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December 30, 2005
Taiwan, Hong Kong and Macau Residents
Working in Shanghai are Considered Locals
Shanghai has implemented the Regulations for the Administration of the
Employment in the Mainland of Residents from Taiwan, Hong Kong and Macau. This
means Taiwan, Hong Kong and Macau residents without working experience will also
be allowed to seek employment in Shanghai. Detailed provisions for social
security protection they are entitled to are being formulated. According to
experts, the implication of these new regulations is that Taiwan, Hong Kong and
Macau residents will enjoy equal employment rights as mainland residents.
However, Taiwan, Hong Kong and Macau residents working in the mainland will
still have to apply for a work permit, which is subject to administrative
permission and will be registered and filed for the record. The registration of
work permit replaces the previous practices of extension of stay and annual
inspection. Employing units must also sign labor contracts with the Taiwan,
Hong Kong and Macau personnel employed and make contributions to social
insurance in accordance with regulations. The Shanghai municipal labor and
social security department is losing no time in finalizing details of the labor
contracts and social insurance provisions for the employment of Taiwan, Hong
Kong and Macau residents.
While making it easy for employing units to recruit Taiwan, Hong Kong and Macau
personnel, the new regulations also entail harsher penalties for violations. Any
employing unit that fails to help the Taiwan, Hong Kong and Macau personnel it
employs to apply for work permits or complete filing procedures, or fails to
cancel the work permits of Taiwan, Hong Kong and Macau personnel after
terminating their labor contracts or after the departure of these personnel at
the end of contract, will be ordered by the labor and social security
administrative department to make rectifications and fined Rmb1,000. Any
employing unit that falsifies, alters, falsely uses or transfers work permits
will be ordered by the labor and social security administrative department to
make rectifications and fined Rmb1,000. In addition, it will also be prohibited
from employing Taiwan, Hong Kong and Macau residents for one year.
Impact of 11th Five-Year Plan on Hong Kong Companies
The 11th Five-Year Plan adopted on 11 October 2005 will be submitted to the
National People's Congress to be held next March for approval. The proposal put
forward six priorities: bringing about a change in the mode of economic growth;
readjusting and optimising the industrial structure; addressing the three
agricultural issues; promoting the sound development of urbanisation; bringing
about coordinated regional development; and intensifying the building of a
harmonious society.
It is understood that the 11th Five-Year Plan is very different from previous
five-year plans and marks an important phase of transformation in the Chinese
economy. In the process of transformation, domestic and foreign enterprises will
find opportunities as well as challenges. As economic ties between Hong Kong and
the mainland become increasing close, the 11th Five-Year Plan is expected to
have far-reaching impacts on Hong Kong's economy and enterprises. The plan
covers a wide range of issues. The following are issues with a close bearing on
Hong Kong:
1. Change in Mode of Economic Growth
The Chinese economy has seen rapid growth for more than 20 years, but it has
also paid a heavy price. The main manifestations are serious environmental
pollution and heavy consumption of resources. The impact of economic growth on
the environment has wasted 7% of the GDP generated, and the amount of resources
consumed per unit GDP in China is higher than the world average. Environmental
pollution and shortage of resources have become serious problems holding back
China's sustainable development.
The plan clearly points out that it is imperative to change the mode of economic
growth, make resource conservation a basic national policy, build a
resource-efficient and environmentally friendly society, promote economic
development in harmony with population, resources and the environment, and
achieve sustainable development. In this connection, the government is bound to
introduce new industry standards; impose stricter environmental and energy
consumption standards; develop and promote energy-saving, substitution and
recycling technologies; and implement a system for the mandatory elimination of
high-consumption, high-pollution and technologically backward techniques and
products.
Hong Kong is the largest source of foreign investment in the mainland.
Investment mainly goes to the real estate, garment, toy, electronic, watch and
clock and other manufacturing sectors. During the 11th Five-Year Plan period,
Hong Kong enterprises should avoid investing in high-pollution and
high-consumption projects while companies with investment in this type of
projects should undergo transformation or make use of new technologies to lower
energy consumption and reduce pollution. Compared with their mainland
counterparts, Hong Kong companies have a head start in green production
techniques. Enterprises with a good grasp of advanced environmental protection,
energy conservation and recycling technologies should be able to find great
opportunities on the mainland.
2. Optimization of Industrial Structure
The plan points out that developing advanced manufacturing industries, raising
the proportion of service industries and strengthening the building of basic
industries are important tasks for industrial restructuring. It is imperative to
draw up and perfect policies and measures for promoting the development of
service industries; vigorously develop such modern service sectors as finance,
insurance, logistics, information and legal services; develop industries with
strong potential demand such as culture, tourism and community services;
transform and upgrade traditional service industries through the application of
modern management methods and information technology; and raise the proportion
and standard of service industries. It is also necessary to promote trade in
services, continue to open up service markets and take over relocated
international modern service industries in an orderly manner.
The plan can be seen as good news for Hong Kong's service industries. Logistics,
real estate, legal service and banking are strong and well-developed sectors in
Hong Kong. The signing of CEPA has lowered the threshold for 18 service sectors,
giving Hong Kong's service industries and advantage over their foreign
counterparts. The rapid growth of the service sectors in the mainland during the
11th Five-Year Plan is bound to bring infinite opportunities to Hong Kong
service providers.
3. Promotion of Healthy Development of Urbanization
The proposal pointed out that the Pearl River Delta, Yangtze River Delta and
Bohai Rim area should continue to perform their functions in stimulating the
economic development of their hinterlands. It is also necessary to continue to
bring into play the roles of special economic zones and the Shanghai Pudong New
Area, and promote the development and opening up of the Tianjin Binhai New Area
and other regions with fairly good conditions in order to fuel regional economic
development.
4. Maintenance of Long-Term Prosperity and Stability in Hong Kong and Macau
According to the proposal, it is necessary to strengthen and promote exchanges
and cooperation with Hong Kong and Macau in trade and economy, science,
education, culture, health, sports and other fields; continue to implement CEPA
agreements with Hong Kong and Macau; and strengthen cooperation with Hong Kong
and Macau in infrastructure construction, industrial development, resource
utilization and environmental protection. Hong Kong should be supported in its
efforts to develop such service industries as finance, shipping, tourism and
information in order to maintain its status as an international financial, trade
and shipping centre.
As an important window and bridge for the mainland, Hong Kong has made important
contributions to China's economic and social development over the years. Hong
Kong enterprises have also been able to find tremendous room for development in
the process. The mainland has become Hong Kong's largest trading partner while
Hong Kong is the biggest investor on the mainland. Hong Kong's role as a bridge
has diminished following the opening of the mainland in recent years. However,
Hong Kong remains an international financial, trading and shipping centre and
its advantages in the service sectors remain strong. The central authorities
also hope to further strengthen cooperation and exchanges with Hong Kong and
achieve complementarity and common prosperity during the 11th Five-Year Plan
period.
December 23, 2005
China's status as the sixth-largest
economy in the world
Results of the first national economic census confirmed China's status as the
sixth-largest economy in the world, and indications are that it will soon be in
fourth place. More accurate analysis of the services sector showed that China
has been underreporting its economic output to the annual tune of US$284
billion. Some who had predicted that China would dethrone the US as number one
by the year 2040 moved the date to 2035.
In the nearer future, 3G licenses are expected to be issued as early as the
first quarter of 2006. The wireless communications technology is expected to
have as many as 23 million China users by end-2006, and over 100 million by the
time the Olympic flame reaches Beijing in 2008.
A senior official said developing futures markets to control prices for bulk
commodities such as metals was essential for competitiveness. With China's
seemingly insatiable appetite for raw materials, especially in the energy and
construction sectors, the government is embracing futures markets as a means of
keeping prices down. Copper has been a case in point, though a botched one.
Earlier this year, a government trader shorted a large amount of copper in hopes
that the price would drop. Instead, the value of copper continued to rise; now
those contracts are being called in, and the whereabouts of the trader are
unknown.
Finally, Christmas is coming in China. The officially atheist nation, which
nonetheless acknowledges several million Christians among its population, has
increasingly embraced the holiday as a means of boosting retail sales. Malls and
restaurants across the country are strewn with lights, Christmas trees, and
Santas. But in a way, China has been doing Christmas for years: it leads the
world in the production and export of many yuletide necessities, including
decorations, toys, and fake Christmas trees. Only now, lots more of these items
are selling at home as well.
December 14 - 19, 2005
World Trade Organization (WTO) Meeting - Hong Kong Police has shown high degree of restraint and
professionalism without using any deadly force to safeguard WTO delegates, to
protect life and properties. Many has worked 36 hours without rest. The demonstrators were well organized and well
trained to achieve maximum news coverage - Photo Highlights, please click on
the small picture for full view
December 1, 2005
 High
growth, low inflation underpin regional edge
Robust exports of goods and services coupled with strong consumer spending
propelled Hong Kong to a spectacular performance in the third quarter of 2005,
with GDP growth of 8.2 per cent year-on-year. The economy grew for the ninth
successive quarter, the longest growth cycle since the early 1990s. "The
stronger-than-expected expansion was characterised by a continued surge in
exports of goods and services, re-acceleration in consumer spending growth, and
sustained growth in machinery and equipment investment," explained the
Government economist K.C Kwok.
Total exports of goods recorded 12.8 per cent, marked by distinct growth in the
mainland and European Union markets, steady growth in the US and pick-up growth
in Japan, Taiwan, South Korea and Malaysia. External trade strong despite
external uncertainties such as high oil prices, rising US interest rates and
exchange rate movements, Hong Kong's external trade continued to be good.
"We have a situation of high growth and low inflation. Barring unforeseen
adverse developments, Hong Kong's external trade is likely to attain solid
growth through to the end of the year," added Mr Kwok.
Positive figures were also recorded at the Hong Kong International Airport (HKIA).
Boosted by strong inter/intra-region traffics, cargo throughput rose nearly 7
per cent year-on-year in October. Passenger numbers and aircraft movements grew
6.5 per cent and 12.2 per cent respectively over corresponding months of last
year.
The commercial director of Airport Authority Hong Kong, Hans Bakker, attributed
the strong performance to "Asia's buoyant economy and the continued strong
demand for exports from the Chinese mainland".
Trade fair advantage ending the year on a high note is the December 21 opening
of the AsiaWorld-Expo (AWE), which will further enhance the trade fair industry
in Hong Kong. The HK$2.35 billion (US$302 million), 70,000 square metre
exhibition centre is expected to complement the existing Hong Kong Convention
and Exhibition Centre (HKCEC) in Wanchai.
Both AWE and HKCEC have agreed to co-operate to maintain the edge in a highly
competitive business, where buyers would only go for the biggest and best shows
for a particular sector. Most would agree that despite regional competition,
Hong Kong can still leverage its brand and infrastructure.
Already, the Asiaworld-Expo calendar over the next year is packed with 32 events
starting in January. Nasdaq-listed trade facilitator Global Sources is
relocating two of its biggest fairs from Shanghai to AWE Hong Kong next year due
to space constraints.
Multilateral trade paves the way for SMEs worldwide
Li & Fung chairman Dr Victor K. Fung urges ministers to strengthen the WTO's
multilateral approach to trade regulation. The future of the global production
system, along with the gains it creates for consumers and everyone in the supply
chain, rests on the shoulders of negotiators at this month's Hong Kong
Ministerial Conference of the World Trade Organisation (WTO). That is the view
of Hong Kong business leader Dr Victor K. Fung, group chairman of Li& Fung, a
leading international trading, distribution and retailing group based in Hong
Kong.
At a recent UNESCAP conference in Macau, Dr Fung urged ministers to strengthen
the WTO's multilateral approach to trade regulation when they meet in Hong Kong
from December 13 -18. He said this was the only way to ensure the health of the
global production system and promote global prosperity.
Wide ranging benefits - Dr Fung, who is also chairman of the Airport Authority
Hong Kong, said the benefits of the modern global production system stem from
several factors:
* it disperses production across different factories in different countries
* developed countries can focus on design, branding, understanding the needs of
consumers and specialised activities that are knowledge-intensive
* developing countries can get into the game by performing just one or two
pieces of the chain
* consumers get higher quality, greater variety and lower prices because it is
possible to draw from the entire world as a production base
"The modern global production system lowers the barriers for entry for
developing countries, especially for small and medium-sized enterprises (SMEs)
worldwide. This has obvious implications for employment and economic
development", Dr Fung said.
"It is the multilateral system that enables each location around the world to
contribute according to its skills and capabilities, and to develop its own
competitive advantages."
World trade's 'best hope'. He voiced concern that proliferating bilateral
agreements would undermine the multilateral approach. He added that a
multilateral world trade system was the best hope of addressing the trade
liberalisation issues on the Doha agenda (named after the city in Qatar where
the current round of WTO talks started in 2001).
"With respect to market access and tariffs, multilateral solutions will help us
optimise the efficiency of the complex cross-border flows generated by dispersed
manufacturing. "Multilateralism democratises the global economy. There is indeed
a place for everyone."
 Shopper's
paradise now a haven for luxury
Louis Vuitton will open a state-of-the-art emporium in Central, adding to Hong
Kong's long list of luxury brand flagship stores. Hong Kong has a bright future
as a magnet for Chinese shoppers seeking the best of the world's luxury brands.
Sales of luxury branded goods are growing as fast as 20-30 per cent annually in
Hong Kong and China, estimates Carrie Yu, a partner and retail and consumer
leader for accountants PricewaterhouseCoopers (PwC).
"It is clear the Chinese elite are very luxury brand conscious and they like
travelling. Hong Kong is the number one destination for both business and
pleasure. I don't think this trend will change," she said. "Hong Kong is like
the Milan, Paris or New York of China. Shoppers are coming here for the bigger
collections, because the goods are obviously authentic, and the pricing is
better."
China has already become the world's third-largest market for luxury goods with
US$631 million in sales, driven by the emergence of a 100-million strong middle
class, according to PwC research. Last year, mainland visitors to Hong Kong
surged 44.6 per cent to over 12 million and accounted for 12 per cent of the
city's retail sales, said Conway Lee, an Ernst & Young China partner and
industry leader for retail and consumer products.
Leading brands increase presence - Mainland visitors buy 12 per cent of luxury
branded products sold in Hong Kong, says Conway Lee, an Ernst & Young partner
The tremendous growth opportunities are recognised by the world's leading luxury
brands, which have been quick to open or expand their stores in Hong Kong as
well as pushing into China. "In the past couple of years most of these flagship
stores in Hong Kong have had a facelift," said PwC's Ms Yu. "The flagship stores
are to attract consumers and also showcase their brands to China as a whole."
Louis Vuitton (LVMH) is the latest of the big names to undergo a store revamp in
Hong Kong. The French giant plans to open a state-of-the-art, two-storey
emporium as a leading attraction in Central's swanky Landmark complex. The
Landmark's roster of top names, which includes Gucci, Fendi and Dior, was given
another big boost with the September opening of a HK$100 million (US$12.8
million) Harvey Nichols store, the British luxury brand retailer's first in Hong
Kong. Also stepping into the Landmark this year was French luxury shoe brand
Roger Vivier, which opened its first store outside Paris in the Hong Kong mall
this year.
Meanwhile, Italian fashion house Roberto Cavalli opened a flagship store in
Central's ifc mall in June, and Italian men's personal care products maker Acca
Kappa set up in Times Square, Causeway Bay, in July. There's no sign that Hong
Kong's growth as a luxury brand hub is running out of steam, said Ernst &
Young's Mr Lee.
Leveraging the Hong Kong image - "Hong Kong is an international financial centre
and an advanced, business-minded, materialistic city. It provides a distinct
image to luxury brand companies setting up shop in Hong Kong and it signals to
mainland Chinese that they are purchasing a world renowned luxury brand," he
said.
The luxury sector has also been investing heavily in China, but it would be a
mistake to think that longer term Hong Kong is going to lose out to China in the
sector, says Annie Bingham, a vice-president of executive search firm AT
Kearney.
"Hong Kong will always be the jewel in China's crown," said Ms Bingham who
specialises in the luxury goods sector and is herself a former senior manager
for names like Laura Ashley, Chanel and Yves Saint Laurent. "I think there is
enough business to go around. There's this voracious desire for luxury today."
Hong Kong also has the edge in terms of its world-class service quality. How
Hong Kong treats its VIPs is "way above other countries," said Paris-based Ms
Bingham.
During a recent trip to Hong Kong she was particularly impressed by Lane
Crawford's new HK$200 million (US$25.7 million) 7,600 sq metre flagship store at
Two ifc in Central, which features a host of apparel collections from leading
brand names like Paco Rabanne and Lanvin.
The Hong Kong and China stories are "all interrelated", says PwC's Ms Yu. Many
Chinese consumers only go window shopping at luxury brand stores on the
mainland, which has a 30 per cent luxury goods tax. They wait to make their
actual purchases in Hong Kong which is a duty-free port.
Hong Kong's status as a regional aviation hub means it is ideally placed to also
capitalise on the strong demand growth elsewhere in Asia for luxury products.
Indeed, Hong Kong International Airport has become a haven for luxury shoppers,
many of them Chinese travelers transiting through Hong Kong to take flights to
the West. "Most of the luxury brands have stores there -- it is unique in the
world and has a lot of traffic," said Ms Yu.
Rising Gold Price Fuels Sales of Gold
Products
Demand for gold products has rocketed in recent weeks on the mainland, according
to TDC's Beijing office. All kinds of gold products are selling hot. Gold bars,
gold coins, gold ornaments, and solid and karat gold jewellery all have their
followings. The market is red hot.
Gold price has recently surged to nearly US$500 an ounce, a 24-year high. Gold
bars, coins and ornaments are sold in large quantities mainly as investment
products, and soaring gold price in the past few years has given investors
handsome returns and increased their confidence in the precious metal. Gold as a
rare commodity is an excellent tool for fighting inflation and is also a safety
haven for investment funds.
Pure gold jewellery has always carried weight in the mainland market. Product
innovation has given solid gold jewellery new perspectives and provided a
greater choice for consumers who mainly make purchases to hedge against
inflation and accumulate wealth. Chinese animal horoscope gold bars, Olympic
gold bars and Shenzhou 6 gold bars are keenly sought after by consumers and
investors. The current market price is Rmb138.00/g for solid gold and
Rmb142.00/g for 999 gold.
The market share of karat gold is steadily growing. The reason is that karat
gold has many strong points, such as malleability, hardness and variety of
colours, which can be turned to good account in the creation of beautiful and
complicated mesh, petal, tassel, lace and other designs.
Apart from unique shapes and designs, the beautiful colours of karat gold, such
as rose gold, pink gold, blue gold and purple gold, made by mixing solid gold
with alloy metals are also attractive to consumers. Personalised consumption has
fueled the sale of karat gold jewellery although the efforts of the World Gold
Council in promoting karat gold are not to be ignored. The prices of karat gold
jewellery itsms are dependent on the technology involved and may vary between
Rmb100 and Rmb50,000.
The popularity of gold products deserves the attention of jewellers.
October 29, 2005
By invitation of the United States Pacific
Fleet, we have participated in the daylight embark aboard USS Nimitz Aircraft
Carrier cruising 300+ miles outside of the Hawaiian island via C-2 Greyhound. It
is an exception experience meeting with Captain Ted Branch of USS Nimitz (the
size of more than 3 football field) and 1,000s of professional crews. The
following is the note of interest of USS Nimitz - NIMITZ reaches over 18
stories high from to keel to the top of the mast, Eight steam turbine generators
each produce 8,000 kilowatts of electrical power, enough to serve a small city,
NIMITZ` Food Services Department provides 18000 - 20000 meals a day, NIMITZ can
stock at least 90 days of refrigerated and dry storage goods, NIMITZ` two barber
shops trim over 1,500 heads each week, The Post Office processes more than one
million pounds of mail each year, The ship has a fully equipped dental facility,
staffed by five dentists, The Medical Department is manned by six doctors
including a surgeon, who provide everything from surgery to hydro-therapy. The
ship also features an 80 - bed hospital ward and Four destilling units enable
NIMITZ engineers to make over 400,000 gallons of fresh water a day, for use by
the propulsion plants, catapults and crew (more go to the Photo Album Page)
October 3, 2005
 Hong
Kong Booming economy abuzz with opportunity
Hong Kong Disneyland is opened to much excitement and a forecast of 5.6 million
visitors in the first year. (From right) Walt Disney's Bob Iger and Michael
Eisner with China's Vice-President Zeng Qinghong and HKSAR Chief Executive
Donald Tsang. The second half of the year promises exciting times ahead for Hong
Kong's already humming economy. Hong Kong Disneyland opened to much fanfare on
September 12; two five star hotels opened in Central to surging visitor arrivals
and a booming convention business; while international brands and new department
stores scramble to get a slice of the sizzling hot retail pie.
No sooner had Disney's Magic Kingdom opened its gates, a second theme park for
Hong Kong was announced by its chairman George Mitchell. He was reported in The
Standard saying that the new addition would transform the site into a "true
multi-day destination resort". Much is expected from Disney's theme park, which
is forecast to attract 5.6 million visitors in the first year of business. As
one international fund manager noted: "Disneyland could be the catalyst that
drives the market higher." (Buckle up for a ride of a lifetime)
September saw the opening of two new luxury hotels in the Central financial
district - the six star Four Seasons and the hip Landmark Mandarin Hotel. The
hotel sector has not seen it this good since the peak in 1996. Occupancy rates
are over 80 per cent across all classes of hotels in the city so far this year,
and analysts are tipping even brisker business in the second half.
"There are so many good stories to tell," said James Lu, executive director of
the Hong Kong Hotels Association. (Luxury hotels rise to meet strong economic
growth) The influx of visitors to Hong Kong is one of the good news stories. A
record 2.07 million people visited Hong Kong in July, up nearly 4 per cent
compared to previous July.
Long haul travellers are driving the growth and filling up hotel rooms. There
has been a 20 per cent surge across all long haul markets from Europe, Africa
and the Middle East (up 27.5 per cent) and from the Americas (up 8 per cent).
HKTB anticipates over 23 million visitors to Hong Kong this year, a 7 per cent
growth from last year. The general feeling among hoteliers is that 2005 will be
the best time after the dizzying days of 1996. "There is a potential to do
better than 1996," said one hotelier.
Indeed, William Mackay from the waterfront Four Seasons - where corporate rates
start from HK$3,300 (US$424) for a 484 sq ft standard room - is confident of
heavy bookings as several trade shows and global conferences such as December's
World Trade Organization ministerial conference will be held in Hong Kong.
Hong Kong's retail sector rose faster than expected in July as the strong
economy buoyed consumer demand. Hong Kong's July retail sales volume grew 5.6
per cent from a year earlier to HK$17.4 billion (US$2.2 billion). Economists
said they expect the positive momentum to continue for the rest of the year
fuelled by the drop in unemployment, the ripple effect from the "feel good
factor" of the Disney launch, rising interest rates and the vibrant inbound
tourism.
Iconic London store Harvey Nichols took this opportunity to open its first Asian
store right in the heart of Central. Dickson Poon, chairman of Dickson Concepts
(International) which holds the exclusive rights to develop the "Harvey Nicks"
brand in Hong Kong, said the opening of the HK$100 million (US$12.8 million)
store was one month ahead of schedule.
Harvey Nichols, like New York fashion label Ira von Furstenberg and French
luxury footwear Roger Vivier which have just set up retail outlets in Central,
is hoping to capitalise on the influx of mainland visitors who will be visiting
Hong Kong Disneyland. Mr Poon is very optimistic about the retail market in Hong
Kong, citing double-digit growth since April in his stable of international
brand names that include Ralph Lauren, Bulgari, Chopard and Coach.
World's freest economy confirmed, With overwhelmingly positive upturns in almost
all sectors of the economy, it is no wonder that Hong Kong was once again voted
the world's freest economy in the Economic Freedom of the World: 2005 Annual
Report released by Canada's Fraser Institute and the US' Cato Institute.
Compared to 127 economies, Hong Kong came up tops in "freedom to trade
internationally" and "regulation of credit, labour and business", and second in
"size of government".
Hong Kong Luxury hotels rise to meet strong economic growth
Hong Kong is witnessing the splashy opening
of two new five-star hotels, part of a rapid build out of the sector to cater
for a surge in mainland tourists and strong growth in business travelers. The
new Landmark Mandarin Oriental and the Four Seasons will offer the ultimate in
high-end luxury in Hong Kong's Central district. But they are merely the
headline acts in a wider story of how Hong Kong has responded with remarkable
speed to a rising tide of mainland tourists following Beijing's easing of
restrictions on individual travel.
According to Hong Kong Tourism Board data, the number of hotels in Hong Kong
will jump from 101 with a total of 39,128 rooms at the end of 2004, to 131
hotels with 53,152 by end 2006. "The rising number of hotels is attributable to
the phenomenal spending power of the Chinese mainlanders coming to Hong Kong,"
said Tony Chan, a property analyst and executive director of Vigers Appraisal
and Consulting. Strong economic growth in Hong Kong and China in the past two
years has fuelled a boom in hotel building, which requires a large commitment of
capital and long payback times.
William Mackay, vice-president and general manager of Four Seasons Hotels and
Resorts, says Hong Kong's hotel industry is in full swing. "The industry in Hong
Kong was severely battered by the Asian financial crisis and then SARS. Now it
is in the process of making up for lost time in capital investment," said
William Mackay, vice-president and general manager of Four Seasons Hotels and
Resorts. "It has been 15 years since a major hotel was launched in Hong Kong.
The industry has recovered extraordinarily fast."
Chinese people love to shop on their holidays - and a growing number have the
desire and cash to do it in the myriad of classy malls that stud Hong Kong,
providing a ready-made client-base for hoteliers. Visitor arrivals in the city
are projected to rise from 23 million this year to 27 million next year, with
mainlanders accounting for much of the growth, said James Lu, executive director
of the Hong Kong Hotels Association. But there has also been strong growth in
business travelers coming to the city as the outsourcing-to-China story gathers
pace. This is the segment which Four Seasons is mainly aiming at, said Mr.
Mackay.
"Hong Kong is a major worldwide city. I think there is a very bright future
because of the extraordinary growth in China," he said. There are some concerns
that the rush of new hotels coming on stream could outpace the growth of visitor
arrivals. That could put pressure on room charges and occupancy rates, which
have been at a high 83 per cent across all classes of hotels in the city this
year. But there are plenty of future tourism growth drivers around, ranging from
the likely rise of Hong Kong as a hub for low cost airlines to nearby Macau's
meteoric rise as a centre for leisure and gaming.
"There are so many good stories to tell," Mr. Lu said. Most recently there has
been opening of Disneyland in September, which should spur the next leg of
growth in mainland tourist arrivals. The individual visitors' scheme has been
rapidly extended across the country since it was introduced two years ago but
"there are still more provinces asking for their people to be allowed to come
down here," said Mr. Chan. "Their spending power is very high. They are looking
for brand names, leather goods, jewellery and gold watches."
Visitors all need somewhere to stay the night and back in 2003, the government
was worried that the hotel sector would be overwhelmed by the influx of mainland
visitors. It even considered turning some government flats into guesthouses.
Private sector rallies. But, with government encouragement, there has been a
remarkable response from the private sector. Many of the new hotels are located
in non-prime areas in Kowloon and the New Territories, sometimes on sites which
are converted from disused industrial premises, underlining Hong Kong's move up
the value-added ladder from a manufacturing to a services economy.
The boom in building hotels which can take an average of 10 years to repay the
capital invested has surprised some analysts. "In terms of cash flow, investing
in a hotel is not an ideal choice for a developer," Mr. Chan said. "You can
build and sell offices and residential units quickly but hotels lock up your
upfront investment in land and building costs. Then you have to recoup your
investment slowly through room charges, food and beverage and shopping."
Some of the new hotels are as a result of incentives from Hong Kong's Town
Planning Board, which has encouraged developers to include hotels in residential
housing projects or industrial site conversions. Hong Kong's solid,
business-friendly legal structure and government machinery have also encouraged
the investment in hotels by keeping developers' options open in terms of selling
the project rather than a lengthy wait for payback.
Innovative business planning. Some innovative business planning has gone into
the Four Seasons and the Landmark Mandarin Oriental - both are trying the new
concept of attaching a hotel to a shopping mall packed with luxury brand name
stores. The proximity of the mall is expected to attract shopping-minded guests,
while the five-star hotel, in turn, adds a touch of extra class and draws more
shoppers to the mall.
The Landmark mall is charging rents of HK$200 to HK$400 (US$26 - $51) per square
foot per month for retail space but, if hotel is a success, Mr. Chan believes
that could double. "This is an experiment that will certainly work in the minds
of the operators," he said.
The Four Seasons Hotel is also tapping into a new trend among upper-end hotel
guests who are "blurring the lines" between business trips and vacations, added
Mr. Mackay. Guests on business are often adding some extra leisure time to their
trips while holiday makers nowadays do not want to completely lose touch with
the office. The trend explains why the Four Seasons in Hong Kong has gone to the
expense of including one of the most sophisticated urban spas in Asia, as well
as equipping rooms with top-line communications facilities, said Mr. Mackay.
October 1, 2005
 New China celebrates 56th founding
anniversary
On October 1, 2005, the People's Republic of China, or "New China" as it is
fondly referred to by the entire Chinese people, turns 56 years old.
With a population counted at 1.3 billion on the first day of this year and a
land mass of 9.6 million square kilometers, plus 4.73 million square kilometers
of territorial waters, China is the largest developing country in the world.
For China, which takes pride in its civilization that dates from 5,000 years
ago, October 1, 1949 marked the beginning of development in real sense. For the
Chinese people comprising 56 ethnic groups, the day meant freedom, once and for
all, from humiliation and starvation, the beginning of a historic long march
toward stability and prosperity.
For a whole century before the late Chairman Mao Zedong pronounced the birth of
New China, the Chinese nation was tormented by foreign invasions and wars fought
among warlords for supremacy over the country. The humiliation the nation
suffered was so bitter that Deji Cholga, a 7th grader at Beijing's Huaxia Girls'
School, says she hates to study that part of Chinese history.
The part of the nation's history the teenage girl feels unpleasant to learn
covered the Opium War (1840), in which the United Kingdom, with just 20,000
troops and 50 gunboats, defeated the antiquated armies of the Qing (1644-1911),
China's last feudal dynasty, which boasted 900,000 men. Though the victim of
this armed aggression, China was forced to pay the aggressor 21 million taels of
silver in "war reparation" and opened five trading ports. Hong Kong was ceded to
Britain, to be returned to China in 1997.
Even more bitter were memories of Japanese aggression against China. In 1931,
Japan seized the entire northeast China, an area of 800,000 square kilometers,
where it set up a puppet regime known as "Manchoukuo." And in late 1937,
Japanese troops massacred more than 300,000 disarmed Chinese soldiers and
civilians in Nanjing, then the national capital, in just a few weeks after the
city fell.
Foreign aggression went hand-in-hand with internal turmoil, making it impossible
for China to develop. "In the 200 years from 1750 to 1950," says Prof. Hu Angang
of the prestigious Tsinghua University in Beijing, "much of the world was
striving for industrialization, but the Chinese economy stood stagnant, and the
country was rated as one of the weakest in the world."
Prof. Hu is known for his study of China's national conditions. "Old China was
unable to industrialize because it did not have a strong enough government to
defend the country and keep society in order," he says. Stability, the
prerequisite for achievement of prosperity, was a long-cherished dream of the
Chinese people. The dream has come true in New China. That, in part, explains
why the Chinese people support the Communist Party of China, the ruling party
since 1949. Says Zhou Jun, an amateur historian and TV worker in Chengdu,
capital of Southwest China's Sichuan Province, "The Party has done what all
governments before 1949 failed to do."
Stability and prosperity can in no way be realized without democracy. By
proceeding from its own conditions, New China practices the "system of
multi-party cooperation under the leadership of the Communist Party of China,"
which has proved effective in getting all patriots and their political groupings
actively involved in national development.
How the name of New China, the People's Republic of China, was chosen highlights
the extent to which this "socialist democracy" has been practiced. It was
adopted in September 1949, on proposal from non-Communist delegates to a
conference called by the Communist Party to make preparations for the founding
of the new government.
"It was the outcome of democratic consultation," says Lu Guoqing, a historian.
Dai Huang, a retired journalist who witnessed the celebrations of the founding
of the People's Republic on October 1, 1949, says he loves the new name chosen
for the country. "After two millenniums of feudal rule and a whole century of
imperialist aggression, China finally made itself a republic of, and certainly
for and by, the people."
And democratic consultation and multi-party cooperation under the leadership of
the Communist Party have become institutionalized. Political consultation takes
the organization form of the Chinese People's Political Consultative Conference,
which gathers representatives of all the eight non-Communist political parties
and non-party figures aside from those from CPC.
The non-Communist political parities all have representation in the National
People's Congress, the supreme organ of state power, and local people's
congresses. Of the nearly 3,000 deputies to the current 10th NPC, deputies from
non-Communist parties and patriots without party affiliation account for 16.09%,
and workers and farmers take 18.46% of the seats.
All the 55 ethnic minorities have deputies to the NPC, who take 13.91% of the
seats, although their combined population account for less than 9% of the
national total. And their development and prosperity have always been high on
the agenda of the leaders of the People's Republic.
Before 1949, central governments of different periods each had their own
policies and systems in place for administering ethnic affairs. But none of
them, whether set up by the Han people or by ethnic minorities, secured any
measure of equality among ethnic groups, says Prof. Chen Liankai of the Central
Ethnicity University.
The founding of New China marked the beginning of a new era featuring equality,
unity and mutual assistance among all ethnic groups in the country. People of
ethnic minority groups have the legal right to self-government in areas where
they account for more than one-third of the local population. To date, China has
five provincial-level autonomous regions, 30 autonomous prefectures, 120
autonomous counties (or "banners" in areas with ethnic Mongolians living in
compact communities), and more than 1,500 autonomous townships. Among China's 55
ethnic minority groups, 45 have set up autonomous areas of their own.
Ethnic minority areas, mostly outlying with relatively difficult natural
conditions, are not as developed like areas where Han Chinese are the majority.
To promote their development, the central government has allowed a whole range
of policy privileges to help them stand on their own while providing them with
financial, technological and other assistance.
The policy has worked. One example is Inner Mongolia Autonomous Region. Since
1996, the region has reported faster growths than the national average in gross
domestic products (GDP), per capita disposable income for urban residents, per
capita net income for farmers and herders, and local government revenue.
Ensured by democracy, stability has ensured economic growth and social progress
nationwide. According to the National Bureau of Statistics, China's GDP has
grown at annual rate greater than 9% since 1979, reaching 13,651.5 billion yuan
(8.27 yuan against the U.S. dollar) in 2004, nearly double that of 1998. China
is producing enough to feed one fifth of the world's population though its
arable land accounts for only 7% of the world's total.
Thanks to increased government inputs and efforts of various social groups,
China has reduced its rural population living in absolute poverty - those with a
per capita income of less than 668 yuan - from 250 million in 1979 to 26.1
million in 2004.
The Chinese people have become richer, particularly in the past 25 years. In
2004, net incomes for rural residents averaged 2,936 yuan per capita, up from
133 yuan in 1978. Per capita disposable incomes for city people increased from
343 yuan to 9,422 yuan during the same 27-year period.
The country has won recognition as one of the fastest growing economies in the
world. It is now pressing ahead with implementation of what the central
government calls a "scientific outlook on development" - meaning an all-round,
well-balanced and sustainable development, a development that truly serves the
vital interests of the Chinese people.
Despite these achievements, the Chinese people know that many challenges lie
ahead. The Chinese economy has maintained strong growth momentum, but the
quality of economic operation needs improvement, says Li Deshui, director of the
National Bureau of Statistics. Living standards have kept improving, but the gap
in development is widening between the hinterland and coastal areas.
China's legal and social security systems need improvements to adapt to the
changing economic and social conditions. People are increasingly aware that on
no account must economic development be achieved at the expense of the
environment. Says Hu Angang, "China is doing something without precedence in
human history."
Meanwhile, the Chinese people and their leaders are more determined than ever to
build the country into a more prosperous, more democratic society on the basis
of what they have achieved since 1949. When New China celebrates its centenary
in the mid-21st century, as predicted by Professor Hu and other experts, it will
become as developed as an average developed country.
September 23, 2005
Hong Kong's High quality or low quality? by Bernard
Chan. Hong Kong SAR
Hello. One of the biggest events in the last few weeks here in Hong Kong has
been the opening of the new Disneyland. Most people seem to like it. But, as
always in Hong Kong, there are complaints. In particular, people have voiced
concerns about the behaviour of some of the Mainland visitors at the park.
People are asking whether we are lowering our standards in order to attract more
low-income tourists to our city.
Meanwhile, of course, our designer label shops, medicine outlets, jewellery
stores and many other retailers are doing a huge amount of business, thanks to
the large number of high-income tourists we have these days. And where are many
of them from? That's right they're also from the Mainland.
There is an interesting question here. Should Hong Kong go for quantity, or
quality? Should we aim for the mass market, or should we be more exclusive? This
is not simply about tourism. It's about our whole identity and our economic
role. What sort of businesses do we want here? What sort of work force will they
need? What sort of city will those workers want to live in?
If we want to decide what sort of place we want to be, then maybe we also have
to decide what sort of place we will not be. For example, if we want to be
high-quality, we can't be low-cost.
During the summer, I read an article in Time magazine in which a Hong Kong-based
journalist said we should look to Monte Carlo rather than Disney. He was saying
we should capitalize on our up-market, international, exclusive side. He
mentioned our low taxes, our unique physical environment and our international
population.
I think many people would agree that Hong Kong needs to go in the up-market
direction. We should aim to attract high-value service industries, and forget
about labour-intensive activities. We must aim to attract highly skilled people
from around the world, not the unskilled or uneducated. This is essentially what
we mean when we say we want to be a world city like New York or London.
However, we have a serious contradiction here. The Government also wants to
encourage the creation of jobs for the less-skilled. That is one of the reasons
we have welcomed large-scale Mainland tourism through Disney. And it is
considered one of the benefits of infrastructure projects and other development.
If we look at New York and London, we will see that in both cities in recent
decades, the population has become younger, better educated and more
international than the national average. The elderly and less-skilled have moved
to cheaper areas, while younger, qualified people especially foreigners have
come in. In Hong Kong, it¡¦s different. Over the last few decades, we have seen
many educated middle-class people leave, and more unskilled people arrive.
So how are we supposed to go up-market, while at the same time accommodating our
less skilled workers?
We cannot carry on building Disneylands or more and more infrastructure projects
in an attempt to create jobs for them. First of all, these things cost money.
Secondly, they impose other costs. More mass tourism means more traffic and more
crowds. More construction means more environmental damage. This is a recipe for
going down-market ¡V we would drive the high-value service industries away
through high taxes and poor quality of life.
I don't think there is a quick fix for this problem. But I do think that we will
solve it gradually in the longer term.
For example, we should slowly see the benefits of educational reform in the
coming years. This is an ongoing process, but there are already some early signs
that our children are doing better at school in key areas. At the same time, the
older, less-skilled workers are growing closer to retirement. So time will
gradually help to upgrade the skills of our work force.
Also, Mainland living standards are far higher than they used to be. There will
come a time when it will make sense for low income earners in Hong Kong to think
about moving somewhere more affordable, especially if they can take some of the
benefits of Hong Kong residency with them.
And there is a growing recognition that we need to actively attract skilled and
talented people from the Mainland and the rest of the world. We need to get the
message across that smart, energetic, creative and entrepreneurial people will
create jobs, not take them.
These are quite sensitive subjects, but we need to face them openly just as we
need to address other difficult issues if we want to be a more attractive place
to live in and to do business in.
We have to get to grips with the issue of food. We have been through a lot of
food scares recently. People are scared of eating pork, chicken and fish. We
need to source our food from places with good inspection systems. We need to
think about better consumer protection and things like food product labeling.
These might mean higher taxes or higher food prices. But if we want to keep
moving up, that's a price we have to pay.
The same applies to issues like pollution and overall quality of life. If we
want cleaner air, it will cost money. Our manufacturing base in the Pearl River
Delta is an extension of our economy. If we want to cut the emissions of those
factories, we will pay for it one way or another. The factories¡¦ profits might
go down, and so their head offices here might pay less tax. Or maybe they will
pay lower dividends into your Mandatory Provident Fund account.
If we want more green space and less crowding in our urban areas, we have to
accept that the Government will raise less revenue from land sales and land
premiums. That means all else being equal visible taxes might have to go up. We
will have to pay for a nicer environment.
The same applies to our education system, our health care and other public
facilities like law and order. For example, enforcing new laws against smoking
in public places, and therefore becoming China's first smoke-free city. If we
want more quality, it will cost us money.
All of this points to Hong Kong continuing to have a high cost base. Like New
York or London, this city is not going to be a cheap location. Some people claim
our cost base is too high. And of course, they are right. It is too high, if you
are trying to make a profit or make a living ¡V in low-value, labor-intensive
activities.
But for people who want premium service, premium skills and a premium living
environment, it will be good value. Many richer Mainlanders come to Hong Kong to
buy all sorts of products and services from babies milk powder to gold. They pay
more here, but they have confidence in the quality of what they are buying.
That's what Hong Kong as a whole needs to be like in the future.
The background to all this is the huge changes happening outside Hong Kong.
These changes are beyond our control. We are integrating with the Mainland at
the same time that China is integrating with the rest of the world. We have no
choice but to keep going up-market. It means continuing change for our economy
and our society.
If we think of Hong Kong as a complete, separate economy, this might seem like a
threat, or at least a terrible challenge. How will the unskilled make a living?
How can we stay competitive? But if we see Hong Kong as a wealthy neighborhood
of a larger and more varied region, then the way ahead seems clearer.
We will specialize in the things we do best, and do better than anywhere else.
We won't do the other things. As for the tourists coming to Disney, they will
probably still be coming but more of them will be going off to the designer
label shops afterwards.
September 21, 2005
A Trip of Assurance -
President Hu Jintao’s North American tour drives home the idea that China is
committed to peaceful development -
By ZHANG GUOQING, Institute of American Studies, Chinese Academy of Social
Sciences
Is China a “threat” or an “opportunity?” Is it a “partner” or a “rival?” These
are the questions that have not only been haunting Sino-U.S. relations, but also
casting a shadow that subtly affects other international relations as well as
the economic development of the entire world.
Evaluating China’s development in a historical light remains a thorny issue for
some economists. “The best comparison for what’s happening [in China] is
probably 19th-century America, rather than an East Asian nation like Japan or
South Korea that recently underwent a similar development,” said Arthur Kroeber,
Managing Editor of China Economics Quarterly. “Both are continental-size
economies with immense manufacturing capacities and vast pools of labor.”
Kroeber pointed out that the United States was the biggest recipient of global
capital a century ago and many complained that cheap U.S. labor threatened
Europe’s industries. “Now it is China’s turn,” he said. Obviously, to those who
approach development in a rational manner, China’s extraordinary development is
not a surprise, let alone a threat or a challenge.
In any case, China’s economic growth benefits most of its neighbors, rather than
undermining the development of its neighboring countries and regions. As noted
by some foreign experts, China’s diplomatic policies in recent years have been
increasingly geared toward shaping good neighborly relations with others, which
has paved the way for its peaceful development.
In fact, China’s neighbors have eagerly embraced this growth. While reiterating
its belief that China’s economic takeoff is good for the organization, the
Association for Southeast Asian Nations (ASEAN) is seeking to further boost
economic linkages with the prospering neighbor, though it regarded China as a
potential threat a few years ago.
As the Chinese saying goes, “the onlookers always have a better picture.” Bruce
Murray of the Asian Development Bank (ADB) believes that even Asian countries
worried about China’s skyrocketing exports have actually benefited a lot from
the country’s huge consumption capacity. Needless to say, China is a major
source of motivation for most Asian countries trying to rev up their economies.
It is playing an ever-greater role in promoting regional economic development
and expanding employment.
History tells us that China’s prosperity is conducive to stability in the
region. According to David W. Kearn, a U.S. scholar, it is quite unnecessary to
worry about China’s growth, as historical experience has shown that a strong
China constitutes the basis for Asian stability. It is his belief that a weak
China tends to result in turbulence in Asia, whereas the continent always
remains in good order when China is strong and stable. It has been widely noted
that China has generally maintained peace and good order while making great
strides forward in the economic field, a prominent feature of China’s peaceful
development.
As a matter of fact, China does not mean to ascend to supremacy in the world
through its development. Materializing development in a gradual manner, China
shares its growth and prosperity with all of its surrounding countries. Over the
past two decades, China resolved territory disputes with Afghanistan, Myanmar,
Kazakhstan, Kyrgyzstan, Mongolia, Nepal, Pakistan and Russia. It also normalized
the relationship with Viet Nam and demarcated the border between them.
What is worthy of serious thought is that further enhanced relations between
China and other Asia-Pacific nations have exerted subtle influence over the
Sino-U.S. relationship. Philippine President Gloria Arroyo once said that
Beijing is also an ally of the Philippines, like Washington. According to
Arroyo, this assertion is based on the decisive role that China has played in
economics and security affairs in the countries of the region, including the
Philippines. Given this, the Philippines must associate with China to influence
Beijing’s actions, thereby ensuring that China will become a friend rather than
an enemy of the international community. Despite the slew of people who
stubbornly hold onto the “China threat” view or are doubtful about China’s
peaceful development, Asian countries have chosen to take a balanced approach
toward China and the United States instead of constraining China’s development.
Furthermore, China’s peaceful development has delivered benefits to the world.
The economic boom in China has already helped Japan emerge from its
longest-lasting economic downturn since World War II. It has also been helpful
to the United States in its recovery from a recent economic slowdown. Consumers,
Asians and Americans alike, are all entitled to the tangible benefits brought
about by China’s development. Morgan Stanley, the large global financial
services firm, estimates that U.S. shoppers have saved $100 billion because of
low-priced clothes, shoes and home appliances imported from China.
There is no doubt that China’s peaceful development contributes positively to
the world’s economic growth through international trade. Being committed to its
opening-up policy, China has attracted huge amounts of foreign direct
investment. More significantly, it has set an example for the developing
countries eager to move on.
In terms of economic growth and poverty reduction, China has also made
remarkable contributions to the world. Its impressive development kindles hope
among the temporarily underdeveloped countries. The Canadian newspaper The Globe
and Mail reported that “since Deng Xiaoping executed China’s historic U-turn at
a session of the Eleventh Central Committee of the Communist Party [of China] in
1978, 270 million people have climbed out of poverty-the most successful
development project in history, and a slap in the face for those who say
globalization helps only the rich.”
Most importantly, China has evolved from a closed, mediocre country into one
that is among the most vigorous in the region in the past two decades. One of
its dramatic changes is that today’s China has demonstrated a genuine will to
join the international community. It is trying not only to adapt its domestic
economic regimes and laws to international norms, but also to become an active
participant in many international or transnational organizations. In the past
few years, China has played a pivotal role in promoting WTO negotiations and UN
reforms.
China will never undercut its neighboring countries or the United States in its
pursuit of development. It is a well-established fact that the international
economy is not a zero-sum game. All the other countries, including the United
States, can reap benefits from China’s economic development. It is interesting
to note that China, as the third largest trading partner of the United States
after Canada and Mexico, has dispelled the long-standing myth that the biggest
trading partners of the United States are all its close political and military
allies. “China is neither close ally nor confirmed adversary,” wrote Washington
Post columnist Robert J. Samuelson.
It is plain enough that China has mainly focused its attention on economic
development. It has no intention to compete with the United States for world
supremacy. The last thing that it will ever do is to pose a threat to other
countries. In a sense, a correct and rational perception of China’s peaceful
development not only bears on the sound development of Sino-U.S. relations, but
will also determine whether the United States can fully seize the opportunities
that China has brought along.
James Sasser, the former U.S. Ambassador to China, has some insightful ideas on
this point. It is his belief that the United States can manage China’s rise well
if it is willing to do so, and if it wants to treat China as an enemy, it will
become an enemy. Former U.S. President Bill Clinton also pointed out that
compared with a rich and democratic China, the United States has more to fear
from a poor and weak China. In other words, China’s peaceful development poses
no threat, but offers opportunities. It is a motive force, rather than a
headache, for the region and the world.
In light of this, President Hu Jintao’s visit to the United States, Canada and
Mexico helps solve problems, strengthens cooperation, and gives these countries
an in-depth and objective picture of China’s peaceful development.
For the politicians and entrepreneurs in the United States, it is irrational to
deal with China by military or improper political means. The healthy development
of Sino-U.S. relations will not only bring about a win-win result for all
trading partners, including China and the United States, but is also of
paramount significance to a global situation replete with uncertainties. Hu’s
visit to North America marks a new start in further strengthening Sino-U.S. ties
and in turning China’s peaceful development into a positive element of those
ties.
September 7, 2005
Kissinger: Stronger China
contributes to world peace, prosperity
Former US Secretary of State Henry Kissinger said on Tuesday that he disagreed
with the assertion that a stronger China could pose a threat to regional peace
and stability.
In a joint interview with Xinhua and China Central Television, Kissinger said he
does not agree with those who made the above presumption of "China threat."
"Fundamentally, China is making a contribution to international peace and
prosperity."
"China poses no challenges to the United States militarily, there are challenges
presented by its rapid economic development. But they can be dealt with on a
competitive basis," he noted.
Kissinger said that when he visited China in 1971, nobody would believe that
China could develop its industry so quickly and could become competitive on the
international export market.
"Inevitably, this produces some competition. On the other hand, it also produces
enormous opportunities," he said. "There are American companies that have
invested tens of billions of dollars in China. They would have not done that if
they also think this is not in their interests."
When asked to comment on China's acquisition of American companies, Kissinger
said there were some discussions in the United States about the acquisition, but
"that's not a key problem."
The key issue that the United States and China need to discuss is the supply of
energy and the growing demand for energy worldwide, he said, adding that the
United States, China, India and many other countries are major contributors to
the present supply challenge.
"I believe that China and the US should discuss issues like that in order to
contribute to an evolution of and to the understanding of the problem," he went
on to say.
As to the US-China relations, Kissinger said that fundamentally the relationship
is good although it has complications that are caused in large part by the fact
that the international situation is changing so rapidly.
"The fundamental problem is that the US is the most advanced developed country,
China is the most rapidly advancing developing country," he said. "Countries
with such different background sometimes don't come immediately to the same
point of view."
"Therefore," he continued, "contact between our leaders is essential and should
be even more regular than it has been."
Citing the six-party talks on the nuclear issue of the Korean Peninsula,
Kissinger said China and the United States have cooperated closely on some
international issues.
"There are issues like proliferation ... in which the two sides have very
important contacts. Contributions of the Chinese side from the American point of
view have been very constructive," he explained.
"Up to now, I have been in contact with eight American administrations. No
matter how they started, they would conclude with close relations with China
that are essential for the world peace, development and progress," he stressed.
Kissinger suggested that the internal debate in America on the US-China
relations should be looked at in perspective.
"You can always find different arguments that are put forward by others but they
are not the government and they are not decisive," he said. "But fundamentally
the need for close relations between our two countries is recognized and
supported by our top leaders."
August 29, 2005
China President Hu Jintao's
American visits will inspire mutual trust
In a few days President Hu Jintao will fly to the United States, Canada and
Mexico for two weeks of diplomacy. China's relationships with the three
countries and the world summit at the United Nations will top his agenda.
The visits will represent the culmination of Hu's active and realistic diplomacy
this year.
Hu has been busy with tours to foreign lands. In April he visited three
Southeast Asian countries - Indonesia, Brunei and the Philippines. In June and
July he traveled to Russia, the Kazakh capital Astana for a summit of the
Shanghai Co-operative Organization leaders and attended the G8 summit in
Scotland.
His upcoming autumn diplomatic endeavor shows China's desire to develop friendly
relations with the rest of the world.
Hu's visits come amid signs of warming relations between China and the three
countries.
This will be Hu's first tour to the United States since he took the helm of the
Chinese Communist Party in November 2002. He visited as vice-president earlier
that year.
China and the United States share plenty of common ground in the Asia-Pacific
region and the world at large. Still, big differences and suspicions remain
between the nations. China is very concerned about the US military and its
security co-operation with Taiwan. The United States misunderstands the
strategic purposes of a growing China. As a result, many politicians and
conservative scholars in the United States believe China is a strategic threat
to their country.
Exchanges of visits between top leaders of the two countries help clarify
policies and clear minds of doubts and misgivings. They are expected to expand
areas of common interests and co-operation to the full, and settle differences.
Leaders of the two countries have met every year. US President George W. Bush is
expected to visit China later this year. High hopes are pinned on such exchanges
of visits that will serve to deepen understanding and create more areas for
co-operation.
The two countries have built channels of contact at all levels, with a view to
enhancing mutual understanding and trust.
The more they interact, the better they will understand each other. This, in a
sense, helps remove doubts and avoid conflicts.
Hu will join more than 100 heads of states and governments at the summit of the
United Nations for celebrations of the 60th anniversary of the establishment of
the world body.
They are supposed to bring with them consensus on UN Secretary-General Kofi
Annan's reform proposals to give the world organization a much-needed facelift.
Loud voices from every corner of the world reflect the sense of urgency
regarding the organization's future. It needs to be refashioned to keep up with
changing circumstances.
The United Nations is the foremost embodiment of multilateralism. Reforms should
not change its fundamental values. Deliberations at the headquarters of the
world organization should chart the correct road for its future.
Hu's journeys next month epitomize China's diplomatic sophistication - a more
nuanced and constructive style.
The active approach shows the government's sincerity and efforts to inject new
momentum into relationships with the United States, Canada and Mexico.
Discussions will focus on where common interests overlap and co-operation is
possible.
Autumn is a season for harvesting fruit. Hu's tour has aroused expectations for
tangible rewards.
August 24, 2005
July 30, 2005
China's State Councilor
Tang Jiaxuan leaving Tapa Tower Ballroom after meeting with Chinese Business and
Community Leaders
China's State Councilor Tang Jiaxuan, Chinese Ambassador to the United States Zhou Wenzhong , Consul General Zhong Jianhua of Chinese Consulate Los Angels Met
with Chinese Business and Community Leaders in Hawaii on July 30, 2005.
China's State Councilor Tang Jiaxuan has met with President George Bush,
Secretary of State Condoleezza Rice, Treasury Secretary John Snow, Secretary of
Homeland Security Michael Chertoff and President Bush Senior in Washington DC
before going to Washington State with a one day stop over in Hawaii before
returning to Beijing tomorrow morning, July 31st.
During the hour long meeting Councilor Tang shared with the special guests the
importance of the U.S. China relationship. China President Hu Jintao is
planning a State visit to the USA during early September and a return visit by
President George Bush in November of this year.
Councilor Tang explain the challenge of Cross Strait relationship and China's
stand on the one China policy which is shared by President George Bush.
Councilor Tang said Hawaii played an important role in Modern China, Dr. Sun Yat
Sin, the founding father of the Modern China had his education in Hawaii, found
Xin Zhong Hui and The political philosophy "Three Principles of the People" (Sanmin
Doctrine). July 20, 2005
User-friendly arbitration
to benefit overseas firms
HKIArb head Sylvia Siu says overseas firms nominating Hong Kong as their
arbitration centre can proceed with confidence. The adoption of simplified,
user-friendly arbitration laws will make it easier than ever for overseas firms
to use Hong Kong for contractual dispute resolution, especially in dealings
involving the Chinese mainland.
The changes will further position Hong Kong - already recognised as a regional
arbitration hub - as a centre for international arbitration.
An amendment proposed by the Hong Kong Institute of Arbitrators (HKIArb) and the
Hong Kong International Arbitration Centre (HKIAC) would see current legislation
changed to eliminate court supervision, and create one set of laws to deal with
both domestic and international cases. This would make Hong Kong's arbitration
laws easier for overseas companies to understand - and therefore more
attractive, according to president of the HKIArb Sylvia Siu.
"It is hoped this move would entice more overseas companies, whether doing
business directly with the Chinese mainland or entering into joint ventures, to
use Hong Kong as their platform," Ms Siu said. "By putting a Hong Kong
arbitration clause into their contracts - specifying Hong Kong as the place and
the Hong Kong Arbitration Ordinance as the procedural law for arbitration - we
believe overseas firms can conduct their mainland business with greater
confidence."
Hong Kong is already a recognised regional centre for arbitration, with over
international 300 cases adjudicated at HKIAC last year - a number far exceeding
that of Singapore, Ms Siu said. It has a number of advantages, including
geographical proximity to China and other South East Asian countries.
Neutral venue with a pool of talent - "Hong Kong is a neutral venue for
arbitration of disputes between a mainland party and, say, a US or European
party, or two non-Hong Kong parties," Ms Siu said. "Hong Kong has a pool of
experienced, bi-lingual arbitrators. It has a wealth of experienced Hong Kong
lawyers specialising in common law, as well as many top overseas lawyers who
work in well regarded local and international law firms.
"Lawyers in Hong Kong are expert in many disciplines, and particularly well
versed in shipping, insurance and international commercial dispute resolution.
They are supported by multilingual translators and other arbitration supports as
such "live" notes. Overseas parties and their advisors have easy access to Hong
Kong, and there are no visa problems."
The ease with which awards made in Hong Kong can be enforced in other
jurisdictions is another important factor. This applies to all signatory
countries to the New York Convention, and in the Chinese mainland under an
agreement to enforce Hong Kong awards at the level of Intermediate People's
Court of China. Further, adds Ms Siu, there are many cases arbitrated in Hong
Kong using Hong Kong's Arbitration Ordinance as the procedural law and the law
of another jurisdiction as the substantive law of the contracts.
The changes were proposed following a review of the current arbitration system.
The government has agreed on the framework and will decide on the legislation's
ultimate form.
What is HKIArb and when was it founded?
Hong Kong Institute of Arbitrators (HKIArb) is a Hong Kong company limited by
guarantee established in September 1996. A group of Hong Kong professional
people interested in arbitration, mediation and other kinds of dispute
resolution got together to form Hong Kong's own arbitration institute. It has
charitable status and is non-profit making.
What are the objectives of HKIArb?
A main objective is to promote arbitration and other alternative methods of
dispute resolution (ADR) in Hong Kong which is a service centre for Asia and
gateway to China. HKIArb will be involved in the training of arbitrators and
mediators and the setting of appropriate standards of conduct for arbitrators
and mediators in Hong Kong. It is involved in law reform relevant both to
arbitration and mediation. It is working to develop ties with other
organisations involved in arbitration and ADR, particularly those within China
and in the Asia region.
Who is HKIAC?
HKIAC (Hong Kong International Arbitration Centre) was established in 1985 to
assist disputing parties to solve their disputes by arbitration and by other
means of dispute resolution. It was established by a group of the leading
business and professional people in Hong Kong to be the focus for Asia of
dispute resolution. It has been generously funded by the business community and
by the Hong Kong Government but it is totally independent of both and it is
financially self sufficient. HKIAC is a non-profit making company limited by
guarantee. It operates under a Council composed of business and professional
people of many different nationalities and with a wide diversity of skills and
experience. Administration of HKIAC arbitration activities is conducted by the
Council through the Centre's Secretary-General who is its chief executive and
registrar.
China
Post to be Split into Three Divisions
At a regular meeting of the State Council chaired by Premier Wen Jiabao on 20
July, a scheme to reform the postal system was discussed and passed. Under the
scheme, the State Postal Bureau will be restructured into a regulatory body for
the supervision of the sector, China Post Group Corp will be set up to run
various postal services, and postal savings banks will be set up to provide
regulated financial services.
The meeting gave the green light to the reform of the postal system. The reform
aims to separate government administration from business management, strengthen
government supervision, improve the market mechanism, ensure the provision of
general and special services, guarantee safe communications, and revamp the
management of postal services and postal savings in the direction of a modern
postal business.
Through the reform, a postal system with government supervision and autonomous
management will be established to ensure the healthy development of the sector.
The meeting stressed that since the reform touches on many aspects of people’s
life, it is necessary to adopt a positive and prudent policy, strengthen
leadership, and carefully implement all supporting measures to ensure the smooth
progress of reform.
July 1, 2005
CNOOC's merger with Unocal may help ease pressure on RMB
If China National Offshore Oil Corporation (CNOOC) Ltd. successfully merges with
the US oil company Unocal, the astronomical sum of loans in US dollars used by
CNOOC will alleviate the pressure on Chinese Yuan's appreciation, observers said
here Thursday.
CNOOC, China's largest offshore oil and gas producer, announced last week that
it had proposed a merger with Unocal, offering 67 US dollars in cash per Unocal
share.
The 18.5-billion-US dollar offer represents a premium for Unocal's shareholders
of about 1.5 billion US dollars over the value of Chevron Corporation's offer,
based on its closing price on the New York Stock Exchange (NYSE) at the time.
If CNOOC succeeds, the case will become the largest overseas merging transaction
of Chinese enterprises in history. According to the Beijing-based China Business
Times, CNOOC plans to borrow atotal of 16 billion US dollars of loans from
Chinese and foreign financial institutions.
Some 13 billion US dollars of loans will be provided by the Industrial and
Commercial Bank of China and its parent company China Offshore Oil group, with
only 3 billion US dollars of international commercial loans.
As China regulates its capital accounts, any overseas merging deals of Chinese
enterprises will be warranted by the State Administration of Foreign Exchange
(SAFE), so CNOOC, a typical state-owned enterprise, must have received support
from the SAFE for the merger proposal, the paper said.
CNOOC's borrowing of huge amounts of fund in US dollars from the Chinese side
will result in the abatement of 13 billion US dollars in China's official
foreign exchange reserve, analysts say.
In some sense this means the alleviation of current pressure demanding for the
Chinese yuan's appreciation, according to the newspaper.
China's forex reserve surged by as much as 206.7 billion US dollars in 2004 to
609.9 billion dollars by the year-end, second only to Japan, according to SAFE
figures.
The country's fast forex reserve increase has become an excuse of some countries
to demand the appreciation of the Chinese currency. The Chinese government,
however, insisted in keeping therenminbi (RMB) exchange rate basically stable at
a reasonable and balanced level.
The rocketing of China's foreign exchange reserve was attributed to the
increasing surplus in trade and capital flow. Some speculative funds betting on
the yuan's appreciation, or the so-called "hot money," have sneaked into China
under capital accounts or based on no real trade since last year, according to
sources with SAFE.
CNOOC's planned merger with Unocol was hailed because it would result in capital
outflows of 13 billion US dollars if it succeeds, which will help reduced
China's foreign exchange surplus.
The foreign exchange loans in enormous sums will also help reduce the risks for
Chinese financial organizations, because if China really appreciates its
currency, the outflow of US-dollar capital will reduce the losses of the Chinese
side for holding US-dollar assets, experts say.
March 23, 2005
AMCHAM'S POSITION ON CONSTITUTIONAL DEVELOPMENT IN HK
HONG KONG - The American Chamber of Commerce in Hong Kong issued today the
following paper on constitutional development in Hong Kong.
The Issue
The American Chamber of Commerce in Hong Kong supports adherence to the rule of
law, and the development of a process that results in universal suffrage for the
election of both the Chief Executive and the members of the Legislative Council
that is consistent with the Basic Law of the HKSAR.
American Chamber Position
The mission of the American Chamber is to foster commerce among the United
States of America, Hong Kong and Mainland China, and to enhance Hong Kong's
stature as an international business center. Among our core values are adherence
to the rule of law, transparency and the free flow of information.
Rationale
The Basic Law of the HKSAR enshrines the fundamental rules for implementing the
"one country, two systems" principle. Essential to the implementation of this
principle, and the specific authority that has been granted to the HKSAR to
"exercise a high degree of autonomy", are the provisions within the Basic Law
with respect to the Chief Executive and the Legislative Council. Articles 45 and
68 provide that the ultimate aim is the selection of the Chief Executive and
Legislative Council by universal suffrage. Article 46 of the Basic Law provides
that the term of office of the Chief Executive shall be five years.
Deliberations concerning how and when Hong Kong will achieve its aim of
universal suffrage have generated local and international interest. Also, a
question has arisen concerning the term of office of the Chief Executive to be
selected in July 2005.
It is of paramount importance that the HKSAR acts in accordance with the Basic
Law of the HKSAR. Faithful adherence to the rule of law is one of the
foundations upon which Hong Kong's success has been built. It is not merely a
matter of fairness and predictability for private commercial arrangements. It is
vitally important to Hong Kong's future that the rule of law be continuously
applied to all aspects of the constitutional development process. Where a
provision of the Basic Law is clear it should be followed, unless amended as
provided in the Basic Law. If a provision is not clear, the process by
which any ambiguity is resolved should be transparent and in accordance with the
Basic Law and the rule of law.
The American Chamber supports an inclusive and transparent process. Such a
process is good for Hong Kong, and for the confidence of those who invest in
Hong Kong. The American Chamber also supports elections for the Chief Executive
and for the Legislative Council in which the greatest number of eligible Hong
Kong voters participate.
February 4,
2005
Bush
Administration Expected to Pursue Dynamic Trade Agenda During its Second Term
Reinforced by a relatively comfortable victory at the polls in November 2004 and
significant Republican gains in both the House of Representatives and the
Senate, the Bush Administration is gearing up to pursue an active and widely
diverse trade agenda during its second term. President Bush has long affirmed
his commitment to trade liberalization and its importance to US prosperity, and
is expected to support a broad range of free trade policies in the next four
years. A few protectionist hiccoughs may emerge from time to time, however,
particularly in the area of textiles.
One of the
principal trade priorities of the Bush Administration during the second term
will be the advancement of economic integration in the western hemisphere. This
will be pursued in two fundamental ways, by achieving (i) Congressional passage
of the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) and
(ii) the successful conclusion of FTA negotiations with Panama and four Andean
countries (Bolivia, Colombia, Ecuador, and Peru). Congressional consideration of
the DR-CAFTA will likely begin in the spring of 2005 and is expected to be a
very tough fight for the Administration. Proponents of the deal face stern
opposition from a coalition which includes labor and environmental groups, sugar
and textile interests, and an amalgamation of Democrats and Republicans that
tend to favor protectionist policies.
If the DR-CAFTA and the FTAs with the Andean region and Panama are ultimately
approved and implemented, this may convince the Brazilian government to expedite
the negotiation of the hemisphere-wide Free Trade Area of the Americas (FTAA),
which had originally been scheduled to be concluded by 1 January 2005. Although
not forgotten, it is undeniable that the FTAA has taken a back seat to bilateral
and multilateral (i.e., Doha Development Round (DDR)) trade negotiations in the
minds of US officials.
The Administration is expected to devote substantial time and human assets in
the next two years to ensure the successful conclusion of the DDR. The DDR
negotiations came to a halt after the acrimonious collapse of the September 2003
World Trade Organization (WTO) ministerial meeting held in Cancún, Mexico, but
have gradually gathered momentum ever since. Nonetheless, there are several
outstanding areas where progress in the coming months is imperative in order for
the DDR to be concluded by the end of 2006, which is the generally accepted
current deadline. For example, members have agreed to use a non-linear formula
to reduce tariffs in non-agricultural products, which would force countries with
higher tariff rates to implement larger cuts, but there is still no consensus on
the particulars of the formula itself. Some countries, including the US, are
also pushing for reciprocal duty elimination on a sectoral basis to complement
the formula cuts.
As regards trade in agricultural goods, perhaps the most politically sensitive
area in the entire DDR, negotiating chairman Tim Groser has stated that members
must produce a "first approximation" or rough draft of the negotiating
modalities for agricultural liberalization by August 2005. This working document
would be the basis to achieve a firm commitment on modalities at the Hong Kong
ministerial meeting planned for December 2005. Urgent progress is also needed in
other critical areas, most notably services.
The concept of "free and fair trade," which has traditionally been embraced more
by Democrats than Republicans, was featured prominently in the Republican
platform for the presidential elections and is expected to play a more visible
role in the Administration's trade policy. The Bush team has warned in the past
that it will not tolerate "foreign practices, rules, and subsidization that put
our exports and manufacturers on an unequal footing." Free and fair trade will
generally be advanced through bilateral/regional FTAs and, perhaps to a lesser
extent, the DDR. A judicious application of US trade remedy laws is also
expected from the Administration, which is also likely to seek resolution of
various disputes through the WTO dispute settlement mechanism. In this regard,
it is very possible that China will be the target of one or more dispute
settlement cases in the next four years.
Speaking of China, Sino-US trade relations will certainly remain a focal point
in the Administration's trade policy, and a number of outstanding bilateral
issues are likely to be resolved during President Bush's second term. An
increasingly larger number of legislators and domestic industry groups have
blamed the ever-growing trade deficit with China for the steady decline in US
manufacturing employment and have urged the Administration to be "tough on
China." The Administration has been relatively immune to these protectionist
cries and has managed to avoid thorny confrontations with China, developing a
rather fluid working relationship with Chinese officials instead. In fact, this
cooperative approach has produced concrete results in the areas of intellectual
property rights (IPR) and market access and is expected to yield more dividends
in the future.
The trade priorities of the Administration vis-?vis China are unlikely to change
during the second term. The US will seek to enhance IPR protections for US
products and copyrights in China and will closely monitor the commitments made
by the Chinese government within the framework of the US-China Joint Commission
on Commerce and Trade (JCCT), the WTO, and the US-China bilateral intellectual
property agreement of 1995. The US is particularly concerned with China's
enforcement efforts in this area. Other issues that will capture the spotlight
during 2005-2008 include the alleged undervaluation of the yuan, China's
compliance with its WTO commitments, and textile-related issues.
China has proclaimed its commitment to move towards a market-based system on
several occasions, most recently during last year's celebration of the 16th
US-China Joint Economic Committee meeting in Washington, DC. Some studies in the
US have suggested that the yuan may be undervalued by as much as 40%, and the
Administration has worked diligently with the Chinese government to achieve
greater exchange rate flexibility in the relatively near future. Most experts
agree, however, that China's banking system is far too fragile at the present
time to handle the demands of a floating exchange rate. The Bush Administration
understands that the introduction of a floating exchange rate should take place
only after the Chinese government has taken all the necessary steps to
strengthen its banks and bank supervision, so that these institutions can
withstand the demands of exchange rate flexibility. This careful treading on the
part of the Administration should not be mistaken for passivity, however. US
officials are expected to continue to urge their Chinese counterparts to
implement a market-based system as soon as possible.
As regards textile trade, a recent injunction by the US Court of International
Trade prevents the Bush Administration from taking any action on the
threat-based safeguard petitions filed in the fall and winter of 2004 against a
host of Chinese-origin textile and apparel products. The Administration has
taken a rather protectionist stance in textiles and it seems that this
injunction will only serve to delay what increasingly appears inevitable, that
is, the invocation of the textile safeguard on a broad range of products
sometime in 2005.
China is by no means the only priority in Asia for the Administration. The US is
currently negotiating an FTA with Thailand and may pursue FTA talks with such
countries as Malaysia and Sri Lanka. The Administration may also support a bill
to provide preferential duty treatment to certain developing countries stricken
by last December's tsunami. Such relief may include duty relief for textile and
apparel imports, as well as other key products not covered by the Generalized
System of Preferences. The US may also conceivably remove the anti-dumping
duties currently in place on such products as shrimp and canned pineapple from
Thailand.
The Bush Administration is also expected to conclude a WTO accession deal with
Vietnam as early as the spring or summer of this year. Although it is much too
early to tell at the present time, that agreement may ultimately include a
textile safeguard clause similar to the one included in China's Protocol of
Accession to the WTO. The EU struck an accession deal with Vietnam in October
2004 where it was able to secure significant market access commitments in
industrial goods, agricultural goods, financial and business services,
transportation, telecommunications, and tourism. Once all interested parties
have signed bilateral agreements with Vietnam, the WTO Working Party will
incorporate the various negotiated terms into Vietnam's Protocol of Accession.
Renewal of Trade Promotion Authority (TPA), which allows the President to
negotiate trade agreements that may not be amended by Congress, is scheduled to
take place during the first half of 2005. The President must request a renewal
by 1 March, which will be granted automatically unless the House or Senate
adopts a resolution of disapproval before 1 June. According to various sources,
any such resolution would be killed at the committee level (i.e., House Ways and
Means Committee and Senate Finance Committee) where trade proponents have strong
numbers. The renewal would extend TPA only for two years, until 2007.
There are a host of other issues that the Administration will consider during
2005-2008, including: (i) the successful conclusion of FTA negotiations with
Oman, the United Arab Emirates, the Southern African Customs Union, and possibly
Egypt, Kuwait, and New Zealand; and (ii) achieving a smoother trade relationship
with the EU and resolving outstanding disputes concerning anti-dumping relief in
the form of the Byrd Amendment, the subsidization of the commercial aircraft
sector, customs procedures, and the food-related provisions of the US
Bioterrorism Act.
November 17, 2004
Sino-American Trade Relations in A Second
Term for President Bush: An Outlook
On 3 November 2004, it became official that President George W. Bush had won a
second term in the Oval Office. Throughout the campaign there had been
speculation that a John Kerry presidency might result in protectionist trade
policies. Mr Bush's re-election should allay some of these concerns. There will
be continuity even though Commerce Secretary Donald Evans has already resigned
and US Trade Representative Robert Zoellick is widely expected to vacate his
post as well. That said, President Bush is unlikely to follow the same hands-off
approach where China trade is concerned that characterized his first term in
office. However, that should not be construed to mean that the White House will
do anything precipitous that could start a transpacific trade war with China.
Why is the Bush administration likely to be a bit more willing to confront China
in the coming months and years? For one thing, the ballooning US current account
and trade deficits will not go away anytime soon. Economists and policymakers
agree that neither is sustainable much longer, and Beijing plays a central role
in the domestic political equation though objectively speaking China has very
little to do with either of these deficits. After all, the rise in the current
account deficit over the past three decades is linked directly to a decline in
the US national savings rate.
Over time, chronic borrowing by the US federal government has resulted in large
debts owed to other countries. This year the US will borrow more than US$600
billion, or 5% of gross domestic product (GDP), from the rest of the world,
which means that other countries are in essence funding America's consumption
binge. The US current account deficit is paid for through direct lending and the
net sales of US assets, mostly to East Asia, including Japan, China, Taiwan and
Singapore. Japan's central bank has bought Treasury bonds for decades. More
recently, China has followed in its neighbors' footsteps, making it possible
for the US economy to hum along without making the necessary painful
adjustments.
In other words, the US needs the money that China and other countries provide so
that both the US government and individual Americans can keep spending at the
present clip, which is painless as long as interest rates remain low. And
despite the Federal Reserve's Federal Open Market Committee's decision on 10
November to raise the Federal Funds rate to 2%, US interest rates will remain
relatively low as long as foreigners keep buying US assets. Evidently, the US
dollar continues to be the world reserve currency, reinforced by the fact that
the US currency is tied to the biggest national market, with despite its
shortcomings the most efficient global capital market.
Consequently, there appears to be very little risk in the current US behavior,
particularly because America's trading partners, first and foremost Asia's
economic giants, have a vested interest in keeping the US economy stable.
Otherwise, if the US economy crashed, China and Japan would lose both their
investments and an important export market, and be pulled down with it. This
school of thought asserts that the US can keep doing what it is doing, but this
is built on the unrealistic assumption that the US current account deficit is
sustainable over the long run. Few economists believe that to be the case.
Something will have to be done, and since Americans are unlikely to push for the
necessary painful adjustments at home, they are likely to look abroad and force
their trading partners to modify their behavior.
Nevertheless, the growing US trade deficit with China is a convenient
explanation for all that ails America's economy. On 10 November the US
Department of Commerce's Census Bureau reported that the US goods and services
trade deficit fell to US$51.6 billion in September, down from a revised total of
US$53.5 billion in August, which was an all-time record. Meanwhile, the
politically sensitive trade deficit with China increased from US$15.39 billion
in August to US$15.52 billion in September, setting a new monthly record as US
imports from China rose to US$18.4 billion.
The September total brings the US trade deficit with China to US$114.31 billion
for the year, significantly up on the US$89.67 billion recorded in the first
nine months of 2003. It also means that the bilateral trade deficit is well on
its way to reach a new record of over US$150 billion in 2004, up from the
previous record of US$124.07 billion recorded last year.
Faced with this reality, even the Bush administration - as enthralled as it may
be with the potential of the Chinese market and thus unwilling to do anything to
offend Beijing too much - will have to act forcefully in dealing with such
issues as China's "currency manipulation". The stage has already been set for
this. Over the course of the past year, US Treasury Secretary John Snow and
other top-level American officials have stated that Washington's objective is to
have China float its currency.
Speaking at the conference "Policy Challenges of Global Payment Imbalances" on 4
November, John Taylor, US under secretary of the Treasury for international
affairs, stated that the Bush administration will continue to promote
market-based flexible exchange rates to smooth the path of global adjustment to
economic shocks. In this context, Taylor singled out China as a focal point for
such US efforts. He noted, "A flexible exchange rate is appropriate for China,
not only in light of its growing international role but also in order to better
manage domestic macroeconomic, particularly monetary, pressures".
In theory, senior Chinese government officials have agreed to float their
currency, simultaneously stressing that a stable yuan is a necessary
prerequisite for both economic stability and development in China, Asia and the
world. In other words, Beijing has agreed to float the yuan, but not now. Most
US policymakers recognize the wisdom of such caution, particularly in light of
the fragile state of China's banking system. Nevertheless, Washington will
likely increase its pressure to achieve a revaluation of the yuan in the near
term, aiming at a free float a few years down the road.
Americans in the state of Ohio may look askance at the readers of the British
newspaper The Guardian telling them how to vote, but the American people and its
government feel no such restraint when it comes to telling other nations how
they should handle their own affairs. That is to say, if the US manufacturing
sector continues to suffer substantial job losses, and there is no reason to
think that it will not, political pressure in the US will rise, forcing the Bush
administration to elevate the issue of China's currency peg to priority status.
One might justifiably ask why? After all, does the Republican Party not control
both the executive and legislative branches of government? The Republicans have
increased their margin over the Democrats to 55-45 (if one counts Senator Jim
Jeffords who is nominally an independent among the Democrats) in the Senate, and
to 233-201 in the House of Representatives. Traditionally, it was the Democratic
Party with its powerful organised labour constituency that called for
protectionist measures, and now with total control of both chambers of Congress,
the White House really is under no political pressure from the Democrats.
However, a quick look at the electoral map shows, John Kerry's victory in
Pennsylvania notwithstanding, that there is a substantial overlap between states
that voted for George Bush on 2 November, and those that have lost manufacturing
jobs. After all, for all intents and purposes the election was decided in Ohio,
a state that has lost more than 230,000 jobs over the course of the past three
years.
To a certain extent, the politically motivated impulse to protect US industries
at home, which was already on display in President Bush's first term when he
imposed steel tariffs and signed an overly generous farm bill, is balanced by
the Republican Party's traditional supporters in corporate America. US firms, if
they have manufacturing operations in China, are benefiting greatly from the
current state of affairs.
Yet, the Bush administration will have to get tough with China precisely because
the Republican Party has secured control of the White House and both chambers of
Congress. The president's political strategists, led by Vice President Richard
Cheney and Karl Rove, have every intention of tightening their party's grip on
the levers of power, and to attract ever more constituencies to their party.
Does that mean that the US and China find themselves on a path that will
inevitably lead to massive trade disputes, or even a trade war? Probably not.
For example, a more assertive Bush administration stance does not mean that
trade sanctions over China's "currency manipulation" are in the offing.
Having no need to placate organized labor with grandiose gestures, the Bush
administration will continue to press the US case vis-?vis the Chinese
leadership, but it will do so in a low-key manner, as opposed to the more openly
confrontational approach that Senator John Kerry might have taken. This process
is likely to begin when President Bush and Chinese President Hu Jintao meet
later this month at the 12th Informal Leadership Meeting of Asia-Pacific
Economic Co-operation (APEC) fo |
