China, Gates Foundation to Boost Cooperation in Agriculture, Health

China， Gates Foundation to Boost Cooperation in Agriculture， Health

Xinhua reported that China’s Minister of Science and Technology held talks on December 7 with Bill Gates in a bid to boost strategic cooperation between China and the Bill Melinda Gates Foundation in modern agriculture and the health industry.

Endeavors in agriculture include developing high-quality， cheap crops， while in the health industry the focus is on biological medicines and vaccines. The products are expected to benefit developing countries and regions such as China， South Asia and Africa.

Wan Gang， Minister of Science and Technology， said the joint efforts of the two sides has important strategic significance， as the cooperation will support research institutions and hi-tech enterprises in China and related countries to progress in scitech and transform research achievements into products.

Gates， co-chair of the Foundation， said that a rapidly-growing China can play a key role in alleviating poverty and famine by promoting innovation through the country’s scitech edge in modern agriculture and the health industry.

Improvements in agriculture will lead to increased crop yields that can potentially alleviate poverty in the world’s undeveloped regions， especially in Africa， Gates added.

The cooperation is based on a memorandum of understanding (MOU) signed between the two sides on Oct. 26 in Seattle. The MOU states that based on the principles of mutual respect and complementary advantages， the two sides will cooperate through a joint work committee and cooperative fund mechanism.

Comment

Cooperation in those fields will lead to important contributions to the development of humanity by addressing global food security and environmental protection.

China to further facilitate agricultural science investment Xinhua reported on December 6 that China would set up a year-on-year growing investment system to facilitate the development of science and technology on agriculture.

The development of science and technology is key to ease the pressure on China’s agriculture， especially on grain production， Zhang Taolin， vice agriculture minister， said at the China Yangling Modern Agriculture Forum held in Xi’an， capital of northwest Shaanxi Province.

In the 2011-2015 period， China faces the enormous pressure and challenges with the surging rigid demand on grains， rising cost of agricultural production and limited land and water resources， Zhang said.

China will explore new models and new systems to further increase investment and upgrade its service efficiency on agricultural production， he added.

China’s grain output rose 2.9 percent year-on-year to 546.61 million tonnes in 2010. And the contribution rate of the science and technology development to the country’s agriculture reached 52 percent， which was higher than other factors such as land， labor and material investment.

China will further increase total investment and put more into the integrated layout of investment on science and technology on agriculture， Zhang said.

China’s grain output is expected to reach a record high of 550 million tonnes in 2011. It would be the first time for China to record grain growth for eight consecutive years in half a century， according to the Ministry of Agriculture.

Comment

Growing investment in agricultural science will undoubtedly improve quality of agricultural produce while lowering agricultural production cost which is of great significance for the sustainable development of agriculture.

China to launch iron ore trading platform in Dec

China plans to launch its first physical iron ore trading platform in December as part of efforts to gain more control over pricing in a sector dominated by foreign suppliers.

Ma Zhipeng， vice-general manager of research and development at the China Beijing International Mining Exchange (CBMX)， said that the new online platform would be formally launched at the end of December.

CBMX will also introduce a new iron ore price index based on completed transactions at domestic and overseas ports， Ma confirmed.

CBMX officials told the China Daily newspaper that the platform would be open to international and domestic iron ore producers， traders and steel firms， but in a bid to deter speculation， banks and financial organizations would not be allowed to participate.

Liang Ruodong， the vice-president of CBMX， said a number of overseas steelmakers have already expressed interest in the platform， which CBMX will set up jointly with the Aluminum Corp of China and the China Everbright Group.

An industry analyst who spoke on condition of anonymity said that since price formation will be based on buyers， sellers and actual demand， China can gain more influence in the world iron ore market as the biggest iron ore importer in the world.

Last year， mining giants Vale， BHP Billiton and Rio Tinto ditched the old “benchmark” system in which annual prices were decided through negotiations between buyers and suppliers.

They switched to an index-based system in which contract prices would be adjusted every three months.

Comment

As the world’s biggest iron ore consumer， China deserves a bigger say when it comes to prices. Foreign indexes are vulnerable to manipulation and speculation and do not reflect the true state of the market. In recent years， many financial organizations and local exchanges have prepared to launch iron ore trading platforms， and CISA itself began to publish an iron ore index in November. It would take time to see which pricing system is more accepted by the market.

Shougang starts venture project in Malaysia

In a move to dominate Southeast Asia’s steel industry， China’s stateowned steel maker Shougang Group launched a project on December 5 to build a 1.8 billion ringgit ($574.25 million) integrated steel mill in Malaysia through a joint venture with local steel maker Hiap Teck Venture Berhad， according to Xinhua report.

The steel slab plant would be built on a 1，200-acre land in Kemaman， an industrial city in the country’s East Coast economic development region that has moderate iron ore reserves.

The project， called Eastern Steel， is the largest Chinese foreign direct investment to date in Malaysia.

The steel plant is estimated to produce 1.5 million tonnes of steel slabs annually， though Eastern Steel was given a license to make five million tonnes of steel products per year.

Shougang， ranked 325 in global Fortune 500， holds 40 percent of the Eastern Steel project while Hiap Teck controls 55 percent of the stakes.

40 percent of the products at the Eastern Steel mill are expected to be shipped to neighboring ASEAN countries， especially Indonesia and Thailand， which consume 4.13 million metric tonnes of steel slabs annually.

The ASEAN heavily relies on producers in eastern Europe for steel slabs but Shougang is optimistic to dominate the Southeast Asian market.

Operations at the plant are expected to start mid 2013.

Comment

Since Chinese steel industry is suffering from overcapacity， Chinese steel corporations look to venture abroad. This venture project will help Shougang tap into the huge and developing ASEAN (Association of Southeast Asian Nations) market.

Chinese steelmakers see profits plunge

China’s 77 major steel companies reported an average profit margin of 0.47 percent in October， with monthly earnings of only 1.375 billion yuan ($216 million)， down 82.6 percent on the previous month， according to the China Iron Steel Association (CISA).

China saw its steel stockpiles increase dramatically between January and September this year amid weak demand.

Luo Bing， CISA’s vice director， said that the low profits of China’s major steel enterprises are due to surging imported iron ore prices.

China’s import prices of iron ore reached$166.66 on a CIF (cost， insurance and freight) basis in the first ten months of this year， up 34.33 percent over the same period last year.

As a result， China’s 77 major steelmakers paid an additional $23.762 billion for iron ore imports between January and October， compared with the same period last year. The figure is almost twice the enterprises’ total profits for the period.

Comment

Surging prices of imported iron ore and oversupply of steel in the Chinese market are the major causes of the profit plunge suffered by Chinese steelmakers. Analysts expect this trend to continue next year.

For all students， all for students， for students all

“For all students， all for students， for students all.” Bei- jing Times reported on December 12.

“A fundamental solution to the problem is to bring the school bus safety issue into the legal system， so as to attract people’s attention.” Premier Wen Jiabao said on the fifth national Conference on Women and Children， November 27th， “I asked the Legislative Affairs Office to work out School Bus Safety Regulations within a month.”

Only half month after this speech， Legislative Affairs Office of the State Council issued School Bus Safety Bill(draft) on December 12， and aimed to seek public opinion from the whole society. The feedback will be considered before January 11， 2012. This quick reaction addressed the importance and urgency to solve the school bus safety issue through legislation， and also proves the priority of people livelihood issue.

The draft emphasizes specially: School should use dedicated school bus to pick children and pupils. As Chinese Car News reported， Professor Yuan Guilin from Beijing Normal University explained that the dedicated school buses are the ones in accordance with the provisions of the state’s school bus standard. It is different with the general vehicles; the design of the bus should be more consistent with the characteristics of child， and secure. Overloaded school bus will be punished severely.

The school buses failed to provide safety equipment ought to be corrected guided by the Public Security Traffic Control Department， and will have fines from 1，000 Yuan to 10，000 Yuan imposed as a penalty.

If the school has violations， such as not assigned people to take care for the whole ride， resulting in casualties of the student， the school will be responsible for the loss and directors who directly in charge and other directly responsible personnel shall be punished under the law.

Comment

We’ve seen enough school bus tragedies in China in recent months. But can government move before the tragedies happening? It wasn’t in officers’ concern， because their children never take a school bus to go to school.

Sales of imported vehicles this year may exceed 1m

Thanks to increased model variety， constantly decreasing vehicle emissions and more expansive dealer networks， sales of imported vehicles have managed to exceed 900，000 in the first 11 months of 2011， 31 percent higher than the amount sold in 2010， reported by Gasgoo. Several predict that number to exceed one million by the end of 2011.

From the beginning of 2011 to October， 797，000 vehicles passed through customs， Ding Hongxiang， chairman of China Automobile Trading said. That year-onyear increase of 29 percent is far above the 9.4 percent sales growth rate for domestically manufactured vehicles. Brand construction and emission rates of imported vehicles are changing in response to changing consumer tastes.

The SUV segment is still the driving force behind Chinese imports， accounting for a total of 55 percent of all vehicles imported in 2011. Despite the natural disasters in Japan earlier this year， sales of SUVs have managed to remain high. Due to consumer preference and favorable government policies， vehicles with engines smaller than 3.0 L were most popular， constituting nearly 80 percent of all vehicles imported.

Luxury vehicles remain one of the strongest markets for imports， with sales of six top manufacturers in the segment increasing over 50 percent.

Comment

China’s market for imported automobiles won’t slow down， as long as its domestic auto manufacturers still have too wide gap to catch up.

Chinese roads hold over 104m automobiles

Statistics from the Ministry of Public Security’s Transport Administration Bureau show that there are over 104 million automobiles on China’s roads as of November， 2011， chinanews. com reported. The statistics also reveal that the number of authorized drivers had reached 234 million by then.

There were 16.28 million new vehicles in China in 2011， growing 7.86 percent from the last year. Automobiles alone made up 13.61 million of that amount， increasing 14.98 percent.

The amount of automobiles finally surpassed motorcycles in last October， the statistics show， signifying that automobiles are well on their way to becoming the country’s preferred choice of transport. Personal and household owners account for 74.17 percent of all automobiles driven.

Currently 14 cities have over one million vehicles on their roads. Beijing leads the pack with 4.94 million. 10 cities had seen their vehicle numbers increase over 20 percent in 2011， including Nanning (Guangxi)， Hohhot (Inner Mongolia)， ürümqi (Xinjiang)， Hefei (Anhui)， Yinchuan (Ningxia)， Changsha (Hunan)， Xining (Qinghai) and Fuzhou (Fujian)， If using the international standard of 16 sedans for every 100 households to judge， several of China’s cities are firmly in the automobile age， reported by Gasgoo.

Comment

It is said that Beijing employees have to spend 70 minutes on average on their journey to work. Besides it is a big city， the busier and busier traffic is one big cause. In the automobile age， government should focus more on the urban planning.

China upgrades its first UHV electricity transmission system

According to Xinhua on December 16， China put into operation a project extending its ultra high voltage (UHV) system to boost electricity transmission capacity from the country’s energy-rich northern regions to the power-short central provinces.

After the extension， the 640-km Jindongnan-NanyangJingmen 1，000-kilovolt alternating grids will double the electricity transmission capacity and greatly relieve the power shortage when demand peaks in winter and summer under the Central China Grid， according to the State Grid Corporation of China (SGCC)， which built the UHV lines.

A total of 120 million kwh of electricity， equal to 60，000 tonnes of coal equivalent， can be transmitted daily through the grids， which run between the city of Jingdongnan in northern Shanxi province and Nanyang， Henan province and Jingmen， Hubei province in central China.

As the first such grid designed and built by China， the UHV grid became operational in January 2009 and was upgraded this year.

In January this year， the SGCC said it planned to invest RMB 500 billion (US$78.9 billion) to extend its UHV electricity transmission lines to six by 2015.

UHV， defined as voltage of 1，000 kilovolts or higher of alternating current and 800 kilovolts of direct current， is designed to deliver large quantities of power over long distances with less power losses than traditional lines.

Comment

The operation of the new system will optimize energy resource allocation and effectively deal with power shortage problems peaked in winter and summer in central provinces.

China’s old-for-new home appliance sales top RMB 300 bln

According to Xinhua on December 16， China’s oldfor-new home appliance subsidy program had stimulated RMB 300.4 billion (US$47.68 billion) in sales by the end of November， the Ministry of Commerce said.

The sales volume of five types of home appliances under the government subsidy scheme， televisions， air conditioners， computers， refrigerators and washing machines， reached 81.3 million units by the end of November， the ministry said in a statement.

Meanwhile， 83.73 million units of home appliances were recycled during the same period.

To stimulate consumption， China began a subsidy plan for home appliance buyers in 9 cities and provinces in June 2009， and expanded the pilot program to 23 cities and provinces in June 2010. In April this year， the program was expanded to the entire country.

The central government allocated around RMB 30 billion in subsidies for the program during the last three years. The program helped boost the country’s employment because many of the 400，000 people it employed are migrant workers and laid-off workers， the statement said. The ministry spokesman Shen Danyang said the program will end by the end of the year as it has achieved its intended goals.

Comment

The program has once played a significant role in coping with the financial crisis， boosting domestic consumption， generating jobs and promoting energy conservation. But unfortunately， the end of the policy has come.

Chinese online sales， especially of electronics， stall

Xinhua reported on November 10 that sales of computer， communication and consumer electronics (3C) products by China’s online retailers in the third quarter of 2011 showed a decline for the first time in three years， according to new statistics released. China’s total online retail sales by all sectors also remained level in quarter three.

The 3C sales value amounted to RMB 36.84 billion(about US$5.8 billion) in the third quarter， one percent lower than the figure for the second quarter， said the report by Analysis International， a provider of information for China’s Internet market.

However， the value of 3C sales by Chinese online re- tailers was still 61.6 percent higher than for the same period in 2010， said the report.

In the third quarter， China’s total online retail sales by all sectors stood at RMB 211.77 billion， no apparent increase compared with the second quarter， according to Analysis International.

Many e-shops will pick up sales in quarter four as yearend price cuts lure buyers. In contrast， the third quarter typically provides few opportunities for promotions， leading to slow business， said the report. Competitive pricing will be key for E-shops to realize their annual business targets， it added.

Comment

Online sale has become a new consumption platform in China with a strong momentum. Its rapid development relies mainly on its cost advantage but urgently needs after-sale service improvement.

China Unicom， China Telecom ask regulator to halt probe

China’s two major fixed-line network operators， China Telecom and China Unicom separately announced on 2 December that they asked Chinese regulators to halt an antimonopoly probe， pledging to substantially raise their broadband speeds and further lower broadband costs over the next five years.

It isn’t clear how the NDRC will respond. The agency confirmed on the same day it had received the applications， which were sent on November 17. It said it was addressing the applications in accordance with relevant laws.

Launch of antimonopoly probe

China Telecom and China Unicom are the two largest backbone network operators in China.

The NDRC， the country’s top economic planner， said on November 9 that it was investigating the two companies over suspected monopolistic practices in the broadband access business.

Li Qing， deputy head of the NDRC’s price supervision and anti-monopoly department， said that China Telecom and China Unicom did not fully integrate their networks and， therefore， increased access costs and slowed down Internet speeds.

Pledges to mend errors

In a statement on its website， China Unicom said that it found improper price charges from Internet service providers during its checks following the antimonopoly probe， and its network was not fully integrated with other networks.

It pledged to enhance broadband access speeds during the next five years and further lower broadband service charges for the public.

China Telecom also said in an online statement that it found improper charges from Internet service providers， and its network integration with other major networks did not meet regulatory requirements.

During the next five years， China Telecom will lower broadband service charges by around 35 percent for the public， the online statement said.

Background information

China has the most Internet users globally， totaling 485 million by mid-2011， but Internet speeds are slow， with the average broadband speeds ranking 71st globally while expenses are several times more than mature markets.

China Unicom and Telecom together account for 90% of the country’s broadband business.

Some smaller players， such as Tietong， are charged relatively high fees when they connect to the Unicom and Telecom backbones for some parts of the networks， resulting in high internet charges for end-users.

The NDRC’s probe into the two operators was the first anti-monopoly case involving large state-owned enterprises in China since the country implemented its first anti-monopoly law in 2008.

According to China’s anti-monopoly law， law enforcement authorities can decide to end anti-monopoly investigations if the business operators promise to take concrete actions to correct their practices in a given period approved by the authorities.

Comment

If the investigation by the NDRC continues and the allegations are proven， the companies could be fined from 1% to 10% of their 2010 operating revenue. However， the two telecom carriers are likely to reach a settlement with the NDRC， given their admissions about the pricing problems.

Think globally and act locally

The Economy Information Congress 2011 was held in Tianjin on December 10， with a theme of “Better Global Integration and Deeper Domestic Cultivation”.

The meeting discussed the economic situation in China and the world at large and the IT applications in corporations.

“The Chinese economy would not see a hard landing， and there is not much to worry about the slow down of its growth，” said Pan Jiancheng， deputy director of the China Economic Monitoring Center of the National Bureau of Statistics， at the meeting.

Participants in the meeting such as Sany Electirc， Tianes， COFCO， and IBM shared their experience and ideas on IT applications in corporations.

With the development of industrial corporations， information technologies have been applied in all corporate activities such as production， operation， and management. And companies have higher and more diverse needs of IT solutions. This will lead to the rapid development of information industry， and make a new point of economic growth.

IT companies such as SAP， Dell， Inspur， Infor， QAD， Kjlink， UFIDA， Kingdee showcased their solutions at the meeting.

In this new arena of industrial application of information technology， Chinese IT companies should not only fully tap into the domestic market but also think in a global perspective.

RRR cut: China’s monetary fine tuning

According to Xinhua on December 5， China’s central bank cut the Reserve Requirement Ratio (RRR) for banks by 50 basis points for the first time in nearly three years to ease credit strains and shore up economy as whitehot inflation is contained.

In order to replenish liquidity in the country’s banking system， the country’s central bank said it will reduce the ratio of money that banks have to set aside on deposit by 50 basis points among commercial lenders， effective on Dec 5. Analysts expected the cut to inject RMB 350 to 400 billion(US$55 to 63 billion) into the market.

Zhou Jingtong， senior analyst of Bank of China， said the cut is expected as RRR is the prime choice when the central bank makes fine-tuning of monetary policy.

Zhou cited three reasons lie behind the move: first， China is under great pressure to keep economic growth. Externally， Europe and the United States are struggling for recovery from the global financial crisis and its aftermath; many emerging countries are faced with high inflation pressure. Domestically， the slowdown of exports and drop of Purchasing Managers’ Index (PMI) have made injecting liquidity a necessity to keep economic growth.

Second， China’s high inflation has eased. The Consumer Price Index (CPI) increased 5.5 percent in October， dropping from a 37-month high of 6.5 percent in July. The Bank of China estimated that November’s CPI will drop to below 5 percent and to below 4 percent in December.

Third， many cash-trapped enterprises urgently need capital injection to keep running at the lowest level or manage some kind of expansion.

Comment

The move， implying a fine tuning of macro policy， will contribute to keeping the stable and relatively fast economic growth in the current complex situation， however it does not mean the change will bring about a full-on move toward a looser monetary policy.

Capital market for returning yuan

Xinhua reported on December 17 that China launched a pilot program that will allow overseas investors to use offshore yuan deposits to invest in the mainland’s capital markets. Calling it a landmark move， experts said the deregulation will increase the popularity of the currency and expedite its internationalization.

The initial quota of the program， known as the RMB Qualified Foreign Institutional Investor， is RMB 20 billion (US$3.1 billion)， according to the China Securities Regulatory Commission. Some securities firms and fund companies that have subsidiaries in Hong Kong are expected to take part in its trial run.

According to the regulator， 80 percent of the quota will be allowed to invest in the mainland’s fixed-income markets such as government and corporate bonds while only 20 percent will be allowed to enter the stock markets.

The launch of the program comes as the mainland is experiencing emerging pressure of capital outflows and mainland banks have seen a decline in their yuan positions for foreign exchange purchases.

The mainland’s stock markets have also been burdened by the growing liquidity pressure， with the benchmark Shanghai Composite Index declining by more than 20 percent this year， making it one of the worst performers among major global markets.

“The program will attract more offshore yuan to flow back to mainland markets， which could help ease the mainland’s liquidity pressure and offset the recent outflows of US dollars，” said Dong Dengxin， director of the Finance and Securities Institute at Wuhan University of Science and Technology.

Dong said introducing more mature institutional investors to the capital markets will help improve the investor structure of the mainland’s stock markets， which are dominated by retail investors.

Analysts said that the launch of the program will help boost weak market confidence and shore up A-share market liquidity in the short run， but it can hardly be a market savior given the limited size of the initial capital pool.

But Wang said that the start of the program will benefit the fast-growing offshore yuan market in Hong Kong and help push forward the internationalization of the yuan.

Analysts in Hong Kong expect that the scale of the program may grow to between 50 billion yuan and 100 billion yuan in the next two years.

Comment

The participation of more institutional investors will help stabilize the market in the long run and curb speculation that usually leads to sharp fluctuations. But， the program won’t have substantial impact until the regulator gradually expands the current quota， which is too little to have any influence on the market.