because they can get a tax rebate of 12 per cent," he said. "If their deals are settled in yuan, it would be considered as a domestic trade, and they would not be able to get the rebate." (Companies that are among the approved 67,000, though, can get a tax rebate even if they settle their trade in yuan.) To enhance the attractiveness of holding yuan offshore, Beijing permitted yuan transfers among banks from July last year, enabling investors to transfer funds to brokers and fund houses. Purveyors of investment products then started to create yuan vehicles. Insurance companies launched yuan-denominated policies and some companies, including multinationals such as McDonald's fast food restaurants, issued yuan-denominated bonds, dubbed "dim sum bonds". Bankers began thinking about how to attract more yuan deposits from customers, including offering higher interest rates. The Monetary Authority says yuan bank deposits in Hong Kong jumped nearly ninefold to 510 billion yuan at the end of April from 60 billion yuan a year earlier. The first yuan-denominated initial public offering of shares outside the mainland took place in April on the Hong Kong stock exchange. The IPO by Hua Xian, a company associated with Hong Kong businessman Li Ka-shing that owns a shopping complex in Beijing, was in the form of a real estate investment trust. But it did not prove popular with investors. In May, the Chinese Gold & Silver Exchange Society started a trial run to trade yuan-denominated gold bars ahead of an official launch later in the year. "Companies need to invest the yuan for a reasonable return or they have no incentive to accept the currency," Monetary Authority chief executive Norman Chan Tak-lam said. "With many investment products in yuan, such as yuan bonds, yuan-structured products and yuan shares, companies are feeling more comfortable accepting the yuan for trade settlements." There is a lot at stake for Hong Kong. The Bank of China started offering yuan trading services in the US late last year, and Singapore has been making noises about becoming an offshore yuan trading centre. But so far, the offshore yuan action has mostly taken place in Hong Kong. "Hong Kong is part of China, yet a distinct market," said Julia Leung Fung-yee, Hong Kong's undersecretary for financial services and the treasury. Further, she said, the city had the "first mover advantage", having started its yuan settlement business in 2004. Still, the scope of the internationalisation was tiny in relative terms, a recent report by BNP Paribas noted. "Offshore renminbi deposits are currently equivalent to only 0.6 per cent of onshore renminbi deposits." By contrast, it said, "over 50 per cent of US dollars circulate offshore". Hong Kong officials recognise that certain obstacles need removing to boost the market. For instance, while there are no limits on the amount of foreign currency a company can exchange into yuan, individual investors are limited to 20,000 yuan daily. Also, any entity repatriating its renminbi to the mainland is subject to a cumbersome case-by-case approval process. And bureaucratic red tape is discouraging mainland companies from using yuan to acquire businesses overseas; usually they pay in US dollars. In April, Hong Kong's secretary for financial services and the treasury, Professor Chan Ka-keung, said the city's authorities "understand the concerns" about repatriating yuan and "have reflected this to the mainland authorities". Ultimately, the biggest reason behind China's quest to internationalise the renminbi might be to overhaul and modernise its domestic financial markets, GaveKal-Dragonomics' Kroeber said. It was, he said, the "most significant and least understood" of China's motives. "Just as [former premier] Zhu Rongji used the external pressure of entry into the World Trade Organisation to force reforms in domestic markets and state-owned enterprises, [China's central bank] hopes to use the offshore renminbi market in Hong Kong to force the pace of financial reform." Kroeber points to a precedent: "In the '70s and early '80s, Japanese authorities similarly developed an offshore yen market as a prelude to domestic financial liberalisation."

The world of visual art has lost one of the most influential and innovative modern Chinese ink painters. Irene Chou, known for her full and complex brushstrokes, splashing and piling of ink, and representation of her mind's vision of the universe, died on July 1. She was 87. "She had developed her own pile ink technique - small strokes of ink gradually building up to make a three-dimensional effect," said Alice King of Alisan Fine Arts, who knew Chou in the 1980s before the artist left for Australia in 1992. "I really admire her talent, her technique as a dedication to promote Chinese ink painting, her dedication and her devotion to continually working on ink paintings so that [her style] would become something that would identify ink paintings as a form of Chinese paintings." Chou's works have been praised for their experimental, even cosmic, qualities. According to Johnson Chang Tsong-zung, founder of Hanart T.Z. Gallery, she was a pioneer of the New Ink Painting movement, which blends modern Western aesthetics and traditional Chinese elements. "Irene was one of the first who really explored the possibility of the inner physical body as a metaphor of the outer cosmos," Chang said. "Many of her paintings started with meditative, introspective imagination about the re-entering of the physical female body." Chou, also known as Zhou Luyun, was born in Shanghai in 1924. She moved to Hong Kong in 1949 and was one of the few Chinese female modernist painters of her time. Her works are held by institutions such as the Hong Kong Museum of Art, the National Museum of History in Taipei, the Queensland Art Gallery in Brisbane and the Museum of Fine Arts in Boston. Chou is survived by her husband Evan Yin Wen, three children - Dr Michael Yang, Julia Yang Warwin and Catherine Yang - four grandchildren and three great-grandchildren.

TVB boss did not sanction side jobs - Channel's managing director said in a written statement that she was not approached about nor did she approve external work by two senior staff - Mona Fong Yat-wah, wife of TVB (SEHK: 0511)'s 103-year-old founder Run Run Shaw, never gave approval for Stephen Chan Chi-wan to do outside jobs, the District Court was told yesterday. Fong, who is also the TV station's managing director, did not appear in court, but according to testimony read out by the prosecutor, she said Chan and Wilson Chan Wing-shuen, former head of business development for TVB's marketing and sales division, never wrote or asked her directly if they could do outside jobs. Nor did she give any approval. Also read to the court yesterday was testimony from executive deputy chairman Norman Leung Nai-pang, who said he also did not receive any applications from the pair or give approval. Stephen Chan has denied conspiring with his former personal assistant Edthancy Tseng Pei-kun, 28, to receive HK$112,000 in bribes and defraud the TV station. The two also deny cheating five actors out of HK$300,000 in commission for attending a mall event through a firm owned by Tseng, Idea Empire Advertising and Production. Tseng and Wilson Chan deny defrauding TVB of HK$550,000 during the organisation of a show, All Singers for TVB Anniversary Special 2009. Melco Crown Hotels in Macau agreed to pay TVB HK$5.2 million in sponsorship. In the end, TVB received HK$4.65 million after Idea Empire charged the station HK$550,000 for securing Melco's sponsorship and its logistics support, the court was told. Melco also paid Idea Empire HK$690,000 on top of what it promised TVB. Wilson Chan's former superior Tso Shiu-to, deputy controller of TVB's marketing and sales division, said in court that Chan never mentioned Idea Empire or related contracts to him. When a TVB staff member found it necessary to outsource projects, he was required to seek either his supervisor's approval or go through the administrative department to start a tendering process, he said. Even Tso himself was not empowered to sign any contract that appointed a third party as TVB's representative to secure advertisers, he said. In concealing the HK$690,000 payment from Melco to Idea Empire, "not only has [Wilson Chan] neglected his duty. He could have damaged TVB's interests," Tso said. Cheong Shin-keong, Tso's superior, also testified that he never heard about agreements with Idea Empire before the station conducted an internal audit. Idea Empire was not an approved agent appointed by an advertiser, nor was it formally appointed by TVB to act as its media representative, he testified. However, he said Wilson Chan was justified in not telling him the details as long as Wilson Chan achieved a 20 per cent mark-up for the sponsorship deal. For the All Singers show, the station's internal cost was HK$3.15 million, while the sponsorship it received - after deducting service charge to Idea Empire - was HK$4.65 million, according to evidence provided in court. That figure was well above the required mark-up.

The government-run medical insurance scheme to be unveiled in Legco on Monday aims to transform the city's health-care system by bringing quality and prices under tighter control, health professionals say. Health chief Dr York Chow Yat-ngok will brief lawmakers on the Health Protection Scheme (HPS) which will be kick-started with a HK$50 billion budget and will be administered by a statutory body provisionally known as the Health Protection Scheme Authority. The authority will be set up by 2015 and will be responsible for designing the insurance plan's coverage and premium. It will also handle complaints from the public and even govern how private hospitals split fees with doctors. Health officials hope that the scheme will immediately attract up to 500,000 people, including high-risk groups such as those with pre-existing conditions and the elderly, whose premiums will be subsidised by the government. The scheme will provide coverage of fixed-priced in-patient services and insurers will have to guarantee renewals and will not be allowed to reject subscribers because of their old age or medical condition. Chow's briefing to Legco follows a three-month consultation which attracted around 500 public submissions, most of them in support of the creation of some form of voluntary medical insurance scheme. A senior medical source said the scheme would allow the government to play a "more active role" in setting a "standard" medical insurance plan and, consequently, regulating the prices and quality of private hospitals services. "Overseas experiences show that once such an insurance scheme has attracted a large number of subscribers, services providers are bound to price and design their services according to it," the source said. "As a result, the scheme can set benchmark for both pricing and service quality in Hong Kong." Officials are confident that more than 500,000 Hongkongers will sign up to the HPS, as more than two million are already insured by plans that offer them less protection than that envisaged by the new scheme. But some doctors have warned the government against interfering in the private health market. "We want to know how much the government is going to interfere in the private market such as doctors' fees. If the plan sets a very low price, not many doctors will join the scheme and it won't be attractive to the public either," said Medical Association president Dr Choi Kin. From now to 2013, Chow's Food and Health Bureau will work on three areas of the reform involving the HPS and its governing body. It will: Table a legislative package by 2013 for setting up the HPS Authority, which will be formed by representatives from various sectors, independents and patients' representatives; Set up a high-level steering committee to review Hong Kong's manpower requirements for health care professionals over the next 10 to 20 years; Review all regulatory bodies for medical professionals including doctors and nurses, to improve quality. The law governing private hospitals will also be reviewed to improve quality. The medical source admits that the HPS will inevitably "step into" the business relationship between doctors and hospitals. Some doctors want the government to set rules on how insurance payments would be shared between them and the hospitals.

An American art school that took over a Hong Kong heritage site in Sham Shui Po as its campus has enrolled only 141 students in its first year, fewer than half of the number it planned. The Savannah College of Art and Design, which controversially beat local groups in a 2009 bidding war for the former North Kowloon Magistracy, had proposed to the government that it would get 300 students in the first academic year and eventually run a campus for 1,500 students. There was "some gap" between the proposed figure and the actual enrolment, a Development Bureau spokeswoman admitted yesterday. "The college told us many reasons. It had to do with whether the school was well known and the operation," she said. The college has recently submitted its first financial report to the bureau, as a condition under the heritage revitalisation scheme. The bureau did not release any information about the institution's accounts, however. The college does not receive any government subsidy. Of the enrolled 141 students, 40 per cent are locals. The school said last year that it had students from the US, Latin America, Africa and the Middle East as well from Hong Kong. A spokesman for the school said it received 1,000 applications from 47 countries last autumn. "We maintained our high standards for the selection of our inaugural class in order to provide even more individual attention at this new location." He said the school had doubled the number of prospective students for autumn enrolment this year, compared with last year. The bureau said the college would step up publicity to raise enrolment for the coming year, organising campus tours and visits to secondary schools. "We will make allowance for Savannah and will continue to monitor its operation," it said. The awarding to the college of the right to use the building on Tai Po Road was controversial. Another of the bidders, Cantonese opera group the Chinese Artists Association, complained that the government handed a public site to a foreign institute for a nominal land premium. Dr Ng Cho-nam, a member of the Antiquities Advisory Board, said the government should be more transparent about the arts college, the first completed project under a heritage plan which covers five other sites. "As the first project, it should set a role model for the others coming up," he said. "I am also a little disappointed that it's fallen short of the target student numbers as it had claimed to be a well-established US school."

Two construction workers were crushed to death when a 10-metre-high steel cage they were working in collapsed yesterday, prompting the government to open talks with the construction industry on "worrying" safety issues. Ten workers have died in accidents at construction sites this year, compared to nine in all of last year. Barbenders Ng Yan-wing, 46, and Fu Po-yee, 49, were inside the two-metre-diameter structure at a Kwai Chung building site when it collapsed at around noon, crushing them under dozens of steel bars weighing about 180kg each. "The situation is worrying," said a spokeswoman for the Labour Department, which plans to hold talks with the construction industry on how to improve site safety. Relatives of the workers said the construction company had not explained details of the accident. It had made ex gratia payments of just HK$50,000 per family. "The company just gives out HK$50,000 without saying any thing to us. How can we sustain our living?" said Ng's wife. "I still have to raise a 12-year-old daughter. What can I do?" After the collapse, co-workers used a crane to lift the bars in an attempt to free the pair, the Fire Services Department said. One of the men, semi-conscious with multiple injuries, had been freed by the time five fire engines and two ambulances arrived at the site, in Kwok Shui Road. The other victim was unconscious under several unstable steel bars, with a bundle of bars hanging over him from a crane. "We found 10 logs, pieces of concrete and our tools to secure the unstable bars," Lei Muk Shue fire station officer Glenn Da Silva said. "Five to six firefighters lifted the bars before other colleagues scrambled into a space and pulled the worker out." Ng and Fu were taken to Princess Margaret Hospital in Kwai Chung, where they were pronounced dead. Chow Luen-kit, chairman of the Construction Industry Employees General Union, questioned whether a full risk assessment had been carried out. The Association for the Rights of Industrial Accident Victims said the department should release the results of investigations into fatal accidents. Association chief executive Chan Kam-hong said the department should also enhance inspections at construction sites. The Labour Department said occupational safety officers visited the scene of yesterday's accident to investigate. The spokeswoman said the employer was required by law to submit a report detailing the incident within seven days. Because of the increasing number of fatal accidents this year, the department has stepped up inspections and carried out surprise checks.

Actress Tang Wei promotes romance film "Late Autumn" in Taipei - Producer Jooick Lee (L), mainland actress Tang Wei (C) and director Tea-Yong Kim pose for photo during a promotional event in Taipei, southeast China's Taiwan, July 9, 2011. A press conference was held here Saturday to promote the romance film "Late Autumn", which stars Tang Wei and South Korean actor Hyeon Bin, during the ongoing Taipei Film Festival.

Mini wireless keyboard promoted at exhibition in HK - A model displays a credit card-sized wireless keyboard in Hong Kong, south China, July 6, 2011. The mini wireless keyboard invented by a company from south China's Guangdong Province was promoted at an exhibition in Hong Kong on Wednesday. The keyboard has the functions of a mouse, a touch pad, a remote controller and a laser pen.

When it comes to competitiveness, Hong Kong comes second to Taiwan, a survey of Chinese cities and provinces by a local think tank found for the second year running. The next best locations are the provinces of Guangdong, Jiangsu , Shandong and Zhejiang , says the China Institute of City Competitiveness, a non-government organisation which has been compiling the rankings for a decade. The new results were released yesterday at Hong Kong Baptist University, whose Advanced Institute for Contemporary China Studies collaborated in the research. Shanghai and Beijing came seventh and eighth in the integrated competitiveness list. Institute chairman Gui Qiangfang said Hong Kong's growth rate had been low for the past few years and mainland cities had been catching up quickly. "Hong Kong had a head start 30 years ago when its various industries bloomed," he said. "But Shenzhen's gross domestic product will exceed Hong Kong's in just six years if the current growth rates remain steady." This explained why Hong Kong was, like last year, ranked 10th in this year's growth-potential ranking, which was topped by Guangdong, Jiangsu and Shandong. The institute's research includes 24 separate lists of rankings this year, including the top 10 innovative cities, the 10 best cities to live in and the 10 best cities for natural scenery. Despite the Hong Kong administration's recent performance, including a string of policy U-turns, the city was once again named the most efficient among all provincial governments, followed by Taipei and Shenzhen. Gui said he defined an efficient city as one that followed the rule of law and was fair and transparent. "By that standard, the Hong Kong government is more efficient than those on the mainland," Gui said.

 China*:  July 11 2011  Share

A tech-savvy, 48-year-old rising star in the mainland military has been promoted to head a prominent college affiliated with the People's Liberation Army in the latest personnel reshuffle. Major General Yang Xuejun was made president of the National University of Defence Technology in Changsha this week, staff at the university said. Zhou Sheng , a political official with the university's optoelectronic science and engineering school, said: "Yang, originally the deputy head of our school, was formally elevated as our president on Monday. Born in 1963, he is a very young leader." Yang's promotion was confirmed by two of the teaching staff at the university. Other recent personnel changes within the PLA have seen the chief of staff of the Nanjing military region, Lieutenant General Cai Yingting , 57, become the PLA's deputy chief of general staff, while the deputy political commissar of the Shenyang military region, Lieutenant General Wang Hongyao , 60, became political commissar of the General Armament Department. Cai was once the secretary of Zhang Wannian , a former vice-chairman of the Central Military Commission. Both Cai and Wang are regarded as potential contenders for a seat on the commission, the army's top decision-making body, when it is restructured at the Communist Party's 18th congress, scheduled to be held in autumn next year. Xu Guangyu , a retired PLA major general, said Yang was an information technology expert with good career prospects in the army. "Unlike those who are due to retire a couple of years after their promotions, Yang boasts the huge advantage of getting promoted at a young age," Xu said, adding that there were only a handful of young generals who had managed to land such high-ranking jobs in the PLA. "There are currently only a few high-ranking, young military officers born after 1960," he said. "One is the deputy head of the Beijing military region while another is deputy head of the Second Artillery Corps (the PLA's strategic missile force). "Having made his name in the engineering and technology sector over the years, Yang is an expert in modern information warfare. There is no doubt he will have a bright and promising future in the army." A computer processing and software engineering expert, Yang won the National Grade I Prize for Science and Technology Progress for his contribution to the research and development of the country's Galaxy series supercomputer system. The ability to handle advanced weaponry and master warfare in the information age has become one of the most important yardsticks for promotion in the PLA's officer ranks in recent years. The People's Daily reported in April that Central Military Commission chairman Hu Jintao - also the nation's president and general secretary of the Communist Party - had called on the military, particularly military colleges and academies, to fully realise the importance of cultivating talent and to foster "a large number of high-quality military talents". A Shandong native, Yang has been teaching and doing research at the university since earning his PhD in computer science in 1990. He became a major general in 2004.

China's CPI growth hits three-year high of 6.4 pct in June - China's consumer price index (CPI), the main gauge of inflation, rose 6.4 percent year-on-year in June, the highest level since June 2008, the National Bureau of Statistics (NBS) said Saturday.

China Int'l Boat Show kicks off in Zhoushan City - The China Int'l Boat Show will be held from July 9 to 11 in Zhoushan. Many boat and yachts manufecturers displayed their products at the show.

Two private enterprises out of a total of 69 Chinese companies have been listed in the Fortune Global 500 for 2010. Experts said it demonstrates the national economy should be further opened to the private sector by increasing the current policies designed to encourage the private economy. Boosted by China's rapid economic growth, 15 Chinese companies entered the list for the first time, making the country the second-largest contributor in terms of the number of companies listed, second only to the United States. Of the Chinese companies listed, 61 are located on the mainland. The two private companies are the manufacturer of telecommunications equipment, Huawei Technologies Co Ltd, which ranks 351th, and the Jiangsu-based steelmaker Shagang Group at 366th. China has implemented a series of policies to give the private sector access to areas currently dominated by major State-owned companies. But the step should be bolder, analysts said. China should create a better investment environment for private companies and encourage them to enter the monopolized industries to make them larger and stronger, said Li Zhongmin, an investment research fellow with the Chinese Academy of Social Sciences. Currently, there are still few private companies in crucial industries such as oil, telecommunications, railways and finance, although the nation has pledged to open the economy to market players of all ownerships. "Private companies are pillars that can be relied on to improve the nation's international competitive strength, but both State-owned and foreign companies enjoy a more favorable investment environment than the private ones in China," Li said. The private sector creates more than half of the country's gross domestic product, according to Huang Mengfu, chairman of the All-China Federation of Industry and Commerce. It also accounts for more than 70 percent of jobs nationwide. Wang Zhile, director of the Research Centre for Transnational Corporations at the Ministry of Commerce, said that the relatively smaller scale of private Chinese companies makes it hard for them to get onto the list because the Fortune rankings simply list the companies by revenue. The number of Chinese companies on the list has risen for the eighth consecutive year and more will appear in the future, said Wang. However, the list does not necessarily reflect real corporate competitiveness. "The list only tracks companies' annual revenue, but being a big company doesn't necessarily mean that it will be strong and long-lasting," he said. Three State-owned companies, China Petrochemical Corporation, or Sinopec, China National Petroleum Corp and the State Grid Corporation of China, joined the top 10. The US retail giant Wal-Mart Stores Inc is the largest company on the list, followed by Royal Dutch Shell Group and the Exxon Mobil Corporation. Sinopec, ranked fifth among the top players, is China's largest company by revenue, while Industrial and Commercial Bank of China ranks as the nation's most profitable company. The four largest banks and two other State-owned companies, China Mobile Ltd and China National Petroleum Corp, were also among the top 50 companies listed. The increasing number of Chinese companies on the list is a result of the country's robust domestic market, and the appreciation of the yuan has also helped more companies as their revenues are calculated in US dollar, which has been depreciating against the yuan, said economists. However, compared with international rivals, Chinese enterprises lack experience in managing international operations and integrating global resources, Wang said. "Chinese companies are better at profiting from the domestic market using domestic resources," Wang said, adding that there's a long way to go before they become truly competitive international players. The Chinese companies on the list come from 22 industries, mainly in banking, energy and metals, while the US companies are fragmented across 35 sectors.

Huawei Technologies Co, China's largest maker of networking equipment, asked the US Federal Communications Commission (FCC) to help it sell equipment to states and localities building high-speed emergency communications networks. A Huawei Technologies Co booth at an international communications expo in Beijing. Huawei, which makes high-speed wireless Internet equipment, wants to be able to sell to early adopting jurisdictions. Shenzen-based Huawei "for reasons unknown" hasn't gained entry to a US program that assesses equipment to be used in the networks, and during a June 14 meeting asked the FCC to support its entering the program, Huawei said in a July 6 filing posted on the FCC's website on Friday. Huawei applied "earlier this year" to the program and its request is being considered along with others, said Michael Newman, a spokesman for the National Institute of Standards and Technology, in an e-mail. The institute runs the program, known as the Public Safety 700-MHz Demonstration Network, along with the National Telecommunications and Information Administration, another part of the Commerce Department. In December, the FCC opened the way for 21 jurisdictions to begin building public-safety radio systems that use broadband, or wireless high-speed Internet services, before the agency issues final standards for the networks. Huawei, which makes high-speed wireless Internet gear, wants to be able to sell to early adopting jurisdictions. The meeting with FCC officials was part of "a very broad fact-based communications campaign" in Washington and elsewhere by Huawei, which is seeking to expand its share of the US telecommunications equipment market, said Bill Plummer, a Huawei spokesman, in an interview. FCC officials at the meeting included James Barnett, chief of the Public Safety and Homeland Security Bureau, according to Huawei's filing. Plummer was among four Huawei executives in attendance. Huawei, founded in 1988 by former Chinese army officer Ren Zhengfei, has struggled to expand in the US as the government considers whether the company's phone networks pose risk to national security. Members of Congress wrote at least two letters last year expressing their concerns.

A new edition of the most authoritative Chinese language dictionary, "Xinhua Dictionary," or "New China Dictionary," has been published to include Internet words and reflect such concepts as animal conservation, cross-Strait exchanges and caring for people's livelihoods. This is the 11th edition of the prestigious reference book, which has had a far-reaching influence in learning the Chinese language. Since 1953 when the first edition of the dictionary was published, more than 400 million copies have been sold, said Zhou Hongbo, deputy editor-in-chief of the Commercial Press, the dictionary's publisher, during an interview. The two "Xinhua" are not related. "The book has the world's largest number of readers," he said.

Hong Kong*:  July 10 2011  Share

More than 50 nongovernmental organizations and schools - including the Hong Kong Association of the Deaf, the Society for the Prevention of Cruelty to Animals and St James' Settlement - were among 250 community projects to receive more than HK$36 million yesterday. A total of HK$34 million from the Li Ka Shing Foundation was awarded to 230 projects, while foundation chairman Li Ka-shing handed out an extra grant of HK$2.3 million to 20 other ventures. The projects cover a wide spectrum of community services, from medical care for diabetics and renal patients, to social services for single parents and ethnic minorities under the foundation's "Love Ideas, Love HK" program which was established last year. One of the projects to benefit this year is the Asbury Methodist Social Service's "Dancing to a Colorful Life," which got a one-off grant of HK$300,000. The organization's youth service manager Josephine Chun Yuk-yu said the project aims to help marginal youngsters build up self- esteem through dancing. Chun said the project began last year and the grant will be used to recruit more dancing instructors and social workers, and hire more venues. She said that after talking with teenagers, they found that many of them were interested in music and dancing. "We want to attract them to our center to learn dancing instead of wandering about the streets," she said. The Li Ka Shing Foundation was set up in 1980 and has given out more than HK$12.5 billion in charitable donations. Last year about HK$28 million was given in grants to 181 projects.

Admission fees to Hong Kong Disneyland are expected to rise by 10 percent from August 1, with a formal announcement expected as early as today. A source said the new prices will first apply to non-locals buying tickets on the spot. SAR residents will be spared until the end of this year. Group tickets booked by tour operators will also not be affected immediately. One-day tickets for adults will rise from HK$350 to a level slightly below HK$400. The park last increased the prices of annual passes by up to 40 percent in March. The source said despite price increases for some types of tickets, the park will be offering sweeteners though details have not been released. The theme park, the source said, has long maintained contact with stakeholders including tour agencies, which found the increase "acceptable." A Disneyland spokesman said yesterday he had no news on the price hike plan. The park's net loss fell 45 percent to HK$718 million for the year to October 2. It was HK$1.31 billion in 2009 and HK$1.57 billion in 2008. It will add three themed areas by mid-2014, enlarging the size of the park by about 23 percent. Toy Story Land, the first, is slated to open year-end. The others are Grizzly Gulch and Mystic Point.

Furious Beijing officials slammed ATV yesterday for reporting that Jiang Zemin has died, describing days of intense internet speculation about the death of the former president as "pure rumor." The Hong Kong television station announced the death of Jiang on Wednesday, citing unspecified sources and giving no details. ATV said it would air a special one- hour tribute, but later canceled it. The broadcaster yesterday withdrew the report and apologized to viewers, Jiang and his family. The internet chatter began after Jiang failed to appear at Chinese Communist Party celebrations and culminated with ATV and Japanese media putting out reports about his death. The semi-official China News Agency cited a Central Liaison Office official as expressing indignation at the ATV report, describing it as a serious breach of professional ethics. "The report of Asia Television in Hong Kong was not based on facts and was purely a rumor," the official said. "We expressed great indignation at the act of ATV as it was a serious breach of professional ethics in journalism." Xinhua News Agency said in an English dispatch: "Recent reports by some overseas media organizations about Jiang Zemin's death from illness are pure rumors." Foreign ministry spokesman Hong Lei, who was repeatedly asked about the 84-year-old leader at a briefing in Beijing, refused to comment and referred media to the Xinhua report. Hao Tianchuan, director of the department of publicity, culture and sports at the Central Liaison Office, said he had no further comment to make when questioned on the fringes of a function yesterday afternoon. China News Agency cited an authoritative source as saying the party's senior officials have been performing their tasks as usual and would not be affected by the death of any top leader. "It is impossible for the authorities not to publish an obituary if a former national leader has died," the source added. A source earlier told The Standard that Jiang, who oversaw the handover, was "critically ill" in hospital. Jiang led China for a dozen years until transferring power to President Hu Jintao in 2002. A Japanese daily reported the death of Jiang on its website before Xinhua dismissed the reports. The website posted a black banner with white characters. The website could not be accessed yesterday. News that some overseas media had reported the death spread through social networking sites. However, searches yesterday for the name Jiang and terms such as "myocardial infarction" and "condolences" on the popular Weibo service were blocked in the mainland - an indication that censors are stopping information from leaking out.

Chinese restaurant chain operator South Beauty may raise money in a Hong Kong initial public offering next year after the mainland securities regulator shelved its application to list in Shenzhen, a report said late on Thursday. South Beauty had started to revise its fundraising plan to pursue a Hong Kong listing next year and UBS Securities is arranging the deal, IFR reported, citing sources.“The China Securities Regulatory Commission (CSRC) is mulling new rules on restaurant IPOs, but we don’t know when this will be completed. During this period, a growing number of restaurant operators may have to turn to overseas markets,” IFR quoted one of the sources as saying. The CSRC had tightened approval requirements for IPOs from companies in some industries perceived as having a high risk of financial irregularities, including restaurants and chain stores, industry sources told Reuters earlier this week. The requirements, not officially announced but communicated to investment bankers involved in IPOs, had been ratcheted up over the past couple of months, said four sources with direct knowledge of the changes.

Roy Chung, chairman of the Federation of Hong Kong Industries, says the government needs to define a policy for industry for the city. Hong Kong manufacturers of low-value exports across the border have been given some financial breathing space by the provincial government but been warned they must upgrade to reduce pollution and energy consumption. Guangdong vice-governor Zhao Yufang during a visit to the city yesterday announced measures including tax exemptions on imported machinery and simplified administrative procedures for business licences to help tens of thousands of Hong Kong factory owners manufacturing in the province. Leading a 1,000-strong business delegation to court investors, Zhao said additional measures were in the pipeline, marking a softer stance on processing trade factories in the Pearl River Delta. But the bulk of manufacturers which use imported raw materials to produce goods for exports deemed labor-intensive, energy-consuming and environmentally unfriendly are no longer welcomed by Guangdong. "We are working with the Ministry of Commerce, and customs for more policies to facilitate the transition," Zhao said after a trade promotion conference yesterday in Hong Kong. "They (the manufacturers) must move on." Manufacturers in the so-called factory of the world are now in the cross hairs of the mainland's ambition over the next five years to elevate itself on the value chain and technology ladder. The Federation of Hong Kong Industries deputy chairman Stanley Lau Chin-ho said the Guangdong provincial government had "obviously softened" its attitude on weeding out processing trade manufacturing after intensive lobbying in the past three years. The federation's last poll on the number of Hong Kong processing trade manufacturers in the delta in 2008 counted about 60,000 factories employing about 10 million migrant workers. Some industrial sources said the factory numbers had dwindled to 35,000 at the end of last year amid rising labour and material costs as well as a sluggish global economy. "Some manufacturers are still dragging their feet on upgrading themselves," Lau said. They must "wake up, or they will miss the boat". Lau said 30 per cent, or about one in every three factories, could go bust if they failed to follow the nation's new industrial regime. The survivors would have to seek ways of increasing value including creating their own brands and designs, innovative products and forays into the mainland's consumer market. They must also raise productivity and automation. The Pearl River Delta's reputation as an industrial powerhouse is under threat as the mainland aims to double the average minimum wage by the end of the 12th five-year plan in 2015. Labor shortages, more expensive raw materials and a strengthening yuan also continue to hit manufacturers. Lau said the mainland's historical advantages of cheap land and labour were a thing of the past. "China is no longer the world's factory of low-cost goods, but it will be the world's factory of higher value and higher quality goods," he said. Dr Roy Chung Chi-ping, who was elected chairman of the federation yesterday, urged the Hong Kong government to introduce a clearly defined industrial policy for the city despite its reputation as a world financial hub. "We can't leave a vacuum in the city's industry landscape," Chung said. "Hong Kong, for example, could develop high value-added processing of products involving rare earths." Lau pointed out that Hong Kong was an ideal base for food production, thanks to higher consumer confidence in the "Made in Hong Kong" brand than food coming from the mainland.

China's biggest hypermarket operator Sun Art Retail Group raised US$1.1 billion after pricing its Hong Kong initial public offering at the top of an indicative range as investors jostled for a piece of China’s booming consumer market. Sun Art is only the second US$1 billion-plus Hong Kong IPO this year to price at the top of expectations, after casino operator MGM China in May, as weak world markets led companies to delay or cancel IPOs, or raise less money. China Everbright (SEHK: 0165) Bank delayed its planned US$6 billion offering last month, while Prada’s IPO raised less than originally planned. “Investors are bullish about consumer demand in China,” said Olive Xia, a consumer analyst at Core Pacific Yamaichi International in Shanghai who recommended investors to buy the stock in the IPO. “Sun Art priced at a premium to other hypermarket and supermarket operators in China, but in view of its strong growth outlook and management’s profit forecast, this will support its premium valuation.” The IPO attracted cornerstone investors – who back many Asian listings with commitments to buy large, guaranteed stakes – such as sovereign wealth fund Government of Singapore Investment (GIC) and Malaysian state investor Khazanah. Sun Art competes with the world’s largest retailer Wal-Mart Stores and No 2 Carrefour to attract a new class of Chinese consumers who flock to supermarkets, shopping malls and auto dealerships to spend their earnings. China saw the number of hypermarkets rise exponentially to 3,222 by the end of last year from just 96 in 2000 and that number is expected to jump further to 5,211 by 2015, according to market-research firm Euromonitor. “We expect that growth in the hypermarket segment ... and the broader grocery retail industry in general will continue to be based on economic growth in China as well as continuing urbanisation of the population with accompanying rises in disposable income,” Sun Art said in its IPO prospectus. The company sold 1.14 billion new shares in a primary offering at HK$7.20 each, at the top end of an indicative range of HK$5.65 to HK$7.20 per share, IFR reported, raising HK$8.21 billion (US$1.1 billion) to fund expansion and pay down debt. The IPO price values Sun Art at 31.5 times this year earnings and 24.1 times next year earnings, according to the consensus estimate of banks underwriting the deal. Rival China Resources Enterprise (SEHK: 0291) Ltd trades at a P/E of 32.4 times for this year and 26.4 times for next year. “The consumer sector has been doing quite well recently. The Chinese government just raised the threshold for income tax, so there’s still optimism on consumption, especially in the low end, which may help lift sentiment overall,” said Daniel So, an analyst at Sun Hung Kai Financial. “In general, I’m quite optimistic on retailers.” Sun Art, a joint venture between Taiwanese conglomerate Ruentex Group and privately held French retailer Groupe Auchan, operates 197 hypermarkets across China under the Auchan and RT-Mart banners. The company posted a profit of 1.61 billion yuan (US$249 million) last year on sales of 56.17 billion yuan and forecasts a profit of 1.79 billion yuan this year. Sales in the three months to March this year surged 26.6 per cent to 19.82 billion yuan from a year earlier, while profits were up nearly 34 per cent to 817 million yuan. Sun Art is the top hypermarket operator by sales in China with a 12 per cent market share, it said in the prospectus, citing estimates from Euromonitor. Wal-Mart ranked second with a 11.2 per cent share, followed by China Resources Enterprise with a 9.8 per cent share and Carrefour with 8.1 per cent. Ruentex opened its first China hypermarket in Shanghai in 1998, with Auchan following suit in 1999. The companies decided to merge their Chinese business in 2000 in a joint venture, launching Sun Art. Sun Art plans to use 50 per cent of the IPO proceeds to open new stores in China, while 30 per cent will be set aside to pay down debt. The remainder of the funds will be used to upgrade and remodel existing hypermarkets, set up new distribution centres and for working capital. The company said it has 51 hypermarkets under construction across China and secured 121 locations for future openings, without giving a timetable for when the stores would open. As part of the IPO, Sun Art sold US$420 million shares to cornerstone investors. GIC and Khazanah each took US$40 million worth of Sun Art shares, while private-equity firms General Atlantic and Hillhouse Capital Management invested US$70 million a piece. Hedge funds Owl Creek Asset Management and Tiger Global, private-equity firm Arisaig Partners and an affiliate of Bain Capital and French fund manager Carmignac Gestion also invested US$40 million each. UBS, Citigroup and HSBC Holdings (SEHK: 0005) acted as joint global co-ordinators for the deal, with BNP Paribas, China International Capital, Goldman Sachs Group and Morgan Stanley also helping underwrite the offering as joint bookrunners. The stock is slated to begin trading at the Hong Kong stock exchange on July 15.

Star TVB (SEHK: 0511) actress Charmaine Sheh Sze-man said she had to show up at an event at a shopping mall even though she was not paid because the request came from TVB's top executive Stephen Chan Chi-wan, the District Court heard yesterday. "Without any remuneration, I did not want to attend [the event]. But as it was a request by Mr Chan, I could not refuse," TVB's best-actress-award winner said in a statement read at the corruption and fraud trial of TVB general manager Chan and his two co-accused. The reading of Sheh's statement meant that she and four other actresses - Tavia Yeung Yi, Sharon Chan Man-chi, Skye Chan Sin-yeung and Shirley Yeung Sze-ki - would not be called to give evidence in court, under an agreement between defence lawyers and the prosecution. That left actor Wayne Lai Yiu-cheung as the only artist to give evidence in person at the high-profile trial. The former TVB best actor award winner testified in his brief appearance in court that he took part in the events to support Chan. Chan, 51, has pleaded not guilty to conspiring with his former personal assistant Edthancy Tseng Pei-kun to receive HK$112,000 in bribes and defrauding TVB. The pair deny cheating the five actresses out of HK$300,000 in commission, through a firm owned by Tseng, by denying them the chance to earn appearance fees. Tseng and Wilson Chan Wing-shuen, 63, head of business development for TVB's marketing and sales division, have also pleaded not guilty to defrauding the television station of HK$550,000. The court heard that Chan and Tseng had asked the actresses to "show their support" at an event to mark the launch of a book by Chan, which took place at the Olympian City 2 shopping mall in West Kowloon on February 7 last year. They claimed the profits would go to charity - but did not mention that the event had attracted a HK$300,000 sponsorship package from a jewellery company, all of which went to a company run by Tseng. In her statement to the court, Sheh said: "All along, I thought it was an event organised by TVB. If it was not a request by Mr Chan, definitely, I would not have attended [the event]." She said she normally charged an appearance fee of at least HK$40,000 for each event. The court heard that Chan had asked TVB executive producer Mui Siu-ching to rearrange Sheh's schedule to free her up for the book launch. Sheh had been shooting a drama for the channel. "Mui told me that as it was a direct request by Chan, she must release me," Sheh said. Tavia Yeung said in her statement that she had told the Independent Commission Against Corruption she had not come under any pressure from Chan to waive her normal charge of HK$40,000 to HK$50,000 for the function. Shirley Yeung said in her statement: "Mr Chan is a top executive. I am happy to show my support for him." She also said that TVB would charge organisers of commercial events for appearances by artists under its management. She would not have agreed to attend the event without receiving any money if it were not for Chan or TVB's participation. In his brief testimony, which lasted for less than 30 minutes, Wayne Lai said he did not know much about who had organised or sponsored events.

ATV major shareholder Wang Zheng steps outside to face the media at the broadcaster's headquarters in Tai Po. Sometimes, mistakes are unavoidable, he told reporters. A day after his TV station shocked the world with a prime-time report of former president Jiang Zemin's "death", ATV's major shareholder Wang Zheng denied having advance knowledge of the story. "I learned the `news' only when I saw the ATV broadcast," Wang Zheng told reporters outside the station's headquarters in Tai Po yesterday. Immediately after ATV's 6pm news program on Wednesday reported that the 84-year-old former president had passed away, media around the world, as well as social networking sites, were buzzing with the "news". The report followed rife speculation over Jiang's health for several weeks, which intensified when he was conspicuously absent from recent public events, especially the Communist Party's 90th anniversary celebrations last week. But the report was given added credence because of Wang's reputed strong relationship with senior mainland officials and the strong mainland connections that ATV has cultivated over the years. Wang, also known as Wong Ching, is a member of the Chinese People's Political Consultative Conference, the central government's top advisory body. He also comes from a so-called "red princeling" family. Wang, who has lived in Hong Kong for about two decades, is the stepson of the late Communist leader Shu Tong - the Shandong First Party Secretary in the 1950s and deputy director of the PLA Academy of Military Science in the 1970s. When Wang's mother, a Communist Party veteran, died last year, Jiang was among senior figures who sent floral tributes. Both of Wang's parents are buried in Beijing's Babaoshan Revolutionary Cemetery, an honour reserved for the nation's elite. Wang made his fortune by investing in mainland property. When he acquired his majority holding in ATV last year, he said he would transform Hong Kong's oldest TV station into "Asia's CNN". The station's two former major stakeholders, Chan Wing-kee and Liu Changle, also have strong ties to senior Communist Party officials. Chan is a Hong Kong member of the CPPCC standing committee and Liu is a Shanghai-born former colonel in the People's Liberation Army. Camoes Tam Chi-keung, associate professor of journalism at Macau University of Science and Technology, said he believed the report would not damage the good ties between Wang, ATV and Beijing. "The central government has spent lots of time and money cultivating the network and channel. They would not give it up over a single event like that," he said. Tam noted that major mistakes over senior mainland officials had occurred in other pro-Beijing media, including Wen Wei Po in the past. After denying that he knew of the "news" Wang added, "I suppose these kinds of things are unavoidable in a society like Hong Kong ... I think there is no need to overreact. I hope the news isn't true, either." Tam said the remark referred to the strong media competition in Hong Kong. "ATV might have made the mistake as it wanted to gamble on a scoop," Tam said. The Broadcasting Authority received 18 complaints over the ATV report yesterday, with many saying the news was misleading. The watchdog said it would follow up the cases.

Private hospitals have agreed to set aside 7,000 beds in maternity wards for mainland women married to Hong Kong men, Secretary for Food and Health York Chow Yat-ngok said on Friday. Chow said that after talks with heads of private hospitals, they agreed to allocate this number among a yearly quota of 31,000 for non-local women – mainly from China. He said mainland women with a Hong Kong husband should be given a “slightly better priority” when\ applying for places in the private hospital’s quota system. “Since we recognised that among non-Hong Kong pregnant women category, some are married to Hong Kong men, we feel there is a need to give them some priority in the quota system although they are non-entitled patients of the Hospital Authority,” Chow said. The government last month capped the annual number of maternity beds for non-local mothers in public and private hospitals at 34,400. This was to ease pressure on maternity wards in the face of a surge in births by mainland women. Last year, the city saw 88,000 births. About 40,000 of these involved mainland mothers. But the newly announced quotas have upset some mainland women married to Hong Kong men, who wish to give birth here. Last week, three pregnant mainland women with Hong Kong husbands knelt in front of Chow’s car to protest the quotas. They argued that they should be treated as local mothers and be free from quotas because their husbands were Hong Kong residents.

Hong Kong regulators said Friday they had reached an agreement with the local retail banking unit of Citigroup Inc. under which the bank will offer to buy back 1.06 billion Hong Kong dollars (US$136.2 million) of Lehman Brothers-related products from investors, following a string of similar agreements with other financial services providers in the Chinese territory. The agreement underscores regulators' efforts to improve oversight of the sale of complex structured products following the 2008 collapse of Lehman Brothers. Hong Kong lenders sold millions of dollars worth of structured products related to Lehman Brothers, whose bankruptcy triggered a slump in the value of the products and sparked protests by investors, who complained they had been misled by the banks who sold them. Without admitting liability, Citibank Hong Kong Ltd. has agreed to pay eligible customers 80% of the value of outstanding market-linked and equity-linked notes issued by Lehman Brothers and distributed by Citibank Hong Kong, according to a statement issued jointly by Hong Kong's Securities & Futures Commission and the Hong Kong Monetary Authority. About 92% of Hong Kong customers holding the outstanding notes, which were distributed between March 2007 and June 2008, are eligible for the deal, it added. Professional investors don't qualify for the offer, the regulators said. Including the latest agreement with Citibank, financial services providers in Hong Kong have offered to repay 35,000 investors more than HK$9.5 billion for Lehman Brothers-related structured products, a spokesman for the SFC said Friday. "Although Citibank HK's written guidelines to staff in relation to the sale of securities were comparatively sound and provided a foundation for compliance with key regulatory requirements, the SFC had a number of concerns regarding the bank's implementation and supervision of those guidelines and associated procedures and controls which posed risks that regulatory requirements would not be met," the statement said. Citibank said it "believes this offer of 80% of principal with interest represents an opportunity for investors to recoup the majority of their investment in Lehman Brothers related product in Hong Kong." The statement follows a March agreement between Hong Kong's regulators and a unit of Standard Chartered PLC under which the bank agreed to make a repurchase offer worth HK$1.48 billion to eligible customers holding outstanding equity-linked structured notes related to Lehman Brothers. In July 2010, a unit of DBS Group Holdings Ltd. agreed with regulators to offer to pay HK$651 million to its customers who purchased certain Lehman-related notes. In July 2009, under pressure from regulators, the 16 banks that sold a complex product linked to Lehman Brothers called "minibonds" agreed to buy them back from retail investors for as much as 70% of their value. Martin Wheatley, the former chief executive of the SFC who left his post last month, said at a December news conference, during which he announced his decision to leave the regulator, that "undoubtedly" the most difficult time of his tenure included the collapse of Lehman Brothers and the subsequent shocks to global markets.

Hong Kong General Chamber of Commerce chief executive Alex Fong Chi-wai is to step down by December, ending his five-year stint at the 150-year-old business body. Fong has not specified his exact date of departure nor has he elaborated on his next move. The chamber has not revealed who will be Fong's successor or if it is even looking for one. Last month, there were rumours about him leaving the chamber. But in an e-mail reply to a South China Morning Post (SEHK: 0583) query, he had said he had no plans to leave "in the immediate future". He declined to say if his employment contract had been terminated before its due expiry in September next year. The rumours had circulated a day before Anthony Wu Ting-yuk was re-elected as the chamber's chairman. Fong said yesterday he would complete outstanding work related to the chamber's 150th anniversary celebration and projects related to its 2010 business summit before leaving. Wu yesterday expressed appreciation of Fong's leadership and thanked him for leading the chamber's anniversary celebration last month. The chamber has had a rough ride of late as former chairman Lily Chiang Lai-lei was forced to step down in January 2008 after eight months at the helm. She was then charged by the Independent Commission Against Corruption with conspiracy to defraud related to share dealings. She was found guilty and was jailed for 3 1/2 years last month. As chief executive, Fong raised awareness on several issues, such as the minimum wage law, competition law, health-care financing reform and the electoral arrangement for Hong Kong's next chief executive. Before joining the chamber, he was Hong Kong's economic trade representative in Tokyo.

 China*:  July 10 2011  Share

China's Red Cross has vowed to make public all donations it receives after allegations of corruption sparked a storm of controversy, amid reports even tennis star Li Na is shunning the charity. “We will humbly listen to different opinions, strengthen our sense of responsibility... and strive to enhance the Red Cross Society’s credibility in society,” the organisation said in a statement. It also vowed to make public the donations it received and its purchasing activities, according to the statement issued late on Thursday. The scandal erupted last month when a young woman was found flaunting her wealth online. She said she was the general manager of a firm called “Red Cross Commerce”, which web users took to mean she had received embezzled funds. “Guo Meimei Baby”, as she called herself, had posted photos of her opulent lifestyle on her Twitter-like account on Sina Weibo – posing in front of a Maserati or sipping a drink in business class on a plane. The Red Cross and Guo soon denied any links to the other party, and she insisted she had made up her job title. China’s state auditor then waded into the controversy, saying it had found five discrepancies in its review of the Red Cross’ last year budget, which the charity instantly said was not linked to corrupt practices. The flap has fuelled already deep-seated public suspicion of state-run charities such as the Red Cross Society of China, amid a general lack of transparency and openness in the sector. Even Li, who won the French Open last month and has become one of the nation’s sports darlings, has reportedly refused to donate money through the Red Cross. Li, who pocketed US$1.65 million in prize money for winning at Roland Garros, will donate 500,000 yuan (US$77,000) to a home for the elderly, disabled people and orphans in her hometown of Wuhan, the official People’s Daily said. But the report said she had refused to donate that money through the Red Cross, after hearing about the Guo Meimei controversy. “I really hoped I would be able to help them, so in the end I decided to go handle everything myself,” she was quoted as saying in the report.

China's asset managers, who have been approved to raise $70 billion for allocation overseas, are seeking additional funds to invest in gold and precious metals as soaring inflation spurs interest in alternative assets as a way of protecting wealth. This year, five companies have been approved to raise cash for investment in precious metals products overseas through the qualified domestic institutional investors program (QDII), said Hu Miao, an analyst at the Shanghai-based fund research firm Z-ben Advisors Ltd. Twenty more applications for resources and commodity investment are pending, said Hu. Gold climbed to a record in May as rising inflation and concern about the global economic recovery spurred demand for an alternative asset. China became the largest physical gold investment market in the first quarter, according to the World Gold Council. Lion Fund Management Co was the first to place money in foreign gold exchange-traded funds (ETFs), raising more than 3.2 billion yuan ($495 million). "There's a discernible surge in new QDII products that are linked to gold and precious metals this year. It's a hot theme," Hu said from Shanghai. Investors favor gold after its rally and as other investments, including equities, haven't performed as well, Hu said. The QDII program, which allows purchases of overseas financial assets from within China, had approved $68.4 billion in investments by the end of last year, according to the State Administration of Foreign Exchange. The total amount now is about $70 billion, said Z-ben's Hu. Gold demand in China, the world's largest producer, is expected to continue rising as economic growth boosts wealth and as inflation, rising at the fastest pace in almost three years, drives demand for alternative assets. Investment demand more than doubled in the first quarter to 90.9 metric tons as the nation overtook India to become the largest market for coins and bars, the World Gold Council said in May. Exchange-traded funds, which trade like shares, enable investors to buy commodities such as metals without taking physical delivery. China doesn't have gold ETFs and investors usually choose to buy physical gold or contracts traded on the Shanghai Gold Exchange and the Shanghai Futures Exchange. Consumer prices in China advanced 5.5 percent in May, the most since July 2008 and exceeded the government's target of 4 percent every month this year. The People's Bank of China said on Wednesday it had raised interest rates for the third time this year to curb inflation. "When Lion Fund introduced the first gold product, it received a lot of attention as investors were looking for ways to hedge against inflation," said Lu Huitian, an analyst at, an independent fund researcher that specializes in advising investors. "Another reason is that the normal spectrum of fund products only offers exposure to equities and bonds." Other companies have been quick to follow. Harvest Fund Management Co, backed by Deutsche Bank AG, has received approval to raise money for a gold-themed fund, said Yang Yang, manager at Harvest. The fund will start raising money this month, Yang said, without disclosing the target amount. China Universal Asset Management Co, whose investors include China Eastern Airlines Corp, was cleared to start a fund that will invest in ETFs backed by gold, silver, platinum and palladium, according to Liu Min, a spokeswoman in Shanghai. Efund Management Co raised more than 2.6 billion yuan for its gold fund in May, with investments in overseas ETFs or gold equities funds, said Zhang Xiaogang, manager at the fund. Bosera Asset Management Co raised $300 million for its inflation-themed fund by the end of April, with about 20 percent of the portfolio marked for precious metals, said Zhang Qiang, Shenzhen-based fund manager, in May.

Rail patents 'do not violate IPR': Ministry - The Ministry of Railways has rejected a Japanese claim accusing China of violating intellectual property rights concerning high-speed rail technology. The accusation came after China submitted applications for international patents.

69 Chinese firms on Fortune 500 - A total of 69 Chinese firms (including those in Taiwan) made it into the Fortune 500 list this year, 16 more than last year, China National Radio reported Friday.

Chinese market sets scorching pace for Asian - Akio Toyoda, president of Toyota Motor Corp, stands before a crowd at this year's Shanghai Auto Show speaking about the reasons his company loves working in China. "Bringing smiles to the faces of customers in China is key," Toyoda says. His words are not merely a reflection of a healthy business bond but also a statement of conviction on how the Middle Kingdom has come to dominate the scheme of things relating to automakers across the world. The Chinese auto industry is revving up for fast-paced action as global players make a beeline to get a slice of the world's second-largest economy. What's more, the boss of the famed automaker also lets it be known why his company chose to build a research and development center along with one of the world's largest test tracks in China last year. Toyoda reveals that it's not just market share, his company wants to win China's mind-share, too. "By greatly developing education here, we will be able to produce (the kind of) cars that will exceed the expectations of Chinese consumers," he adds. That's a polite way to express his gratitude for the opportunity his company has been granted to do business in a country where, global research firm Nomura predicts, car sales will hit 20 million by the end of the year. China's market offers a further sweetener - most buyers are still purchasing their first car. That means in China, sales are more likely to represent money in the bank for automakers than in other mature markets such as the US. Fueled by 28 percent in 2010 and 48 percent growth in 2009, China has come to be seen as a market of limitless opportunities and possibilities. In February alone, about 1 million cars were produced in China, according to the China Association of Automobile Manufacturers. The makers include some leading Asian brands. advised to stop selling drugs -, China's leading e-commerce platform, has been advised to stop selling drugs as the website hasn't obtained relevant official certificates, according to the State Food and Drug Administration (SFDA).

On July 12, the Taiwanese film “Night Market Hero” will open in 14 Chinese cities, becoming the first under new regulations that exempt Taiwanese movies from Beijing’s import quotas that limit the release of foreign films (only 50 a year are allowed in the mainland). The movie centers on a band of food hawkers seeking to save their night market from being turned into an apartment block by a corrupt politician and an unscrupulous developer. Although the Taiwanese government has billed the movie—which features iconic night-market treats like peppered steak and fried chicken— as a potential boon to tourism, the release also marks an opportunity for Taiwan’s film industry, past its glory days in the ’80s and ’90s when directors like Edward Yang and Hou Hsiao-hsien were putting out movies that still feature prominently in the pantheon of Chinese-language cinema. It remains to be seen how much money “Night Market Hero,” which will be released in mainland China by Bona Film Group Ltd. can bring in—US$4.9 million in Taiwan—but for a film industry with a domestic audience of only 22 million, every little bit counts. When the 2008 Taiwanese hit “Cape No. 7” was released in mainland China it earned only 20 million yuan (US$3.1 million), large by Taiwan standards, but peanuts by Chinese standards, says Wen-ching Chu, the head of Taiwan’s Government Information Office department of motion pictures. That puts some pressure on “Night Market Hero,” which Mr. Chu says has the eye of many Chinese film distributors looking to gauge how popular Taiwanese films will be in the Chinese market. Judging by the popularity of Taiwanese television in China, there will undoubtedly be interest. The common cliche in Taiwan is that mainland Chinese tourists who visit the island often fail to leave their hotel rooms at night they are so taken by evening variety shows. But “Night Market Hero” faces a unique set of challenges. True to the local side of Taiwanese culture it depicts, the movie is in the Hokkien dialect, spoken across Taiwan but incomprehensible to most residents of cities such as Beijing, Shanghai and Chongqing, where the movie will play. According to Mr. Chu, the movie will be translated into Chinese slang, but there is a strong possibility the translations of the dialect, which has its own sayings and jokes, will fall flat in Mandarin. Still, even if the translation doesn’t sparkle, the movie’s political elements may resonate with mainland audiences at a time when independent politicians are increasingly declaring their candidacy in county and township elections. In the film, the market democratically elects the film’s protagonist to stand up against the more powerful forces that want to shut it down. The rest of the characters, meanwhile, are free to protest and harness the power of the media to spread word of their plight. In Taiwan there is a well-worn idea that the best solution to the seemingly intractable cross-Strait political divide is for Taiwan to influence the mainland from within, holding itself up as an example of a democratic model. One way to promote that model is through movies, assuming they can get past the government’s censors, as “Night Market Hero” did. And even if future movies do less to propel political ideas—the next Taiwanese movie slated to come out in the mainland is a romantic comedy called “L-O-V-E” –the larger China market offers great potential for a Taiwanese film industry that has often had much to say, but rarely enough people to say it to.

The Zhoushan archipelago is set to become a massive trade hub for bulk commodities on the back of last week's decision by the State Council to make it the country's first state-level pilot zone directed at developing the maritime economy. Covering 1,440 square kilometres of land and a 20,800-square-kilometre marine area, Zhoushan, in eastern Zhejiang province, was named a pilot zone for maritime economic co-operation and as a major growth engine of the Yangtze River Delta, provincial governor Lu Zushan said yesterday. It becomes the country's fourth state-level "new area" after Shanghai's Pudong, Binhai in Tianjin , and Liangjiang in Chongqing . Economic development areas receive perks in terms of taxes, policies and development priority. The scheme was approved four months after the State Council designated Zhejiang as a national oceanic economic development demonstration zone, alongside Guangdong and Shandong. The marine economy accounts for almost 10 per cent of the country's GDP. The government's 12th five-year plan makes the development of the maritime economy a priority for the 2011 to 2015 period. Zhoushan's gross domestic product reached 63.3 billion yuan (HK$76.1 billion) last year, with 68 per cent from maritime business. The Zhoushan archipelago has 1,390 islands, many only 10 nautical miles from an international marine navigation route. It is connected to Jiaozhou Bay and Bohai Bay in the north and Fujian and Guangdong in the south, as well as with the Yangtze River, which connects it to inland areas of the mainland, and with the Pacific Ocean to the east. The archipelago also boasts 280 kilometres of coastline, and more than 100 kilometres of it are more than 20 metres deep, making it ideal to build ports, Lu said. "The Zhoushan archipelago is the nearest one to the ocean. The geographic advantage is the unique and favourable conditions for us to develop the maritime economy," he said. "With the Ningbo Zhoushan Port handling more than 140 million tonnes of oil, mineral products and coal each last year, it has become the major port of the Yangtze River Delta. [Zhoushan] will be built as the country's hub for storage, transportation, processing and trade in bulk stock." The Ningbo Zhoushan Port boasts the largest handling capacity in the world, with 630 million tonnes of goods handled last year. It has become a national strategic oil-reserve base, the nation's biggest crude-oil reserve base and the biggest transfer hub for mineral materials. Lu said those advantages had made possible the designation of the Zhoushan archipelago as a special economic zone of this type. Under the plan, Zhoushan will improve storage and distribution by providing tariff-free warehousing, among other upgrades, and will explore ways to develop and preserve islands, Lu added. A framework for the area will be established in five years, and it will start to take shape in 10 years, Lu said.

Hong Kong*:  July 9 2011  Share

Bidders turned cautious at an auction of luxury flats yesterday as the government's property curbs have started to bite. Of the 10 flats that went under the hammer, three of them - two at Baguio Villa and one at Beverly Hills - were withdrawn after failing to win any bids. Base price of the 10 flats ranged from HK$19 million to HK$21.3 million. The seven units that were sold managed to fetch a price that was 2 to 4 percent above the first bid. "The bidders today were very cautious, partly because many are end users and some were first-timers at auctions," said Midland Surveyors director Alvin Lam Tsz-pun. The auction lasted about three hours. A 2,330-square-foot unit at Baguio Villa in the southern district of Hong Kong Island - the first unit under the hammer - took about 10 minutes to receive five bids before it was sold for HK$24.8 million, or HK$10644 per sq ft, only 4.2 percent higher from the first bid. Another flat at Baguio Villa took 20 minutes to draw four bids from the same person before the price exceeded the owner's reserve price. The 2,330 sq ft unit was sold for HK$24.7 million, or HK$10,601 psf. A 1,707 sq ft flat on Mount Davis Road in Kennedy Town was sold for HK$29.7 million, or HK$17,399 psf, after going through 20 bids in more than 30 minutes. The successful bidder, Sunil Nanda, said property prices in Hong Kong were skyrocketing. "I do feel the market is high and there is limited upside in the near term. Property values both residential and commercial are far too high and not enough is being done by the administration to cool the market," Nanda said. He added that the government should increase the land supply as a further cooling measure. The seven units sold generated a total of HK$198.5 million.

ATV retracts Jiang Zemin death report - Hong Kong-based broadcaster Asia Television on Thursday withdrew its earlier reports which said former mainland president Jiang Zemin had died, and issued a public apology.

The government's reluctance to give a HK$200 million financial guarantee is likely to cost Hong Kong the opportunity to host the Fina World Aquatic Championships in 2015 or 2017, a top sports official said yesterday. Ronnie Wong Man-chiu, secretary of the Hong Kong Amateur Swimming Association, said Hong Kong, Guadalajara in Mexico and Kazan in Russia had been shortlisted to host the event, the sport's biggest next to the Olympics. Swimming's world governing body, Fina, will next week name the the 2015 host city, and possibly the 2017 host if it finds "two bids are judged capable of hosting". Without a government assurance, Hong Kong "could all but kiss the chance goodbye", Wong said. "One of the conditions required is a supporting letter from your government, but we have not been able to get that. If the other two cities have their governments' support, I have little hope for our bid." He said staging the world championships would cost at least HK$200 million. "I think this is a problem with the government afraid to commit so much money to any sports project following the issues we had with the 2023 Asian Games bid as well as audit queries about expenditure for the 2009 East Asian Games." Wong also suggested politics may have played a part. "I think the government's show of reluctance is understandable with everything having to go to Legco, which hasn't been quite supportive recently," Wong said. Home Affairs Bureau principal assistant secretary Benjamin Mok Kwan-yu said the government needed more time to assess the request. "We only got a request for a supporting letter from the swimming association about two weeks ago. The financial implications of this bid are substantial and we cannot make a decision in haste," Mok said. "In principle, we support this initiative, but there are many procedures to follow before we can give a commitment." The event, held every two years, will be hosted by Shanghai this year and by Barcelona, Spain, in 2013. China originally put forward Guangzhou to host the championships in 2015 or 2017, but then pulled out, raising Hong Kong's hopes of staging a major sporting event. Wong said even though the costs ran into hundreds of millions, most of the money could be recouped through sponsorship and the sale of tickets and television broadcasting rights. "We could even make a profit, but at the end of the day we should not worry about how much it costs and look at it as an event which would raise the profile of Hong Kong," Wong said. "A world championship would bring 2,500 athletes from more than 160 countries. Not only will we have a huge number of visitors coming to town, this would also be shown live around the world." The world championships feature five disciplines: swimming, diving, water polo, synchronised swimming and marathon swimming. Hong Kong's plans envisaged the use of Victoria Park, where a new HK$1.2 billion swimming complex will be ready by 2014, as well as the new pool at the Hong Kong Sports Institute in Sha Tin, due to open next year. Other venues could include Tseung Kwan O and Kowloon Park. "We would need at least four or five pools as we would have to cater to five different disciplines. We will have that capability by 2014," Wong said. He will head for Shanghai next week hoping that the rival bids from Mexico and Russia also lack government backing. "Our only chance is that those two cities also don't have government support or Fina decides the 2017 vote will be decided later, maybe next year," he said. "Hopefully, by then the political situation in Hong Kong will be clearer and the government will be able to commit money to bringing this big event to Hong Kong."

A steady pay cheque is hard to come by for a convicted felon serving hard time, but for Taiwan's graft-tainted ex-president, Chen Shui-bian, it's just a weekly column away. Thanks to Taiwan's freedom of speech laws, the 60-year-old - who is serving a 17-1/2-year jail term on two bribery convictions with more charges pending - recently joined the Taiwan edition of Hong Kong-based Next magazine as a columnist. Since June 30, he has written two articles for the publication, and magazine officials say he is paid about NT$20,000 (HK$5,410) per piece. His literary endeavour was made possible after a protest by his office and supporters that the government of mainland-friendly President Ma Ying-jeou had violated the constitution by silencing Chen. Taipei Prison, where the former president - in office from 2000 to 2008 - is serving his sentence, initially tried to block Chen from publishing political commentaries for the magazine, citing the island's prison laws. But a wave of allegations, mainly by the pro-independence camp, that Ma and his government were suppressing civil liberties prompted Ma to call for the protection of free speech, forcing prison authorities to give in on June 28. But on Tuesday, Chen's office and lawmakers of the pro-independence Democratic Progressive Party again accused the Ma administration of dispatching the "thought police" by censoring a political commentary by Chen that was to run in another magazine and a Taiwanese newspaper. Taipei Prison spokesman Su Kun-ming said yesterday that the new ban was imposed because content in the article had been deemed improper. "The prison authorities have encouraged inmates to write about their thoughts and opinions, but the release of such views must be in line with the prison statute that says they should not attack others or divide the public," he said. Kuomintang legislators, however, are crying foul, saying Chen is enjoying special privileges because he was president. "The judicial authorities should never have allowed him to write articles to make money," KMT lawmaker Chiu Yi said. "When I was in prison, many publications approached me to write articles for them, but Chen used his presidential authority to force prison authorities to block me from writing." Chiu was jailed for 14 months in 2007 for rallying supporters to demonstrate against a ballot count he claimed was faked to ensure Chen a second term. His whistle-blowing of funding irregularities by Chen and his family led to Chen's jailing.

An underwater oil-skimming robot created by Hong Kong University of Science and Technology students has won a design award at an international competition in the United States. The 13-member "Gear" team representing the territory won the Design Elegance Award at the International Student Remotely Operated Vehicle Competition held at NASA's Neutral Buoyancy Laboratory in Houston, Texas, last month. Participants were required to design underwater robots to clear a simulated oil spill for the contest, in which HKUST beat 26 teams from seven countries. The engineering students made their own materials such as circuit boards, so the robot cost only a third of the others in the fray, electronics and computer engineering professor Woo Kam-tim said. Team captain Wong Ka-kin used HK$5 aluminum plates, instead of more expensive HK$150 pieces, to make an improved propeller - "making the robot go three times faster than before." Their creation took only 15 seconds to plumb 10 meters of the simulated sea. "Unlike others, our robot is capable of 360-degree rotations," Woo added. The judges praised the HKUST robot for incorporating "aesthetics, simplicity and functionality into one pursuit." The team aced a regional contest in April for the right to represent the SAR.

Tour operators are looking forward to a profitable summer with demand for educational and travel trips up by 60 to 70 percent despite a 20 percent rise in fares. They say the improved economy has led to a clamor by parents for study and book tours, with Jetour reporting it is fully booked for a 16-day trip to Switzerland that costs HK$30,000 per head. Hong Thai Travel Services said it has been working with secondary schools to provide tailor-made study tours that have seen the number of participants rising by 60 to 70 percent. "The destinations and programs are specially designed for different schools," corporate communications manager Cherie Fong Wai-yee said. "For instance, if the students are interested in music, they may prefer to visit Vienna." Fong said the agency has arranged 30 tours this summer with about 30 to 40 students in each group. But some agencies said they are limiting numbers to maintain tour quality. "We are only conducting seven to eight tours this summer, the same as last year, with 20 students in each," Jetour overseas education services executive Wong Wai-yan said. The tours mainly cater to students aged 12 to 15 with each having a particular theme. The cheapest is a HK$12,000, eight-day tour to Sabah that will concentrate on environment conservation and outdoor activities. "Parents want their children to be exposed to other cultures so as to raise their competitiveness," Maxway Education director Janice Yao Mung-lok said. EGL Tours is arranging three packages with 100 students in each group to the Whampoa Youth Military Training School in Shenzhen. The tour costs about HK$1,000. "Many parents want to improve their children's self-help skills," said Keith Kwok, senior product development manager at EGL. He added the costs of most tours are up by 10 percent due to inflation, low currency exchange rates and aviation fuel surcharges. But, Yao said, "since the economy has improved, parents can afford the additional costs."

 China*:  July 9 2011  Share

China is close to clinching a top-level post at the International Monetary Fund, IMF sources said on Wednesday after the Fund’s new chief pledged to give more power to emerging economies. They said Min Zhu, a Chinese national who was a special adviser to former IMF Managing Director Dominique Strauss-Kahn, was expected to fill a new deputy managing director post to be created by the Fund’s new chief, Christine Lagarde. “Min Zhu is expected to be named to deputy managing director,” an IMF board member told reporters. The appointment, which would give China one of the top five management jobs at the Fund, would first need the approval of the 24-member IMF board of member countries. Lagarde on Wednesday vowed during her first news conference as managing director to give developing nations a greater role in the fund. She said she was considering creating a new high-level job that would be filled by a candidate from an emerging market country. The move should appeal to emerging and developing markets, which have demanded a greater say in the international financial institution to reflect their growing economic clout. China, the world’s second-largest economy, has pressed for a senior-level position but was blocked by Japan’s long-held lock on another deputy managing director post, currently held by Naoyuki Shinohara. Zhu is a former deputy governor of the People’s Bank of China. His appointment would give Asia two senior management posts in the IMF plus the chair of the IMF’s top advisory committee, which was recently filled by Singapore Finance Minister Tharman Shanmugaratnam. The deputy managing directors often chair board discussions on lending decisions when the managing director is absent. The IMF’s No 2 job is also set to open up with the departure at the end of August of American John Lipsky, the Fund’s first deputy managing director. IMF sources have said the United States is considering naming White House adviser David Lipton for the job, keeping the post in US hands. During her candidacy, Lagarde traveled to Beijing to lobby for support and was selected with the backing of China and other large emerging market countries, such as India, Brazil and Russia. “The world is going to continue to change,” she told reporters on Wednesday. “We have these tectonic plates that are moving at the moment, and that needs to be reflected in the composition of governance and employment at the fund.” Derek Scissors, an expert on Asia economic policy at the Heritage Foundation in Washington, said it was long overdue that Beijing gain more influence in institutions like the IMF. “I don’t think that anyone has a reasonable objection to China getting a top-level post at the IMF,” he said. But Scissors said it was “unfortunate” that the IMF had to create an entirely new post just because the United States or Europe would not yield any power to emerging markets. “This looks very much like we had a campaign for this job and [Lagarde] and others went around promising pork in order to get elected,” he added. Lagarde said she would press IMF member countries to pass voting reforms agreed on last year, which give some developing countries more power within the institution. “But that should also reflect in our employment policies, in our training policies, in the way in which we build teams, in the way in which we organise recruitment so that people are not clones of each other,” she added. Lagarde sought to distinguish between her management style and Strauss-Kahn’s. The former IMF chief, who is facing charges of sexual assault and resigned in May, was criticized for failing to delegate decision-making and instead relying on a tight circle of advisers. “My style is about opening up, reaching out, engaging people and working as a team,” Lagarde said. “I can’t do it alone, they can’t do it alone. We have to pool the institution together and engage the staff.”

Employees assemble parts for Fujitsu Ltd computer servers on a production line in Japan. The company's revenue in China was 110 billion yen ($1.36 billion), which was just around 2.5 percent of its global total. Fujitsu Ltd aims to at least double its revenue from China in three years. The Japanese technology giant is planning to increase the proportion of revenue earned in overseas markets and to join the growing number of technology companies developing cloud-computing services. Masami Yamamoto, president of Tokyo-based Fujitsu, told China Daily in Beijing that last year, the company's revenue in China was 110 billion yen ($1.36 billion), which was just around 2.5 percent of its global total. However, as the company, often known as "Japan's IBM", is trying to expand overseas rapidly amid a slowing domestic market, China can play a significant role. "The Chinese market is just a fraction of our worldwide business. Our official target is to double that in three years," he said. "However, personally, I believe it is a conservative target." He said that if Fujitsu can achieve 5 trillion yen in net sales, it is likely that China can contribute 10 percent of that. Fujitsu has been trying to recover from the fallout of the global financial crisis. In the company's fiscal 2010, which ended on March 31 this year, net sales fell by 3 percent year-on-year to 4.53 trillion yen, although operating income grew by 41 percent to 132.5 billion yen. Global expansion has become a key strategy for Fujitsu to achieve sustained growth. It planned to increase the proportion of revenue from overseas markets to 40 percent in the near term, from 35 percent seen at the end of the 2010 fiscal year. One area which Fujitsu is betting is cloud computing, which hosts computing services on the Internet and allows users to access the same applications and data from any location. The US-headquartered research company International Data Corp (IDC) has predicted that China's cloud-computing service market will grow to $1 billion by 2014 from last year's $320 million. The domestic research company CCID Consulting Co Ltd gave a more ambitious number: The market size could be 60.7 billion yuan ($9.38 billion) in 2012, up from 16.73 billion yuan in 2010. CCID's figures also included hardware sales. Yamamoto said Fujitsu's focus in China is still product-centered, including computer servers, storage and personal computers, but, cloud computing, which is service-oriented, will be the key in the future. The company has decided to invest $30 million in a data center in Foshan, Guangdong province, to meet customer demand for the service. The facility will be operational by the end of the year. It is also in discussions with China Telecommunications Corp, with which Fujitsu has a key joint venture in Fujian province, on combined development of the cloud computing business, Yamamoto said. Fujitsu is just one of the technology companies that sees cloud computing as a key to the future. Hewlett-Packard Co launched a cloud executive briefing center in Tianjin on June 28, when its president and CEO, Leo Apotheker, visited China. "Cloud computing and connectivity are redefining the way people live, businesses operate and the way the world works," said Apotheker at that time.

A reception was held in San Francisco Tuesday to mark the 40th anniversary of ping-pong Diplomacy, which led to the establishment of diplomatic relations between China and the United States. San Francisco Mayor Edwin Lee (left) and Vice-Minister of China's General Administration of Sport Cai Zhenhua (right) plays ping-pong to celebrate the 40th anniversary of ping-pong Diplomacy in San Francisco, July 5, 2011. "Forty years ago, thanks to the extraordinary strategic vision and remarkable diplomatic skills of our leaders of the older generation, that magic small ball (pingpong) successfully gave a big push to the big ball of China-US relations," Chinese State Councilor Liu Yandong said in a congratulation letter, which was read at the reception. "In the course of the growth of the China-US relationship, people-to-people interactions, including sports exchanges, play an indispensable part. That makes the observance of ping-pong Diplomacy even more necessary and important today," she said. Liu expressed the hope that people-to-people exchanges, including sports exchanges, like the "ping-pong Diplomacy" 40 years ago, could help further boost the China-US cooperative partnership based on mutual respect and benefit in the new era. In 1971, nine American table tennis players were invited to Beijing for exhibition games with Chinese players, helping break the ice between China and the United States. In February 1972, US President Richard Nixon paid a visit to China. The two countries eventually forged diplomatic ties in 1979. At Tuesday's reception, Gao Zhansheng, Consul General of China in San Francisco, said ping-pong Diplomacy served as a perfect example of how people-to-people exchanges could spearhead a country-to-country relationship. Gao's comments were echoed by San Francisco Mayor Edwin Lee. When people begin to play sports on an international level, they will begin to talk to each other and better understand each other's cultures, Lee said. Vice-Minister of China's General Administration of Sport Cai Zhenhua told the reception various exchanges and cooperation between China and the United States were now "at a new historical stand point." "We shall continue what we started. Together with our American friends in the sports circle, we will strengthen China-US sports exchanges, promoting the understanding and friendship between players and people in general, so as to promote the China-US relations to a new height," he said. Cai is leading a Chinese delegation of table tennis Olympians, sports officials, and members of the team who played in the exhibition matches in 1971, to participate in celebrations of ping-pong Diplomacy held in Milwaukee, San Francisco and Los Angeles from July 1 to 9.

A gilt bronze statue of Guanyin, with 11 heads, 1,000 eyes and hands, is on display at Henan Museum, July 5, 2011. The "Holy Tibet-Treasures from Land Closest to the Sky" exhibit is open to the public in Zhengzhou, capital of Central China’s Henan province. The 77-centimeter-tall statue, made in the 17th to 18th century, was stored in Norbulingka (literally the "Jeweled Park"), formerly the Dalai Lama's summer resort in Lhasa. Over 127 precious items are being shown in the exhibition, which will run for two months starting July 6.

China's State Council, or the Cabinet, has approved a plan to establish the Zhoushan Archipelago New Area in southeastern Zhejiang Province, local authorities said Thursday. Fishing boats sail into Shenjiamen Harbor in Zhoushan, East China's Zhejiang province. Photo taken in 2009. It will be the country's fourth state-level new district after Pudong New Area in Shanghai Municipality, Binhai New Area in Tianjin Municipality and Liangjiang New Area in Chongqing Municipality, Zhejiang provincial governor Lu Zushan said at a press conference. The New Area, covering all of Zhoushan City with 1,440 square kilometers of land area and 20,800 square kilometers of inland sea, is planned to be built into a pioneer area in leading oceanic economic development as well as an important new growth engine for the Yangtze River Delta economic zones, Lu said. "It is the first time for the country to set up a new district themed with the oceanic economy at the state level," said Fan Hengshan, director of the National Development and Reform Commission's regional economy division. Fan said the Zhoushan Archipelago New Area will help enhance the country's oceanic economy, expand its marine development strategy, and promote the ability to integrate global resources to secure the national economy. According to Lu, the New Area will become a trade center for the storage, transportation and processing of bulk commodity, an important gateway on the eastern seaboard, a comprehensive demonstration zone for island protection and development, a modern ocean industrial base, and a pilot region for integrating land and sea resources. The local government will also work to improve the layout of the New Area, step up policies to create a favorable environment, and create measures to protect the marine environment while exploring economic growth, Lu said. Zhoushan, the country's only prefecture-level administrative city based on islands, fosters an oceanic economic system mainly supported by port logistics, coastal industries, marine tourism and fisheries. Comprising 1,390 islands, it has an approximately 280-kilometer-long deep-water coastline, taking up 18.4 percent of the country's total.

Li Ning’s star – and stock price – is falling further after the company announced what basically amounts to a profit warning. The sportswear maker, founded by China’s gymnastics Olympic legend of the same name, tumbled more than 13% in Hong Kong on Thursday to 11.88 Hong Kong dollars (US$1.53) after the company issued an operational update warning of declining revenue and profit margins as it moves to revamp its distribution channels. The intraday low of $11.70 is a 52-week trough, and the stock has lost 28% year-to-date. Li Ning Co. said in a statement to the stock exchange that its net profit margin is expected to fall to 6% to 7% in the first half of this year from 12.9% in the year-earlier period. Alarm bells have been going off since last winter when the company announced weaker-than-expected order data, with its share price down 44% in 2010. As we previously wrote, the lofty valuations of sportswear makers came crashing down as it became apparent that the growth model of rapid store expansion was coming to an end and over-competition in the sector started to kick in. On a recent visit to China, brokerage UOB KayHian said it observed rampant discounting of up to 90%, inventory pile-up and overcrowded stores, reports Dow Jones Newswires Market Talk. If it’s survival of the fittest from now on in the sportswear sector, then Peak Sport Products Co. Ltd. is one that’s looking in better shape. On Monday, Peak released its latest operating data disclosing its first-quarter 2010 order book is up 20.2% on-year. Li Ning’s peers in Hong Kong, including Anta Sports Products Ltd., Dongxiang Group and Peak Sport are down as much as 5% in midday trading.

Hong Kong*:  July 8 2011  Share

Cafe de Coral Holdings (SEHK: 0341) will partner with Taiwan-based Gourmet Master to open 25 coffee shops in the city to compete with Starbucks and Pacific Coffee. Each company will invest HK$15 million for 50 per cent of the joint venture. The first store would open in September and the group aimed to have 25 shops in Hong Kong in three years, Cafe de Coral spokeswoman Lucia Cheung said. The fast food chain is looking to diversify its portfolio as growth moderates. Its 151 Cafe de Coral outlets serving Hong Kong-style dishes are facing cost pressures from rising food prices and a higher minimum wage. "They are actively looking for a growth opportunity," said Jacqueline Ko, a Hong Kong-based analyst at Kim Eng Securities. Ko downgraded Cafe de Coral's stock to "sell" from "hold" this week after the company released its 2010 annual results. Sales for the year ended March 31 were HK$5.33 billion, compared with HK$4.88 billion a year earlier, the company said. The chain reported flat growth in profit - HK$514 million - for the first time since 2003, it said. "Last year's same-store sales growth missed its guidance," Ko said, adding that customers were put off by an increase in menu prices. The company's stock has risen 2 per cent this year, compared with a 1.6 per cent decline in the benchmark Hang Seng Index. Gourmet Master operates 325 stores in its 85C chain of coffee shops in Taiwan, more than 200 in mainland China, one in the US and four in Australia, company spokeswoman Michelle Hsieh says. Starbucks and Pacific Coffee run about 100 stores each in Hong Kong, says Roxan Hsu, analyst for Goldman Sachs. "The HK venture is likely to face tough competition," she said. "We believe HK is a mature market for the coffee business." Gourmet Master shares are down 14 per cent this year, compared with a 1.7 per cent decline in Taiwan's benchmark Taiex Index.

HK roared back, but jury's still out on its audacious raid - As the financial crisis swept across East Asia in 1997, the Hong Kong government's first response was to arrogantly assert that it was much better positioned than others to weather the storm. Donald Tsang Yam-kuen, as financial secretary, claimed the crisis might well be over by the end of the year. However, as 1997 morphed into 1998, things got a lot worse in Hong Kong. The economy slammed into reverse, property prices tumbled by around 40 per cent and there was evidence that vulture-like investors were gathering for an attack on the Hong Kong dollar. Officials persuaded themselves that this was turning into a double play that involved both the currency and equity market. Joseph Yam Chi-kwong, then chief executive of the Hong Kong Monetary Authority, dramatically stated that he was facing a "severe conspiracy". At the end of 1997, with the Hong Kong dollar under pressure, the authorities engineered a scheme to put overnight interest rates up to a staggering 300 per cent. But the pressure did not ease and the government worked itself into a frenzy, culminating in an audacious raid on the stock market on August 28, when some HK$118 billion of public money was used to buy up blue chip stocks. The drama of this response caught global attention, but a great deal of it was not favourable. The economist Milton Friedman, one of the biggest cheerleaders for the Hong Kong economic system, declared the stock market raid to be "insane". Others, including Alan Greenspan, the head of the US Federal Reserve, were uncharacteristically frank in castigating the move. However, financier and philanthropist George Soros said in 2001 that the authorities did "a very good job when they intervened to arrest the collapse of the Hong Kong market" and that the subsequent damage to the government's laissez-faire reputation was worth it. We now know that if the government had done absolutely nothing, many of the speculators in the Hong Kong market would have been forced out within a week or so because they were dangerously overexposed in the Russian market and desperately needed funds, sloshing around in Hong Kong, to cover their positions. Nevertheless, the government raid was claimed to be a great success and when some, but not all, of the shares acquired in 1998 were finally sold with the creation of the Tracker Fund, there was much crowing over how much profit had been made. The jury is still out on whether this was the best way to tackle the crisis. It is interesting to compare what happened in Hong Kong with normally interventionist Singapore. Like Hong Kong, Singapore went into the crisis with a much stronger economic and fiscal position than its neighbours, and while those countries were busy seeking ways of keeping money in their countries, the Singapore government relaxed controls and took some interesting initiatives to open up the economy. At the end of the day Singapore emerged from the ravages of 1998 with considerable strength, and so did Hong Kong.

Several private hospitals will reserve obstetric services for the mainland wives of Hong Kong men as pressure mounts on the government to take care of cross-border families affected by a recently announced cap on baby deliveries in the city. Baptist Hospital, home to Hong Kong's biggest obstetric unit, will reserve 100 beds each month next year for mainland wives, while Union Hospital will hold 40 to 50 beds a month. The government has capped the total number of deliveries for mainland mothers at 34,400 next year - 31,000 at private hospitals and 3,400 at public hospitals. Health officials had rejected calls to give priority in using public services to women married to Hong Kong residents, fearing it could lead to legal challenges. However, the decision angered cross-border families, with the government now turning to the private sector for help. Baptist Hospital chief executive Dr Raymond Chen Chung-I said the hospital had already begun reserving beds for mainland wives for bookings starting in February. "We have encountered many difficulties in accrediting their marriage certificates," Chen said. "We hope that the government can take up this administrative procedure if the protected quota for cross-border families becomes a long-term policy." The beds for these women are reserved under the hospital's quota for mainland mothers of 10,300 next year. "We can reserve more beds for these families if the administration can be streamlined," he said. Union Hospital medical director Dr Anthony Lee Kai-yiu said the reserved beds for cross-border families would be available from March. He said the reserved capacities should be shared between the hospital's quota for mainland mothers and for local mothers. The quota on maternity services only applies to mainland mothers, not locals. So if half of the beds for cross-border families are counted as local, the hospital can then take in more patients. "We are willing to help the government and the cross-border families but it would be unfair if the beds reserved for them are absorbed only by our quota for mainland mothers. These women have a special status as half-Hongkongers, otherwise the government wouldn't treat them differently," Lee said. About 6,000 mainland mothers married to Hong Kong residents give birth at local hospitals every year, about 40 per cent use private services. Mainland-Hong Kong Families Rights Association organiser Tsang Koon-wing said it was good that cross-border wives were offered more beds, but hoped there would be discounts on fees. "A lot of families cannot afford private services. It would be better if they were counted as locals or given government subsidies in giving birth," he said. But the private hospitals said they had no plan to offer discounts. A Precious Blood Hospital spokesman said it would be willing to offer more beds for mainland wives if they were admitted on top of the government's mandated quota. "We have a capacity of 3,600 births although the government just gave us a quota of 3,000 per year. If we can admit these women on top of our quota, we can consider offering a discount for them," he said.

HSBC will raise its HIBOR-based mortgage rates for the fourth time this year, but trim its prime rates for the first time, to draw more clients to the latter. The new rates are effective today. Customers of the largest mortgage lender will get HIBOR plus 1.8-2.3 percent instead of HIBOR plus 1.5-2 percent. Or they can opt for prime minus 2.7 percent, a deeper cut from the old rate of prime minus 1-1.5 percent. Hang Seng Bank (0011), Standard Chartered and Bank of East Asia (0023) said they are sticking to their rates for now. Bank of China (Hong Kong) (2388) said it is monitoring the situation closely. With the one-month Hong Kong interbank offered rate at 0.2 percent, the new HIBOR-based rate would range from 2-2.5 percent. And with the prime rate standing at 5 percent, it is 2.3 percent for those opting for the alternative. "The other banks are definitely going to follow HSBC's move," said Centaline Mortgage Broker managing director Ivy Wong Mei-fung said. "The gap between the two mortgage plans has narrowed. Some home owners - especially long term borrowers - may shift to the prime-based plans." An owner of a HK$2 million property who has taken a 70 percent HIBOR- based mortgage over 20 years will have to pay HK$7,082.37 to HK$7,418.65 per month, as compared to HK$6,885.18 to HK$7,215.74 previously. The alternative is HK$7,283 per month for prime-based mortgages. The give and take from HSBC comes as latest official figures show there were 70,342 sale and purchase agreements in the first half, 17.7 percent less than the second half of last year. The value of the deals was HK$370.1 billion, down 2 percent from the second half of last year.

Chief Inspector Cheng Ka-wai holds a master HK$100 banknote (left) and 36 fake banknotes that had been copied from it. Twice as many counterfeit HK$100 banknotes have been seized this year, compared with the same period last year. Most of them were made in Hong Kong, police believe, after arresting two suspected syndicate members. Police seized 568 fake notes in the first five months of this year, compared with 273 in the same period last year and 625 over the entire year. "The colour fades when you rub the [counterfeit] notes, and the fakes contain no security features," Superintendent Ravy Fong Kwok-wah of the commercial crime bureau said. Bureau officers arrested a 36-year-old man at lunchtime on Tuesday at a stall in the Java Road Market in North Point. The suspect bought vegetables using a counterfeit HK$100 note, and four more fakes were found on him. On the same day, officers stormed a home used as a counterfeit-money factory in Pei Ho Street, Sham Shui Po. They arrested a 32-year-old man and seized 36 fake HK$100 notes, more than 2,000 unfinished banknotes and two inkjet printers. The two Hongkongers, who were being held for questioning, were core members of a counterfeiting syndicate that had been operating for about six months, police said. All the bogus banknotes had been copied from two genuine HSBC (SEHK: 0005, announcements, news) -issued HK$100 notes that had been scanned into a computer, police said. "Our surveillance showed that the counterfeiters mainly targeted elderly stallholders in meat, vegetable or fish shops," Fong said. "They approached the shops at peak hours when the shop owners or employees were busy and had no time to double-check the cash." Chief Inspector Cheng Ka-wai, the bureau's counterfeit expert, said the fakes could easily be distinguished if you took a few seconds to look at them, since they were missing security features such as watermarks and embossed figures.

It will cost HK$2 more for every taxi ride from Sunday, but operators and drivers are confident that business will not suffer. "I see people now paying HK$20 on an HK$18 fare," said Chung Shing Taxi managing director Cheng Hak-wo. "So I don't think there'll be much of an effect." The Executive Council approved in May the HK$2 hike in the flagfall charge. So for urban taxis it rises to HK$20 while for most of the New Territories it will be HK$16.50 but HK$15 on Lantau. "If the economy was in a bad way it would be a different story," Cheng added. "But the economy is good, the weather is hot and the summer vacation period has started." Ng Kwan- sing, the chairman of the Taxi Dealers & Owners Association, said operators have been struggling to make ends meet. Not only was a fare hike delayed for a year, he said, but out-of-control insurance premiums have driven costs way up. "Two years ago, the insurance rate per taxi per day was around HK$20. Now, they have risen 150 percent to HK$60 per day. We have no way of keeping up. Without the rise we'd go bankrupt." Ng blamed crippling premiums on an increase in claims by people who inflate the seriousness of injuries. The answer, Ng said, is stricter rules on what can be claimed under insurance - and that is the government's responsibility. Ng hopes the insurance issue will go to the next meeting of Legco's panel on financial affairs, either late this month or in August.

 China*:  July 8 2011  Share

Dell, the world's second-biggest supplier of personal computers, moved another step closer to completing its infrastructure expansion in western China with the launch yesterday of an "information-technology solution centre" in Chengdu. The centre will be part of the Texas-based company's second mainland flagship manufacturing and customer-support complex, which is due to open later this year. The first such complex was built in Xiamen. Dell had earlier said it would boost investment on the mainland, its second-biggest market after the United States, to more than US$25 billion a year this decade in terms of manufacturing and sourcing of IT components and related products. The Chengdu centre is part of Dell's US$1 billion global investment program this year to build multiple data centres, "enterprise solution hubs" and cloud computing services during a 24-month period. Dell China vice-president Li Guoqing said that industry-specific facility would be a base for testing business systems used by customers in health care, education, cloud computing, mobile services and some government projects. That followed the opening last week in Shanghai of the first Dell Global Solution Centre in the Asia-Pacific, where staff will work closely with large corporate customers to select IT systems based on their specific requirements. Dell China president Amit Midha said earlier that Dell had about 60 per cent market share of the enterprise server computers and storage systems used by the mainland's biggest internet companies, including gaming giant Tencent (SEHK: 0700), online search provider Baidu and e-commerce firm Alibaba (SEHK: 1688).

Caterpillar sold US$355 million of yuan-denominated bonds yesterday in the biggest deal by a foreign multinational company in the offshore yuan market, a sign that Western firms are gaining confidence about China's currency experiment. The world's leading maker of construction and mining equipment is the second company to return to the so-called "dim sum" bond market after Hopewell (SEHK: 0054) Highway Infrastructure raised offshore yuan funds in May and came ahead of McDonald's Corp, which is also planning to tap the yuan bond market a second time. China's ambition to spread the use of its currency in international trade led Hong Kong to become an offshore yuan hub, an experimental capital market that has seen explosive growth over the past year. Caterpillar's two-year bonds priced at 1.35 per cent, well below Caterpillar's two-year "dim sum" bond in November last year, when the heavy equipment manufacturer issued a yuan-denominated bond with an interest rate of 2 per cent. The latest bond yield was also in the middle of early price indications of 1 per cent to 1.5 per cent, suggesting investors were willing to shrug off concerns on European sovereign debt and an economic slowdown in China when it came to high-grade credit. "As concerns over Greece and corporate scandal issues in China recede, the market is slowly opening up for high-grade names," said Tim Jagger, the head of credit strategy at Royal Bank of Scotland in Singapore. "Cost savings are very attractive in the offshore market, especially if it is high-grade paper like Caterpillar." Caterpillar has been beefing up its presence in China. A top executive said in January it planned to spend more than US$1 billion in the next few years to raise manufacturing capacity. In April, it said a joint venture in China would produce drivetrain systems and heavy machinery parts. The growing pipeline of "dim sum" bond offerings seized up briefly last month after short seller Muddy Waters accused Toronto-listed Sino-Forest Corp of exaggerating the size of its forestry assets, adding to concerns about China Inc's corporate governance standards. Deals appear to be flowing in the market. About 70 billion yuan (HK$84 billion) of dim sum bonds has been issued in the first half of the year, according to Thomson Reuters.

Air China, the mainland's biggest airline, aims to cash in on the surge in outbound business and leisure travel while it faces competition from high-speed trains on the domestic front. Air China aims high with plans to boost fleet size - The world's most profitable carrier has global ambitions and it wants to increase its number of wide-bodied aircraft from 40 to 100 by 2015 - Air China (SEHK: 0753) plans to more than double its fleet of wide-bodied aircraft in five years, reinforcing its ambition to become one of the world's top carriers, according to He Li, the company's vice-president. The mainland's flagship carrier, the world's most profitable airline and the one with the biggest market value, expects to own 100 wide-bodied planes by 2015, compared with more than 40 now. "We need a fleet of 100 wide-bodied aircraft before fully competing in the international market," He told an aviation forum yesterday. "Air China is now short of planes, particularly wide-bodied planes." A wide-bodied aircraft has two passenger aisles and a fuselage diameter of between five and six metres. A traditional, narrow-bodied airliner has a diameter of three to four metres. Air China became the world's most profitable carrier when it reported net profit of 12 billion yuan (HK$14.44 billion) for last year, narrowly beating strategic partner Cathay Pacific Airways (SEHK: 0293), which earned HK$14.05 billion. The rising affluence of mainlanders benefited mainland airlines, which took a lion's share of the domestic market amid the increasing demand for business and leisure travel. Domestic services accounted for about 60 per cent of Air China's business. He said Air China, the biggest carrier among the mainland's Big Three, was adamant about going global. The company expects its revenue to reach 140 billion yuan in 2016, up from 82.49 billion yuan last year. The Beijing-based company also plans to expand its fleet from the current 400 planes to 700 in 2015. "Air China's ambitions largely hinge on China's economic growth as outbound business and leisure travel increases in the coming years," China Jianyin Investment Securities analyst Li Lei said. "The target for the size of the businesses might not be difficult to achieve, but it's the quality of the services that will be used to gauge the competitiveness of the company." Mainland airlines are facing competition from high-speed railways after the Beijing-Shanghai bullet train began services on June 30. He admitted that competition from the high-speed trains would affect airline profitability on the most lucrative routes. The country's gross domestic product expanded 10.3 per cent last year, making it the world's fastest-growing major economy. Analysts predicted the revenue of the country's major airlines could beat that growth rate in the next five years. Air China received approval to set up an airline in Dalian, Liaoning province, recently as part of its efforts to boost its domestic businesses. It spent 800 million yuan to take an 80 per cent stake in the new carrier while the Dalian government owns the remaining 20 per cent share. He said the Dalian subsidiary would begin operations this year. "We hope we can start the businesses soon," he said, declining to give a specific date. Air China shares closed 3.9 per cent lower at HK$7.82 yesterday.

The jasmine revolutions in the Arab world will not hamper China's efforts to improve relations with all Arab states and Islamic countries, according to the head of the regional government in Ningxia, an area with a large Muslim population. Wang Zhengwei , the chairman of the Ningxia Hui Autonomous Region in northwestern China, admitted that the tumult in the Arab world this year had hurt efforts to attract investment from Arab and Islamic countries. But he said Ningxia still intended to strengthen business ties with these countries and the impact from the jasmine revolutions would be "only marginal and short-lived". Ningxia is a Muslim autonomous region on an upper section of the Yellow River, the so-called cradle of Chinese civilisation. Around a third of its 6.3 million people belong to a Muslim group called the Hui people. With prospects for continued trade expansion with North America and Western Europe dimming, the Hui people have become something akin to Islamic ambassadors, with Beijing using Ningxia as a national platform for promoting trade and economic ties with Arab and Islamic countries, even though Ningxia is the smallest provincial-level division in the mainland, with a population just a third of Beijing's. Wang said Ningxia had won central government support to host an annual economic forum and trade fair with the Arab states in September. The first was held last year. The events will be jointly hosted by the Ministry of Commerce and China Council for the Promotion of International Trade. Local press reported that Ningxia would build a permanent venue for the annual China-Arab states economic forum in 2015. Ningxia wanted to beef up its industries to make "Muslim foods" and "Muslim products", Wang said, capitalising on the local people's shared religious roots with the Islamic world. Muslim foods and restaurants had been getting more popular on the mainland in the past five years, said Yang Liu , deputy mayor of the regional capital, Yinchuan. Yang, a Hui woman, called for Ningxia to step up efforts to ride the trend and meet international standards, including the halal standards for Muslim foods, local news portal reported. Only by doing so could Ningxia's Muslim food industry be more competitive nationwide and abroad, she said. On the practical side, the Ningxia people's congress passed an amendment to the regional regulation on Muslim foods a week ago. Some rules were made stricter, but the word halal, meaning permissible according to Islamic law, was not used. But while Ningxia has big dreams of becoming the Chinese hub for Muslim business, it is starting from a low base. According to Ningxia's commerce department, from January to May, the autonomous region's international trade totalled US$920 million, up 31 per cent year on year. But exports to Arab League countries totalled just US$11 million, up 17 per cent. Food exports did not begin until May, when Ningxia sent its first shipment of mutton, worth more than US$100,000, to the Middle East, according to, the website of People's Daily. Ningxia's gross domestic product last year was 164.3 billion yuan, 2.7 times more than in 2005. It aims to double it again in the next five years, Wang said, and lift per capita GDP to US$6,250 in 2015. Arrangements would also be made for nearly 80,000 households and 350,000 people from central and southern areas under the threat of almost permanent drought that made the areas unsuitable for farming to relocate to the northern cities.

China's foreign trade outlook for June was not optimistic, with exports continuing to drop and imports shrinking from the previous scale, market analysts said Wednesday. "The credit squeeze is taking a toll on small and middle-sized exporters, while the weak U.S. recovery and European debt crisis are having a negative impact on exports," said the Bank of Communications in its latest report. The bank forecast that growth of June exports would slow to 18.4 percent year-on-year from 19.4 percent in May. China's imports jumped 28.4 percent year-on-year to reach 144.11 billion U.S. dollars in May. But export growth slowed to 19.4 percent in the same period to 157.16 billion U.S. dollars, sharply down from April's 29.9-percent increase. Lu Zhengwei, chief economist with the Industrial Bank, said China's import growth may slow to between 24.4 and 26 percent year-on-year, while that of exports could would fall between 15.7 and 17.2 percent in June. Transportation of metallic ores was inactive last month, while iron ore prices kept falling, which both indicated weak domestic demand, he said. The Bank of Communications also takes a dim view on foreign trade outlook for the second half of this year. The slowdown in the U.S. economic recovery might continue, while the European debt crisis would not be solved in the short term or could even worsen in future, which could both dampen external demand, said the report. A rise in labor costs and a liquidity shortage would also hurt Chinese exporters, it added. The General Administration of Customs is scheduled to release trade figures for June on Sunday. 

US-based cosmetics maker Estee Lauder Cos Inc raised the price of its brands by an average of 8 to 10 percent on July 1, a move that follows price increases by its competitors, analysts say, and that will not significantly affect its market share. A brown bottle of Estee Lauder eye cream now costs 530 yuan ($81.94), a 10.4 percent increase. The group's brands on the Chinese mainland include Estee Lauder, Clinique, MAC, La Mer, Origins and Bobbi Brown, according to Selina Song, an employee from Estee Lauder (Shanghai) Co. The company spokeswoman was not available for comment. Price changes of particular brands are usually the result of various factors, such as the rising costs of ingredients and labor, and their market performance, Liu Wei, director of public relations and corporate communications with Estee Lauder (Shanghai), was previously quoted as saying by the Beijing News. "There are a couple of factors contributing to the increase in prices. The first is that the cost of the commodities used to make these products has increased, and many brands are raising prices so that their margins do not erode too much," said Ben Cavender, associate principal of China Market Research Group (CMR). "The second for Estee Lauder is that competitor brands have also raised prices over the last several months and it is important for them to adjust the prices of products sold by their sub-brands so that brand image and positioning stay where they want," said Cavender. According to Cavender, Paris-based L'Oreal SA, Estee Lauder's main rival, already raised prices a few months ago. Estee Lauder's price increases come in part to keep its prices comparable to its competitors', Cavender said. Xu Wei, an Estee Lauder saleswoman at a downtown Shanghai department store, told China Daily that the price rise applies throughout the Chinese mainland. Xu said it will not affect sales because their clients are less price-sensitive and more loyal. "This morning, our counter alone sold more than 10,000 yuan worth of products, which is pretty much the usual amount," she said. Cavender said Estee Lauder is not likely to lose many customers. There is enough growth in demand in the sector that it should be able to maintain sales growth, he said. Zhao Li, a middle school teacher and fan of Estee Lauder products, however, said she never buys them on the Chinese mainland. "It is too expensive to buy them domestically, and whenever a friend goes to the United States or Hong Kong, I ask him or her to buy some for me," Zhao said. Zhao said she is not worried about price rises because she has plenty in stock. "Many people who buy high-end cosmetics are less price-sensitive, so a 10 percent price rise will not stop them," she added. Qi Xiaozhai, director of the Shanghai Commercial Economic Research Center, said that while foreign rivals are raising prices, Chinese manufacturers should seize the opportunity to develop good products and capture market share. China's beauty and personal-care market had 160.83 billion yuan in sales in 2010, and is estimated to reach 177.7 billion yuan in 2011, up 10.5 percent year-on-year, according to the market research company Euromonitor International.

An experimental orbiter in China's Shi-Jian satellite series, SJ-11-03, boosted by a Long-March II-C rocket carrier, lifts off from the Jiuquan Satellite Launch Center in Northwest China's Gansu province, July 6, 2011. The satellite will be used for experiments of space science and technology. China on Wednesday launched an experimental orbiter in the country's Shijian satellite series from the Jiuquan Satellite Launch Center in Northwestern Gansu province. The satellite, SJ-11-03, was sent to space at 12:28 am (BJT) by a Long March II-C carrier rocket, according to the launch center. The orbiter, developed by China Spacesat Co. Ltd under China Aerospace Science and Technology Corporation, will be used to conduct space scientific experiments, the company said. It has been the 139th flight of the Long March rocket series.

The top Party official in Northwest China's Xinjiang Uygur autonomous region made a surprise visit on Monday to outdoor food courts in the regional capital, winning praise from local residents and netizens. About 10 pm on Monday, diners and food stand owners at the Dawan Evening Food Court in Urumqi became excited by the unexpected arrival of Zhang Chunxian, the Party secretary of the autonomous region, Xinjiang Daily, the local official newspaper, reported on Tuesday. Zhang Chunxian (center), Party chief of the Xinjiang Uygur autonomous region, on Monday offers lamb kebabs to local residents who were having dinner at a food court in Urumqi. 

ConocoPhillips, the US oil and gas company involved in two recent oil spills off the coast of Shandong province, may end up facing a far higher compensation bill from the central government than the 200,000 yuan (HK$240,400) penalty announced on Tuesday, a marine environment expert says. Professor Wang Yamin , from the Marine College at Shandong University in Weihai , said the final sum could be triple the immediate economic losses caused, including the impact on the fishing industry and some endangered animals. Wang said related central government departments such as the State Oceanic Administration and Ministry of Agriculture could demand compensation from the polluter according to a state regulation enacted in 2008 that sets out the means of calculating economic losses to fisheries from pollution accidents. "As the impact of such pollution usually lasts for three years, the amount of compensation is therefore triple the total economic loss," he said. The total bill could be much higher than 200,000 yuan - the maximum penalty for sea pollution under mainland law. The State Oceanic Administration said on Tuesday that compensation was a separate matter that could far exceed the fine for polluting the environment. ConocoPhillips held a press conference in Beijing yesterday, saying it was still assessing the damage. Production had dropped at its Penglai 19-3 oilfield in Bohai Bay after the company relieved pressure on a well as part of the clean-up process, it said. Two oil leaks were detected separately on June 4 and 17. In an interview with China Central Television yesterday, China National Offshore Oil Corporation, the joint owner of the oilfield, denied it had covered up the accidents. Delays by the two companies in reporting the spills have triggered public anger, even though the State Oceanic Administration said no damage to the fishing industry had been found.

Hong Kong*:  July 7 2011  Share

A senior TVB official yesterday told a District Court that general manager Stephen Chan Chi-wan needed his approval to accept outside jobs and that none had been given for the 2009 countdown show in Macau or the book-signing event - two of the three corruption charges Chan faces. He also said that Chan was not paid for any of his appearances in the Be My Guest show regardless of where it was held. "The contract states he can be assigned to any work ... any reasonable work .... If Chan did not agree, you can't force him," TVB group general manager Mark Lee Po-on said on his first day in the witness stand. Lee rejected a defense suggestion that Chan merely had to notify him "out of courtesy" before accepting outside work. "The principle [of the employment contract] is for him to seek approval from one's superior [for an outside job]. It is common sense." Lee rejected the defense's suggestion that Chan could accept outside jobs as a celebrity. "Every staff member of TVB is, as an employee, bound to internal guidelines and related ordinances and framework. He can have only one identity," Lee said. Chan and Lee were employed as general managers in charge of different sections until Lee was promoted in 2009. Lee said Chan is bound by an executive contract to seek his written approval for any outside job, paid or unpaid. He said he would only give the green light if the appearance did not go against TVB's interests. He said he had only given permission on two occasions, one commercial and one for charity, neither of which was related to the countdown show in Olympian City on December 31, 2009, or a book-signing event on February 7, 2010, which five TVB female artists attended free and for which TVB did not receive any commission. Lee said TVB would never have permitted the female artists to attend the book-signing for free as it was clearly commercial. Lee said the broadcaster decided to open an investigation and conduct an internal audit in 2010 after receiving complaints about irregularities in the Jade Singers Celebrate TVB Anniversary held in Melco Crown Hotels in Macau in 2009. He later found two contracts signed by another defendant, former TVB head of business development for marketing and sales Wilson Chan Wing-suen, 63, on behalf of the station and Melco, and the other between Idea Empire Advertising and Production Company, owned by yet another defendant Edthancy Tseng Pei- kun, 28. Lee said he was "very surprised" by the first, and found the second contract - which stated Tseng's company had at its disposal TVB's more than 100 sales and nearly 3,000 other staff - to be "ridiculous." Lee said he later overheard Tseng's company had received HK$160,000 from Olympian City even though Stephen Chan's appearance in the By My Guest sideshow in the countdown should have been free. He asked an employee to investigate the rumor. Television actor and Chan supporter Wong Hei was in court to hear the evidence. Lee's testimony continues before District Court judge Poon Siu-tung today.

It is a race for capital for seven mainland companies that are tapping Hong Kong's equity market as fears of a slowdown in China's economic growth and concerns over the country's bad loans weighing on investors. The volatile equity market has claimed several victims who pulled their initial public offerings, while delaying a number of other Hong Kong listings and slashing fund-raising targets from mainland firms. But cash-hungry mainland firms have not been deterred, with seven IPOs competing for investors' attention and hypermarket operator Sun Art Retail Group has come out on top despite its costly valuation. Brokers said Sun Art's IPO, which was launched yesterday, received a better response compared with the other six offerings, which include a children's healthcare-products maker named Prince Frog International, a provider of printing services to international book publishers and print media companies, 1010 Printing Group, and Winox Holdings, a maker of stainless steel products. Sun Art, which operates 197 hypermarket complexes across 21 provinces, hopes to raise up to HK$8.2 billion to repay debt and boost the number of stores. Investors that were bullish on China's strong fundamentals have turned bearish on mainland stocks especially those from the financial, property and resources sectors. "Many sectors have lost their appeal to investors," said Alvin Cheung, associate director with Prudential Brokerage. "Those from the consumer sector have fared better, but Sun Art is not cheap and is not a small offering." Sun Art has been valued between 25 to 31 times its 2011 estimated earnings, higher than other IPOs. David Chin, head of investment banking for Asia at Swiss bank UBS, one of the underwriters of the Sun Art IPO, said the offering had been well received in spite of its "record-high" valuation. He did not specify the amount of orders placed. He attributed the strong reception from investors to Sun Art's business, which is directly linked to mainland consumption and few sizeable competitors in the same sector. "It really depends on individual companies," said Chin. "Some like Sun Art can do well [with a high valuation], but some wouldn't go anywhere even with a low valuation." But other analysts are more reserved with Sun Art. Its controlling shareholders are Taiwanese conglomerate Ruentex Group, which has just bought Taiwan's Nan Shan Life Insurance from American International Group, and French retailer Groupe Auchan. There is significant political risk, states the "Risk Factors" section of Sun Art's listing prospectus. Ruentex, whose investments in the mainland are subject to approval by the Taiwanese government, may have to cut its shareholding in Sun Art. Sun Art's share price upon listing could also be affected by Ruentex's pledge of some of its holdings for a loan to finance its acquisition of Nan Shan from AIG.

Muddy Waters & Co heading east - As the costs of short selling rise in North America, Hong Kong is becoming the target for listing frauds. The short sellers who have made a mint on Chinese stocks listed in North America are shifting their attention to Hong Kong. They have made enough noise and cash shorting the shares of New York and Toronto-listed Chinese companies and issuing reports accusing them of fraud that the charges for borrowing shares in these companies has soared. They have also picked off the low-hanging fruit - the companies, most of which came to the US market through reverse takeovers, that have committed the most obvious accounting shenanigans. Through an RTO, a company merges with a shell company that already has a listing on a US exchange as a way of gaining quick, cheap and simple access to stock market investors. "This is no longer an easy game. We're moving on from the Chinese RTOs. They've been beaten to smithereens by this point. The game is getting harder and is moving to Hong Kong," said John Hempton, a short seller of Chinese companies as the chief investment officer of Australia-based Bronte Capital Management. There have been over 20 Chinese companies delisted or halted in the US so far this year. Others have been hit by the resignation of their auditors. They include Rino International, China Media Express, and Longtop Financial Technologies. An investor who hones in on a company believed to have provided fraudulent information and wants to short the shares used to be able to borrow those shares at less than 1 per cent a year. "Costs are now up to anywhere between 7 to 70 per cent," said Andrew Left, a Beverly Hills-based blogger and short seller who runs Citron Research. In some cases it is higher, perhaps even 100 per cent. Short sellers bet on a decline in a stock by borrowing shares in the market and selling them in the hope they can buy them back once prices have dropped. They would then return the shares to the owner and keep the difference as profit. Carson Block, founder of one of the most prominent short-selling firms, Muddy Waters, said in an email that the increasing inability to borrow shares has made it more difficult to commit capital and resources to research companies it suspects of fraud. Dan David, head of sales and daily operations at research and investing firm Geo Investing in Pennsylvania, said: "It takes 100 per cent of your margin buying power to borrow here and quite frankly some of the other exchanges haven't caught up with what we've dealt with the past eight months. We are trading other exchanges. That's very much a recent development." The Hong Kong authorities have indicated that they think the shorting bonanza will not be exported to the city. A source close to Hong Kong regulators said the US Securities and Exchange Commission "has acknowledged there's a problem with the way some of these companies have been able to list in the US, which wouldn't happen in Hong Kong". Hempton doesn't buy this. "The first Chinese forestry company that got pinged faking their ownership was in Hong Kong, not Canada." He was referring to China Forestry Holdings, whose shares were suspended in January of this year after auditor KPMG informed the board of directors of possible irregularities in its books. More recently, shares in another forestry concern, Toronto-listed Sino-Forest plunged after accusations of fraud that are denied by the company. Singapore is also seen as fertile ground. On Thursday, the Singapore Exchange reprimanded Chinese multimedia firm KXD Digital Entertainment for breaching a string of rules - including failing to disclose it had ceased business operations. The same day, China Gaoxian said its special auditor had obtained evidence showing its cash and bank balance at the end of last year was around 93 million yuan (HK$112 million), not the 1.1 billion yuan the fabric maker had claimed. Short interest, that is shares in a company being sold short as a percentage of the total number of shares outstanding, is rising on the Hong Kong bourse, according to New York-based researchers Data Explorers. Year-to-date, average short-interest among Chinese companies listed in the US has doubled to 5.8 per cent in the past six months, though it is off a recent peak of 6.7 per cent. Short interest in Hong Kong-listed shares is considerably lower, but has risen to 1.34 per cent from 0.81 per cent around the end of last year. However, rules in Hong Kong could throw up barriers to short selling firms such as Muddy Waters if they don't have a licence to offer advice on listed companies. Block, in his e-mail, said this issue comes down to what extent there are protections for free speech to discuss a stock. "There is a witch hunt going on. They're going to find some companies (in Hong Kong) and I think it will be good in the long term for investors," said Himanshu Shah, president and chief investment officer of Shah Capital, a US$300 million hedge fund in North Carolina. "It's not going to be accomplished overnight or in a quarter; the cleansing of corporate China has begun for sure."

Several legislators yesterday called on the government to further revise its plan to reform insurance regulation. They said the Hong Kong Monetary Authority should play no role in regulating the insurance business, even when banks are involved. Last Friday, the government announced a new proposal to increase the power of the new Insurance Authority. It would be the lead regulator for the more than 70,000 insurance salespeople in the city, starting in 2013. That is regardless of whether insurance professionals work for an insurance company or a bank. However, the government still wants the HKMA to play a role in regulating the insurance business of banks, which employ 18,000 salespeople and account for 30 per cent of the insurance policies sold in Hong Kong. The government had already amended its original proposal. Professor Chan Ka-keung, secretary for financial services and the treasury, agreed last July to establish the Insurance Authority as the regulator - instead of it being a government department - to oversee insurance companies and their 52,000 sales staff. The new authority, however, has no power to regulate the insurance business of banks, which was under the authority of the HKMA. The whole reform plan was designed to match international practice, but the spilt regulatory model has drawn strong opposition from insurers and some lawmakers who argued it might lead to two standards. The government's new proposal would establish the Insurance Authority as the lead regulator for all insurers and salespeople. And it would be the sole regulator in setting codes of conduct and imposing penalties on those who fail to comply with regulations. But the government also wants the HKMA to share surveillance and investigative responsibilities with the Insurance Authority. "This new proposal addresses the concerns of the industry," Chan said. "We still need to maintain a role for the HKMA, because as a banking regulator, its involvement in the surveillance and investigative work would be more cost-effective." But Chan Kin-por, legislator for the insurance sector, said businesses were against the idea of HKMA having any regulatory role in their affairs. "We want to know how the HKMA would share the work with the Insurance Authority in terms of the surveillance and investigative work," he said. "We also want the insurance industry experts to be involved in the disciplinary process." Emily Lau Wai-hing, co-vice chair of the Democratic Party, said she was concerned about authority being divided between the HKMA and the Insurance Authority. "I appreciate that the government has made the concession, but I do not understand why it has not gone all the way to allow the Insurance Authority to do all the investigative and surveillance work," she said. "Why does the HKMA need to send staff to work with the Insurance Authority?" But Secretary Chan opposed eliminating the HKMA from insurance regulation completely. "Banks are now selling multiple products such as funds, securities, insurance policies and other products," he said. "We cannot ask the HKMA not to touch the insurance business of banks. It does not make sense." The new regulatory plan will be open to public comment for the next six months.

Wetland housing plan halved - Project chiefs cut number of homes, drop golf course to gain approval for long-stalled development, but green groups say plan is still an ecological danger - The landowner and developer of the ecologically-sensitive Nam Sang Wai wetland have proposed cutting the total number of houses and flats they will build on the site in half, as well as establishing a nature reserve and a community park. Under the latest proposal submitted to the government yesterday, between 1,200 and 1,500 homes are being planned for the popular wetland in Yuen Long, compared with 2,550 under a previous plan. Total residential-related development will be reduced from 98 to 50 hectares, with the removal of a 43-hectare golf course. However, the total boundary of the revised plan will cover a much larger area - about 176 hectares of government and private land because of the new ecological features. These include a 56-hectare nature reserve at Lut Chau, north of Nam Sang Wai which will be separated by the Kam Tin River. Wan Man-yee, a consultant to the project, admitted the key battleground was winning public understanding and support for the revised project. "The major problem is not about ecology, but getting a chance to convey our message to the public and getting their understanding," he said, adding that a website providing information on the site's history and the proposal would be launched this week. The changes were made after developer Henderson Land (SEHK: 0012) failed to meet planning conditions imposed on the project within deadlines, which had been extended several times since 1996. The land co-owner, the prominent Fu family led by Adrian Fu Hau-chak, last year decided to take over Henderson's lead role in the development and launched a revised plan. The site, which now has one of the city's largest reed beds, will be filled by low rise houses and flat blocks no taller than eight storeys. But critics are not convinced. Dr Cheng Luk-ki, the conservation and research head of Green Power, said his organisation stood firm against the project that would see permanent loss of natural habitats. "The developer has so far failed to tell us what they mean by wetland enhancement. But we know for sure there are going to be more than a thousand homes there. Unless they say these houses can attract wildlife and birds, I don't see how they can compensate for the wetland's ecological functions," he said. Under the revised plan, fish ponds will be rearranged to support more birds of different species. At the southern tip of the reserve, the developer also proposes removing some mangroves and lowering the banks of some fishponds to ease flooding risks. A community wetland park, as proposed by the developer, would also be established north of the housing site. The park would be open to public access, but it is not known if there would be any charges. Both the reserve and park will be financed by the developers. The developers initiated an environmental impact assessment process yesterday by submitting a project profile to the Environmental Protection Department and plan to submit an application to the Town Planning Board in October. The developers hope to complete all statutory processes by 2013 before construction and completion by 2019. Wan said without proper management, the wetland and fishponds in the area would be degraded through such actions as illegal dumping of construction waste. But he also admitted that it would be impossible to meet the planning principle of "no-net-loss" in wetland. "How can we do that when there is development? It can only be done by floating the houses in the air," he said, adding that they could enhance the wetland to compensate for the loss of the ecological functions. Alan Leung Sze-lun, senior conservation manager of WWF Hong Kong, said the site's ecology had to be carefully assessed, including the impacts on otters that lived there. A spokeswoman for Henderson Land yesterday said the company pledged full support for the plan.

In the end, 21 loyalist lawmakers did call for a public consultation on the controversial by-election plan, before the government agreed to the climbdown. But many will pay for their initial objection, critics say. Chief Secretary Henry Tang Ying-yen (left); justice secretary Wong Yan-lung and constitutional affairs minister Stephen Lam Sui-lung. Regina Ip Lau Suk-yee is likely to emerge a winner for helping secure the government concession, while hard-core loyalists the Democratic Alliance for the Betterment and Progress of Hong Kong could pay a political price for objecting until the last minute to any consultation. Observers say the gains and losses could be reflected in the district council election in November. Dr James Sung Lap-kung, a City University political scientist, said that Ip, as chairwoman of the New People's Party and a former security minister, had built a clear image for her party: it is government-friendly but will exercise checks and balances on the administration when it matters. "She is sending a clear message to the voters that her party would not blindly follow the government," he said. "This can help her party in its debut in November's district polls." Ip has been strongly advocating consultation and is a harsh critic of the government's performance in tackling the controversy. The administration has proposed that midterm vacancies for directly elected Legislative Council seats should be filled by people from the same party as the former incumbent or, if the party list is exhausted, the next-best-placed candidate in the previous election. The government aims to stop lawmakers resigning seats to trigger by-elections. Some pan-democrats did so last year over electoral reform, hoping the by-elections would serve as a de facto referendum on the pace and scope of democratisation. "If the government wants to defuse the bomb, it had better make use of the summer recess to consult people," Ip said on Saturday. She also indirectly jibed at the performance of Secretary for Mainland and Constitutional Affairs Stephen Lam Sui-lung. "You people shouldn't humiliate him. It's just a job for him," she said on Sunday. She came under similar fire when promoting the national security legislation as security chief in 2003. Sung said the DAB and the Federation of Trade Unions - staunch government supporters - would suffer after the government U-turn. "The two parties have been positioning themselves as part of the ruling coalition, so the sudden U-turn is a kick in the teeth for them," he said. As late as Sunday, DAB chairman Tam Yiu-chung was still saying that the bill had to be passed on July 13 to ensure that district council candidates - and possibly also hopefuls for the new district council functional seats - were informed of the changed electoral rules. Tam said yesterday: "Some members of the Legco bills committee want more consultation. The problem of not informing the district poll candidates of the rules remains ... so they should take different cases into consideration." FTU lawmaker Wong Kwok-kin had also said that deferring voting on a by-election ban was impractical. Professional Forum's Dr Priscilla Leung Mei-fun faces political pressure too, as the Kowloon West lawmaker was the first to suggest banning by-elections, to prevent the so-called referendum loophole. She remained undecided on how to vote on the bill before the government announced the U-turn yesterday. There is pressure, too, on constitutional minister Lam, who now faces calls to step down. Professor Ma Ngok, a political scientist at Chinese University, said he should step down to shoulder political responsibility for mishandling the legislation. But Democratic Party lawmaker Cheung Man-kwong said even resignation by Lam could not solve the core problem. "Throughout the whole controversy, Lam is Beijing's puppet and messenger only," he said.

 China*:  July 7 2011  Share

China's local government debt may be 3.5 trillion yuan (US$540 billion) larger than auditors estimated, potentially putting banks on the hook for deeper losses that could threaten their credit ratings, Moody's said on Tuesday. Moody’s reviewed a report released by China’s state auditor last week, which found that local governments had chalked up 10.7 trillion yuan of debt. Moody’s said it identified more loans funded by banks after accounting for discrepancies in figures given by various Chinese authorities. Moody’s warning weighed on Chinese bank shares, which were the biggest drag on the Hang Seng index in midday trading. However, the share declines were relatively modest. Analysts said that was because Moody’s figures were close to other estimates from Beijing on China’s debt mess. Investors worry the pile of loans, about half of which were racked up during a 2008 stimulus spending binge, could destabilise the Chinese economy in the long run. If banks have to absorb heavy losses, it could restrict lending. “We assume that the majority of loans to local governments are of good quality, but based on our assessment of the loan classifications and risk characteristics...we conclude that banks’ exposure to local government borrowers is greater than we anticipated,” says Yvonne Zhang, a Moody’s analyst. The ratings agency said a jump in local government loan defaults could push the non-performing loan ratio for Chinese banks as high as 12 per cent, well above its base-case scenario that envisions losses in the range of 5 per cent to 8 per cent. Unless China comes up with a “clear master plan” to clean up the problem, the credit outlook for Chinese banks could turn negative, Moody’s said. The agency said it expects Beijing to “implement gradual discipline” over the stock of government debt, and that would involve the Chinese government leaving banks to manage a part of problem loans on their own. Many investors have long eyed China’s mountain of local government debt as a major risk. The worry is that slower growth in the world’s second-biggest economy could set off a wave of loan defaults and hobble its banking system. About half of the debt dates back to the 2008 financial crisis when Beijing unveiled a 4 trillion yuan fiscal stimulus package that compelled local authorities to spend their way back to economic health. But the legacy of the massive spending is now catching up with China as maturity dates for the loans, many of which are due in 2013, draw closer. While most loans were used to build roads and other infrastructure that some analysts argue China needs, it has also generated some wasteful spending. For the most part, investors have assumed that cash-rich Beijing would step in to soak up losses if needed, but some analysts are starting to flag the chance of banks paying for a part, or even all, of the losses. “There is political risk here and concern of a tail-risk event. While the likelihood is very slim, the risk here is that the central government steps away from these loans,” said Mike Werner, a bank analyst at Bernstein Research in Hong Kong. Some analysts said local governments still have options available for ensuring the debts don’t go bad, such as selling assets or extending loan maturity dates. China’s five-year credit default swap widened after the Moody’s report to around 84 basis points from an opening level of around 80 bps, underperforming a steady iTraxx IG index. Bank stocks were trading down modestly. Analysts said their cheap valuations, which are near troughs seen during the 2008 financial crisis, could pave the way for a rebound later this year. In a bid to assuage investor worries, different Chinese authorities including the state auditor, the bank regulator and the central bank have tried to assess the local government debt situation. But all three agencies have used different definitions and accounting methods to review the debt, resulting in a hodgepodge of official forecasts. Moody’s said it derived the additional 3.5 trillion yuan of debt after comparing the estimate of China’s state auditor with that of the bank regulator. The ratings agency said the Chinese state auditor likely omitted the 3.5 trillion yuan of debt from its assessment because they were not considered real claims on local governments. “This indicates that these loans are most likely poorly documented and may pose the greatest risk of delinquency,” said Yvonne Zhang, a Moody’s analyst.

A board member from a partner company of the Red Cross Society of China has been forced to resign after being revealed as the boyfriend of Guo Meimei , a materialistic young woman who sparked an internet frenzy by flaunting her luxury lifestyle. In an entry on his microblog on Sunday, Zhonghong Boai (China Red Charity) assets management chief executive Weng Tao revealed that board member Wang Jun, 42, had quit late last month after admitting the relationship. Asked by the Shenzhen-based Daily Sunshine if 20-year-old Guo was Wang's girlfriend, Weng implied that she might be his mistress. "We're all men," he said. "Does such a question need to be answered nowadays?" Weng said Wang had admitted giving Guo, a small-time actress originally known as Guo Meiling, a Lamborghini, a Maserati and designer handbags. Guo began to brag online about the cars and her closetful of handbags this year. But it was the title she adopted - general manager of the "Red Cross Chamber of Commerce" - that triggered online uproar, with internet users, who assumed it was a subsidiary of the Red Cross Society of China, questioning how someone working for a charity could afford such luxuries. The Red Cross Society of China quickly denied having any such subsidiary or anything to do with Guo. However an internet search by members of the public revealed the existence of a shadowy business arm - Red Cross China Business System - and its murky deals with several companies including Zhonghong Boai, which was contracted by the subsidiary to market Red Cross first aid vans across the mainland. Internet users also tracked the Lamborghini Guo claimed to drive to a man in Shenzhen named Wang Jun. In an interview that appeared in The Beijing News yesterday, Weng said he felt he could no longer keep silent about Wang's relationship with Guo. "The truth will come out sooner or later," he said. "I was challenging him if he was OK to sit on the board as the saga appeared to portray both the Red Cross Society of China and our company in a bad light." Weng defended his company's business deals with Red Cross China Business System, saying they had yielded only a marginal profit, which was in line with the charter of a charitable organisation. As the scandal deepened, the Red Cross Society of China put all of Red Cross China Business System's operations on hold pending an independent audit. However, many internet users dismissed the revelation as a smokescreen to cover Guo's possible ties to high-ranking Red Cross officials. The ownership of the Maserati convertible she claims to drive is also in question. Professor Deng Guosheng, from Tsinghua University's Centre for Innovation and Social Responsibility, said the Red Cross business arm had not violated the charity's charter by rolling out business initiatives involving the private sector. "The ubiquitous mistrust is a result of a lack of transparency with the Red Cross Society of China and many other government-backed charitable organisations," he said.

Guangdong will soon roll out concrete measures to protect the rights and interests of migrant workers and other disenfranchised groups, provincial party chief Wang Yang says in an online chat with the public. A policy document on strengthening "social construction" was imperative, Wang said yesterday. Despite stellar economic growth in the past few decades, Guangdong still owed a "social debt" to communities whose civil and democratic awareness was on the rise, he said. His remarks follow a spate of unrest that has rocked the province. Migrant workers in Zengcheng and Chaozhou vandalised cars and torched government offices in protest at perceived injustices. Wang said his government would meet on "social construction" in the middle of this month and release a policy paper that would include concrete steps on achieving it. "In all those years of focusing on economic development, we have neglected `social construction'," he said during a two-hour web chat. "Social development in many ways has lagged behind economic progress; many debts have to be repaid in this regard." He said the government should attach great importance to the public and social services demanded by the more than 36 million migrant workers who make up more than 35 per cent of the Guangdong population. Wang said his government must deepen its understanding of social development, explore suitable approaches based on the public's needs, refine laws and regulations and strengthen funding and administrative manpower to back "social construction". He promised concrete measures to improve livelihoods, boost grass-roots welfare, improve public services, nurture non-governmental organisations and create a more democratic environment. Ding Li , a regional planning expert with the Guangdong Academy of Social Sciences, said Wang was trying to roll out a preliminary but solid foundation for the province's happiness, based on solid economic progress and social justice. "The online chat serves as a platform to promote the government's next important move," Ding said. "In interacting with web users, it seems that Wang is preparing a drive for more democratic governance. "His remarks on social construction were quite to the point. Social problems faced by Guangdong today are far tougher and more complicated than the rest of the country and can only be improved on a gradual basis but not completely resolved." He said Wang had shied away from making social justice a political campaign because he was more practical than some other provincial party chiefs. He knew it would not be completed during his time in Guangdong - a marked contrast to political rival Bo Xilai's "red culture" campaign in Chongqing. "Many people are expressing doubts over Bo's red song campaign as the city's economic development ranks below medium nationwide," Ding said. "Without a solid economic foundation, many are worried his policies will bring Chongqing back to the days of the Cultural Revolution." A researcher at the academy, Peng Peng, said the provision of public services to migrant workers that were equal to those for local residents could cost a lot - 80,000 yuan (HK$96,260) per person per year. Peng said the government could first consider education and housing.

Hong Kong*:  July 6 2011  Share

Italian fashion house Prada said joint bookrunners for its Hong Kong listing had exercised an over-allotment option bringing more shares to the market and raising an additional HK$2.5 billion ($321.3 million). Prada is up 18.5% since its June 24 trading debut and has significantly outperformed the broader market's 1% gain over the same period, underscoring strong demand for shares of luxury brands expanding in China. The over-allotment will bring the controlling shareholder Prada Holding BV's ownership in the company down to 80% from 82.5%. The maker of luxury bags and Miu Miu dresses raised $2.14 billion in the initial public offering (IPO) after pricing it at the bottom of a revised indicative range. 

Hutchison Telecommunications (Hong Kong) (0215) said a price war among local telecom operators will help expand its market share and boost profits by taking advantage of its high-speed network built 16 years ago. The telecom operator will invest HK$600 million this year to strengthen its fixed-line network infrastructure, in which it has invested more than HK$10 billion since construction began in 1995. "While other operators were using copper wires, we started constructing a fiber optics network," said Byron Chiang Yung-hon, fixed network technology and operations director at Hutchison Global Communications. Excluding the cost of materials, including conduits and optic fibers, just the dig-and-cover road works cost HK$300- HK$400 a meter. That alone cost Hutchison up to HK$2 billion for its 5,000 kilometers of optical wires, Chiang added. Hutchison's fiber optics network now covers more than 8,000 buildings - or 1.22 million households - said Raymond Ho Wai-wing, head of consumer market (fixed services). "We have an edge in providing a true high-speed internet service of at least 100 megabytes per second," said Ho. He added that the operator will bundle the fixed line with mobile phone services under the "3" brand. Hutchison is now offering a high- speed home internet package from HK$85 a month. A 200 Mbps plan costs HK$122 a month compared with HK$132 from PCCW (0008). Hutchison also provides a HK$149 plan for a one-gigabyte-per-second package. This is less than the HK$158 offered by Hong Kong Broadband. While residential services contributed 20 percent of fixed-lined revenue last year, the corporate and business market provided 26 percent of income in the segment. "Around 90 percent of financial firms in the Hang Seng Index, as well as major investment banks, are using our services as we provide a high-speed and stable data network," said Andrew Lee Yat-lung, commercial director (wholesale and business market).

Visitors watch old HK exhibition - Visitors watch building models at an exhibition of old Hong Kong building models in Hong Kong, south China, July 3, 2011.

Selling a perfect image, sculpted by computers - Beauty salons and slimming centres are resorting to Photoshop to alter the look of the models. Does this practice approach misleading advertising? A sign for Slim Beauty in Causeway Bay. Slim Beauty admits it used Photoshop but will not say how. One arm raised, the back of her red skirt billowing to reveal a pair of long, slender legs, singer-actress Linda Chung Ka-yan is on billboards all over Hong Kong these days, promising a flat tummy, firm arms or a life without cellulite. She is a vision of perfection as she advertises Slim Beauty, a spa and slimming centre. All is not as it seems, however. Before going on display, her image was doctored with that favourite tool of image-enhancers, Photoshop. Slim Beauty admits it used Photoshop but will not say how. And it is not alone among the spas and beauty salons that abound in image-conscious Hong Kong where such alterations are widely tolerated despite being frowned on elsewhere, drawing censure and sometimes hefty fines. A spokesman for rival Oasis Beauty said of its advertisements with model Sarah C: "We enhanced her skin tone a bit." Such a touch-up can be done easily on a computer, as shown in the pictures here. In Britain, that admission might have got the salon into trouble. An advertisement featuring former model Twiggy for Procter & Gamble's Olay Definity Eye Illuminator cream was judged misleading by Britain's Advertising Standards Authority in December 2009 after the company did post-production work around her eyes. Two years earlier, the authority condemned L'Oreal for an advertisement featuring the Spanish actress Penelope Cruz that claimed women could have up to 60 per cent longer eyelashes with its Telescopic mascara. But someone complained it looked fake, and fake it was. The authority ordered the French brand to add a disclaimer on future advertisements whenever models were wearing false lashes. In Sweden last year, L'Oreal was ordered to pay a fine of 1 million Swedish kroner (HK$1.24 million) for its claims for two anti-ageing creams, one of which was said to reduce wrinkles "as fast as a laser" and reduce their visibility by up to 70 per cent. Despite the widespread use of such strategies in Hong Kong, its residents are becoming more sceptical. A "Hong Kong Study on Advertising Credibility", published in the Journal of Consumer Marketing in 2009 said: "Doubts about the truthfulness of many advertisements have increased significantly in recent years." Professor Gerard Prendergast, a co-author of the study and head of Baptist University's marketing department, said the four most misleading types of advertisement were those for weight-loss products, weight-loss services, hair regrowth products and cosmetics. The Consumer Council recorded 469 complaints in 2008 and 514 in 2009 about beauty parlours' dubious practices. Commenting on the use of Photoshop, a council spokeswoman said: "I suppose what is at issue here is authenticity. If everybody used Photoshop, you'd have to have proof and evidence on how they applied it, as it can be used in enhancing the colours or making the picture sharper, not necessarily altering the shape or features of the model." Professor Francis Chow Chun-chung, president of the Hong Kong Association for the Study of Obesity, said such advertisements were not aimed at medically obese people. "It is all about marketing strategies and it is not evidence-based," Chow said. Some centres did not use a safe weight-loss method because they actually rid the client of water instead of fat. The only way to lose weight in a healthy way, Chow said, was still to cut the energy intake and increase the energy expenditure. In short, eat healthy food and exercise more. That is not necessarily what Hong Kong's busy, image-conscious people want to hear. "Exercising is not very popular for Hong Kong women," noted Liz Tan, a 28-year-old Australian who works in Hong Kong. "People seem to think that they can lose weight with a massage."

Tutor Agency Modern Education Surges in Debut - Richard Eng, a co-founder of tutorial school Beacon College, teaching an English class to secondary students in Hong Kong. Another well-known Hong Kong consumer brand has gone public. But it’s not selling handbags, food or anything you could actually buy in a store. It’s private tutoring agency Modern Education, which, amid a slew of pulled initial public offerings, is powering ahead on its debut on Monday after raising HK$151 million (US$19.4 million). Its shares were up more than 30% at one point, hitting an intraday high of HK$1.71, compared to its listing price of $1.30. Much of that is down to short-term share flipping though, writes Dow Jones Market Talk. Modern Education doesn’t appear to fit the description of stocks ideal for long-term holding, as Hong Kong’s demographic projections just aren’t enough to sustain a base of secondary school students in the long-run, the company’s key demographic. A report from brokerage KGI says the number of secondary school students is forecast to continue falling, bottoming out in the 2016/2017 school year. In the nearer term, Modern Education’s full-year results could take a hit as course enrolments drop due to the abolishment of the Hong Kong Certificate of Education Examination as part of the city’s education reforms. The company has also said that 38% of the IPO proceeds will go to paying dividends, as it drew a bank loan of HK$12 million in January to settle part of its declared dividends, according to Dow Jones Market Talk. But more importantly, all this could even spell an end to the lifestyles of some of Hong Kong’s best known celebrity tutors.

The Hong Kong government said Monday that individual shareholders of H-share stocks, or Hong Kong-listed companies incorporated in China, will be subject to a withholding tax of 10% on the companies' dividend payments. The tax is imposed by mainland Chinese authorities. The government's statement followed a reply it received from China's State Administration of Taxation clarifying arrangements concerning individual investors in Hong Kong. Some H-share companies had been unclear as to which tax rate to apply, and some, such as Air China Ltd., decided to withhold 20% of dividend payments pending clarification from authorities. Individual investors of China-incorporated stocks listed in Hong Kong had previously been exempt from paying withholding tax in China, though the arrangement was cancelled this year. Meanwhile, the 10% withholding tax rate for corporate owners of shares remains unchanged. The government also said that the withholding tax rate may be different for individual shareholders of Hong Kong-traded H shares who aren't residents of the city. "For shareholders who are residents of other countries and whose home countries have reached an agreement with China on an applicable withholding tax rate higher or lower than 10%, they have to follow the bilateral tax agreement in paying tax in connection with dividends paid by mainland companies listed in Hong Kong," the government said.

The government on Monday postponed a vote on its controversial by-election proposals and launched a public consultation in its second U-turn on the issue in just a week.

Hong Kong investors in H-shares such as Bank of China and Air China will now be subject to a 10 per cent tax on dividends, the territory’s government said on Monday.

 China*:  July 6 2011  Share

Nestle's bid for snack firm may win approval - The proposed takeover of Chinese snack and candy maker Hsu Fu Chi International Ltd by Nestl SA, reported by the Wall Street Journal, is very likely to be approved by Chinese regulators, analysts said. "China's confectionery sector is a fully competitive industry where mergers and acquisitions naturally arise," said Huang Shichuan, a food and beverage industry analyst with Southwest Securities. "Chinese regulators have become more open to foreign mergers and acquisitions in the industry, which is not strategically important. I think price is the major determinant for this deal." The Wall Street Journal reported on Sunday that Nestl, the world's largest food company by sales, is negotiating to buy Guangdong province-based Hsu Fu Chi, which has a market capitalization of $2.6 billion. A deal would be one of the biggest foreign takeovers of a Chinese company. But any agreement is weeks away, as talks are at a delicate stage and there are several hurdles to overcome, the newspaper quoted an anonymous source as saying. Officials from Nestl and Hsu Fu Chi couldn't be reached for comment on Monday. A deal would come amid a strategic shift by foreign food and beverage giants, which are increasingly turning to mergers and acquisitions, rather than organic growth, to expand in China, Huang said. "Foreign beverage and food makers tried to grow organically in China but had limited success," so they are turning to mergers and acquisitions, he said. Several such deals have been proposed or completed recently in the industry. Nestl announced in April that it bought a 60-percent stake in Chinese food company Yinlu Food Group. The price was not disclosed. In May, Yum! Brands Inc, owner of the Kentucky Fried Chicken fast-food chain, offered to buy Little Sheep Group Ltd in a deal that valued the operator of hot pot restaurants at HK$6.7 billion ($861 million). Last week, British liquor giant Diageo PLC ended a 16-month wait for Chinese regulatory approval for its bid to take control of a local Sichuan white-spirits maker, Shui Jing Fang Joint Stock Co Ltd, which Huang said is a sign that Chinese regulators have become more open to such deals. In 2009, Coca-Cola Co's $2.4 billion bid to buy Chinese soft drink maker Huiyuan Juice Group Co was rejected by Chinese regulators. Hsu Fu Chi, which sells candies, cakes and pastries, is listed in Singapore. The 19-year-old company reported a 31-percent rise in 2010 profit to 602.2 million yuan ($93 million), with sales up 14 percent to 4.31 billion yuan. According to Euromonitor International, a London-based market research firm, Hsu Fu Chi had a 3.9-percent share of China's 58-billion-yuan confectionery market in 2008, when Nestl had a share of 1.6 percent. Acquiring Hsu Fu Chi would help Nestl achieve its goal of generating 45 percent of revenue from developing economies, including China, by 2020, compared with about a third at present. Guodu Securities analyst Xu Hao said that China's food and beverage market will experience a "golden era" of growth over the next five years. "The 12th Five-Year Plan has given new impetus to the country's policy of boosting domestic demand, which will benefit the food and beverage industry," Xu said. "We will see rapid growth and consolidation in the sector."

The World Trade Organization is set Tuesday to condemn China for limiting its exports of major raw materials, rebuffing Beijing's arguments that curbs are necessary to protect the environment, according to trade diplomats and lawyers. The decision will help steelmakers and other industrial producers, but, more importantly, will set a precedent for the U.S. and the European Union to file another complaint against China over its quotas on the export of rare-earth materials, 17 minerals used in the high-tech industry. The raw-materials case "is more a political issue than a trade issue," said Magnus Ericsson, a senior partner with Raw Materials Group, a consultancy based in Solna, Sweden. The U.S., the EU and Mexico filed their complaint on raw materials in 2009. China and the West have faced off in recent years on issues ranging from the pirating of Hollywood movies to whether the U.S. can penalize Chinese companies for receiving state subsidies. Under WTO law, China now can appeal the decision on raw materials. If it doesn't, or if it loses its appeal, it must remove its export restrictions or face retaliatory trade sanctions from the three complainants. China pledged to get rid of export controls when it joined the WTO in 2001. However, the financial crisis has increased pressure on all countries to retain as much of their raw materials as possible, and Beijing has gradually returned to clamping down on exports. That matters. China is the No. 1 producer in the world of cadmium, gold, indium, iron ore, lime, lead, manganese, mercury, molybdenum, phosphate, tin, tungsten and zinc. It has consistently cut exports of these minerals. Chinese exports of phosphorus—used to make matches, but also herbicide and other chemicals—fell to 39,665 tons in 2010, from 102,346 tons in 2005, according to Global Trade Information Services, a Geneva-based trade company. In a letter sent to the U.S. Trade Representative's office this year, U.S. steel lobbies accused China of again cutting its export quota for bauxite to 830,000 tons in 2011, from 930,000 tons in 2010. After its three trading partners complained, China invoked the WTO's Article 20, which allows its 153 members to limit exports for reasons such as environmental protection. The WTO has rejected that argument, said trade diplomats and lawyers familiar with the case. The victory will pave the way for a case on rare earths, said U.S. and EU trade officials. The raw-materials case "will considerably strengthen the position of the European Union" for a case on raw earths, EU trade commissioner Karel De Gucht said in a speech at a recent conference on raw materials in Brussels. Rare-earth minerals, which are essential to many industrial applications, have become a special problem. China has some 30% of the world's supply but is responsible for more than nine-tenths of the world's exports. Analysts such as Mr. Ericsson said that the rest of the world will soon catch up, as companies in the West reopen old mines. That will take a decade or so and will eventually secure steady supplies, he said. But for now Chinese rare earths "are crucial to global supply," he said. Meanwhile, China is gobbling up raw materials from all around the world. It now imports roughly half of all iron ore traded around the world. Imports of all ores, slag and ash grew to $108 billion in 2010, from $25.9 billion in 2005. The EU said that, for legal reasons, it couldn't comment on the case until after the final report was issued Tuesday. A senior official at the Ministry of Commerce's news office said it would make a comment in the next couple of days.

Tokyo, Beijing call for improved relations - Japanese Foreign Minister Takeaki Matsumoto shakes hands with Chinese Foreign Minister Yang Jiechi at the Diaoyutai state guesthouse in Beijing on Monday. Japan's and China's foreign ministers are calling for improved relations between the wary Asian rivals. Chinese Foreign Minister Yang Jiechi welcomed Takeaki Matsumoto to Beijing on Monday, and the two struck positive tones. Matsumoto says stability is important to both nations. Ties between Japan and China have been strained for years over a contested gas field in the East China Sea and China’s claims to Japanese controlled islands. They now face a new strain: Last month Japan and the US agreed to coax China to act more responsibly to address regional tensions. Over the past year, China has been at odds with South Korea, Vietnam, the Philippines as well as Japan over contested claims and navigation rights.

Daimler in 'attack mode' on premium compact cars - Optimistic about the future of China's auto market, especially the premium compact segment, Daimler AG and its car unit Mercedes-Benz are pushing the accelerator for local R&D and production in the country. Chairman and CEO of Daimler Northeast Asia Ulrich Walker (right, front row) and Chairman of Beijing Automotive Group Co Ltd Xu Heyi sign an agreement to co-invest 2 billion euros in new production facilities in China as German Chancellor Angela Merkel, Chinese Premier Wen Jiabao and Board Chairman of Daimler AG and Head of Mercedes-Benz Cars Dieter Zetsche look on. The German automaker last week signed a strategic framework agreement with its Chinese partner Beijing Automotive Group Co Ltd to co-invest 2 billion euros ($2.88 billion) in local production of new models and engines as well as the establishment of an R&D center. Daimler began to produce Mercedes-Benz cars in China five years ago at its joint venture Beijing Benz Automotive Co Ltd, which is now able to produce a combined 80,000 C-Class and E-Class sedans annually. Under the framework agreement, the joint venture will build the GLK compact SUV later this year and three other compact models after 2013. "As early as 2020, at least one in five premium compact cars is expected to be sold in China," Dieter Zetsche, chairman of the board of management of Daimler AG and head of Mercedes-Benz Cars, said in a statement. "In the light of this enormous potential, we are resolutely switching to attack mode with the local production of our new compacts," he said. The data offered by the company shows that 770,000 premium compact models were sold in China last year, and yearly sales of the segment is expected to grow to more than 2 million units by 2020. Responding to the immense demand, Mercedes-Benz has imported its A-Class, B-Class, GLK and the smart in China. Combined delivery of the models and the C-Class now account for about 40 percent of Mercedes-Benz sales in the country, according to Ulrich Walker, chairman and CEO of Daimler Northeast Asia. The new agreement also calls for investment in an engine plant and an R&D center. The engine plant, due to start production in 2013, has designed capacity of 250,000 gasoline engines that will be used in locally built Mercedes-Benz cars and vans. Mercedes-Benz also makes vans at the joint venture between Daimler AG and Fujian Motor Industry Group Co Ltd in South China. The agreement was signed in Berlin during Premier Wen Jiabao's recent visit to Germany, when a total of 14 deals that worth more than $15 billion were inked between the two countries. Last year Mercedes-Benz moved a total of 148,000 vehicles in China, more than double the 2009 tally. In the first five months this year, the carmaker delivered more than 75,800 vehicles in the nation, an increase of 62 percent compared with the same period last year. Currently about one-third of Mercedes-Benz's China sales are locally produced models. The company previously announced that it will greatly expand the Beijing joint venture's capacity to 200,000 units a year by 2015, when it expects to sell 300,000 vehicles a year in China. The company also plans to add at least 30 new dealerships in China this year. It currently has more than 160 dealer outlets in the country.

New deal for commercial flights over the Great Wall - A helicopter prepares to take off at Badaling Airport in Beijing on June 29. Visitors can now have a bird's eye view of the Great Wall from the chopper. Sightseers can rise above the crowds and get a bird's eye view of the Badaling section by taking a spin with Capital Helicopter on a single-engine, six-seat AS350B3 Squirrel helicopter. Tours start at Badaling Airport and last about 15 minutes. "It'd be wonderful to take pictures of the Great Wall from above," said Xi Lei, a 31-year-old Beijing photography fan, after hearing about the tour. However, the cost could be a hurdle for many. On, a group-purchase website, trips were listed at 1,500 yuan ($232) per person, a 50-percent introductory discount. For those who can afford it, the tours promise to be five-star flights of fancy, covering the Great Wall and several other scenic spots. 17 people have so far bought tickets through the website since the service was launched last Tuesday and others have contacted the company directly. "We're taking the opportunity as low-altitude airspace (below 1,000 meters) is gradually opened to move ahead in the private flights market," said Lou Xiaoqiao, marketing manager of the airline, which is a subsidiary of HNA Group. As well as running aerial tours, the company's helicopters are also licensed to perform other activities, such as medical assistance, rescue operations, aerial photography and crop dusting, according to the Civil Aviation Administration of China (CAAC). Air traffic authorities opened part of the country's strictly controlled low-altitude airspace to private aircraft last October, with more pilot cities to be announced this year. Li Jiaxiang, head of the CAAC, said in March that the government aims to "thoroughly" open low-altitude airspace across the country by 2015. Despite the potential market demand created by China's growing number of millionaires, professor Li Xiaojin at the Civil Aviation University of China warned investors there are still many risks. Most private jets, he explained, are imported with heavy tariffs, which coupled with high fuel prices make private flights an expensive business. "The market needs to grow larger to support the high cost," he added. As of 2009, China had just 997 privately owned aircraft, compared to 200,000 in the United States.

Subway eyes further China expansion - A Subway restaurant and take-away in Shanghai. The US fast food giant is opening 80 new outlets across China this year to compete with other fast food chains. After overtaking McDonald's Corporation in the number of its outlets globally, US fast food giant Subway now aims to more than double the figure in China over the next five years. It also wants to become more localized, capitalizing on China's huge urbanization program and the fast-growing catering industry. The sandwich maker currently has 220 stores in China and 73 in Beijing. "By the end of this year, we expect to have more than 90 stores in Beijing and nearly 300 in China. By 2015 there will be 180 stores in Beijing and well over 600 stores in China," said Alexander Moody-Stuart, Subway franchise's general agent in Beijing. "The total sales revenue for Subway in Beijing grew more than 40 percent year-on-year in 2010 and we expect to see similar rates of growth continue over the next two years," said Moody-Stuart. According to the agent, Subway's sales in Beijing increased by an average of 25 percent over the last five years. The US-based franchise brand started its business in China in 1995 with a few stores targeting areas with lots of foreigners. The brand began to grow more quickly from 2004, said Moody-Stuart, who was an accountant in London before becoming a Subway agent for Beijing in 2006. Subway has become very popular among many Beijing office staff. According to Luo Tian, a saleswoman in Beijing's Yinghua Dongjie store, she usually sells 200 sandwiches every Wednesday lunchtime, when the shop offers a "buy one, get one free" service. "People queue several meters outside the doors," she said. The outlets, which make sandwiches to order, attract many people who like to see their meal prepared in front of them from a diversity of ingredients and who can choose to eat in or take it away. Its biggest sales occur at lunchtime, according to Moody-Stuart. As a result, most Subway stores in Beijing are located near office buildings. However, he said the company also has some profitable loctions in shopping malls, outlet concessions, near universities, at travel depots and tourist spots such as the Great Wall. "We also plan to open our first drive-through locations," Moody-Stuart added. Data from Subway shows that the most favored sandwich in China is tuna. Moody-Stuart said the franchise is going to launch more local flavors this year but the core menu will stay the same. The price for a Subway sandwich with several fillings in China is 30 yuan ($4.62), and 15 yuan for a daily special chosen from the regular menu. "The average selling price for each sandwich was a little over 19 yuan for March," said Moody-Stuart, adding that 15 yuan is a price that a lot of people in Beijing can afford. "We are not competing to provide the cheapest food in Beijing," he said, noting that the franchise has not raised its prices for more than two years and has no current plans for any price increases, even though there is high inflation in China. At present, people who want to own a Subway franchise need to pay $9,000 for a franchise number. They get a 50 percent discount if they open a second outlet. Subway's general agent in Beijing takes 8 percent of the store's weekly sales and checks every store each month to see if they are maintaining prescribed standards. Moody-Stuart said the total cost to open a Subway, which includes the franchise number, equipment and remodeling expenses, is around 750,000 yuan to 1 million yuan, depending on location. Subway has entered 16 Chinese major cities. Moody-Stuart said the company has no clear plans to enter small cities or the countryside on account of cost considerations. China has become a competitive market for fast food brands because of the huge city populations brought about by rapid urbanization in recent years. YUM! Stores (China) Investment Company, which owns more than 3,000 KFCs and 500 Pizza Huts, received $4.1 billion in sales revenue in 2010, which was about 36.5 percent of the group's global sales last year. "Fast food has become the first choice for 85 percent of Chinese city dwellers when they want to eat out," said Bian Jiang, vice-general-secretary of the China Cuisine Association, who is responsible for the fast food department of the organization. According to him, the size of China's fast food market is about 540 billion yuan and has been growing at a speed of 18 percent year-on-year. "I believe the next five years will be a crucial time for China's fast food industry because the urbanization progress is accelerating and more people have come to live in cities. They are often in a hurry but demand good hygiene standards," said Bian.

People cool off in air raid shelters - People visit an air raid shelter, which was opened to the public as a place to escape from the heat waves, in Hangzhou, East China's Zhejiang province, July 1, 2011. The city opened 10 of its shelters this year, compared with nine last year.

Japan's foreign minister visits China - China's Vice President Xi Jinping (R) shakes hand with Japan's Foreign Minister Takeaki Matsumoto at the Great Hall of the People in Beijing July 4, 2011.

Nestlé SA is in talks to buy Chinese candy maker Hsu Fu Chi International Ltd., the Chinese company announced Monday, in what would be one of the biggest foreign takeovers of a Chinese company. The talks between Nestlé and Hsu Fu Chi are at a delicate stage and still have a number of hurdles to clear, a person familiar with the matter said. Any deal for Hsu Fu Chi, which has a market value of $2.6 billion, is weeks away, the person added. Hsu Fu Chi, in a statement to Singapore's stock exchange, said it isn't certain a deal will materialize, and it will make a statement in the event of any material developments. Nestlé confirmed on Monday that it was in preliminary talks with the Chinese firm. "Nestle confirms that it is engaged in preliminary confidential discussions with Hsu Fu Chi," said Nestlé spokeswoman Nina Backes. "Nestle has no further comments to make at this stage." Many big Western companies like Nestlé, the world's largest food company by sales, are scouring developing markets for deals amid sluggish growth at home. But such deals aren't easy to pull off. In 2009, Chinese authorities rejected a $2.4 billion bid by Coca-Cola Co. to buy all of Chinese soft drinks maker Huiyuan Juice Group Co. It took U.K. liquor giant Diageo PLC 16 months to win Chinese regulatory approval for its bid to take control of a local Sichuan white-spirits maker. Diageo's approval to buy Chinese baijiu brand Shui Jing Fang, announced this past week, could indicate that Chinese authorities are more open to such deals. But the Hsu Fu Chi deal is a complex one, not least because few takeovers on this scale have ever been pulled off in China. The Diageo deal involves a company valued at less than $1 billion. Sun Tianzhen, a spokeswoman for Hsu Fu Chi, declined to say whether Hsu Fu Chi is in acquisition talks with Nestlé, but she said many companies including Nestlé have approached Hsu Fu Chi about possible strategic cooperation since it listed in Singapore in 2006. "We are seeking the development of our business," she said. Hsu Fu Chi is 19-year-old company founded by the Hsu brothers who still own a significant stake. The company, which makes chocolate, other candy and the Chinese pastry sachima, had a profit of 602 million yuan ($93 million) on revenue of 4.3 billion yuan in the 12 months ended June 30, 2010. The company's shares are traded in Singapore. The talks between Nestlé and Hsu Fu Chi were earlier reported by Bloomberg News. Nestlé, maker of brands such as Nescafe, Häagen-Dazs and Purina, has been looking to increase its sales in the emerging markets from about a third now to nearly half within a decade. It has also been reformulating some traditional products and putting them in lower cost packaging so that it can sell them at lower price points that poorer shoppers can afford. Sales in Nestlé's Asian and African division rose nearly 12% in the first three months of this year, the fastest growth of any region. The deal would also boost Nestlé's confectionery business, which makes up about 12% of sales, but has been a laggard, particularly compared with rivals such as Cadbury, a division of Kraft Foods Inc. that have large candy businesses in countries such as India and Mexico. In recent years, some analysts wondered whether Nestlé might sell the business, which includes brands such as KitKat and Nestlé Crunch. Instead, it has pushed harder on innovation and raised sales growth. This past week, it launched KitKat in Brazil for the first time.

Hong Kong*:  July 5 2011  Share

Executive Council convenor Leung Chun-ying said yesterday that rowdy rallies should be "sanctioned and restrained" - hours after a hard core of July 1 marchers caused traffic chaos in Central as they clashed with police until about 4am. Leung, a chief executive hopeful, also said police should keep records of the organisations involved in such rowdy rallies for reference when they applied to stage future protests. That way, he said, the demonstrations would not result in casualties. "There is a rising number of protests in which protesters refuse to leave but rush to block main roads in urban areas. This activity should be sanctioned and restrained," he said. "We all remember two weeks ago when a police sergeant fell off a bridge and died because of one person protesting in Central. This sort of action should be reprimanded by society," he said, referring to the death of a police officer on June 15 when he fell off a footbridge as he tried to approach a protesting chicken trader. The number of arrests yesterday, 231, was the second highest at any demonstration in the last six years. More than 900 people were arrested in rallies against the World Trade Organisation meeting in the city in 2005. In March this year, a protest against the government's budget proposals led to 113 arrests. City University political commentator Dr James Sung Lap-kung said the government should be aware that people were increasingly willing to take a more confrontational stance towards authority. "There is growing discontent among some groups, especially youngsters, about the administration," he said. "They feel their voices are not heard. The jobless rate is high among youngsters and they may think government policies do not favour them. Therefore, they support and take part in radical protests." Sung also believes the police force, led by Commissioner Andy Tsang Wai-hung, is pursuing a heavy-handed approach towards demonstrators to prevent matters escalating out of control. This explained the increasing number of arrests during recent protests, he said. Organisers said 218,000 people marched from Victoria Park on Friday. They aired various grievances, from the scrapping of by-elections to land issues. Police said 54,000 marched. At the end of the march, in the biggest show of discontent with the government since 2004, a splinter group of more than 1,000 people blocked sections of Connaught Road Central and Queen's Road Central, causing widespread traffic jams that left some travellers delayed for hours. Most of the group were from People Power and the League of Social Democrats. It took a few hours and 231 arrests before the police were able to remove the breakaway protesters. Officers used pepper spray, handcuffs and hard plastic bands to restrain them. Human Rights Monitor director Law Yuk-kai said the police had used unjustifiable force to control the protesters, who he said had shown no signs of turning violent. Law said he was nearly arrested himself outside City Hall while observing the protest. People Power member Jo Lee Wai-yee, who was among the protesters, said the march did not turn chaotic until police used pepper spray. She said many people fell down, almost triggering a stampede. Gary Fan Kwok-wai, convenor of the Civil Human Rights Front, which organised the main protest, also said police had used excessive force in dealing with breakaway protesters. By last night, all those arrested had been released; while more than 50 put up the money required for police bail, the rest refused to do so. People Power legislator Wong Yuk-man said his group would not be deterred by convenor Leung's comments and would stage more rallies if the government did not withdraw its plan to scrap by-elections. League lawmaker "Long Hair" Leung Kwok-hung said the mass protest was a result of deepening discontent that had evolved into a political crisis. "The more you suppress it, the more disturbance there will be."

Chief Secretary Henry Tang Ying-yen, who has long been seen as front runner for next year's chief executive election, trails in third place among five likely candidates, according to a survey commissioned by the Sunday Morning Post (SEHK: 0583). Tang was over 20 percentage points behind Rita Fan Hsu Lai-tai, a National People's Congress Standing Committee member, and also behind Civic Party leader Alan Leong Kah-kit. Fan had a wide margin in public support over other potential hopefuls, winning the support of 32.9 per cent of 512 respondents polled on June 21 and June 22. This compares with 13.3 per cent who supported Leong and 10.2 per cent who chose Tang. The chief secretary last month began an online campaign apparently to promote his candidacy. Former secretary for security Regina Ip Lau Suk-yee took the fourth slot with support from 9.1 per cent of respondents, followed by Executive Council convenor Leung Chun-ying, who was backed by 8.3 per cent. The University of Hong Kong's public opinion programme conducted the survey for the Post to gauge views on the chief executive election scheduled for next March. About 16 per cent said they preferred none of the five candidates, while another 9.1 per cent said "don't know/hard to say". Fan, Leung and Tang have been widely tipped as the main candidates for next year's chief executive poll. So far, none of them has confirmed they will run. Dr Li Pang-kwong, director of the public governance programme at Lingnan University, believed Tang's low level of support was due to a recent gaffe. In the Post last month, Tang rejected the notion of "property hegemony," a catchphrase describing how property tycoons unfairly dominate Hong Kong. Instead of complaining about the wealth and power of the city's richest man, the chief secretary said, young people should ask themselves: "Why can't I become the next Li Ka-shing?" "Tang's remarks showed his mindset was out of touch with ordinary people and reinforced negative perceptions of him," Li said. Sixty per cent of the respondents said narrowing the wealth gap should be the chief executive's top priority. Ip, also a lawmaker and chairwoman of the New People's Party, has dropped hints on several occasions that she may contest the top job in the vote in March, while Leong, who challenged Donald Tsang Yam-kuen in the 2007 chief executive election, is seen as a likely candidate within the pan-democratic camp. Programme director Dr Robert Chung Ting-yiu said Fan got the most support. "But even then we are talking about one in three support [for Fan], so the race, if it has even started, is far from over." The survey had a 67.5 per cent response rate and a sampling error of plus or minus 4.4 percentage points, with a 95 per cent confidence level. Fan, who is out of town, could not be reached for comment. Tang's press secretary said Tang would do his best to discharge his duties as chief secretary. Leong said both Tang and Leung were taking the blame for the city's maladministration. "The support for me is very much a manifestation of the people's discontent with the present administration [...] and our hope for change."

Busy twentysomethings look for help to find a mate - Life gets busier and love gets harder to find for an increasing number of professional men and women. Speed-dating-event organiser Elisabeth Attwood is reviving quick romance in Hong Kong. Speed dating and dating agencies are nothing new, but the participants are getting younger and younger as career-driven Hongkongers in their mid-20s increasingly seek professional help to find love. Dating agencies such as Lunch Actually are attracting a new and younger clientele, driven by the city's fast-paced lifestyle that can leave working professionals with little time for love. "It's as if they are married to the bank", said the agency's founder, Singaporean Violet Lim. The agency, which started in Singapore in 2004 and expanded to Hong Kong in 2008, pairs like-minded working professionals on lunch dates in restaurants in Central, Causeway Bay and Wan Chai. "When we first started in Hong Kong, we only had a handful of clients who knew about us through friends' recommendations. Now, we have more than 1,500 members in Hong Kong," Lim said. About 60 per cent of the Hong Kong members were women and the age of members was dropping. "When we first started, many people were under the impression that only older people in their 30s and 40s would require dating services," Lim said. "However, more and younger executives, especially women in their mid-20s, are also becoming more receptive to using dating services. "They are starting to see dating services as another platform for them to widen their social circles and meet more people." Hongkongers' lifestyles also reflected their dating style, Lim said. "Hong Kong singles expect their dates to be arranged very quickly and they are also quick to decide whether they would like to meet the person for a second time," she said. "In Malaysia, singles are generally quite open to meeting for a second or third time to get to know each other better. But in Hong Kong, people are very clear about what they are looking for. If they feel that there's no chemistry, they would rather not meet up again." Hong Kong women were also generally more open-minded than their counterparts in Singapore and Malaysia when it came to accepting men who were younger, less educated and earning less than them, Lim said. Speed dating is a popular option for some singles, but while it is widespread in America, Britain and Australia, it is not as prevalent in Hong Kong. Journalist Elisabeth Attwood hopes to revive the speed-dating scene after organising an event in Central earlier this year. "There's a misconception there are no available men in Hong Kong, but tonight there are more men than women," Attwood said. "People just have to be open-minded. I met my boyfriend in Hong Kong in January and we just got engaged." For Leo Chung, 28, dating in Hong Kong was more difficult because the gay scene is much smaller. Still, the Hong Kong local found love and is moving to Australia to be with his partner who he met eight months ago. "Dating in Hong Kong is hard, but there's definitely hope. It's just seeing how open you are about different races," he said.

Cepa sags in bureaucratic red tape - Hong Kong firms find it easier to simply register as a foreign investor to do business on the mainland - Eight years after it was signed, the Closer Economic Partnership Arrangement (Cepa) has provided limited opportunities for small and medium-sized Hong Kong enterprises in the services industry. The biggest obstacle for the pact - which was originally designed to boost Hong Kong business on the mainland - is bureaucracy. Anna Huang is among those who never thought that it would be so difficult for such businesses to operate under Cepa. Just finding out how to expand to the mainland is the first of many questions she said people struggled with in an opaque and complicated system. For those who started the application procedure, such as the Healthway Medical Centre - a Hong Kong clinic that Huang works for in human resources and as an administrator - there are even more questions. How long will the application procedure take? How many government departments will they have to visit to apply for certificates? How many other requirements don't they know about yet? And who can they turn to for the answers to these "how" questions? These issues help explain the lukewarm response from Hong Kong enterprises in making use of the agreement, which was hailed by authorities as a major measure to help accelerate the recovery of Hong Kong's economy, hit hard by the Sars (severe acute respiratory syndrome) crisis in 2003. An indicator of how effective Cepa has been in boosting cross-border investment is the number of Hong Kong Service Supplier Certificates (HKSSCs) issued by the Trade and Industry Department. These are documents that companies in the city must present if they want to apply to mainland authorities to start a business there under the Cepa terms. From 2004 to the end of May this year, the department issued just 1,330 companies a total of 2,388 HKSSCs, with the firms needing a certificate for each industry they work in. It is not clear how many of those HKSSC holders set up shop on the mainland but figures released by the department last year showed that just 48 per cent of 1,208 certificate holders had established a presence on the mainland by September 2009. Seven Lam, the manager of S&F Enterprise Management, which provides registration services for businesses to operate on the mainland, admitted that his company did not have enough resources to help some businesses register under the complicated Cepa guidelines. Instead, his firm can more simply register Hong Kong companies as foreign investors. Based on the department's figures, he said: "We can see that, on average, big cities such as Beijing, Shanghai and Guangzhou might have had only several dozen HKSSC holders registered under Cepa in the past few years." For those Hong Kong businesses that do go through the Cepa process, they must also apply to local mainland authorities for various licences. According to A.J. Kong, the general manager of Guangzhou-based China H.K, the biggest obstacle for Hong Kong companies under Cepa is obtaining all the certificates that must be issued by different mainland government departments. For example, a clinic will have to apply to a local health department while a logistics firm has to deal with local communication authorities. "If the logistics company provides an express service at the same time, it also needs to apply to the Post Office, which is in charge of certificates for a postal business," Kong said. Healthway, which has had a clinic operating as a domestic company in Guangzhou for two years and is trying to register it under Cepa, said it took more than seven months to zigzag through the complex application procedures, which were partly delayed because not even the officials handling the applications were familiar with the procedures. Huang said they first handed in application documents at the end of November, thinking they would be certified within 30 working days. But it wasn't until February, after consulting with different government departments several times, that they were told three more documents were needed. It took Healthway nearly three more months to prepare the additional documents as the company struggled to get clear guidelines for them. "Three employees with the same department would give you three different answers to the same question," Huang said, adding that she was not blaming the officials who admitted that they were still learning how to provide services under Cepa. As at February last year, 42 service areas were covered under Cepa, meaning that several dozen mainland government departments and thousands of their ill-equipped employees are responsible for implementing Cepa nationwide. Lam said that only with special training would mainland government employees be able to properly support Cepa applicants, but he questioned whether it was even worth the effort as there were so few Hong Kong companies interested in using the pact. Joe Fang, the assistant chief research officer with the One Country Two Systems Research Institute, said: "Cepa is the agreement signed by the Ministry of Commerce and Hong Kong government but every Hong Kong service provider has to deal with local government departments under different ministries when they want to do business on the mainland" under the agreement. "As far as I know, other ministries and local governments are not interested in the agreement, for they get almost nothing from it." Fang has suggested that the Hong Kong and Macau Affairs Office negotiate with different ministries on behalf of Hong Kong companies and urge the ministries to provide detailed guidelines to their subordinates at local level. Healthway's Huang said they should have the necessary Cepa certification from the Guangdong Health Department by next month but there are still more issues. "We do not yet know [as a company registered under Cepa] how to hire foreign doctors, how to transfer money from overseas, or how to send the profits back" to Hong Kong, Huang said.

 China*:  July 5 2011  Share

Divorce rate soars as couples find it easy to quit - Ending a marriage is a simple formality, and rising wealth has been matched by an increase in break-ups. Two years ago, Helen Zheng's 58-year-old mother finally called it quits on her marriage after her husband had been cheating on her for 10 years. She looks at the divorce as a blight on her life. The issue is rarely broached with outsiders and she even feels self-conscious around friends and family, said her daughter, 33, from Shanghai. "But my mother felt relaxed at the end of the long saga, despite having struggled for years to rescue her marriage," Zheng said, speaking for her mother, who declined to be named. "She knew if she didn't divorce and stayed bound to my father, she would never be happy." Zheng said her parents met in the 1960s when her mother was sent to a village in Anhui from her home in Shanghai - one of the tens of thousands of young students ordered by Chairman Mao Zedong to receive "re-education from peasants". They married and lived in Tongling , Anhui. But soon enough she found that her husband, a clerk, started having an affair. The result, albeit slow to come, was a divorce that has added to a surge in marital collapses across the mainland in recent years. The increase is causing concern. The annual divorce rate has jumped from just more than 200,000 in the 1970s to 3.2 million in 2007, 3.56 million in 2008, 4 million in 2009 and 4.5 million last year. The latest civil affairs statistics show that 465,000 couples across the mainland divorced in the first quarter of this year, up 17.1 per cent from the same period last year. To break it down further, about 5,100 people were divorced each day from January to March, and past statistics show that the first quarter in a year is usually the low season for divorce, meaning the number for the full year could be even higher. Xu Anqi , a researcher at the Shanghai Academy of Social Sciences, points out that the divorce rate has risen with its growing prosperity (SEHK: 0803, announcements, news) . Furthermore, she said, mainland citizens take divorce lightly, and more couples choose to split rather than try to work out their problems. A report published by the Shanghai-based Xinmin Evening News even coined the term "divorce with no reason" to describe the rising trend of people simply divorcing when they feel like it. Divorce has become so common that it is even a theme for TV series. One such popular drama is called Divorce Chinese-style. On the mainland, divorce requires only that both parties sign a document at their local Civil Affairs Bureau if there is no dispute over the assets. Either party can apply for a divorce. Chen Yong , a 32-year-old sales manager, shocked his parents in early 2009 when he decided to divorce only five months after tying the knot. But when he explained his reason - that the couple's characters didn't match, his wife didn't do any housework and didn't take care of him, and she had hidden her love history - his parents understood and supported him. The two, both natives of Jiangxi and working in Shanghai, had met on a long-distance train journey in 2006. They eventually fell in love and married in October 2008. "Soon afterwards, I found I didn't know her very well. She didn't love me but loved my money, regarding me as her ATM," Chen said. He said the divorce had brought him no trouble in his personal or professional life. He has dated some women since, and they don't care that he is a divorcee. He attributed this to the public's tolerant attitude towards divorce. If it wasn't so acceptable nowadays, he said, he would have opted to stay in an unhappy marriage. But while couples often cite differences in character when divorcing, analysts point out that extramarital affairs are increasingly the culprit. A two-year survey released last month by the Wan He Lian He Law Firm in Changsha , Hunan , found that half of more than 500 divorced couples split up over an affair. Li Jian , a lawyer at the firm and the founder of the Anti Third Party Association, said society should treat the damage to families caused by "third parties" - a formal term in China referring to men or women caught up in a love triangle with a married couple - as a matter of great importance. The consequences of third parties' adultery range from family disputes to severe criminal activities such as blackmail, libel and even murder. It also has a negative impact on young people, Li said. Huang Lin , who researches feminism at Capital Normal University in Beijing, said "third party" groups are common on the mainland and, in strong contrast to Westerners, who often regard affairs as shameful, many Chinese men are happy to show off their mistresses.

Miss World China Pageant Finals held in Beijing - Beijing regional audition of the Miss World China Pageant Finals was held in Beijing, July 2, 2011.

More than 200 people gathered at Milwaukee Art Museum Friday night to welcome a Chinese table tennis delegation, in celebration of the 40th Anniversary of Ping Pong Diplomacy. In 1971, nine American table tennis players were invited to Beijing for exhibition games with Chinese players, helping break the ice between the two nations and lay the groundwork for the eventual establishment of diplomatic relations between the two nations. Chu Maoming, China's deputy consul general in Chicago, attended the reception and welcomed the delegation, which includes members of the original 1971 delegation. "This exchange of visits means a lot in the history of China-U.S. relations," Chu said. "Not only did it break the ice (for China-U.S. diplomatic relations) during the Cold War and end isolation of our two peoples, but also opened the door for the normalization of bilateral diplomatic relations," he said. Following a welcome dinner, original players replayed their historic matches of 1971, while current elite senior and junior players from the two nations provided showed what the latest generation could do. Liang Geliang, who played against the U.S. team in Beijing in 1971, told Xinhua the event not only helped the veterans revive old memories, but also strengthened ties among the younger generations. He hoped the younger generation would make continuous efforts to pursue the ping pong spirit and deepen the friendship between two peoples.

Manufacturing production slows - A textile factory in Huaibei, Anhui province. China's Purchasing Managers' Index, an indicator of manufacturing activity, declined to 50.9 in June from 52 in May. China's manufacturing production fell to a 28-month low in June, indicating a sizeable slowdown in economic growth against a recent background of soaring inflation. However, the inflationary pressure is likely to ease in the second half of the year, with both manufacturing input and output prices showing a slower rate of increase, according to a statement on the website of the China Federation of Logistics and Purchasing (CFLP). The country's final official Purchasing Managers' Index (PMI), an indicator of manufacturing activity, declined to 50.9 in June from 52 in May, signaling a slower growth rate for the world's second-largest economy. The index was jointly released by the CFLP and the National Bureau of Statistics (NBS). The June figure follows readings of 52.9 in April and 53.4 in March. A reading above 50 means an expansion in manufacturing activity, while one below 50 indicates a contraction. A heated debate is emerging in Beijing about whether the current monetary policy is overly tight and damaging to the economy. At a forum last weekend, Professor Li Yining of Peking University argued that stagflation is likely to develop if monetary policy is further tightened. Qu Hongbin, chief economist for China and co-head of Asian Economic Research at HSBC Holdings PLC, said that "the slowdown implies that policy tightening is working, pointing to a peak in inflation in the coming months". The final June PMI reading confirmed that both manufacturing activity and inflation are slowing, he said. HSBC had released a lower preliminary PMI figure of 50.1 about a week ago. Qu predicted GDP of around 9 percent for the whole year, given the year-on-year industrial output growth of 12 percent. Gao Ting, head of the Wealth Management Research Department of UBS Securities Co Ltd in China, said that reductions in exports and consumption have contributed to the slowdown during the past month, but fixed asset investment still increased at a rapid pace, supporting a moderate expansion of the economy. "The nation's economy is not likely to face a hard landing, and the slow growth rate may stop soon," said Gao, who predicted full-year GDP growth of 9.3 percent. China's economic development may maintain a slower pace in July and August, but expansion is expected to be stable in the fourth quarter of the year, given a gradual easing of inflationary pressure, according to the statement from the CFLP. A sub-index of manufacturing input prices has declined for four consecutive months to 56.7 in June, compared with 60.3 in May. That means that imported inflation, pushed higher by soaring global commodity prices, is easing, said the CFLP. In addition, the PMI for the agricultural food-processing industry was 60.1 in June, 5.5 points higher than in May, indicating sufficient food supply in the market. Food prices are not likely to rise much higher in the future, despite floods in southern China, according to the CFLP.

Hong Kong*:  July 4 2011  Share

Far too much attention is being placed on university rankings, with one upmanship rising to the level of a "basketball or football league," Chinese University of Hong Kong vice chancellor Joseph Sung Jao-yiu said in a rare outburst. Sung said there are other parameters that make a top institution - not only the "holy grail" of rankings. In a blog posted on the university's website, Sung wrote: "An example is that in the Asian university rankings recently released by QS Quacquarelli Symonds Ltd, Hong Kong learns that three of her universities have been ranked among the top five in Asia, and three others are positioned in the top 50." But he said many take university rankings as "a holy grail, the most important parameter in assessing the performance of the ranked educational institutions." Sung, named by Time magazine as one of the heroes in the battle against SARS in 2003, took over as CUHK vice chancellor on July 1 last year. He said some academics and university leaders also devote much attention "to playing the game." "In order to win higher rankings, some universities are willing to position themselves strategically by recruiting high-profile researchers to boost their research output which, thus engendered, is strictly speaking, ready-made elsewhere." He said it is rumored "some pay professors from abroad to list an affiliation so that their research output can be counted." "Are we no different from football or basketball leagues?" Sung believes more emphasis should be placed on how well institutions educate and mentor their students. "University education is about molding lives and helping young people to grow up to become mature adults, with knowledge and integrity," he said. "The ranking game has pushed education, the primary mission of a university, to the sidelines." CUHK was listed fifth in the 2011 QS Asian University Rankings, and 42nd in the 2010 world rankings. Previously it held both fourth and second places in the QS Asian University Rankings in 2010 and 2009, respectively. Edward Fan Chak-fa, director of GET Education Consultancy, said a ranking "is a kind of indication of how good the university is." Fan added: "But only an indication; we can't just rely on rankings." Separately, John Wong, the former University of Hong Kong department of surgery head, appears in court today to face two charges of misconduct and two counts of false accounting. Wong is not an associate consultant at Chinese University, CUHK said yesterday.

The Hong Kong Convention and Exhibition Centre exploded in an extravaganza of sight and sound as Kylie Minogue's Aphrodite Live concert burst into life. The stage was adorned with a near life-sized facade of the Parthenon with dancers dressed as nymphs frolicking about the set. The show opened with the pop diva ascending from beneath that stage on a golden shell much like Botticelli's painting "The Birth of Venus" and kick-starting her concert with Aphrodite the title track of her latest album. Clad in a flowing white gown the Australian songstress was the living embodiment of Aphrodite, the goddess of love. The show was a mixture of Kylie's popular hits as well as a large number of new hit songs from her current album. Concertgoers were treated to a truly amazing show that mixed Broadway with Brazilian carnival and Cirque du Soleil. Only Kylie (pictured) could pull off such a show and it was no wonder there wasn't an empty seat in the house. A particular highlight of the show was a smooth jazz performance of the song Slow which invoked an atmosphere of being in a 1940s nightclub and, in that instant, Kylie's whispery chanteuse voice rivalled that of Nina Simone. The modern-age Greek goddess performed a number of crowd-pleasing hits that included Confide in Me and I Should be So Lucky and the crowd erupted in excitement as they recognised the opening strains of Can't Get You Out of My Head. When asked for requests a lively audience shouted for Locomotion and the pop diva delivered a fantastic hip-swivelling "Chug-a-chug-a" performance of her debut song. Kylie wrapped up the show with an encore that included On A Night Like This and All the Lovers. The show ended in shower of shimmering gold and the goddess Aphrodite disappeared into the dark and sadly, like waking from a wonderful dream, the show was over.

The implementation of a controversial policy requiring Hong Kong and foreign employees working on the mainland to pay into China's social security fund has been delayed because final details have yet to be thrashed out following objections from disgruntled businesses. Industry chiefs have warned the move could push up operating costs and drive thousands of companies and professionals out of business. Under the Social Insurance Law passed in October, all overseas people who have worked on the mainland for more than six months will have to pay social security insurance. It was originally scheduled to come into force yesterday. Tsui Li, managing director of a Hong Kong-based logistics firm with six branches on the mainland and two Japanese staff working in its Shanghai office, said it had not received any official notice from Shanghai authorities on the new policy. "The policy lacks transparency; we no longer know what course to follow with all of these half-official rumours being spread around. I'm extremely annoyed," Tsui said. The deputy chairman of the Federation of Hong Kong Industries, Stanley Lau Chin-ho, said there had been non-stop opposition to the policy but members felt powerless to stop it. "Our members understand the country will not make adjustments to major policies just because we are making noises," Lau said. "We are already fed up in light of so many previous regulations on minimum wages, environmental protection and labour contracts for example." A Guangzhou-based lawyer specialising in labour contracts said many foreigners disliked the idea of paying into mainland social insurance and the implementation of the policy would need to be handled carefully as it involved diplomatic issues. "It is expected that the government will fine-tune the policy along with any problems arising after the law has taken effect," he said. On June 10, the State Council's Legislative Affairs Office launched a one-week consultation on the policy and published draft temporary measures. However, a conclusion has not been reached, with mainland media reporting on Wednesday the authorities were still studying measures to cover foreigners. The social security authorities in Shanghai and Guangdong said in the meantime they will carry on with past arrangements, under which overseas employees can choose to pay into the mainland's social insurance scheme on a voluntary basis. According to the draft temporary measures, the law is meant to protect foreigners by giving them the right to enjoy social insurance. It proposes that employers, employment agents and foreign employees holding the appropriate permits - as well as those from Hong Kong, Macau and Taiwan who work for organisations registered on the mainland - should pay into a social insurance fund covering endowments, basic medical insurance, unemployment benefits, work-place injury protection, maternity leave and a housing provident fund. Overseas contributors to mainland social insurance would be issued with a dedicated and permanent insurance identity card. However, the draft measures did not specify contribution rates for foreigners. Early last month, mainland officials announced that only foreign nationals whose countries had signed bilateral social insurance agreements with the mainland would be exempted. Only Germany and South Korea have signed such treaties with Beijing. Hong Kong has no such arrangement and to do so would require the city to change its own Mandatory Provident Fund policy to exclude mainland workers. It is estimated there are 600,000 foreign workers on the mainland, excluding 200,000 Hongkongers. Anyone evading the payment risks a hefty fine of up to three times the due contributions.

Chief Executive Donald Tsang (centre) toasts the 14th anniversary of the handover with Chief Secretary Henry Tang. Donald Tsang Yam-kuen's administration is no "sunset government", the chief executive has said, pledging his team would serve Hong Kong until the last minute. As Tsang yesterday entered his final year of office with his popularity ratings hitting a record low, the chief executive defended his legacy. Speaking at the official reception celebrating the 14th anniversary of Hong Kong's handover, he said: "On 1 July next year, a new term of the Hong Kong SAR government will take office. Some people suggest it will be difficult for the incumbent `sunset' government to accomplish much in its last year. I do not intend to join the quibbling over political terminology. "Let me assure you from the bottom of my heart that, in a humble way, my team and I will continue to work with full dedication for the betterment of Hong Kong until the last minute of office. "Our resolve to dedicate ourselves to the service springs from our passion and commitment to Hong Kong." Tsang was joined at the reception by hundreds of guests, including politicians, businessmen, social group leaders and foreign consuls. Defending his record, the chief executive laid out his government's achievements: "Over the past year, we have made significant progress on various fronts with the joint efforts of the community. "The statutory minimum wage, after years of discussion, finally came into legislation and implementation. The transport subsidy and the Community Care Fund were rolled out as new measures to alleviate poverty. The legal frameworks for selecting the chief executive and forming the Legislative Council in 2012 were also put in place." He also cited growing yuan business and the city's participation in the 12th national five-year plan to demonstrate closer ties between the mainland and Hong Kong. Looking to the final year of his government, Tsang warned of challenges ahead, such as high property prices, inflation and external economic fluctuations. "I strongly believe that if we can listen carefully to the different voices and aspirations of the community, accommodate each other's needs and concerns, and work together in a practical manner for feasible solutions, we can overcome all challenges and continue to prosper," he said.

 China*:  July 4 2011  Share

Far from cutting taxes on imported luxury goods, China needs to raise duties to help redistribute wealth, a senior researcher with the Ministry of Finance said. "Taxes on luxury goods are aimed at the wealthy and undoubtedly are beneficial to social fairness," Liu Shangxi, deputy director of the ministry's research institute for fiscal science, said in an article posted on the ministry's website Friday. The article originally appeared in a ministry-related publication, the China Financial and Economic News, Thursday. The article conceded that there are differing definitions of "luxury item," but it singled out expensive watches and golf equipment as examples. Mr. Liu said that reducing taxes on imported luxury goods would have a "severe impact" on domestic producers and might force some of them out of business. Mr. Liu's remarks, which echoed recent local media reports citing Ministry of Finance officials arguing against any attempt to cut import duties, revealed an continuing dispute over the issue within the government. Ministry of Commerce spokesman Yao Jian said at a news briefing in June that China will cut import tariffs, including those on luxury goods, to help expand imports. Mr. Yao described lowering import duties on luxury items as an "irresistible trend," adding that there is already an agreement among related government departments to move ahead with tax cuts. China has come under considerable pressure from its major trading partners, such as the U.S. and the European Union, to boost imports and help cut China's substantial trade surplus. The Ministry of Commerce would like to help reduce trade friction, and so prevent further curbs on Chinese products in overseas markets. But it has been at odds with the Ministry of Finance, which doesn't want smoother trade relations to come at the expense of tax revenues. 

Beijing is not in a hurry to subsidise solar power consumption nationwide as it wants to take time to decide on "suitable" power prices, according to a senior researcher at a state energy think tank. Rather, it is prepared to provide incentives region by region, in order to reduce the risk and fallout from potentially giving too few or too many subsidies through a national scheme. Analysts say the reason Beijing has been delaying a large-scale introduction of subsidised solar power prices for more than two years is that it wants to limit the amount of subsidies it has to dole out. By waiting for further falls in solar power equipment prices, it can afford to subsidise more projects, especially in economically less-developed regions where most of the country's solar energy resources are located. Solar power projects are currently economically unviable because solar power is almost double the cost for consumers compared with coal-generated power, on a same- investment return basis for project developers. With solar panel prices having fallen 20 per cent in the past few months, now may be an opportune time to launch the national scheme long awaited by the industry, some industry watchers say. But Li Junfeng, a deputy director general of the industry regulator, the Energy Research Institute of the National Development and Reform Commission (NDRC), played down the conjecture. "This is not necessarily the case. Equipment prices may have fallen, but they will decline more in the future," Li said on the sidelines of the CBI China Solar Industry Leadership Summit. He said given the sheer size of the economy and huge regional differences, it was difficult to come up with a policy that worked well across the nation, adding that launching subsidy schemes on a region-by-region basis would be better. "A successful subsidy scheme does not always have to be top-down. We can start from the local level and work our way upwards," he said, citing a recent decision to award a solar power tariff of 1.15 yuan (HK$1.38) per kilowatt-hour in Qinghai province for projects completed before September 30 as a policy breakthrough. This came after the NDRC failed to respond to industry players' calls for the launch of a comprehensive subsidy scheme to encourage solar power consumption. Instead, the regulator decided to let the market decide on fair prices for solar power by launching two rounds of open tenders for project developments. However, the bidding was dominated by large state-owned energy firms, which are required to have a certain amount of their installed power generation capacity powered by renewable energy sources. These companies have strong backing from state banks and mostly put operating scale and market shares ahead of profitability. They have won pilot projects with bids ranging from 73 fen to 1.09 yuan per kilowatt-hour that are widely considered to be loss-making or breakeven at best. The ultra-low power prices put tremendous pressure on the winning companies to cut infrastructure costs to stem losses, which raised concerns they will sacrifice quality for price. "Mainland project developers focus too much on low equipment prices. They don't much consider other things like functionality and reliability," said a sales manager at Refusol who declined to be named. The German maker of electrical inverters, a key component of solar and wind power stations, is having a tough time cracking the cost-conscious mainland market. China is home to the world's biggest solar panel manufacturing industry, accounting for 48 per cent of last year's global output. About 95 per cent of its output is exported as the domestic market is underdeveloped. Two years ago, Beijing launched a temporary subsidy scheme for a limited number of solar power projects to encourage consumption of clean energy. It subsidised half the installation costs of solar panels of several hundred projects in different provinces. Li said the implementation of the subsidised projects had been challenged by the difficulty of connecting the projects to regional power grids. This is because solar power output depends on weather and conditions at times of the day, which means costly upgrades are needed at power grids to ensure solar power can be absorbed without disrupting normal grid operations on a sustained basis. Lian Rui, a Shanghai-based analyst at United States solar sector research house Solarbuzz, said the ultra-low winning prices for projects tendered by the NDRC had made it politically difficult for policymakers to justify offering higher but economically sustainable power prices for new projects on a nationwide basis. "It's a catch-22 situation for the NDRC. If the prices it picks turns out to be too high, it will spur a lot of demand, but Beijing will have difficulty paying the huge subsidies," Lian said. "If the prices turn out to be too low, it will find no takers for new projects." A year ago, Beijing launched fixed subsidised tariffs for wind power projects, which vary between 51 and 61 fen per kilowatt-hour, depending on the region and wind resources, compared with the average coal-generated power price of 30 fen. Li rejected the suggestion that the NDRC was under pressure to launch similar subsidised tariffs for solar power, in response to projections from some analysts that demand from China's largest solar panel market, the European Union, will fall in the next few years on the back of rapidly falling subsidies. "China will pursue its own solar power development policy. It will not hinge on what happens in the EU market," he said. Lian said nationwide subsidies for solar power would be difficult to launch in the short term because of the huge costs involved, as rapid wind power output growth meant Beijing already had to dole out subsidies. An average 0.4 fen per kilowatt-hour surcharge on end-users' power bills was insufficient to cover the subsidies that amounted to billions of yuan annually, he said.

Liquor auction selling Chinese famous spirits to be held in Tianjin - A visitor looks at bottles of stored Moutai liquor at an auction preview in Tianjin, north China, July 1, 2011. A liquor auction selling Chinese famous spirits, like Moutai, Wuliangye and Luzhou Laojiao, will be held in Tianjin on July 3. Those auction items were stored for years by private collectors.

Tibet Airlines receives first A319 from Airbus - France-based European aircraft manufacturer Airbus on Friday delivered an A319 to Tibet Airlines, making the newly established Chinese airline the newest operator of Airbus in China. This aircraft is the first out of three A319s ordered by the Lhasa-based airline in May 2010. Powered by a CFM56-5B engine, the 128-passenger plane will be operated between Beijing, Chengdu and Lhasa, and on other regional routes, reaching China's highest airports, such as the Kunsha airport in western Tibet which stands at 14,000 feet above the sea level. "We aim to build a regional network covering all civil airports in Lhasa (and) the Tibet autonomous region," said Xu Bo, Chairman of Tibet Airlines. Airbus China President Laurence Barron said "We are honored that our modern Airbus A319 aircraft will contribute to the development of civil aviation on the Tibetan plateau and we warmly welcome Tibet Airlines as our new operator." So far, over 85 percent of the commercial flights to and from Tibet are performed with an Airbus aircraft, Barron noted.

China's ports will remain number one - A harbor at Qinzhou in the Guangxi Zhuang autonomous region. Chinese ports will remain the busiest in the world this year, although sluggish economic recovery in the United States and the European Union (EU) will dent their container volume growth, according to an outlook report by the Chinese Academy of Sciences. The report, released on Friday by the Center for Forecasting Sciences at the academy, also suggested global container volumes will continue to rise this year, but the growth rate will be smaller than in 2010. Containers are the basic element of the global trading system. The average growth at the world's top 20 ports will remain at between 8.5 percent and 10.3 percent year-on-year, down from an increase of 15.2 percent in 2010, the report said. "China has served as a major driver of rapid growth in the global shipping industry," said Wang Shouyang, a professor at the academy. "Its robust economic and trade growth has prompted increases in port business in trading-partner countries." According to the report, half of the increase in business at Antwerp port in Belgium was driven by demand from the Chinese market, and no less than 30 percent of the containers in Hamburg port were transferred to or from China. As the developing economies emerge as the new engine for the global economy, container volumes at their ports are expected to register rapid growth. Meanwhile, the lackluster economic performance in the developed countries will hamper the growth of trade, the report said. Lacking an internal engine, economic growth in the US and the EU may remain insipid, said Zhang Monan, an economist at the Economic Forecast Department of the State Information Center. With a jobless rate as high as 9.1 percent in June and debt-supported fiscal and monetary policies coming to an end, the US needs additional policies to boost its economy, Zhang said. The US government has already reached its $14.3 trillion legal debt limit and has urged that the limit should be raised by Aug 2. President Barack Obama and Treasury Secretary Timothy Geithner have warned that if Congress failed to do so, it could lead to default on the nation's debt obligations, causing financial market turbulence and other serious consequences. In the meantime, economic recovery in the EU may be affected by the debt concerns and ensuing tightening policies, Zhang added. "These factors are likely to hamper economic growth in the US and EU in the latter half of this year," she said. "Given the current global economic climate, it is safe to predict a slowdown in the growth of container volumes worldwide," she added. China's Dalian port is expected to become the 20th largest in the world this year, and 10 of the top 20 container ports would be in China, the report said. The rest remained largely unchanged.

Businessman donates cash to S China village - Saree Chan (C), chairman of the Canada Fei Cui International Industrial Group Ltd, donates 3 million yuan ($464,000) for the elderly, disabled people, poor university students and another 200,000 yuan ($30,933) to Hainan Small Animal Protection Association in Rongshan village in Xiuying district of Haikou city, South China's Hainan province, June 30, 2011.

Hong Kong*:  July 3 2011  Share

Pandas in Sichuan are getting their lives back on track, thanks to the help of Hong Kong's largest theme park and the government. The project, under Ocean Park's conservation foundation and the Development Bureau, aims to support the restoration of giant panda habitats in Sichuan affected by the 2008 earthquake. The project includes reconstruction of the destroyed Wolong Nature Reserve, turning it into the new China Conservation and Research Centre for Giant Pandas, occupying an area of almost 20,000 metre squares. The centre will focus on research into the husbandry of giant pandas, as well as the restocking of the wild population. The Giant Panda Conservation and Disease Control Centre in Dujiangyan is also being helped to rehabilitate and care for injured or sick giant pandas. The 12,500 square metre centre will separate the area for the care and breeding of the core panda population from the zone for disease control. A centre for eco-tourism and promoting public education on giant panda conservation will also be part of the centre for the pandas' rehabilitation. Funded by the Hong Kong government to the tune of about HK$376 million, construction of the two centres has just begun and they are expected to be completed late next year or in early 2013. Ocean Park also organised the first study tour - from Monday to yesterday - for mainland representatives from the Wolong Nature Reserve. The 22-member team visited Ocean Park and also the Geopark, Wetland Park and Mai Po Nature Reserve, aiming to learn about local conservation techniques and experience in facility management, animal care, eco-tourism, staff training and more. "We have benefited greatly from the tour and experienced first-hand animal-care training in the city," said Zhang Hemin, chief of the Wolong Nature Reserve Administration.

A veteran politician tipped to be a candidate for the next chief executive post, an entrepreneur involved in local tourism development, and three Hongkongers killed in the Manila hostage tragedy will receive the city's top honors Three Hongkongers held hostage and killed in Manila last year will be awarded the gold medal for bravery. Ken Leung Kam-wing and Fu Cheuk-yan were recognised for their brave act of trying to stop the shooting by a gunman who held them hostage in a tour bus last August. Masa Tse Ting-chunn, a tour guide, will also be given the medal for reporting the incident to his Hong Kong colleagues. Leung Chun-ying, the convenor of the Executive Council, and Allan Zeman, chairman of Ocean Park, will be given the Grand Bauhinia Medal in recognition of their contribution to public services. Leung is tipped as a candidate for chief executive. Two other potential rival candidates - Chief Secretary Henry Tang Ying-yen and Rita Fan Hsu Lai-tai, a member of the Standing Committee of the National People's Congress - received the top award in 2009 and 2007 respectively. Dubbed the father of Lan Kwai Fong, Zeman is known for turning the old neighbourhood in Central into a top entertainment and tourist spot. "It is something I never expected and I am very honoured to be chosen," said Zeman, adding he would continue to work in his own way for the good of Hong Kong. "When I feel I can help make a difference, I'll say, `yes', and do my best." A total of 322 people from different backgrounds will be honoured this year. This is 26 more than last year but still 112 fewer than in 2009. The honours list is also the fourth and the second-last one chosen by the current administration, whose term will end next June. The honours will be awarded in October.

Pan-democrats and the government are in a tug of war to win functional constituencies' vote on the controversial bill to scrap by-elections. Neither side has enough support, making the vote of 13 undecided lawmakers among the 30 in the functional constituencies crucial to the outcome of the battle, which intensified on Wednesday night when Secretary for Justice Wong Yan-lung and Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung hit back at criticism of the plan. Under the bill - revised on Tuesday and to be tabled for voting in the 60-seat Legislative Council on July 13 - vacancies in directly elected Legco seats would be filled by people from the same party as the former incumbent. If their party list is exhausted, the next-best-placed candidate in the previous election would get the nod. The government will closely monitor today's turnout for the march in Victoria Park to gauge the strength of opposition to its proposal. "If the march draws a substantial turnout or exceeds 100,000, the administration will face the risk of some pro-government legislators withdrawing their support for the bill," a person in the government said. The government's goal is to eliminate the current system for by-elections, which it says was abused by lawmakers who resigned last year to trigger by-elections they hoped would be de facto referendum on democratisation. Paul Chan Mo-po, who represents the accounting constituency and is close to the government, demanded the administration postpone voting on the bill, saying more time is needed. "If the government insists on pushing it through, I will consult the sector before deciding how to vote," Chan said. Pan-democrats need six others to vote with them to veto the proposal. Professionals and groups in seven sectors in which lawmakers remain undecided have urged their representatives to vote no. Concern over the plan came from electorates for the accounting; architectural, surveying and planning; engineering; information technology; medical; sports, performing arts, culture and publication; and transport constituencies. The functional lawmakers - who are traditionally mostly pro-government - said they need to scrutinise the proposal further and absorb opinions before making a decision. Some said the turnout of today's march will not affect their thinking. Transport lawmaker Miriam Lau Kin-yee, who is also chairwoman of the Liberal Party, said she would consult her sector and seek legal views before deciding how to vote. "The government should be criticised for the lack of consultation, but I also feel the proposal stems from the public in plugging by-election loopholes," said Lau. The chairman of a major transport union said the drivers had not been consulted. "I may appeal to Lau. We disagree with the proposal to take away our rights, but she has not consulted us," said Lai Ming-hung, who chairs the Taxi and Public Light Bus Concern Group. A petition for the proposal's withdrawal organised by Hong Kong Professional Teachers' Union and the Professional Commons has gained more than 120 signatures within three days. It covers seven sectors.

Pan-democrats and the government are in a tug of war to win functional constituencies' vote on the controversial bill to scrap by-elections. Neither side has enough support, making the vote of 13 undecided lawmakers among the 30 in the functional constituencies crucial to the outcome of the battle, which intensified on Wednesday night when Secretary for Justice Wong Yan-lung and Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung hit back at criticism of the plan. Under the bill - revised on Tuesday and to be tabled for voting in the 60-seat Legislative Council on July 13 - vacancies in directly elected Legco seats would be filled by people from the same party as the former incumbent. If their party list is exhausted, the next-best-placed candidate in the previous election would get the nod. The government will closely monitor today's turnout for the march in Victoria Park to gauge the strength of opposition to its proposal. "If the march draws a substantial turnout or exceeds 100,000, the administration will face the risk of some pro-government legislators withdrawing their support for the bill," a person in the government said. The government's goal is to eliminate the current system for by-elections, which it says was abused by lawmakers who resigned last year to trigger by-elections they hoped would be de facto referendum on democratisation. Paul Chan Mo-po, who represents the accounting constituency and is close to the government, demanded the administration postpone voting on the bill, saying more time is needed. "If the government insists on pushing it through, I will consult the sector before deciding how to vote," Chan said. Pan-democrats need six others to vote with them to veto the proposal. Professionals and groups in seven sectors in which lawmakers remain undecided have urged their representatives to vote no. Concern over the plan came from electorates for the accounting; architectural, surveying and planning; engineering; information technology; medical; sports, performing arts, culture and publication; and transport constituencies. The functional lawmakers - who are traditionally mostly pro-government - said they need to scrutinise the proposal further and absorb opinions before making a decision. Some said the turnout of today's march will not affect their thinking. Transport lawmaker Miriam Lau Kin-yee, who is also chairwoman of the Liberal Party, said she would consult her sector and seek legal views before deciding how to vote. "The government should be criticised for the lack of consultation, but I also feel the proposal stems from the public in plugging by-election loopholes," said Lau. The chairman of a major transport union said the drivers had not been consulted. "I may appeal to Lau. We disagree with the proposal to take away our rights, but she has not consulted us," said Lai Ming-hung, who chairs the Taxi and Public Light Bus Concern Group. A petition for the proposal's withdrawal organised by Hong Kong Professional Teachers' Union and the Professional Commons has gained more than 120 signatures within three days. It covers seven sectors.

Gambling revenue in Macau rose 52% in June from a year earlier, government statistics issued Friday show, as visitors from mainland China continued to fuel strong growth in the only place in China where casino gambling is legal. Gambling revenue in the Chinese territory rose to 20.79 billion patacas (US$2.59 billion) last month, up from 13.64 billion patacas a year earlier, according to data from Macau's Gaming Inspection and Coordination Bureau. June's year-on-year growth rate is the highest so far this year, but the total revenue recorded fell short of the all-time high of 24.31 billion patacas seen in May, bolstered by the holiday season and the strong opening of Galaxy Entertainment Group Ltd.'s new casino resort. In the January-June period, Macau's gambling revenue has risen 45% from a year earlier, following a 58% surge for the whole of last year.

 China*:  July 3 2011  Share

China has built effective infrastructure for manufacturing, giving it an advantage over other production centres despite rising costs. US toy companies are sticking with China as their factory of choice, saying its workmanship and infrastructure are enough to offset rising costs that are forcing some Western fashion brands to seek cheaper locations. The chief executives of Hasbro, LeapFrog Enterprises and Toys "R" Us told a global consumer and retail summit this week that China's considerable advantages as a manufacturing mecca meant it would remain toymaking's main hub. "Costs would have to go up for many, many years" for China to lose its edge, Hasbro chief executive Brian Goldner said. With wages rising at 15 to 20 per cent per year, the labour costs of manufacturing in China could pull even with US levels by 2015, Boston Consulting Group said in May. But wages made up only 7 per cent to 9 per cent of Hasbro's manufacturing costs, Goldner said, and the company, which does not own its factories in China, was making greater use of automation. Mainland China, particularly Hong Kong, is a nexus of toy suppliers, manufacturers and shippers, making it hard for emerging Asian manufacturing centres such as Vietnam, India and Sri Lanka to knock the country off its perch. "Just like you think about Silicon Valley with technology, Hong Kong is the analogous location for toys," Toys "R" Us chief executive Jerry Storch said. The production of simpler items - plastic buckets, toy furniture and some stuffed animals - has moved to places such as Vietnam. But as games and toys get more sophisticated and include more electronics, China remains attractive. "China has built an unbeatable infrastructure for effective manufacturing," LeapFrog's chief executive John Harbour said. "It is still the world's factory." Some firms with more labour-intensive manufacturing are moving some production out of China. Jarden Corp, for instance, now makes items such as baseball bats and life jackets in North America. Clothing store chains also are trying to protect margins that are under growing pressure from rising Chinese wages and oil prices, and many of them say workers elsewhere in Southeast Asia are up to the task. Lululemon Athletica is finding that to be particularly true for simple garments. "Taking some of our more basic product and having that produced elsewhere makes a lot of sense," it said. Lululemon, which is known for yoga pants, eventually would like China to account for 50 per cent of its manufacturing, down from 60 per cent currently. Rather than moving production from there, it plans to add capacity in places such as Vietnam, Cambodia and Central America as its needs increase. Those countries, and others, are closing the skills gap. But China's increasingly affluent workers are losing interest in the grind of production lines. "Nobody particularly wants to work in a textile factory in China anymore," said Dean Moore, of British home shopping company N Brown. "They want to be in a merchant bank; they want to be in a McDonald's."

Workers at a factory in Hebei assemble rotor hubs for wind power turbines. Despite their large capacity for manufacturing, Chinese clean-energy companies lack the latest technology. European and US clean-energy technology firms are increasingly looking to mainland equipment makers and venture capital firms to fund their expansion and as outlets for their investments, with investors hard to come by in their home markets. However, cultural clashes, potential government rejection of the sale of hi-tech firms and a lack of overseas experience among mainland firms present challenges to such deals, and post-acquisition management does not always go smoothly, according to lawyers at international firm Orrick Herrington & Sutcliffe who handle cross-border investments. "Capital scarcity is the single most limiting factor in the development of clean-energy technology [in the West]," said Mitchell Zuklie, head of the firm's renewable energy business in California's Silicon Valley. He said the situation was likely to intensify due to government debt-reduction efforts and tightened capital requirements on banks in the US and Europe. "There is a huge desire to find corporate and strategic partners from Asia and China." China produces just under half of the world's solar panel modules. It has the world's largest market capitalisation for listed firms in the clean-energy sector, most of them makers of solar and wind-power equipment. But they lack the most advanced technologies, which are mainly in developed nations, and are looking to buy the owners of such technology. Providing funding to solar and wind projects in the US and Europe to increase equipment sales and establishing distribution and after-sales service channels on those continents are also reasons China firms are investing more in these markets. On the other hand, some well-funded US clean-energy technology firms are also looking to take advantage of China's low-cost manufacturing by setting up joint venture or taking over plants there. Differences in mindset towards acquisitions and management philosophy means some deals could be stifled unless suitable go-betweens, often mainlanders who have worked abroad, can bridge the gap. Thomas Tobiason, an Orrick partner based in Shanghai, said while Silicon Valley entrepreneurs welcome acquirers with open arms since they can exit from their investment, their mainland counterparts often view being acquired "as a form of defeat". The importance of providing stock options to retain top managers, an essential practice in the US to ensure smooth operation of acquired firms, is not always appreciated by mainland entrepreneurs, he said.

West-East gas pipe begins service - A section of the second West-to-East natural gas pipeline in Ruichang, Jiangxi province. The pipeline involved total investment of 142 billion yuan ($21.88 billion). China National Petroleum Corp (CNPC), the country's largest oil company by output, put its trunk line of China's second West-to-East natural gas pipeline into service on Thursday. When fully completed in June 2012, the pipeline will be able to carry 30 billion cubic meters (cu m) of natural gas annually from Central Asia and the Xinjiang Uygur autonomous region to the Yangtze River and Pearl River deltas. The second West-to-East pipeline, comprising a main line and eight sublines, and required total investment of 142 billion yuan ($21.88 billion). It is the world's longest pipeline project, with a combined length of 8,653 kilometers. The eight sublines, one of which will carry natural gas to Hong Kong, will be completed by June 2012, said CNPC Vice-President Liao Youngyuan, according to the Xinhua News Agency. By then, Hong Kong will have an annual natural gas supply of 1.5 to 2 billion cu m, and Guangdong province will have 10 billion cu m. The western part of the second West-to-East pipeline began operations in December 2009, transferring natural gas from Central Asia to Xinjiang. The entire project will eventually traverse 15 provinces and regions and provide 30 billion cu m of natural gas annually. It will have a minimum lifespan of 30 years and will benefit more than 400 million people, the company said on its website. The project is expected to conserve 76.8 million tons of coal and reduce carbon dioxide emissions by 130 million tons and sulfur dioxide by 1.44 million tons. China plans to build a third West-to-East gas pipeline project, allowing the transfer of more than 20 billion cu m of natural gas annually from Central Asia, Liao said. He added that a fourth and possibly even a fifth pipeline may be constructed. China's first West-to-East pipeline, which began operating in 2004, transferring gas from the Tarim Basin in Xinjiang to Shanghai, allows it to transfer 12 billion cu m of natural gas annually. China intends to double natural gas use to around 8 percent of energy consumption by 2015 to reduce reliance on more polluting energy sources, such as oil and coal, conserve energy and cut greenhouse gas emissions. The national gas demand may rise to 230 billion cu m in 2015, from the current 130 billion cu m. Domestic production could climb 11 percent to 105 billion cu m this year, and imports could surpass 30 billion cu m, CNPC's listed arm, PetroChina, said in January. PetroChina said it plans to spend an estimated 77.3 billion yuan on natural gas and pipeline development this year, a 44 increase percent from 53.6 billion yuan last year, according to the company's annual report.

A ship carrying the vessel Jiaolong, China's manned deep-diving submersible, leaves a port in Jiangyin, East China’s Jiangsu province, July 1, 2011. The Jiaolong is to attempt a 5–kilometer-deep dive in the Pacific Ocean in the next 47 days. The 8.2 meter, 22 ton submersible was designed to reach a depth of 7 kilometers and operate in most of the world's oceans, officials said. Jiaolong is considered to be the world's only deep-sea vessel that can theoretically reach those depths. 

Premier Wen Jiabao on Thursday joined other passengers to board the first bullet train on the landmark high-speed railway between the metropolises of Beijing and Shanghai, calling it a "new chapter" in China's railway history. Before an inauguration ceremony held at the Beijing South Railway Station, Wen visited passengers at the waiting hall and listened to a report by the Ministry of Railways (MOR) on the construction and operation of the Beijing-Shanghai high-speed railway. Wen said the railway's construction was an important decision by the state and of great significance to improve the country's modern transportation system, promote the economic and social development, and satisfy people's need for swift movement. It took 38 months to complete the 1,318-km railway. Even though the Beijing-Shanghai high-speed railway has started operation, railway officials and managers still face arduous tasks to ensure the operation is safe, orderly and efficient, the premier said. "Railway departments must give top priority to the safety (of operation) while continuing to improve their service quality," Wen said. He stressed the importance of scientific planning, coordination of different transportation systems and increasing the overall efficiency and comprehensive revenue of the transport industry as China ushers in an era of massive railway development. After a brief inauguration ceremony, Wen and Vice-Premier Zhang Dejiang boarded the first bullet train G1 of the CRH380 series, which were independently developed by China. Premier Wen Jiabao inspects the driver's cabin while travelling on the first bullet train of the landmark high-speed railway from Beijing to Shanghai, June 30, 2011. 

Hong Kong*:  July 2 2011  Share

Footwear retailer Walker Group said its net profit in the 12 months ended March 31 rocketed by 7.6 times to HK$25 million, boosted by an increase in average prices and the addition of sales outlets on the mainland. The multi-brand shoe group said it would spend HK$75 million in the new financial year to improve its national retail network by opening 150 new stores, most of which will be on the mainland. Chief executive Kenneth Kiu said most of the stores would be self-managed and would be in first- and second-tier cities on the mainland - the Hong Kong-based chain's key market, accounting for 74 per cent of turnover. In the year to March 31, Walker opened 103 new shops, boosting the total to 893, of which 718 were on the mainland. Of the total 796 are self-managed and the rest franchised outlets. Kiu said the company planned to speed up the opening of franchised stores in the third-tier cities across the mainland to strengthen the company's presence in areas where markets were rapidly growing. "We are about to carry out this job," Kiu said. Last year the company sold 9,300 pairs of shoes per day on average, 200 pairs a day more than the previous year. The average selling price rose 7 per cent to HK$360. Kiu said that both labour and leather costs rose last year, and he expected the trend to continue. "For spring/summer shoes this year our cost increased by 5 to 6 per cent and for the autumn/winter it might increase 7 to 8 per cent year on year." He wouldn't rule out the possibility of raising prices this year. "Retailers have to impute their costs to the consumers, but we will also try all means to improve efficiency to offset the impact of rising costs," he said. The company focuses on casual shoes but has taken steps to offer high-end products to be sold at better margins. Since January it has revamped the logo and image of its Artemis brand to attract young women. Walker would increase the number of Artemis shops from the current 44 to 80 by March 2012, and double them again to 150 in 2013, according to Kiu. Last year the company's revenue was HK$1.3 billion, up 14.2 per cent. Gross profit margin climbed 2 percentage points to 59.5 per cent. Its shares fell 2.6 per cent yesterday, closing at HK$1.49.

Hong Kong airport made a record profit of more than HK$4 billion last year following a strong rebound in passenger and cargo throughput, but expansion plans could make for a bumpy ride in the years ahead. Even without building a third runway - which is still in the planning phase - depreciation and amortisation of the HK$9.3 billion midfield expansion programme due to be completed by 2015 could drag the Airport Authority into the red. "If you only look at the [financial] statement, there will be fluctuations, or even losses," said William Lo Chi-chung, the authority's executive director for finance. "However, we have a very strong cash flow. If we maintain that, we shouldn't have problems handling any future projects." It will have to deal with a funding shortfall of HK$102 billion if the third runway goes ahead, but chief executive Stanley Hui Hon-chung said it had no plans yet to raise landing and parking charges for airlines. Even though the authority projects an annual increase of 3 per cent in airport charges until 2030 in its estimated future cash flow, the airport has not raised the landing and parking fees for airlines in 13 years. Fees, in fact, were cut by 15 per cent during the economic downturn of 2000, with another temporary reduction in 2009 following the credit crisis, which has now been reinstated. Record passenger and cargo throughput last year plus strong growth in rents, retail licences and advertising revenues pushed the airport's revenue up by 17.4 per cent to HK$10.58 billion. Helped by good control over operating expenses, net profit jumped 41.9 per cent to HK$4.04 billion. The operating margin also rose to 66.3 per cent in the 12 months to March from 62.3 per cent a year ago - the highest among utilities investments, while return on equity reached double digits for the first time, at 11.1 per cent. Hui said if passenger throughput continued to grow at an annual clip of 3.2 per cent, Hong Kong might overtake Heathrow as the airport handling the most international passengers by 2015. Despite the record profit, the government will only receive HK$3.1 billion in ordinary dividends, less than the HK$4.5 billion from an ordinary and a special dividend in 2009. There is no special dividend this year. While Japan's natural disasters and political unrest in the Middle East pushed cargo throughput down by 1.2 per cent in the first five months of this year, passenger and aircraft movements saw year-on-year growth of 5.4 per cent and 12 per cent respectively. Despite a high base, Hui said, Hong Kong airport should end the year with moderate growth.

You might say the people's princess is getting a down-to-earth tribute in Hong Kong. The Diana watermelon, a golden-yellow variety developed by a Taiwanese breeder who greatly admired the late Princess Diana, received approval yesterday from the Agriculture, Fisheries and Conservation Department to be grown here following successful trials. Agricultural officer Chan Siu-lun introduces the new variety of organic watermelon in Sheung Shui. The Diana, known for its sweet, fine red flesh, was bred by Chen Wen-yu, a hybriding wizard known as the "Watermelon King" who has created 1,100 fruits and vegetables, including 285 varieties of watermelon, a quarter of the world's total, according to the Taiwan Review. The melon was developed in 1997, the year Diana died. "All the watermelons in Hong Kong used to be imported," Chan Siu-lun, a department agricultural officer, said. "It's not really a new venture. We've been trying to introduce new varieties for two years." The department has been keen to promote organic farming, seeing a growing demand. It recommends to farmers varieties of fruit and vegetables that have been tested to give high yields in Hong Kong's climate, and then gives technical advice on how to grow and manage the crops, Chan said. Aside from an organic version of the Diana, the department also introduced improved varieties of a green bitter cucumber, a yellow cucumber and a mini wax gourd - more commonly known as winter melon or "mini jade". The latter is also from Taiwan and contains no gourd wax, but has a wax-like, shiny surface when it is in maturity. It is ideal for stews, such as the popular Chinese soup-based summer dish known as the gourd cup, which demands a small winter melon with a firm skin. The new organic watermelon will be available for sale at Tuen Mun Farmers' Market this weekend as part of an organic watermelon festival organised jointly by the department and the Federation of Vegetable Marketing Co-operative Societies. More than 30 farms will participate. Prices will range between HK$20 to HK$30 per kilogram, and farmers are free to barter. An average-sized, 1.5kg Diana is expected to cost about HK$60. "We do not want to set a limit as we want to leave it to the farmers themselves," Chan said.

The tour guide killed during last year's Manila tour bus hostage crisis will be awarded the gold medal for bravery posthumously for his actions during the siege. A person familiar with the situation confirmed that Masa Tse Ting-chunn, 31, who was shot dead by disgraced police officer Rolando Mendoza along with seven tourists, had been nominated for the award by hostage survivors. They want to commemorate his bravery in taking care of passengers and alerting the tour operator in Hong Kong to the situation. Two other victims, Ken Leung Kam-wing, 58, and Fu Cheuk-yan, 39, are also reported to have been granted the medal for trying to stop the gunman from shooting. An official announcement is expected today. Tse Chi-kin, the elder brother of the slain tour guide, said: "I am grateful that Masa's bravery has been recognised by the Hong Kong government and citizens." The coroner's court ruled in March that the eight hostages' deaths were unlawful killings. The court heard that Tse had managed to call Hong Thai Travel secretly after the gunman confiscated all the other hostages' mobile phones. In a recording played for the court, Tse could be heard describing the dangerous situation in a calm voice. Masa Tse also arranged for the release of seven hostages, including three young children and two elderly people. But the gunman later handcuffed him near the front door of the bus then shot dead. The coroner's court also heard that Leung and Fu were shot while they tried to subdue the gunman, who became enraged after watching television footage of his younger brother being arrested by policeman, and began shooting. Fu and Leung rushed from their seats to try to overcome Mendoza, who had shot Masa Tse and Yik Siu-ling, who survived. Fu managed to push the gunman's rifle upwards, but Mendoza took two steps back and fired at Fu and Leung. Tse said survivors from four families planned to lodge a civil claim against Manila officials. He said the legal proceedings would most likely take place in Manila, since it would be difficult to summon witnesses or defendants from the Philippines. Lawyers were still clarifying legal matters, and he hoped the arrangements would be in place next month.

Hong Kong tycoon Carson Yeung Ka-sing on Thursday appeared in Eastern Court to face five counts of “dealing with property known or believed to represent proceeds of an indictable offence”. Yeung, who is the owner of the English soccer club Birmingham City, was not required to enter a plea on Thursday. Prosecutors alleged Yeung laundered HK$748 million between 2001 and 2007, using five different accounts, three under his name and two under his father's. The 51-year-old had been detained in custody since being arrested by police narcotics bureau’s financial investigations unit late on Wednesday at his home on The Peak. Yeung was released on a bail of HK$7 million until the next hearing, scheduled for August 11. He was also was ordered to surrender his travel documents and report regularly to police. The colourful tycoon and former hairstylist took control of Birmingham City in 2009 after paying over HK$730 million to acquire 94 per cent of its shares. The Midlands club iwon the English League Cup in February, beating favourites Arsenal to lift only their second major trophy. But the team were relegated from the Premier League last month.

A developer planning to build a controversial high-rise in Mei Foo Sun Chuen again lost its bid for an injunction against protesters blocking the construction site on Thursday.

Tourists take photos at Xintiandi, a residential and commercial complex known for its high-end bar and restaurant street in Shanghai. A similar commercial complex, adjacent to the Hongqiao International Airport and Hongqiao Railway Station, will be completed in early 2014. The developer of Xintiandi, Shui On Land Ltd, looks to profit from the construction boom in China's high-speed rail network by building a commercial complex adjacent to Hongqiao International Airport and Hongqiao Railway Station in Shanghai. The commercial complex, named the Hongqiao Tiandi project, will have a total floor area of 380,000 square meters (sq m), 280,000 sq m of which will be available for leasing, said Freddy Lee, managing director and chief executive officer of Shui On Land. The Hong Kong-listed Shui On Land spent 3.18 billion yuan ($491.4 million) to acquire the land for Hongqiao Tiandi, and the project will be completed within two to three years. It's designed as a purely commercial project with restaurants, shops and a hotel, Lee said. Hongqiao Tiandi will benefit directly from the huge passenger flow at the Hongqiao transportation hub comprising the Hongqiao International Airport, the high-speed Hongqiao Railway Station, subway lines, bus stations and public parking lots. "In keeping with the Xintiandi model, all the commercial retail space will be available for lease only," Lee told China Daily. He was confident of attracting target clients, many of whom will come via the high-speed railway network. It took Shui On Land 10 years to develop and package the concept of the traditional shikumen (stone gate) houses on narrow alleys in downtown Shanghai into the current Xintiandi, a residential and commercial complex known for its high-end bar and restaurant street. In the coming years, Shui On Land will increase its development pace, and the Hongqiao Tiandi is due to be completed in early 2014, Lee said. After that, Shui On Land will enter a new three-year plan (2013-2015), he said. In a break from Xintiandi's traditional Chinese style, Hongqiao Tiandi will make more modern additions. But unlike Xintiandi, it will have no residential use complex. There is limited space for renovating downtown, so new complexes around high-speed rail stations will become the next growth point. "Following the high-speed railway has proved to be a successful development mode in foreign countries," Lee added. So far, Shui On Land has 11.6 million sq m of land in reserve, of which more than 6 million sq m has been set aside for commercial development. "Almost all market-savvy property developers have focused on commercial development, but to have a mixture of residential and commercial would be nice," Lee said. During China's 12th Five-Year Plan (2011-2015), the country will build up to 30,000 kilometers of new railways, making the national rail network reach 120,000 kilometers, Wang Yongping, Ministry of Railways spokesman, was quoted as saying by China Central Television in May. Hongqiao Tiandi is currently in its preparatory stage, and construction is due to begin in the third quarter.

Former Taiwan president Lee Teng-hui, the island's first directly elected leader, was indicted Thursday on charges that he and a former economic adviser embezzled funds from Taiwan's National Security Bureau from 1994 to 1999. The 88-year-old Mr. Lee, widely viewed as the father of democracy in Taiwan, and adviser Liu Tai-ying were accused of having used a fund that conducts secret diplomatic activities to embezzle US$7.8 million. The charges come just seven months ahead of the next presidential election, and analysts say they will have a strong impact on a recent thaw in economic relations with China. In a statement, the Taiwan Supreme Prosecutors Office said Mr. Lee used the funds to set up a private think tank called Taiwan Research Institute. Prosecutors have been investigating Mr. Lee since 2002, when a media leak alleged embezzlement within the National Security Bureau, according to the 23-page indictment. Mr. Lee has repeatedly denied charges of embezzlement. Responding to the indictment, Mr. Lee's attorney, Wellington Koo, said Mr. Lee was questioned by the prosecutor May 31 but that there was insufficient evidence to charge him with the crime. "Furthermore, the prosecutor never gave the defendant a chance to argue his case before the indictment was handed down. The rights of the defendant were completely ignored," said Mr. Koo, who also defended former President Chen Shui-bian against corruption charges. Mr. Chen, who succeeded Mr. Lee as president in 2000 and served two four-year terms, is in prison after being convicted on a range of corruption charges in 2009. The prosecutor said a sentence for the crimes, if Mr. Lee is convicted, could range from 10 years to life, but noted that due to Mr. Lee's advanced age, any sentencing would likely be lenient. Mr. Lee, the first Taiwanese president born on the island, is widely credited with ushering Taiwan into democracy after years of autocratic rule by Chiang Kai-shek and his son Chiang Ching-kuo. Mr. Lee succeeded Chiang Ching-kuo as president of Taiwan in 1988 and in 1996 became the island's first directly elected president. Forced out of the Nationalist Party, or Kuomintang, after stepping down from office in 2000 and setting up his own pro-independence party known as the Taiwan Solidarity Union, Mr. Lee has remained a powerful political figure in Taiwan and is a supporter of the opposition Democratic Progressive Party. Taiwan Solidarity Union Chairman and close confidant to Mr. Lee, Huang Kun-huei, accused President Ma Ying-jeou of using his influence to sway the prosecutors, calling it a "dirty trick" by Mr. Ma. "This is Ma's way of getting revenge against former president Lee, who has urged voters to vote against him to safeguard Taiwan. Ma knows Lee's rallying cry could greatly impact voter sentiment before the presidential election," said Mr. Huang. The election is scheduled for Jan. 14, and will pit Mr. Ma against DPP Chairwoman Tsai Ing-wen. A spokesman for the Presidential Office said the office would issue a statement later.

 China*:  July 2 2011  Share

BYD makes turbocharged debut in China - Shares of BYD, the Chinese carmaker backed by US billionaire Warren Buffett, surged as much as 46 per cent on its Shenzhen market debut on Thursday.

Beijing Jingneng delays US$630m HK IPO - Beijing Jingneng Clean Energy has decided to delay an up to US$630 million initial public offering in Hong Kong, IFR reported on Thursday, citing a source familiar with the plan.

China GDP growth expected to hit 9.5pc - China's GDP growth in the first half of this year is expected to reach 9.5 per cent while its consumer price index likely grew 5.3 per cent year-on-year, a report said on Thursday.

China raises income tax threshold to 3,500 yuan - China's top legislature on Thursday adopted an amendment to individual income tax law, which raises the monthly tax exemption threshold from 2,000 yuan ($307.7) to 3,500 yuan($538.5).

China's second east-west natural gas pipeline went into operation on Thursday. The pipeline, connecting central Asia and China, will send natural gas from Turkmenistan to South China's Pearl River Delta after passing through 15 of the country's provinces. The pipeline is the world's longest, with a total length of 8,700 km. The pipeline was built with 142.2 billion yuan ($21.98 billion) in investments.

China opens world's longest sea bridge - China’s Jiaozhou Bay Bridge, the world’s longest cross-sea bridge, linking the eastern port city of Qingdao and the offshore island Huangdao, opens on June 30, 2011. China has opened the world's longest cross-sea bridge. The Jiaozhou Bay bridge is 26 miles (42 kilometers) long and links China's eastern port city of Qingdao to an offshore island, Huangdao. CCTV says the 110-foot (35-meter)-wide bridge is the longest of its kind and cost more than 10 billion yuan ($1.5 billion). CCTV says the bridge passed construction appraisals on Monday and the bridge and an undersea tunnel opened to traffic on Thursday. It has taken four years to build the bridge, which is supported by more than 5,000 pillars. According to Guinness World Records, the previous record holder for a bridge over water is the Lake Pontchartrain Causeway in Louisiana. The Chinese bridge is more than 2.5 miles (4 kilometers) longer.

Hong Kong*:  July 1 2011  Share

Chief Executive Donald Tsang Yam-kuen yesterday appointed Gregory So Kam-leung as the new secretary for commerce and economic development, saying he is both capable and suitable for the post. The 52-year-old So has been the bureau's acting secretary since Rita Lau Ng Wai-lan, 57, stepped down in April for health reasons. As So was not appointed until yesterday, there had been speculation he was not the government's first choice. Tsang declined to say how So was ranked among other possible candidates and whether the government is suffering from a brain drain. "Appointing a secretary is very important and serious task, so I had to deal with it cautiously ... Greg is familiar with the work of the Commerce and Economic Development Bureau and is very committed. I consider him a very suitable choice." Tsang said since So became an undersecretary in 2008, "he has gained a comprehensive understanding of the range of work of the bureau, serving the public diligently and with devotion. "He listens well and is receptive to different views." So, a former vice chairman of the Democratic Alliance for the Betterment and Progress of Hong Kong, is the first undersecretary to be elevated to a ministerial post but will serve only until the end of next June. So, who was embroiled in an immigration row when his incomplete application for a domestic helper was approved, said his previous affiliation with the DAB would not affect his work. New People's Party chairwoman and former secretary for security Regina Ip Lau Suk-yee described the appointment of So as "a choice that you make when you have no other choices." Lawmaker Jeffrey Lam Kin-fung of Economic Synergy admitted they have difficulty in communicating with So and expressed the hope that the situation will improve.

A newly tweaked mechanism to replace by- elections will be able to withstand court challenges, constitutional affairs minister Stephen Lam Sui- lung said. Lam gave details of a revised proposal for filling vacancies in the legislature, as reported yesterday in The Standard. He is confident the government will win in court if the leave for a judicial review by registered voter Cheung Tak-wing, 54, is heard. Cheung has demanded that Lam, as the secretary for constitutional and mainland affairs, should consult the public before the second reading of the amendment bill. Cheung is also seeking a ban on the bill's implementation, which he considers unconstitutional. The Law Society said the government's revised mechanism announced yesterday still deprives voters of the right to vote. It echoed earlier protestations by the Bar Association. Lam announced the revised mechanism after meeting members of a bills committee who were scrutinizing the amendment bill. All pan-democrats from the panel had earlier withdrawn. Under the revised proposal, the next candidate on the same list as the lawmaker who resigns, dies or is disqualified during his four-year term will get the seat should a mid-term vacancy arise. If that person is not willing to take it or is no longer qualified, or if no one else is on the list, then the seat will go to the candidate next in line in terms of the number of ballots their slate received in the election. And if the vacancy still cannot be filled, then a by-election will be held. "It can preserve the proportion of ballots cast by voters in favor of different political factions and candidates to become lawmakers in a Legislative Council general election under the proportional representation system," Lam said. The government wants to scrap by-elections in geographical constituencies and the five newly added district council-sector seats in the Legislative Council next year after five pan- democrats quit last year to trigger what they dubbed a referendum on universal suffrage. Lam insisted a public consultation exercise is not necessary. He wants to put the amendment bill to the vote before Legco goes into recess in mid- July. Law Society president Junius Ho Kwan- yiu urged the government to withdraw the bill and launch a full consultation.

Swire Pacific (SEHK: 0019) says its wholly-owned subsidiary is in talks to sell a "significant" property asset that could lead to a disclosable transaction under listing rules. The announcement was released after Sing Tao Daily reported that Singapore's Mapletree Investments is in talks to buy Swire's Festival Walk centre in Kowloon Tong, involving HK$22 billion. Swire Pacific said yesterday that Swire Properties "is in discussions which could lead to the disposal of a significant investment property asset". If the talks lead to an agreement, it will be a disclosable transaction, it said. A spokeswoman for Swire Properties declined to identify the property and also declined to comment on the news report. Festival Walk, which opened in 1998, comprises 980,089 square feet of shopping space and 228,665 square feet of offices. An independent valuation of the retail arcade as of March 3, 2010 came in at HK$14.45 billion, while the office portion was valued at HK$1.45 billion, according to information Swire Properties provided to Hong Kong Exchanges and Clearing (SEHK: 0388) last April. Swire Pacific planned a HK$20.84 billion initial public offering for Swire Properties, but last May called it off because of a downturn in market sentiment. The Festival Walk development was jointly built by Swire and Citic Pacific (SEHK: 0267) at a cost of HK$5 billion. The two companies paid HK$2.85 billion for the site at a government land auction in 1993. Swire owns 100 per cent of the property since it bought the 50 per cent stake from Citic Pacific for HK$6.18 billion in January 2006. Swire Pacific, which also owns Pacific Place mall in Admiralty and Cityplaza mall in Taikoo Shing, had studied a spin-off of Festival Walk shopping mall into a real estate investment trust in 2007, but no plan was finalised. Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services, said strong liquidity and low interest rates have encouraged foreign capital flowing into Hong Kong to buy hard assets. Mapletree Investments is a unit of Temasek Holdings, Singapore's state-owned investment company.

A former top leader of Hong Kong's biggest party, Greg So Kam-leung, yesterday became the first government minister with open political affiliation after he was formally appointed as secretary for commerce and economic development. So, who gave up his Canadian citizenship to secure a position in the political elite in 2008, remains a rank-and-file member of the pro-Beijing Democratic Alliance for the Betterment and Progress of Hong Kong, but said yesterday his affiliation would in no way affect his decisions as a minister. Senior civil servants and political analysts saw the appointment of So, who used to be a vice-chairman of the party, as a "compromise" and not a move towards party-led government. After heading the Commerce and Economic Development Bureau as acting secretary since March when his predecessor Rita Lau Ng Wai-lan stepped down for health reasons, So will lead the bureau until June 30 next year when the tenure of Chief Executive Donald Tsang Yam-kuen and his cabinet ends. Chinese University political scientist Ivan Choy Chi-keung said: "With only a year left for the government it is hard to find a replacement. Instead of thinking that a trend has been set for people with a political background taking up senior posts, I would say it is only a compromise." Since Lau quit after surgery for colon cancer, the government has approached a number of people to fill the post, including the bureau's permanent secretary, Andrew Wong Ho-yuen, and his predecessor, Yvonne Choi Ying-pik, who retired last November. "With such a short tenure, it is unfair to ask an administrative officer to give up a permanent post or ask a retiree to return to work," Choy said. Senior Government Officers Association chairman So Ping- chi did not believe the appointment meant more people with political backgrounds would become ministers. "Greg So was given the job because many people declined to take up the post as it will only last for a year," he said. "Since he was the undersecretary, it is normal that he was picked as he is familiar with what is going on in the bureau. He has been there for three years already," he said. At a press conference on the appointment yesterday, So was asked whether he would favour any political party given his relationship with the DAB. "My working philosophy has been practical and impartial. And during my tenure in the government, I've never been involved in the party's affairs," he replied. There are plenty of challenges ahead for So - the competition bill, development of the new cruise terminal and reform of RTHK. Ironically, So's party is threatening to block the proposed competition law unless it is substantially changed to meet its demands, including exempting smaller companies from being regulated and confining the power to initiate a lawsuit only to a future competition commission. Political parties had mixed views about his appointment. The DAB, Civic Party and Democratic Party all welcomed it and hoped that So would listen to community voices. But People Power lawmaker Wong Yuk-man said So should cut his ties with the DAB. "When Elsie Leung Oi-sie was appointed secretary for justice in 1997, she resigned from the DAB," he said. Leung was a founding member of the party. New People's Party legislator Regina Ip Lau Suk-yee did not have high hopes for the new secretary. "His tenure is only short - he's just a temporary replacement," she said.

Beijing's plan to cut import tax on luxury goods is expected to pour cold water on sizzling spending in Hong Kong's top tourist hot spot Causeway Bay. The Ministry of Commerce said yesterday that it had reached a consensus with other government departments on lowering import tariffs to spur domestic consumption and restore trade imbalances, key objectives of the nation's 12th five-year plan to 2015. Although the extent of the potential cut is unclear, some analysts estimate that tariffs on big-ticket items such as watches, jewellery, gold and silver ornaments could be reduced to as little as 2 per cent from 15 to 30 per cent. This effectively means mainland tourists, the darling of Hong Kong retailers, will no longer have to flock to tax-free shopping districts such as Causeway Bay and Tsim Sha Tsui for luxury goods. Stanley Lau Chin-ho, deputy chairman of the Federation of Hong Kong Industries, said the city's retail market, which relied on mainland visitors, was exposed to growing risks. The potential new tax regime may put a dent in the city's retail sales, which rose by 28 per cent in April - the sharpest growth since 1991 - and reshape the retail rental market as well as retailers' strategies, he said. But the pain expected to be inflicted on landlords is unlikely to win sympathy from many small businesses who have been pushed out of the district. "Rents in Causeway Bay have sky-rocketed to an extent that it is dominated by watch, jewellery and gourmet dried seafood shops. It is so difficult to find a place to have a bowl of wonton noodles," Lau said. "It is unhealthy to rely on such a narrow range of merchandise." High rents have claimed yet another victim in Causeway Bay, with the popular Gourmet Coffee shop in Hysan (SEHK: 0014) Avenue due to close tomorrow after the landlord raised the rent by 50 per cent. Gourmet Coffee co-owner Robert Chan, who opened the sandwich and coffee shop 13 years ago, said yesterday that demand for retail space was so strong that landlords preferred leaving properties unoccupied rather than accept lower rents. "How many cups of coffee will have to be sold to generate sufficient income to offset nearly HK$100,000 in rent a month?" Chan said of the new rental charge that has given him sleepless nights for the past two months. "On top of rents, coffee beans, bread rolls and wages have been inflated by at least 40 per cent in the past year." He is seeking to relocate the cafe in the area. Gourmet Coffee is among a number of restaurants in Hysan Avenue destined to relocate or fold as its biggest landlord, the Lee family, is raising rents and upgrading further the Lee Gardens shopping mall for luxury brands. Hong Kong emerged as the world's second-most expensive location after New York after recording a 46 per cent jump in retail rents to US$1,697 per square foot in the first quarter of this year over the previous quarter, according to a CB Richard Ellis survey this month. Helen Mak, a director of retail services at real estate brokerage Colliers International, said high rents in Causeway Bay showed no signs of abating as too many retailers were chasing too few spaces. However, she said the potential new tax regime could have an adverse impact on Hong Kong retail sales and rental growth, and that had prompted a rethink on the sustainability of Hong Kong landlords' rental strategies. In Causeway Bay, for example, there was growing realisation that a mix of shops, ranging from food to high-end goods should be provided so that local consumers had more choice. "It is an alarm siren," she said of the planned tax policy. "Hong Kong will have more competition and if landlords do not rethink their rental strategies, the sustainability of rent levels is in doubt."

Loans and relocation accommodation would be provided for villagers affected in a crackdown on illegal structures, the secretary for development said yesterday. But as Carrie Lam Cheng Yuet-ngor explained the new sweetener for the enforcement policy in the Legislative Council yesterday, thousands of villagers from the New Territories led by rural affairs body the Heung Yee Kuk staged an hour-long rally outside. Police said there were 1,700 protesters, but organisers claimed there were 5,000. Despite the opposition, the minister said the policy would be launched in a year and no more consultations would be held. "The government has all the power to enforce the law ... there's no such thing as a consultation to make everyone happy," Lam said. She said three measures would help villagers, especially those who built extra storeys on top of the standard three-level format. An existing building safety loan scheme would provide cash, capped at HK$1 million per house, to residents who have financial difficulty in demolishing illegal structures. The elderly and those who satisfy a means test will receive interest-free aid. The Housing Department will provide public rental housing to villagers if they are forced out of the storeys that must be demolished. For old houses that contain extra storeys that were topped up later, Lam said owners would be encouraged to rebuild them because of bad designs. Such applications would go through a streamlined procedure. Kuk chief Lau Wong-fat said the kuk would not accept a crackdown on homes on so-called old house lots since these leases did not contain a building height limit. There are up to 1,000 such houses that are built higher than three storeys, according to official estimates. "The kuk is studying a judicial review. When the Buildings Ordinance was applied to the New Territories 50 years ago, the law was only in English. Villagers did not understand it and the British did not consult us or publicise the law ... Villagers were not aware of the rule," he said. Lam said the government would leave the courts to make a decision. "This is a building safety issue, which I hope won't be interpreted as a measure targeting New Territories villagers ... In fact, many village houses have been sold and are occupied by urban people, she said. Leung Fuk-yuen, a kuk member that organised the protest yesterday, warned of further action. Villager and protester Man Ho-kan from Yuen Long doubted the need to pull down extra floors on top of the three-storey village house he inherited from his grandparents. Each floor is 110 square feet in area.

 China*:  July 1 2011  Share

Canada's tourism industry is seeking to attract more Chinese tourists by providing quality products, said Greg Klassen, senior vice president for Marketing Strategy and Communications at the Canadian Tourism Commission (CTC). Canada has launched a "Say Hello to Canada" campaign earlier this year to introduce Canada to Chinese, Klassen told Xinhua during an interview on the occasion of the first anniversary of the Approved Destination Status (ADS) agreement between China and Canada. "We hope that will attract a great number of Chinese travelers to learn about Canada, understand it, and want to take a trip here," Klassen said, adding that the campaign will be running into this autumn. Canada has seen a quick surge in the number of Chinese tourists since the agreement was signed on June 24 last year, compared with the results of the previous several years, when only a one-digit increase was recorded. According to figures released by the CTC, trips to Canada by Chinese travelers increased by 21.3 percent in 2010. According to information the China National Tourism Administration got from main travel agents for outbound trips in Beijing, Shanghai, as well as Guangdong and Zhejiang provinces, Chinese tourists are satisfied with the tourism products Canada provides as a whole, while some complaints exist in terms of airfare. Klassen admitted that the airfare is expensive, but he thinks that once more airlines offer flights to Canada, the prices will go down. "But we always focus on making sure regardless of some of our higher prices, relative to some other markets, that we earn that price by providing value to Chinese travelers," he added. Klassen said in order to provide better service to Chinese visitors, Canada still has a lot to do, such as making sure some services are provided in the Chinese language, providing more special foods in restaurants and hotels to accommodate Chinese people's eating habits, and Chinese-language television in hotel rooms. 

Prices for solar power equipment are likely to resume their decline later this year as production exceeds demand, according to energy executives at an industry conference in Xining. A major clear-out of excess inventory - from polysilicon to panels - by producers pushed prices down by 20 to 40 per cent across the supply chain in the past five months. "I believe solar component prices will stabilise in the next three to four months before they resume their downtrend," Liu Junfeng, deputy director general of the National Development and Reform Commission's Energy Research Institute, told the CBI China Solar Industry Leadership Summit. He said analysts were projecting this year's global demand for panels to reach 18 gigawatt to 20 GW, up from earlier estimate of 15 GW to 17 GW. Last year's installation was 16.6 GW. One GW of capacity is enough to meet the needs of around 800,000 mainland households for a year. Liu's optimism is shared by analysts at Fitch Ratings. Increasing demand for clean and safe energy, the improved efficiency of solar panels and lower equipment prices will spur demand in the medium term, the rating agency said. The silicon-based solar industry has a long supply chain that begins with the manufacture of polysilicon, followed by wafers, cells and panels. Polysilicon prices have fallen 21 per cent between the end of last year to June 8, according to a Macquarie Securities research report. Meanwhile, wafer prices slumped 39 per cent, cell prices slid 31 per cent and panel prices fell 19 per cent. Uncertainties around Italy's government subsidy for panel installation and possible cuts in German subsidies in July caused buyers to delay orders and producers to dump excess inventory in the past five months. Germany installed 7.4 GW of solar panels last year, accounting for 45 per cent of global demand. Italy was the second-biggest market with 2.3 GW of installations. Mainland solar power equipment makers are affected most by European subsidy policies, since they together supplied 48 per cent of the world's solar panels last year. Panel production capacity is expected to exceed demand by between 13 GW and 35 GW in 2015, based on the projections of 15 industry research organisations, said Lei Ting, vice-president of Jiangsu province-based Suntech Power Holdings, the world's biggest maker of solar panels. The oversupply explains continuous equipment price declines, which could mean solar power will be as cheap as coal-produced electricity in a few years in Europe. On the mainland, this may not happen until the end of the decade due to low state-set prices for coal-produced power. Germany earlier considered cutting subsidised prices for solar power by up to 15 per cent starting in July, but did not do so since demand fell short of a threshold for a reduction under a law passed in January. Such subsidised prices are higher than those of conventional pollution-prone energy, in order to allow developers to make a profit even though they bear the more costly investment costs of solar panels. The Macquarie report said that brisk demand from Germany following the steep price cuts in the past few months could stimulate installations, which could reach 7 GW in the 12 months to September this year. The projected large installation volume could trigger an 18 per cent to 21 per cent cut in German solar power prices in January next year, it said. In Italy, the government last month announced caps on subsidised panel installations, as well as gradual solar power price cuts for the next five years, to put a ceiling on the government's financial burden.

Volumes set to rise at Shanghai Port - Shanghai International Port (Group) Co expects the volume of business in the Port of Shanghai to rise by about 10 percent a year during the next five years. Shanghai port, the world's busiest for containers, expects business volumes to rise about 10 percent annually for the next five years. That will come as manufacturers open plants in western and inland China in search of lower-cost labor. Rising production in these regions has benefited Shanghai because of increasing cargo volumes along the Yangtze River, said Chen Xuyuan, president of the harbor operator Shanghai International Port (Group) Co, in a June 23 interview. The river, Asia's longest, stretches 6,397 kilometers across China before meeting the East China Sea at Shanghai. The Yangtze River Delta "will continue to be the main region driving China's economic expansion", Chen said. The river handled 1.34 billion tons of cargo in 2009, more than triple the volume in 2000, according to government data. Shanghai's container traffic may rise 12 percent this year, enough to retain its crown for cargo-box volumes over Singapore, Chen said. Volumes leapt 16 percent in 2010 as the end of the global recession triggered a surge in shipments of Chinese-made auto parts, furniture and toys to the United States and Europe. "Last year, we saw incredible growth," Chen said. "This year, traffic is growing at a more normal and healthy pace." Shanghai handled 12.7 million containers in the first five months of this year, compared with 12.1 million by Singapore. Apple Inc supplier Foxconn Technology Group and Lee & Man Paper Manufacturing Ltd. are among the companies to have opened factories in inland provinces because of lower wages and government incentives. The government has encouraged the trend to spread economic growth beyond coastal regions including the Pearl River Delta in Southern China. Shanghai last year surpassed Singapore as the world's busiest container port.

Chinese officials have denied adopting a looser national standard of milk quality and claim to be developing grading levels for raw milk to guide the production of differentiated products. In response to recent reports that China's dairy industry has the world's lowest standards, the Ministry of Health said the new standard for the maximum limit of bacteria in raw milk is stricter than before. According to a notice issued by the ministry, the original standards of bacteria counts consisted of four grades, from 500,000 per milliliter to 4 million per ml instead of the one standard of 500,000 per ml reported by media. "The new milk quality standards implemented in March 2010 adjusted the standard to 2 million, which is more stringent than before, and has raised the threshold for raw milk," Meng Jin, a member of the working group of experts on dairy safety standards, said in the notice. In response to the criticism that the minimum requirement for protein content had been lowered from 2.95 grams per 100 g of milk to 2.80 g, the notice attributed the change to the ministry's survey result that 90 percent of raw milk produced in North China in 2008 was below the standard of 2.95. "The survey data comes from 2008, when the melamine-tainted baby formula scandal broke. The proportion of qualified raw milk should have increased a lot by now," Wang Dingmian, chairman of the Guangzhou Dairy Association, told China Daily on Sunday. According to the notice, compared with the 2.80 standard for protein content in raw milk, the indicator in pasteurized milk and sterilized milk must be no lower than 2.90. Industry experts said the widely taken approach of manufacturing milk products of higher protein content with raw milk of lower protein content is done by artificial post-processing. "The country set a protein content standard for raw milk which is in contradiction with the standard in end products. It shows the country permits the adding of material and is forcing dairy firms to cheat," Wang said. "And the added material cannot be milk protein derived from other raw milk. In most cases, it is protein powder." Food safety experts said allowing the addition of material may pose dangers to milk security. "The 2008 melamine-contaminated baby milk scandal was precisely caused by dairy firms adding the chemical into watered-down milk powder to cause it to appear to have a higher protein content," said Sang Liwei, a food-safety lawyer and the China representative of the NGO Global Food Safety Forum. That year, nationwide outrage exploded over the dangerous milk that made 300,000 infants sick and killed six children, who died of kidney stones and other kidney damage. Wang Zhutian, deputy director of the Fortified Food Office under the Chinese Center for Disease Control and Prevention and the leader of the working group of experts on dairy safety standards, said in the notice of the ministry that they are tracking and evaluating the implementation of the national dairy safety standards and will make appropriate improvements. The ministry also encourages dairy firms to purchase raw milk with a flexible policy to pay high prices to farmers for high-quality milk and to set grading standards for bacteria counts when buying raw milk.

China placing priority on biotechnology - A company exhibits biodiesel fuel at an expo held in Beijing. From 2011 to 2015, the biotechnology industry is expected to generate 1 million jobs and reduce emissions of the most common pollutants by 10 percent, said Ma Hongjian, deputy director of China National Center for Biotechnology Development. China will spend 2 trillion yuan ($308.5 billion) on science and technology, making biotechnology a major priority, in the next five years, Chinese State Councilor Liu Yandong said at the ongoing 2011 International Conference for Bio-economy (Bio Eco 2011). The Chinese Government will work to further combine biotechnology with economic development and with improving ordinary people's livelihood, Liu said. "The development priorities of the 12th Five-Year Plan (2011-2015) - biopharmacy, bio-engineering, bio-agriculture and biomanufacturing - will bring benefits to Chinese people." In the next five years, China will further use biotechnology to prevent disasters or alleviate the harm caused by them, to protect the environment, to employ "green" construction methods and to control climate change. Meanwhile, the latest innovations in biotechnology should be relied on to guarantee domestic standards are met for nutrition, hygiene, healthcare, food and drug safety and disease diagnosis and prevention, Liu stressed. Liu's opinion was echoed by Percy W. Misika, a United Nations Food and Agriculture Organization (FAO) Representative in China. Misika contended that the energy shortage is getting increasingly severe in the world. Biotechnology should be employed in campaigns to make food safer and to combat climate change. During the 12th Five-Year Plan period, the Chinese Government will spend 20 billion yuan on innovative medicine, on the cultivation of new varieties of genetically modified organisms and on the prevention and control of viral hepatitis and other infectious diseases, according to Ma Hongjian, deputy director of the China National Center for Biotechnology Development. Biotechnology has become a strategic pillar industry for China. From 2011 to 2015, it is expected to generate 1 million jobs, extend people's life expectancies by one year and reduce the infant mortality rate to 12 percent, as well as reduce emissions of the most common pollutants by 10 percent, Ma elaborated. Huang Xingguo, mayor of Tianjin municipality, said the city has become a center for the production of biotechnology products in China. Bio Eco 2011 is being held in Tianjin from Sunday to Tuesday. Sponsored by both the Tianjin Municipal government and 14 state ministries, the conference has the motto: "Develop the bio-economy, improve people's livelihoods".

Proposal Floated to Lower Chinese Tariffs on Luxury Goods - China's government is considering a plan to lower tariffs on some luxury goods, an official said, a move that could bolster imports—if it's able to overcome political resistance in a society increasingly concerned about the gap between rich and poor. On Tuesday, the state-owned China Daily newspaper quoted a spokesman for China's Ministry of Commerce, Yao Jian, as saying that his and other key ministries plan to propose cuts in tariffs on imported luxury goods to China's cabinet. The reductions are just "a matter of time," the paper quoted Mr. Yao as saying, without adding details. His comments echoed remarks he made at news conference earlier this month. Other agencies, including the powerful Ministry of Finance, have yet to publicly confirm the planned cuts. The Commerce Ministry and the Finance Ministry didn't reply to requests for comment Tuesday. A cut in the tariffs could be a boon for luxury goods companies, though it's unclear by how much tariffs would fall and exactly which products might be included if a measure is adopted. China is the world's fastest-growing luxury market and is poised to become the world's largest by 2020, according to investment research group CLSA Asia-Pacific Markets. China's luxury tariffs tack on an extra 10% to 30% for imported products like handbags, wine, watches, and cosmetics. As a result, Chinese luxury consumers do much of their buying in Hong Kong and in foreign countries. More than 50% of luxury purchases made by Chinese shoppers in 2010 were made overseas, according to consulting firm Bain & Co. China's government has vowed to boost imports, in part by lowering tariffs, in response to heavy pressure from trading partners and as part of efforts to refocus its economy on domestic consumption instead of exports and investment. Trimming luxury tariffs would be politically fraught. Some government officials, particularly at the Finance Ministry, would likely oppose such a move, given concerns about already growing fiscal constraints. More important, tariff cuts that would benefit only a sliver of wealthy consumers would seem to clash with the Chinese leadership's emphasis in recent years on trying to narrow a widening wealth gap. By implementing the policy, "the government would attract criticism that it is serving the needs of the rich," said Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation, which operates under the Commerce Ministry. Representatives of several companies selling luxury goods, such as L'Oréal SA, said they are not expecting lower tariffs any time soon. The European Union Chamber of Commerce in China, whose members include LVMH Moët Hennessey Louis Vuitton and Chanel, also doesn't expect imminent changes on taxes on high-end products, according to Dirk Moens, the chamber's secretary general. "We would welcome an initiative taken by the Chinese government, but are not advising our members to make any changes to their business strategies at this time," Mr. Moens said. Chloe Reuter, who runs ReuterPR, a Shanghai-based consulting company for luxury-brand communications said most luxury brands aren't reacting to rumor tariff changes because they've heard similar reports before over the years. If there were any tariff reduction, luxury companies expect it would be "phased in," starting with changes to pricing on cosmetics, alcohol and tobacco, said Torsten Stocker, an analyst at Cambridge, Mass., consulting firm Monitor Group.

Hong Kong*:  June 30 2011  Share

Greg So Kam-leung has been appointed secretary for commerce and economic development to succeed Rita Lau Ng Wai-lan, who resigned for health reasons, the government announced on Tuesday. So, the undersecretary for commerce and economic development, takes up the new position immediately. A government spokesman said the Central People’s Government had approved So’s appointment on the recommendation of Chief Executive Donald Tsang Yam-kuen. So, 52, has been acting secretary since Lau took sick leave in March and resigned in April. Lau said she had had an operation to remove a colon tumour and needed further treatment. Tsang praised So, saying he had a comprehensive understanding of the bureau’s role. “Greg is diligent, receptive and fully devoted to serving the public,” Tsang said. “I am confident he will do well in his new position.” So is a member and former vice-chairman of the Democratic Alliance for the Betterment and Progress of Hong Kong. He was appointed undersecretary for commerce and economic development in 2008. Before joining the government in 2008, So practised law for more than 20 years in Canada and Hong Kong. He is married and has a son and two daughters.

Nearly 300 solo travellers from the mainland arrived in Taiwan on Tuesday, officials said, the first individual tourists in more than half a century after Taipei lifted a long-standing ban. The first mainland tourists travelling individually, and not as part of a supervised tour group, hold up gift bags as they arrive at Songshan airport in central Taipei on Tuesday. Travel between the island and the mainland stopped at the end of the civil war in 1949, and mainland tourists were previously only allowed to visit Taiwan in groups due to official concerns they might overstay their visas to work illegally. Individual mainland tourists are expected to generate up to NT$19.5 billion (US$673 million) in additional tourism income each year, according to authorities, providing a significant boost to the holiday industry in Taiwan. The tourists from Beijing, Shanghai and Xiamen were greeted with aboriginal dances, gifts and snacks when they landed in three Taiwanese cities in the late morning. “The opening of solo mainland tourists will give a new boost to Taipei city’s tourism development,” said municipal tourism chief Chao Hsin-ping at a welcoming ceremony at the Taipei airport. More than 170,000 mainlanders are expected to visit the capital city on solo trips each year, generating at least NT$2.4 billion in revenue, she said. Initially, Taiwan will allow 500 individual arrivals from the three cities per day, in the hopes that the visitors will help promote peace across the Strait. “This is my second trip to Taiwan and I want to visit the bookstores and see more of Taiwanese culture this time,” said Yan Ting, a 27-year-old woman from Xiamen, who was visiting the towering Taipei 101 skyscraper. Maa Shaw-chang, deputy secretary-general to Taiwan’s quasi-official Straits Exchange Foundation, told reporters last week: “The Chinese tourists will all be peace ambassadors.” Ma Zhiqiang, general manager of the Xiamen Chunhui International Travel Service, said young and middle-aged people would be most drawn to individual travel. “Young backpackers don’t like to be restricted to group tour schedules and they prefer to avoid crowded scenic spots and choose personalised itineraries,” Ma said. Taiwan’s United Daily News reported on Saturday that solo mainland tourists may be allowed to visit the island’s parliament. Travel between the two sides has boomed since Beijing-friendly President Ma Ying-jeou came to power in 2008 in Taiwan, pledging to boost trade links and tourism. A blanket ban on mainland travel to Taiwan was lifted by the two sides the same year. Last year, more than 1.63 million mainland tourists visited Taiwan – most of them on organised group tours – a rise of 67 per cent from a year before, making the country the biggest source of visitors to the island, according to Taipei.

Hollywood star Michelle Yeoh Choo Kheng, who plays pro-democracy champion Aung San Suu Kyi in an upcoming film, has been deported by army-dominated Myanmar and blacklisted, an official said on Tuesday. “She did not have the chance to enter Myanmar again. She was deported straight away on the first flight after arriving at Yangon International Airport,” a Myanmar official, who did not want to be named, said. “She’s on the blacklist now,” a second official said, declining to say why. The Malaysian-born former Bond girl met the Nobel Peace Prize winner at her Yangon home in December after shooting scenes with French director Luc Besson in Thailand for the production, which has been kept under close wraps. The film is expected to be released later this year. Suu Kyi was freed in November after seven straight years of house arrest, less than a week after an election that critics said was a charade aimed at preserving military rule behind a civilian facade in Myanmar. Suu Kyi, who turned 66 this month, has won international acclaim for her peaceful resistance in the face of oppression. In 1990 she led her National League for Democracy party to a landslide election win that was never recognised by Myanmar’s military rulers. She boycotted last year’s vote, saying the rules were unfair. Yeoh, 48, a former Miss Malaysia, shot to international fame when she co-starred with Pierce Brosnan in the 1997 James Bond film Tomorrow Never Dies as a tough but beautiful Chinese spy. She then starred in Ang Lee’s Crouching Tiger, Hidden Dragon – a Chinese-language martial arts epic that was an international hit – and Memoirs of a Geisha based on the best-selling novel by Arthur Golden.

Beijing's liaison office in the city has suggested the Hong Kong government's plan to scrap by-elections should undergo big changes. As a result, the Hong Kong administration, which has also come under pressure from its allies over the issue, looks set to make a U-turn on the controversial proposal. Under the proposal, no by-election would be held for any Legislative Council geographical constituency seat or any of the five so-called super-seats in the district council functional constituency to be filled next year. Instead, the candidate next in line in terms of the number of ballots his or her team received in the election would fill the vacancy. The Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) - the biggest pro-Beijing and pro-government party - has staunchly defended the proposal but yesterday called for a rethink, as did Beijing loyalist and executive councillor Cheng Yiu-tong. A person close to the liaison office said it was floating alternatives in discussion with pro-Beijing figures "to avoid political tension". "Two options are being pondered, including allowing a midterm vacancy arising from death or serious illness to be filled by a by-election. Another option is to fill the vacancy with the next-in-line candidate on the same party's list," the person said. The second option would prevent by-elections such as those called when five pan-democrats quit in 2010 to trigger what they saw as a referendum on constitutional reform. The DAB said the suggestion of drawing the replacement lawmaker from the same team as the person who originally held the seat was worth studying. "There were some lawmakers raising the view at Legco bills committee meetings that a candidate from the same team should take over the vacancy," party chairman Tam Yiu-chung said. "Their argument was that the government proposal to have the next-best-placed candidate taking over might distort voters' will. My opinion is that this proposal is worth studying." Cheng urged the government to arrange by-elections for seats left vacant by the death of legislators. Two Hong Kong members of the Basic Law Committee agreed. Professor Albert Chen Hung-yee said the government should not ban by-elections called because a lawmaker dies or is seriously ill. Lau Nai-keung said the amendment was intended to prevent legislators resigning to trigger "de facto referendums". Independent lawmaker Regina Ip Lau Suk-yee said Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung had suggested any amendment to the proposal would face legal problems. Secretary for Justice Wong Yan-lung defended the proposal for the first time after growing demands from pro-government lawmakers to do so. But Bar Association chairman Kumar Ramanathan reiterated that the proposal to replace by-elections was against the Basic Law.

Magazines warned over pictures of TVB actors - Vincent Wong, Yoyo Chen and Bosco Wong lodge complaints yesterday after being photographed by paparazzi at their homes. The Privacy Commissioner yesterday warned two entertainment magazines that they could face criminal liabilities if they took pictures of three TVB (SEHK: 0511) actors again. The warning came after the three actors lodged complaints to the watchdog after being photographed at their homes by paparazzi. Commissioner Allan Chiang Yam-wang said an initial study of the complaints made by TVB's Bosco Wong Chung-chak, Vincent Wong Ho-shun and Yoyo Chen Chi-yiu showed that two Next Media (SEHK: 0282) magazines might have breached a principle under the privacy ordinance which states that data collection should be done fairly and lawfully. The complaints involved Sudden Weekly, which published nude photos of Bosco Wong walking around his home, and Face, which ran intimate photos of Vincent Wong and Yoyo Chen at their home earlier this month. "If we confirm that it was a breach of law, we can issue an enforcement notice to the parties involved to [ask them to] rectify the situation," he said. "If they do not follow the enforcement notice ... that equates to a criminal offence." But Chiang acknowledged that the privacy law does not give him the power to impose fines on the magazines. He suggested the actors take civil action to seek compensation and said he would investigate and follow up the case. Hong Kong Performing Artistes Guild representative Astrid Chan Chi-ching accompanied the trio as they submitted their complaints with evidence to the commission's Wan Chai office and participated in a two-hour inquiry in the afternoon. The actors said they were considering further action. "Compensation is not what we want most," said Vincent Wong. "Our aim this time is to express our opinion on the unfair situation to the commissioner ... What we want most is a balance between press freedom and celebrities' privacy." TVB production resources controller Virginia Lok Yik-ling said that as tax-paying residents, the actors had a right to privacy. "Artists should enjoy respect for their privacy - as all taxpayers do," she said. The magazines did not respond to requests for comment. Chiang said it was worth reopening public discussion of two consultation reports by the Law Reform Commission - in 2000 and 2004 - which proposed legislation to protect people from media intrusion and stalking.

 China*:  June 30 2011  Share

Reducing import duty on luxury goods is only "a matter of time" as key ministries have reached general agreement on the issue, Yao Jian, Ministry of Commerce spokesman, told China Daily on Monday. The commerce and finance ministries are likely to submit a proposal on measures to promote imports to the State Council, the Cabinet, and this will include details on cutting duty on luxury items, Yao said. China has committed itself to doubling imports by 2015 to balance trade. Amid a decline in import growth over the past few months there were suggestions that the government was considering cutting duty on some luxury goods, such as cosmetics, cigarettes and alcohol. "The relevant authorities have, in principle, reached agreement on lowering import duty on some luxury goods to help boost imports, although there are differences of opinion on the specifics," Yao said, without elaborating. With rising disposable income and a growing brand awareness, China is expected to surpass Japan by 2012 as the world's largest luxury consumer market, with an estimated value of $14.6 billion, according to the World Luxury Association. But industry figures also reveal that Chinese consumers spend four times more on luxury goods abroad than at home, thanks to high import duty and taxes. "Cutting duty (on luxury goods) is a general trend," Liu Huan, an adviser to the State Council and deputy director of the School of Taxation at the Central University of Finance and Economics, said. "It should stimulate domestic consumption as consumers will spend more in the domestic market." Reducing duty will also mean that China honors commitments to the World Trade Organization (WTO), he added. Since China's WTO entry in 2001, import tariffs have dropped to 9.8 percent, on average, from 15.3 percent. But tariffs on luxury goods are 30 percent, on average, with import duty hitting 65 percent on wine. China vowed late last year to increase imports to balance trade and ease pressure on yuan appreciation resulting from its large surplus. The Ministry of Commerce said that imports of luxury goods, and other items such as high-tech products, will be expanded. Manufacturers of luxury goods welcomed the planned duty reduction. "The tax cut will definitely help and improve our business in China. We are looking forward to it," Lutz Bethge, chief executive officer of Montblanc, told China Daily. China has been the largest market, since 2007, for the German-based manufacturer of writing instruments, watches and accessories. Taken together, import duty, value-added tax and consumption tax on imported goods, including luxury items, reached more than 1.25 trillion yuan ($193 billion) last year, accounting for 30 percent of China's fiscal income. But some experts doubt the effect of cutting duty. "Not all people can afford luxury goods and the majority of consumers are unable to buy them," Yang Zhiqing, deputy director of the School of Taxation at the Central University of Finance and Economics, said. Zhou Shijian, a trade expert at Tsinghua University, agreed. "Not only luxury goods but also ordinary items, needed for everyday life, should be included in any import duty reduction."

China, U.K. Forge New Trade Deals - U.K. Prime Minister David Cameron and Chinese Premier Wen Jiabao announced business deals between the two countries valued at £1.4 billion ($2.2 billion), as the men discussed ways to increase bilateral trade to $100 billion by 2015. "To achieve that, both countries must continue to make the case for mutual commitment to market access," Mr. Cameron said at a news conference at Downing Street during a five-day European tour by Mr. Wen. "The U.K. is one of the most open economies in the world, one of the easiest places to invest, to raise capital, to expand, and to export from. We are the natural home for Chinese investment into Europe." China's ambassador to the U.K. last week said China-U.K. trade was $50.1 billion last year. Among the deals announced Monday, U.K. energy firm BG Group PLC reached a memorandum of understanding with Bank of China Ltd. for a $1.5 billion credit line that BG says will be used to support its global growth plans, including in China. Beverage maker Diageo PLC was given approval to increase its holding in Chinese spirit company Sichuan Chengdu Quanxing Group Company Ltd. to 53%, a rare majority stake by a foreign firm in a Chinese company and a sign of increasing openness by Beijing. Diageo said steps are being taken to complete a 4% transfer for about 140 million yuan ($22 million). A British-government spokeswoman said U.K.-based Seamwell International Ltd. had signed a deal with China Energy Conservation and Environmental Protection Group to build an underground coal gasification plant and that U.K. design house Priestmangoode will open an office in the Chinese city of Qingdao. The leaders also agreed to expand trade cooperation outside of the big cities of Beijing and Shanghai and to encourage bilateral trade in services, the U.K.'s most competitive sector. And they agreed to foster opportunities for British companies to invest in infrastructure and other projects in China, and to streamline trade taxation between Britain and China, the U.K. said. During their meeting, Mr. Wen spoke of the need to rebalance China's economy, Mr. Cameron said. Trade with China represents a major opportunity for U.K. companies as China aims to boost domestic consumption, he said. Exports have fueled much of the country's economic growth in past years. Mr. Cameron said he welcomes Chinese investment in U.K. infrastructure projects. Mr. Wen said China hopes to expand its cooperation with other countries in high-speed railway projects. The men treaded lightly regarding human rights. Mr. Cameron said there is no "trade-off" between discussing trade or human rights with China, but that "political and economic development should go hand-in-hand." Mr. Wen said China aims to build a society based on democracy and the rule of law.

ICBC Financial Leasing Co., a leasing company held by China's biggest lender Industrial & Commercial Bank of China Ltd., Tuesday ordered 62 Airbus A320 aircraft at a ceremony in Berlin. Tom Enders, the head of the Toulouse, France-based division of European Aeronautic Defence & Space Co. NV, and Li Xiaopeng, chairman of ICBC, signed the agreement in the presence of Chinese Premier Wen Jiabao and German Chancellor Angela Merkel. Airbus also signed a skeleton agreement on A320 aircraft with China Aviation Supplies Import and Export Group Corporation.

Sino-British ties were free of historical disputes and burdens after Britain recognised Tibet as part of China, Premier Wen Jiabao told former British prime minister Gordon Brown yesterday. Wen met Brown (pictured), his predecessor Tony Blair and Chinese people living in London on Sunday after visiting the MG car plant in Birmingham and the birthplace of playwright William Shakespeare - Stratford-upon-Avon, where he was treated to a short theatrical performance. Wen described Brown and Blair as old friends, and praised Brown for contributing to Sino-British ties. "The most unforgettable thing is that you tackled our last historical issue when you were in office, that is the UK admitting Tibet is an inalienable part of China," Wen said. "Since then, China and the UK have no historical issues and burdens to deal with, and the two sides can co-operate." Brown's decision to recognise Beijing's direct rule over Tibet, made in 2008, was described by Zhu Weiquan, a senior Chinese official who was leading talks with Tibetan exiles, as being "in line with the universal position in today's world". Wen said China and Britain had continued to co-operate on many major issues, such as climate change, after Brown left office. In his meeting with Blair, Wen praised the former prime minister for continuing to promote Sino-British ties after leaving office. "You are an old friend," Wen said. "The UK government co-operated comprehensively with the Chinese government when you were still in office. "Maybe those who left office know better about the importance of Sino-UK ties. I have read many of the commentaries you wrote after leaving office. You did not promote Sino-UK ties only when you were in office."

High-speed rail link still has problems - With just four days until the 90th anniversary of the Communist Party, speedy rectifications are needed - The sleek new Beijing-Shanghai high-speed train treated the media to a trial run yesterday. Named "harmony" after President Hu Jintao's "harmonious society" slogan, the train with, reclining, airline-style business class seats and a no-smoking policy, cuts travel time on the 1,318-kilometre journey to under five hours. However, there were some problems. Fancy having business-class airline amenities and service on a train? You can have them all on the much-hyped, high-speed rail service between Beijing and Shanghai. Expect comfortable airline-style seats, all-smiles customer service and on-board entertainment, railway officials boast. But although most of what is promised seems to have been delivered, a test run on the 1,318-kilometre link yesterday showed some glaring inadequacies and hassles that needed to be addressed, just days ahead of the official launch of the 220.9 billion yuan (HK$265.7 billion) rail line. Billed as a great engineering feat, the line - which will almost halve travel times between the mainland's two biggest cities to less than five hours when travelling at the top speed of 300km/h - is scheduled to open on the eve of the 90th anniversary of the July 1 founding of the ruling Communist Party. Apart from minor complaints about the quality of the food and service, the more than 300 reporters from 150 overseas media outlets who were invited onboard yesterday, found making phone calls almost impossible on a train that was running at 300km/h. While the mobile signal appeared normal, a telephone call was often cut off every 10 seconds and internet connection through a 3G USB modem was frequently disrupted. Poor mobile reception may become a turn-off for airline customers who are eager to change the way they travel between the two cities. Keen to showcase the longest and most expensive high-speed rail connection in the world, the authorities deployed more train attendants, and raised the meal standard in an apparent attempt to woo the media pack. But both food and service were best described as mediocre during the outbound trip, which left Beijing South Railway Station at 9am and arrived at Shanghai's Hongqiao Station at 1.48pm after a non-stop trip. Things improved markedly on the return trip, despite the fact that it was a lot more crowded, with the number of carriages halved to eight. It took 30 minutes longer to return to Beijing after making several brief stops at some of the 24 stations on the route. Nonetheless, the round-trip ride was completed rather smoothly and well on schedule. With smoking banned onboard and good air-conditioning, the nearly 11-hour journey was more pleasant than expected.

The top legislature has reviewed the first draft amendment to the country's military conscription law in 13 years in the hope of recruiting more tech-savvy graduates to master upgraded weapons and modern warfare techniques, Xinhua reported yesterday. In the draft amendment to the Military Service Law submitted to the National People's Congress Standing Committee yesterday, an article which stipulated that "full-time students can defer their military service" was replaced by "university graduate recruits with outstanding performance in the army may be directly promoted to active-duty officer posts", Xinhua reported. Citing a National Defence Ministry source, Xinhua said the country could use more university students as the armed forces were modernised because they could master the latest weapons and warfare techniques. It also said that university students who enlisted for active service could resume their studies within two years of leaving the military, which is pushing the maximum age for recruitment to 24. Xinhua said most People's Liberation Army recruits today were high school graduates. China's military began enlisting university graduates in 2001. By the end of 2009, there were 130,000 university-educated soldiers in the PLA. The change could see the PLA seek more recruits from among the country's booming population of university graduates. Meanwhile, the top legislature also heard national audit reports of 53 ministries and central government affiliates, including the Red Cross Society of China. National Audit Office head Liu Jiayi said it had established 139 leads on cases of serious embezzlement, the Procuratorate Daily reported on its website. Of those, 32 cases were found in the finance sector, with 19 involving 743 million yuan (HK$894 million) in cash and three others involving more than 50 billion yuan handled via internet banking. At the Red Cross Society of China, government auditors found almost 2.2 million yuan of spending and more than 4.2 million yuan of income failed to comply with internal financial disciplines, China News Service reported. It also reported that the Finance Ministry had approved about 292 million yuan of the society's 2010 budget.

 *News information are obtained via various sources deemed reliable, but not guaranteed