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November 14, 2008

Immigrant-Owned Businesses Provide Important Contribution to U.S. Economy - Immigrants are 30 percent more likely to start businesses than non-immigrants

Washington, D.C. –The Minority Business Development Agency (MBDA) and the Small Business Administration (SBA) join together to share the report, “Estimating the Contribution of Immigrant Business Owners to the U.S. Economy” by Robert W. Fairlie, PhD, professor of economics at the University of California Santa Cruz at an event held at the Department of Commerce from 10:00 am through 12:00 pm. The study, funded by SBA’s Office of Advocacy, finds that immigrants are nearly 30 percent more likely to start a business than non-immigrants, representing 16.7 percent of all new business owners in the United States.

There are approximately 1.5 million immigrant business owners in the United States, representing 12.5 percent of all business owners. Immigrant business ownership is geographically concentrated in a few states, such as California, New York, New Jersey, Florida and Hawaii. Nearly 30 percent of all business owners in California are immigrants. One quarter of all business owners in New York are foreign-born and one-fifth of all business owners are foreign-born in New Jersey, Florida and Hawaii.

“U.S. Census figures predict that by 2050, the United States will be a majority-minority country. This growth will be fueled by immigrants-specifically people of color,” says Ronald N. Langston, National Director, MBDA. “Some fear this change and others complain about the burden and cost of immigration,” he adds. “But, this report illustrates the positive rewards of embracing inclusion, diversity and minority entrepreneurship.”

“This report is the first time that immigrant business ownership rates and immigrant-owned businesses contributions to the economy have been studied in detail,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. “These findings can make a significant contribution to public policy debates,” he added.

Although Mexican immigrants make up the largest percentage of immigrant business owners, the top five countries of origin also include Korea, India, China and Vietnam. Immigrants also own businesses that range from low-skill businesses such as retail and wholesale trade to high-skill jobs like technology and engineering. In fact, approximately 25 percent of engineering and technology jobs started in the past decade were founded by immigrants. These specific firms had more than $52 billion in sales and hired 450,000 workers, according to the report.

About the Minority Business Development Agency (MBDA)

MBDA, http://www.mbda.gov, an agency within the U.S. Department of Commerce, serves minority entrepreneurs across America who are building and growing enterprises. In doing so, minority-owned firms are better equipped to create jobs, impact local economies and compete successfully in domestic and global marketplaces. With a nationwide network of more than 40 business centers and strategic partners, MBDA assists minority entrepreneurs and business owners with consulting services, contract and financing opportunities, bonding and certification services, building business-to-business alliances and executive training.

About SBA’s Office of Advocacy

The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The presidentially appointed Chief Counsel for Advocacy advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. For more information, visit www.sba.gov/advo, or call (202) 205-6533.

February 25, 2007

Hong Kong Manufacturers Enjoy Priority in PRD Power Supply Increase

Guangdong plans to increase its installed capacity by 8.35 million kw this year to ease the problem of power shortage, which has forced many factories to "open for three days and close for four days" a week. Hong Kong manufacturers in the PRD will enjoy priority in electricity distribution.

Guangdong's power shortage has been a major headache for enterprises, including Hong Kong manufacturers, who find the practice of "opening for three days and closing for four days" a week unacceptable because it affects their normal production process. In light of this, measures have been taken in recent years to give Hong Kong manufacturers priority in power supply. Under these measures, Hong Kong companies enjoy shorter power cutoff hours and more prompt service. In the event that their power supply is interrupted, they can notify the local foreign trade and economic cooperation department and their problem would be resolved promptly.

Demand for electricity in Guangdong will continue to grow rapidly and steadily this year. Total power consumption is expected to reach 333.9 billion kwh, an increase of 12% year-on-year. Maximum load demand will reach 56 million kw, up 13% year-on-year. Of this, 46.5 million kw are subject to overall planning, up 24% year-on-year. With the increase in installed capacity by 8.35 million kw this year, the problem of power shortage in the province could be eased.

Guangdong will see power generation projects going into operation in Guangzhou, Shenzhen, Zhuhai, Huizhou, Shanwei and other places this year. Three of these projects have 2 x 600,000 kw generating units. Each of them will increase installed capacity by 1.2 million kw and flue gas desulfurization capacity by 1.2 million kw. The three projects are: the installation of generating units Nos. 1 and 2 in the first phase of the Shanwei Power Plant at a cost of Rmb580 million; the installation of generating units Nos. 3 and 4 in the first phase of the Zhuhai Power Plant at a cost of Rmb500 million; and the installation of generating units Nos. 1 and 2 in the first phase of the Huilai Power Plant at a cost of Rmb600 million. Following the completion of these projects, except for the January-April dry season when a small power shortage is to be expected, power supply will be basically well-balanced for the rest of the year under normal circumstances. Overall, the year will see an easing of power shortage.

Proven Track Record Needed When Applying for Foreign-Invested Design Enterprise Qualifications

On 1 February, the Ministry of Construction and Ministry of Commerce jointly issued the Implementing Rules for Regulations on the Administration of Foreign-Invested Construction Engineering Design Enterprises. The new rules set strict standards for the application and verification of qualifications of foreign-invested construction engineering design enterprises.

Under the new rules, when applying for verification of qualifications, foreign-invested construction engineering design enterprises must not only meet the necessary professional requirements, but must also provide documents supporting their track record as foreign service suppliers outside China as well as qualification certificates of individual registered architects and engineers.

As required by the Ministry of Construction, foreign service suppliers should be enterprises engaged in construction engineering design or natural persons who have obtained relevant professional qualifications in their own countries or regions. While foreign enterprises must have proven track record as construction engineering design enterprises in their own countries or regions, natural persons must be registered architects or engineers engaged in construction engineering design in their own countries or regions.

When foreign-invested construction engineering design enterprises employing foreign registered architects or engineers as principal professional personnel apply for qualifications as a construction engineering design enterprise, the professional titles of these personnel will not be verified. Verification will only be conducted on their academic qualifications, number of years of service in engineering design, as well as their registered qualifications, track record and goodwill in engineering design abroad.

February 11, 2007

Michael Wu with his grandfather, the late S.T. Wu, and great uncle James Wu. The younger Wu has helped to modernise Hong Kong's largest restaurant group. Hands-on maxim a recipe for success by ENOCH YIU

In 1992, Michael Wu Wei-kuo had to make one of those gut-wrenching choices common to the progeny of successful entrepreneurs. About to graduate from Brown University with a degree in applied mathematics and economics, he had been planning to become a banker. But then his grandfather S.T. Wu, co-founder of Maxim's Group, made him an offer: work in the family's half-owned business - Hong Kong's largest restaurant group - and if you do well, you may be the boss one day.

For the 22-year-old, that meant turning down an offer from US investment bank Merrill Lynch for US$40,000 a year plus a US$12,000 annual bonus, to become a HK$8,000-a-month trainee toiling as a delivery boy for the company's fast-food restaurants, as well as waiting tables at the Mandarin Oriental's coffee shop and grill and making pies at Pizza Hut, all which are owned by the Jardine Group and Maxim's 50 per cent stakeholder, Dairy Farm.

Reminiscing about having to carry 20kg loads of frozen chicken legs, he said: "The kitchen staff didn't know I was a trainee. They thought I was a new delivery boy and felt sorry for me, that I was carrying such a heavy load. They gave me a piece of toast, thinking I must be hungry. That was the best piece of toast I ever had - it was hard-earned."

This in-the-kitchen experience, he said, was his most important training, preparing him to take the helm from his grandfather in 2000, at the tender age of 29 (his father had already died).

"It was a gradual transition. My grandfather never really gave up his job when he retired in 2000. He still wanted to know everything, although he let me make decisions and he fully supported me," said Mr Wu.

His challenge, as for many inheriting a business, was to transform a brand established in 1956 into something attractive for a new generation of customers. In part, his hand was forced by the city's changing tastes. Wedding banquets had traditionally been a key income contributor for the group, but in the past decade couples increasingly preferred hosting their nuptials at deluxe hotels. His answer was to launch a brand, m.a.x concepts, unbound by the public impressions of the old, but retaining its organisation and core focus on service. Launched in 1998, it opened a slew of restaurants in Hong Kong, including eating plus, Thai Basil, Mezz and Kiku, which in style and temperament were nothing like their predecessors.

At present, 30 per cent of Maxim's revenue comes from m.a.x concepts, Genki Sushi and Starbucks and the rest from the traditional Maxim's business. It was the same thinking - move on from the old - that led the company to bring Starbucks to Hong Kong.

"Starbucks not only has a good brand worldwide but also has the knowledge, the system and technique to run the coffee chain," he said. Not that this radical change came without a battle. The fiercest was with is grandfather, who died in 2003, aged 92.

"My grandfather was very against Starbucks and many m.a.x concepts restaurants because he didn't like the products or the decorations. After I convinced him that our young customers liked it, he let me try, but made sure I was aware of the risks," he said.


The younger Wu also broke with tradition by eschewing the company's strict adherence to organic growth, opting instead to also expand by acquisition. Last year, the company bought Genki Sushi, the largest sushi chain in the city, becoming number one seller in Hong Kong of a cuisine popular among Michael Wu's contemporaries. In September, Maxim's won the local franchise rights for well-known US steak chain, Lawry's Prime Rib.

In some ways, even as he was moving away from tradition, he was returning to the company roots. Maxim's now might be most recognised for its cake shops around the city or as a place for yum cha in its chain of namesake Chinese restaurants and Peking Garden.

But in fact, the group began with a western restaurant set up in 1956 by S.T. Wu and his brother James in Central, where the Landmark now stands.

From there the company traveled a long road to become Hong Kong's largest restaurant group, with more than 12,800 employees working at 413 outlets - 50 Chinese restaurants, 25 m.a.x. concepts, 150 cake shops, 95 fast food restaurants, 70 Starbucks, and 23 Genki Sushi.

In order to manage the empire, Mr Wu also needed to break from his grandfather's hands-on mode of management. "My grandfather wanted to make decisions on everything, no matter how small. He was very opinionated. That was good, as his judgment was usually correct. As for my management style, I like to delegate more and I like my people to be accountable by giving them authority to make their own decisions," Mr Wu said.

But in at least one way, Mr Wu adheres to his grandfather's credo of close control. The company has turned down requests to open outlets in London and Vancouver, because, he said, "one has to be very hands-on in the restaurant business. If we don't have control of the chefs and managers, it is very difficult to manage".

Despite reports every year of investment bankers receiving multimillion-dollar bonuses, Mr Wu has no regrets about his choice of career. "The restaurant business is fun," he said. "I can create something - a new concept or brand - and if people like the food and concept, it is very satisfying. Even more fulfilling is if it makes money."

January 11, 2007

A new life - In the first big share offering of the new year, China Life debuted on the Shanghai stock exchange, its stock price more than doubling in value to make it the third-largest insurance company in the world with a market value of US$141 billion. The company will be added to a number of Shanghai bourse indices before the end of the month. The market rose from 2,650 to over 2,800 on the strength of the offering. Meanwhile, the company’s Hong Kong shares fell 4.7% amid general profit-taking on mainland companies. China’s second-largest insurance company, Ping An, is expected to list in Shanghai later this year.

Setting the tone -
In a series of addresses, top Chinese officials outlined the country’s outlook for 2007. PBOC Governor Zhou Xiaochuan said the central bank would continue to keep a keen eye on overinvestment and liquidity, starting with a 50-basis-point raise of the reserve requirement ratio, the fourth hike in seven months. He also hinted that regulators would allow greater flexibility in the official RMB exchange rate. President Hu gave a few speeches indicating that both the prosecution of corrupt officials and the buildup of the nation’s armed forces would carry on. Meanwhile, it was reported that certain members of the leadership were urging Hu to step down from the presidency – an unlikely outcome, it would seem.

Mutual appreciation -
As the value of China’s mutual fund market passed US$100 million for the first time, up 83% in the last year, regulators announced a freeze on the creation of new funds to last “a few months” with the aim of cooling the market. According to one source, “mutual funds are required to start buying shares within 10 days of launching, which obviously pushes up stock prices”. At the same time, the bond market is looking to expand: mainland financiers will soon be permitted to sell RMB-based bonds in Hong Kong, further expanding yuan-based business in the Special Administrative Region.

January 9, 2007

Flexible measures to attract overseas talented people

Chinese Ministry of Personnel has vowed to work harder to provide better channels for overseas talented people to serve the motherland.

According to MOP's 11th five year plan, China will implement three major measures to attract three types of talented people including leading persons in academic research, senior managerial personnel and special talents in need to help build a well-off society and independent innovation.

First, the leading persons who master the core technology and are capable of independent innovation in academic field. China will encourage the national key laboratories, universities and scientific and research institutions to openly recruit their leaders or leading research fellows both home and abroad in order to introduce a group of world's first class scientific and technological leaders and strategic scientists. Meanwhile, in combination with the national key programs and important innovation projects, China will also introduce high level overseas talented people, scientific and research teams and creative talented people who have great potential to contribute in technology and independent innovation in the fields of energy, water, mineral resources, environment and agriculture, biotechnology, advanced manufacturing and new materials.

Second, senior management and operation personnel who are familiar with international practices and capable of international operation. In order to grasp the important opportunities of the new round of optimization and industrial transfer of global production factors, in combination of the demand of China's upgrading of industrial mix and utilization of foreign investment, China will actively introduce a group of senior management personnel in financial, legal and trade fields.

Third, special talented people who have special expertise for the economic and social development. According to the special introduction plan, China will take flexible and special methods to introduce top strategic talented people.

According to the plan, a group of industrial bases will be established on the basis of market demand. They will provide good momentum for returned overseas talents to produce, study and research.

In the following five years, Ministry of Personnel will continue to cooperate with the local governments to establish special zones for returned overseas students and encourage them to help the latter apply for government supported projects in proper procedures, support the zones recruit advanced personnel home and abroad and find proper projects for them. A total of 10 thousand enterprises are expected to settle in 150 special entrepreneurs' zones.

In order to encourage overseas talented people to come back, a series of favorable measures will be taken: supporting the transfer of patents, special know-how and scientific and technological achievements by allowing the returned overseas personnel to hold shares or establishing new enterprises, providing them with convenience in tax, co-financing and labor and personnel. A co-financing mechanism in high-tech transfer will be established and foundations for returned overseas students will be set up. Special zones with better conditions are encouraged and supported to introduce venture investment funds or entrepreneurs' fund so that those who returned from overseas can get funding easily.

MOP encourages overseas talented people to take part in the construction of China in various forms. The plan proposes to make full use of those talented people surrounding the strategy of opening up. Overseas talented people can serve China in a broader extend and higher level through part-time work, cooperative research, giving lectures in China, conducting academic exchanges, visiting or providing intermediate services as long as it is conducive to promoting domestic reform and development. During the 11th five year plan period, MOP plans to attract a total of 200 thousand people to come back and work for the country in various ways.

To facilitate the service channel, MOP is more open for new ways, for example, appointing someone to a certain position for certain term or contracting certain projects so that it is easier for more overseas talented people to serve China. A stimulating model will be established for the talents by participating in the distribution of production factors including knowledge, technology and management. MOP will constantly complete the new mechanism for overseas talented people to work for China and encourage them to organize teams and establish bases for them to have opportunities to support key field and industry in China.

MOP will continue to host various returned overseas talented people's exchange program, provide exchange platform and widen the service field and make the service channel smooth.

MOP vows to complete the work mechanism for returned overseas students and create a 'green passage'. It proposes to complete policies and measures in attracting overseas talents to work for the motherland and providing convenience for their work, career and living conditions. A working mechanism will be formed and the role of the working office for the overseas talented people should be exerted. MOP will encourage the hosting of the annual liaison meeting and guide the overall development of the work of attracting more overseas talented people.

MOP's plan also stresses to take flexible and special methods to open a 'green passage' for high level overseas talented people to come back. Those people will be provided with convenience in applying programs, appraising professional titles, rewards, spouse's employment, children's education and entrance and exit of the border. To create new working methods, MOP can treat special talented people with special service. With a better work environment, harmonious relations among people, democratic academic environment, respect and understanding in society, MOP hopes to attract more overseas talented people to come back to China.

December 13, 2006

High-Tech Hong Kong: Into a New Era - Has high-tech left Hong Kong behind? Not according to Peter Woo. HKTDC’s Chairman argues that Hong Kong is already more high-tech than it realises. He contends that the logical next step for Hong Kong is to develop a high-tech partnership with Shenzhen and climb to a new and dynamic level of business. Let's start with a misconception. There is a saying in Hong Kong's local industry that "high-tech means losing money". Some also say Hong Kong is not perceived as a place for front-end research and development (R&D) activities. No massive production plants for high-tech products of well-known brands are visible. Many conclude Hong Kong is simply not a place for tech development.Well, just where do we stand on that? For a start, industry insiders say that Hong Kong possesses certain key technologies that have contributed to its success in international trade.

Riding on China's Coat Tails in Uncertain Times: Hong Kong Merchandise Export Outlook 2007 - Hong Kong's traders should see a modest wind in their sails over the next 12 months. While the US leads a slower global economy, Hong Kong should benefit from a more dynamic Asia, led by the Chinese mainland. But there’ll be "down drafts" - in particular, Chinese regulatory uncertainty. China is going to make much of the running in the global economy in 2007. A softer US outlook implies slower global growth, but that won't be the dominating wind of economic change swirling through Hong Kong's merchandise export sector. Rather, it will be China's inward and outward trade performances, allied to the dynamism of other Asian economies.

The Mystery of the Disappearing Industry - Manufacturing has mostly disappeared from Hong Kong. But have the huge benefits forindustrialists setting up on the Chinese mainland removed a central pillar of the SAR's economy- and with it, added to local unemployment? A new HKTDC evaluation looks at whether it's time to hold a requiem or a re-think on the economic model.
Every so often, doomsayers have been forced to recant when they've warned of Hong Kong's sudden demise. But there's been one story which has so far refused to lie down: That's the disappearance of Hong Kong's manufacturing base across the boundary to the Chinese mainland, and whether it could spell the SAR's eclipse, should the remainder of Hong Kong's core economic activity take the same route.

China's Agent of Change - Chinese mainland firms are readying themselves to develop brands, upgrade technology and generally "go out" to create investment opportunities on world markets - all are goals that have been set out under the country's 11th Five-Year Plan. A study reveals that to make the right adjustments for change, they need look no further than Hong Kong's services sector. Chinese mainland executives worry a lot about how to create the kind of brands that will appeal in global markets - rightly so, since there are currently precious few beyond the likes of TV manufacturer Haier and computer giant Lenovo that actually have great resonance away from home.

The Promise of Europe’s Eastern Lands - Not everything about Central and East European trade is uniformly positive. But EU accession and a growing bridge to Asian manufacturers and markets are giving East European companies new imperatives to look even further east for better business. Ask Hungarian, Czech or Romanian importers about the business they expect with Asia in the future and many are single minded: They want to recognise the opportunities and are determined to take action.

November 25, 2006

The highs and lows - The Shanghai composite climbed above 2,000 points for the first time in five years, continuing the market’s 2006 bull run. The Shanghai Stock Exchange has gained 74% in value since the beginning of the year as it and the Shenzhen exchange have gotten closer in line with China’s overall economic growth. But not all is well with China’s story of prosperity. A new report from the World Bank revealed that the lowest decile on the economic ladder – some 130 million people – saw their incomes drop 2.4% in 2001-2003; conversely, the richest 10% had income gains of 16% over the same period. Meanwhile, the chief of the PBOC drew attention to the country’s growing pension problems; the environmental agency said that the captains of industry were continuing to pollute the air and water; and, most worryingly, the Ministry of Health confirmed that the number of HIV/AIDS patients is up 30% on the year. Something is rotten in the state of China.

Bankrolls -
Since the release last week of new banking regulations further opening the sector to overseas competition, applications for new branches have been flowing into the banking regulator’s office. At least 10 foreign banks, including HSBC and Standard Chartered, have applied for local subsidiaries which would allow them to offer RMB services to Chinese clients throughout the country. Meanwhile, the acquisition of domestic banks continues unabated, as deals were announced by Banco Bilbao Vizcaya Argentaria of Spain and Australia’s ANZ.

Eastern summit - The leaders of the world’s two most populous nations sat down to talk. Hu Jintao said that China’s economy is “complementary” to India’s and that the two nations should work together rather than against one another as they both regain prominence in world affairs. A flurry of accords and agreements were signed as President Hu and Indian Prime Minister Manmohan Singh vowed to double bilateral trade to US$40 billion by 2010. More difficult issues – such as the presence of the Dalai Lama and the 120,000 Tibetan exiles in India, and China’s arms sales to Pakistan – saw zero progress. Hu left India for Pakistan on Thursday.

November 2, 2006

Hong Kong Hotels bask in booming economy

At the plush Four Seasons, in addition to near-capacity room occupancy, guests are spending on spa treatments and fine dining

Hong Kong hotels are basking in a bumper 2006, a year that is exceeding projected business forecasts to achieve near-record results. As business and leisure travellers flock to Hong Kong, occupancy rates across all categories of hotels and guesthouses leapt to 89 per cent in August, three percentage points higher than for the same month in 2005. In the bustling tourist areas of Kowloon (Yau Ma Tei and Mong Kok), hotels recorded a near-capacity occupancy of 93 per cent. Demand for beds continues to increase, despite the fact that Hong Kong’s hotel room supply grew by 3.4 per cent between August 2005 and August 2006. The average room rate across all hotel categories also increased to HK$920 (US$118), 18.3 per cent higher than in August 2005.

James Lu, Executive Director of Hong Kong Hotels Association

Good news all round - James Lu, Executive Director of Hong Kong Hotels Association (HKHA), said hotel operators had expected a bumper 2006, but the results exceeded expectations. “Firstly, all major (tourism) markets registered double digit growth this year, and in particular the MICE market (meetings, incentives, conferences and conventions, and exhibitions) has done exceptionally well,” Mr Lu said. “We’ve had more events in Hong Kong and each event has had more participants, both in exhibitors and buyers. “The positive business performance in both Hong Kong and China has triggered a strong surge in business travelers, while the stable economies of the region have resulted in increased intra-Asia travel in both business and leisure categories.”

Peter French, General Manager of the Mandarin Oriental Hotel

Peter French, General Manager of the Mandarin Oriental Hotel, which reopened last month following a HK$1.09 billion (US$140 million) refit, agrees. “For the past three years Hong Kong has experienced a stable business demand from all of its major markets, both long haul and short haul. The outlook going forward is very positive, predominantly from the Asian markets and of course in particular, China,” Mr French said. “On the back of strong room occupancy, room rates have returned to levels not seen since 1997.” On current figures, HKHA expects to end the year with overall room occupancy of 86 - 87 per cent across all hotel categories – close to the record 88 per cent achieved in the late 1990s and again in 2004. With an additional 8,000 hotel beds coming on stream in 2007, Hong Kong is positioning itself for a further influx of visitors resulting from major attractions such as Disneyland, Nong Ping 360 Cable car and the Hong Kong Wetland Park, and by business tourism drawn to world-class events at the Hong Kong Convention and Exhibition Centre and AsiaWorld-Expo.
“Hong Kong is well entrenched as a must-visit destination, both for doing business and for leisure,” HKHA’s Mr Lu said. “The mood among hotel operators is buoyant.”

William Mackay, Vice-President and General Manager of Hong Kong’s Four Seasons Hotel

Hong Kong’s plush new Four Seasons Hotel, which recently completed its first full year of business, had “fulfilled our expectations and more”, Vice-President and General Manager William Mackay said. “In fact, this opening remains one of the most economically successful Four Seasons has ever had.” “Besides the hotel’s own strength in terms of location, service quality and produce quality, we were fortunate to open when the market was just sizzling, and it has remained sizzling ever since,” said Mr Mackay, whose hotel is running very close to capacity. Going forward, he said the outlook is extremely positive given a broad range of indicators ranging from office absorption rates and rentals, to residential rentals, business registrations in Hong Kong, and unemployment at a record low.
“The economy here is so well managed there is not the danger of overheating,” Mr Mackay added. “We are in an almost ideal business situation. And as people are economically successful, so the brands and suppliers of luxury products also benefit. There is a feelgood factor that works well not only for room occupancy, but because people feel comfortable spending more on spa treatments and fine dining.”

SMEs thrive in world’s freest economy - Global entrepreneurs flock in their thousands to Hong Kong’s annual SME World Expo

Executives from the world’s leading small and medium-sized enterprises (SMEs) flocking to Hong Kong this month will find a city that has long counted the sector as its main economic growth engine.
Entrepreneurs from 30,000 SMEs will converge on Hong Kong’s Convention and Exhibition Centre on November 29 for three days of networking seminars and marketing, in an event organised by the Hong Kong Trade Development Council. (World SME Expo) A particular focus will be on how to exploit China’s accession to the World Trade Organisation and Hong Kong’s Closer Economic Partnership Arrangement (Cepa) with China, which allows Hong Kong-based enterprises special access to mainland markets. The world’s SMEs will find their Hong Kong counterparts have an enviable environment in which to operate. The city’s economy has for years been dubbed the freest in the world by global think-tanks, allowing SMEs to thrive in the city.

Dynamic force - Private sector employment in Hong Kong rose 2 per cent in March versus a year earlier in the most recently available government figures, with 1.8 per cent of the extra jobs being created by SMEs and only 0.2 per cent by large enterprises. SMEs are defined as manufacturing companies with less than 100 employees and non-manufacturing businesses with less than 50 staff. “SMEs provide a very dynamic force in the Hong Kong economy. They provide a major source of employment and they are also a source of Hong Kong’s economic flexibility,” said Hong Kong government economist K.C. Kwok. “Typically if you have a new type of business, the SMEs are there first,” he said. “Some of them may fail but others survive and that provides the dynamism”. Hong Kong had nearly 271,500 SMEs at the end of March, accounting for 98 per cent of business establishments by number. They provided 1.18 million jobs or about 50 percent of total employment outside the civil service.

Bedrock of Hong Kong - “My impression is that SMEs have not only been the bedrock of the Hong Kong economy but have a major share of Hong Kong’s productivity [gains],” said Simon Lee, co-founder of Lion Rock Institute, a Hong Kong-based free-market think tank. “That contribution to the economy has been because the economy has been driven by a free market. There are virtually no barriers to entry for people to start their own business, especially in goods and services.” Hong Kong has a corporate profits tax rate of 17.5 per cent, one of the lowest in the world, while unincorporated businesses pay only 16 per cent. All tax payers are treated equally, regardless of their residential status. No tax is levied on profits arising from abroad. The biggest portion of Hong Kong SMEs are in the import/export trade, underlining the importance of small businesses in the city’s traditional role as middleman for commerce between Asia and the West. The real estate, insurance and financial sectors are also heavily populated with SMEs. “Setting up the company in Hong Kong was super-easy. It only took a few days,” said fund manager David Devine, who decided to open his own business, Lynas Capital, in 2002.

Strong support - Hong Kong has great support services for SMEs with specialist lawyers and corporate facilitators on hand to speed the creation of a new company. “You can even buy a new company off the shelf,” said Mr Devine, whose company has grown quickly to have more than HK$467 million (US$60 million) under management. He also noted that Hong Kong officials were efficient and fair, a big plus in a region which has its share of corrupt bureaucracies for business people to deal with. SMEs in other parts of the world often have to suffer the heavy hand of regulators and local officials, but Hong Kong small business owners say the light touch in terms of red tape in their city means entrepreneurs can focus on business rather than completing endless official documents. “It was pretty straight forward to set it up and once it’s up and running it’s easy as well,” said Brie Sievert, a 34-year-old Canadian who operates a landscape garden business in Hong Kong called Asian Earth. Asian Earth imports plant pots and other supplies from Indonesia and Vietnam and Ms Sievert has found processing the imports through Hong Kong’s port straightforward. That’s a rarity in Asia where form filling and unscrupulous customs officials can make importing goods into a country a real headache.

Help when needed - On occasion, entrepreneurs need help from officialdom. Corinne Jedwood, who runs a successful community magazine, Inside DB, for Hong Kong’s Discovery Bay district, recalled being impressed with how the city’s Small Claims Tribunal helped her recover some overdue payments. Hong Kong’s SME-friendly environment has played a part in helping her business thrive. “I had never done a publication before. I started working from home in a little corner of my living room. I just wanted to do something small and it got bigger and bigger,” said Ms Jedwood, a French national who is a long-time Hong Kong resident. She now has seven full and part-time employees and this year has successfully launched a second magazine, Square Foot, which focuses on the city’s property market. One lasting impression for her when she was starting up was how executives at established companies in Hong Kong would offer help, advice and even capital. “People were very supportive. There was a need for the magazine and now we have a niche in the market.”

October 28, 2006

New Vision Arts inspires and delights - The dynamic New Vision Arts Festival runs

Avant-garde, unconventional and cutting-edge - these are the themes that inspire and run through the New Vision Arts Festival due to hit Hong Kong in mid-October. Artistes from around the world will converge in Hong Kong, collaborate with local talent, and put on a unique show for the pleasure of an arts-hungry audience.

“This festival is being organized for the third time in Hong Kong, and the aim is to give our audiences something really new and cutting-edge in terms of crossover art forms,” said Elaine Yeung, Senior Manager at the Festivals Office of the Leisure and Cultural Services Department (LCSD).

“Most of our programs are not readily available on the market, and many of them are specially commissioned for this festival. This festival is also a platform for artistes in Hong Kong to work with talent from around the world, and create something entirely unique in the process.”

East-West fusion - In the spirit of East-West fusion, crossover music will break new ground as Mongolian long songs and throat singing by the Khoomii Sound Machine blend with Western jazz and contemporary music played by artistes from Sweden, Austria, Korea and Argentina, and Hong Kong’s Dickson Dee.

The Hong Kong Philharmonic Orchestra will perform one of the most controversial works of the 20th Century, Igor Stravinsky’s Rite of Spring. They will also perform Iris Dévoilée (Iris Unveiled) - an orchestral suite devoted to the nine facets of a woman – composed by Paris-based Chinese composer Chen Qigang.

Opening the festival will be two signature pieces by US-based Chinese contemporary dance choreographer and painter Shen Wei, who is renowned for his unique style that combines dance with visual art.

Groundbreaking Singaporean director Ong Keng Sen will present Geisha, uncovering fresh insights into the famous Japanese cultural symbol; while Japanese Ryuichi Sakamoto will team up with German Alva Noto to bring insen, a unique collaboration where evocative music is transformed into digital sonic and visual images on a large LED screen.

World premiere - A specially-commissioned collaboration will be the world premiere of city:zen, blending the talent of British-Asian choreographer Shobana Jeyasingh with Hong Kong dancer and choreographer Mui Cheuk-yin. More eclectic fusion will be on display as the Yoshida Brothers of Japan put on their unconventional shamisen concert, mixing traditional Japanese instrumental music with elements of punk, folk, rock and jazz.

The festival will also host the “Theatre Criticism Project for Tertiary Students” in conjunction with the International Association of Theatre Critics (IATC) and the leading universities in Hong Kong. The aim is to foster the skills of arts appreciation and critique-writing in local students through a series of forums for exchange of ideas and views.

The New Vision Arts Festival, organized by the LCSD, will run from October 20 to November 19.

September 28, 2006

First Negotiated Bidding for 2007 Textile Export Quotas

The Ministry of Commerce (MOFCOM) issued a notice on the first negotiated bidding for 2007 quotas for textile exports to the EU and the US on 22 September. According to the Measures for the Administration of Textile Export (Provisional), textile products under categories 4, 5, 6, 7, 26 and 31 for export to the EU and products under categories 338/339, 340/640, 347/348, 349/649, 638/639, 647/648 and 847 for export to the US will be open for negotiated bidding.

A minimum number of quotas for bidding is set for each category, while the maximum number of quotas individual enterprises may bid for is worked out on the basis of their export value between January and July 2006 and the formula stipulated in Article 11 of the Measures for the Administration of Textile Export (Provisional). Enterprises may decide to bid for any number of quotas between the minimum and maximum amounts in the categories they are qualified to bid for.

The negotiated bidding price for different categories are determined in the light of the market situation in the following year and after consultations carried out by the China Chamber of Commerce for Import and Export of Textiles on the views of leading enterprises.

The bidding will be conducted electronically. Enterprises should submit their bids to the bidding office through the "electronic bidding system" between 09:00 hrs on 15 November and 02:00 hrs on 24 November.

For details in Chinese regarding the bidding arrangements, bidding price, minimum number of quotas and list of enterprises qualified to place bids, please visit the website of MOFCOM at: http://www.mofcom.gov.cn/aarticle/b/e/200609/20060903232554.html

For details in Chinese of the Measures for the Administration of Textile Export (Provisional), please visit the website of MOFCOM at: http://www.mofcom.gov.cn/aarticle/b/c/200609/20060903218968.html

September 27, 2006

China's advertising industry braces for overhaul

China's advertising industry has been told to brace itself for a major overhaul over the next 10 years. Experts attending the 2006 China (International) Creative Concepts Forum in Beijing on Sept. 3 said to expect upheaval and major readjustment during the upgrading process. According to a report released at the forum, the current output value of China's advertising industry is 100 billion yuan (89.38 billion U.S. dollars), and it will take 'only six years' to double that figure.

The ad industry, one of the barometers of social, cultural and economic development, plays a key role in the building of a 'creative society', said Shen Jianjun, secretary of the Party Committee of the Capital University of Economics and Business. Shen added that China's ad industry is attracting worldwide attention because of its high rate of growth in the last six years. In 2000, the British government published a white paper on the creative industry. 13 industries were grouped under this classification. 'Of the 13 industries, advertising industry ranks No.1,' according to Yang Tongqing, a professor at Capital University.

On a global scale, the daily output value of the creative industry has reached 22 billion dollars and this is increasing at an annual rate of 5 percent, Yang added. In developed countries, the annual growth rate of the industry is of course higher; 14 percent in the US, and 12 percent in Britain. The innovations industry has become Britain's second largest industry accounting for 7.9 percent of its GDP, after the financial services industry. The Chinese ad industry will no doubt follow the trend of the times, said Zhang Xiaoping, chief executive officer of the Guangdong Heima Advertising Co. Ltd. 'Once advertising is classified as part of the creative industry, it will upgrade itself quickly to become more professional, varied and colorful.'

In the meantime, however, experts pointed out that the current pace of economic development will continue to place heavier demands on domestic companies who have to fend off competition from big global names. From January 1, wholly foreign-funded advertising companies were permitted to operate in the Chinese market, which many saw as the beginning of the end for domestic players. But Wu Xiabo, general manager of Guangdong Pingcheng Advertising Co., saw it as an opportunity: 'The year 2006 marks the beginning of a new era in the Chinese advertising industry. Now, it is truly on the road to globalization.'

'And with globalization, we can't cling to accepted practices without thinking of making any improvements,' Wu said, adding that this is the time for restructuring and readjustment. But there are challenges ahead. These include restrictions placed on creative concepts by the incumbent economic structure; an underdeveloped professional structure; fixed patterns of urban development and planning; lack of effective intellectual property rights protection; a traditional and conventional education system; and low consumption levels of creative products.

Kang Jun, a member of the Tianjin Municipal Committee of the Chinese People's Political Consultative Conference, added that stronger government support for the development of the industry is required in the face of increasing competition from foreign companies.

China’s Auto Industry Hits Top Gear

By the end of 2006, China is expected to over-take Germany as the world’s third largest producer of cars and vans, with output to reach about 5.9 million units compared to 5.38 million units for Germany. While the US and Japan are still the world’s largest producers with output of 11 million and 10.63 million units respectively, China is inline to be the next top global auto-manufacturing hub. Between 2000 and 2005, China experienced an average of 40 percent growth in export of vehicles and auto parts, with the export of completed cars growing at 70 percent per annum. In 2005, exports reached USD10.9 billion and are targeted to reach USD70 billion by the end of 2010. Nevertheless, China’s export of vehicles and auto parts represents only 1 percent of the world’s market share, signifying the massive potential that is still open to car manufacturers, in particular foreign joint ventures on the mainland. Currently, Chinese-made automobiles are mostly sold to emerging markets such as Russia, South America, Africa and the Middle East.

In recognition of such market potential, the Chinese government has been quick to adopt measures to build the reputation of the industry and incentives to attract further investment in the sector. On 1 July 2006, China reduced its import tariff on light vehicles and small buses from 28 percent to 25 percent, and the tariff on import of auto-parts was reduced from 13.8-16.4 to 10 percent, which is in line with WTO entry commitments.

There are also plans to develop eight automobile export bases with the hope of raising quality standards, encouraging technical innovation as well as protecting intellectual property rights. The eight national bases, which cover 160 manufacturing companies are located in Changchun, Shanghai, Tianjin, Wuhan, Chongqing, Xiamen, Wuhu and Taizhou. Another measure to help raise the quality of Chinese-made automobiles is to only allow “authorized” manufacturers to engage in exports starting in 2007. Those that fail to guarantee product quality or after sales service would be banned from exporting.

As it stands, foreign automotive joint ventures in China are best positioned to take advantage of this enormous market potential. With their strong design capabilities, low cost base and a network of sales channels overseas where they can increase market share and improve profit margins.

September 22, 2006

US Treasury Secretary Hank Paulson arrived in China this week for his first trip as a government official, though he previously made over 70 journeys here in his capacity as chairman of Goldman Sachs. He was scheduled to meet with senior officials in Beijing. Paulson’s comments on China’s fiscal policy have been a relief to moderates who shrink from the rhetoric of China hardliners such as Senator Charles Schumer. The secretary has been less critical of China than his predecessor John Snow, and has said that he is not looking for any “quick fixes” on US-China trade issues, a blunt reference to congressional calls for immediate, drastic RMB revaluation. Rather, Paulson said he is interested in fostering an "economic dialogue" with China that would focus on long-term issues.

Increasingly credible rumors that the CSRC is going to merge two of China’s share classes drove the B-share market up almost 10% early this week. For some time now, the securities regulator has been talking about merging B-shares, which are relics from the days when foreigners faced heavier investment restrictions in China’s markets, with the dominant A-share market. Investors now believe this could happen by the end of the year. Meanwhile, the CSRC also unveiled China's first financial futures product, which will debut late this year or in early 2007; and Credit Suisse claimed that mainland markets could overtake Hong Kong’s within five years.

September 20, 2006

74 countries, int'l organizations sign up to Shanghai World Expo

By Monday, 66 countries and eight international organizations had accepted invitations from the Chinese Government to attend the Shanghai World Expo 2010.

About two thirds of the countries that have signed up for the Shanghai World Expo are from Africa and Asia, alongside 14 European nations such as France, the Netherlands, Switzerland and Britain, according to Zhou Hanmin, deputy director of the Shanghai World Expo Coordination Bureau.

Franklin Lavin, U.S. Under Secretary of Commerce for International Trade, said during a recent visit to Shanghai that the United States would support the 2010 Shanghai World Expo and is likely to take part.

International organizations including the United Nations and the World Bank have also officially confirmed they will be participants in the expo scheduled to run from May 1 to Oct. 31, 2010.

Invitations signed by Chinese Premier Wen Jiabao were sent out to 190 countries and 60 international organizations in March, inviting them to take part in the expo. The theme of the expo is 'Better City Better Life'.

'Our ultimate goal is to attract more than 200 countries and international organizations, outnumbering the 155 present at the 2000 World Expo in Hanover, Germany,' said Zhou.

September 15, 2006

China Adjusts Its Tax Rebate on Exports

On 14 September 2006, the Ministry of Finance together with four other government organisations issued a joint Notice on Adjustments of Tax Rebate on Exports and Additions to the Prohibited Category of Export Processing Trade.

According to the Notice, tax rebate on export items under Chapter 25 of the imports and exports classifications (except salt and cement) will be removed. Tax rebate on some items including iron and steel, textiles, household products, plastic materials and lighters will be reduced. However, tax rebate on items such as IT and pharmaceutical products will be raised.

According to the Notice, all items which no longer enjoy tax rebate are now included in the prohibited category of export processing trade. The new adjustment takes effect on 15 September 2006.

For details of the adjustment, please visit the website of the Ministry of Finance at:
http://www.mof.gov.cn/news/20060915_1556_16612.htm

September 13, 2006

Planned weddings get a management makeover

China's burgeoning wedding services market has spurred demand for new service options such as bride's secretaries, wedding supervisors and wedding masters of ceremonies (MCs). There is said to be tremendous market potential for these types of management services, bearing in mind the high cost of holding weddings on the Chinese mainland. Take for example Miss Zheng, who works as a bride's secretary at a wedding service company in Beijing. She sees her job as a true bride's "maid": she has to be with the bride all the time during the wedding. She carries with her a host of small "rescue" items such as drinking straws, combs, brushes, rubber bands, needles, pins, threads, stockings and scissors to deal with unexpected situations that may need attention.

The straw is for the bride to drink water through, so as not to ruin her beautifully-adorned makeup. Needles and thread are needed in case of embarrassment, such as if the seams of the wedding gown burst open. An extra pair of stockings will come in handy as the bride may get hers torn when climbing in or out of the wedding limousine. And so it goes on. "The secretary has to be with the bride from the time she leaves home until the time she retires to her nuptial chamber," Zheng explains. "She has to remind the bride of a host of little details, such as not to wear broaches with the wedding gown, not to lift up her gown when she walks, not to look too stiff, and to wear a blouse when putting on makeup - so she can easily slip it off and change into her wedding gown."

In the opinion of Mr Yang, who's a wedding "housekeeper", the custom is old in Beijing but still one that is irreplaceable, particularly when wedding banquets get under way before 12 noon. According to traditional scheduling, the wedding ceremony usually starts at 11:08 am and it is the housekeeper's role to keep the whole business down to within 50 minutes. "On one such occasion, the ceremony started late because of some accident and time was running out. I was absolutely drenched in sweat. I tried to [encourage] the master of ceremonies to stick to the rundown while asking the restaurant to start serving cold dishes. Finally, we managed to start the banquet at 11:58 am."

The housekeeper also has to try out different routes for the wedding party during rehearsals and analyse them one by one, often with different options. If traffic is too smooth on the wedding day, he will have to ask the driver to make up time by driving around to avoid the embarrassment of arriving before the guests. The master of ceremonies also has an important role in the proceedings, as Mr Wu (himself a wedding MC) explains. For example, Wu suggests that music can add to or evoke the right mood for the ceremony. Good music at suitable moments can achieve the right effect, which is not only pleasing to the new couple and the guests - but may also bring the company new business. "These days nearly all wedding ceremonies are accompanied by music," Wu says. "Wedding DJs must be experienced and be able to come up with new ideas."

China's civil affairs departments reckon that over 120,000 couples will register to get married in Beijing this year. Among them, more than half will choose to walk the traditional red carpet. "With only 500 to 600 wedding planners in Beijing, each of them has to plan 100 weddings. This could really wear them out," says Shi Kangning, executive director of the Committee of Wedding Service Industries with the China Association of Social Work.

It is understood that wedding planners will be included in the list of new professions to be announced by the Ministry of Labour and Social Security in the fourth quarter of this year, with the prospect of an acute shortage of wedding service professionals on the market. Efficient and able brides' secretaries are hard to come by. Those who are familiar with wedding ceremonies and nuptial rites, sensitive to the bride's feelings and can deal with emergencies are well worth their weight, when making sure that nothing goes wrong.

Most bride's secretaries charge about Rmb600 (HK$582) each, for taking care of an event. Training courses offered by the Committee of Wedding Service Industries with the China Association of Social Work have trained nearly 100 secretaries. Of course, standard wedding expenses include wedding pictures, jewellery, the rental or purchase of wedding gowns and tuxedos, wedding service companies, the honeymoon - as well as purchases of cigarettes, spirits and sweets, as gifts for guests.

Wedding pictures are important, although they don't constitute the largest items of expenditure. Many new couples are not satisfied with stereotypical pictures taken in studios and would rather spend more money to capture the most beautiful and memorable moments of their lives outdoors. According to figures available through Shanghai's wedding service industries, over 90% of new couples in the city prefer to have their wedding pictures taken outdoors. Time and money permitting, they love to take wedding photo trips with their personal photographers.

The beautiful Siguniang Mountain and Jiuzhaigou in Sichuan, the Yulong Snow Mountain in Yunnan, ancient and mysterious Tibet, the blue sky and clear water of Hainan, as well as coastal cities like Xiamen and Qingdao are considered the ideal venues for taking the right wedding images. The rental and sale of wedding gowns are rapidly-developing businesses. It costs between Rmb100 (HK$96) and Rmb800 (HK$768) to rent a gown, but some people are buying their own because they have personal preferences or want to maintain their dresses as memorabilia.

For those who look for better quality and design, professional wedding gown workshops can look after most needs. But hand-made gowns are by no means cheap and can cost thousands of yuan each. The wedding expenses list prepared by a well-known wedding services company in Beijing for a couple getting married in October this year speaks for itself. Wedding pictures will cost Rmb17,500 (HK$16,975) while jewellery at Rmb100,000 (HK$97,000) includes a 0.5 carat diamond ring, a 1 carat diamond necklace, a diamond broach, diamond earrings and platinum rings.

Then there are other banquet expenses. Features costing up to Rmb14,000 (HK$13,580), include candles, champagne tower, spotlights, bubble machine, cold fire, dry ice and a smoke generator. The list does not cover the wedding gown and tuxedo for bride and groom, the limousine rental, the banquet or honeymoon expenses. For this particular list, the couple both work as managers with foreign companies and so are willing to dig deep for the right event. In fact, this is by no means the most expensive wedding.

Although there are many wedding service companies on the mainland, there are not that many truly innovative wedding planners around. Shanghai is the current market leader, but even in this city, there are only about a dozen wedding planners and often they are all fully booked. The same is true for Beijing. Top wedding planners are booked up a year in advance. "Planning a wedding is like directing a movie and involves script writing, planning and implementation. It requires a director and production assistant, and constant communication with the customer is necessary to come up with the most brilliant ideas," says Mr Zhang, the planner for a wedding service company.

In the opinion of a wedding service company operator, good wedding planning is not only about novelty and extravagance. It is important to pay attention to details and make the guests share warm feelings with the newly-weds. Innovative and touching wedding arrangements are enthusiastically embraced by younger people. The bride and bridegroom could be exchanging vows on the beach, on green lawns, in a garden, by the poolside, in a bar or even under the sea or up in a hot-air balloon.

Traditional wedding processions, such as with trumpets blowing and a bridal sedan chair carried by eight porters, are also popular among retro-minded young people. Shanghai's Wedding Service Industries Association appears to be encouraging the creative wedding arrangements that are very popular among new couples who want to be different.
The creativeness not only finds expression in the ceremony itself but also in gimmicks that reflect the couples' character. Some weddings make use of high-tech wizardry, such as when a magician waves his hand and produces an eight-layer wedding cake from under the table. In another escapade, the bridegroom presses a remote control and a wedding ring drops from the ceiling. Guests can also send sincere, humourous or idiosyncratic messages to the new couple through text messages.

Industry sources admit that some wedding service companies are still not very professional in their operation. They may raise their prices or change the limousine on the actual wedding day - or even charge additional fees for editing or post-production of wedding videos. Better wedding service companies rely on word-of-mouth to win customers. Established overseas wedding service companies should be able to find great business potential venturing into the mainland market.

August 31, 2006

HK leads financial hub race for Asia - MarkLee

Hong Kong is the most competitive financial center in Asia Pacific, ahead of Japan and Australia, a survey has found. The city ranked high for its transparent business regulations and low tax base, among other advantages, according to a study by the Securities and Futures Commission. "Hong Kong is clearly ahead of other Asian markets in most factors," said the SFC study, which extracted and compared the scores of 12 regional economies, including the mainland, Hong Kong, Taiwan, Japan, Australia and Singapore, in two recent global competitiveness surveys run by the Geneva-based World Economic Forum and the International Institute of Management Development, based in Lausanne.

Hong Kong slipped seven places to 28th in the WEF's latest Global Competitiveness Report, released last September, but retained second place in the IMD's latest World Competitiveness Scorecard, released in June. The SFC said the SAR scored higher than other economies in financial- services-related areas in the surveys. "Hong Kong may be the most competitive market regionally for equities, but it needs further development of the debt market to be an all-round financial center," said Standard Chartered economist Frances Cheung.

"However, the same can be said of most other Asian financial centers, with the exception of Japan and Australia." A record HK$195 billion was raised in initial public offerings last year on the Hong Kong stock exchange, making it the second largest IPO market in the world behind the New York Stock Exchange. This was largely as a result of several blockbuster share sales by giant mainland companies, including China Construction Bank (0939) and China Shenhua Energy (1088). The trend is continuing this year, with the IPO by Bank of China in June raising a record HK$90 billion.

"There needs to be a further balancing in Hong Kong in favor of other funding channels such as bonds," said John Bailey, director of corporate and infrastructure ratings at Standard and Poor's. The size of the market for corporate and government bonds in Hong Kong stands at less than US$100 billion (HK$780 million) at present, compared with more than US$7 trillion in Japan. "The Hong Kong government doesn't have much need to raise debt, which makes it difficult for the bond market to be kick-started," said Cheung from Standard Chartered.

The relatively lop-sided nature of Hong Kong's financial markets does not detract from their ability to attract international investors, the SFC said. Foreign funds now account for about 34 percent of total stock market transactions in Hong Kong, the SFC said, compared with 30 percent for local retail investors, and 27 percent for domestic institutional investors.

"Hong Kong is one of the more transparent markets for investors, and one of the easiest to work in," said Bailey. "Also, it provides international investors the best opportunities to participate in the growth of the mainland economy." The SFC said Hong Kong also scored higher than the other 11 economies in its ability to produce and attract qualified financial professionals.

There are more than 3,000 certified financial analysts in Hong Kong, compared with just 200 in 1995, the SFC said. The number of certified public accountants has also more than doubled to 25,000, from 11,500 in 1995, the SFC said.

August 30, 2006

Hong Kong’s Position to be Significantly Enhanced by New Tax Pact

On August 21, 2006, China’s mainland and Hong Kong signed a groundbreaking agreement in a bid to further enhance the potential of Hong Kong as the strategic gateway to China. Essentially a tax treaty in form, the new tax pact will ensure that business profits will not be doubly taxed in the two places, securing Hong Kong’s position as the ideal offshore base for foreign investments flowing into China. Analysts are confident that the new pact will sharpen Hong Kong’s competitiveness and encourage investment in the region by providing added incentives for international investors to enter the vast market on the Chinese mainland via Hong Kong.

Having contributed nearly 42% of China’s US$621 billion foreign investment over the last two decades, Hong Kong firms have played a critical role in developing China from an agrarian socialist state to an economic powerhouse. Unlike the United States, Britain and 80 other countries which have enjoyed preferential status to limit the taxes their nationals pay on items such as capital gains, Hong Kong had to rely solely on other advantages until this moment.

The new tax pact will cover profits that are classified as direct income, such as operating profits and employment income, and indirect income, such as dividends, interest and royalties. According to the new arrangements, maximum withholding tax for dividends a Hong Kong business receives from mainland investments will be reduced from 10 percent to 7 percent, and if the business holds at least 25 percent of the enterprise’s capital in the mainland, the rate can be further reduced to just 5 percent. Also importantly noted is that the pact also introduces a tax-credit agreement that will ensure that the same income will not be taxed twice.

With the new agreement in place, businesses in the region can assume much greater confidence as the preferential tax treatment will enable them to better assess their investment positions and greater synergies can be realized between Hong Kong and the Chinese mainland. The new arrangements will also promote Hong Kong’s economy, enhance its competitiveness and attract overseas capital by promoting cross-border financing arrangements and the transfer of technical know-how and patent rights between the two locations.

The ratification of the pact will be subject to an order under the Inland Revenue Ordinance, subject to the Legislative Council’s review and approval. If the pact is ratified before 31 December 2006, the new arrangement will come into effect with respect to Hong Kong taxes from the year of assessment beginning on or after 1 April 2007. With respect to taxes on China’s mainland, the pact will be effective on the taxable year beginning on or after 1 January 2007.

Aug 22, 2006

New deal puts paid to double taxation - Jonathan Cheng

The government has claimed a victory for Hong Kong residents and businesses operating in the mainland, signing an agreement with Beijing that will eliminate double taxation and pave the way for more mainland investment through Hong Kong. The deal, signed in the city Monday by Chief Executive Donald Tsang Yam-kuen and Xie Xuren, the mainland's Minister of the State Administration of Taxation, will cut the top tax rates on direct income, such as operating profits and salary, as well as indirect income, like dividends and interest.

It will also increase cooperation between the two sides to stamp out tax evasion in either jurisdiction. Tsang hailed the new agreement as another attempt to draw both sides closer together economically, saying the new tax agreement would enhance cross-border financing and the exchange of patent rights between Hong Kong and the mainland.

"These will help promote Hong Kong's economy, enhance our competitiveness and attract overseas capital," Tsang said. Under the agreement, Hong Kong residents earning money on dividends, interest income and royalties from mainland enterprises will see the top rates on withholding tax - the tax that is automatically deducted before it even goes to the recipient - slashed by about half.

In particular, top withholding tax rates on mainland dividends for Hong Kong residents would fall from 20 percent to 10 percent, and from 10 percent to 5 percent for local businesses with major stakes in a mainland enterprise. The top withholding rates on mainland- based interest income and royalties, meanwhile, would drop to a standard 7 percent. Also, any Hong Kong entity that makes gains on a transfer of shares in a mainland enterprise will see the taxes diverted entirely to the Hong Kong government.

The new agreement stipulates that any other instances of double taxation will be resolved by issuing tax credits to the taxpayer. Double taxation occurs when a person or company that earns money in two jurisdictions ends up paying both governments for the same income or profits. All told, the terms of the new agreement will help clarify tax responsibilities and "provide a further level of certainty and stability to potential investors," the government said in a statement. The government also said the measures would attract more overseas investment into the mainland through Hong Kong, while the cutback on royalty taxes would encourage artistic creativity and innovation.

But some raised concern about the exchange of personal information between Hong Kong and mainland taxation authorities, saying investors wary of mainland prying would be more reluctant to pour money into the mainland after Monday's announcement. That concern aside, most tax experts and business leaders praised the new agreement. "This is a step forward," said Wong Ting-kwong, a pro-Beijing legislator who heads the Hong Kong Chinese Importers' and Exporters' Association. Wong said some businessmen who frequently shuttled between Hong Kong and the mainland often got caught between the two jurisdictions, leaving them with "the worst of both worlds."

"It was a problem that needed to be resolved, and this agreement highlights the central government's support for the Hong Kong government, and shows that the relationship between them is very close," he said. Taxation Institute of Hong Kong president Richard Chow Yeung-tuen welcomed the announcement saying it would help taxpayers and the two governments avoid gray areas. Marcellus Wong Yui-keung, a member of the Taxation Institute and a tax partner at PricewaterhouseCoopers, said the treaty would strengthen the competitiveness of Hong Kong investors and businesses.

"With fewer tax burdens, Hong Kong's financial position will be strengthened," Wong said. He said Hong Kong businesses would benefit from the fact that any capital gain made by transferring shares would not be taxed in Hong Kong, as long as the gain is not an operating profit or sourced in Hong Kong. Paul Chan Mo-po, president of Hong Kong Institute of Certified Public Accountants, said the deal could make the territory a "springboard" for overseas investment into China.

The Hong Kong General Chamber of Commerce had no comment on the agreement, while the American Chamber of Commerce in Hong Kong was not available for comment.

The new deal, which will take effect when both the sides ratify the agreement, will have no expiry date, and officials said the agreement was meant to be a permanent part of the tax landscape, though either government could request a review of the conditions if any problem arose later. Hong Kong's commissioner of inland revenue, Alice Lau Mak Yee- ming, emphasized that withholding rates would be lower than those agreed upon in parallel agreements Beijing had made with both Macau and Singapore. But she conceded that it was hard to estimate how much extra tax revenue the agreement would bring the Hong Kong government, or to predict exactly how many people and businesses would benefit from the agreement. But she pointed to figures showing that 228,000 Hong Kong residents were working in the mainland in 2004, saying she anticipated that "more and more will work there" as a result of Monday's announcement and other conditions under the Closer Economic Partnership Arrangement.

She also said the new deal would not affect China's World Trade Organization obligations.

Financial Secretary Henry Tang Ying-yen said the new arrangements would allow investors to accurately gauge their tax burdens.

Aug 14, 2006

Hong Kong Freight Forwarding

Overview

  • By arranging cargo transport, the freight forwarding industry has contributed fundamentally to Hong Kong's success as the 11th largest merchandise trading entity and one of the most trade-oriented economies in the world.
  • Most of the larger freight forwarders have a wide network of overseas branches, and act as agents for international air and ocean liners.
  • The industry is responding to customers' needs by also providing more value-added services such as warehousing, packing, sorting, distribution and total logistics solutions.
  • The industry has benefited from Hong Kong's leading freight infrastructure:
  1. The combined cargo handling capacity of Hong Kong's two air cargo terminals has already amounted to 3 million tonnes. In particular, Asia Airfreight's new air cargo terminal (T2) is expected to be in operation by the end of 2006 with a handling capacity of 910,000 tonnes.
  2. The Marine Cargo Terminal, which was opened in March 2001, provides a one-stop service linking the airport with various river ports in the Pearl River Delta.
  3. The Airport Freight Forwarding Centre provides on-airport premium warehousing services and houses over 50 freight forwarding/logistics companies and ancillary service providers.

Industry Data - Total (Inward+Outward) Freight Movement (million tonnes)

-

Seaborne

River

Road

Rail

Air

Total

2001

131.0

47.5

36.9

0.4

2.1

217.6

2002

138.3

54.2

39.4

0.4

2.5

234.7

2003

148.6

59.0

39.4

0.3

2.6

250.0

2004

158.6

62.3

40.5

0.3

3.1

264.7

2005

161.5

68.7

39.2

0.2

3.4

273.0

Source: Summary Statistics on Port Traffic of Hong Kong,Port, Maritime and Logistics Development Unit

-

2005

Number of Air Cargo Forwarders

750

Employment

14,208

Number of Sea Cargo Forwarders

2,126

Employment

20,369

Source: Quarterly report of Employment, Vacancies and Payroll Statistics, 2005, Census and Statistics Department

 

 

2001

2002

2003

2004

Business Receipts of Air/Sea Cargo Forwarding Services

78,750

87,409

92,680

121,554

Exports - Cargo Forwarding

12,609

12,888

13,667

16,665

Contribution to Services Exports

3.9%

3.8%

3.8%

3.9%

Source: Report on Hong Kong Trade in Service Statistics for 2004,Census and Statistics Department

Range of Services

The core business of a freight forwarder is to move a shipper's consignment to the consignee within the stipulated time, in perfect order and at the most competitive cost. Responding to changing customer demands, many freight forwarders also provide more value-added services such as warehousing, distribution and total logistics solutions.

The services offered by the industry vary according to the sophistication of the freight forwarder. The larger and more comprehensive freight forwarders offer a full range of transportation and logistics services including warehousing, consolidation, air express, trucking, distribution and customs clearance, tracking and monitoring of freight being transported, and applying electronics data interchange (EDI) technology to facilitate just-in-time based supply chain management. Their customers, particularly those in the time-sensitive manufacturing, trading and retail sectors, can thus concentrate on their core competencies and reduce their business cycle time.

In general, the smaller freight forwarders provide more basic and economical services. Related services involved in the import/export process, such as the preparation of shipping documents, customs clearance and logistics, may be undertaken by the import and export traders or their agents. The smaller firms do provide more flexibility and a more personalized service. In addition they have lower overheads as they "piggyback" on the fixed capacities of the larger companies, and therefore can often provide lower rates.

Service Providers

The Hong Kong Association of Freight Forwarding Agents (HAFFA), formed in 1966, is a local association representing the interests of the freight forwarding industry. It has been renamed as Hong Kong Association of Freight Forwarding and Logistics Ltd to reflect the sophisticated nature of the business.

The larger sea freight forwarders tend to target big companies for exclusive deals. They provide value-added services and invest in information technology to ensure that they meet the expanding needs of the customer's changing markets. They can also set up individual logistics subsidiaries to provide tailor-made and specialized services in order to work as a service partner for their customers. Generally speaking, larger companies' well-established brands and far-reaching logistics networks have enhanced their significant market shares in the global export market. The smaller regional players, however, have better understanding of the business culture, better knowledge of their markets and have established networks in the region.

As reliable and speedy delivery is the key to successful freight forwarding services, Hong Kong's forwarders' understanding of the international practices and their networks can help them to secure the confidence of international customers.

The specialist freight forwarders such as conference freight forwarders also provide industry expertise which is not offered by many other companies.

Exports

The destinations of freight forwarding services mirror the trade routes. The main markets for international freight forwarders are thus North America, Europe and Japan. The Chinese mainland is the most important source of cargo for Hong Kong's freight forwarders.

The larger freight forwarders often follow their big international customers to new markets. In some instances transport service providers set up business in the new markets before recommending their customers to follow suit. They expand overseas usually by setting up subsidiaries, joint ventures or appointing agents to render global services.

In order to provide an integrated, seamless storage and distribution network, freight forwarders often build warehouses, logistics bases and other supporting facilitates in other countries.

Major Export Markets of Cargo Forwarding Services 2001-2004 (HK$ million)
 

-

2001

Share (%)

2002

Share (%)

2003

Share (%)

2004

Share (%)

Asia

3,430

27.2

2,929

22.7

4,809

35.2

4,897

29.4

North America

5,506

43.7

5,645

43.8

4,717

34.5

5,898

35.4

Western Europe

3,026

24.0

3,264

25.3

3,337

24.4

4,748

28.5

Sources: Report on Hong Kong Trade in Services Statistics for 2004, Census and Statistics Department

Industry Development and Market Outlook

Outsourcing Logistics Services

A number of global trends are affecting the freight forwarding industry, including the globalisation of the supply chain, mass customisation, shortening of product lifecycles, low inventory, and quick response requirements. In facing these trends, an increasing number of businesses feel the need to optimise their supply chains via external experts, i.e. third-party logistics (3PL)and fourth-party logistics (4PL).

3PL refers to an outsourced provider that manages all or a significant part of a business' logistics requirements and performs transportation, locating and sometimes product consolidation activities. In contrast, 4PL refers to an outsourced provider which completely integrates its client's supply chain - managing the resources, capability and technology of all parties, including the 3PLs, to deliver a comprehensive supply chain solution.

Freight Forwarding Market in China

In 2005, China's logistics cost totalled RMB 3,386 billion (US$422 billion), up 13% over 2004 in current prices, according to statistics by the China Logistics Alliance Network. The national logistics cost was equal to 18.6% of China's GDP in 2005, down 0.2% from 2004. It is generally estimated that China's logistics spending as a percentage of GDP is about twice that of the US, an indication of the inefficiency of its logistics and transportation sector.

China's logistics sector is fairly fragmented, with more than 18,000 logistics service companies. It is estimated that no single logistics company currently offering nationwide distribution services and commanding more than 2% of the market. With China's logistics market becoming much more open after phasing in all of the related WTO commitments, the continued influx of foreign logistics companies is expected to fuel consolidation of the mainland's logistics market. Besides, according to IDC, there will be an increased dependency on 3PLs on the mainland, with logistics outsourcing expected to grow annually by more than 20% over the next decade.

For the mainland's top 100 freight forwarding enterprises, the average business transactions amounted to RMB1.5 billion in 2004 (up 40% from 2003), according to figures by the China International Freight Forwarders Association.

On the regulatory front, the mainland government introduced a new register system in April 2005. In contrast with the old examination system which required RMB 5 million as registered capital, the new system imposes no access restriction and fee. Records on forwarders are shifted from hard copies to digital-based.

Since 11 December 2005, the mainland government has allowed the access of wholly foreign-owned forwarders to the industry as part of China's WTO accession terms. These new opportunities are expected to bring further changes to the already robust freight forwarding market.

The Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)

When CEPA was first implemented in 2004, Hong Kong companies were given a head start of one to two years, compared to other foreign companies, to set up wholly-owned enterprises on the mainland to provide logistics services, freight forwarding agency services, storage and warehousing services, and road freight transport services. While WTO commitments have been gradually phased in, CEPA still offers Hong Kong companies with WTO-plus access to the mainland market.

Freight Forwarding

Under CEPA, the minimum registered capital requirements for international freight forwarding agency companies and storage and warehousing companies set up on the mainland by Hong Kong companies are clearly stated in mainland regulations.1

Hong Kong companies are permitted to provide direct non-stop road freight transport services (i.e. direct road transport services between Hong Kong any mainland city), a niche area in which Hong Kong companies may be interested. Hong Kong services providers must be enterprise juridical persons.

According to Administration Measures on Foreign Invested International Freight Forwarding Enterprises, foreign agencies need to have operated in China for one year, have paid up the registered capital and obtained the approval from the Ministry of Communications (MOCOM) before they can establish a subsidiary. Thus, the CEPA provisions allow Hong Kong services providers to penetrate the market more effectively as they can set up branch offices upon full payment of registered capital.

Maritime Transport Services

According to China's WTO commitment and the Regulations on the Administration of Foreign Investment in International Marine Shipping (issued by MOCOM, which became effective in June 2004), only foreign joint-venture is allowed to provide the following services: maritime cargo-handling services, customs clearance services for maritime transport, container station and depot services, international shipping, international shipping agency, international ship management, international marine shipping freight loading and unloading international marine shipping container terminal and yard business.

By contrast, the CEPA provisions allow Hong Kong services provides to have greater flexibility to access the market as they are allowed, from 1 January 2005, to form wholly-owned units in providing certain types of maritime services like international ship management services, containers station and depot services, non-vessel operating common carrying services, port cargo loading and unloading services.

Further, from January 2006, CEPA allows Hong Kong companies to set up wholly-owned companies to provide, for tugs that they operate between Hong Kong and mainland ports, regular business such as shipping undertaking, issuance of bills of lading, settlement of freight rates and signing of service contracts.

Logistics Services

According to China's WTO commitments, foreign investors are only allowed to hold majority ownership in maritime auxiliary services enterprises. CEPA therefore gives Hong Kong companies greater scope of development in the mainland's logistics market.

CEPA is considered a breakthrough for Hong Kong companies to penetrate the mainland market. Hong Kong's freight forwarders and storage/warehousing operators, who already have a strong presence on the mainland, may have more flexibility in business strategy without having to worry about identifying good joint venture partners.

However, if the asset and capital requirements remain unchanged for integrated logistics services, Hong Kong players, particularly the smaller ones, may still have difficulties entering the market alone. Besides, for a Hong Kong company offering maritime transport services, Hong Kong-registered vessels must account for over 50% of the total tonnage of its fleet.

Land transport Services

Announced in June, 2006, the "Further Liberalization Measures under CEPA in 2006" allows the set up of wholly foreign-owned enterprises in the Mainland by Hong Kong companies to operate road freight transport station (depot) and motor vehicle repair.

Since CEPA was implemented, the transport and logistics sector has accounted for the majority of approved HKSS applications. As of June 2006, out of 1013 approved applications, 456 (45%) of them were from the transport/logistics sector. In March 2004, the Ministry of Commerce granted the first wholly-owned international freight forwarding license to a Hong Kong company under the CEPA procedure.

Aug 8, 2006

CEC expansion gives mega-fairs room to grow

The world meets at Hong Kong Convention and Exhibition Centre (CEC), voted Asia’s leading conference centre three years in a row - Work has begun on the Trade Development Council’s HK$1.4 billion (US$180 million) expansion to the Convention and Exhibition Centre (CEC), Hong Kong’s award-winning waterfront venue which has hosted many world-class events and international exhibitions. To be completed by 2009, the project will create 40 per cent more exhibition space (19,400 sq metres, equivalent to 1,000 booths) in the structure that connects and integrates the facility’s two buildings. There will be no reclamation and no significant visual impact on the Victoria Harbour or on the CEC’s landmark architecture. “Preserving the environmental integrity of this special site is our priority,” said TDC Chairman Peter Woo in an earlier press release when approval was granted for the CEC extension.

Timely decision - Mr Woo noted that the present facility was bursting at the seams during peak trade fair seasons, with long waiting lists of exhibitors. Meanwhile, other cities in the region had built vast fairgrounds to compete directly with Hong Kong. “We haven’t a moment to lose as trade fairs are a winner-take-all business. They’re about building critical mass in your marketplace faster than your competitors can,” he said.

It is estimated the CEC extension will bring more than HK$40 billion (US$51.4m) in additional economic benefit to Hong Kong in the first 15 years after completion, not counting business orders at the trade fairs. The expansion will also allow many of Hong Kong’s mega trade fairs to have further room to grow and many undoubtedly will become number one in the world for their industries.

Global kudos - CEC, which was first opened in 1988 and later expanded in 1997, has won many international awards. Last year, CEC was voted “Asia’s Leading Conference Centre” for the third consecutive year at the world prestigious World Travel Awards. Over 150,000 frontline agents and 80,000 travel agencies worldwide gave the top honour, described as the “Oscars of the world tourism and travel industry”. This year, CEC was once again voted the most popular exhibition venue in the Asia-Pacific region in a survey by the CEI Asia Pacific magazine

Aug 4, 2006

Meeting with Prakash Khatri - Ombudsman and Ted Gong - Ombudsman/Executive Officer of Citizenship and Immigration Service, U.S. Department of Homeland Security of Washington DC regarding the ongoing Approved Destination Status (ADS) discussions with the People Republic of China, the challenge that Group VISA currently not available or not granted by the U.S. Government and Biometric information at the time of VISA application. There are also various immigration issues and concerns such as people entering the United States for training has job guaranteed upon returning home. College graduates working in the field of studies using their 1 year practical training option has the opportunity to put in supervisory or management position i.e. international hotel chains in Hawaii not part of their Asia division expressed no interest to invest in the cost of training management employees for operations like China when more than 800 hotels are expected to be built in the next 3 - 5 years. Special VISA for wealthy retirees to live in Hawaii or anywhere in the USA without subject them to negative U.S. tax implication. How the State of Hawaii could work with other States to improve the chances to work out the final ADS Agreement?

click here to view the Citizenship and Immigration Services Ombudsman Annual Report 2006 (completed in June 2006)

August 1, 2006

HK-based Ocean Park is planning a HK$5.55 billion (US$713m) makeover of its Aberdeen marine-based theme park. Fifteen construction contracts will be awarded to local and international companies. Ocean Park Corporation is looking to award 15 construction contracts for its HK$5.55 billion redevelopment plan to be carried out in eight phases. The redevelopment is aimed at making the Aberdeen attraction a much- improved marine-based theme park. The makeover for the government- owned park was announced in March 2005. Speaking to The Standard, chief executive Tom Mehrmann said 11 major and four minor contracts will be available. Certain packages will be "high value" such as the infrastructure works contract, which includes the funicular train and tunneling and also a 4,500-seat killer whale stadium. A Legislative Council paper last November noted that site formation, access roads, infrastructure and area development could cost a combined HK$994 million. Development of facilities at the summit (150 meters above sea level) and in the park and waterfront are estimated at HK$1.75 billion and HK$1.24 billion, respectively. So far it has called for expressions of interest from contractors for three contracts. These are for infrastructure work, the veterinary hospital, and a temporary entrance and skyfair for the waterfront at the main entrance to the park. The main entrance at present is on the northern side of Nam Long Shan. Mehrmann said the park has received between six and 12 expressions of interest from contractors, depending on the contract. "I think we were able to get the major contractors," Mehrmann said, but added the contractors may decide to form joint ventures so the number could fall as a result. The park also decided to abandon its two-phase approach planned earlier, and redevelop in eight phases over a period up to 2012 to allow more "management latitude."

"It really gives us more marketing opportunities," Mehrmann said. The building contracts will use the government's standard form of contract instead of the private sector's new 2005 standard form that the park had originally planned to use. "We did it because it was the right thing to do," Mehrmann said, adding that as the industry is familiar with it, then "why reinvent the wheel." Asked about the possibility of bonus payments for finishing projects ahead of schedule and below budget, he said "we can certainly entertain the idea," but only at a later time. The park is continuing to refine its plans - for example, when it issued the expressions of interest for infrastructure work, contractors were told they will have to remove one million square meters of a hill to make way for facilities on the summit. However, after value engineering studies, the amount of removal is "now substantially less" and the park's objective now is to find a site that can take in rock fill. "We'd rather not go to limited landfill sites," Mehrmann said. He also defended the park's handling of recent tenders for the design work for the infrastructure and waterfront, as well as legal and insurance advisers' packages. Design consultants, insurers and law firms have been critical of the park's brief to tenderers, the prolonged wait for results, a claimed lack of transparency as well as suggestions of favoritism. The issue of the "draft" tender for the infrastructure design package prompted the Association of Consulting Engineers of Hong Kong to write to the park to request the removal of onerous conditions it wanted to impose on designers. "We feel we've been incredibly transparent," Mehrmann said, pointing out that as a public body the park had strict procedures for tendering which had been reviewed by the Independent Commission Against Corruption. He said engineering consultant Maunsell AECOM, which has done preliminary studies for the park, did not get "the lion's share" of design work. While Maunsell is lead consultant on the infrastructure design, the second design consultancy for the waterfront went to architects Aedas and not Maunsell, as had been previously believed by the consultancy industry. However, Mehrmann confirmed Maunsell is one of the subconsultants for Aedas. For the third and last design consultancy for the summit, Maunsell did not summit a tender, Mehrmann said. But The Standard has learned of attempts by Maunsell to join another consultant's bid. Ocean Park was opened in 1977, funded by the Hong Kong Jockey Club, and operated until July 1987 as a subsidiary of the club.

Hong Kong is moving closer towards integrating its economy with China – a process which is helping to lay the foundation for the city’s long-term future. Soon, Hong Kong companies and foreign firms based in Hong Kong will be able to settle bills for imports from China in the mainland’s currency the renminbi (RMB) or yuan. In addition, Chinese financial institutions will be allowed to issue bonds in Hong Kong denominated in yuan. The moves were announced as Hong Kong celebrated the ninth anniversary of its handover to China. “This is a major policy initiated by the Central Government in support of the consolidation and development of Hong Kong's status as an international financial centre,” said Hong Kong’s Chief Executive Donald Tsang. The State Council in Beijing is putting the finishing touches to the legal framework for the initiatives before they get underway.

Hong Kong provides an ideal bridge between the West and China for intellectual property protection, according to Simon Speeks, a partner in the Hong Kong office of UK’s leading trademark and patent attorney firm Marks & Clerk. “Hong Kong has Western experience, but it also has Chinese knowledge. Many overseas firms don’t understand how Chinese patent law operates. Here in Hong Kong we have someone who understands their point of view, and also understands Chinese law and culture,” said Mr Speeks. Marks & Clerk helps foreign and local companies acquire, secure and register IP rights and manage their IP portfolios, and counts leading brands such as MGM, McDonalds and Southern Comfort among its clients. The company plans to open a Shanghai office this year. Because Hong Kong and China have separate legal jurisdictions, companies have to register IP rights in both Hong Kong and China. “If companies are setting up in China, it’s very important to look at protecting their ideas, otherwise the likelihood is that the possibility of an infringement occurring is much higher in China, or South East Asia generally, than elsewhere. Without some form of IP registration (e.g. Patent, Design or Trademark) it is almost impossible to take effective action against infringers.

Two international ratings agencies have upgraded Hong Kong’s long-term credit rating, reflecting the city’s sound economic fundamentals and improved fiscal position. Standard & Poor’s Rating Services raised the city’s long-term credit rating to AA from AA-, the highest rating it has ever assigned the city. This upgrade came hot on the heels of another credit lift from Fitch Ratings which upgraded its long-term foreign currency outlook on the city to “positive” from “stable”. “The upgrades confirm that Hong Kong’s improved fiscal position and sound fundamentals deserve a much higher rating,” said Financial Secretary Henry Tang. “It is also recognition of the continued strength of China’s economic performance and the overall strengthening of its creditworthiness. Hong Kong will continue to capitalize on the opportunities arising from China’s rapid growth.”

July 26, 2006

China tightens control over foreign investment in real property market - O'Melveny & Myers LLP

The PRC government has adopted a number of measures recently in order to stop the perceived speculative activities in China's real estate market. One such measure is the Opinions on Regulation of Approval and Administration of Foreign Investment in the Real Estate Market, known as Circular Jian Zhu Fang [2006] No. 171 (¡°Circular 171¡±) issued by China's Ministry of Construction, Ministry of Commerce, National Development and Reform Commission, People's Bank of China, State Administration for Industry and Commerce and State Administration of Foreign Exchange.

Circular 171 is specifically targeted at foreign investment in China's real estate sector. The following is a brief summary of its key provisions plus our preliminary comments (in square brackets):

A foreign invested enterprise engaging in the real estate business (a ¡°Real Estate FIE¡±) must have a registered capital representing no less than 50% of its total investment amount, if the total investment amount is US$10 million or more. [Note: Under the general FIE rules, the percentage could be one third if the total investment amount exceeds US$30 million. In addition, it is not clear if a Real Estate FIE includes purchasers as well as developers of real properties.]

The purchase price for the acquisition of a domestic real estate enterprise by a foreign investor must be paid in full by the foreign investor in one lump sum. [Note: Under the general foreign investment M&A rules, such payment could be made by a foreign purchaser in installments within one year.]

A Real Estate FIE may borrow loans only upon the satisfaction of the following conditions: (i) its registered capital has been fully paid; (ii) the land use right certificate has been obtained; and (iii) its registered capital constitutes 35% or more of the total capital demand of the construction project. [Note: This is presumably applicable to loans from either domestic or foreign sources and from either banks or shareholders.]

A foreign investor (corporation or individual) must establish an onshore ¡°commercial presence (i.e., a ¡°foreign invested enterprise or an°FIE) to invest, develop, own or operate real property in China (except for ¡°real property for self use discussed below).

Offshore institutions may purchase real property in China for self use only, if they have been duly approved to set up branches or representative offices in China. The relevant documents evidencing such approved ¡°presence¡± must be submitted before an offshore entity can register title to real property in China.

Foreign individuals may purchase real property in China for self use only, if they have been working or studying in China for more than one year. The relevant documents evidencing such resident duration must be submitted for a foreign individual to register title to real property in China. Residents of Hong Kong, Macau and Taiwan, and overseas Chinese citizens may purchase real property of a certain floor area for self use. [Note: Hong Kong, Macau and Taiwan residents and overseas Chinese citizens are presumably exempted from the one-year durational requirement, but this is not clearly provided.]

The formal approval certificate and business license of a Real Estate FIE will be issued only after the Real Estate FIE has paid off land grant premium and obtained the related land use right certificate. [Note: This is presumably only applicable to real estate developers.]

In case a Real Estate FIE is a Chinese-foreign joint venture, the parties must not guarantee fixed returns to any party in their joint venture contract or other investment documents.

Any irregularities engaged in by Real Estate FIEs will be investigated and sanctioned under applicable rules. [Note: Circular 171 specifically mentions that the State Council Circular 37 regarding ¡°stabilization¡± of real property price, issued on May 24, 2006, must be applied.]

Local governments must not issue new unauthorized policies favorable to foreign investment in real property market, and those existing favorable policies should be reviewed and amended if warranted.

Circular 171 is not free from ambiguities (e.g., it is not clear if the new registered capital ratio would apply to existing FIEs when they apply for increase in total investment). The various ministries involved are reported to be in the process of drafting the relevant implementing rules. While they may shed light on how to implement Circular 171, they could contain further restrictions on foreign investment in China's real estate sector.

July 21, 2006

DESIGNATING THE FIRST DAY ON THE ASIAN LUNAR CALENDAR AS “ASIAN LUNAR NEW YEAR DAY” BY THE CITY AND COUNTY OF HONOLULU - Proposed by Johnson Choi, President of the Hong Kong.China.Hawaii Chamber of Commerce, Introduced by Honolulu City Councilman Charles D'jou and PASSED by the Full Council on July 19, 2006

Honolulu will join more than 1.5 billion of the World Population, with almost all major economies in Asia, Major Cities in North America and Europe recognizing the significant of the Asian Lunar New Year to enhance and promote cultural ties and business collaborations

 

CITY COUNCIL No 0 6 2 1 5
CITY AND COUNTY OF HONOLULU
HONOLULU, HAWAII

RESOLUTION

DESIGNATING THE FIRST DAY ON THE ASIAN LUNAR CALENDAR AS “ASIAN LUNAR NEW YEAR DAY” FOR THE CITY AND COUNTY OF HONOLULU.

WHEREAS, a lunar calendar is based on the phases of the moon, with a lunar month being measured as the time between new moons and a lunar year consisting of twelve lunar months; and

WHEREAS, the new year on the Asian lunar calendar begins with the second new moon following the winter solstice, the day in December with the fewest daylight hours when the Northern Hemisphere is the most inclined away from the sun; and

WHEREAS, the new year marks the beginning ofthe Asian Lunar New Year celebration, also known as Spring Festival or Chinese New Year, which lasts 15 days and ends with the arrival of the full moon; and

WHEREAS, for example, the Asian Lunar New Year in 2006 took place between January29 and February 13; and

WHEREAS, the lunar new year is a time of commemoration and celebration for more than a billion people in Asia and of Asian ancestry worldwide, including more than 12 million Asian-Americans; and

WHEREAS, other jurisdictions, including New York State, New York City, and Maryland, have adopted measures recognizing the Asian Lunar New Year; and WHEREAS, forty-six percent of the city population is of Asian descent, the highest percentage of Asian residents out of all U.S. counties; and

WHEREAS, the council recognizes the special significance of the Asian Lunar New Year for these residents; now, therefore,

OCS/060606/03:521CT 1

http://www4.honolulu.gov/docushare/dsweb/Get/Document-48521/1gz90qq4.pdf

CITY COUNCIL
CITY AND COUNTY OF HONOLULU NO.06-215
HONOLULU, HAWAII

RESOLUTION

BE IT RESOLVED by the Council of the City and County of Honolulu that it hereby declares February 18, 2007 and the second new moon following the winter solstice thereafter as “Asian Lunar New Year Day” for the City and County of Honolulu.

DATE OF INTRODUCTION:
JUN 09 2006
Honolulu, Hawaii Council Members
(OCSIO6OGO6Ict)

CITY COUNCIL
CITY AND COUNTY OF HONOLULU
HONOLULU, HAWAII

C E R T I F I C A T E

I hereby certify that the above is a true record of action by the Council of the City and County of Honolulu on this RESOLUTION.
RESOLUTION 06-215

Introduced: 6/9/06 By: CHARLES DJOU (BR) Committee: EXECUTIVE MATTERS
Title: RESOLUTION DESIGNATING THE FIRST DAY ON THE ASIAN LUNAR CALENDAR AS “ASIAN LUNAR NEW

YEAR DAY” FOR THE CITY AND COUNTY OF HONOLULU.
Links: RES06-215

EM 07/07/06 CR-357 – RESOLUTION REPORTED OUT OF COMMITTEE FOR ADOPTION.

COUNCIL 07/19/06 RESOLUTION AND CR-357 ADOPTED.

APO Y
CACHOLA Y
DELA CRUZ Y
DJOU Y
GARCIA Y
KOBAYASHI Y
MARSHALL Y
OKINO Y
TAM Y

Y = Yes Vote

DENISE C. DE COSTA, CITY CLERK

DONOVAN M. DELA CRUZ, CHAIR AND PRESIDING OFFICER

Page 1 of 2 CITY COUNCIL

7/21/2006 http://www4.honolulu.gov/docushare/dsweb/Get/Document-48519/RES06-215.htm

Related Communications:

No. M-1124  

From: Johnson Choi, China-Hawaii Chamber of Commerce; Hong Kong-Hawaii Chamber of Commerce, Hong Kong China Hawaii Chamber of Commerce – Support Res.

Page 2 of 2 CITY COUNCIL

7/21/2006 http://www4.honolulu.gov/docushare/dsweb/Get/Document-48519/RES06-215.htm

The search for fair taxes - Bernard Chan, Hong Kong

The Hong Kong government is always looking for consensus, and perhaps now it will get its wish: nearly everyone in the community seems to agree that they don't like the proposed goods and services tax (GST). Of course, nobody likes taxes - except those that only other people have to pay. The whole point of a GST is that everyone pays it, so it would be amazing if the proposed tariff were popular.

At the same time, many people agree that we do need a broader tax base. We saw one weakness of our current, narrow tax base during the recession a few years ago. Revenues fell sharply, and the government ended up with a serious deficit. It had no way of knowing whether the problem was cyclical or structural, or how long it would take to get its books in order again.

There has been an international trend to cut corporate and individual income taxes. In many cases, this is a deliberate attempt to attract businesses and talented individuals. In other cases, policymakers think it's fairer to tax consumption rather than income (in order to encourage saving and investment, for example).

Low taxes on profits and salaries are among Hong Kong's key attractions and advantages as a business centre: that international trend could threaten our overall economy. We have actually been increasing salaries and profits taxes in recent years, even though other economies have moved in the opposite direction. From that point of view, it makes sense to spread the tax burden more onto consumption, cutting taxes on incomes at least a little.

Several sectors claim that a GST would hurt their business. But I doubt that a price increase of a few per cent would make that much difference to most consumers' behaviour, at the end of the day. However, I do worry that the work involved in monitoring compliance will be a burden.

The simplicity of our tax system is almost as attractive as our low tax rates. This is a valid concern.

A serious worry is that a GST, combined with cuts in corporate and individual taxes, is basically a transfer of some of the burden from the better off to the poorer. This is inevitable when you are broadening from such a narrow base.

If the richest 83 per cent of the population forced the poorest 17 per cent to pay more tax, that would be unfair and immoral.

But what we are looking at here is the other way round. Only 17 per cent of Hongkongers pay salaries tax. Only 35 per cent of working people actually pay any salaries tax.

And the number of people in the workforce will decline as the population ages. Nearly all of us use government services at some time. Just because someone is richer than you does not mean you are totally free of responsibility to make any contribution.

But no one should have to pay more than they can afford, and the GST proposal includes systems to compensate the poor for higher shopping bills.

But that raises other worries: could a GST lead to bigger government, more bureaucracy and more spending programmes?

The government believes we need to broaden the tax base, and it has identified a GST as a viable way to do it. But, at the end of the day, it is a question for the community as a whole.

Read the consultation document, which is detailed but in plain language, and think about responding. If you don't think we need to broaden the tax base, say why. If you accept the need for a broader tax base but don't want a GST, offer an alternative.

There are alternatives, though all have their pros and cons. We could broaden the existing salaries and profits tax net. We could have a basic retail sales tax. Some suggest a tax on all electricity and gas bills, which would be simple to collect.

Or we could cut spending - and that brings us back to the basic problem: the more people want public services, the more people need to pay taxes.

July 21, 2006

China Bans Offices of Foreign Firms from Business Activities

Many foreign firms (including those from Hong Kong) have offices on the mainland, but very often they are engaging in activities beyond their scope of operation and are actually involved in other lines of business. To address this problem, the Chinese government has just issued a set of implementation opinions banning unauthorized business activities by foreign firms. Hong Kong companies should take note of this development. These rules, which form part of the supporting measures for the Company Law and Regulations on the Administration of Company Registration amended earlier this year, are intended to straighten out the investment activities of foreign firms.

One of the measures is to require each foreign firm to sign a pledge, stating: "This office has never engaged in business activities and will never engage in any form of business activities in future." The authorities will also make surprise inspections of all offices of foreign firms. This work is already underway in places like Zhejiang and Shanghai, with officers from the industry and commerce administration conducting the inspections. This exercise will soon commence in Guangdong.

The above regulations, jointly issued by the State Administration of Industry and Commerce, Ministry of Commerce, General Administration of Customs and State Administration of Foreign Exchange, took effect immediately upon promulgation.

The implementation opinions pointed out that with immediate effect, existing offices of foreign firms may continue to exist provided they do not engage in business activities. They may not engage in unregistered business activities, and must apply for approval to set up a new branch if they intend to engage in business activities.

This new rule has made many offices of foreign-invested enterprises feel all at sea.

Under the Company Law and Regulations on the Administration of Company Registration, foreign-invested enterprise may set up branches or offices at places other than their domicile. While branches may engage in business operations, offices may only engage in business liaison within the parent company's scope of business.

Different tax policies apply to branches and offices. These mainly concern corporate income tax and turnover tax. "Company branches pay corporate income tax and turnover tax in their domicile. Since offices do not engage in business activities, they naturally do not have to pay tax in their domicile. They only have to pay tax in the company's domicile," explained an officer from the State Administration of Industry and Commerce.

Different places have different preferential tax policies, and development zones and bonded areas have more tax concessions to offer. Many companies try to tap these benefits by registering in development zones and setting up offices in other places for business operations.

According to the implementation opinions, no alteration or extension applications for registration will be accepted from offices already registered. Upon expiration of registration, they have to complete deregistration formalities or apply for permission to set up branches if necessary.

Actually, local departments of taxation and industry and commerce administration have long been aware of offices of foreign-invested enterprises engaging in business activities. However, since the government was under pressure to attract foreign investment, they did not take any strict actions against these activities.

China badly needed foreign capital and welcomed any form of foreign investment in the past, but these days are gone. Through strict control of the offices of foreign-invested enterprises and the abolition of the system of annual verification, foreign firms that engage in operations beyond their scope or in violation of regulations will disappear, and so will those with low value-added and those which exist on low taxation. Only those with a higher profit ratio and better quality of output will remain.

July 21, 2006

Secret world of China's richest men

Most people envy men of wealth and their grand appearance, but what do you really know about their world?

Southern Weekly recently conducted a survey of the richest entrepreneurs on the Chinese mainland, all of whom had an average individual wealth of 2.202 billion yuan. They were asked about their career and money, as well as religious beliefs, marriage and family, views on sexual relations and life in general. There are 80 people on China's annual richest entrepreneur list, which draws only from the mainland. While 55 percent of these men on took part in the survey and returned their questionnaires, only 33 of them were valid .

The average age of those surveyed is 49.8; the oldest is 58 and youngest 33. Seven were in their 30s, accounting for 21.2 percent of the total; nine were in their 40s, 27.3 percent of the group; eleven were in their 50s, the largest age group, making up 33.3 percent of the total figure; and only 6 were over 60, 18.2 percent of the Chinese mainland's richest men.

Only 17 of these men held bachelor degrees, 51.5 percent of the group, and 8 held masters degrees or higher, 24.2 percent of the group.

In terms of career, as many as 75 percent of China's richest entrepreneurs have worked in similar organizations and industries, and some of them have held high managerial posts. Of them, 16 were CPC members, 48.5 percent of the total.

There were five categories in the questionnaire: career, wealth, marriage and family, religion and life.

Career is just one part of life, and a course through it, but wealth plays a big role.

Of those surveyed 27 acknowledged this when they were asked for their views on their career. Only four said their careers meant everything to them and two claimed to be indifferent.

When asked how they would choose to dispose of their property, only three were willing to hand it over to the stand. Fifteen said they would trust the process to professional agents and twelve would pass it on to family members. One said he would hand donate it to those in need, one had never considered the matter before and one declined to answer.

Most of mainland China's richest men have mixed feelings about money.

Asked where they spent most of their money outside of further business development 13 of the 33 surveyed said they would improve the welfare of their employees and managerial team, 12 said they would donate money to charities, 5 said they would cultivate and develop their personal hobbies, and 3 said they would improve their own standard of living.

As of what the huge wealth would bring on them, most of the rich people attached great importance on social status and sense of achievement money has brought on them. Meanwhile, 7 of them have also acknowledged that money brought them sense of insecurity and vexation.

Rich entrepreneurs laid more importance on career than marriage and family and half of them turned a blind eye to extramarital affairs.

On the question of which one will you choose, career or marriage and family, 21 chose the former as against only 12 the latter.

As of the extramarital relations, ten said they were indifferent to it while six believed it was reasonable as against 16 who held it was irrational. Apart from that, six of them have ever divorced.

Most of the rich entrepreneurs hold a proper attitude towards life.

When answering the question of what can make you feel great happiness, 11 chose health, 9 successful career, 8 easy life and 6 happy family.

Being asked on the attitude on life, 20 of them have voiced positive opinion on that, while 9 held life was changeable as against 1 who held an indifferent view.

Generally speaking, most of the rich entrepreneurs held proper and active view on life. But there were still a certain amount of people held that life was changeable, which showed their helplessness towards the reality.

Rich entrepreneurs are polarized on religious belief.

When being asked the view on religious belief, 16 voiced their indifferent view followed by 13 positive answers and 4 negative ones.

On the question of whether you had religious belief or not, 23 chose no while 10 chose yes.

As of the question of which religion you believed in, only 12 chose Buddhism, and 2 who declined to acknowledge personal belief also chose Buddhism. They believed to be non-Buddhists but appropriated Buddhist ideas and were fascinated by the influence of Buddhist doctrine and posed themselves off as disciples of Buddhist thinking.

Generally speaking, there were 20 rich entrepreneurs who held indifferent or negative idea towards religion, and most of them adopted an attitude of negating it. However, there were also 13 who had positive view on religion or believed in Buddhism, which could not be neglected.

July 20, 2006

Food and Agricultural Import Regulations and Standards - China Streamlines Food Label Approval Process

During the past 3 years, we have been working with exporters from Hawaii and North America to bring their products to China. One of the many areas an exporters need to be aware of is the labeling requirements. A manufacturer or exporter cannot simply load their goods on a container and send it to China.

I would like to share with you a report prepared by the USDA. Their Offices in China are valuable resources. Before you contact them, you should also do some homework. The GAIN report covering the subject matter is included for your references.

I have also met with USDA Officers in Shanghai China and the Head of the Shanghai CIQ in May 2006 to get a clear understanding on how the rules will apply to importers.

If you have further questions, feel free to contact our office. Johnson Choi, President, Hong Kong.China.Hawaii Chamber of Commerce at 808-524-5738 or by email to jwkc8168@yahoo.com

USDA Foreign Agricultural Service - GAIN Report - GAIN Report Number: CH6020 2006
Global Agriculture Information Network
Template Version 2.09
Required Report - public distribution
Date: 4/19/2006

Peoples Republic of China
Food and Agricultural Import Regulations and Standards
China Streamlines Food Label Approval Process

Approved by: Maurice House, U.S. Embassy Beijing

Prepared by: James Butterworth, Ralph Bean, & Zhang Lei

Report Highlights:

On March 27, 2006, China’s General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) announced that, effective April 1, 2006, it would no longer require a separate approval process for labels used on imported and exported foods and cosmetics. Approval of the label will be conducted as part of the import inspection at the port of entry. This report is a free UNOFFICIAL translation provided for the benefit of U.S. exporters by the USDA FAS Agricultural Affairs Office in Beijing.

Includes PSD Changes: No
Includes Trade Matrix: No
Unscheduled Report
Beijing [CH1]

On March 27, 2006, the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) released its Announcement No. 44 2006, “Adjustment of Import/Export Food and Cosmetic Label Examination System.” The original document is available in Chinese at: http://www.aqsiq.gov.cn/cms/template/item.html?did=25&cid=2038\18558 

Effective as of April 1, 2006, the Announcement eliminated the need for a separate, preliminary examination and approval of labels used on imported and exported foods and the fee associated with that review. The label will be approved as part of CIQ’s other inspection responsibilities at the port of entry.

The new policy also states that, up until October 1, 2006, labels used on imported and exported food that do not comply with China’s labeling requirement can be changed to bring them into compliance. After October 1, 2006, however, any imported foods that use labels that do not comply with the relevant labeling laws will be disposed of according to “Regulations on the Enforcement of the Law of the People’s Republic of China on the Inspection of Import and Export Commodities.” Please refer to GAIN Report CH5071 for the unofficial translation of the Regulations, which is available at:

http://www.fas.usda.gov/gainfiles/200511/146131419.pdf 

Post believes this streamlined label approval procedure may facilitate imports. Also, importers will not be charged an additional label pre-examination fee. One potential downside, however, is that this decentralized approval process increases the likelihood of inconsistent interpretation of China’s labeling requirements because every CIQ official at the port of entry is authorized to approve or reject the label as part of their other inspection responsibilities.

BEGIN TRANSLATION:

Announcement No. 44 2006
By the General Administration of Quality Supervision,
Inspection and Quarantine (AQSIQ)

March 24, 2006

In fulfillment of the spirit of the State Council’s administrative approval reforms, simplification of procedures, and ease imports and exports, it is decided to modify the label examination system applicable to imported and exported foods and cosmetics as follows:

The label of imported foods and cosmetics must comply with China’s law, regulations, and mandatory standards (which are available at AQSIQ website: www.aqsiq.gov.cn); labels of exported food and cosmetic must comply the requirements of the importing countries and regions.

Effective on April 1, 2006, the examination of labels used on imported and exported foods and cosmetics will be combined with goods inspection and quarantine procedure; pre-examination will not be conducted anymore. CIQs at all levels will not accept label pre-examination applications for imported and exported foods and cosmetics. The Import/Export Food and Cosmetic Label Examination Certificate will not be a mandatory document for the inspection request anymore.

CIQs will check if the label used on imported and exported foods and cosmetics to ensure it complies with China’s laws, regulations, and standards; and check the truthfulness and accuracy of quality-related content when imported and exported foods and cosmetics are subjected to inspection and quarantine. The inspection certificate of goods that meet all the requirements will be marked “Label is qualified”.

Prior to October 1, 2006, any product whose label fails to meet the new standard will be given the opportunity to be changed under CIQ’s supervision to meet the new standards, after which it may be released. After October 1, 2006, products whose labels fail to meet the new standard will be disposed of according to according to Article 19[1] of “Regulations on the Enforcement of the Law of the People’s Republic of China on the Inspection of Import and Export Commodities”; those export food and cosmetic, whose label does not comply with requirements of imported countries or regions, will be disposed according to Article 27[2] of “Regulations on the Enforcement of the Law of the People’s Republic of China on the Inspection of Import and Export Commodities.”

All Imported/Exported Food and Cosmetic Label Examination Certificates already issued are still valid. If the labels of imported and exported foods are consistent with the content of the certificate, examination of the label will not be required.
Those who need new certificates because of the labeling requirements contained in “GB7718 – 2004: General Rules of Prepackaged Food Labeling” and “GB13432 – 2004: General Standard of Labeling for Pre-packaged Food of Special Dietary Use.” must renew their certificates according to the requirements of “Notification on Renewal of Imported Food Label Examination Certificate” released by AQSIQ’s Import/Export Food Label Office on December 9, 2005. Renewal of such certificates will be accepted until May 1, 2006. After that, any certificates that do not comply with the new labeling laws, regulations, or standards’ will automatically become invalid.

CIQ's inspection and quarantine services on import/export food and cosmetics includes all label examinations and reviews. Charges for these services are included in the inspection fees. No additional or specific charges will be levied for label examination and approval.
[End Translation]

[1 Article 19 Unless provided otherwise by laws and administrative regulations, the exit and entry inspection and quarantine institutions shall order the parties concerned to destroy the import commodities subject to mandatory inspection that are found via inspection to have failed to meet the standards for personal life and property safety, health and environmental protection. They may also issue a return notice and notify custom in writing. With the return notice, customs shall handle the formalities of shipping the goods back. Goods failing to meet other standards may be technically treated under the supervision of the exit and entry inspection and quarantine institutions and may be sold or used only after they are found to have met these standards through re-inspection. If the parties concerned apply to the exit and entry inspection and quarantine institutions for certification, these institutions should issue certificates in a timely manner.

If the exit and entry inspection and quarantine institutions find that complete sets of imported equipment and related materials fail to pass inspection, they shall issue a notice to forbid their installation and use. Only goods that have been technically treated and have passed re-inspection by the exit and entry inspection and quarantine institutions may be installed and used.]

[2 Article 27 If the export commodities subject to mandatory inspection fail to pass inspection by the exit and entry inspection and quarantine institutions or the port-based exit and entry inspection and quarantine institutions, technical treatment may be carried under the supervision of the exit and entry inspection and quarantine institutions. Only the export commodities that pass re-inspection shall be allowed to be exported; if the export commodities cannot be treated technically or fail to pass re-inspection after treatment, they shall not be allowed to be exported.]

July 19, 2006

Over 10,000 titles on show at Book Fair

Over 10,000 titles are on show at the 17th Hong Kong Book Fair which opens from today (July 19) until next Monday (July 24) at the Hong Kong Convention and Exhibition Centre. The fair is bigger and more enticing than ever, with over 10,000 titles showcased by 434 exhibitors, a 11 per cent more than last year.

According to the organizer, Hong Kong Trade Development Council (TDC), religious books top the book fair's website online entries of new titles, followed by popular readings, children books, social science, literature, finance/business, travel guides, history, spiritual and arts/music.

TDC, a strong believer that books enrich lives, educate, as well as entertain, has donated 30,000 admission tickets to the Hong Kong Council of Social Service to distribute to its members. The attraction-packed fair also features an "International Cultural Village" at which books from 15 countries and regions are available in their respective languages. New "villagers" this year include New Zealand, Mexico, Nepal, Pakistan and India. They are showcasing their titles next to France, Spain, Eqypt, Singapore, Thailand, Poland, Belgium, Malaysia, the Philippines and Vietnam.

Famous writer and VIPs such as swordsman fiction writer Louis Cha (Jin Ronge), science fiction author Ni Kuang (٦J), Hong Kong literature historian Professor Lo Wai Luen (Xiao Si p), as well as Hong Kong's Chief Executive Donald Tsang come to share their writing and reading experience respectively. Writers from Hong Kong, Taiwan and the Chinese mainland will attend a forum entitled: "In Search of Humanity in the 21st Century", which is co-organized by TDC, Yazhou Zhoukan and the Hong Kong Arts Development Council to discuss cultural matters related to their regions.

They include Liu Xin Wu (BߪZ)BHong Ying(iv)BChu An Min (w)BSu Wei Zhen (Ĭs) and Xiao Si (p). These five writes, together with Yu Hua are scheduled to host their individual meet-the-readers sessions after the Forum. The Fair also features a panel display on the renowned 20th Century Chinese mainland writers' activities in Hong Kong.

To better prepare students who plan to meet with famed authors taking part in these sessions, the Education and Manpower Bureau is providing schools and students with materials on writers' backgrounds and their works. The Fair this year stays open until 10:00 pm each day from July 19 to 21. It is further extended on Saturday (July 22) to 2:00 am on Sunday (July 23) to serve midnight visitors. Local bus companies will arrange special routes to serve readers. Last day of the fair (July 24) will close at 6:00pm.

Visitors from outside Hong Kong can purchase half-price tickets on presentation of their travel documents/visas. The Fair attracted near to 640,000 visitors last year. Hong Kong's printed matters exports amounted to US$ 1,979 million in 2005, up 12% from 2004.

July 14, 2006

Hawaii Governor Linda Lingle Signs Bill to Improve Language Access for Immigrants with Limited English Proficiency - "The state has taken a long-awaited and critical first step toward narrowing a civil-rights gap that has separated our immigrant population from the government help it deserves and needs." - Honolulu Advertiser editorial, "Language-access law sets key agenda." Governor Lingle signed into law a key bill designed to improve state and state-funded services to immigrants with limited English proficiency. The Language Access Law requires the state, as well as state-funded programs, to develop plans to provide interpretation services and translated documents to immigrants and residents who have limited ability to read or speak English. "This bill will help a silent minority in our community - those who are not getting services they are entitled to," Governor Lingle said. "Language should not be a barrier to basic needs such as housing, food and health care."

July 12, 2006

Proposed Changes to U.S. Export Control Regulations Applying to U.S.-China Trade

The U.S. Department of Commerce's Bureau of Industry and Security (“BIS”) has published a proposed rule amending export and re-export controls for the People's Republic of China (“China”). BIS is responsible for administering U.S. export control laws regarding so-called "dual-use" items, which are items with both commercial and military applications. This long-anticipated proposed rule may significantly affect companies that export or re-export U.S. -origin goods, software and technology to China.

There are three components to the new rule:

Military End-Use Control: The proposed rule would establish a new control policy based on an exporter's knowledge of a military end-use for certain dual-use items. Specifically, the proposed rule would impose a new licensing requirement for certain items controlled on the Commerce Control List (“CCL”), but which do not currently require a license for export to China, if the exporter has knowledge, or reason to know, that such items are destined for a military end-use in China. (This would principally affect certain items that are currently controlled only for anti-terrorism reasons.) The proposed rule defines “military end-use” as "incorporation into, or use for the production, design, development, maintenance, operation, installation, or deployment, repair, overhaul, or refurbishing of items" listed on the U.S. Munitions List, the International Munitions List, or covered by Export Control Classification Numbers ending in “A018” on the CCL. Exporters seeking licenses for items to be used for a military end-use in China will need to explain why the proposed export should be approved despite U.S. concerns about the capabilities of the Chinese military. In a recent speech on U.S.-China high-technology trade, U.S. Commerce Department Under-Secretary for Industry and Security David McCormick defended the proposed measure, stating that the rule: “is not a wide-ranging 'catch-all regulation' that subjects everything from fountain pens to office furniture to government scrutiny. Rather, these changes carefully target certain technologies that, while unrestricted until now, have the potential to materially enhance China's military capabilities.”

Validated End-User Authorization: The proposed rule creates a new authorization for validated end-users located in certain destinations, including China, to whom controlled items may be exported license-free. This program will permit expedited shipments to a published list of end-users that have been vetted and determined to have no ties to the Chinese military or other activities of concern (for example, nuclear proliferation). Under-Secretary McCormick extolled the benefits of this program: “U.S. exporters seeking to grow market share in critical sectors such as semiconductor equipment and electronics will be spared the need to apply for licenses for potentially hundreds of millions of dollars worth of sales to these companies in China.”

Expanded End-User Certificate Requirements: BIS proposes to expand the requirement that exporters obtain an End-User Certificate from the Chinese Ministry of Commerce ("MOFCOM") for items that both require a license to China for any reason and exceed a total value of $5,000. Currently, only items controlled for national security purposes require such certificates.

The impact of the proposed rule (once adopted) will depend on the nature of a company's products and its customers. A copy of the proposed rule is attached. [PDF] Any interested party may submit comments to BIS regarding these proposed revisions of U.S. export and re-export controls to China by November 3, 2006. Following its consideration of the comments, BIS will publish a final rule.

July 7, 2006

 Success in world trade's pearl of the orient

Pearl trader Rene Hodel identified Hong Kong as the best base for his business, and has never looked back - Exquisite, branded pearl jewellery by Hodel of Hong Kong is in demand around the world.

Swiss luxury pearl brand Hodel has leveraged Hong Kong's trading strengths to develop as a pioneer in the pearl industry, with a worldwide export business. Originally a behind-the-scenes wholesaler, Hodel (Hong Kong) Ltd now has teams operating globally from Tahiti to Western Australia. The business is rapidly expanding across Asia, with offices in Hong Kong (its global headquarters), Taiwan, Singapore, Indonesia and Kuala Lumpur.

Managing Director Rene Hodel says Hong Kong's competitive advantages have been critical to his success. Could he have achieved so much if he had set up his business anywhere else but Hong Kong?"Never, impossible," Mr. Hodel replied. Mr. Hodel was sent to Hong Kong in 1981 to run the pearl department of his then employer, a Swiss jewellery company. A few years later, he approached Schoeffel, the largest pearl company in Europe, and proposed a partnership in Hong Kong."This is what we did, and the company (Schoeffel HK Ltd) grew over 20 years to one of the most respected pearl specialists in Asia," Mr. Hodel said. In September 2005, Mr. Hodel bought out Schoeffel Stuttgart's 50 per cent share and the company was rebranded as Hodel.

Mr Hodel said choosing Hong Kong made economic sense. "Hong Kong, with its laissez faire attitude, is the greatest trading place on earth. You buy a company in the morning and can be doing business in the afternoon. There is no other place like that. On top, Hong Kong allows you to build up a business. We pay only 17 per cent tax, so profits can be re-invested and companies have a chance to grow. This is not possible in Europe, America or Australia, where you pay hefty taxes."

Mr. Hodel also used his own connections to help grow the company."Having been in the industry for more than 25 years, of course I know all the important suppliers as well as competitors," he said. "Pearl business is a people's business and has a lot to do with personal relationships. Thanks to these connections, we were able to establish offices Asia-wide, and we have very close associates worldwide who are selling our branded products."

In addition, he cites Hong Kong's world-class trade shows as an effective business tool. "We have attended the Hong Kong International Jewellery Show since day one," he said. "I started to exhibit in 1981 and have supported all jewellery shows since." Over time, Mr. Hodel has seen many changes. "When I started in the business, Kobe, Japan was the pearl city of the world. This has changed over the past 10 years, and nowadays, all pearl producing countries hold their major auctions here, in the Hong Kong Convention and Exhibition Centre."

He is also regarded as an industry pioneer. While working with Schoeffel HK, Mr. Hodel helped establish the first Chinese Akoya processing company in Hong Kong. Some time later, the firm pioneered the first freshwater pearl company in China specialising in pearls sized from 9 mm up. He participated in the first South Seas pearl auction held in Darwin in 1989, and was among the first to import black pearls directly from Tahiti.

Hodel produces jewellery in Hong Kong, China and Thailand, and sells it in Hong Kong, Europe and Asia. "The US (market) is fast growing, but so is China," Mr. Hodel said."China will be our market of the future." The firm's biggest growth area is branded jewellery, which is overseen by Mr. Hodel's wife, Linda. Mr. Hodel says there is no question where the hub of his business will remain. "Hong Kong is the centre of the world (or so we think). It's a vibrant and bustling place, where people come to buy and do business."

July 4, 2006

China Soon to Allow Limited Liability Partnerships - HKTDC

China is currently reviewing the draft of the revised Partnership Enterprise Law, marking the first round of revisions since the law was promulgated in 1997 and covering new rules on doing business in China in the form of partnership. Currently, Hong Kong companies are prohibited from establishing independently-run operations and must team up with mainland partners in certain business sectors (especially key industries). Hence, Hong Kong companies should take note of these imminent changes.

According to Zhu Shaoping, director of the National People's Congress financial and economic committee bills office, the present round of revisions submitted for deliberation primarily contains changes in the following areas: two new forms of partnership, namely limited partnership (LP) and limited liability partnership (LLP) are introduced, and legal persons can take part in partnerships.

According to Zhu, the existing Partnership Enterprise Law was formulated at a time when the planned economy was shifting gear to the market economy and partnership was only narrowly defined as general partnership. As time changes, the old law can no longer cope with the current needs for building an innovative nation and promoting private investment. One of the major considerations for revising the Partnership Enterprise Law is to introduce LP as a new enterprise form, paving the way for attracting venture capital and promoting the input of technology and innovation.

An LP is a form of enterprise that allows partners assuming limited liability to join on the basis of one or more partners assuming unlimited liability.

This type of partnership has several advantages. First, as a partnership enterprise, no corporate income tax has to be paid and the investors concerned will not be subject to double taxation. Second, investment risk can be reduced as some of the investors and investing institutions concerned may assume limited liability. For those partners who assume unlimited liability, this type of partnership offers the capital enlargement effect as they may raise a massive amount of capital based on a relatively small sum backed by good reputation. In other words, it offers the benefits of low operating cost and high efficiency.

LP is an internationally adopted form of enterprise especially suited to investment in the form of venture capital. Partners with limited liability are usually the major venture capital contributors. They only assume limited liability for their share of capital and are not involved in the management and operation of the venture capital funds. Meanwhile, general partners are responsible for managing the venture capital. They are entrusted with the management of the partnership enterprise because of their higher management capability. They may make a smaller capital contribution but assume unlimited liability. The parties concerned enter into an agreement which clearly sets out the contractual rights and obligations of the respective parties. As a form of enterprise, LP offers various advantages over limited company for venture capital investments, including the operation scale of the capital, the level of professionalism in investing, and the cost of management.

In fact, the issue of LP was discussed during the legislative process of the existing Partnership Enterprise Law. In the year following the formulation of the Partnership Enterprise Law, a group spearheaded by the chairman of China Democratic National Construction Association Cheng Siwei tabled a proposal at the CPPCC (Chinese People's Political Consultative Conference) annual meeting to promote venture capital with full force.

Subsequently, some local authorities experimented with venture capital investment in the form of LP but limited progress was made because LP was not covered in the law.

According to Zhu, more than 250 venture capital firms are currently operating in China involving over Rmb50 billion worth of venture capital funds. These funds are being invested in 3,000-4,000 projects where the investment amount accounts for about one-third of the total capitalization. The relatively low ratio is attributable to the absence of free flow of capital into and out of China.

Although the introduction of LP is the right move, law professor Gan Peizhong of Peking University who participated in drafting the existing Partnership Enterprise Law cautioned that, "LP also involves high risks because partners with limited liability are not involved in management and they have to take into consideration the credentials and trustworthiness of their partners with unlimited liability, as well as supervision and control over them".

"Legal persons participating in partnerships is an issue that warrants prudence," said Gan. This is because legal person shareholders cannot exert control over partners with unlimited liability, and in-between there is also the presence of the management staff of the legal person. Hence, in many countries and regions the law will require the consent of all or the majority of shareholders for admitting legal person partners.

While the existing Partnership Enterprise Law consists of 78 articles under nine chapters, the revised draft law adds 26 new articles, deletes two articles and combines four articles to form 11 chapters with a total of 100 articles. Major revisions include:

1) The draft contains a new chapter on "Special Provisions on Limited Partnership" which sets out the rights and obligations of the partners with limited liability, how the affairs of the limited partnership are to be managed, as well as special rules governing limited partnership as opposed to general partnership.

2) The draft also contains a new chapter on "Special Provisions on Limited Liability Partnership" which covers the definition of limited liability partnership, the responsibilities of professional services providers, and the professional risk fund etc.

3) The draft provides for the participation of legal persons in partnerships. Wholly state-owned enterprises and listed companies should participate in partnerships via their subsidiaries or other holding companies.

China's First Food Recall Rule to Take Effect in Shanghai in August - HKTDC

Starting from 1 August, "problematic food" will be recalled in Shanghai. According to the Shanghai food and drug administration, food manufacturers are required to recall within 72 hours food products that have already caused, or there is evidence they may cause, serious health hazard or even death. The manufacturer concerned must also report the progress of the recall to the Shanghai food and drug administration once every 24 hours. If the manufacturer concerned does not recall the problematic food voluntarily, the government will issue a recall order and seal up the problematic food if the manufacturer still refuses to take any action.

Before, Shanghai would only punish the food manufacturer after a food hazard incident had occurred. Now the new food recall rule puts people¡¦s health first by recalling problematic food once it is found.

In future, there will be unified standards for defining problematic food, which is classified into three levels:

Level 1 problematic food products refer to those that have already caused, or there is evidence they may cause, serious health hazard or even death.

Level 2 problematic food products are those that have caused or may cause temporary health hazard but the hazard is curable, or food products that are less likely to lead to serious health hazard.

Level 3 problematic food products are those that do not cause obvious health hazard after eating.

Relevant recall measures will be taken according to the seriousness of the problem. There are two major categories of problematic food. One is food items that fail to conform to national standards; the other is food items with no unified standards for the time being, such as Sudan Red, but may pose health hazard and need risk evaluation by experts.

Under the new regulation, a food manufacturer should voluntarily recall its products upon discovering through self-examination or through reports or complaints by distributors or consumers that the food products pose safety hazard. At the same time, the food manufacturer should report to the government department concerned, draw up a recall plan, promptly notify consumers, and recall the products from the market and from consumers. The whole recall process will be monitored by the government department concerned. If it is discovered that the food manufacturer fails to make a voluntary recall, a recall order will be issued by the government department concerned.

The food and drug administration will only mete out lenient punishment if an enterprise voluntarily recalls its problematic products and the recall is effectively implemented. Otherwise it will be subject to severe administrative penalty whereby the problematic products will be sealed up and its food production licence may be quashed.

After the issuance of a Level 2 recall order, the food manufacturer should also announce the recall notice to the public and recall its products from all consumers. The recall must be completed within seven days, and the progress of the recall should be reported to the food and drug administration once every three days.

Once the "Red Alert" for Level 1 problematic food recall is raised, the Shanghai food and drug administration will announce to the public details of the problem, emergency measures to be taken to avoid hazards, as well as other relevant information. The manufacturer will issue a recall notice and have the products recalled from consumers and users. The recall must be completed within 72 hours and the manufacturer must report the progress of the recall to the food and drug administration once every 24 hours.

For Level 3 problematic food products, the recall may be extended to wholesalers or retailers if necessary.

June 21, 2006 - by Yan Weilu and Xu Jing

Xinjiang's burgeoning market for Hetian jade

Hetian jade has a history of at least 7,000 years in China. According to experts, the "Jade Road" existed long before the "Silk Road", and Chinese emperors all through the ages had their imperial seals carved out of the jade from Hetian. Opening in August 2005, the classic-looking Hetian Jade Trading Centre is located at Renmin Road in the prime area of Urumqi, Xinjiang's capital. With its pleasant shopping environment, it is an ideal place to appreciate and purchase jade. Renmin Road is basically the financial district of Urumqi - so the jade centre could not have picked a better location.

According to Wu Gang, manager of the centre, Hetian jade mostly comes from the northern slopes of Xinjiang's Kunlun Mountains. It is semi-translucent and fine, with a greasy kind of gloss after polishing. Its hardness is between 5.5 and 6.5 degrees. Hetian jade comes in white, green, blue-green, black, yellow and yellow-green, depending on the type of trace minerals it contains. The most expensive white jade is called "mutton-fat" jade. At present, 1 kg of "mutton-fat" jade is worth more than Rmb100,000 (HK$97,500).

The Xinjiang Hetian Jade Trading Centre is housed in a three-storey building with a floor area of over 3,000 sqm. It now has more than 50 shops, each with a business area of 10 to 70 sqm. Using the "shops in front and factory at the back" model of operation, the front of the centre is lined with shops while the Xinjiang Jade Carving Factory lies at the back. It is one of the rare Hetian jade trading centres where jade carving, sales and appraisals all take place under one roof.

The centre mainly sells mid-to-top-end Hetian jade, so it has attracted some pre-eminent names in the production and sale of Hetian jade, including Furunmantang, Sanyang Jade Garden, Minghe Jade, Jiufeng Jade, Boyu Gallery, Yawan Gallery, Ziyu Gallery and Baoyu Gallery. Among these, Minghe Jade was first produced by famous Xinjiang jade carver Zhou Yanming, while the Yawan Gallery was brought on the market by Li Shaoen, the largest jade producer and dealer in Bayinguoleng, Mongolia.

Boyu Gallery jade is run by Ke Changlin who has mined for precious materials for more than 20 years. These shops mainly deal in jade pendants, bangles, belt buckles and accessories, with pendants accounting for 80% of total sales. Aside from local jade traders, dealers from Suzhou and the northeastern provinces have also set up business in this trading centre. Most of them carry on wholesale and retail businesses at the same time. In addition to Hetian jade, they also sell small quantities of jade from Qinghai and Russia. The future direction of the centre appears to be aimed at providing the purest of the pure Hetian jade from Xinjiang.

Shop space at the trading centre is for lease only. The daily rent is Rmb7 (HK$6.7) per sqm for ground-floor shops facing the street, Rmb5 (HK$4.8) per sqm for ground-floor shops inside, and Rmb1.5 (HK$1.4) to Rmb2 (HK$1.9) per sqm for first-floor shops. Rental includes water charges but tenants have to pay Rmb6 (HK$5.8) per sqm a month for electricity, heating and management fees.

Ms Li, owner of Ziyu Gallery, has been in the jade business for nearly six years. She is satisfied with the centre's shopping environment and thinks that it is well-managed and adheres to proper contract terms. In view of the centre's market size and customer flow, she is thinking of leasing a larger shop to expand her business.

Jade is a specialised collectible and pricing for jade is more complicated than for diamonds and gold, with only experienced experts able to vouch for the authenticity and grade of Hetian jade. The centre has taken some protective measures to give consumers a sense of reassurance. Since it opened for business, tenants have formed a disciplinary committee, have worked out relevant standard business guidelines and made assurances to the public that it would strictly enforce the Product Quality Law to ensure that goods sold are genuine and value-for-money.

These practices have earned the centre a positive reputation among consumers. The Xinjiang Mineral Products Quality Inspection Station offers an appraisal and enquiry service at the centre. It provides free jade testing and appraisal to monitor the quality of products sold, so that unscrupulous businesses cannot offer fakes. In order to further promote Hetian jade from Xinjiang and attract buyers, the centre plans to host an exhibition and an auction in conjunction with the Gemmological Association of Xinjiang this year. It will also invite top Xinjiang jade carver Ma Jingui as image ambassador, to build up the Hetian jade brand name.

The centre is monitored by infrared, video and other security alarm systems. It has also reached agreements with the industry and commerce administration and taxation departments to open offices at the centre for the convenience of occupants in paying taxes and fees. The centre has also established an online trading platform with commercial banks in Urumqi. Point-of-sale (POS) machines are in use so customers can make purchases with credit cards and save themselves the trouble of having to carry a lot of cash.

All shops at the centre are broadband-connected so staff can follow market movements and make business deals without having to go out. It is understood that the centre also intends to establish an online trading platform for Hetian jade with the Gemmological Association of Xinjiang and other units so customers and enterprises can make use of the network to conduct business more efficiently.

The trading centre is next to Urumqi's busiest Erdaoqiao shopping area so that there is a large and consistent customer flow and good public transport. According to traders, Hetian jade has seen soaring sales in recent years and the prospects are good. As a non-renewable resource, it is becoming more and more valuable to collectors. Also, as people become more health-conscious, the traditional saying that jade nourishes people as much as people nourish jade is played up, so making jade items more popular than ever, with Hetian being the most sought-after.

Hetian jade products could be among the hottest collectible items on the mainland in the next 10 years. For the many local and overseas tourists visiting Xinjiang on sight-seeing trips or for short stays, Hetian jade certainly makes for memorable souvenirs.

The fact that the official seal for the Beijing Olympics 2008 is carved out of Hetian jade has affirmed its excellent reputation.

June 19, 2006

Mainland China's training needs on the rise - By HKTDC

The buzz is loud and clear: the Chinese Mainland is short of talent and skilled labor - and needs help. "Training business" is deemed to be one of the highest profitable margin businesses in the Chinese mainland. Clients in the mainland are willing to pay training consultants RMB30,000-50,000 per day for customized courses. This is the finding of a TDC study released today which says Hong Kong is in a profitable position to help.

The Mainland is eager to modernize its industrial structure, upgrade its workforce, and to build a knowledge-based economy with quality people to stay competitive in the rapidly changing business landscape. Many mainland companies are now seeing the value of training their own people, the TDC report says.

Mainland talents have higher expectations now. Companies need to provide not just training, but also secure talent at an early stage, for instance, attracting fresh graduates. Industry surveys also indicate that mainland university graduates rate highly the prospects and training offered by a company when choosing their jobs.

An overwhelming majority (96%) of the Hong Kong training companies sees promising prospects for their mainland training business over the next 1-3 years.

The most lucrative segment is soft skills related training (like managerial skills, negotiation skills, presentation skills, interpersonal skills and problem solving/decision making) for managerial staff and executives, which accounts for the bulk of users' training budgets.

Users have a strong preference for foreign consultants given their perception that local training companies still lack international exposure and vision.

There is a growing demand for non-management related training courses, for instance, customer services, sales and marketing.

Up to 78% of Hong Kong's training companies are already providing services there - mainly to Hong Kong and other foreign companies. But mainland firms are now becoming the best targets. Many training consultants in China are "checking the temperature" of local mainland companies as they believe business opportunities are emerging.

Companies on the mainland in need of personnel training include those in the manufacturing, trading, Hotel, Restaurant, Travel Related Services and financial services sectors, as well as government.

Mainland users find Hong Kong companies well suited to offer them training in financial, telecommunications and logistics services because of Hong Kong's deep foundation of know-how in these fields and because of its international exposure.

According to the survey, Shenzhen, Guangzhou and Shanghai are currently the biggest beneficiaries of Hong Kong's training services. But training companies see the potential for bigger growth is in Shanghai and Beijing over the next 1-3 years.

Training companies can also meet Mainland China's training needs by bringing staff of mainland companies overseas for training. More and more mainland China companies and institutions such as government departments and hospitals are sending their staff to Hong Kong to gain working experience and foreign exposure. They opt for training in Hong Kong rather than the US/Europe because of Hong Kong's advantages in professional experience, business culture and language.

Training programs provided by foreign firms in the Mainland are usually drawn up by consultancy firms to suit individual needs. But these firms are not yet allowed to be wholly-owned, whereas Hong Kong companies can set up wholly-owned consultancy firms under the Closer Economic Partnership Arrangement (CEPA) with the mainland.

This gives Hong Kong firms added advantage in what is becoming a big business.

Training is one of the few business areas that are not dominated by big players. Most training providers on the mainland are small in size. According to industry surveys, 50-60% of training providers employed less than 20 people. In terms of annual revenue, about 70% of the companies earned an annual revenue of less than RMB 2.5 million (US$310,000).

June 16, 2006

AmCham Shanghai's Fast Facts on Section 911: How Changes in the U.S. Tax Code Will Affect You

On May 17, President Bush signed into law the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), bringing a number of last minute changes to the foreign income exclusion provisions of the U.S. tax code that have taken A! merican expatriates by surprise.

The new law stipulates significant changes to Section 911 of the U.S. tax code, which previously granted Americans living overseas an exemption from paying personal income tax for the first US$80,000 earned. These changes include:

The US$80,000 compensation exclusion is indexed for inflation starting in 2006, instead of 2008, bringing the exclusion for this year to US$82,400.

The amount of income that is not excluded is now taxed at the marginal rates that would apply without the exclusion-- meaning an increased tax rate for many U.S. expats.

The housing cost exclusion (or deduction) is now capped at 30% of the taxpayer's maximum compensation exclusion. The U.S. Treasury Department may issue guidance for non-U.S. cities with expensive housing, but without such a ruling, the housing exclusion for 2006 is US$11,536 ?¡ìC bringing the total exclusion allowable for 2006 to US$93,936.

For many expatriates living in China, the effect of the new law may be limited, because U.S. tax law allows for a foreign tax credit to offset payments to the IRS. Since the mainland Chinese tax rates are already quite high many Americans living in China already receive credit with the IRS for payments made here and thus do not pay U.S. income taxes.

Some view the change in the tax law as a warning of what may come in the future: elimination of the foreign-income exclusion altogether. AmCham Shanghai encourages Americans living overseas to contact their elected representatives and explain the benefits of the foreign-earned income exclusion to the U.S. economy ?¡ìC especially in promoting American business interests and strengthening U.S. companies around the globe.

For a look at the Background Fact Sheet on Section 911, prepared by Chair of the Senate Finance Committee Chuck Grassley's staff, visit http://finance.senate.gov/press/Gpress/2005/prg052506.pdf

June 15, 2006

McDonald's food center to overlook quality in 35 markets

(From left) McDonald's President for Asia-Pacific, Middle East and Africa (APMEA), Tim Fenton; InvestHK's Mike Rowse; and Managing Director of McDonald's Restaurants (Hong Kong) Ltd, Joseph Lau, at the opening press conference

Global restaurant chain McDonalds recently opened its Food Studio and Quality Centre in North Point, Hong Kong. The new facility is the centre for quality and food standards operations for over 35 markets and the development of new foods for the Asia, Pacific, Middle East and Africa (APMEA) region. Another demonstration of the company's commitment to Asia is the relocation to Hong Kong of Tim Fenton, McDonald's President for Asia-Pacific, Middle East and Africa (APMEA). He has also brought with him key members of his management team.

Mr Fenton said: Hong Kong is a trading city, with excellent transportation and logistics infrastructure. This allows us to send food items in and out of Hong Kong efficiently and conveniently for quality assurance. At the same time, Hong Kongs central location makes it a great place to meet and train. China is one of the fastest growing and most important markets for McDonald's. By basing ourselves in Hong Kong - one of the international cities of China we can stay close to the rapidly expanding market.

Third global location - According to Mr Fenton, Hong Kong is the third global location chosen by McDonalds for its Food and Quality Assurance Studios. Similar facilities are located near Chicago (US) and Paris. The Studios in Hong Kong will cover 35 countries across 16 time zones including all of Asia-Pacific, South Africa and the Middle East.

McDonalds APMEA markets will continue to develop ideas for different products. The food studio in Hong Kong will be where those ideas can be brought to life, producing new products that can be introduced across international markets.

Initially, at least 12 full-time staff will be employed to operate the studios. They will include a chef to help develop new foods and tastes, and a nutritionist to ensure the proper dietary balance of the foods.

The Director-General of Investment Promotion at Invest Hong Kong, Mike Rowse, welcomed McDonalds expansion in Hong Kong. He said, Long-term investors like McDonalds do not just create employment opportunities for our workforce. By choosing Hong Kong as their regional base, these investors bring new ideas and knowledge from different markets to our city helping make Hong Kong a centre for excellence.

Shanghai World Expo shifts gear

Shanghai party secretary Chen Liangyu pointed out at the executive committee of Shanghai World Expo 2010 that preparations for the Expo have entered a new stage marked by three main elements, involving a shift from partial to full implementation following construction. The project has moved on from conceptual thinking to concrete embodiment in theme interpretation, and from preliminary contacts to gradual implementation in investor and exhibitor recruitment.

The first issue is about how local people will adapt to the Expo. In Shanghai, people like to go to the Bund and lean against the railings on the banks of the Huangpu River, watching the flowing water and the boats in the river. However, they can only do so from the top of the embankment and cannot get close to the water. At the International Conference on Ecocity Planning on 12th May, chief planner for the Shanghai World Expo, Wu Zhiqiang, said the World Expo intends to build a three km central greenbelt on the expo site, part of which will be built on the banks of the Huangpu River so people can have closer contact with the river.

According to Wu, this central greenbelt will be the centre of the Expo Park. On the banks of the Huangppu River, aquatic plants such as reeds are going to be planted in large quantities. Special grass or trees may also be planted using the latest eco-friendly cultivation techniques to prevent plants from being damaged. The grass must also be resistant to trampling so that people can play on the lawn and walk close to the water.

Xia Nankai, executive vice president of the Shanghai Tongji Urban Planning and Design Institute, said the green slope is just one of the proposed designs for the riverside greenbelt. Another proposal is a "terrace design" under which layers of terraces will be built leading down to the embankment. Since the lower terraces will often be inundated, aquatic plants can grow there whereas trample-resistant plants can be planted on the higher terraces. According to Xia, they are also considering building elevated pedestrian walkways over the wetlands so people can appreciate the wetland plants.

When visitors need to find out where they want to go in the Expo park, signs of different colors will be very important in distinguishing the various areas. For example, different colors will be used for different countries and regions. When different colors are put together, they look like a rainbow. Wu disclosed that they plan to use the rainbow to decorate the Lupu Bridge during the period of the World Expo so that the bridge will also become a tourist attraction.

The Aichi World Expo in Japan in 2005 also used different colors to decorate the floor. At the Shanghai World Expo, the colors of the rainbow will be used to decorate rain shelters, sun shelters and street lamps, turning the sky into a multicolored "dome".

In the blueprint for the underground spaces at the World Expo site, there are going to be not only small shops and underground access but also plants and bamboos. Special energy-saving techniques will be used to bring sunlight directly into the underground space, making it warm in winter and cool in summer. Energy consumption is anyway going to be very low at the Expo, by design.

June 14, 2006

Stephen Roach, chief economist of Morgan Stanley, said in his latest economic review that although China is more influential than any other economy in the world in terms of pushing up global demand for bulk commodities, the new policy made by the Chinese leadership indicates a major shift of the country's growth model --- from high-resources consumption manner to low-resources consumption. He believes this strategy would not only facilitate China's sustainable development, but also well serve the global economy.

Statistics show astonishing proportion of China's contribution to the increase in world's industrial material consumption. Among which, consumption of aluminum increased by 50%, iron ore by 84%, steel by 108%, cement 115%, zinc 120%, and copper and nickel even by triple. China has become the largest consumer of copper, nickel and zinc. Apparently the Chinese economy is mainly based on bulk commodities consuming industrial production and driven by fixed investment and export.

When many think this trend will go on limitless, the Chinese leaders have wisely made the new growth guideline. Stephen Roach expects that the new strategy would bring significant effect to China's economic growth features, and even influence the financial market and global economy.

Stephen Roach also interpreted the newly promulgated 11th Five-year Plan, and found that China would focus more on boosting its domestic consumption and reduce its reliance on investment and export.

In his forecast, in the future 5 years, China will maintain annual GDP growth of 7.5% and reduce its resource consumption by 20% per GDP by 2010.

He regards all of this as an implication that the process of China's economic re-balancing has begun.

June 14, 2006

Eight out of 10 mainlanders say they are satisfied with the way things are going in China, according to a survey, in a sign that robust economic growth is outweighing social tensions over the income gap between rich and poor. The 81 percent satisfaction rate is an increase from the 72 percent recorded last year, the Pew Global Attitudes Project said in a public opinion poll of 15 countries.

Those mainlanders who were unhappy with the state of the nation dropped to 13 percent, from 19 percent a year ago, according to survey results released Tuesday.

Aside from China, citizens of only two other countries - Egypt and Jordan - were content with national conditions, said the survey, which covered a range of topics, from national attitudes to global warming, bird flu and the Iran nuclear crisis.

Contentment at home also reflected well in mainlanders' opinions of foreign countries, except Japan, whose relations with China have deteriorated from disputes over territory and wartime history. Only 21 percent held a favorable opinion of Japan, the survey said, while views of the United States, France and Germany grew more positive.

The survey has a 2 percent margin of error. It interviewed 2,180 people between the ages of 18 and 60 and was skewed toward urban China, with the interviews mostly conducted in the cities of Beijing, Shanghai, Guangzhou, Xinxiang, Jinzhong and Luzhou.

Years of nearly double-digit or higher economic growth have favored cities, creating more comfortable lives for many. In rural China, authorities face increasingly violent protests by the poor over official corruption and land seizures for development. In response they have promised to increase funding for rural areas to address a yawning income gap.

June 7, 2006

The lesson of Japanese currency

A pair of brand name sports shoes are made at the cost of 12 dollars in China but sold at 120 dollars a pair on the US market. Only two dollars goes to Chinese workers.

That makes some people believe that a suspension of trade with China would immediately push the US inflation rate up by two percentage points as China enjoys unparalleled labor cost advantage.

They are also assured by the fact that China has invested 300 billion US dollars on the overseas market while receiving 500 billion US dollars of foreign stakes.

But an expert on finance at Beijing Normal University warns against the "over optimism" about the risks of China's international account imbalance and the exchange rate issue and reminds of the lessons from the tragedy of the Japanese economy and Japanese currency yen in history.

The Japanese yen exchange rate has gone through three stages. During the first stage between 1949 and 1971, Japan achieved a 10 percent economic growth annually through its export-oriented strategy based on fixed exchange rate system with 380 yen against a dollar. Such a growth outraced Britain and France and modeled after by other East Asian economies.

A dramatic change occurred in December, 1971, when finance ministers of ten Western countries reached the Smithsonian Agreement in Washington requiring a precise yen appreciation of 16.88 percent and floating band of 2.25 percent around the newly agreed par value. That ended yen's 12-year old pegged rate system and the yen began to float since then.

The second stage since then lasted till 1985, during which the Japanese currency inflated from 315 yen against a dollar to 200 yen against a dollar with an annual growth of 5.2 percent. The upward yen did not seem to hinder Japan's prosperity. The huge trade surplus and capital influx pushed Japan's foreign exchange reserve up sharply.

However, nobody realized at that time that the yen's constant, moderate appreciation was leading to buddle economy which was injuring the dynamics of the Japanese economy.

That was followed by the third stage till 1989. On Sept. 22, 1985, the Group7, under the proposal of the United States, initiated the Plaza Accord maintaining the dollar's dominance and shrinking the value of other major currencies in the world by 30 percent in two years.

Then there was Louvre Accord dragging yen into uncontrollable uptick. The media reported that the land prices of the 23 districts of Tokyo could buy the whole US.

But the bubble of the Japanese economy went burst in 1989.

Recalling the history is to learn from it so that the same thing would not happen in the future. There are similarities in the two economies which both depend on foreign trade and capital. Comparing China in 2004 and Japan in 1967, we can see a lot of parities in terms of per capita GDP, per capita power consumption, the urban Engel's coefficient, industrial structure, and even the hosting of the World Expo and the Olympics.

The Chinese currency yuan, like yen, also was pushed into a period of slight appreciation after 22 years of fixed exchange rate system from 1983 to 2005. And China's foreign trade mix currently is nearly repeating Japan's when yen was going up slightly. Both began with textiles, evolved into electromechanical products and upgraded into automobiles.

Back to the issues of China's exchange rate and trade conflicts, how can a pair of 12-dollar Chinese shoes exported to the US for insignificant processing profits affect a pair of 120-dollar shoes significantly? How can we dare to say that the US orders would not shift to India or Indonesia where there is labor as smart and diligent as that in China so as to bring same economic miracle?

The difference between Japan's past and today's China does not lie in the way they go down, but on how far they have been on the way.

May 17, 2006

US firms hit visa and tech `handicap' - US policies on visa approvals and technology exports are hindering American companies' efforts to develop markets in the mainland, the American Chamber of Commerce in China said.

US policies on visa approvals and technology exports are hindering American companies' efforts to develop markets in the mainland, the American Chamber of Commerce in China said. Visa procedures deter mainland businessmen from visiting potential trading partners in the United States, it said in an annual white paper, released Tuesday. Many technology products barred from US export are already "readily available" within China or from other exporters, it said.

The US is sometimes "handicapping itself" in correcting the problem that defines the two countries' relationship - the American trade deficit - said chamber president Charles Martin. That deficit swelled to US$201.6 billion (HK$1.57 trillion) last year, with some US lawmakers blaming an artificially weak yuan.

A survey of 55 chamber members showed 44 percent lost "significant" sales or business relationships because of visa issues. Mainland officials buying for large state-owned enterprises saw the US visa application process as lengthy and personally humiliating, with no guarantee of success, it said. Most European Union visa applications can be processed within a week and, unlike US procedures, do not require fingerprinting.

It was the first time the chamber reported on visa policy, though companies have complained regularly about the tighter scrutiny imposed after the September 11, 2001, terror attacks.

The huge volume of US-Chinese trade means the rules hit businesses harder in China even though they might be applied the same way in other countries, said Donald Forest, executive director of the financial firm, Sierra Asia Partners, who helped to oversee the survey.

"Relative to competing nations, visa policy remains a significant deterrent to buying American goods," he said. A lack of US government programs to promote exports to China is also causing companies to lose market share to exporters in countries like Germany and Japan. The chamber cited Japan as an example of a country with a smaller economy than the US that spent more on promotion and had a larger slice of China's imports. Japan's 15 percent share was double that of the US.

Martin said China, for its part, is still doing too little to fight growing product piracy despite repeated crackdowns, causing mounting damage to legitimate producers of movies, music and other goods. "The problem is growing faster than the enforcement efforts," he said, calling on Beijing to increase criminal penalties and enforcement efforts for piracy.

The report, based on a survey of more than 200 US companies in China, listed other obstacles to foreign businesses such as bureaucracy and unclear regulations.

But Martin said Beijing has made steady progress in those areas - much of it mandated by its World Trade Organization commitments - while product piracy is getting worse.

China is widely regarded as the world's top source of illegal copies of products ranging from pop music and Hollywood movies to designer clothes and even heart medicines. Pirated goods are still widely available in China despite repeated government crackdowns.

The chamber said 41 percent of companies in its survey reported seeing more counterfeiting of their products, while 49 percent were dissatisfied with Chinese enforcement.

Also Tuesday, the China Daily newspaper reported that 13 people were sentenced to up to seven years in prison for pirating liquor, auto parts, DVDs and other goods.

May 3, 2006

Asian Lunar New Year becomes official Day of Commemoration in U.S. State of Maryland

Maryland Governor Robert L. Ehrlich signed a bill on Tuesday that makes the Asian Lunar New Year, which falls in late January or early February each year, a Day of Commemoration in the east U.S. state.

"Through hard work, talent, and industry, Asian Americans have helped make Maryland top in science, technology, sports and the arts," said State Delegate Susan C. Lee, the lead sponsor of the bill in the House of Delegates.

Lee introduced the bill in the House early this year, followed by the introduction of a similar bill in the state Senate by Senator Brian E. Frosh. Both bills were passed in the state legislature with overwhelming support.

Under the new law, the governor of Maryland shall annually proclaim the Lunar New Year on the Asian Lunar Calendar as "Lunar New Year Day," in recognition of the economic and cultural contributions of the many Marylanders for whom the Lunar New Year holds special significance.

"It is important that we highlight and recognize their many contributions and achievements by commemorating this important Asian American holiday," said Lee, a Chinese American.

Currently there are over 250,000 Asian Americans living in the state of Maryland.

"We can be proud that Maryland has one of the highest percentages of Asian American residents of any state in the nation. It's only fitting that we dedicate the Lunar New Year in our state to celebrate their extraordinary accomplishments," said Frosh, the lead sponsor of the bill in the state Senate.

The designation of the Lunar New Year as a Day of Commemoration in Maryland is the result of the efforts made by the Chinese and other Asian communities during the past year, said Stan Tsai, chairman of the Maryland-based Chinese Culture and Community Service Center.

The move will surely help to promote cultural exchanges between China and the United States, he added.

Tsai expressed the hope that more U.S. states would pass legislation to make the Lunar New Year a Day of Commemoration.

The Chinese community and other Asian communities, including the Koreans and the Vietnamese, have been working over the past one and a half years for the state legislature to pass the legislation. The Chinese community has been hosting Chinese New Year celebrations over the past several years in Washington, D.C., and at a Washington suburban shopping mall in Maryland, as an effort to introduce traditional Chinese culture to the American society.

Prior to Maryland, the state of New York and the New York City have already passed legislation that designates the Lunar New Year as a Day of Commemoration.

April 24, 2006

Reviving local film's Golden Age - The Standard Hong Kong

Famed movie director Tsui Siu-ming seems to be getting in on the financial and creative action at just the right time. Hong Kong filmmaking took a nose dive during and after the Asian financial crisis, but Tsui says he can turn around the decline in filmmaking and restore the glory days of its golden era in just two years.

Tsui, president of Sundream Motion Pictures, a production company launched in March 2003, plans to make in- house movie production - the crafting of a film almost exclusively from start to finish-- a hallmark of Hong Kong moviemaking. The first thing Tsui's public relations manager, James Chick, shows off before the interview is the office of i-Cable Satellite Television, where Tsui wears his second hat as chief operating officer.

This is Tsui's attempt to develop the first Rupert Murdoch-type institution for making, marketing and distributing major motion pictures in a territory that used to be the pinnacle of the industry but has seen a total slump in the past 10 years. The industry famous for producing about 200 films a year in the 1970s and 80s only managed about 90 a year in the late 90s due to the Asian financial crisis. Moviegoers could not afford to visit theaters. Producers refused to back risky ideas and did not financially support a movie unless it promised a big profit. So movies started to decline in quality as the industry became mired in stereotypes.

It was not until January 2004 that Hong Kong moviemakers saw the potential to lift the industry out of its morass. When the SAR and mainland governments signed the Closer Economic Partnership Arrangement in that year, Hong Kong directors working in China earned the "domestic" trademark. They now no longer take on seven mainland talents for every three Hong Kong ones. The ratio is now 5:5. And propagandistic nationalist mainland topics are no longer the focus.

Big problem. That near-10 year gap in movie production left Hong Kong woefully lacking in gifted writers, costumers, cinematographers and willing directors. Hong Kong's movie moguls are obsessed with finding the next Crouching Tiger, Hidden Dragon and Seven Swords, says Tsui, who counts the latter's director Tsui Hark and star Jet Li, as close friends.

But instead of blockbusters, Tsui Siu-ming wants small and medium- sized films from young and independently minded creators. He wants to grow an idea and to do it in the same office, together. Tsui plans to produce an expected 15 films in two years. To do that, he has joined i-Cable Satellite Television, arguing that satellite will launch the careers of future great names in Hong Kong movies at a cheaper price and to wider North American, European and mainland audiences.

Tsui sits at a table in his velvet- paneled screening room in Cable TV Tower in Tsuen Wan, flipping through PDA e-mails while Jeffrey Chick, his translator, explains what makes Tsui so special. Back in the 1980s, when tensions between China and Taiwan were at a high, Tsui directed two films, The Holy Robe of Shaolin Temple and Mirage, despite the risk of damaging his relations with Taiwan. Because of the sensitive political climate, the Taiwanese told Tsui they "would ban him forever" from visiting the island.

"I love China, and I love movies," Tsui interjects in English, when asked why he wanted to risk losing out on a career that could span to Taiwan, a famous destination for moviemakers. He smiles, arranges his tie and nods.

He understands, Chick says, but Tsui is in the vanguard. He knows where to go to find something successful. And six years later, buoyed by a surging domestic film industry and desperate to tap into what proved to be a growing market in China, the Taiwanese invited Tsui to speak about his role in breaking through the regulatory walls created in post-Mao China.

"It was a brave thing," Tsui says. His cherubic cheeks puff out in a smile. He no longer resembles the guy who orchestrated the kung fu moves in several 1980s movies. Instead, wearing glasses, he looks more like a pudgy academic. Learning from that experience, Tsui decided two years ago that Hong Kong must nurture its young talent as there was no one yet willing or able to fill the shoes of former television actors-turned movie stars such as Tony Leung, Andy Lau and Maggie Cheung, all of whom feature in internationally released movies. Lau has just signed on to act in his first film for Sundream, A Battle of Wits.

He and his peers all learned how to act in small television studios in a close community of equals who shared a vision, who communicated their ideas together and who grew in a cohesive, harmonious environment. Only two years into CEPA, Hong Kong still draws excessively on China's film world for writers, costume designers and directors.

Tsui believes that producers and actors in the Hong Kong movie industry focus on profit and big budgets. "Movies now are not realistic. They use gimmicks to make a story, they don't think of core elements," Tsui says. China does a much better job in producing the young talent that makes it into great films, he says. "We need to follow their trend to get into the market."

In the 1970s, when Bruce Lee went international with kung fu, and the late 80s in movies such as Sun, Moon and Star, and Island of Greed, a 1997 film starring Leung and directed by Michael Mak, who works with Tsui, Hong Kong movies actually made it big in the world.

Tsui thinks that tradition can be revived, but that ideas have to start small and must focus on local industry players.

Working with a team of 15 creative workers, Sundream plans to pour US$400 million (HK$3.12 billion) into small and medium-sized Hong Kong films - some with international backing - in the next three years.

Fist of Love, a new movie set to begin filming on location in April, already has a US$16 million price tag. Its executive producer, Mak, who brought to Hong Kong the Asian version of the US television hit Charlie's Angels, says people have to adjust their perceptions of what a good film is to something beyond movies such as Crouching Tiger, Hidden Dragon.

"We cannot just stick with this kind of topic," Mak says.

But life has not been easy. During a meeting in late March a brainstorming session on new movie ideas came up short. "We cannot find one you need to film," Mak says. "Different companies [already] produce a certain kind of movie." Mak, who used to work for Rupert Murdoch's son James says he heard one piece of advice that still makes sense to him. "I always remember one sentence from James Murdoch: `Where is the money?"' Mak says. "Because making movies is a business.

The key now is to make small movies. The smaller, the better. Make a trailer, put it on satellite, and snap! "The budget is so low, it's a success," Mak says.

April 19, 2006

Hong Kong stores give life to Nanjing's retail

Recently, Hong Kong's leading high-end department store operators have taken premium sites in Nanjing's Xinjiekou district. Together with overseas Chinese funded stores, they will be competing on price, profits and quality. Even traditional local players are eagerly hoping to pick up a share of the competitive pie.

Hang Lung, a department store owned and operated by Hong Kong interests with an international network, is reportedly eyeing the street-facing site of the Xinhua News Agency. Observers believe it will not be long before Hang Lung sets its footprint on Nanjing.

As one of the few remaining prime sites in the Xinjiekou district, the Xinhua site currently has an area of between 10,000 and 30,000 sqm. When completed, the shopping centre will have a floor area of between 50,000 and 60,000 sqm.

Earlier, the site of the former Times Square at the northeastern corner of Xinjiekou was taken by Hong Kong's Pat Davie Ltd, despite the fact that the place used to be known locally as the "dead end" of Xinjiekou, having changed hands many times. All previous development plans were aborted halfway and failed.

In fact, it was not until 2004 when Pat Davie took over the site, which was Deji Plaza, that the industry began to see its prospects differently.

Since then, the Deji Plaza has become a feasible prospect. It is a seven-storey building with a business floor area of 20,000 sqm. In addition to clothing brands, it is also home to restaurants, five-star cinemas and children's amusement venues. Only Phase 1 of the project is now open for business, although Phase 2 will have another 200,000 sqm business area.

The up-and-coming Xinjiekou district, There seems more to high-end department stores in Xinjiekou than Deji Plaza and the Hang Lung Shopping Centre, the latter of which is still in preliminary development.

According to the urban development plan for Xuanwu district, the northeastern corner of Xinjiekou will be developed into a top-end shopping area. The goal is to have Xinjiekou rise in glory again within three to five years.

Six mega property developments in north eastern Xinjiekou, each involving an investment of over Rmb1 billion (HK$833 million), have piling work under way.

They include Deji Plaza, Landmark Plaza, Kairun Jincheng and Dengfuhang Trade City, all of which are to be modern shopping and business venues, with what's expected to be top-rated facilities.

When completed in 2008, these commercial developments will provide a total business area of one million or more square metres and are expected to generate revenues of between Rmb10 billion and Rmb20 billion (HK$8 billion and HK$16 billion), equivalent to yet another Xinjiekou.

As Hong Kong department stores make their inroads, existing high-end department stores in Xinjiekou are also hastening their renovation.

The Jinling Hotel Shopping Centre, built in 1983, has already been renovated and the management is looking for new tenants. So far it has attracted international catering and leisure brands like Haagen-Dazs and Yosemite.

Another newcomer, Jinling Department Store, started a call for investment in 2005 in a bid to look for partners for equity or cooperative joint ventures. It is also looking at possible chain operations to develop brands and maximize available resources and capital.

With Deji Plaza and the Hang Lung Group dominating the northeastern end of the re-born retail area, locally managed Golden Eagle and the Jinling Department Store are in the west while Oriental Shopping Centre is in the south.

Together with Golden Wheel Plaza Shopping Centre (still under construction), these high-end department stores are arranged in a "diamond" pattern between Zhongshan Road East and Hanzhong Road in Xinjiekou, making competition intense.

The entry of Hong Kong capital into Nanjing's Xinjiekou has certainly ushered Nanjing's commercial dealings into an era of fierce corporate contests.

Large Hong Kong companies like Henderson Land Development, Hang Lung Development, Swire Properties, Hongkong Land and New World China started investing in the commercial property development sector on the mainland in the 1990s in the form of "property plus commercial development".

These big property developers are all venturing into the retail sector at the same time. For example, Sun Hung Kai is the controlling shareholder of Grand Ocean Department Store, New World owns the New World Department Store chain, Hutchison Whampoa operates Park'n Shop and Watson's, while Hang Lung Development has invested in the Hang Lung Shopping Centre.

Nanjing's Central Plaza recently indicated its intention to bring in high-end consumption by opening a luxury brand section. This may herald the upgrade of traditional department stores in the city.

April 13, 2006

Protecting intellectual property in China - Litigation is no substitute for strategy.

By Meagan C. Dietz, Sarena Shao-Tin Lin, and Lei Yang

Many multinational companies in China are losing the battle to protect their intellectual property, largely because they rely too heavily on legal tactics and fail to factor IP properly into their strategic and operational decisions. When we studied the Chinese operations of ten multinationals competing in IP-sensitive industries (including consumer electronics, medical equipment, pharmaceuticals, semiconductors, and software), we found that many executives think of protecting IP solely in legal terms—and sometimes only after property has been stolen. The most successful companies, however, take strategic and operational action to protect their IP before that happens, thus lowering their litigation costs and improving the odds that their IP will remain safe.

Companies should of course register their trademarks and patents with local authorities and prosecute violators with appropriate vigor (and prudence). The recent passage in China of a stronger statute on IP rights should better protect companies that take these measures. But litigation is no substitute for strategy. The best companies reduce the chance that competitors will steal their IP, by carefully selecting which products and technologies to sell and manufacture in China. For fear of IP theft, one pharmaceutical company we studied withholds its most innovative, high-margin drugs from the Chinese market altogether. The company is willing to introduce lower-margin products, such as mature, off-patent drugs that are sold over the counter.

One large equipment manufacturer designs and develops hardware in China but produces the related software (in this case, the most valuable IP) abroad. The software, with its source code hidden, is delivered to Chinese engineers ready to plug into the system. By separating functions and keeping technological details secret in this way, the manufacturer significantly reduces the possibility of an IP leak.

Developing software in a country with better IP protection and then transporting it to China adds time, costs, and complexity to the process. In the long term, however, the manufacturer estimates that the ability to protect its critical IP and to lower its litigation costs makes the trade-off worthwhile. In our experience, some executives are so caught up in the rush to reach the Chinese market that they share technological and business secrets too readily with partners, which subsequently use the information to become competitors.

Operational action is also critical. While most companies implement the necessary security measures, such as the use of surveillance equipment or firewalls, to prevent large file transfers, the best companies go further. Indeed, we found that these exceptional performers cultivate an awareness of IP and screen all job candidates for high ethical standards.

One global company, for example, prefers employees with international work and educational experience, which it hopes will foster a healthy respect for IP. A vast majority of the company's R&D scientists (who are, for the most part, Chinese nationals) have foreign PhDs and have worked outside China. The company reinforces IP awareness by requiring non-compete clauses (which prevent employees from serving competitors for up to three years after leaving) in employment contracts for all positions. Despite high attrition levels—the company is an excellent training ground, so its employees are often poached—it estimates that it has saved a good deal of money and market share by successfully minimizing IP leakage and theft. Poorly performing companies, by contrast, tend to neglect employment contracts, and even background checks, in their haste to hire.

Executives from the companies that best protect their IP frequently monitor the activities of their Chinese business partners—even long-term, trusted ones—for potential leaks. A leading high-tech components manufacturer, for instance, closely scrutinizes its business partners to ensure that parts aren't illegally copied and resold. It routinely verifies that the number of components delivered to its customers matches the number in products subsequently sold. This level of scrutiny is uncommon, however. Of the ten companies we studied, a majority fail to audit the compliance of their partners frequently or rigorously.

The law alone isn't enough to protect intellectual assets. A company should assign explicit responsibility for its IP to senior managers who are familiar with all aspects of the business and able to focus their energies on those elements of IP protection it can control. Achieving the right mix of legal, operational, and strategic considerations is difficult (exhibit), and companies certainly can't protect all of their IP all of the time. Yet those that get it right are more likely to build successful businesses in China.

April 11, 2006

Hong Kong Tycoons grab shares in Bank of China - Tim LeeMaster

The US$6 billion (HK$46.8 billion) initial public offering of Bank of China, one of the most eagerly awaited share sales of the year, has already been covered as Hong Kong tycoons scramble to become cornerstone investors, market sources said.

The US$6 billion (HK$46.8 billion) initial public offering of Bank of China, one of the most eagerly awaited share sales of the year, has already been covered as Hong Kong tycoons scramble to become cornerstone investors, market sources said. Hutchison Whampoa's Li Ka-shing, Henderson Land's Lee Shau-kee, and Cheng Yu-tung of New World Development have succeeded with others in getting shares in the bank, the mainland's second-largest lender.

"It's attracted US$6 billion," a person familiar with the matter said. "We had to turn a lot of people away." Orders ranged from a few hundred million US dollars to US$1 billion.

Investors are flocking to Bank of China after seeing shares in its mainland rivals China Construction Bank and Bank of Communication surge after the lenders listed in Hong Kong.

The banks are raising funds in advance of China fully opening to overseas banks at the end of this year.

Bank of China was likely to be priced around two times book value, a source close to the bank said.

"That's very much within the market consensus and is actually at the lower end," a fund manager said. "With the price gains of China Construction Bank and Bank of Communication I don't think any of the upcoming Chinese bank IPOs will go below two times book value."

The top end of the valuation range for mainland banks coming to market was likely to be 2.3 times, he added.

Shares of CCB have risen 26 percent this year and at present trade at 2.8 times book value.

At the time of its US$9.2 billion IPO in October, the world's largest in 2005, CCB, the third largest mainland bank, was valued at 1.96 times book.

Bank of Communications, China's fifth-largest bank and first to sell shares overseas, has leaped 38 percent since December and trades at 2.7 times book value. The Hang Seng Index has risen 11 percent this year.

BOC will face the Hong Kong stock exchange listing committee April 27, complete its IPO near the end of May and start trading around that time or in early June, market sources said. BOCI, Goldman Sachs and UBS are arranging the sale.

An IPO worth more than US$1.3 billion from China Merchants Bank may follow in the second quarter and Industrial and Commercial Bank of China may raise more than US$10 billion in the last three months of the year. A planned listing by Minsheng Bank this year has faltered as shareholders cannot agree on how to proceed on some issues, including whether to bring in additional strategic investors.

A consortium led by Royal bank of Scotland, the world's sixth-largest bank, paid US$3.1 billion for 10 percent of Bank of China in August. RBS holds 5 percent while Li Ka-shing and investment bank Merrill Lynch took up the rest. Merrill later sold its stake to two US hedge funds, Oak Tree Capital Management and Och-Ziff Capital Management. RBS maintains control of the consortium's 10 percent stake.

Singapore government investment arm Temasek tried to take a 10 percent stake in Bank of China but was forced to settle for 5 percent in the face of a mainland backlash against foreign ownership of Chinese banks. The National Council for Social Security, which manages China's seriously underfunded pension plan, picked up the remaining 5 percent for 10 billion yuan (HK$96.83 billion).

Banks such as HSBC and Citigroup seeking to benefit from China's surging economy have bought stakes in mainland lenders and have launched credit card ventures. Citigroup also wants to grow its wealth management business with partner Shanghai Pudong Development Bank.

BOC, with the mainland's second- largest branch network behind ICBC, and RBS have targeted the same niche. The two have opened 100 wealth management centers since August.

Mainland banks want to attract foreign strategic partners to raise the confidence level of overseas investors, wary of China's scandal-ridden financial sector, in the run-up to IPOs.

Foreign banks, for their part, hope to penetrate the mainland market more quickly than they could on their own by using the larger branch networks that local banks have on the ground.

Bank of America spent US$3 billion acquiring a 9 percent stake in CCB. Goldman Sachs, with partners Allianz Group and American Express, paid US$3.8 billion for 10 percent of ICBC earlier this year, while US private equity fund Newbridge Capital owns a controlling 17.98 percent of Shenzhen Development Bank. HSBC owns 19.9 percent of Bank of Communications.

Bank of China uncovered 52 cases of fraud after an investigation into more than 11,000 branches, according to a statement posted Monday on the bank's Web site. The bank did not disclose the amount of money involved.

Ocean Park opens new jellyfish aquarium - Wendy Lam

Ocean Park has unveiled a jellyfish aquarium. And in what is seen as a preview of things to come, with a HK$5.5 billion refurbishment due to begin in September, the park opened two restaurants with stunning sea views, the first new additions to the park in 20 years.
The HK$6 million aquarium will house more than 1,000 jellyfish, some of which are never seen in Hong Kong waters. About 10 are said to be rare species.

Park chairman Allan Zeman, dressed in a jellyfish costume, told guests at the opening ceremony Monday the aquarium will help teach people about the importance of clean oceans. The park previously exhibited jellyfish in another aquarium and, noting the intensity of public interest, decided to build a second aquarium especially for the delicate creatures.

"We noticed that people stood and watched them for long, long time, so we decided to help people get a better understanding of jellyfish and their place in marine ecology," Zeman said.

The newly opened aquarium and restaurants are next to the upper cable car station and cost HK$28 million.

The aquarium has 3,000 square feet of display area and a 1,500 sq ft "conservation room" to breed jellyfish.

"The design of the theater-like display rooms with music and special lights is unique, compared to ones in the United States and Japan," Ocean Park curator David Lai Yiu-nam said.

About 60 percent of the jellyfish come from overseas, 30 percent are bred here and the rest obtained from local waters.

There is an interactive zone for children to play "touch and go" with jellyfish which move away when a screen is touched.

"Jellyfish are fragile and very difficult to keep," Lai said.

The life cycle of a jellyfish is about six months so the park must breed 400 to 500 jellyfish a month.

April 6, 2006

The debate on Hong Kong being marginalized by the rapid development across the border has gained new impetus, with Premier Wen Jiabao saying it will not happen.

" I don't think the economic development of Hong Kong will be marginalized ... I have sufficient confidence in the future economic development of Hong Kong," he said Wednesday in an interview with Asia Television and Phoenix Satellite Television. ATV chief executive Chan Wing-kee is a member of the Chinese People's Political Consultative Conference Standing Committee while Phoenix Satellite Television chairman Liu Changle, is the majority shareholder of ATV.

Wen was quoted as saying that Hong Kong enjoys "the freest economy in the world, the most comprehensive legal system, a group of entrepreneurs with international experience and a wide economic network with different countries and regions."

Because of this, Hong Kong has been able to maintain its edge as a trading center, a financial center and an international metropolis.

"Its position is irreplaceable," Wen said.

He said the future of Hong Kong, with "the support of the mainland at its back and the world [market] in front," is very promising.

He also spoke about the potential of the mainland market. "Hong Kong's economic development has contributed a lot to the mainland's economic development over the past 30 years.

"Hong Kong and the mainland have now established the Closer Economic Partnership Arrangement, so the mainland's future economic development will also have a huge impact on Hong Kong," he said.

Wen noted that about 40 percent of the more than 600 billion yuan (HK$580.74 billion) of foreign investment in China comes from Hong Kong.

"Hong Kong citizens should have the spirit of self-reliance and be strong and united to make Hong Kong better, not simply to implement the directives of `one country, two systems,' Hong Kong people ruling Hong Kong, and a high degree of autonomy, but also to lift up the internal vitality of Hong Kong's economic development," Wen said.

"Only by doing this can the future of Hong Kong's economic development be assured."

Wen's remark contradicts a warning by Chief Secretary for Administration Rafael Hui who two weeks ago said the city faced being marginalized by rapid developments on the mainland and especially the Pearl River Delta.

Hong Kong Monetary Authority chief executive Joseph Yam last week also warned that Hong Kong must reinforce its role as a financial intermediary between the mainland and overseas to avoid marginalization.

In response to the warning, National People's Congress Standing Committee vice chairman Xu Jialu said Hong Kong was an international city and would not be marginalized by the development of the mainland cities.

Last Tuesday, National Development and Reform Commission deputy chief Xu Li reaffirmed that Hong Kong's status as an international financial center was irreplaceable.

However, a report commissioned by the Corporation of London released last November said New York and London are clear leaders as global financial centers, but views on a third center, in Asia, are split.

"Most people agree that if a third global financial center develops, it is most likely to be in China, and probably in Shanghai."

April 5, 2006

60 national firms have global potential

Sixty Chinese companies are set to become global players over the next decade, according to a paper released yesterday by the IBM Institute for Business Value. The 60 companies, 47 State owned and the rest privately owned, were selected by IBM after passing three tests relating to their global potential.

Among the firms, there are relatively well-known players such as telecom equipment maker Huawei, and oil firms CNPC and CNOOC.

There were also less well-known companies, such as Galanz, the Wanxiang Group, the Midea Group, Chery, Lifan and Ningbo Bird.

"We used three filters, company size, industry characteristics and company characteristics, to select Chinese companies. "These were primarily in manufacturing and natural resources industries, and all had strong globalization potential," said Alan Beebe, research director at the IBM Institute for Business Value in China. Most Chinese companies remain small by global standards. Among China's top 500 enterprises, only 290 companies met the initial filter of annual revenue over US$1 billion.

The second filter identified Chinese industries with strong globalization potential based on criteria such as industry size as a percentage of GDP, degree of industry concentration, export intensity and government support. For instance, the result included the home appliances industry, where Chinese companies are the largest global manufacturers in 28 out of 32 product categories. Air conditioners and refrigerators made in China accounted for 67 per cent and 34 per cent respectively of global production in 2005. A total of 12 industries met the second filter criteria, including consumer electronics, computer products and components, telecommunications equipment, cars, steel, logistics and petrochemicals. This narrowed the list to 124 companies, including 105 State-owned enterprises and 19 privately-owned firms.

The final filter identified companies that met additional criteria, such as a leading market position in China, over 15 per cent of revenue from either exports or foreign operations, and a strong global vision. Chinese companies will undoubtedly accelerate their global activities in line with China's ascent as a major economic power. IT firm Lenovo's recent purchase of IBM's personal computer division, SAIC's 50.6 per cent acquisition of South Korea's Ssangyong, CNPC's US$4.2 billion acquisition of PetroKazakhstan and Haier's unsuccessful bid for Maytag in 2005 highlighted Chinese companies' global expansion plans.

"It is primarily among these 60 companies that China's global leaders are likely to emerge, but in our view only those with a clear management vision, strategy and strong execution capabilities are likely to succeed," said Beebe.

Overcoming a lack of qualified workers and building global brands were overwhelmingly identified as the top key challenges. Companies can recruit overseas Chinese or foreigners, but it is often difficult to integrate these experienced managers into the culture and daily operations of the parent company.

"We are still students trying to learn global management," said Tong Haibin from Shanghai Machine Tool Group. "Our overseas workforce is sometimes qualified to be our teachers in this area. But it is very difficult for 'students' to manage 'teachers' as we go global."

The paper also said many Chinese companies consider brand ownership critical to their success overseas, but they may not fully appreciate the sustained investment required for brand building and management.

April 3, 2006

China Vice Premier Wu Yi lead a business delegation of over 100 members representing the Major Agriculture Sectors, Aerospace, Automobile, Electronics, Petroleum, Petro-chemical and Heavy Machinery, stopped by Hawaii for 2 days to meet with Hawaii Business Leaders and Government Representatives. A Memorandum of Understanding and Cooperation was signed between Hawaii Governor Linda Lingle and Chairman Shao Qiwei of the China National Tourism Administration at a reception hosted by Governor Lingle at the Washington Place.

Beijing is to seal agreements to purchase US agricultural products, software, passenger aircraft, cars, automotive spare parts and electrical products ahead of President Hu Jintao's US visit later this month, Xinhua reported yesterday. Representatives of 111 mainland companies would soon begin negotiations with authorities, commerce associations and companies in 13 US states, it said. It is the first time the official media has confirmed widespread speculation about the likelihood of big-ticket purchases. In recent years, Beijing has usually sent a delegation of businessmen to place orders for US goods worth billions of US dollars ahead of a Chinese leader's visit to Washington. Although the size and other details of Beijing's planned purchases remain unclear, the cost could easily run into billions of US dollars, judging from the shopping list. It has agreed to purchase 80 Boeing passenger aircraft, and earlier reports indicate officials plan to lift the ban on imports of US beef and have agreed to buy more American soya beans. President Hu is due to visit the United States from April 18 to April 22. At his first stop, in Seattle, he is scheduled to visit the Boeing company and have dinner with Microsoft chairman Bill Gates at his palatial home. As computer software is on the shopping list, it is possible that Beijing could promise to purchase more Microsoft Windows operating systems and other US-made software as part of efforts to crack down on the widespread use of pirated computer software on the mainland, which costs US software makers billions of dollars in lost revenue each year.

Vice-Premier Wu Yi who paid a stopover visit to Hawaii on Monday, is responsible for overseeing the purchases in the United States. She was on her way to Washington for the China-US Joint Commission on Commerce and Trade. While in Hawaii, she oversaw the signing of an agreement that will boost the number of mainland visitors to the island. The agreement "helps us to continue to spread the word in China about Hawaii", the Pacific state's Governor Linda Lingle said. The number of mainland visitors to Hawaii has been rising - up 34.5 per cent in 2004 from the year earlier to 34,216 travelers. But it captured just a tiny fraction of the about 27 million mainlanders who traveled to overseas destinations that year. Ms Wu said Hawaii had expertise in tourism planning, management and personnel training which could "serve as a valuable reference for the Chinese tourism industry".

March 30, 2006

A realistic view into the IPR issue

US Secretary of Commerce Carlos Gutierrez is in Beijing for his second China visit with a focus on intellectual property rights protection.

The nuclear stand-offs in the Korean Peninsula and Iran, as well as the Taiwan issue, are also the major concerns of China and the United States. The trade issue, however, is particularly imminent in recent days. The Capitol Hill, which is frustrated by the trade deficit with China, is trying to pressure on two aspects: the RMB exchange rate and the intellectual property rights.

The first issue was the focus of the visit by two American senators, Charles Schumer and Lindsey Graham, a few days ago asking for higher tariffs on Chinese products while Mr. Gutierrez immediately shifted people's attention to the second.

The IPR protection has become one of the most important issues between China and the US. The implication is that the Sino-US relations are entering a definitely different stage which is described by some experts as "problem solving" stage.

The trade issue is underpinned by several reasons. The closer exchanges and more understanding between the two sides also lead to frictions concerning interests which have direct bearings. Conflict of interest also emerges in some sectors when China's economy is growing very fast.

In addition, the trade issue has a much more direct bearing on people's livelihood and is easier to draw people's attention than ideological or strategic issues. And trade issue is relatively easier to be solved. In fact, the two sides have established a mechanism for that.

The disputes over the IPR reflect the difference between the two countries on economic structure, development stage and interests. The IPR disagreement is actually a question of how the US thinks of China's development.

When the developing world began to deliberate seriously on how to "transplant" the concept of the intellectual property rights at the end of last century, developed countries, led by the US, had fenced know-how which they develop but is urgently needed by many developing countries.

Developing countries, in the process of industrialization, have been increasingly aware of the importance of respecting the IPR and kept learning and introducing advanced knowledge. In the meantime, they have no choice but following the "game rule" set by developed countries and facing formidable IPR enclosure.

Given that, China has been making unremittng efforts on building an IPR protection system which complies the international standard on the one hand and exploring an IPR protection regime which is in accordance with China's situation and helps promote a rational international trade order on the other.

It is fair to say that China has made rapid progress on the IPR protection although it took a somewhat late start on it. An objective, impartial view on the global and China's IPR protection is always based on the future perspective.

Tactics of bulldozing never works and has the risk of politicizing the trade issue. That is especially alarming this year when the US Congress will have its mid-term election.

History always goes with ups and downs. Frictions are unavoidable in the scale-up of the China-US trade. As the US deputy trade representative Karan K Bhatia said in Shanghai last week, " Trade frictions arise even among the closest of partners. In a mature international relationship, those frictions are dealt with on their own terms, while the broader relationship continues to flourish."

March 28, 2006

Budget business hotels splash out

It was two years ago when Home Inn opened its first budget business hotel in Fuzhou on Hualin Road in Fujian Province, with a modest investment but big ideas for the future.

In February 2006, those plans are being fast taken up, as regional general manager for southern China, Wu Wei, inspected a 5,000 sqm property in the city's Drum Tower District.

With an eye to just how successful the "budget" concept can be, Fuzhou general manager Yuan Xiaogu explains how the first Home Inn at Hualin currently has an occupancy rate of over 90% - with an average occupancy rate of 78% and 88% for 2004 and 2005 respectively.

In view of Home Inn's plan for a second hotel, the rival Super 8 hotel chain and locally-founded chain Jinjishan Hotels are both also stepping up efforts to select sites in the city.

Super 8's new hotel in Fujian (its first) is scheduled to open for business in the Xiamen district this month or next, with local hostelry New Era Garden becoming a partner. New Era Garden general manager Xu Deqing reported that Super 8 is currently looking for a suitable site.

Super 8 indeed is quite pleased with the prospects in Fujian and expects to have at least nine new hotels established throughout the province by 2008.

Jinjishan Hotel's chairman Yan Kewu believes his chain's hotel in Fuzhou is right on course, with site selection for its second hotel well under way.

Budget hotels tend to be small and clean, with simple check-in formalities and room rates ranging from between Rmb100 and Rmb200 (HK$96-HK$192).

An increase in the number of these budget establishments is expected to pose a serious threat to two- and three-star hotels, which would have to increase their value-added by offering more and better facilities.

February 1, 2006

Hong Kong - The World's freest economy draws record foreign business ventures 

Chief Executive Donald Tsang receives the Heritage Foundation's 2006 Index of Economic Freedom - which votes Hong Kong as the world's freest economy - from its President, Dr Edwin Feulner

The Year of the Dog got off to a roaring start with Hong Kong being voted the world's freest economy for the 12th consecutive year by the Heritage Foundation. The 2006 Index of Economic Freedom Study found that out of 161 economies worldwide, Hong Kong ranked first in six broad factors, namely trade, monetary policy, foreign investment, banking, finance, property rights, and regulation.

Hong Kong also had one of its best years for attracting foreign companies to set up operations in the city, with investors putting in nearly HK$9 billion (US$1.15 million) last year. Invest Hong Kong, the government's investment promotion arm, assisted 232 foreign companies to establish or expand their presence in Hong Kong in 2005, a rise of 13 per cent compared to 2004, itself a record year.

Invest Hong Kong's director-general Mike Rowse noted that foreign investments were made in different sectors including consumer products, sourcing, financial services, tourism, IT, multimedia, professional services, transportation and manufacturing.

Invest Hong Kong's Mike Rowse believes 2006 will be another bumper year for foreign investors setting up in Hong Kong

Foreign companies such as UK home improvement retailer B&Q expects to invest HK$200 million (US$26 million) to open its first store in the city in 2007. Global restaurant chain KFC plans an additional HK$150 million (US$19 million) to expand its number of outlets from 52 to 90 by 2009. Mr. Rowse is confident that 2006 will be another year of growth for investment promotion in Hong Kong. "We are targeting to assist between 240 and 250 companies this year. The target is challenging but we are confident."

Upbeat sentiments were also reflected in the recent Business Outlook Survey conducted by the American Chamber of Commerce (AmCham) in Hong Kong. The ACNielsen survey found an overwhelming majority of AmCham member companies strongly believe in the strength of Hong Kong's economy and business environment conditions, with the majority planning for growth for the next three years. "The positive feedback can be credited to Hong Kong's ability to provide an excellent platform for conducting business and a world-class commercial hub for the region," the survey noted.

Banking sector strong - Hong Kong's banking system was in good condition in 2005 and will continue to show healthy growth despite keen competition and an uncertain interest rate environment, said Monetary Authority (HKMA) Deputy Chief William Ryback. He expects interest margins to continue to do well and their earnings in the first half of this year to show "reasonable growth" given the strong underlying economy.

Other positive indicators included record figures for passenger throughput, aircraft movements and cargo at Hong Kong International Airport (HKIA) last year. Due to a surge in transit passengers and visitors, passenger throughput rose nearly 10 per cent to 40.74 million in 2005 when compared to 2004. Robust demand for intra-regional trade and trade with the US and Europe saw cargo rising 9.9 per cent over 2004 to 3.4 million tons, while aircraft movements rose 11 per cent to more than 263,400.

January 6, 2006

Interview Professor Bill Fischer (An Internationally Recognized China Expert) - China's economic development can be a huge opportunity

As China celebrates its progress over the past five years and looks forward to further economic and social development in its next five year plan period starting from 2006, some countries in both developed and developing world are still preaching so-called "China threat". But many others think differently. Reporter Chen Xuefei has recently had a written interview with Bill Fischer, Professor of Business Administration, IMD, and former-President Sino-European International Business School in Shanghai. Mr.Fischer thinks China's development can be a huge opportunity for the world.

Q: Professor Fischer, how do you comment on China's economic growth and social development? What's the great challenge ahead?

Mr. Fischer: I think that China's economic growth, since 1979, has been extraordinary; certainly one of the great stories of the 20th century and likely to be one of the biggest in the 21st century, as well.

It has not been without some serious dislocations, of course, but that has been true for most great economic successes, and China is no exception. I believe that there are several major challenges ahead, but let's not forget that overall the quality of life in China is better, and for more people than it probably has been at any other point in recent history. Among the challenges, I'd include: China needs to be sensitive to the growing disparities between the rich and the poor. There has been a lot of comment recently both within the Chinese and foreign press about China's "gini" coefficient reaching levels that some might consider alarming. This also somewhat, but not entirely, an urban-rural difference, but could be a source of continuing social problems if not addressed more effectively than it has been. Feelings of inequity particularly within the countryside neighboring some of China's largest and most prosperous cities are indications of the seriousness of this problem.

A second great challenge is in keeping the already-high level of unemployment in check. China has had high levels un- and underemployment for some time, but this is a chronic problem in that seems not to go away, and it is extremely serious.

A third challenge will be to continue to assure China's integration into the world economy. Over time, this will mean that China will have to accept an increased foreign economic presence in its domestic economy; it will have to support the social infrastructure that leads to Chinese domestic firms becoming better-prepared for international business activities, and it will have to support the development of internationally-acceptable governance frameworks for business ownership/management, investment, and for intellectual property.

Q. As you know the Fifth Plenary Session of the 16th CPC Central Committee has issued new strategies on a more sustainable way of developing its economy by a great shifting of emphasis. From now on, GDP will not be the only measurement for achievements, environment impact and social equality should also be under consideration. What do you think of this?

Fischer: This is, of course important, especially given what I've noted above, but it is much easier to announce such action than it is to administer and enforce it. The story of China, like many developing countries, is that when faced with choices between ecological and social responsibility on the one hand, and employment and wealth-creation on the other, they inevitably choose the latter, and who can blame them? The further one moves from Beijing and the richer areas, the more difficult it is to ensure that such policies will be respected.

Q. What do you think of Chinese workers, employment and the impact of urbanization in China?

Fischer: I think much of the attraction of urban areas for migrant workers is the hope of gaining wealth that would be otherwise unavailable in the interior and rural areas. However, the continued construction of China's urban areas is today dependent upon these same migrant workers. They have become "institutionalized" into the saga of China's modern growth. This creates a bit of a conundrum, as these same migrant workers are probably the most socially-vulnerable group to dissatisfaction over wealth inequities, since every morning they wake up in places where there is considerably more wealth and opportunity than is available to their families back home, They also live on the margins of these same urban societies that they are building and they are concentrated spatially and socially in ways they would not have been if they had remained at home. So, they pose a possible threat to social security, but they are essential if China is to continue to deliver on its promise of prosperity to the upwardly mobile urban population.

Q: Many people blame China of grabbing the jobs not just from Europe or America, but also that of Jakarta and even Africa, is it fair to China to have such kind of comment?

Fischer: The reality is that with globalization has come the opportunity for foreign buyers to source products from China, where they are cheaper than from local factories, from which they had previously bought. As a result, jobs are lost, and those jobs reappear in China. Should China be "blamed"?

I think, actually, that the market preference for goods that are more affordable and at the same quality is the real culprit; and these products are increasingly being made in China. In other words, the reasons that jobs are being in lost in Europe and North America is that we European and North American shoppers are expressing a preference for those products which happen to be made in China. We, the European and North American shoppers are the real cause of these job losses. If European and North American factories could make the same products for a lower price, we'd return to buy locally. It's not that we're buying Chinese or local, but that we're trying to maximize the value we receive for the dollar or Swiss franc or pound that we spend and lately that means buying products that are Chinese made.

Q. What's your comment on so-called "China threat", Is China's development really a threat to the world, or a contribution to the world in terms of poverty alleviation and maintaining stability?

Fischer: We live at a geopolitical time when "fear" seems to be the dominant reflex, but whatever happened to "opportunity"? Despite all of its historical disappointments, China is one of the few places that actually has the potential to become a true ElDorado market: the numbers, the demographics, and increasingly the disposable income, are compelling; the opportunities are great. Besides, what really is at risk here?

Seventy-to-eighty percent of China's high-technology imports and exports are accounted for by foreign-invested enterprises. It is not "the Chinese" who are responsible for this intellectual property being in China, but the foreign IP owners. Assuming that these are bright people, not engaging in lemming-like behavior, they must see more opportunities than risks. Additionally, most of this technology involves assembly components rather than the "family jewels." Yes, there is counterfeiting; yes, there is copying; yes there are surprising new regulations [wireless communications, retailing]; but such behavior alone, while locally troublesome, should not be a reason for "fear" on the global stage.
The real competitive advantage that modern complex organizations have is the knowledge about doing business, running a large, global corporation. This sort of IP is tough to copy. Managing a modern, global competitor is an extremely difficult art-form.

The truth is that nearly a quarter of the world's population is building a new future for themselves, and by default for the rest of us as well. We should want to be a part of that. Fear only keeps us out of the game.

January 3, 2006

WTO roadmap shows the way ahead

(Right) WTO director-general Pascal Lamy and John Tsang, chairman of the Hong Kong WTO, shake hands at the end of six days of intense trade talks

David Eldon, chairman of the Hong Kong General Chamber of  commerce  says Hong Kong has done its bit for the global community

Hong Kong, voted the world's freest economy and often described as "a bastion of free trade" hosted the WTO Sixth Ministerial Conference which ended on December 19. After six days and nearly 100 hours of intense negotiations, the 150 member countries endorsed a compromise deal that clears the way for an international trade pact by the end of 2006.

WTO director-general Pascal Lamy said participants had put the Doha Development Agenda "back on track, gave it a new sense of urgency, (and) made quantitative improvements". "We have political fuel to make cruising speed by 2006," Mr Lamy said. Delegates had agreed to eliminate farm export subsidies on agricultural goods by the end of 2013, and to grant duty-free and quota-free privileges to at least 97 per cent of least developed countries' exports by 2008.

Trade ministers left hard decisions on agriculture, industrial goods and market liberalisation in service industries for the new year, giving themselves a deadline of April 30 to fill in the blanks left from Hong Kong. No date or place was set for the next ministerial meeting. Secretary for Commerce, Industry & Technology John Tsang, who chaired the WTO meeting in his capacity as host minister, said of the "modest outcome": "There is now a roadmap for the way ahead, and this meeting had come much further than seemed possible even two weeks ago."

Role model of free trade - Hong Kong's openness to trade was held as a glowing example of the world trading system. The South China Morning Post reported that the banana-loving Mr Lamy said in his popular blog that someone had asked where his bananas came from. "I have been told they come from anywhere in the world because trade in Hong Kong is so open - but that these most likely come from the Philippines at this time of the year."

Mr Lamy was effusive in his praise of Hong Kong as host and thanked the city for its "impeccable organisation". The world may have seen violent clashes between demonstrators and the Hong Kong police force on their TV screens, but there are many who're convinced that Hong Kong did the right thing in staging the conference. David Eldon, chairman of the Hong Kong General Chamber of Commerce (HKGCC), said there are times when people who are members of a world community must contribute.

"Hong Kong has done its bit for the global community. Yes, a lot of money was spent on the WTO conference but I think when the world sees what Hong Kong has done, the cost will be justified." HKGCC senior director for business policy W.K Chan was quoted in The South China Morning Post as saying: "Hong Kong should look at the WTO really in its macro and global context. If an agreement can be reached then that will increase global trade and Hong Kong would stand to benefit from that as a major logistics centre."

Double digit growth seals bumper year of trade


David O’Rear, chief economist at the Hong Kong General Chamber of Commerce, describes Hong Kong’s economic performance as “extraordinary”. Hong Kong's economy has chalked up some important milestones while firing on all cylinders during 2005. And there is good cause for optimism about the prospects for 2006, analysts say.
Hong Kong should post stunning growth in gross domestic product of about 7.5 per cent, said David O'Rear, chief economist of the city's General Chamber of Commerce. That is only down slightly from last year's 8.2 per cent. The dynamic performance is in large part due to Hong Kong continuing to do what it does best - trade. "This is the best international trade environment we have ever seen. It has been absolutely extraordinary. There is very little that would qualify as a normal year," Mr O'Rear said. "We have had a fourth year of double digit growth in trade. That is the first time that has happened since the late 1970s." At the heart of the story is Hong Kong's important function in facilitating the sourcing and movement of goods from China's super-efficient factories to Western markets. Hong Kong International Airport has been playing a leading role, with 319,000 tonnes of cargo moving through it in November, the third straight monthly record.

Record port activity - Trade, tourism, retail sales and the stock market peaked in Hong Kong in 2005, with the momentum continuing to build. Port activity also looks on course for another record year having recorded throughput of 20.5 million 20-foot equivalent units in the first 11 months. But the more invisible aspects of trade such as banking, insurance and supply chain management play just as an important part in Hong Kong's ongoing economic success story. Besides handling greater volumes of goods, the growth in GDP is partly coming from increasing efficiencies in Hong Kong's economy.
"It is hard to imagine any productivity gains when (Hong Kong's) manufacturing as a share of GDP has been on a secular decline," said Enoch Fung, an economist with Goldman Sachs. "(But) the fact is we believe Hong Kong is reaping the benefits from being the servicemen to China's rapid growth through its integration with the mainland economy."

Beyond the numbers, Hong Kong has completed a number of important projects in 2005 that should help keep the growth bandwagon rolling. Hong Kong now has the only Disneyland in Asia outside Japan after the city's park opened in September. It has already attracted more than one million tourists in its first 100 days of operation.

Events hub shines - And last month (December) Asia-World Expo, a cavernous exhibition centre adjoining the airport, opened its doors. It already has a packed events calendar for 2006 and will help alleviate a shortage of space for trade shows which play an important part in cementing orders for Chinese manufacturers from Western markets. Global corporations have continued to find a home in Hong Kong, thanks to the city's low taxes, free port status and efficient infrastructure. The government's annual survey of the private sector found a record 3,798 companies have regional headquarters or regional offices in Hong Kong, up 5.2 per cent from last year.

Hong Kong's stock market has also had a record year in terms of fund-raising activities, with an estimated US$150 billion raised by dozens of new listings, including China Construction Bank, whose US$8 billion IPO was the world's biggest since 2001. That didn't stop the blue chip Hang Seng Index from reaching four-year highs in 2005, reflecting on how the robust economy is resulting in bumper corporate profits. The year 2005 will also go down as the year when China began the reform of its foreign exchange regime with July's 2.1 per cent revaluation of the yuan. Economists believe the move will just be the start of a gradual rise by the yuan against other currencies, which should be an overall benefit for Hong Kong by lifting the spending power of mainland tourists and investors.

Stock market strong - "Yuan appreciation is going to continue to help the Hong Kong (stock) market and the inflow of funds," said Kenny Tang, associate director of Tung Tai Securities and well-known stock commentator. Besides trade, big growth in tourism receipts has been an important driver for the economy as China relaxes restrictions on individual travel. "Tourism keeps booming and that is helping create a record number of jobs," Mr O'Rear said. October was another record month for tourists with 2.1 million visiting Hong Kong. In the 10 months to October the city has already played host to 19 million tourists, up 7.5 per cent on last year.

The strong performance of the tourism and trade sectors plus renewed confidence among Hongkongers reflected in robust retail sales has helped the unemployment fall to a four-year low of 5.3 per cent in the third quarter.

Hong Kong is still only at the mid-point of an economic up cycle and should enjoy another strong year in 2006 with GDP growing at a 5 per cent pace, said Goldman's Ms Fung. "We believe the potential demand from mainland private enterprises for Hong Kong's services is significant and therefore we remain optimistic on the long-term economic outlook for Hong Kong," said Goldman's Ms Fung. Much will depend on whether US economy experiences a slowdown as financially overstretched consumers finally shut their wallets, said the General Chamber's Mr O'Rear. He believes Hong Kong's growth will slow to 3.5 to 4 per cent next year reflecting the likely knock-on effect of a softer US economy. "The first half should certainly be better than the second half," he said.

New mega venue off to a flying start 

Hong Kong's HK$18.3 billion (US$2.35 billion) AsiaWorld-Expo, one of Asia's biggest exhibition centres, opened on schedule on December 21 in a move warmly welcomed by the trade fair industry. The city's Chief Executive, Donald Tsang, cut the ribbon to launch the gleaming new facility adjoining Hong Kong International Airport. It features 70,000 square metres of rental exhibition space - equal to 10 soccer pitches - and the 13,500-seat AsiaWorld-Arena, the biggest purpose-built indoor-seated entertainment arena in Hong Kong. The new centre, a joint venture between the government and private investors, is fully integrated with the airport and even has its own stop on the Airport Express railway that runs to the city centre.

"It is an important step forward," said Paul Woodward, regional manager of UFI, the global association for the exhibition industry. "At the peak times of the year, the current facilities have been pretty full so this opens opportunities for people to expand existing events or add new ones." Mr Woodward described the response from the industry as "very positive". He said the number of events on the venue's calendar "is a clear indication of that".

30 shows lined up - AsiaWorld-Expo should get off to a flying start. It has already lined up 30 major international exhibitions and events for next year, which are estimated to bring HK$4 billion (US$0.5 billion) in economic benefits to Hong Kong over the 12 months.
One of AsiaWorld-Expo's biggest coups was to lure the ITU Telecom World event away from Geneva where it has been held for three decades. The calendar features trade shows across a wide range of product types from fashion to auto parts. "These events are virtually all firsts to Hong Kong and the majority of them are recurring events for subsequent years," said Nicolas Borit, chief executive officer of AsiaWorld-Expo Management, the privately owned company which will run the venue. Opening AsiaWorld-Expo was another plank in Hong Kong's strategy of positioning itself as "Asia's world city", Mr Tsang said in his speech at the inauguration.

Springboard to China - Hong Kong has a role "to serve as a two-way springboard: for companies from around the world wishing to access the Chinese mainland, in particular the Pearl River Delta, and for mainland companies to launch themselves into the international marketplace," Mr Tsang said. "It is no coincidence that many of the exhibitions to be held here in the coming years are to show off Chinese goods and services to the world. Others will show the world's best products to an increasingly sophisticated and substantial market in the mainland." Hong Kong already has its Convention and Exhibition Centre (HKCEC), a signature building in the downtown cityscape, but the new building is intended to provide a complementary venue amid rapidly growing demand for exhibition space.

Some trade fair organisers may eventually split their events between the two venues, said UFI's Mr Woodward. "Some people in the industry will welcome (competition) but it won't be competition in any kind of damaging way," he said.

Added incentive - The new venue will also give trade fair organisers the option to add incentive by coupling their event with a concert or sporting tournament at the AsiaWorld-Arena. AsiaWorld-Expo is intended to specialise in some of the larger products manufacturers want to showcase, while the HKCEC is focused more on trade fairs featuring light manufactured goods. The HKCEC is planning to build a 19,400 square metre extension to come on stream in 2009. But the rapid growth of the trade show industry in Hong Kong means there should still be plenty of business for both venues even then.

HKCEC Director of Business Development Monica Lee-Muller welcomed the opening of AsiaWorld-Expo (AWE). "We hope that AWE can further enhance Hong Kong's exhibition industry development and bring more new shows to Hong Kong," she said. "The two centres represent two different products, however both sharing the same economic and political environment. We do not view the two centers as competitive. Our major recurrent clients have expressed their strong desire to continue their existing international exhibitions at the HKCEC." There were many considerations for trade show organisers when selecting a venue, including convenience of moving freight to the site, proximity and availability of hotel rooms and the availability of other ancillary services such as shops, restaurants and banks, said Ms Lee-Muller.

Long track record - "HKCEC has 17-year track record of hosting successful international exhibitions which have built a strong reputation for quality, presentation and product. Our current portfolio is headed by the world's biggest trade fair for watches and clocks, and its second-largest for electronics," she added.

To some extent the new venue and an enlarged HKCEC will generate their own business, with trade show organizers wanting to stage their events in the best possible environment. Having the Chinese mainland, the world's outsourced manufacturer, in its backyard is an irresistible draw card for Hong Kong. The number of visitors to the city's trade shows reached 3.6 million in 2004, a 29 per cent rise over the 2.8 million two years earlier, according to the most recent day from the Hong Kong Exhibition and Convention Industry Association.

        

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