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(approximate $ exchange rates: US$1 = HK$7.8, US$1 = RMB$6.8)

June 22 - 30, 2009

Hong Kong: Pointing to "a wave of extreme anger" within their ranks, up to 1,000 police officers are expected to rally later this month against a possible pay cut. The protest would be the first by police since 1977, when officers took to the streets in anger at graft investigations being carried out by the newly formed Independent Commission Against Corruption. Police union representatives say officers are unhappy with the government's announcement last month that civil servants might have to follow the private sector and cut top salaries by 5.38 per cent and freeze the pay of others. They want their own salary-adjustment mechanism. In a letter sent to the civil service minister, the force said "a wave of extreme anger and disappointment swept across the Hong Kong Police Force" upon learning of possible pay cuts. "Morale ... is at its lowest in a decade" over the way the survey was conducted and "the integrity of the results", the letter said. Officers have had three salary cuts and two pay freezes since 1997. The chairman of the Police Inspectors' Association, Chief Inspector Tony Liu Kit-ming, said individual officers were organising a protest on June 28, a Sunday. Unionists expected a thousand off-duty officers to participate. The protest will start at police headquarters in Admiralty, and continue to the Central Government Offices. "The protest will be conducted in a peaceful and lawful manner," Chief Inspector Liu said. Most of the committee members in the inspectors' association including Chief Inspector Liu are likely to join the protest. No slogans or banners will be used during the protest. Staff representatives of the Police Force Council, which represents the four associations of the police, yesterday wrote to the chief executive asking for a committee to be established to review the survey results. Senior Superintendent Peter Cornthwaite, who is also a staff representative of the council, said the Tsang administration's final decision on pay adjustment next Tuesday would have a big effect on what happened with the protest. "If the Executive Council agrees to our request to set up a committee of inquiry, this may prevent them from going for the march. All depends on the response of the government," he said. Exco member Cheng Yiu-tong had called a meeting with staff representatives of the Police Force Council on Monday, Mr Cornthwaite said, but the agenda of the meeting was not known. According to the Police Ordinance, officers cannot participate in political activities or take part in strikes. Off-duty protests by officers did not breach any law or police regulations, Chief Inspector Liu said. A police spokesman said that as of yesterday the force had not received any notification of a protest organised by officers, and that management would continue to communicate with the unions. A spokesman for the Civil Service Bureau said it too would continue to communicate with the force unions, adding that it was examining the police petition. Lawmakers have called for the government to take the initiative in commencing talks with the unions. Independent lawmaker Regina Ip Lau Suk-yee, a former security secretary, said it was unfortunate to see the police staging a protest. She urged the police management and the Civil Service Bureau to allay concerns among the police staff. "I appeal to the police staff to stay calm," she said. Exco member Lau Kong-wah and unionist lawmaker Lee Cheuk-yan urged the administration to strengthen its communication with staff over their concerns about the pay trend survey results. "The government should solve disputes with its labour through active negotiation. Otherwise, the dispute may undermine public's confidence in the government," Mr Lee said. Meanwhile, the Government Disciplined Services General Union, which represents the staff of five disciplined services, has called for a rally tomorrow to express dissatisfaction with the way of government has handled the results of a Grade Structure Review, which recommended a pay rise for long service at the lower levels but deferred the implementation.

HK's 'sound legal system' wins praise - Senior mainland judges and officiating guests attend the closing ceremony of the Advanced Program for Chinese Senior Judges at City University. Hong Kong's sound legal and judicial system is an important reason for the city's economic success and social stability, Huo Min, vice-president of the Guangdong Higher People's Court, said after attending a four-week legal program at a local university. Speaking at the closing ceremony for the Advanced Program for Chinese Senior Judges, Mr Huo said that he was impressed with the way the city's judicial personnel adhered to the rule of law. The advanced program was organized by City University's School of Law in collaboration with the National Judges College of the Supreme People's Court of the People's Republic of China. The course, which started on May 26 and ended yesterday, introduced 28 senior judges from various mainland cities and provinces to the common law system and key international legal concepts. Participants visited legal enforcement and judicial organizations and attended video-link lessons from Columbia University's School of Law. "This [program] is not simply an academic exchange," said Justice Wang Xiuhong, a member of the judicial committee of the Supreme People's Court. "Most importantly, it allows judges in Hong Kong and China to better understand and respect each other's political and economic culture." Kuo Way of City University said that the program had also benefited Hong Kong's legal development because local practitioners had been able to learn directly from mainland judges how mediation occurred on the mainland. "We are just beginning to develop such a system in Hong Kong," he said, explaining that mediation was different from the adversarial approach used in litigation locally, in that it allowed disputes to be resolved quicker and more harmoniously. Professor Kuo said that a similar course would be held later this year, and the plan was to organize two programs each year for senior Chinese judges. Elaine Lo, a senior partner with Mayer Brown JSM, the law firm that sponsored the program, said it would be helpful to Hong Kong firms involved in litigation or arbitration in the mainland if mainland judges had a better understanding of the city's legal and judicial system. The advanced program had served that purpose well, she said.

Television Broadcasts (SEHK: 0511) general manger Stephen Chan Chi-wan insisted last night the station's management would not intervene in the editorial policy of its news department. He was responding at a Broadcasting Authority public hearing to criticism that the station had downplayed the candle-light vigil on June 4, the 20th anniversary of the Tiananmen Square crackdown. Mr Chan said that although TVB had not led its 6pm news with the item, it had devoted almost a third of the bulletin to the vigil and had made it the lead in its 11pm newscast. "The news department is independent in deciding how to handle news. The management has never intervened," Mr Chan told the hearing in the lecture hall of the Hong Kong Space Museum. It was one of three public hearings the authority plans to hold in relation to the licences of TVB and its rival free-to-air channel, Asia Television. Their licences were renewed for 12 years in 2003 and the authority is conducting a mid-term review. Before the hearing, a group of Chinese University students protested outside the venue, criticising TVB news for exercising self-censorship. ATV plans to invest about HK$2.3 billion in equipment and production of programmes over the next six years, while TVB has said its investment in the same period will amount to HK$5.7 billion. Two more hearings are planned next month, one on Hong Kong Island and one in the New Territories.

Starting as early as next week, swine flu patients in Hong Kong will not automatically be sent to hospital for isolation, amid growing complaints from frontline doctors that unnecessary admissions are wasting public resources. Health officials expect that the number of swine flu cases will double every three days, and are working with medical experts to project the virus' behaviour. Hong Kong reported 26 new cases yesterday, bringing the total to 247. As of yesterday, more than 170 confirmed swine flu patients and another 130 people who had been in close contact with them were in isolation wards in public hospitals. None had developed severe complications. These patients are under the government's quarantine orders and cannot be discharged until they are found to be no longer infectious. Secretary for Food and Health York Chow Yat-ngok admitted yesterday that sending mild cases to isolation wards had stressed public hospitals. Since Thursday, the Hospital Authority has been admitting only confirmed swine flu patients but not suspected cases or their close contacts. A government source revealed yesterday that as Hong Kong proceeds past containment to the mitigation phase of the outbreak, mild cases would be put under home care, similar to what United States and Australia are doing. "We are revising the policy and will make a decision as early as next week. Under home care, patients would be given Tamiflu, and public-hospital beds would be reserved for severe cases only," the source said. If the outbreak spreads further, mild cases will not even be given Tamiflu. The antiviral will only be used on severely ill patients. Ho Pak-leung, of the Public Doctors' Association and a microbiologist at the University of Hong Kong, said the government should switch from hospital care to home care as soon as possible. "There are complaints from frontline doctors that as the virus appears so mild, there is no clinical basis to isolate the patients. The mitigation effect of isolation is diminishing, as the virus is already rooted in the community," Professor Ho said. One frontline doctor said: "These patients have very mild or even no symptoms; it is a waste of resources to put them in single isolated wards, and this compromises some regular services." Meanwhile, the Food and Health Bureau is working with medical experts at the University of Hong Kong to find an outbreak model for swine flu. Patient information and laboratory results are being analysed to project the virus' infectivity and how long the peak will last. Initial findings are expected in two weeks. The government is also closely monitoring whether the new H1N1 virus will overtake the seasonal H3N2 flu virus in Hong Kong. In the United States, about 90 per cent of flu viruses isolated are swine flu. The government source said this "strain replacement" situation would be one of the key factors in planning strategies. The source said the summer flu peak would be the first wave of the swine flu outbreak, to be followed by a second wave in the winter flu peak. "It is a long battle. Hong Kong has to prepare for two waves that will last until next March or April. We have to prepare for the worst."

Bankruptcy petitions in Hong Kong in May jumped 54 per cent from a year earlier, totaling 1,417, as the territory continued to struggle with economic recession, but they fell on a monthly basis for a second straight month, government data showed on Friday. Bankruptcies in April totalled 1,490, up 56 per cent from a year earlier. The number of bankruptcies in May was the lowest since January and marked only the third time since August that bankruptcy petitions, which give an indication of future bankruptcies, had fallen from the previous month. Hong Kong’s economy tipped into recession in the third quarter of last year and the government has forecast it will contract by between 5.5 and 6.5 per cent this year. Economists say it may now be bottoming out, but is likely to remain weak this year.

An exhibition to mark the 60th founding anniversary of the People's Republic of China has been held in Hong Kong City Hall, which will last for two weeks. Hundreds of pictures and relics were exhibited to show the close ties between Hong Kong and the mainland during the past 60 years since 1949. Donald Tsang, chief executive of Hong Kong special administrative region, Peng Qinghua, director of the Liaison Office of the Chinese central government in the Hong Kong, Lv Xinhua, special representative of the Ministry of Foreign Affair to Hong Kong, and Zhang Shibo, Commander of the PLA Garrison in Hong Kong attended the opening ceremony. Through exhibitions, the organizers hoped to carry forward the patriotism, review the extraordinary path Hong Kong had gone through and deepen the knowledge of the latest development of the mainland, according to Stephen Lam, secretary for constitutional and mainland affairs of the Hong Kong government. The exhibition was jointly organized by Hong Kong Culture Promotion Association and Chinese General Chamber of Commerce.

The number of Hong Kong-listed Chinese mainland firms has grown to 470 from 0 over the past 16 years, a senior financial official of the Hong Kong Special Administrative Region (HKSAR) said on June 18,2009. Financial Secretary John Tsang said Hong Kong is playing a vital role as a capital formation center for mainland enterprises. "In the past decade or so, we have seen a much broader range of companies listing on our stock market," Tsang said, citing the first Hong Kong listing of a mainland enterprise in 1993. More than half of the Hang Seng Index constituents were from the mainland now. The HKSAR government is engaged in ongoing discussions with the relevant parties in Beijing and across the mainland to further strengthen financial co-operation, he added.

China:  China's stocks rose for the third straight day Friday, driving the benchmark index to a 10-month high as financial shares gained after the securities regulator approved the nation's first initial public offering (IPO) since September.

The organizers of Shanghai World Expo 2010 have ditched a "final" deadline for work on national pavilions to begin by the end of the month, the deputy chairwoman of the fair's executive committee said yesterday. Zhong Yanqun said the organizers needed to be flexible to accommodate countries that were not yet ready to break ground on their Expo stands - and hinted that construction work could extend to the eve of the opening on May 1 next year. "Whether you can have a very strict deadline for building pavilions or participation, in reality, as far as the World Expo is concerned, it does need to be flexible," she said. "We hope that all of the self-built pavilions will be able to begin work in July." When pressed on the situation of the cash-strapped US pavilion project, she said organisers' main concern was whether they would be ready in time for the opening. "Our time limit is May 1 next year, when all national pavilions will need to be able to open," she said. Ms Zhong's position represented a U-turn on tough statements she made last month, when she said countries would not be allowed to build their own pavilions if they failed to begin work by June 30. "If work on a pavilion starts after June 30 this year, it can't be completed before May 1 next year. This will affect the operation of the whole World Expo Park," she said at the time. Nations that failed to meet the deadline would be asked to rent facilities constructed by the Expo organisers - considerably simpler prefabricated hangars. The question mark hanging over US participation has been the source of long-running embarrassment for Expo organizers, who planned on it being one of the main draws. The largest plot for a foreign country has been set aside for the US, but it remains the only nation that is yet to sign a participation agreement. Unlike other countries, the US State Department has ruled out the use of public funds to pay for its pavilion, which is to be paid for entirely with private donations. The fund-raising committee announced on Thursday that it had secured backing from agriculture, industry and finance giant Cargill. A spokeswoman refused to reveal how much of the estimated US$61 million budget had been raised. The Shanghai Daily quoted a spokeswoman for the US pavilion saying it could take another three to six months to raise the cash. With construction expected to take five months, that could bring work perilously close to the opening date. However, the US is not the only country facing difficulties. Shanghai government sources told the South China Morning Post (SEHK: 0583, announcements, news) that there were concerns about 20 countries. Ms Zhong said ground had been broken on some 24 of the 40-odd self-built pavilions. The Shanghai World Expo 2010 is planned to be the biggest and most expensive in the event's 158-year history. Organisers estimate the Expo will draw more than 70 million visitors during its 184-day run. Just 5 per cent of those are expected to come from outside the mainland.

The mainland says it made an operating profit of 1 billion yuan (HK$1.13 billion) hosting the Beijing Olympics - but the figure excludes the construction cost for the venues, a long-awaited National Audit Office report said yesterday. The Beijing Games wowed the world with extravaganza and organization. However, the unprecedented national mobilization and single-minded pursuit of grandeur led many to worry about budget blowouts at the expense of taxpayers. The audit office has been under mounting pressure to publicize the report, which many hope will shed light on the scale of spending since Beijing won the bid in 2001. The report said the organizing committee for the Beijing Olympics (Bocog) had made 20.5 billion yuan in revenue by March 15 this year, 800 million yuan more than expected from a profit split with the International Olympics Committee, sponsorship, merchandising and ticket sales. It also reported a total outlay of 19.43 billion yuan for venue upgrades, television broadcasting, accommodation and personnel. Auditors acknowledged a cost of 19.49 billion yuan to finance 102 new venues and training camps, but failed to reveal spending in other areas such as environment and security. Economists earlier estimated that Bocog would need 400 billion yuan including costs to clean the environment and basic infrastructure to stage a decent Olympic Games. Beijing Institute of Technology professor Hu Xingdou said that was a fair estimation, but there was no point in discussing if the Beijing Olympics made a profit or how much was lost "because money was never a top priority for the country to host the Games". "The Olympics were regarded as the country's coming out onto the world stage and to achieve that goal the government was willing to spend as much as it needed," he said. "Look at the number of roads that were built and how many police officers were ferried to Beijing." The secrecy over some Olympics spending raised concerns over official corruption after the downfall of Beijing's former vice-mayor Liu Zhihua in 2006. Liu 60, who was in charge of the municipality's Olympic construction office, was given a death sentence suspended for two years in April this year for graft. Auditors admitted that irregularities were uncovered, but most of the problems were solved. However, the National Stadium, or "Bird's Nest", was over budget by 456 million yuan due to the complexity of the engineering work and price increases for raw materials.

Barclays Capital raised its forecast for mainland’s gross domestic product growth for this year to 7.8 per cent on Friday, from 7.2 per cent, citing unexpectedly strong May data and a potential uptick in private spending. Barclays joins a number of institutions that have upgraded their forecasts for mainland’s growth in recent weeks, as a government-led investment boom has helped offset the impact of falling exports on the world’s third-largest economy. The World Bank on Thursday raised its GDP growth forecast for this year to 7.2 per cent from 6.5 per cent. “Our view of China on a recovery path is gaining support from economic developments, with the May data pointing to further acceleration of fixed asset investment and a pick-up in retail sales growth, despite continued weakness in exports,” Barclays economists Wensheng Peng and Jian Chang said in a report. “Overall, the latest data support our view that the Chinese economy should be on an accelerating recovery path in H2, although indicators may not move uniformly in one direction.” Annual growth in fixed-asset investment accelerated to 32.9 per cent in the first five months of the year, up from 31 per cent in January through April, led by the government’s 4 trillion yuan (HK$4.5 trillion) stimulus package. Retail sales growth also picked up in May, to 15.2 per cent, helping offset the impact of a 26.4 per cent fall in exports in the year to May. With the stimulus kicking in, many economists now expect that Beijing will be able to come close to its target of 8 per cent growth for the year as a whole. Barclays now expects GDP growth of 9.6 per cent next year, up from its previous forecast of 9.0 per cent, in part because it sees private investment becoming more of a growth driver. “Rising asset prices should help lift investor confidence and stimulate private investment going forward,” Peng and Chang wrote.

Wang Yi (L front), chief of the Taiwan Affairs Office of the Chinese State Council, greets the overseas Chinese in San Francisco, the United States, June 18, 2009. Wang Yi said here on Thursday that the mainland will focus on economic, cultural and educational cooperation as well as people-to-people exchange with Taiwan in a bid to further promote cross-Strait ties.

Visiting Chinese President Hu Jintao (L) meets with Slovakian President Ivan Gasparovic for talks in Bratislava, capital of Slovakia June 18, 2009. Chinese President Hu Jintao and his Slovakian counterpart Ivan Gasparovic held talks in Bratislava on Thursday and they agreed to take the 60th anniversary of diplomatic ties as an opportunity to consolidate their traditional friendship and enrich the contents of cooperation. Speaking highly of the longstanding friendship between the two countries, Hu noted in particular the substantial development of bilateral relations since the Central European country gained independence 16 years ago.

Peking Opera is perhaps China's best known traditional opera — but traditionalists are now seeking to promote Kunqu Opera, one of the oldest operatic forms and is considered the bedrock of the operatic form. Now undergoing a makeover, Kunqu is attracting new audiences around the world. One example of the opera's resurgence is the Suzhou Kunqu Opera Theater's adaptation of The Peony Pavilion. Written by Tang Xianzu in the Ming Dynasty(1368-1644) and first performed in 1598, the opera is about the romance between Du Liniang and Liu Mengmei. The play is regarded as one of the most romantic stories in Chinese literature and is often compared to Shakespeare's Romeo and Juliet. According to producer Bai Xianyong, the story's theme of love and beauty still resonate. While preserving the story's integrity, Bai has used modern theater techniques to appeal to a more contemporary audiences. He cut the original 55-act performance down to 27 for his stage version and selected young actors to inject vitality into the centuries-old story. The theater staged the updated version of the famous opera at more than 20 universities around China.

A technician puts a sample of the A(H1N1) virus into a transfer cabinet during preparations to produce vaccines in Wuhan, Hubei. The swine flu virus continues to spread across the mainland, with 33 more cases reported yesterday, bringing the number of infections to 297. The Ministry of Health said that among the new cases, nine were reported in Shanghai, seven in Guangdong and five in Fujian province . A total of 162 patients remain under treatment, and the others have been discharged from hospital. The mainland has reported no deaths. In Guangdong, where 63 cases lead the mainland, the Health Department denied the existence of any community outbreaks. The province reported seven cases yesterday and nine cases on Wednesday, but health authorities said they were scattered across the community, the Guangdong daily newspaper New Express reported. The ministry released a work plan on Wednesday that would be implemented in case of an outbreak or epidemic at the community level. Authorities will focus on limiting social contacts and isolating infection sources rather than trying to spot virus carriers at border checkpoints as they do now. Meanwhile, dozens of American high school students quarantined in Hubei after some of their classmates were diagnosed with swine flu had been cleared for release, an employee of the city's swine flu command centre said yesterday. Seven in the group, from the private Pacific Ridge School in Carlsbad, California, tested positive for swine flu and were in hospital in stable condition.

Wang Yi (L front), chief of the Taiwan Affairs Office of the Chinese State Council, greets the overseas Chinese in San Francisco, the United States, June 18, 2009. Wang Yi said here on Thursday that the mainland will focus on economic, cultural and educational cooperation as well as people-to-people exchange with Taiwan in a bid to further promote cross-Strait ties.

Visiting Chinese President Hu Jintao (L) meets with Slovakian President Ivan Gasparovic for talks in Bratislava, capital of Slovakia June 18, 2009. Chinese President Hu Jintao and his Slovakian counterpart Ivan Gasparovic held talks in Bratislava on Thursday and they agreed to take the 60th anniversary of diplomatic ties as an opportunity to consolidate their traditional friendship and enrich the contents of cooperation. Speaking highly of the longstanding friendship between the two countries, Hu noted in particular the substantial development of bilateral relations since the Central European country gained independence 16 years ago.

Peking Opera is perhaps China's best known traditional opera — but traditionalists are now seeking to promote Kunqu Opera, one of the oldest operatic forms and is considered the bedrock of the operatic form. Now undergoing a makeover, Kunqu is attracting new audiences around the world. One example of the opera's resurgence is the Suzhou Kunqu Opera Theater's adaptation of The Peony Pavilion. Written by Tang Xianzu in the Ming Dynasty(1368-1644) and first performed in 1598, the opera is about the romance between Du Liniang and Liu Mengmei. The play is regarded as one of the most romantic stories in Chinese literature and is often compared to Shakespeare's Romeo and Juliet. According to producer Bai Xianyong, the story's theme of love and beauty still resonate. While preserving the story's integrity, Bai has used modern theater techniques to appeal to a more contemporary audiences. He cut the original 55-act performance down to 27 for his stage version and selected young actors to inject vitality into the centuries-old story. The theater staged the updated version of the famous opera at more than 20 universities around China.

A technician puts a sample of the A(H1N1) virus into a transfer cabinet during preparations to produce vaccines in Wuhan, Hubei. The swine flu virus continues to spread across the mainland, with 33 more cases reported yesterday, bringing the number of infections to 297. The Ministry of Health said that among the new cases, nine were reported in Shanghai, seven in Guangdong and five in Fujian province . A total of 162 patients remain under treatment, and the others have been discharged from hospital. The mainland has reported no deaths. In Guangdong, where 63 cases lead the mainland, the Health Department denied the existence of any community outbreaks. The province reported seven cases yesterday and nine cases on Wednesday, but health authorities said they were scattered across the community, the Guangdong daily newspaper New Express reported. The ministry released a work plan on Wednesday that would be implemented in case of an outbreak or epidemic at the community level. Authorities will focus on limiting social contacts and isolating infection sources rather than trying to spot virus carriers at border checkpoints as they do now. Meanwhile, dozens of American high school students quarantined in Hubei after some of their classmates were diagnosed with swine flu had been cleared for release, an employee of the city's swine flu command centre said yesterday. Seven in the group, from the private Pacific Ridge School in Carlsbad, California, tested positive for swine flu and were in hospital in stable condition.

Several dams along the Yellow River are close to collapse just a few years after they were built amid concerns that over 40 per cent of the nation's reservoirs are unsafe, state media said on Friday. Shoddy construction, unqualified workers and embezzlement of funds are threatening dams' safety in the northwestern province of Gansu, the China Daily said - situation that could also put people in danger. "Several dams on branches of the Yellow River in Gansu province are near collapse only one or two years after their construction," the paper said. Citing an investigation by the state-run China Youth Daily newspaper, the report pointed to one dam built in 2006 in Huan county on the Yellow River that has developed a dangerous breach in the middle. Locals were quoted as saying that at least five newly built dams in the area were in very poor condition. An official at the county's water protection bureau, who refused to be named, told reporters the matter was being investigated by the government, but refused to provide any more details. But the dire situation is not only limited to Gansu. More than 40 per cent of reservoirs in China - or 37,000 - are in potential danger of being breached, according to the report. Of these, about 3,640 dams are currently being reinforced, and another 7,600 are in need of immediate attention. In the 10 years to last year, a total of 59 dams were breached in the mainland due to torrential rain and quality defects, the report said. It did not give a casualty figure for these incidents. Environmentalists and rights groups have long warned of the negative impact of dams, citing ecological damage and the forced relocation of residents.

Vehicles move on a flooded street in Xi'an, capital of northwest China's Shaanxi Province, June 19, 2009. Heavy rain has been striking some cities and counties in Shaanxi Province since June 18.

The 2008 Beijing Olympics reaped aprofit of more than 1 billion yuan (146.4 million U.S. dollars), China's National Audit Office (NAO) said Friday. The Beijing Organizing Committee for the Games of the XXIX Olympiad (BOCOG) reported income of 20.5 billion yuan and expenses of 19.34 billion yuan for the 2008 Beijing Olympics, according to an NAO tracking audit of Games' finances and construction costs of venues. The Beijing Paralympics broke even with income and costs each totaling 863 million yuan, said the eighth NAO report of the year. The tracking audit started from 2005, including an audit on the draft final accounts of the BOCOG, according to NAO. The Games' income mainly came from sales of broadcasting rights, souvenirs and tickets, assets sales, and sponsorship, while the main expenditure items involved temporary facilities, sports and communication equipment, accommodation and medical services. BOCOG spent 831 million yuan on the opening and closing ceremonies, 332 million yuan on the Olympic torch relay, and 171 million yuan on the volunteer program. Ticket sales brought in 1.28 billion yuan and assets sales 240 million yuan. A total of 6.46 million tickets were sold, accounting for 95 percent of the tickets available. Total investment in the Beijing Olympic venues stood at 19.49 billion yuan, covering 102 projects in Beijing and five co-host cities, said the report. Of that investment, 3.5 billion yuan came from the central government, 8.26 billion yuan was allocated by local governments, and 1.08 billion yuan from donations from overseas Chinese, according to the report. No major problems were found during the audit, and no accidents or quality problems were identified in the construction of the Olympic venues, it said. BOCOG had maintained "strict control" over spending and income, and kept "transparent, economical and efficient" accounts, said a statement on the NAO website. However, minor problems did exist, said the report, including irregularities in project subcontracting and bidding, as well as a deficit in the construction of the National Stadium, or the Bird's Nest. The construction of the stadium went 456 million yuan over budget due to its complicated structure, technical difficulties, and adjustments in construction standards and its functions. The estimated budget of the Bird's Nest stood at 3.14 billion yuan, it said. "The 2008 Olympics and Paralympics were not the most expensive games ever held," the statement said, citing the expenditure of the previous Games and the budget of the 2012 event in London. Athens had spent more than 10 billion Euros (11.9 billion U.S. dollars in 2004) staging the 2004 Olympic Games, and its operating costs stood at 2.4 billion U.S. dollars. The budget of the 2012 London Olympics and Paralympics reached 9.3 billion pounds (15.2 billion U.S. dollars), according to the British government annual report on preparations for the Olympics and Paralympics. The profit would be distributed to the International Olympic Committee, the Chinese Olympic Committee and BOCOG, which would set up funds for sports development, including improvements to public sports facilities and promoting mass sports activities, said the statement.

China's outsourcing industry has maintained a strong business growth in the first five months of this year although the financial crisis has reduced demand from foreign companies such as big banks and insurance companies. Wang Chao, assistant minister of commerce, said in an industry forum yesterday that the contract value of China's outsourcing industry reached $2.59 billion from January to March, an increase of 25.9 percent compared with the same period last year. "Although overseas demand for outsourcing services shrank in the first half of this year, China's software exports and outsourcing industry still maintained a rapid growth," Wang said at the China International Software & Information Service Fair in Dalian. But he said Chinese outsourcing companies still have to face great challenges, as the global economy cannot recover in the short term. He warned that some small and medium sized outsourcing companies might have to wind up due as banks have become cautious in their lending due to the economic crisis. Impacted by the financial crisis, many of the big companies, especially the financial institutions, have reduced their outsourcing orders due to shrinking business. But Chinese outsourcing companies, whose major customers are Japanese companies rather than US and European firms, still maintained a strong growth due to the country's relatively lower labor cost, the government's strong support and the abundant pool of college graduates. "Our software outsourcing business increased 94 percent year on year in the first five months of this year," said Zheng Shiyu, CEO of Dalian Yidatec Co Ltd, one of China's largest outsourcing firms. The company acquired two Japanese counterparts during the past ten months and plans to attract more high-end customers. In order to help it transform from a manufacturing base to a service hub, China aims to double in five years the export value of the outsourcing industry by 2010. By achieving that, the government announced earlier that it plans to woo some 100 multinationals to transfer part of their service outsourcing industry to China by building 10 cities with international standards. It also plans to help 1,000 Chinese outsourcing companies grow into medium to large size enterprises within the five-year period ending 2010. But experts said Chinese outsourcing companies still have a smaller scale and lack the experience and capacity to deliver complicated outsourcing services, when compared with their Indian counterparts like Infosys and TCS. Liu Jiren, chairman of Neusoft, China's largest outsourcing company, said Chinese outsourcing companies need to grow bigger to have the advantage of scale. He said Neusoft, which failed in its effort in March to acquire Dalian Hi-Think Computer Technology Corp, China's second largest outsourcing company, is still in acquisition talks with many domestic and foreign companies. He said as more US and European companies are starting to outsource their business to Chinese firms, China is expected outpace India in outsourcing in the next five to ten years.

The offspring of female panda Lin Hui lies on a mattress at Chiang Mai Zoo, north of Bangkok, June 18, 2009. Lin Hui, a female panda on loan from China, gave birth to the baby panda in Thailand on May 27 after being artificially inseminated with her partner's sperm for a second time.

June 20- 21, 2009

Hong Kong: Hong Kong Exchanges and Clearing (SEHK: 0388, announcements, news) may launch a new derivative contract called "flexible options" in the first quarter of next year, aiming to draw 10 per cent of turnover on the over-the-counter market to the bourse. Chairman Ronald Arculli hoped the product would be able to attract options trading to the exchange and help improve regulations. "This will enhance market transparency and bring better regulations than on the over-the-counter market," Mr Arculli said at a reception to celebrate the ninth anniversary of HKEx's establishment. "US President Barack Obama has suggested a range of regulatory reforms to tighten regulations, while the G20 meeting in London earlier also recommended more regulations on over-the-counter trading." HKEx chief executive Paul Chow Man-yiu said at the same event that a consultation would be conducted in September and that the product could be launched in the first quarter of next year. Flexible options will be structured like existing stock options but with more settlement months, contract sizes and features, which are to be discussed in the consultation period. "The benefit of trading flexible options in our system is that it will be more transparent than on the over-the-counter market," Mr Chow said. "Also, the exchange's clearing house will settle the options, which means the investors will not face the counterparty risks. "We hope we can attract about 10 per cent of such products' trading turnover on the over-the-counter market to the exchange." Stock options trading on the exchange at present are derivatives that track the prices of their underlying stocks. The contracts carry certain sizes and maturities. Options are popular instruments in Hong Kong and are usually used for hedging purposes. Last year, the number of stock options traded on the exchange stood at 54.69 million, accounting for 52 per cent of all futures and option trades. However, trading outside the exchange by investment banks and their clients, commonly called over-the-counter trade, is also active. Hong Kong Stockbrokers Association chairman Kenny Lee Yiu-sun said there was no data on over-the-counter trades, but the volume could be slightly bigger than on the bourse. "If the exchange-traded flexible options have more varied contract sizes, terms and structures, they should be able to attract 10 to 20 per cent of the over-the-counter market turnover on option products," Mr Lee said. "Trading on the exchange has greater transparency." Mr Chow said the HKEx would announce next Friday a consultation paper on the launch of carbon emission credits futures contracts. Mr Chow, who will retire in January next year, also said he believed the transition to the new chief, Charles Li Xiaojia, would be smooth. Mr Li will join the exchange and work with Mr Chow in October. "We will work together to handle many ongoing projects, such as the upgrade of the trading system as well as the market consultations," said Mr Chow.

Shanghai's most senior Communist Party official yesterday played down the city's rivalry with Hong Kong and suggested the two could play complementary roles in the future. It was the first time a top Shanghai official had addressed the relationship with Hong Kong since the mainland's economic powerhouse declared its ambition of becoming a global financial centre. Yu Zhengsheng , the city's party secretary, spoke to the Hong Kong media in an attempt to ease concerns over a scramble for resources and talent. "Shanghai is not an international financial centre now," Mr Yu said. "It's still unclear what shape Hong Kong will take and what it will look like by 2020 as it continues to grow. "But Shanghai and Hong Kong will always be complementary to each other and the growth of the two cities brings them mutual benefits." In March, the State Council endorsed a guideline to transform Shanghai into a global financial and shipping centre by 2020, encouraging it to take a bold step in developing its capital and monetary markets. The plan fuelled speculation that Shanghai would eventually eclipse Hong Kong, leading to a flight of capital and relocation of business. But Mr Yu said: "Shanghai has a lot to learn from Hong Kong in terms of taxation policy, credit system, market regulations as well as lawmaking. Hong Kong and Shanghai will always be brothers." Xu Kuangdi , a former Shanghai mayor, said in 2001 that the two cities were on an equal footing as they were "two engines of an airplane" jointly propelling the Chinese economy. Ng Leung-sing, a local deputy to the National People's Congress and vice-chairman of the Chiyu Banking Corporation, said Mr Yu had conveyed a positive message. "While our city has long been one of the world's financial centres, Shanghai has an important status in the country's financial sector. China is such a big market and it is reasonable to have both cities serving as financial hubs," he said. "There is no need to worry that Hong Kong will be replaced by Shanghai." Mr Ng said whether Hongkongers saw Shanghai's development plan as a threat was their own concern. "If you worry, others cannot alleviate worries for you. Whether we maintain confidence does not depend on what a government official says." Lingnan University economics professor Ho Lok-sang said the two cities could complement each other, as Hong Kong had an edge over the external market while Shanghai had strong national networks. But he said they would compete against each other for talent. Mr Yu said Shanghai's priority was to fine-tune domestic financial markets to ensure that the city's financial institutions offered first-class services to clients. The city is still awaiting final approval from Beijing to start trading stock-index futures at the China Financial Futures Exchange. It was established in September 2006 but not a single contract has been listed on the bourse so far. Mr Yu, who is also a member of the Communist Party politburo, said Shanghai was plotting a campaign against terrorism to guarantee a successful World Expo in the city next year. He also believed that the United States would take part in the high-profile event even though it was struggling to raise funds.

A photographer takes a picture of "Lamma Winds", Hong Kong's first wind power station, on Lamma Island. The construction of an offshore wind farm near Sai Kung will add about 2 per cent to electricity bills while supplying only about 1 per cent of the city's needs, CLP Power (SEHK: 0002) says. The disclosure prompted critics to question the cost-effectiveness of the estimated HK$6.7 billion project, and whether it would generate even the predicted amount. The 2 per cent figure was based on the estimated construction costs of between HK$80 million and HK$100 million for each wind turbine, including the foundations and undersea cables, CLP said yesterday. The plans call for the installation of 67 wind turbines, each with a 3MW generation capacity, at a site 10km from Clear Water Bay. A spokeswoman for the utility said offshore wind farms tended to be three to five times more expensive than power plants using conventional fuel. She said the preliminary cost estimates were in line with overseas wind farms of a similar scale. The final costing would hinge on further detailed wind studies at the site. "As detailed site data have yet to be gathered ... only rough estimates can be made at this stage," she said. It was the first time CLP had offered an estimate of the impact on tariffs since an environmental assessment for the project was made public early this month. It said that if 50MW turbines were installed first, the tariff increase would average 0.8 per cent. When all 67 turbines were in operation, with a total capacity of 200MW, the rise would be 2 per cent. The power utility had said the wind farm could generate about 40 million kWh of electricity a year, enough for 80,000 households a year at an annual carbon reduction of 300,000 tonnes. The generation figure was based on an assumption that the wind would be strong enough to drive the turbines at full force 25 per cent of the time. But this assumption was challenged as too optimistic. "Major coastal wind farms in Guangdong, where the wind resource is richer than in Hong Kong, do not yield such a high rate," said Jasper Ip Chi-man of Green Future, which promotes renewable energy. A wrong forecast might affect the pay-back period of the wind farm and affect power tariffs, he said. Lo Wing-lok of the Country and Marine Parks Board asked if the money could be better used installing equipment to cut emissions from coal-fired power stations.

Hong Kong government is looking into whether retailers will break the law if they adopt ploys to get around the 50-cent levy on plastic bags when it takes effect next month. Secretary for the Environment Edward Yau Tang-wah said his bureau was studying the legality of "tricks" such as pre-packaging products in plastic bags or offering different types of bags. Mr Yau said the bureau would consider amending the relevant laws, although he did not believe such ploys would be prevalent early on. "They will be going to an unnecessary extreme if they do this," he said. "It will ruin their reputation and put them at odds with the public who support cutting bag abuse through the levy." The Circle K convenience store chain has said it will challenge the levy by offering a free bag to any customer who does not want to pay the 50 cents, but the rival 7-Eleven chain has said it has no plans to follow suit. Green groups are also concerned about possible abuse of pre-packaged products, some of which come in unsealed bags with handles. Under the law, passed in April, the levy will not be imposed on products such as toilet paper rolls in plastic bags, while plastic bags without handles are also exempt. While most such packaging originates with manufacturers, officials admit it will be difficult to tell if the retailers have put the products in unsealed bags, which customers can then use for other purchases as well. More than 2,800 retailers affected by the levy have registered with the Environmental Protection Department, meaning free plastic bags at their outlets will be banned from July 7. The number was about 95 per cent of the targeted retailers - those that are operating at least five stores or a store of at least 200 square metres and selling food and drinks, personal care and beauty products, and medicine or first aid items simultaneously. Mr Yau said the remaining 5 per cent, mostly small stores such as local groceries, might have decided against offering plastic bags any more or to switch to paper bags. He urged customers to check whether the official logo of the plastic bag levy was displayed in a store before they asked and paid for the bags. He also reminded consumers that refusal to pay could be an offence but it was not against the law for a retailer not to issue a levy receipt. Retailers not on the registry who collected the levy might be guilty of deception. "I don't think people will take the risk of violating the law just for a plastic bag," he said. The department's inspection team will enforce the law at street level. Consumers in doubt can call the department's hotline, 3187 0333. Mr Yau said he was unworried about confusion on July 7 as a series of publicity events were planned in the coming weeks. He called on consumers to take the chance to switch to a greener lifestyle and minimise excessive use of plastic bags.

Swine flu forced the closure of five more secondary schools yesterday as the number of confirmed cases topped 200, but the government said class suspensions would not be extended to all schools.

Swire Properties recently reduced office rents at Pacific Place 20 per cent from last year's peak when leases came up for renewal, but the company believes Hong Kong's office market has bottomed out, chief executive Martin Cubbon said. Office rents at One, Two and Three Pacific Place, comprising 2.2 million square feet, have dropped from as much as HK$100 per square foot per month last year to "the high 70s to the low 80s", Mr Cubbon said. "We are positive regarding the Hong Kong market in the coming months and next year in view of the renewed confidence, as evident in the surging demand in the residential market and growing confidence in the international business and financial sector to invest in Hong Kong. "We expect a gradual pick-up, and we do not see a correction coming." Occupancy rates at One, Two and Three Pacific Place and Taikoo Place were 99 per cent. Ninety-eight per cent of spaces of Swire's Cityplaza were let and 91 per cent were occupied in One Island East. Swire owns 15 million sqft of office and retail property in Hong Kong and 1 million sqft in Beijing. It plans to increase its investment properties to 24 million sqft by 2013, of which 8 million will be on the mainland and 16 million in Hong Kong. The company had less exposure to financial tenants, analyst Gary Pinge wrote in a Macquarie Research report. Macquarie has raised its forecast for office rents, saying they will grow 10 to 15 per cent by next year. This is a reversal of earlier predictions of a 10 to 20 per cent fall. However, property consultant CB Richard Ellis disagreed, saying grade A office rents in Central could decline a further 13 per cent in the second half of the year on top of a 27 per cent fall in the first half. In the residential market, Swire sold 50 units at its North Point development Island Lodge at an average of HK$11,000 per square foot when it relaunched the project early this month.

Voluntary drug testing in schools will be introduced in September, a year ahead of schedule. All 23 secondary schools in Tai Po, involving around 20,000 students, will participate in the initial round. The announcement came on a day when there were five reported cases of drug abuse in 24 hours, one involving a 14-year-old student. Speaking after a meeting of the Action Committee Against Narcotics, Commissioner for Narcotics Sally Wong Pik-yee said the original plan was to introduce a pilot scheme in 2010. "As there are voices urging the tests be speeded up and with several school principals eager to join the scheme, the test will be implemented this year," she said. Wong said school principals from several districts have shown interest, but she did not have exact figures. The initial tests will be conducted on a small scale, considering current resources for drug rehabilitation services. Details will be discussed with the Education Bureau. The names of consultants, who will draw up the guidelines for schools, will be announced next month. Action Committee Against Narcotics chairman Daniel Shek Tan- lei said the number of female drug takers under 21 increased 18.5 percent in the first quarter of this year, though the total number of users under 21 dropped 5 percent to 1,200. Ketamine is still the main drug being abused, he said. There were five cases in Mong Kok, Tseung Kwan O, Tuen Mun and Wong Tai Sin within 24 hours of the meeting being held. A 24-year-old woman fell unconscious in her home in King Lam Estate, Tseung Kwan O, at about midnight on Wednesday following a suspected ketamine overdose. Police found ketamine in her home and she was arrested for possession of a prohibited drug before being admitted to Tseung Kwan O Hospital for treatment. Three students of Ju Ching Chu Secondary School in Tuen Mun - two aged 14 and one 17 - were arrested yesterday. A 14-year-old and the 17-year- old were charged with consumption of dangerous drugs, while the other 14-year-old was charged with providing such drugs. All three were released on bail and told to report to police a month later. On Wednesday afternoon, a 16-year-old female student at the same school collapsed in the Lung Mun Oasis car park, also following a suspected ketamine overdose. She was admitted to Tuen Mun Hospital and is in stable condition. She was also arrested for consumption of dangerous drugs. Shek noted that drug rehabilitation institutions are overcrowded and his committee is studying how to provide more facilities, particularly with drug testing due to begin in three months. PS33-Centre for Psychotropic Substance Abusers consultant Ho Fung- kuen said it takes about two months for a social worker to identify a drug abuser whereas in the past it took only five to 10 working days. She feared the determination of youngsters to quit would weaken if they did not get immediate attention. Meanwhile, anti-drug enforcers seized 3.4 kilograms of ketamine in two separate incidents yesterday. Customs officers intercepted a man at the Lo Wu border control and allegedly found 3 kilograms of the drug on him, worth HK$348,000. The 48-year- old man will face charges of trafficking in dangerous drugs in Fan Ling court today. A 24-year-old man was arrested when police raided a flat in Shanghai Street, Mong Kok, and seized 400 grams of ketamine.

Financial Secretary John Tsang Chun- wah admitted for the first time yesterday that a three-member committee concluded its search for a new chief executive of the Hong Kong Monetary Authority late last year - months before the government finally announced the retirement of Joseph Yam Chi-kwong.

Investors are welcoming new listings in Hong Kong, with sportswear firm 361 Degrees International getting a warm response after opening its retail book. This comes after China Metal Recycling's retail tranche was oversubscribed more than 44 times. Seven brokerages received margin financing orders of about HK$200 million for 361 Degrees - almost fully covering the retail tranche of HK$217.5 million. "Speculators may shift to invest in the initial public offering market as shares of Lumena Resources Corp [0067] performed well after its trading debut," said Ben Kwong Man-bun, chief operating officer at KGI Asia. The firm received margin orders of HK$40 million for 361 Degrees yesterday. Lumena, which listed on Tuesday, closed yesterday at HK$2.52. That was 26 percent above its offer price, making it the best-performing IPO stock this year. Market response to 361 Degrees was better than expected, Redford Securities head of research Kenny Tang Sing-hing said, but he doubted the subscription would match that of CMR, China's largest scrap metal recycling firm."It has to share the market spotlight with Bawang International, another consumer good producer planning to float in the market," he said. China Qinfa Group, meanwhile, revealed a plan to raise up to HK$630 million in the listing market to finance a coal terminal in Zhuhai and a coal-loading station in Shanxi. The company aims to issue 250 million shares at HK$2 to HK$2.52 each. It is set to go public on July 3 - the same day as shampoo maker Bawang. Qinfa is expected to face fierce competition in attracting investors' interest, market watchers said. Moreover, green energy firm Amber Energy is planning a HK$200 million float, sources said. Its offer price is expected to be between 8.7 times and 11 times. And China Minsheng Banking Corp may sell as much as US$3 billion-worth of stock in Hong Kong by year's end, Bloomberg reported. Thirteen firms are applying to list in the SAR and 15 have already won approval to launch IPOs, according to Paul Chow Man-yiu, chief executive of Hong Kong Exchanges and Clearing (0388).

Hutchison Whampoa (0013) is offering to buy back more than HK$7.6 billion worth of its sterling- and euro-denominated debt early at discounts of up to 16 percent. The ports-to-telecoms conglomerate, controlled by tycoon Li Ka-shing, said it is willing to buy back up to 350 million (HK$4.4 billion) worth of its sterling-denominated notes. The offer applies to Hutchison's Series B 400 million 5.625 percent guaranteed notes due 2026, which the company is offering to buy back at a 16 percent discount, and its Series A 300 million 5.625 percent guaranteed notes due 2017, which it is offering to buy back at a 4.7 percent discount. Hutchison is also willing to buy back up to 300 million euros (HK$3.24 billion) worth of its euro- denominated notes. The offer applies to its 1 billion euros of 4.625 percent guaranteed notes due 2016, which it is offering to buy back at a 4.5 percent discount. "It's an attractive near-term use of cash resources," a Hutchison spokesman said. The offer is open until June 26, with settlement expected to take place on June 30. Calyon is the dealer manager for the buyback. Hutchison has offered to buy back debt several times since the onset of the global financial crisis as it seeks to take advantage of the low-interest-rate environment to lower its financing costs. The conglomerate had consolidated debt of HK$253.88 billion as of December 31, according to its annual report. Hutchison said 33 percent of its borrowings were in euros as of that date, while 6 percent were in sterling.

China:  China might buy more United States treasury bonds, a former governor of the central bank said, but Washington must take action to ensure the safety of foreign countries' assets.

A property unit of Australia's biggest bank Macquarie Group has sold a luxury residential project in Shanghai at below cost. The bank recently disposed of the 26-storey City Apartments to a mainland investor for less than 300 million yuan (HK$340.17 million), sources said. Macquarie declined to comment. Macquarie had bought the property for 400 million yuan four years ago. A source said it managed to sell it for more than the price offered by a previous potential buyer. In April, it was reported that Citic Capital's real estate arm was close to buying City Apartments, a 16,000 square metre residential development in downtown Shanghai, for about 250 million yuan. Citic Capital, an investment arm of the mainland's largest financial conglomerate, Citic Group, had been negotiating to buy the property for months but no deal was clinched, sources said. Citic Capital declined to comment. "As the market in the city recovers, the property was sold to a mainlander who was willing to pay a price higher than 16,000 yuan per square metre," one source said. The sale price was estimated at between 17,000 yuan and 18,000 yuan per square metre, another source said. Built in 2000, the residential tower comprises 90 flats. A source close to the bank said the disposal was part of Macquarie's business strategy rather than market sentiment. The company would like to streamline its business to focus on commercial properties, so it wanted to sell the residential asset as quickly as possible, he said. The mainland property market has started to recover in the past few months, with sales of high-end properties surging in some cities, such as Shanghai. The property unit of United States investment bank Morgan Stanley had offloaded all the units at its 58-unit block at Chateau Pinnacle in Xingfu Road in the former French concession area to individual buyers in the past two months. The units were sold at an average price of 60,000 yuan per square metre, a source said.

Despite the economic slump, mainland information technology and financial services companies are pushing ahead with key investments in Britain, with an eye to accelerating their expansion across Europe, British trade officials said. Initiatives from Huawei Technologies, (SEHK: 1688, announcements, news) , China Central Television, China Mobile (SEHK: 0941, announcements, news) , Crystal Digital Technology, China Construction Bank (SEHK: 0939, announcements, news) Corp and China Merchants Bank (SEHK: 3968) were just the cream of 59 new mainland projects in Britain in the past financial year to March, the UK Trade & Investment said yesterday. Britain's international business development and promotion group ranked China as the eighth-largest source of foreign direct investment during a strong year in which Britain saw a record 1,742 new projects from 53 countries, up 11 per cent from the previous financial year. "China remains a significant investor in Britain despite the challenging economic climate," said Tony Collingridge, the head of the Asia-Pacific team at UK Trade & Investment. "Mainland firms see Britain as a gateway to international connections, including a huge market of 455 million consumers in Europe, and a centre of world-class creativity, innovation and research and development." More than 400 mainland firms are in Britain, where about 85 have set up shop since April 2007. Total mainland investment figures were not provided, but Mr Collingridge said technology and financial services firms had stepped up their expansion and research and development programmes. "Huawei grew its British business further through the addition of a marketing operation. It also forged research and development partnerships with four British universities," Mr Collingridge said. Hangzhou-based, the world's leading business-to-business e-commerce company, has set up its European headquarters in London. Crystal Digital, one of the mainland's largest computer graphics firms and the producer of the 3G imagery and animation used for Beijing's 2008 Olympics bid, also chose London as its launch pad for expanding across the continent. "We expect mainland companies to increasingly look at merger and acquisition opportunities over the next 12 months," Mr Collingridge said. There were 130 new foreign financial services projects in Britain during the financial year, of which 18 were credited to mainland firms. CCB's decision to set up a London subsidiary, which opened on June 1, was the biggest of those new mainland projects, he noted. It was the third wholly owned international subsidiary and the first in Europe for CCB, the world's second-largest bank by market capitalisation. "CCB's decision to expand their presence in London sends a strong signal to the world's financial institutions, showing London remains the world's leading financial and business centre with easy access into Europe," said chief executive Michael Charlton of Think London, the official foreign direct investment agency. Mr Charlton said the British capital was already "the largest recipient of Chinese foreign direct investment of any city in Europe".

June 19, 2009

Hong Kong: The executive head of the West Kowloon arts hub, Angus Cheng Siu-chuen, quit on Tuesday for personal reasons, a week after taking up his new job. The departure of Mr Cheng, whose background as a Disneyland designer had prompted questions about his suitability as head of the West Kowloon Cultural District Authority, raised more issues. Lawmaker Alan Leong Kah-kit said the the authority's board should review its approach. "It's illogical to hire the executive director before the CEO, who is the brain and has the final say," he said. "It would be wasting his time if what he has done could be overruled when the CEO arrives later this year. "The incident sends a powerful signal to Chief Secretary Henry Tang [Ying-yen] and his team that the way they have gone about the arts hub is not correct. But it provides us an opportunity to get it right." Many board members said they were surprised because they had not had a chance to meet the newly appointed head. The authority announced Mr Cheng's resignation last night, saying it respected his decision, and thanking him. An authority spokeswoman said a new recruitment process for the post would begin as soon as possible. Mr Cheng said he was honoured to have worked for the authority and regretted that he had to leave for personal reasons. "I would like to thank the board and colleagues on the authority and the Home Affairs Bureau for their support. I wish the project every success," he said. A source familiar with the situation said a combination of government bureaucracy, media scrutiny and public pressure probably made the job transition difficult for Mr Cheng. "He's a good guy but it was very difficult for him to switch from the commercial world to the government," the source said. "He had a difficult time adjusting." The source said Mr Cheng's resignation was "a bit destabilising" but denied it was a setback. The authority would have to go back to the drawing board and secure candidates for the positions of chief executive and executive director. Authority remuneration committee chairman Sin Chung-kai said he was not worried about finding a successor: "Last time, we did not even have an organisation structure before we looked for a candidate. This time, we can show clearly what the structure will be."

China: Massive policy stimulus should enable mainland to keep growing at a respectable rate this year and next, but a robust recovery is unlikely given the weak global environment and softness in non-government investment, the World Bank said on Thursday. In its quarterly update on the world’s third-largest economy, the bank raised its forecast for gross domestic product growth this year to 7.2 per cent from the 6.5 per cent projected in its previous report in March. The bank welcomed an unfolding surge in government-influenced investment, triggered by Beijing’s 4 trillion yuan (HK$4.5 trillion) stimulus package. And it said more domestic demand was helpful for the world economy. “However, it is unlikely to lead to a rapid, broad-based recovery in China, given the current global environment and the subdued short-term prospects for market-based investment. China’s economic growth is unlikely to rebound to a high single-digit pace before the world economy recovers to solid growth,” it said. Growth next year was likely to be 7.7 per cent, the bank said, offering its first view of next year’s performance. A boom in bank lending in the first five months of the year would support growth in coming quarters. While the full-year outcome might not meet the official target of 8 per cent, it would be “very respectable” given the global setting, the report said. “On current projections it is not necessary, and probably not appropriate, to add more traditional fiscal stimulus this year,” the bank said. With its budget deficit set to leap to 4.9 per cent of GDP this year from 0.4 per cent last year, the government should instead keep some powder dry in case it is needed next year. Policymakers should also have the confidence to emphasise forward-looking policies and structural reforms to promote service-driven consumption and energy efficiency, the bank said. One of the key risks to the bank’s forecast is that market-based investment will be lower than expected in light of excess capacity and poor profit prospects in many industries. A full 6 percentage points of this year’s projected 7.2 per cent GDP growth will come from spending and investment that is either carried out or directly influenced by the government, with additional stimulus from lower tax revenues, the report said. Government-influenced investment rose 39 per cent in the first four months, up from an estimated 13 per cent last year; by contrast, market-based investment rose just 12.6 per cent, much less than last year’s 20 per cent increase. The bank’s definition of government-influenced investment covers utilities, transport, scientific research, water and environmental conservation, education, health care, social security, culture, sport and public administration. It called the medium-term sales prospects for the real estate market reasonably good. But the outlook for some other sectors was less favourable as extensive spare capacity was exerting serious downward pressure on producer prices and profits. “Thus, market-based investment may remain subdued for a while, particularly in manufacturing, where foreign sales make up between one-fourth and one-third of the total,” the report said. With net exports set to subtract from growth this year, after contributing 0.8 percentage point of last year’s 9.0 per cent rise in GDP, the bank forecast that mainland’s current account surplus would shrink to 8.0 per cent of GDP this year from 9.8 per cent. On the capital account, the bank is now pencilling in whopping outflows of US$170 billion this year, up from just US$7 billion last year, due to factors such as outward foreign direct investment, losses on foreign assets, repatriation of profits and “hot money” outflows. As a result, the pace at which mainland accumulates official foreign exchange reserves will slow dramatically. The bank expects they will rise by US$218 billion this year after increasing by US$419 billion last year and US$462 billion in 2007. However, the report noted that estimates of underlying capital flows are cloaked in uncertainty. As recently as March, the bank was assuming that mainland’s capital account would be in balance this year. In an illustrative scenario of mainland’s medium-term prospects, the bank said exports could grow 9 per cent a year over the next decade, 10 percentage points less than in the past 10 years. That in turn would lower GDP growth by 2 percentage points a year. “This is significant, but not dramatic, compared to average GDP growth of 10 per cent in the previous decade,” the bank said.

Actress Shu Qi (R) and director Feng Xiaogang attend the opening ceremony of the first Cross-Straits Film Show in Taipei of southeast China's Taiwan, June 17, 2009. Movie "If You Are the One" by Feng Xiaogang was the first to be projected in the film show of movies from the Chinese mainland and Taiwan.

Airbus has so far edged itself into the top for plane orders on Tuesday at the Paris Air Show and bettered its American rival Boeing, despite the global recession this year and recent plane crash, local media reported on Tuesday. Airbus has secured a contract with Qatar Airways for 24 medium-haul A320 planes worth US$1.9 billion, followed by new orders for commercial planes from Vietnam Airlines. The aerospace giant on Tuesday announced a private order for an A320 Prestige high-end business plane, the first Asian buyer for the high-end business aircraft. However, the planemaker still faces the plane crash concerns. Airbus, which hold a press conference at Paris Air Show Tuesday, defended its response to the recent crash of an Air France Airbus airliner and insisted their planes were safe, giving an upbeat assessment of the company prospects. Starting on Monday, the Paris Air Show celebrates its 100th anniversary and runs through June 21.

US reform 'will secure Chinese investment' - A sweeping plan for financial regulation unveiled late last night (Beijing time) by US President Barack Obama will offer better protection to China's investments in that country, Chinese experts said yesterday.

China's potential wind power resources alone are sufficient to meet its entire electricity demand, the country's top wind power research institute has said. 'Wind can power up entire nation' Xiao Ziniu, director of the National Climate Center (NCC), said China's onshore wind power potential has been evaluated at between 700 gW and 1,200 gW, exactly within the range of the country's 790 gW power generating capacity for 2008. The NCC released the numbers after 10 of its experts carried out an intensive investigation of wind power resources across all the provinces of China. "This result assures us that the country's entire electricity demand can be met by wind power alone," said Xiao, whose institution functions under the China Meteorological Administration. The evaluation also revealed that China has 250 gW of potential offshore wind power capacity. Some regions, Xiao said, had more wind power potential than previously thought. 'Wind can power up entire nation' China is the world's second largest wind power market, behind only the US, in terms of newly installed capacity. The Xinjiang Uygur autonomous region was estimated to have over 100 gW of wind power generating potential, much more than was estimated earlier. The new investigation methodology used digital simulation, which resulted in a significant increase in the evaluation potential compared to the 280 gW onshore resources potential evaluated in 2004, Xiao said. "It greatly strengthened experts' confidence about the country's wind power prospects," he said. Zhang Guobao, the director of the National Energy Administration, had said earlier that China would soon devise favorable policies to develop mega wind power farms, each with over 10 gW capacity. The National Development and Reform Commission allocated 280 million yuan to the NCC to conduct the investigation and work out a development plan for wind power resources by 2011, Xiao said. "We set up 400 wind towers to test and simulate the wind energy data so as to analyze the key cities with huge available wind resources," said Xiao. "The result will come out in July. The next step will be to test the specific wind power resources in terms of different districts for these key cities." "The fresh assessment will help the country choose wind power bases more precisely," he said. By 2008, China was the world's second largest wind power market, behind only the US, in terms of newly installed capacity. China added 6 gW of new capacity in 2008, bringing total capacity to 12 gW. The country's goal to raise its wind power generation capacity to 100 gW by 2020 was still achievable despite the economic downturn, Shi Lishan, deputy director of Renewable Energy Department of the National Energy Administration told China Daily in a previous interview. Zhang said China would build several wind farms with over 10 gW capacities in the Inner Mongolia and Xinjiang Uygur autonomous regions, and Gansu, Hebei and Jiangsu provinces, over the next decade. Xiao said that Jilin and Heilongjiang provinces in northeast China have also started building 10 gW wind power bases. "The construction of wind power bases is changing fast," he said. "But one thing is for sure, China will accelerate the construction of wind power bases in areas that are proved to have huge wind power potential." The Xinjiang wind power generation base in Hami will produce 20 gW of electricity. Inner Mongolia will have a 20 gW and 30 gW wind power base in western and eastern parts of the region, respectively. Hebei and Jiangsu will each have wind power facilities capable of generating 10 gW although 70 percent of Jiangsu's wind power capacity will come from offshore operations.

More than half of nearly 800 wealthy Chinese recently polled believe the widening gap between the rich and poor is also creating an emerging upper class in the country. The survey, carried out by lifestyle magazine Best Life, interviewed 792 rich Chinese in 62 cities from 27 provinces through local chambers of commerce. Those interviewed were private entrepreneurs with personal assets of more than 10 million yuan ($1.4 million). More than 80 percent of those polled also said the income gap between rich and poor in the country was too wide, the magazine reported this week. "In recent years, the huge gap between rich and poor has become an indisputable fact in China," Li Wei, director of the social development department at the Chinese Academy of Social Sciences (CASS), told China Daily Wednesday. "Our research has repeatedly shown this and it is not surprising that rich people themselves feel the same way," Li said. Those polled in the latest survey defined the upper class in a variety of ways. Some said the upper class included the yuppie group, while others said the upper class terminology refers to high-society networks, luxurious lifestyles and even greater social responsibility, the magazine reported. The country's widening income disparity is considered to be one of its most pressing social problems, with the average income of 20 percent of the richest Chinese families 17 times higher than the poorest households, the CASS reported in its 2009 Blue Book on Chinese Society. China's rapid economic growth has caused the number of rich people to rise swiftly. By the end of 2007, the country had 415,000 wealthy people, a 20.3 percent jump from the previous year, according to the third annual Asia Pacific Wealth Report released by Merrill Lynch and Capgemini. The rich people in the report were those who owned more than $1 million in property, excluding their own residence. The average wealth of rich Chinese is $5 million, the report said. Still, Li maintains the upper class in China is distinct from the merely wealthy. "I agree that there is such an elite group in China," he said. "Wealth is just one of the entry passes into high society and only a small number of people with wealth, social status and power can be called the upper class." Most of them are business tycoons in both private and State-owned enterprises, as well as a number of powerful officials, Li said. "This social differentiation is inevitable in China because of economic development," he said. "It can be a stimulus for social development as long as every one has equal access to wealth." Some entrepreneurs acknowledge the presence of a wealthy class. "I believe there is an upper class in China but I am not part of it," Kevin Zhou, 31, a private entrepreneur of a large general motor manufacturer in Chongqing, told China Daily Wednesday.

Foreign direct investment (FDI) has been in decline for eight months, but the size of the fall in May was smaller than the one in April, probably signaling an easing off.

June 18, 2009

Hong Kong: A judge in a bitter divorce case involving a tycoon and his wife, and assets estimated at HK$870 million, has called for a review of divorce legislation, saying present laws do not allow parties to seek settlements in Hong Kong regarding their assets if they get divorced abroad. At present, once Hong Kong recognises a divorce procured overseas, the city's courts can no longer rule on either the husband's or the wife's application for ancillary relief, because in recognising the divorce, the marriage is officially dissolved. "Serious injustice could arise from this jurisdictional limitation," Mrs Justice Doreen Le Pichon said. "For example, where the marriage is terminated by foreign proceedings in which no financial order is made, the Hong Kong courts would have no power to grant financial relief even where there are matrimonial assets within the jurisdiction." She said Britain addressed the issue by introducing Part III of the Matrimonial and Family Proceedings Act 1984, which gave English courts the right to grant ancillary relief to parties divorced overseas. She said she would call for an immediate change to the legislation to give Hong Kong courts jurisdiction in appropriate cases to deal with ancillary relief even after recognising an overseas divorce. Mrs Justice Le Pichon gave her views in a judgment yesterday on a divorce involving a husband and wife, identified only as YJ and ML in court documents, whose combined wealth was estimated at HK$870 million in May last year. The judges hearing the case at the Court of Appeal - Mrs Justice Le Pichon, Mr Justice Peter Cheung and Mr Justice Arjan Sakhrani - decided by a majority to recognise a divorce that the husband had applied for in Shenzhen. The effect of the ruling is that the wife can no longer seek relief in Hong Kong regarding unresolved assets, including HK$66 million worth of assets in Hong Kong. However, they noted she may still pursue her claims on the mainland. The couple were born on the mainland. They got married in Shenzhen in 1992, moved to Hong Kong in the early '90s and have two sons. They had considerable property and shares in companies on the mainland and in Hong Kong.

The Link Real Estate Investment Trust (0823) reported an increase of 13.5 percent in full- year distributable income on strong retail rental revisions and contributions from completed asset enhancement projects. The firm, which manages retail and car park facilities in public estates, said distributable income for the year ended March 31 was HK$1.819 billion, compared with HK$1.602 billion the previous year. The company has also approved a final distribution per unit of 43.13 HK cents, compared with 38.29 HK cents a year earlier. The total distribution per unit for the year amounted to 83.99 HK cents, up 12.9 percent. The distribution for the year of 83.99 HK cents represents a distribution yield of 5.5 percent based on the market price on March 31 of HK$15.32. The Link, which was besieged by protesters demonstrating against working hours for car park staff before its press conference, said none of its employees was involved in car park business. This work was outsourced, according to chairman Nicholas Sallnow-Smith. He said the company was generating jobs in Hong Kong, and planned to expand its property investment by HK$2.6 billion over the next few years. That will comprise HK$1.2 billion to complete 11 asset enhancement projects in the next two financial years and HK$1.4 billion for a further 11 asset enhancement projects. The average base rent rose 11.8 percent to HK$28.40 per square foot from a year ago and the retention rate grew 1 percentage point to 72.9 percent. Asked if the firm will consider cutting rents, Sallnow-Smith said: "It's always one of the discussions with our individual tenants." On British hedge fund The Children's Investment Fund dumping its shares of The Link recently, Sallnow-Smith said only: "Our relationship is fine."

Two students of Christian Zheng Sheng College listen as their headmaster, Alman Chan (wearing a blue shirt, at the rear), speaks with legislators Cheung Man-kwong and Tanya Chan after a Legislative Council meeting to discuss relocation of the college to a site in Mui Wo previously occupied by New Territories Heung Yee Kuk Southern District Secondary School. A vacant school in Mui Wo is likely to be made available to the Christian Zheng Sheng College, which helps rehabilitate students with drug problems, despite huge opposition from village residents. After meeting Chief Secretary Henry Tang Ying-yen, education sector legislator Cheung Man-kwong said Mr Tang had expressed support for the college's move to a larger premises in Mui Wo so it could accommodate more students. "Mr Tang said the vacant school was an appropriate site for the college. He also appealed to Mui Wo residents to calm down and support students of the drug rehabilitation school with a loving heart," Mr Cheung said. Since December 2006, the college and Mui Wo School have vied for the use of the vacant New Territories Heung Yee Kuk Southern District Secondary School, which ceased operations in September 2007. But a source said the government was quite determined to give the site to the college. "It is quite sure that the college will get the site." About 200 Mui Wo residents marched in Central on Monday to protest against plans to re-site the college in their village. Hundreds also vented their anger on Sunday during a consultation session. Island district councillor and Mui Wo Rural Committee member Rainbow Wong Fuk-kan said residents would not give up. "We will continue to look for other sites for the college," she said. Undersecretary for Education Kenneth Chen Wei-on voiced his support for the college's relocation to the Mui Wo site at a Legco education panel meeting yesterday. Mr Chen was the first top education official to publicly back the move. "We received submissions from different parties expressing interest in running education services at the vacant school site," he said. "We have considered different factors including public concern about drug abuse problems. We think the site should be given to the Christian Zheng Sheng College." Addressing Mui Wo residents' demands to use the vacant school, Mr Chen said there was already enough school places for students in the town. Mr Chen said the government's aim was to help students with drug problems return to mainstream schools in the shortest time frame possible. Some students at Christian Zheng Sheng College are placed in the school under probation orders for two years, but most opt to stay longer to complete Form 5. Daniel Shek Tan-lei, chairman of the Action Committee Against Narcotics, criticised Mr Chen for lacking knowledge about providing education services for young drug abusers. "Students who only take drugs for fun can return to mainstream schools very quickly," Professor Shek said. "But some students turn to drugs because of complicated behavioural, family or emotional problems, and they find it hard to survive in mainstream schools. These students should be put in schools for students with special needs." Meanwhile, 31 lawmakers, mostly pan-democrats, yesterday signed a letter urging the government to give the vacant site to the college, and the letter will be submitted to Chief Executive Donald Tsang Yam-kuen later this week. Democratic Alliance for the Betterment of Hong Kong and Federation of Trade Union lawmakers have not signed the letter.

New private diesel cars will be on sale in Hong Kong next month for the first time in more than a decade. Audi's distributor Premium Motors confirmed that one of its latest batch of Euro V diesel-engined cars, the Audi Q7 3.0 TDI Quattro, had passed the government's stringent emissions standards and would be arriving in about a month. Motor traders began a global hunt for suitable diesel cars after the Environmental Protection Department introduced what it called "improved flexibility in vehicle emissions standards" in January. Diesel engines are considered more powerful and fuel-efficient than petrol engines, but in the past they were not welcomed because they emitted high levels of particulates and smog-inducing nitrogen oxides. But carbon monoxide emissions from Audi's latest diesel engine were more than six times lower than the emissions standard for a Euro-V petrol car, nitrogen oxide emissions were 16.7 per cent lower, and particulate levels 78 per cent lower. Premium Motors managing director Chong Got said the same diesel engine had been running in Europe for three years, but it had been difficult to convince Audi to alter the engine's specifications just to fit Hong Kong's emissions requirements because such a move would only boost sales by several hundred vehicles a year. "The decision was made beyond business concerns," he said. "The manufacturer values Hong Kong as a market; they are more concerned in boosting the brand's name and goodwill." Audi would introduce more diesel models in the future. The Audi Q7 was expected to cost about HK$800,000 - 10 per cent more than its petrol counterpart. But the diesel model had better acceleration and was also about 30 per cent more fuel-efficient than the petrol model. Diesel sells for HK$8.89 per litre - about two-thirds the price of petrol in Hong Kong. Motor Traders Association chairman Michael Lee said he did not believe diesel cars would become very popular in the short term because most manufacturers were reluctant to alter their diesel engines for a small market like Hong Kong, and others were exploring alternative green vehicle models like hybrids and electric cars. Under the existing transport policy, a person can only register a diesel-engined car as commercial vehicle or a cargo van. Owners of commercial vehicles have to spare a third of their cabin space for cargo storage and cannot enter certain places, such as Mid-Levels, at certain times, although they also enjoy a big waiver on the first-registration tax.

Security guards use a metal detector to check visitors before a meeting at the Legislative Council yesterday. The new security measures at the Legislative Council building, which came into effect yesterday, will cost HK$45,000 a month. Legco secretary general Pauline Ng Man-wah said that the cost included the installation of a door-frame metal detector at the public entrance, a hand-held metal detector and the hiring of three professional security guards. It was expected that the height of glass barriers in the public galleries would be increased by the end of the year at the earliest, she said. The legislature reviewed its security measures after a mentally ill man slashed himself with a box cutter in the chamber during the weekly sitting on Wednesday last week. The 53-year-old man, surnamed Ching, was arrested for "contempt of Legco". About 50 members of the public went through the new security checkpoint yesterday. Ms Ng believed the new arrangement would not discourage the public from observing Legco meetings, adding that the first day of operation was satisfactory. "We found the first day arrangement quite smooth and it did not take too much time for security checks. It took less than two minutes for each individual," she said. Security measures would be reviewed at the end of this month and the secretariat would collect views from users before making a decision about long-term measures. Members of the public are required to store all baggage in lockers and walk through a door-frame metal detector before they proceed to Legco public galleries. Guns, pointed or edged weapons, sharp objects and any items which could cause injury are not permitted inside the building. Food and water are also not allowed. Tomorrow, the Architectural Services Department will submit a design for higher glass barriers in public galleries. The Legco commission is to meet next month to further discuss the proposed design.

Star Cruises (SEHK: 0678) has proposed using the China Merchants Wharf in Kennedy Town as an alternative terminal for its fleet, which cannot be fully accommodated at Tsim Sha Tsui's Ocean Terminal. But while Central and Western District Council members generally welcomed the idea, saying it would revitalise the waterfront, some councillors worried that the absence of supporting infrastructure would frustrate visitors and might aggravate traffic congestion. In an informal meeting with district council members yesterday, Star Cruises said the China Merchants Wharf was appropriate since it had just been refurbished and strengthened and could accommodate vessels of about 30,000 tons. The company said about 800 passengers would board at the pier each day. Passengers were expected to disembark from 8am to 9.30am and board from 4pm to 6.30pm, and would be transported to and from Tsim Sha Tsui or Sheung Wan in 12 to 16 shuttle buses. A large tent would be set up for immigration facilities. Councillors were told that the company would promote cultural features and heritage in the district during cruises. Council vice-chairman Stephen Chan Chit-kwai said it had been planning to revitalise the waterfront, and hoped the proposal would boost the district's economy and make the waterfront more vibrant. But he urged the company to direct its shuttle buses to the Western Harbour Tunnel to avoid causing serious traffic congestion. Another councillor, Tanya Chan of the Civic Party, urged the government to explain details of the proposal. "The pier currently has no supporting facilities," she said. "Is it safe for passengers? Would the government monitor the project? The government should inform the public of details clearly." A Tourism Commission spokesman said Star Cruises would soon consult the district council formally. The government would help identify berthing arrangements before the city's second cruise terminal was completed at Kai Tak by 2013, he said.

A nurse from United Christian Hospital has become the first member of the frontline medical staff to be hit with the human swine flu. However, Hospital Authority director Leung Pak-yin said it was not immediately clear whether she had contracted the virus from a 20-month-old baby she attended or from the community. The nurse developed minor flu symptoms on Saturday but remained at work until she developed fever on Tuesday and was taken into isolation for further laboratory testing. A fifth secondary school was closed yesterday after a 16-year-old schoolgirl from Evangelize China Fellowship Saint Too Canaan College in Kwun Tong was confirmed to have human swine flu. Meanwhile, one parent and 26 more Australian International School students have tested positive. The school was closed yesterday after two students had come down with the disease. An 18-year-old student from Hong Kong International School in Tai Tam was also among the confirmed cases, but she had already stopped attending class before developing the symptoms. The city had a record high 54 new confirmed cases in a single day, bringing the tally to 172 so far. Health authorities have also scaled down their "preventive measures" to mitigation phase from today. In view of the increasing number of local infections, the government has stopped contact tracing for air passengers, and for close contacts of confirmed cases they will seek diagnosis from the designated clinics and only send patients to hospital if their test result is confirmed. "Since our isolation measures no longer work in preventing local infection, we will focus our resources on treating confirmed patients instead," the Centre for Health Protection controller Thomas Tsang Ho-fai said. But he said it was still not the time to close all secondary schools. "We are not at the level to decide immediately that all secondary schools should be closed. However, we are assessing the situation very closely on a daily basis." Speaking after a Legislative Council meeting yesterday, Secretary for Food and Health York Chow Yat-ngok said all schools should be prepared for closure any time, even if the government had yet to issue the order. "If there are many schools and a high number of students coming down with the infection, we will of course consider it [closure of all schools]. However, some schools will start their summer recess in early July which is about three or four weeks from now." He added all schools should be ready for the possibility of ending the school term early. Meanwhile, the mainland's health ministry yesterday announced its worst- case scenario contingency plan which will restrict movement in residential areas and shut down entertainment centers to prevent the H1N1 flu strain from spreading. With 264 cases as of yesterday, the ministry's new plan seeks to address possible outbreaks in residential neighborhoods. Australia yesterday raised its swine flu alert level to the newly created "protect" stage as the number of cases climbed above 2,000.

Testimony in the Nina Wang Kung Yu- sum probate battle about hundreds of millions of dollars changing hands over massages and fung shui services has prompted lawmakers to question whether the proper taxes are being paid for these incomes. Undersecretary for Financial Services and the Treasury Julia Leung Fung- yee said she could not comment on individual cases but hinted that press reports about the highly publicized court showdown would be looked into by tax investigators. Legislator Jeffrey Lam Kin-fung had earlier asked for the number of self- employed people, including fung shui consultants, paying taxes and on whether cases of tax evasion are prevalent. However, Democratic Party lawmaker Lee Wing-tat was more direct. "In a recent estate case in court, it showed one Mr Chan and another gentleman, through the provision of fung shui advice and massage services, had received very huge incomes," he said. It has been alleged in the Court of First Instance that at least HK$700 million in cash from Wang was secreted in trucks at night and given to the fung shui consultant. Leung told lawmakers the Inland Revenue Ordinance states that any person earning income by providing services in his personal capacity is regarded as carrying on a business and is required to apply for registration of business and file tax returns. She said the Inland Revenue Department's intelligence team gathers information before dispatching field teams empowered to obtain personal and bank records to reconstruct an auditee's finances. Gifts such as lai see cannot be taxed by the government, Leung added. However, Association of Chartered Certified Accountants international council member and Islands district councillor Amy Yung Wing-sheung said gifts are still scrutinized by auditors with auditees required to detail the nature and circumstances of the gift. "If there is any hint that the gift is connected to services rendered, it is taxable," she said. City University's department of accountancy associate professor Grant Richardson said bonuses for a job well done are also subject to profits tax. He said self-employed people with no fixed prices for their services are required to report their incomes to the Inland Revenue Department, but added that in any cash transaction where the onus is on the income earner to honestly report the income there is always the possibility of tax evasion. A total of 1,862 cases of tax evasion, amounting to HK$2.56 billion, were processed last year. This compares with HK$2.54 billion in 2007 and HK$2.44 billion the year before, Leung said. She said accidental failure to file an accurate tax return can result in a HK$10,000 fine plus treble the tax undercharged, while willful evasion carries a fine of HK$50,000 and treble the tax undercharged as well as a prison term of three years.

A Secondary One schoolgirl was rushed to hospital yesterday after collapsing on the rooftop of a Tuen Mun car park following a suspected ketamine overdose. It was the fourth incident of apparent teenage drug abuse in a month. The 16-year-old student was with two other schoolgirls when she collapsed in the Lung Mun Oasis car park. She was wearing the uniform of the Ju Ching Chu Secondary School in Tuen Mun. The girl's parents came from Vietnam but she was born in Hong Kong. Her father is a construction worker and her mother a housewife. Her 20-year-old sibling said she could not believe the drug claim as her sister is normally well-behaved. According to a Mrs Cheung, a resident of the housing estate, the three girls were chatting with a man in the car park around 2pm. The 16-year-old complained of a headache and then sweated and vomited before falling unconscious. Her boyfriend, who was called to the scene, and the other two girls tried to awaken her but in vain. The police arrived after the two girls had fled, leaving the girl and her boyfriend on the rooftop. She regained consciousness after ambulance staff performed first aid and was in hospital last night under observation. School principal Hong Chi-keung expressed shock, saying it was the first time any student of the school had been involved in alleged drug abuse. The girl's academic and discipline grades are average though teachers say her attitude in school is good. Hong said the school has held anti- drug forums and students had been warned about the danger of drugs. In addition, teachers often patrol the neighborhood during lunch breaks. However, a student of the school doubted the effectiveness of the talks. "They [drug users] may have become addicted to the drugs and have not yet felt the danger. They may consider the talks to be just a threat or an exaggeration," the male student said. An Education Bureau spokesman said it is very concerned about the matter and will liaise closely with the school.

China: The China Securities Regulatory Commission will pick several small-cap companies to spearhead the resumption of initial public offerings on the mainland after a nine-month hiatus, a modest start intended to avert a huge liquidity drain on the volatile market. According to sources close to the CSRC, the regulator is set to approve the first batch of listings at the weekend, with a kick-off of new share sales before June 25. Among the top candidates, Guilin Sanjin Pharmaceutical Group and Zhejiang Wanma Cable edged closer to launching small offerings on the SME board of the Shenzhen Stock Exchange with their underwriters awaiting official nod from the regulator, sources said. The decision underscores the CSRC's fears of a sharp fall in the market, which may not be able to digest large flotations by companies such as Everbright Securities and China State Construction Engineering. The regulator planned to allow either Everbright or China State Construction to pioneer the renewed float of initial public offer shares, since it would give the huge state-owned companies much-needed funds for expansion. But it made a U-turn because of concerns of a hefty drop on the Shanghai and Shenzhen bourses. "The CSRC is still in a dilemma," said Citic Securities analyst Sun Chao. "It may still want to use small IPOs to test the market in order to minimise the damage to the existing holdings." Beijing suspended listings in September last year to boost the weak market. Last week, the CSRC said the nine-month ban was lifted, unveiling revised listing rules under which retail investors are given a better chance to win lucrative new shares. The Shanghai Composite Index has jumped 54.33 per cent so far this year, buoyed by speculative capital, though some analysts predict a correction is looming. Thirty-three companies had received approval to sell new shares before the suspension. Among them, China State Construction is expected to raise more than 40 billion yuan (HK$45.2 billion) by floating 12 billion shares, while Everbright seeks 11.5 billion yuan in proceeds. Analysts said the listings would spark a subscription spree, because highly profitable new shares are always the darlings of mainland investors. New offerings normally surge on the first trading day, since the shares are priced artificially low to facilitate fund-raising by the state-owned company. Under the new mechanism, institutional investors can bid for new shares through either online or offline systems, a move to restrict them from obtaining too many flotation shares. Analysts said retail investors would dump a huge number of existing shares on the market to reserve cash for the new share offers. According to their statements earlier, Guilin Sanjin plans to offer 46 million shares, expecting to net 630 million yuan, while Zhejiang Wanma intends to float 50 million shares to raise 340 million yuan.

Faced with falling exports, the government says it will try to further revive domestic consumption and maintain stable growth in investment. China's economy was showing more positive signs of a recovery but was at a critical juncture, the central government said yesterday after a cabinet meeting. The State Council, following a meeting chaired by Premier Wen Jiabao, warned that the foundation of the recovery was not firm enough yet and it was necessary to step up measures to promote growth. "The current economic performance has started to show positive changes, favourable and positive factors are increasing, and the overall situation has stabilised and is moving towards the good side," the cabinet said in a statement posted on the government website. But the statement also noted that "the foundation of the economic recovery is not firm, and that there are many uncertainties as some regions, some sectors and some companies still faced difficulties". The cabinet meeting, which was called just two days after the government completed its week-long release of economic data for May, agreed that the government would stick to its proactive fiscal policy and moderately easy monetary policy. Official data released in the past week showed that factory output, retail sales, fixed-asset investment and bank lending all accelerated, while a decline in consumer prices slowed last month. But there was a sharper decline in exports and foreign direct investment. The statement noted that investment growth was accelerating, consumption maintained a rapid and steady increase and domestic demand played a stronger role in boosting economic growth. Agricultural and industrial production grew, regional co-ordinated development was making progress, the financial market was stable and investor confidence stronger. The cabinet cited the slump in exports, overcapacity in industrial production, declining corporate profits and fiscal revenue and rising unemployment as evidences of difficulties. The better than expected economic data has strengthened market expectation that the world's third-largest economy could see an early recovery, helped by Beijing's massive spending programme. The mainland's two stock exchanges ended higher yesterday, boosted by the bullish outlook on the economy. The Shanghai Composite Index closed up 1.23 per cent at 2,810.123 points. Still, the State Council statement appealed to officials to prepare for long-term difficulties. The cabinet stressed that the country still faced a grim external environment for growth, citing weaker overseas demand and rising trade protectionism. It reiterated that the government would try to further revive domestic consumption and maintain stable growth in investment, including subsidies for the purchase of home appliances and cars in rural areas. Policies would be launched to encourage inflows of foreign direct investment, which have slowed in the wake of the global slowdown, while encouraging domestic companies to invest overseas, the cabinet said, without elaborating.

China Investment Corp (CIC), the country's US$200 billion sovereign wealth fund, is in the midst of a global recruiting campaign and is allocating more funds to asset manager partners abroad. The twin moves marked its emergence from a hiatus while it kept a relatively low profile, when the two-year-old fund was risk-averse and hoarded its cash, and could lead to some substantially bigger indirect investments, analysts said. CIC committed A$200 million (HK$1.23 billion) to a financing facility for troubled Australian company Goodman Group, which could end up leaving the fund with 8 per cent of the largest industrial-property trust in Australia, Reuters reported. Earlier this month, CIC subscribed for US$1.2 billion worth of shares in Morgan Stanley, increasing its stake in the American investment bank to 9.86 per cent. The mammoth fund, with the authority to invest US$90 billion overseas, reportedly also offered to acquire a minority stake in Italian energy firm Enel. In the latest sign that CIC is becoming more aggressive, the fund, which employs about 200 people, said on its website yesterday it was seeking new staff in 33 categories ranging from risk management to hedge fund investment. "I think it's correct to say that there has been forward momentum after a significantly long hiatus [for CIC]," said Peter Alexander, a principal at fund industry consultancy Z-Ben Advisors. "Today's announcement that they would be looking for additional people is another clue that CIC is sort of back at the forefront." CIC, created with the mandate of diversifying China's huge foreign- exchange reserves away from US-dollar-denominated debt instruments, had held a cash position of about US$70 billion for most of the past year amid the global market turmoil, Mr Alexander said. Now, with markets looking more stable, the fund is flexing its muscles. "They are doing two things, from what we understand. Step one is to allocate investment to a batch of global asset managers that were picked last year but not funded, thanks to ensuing market conditions," said Mr Alexander. Felix Chee, an adviser to CIC, told Bloomberg yesterday in Monaco that the fund aimed to allocate an unidentified amount of cash to designated hedge funds by the end of the year. "We will have a preference for managed accounts," he said. "The platform would like a core of single-manager funds and funds of funds." Mr Alexander said the first batch of asset managers chosen totalled about 15 and he foresaw a grander scheme to follow. "Once they complete the funding of these managers picked last year, CIC would probably become more biased towards what we call in industry terms a 'passive investing' practice," he said. Xu Mingqi, a professor at the Shanghai Academy of Social Science, said passive investing fitted CIC's strategy as a sovereign wealth fund.

Coca-Cola, General Electric and Wal-Mart Stores are among United States-based companies that might seek to list on China's stock exchanges, UBS said. John Tang, a UBS strategist, said he expected a dozen western companies with a "strong presence" in China to offer shares in the yuan-denominated A-share market. "An A-share [initial public offering] allows foreign companies direct access to much-needed [yuan] funding," Mr Tang wrote in a note to clients. The US companies would benefit from higher valuations on the mainland's stock exchanges, he said. The Shanghai Composite Index has rallied 52 per cent this year, boosted by increased lending and prospects for a recovery in Asia's biggest economy. The index trades at 28 times reported profit, twice the price-earnings ratio of the S&P 500 Index. The mainland would gain by expanding choices for its investors, improving corporate governance and helping the exchanges become more "internationally oriented", Mr Tang wrote. Besides Hong Kong-listed stocks and mainland companies, the central government might allow western companies in the consumer and manufacturing industries to offer shares, Mr Tang said. Donald Straszheim, who runs Straszheim Global Advisors, said US companies might not be interested in listing on the mainland. "China still does not have a sufficiently robust history of equity market stability, either in terms of performance or in terms of rules and regulations," he said. "Until that is the case, I can't see any significant foreign company doing [initial public offerings] in China," Mr Straszheim added. The central government said as early as November 2001 that it might allow foreign companies to list on its domestic bourses. HSBC Holdings (SEHK: 0005, announcements, news) chief executive Michael Geoghegan said last month the bank was looking forward to listing its shares in Shanghai when local rules permitted. NYSE Euronext, the world's largest owner of stock exchanges, has the central government's support for listing in Shanghai, chief executive Duncan Niederauer said last month. Everbright Securities, Zunyi Titanium and Sichuan Expressway may be among the first domestic companies to sell shares publicly on the mainland this year as the government prepares to reopen equity fund-raising activities, which it stopped last year. The companies were working on final documents required for regulatory approval to offer stock in Shanghai or Shenzhen, sources said.

China Qinfa Group, the mainland's largest non-state-owned coal trading and logistics firm, is selling its expansion story to investors this week, hoping to raise up to HK$630 million. The Guangzhou-based company plans to sell 250 million new shares at HK$2 to HK$2.52 each and use the proceeds to finance construction of a coal handling terminal. The group sold 6.3 million tonnes of coal last year, or 1.2 per cent of total coal sales by non-state firms and 0.4 per cent by all companies in an extremely fragmented market, its preliminary listing prospectus showed. Sales volume was 21.3 per cent less than in 2007 amid falling demand from power firms as economic growth slowed in the second half. In the first four months of this year, coal sales dropped 78.9 per cent year on year to 538,000 tonnes as talks between power and coal producers over this year's supply stalled. But Qinfa said sales rose in April to 274,000 tonnes, compared with the monthly average of 88,000 tonnes in the first quarter. It posted a net profit of 330.69 million yuan (HK$374.84 million) last year. Excluding a 97.1 million yuan one-off gain from selling a small stake in an Australian coal mine, underlying pre-tax profit grew only 20 per cent, against a 59.6 per cent rise in net profit including the gain. A sharp drop in coal prices last year led the firm to book a 31 million yuan inventory write-down. It also posted a loss in the first quarter of this year, but that was almost offset by a profit in April. While there was no comparable listed firm in Hong Kong, as the others are all coal producers, analysts said Qinfa's selling price, at 6.7 to 8.5 times its earnings last year, was valid. "I think the pricing is reasonable and its share price may rise to a price-earnings ratio of 10 times," said Redford Asset Management head of research Kenny Tang Sing-hing. Triskele Capital chief investment officer Tsuyoshi Shiba said a 20 per cent discount to the valuation of coal producers would be reasonable for coal traders. "Compared with coal producers, the earnings outlook for traders is cloudier since it is hard for investors to forecast the firm's inventory management, which is key to a trader's profitability," he said. Coal mining majors China Shenhua Energy (SEHK: 1088, announcements, news) and China Coal Energy (SEHK: 1898) are trading at 16.7 times and 14.65 times last year's earnings respectively, compared with 6.7 times for the smaller Yanzhou Coal Mining (SEHK: 1171). Qinfa bought 46.6 per cent of its coal from traders and the rest from miners last year. About 75 per cent of its revenue came from power generators, 8.9 per cent from coal traders and 15.7 per cent from cement and other producers. In addition to chartering vessels, Qinfa owns five dry-bulk vessels with a combined capacity of 281,717 deadweight tonnes. About 62.9 per cent of its sales were moved by its own vessels, and the rest by chartered ones. To relieve a bottleneck at coastal ports in Guangdong, the firm plans to build a 1.5 billion yuan coal terminal in Zhuhai to provide transshipment, storage and blending services. It plans to take a 60 per cent stake in the project, and state-owned Qinhuangdao Port has signed a preliminary deal to evaluate taking up the rest. The Zhuhai terminal will take 30 months to build and is expected to have 20 million tonnes of annual throughput capacity. Analysts said Qinfa's integrated operation allowed it to tighten its relationships with customers, but any significant expansion of its sales volume would only come when the Zhuhai terminal was completed. Its small size, despite being the largest among non-state players, may also limit its gross margin, which fell to 13.3 per cent last year from 15.6 per cent in 2007, they added. "In coal trading, Qinfa is relatively big in scale, but the traders generally don't have much bargaining power against their mega-sized customers, the power producers," said Mr Shiba.

China Mobile (SEHK: 0941) and Taiwan's Far EasTone Telecommunications may seek new ways to set up a joint venture on the mainland to sell mobile applications, according to Douglas Hsu Shu-tong, the chairman of Far EasTone. The news on a proposed joint venture came on the heels of Far EasTone shareholders' approval on Tuesday of the disposal of 444 million new shares to China Mobile at NT$40 (HK$9.42) each. The plan is part of the strategic alliance between the two companies. "The setting up of the joint venture will be the second step in the China Mobile-Far EasTone alliance, after China Mobile successfully wins the regulatory approval to take a stake in Far EasTone," Mr Hsu said after the general meeting of Asia Cement (China) Holdings. "Our plan is to initially use the net proceeds from China Mobile to fund the joint venture. But we may discuss other ways of setting up the joint venture, as that is much more important for us." China Mobile and Far EasTone entered into a strategic alliance in April. It was agreed that China Mobile would subscribe to Far EasTone shares and the two companies would set up a joint venture to enter the fields of mobile applications and value-added services. China Mobile will hold a 51 per cent stake and Far EasTone a 49 per cent stake in the joint venture. "We hope the joint venture will help Taiwanese software companies to enter the much bigger mainland market," Mr Hsu said. He said the next step would be for China Mobile to apply to set up a Taiwan-based company to handle its investment in Far EasTone, which is subject to approval by the Taiwan government. He was confident the transaction would be concluded by the end of this year. "The Taiwan government is busy working on the rules regarding mainland companies investing in the island," Mr Hsu said. "There are no rules in this area, not only in telecommunications, but in the banking sector as well. The regulatory framework is lagging the existing market situation. They are now working on it." China Mobile shares fell 0.77 per cent yesterday to HK$77.20.

Korea National Oil Co (KNOC) and mainland’s Sinopec (SEHK: 0386) are competing for the takeover of Switzerland-based oil and gas explorer Addax Petroleum, sources said on Wednesday, with bids valuing the company at more than US$8 billion, including debt. Both KNOC, and Sinopec Group, the parent company of mainland’s Sinopec, were negotiating with Addax, the sources said. “KNOC has put in a bid for Addax – for the whole company,” a source with direct knowledge of the matter said. All sources declined to be named because they were not authorised to speak publicly about the matter. A spokeswoman for Sinopec said the company declined to comment when contacted. Africa and Middle East-focused Addax Petroleum – with a market capitalisation of US$6.1 billion – has projects in Nigeria, Gabon, Cameroon, and exploration licenses in the Kurdistan region of Iraq. An acquisition by Sinopec or KNOC would fit with the two companies’ strategy of securing energy assets to fuel their economies. Addax has fields in West Africa, where Sinopec has interests, and in the semi-autonomous Kurdish region of Iraq, where KNOC is drilling for oil.

Shanghai formally opened its doors to outsiders yesterday, releasing details of new rules that allow them to become permanent residents. The tiered system will mean some incomers will be able to qualify for the coveted hukou in as little as three years - but for most it will take at least seven. The rules, which are being implemented on a three-year trial basis, are aimed at switching from a quota-based mechanism providing permanent residency according to profession to one based on clearly defined entitlement criteria. "We can definitely guarantee the system is fair and just," said Mao Dali , deputy director of the Shanghai Municipal Human Resources and Social Security Bureau. Mr Mao pledged that city officials would handle applications within 60 working days. The first hukou to be issued using the new criteria could be released within three months, Mr Mao told a press conference yesterday. Under the basic requirement - first floated by the municipal government in February - immigrants must have been formally registered as a resident of the city for at least seven years. Applicants will need a stable income, a "good credit rating" and to have paid social security and tax in the city throughout the period. However, the city hopes the new system will boost its competitiveness in attracting talent. Professionals in certain fields and those holding top-tier national technical qualifications will be able to jump the queue. There is also a shortcut for the wealthy. Immigrants who have posted a taxable income averaging more than 1 million yuan (HK$1.14 million) for three consecutive years will not need to meet the seven-year residency requirement. Entrepreneurs employing at least 100 people in the city for three years will have the same advantage. Teachers and hygiene workers in rural districts around the city's periphery are also being given priority. They can apply after just five years' residency. According to population figures from the Shanghai Municipal Statistics Bureau, fewer than 13.6 million of the city's 18.6 million inhabitants held a local hukou at the end of 2007. But Ye Mingzhong , the deputy director of the Shanghai Municipal Development and Reform Commission, said officials did not expect to be overwhelmed with applications during the first year. "Since the pilot system for issuing residence permits was introduced in 2002, applications have increased year on year, reaching a total of 270,000 by the end of 2008," he said. "But the number of successful applications in '02, '03 and '04 was not so high." Currently there were just 3,000 residency-permit holders who had reached the seven-year requirement. The hukou system used throughout the mainland in effect ties access to public services to a person's place of birth. Shanghai's resident-permit system was initially offered to talented migrants in 2002. It was extended to all immigrants in 2004.

A spokesman for mainland-friendly Taiwanese President Ma Ying-jeou yesterday dismissed suggestions the island was drifting towards reunification with the mainland. Wang Yu-chi said the president believed in maintaining "the status quo" under which the two territories are ruled separately, unless a majority of islanders vote for change. The spokesman's comments came after Mr Ma was quoted saying in a recent interview with the Taipei-based CommonWealth magazine that he would not "rule out" pursuit of a unified China. The remarks sparked speculation that Mr Ma was moving towards Beijing's goal of reunification, 60 years after the two sides split at the end of a bitter civil war. But Mr Wang said the comments had been taken out of context. "What he was trying to say was that Taiwan's future should be voted on by the 23 million people here," he said. "Like a great majority of the locals, he wants to sustain the status quo of the Taiwan Strait." Mr Ma has repeatedly pledged that during his tenure he would not press for either reunification or formal independence. Meanwhile, the de facto US embassy in Taiwan said its new facilities in Taipei would include quarters for security personnel - raising the possibility that serving US Marines would return to the island for the first time since Washington transferred diplomatic recognition to Beijing in 1979. In a statement announcing the dedication of the yet-to-be- built US$170 million facility, the American Institute in Taiwan said an initial construction phase would include the security personnel quarters.

June 17, 2009

Hong Kong: Donald Tsang Yam-kuen yesterday defended the pay cut of 5.38 per cent for his political team, which will save about HK$440,000 a month, as a commitment to stand together with the public during difficult times. The announcement of the voluntary pay cut for the chief executive and 33 political appointees, which will take effect from July 1, came as the Executive Council also proposed a pay cut of 5.38 per cent for 18,700 senior civil servants. Fourteen non-official members of the Executive Council have also agreed to a pay cut from next month. Mr Tsang said that political appointees' pay was fixed by contract and that there was no annual adjustment mechanism. He said his team, in deciding, had referred to the pay-trend survey, which found that civil servants in the upper salary band could face pay cuts of 5.38 per cent. A government source said the idea of setting up an annual pay-adjustment mechanism for political appointees was worth exploring. Mr Tsang said: "The team of political appointees hopes to make clear its commitment to stand together with the public, and volunteers a pay cut. I am confident that, together, we can overcome the current economic difficulties." Mr Tsang, who earns HK$371,855 a month, will take a HK$20,000 monthly cut, while Chief Secretary Henry Tang Ying-yen's pay will decrease by about HK$18,000 per month. The monthly honorarium (payment for services nominally without charge) of Executive Council convenor Leung Chun-ying will drop by about HK$5,600. But Lee Cheuk-yan, chairman of the Legislative Council public-service panel, said the pay cuts were not big enough to show top officials' sincerity about sharing the community's economic pain. Former chief executive Tung Chee-hwa and principal officials took a pay cut of 10 per cent in 2003 to demonstrate their willingness to share the pain with the community. Ma Ngok, a political scientist at Chinese University, said that the pay cuts' political message would have been stronger if Mr Tsang's team of political appointees had taken a bigger pay cut. "It is unreasonable to follow the pay cut for senior civil servants in deciding the salary reduction for appointees, whose job nature is different from that of civil servants," Professor Ma said. Ng Leung-sing, a member of the Independent Commission on Remuneration for Members of the Executive Council and the Legislature, and Officials under the Political Appointment System, said he and other commission members would heed public opinion before considering whether there was a need to devise an annual pay-adjustment mechanism for political appointees. Jeffrey Lam Kin-fung, legislator representing the General Chamber of Commerce, said it would minimise further controversy if such an adjustment mechanism were established. The Executive Council's proposed pay cut of 5.38 per cent for about 18,700 civil servants was for those in the upper salary band and directorate officers whose monthly salary is above HK$48,401, and came with a pay freeze for civil servants in lower and middle bands. Taking together the annual saving of about HK$5.8 million from pay cuts for political appointees and Executive Councillors, the government would save a total of HK2.12 billion per year.

Heung Yee Kuk chief mulls second site for rehab school - Heung Yee Kuk chief Lau Wong-fat is considering a proposal to resolve the Zheng Sheng school Mui Wo saga by moving the rehabilitation center to a vacant school in Kwai Chung.

Civil service and police inspectors' unions yesterday opposed a proposed 5.38 percent cut in the salaries of senior officials in government and publicly funded organizations that may save HK$2 billion in annual expenditures.

Hong Kong's unemployment rate held steady last month for the first time since the global financial crisis began, surprising economists and prompting hopes that the government's economic stimulus measures are having an effect. But economists and the government say the worst is not over and the unemployment rate is likely to rise in coming months as university graduates start looking for work. Unemployment in the three months to the end of May was 5.3 per cent, the same as in April. Economists had forecast a rise to 5.4 per cent. The number of unemployed workers rose by 2,800 from the February to April period, to 199,700, but the workforce increased by 15,700 to an all-time high of 3.71 million. The number of people in work rose by 12,800, to 3.51 million - the first such increase for four months. The underemployment rate edged up from 2.2 per cent to 2.3 per cent; in the March to May period, 85,200 people were unable to find more than 35 hours' work a week. Significantly, the unemployment rate in the hard-hit construction sector fell for the first time in seven months, to 12.1 per cent, from 12.7 per cent at the end of April - a sign that government efforts to provide construction work are paying off. The manufacturing, entertainment and transport sectors also showed improvement; social workers and people in the food services and wholesale sectors bore the brunt of the job losses. The Labour Department was notified of more than 40,000 private sector job vacancies last month, 28 per cent fewer than a year earlier and 10.2 per cent fewer than in April. Secretary for Labour and Welfare Matthew Cheung Kin-chung warned against jumping to conclusions. With a flood of fresh university graduates joining the workforce this summer, the unemployment rate was likely to rise. Still, he said the government's "various measures to support enterprises and preserve jobs" were beginning to take effect. In February the government announced tax rebates and rent and rates waivers for households and the creation of jobs for nearly 62,000 people. Last month, it extended the rebates and waivers, waived some business fees and increased loan guarantees for businesses - measures worth a total of HK$16.8 billion. Economists were less optimistic. Hong Kong General Chamber of Commerce chief economist David O'Rear doubted jobs were being created. Goldman Sachs economist Enoch Fung predicted unemployment would hit 5.8 per cent this year - the highest since April 2005. Mr Fung said improvements in employment growth would be the key indicator of a turnaround in the job market. The number of people in work last month was down 20,300, or 0.5 per cent, from a year earlier. Still, that was half the year-on-year drop recorded in April.

Swine flu forced the closure of an international secondary school for the first time yesterday after two students out of 60 who had shown flu symptoms tested positive for the virus. The summer holiday will begin today for the secondary division of the Australian International School in Kowloon Tong, where two Grade Eight students were confirmed to have been infected. The sources of infection for the 13-year-old boy and 14-year-old girl, who were in different classes, remained unknown. Centre for Health Protection controller Thomas Tsang Ho-fai said 60 other students had shown flu symptoms, and 29 were now in hospital. The school was originally due to close for a month on June 26. The Tang Shiu Kin Victoria Government Secondary School, which has also closed, had another flu patient yesterday - a 16-year-old boy who sat "a few seats" away in an exam from a 15-year-old girl who was confirmed to have swine flu on Monday. Two more Form One students from St Paul's Convent School in Causeway Bay and a Primary Six pupil at St Anthony's School in Pok Fu Lam have also tested positive. Dr Tsang said the government would "evaluate if the frequency and severity of cases are more serious than seasonal flu" before deciding whether class suspension would be extended to all secondary schools. Three local cases were also found in the wider community - two women in Fanling - one 18 and the other 49 - and a 34-year-old man in Kowloon Tong, none of whom had travelled overseas recently. The centre was not certain yesterday whether one other patient, a 45-year-old man, was a local or an imported case. Dr Tsang said local cases were now increasing more quickly than imported ones. There were five imported cases yesterday, with travellers coming from Thailand, the United States, India and Europe. Asked whether offices would be closed if patients were found there, Dr Tsang said not unless there were special factors requiring it.

A Chinese-born astronomer has won the 2009 Shaw Prize along with four scientists from Britain and the United States, the Shaw Prize Foundation announced yesterday. The three prizes - awarded for astronomy, life science and medicine, and mathematical sciences - each bring an award of US$1 million. Frank Shu Hsia-san, 68, a physics professor at the University of California at San Diego, is widely recognised for his contribution to the study of star formation. He became the president of Taiwan's National Tsinghua University in 2002. "Professor Shu has done considerable work in the [theories of the] formation of stars, planets and comets, which changed many of our conventional concepts," Yang Chen-ning, chairman of the Shaw Prize adjudicators, said. "[The theories] are found to be consistent with subsequent [observations]." The prize in life science and medicine was shared by Douglas Coleman, of the Jackson Laboratory, a genetics-research organisation in the US state of Maine, and Jeffrey Friedman, a professor at New York's Rockefeller University, for their work leading to the discovery of leptin - a hormone that regulates food intake and body weight. Ma Lin, chairman of the board of trustees of Shaw College at Chinese University, said the discovery showed that hormone disorder, rather than a lack of will, was responsible for obesity. The discovery was prompted by joining blood vessels of an obese rat with a rat with diabetes, he said. The body weight of the obese rat began to drop, whereas no change in body weight was observed in the rat with diabetes. "[Their efforts] open the door to possible future manipulation of the hormonal system in order to cure obese people's problems. It is not impossible that, within five to 10 years, new drugs will come to the market [that] would be welcomed by all obese people." The mathematics prize was awarded jointly to Simon Donaldson, a professor of Imperial College, London, and Clifford Taubes of Harvard University in the US for their contributions to geometry in three and four dimensions. Professor Yang said that Einstein's theory of relativity suggested that the geometry of the universe was four-dimensional, which was mathematically complex. "The two [Shaw laureates] contributed to unravelling one of the most important [maths] subjects during the past half century," he said, "and helped us understand more about the complexity of this structure." The Shaw Prize was established under the auspices of Sir Run Run Shaw in 2002. They will be presented on October 7.

Seafood restaurant owners in Lei Yue Mun say they may have to close when a new rule banning them from pumping seawater from the harbour into their fish tanks is introduced in August. The government is amending the Food Business Regulation to stop fish vendors using seawater from Victoria Harbour and areas in typhoon shelters, which constantly show high levels of E coli bacteria. But seafood restaurateurs in Lei Yue Mun said the change in the law would hit their businesses hard. Restaurants pump their seawater from points 100 metres away from the shore. Peter Law Shing-hing, vice-chairman of the Lei Yue Mun Kaifong Association and a seafood restaurant owner, said the seawater was sterilised before being used in fish tanks. Kwun Tong district councillor Lui Tung-hai said the restaurants had been pumping water from the sea nearby for decades and he could not see any problem. "If they forbid restaurants to pump from the sea, all the restaurants here will close down." The Food and Environmental Hygiene Department found the seawater in the area contained E coli levels higher than the legal limit in seven out of 10 samples taken last year, and tank water in two restaurants was found to be contaminated during tests twice in the past four years. The government has suggested restaurants in Lei Yue Mun buy seawater from elsewhere and transport it to Lei Yue Mun by vehicle. But Mr Law said this would not work, considering the very narrow streets in the area. "When we push the trolleys of water along the road, there will be no room for pedestrians," he said. Lawmakers from a Legco subcommittee examining the amendment suggested after a site visit yesterday that the government could pump cleaner water for restaurant use from another area of the sea. But the undersecretary for food and health, Gabriel Leung, said the government would not get involved in business activities. After lawmakers threatened to vote the law change down, a spokesman for the Food and Health Bureau said yesterday the bureau would press for passage of the amendment through Legco because the new rule was "very important for the health of citizens and food safety".

Mainland buyers find housing estates like the Sorrento above Kowloon Station attractive because of its accessibility to transport links. Jiangsu businesswoman Ms Li secured Hong Kong residency in March under the government's Capital Investment Entrant Scheme by buying a flat in the Sorrento development above Kowloon Station for more than HK$7 million. To qualify under the scheme, an applicant must invest at least HK$6.5 million in real estate, equities, debt securities, bank deposits, subordinated debt or in an eligible collective investment scheme. To expand her trading business in Hong Kong, Ms Li applied almost a year ago to obtain residency under the scheme. She chose to buy the 800 square foot flat in Sorrento instead of investing in the stock market. "I'm not familiar with the stock market. I am always travelling, and so I don't have time to handle stock investments. The outbreak of the global financial crisis also showed that the stock market is risky," she said. "Property investment is more conservative." Mainlanders seeking to qualify under the scheme have so far spent a total of HK$7.51 billion in buying properties. Like many of them, Ms Li found the housing estates above Kowloon Station attractive. She said the area was highly accessible to transport links and would be even better served by the Guangzhou-Shenzhen-Hong Kong Express Rail Link, now under construction. She added that she was attracted to the comfortable living environment and the view and the proximity to the landmark International Commerce Centre office building. But she has a "Plan B" if she fails to expand her business in Hong Kong: "Then I will lease my unit. I've investigated the residential leasing market in the area. The rents are high." Mainlanders such as Ms Li have become the new targets of developers in recent years. But their investment in real estate has so far been much less than their investments in financial markets. By the end of March, the Immigration Department had granted 2,683 Chinese nationals permanent residence and Hong Kong identity cards under the scheme, which was launched in October 2003. However, only 28 per cent of the total qualifying investments were made in real estate. Eddie Kwan King-hung, managing director of Eddie Kwan Immigration Consulting Services, said more people had begun investing in property since the outbreak of the global financial crisis. "In the last two quarters, about 40 per cent of our clients invested in the property market, as they began to appreciate that property was a less risky investment after the financial crisis," he said. Mr Kwan's industry may be one of the few businesses that could be said to have benefited from the outbreak of the financial crisis. He said his firm once received 50 to 60 applications a month under the residency scheme, but between the last quarter of 2008 and the first quarter of this year, it had received more than 100 applications every month. "The sharp fall in property and stock prices after the crisis attracted mainland applicants to invest in Hong Kong. But the number of applicants returned to normal levels in the last two months, because prices have rebounded significantly." The main beneficiary of the increase in demand was the property market in Kowloon. Nine out of 10 applicants bought flats in Kowloon, particularly in Kowloon Station, said Mr Kwan, who believed this was because the area was near Tsim Sha Tsui, one of the shopping destinations popular with mainlanders. Thomas Kut On, the chief executive at Midland Immigration Consultancy, a subsidiary of Midland Realty, said new residential projects were highly rated by mainland buyers. Property agents said about 10 per cent of buyers at the Cullinan held Chinese passports, while a further 20 per cent held Hong Kong identity cards with Putonghua phonetic transcriptions. The project was launched in February. "It is [quite] exceptional [that the Cullinan attracted] a high proportion of mainland buyers," said Shih Wing-ching, chairman of Centaline Holdings. Rival new projects did not have so many mainland buyers, he said. Whereas mainland buyers comprised less than 10 per cent of purchasers in the overall property market, they were responsible for about 20 per cent of HK$50 million plus deals in the luxury residential market, he estimated. Mr Shih said the influx of mainland buyers was mainly because mainland banks had relaxed loan conditions earlier this year. But he warned that this policy could be reversed at any time. "We will not see the number of mainland buyers increase sharply in the short term, owing to the political barrier and exchange controls on the mainland," he said. "Real demand for Hong Kong property by Chinese nationals will only be truly reflected once these obstacles have been removed."

VTech Holdings (SEHK: 0303), a Hong Kong-listed manufacturer of cordless phones and electronic toys, would expand its operations outside its key market of North America, chairman Allan Wong Chi-yun said yesterday. The company is seeking to boost its exposure in the Asia-Pacific and other regions such as South America, where sales have been less affected by the global financial crisis. "The revenue from Asia-Pacific and other markets now is less than 10 per cent, which represents a huge growth potential," said Mr Wong (pictured). "We expect to double that at the end of this year to 20 per cent." The company announced a new three-year contract yesterday to supply fixed-line phones to Australian telecommunications giant Telstra Corp, its first direct presence in that country. VTech reported a 33.6 per cent decline in net profit for the year to March to US$143.2 million on a 6.7 per cent drop in revenue to US$1.448 billion. It declared a final dividend of 41 US cents per share, down from 51 US cents. North America contributed 53.4 per cent of VTech's revenue in the financial year, and revenue generated there fell 11 per cent to US$772.8 million. Sales from the Asia-Pacific dropped 1.6 per cent to US$55.2 million but contributed only 3.8 per cent of the group's revenue. Mr Wong said orders in the April-June period had slightly improved from the beginning of the year. However, it would be difficult for revenue to grow in the year to March 2010, he said. "Things [will be] better in the next three months, because retailers have started purchases and our market share is increasing," he said, adding that the company was healthy, with cash of US$300 million. Shares in VTech closed 1.77 per cent higher at HK$40.20 yesterday.

Tencent Holdings (SEHK: 0700), a Hong Kong-listed Chinese internet service provider, is interested in listing its shares on the mainland, chairman Pony Ma said in an interview yesterday. The company, which celebrates the fifth anniversary of its listing in Hong Kong today, hopes to provide a channel for its 411 million mainland users to buy its shares, although it has not set a timetable. "Given that our company is based on the mainland, we want our users to be our shareholders," Mr Ma said. "We are waiting for the government [to issue] policies regarding listings by foreign companies." Mr Ma said it could be better for red chips, which refer to mainland firms registered overseas, to list on the mainland before other foreign companies. Tencent is registered in the Cayman Islands. "Many investors have expressed interest in the company. Several big investors are able to invest in us, while others we can do nothing about," said Mr Ma. He said the company had no immediate plans to reduce the size of the board lot on the exchange. The company's shares trade in 200-share board lots, which requires a minimum trade size of HK$17,840, based on yesterday's closing price of HK$89.20. The company was listed in Hong Kong in June 2004 at HK$3.70 per share. Tencent, the country's largest instant message service provider by number of active users, has branched out to other internet value-added services, such as online games and social networking communities. "China has about 300 million internet users, and it could reach 500 million in the near future," said Mr Ma. "It is very important for us to draw new users to drive growth." Mr Ma said "100 per cent" of new mainland internet users would register as users of Tencent's QQ messaging service as soon as they bought computers with internet access. Tencent has also invested significantly in new products, such as e-mail and office document services, to meet demand. Mr Ma said Tencent would launch several self-developed online game titles from the second half of the year, after the success of Dungeon and Fighter, a game it had licensed.

China: Hollywood's top lobbyist said yesterday the American industry will increasingly work with the growing mainland private film sector to pressure Beijing to loosen its movie quotas and better combat piracy. The top American studios want to show more films in the booming mainland market, but have been frustrated by Beijing's annual quota of 20 blockbusters on a revenue-sharing basis. Chinese films accounted for more than 60 per cent of the domestic box office revenues of 4.3 billion yuan (HK$4.88 billion) last year. "I do not think there has been enormous progress made on that issue," Motion Picture Association of America chairman and chief executive Dan Glickman said in Hong Kong after attending the Shanghai International Film Festival. He said he expected to see more Chinese-Hollywood co-productions, which were exempt from the import quota. Mr Glickman said the Hollywood trade group would increasingly work with private filmmakers in China, who had better connections with government officials and had a stake in intellectual property protection and more products for the growing number of cinemas. The mainland had about 4,100 screens by the end of last year, a 16 per cent increase from the year before. "I think ultimately working in that direction will be as or more effective than just working with the government because I think ... there's got to be more internal Chinese pressure on the government rather than just American and foreign pressure," Mr Glickman said. "If it's just us pushing the Chinese government alone, it's probably not going to get a lot of progress. We need to get much more Chinese engagement in the issue." The former Clinton administration agriculture secretary said Beijing had made progress on curbing piracy - although he came across a pirated DVD store in Shanghai that carried thousands of titles. He said despite the lack of progress on access to the Chinese market, he did not expect Hollywood studios to shift resources to India, another major developing market. "I think there were some who believed that we were putting an enormous amount of effort here and not getting a lot of results in the process," he said. "But notwithstanding that, they recognise this is the biggest potential market in the world. So I think they're going to continue to work to get their product into the country."

A hotel waitress from Hubei is getting her first taste of freedom in more than a month after being convicted yesterday over the killing of a government official who tried to force her to have sex with him. Although the judges at Badong County People's Court ruled that Deng Yujiao was guilty of intentionally causing bodily harm, they set her free for three reasons: she acted in self-defence, albeit with "excessive force"; she turned herself in to police; and she had only limited criminal responsibility because she was suffering from "a certain level of mental disorder". Deng, 21, killed Deng Guida , 44, from Yesanguan town with a fruit knife on May 10 when he forced himself on her in a hotel bathing area. She injured another official who tried to assault her. Police detained her for murder, but her story spread and brought an outpouring of support and sympathy on the internet from people all over the mainland, who applauded her "heroic" behaviour and criticised the dead official for being immoral and Badong police for what many saw as an unjust charge. Deng was released from detention and put under house arrest before being handed over to prosecutors on assault charges on May 31. She has 10 days to decide if she will appeal against the verdict. Xia Lin , a member of her original defence team, said he thought Deng could live with the verdict, although the "mental disorder" finding would reflect badly on her. He called her conviction regrettable. Zhang Zanning , a professor from Southeast University's law school, said the verdict was apparently a compromise the court had to make "to please the higher authorities with a guilty verdict and, at the same time, to heed public sentiment by letting the woman go. But the legal system will bear the brunt for losing public trust". Professor Zhang said the verdict was flawed because Deng had never turned herself in; she had merely called the police following the stabbing to ask for help. "Seeing that call to police as an admission of guilt would turn Deng Yujiao from a victim into a perpetrator, and that would be calling black white," he said.

Chinese President Hu Jintao arrives in Russian capital Moscow on June 16, 2009. President Hu Jintao was welcomed by Russian Energy Minister Sergei Shmatko (1st R) after he arrived in Moscow Tuesday for a state visit.

President Hu Jintao held talks with Indian Prime Minister Manmohan Singh on the long-running border dispute between the two countries as India intensified its military presence along the border. New Delhi deployed four Sukhoi-30 MKI combat aircraft on the border on Monday, just hours before the two leaders met in Russia on the sidelines of a Shanghai Co-operation Organisation summit. With the border demarcation issue not likely to be resolved any time soon, analysts said the military deployment, which has intensified in recent weeks, was an attempt by India to increase pressure before negotiations. In their meeting at Yekaterinburg, Mr Hu told Dr Singh that both sides should safeguard the peace and stability of their border regions before the border issue could be resolved. "We hope that both sides will ... make efforts to prevent the boundary issue from affecting and damaging the relations between the two countries," Xinhua quoted Mr Hu as saying. But some analysts viewed the deployment at the Indian airbase in Tezpur, in the state of Assam, as a sign it wanted to beef up its military presence along the Sino-Indian border. Besides the aircraft, two more army divisions, each comprising 25,000 to 30,000 soldiers, would be sent near the border, an Indian official said last week. J. J. Singh, the governor of Arunachal Pradesh, said the deployment of additional troops was needed because Chinese soldiers frequently entered Indian territory. The move has drawn expressions of concern from Beijing, with the Foreign Ministry calling for peaceful negotiations and state media criticising India's deployment. At a regular press briefing yesterday, Foreign Ministry spokesman Qin Gang repeated that China was willing to work with India to resolve the issue. Since a brief war in 1962, the Asian neighbours have been struggling to settle the demarcation of a border stretching 3,500km in the Himalayan region. Both claim the other side has been occupying its territory. Indian media have reported that special envoys from both sides will meet in New Delhi in August to discuss the issue. Chen Fengjun , an Indian expert at Peking University's School of International Studies, said the meeting between Mr Hu and Dr Singh was more rhetorical than a practical attempt to resolve the border dispute. While Indian media had suggested that border tensions had intensified and a war was possible, Professor Chen said the military deployment was a move to increase leverage in negotiations. "As concerns are mounting in India about a rising China, the Indian government is also under pressure to get tough with the Chinese side," he said. At the SCO summit yesterday, Mr Hu also held talks with Iranian President Mahmoud Ahmadinejad, whose trip was delayed for one day due to protests spurred by his controversial re-election. A brief report from Xinhua said Mr Hu and Mr Ahmadinejad "exchanged views on bilateral relations and issues of common concern" on the sidelines of the summit.

Advertising and consumer spending on the mainland's media and entertainment industry will probably grow 7 per cent this year and next, according to a study by accounting firm PricewaterhouseCoopers. Despite the global downturn, the mainland would still manage to see a 2.15 per cent gain in advertising revenue this year to US$20.6 billion, the study showed. Global advertising revenue was expected to fall 12.1 per cent this year and rebound to a 1.4 per cent increase in 2011, it added. Video games and the internet were expected to be the leading growth engines on the mainland, with spending expected to grow at a compound rate of 15 per cent and 13 per cent, respectively, this year and next. Spending on digital music and outdoor media would increase 7.5 per cent during the period, the study estimated. Revenue from digital media would account for 39 per cent of the total in 2013, up from 28 per cent last year, it said. PricewaterhouseCoopers' global leader of entertainment and media practice, Marcel Fenez, said media companies needed to expand their digital operations, as more and more users were getting content online than by traditional means, such as printed and broadcasting media. "Advertisers will gradually realise that their budgets should be allocated to a platform users stay on for a longer time, and the fact is users spend more time online. Advertising revenue will migrate from the traditional platform to online," Mr Fenez said yesterday. Meanwhile, Hong Kong would suffer a 3 per cent decline in spending on the industry between this year and next, mainly because of a 16.4 per cent decline in television advertising to US$2.16 billion, the accounting firm said. Advertising on television would drop a further 2.17 per cent next year to US$2.11 billion and then gain 3.3 per cent in 2011 to US$2.19 billion, it said.

Shanghai-listed Hisense Electric plans to raise as much as 1.5 billion yuan (HK$1.7 billion) by placing up to 150 million shares to fund further expansion into upstream segments of liquid-crystal display (LCD) television manufacturing. In a statement to the stock exchange, it said the share offer would target both institutional and individual investors at no less than 10.83 yuan per share. It said proceeds from the placement, which has yet to be approved by the China Securities Regulatory Commission (CSRC), would be used for boosting production capacity in LCD modules and flat-panel television sets. After the expansion, production capacity of LCD modules, a key component for flat-panel television sets, would jump from 1.5 million units to 6.5 million, it said. "This move by the company is a natural action to streamline its industrial chain and control its production cost," said a household appliances analyst with Shenyin & Wanguo Securities. Manufacturing of LCD module, a weak link of domestic television producers' industrial chain, which usually makes up about 70 per cent of the cost of the final product, has been an area of intense competition for domestic television makers. Hisense had attempted to issue additional shares to raise 1 billion yuan to fund an LCD module expansion project in April last year, but the CSRC vetoed the effort for reason not fully clarified. "The currently much-improved sentiment of both the television industry and the domestic stock market has also offered a good time window for the share offer," said the Shenyin & Wanguo analyst. Compared with two years ago, demand for appliances has improved under Beijing's generous subsidies encouraging household purchases. And major indices of local bourses have also risen about 50 per cent since the start of the year amid gradually prevailing talk of an economic bottoming-out in the country. But whether the expanded LCD module line would result in the intended effect had yet to be seen, said Qiu Hongtian, an information technology analyst at Fortune Securities, noting the already intense competition in the LCD sector. "Hisense has to prove its competitive strength against both overseas LCD module producers and domestic specialised makers, which have more advantages in economies of scale than Hisense," he said. Hisense closed down 2.83 per cent at 11.68 yuan yesterday.

Wealthy investors from the coastal city of Wenzhou - regarded as the "cradle of Chinese capitalism" - are joining forces to speculate in the mainland property market after a two-year break, betting that a revival in demand will drive prices higher. Wenzhou investors had withdrawn from the property market in 2007 when the central government imposed tougher measures to cool overheating housing prices. "They are digging out opportunities everywhere again after gathering funds in their hometown," said Lu Qulin, the deputy head of Shanghai Uwin Property information Services. According to data compiled by Uwin, Wenzhou investors spent about 1.34 billion yuan (HK$1.52 billion) in buying 732 units in Shanghai last month, accounting for 4 per cent of total Shanghai deals for the month. Other targets included Shenzhen, Hangzhou and Chongqing. Mr Lu said the buying trend would become more obvious when data for this month was released because Wenzhou buyers had more recently focused their attention on Shanghai's rural Nanhui district as they bet that property prices in the area would rise as a result of its integration with Pudong as announced last month. Sales data shows that property prices in Nanhui rose 12 per cent to 9,000 yuan per square metre a month after the announcement. "The area's upside potential is promising as Wenzhou buyers will help to boost prices by flipping properties," said Mr Lu. In Shanghai, average transaction prices edged up 2.89 per cent to 14,285 yuan per square metre between June 1 and 14, he added. Helping to boost property prices in mainland cities besides the demand from wealthy Wenzhou buyers was an inflow of overseas capital, in particular from investors in Hong Kong, Macau and Taiwan, said Mr Lu. Luxury apartments with average transaction prices of more than 30,000 yuan per square metre bought by overseas funds amounted to 452 million yuan last month, up from 316 million yuan in April, he said. Mass and luxury residential projects in Shenzhen were also another favourite among Wenzhou investors. property agents said Wenzhou investors bought more than 20 units in an individual mass residential project in Shenzhen for more than 20 million yuan recently while one investor alone bought 10 units in a luxury development for 40 million yuan. According to mainland reports, Wenzhou speculators bought 90 flats in Shenzhen last month. "There are signs that Wenzhou buyers are back in action in Shenzhen's primary and secondary market," said Alan Chiang Sheung-lai, the head of residential property at property consultant DTZ. Wenzhou investors combined forces to operate in a way similar to private equity funds, buying in bulk rather than acquiring properties individually, Mr Chiang said. But in view of the stronger than expected sales, some developers were reluctant to entertain bulk buyers who asked for discounts, he said. "Developers are also worrying that these bulk purchasers will offer the discounted units for resale in the secondary market. This will create direct competition with developers," he said. Mr Chiang said investors had shifted their stock market gains to properties, pointing out that average home prices had jumped 20 per cent to 13,000 yuan per square metre from early this year. "The real estate market will be closely monitored by the central government and it will introduce administrative measures any time if prices went beyond public affordability." Yang Hongxu, a researcher at property consultant and information provider E-House China Holdings, said investors from Wenzhou, who also speculated on stocks and commodities of coal and cotton, indicated surplus capital now had to seek new investment channels in view of inflation risk. "Buying properties is a way to protect their wealth instead of putting savings in banks to earn a tiny amount of interest," Mr Yang said. He believed Wenzhou investors would take a longer-term view this time as property prices were unlikely to jump 30 per cent within a year.

Despite the hype given to solar energy development, Shanghai Electric Group, China's largest power generating equipment maker, has remained steadfast in getting out of the sector, which it deems as unprofitable, at least in the short-term. The sale of its 35 percent stake in solar energy equipment maker Shanghai Topsolar Green Energy for 138.6 million yuan fell through last week because the buyer was said to have defaulted on payment. Fu Rong, Shanghai Electric's board secretary, said in a written reply that her company hasn't made a firm decision on what to do next with the unsold stake in Shanghai Topsolar. But she had said earlier that the disposal of the company's investment in solar energy was essential because the company couldn't find a way to incorporate it into its future development plans. She was echoing the lines of Shanghai Electric's chairman Xu Jianguo, who said that he couldn't see a profitable future for solar energy despite official efforts to promote the sector as an alternative energy source to supplement fossil fuel. "Shanghai Electric's determination to spin off the solar energy business is not in doubt, given the sector's minor contribution to the company's earnings, "said Zhan Wenhui, analyst with Haitong Securities in Shanghai. Zhan said around 70 percent of Shanghai Electric's sales is generated from manufacture of fire-power equipment. As sales began to decline in recent years, the company has embarked on an ambitious plan to develop its capability in the production of nuclear and wind-powered energy generating equipment. After reaching its peak in 2004, the profitability of Shanghai Electric's mainstay business of fire-powered generating equipment has been falling steadily. The rate of return on sales of such equipment in the second half of 2008 fell to 17 percent from more than 20 percent a year back, although the company continued to hold a 30 percent market share. To raise capital for new ventures, Shanghai Electric in April raised 5 billion yuan by issuing about 700 million new shares at 7.15 yuan apiece. The company said 1.1 billion yuan of the total fund raised would be invested into nuclear projects, while 800 million yuan would go to wind power. The company's A-shares dropped 0.48 percent to close at 10.4 yuan yesterday. "Our target is to produce 800 to 1,000 mega-watt wind turbines by 2010, and have sales of 10 billion yuan from the wind sector by 2011," Xu told reporters earlier this year. Xu said wind equipment would be the second sector to clock over 10 billion yuan sales on the heels of fire-power equipment going forward, due to the recent strategies to develop new energy. Huang Li, deputy director-general in charge of energy saving and technology equipment under National Energy Administration, said last November China would subsidize 800 million yuan to core nuclear and wind power equipment makers, a move expected to benefit nearly 10 percent of the companies in the sector, according to Xinhua News Agency reports. Shanghai Electric started developing wind power since 2004 with the capacity to do volume production of 1.25 mW and 2 mW wind turbines so far. The company said nuclear and wind power will take the place of fire-power to lead the electric power generating over time. Shanghai Electric has so far taken on nuclear-related orders worth 18.3 billion yuan so far, with almost 50 percent market share in making the main equipment of nuclear island domestically. Xu said the company's sales from the nuclear business are likely to grow by 75 percent year-on-year to touch 3.5 billion yuan in 2009. Around 12 new nuclear projects are in the pipeline currently, with installed capacity of around 23.7 million kW. However, Goldman Sachs said in a recent research note that the power equipment industry still has downside risks due to concerns on growth slowdown in power generation capacity partly due to the limited number of new power plants approved by the government. Shanghai Electric gained 2.5 billion yuan in net profit in 2008, down 9.88 percent year-on-year.

The Ministry of Agriculture and local governments released 13 million fries of major fish species Tuesday into the Bohai Sea to preserve fishing resources. The local governments were those from Tianjin Municipality and Hebei, Liaoning and Shandong provinces, which surround the Bohai Bay area. The species released included prawns, crabs, jellyfish and flounder, said the ministry. Agriculture Minister Sun Zhengcai said at the event that the increase of fish stocks was a major step to preserve the aquatic environment and promote the fishing industry. About 19.7 billion fish fries were released in waters across China last year and the total could reach 26 billion this year, said Sun.

June 16, 2009

Hong Kong: Hong Kong secondary schools may be asked to take an early summer holiday as soon as they finish their internal examinations, under the latest anti-swine-flu measures being considered by the government. This follows the two-week closure of a Wan Chai secondary school - the second to be closed since the outbreak began - after a Form Four student was found to have contracted the new virus. All Hong Kong kindergartens and primary schools began a 14-day suspension on Friday and are unlikely to resume classes before the summer holiday starts next month. The government said earlier there was no need to close all secondary schools, as older children were more resistant to the flu. But it is understood that the Food and Health Bureau is now considering new measures on swine flu, including asking schools to take an early summer holiday. The head of microbiology at the University of Hong Kong and flu adviser to the government, Yuen Kwok-yung, last night said that the "flexible" summer holiday measure would be the "simplest and most feasible" option to distance people to slow the spread of the virus. Most secondary schools will finish their examinations in the next week or two. The Centre for Health Protection confirmed yesterday that a 15-year-old girl at Tang Shiu Kin Victoria Government Secondary School in Wan Chai had contracted A (H1N1) swine flu and that the school would close from today until June 29. The girl was sitting an exam with about 200 others on Friday when she developed flu symptoms. She has no recent travel history and her source of infection remains unknown. She lives with her parents at Shun Lee Disciplined Services Quarters in Kwun Tong. Hong Kong yesterday reported 12 new cases - six local and six imported - bringing the total to 104. St Paul's Convent School was earlier closed for two weeks after it was confirmed to have the first locally infected cluster of swine flu cases. It has a total of 20 infected students, including a Form One student confirmed yesterday. Centre controller Thomas Tsang Hoi-fai said that whether other secondary schools should be closed depended on whether the Tang Shiu Kin school had only one case or a cluster of cases. The centre yesterday confirmed swine flu infections in three children, a 10-month-old girl and two boys aged six and eight.

Billionaire financier George Soros has praised the Hong Kong government for thwarting his attempts to undermine the local currency and stock market in 1998 but maintained he had every right to do so. Mr Soros, criticised as being a predatory speculator whose highly profitable currency attacks in 1997 were blamed for destroying the Thai and Malaysian economies, credited the Hong Kong administration for intervening in the local stock and futures markets during the Asian financial crisis. But he remained unapologetic about his actions. The financier made his comments to China Central Television while in Shanghai on Sunday to give a speech at Fudan University. "They actually did a very good job defending the Hong Kong dollar, so they deserve credit. And my attack, if you call it that, was without success. "I don't feel any sense of guilt ... There is nothing wrong about it. This is a point people have difficulty understanding because, in speculating in the financial markets, I do so according to the rules that prevail." Hungarian-born Mr Soros' actions in 1997 led to him being described as "a villain and a moron" by Mahathir Mohamad, then prime minister of Malaysia. Mr Soros' latest comments mirror those he made during a visit to Hong Kong in 2001, when he said local monetary authorities did "a very good job when they intervened to arrest the collapse of the Hong Kong market" and that the subsequent damage to the government's laissez-faire reputation was worth it. The government was generally perceived to have won the battle with speculators after then-financial secretary Donald Tsang Yam-kuen went on an unprecedented HK$118 billion stock-buying spree to defend the currency peg in August 1998. The administration justified its actions by saying hedge funds such as Mr Soros' Quantum Fund were manipulating markets by dumping the Hong Kong dollar while taking short positions on the stock and futures markets. Hedge funds profit in a falling market by shorting stocks, which allows them to sell borrowed stocks and buy them back at a lower price. The Quantum Fund was set up in 1969 and started to experiment with currency manipulation. The fund made money from the devaluation of the Thai baht in July 1997 by betting on falling stock prices. The attack on the Hong Kong dollar raised fears the government would have to break the peg to the US dollar. Sales of large quantities of the local currency flooded Hong Kong with cash and pushed up interest rates as investors sought a higher rate of return. This caused capital to flow from equities to interest-bearing investments and bank deposits as investors abandoned stocks. Had the government failed to intervene or been unsuccessful in its buying spree, hedge funds that had bet on falling stock and futures markets would have reaped huge gains.

Alman Chan, of Christian Zheng Sheng College, defends the plan to take over the vacant school in Mui Wo at the council meeting. The vice-chairman of Mui Wo Rural Committee, Tony Tsang Wan-chuen, apologised yesterday to students of a drug rehabilitation college for the abuse heaped on them by some residents during a meeting on Sunday to discuss the college's plan to expand into a vacant school in the town. "I think what they said did not respect some people. So, I, as a vice-chairman of Mui Wo Rural Committee would like to express my deepest apology to them," Mr Tsang said. The apology came in a Commercial Radio programme, On A Clear Day, during which callers and radio hosts criticised some Mui Wo residents for the way they had referred to students of Christian Zheng Sheng College in Ha Keng, Lantau. Also on the radio show was the school's principal, Alman Chan Siu-cheuk, who said he believed better communication could ease the fears of residents. "I still have confidence in Mui Wo residents," he said. Later yesterday, Mui Wo residents continued their fight for the use of the vacant New Territories Heung Yee Kuk Southern District Secondary School. About 200 of them in red shirts and ribbons took to the streets of Central before Island District Council discussed the matter. Mok Suk-fun, mother of a 12-year-old girl, asked: "Why can't we have a normal primary school? Do all our kids have to take drugs in order to be admitted to the Mui Wo school?" At the meeting, district councillors and a member of Mui Wo Rural Committee Rainbow, Wong Fuk-kan, made an emotional appeal to the government to turn the campus into a school for Mui Wo children. Mr Wong said: "Some Mui Wo youngsters cried at night after the Sunday consultation session. Why must the college take the vacant site? I don't understand. The Southern District Secondary School bred many Mui Wo talents. We have strong feelings for the school." While about 20 students of the drug rehabilitation college attentively listening to discussions, some Mui Wo residents were in tears. Other district councillors, while expressing support for the college's work, questioned why the government could not offer other alternatives for the school. The vice-chairman of the kuk, Daniel Lam Wai-keung, said there were other options. "The Heung Yee Kuk has contacted a mainland university for some co-operation projects on the school site. The Kuk has also been in touch with an international school about using it to run a school with accommodation for children," Mr Lam said. He did not reveal details. The college has sought permission from the Education Bureau since December 2006 to use the vacant school, but government consultation work began only this month. The Sunday session was the first hosted by the Home Affairs Department on the college's application. Mr Chan, the principal, said the site was the best choice. "There is an assembly hall, laboratories and classrooms. No major construction work has to be done before we move in. The students are only under probation order. Many people who are under probation order also live in communities." The school, with a capacity of 64, now has 123 students. David Wong Fuk-loi, principal assistant secretary for security, said: "We will continue to collect views from residents and provide more information for more constructive dialogue.

An additional HK$3 billion in funding is being sought to finance the construction of a highway, six medical and health facilities and 25 rehabilitation projects in Sichuan in a new phase of Hong Kong support for the rebuilding of the quake-stricken province. But officials said the wish of some lawmakers to see the progress in Sichuan for themselves before approving more funding could not be fulfilled at this stage. Democratic Party members said they wanted to visit Sichuan to inspect progress on previous projects before approving the new commitment, listed in a Constitutional and Mainland Affairs Bureau document circulated to legislators yesterday. The government has vowed that Hong Kong's financial commitment to Sichuan reconstruction work will not exceed HK$10 billion. The total granted so far is HK$6 billion. Under the latest plan, about HK$2.3 billion will be used to finance the building of the Mian Mao Highway to improve the transport network of Mianzhu and Mao counties. "As a necessary measure to address the livelihood problems and enable early resumption of the local economy and normal life ... along the road with a total population of about 188,000 people ... it is imperative that the proposed highway project be implemented as soon as possible," the bureau paper said. About HK$300 million would be spent on six projects of medical and health facilities, and another HK$280 million on 25 rehabilitation centres. Democratic Party chairman Albert Ho Chun-yan said legislators should be allowed to visit the sites to assess progress. "It is taxpayers' money. We cannot be too careful in approving the funding request," he said. "Reading progress reports is one thing, seeing for ourselves at the sites is another." But he said it was too early to say whether the party would veto the funding if its request was unheeded. Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung said: "We are all very aware that legislative councillors would wish to visit Sichuan as soon as possible. "We have communicated with the Sichuan provincial government. They appreciate the concern and interest on the part of legislators in Hong Kong. However, as they do have a lot of work to be taken forward, we believe that it is possible that the visit can only take place later." He said the central and provincial governments were hoping to complete the major reconstruction projects in two years, rather than three as originally planned. Officials are expected to submit the funding proposal to the Finance Committee on July 3.

Tony Tyler must contend with government regulations as well as consumer beefs with airlines. To celebrate his becoming chairman of the global airline club last week, Cathay Pacific Airways (SEHK: 0293) chief executive Tony Tyler set out not so much a stall but a whole department store of complaints about the problems that the aviation industry faces. It was a typically Tyler feisty effort, full of rambling good sense along with a few self-serving comments on behalf of airlines. His speech, in Singapore just before he took up the post of chairman of the International Air Transport Association, deserves a wider audience. Does it offer hope that he may use his year in office to try to bring the airlines together to do something practical to improve the sickly business? With the world's airlines facing losses of US$9 billion this year, some of Mr Tyler's home truths are telling, particularly his attack on stifling, greedy, often nonsensical government regulations. Mr Tyler's biggest immediate test is whether he can persuade airlines and governments to come on board with a sensible scheme to make aviation pay for its greenhouse gas emissions. Major airlines such as Cathay and British Airways are pressing for a workable global greenhouse gas tax. Admittedly, they are partly motivated by fear that unless they can get agreement, individual governments will impose more expensive piecemeal taxes. The European Union is showing the way, with planned taxes that will hit non-European airlines such as Cathay heavily. Poorer countries are pressing to raise US$10 billion from a tax on long-haul flights. Britain is imposing heavy taxes on all flights, but the money goes to general revenue, not to protect the environment, "a Brown tax, not a green one", Mr Tyler mocked. Willie Walsh, chief executive of British Airways, conceded that the airlines had spent too much time with transport ministers and within the International Civil Aviation Organisation, a United Nations body, rather than talking to environment ministers. A lot is expected of Mr Tyler, not least because he is based in Hong Kong, and China, along with Brazil and India, has been showing its new political and economic clout. But there are really too many issues calling for his attention. One is to lobby the European Union to stop delaying and accomplish the Single European Sky, bringing together all the air traffic systems. This would save airlines 12 per cent in fuel costs and the choking planet an equivalent amount of greenhouse gases. Then there is an ever-growing plethora of rules and regulations. The United States, Mr Tyler noted, had just issued 177 pages of guidance notes on dealing with passengers with disabilities. Foreign airlines only have to carry dogs as service animals in the cabin for disabled passengers, but US airlines must be prepared to carry miniature horses, monkeys or even ducks if passengers need them for psychiatric or emotional support. Some countries are planning to fine airlines or demand compensation for passengers in the case of delays, and Mr Tyler protested that this was hardly fair if weather, such as typhoons in Hong Kong or snowstorms in New York, was responsible. But one of the reasons why demands for compensation have been made is that airlines treat passengers cavalierly. I was once stuck on board a United Airlines flight for almost nine hours before the flight was cancelled, without compensation. Mr Tyler claimed that wider recognition for the oneworld alliance would give passengers the greater competition of three alliances to choose from. But how is three a better choice than 10 or 20? Airlines have colluded with governments in setting base fares at unrealistically high prices. Only fools and business executives on expenses pay them. But they are a useful base for excess luggage or for imposing a whole range of extra charges and impositions on special fares. These have led to a baffling range of booking classes from A to Z for the three (or four, if there is premium economy) real classes of service on board. Yes, Mr Tyler is right that airlines face tough times, especially with oil prices rising again. But honesty should require him to face up to the airlines' warts as well as those of governments and regulators.

The super freighter Dreamlifter carries the massive wings for the first 787 Dreamliner. Officials say the plane will make its first flight this month. The most talked about plane at the Paris Air Show will be the one that missed the flight. Boeing's 787 Dreamliner was expected to be delivered "bang on schedule" in 2008, commercial planes chief Scott Carson said in June 2007 at the industry's last Paris gathering. Instead, a date has not even been set for its maiden flight after production and development delays put the model back two years.

China: For the first time in 11 months China's holdings of US Treasury bonds fell - to $763.5 billion in April, US government data showed. The figure, down from March's $767.9 billion, was the lowest since June 2008. They do not include US Treasury bond holding in Hong Kong Special Administrative Region, which climbed to $80.9 billion in April from $78.9 billion the previous month.
The decline in the China holding "seems to stem from net selling of Treasury bills," said Chirag Mirani of Barclays Capital Research. On the whole, foreigners decreased holdings of Treasury bills by $44.5 billion in April, the data showed. As the largest holder of US Treasury bills, which are crucial to funding Washington's multi-trillion-dollar recovery plans, China had expressed concerns recently over what it called the safety of its dollar-linked assets. US Treasury Secretary Timothy Geithner traveled to Beijing about two weeks ago to reassure Chinese leaders, saying their money is "very safe" despite the US budget deficit, which he pledged to cut. The United States has been running large budget shortfalls since the tenure of Democratic President Barack Obama's Republican predecessor George W. Bush. Obama administration officials estimate a deficit of $1.841 trillion for the 2009 budget and $1.258 trillion in 2010.

China police say an online gambling racket they have smashed will end up involving the most participants and money exchanged in the nation's history. Twenty-seven people are serving jail sentences, and the trials of 30 others are pending. Gamblers bet on soccer matches, horse racing and also on Hong Kong's Mark Six. "Tens of thousands" of gamblers had bet as much as 50 billion yuan (HK$56.7 billion) nationwide in the operation, Xinhua quoted Gong Daoan , Public Security Bureau chief of Xianning , Hubei , as saying. But because the organisers had transferred the majority of their money overseas it was unlikely to be recovered, Mr Gong said. He added that private business owners, senior managers of state-owned enterprises, and government officials were among those who had gambled. "We found tens of thousands of gamblers from around the country taking part in gambling organised by six gangs between 2004 and 2009. Most of the gambling funds have flowed to overseas gambling groups through underground money-laundering channels," Xinhua quoted Mr Gong as saying. Hubei police began investigating the operation last year, the news agency said. Participants could either bet on overseas websites or ask overseas web managers to bet for them. "Either way, the gambling organisers could guarantee at least 30 per cent profit," Xinhua quoted an officer as saying. The system enabled gamblers to avoid travelling to casinos in Macau and elsewhere outside the mainland. Online gambling appeared to prosper following Beijing's campaign to curtail gambling trips to border towns since 2003. Statistics show the campaign has been working, with the number of border casinos falling from 149 in 2005 to 28 in 2007. But since 2006, the number of online gambling cases on the mainland has been rising. Police in Shanghai, Tianjin , Henan and Liaoning reported smashing operations totalling tens of millions of yuan from 2007 onwards. But the Hubei operation has topped them all, both in the number of participants and money involved. Gambling websites in Taiwan, Macau, Myanmar, the Philippines, Singapore and Malaysia had all made money from mainland gamblers, Xinhua reported.

China has reached a crossroads in its urbanisation drive, and now is the time to shift the focus to the environment and people's welfare, according to a report released yesterday by a central government think-tank. The obsession with industrial output and growth of gross domestic product was outdated, and the global economic downturn provided the perfect opportunity to change direction, said the Blue Book of Cities in China, the annual report by the Chinese Academy of Social Sciences. The report put the mainland's urban population at 607 million, an urbanisation rate of 45.7 per cent. It dubbed 2008 as the turning point and predicted the direction of development would alter from now on. The GDP growth rate dropped - in some cases significantly - in all major cities last year because of a sharp decline in exports and industrial output. Furthermore, real estate developers' previously insatiable appetite for undeveloped land decreased by 8.6 per cent, according to the report. Shan Jingjing , a key author, said this showed that urbanisation was about to enter a period of profound adjustment. "The transformation is about replacing a quantity-first mentality with quality first," Dr Shan said. "The transformation is about the end of the real estate development frenzy, which has been tearing down old cities and building up new ones since the late 1980s. "The transformation is about improving a city's functions rather than increasing its size." A combination of economic chills outside the mainland and burning environmental issues inside meant now was the perfect moment for change. While average annual income increased by 2,000 yuan (HK$2,300) from the previous year, GDP growth slowed by nearly 4 per cent and the cost of living increased. There were fewer jobs for new job-market arrivals and a decline in overseas export contracts wiped out nearly 2 million new urban jobs, the sharpest drop since 2000. One thing that did not slow was the increase in vehicles, which put a lot of pressure on air quality, noise controls and greenhouse gas emissions. The report suggested the government seize the opportunity to achieve sustainable development, a goal that has long been little more than a slogan. Beijing was also urged to increase investment in infrastructure, such as public transport, because the cost of the raw materials was decreasing. It also suggested upgrading information technology facilities to reduce the cost of urban living, and installing environmental protection hardware such as waste-water treatment plants to improve living standards. The think-tank recommended the central government reform the old, malfunctioning residential registration system that discriminates against rural residents and grants numerous privileges in education, employment, medical treatment and welfare to city dwellers. It also suggested the central government cut carbon dioxide emissions in its cities because of the international pressure on the mainland as a major greenhouse gas emitter.

Beijing says the proposed deal between Rio Tinto and BHP Billiton will certainly affect global iron ore supplies, thus triggering concern. Beijing says the nation's new anti-monopoly law gives China the right to investigate the proposed joint venture between Australia's Rio Tinto and BHP Billiton, but any scrutiny will not damage trade relations between the two countries. "If you look at the anti-monopoly law of China, you will find that the joint-venture deal falls within the jurisdiction of our law," Ministry of Commerce spokesman Yao Jian said yesterday. It was the ministry's first public comment on the deal and signalled possible antitrust action against it. Rio walked away from a planned US$19.5 billion equity tie-up with state-owned Aluminum Corp of China (SEHK: 2600) (Chinalco) earlier this month and instead proposed a US$116 billion iron ore joint venture with bigger rival BHP. Mr Yao said Beijing so far had not received any formal application from the two miners for an antitrust review. But he invoked specific clauses on industrial concentration in the anti-monopoly law that he said could be the basis for a legal review. The law says if all participants, whether foreign or domestic, post either a combined operating income of more than 10 billion yuan globally or 2 billion yuan in their mainland operations, they must file their case with Beijing for a review. Mr Yao stressed Rio and BHP were the world's second and third-biggest iron ore suppliers, jointly making up 80 per cent of Australia's ore exports and 36 per cent of the world's. "The joint-venture proposal will surely impact the global iron ore supply, and it's therefore understandable that both Chinese enterprises and related industries have expressed their concern over the deal," he said. Earlier this month, Chinalco expressed "deep disappointment" over losing out to BHP in the Rio deal. Moreover, last week, the China Iron and Steel Association said it would "determinedly" oppose the Rio-BHP joint-venture proposal, saying it "had the colour of monopoly". Despite its strong comments, the ministry assured Canberra any antitrust scrutiny would proceed in a controlled manner and would not damage trade relations between the two countries. "China and Australia are very important trade partners, and the trade relations between us are on the whole very good," said Mr Yao, noting that China was Australia's second-largest trading partner. "The operating issues between enterprises of the two countries will be resolved through lawful means based on commercial principles. We will work out policies that are beneficial for stabilising overall bilateral trade and economic relations, therefore a single case won't affect the general development of relations." Mr Yao also said the ministry had not yet received any application relating to the proposed acquisition of General Motors Corp's Hummer division by Sichuan Tengzhong Heavy Industrial Machinery. He said it was rational and normal for mainland companies to adopt an international outlook. "It's up to the government [to approve the acquisition]," said Tengzhong chief executive Yang Yi, when asked in Beijing if the deal would be approved.

Xiamen, a major city in Fujian province, is seeking to forge closer financial ties with Taiwan by applying to be the mainland's first and only settlement centre for the official currencies in the two markets, according to Xiamen vice-mayor Ding Guoyan. As a core part of closer cross-strait co-operation in finance and trade, the coastal mainland city was seeking the State Council's approval to set up the planned settlement centre, a short cut to existing fund flows from Taiwan into Xiamen through Hong Kong, he said. "We are fighting for this," Mr Ding said yesterday of the plan. "We are also in talks with Taiwan and Hong Kong about intensified co-operation in logistics, services and financial areas." A race to entice more Taiwanese investments was sparked last month when the State Council promulgated a policy to create a special economic belt in the west of the Taiwan Strait by 2012-20. The special zone spanning southeastern Fujian aims to buoy business, financial and cultural exchanges as well as human relationships across the strait. In another move to cash in on burgeoning trade ties across the straits, China Merchants Holdings (SEHK: 0144) (International) plans to invest in a 15 billion yuan (HK$17.01 billion) port development in Zhangzhou, Fujian, according to top city officials. The Hong Kong-listed port operator was expected to take an unspecified stake in the planned project, which involved constructing as many as 10 berths in the fourth phase of the Zhangzhou port zone, said Liu Keqing, the Communist Party secretary of Zhangzhou. Liu Wei, China Merchants Zhangzhou Development Zone deputy general manager, said China Merchants was in talks with its parent firm about the potential investment in the fourth phase. At present, it is a joint venture between the parent company and the local government's investment arms. The new berths would handle bulk cargo such as logs, steel and agricultural products exported largely to Taiwan and Southeast Asia, Mr Liu Wei added. He said "parts" of the new berths would be ready for operation in 2012. That year is the State Council's medium-term target for the Straits West region to become a national leader in scientific innovation with higher living standards and specialising in direct links with Taiwan.

Beijing has weighed into a growing dispute over the allocation of funds in its 4 trillion yuan (HK$4.53 trillion) stimulus package after European companies complained they were being discriminated against in tendering for projects. In an attempt to hose down simmering tensions over the package, top officials claim domestic firms are the ones being discriminated against in some contracts. This counters claims from European manufacturers that they were kept out of wind turbine contracts. It came after the National Development and Reform Commission and eight other ministries issued a joint circular early this month, stressing that government-invested infrastructure projects should favour domestic suppliers. The NDRC explained that many tenders for equipment actually contained "discriminatory conditions" that favoured foreign suppliers over domestic ones. "This is a serious problem, and the relevant industry associations and companies [domestic suppliers] have shown strong disapproval," the industry policy setter said. It said favouring foreign suppliers was against government procurement laws, which stipulate that tenders must be conducted in a fair and transparent manner. It added that such discrimination would hamper enhancement of the competitiveness and growth of the nation's equipment manufacturing industry. The NDRC said government investment projects should follow regulations on government purchases, which require that unless products or services are unavailable at reasonable business terms in the domestic market, contracts should be awarded to local suppliers. Prior approval from regulators is required before they can be imported. An official at the China Machinery Industry Association said in most cases where foreign products were chosen against domestic ones and quality and service are considered the same, higher recognition and trust in foreign brands was the key factor for the purchase decision. An appreciating yuan and equipment import tax exemptions in industries supported by Beijing have also favoured foreign suppliers over domestic ones in some cases. In most nations, priority is given to domestic suppliers if the terms are the same. The NDRC's comments came after European Union Chamber of Commerce in China chairman Joerg Wuttke reportedly said Beijing had embarked on a drive to lock foreign suppliers out of at least one major wind farm project to help domestic firms absorb surplus capacity. However, Chinese Wind Energy Association secretary-general Qin Haiyan yesterday said European contenders had not won contracts because their prices were too high. He said the foreign firms had offered 6,000 yuan to 7,000 yuan per kilowatt of wind turbine capacity, compared with 5,000 yuan being offered by domestic companies. "They said their products are of better quality, but they are only providing the same guarantee of two years," he said. "What has happened is that the foreign suppliers have been losing market share to domestic ones in the past two years as the latter's capabilities caught up rapidly." Foreign suppliers and their mainland joint ventures saw their market share drop to 24.4 per cent last year while that of domestic suppliers jumped to 75.6 per cent from 44.9 per cent, the association's figures show.

Authorities in China and Taiwan, political rivals once on the brink of war, have agreed to remove underwater military barricades and let 100 people swim from one side to the other, Taiwan officials said yesterday. The 8.5-kilometer swim, billed as the latest symbol of peace between the two sides, and their first military agreement, is set for August 15 between Xiamen on the mainland and Little Kinmen, an outlying Taiwan-controlled island. "The bigger meaning is that this is a competition for peace," Kinmen county magistrate Lee Zhu-feng told a news conference. "We want peace, not war." Military officials have agreed to remove anti-ship landing barricades, which stand as testament to a skirmish between the two sides five decades ago. Protected by coast guard boats from both sides, about 100 professional swimmers, 50 from each side, will go one way from Xiamen through the warm but choppy waters. Next year, another 100 swimmers, 50 from each side, plan to do the route in reverse, in what could become a long- term annual event, organizers said. In 1958, China bombed the islands of Kinmen, also known as Quemoy, for weeks as it tried to seize them. Kinmen has strategic and military value, and remains heavily guarded. The main island of Taiwan is about 160 km from China. Since Taiwan President Ma Ying-jeou took office in May last year, the China- friendly leader has eased tension with Beijing through trade and transit deals, although military distrust lingers.

Chinese President Hu Jintao (C Front) and other leaders to a meeting of heads of state of the Shanghai Cooperation Organization (SCO) walk to the venue of an informal dinner to be hosted by Russian President Dmitri Medvedev (1st R Front) in Yekaterinburg, Russia, June 15, 2009. Leaders of the Shanghai Cooperation Organization (SCO) on Monday held a Smaller Meeting in the Russian city of Yekaterinburg. Present at the meeting were the leaders of the six SCO member nations -- China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. It was not immediately known what the leaders had discussed at their meeting, but such issues as regional security, economic cooperation and the global financial crisis were the possible topics. On Tuesday, the leaders will hold a Smaller Meeting with the heads of state or government of the four SCO observer nations, which is to be followed by an extended meeting. Iran, Mongolia, Indian and Pakistan have observer status at the SCO. Joint documents will be signed after Tuesday's meetings, and there will be a press conference given by the leaders of the SCO, which was founded in 2001 in Shanghai.

A model presents a creation inspired from the court dress in ancient China's Tang Dynasty (618-907), during a show of the 2009 Qingdao Fashion Week in Qingdao, a coastal city in east China's Shandong Province, June 15, 2009.

June 15, 2009

Hong Kong: Construction work on the Hong Kong-Zhuhai-Macau bridge was expected to start by the end of the year, Chief Secretary Henry Tang Ying-yen said on Monday. After meeting Zhuhai officials earlier on Monday, Mr Tang said the bridge’s engineering feasibility report had been submitted to the central government for final approval. “The three governments concerned will strive to start the project by the end of this year, and have it completed in five years,” he said. During his visit, Mr Tang also discussed further co-operation with the Zhuhai government – including boosting tourism and logistics. The chief secretary is currently visiting all nine Pearl River Delta cities. Zhuhai was his sixth stop. The 28.9 kilometre Hong Kong-Zhuhai-Macau bridge project will be a series of bridges and tunnels. These will connect the west side of Hong Kong to Macau and Zhuhai. They will be situated on the west side of the Pearl River Delta. The three governments argue the project will bring considerable economic benefits to the Pearl River Delta area.

Shares of Tse Sui Luen Jewellery (0417), whose founder and ex-chairman are in jail, almost quadrupled yesterday after they resumed trading following a break of 3 years. TSL jumped as much as three times to hit an intra-day high of HK$3.26, up from its last closing price of 81 HK cents in January 2006. They closed at HK$2.98, up 2.68 times. TSL, which replaced members of its management team and board after a bribery and embezzlement scandal came to light, said yesterday it could spend nearly 50 million yuan (HK$56.67 million) opening more stores in the mainland this year. The retailer plans to open fewer than 10 more stores in the mainland this year, including new stores and renovations of existing stores, TSL chief executive Erwin Huang said. It will spend 5 million yuan on each store. Huang expects TSL's mainland operations to report single-digit year-on- year sales growth in May and June. TSL will also open a total of four more stores in Hong Kong in the first half of the year. The first - a new store in Mong Kok - opened last night. Sun Hung Kai Financial strategist Castor Pang Wai-sun warned that TSL's shares have jumped too high. "If the market continues to have a correction, then this stock will also follow the market," Pang said. The jeweler's founder and former chairman, Tse Sui-luen, was sentenced in May 2008 to three years and three months in jail for helping dole out HK$170 million in bribes to travel agents. Tommy Tse Tat-fung, his son and the company's chairman at the time, was sentenced to five years. TSL announced on Friday that it has overhauled its system for working with tour groups by entering written contracts with travel agents and eliminating almost all cash transactions with them. TSL reported earlier that net profit for the 12 months ended February 28, 2009, rose 5.6 percent to HK$104.8 million. It declared a final dividend of 3 HK cents per share, up from 1 HK cent the year before.

Pregnant mothers, children, the elderly and those with weakened immune systems have been advised to avoid eight brands of bottled mineral water which have been found to contain a host of microorganisms. The warning was issued yesterday by the Consumer Council, which found levels of heterotrophic plate count - a measurement of microorganisms including bacteria and fungi - varied from two colony forming units per milliliter to 550 cfu/ml in eight out of 40 brands tested. According to the latest issue of the consumer watchdog's Choice Magazine, Fiji natural artesian water had the highest HPC count at 550 cfu/ml, followed by First Choice (natural mineral) with 300 cfu/ml. TY NANT was next at 160 cfu/ml followed by First Choice (French spring) at 120 cfu/ml, Pierval at 58 cfu/ml and Contrex with 38 cfu/ml. Both Evian and Vittel mineral waters came up with 2 cfu/ml. However, the World Heath Organization has no HPC limit for drinking water, which it said in a report is more valuable as an indicator of treatment and disinfection at the bottling stage rather than an indicator for pathogen levels. The WHO report also said HPC levels were "unsuitable for public heath target setting or as sole justification for issuing boil water advisories." However, Consumer Council publicity and community relations chairman Ambrose Ho Pui-him said doctors have suggested it will be better for young children, pregnant women and elderly people with weak immune systems to boil their natural mineral water. Hong Kong University assistant professor of environmental engineering Zhang Tong backed the council claim, saying the 500 cfu/ml threshhold has been adopted by many developed nations. Taiwan limits HPC for bottled water at 200 cfu/ml while the European Union has a 100 cfu/ml limit for bottles incubated at 22 degrees Celsius for 72 hours. Zhang said the main factor affecting HPC levels is the length of time the water has been stored. The council's study also revealed Perrier contained 0.4 milligrams per liter of nitrite, four times higher than the WHO's acceptable daily intake. An adult weighing 60kg would have to drink more than 10 liters of the sample per day to exceed the daily intake of nitrite. People who ingest too much nitrite may suffer from dizziness and have difficulty breathing. Vincent Wan, chairman of Wan Corporate Services, the sole distributor of Perrier in Hong Kong, insisted the health risk is practically non-existent. He said French tests showed nitrite levels at 0.05mg/L, which he expected to be confirmed with more tests in Hong Kong and France. Wan said the company is in contact with the council and assured consumers the health risk is practically non-existent. According to the Centre for Food Safety, there is no specific legislation in Hong Kong on nitrite levels in bottled waters.

Hong Kong Chief Executive Donald Tsang Yam-kuen delivers a speech at the FCC to celebrate its 60th anniversary on Monday. Chief Executive Donald Tsang Yam-kuen on Monday urged Hong Kong people to support the rehabilitation of young drug abusers on Monday afternoon. Mr Tsang – giving a luncheon address at The Foreign Correspondents’ Club – said young people needed patience and understanding. “As a father, I know all too well that no parents want to see their children abuse drugs, but young people sometimes go astray,” he said. The chief executive was commenting in the wake of recent incidents in Hong Kong involving young people abusing drugs. “When our children make mistakes... a little help and guidance can make a big difference to their lives,” Mr Tsang said. He also discussed the controversy over the relocation of Christian Zheng Sheng College from Chi Ma Wan on Lantau to Mui Wo. The college provides rehabilitation services to young drug abusers. On Monday, some 200 Mui Wo residents launched a protest at the Outlying Island Ferry Pier in Central. The protesters claimed the government did not consult them about relocation of the college. Mr Tsang advised them to be tolerant. “I hope Hong Kong society as a whole, and Mui Wo residents in particular, can embrace these young people with love and give them a second chance,” he said. Asked how he would feel if the school was relocated near Government House, he replied: “Whether it is near Government House, or anywhere, we have to accept it.” “I think is a sacrifice we should make,” Mt Tsang added. In related developments on Monday, the Island District Council met to discuss the issue. Principal-Assistant Secretary for the Security Bureau Wong Fuk-loi told the meeting the increasing number of young drug abusers was worrying. He said there was an urgent need to provide more rehabilitation services, local television news reported. He also explained that Christian Zheng Sheng College needed to be relocated. This was because the college did not meet fire safety standards. Nearby hills also posed land-sliding threats to the college, he said.

Singapore retail sales suffered their biggest drop since 1999 as shoppers cut back on big-ticket items such as cars and furniture amid the city-state’s worst ever recession. The statistics department said on Monday that retail sales fell 11.7 per cent from a year earlier after dropping 7.3 per cent in March and 5.5 per cent in February. The government also said it slightly revised up its first quarter unemployment rate to 3.3 per cent from 3.2 per cent initially reported in April. The jobless rate was 2.5 per cent in December. “The weakness in consumption initially reflected a shock to confidence, but personal incomes are now suffering as well,” said Robert Prior Wandesforde, senior Asia economist with HSBC (SEHK: 0005). Singapore expects its economy to shrink up to 9 per cent this year, which would be its worst contraction since splitting from Malaysia in 1965. The recession, which began in the second quarter of last year as exports plunged, has started to eat away at jobs and hurt consumer confidence. The April retail sales numbers are also a bad omen for second quarter gross domestic product growth. Singapore’s GDP plunged a seasonally adjusted, annualised 14.6 per cent in the first quarter from the previous quarter, following a 16.4 per cent drop in the fourth quarter. The unemployment rate will likely rise, further undermining consumer demand, Morgan Stanley said in a report on Monday. Many of the new jobs recently created by projects in the pharmaceuticals, chemicals, retail and hotel sectors were from investments laid out years ago, and fresh capital outlays are slowing, it said. “Job losses could soon catch up when the capital expenditure recession invariably intensifies and consumer strength is likely to stay subdued next year,” the report said. Morgan Stanley said it expects Singapore’s economy to shrink 10 per cent this year and grow 3 per cent next year. Sales of motor vehicles fell 28 per cent, furniture and household equipment dropped 11 per cent, and apparel and footwear slid 6.1 per cent, the department said in a statement. Sales fell a seasonally adjusted 3.1 per cent from March.

Hong Kong continue to face effects of global downturn as figures released on Sunday showed that air cargo shipped through the SAR dropped 17.6 per cent year-on-year in May. Air cargo shipped through Hong Kong dropped 17.6 per cent year-on-year in May, the city’s airport authority said, as the global downturn continued to slash demand for goods made in the mainland. Hong Kong International Airport handled 259,000 tons of cargo in May as shrinking markets in Europe and the United States hit traffic hardest, the Airport Authority Hong Kong said in a statement released on Sunday. The number of passengers passing through the airport, which is one of Asia’s key transport hubs, dropped 12.7 per cent year-on-year to 3.6 million, the statistics showed. Passenger markets that suffered most were Southeast Asia, Taiwan, Japan, mainland and North America. The total number of journeys in and out of the airport dropped 9.1 per cent over the same period. “The negative performance reflected largely the impact of continuing global recession and the new but serious impact of influenza A(H1N1) virus, further weakening the aviation market and resulting in airlines reducing flight frequencies,” said Airport Authority chief executive officer Stanley Hui. He said he expected the trend to continue through June.

A group of building professionals and former government officials have teamed up to work on plans to turn a former landfill site into the first eco-village in the Pearl River Delta. The HK$700 million village in Tseung Kwan O will be the most environmentally friendly holiday camp in the city and a showcase for advanced "green" technologies. Former chief secretary Sir David Akers-Jones, former director of buildings Cheung Hau-wai, former Observatory chief Lam Chiu-ying and the chairman of the Hong Kong Science and Technology Parks, Nicholas Brooke, have been appointed advisers for the project. The idea of building an eco-village on the 68-hectare former landfill site in Tseung Kwan O was first floated last year by the Professional Green Building Council, a non-profit research and education institute created by a group of building-related professional bodies. Tseung Kwan O has three landfill sites. The one under discussion has been idle for 14 years. The proposal sees a financially self-sustainable village that would have zero carbon emissions. It would be run by community organisations rather than the government or big business. Financial and technical feasibility studies are expected to be completed this summer. This will be followed by lobbying for government funding. Universities, green groups and the Youth Hostels Association have expressed interest in the village. "The idea of transforming a wasteland into a green village with unique designs will help Hong Kong take a leading role in both environment and creative industries in Asia," said council chairman Wong Kam-sing, who is taking the project forward. "Families and organisations in the village will have to obey the green rules. They could be given limited access to water and electricity, which would inspire them to think about green living." The village will comprise five parks with village settlements, showrooms and education centres on different themes - water, energy, nature, waste and transport. Visitors to hostels in the "energy park" would be able to try out various renewable-energy installations, while those in the "earth park" would be invited to take part in organic farming. The site - larger than the proposed West Kowloon arts hub - is next to the Lohas Park residential project, which the MTR Corporation (SEHK: 0066) is touting as a green development. The village is expected to take up 45 hectares and will be connected to the MTR. A nearby canal will be revitalised for water activities. The village would rely on two major income sources: rent and consultancy services. Families staying in hostels would be charged HK$500 a night, while non-profit organisations would be asked to pay to hold events. A chance to experience a hi-tech green lifestyle and a range of activities in the village is expected to be the main draw for families. It is to be managed by a board including community representatives and professionals, and is expected to have 200 visitors per day and 400 housing units for a population of 1,200. The council proposes building the village - only one-storey buildings would be allowed - in three phases. The council hopes the government will fund the capital cost of HK$700 million. "It means each person in the city will just need to pay HK$100," said Mr Wong, adding that the council could raise the start-up operating cost of about HK$22 million. A source at the Environment Bureau said it was looking at options for the site. Other proposals include a soccer academy and a pet garden. The chairwoman of the Legislative Council's Environment Committee, Audrey Eu Yuet-mee, said a health assessment and a detailed cost-benefit analysis should be made if the project needed public funding.

High rollers in Macau might not be hitting the VIP baccarat tables like they were a year ago, but increasingly they are discovering the allure of the one-armed bandit. Slot machines, traditionally regarded as the epitome of the "grind" or low-end market, have made serious inroads in high-rolling Macau in recent years. While still only a small piece of the overall market, revenue from slots has grown to US$742.81 million in the year to March from US$81.52 million in 2004. At the same time, the number of machines has increased fivefold to more than 13,000. Despite shrinking winnings from the credit-driven VIP tables in recent quarters, cash-focused slot revenue has maintained its double-digit growth rate. Slot manufacturers say much of this is due to an increase in the variety of games on offer, and indeed several homegrown firms are cropping up to rival market leaders such as Aristocrat Technologies, International Game Technology (IGT), Bally Technologies and WMS Gaming. And then, there are the slot high rollers. Peter Johns, the director of slot operations at MGM Grand Macau, talks about "carry-bag players" who can bet as much as HK$40 million on slot machines at a single weekend. The pool of such slot players in Macau is not large, probably several hundred players, but it is growing. The heady volumes they wager can lead to significant short-term volatility for what is otherwise considered slow and steady grind market revenue for the house. "Ten of them can make or break you," Mr Johns said. The rival Wynn Macau saw slot wagers rise 42.9 per cent in the first three months of the year from a year earlier "primarily due to the play of several high-end slot customers", according to Wynn Resorts' latest quarterly filing. As a result of the growing competition for business from slot high rollers, casinos are increasingly offering tailored services. Many machines are programmed to pay jackpots only after they reach certain levels and big players typically zero in on a single machine, pumping it full of money in an attempt to hit a big payday. If a slot high roller's time in Macau runs out before he nails the jackpot, he will often ask the casino to reserve the unit: "They will say 'Turn off the machine and I'll be back next Friday'," said Mr Johns. But despite the growth of high-end play, Macau's slot market is unlikely to rival destinations like Las Vegas or Atlantic City any time soon. Slot machines accounted for 5.8 per cent of Macau's total casino revenue in the first quarter, compared with 52.8 per cent on the Las Vegas Strip. "Slots have not developed that quickly in Macau, which is in line with the slow development of the mass market in general," said CLSA gaming analyst Aaron Fischer. Mr Fischer cites a number of barriers to growth for the tourist "mass market" including the city's underdeveloped infrastructure and relatively pricey hotel rooms. "All in all, Macau is not yet fully equipped to handle the grind market," he said. As recently as two years ago, some analysts were predicting Macau's slot machine segment could grow into a 30,000 to 50,000-unit market by next year. But delayed or suspended resort projects, Beijing's visa restrictions for mainlanders and the sheer dominance of high-roller table gaming have meant slower growth for the slot machine market. "There's no question those huge numbers people talked about a couple of years ago have failed to materialise," said Marcus Prater, the executive director of the Nevada-based Association of Gaming Equipment Manufacturers. But he adds: "There's still business out there and it's not all doom and gloom." Cath Burns, the Macau-based vice-president for Asia-Pacific at Bally Technologies, said: "The visa restrictions meant we couldn't go to 30,000 slot machines. I still think Macau is a 30,000-unit market but we probably would not get there for another five years unless visa restrictions are relaxed." Despite the macro-level challenges, the slot market continues to grow. Revenue from slots grew 13.22 per cent in the first quarter to 1.53 billion patacas, despite an 11.66 per cent drop in the number of units in operation as casinos sought to maximise their yields from each game by removing unproductive slots. "People have to optimise revenue in expansion mode, but the lull is going to help people catch their breath and focus on optimising the gaming floor," said Kurt Quartier, the vice-president of international casino markets at IGT. "When we first started business in Macau, there were no local manufacturers, but we are seeing more and more emerging Asian manufacturers who look to Macau as their primary market," said Ian Hughes, the managing director of slot machine testing firm GLI Asia. GLI tests games for compliance on behalf of gaming regulators in Las Vegas, Atlantic City, Macau and Singapore, and opened its first laboratory in Macau in November last year with six full-time local engineers. The firm expected that number to expand to 10 or 12 engineers by the end of this year, and that growth would be "very much a function of how much local manufacturers expand", Mr Hughes said. So, will Asian manufacturers have the same impact on the global slot industry that their peers have had on the market for other electronic goods, like DVD players or personal computers? Mr Quartier of IGT, the world's largest slot machine maker, is unconvinced. "I don't want to sound dismissive but anybody can make a box," he said. "Making good games is something different."

Poly (Hong Kong) Investments said late on Sunday it planned to sell new shares to a major shareholder at a discount, raising HK$776 million to fund future investment, including building up its land bank, and for working capital. The property firm said it would sell 230 million shares at HK$3.45 each to a major shareholder after the major shareholder completed a sale of the same amount of existing shares at the same price to third party investors. The issue price represented a 7.26 per cent discount to its closing price of HK$3.72 on Thursday prior to a trading suspension. Trading will resume on Monday. BOC (SEHK: 3988) International and Citigroup Global Markets are the placing agents.

Asia’s largest carrier, Japan Airlines (JAL), said on Monday it would temporarily reduce flights in the region due to lower demand caused by the global economic crisis. The number of round-trip flights between Narita International Airport, the main gateway to Tokyo, and Beijing will be cut from 19 to 14 a week between August 1 and October 24, the company said in a statement. JAL will also reduce the number of weekly flights between Narita and Seoul from 28 to 21 between July 1 and October 24. There are to be other cuts on its Narita routes to Taipei, Shanghai and New Delhi. It will also cut flights between Haneda, another Tokyo airport, and Hong Kong in September and October, and between Kansai in western Japan and Seoul from August 1 to October 24. It will reduce services between Kansai and Shanghai over the same period. “Due to the impact of the recession, a recovery in demand for flights has been delayed and we plan to secure profitability by adjusting our supply capacity,” JAL said in a statement. A company spokesman said the airline would raise the number of flights to current levels following these periods. The International Air Transport Association said last week that the Asia-Pacific, which is forecast to lose US$3.3 billion this year, or more than a third of global losses, may see a recovery next year.

China: Foreign direct investment in the mainland dropped 17.8 per cent year-on-year in May for the eighth straight monthly fall, the commerce ministry said on Monday. Mainland attracted a total of US$6.38 billion of foreign investment last month, the ministry's spokesman Yao Jian told reporters. The decline compared with a fall of 22.5 per cent in April from the same month in 2008, according to previously released statistics. Foreign direct investment in the first five months was down 20.4 per cent from the same period last year to US$34.05 billion, the spokesman said. Mainland attracted a record US$92.4 billion in non-financial FDI last year, an increase of 23.6 per cent from 2007. Inflows surged in the years after the country joined the World Trade Organization in 2001, but have weakened in recent months as the global economic slowdown has hit investment flows.

Venture capital and private equity firms have begun to find some new thirst for investment on the mainland after several months of inactivity, the market researcher Zero2ipo said in a recent report. Twenty-six venture capital (VC) and private equity (PE) companies invested $4.81 billion in 15 deals in May after a cautious April that registered only $156 million in total investment, the report said. The financial services industry attracted by far the most investment in May, some $4.64 billion, or fully 97 percent, of the total. It was one big deal in the finance sector that dramatically changed the investment mix toward financials. On May 12, PE funds led by Hopu Investment Management invested about $4.62 billion to buy 8.53 billion H shares of China Construction Bank. Traditional industries had been the recipient of the most investment in the first four months, yet only $100 million in new capital was directed to the sector in May. The report said initial public offerings (IPOs) in overseas markets have begun to recover as well. According to Zero2ipo, three Chinese companies were listed in May with a combined capital of $1.35 billion, up 431.7 percent from April. All were manufacturing companies that raised an average of $449 million. HK-listed Liaoning Zhongwang Group Co, the country's largest aluminum extrusion products manufacturer and the third-largest in the world, raised about $1.3 billion on the main board in Hong Kong, the most among Chinese companies listed in Hong Kong since April of 2008. It was also the world's largest IPO since the beginning of the year. The other two Chinese companies were listed on the Korea Stock Exchange and Korea Securities Dealers Association Quotations, South Korea's counterpart to the NASDAQ. Six Chinese companies have now been listed in South Korea since August of 2007. While new capital rose, merger and acquisition (M&A) activities shrank in May, the report said. The number of M&A deals dropped 27.8 percent from a month earlier to 13 with a total value of $516 million, down 76.4 percent from April. Three M&A deals backed by VC and PE totaled $107 in the IT, traditional and healthcare industries. M&A deals in traditional industries, including manufacturing, energy, real estate and agriculture, comprised about 82 percent of M&A total in May. There were three cross-border M&A deals in May, two in mining in which Jilin Jien Nickel Industry Co invested $3.79 million to acquire Australia's Metallica Minerals Ltd and $40.38 million for Canada's Liberty Mines Inc. Due to the sustained impact from the global financial crisis, total capital raised by VC and PE funds to invest on the Chinese mainland had been in a free fall since the beginning of 2009. According to Zero2ipo, the total investment by VC companies dropped 71.2 percent year-on-year to $320 million in the first quarter, while the investment from PE funds declined 82.5 percent year-on-year to $2,687 million. Zerio2ipo showed in another report that a number of renminbi PE funds, represented by a green energy technology fund and an army civilian industrial fund, are preparing to raise capital. The number of industrial and equity investment funds that have been approved or recorded by the National Development and Reform Commission has reached 20, which together plan to raise 200 billion yuan.

The newly released Chery Faira YY at a media preview during the 2008 Beijing Auto Show. The ongoing financial crisis that has hit Western countries especially hard is now giving China's homegrown auto brands some traction in Europe, a must-win battlefield for all international manufacturers. "If they (Chinese automakers) do it in Europe, they can do it everywhere," said Hans-Ulrich Sachs, managing director of HSO Motors Europe, sales agent for China's Brilliance Jinbei Automobile Co Ltd in Germany. "I believe Chinese auto brands will have a shorter journey to go than their Japanese and Korean counterparts did decades ago," said Detthold Aden, president and CEO of BLG Automobile Logistics, Germany's biggest logistics company, which is based in the northern port city Bremen. Aden said he believes that the financial crisis, which makes smaller and cheaper cars popular, provides Chinese medium- and low-end vehicles the best opportunity in Europe. To boost car sales the German government this January began providing subsidies of 2,500 euros to consumers for every vehicle more than nine years old that is traded for a new car with a smaller engine capacity. In April, the government raised total funds available for subsidies to 5 billion euros from an initial 1.5 billion euros in the scheme that will expire at the end of the year. "It is (a chance for) a niche market for Chinese auto brands," said Aden. Tong Zhiyuan, president of China's Huatai Automobile Group, agrees with Aden. "It's an opportunity for Chinese cars to enter Europe when local markets cry out for small cars with low prices and good performance." Tong added that by starting in the small car segment, Chinese carmakers can escape a face-down with legendary European rivals in the medium-sized car market. As one of the largest automobile logistics suppliers in the world with more than 130 years of experience, BLG is "able to support the Chinese OEMs in any direction", said Michael Bnning, BLG's sales and marketing director. But Europe's high standards for security, the environment, styling, safety and performance are major hurdles for Chinese carmakers. "They will have to cooperate with local industry players," said Bnning. "More than 500 experienced technicians in our technique center will help Chinese cars overcome some problems and meet local standards." The company will also manage all necessary compliance and customs papers before Chinese cars enter the market. Over the past year, BLG and HSO helped Brilliance to improve its emissions to meet the required Euro IV standard. Feng Ping, vice-president of Chery Automobile Co Ltd in charge of international business, told China Business Weekly that Chery is considering contracting with BLG for pre-delivery inspection (PDI) on Chery cars in Gioia Tauro harbor in Italy. Last year, BLG transported 10,000 Chery cars from China to Russia that were offloaded at Bremerhaven harbor in north Germany. "PDI services, which double-checks the quality and parts and maintains and cleans cars after the long ship journey, prepare brand-new cars for showrooms. It's good for our brand image that the cars have no defects prior to receipt by dealers," said Feng. BLG, the comprehensive logistics partner for Mercedes-Benz, also said it can and would like to help Chinese automakers establish their overseas manufacturing facilities in Eastern Europe. BLG is now providing a logistics services package for South Korea's Hyundai Motors' manufacturing base in the Czech Republic. It delivers auto parts to the facility and then transports assembled vehicles to 43 countries. "As Chinese cars now focus on the Russian market, BLG has also made huge investment to expand its logistics network in Eastern Europe. We - BLG and the Chinese - are going in the same direction," said Manfred Kuhr, deputy chairman of BLG's executive board. BLG's logistics network, which uses vessels, railways and trucks, can provide transport to Chinese cars or their CKD - complete knocked down - and SKD - semi-knocked down - assembles to Russia, currently the prominent destination for Chinese car exporters, Kuhr said. "Around 30 years ago, when Japan's Toyota delivered its first car in Europe from Bremerhaven, one of the largest automobile harbors in the world, people thought it was impossible for Toyota to sell cars in Western countries. Today Toyota is the world's top auto manufacturer," said Kuhr. He noted that when BLG and HSO helped the South Korean brand Hyundai enter the European market 19 years ago, Europeans also looked down on them. "Yet 350,000 cars under the Hyundai brand and 150,000 Kia cars were sold in Europe last year. Now it's China's turn," said Kuhr. Chinese auto brands, including Chery, Great Wall and Geely, now have a share of the Russian and Ukrainian markets. Only Brilliance has gone into western Europe, using HSO's 850 dealerships. HSO sold 800 Brillance cars in Europe in 2008 and aims to increase the number to 3,000 this year, then extend distribution to France, Spain and Italy. According to a distribution agreement signed in 2006, HSO will help Brilliance sell 15,800 cars in Europe within five years. "Last year, 24.63 percent of the cars on the road in Europe came from outside the continent, the majority from Japan and South Korea," said Sachs. "According to our survey, 25 percent of the Eurozone's 200 million drivers said that they wouldn't say 'no' to Chinese auto brands." In addition to Brilliance, Great Wall, BYD and Huatai also have ambitions in Europe. Xing Wenlin, vice-president of Hebei's Great Wall Motor Co, told China Business Weekly that his company "will go to Eastern Europe markets within two years and enter Western Europe in three to five". Shenzhen-based BYD Auto said that it will export its electric cars to Europe one or two years after they enter the US in 2011. "We will start selling our cars in Eastern Europe and the south in the near future," said Tong of Huatai, who declined to disclose a detailed export plan before his company starts production in its new factory in Inner Mongolia in July.

Na Li of China hits a shot during the final of her women's tennis match against Slovakia's Magdalena Rybarikova at the Aegon Classic in Birmingham on Sunday. Slovakia's Magdalena Rybarikova defeated China's Li Na 6-0, 7-6 (7/2) on Sunday to capture the WTA Birmingham grass court tournament, her first career title. The 20-year-old, ranked 58th in the world, eased to victory in 73 minutes over the fourth seeded Li who had defeated former Wimbledon champion Maria Sharapova in the semi-final. Rybarikova said: “I won the first set so easily but the second was so tough as she started to play so much better. “I was very nervous in the tie-break but she looked more nervous than me, so that helped me concentrate even harder.” Victory will take Rybarikova to a career high of 42 when the new rankings are released on Monday. “Winning today is the best feeling of my career so far. It’s unbelievable, just like a dream,” she said. “I was so happy that she [Li] beat Sharapova as she is such a great player and I am not sure I could have beaten her today.” Li said: “I was so excited last night after I beat Sharapova, I forgot I had a match today. It has been a good week for me though. I like grass very much."

Authorities in China and Taiwan, political rivals once on the brink of war, have agreed to remove underwater military barricades and let 100 people swim from one side to the other, Taiwan officials said on Monday. The 8.5-kilometre swim, billed as the latest symbol of peace between the two sides as well as their first military agreement, is set for August 15 between the southeast mainland city of Xiamen and Little Kinmen, an outlying Taiwan-controlled island. “The bigger meaning is that this is a competition for peace,” Kinmen County Magistrate Lee Zhu-feng told a news conference. “We want peace, not war.” Military officials have agreed to remove anti-ship landing barricades, which stand as testament to a skirmish between the two sides five decades ago, county officials said. Protected by coast guard boats from both sides, about 100 professional swimmers, 50 from each side, will go one way from Xiamen through the warm but choppy waters. Next year another 100 swimmers, 50 from each side, plan to do the route in reverse in what could become an long-term annual event, organisers said. In 1958, China bombed the islands of Kinmen, also known as Quemoy, for weeks as it tried to seize them. Kinmen has strategic and military value and remains heavily guarded. The main island of Taiwan is about 160 kilometres from the mainland. The barricades are spikes mounted at an angle on cement bases and designed to spear warships headed toward shore.

An advertisement featuring a Hummer vehicle being displayed at an auto market in Beijing. Sichuan Tengzhong said the deal to buy General Motor's Hummer brand would be concluded in the coming quarter. Sichuan Tengzhong’s bid for General Motor's Hummer brand is normal behaviour for a company seeking to take advantage of the global downturn to broaden its horizons, a Ministry of Commerce spokesman said on Monday. Media reports have said little-known Sichuan Tengzhong Heavy Industrial Machinery could struggle to win official approval to buy the maker of the gas-guzzling sports utility vehicle from bankrupt GM. The Ministry of Commerce had not yet received any application related to the deal, spokesman Yao Jian said. “Against the backdrop of the global financial crisis, it is rational and normal for Chinese companies to adopt an international outlook,” he told reporters at a monthly news conference. Sceptics wonder whether Chengdu-based Tengzhong, which makes special-use vehicles and bridge and highway components, has the experience and resources to turn the Hummer business around. Mr Yao said the government expected local companies in general to encounter frustrations as they ventured abroad because they lacked managerial skills and track records in mergers and acquisitions. “We hope Chinese companies can learn more about international rules and make prudent investments,” Mr Yao said. On Sunday, the general manager of Tengzhong said that the deal should be concluded in the coming quarter. “We think a deal should be completed by the third quarter,” said Yang Yi. Mr Yang has little experience dealing with media and was almost apologetic about not providing more details about the deal. “I hope you can understand, but there are many things I cannot talk about,” he said. One confidential aspect was the Hummer price-tag, although analysts say it would be much less than the US$500 million GM was asking for last year. The executive did say that Tengzhong, a manufacturer of special-use vehicles as well as bridge and highway components, planned to retain the Hummer management team to ensure quality in the off-road vehicle and to keep its small but enthusiastic fan base happy. “There will not be a China Hummer and a US Hummer, he said. “There is only one Hummer.” The mainland company was also looking to develop the gas-guzzling vehicle into a global brand – 70 per cent of sales are now concentrated in North America – that was more fuel-efficient and environmentally friendly, Mr Yang said. “We want to make a green Hummer,” he said. “We think the Hummer has huge potential in emerging markets.” Hummer’s global sales fell 65 per cent in January-March amid rising oil prices and as recession gripped the global economy. “Tengzhong and Hummer are very aware of the government’s fuel-efficiency requirements,” he said. “Hummer has already achieved substantial progress in this area.” While Mr Yang was reluctant to talk about the financial details of the ongoing negotiations, he did say any deal would not include taking on the GM unit’s debt. “We would not be responsible for any debt obligations.” The provincial government of Sichuan has identified the automobile sector as one of four strategic industrial growth engines. And while the provincial seat favours the deal, it must still be approved by the central government, which is pushing for more fuel efficiency from individual citizens and industry. Tengzhong’s lack of experience in both overseas markets and in the automobile industry has unleashed a flood of scepticism and even ridicule from some mainland auto executives, industry analysts and the media over the deal.

A man looks at a stand featuring airconditioners in a Beijing department store. The Ministry of Commerce said on Monday that sales of subsidised home appliances in rural areas rose 42 per cent in May. Sales of subsidised home appliances in rural mainland rose 42 per cent in May compared with April to 4 billion yuan (HK$4.5 billion), the Ministry of Commerce said on Monday. The government introduced the scheme to boost household consumption, which fell last year to a record low of 35.3 per cent of gross domestic product. Rural buyers of selected televisions, fridges, washing machines, air conditioners, mobile phones and computers receive a rebate of 13 per cent of the purchase price. Total sales under the programme, which was launched on a trial basis in 2007 and went nationwide in February this year, had reached 15.3 billion yuan by the end of May, Yao Jian, a Ministry of Commerce spokesman, told a regular news conference. The Ministry of Finance estimates that the scheme will generate sales of 700 million appliances worth 2.1 trillion yuan over four years. The programme is small in the broader scheme of things: nationwide retail sales reached 1 trillion yuan in May. But, encouraged by initial results, the Commerce Ministry launched another pilot programme on June 1, offering a 10 per cent subsidy to consumers in urban as well as rural areas who trade in old domestic appliances for new ones. The trial is taking place in nine provinces and cities, including Beijing and Shanghai. The government has set aside 2 billion yuan this year to encourage trade-ins.

Ping An Insurance (2318) said yesterday it is under no fundraising pressure to complete its 22.13 billion yuan (HK$25 billion) deal for a stake of up to 30 percent in Shenzhen Development Bank. The deal will be fully funded by Ping An's internal resources, said group president Louis Cheung Chi-yan, adding: "This will not have any impact on our company and we are not under any fundraising pressure." Ping An - 16.8 percent owned by HSBC (0005) - will spend as much as 10.683 billion yuan to buy up to 585 million new shares issued by SDB. In addition, the insurer will buy, by way of cash or a share swap, 520 million SDB shares from private equity firm Newbridge Capital - currently the largest shareholder of the mainland bank - before the end of 2010. Ping An will pay 11.449 billion yuan in cash or issue 299.09 million H shares to Newbridge. Ping An prefers Newbridge, now called TPG Capital, to become a new shareholder. China's second-largest insurer said it will be looking for areas in which it may cooperate with SDB if the deal proceeds. "Cooperation [is] subject to [regulatory] approvals ... They are going to have to comply with all relevant regulations," said Richard Jackson, Ping An's chief finance officer for banking. Cheung said "the firm has no plans" to raise its stake in SDB to more than 30 percent. But he added: "We are seeking more room for future development." Ping An shares will resume trading in Hong Kong and Shanghai today and SDB will resume trading in Shenzhen. SDB chairman Frank Newman said he hopes to introduce his company's services and products to Ping An. Newman said the lender has no immediate plan to raise debt capital. "SDB doesn't have specific plans to issue H shares in Hong Kong," he added.

Hong Kong pop star Aaron Kwok Fu-shing (R), Chinese actress Hao Lei (2nd, R), and Zhang Tielin (L) attend the promoting ceremony for their film of Empire of the Silver, at the 12th Shanghai International Film Festival, in Shanghai, east China, June 14, 2009.

According to, Fang Jing, the 38-year-old anchorwoman who found herself in the centre of "Taiwan spy gate" scandal, is back on CCTV's news channel, hosting the program World Weekly on the evening of June 14, 2009. TV grab shows Fang Jing is back on CCTV's news channel, hosting the program World Weekly. It has been 100 days since her sudden absence following the "Taiwan spy gate" scandal. Fang Jing appeared on CCTV's news program World Weekly at 10:15 pm Beijing time on June 14. With a punctuality and wearing a pair of black trousers, Fang looked natural and at ease. The subtitle at the bottom of the screen read "Host: Fang Jing". It seems that the "Taiwan spy scandal" is over. Fang last appeared on-air on March 1 when she hosted an episode about India's military strength featuring Rear Admiral Zhang Zhaozhong, a military expert from the National Defense University. When asked about why she did not host the program for a few months, Fang said the leaders at CCTV could offer a better and more authentic explanation. A Yi, full-named Zhou Yijun and an associate professor with Peking University, said in his blog on June 9 that Fang had asked to host the military program, Defense Watch so as to acquire military intelligence and was therefore detained on the evening of May 12. Fang Jing has denied allegations that she was arrested for spying, saying it's merely groundless hearsay and she might respond by legal means. She posted the message on her blog on June 11. This less than 100 characters message has attracted some one million hits. According to reports, A Yi offered an official apology to Fang in his blog. "If what I wrote in my blog hurt her, I will say 'sorry' to her because explanation will create more pain to both Fang and her friends. I hope the scandal can be pacified and she will be back on CCTV as soon as possible."

Shanghai, an economic powerhouse in eastern China, saw loans for auto buyers grow fastest in credit extension for individuals amid robust sales of motor vehicles in the first five months of this year, the municipal banking regulatory commission said on Saturday. At the end of May, loans outstanding for auto buyers stood at approximately 17 billion yuan (2.49 billion U.S. dollars) in the city, a growth of 55 percent against the end of May 2008. China has since 2004, when it approved its first financing firm for motor vehicles, launched 10 such companies, including four in Shanghai. The four, claiming a two-third share of the municipal auto financing market, recorded 10.6 billion yuan in loans outstanding for auto buyers at the end of May, up 35.29 percent. The local banking regulatory commission said at the end of May, non-performing loan ratio for auto credits stood at no higher than 1.2 percent, below the average NPL ratio in the city. According to China Association of Automobile Manufacturers, China sold 4.96 million home-made motor vehicles in the first five months, up 14.29 percent year-on-year. The total included 3.66 million passenger vehicles, up 21.2 percent. The passenger vehicles included 2.603 million cars, up 16.54 percent.

June 14, 2009

Hong Kong: Donald Tsang and team to take 5.38pc pay cut as Exco eyes civil service - A pay cut of 5.38 per cent for ministers and political appointees will be announced by the government this week. The move follows comments last month by Chief Executive Donald Tsang Yam-kuen that he and his team were willing to "stand shoulder to shoulder with the people" amid the economic downturn. The reduction, to take effect next month, will be the first for top officials since the severe acute respiratory syndrome outbreak in 2003. The Executive Council is likely to discuss the findings of the administration's pay trend survey tomorrow and propose pay cuts for 18,200 civil servants in the upper bands. Civil servants on or above point 34 on the master pay scale - HK$50,475 a month - are expected to have their pay cut by 5.38 per cent. The government is believed to favour freezing wages in the lower and middle bands. The pay cut for ministers and political appointees could be announced as early as tomorrow. The pay trend survey found that private sector wages had dropped by 0.17 per cent for lower-paid staff, 1.34 per cent in the middle range and 4.79 per cent for high earners. Civil servants in the lower, middle and upper bands could face pay cuts of up to 0.96 per cent, 1.98 per cent and 5.38 per cent, respectively. A source familiar with the issue said the administration intended to establish a certain degree of relativity between pay adjustments for political appointees and senior civil servants. "The government decided to introduce a pay cut of 5.38 per cent for political appointees because it wants to use the pay trend survey as a yardstick in making the adjustment," the source said. Former chief executive Tung Chee-hwa and 14 principal officials took a pay cut of 10 per cent in 2003 to demonstrate their willingness to share the pain with the community. But the government did not explain the rationale for the size of the cut at the time, sparking claims that it was arbitrary. Mr Tsang earns HK$371,855 a month. The salaries of the chief secretary, financial secretary and secretary for justice are HK$330,565, HK$319,385 and HK$308,585, respectively. Ministers are paid HK$298,115, while deputy ministers and their political assistants are paid from HK$134,150 to HK$223,585. All political appointees had a pay freeze last year, while senior civil servants had a 6.3 per cent pay rise. The source said a pay adjustment mechanism for political appointees was needed in the long run. Meanwhile, the administration will consult civil service unions about Exco's proposal for a pay cut for senior civil servants. The top policymaking body may make a final decision as early as June 23. The government plans to table a bill in the Legislative Council on a pay cut for senior civil servants before July 8, when the last meeting of the legislative session will be held. Another source believed the pay cuts for appointees and senior civil servants would be welcomed by the public.

Kerry Properties (0683) said it sold 230 units in Tsuen Wan residential project Primrose Hill with prices up 2 percent on average since it launched last Friday. Executive director Chu Ip-pui said 30 percent of the homebuyers were investors. The developer intends to raise the price to HK$6,000 per square foot on average from the original average price of HK$5,062 psf, he said. Kerry reaped over HK$1 billion from selling 170 flats as at Saturday, he said. He said 12 prime apartments on the eighth floor were sold for HK$8,000 psf and two on the 50th floor were sold for HK$7,000 psf. Almost all homes in Block 1 and half of those in Block 3 were sold, Chu said. Kerry yesterday launched 50 apartments in Block 2 at an average price of HK$5,500 per square foot. "The remaining flats may be launched after construction completes and prices may rise 6 percent by then," Chu said. The project comprises three towers with a total of 548 flats. Meanwhile, transaction volume in the secondary home market fell 8.7 percent in the past two days to 63 deals, from 69 deals a week ago, Midland Realty director Andy Ho Ming-pui said. "Turnover in the secondary market fell because homebuyers were attracted by newly launched projects and partly due to the rainy weather," Ho said. Secondary home trade fell the most in the New Territories, by 24 percent. Trading in residential project City One slumped 50 percent to nine deals over the weekend.

Morgan Stanley, Citigroup and Goldman Sachs are frontrunners in the race for lucrative underwriting roles and may share up to US$350 million in fees in the estimated US$10 billion Hong Kong flotation of American International Assurance, sources said. A mainland financial firm is also expected to become a bookrunner in the otherwise US-dominated deal, with China International Capital Corp, Citic and BOC (SEHK: 3988) International being shortlisted for the second round of the beauty contest. More than 30 financial institutions are vying for a role in the giant share offering slated for the first quarter of next year. AIA is likely to choose one or two lead advisers, known as underwriters, and three to five bookrunners that will help the senior banks sell the life insurer's stock. US banks Morgan Stanley, Citi and Goldman are tipped as likely winners of the most highly paid roles underwriting the stock sale. Advisers are expected to be chosen as early as tomorrow and notified by Thursday. Financiers pitching for the deal said the US Federal Reserve, which bailed out AIA's parent, American Insurance Group, and is now the majority shareholder, was determined to give most of the advisory positions to US banks, most of which are still struggling to make money and repay the government bailouts. "This whole process has had a strong element of politics and patriotism," one American banker said. AIA, a pan-Asian life insurer and one of the largest in the region, has US$60 billion of assets under management and serves 20 million policyholders. It was founded in Shanghai 90 years ago. Originally, the patriotic element meant equity capital markets teams in Chinese banks did not expect to make it through to the second round of the selection process. AIG's financial adviser, Blackstone Group, which is choosing the line-up of banks for AIA's share offer, has since allowed three Chinese banks - CICC, Citic and BOCI - to compete for one bookrunning position. All three are understood to have made it through to the second round. Each of these institutions' top bankers enjoy good relationships with senior ministers in Beijing. A Chinese bookrunner may be able to bring money into the deal from an institution such as state investment fund China Investment Corp. Awarding one of these government-owned banks a role would also represent the US government extending an olive branch to Beijing in a volatile period in US-Sino relations. Other banks believed to stand a good chance of working as bookrunners included Credit Suisse and Deutsche Bank. But one US bank, Merrill Lynch, is out of the running. Merrill was bought by Bank of America Corp in a US$50 billion rescue deal in October last year. Congress is investigating the takeover. Another politically out-of-favour institution, Switzerland's UBS, did not make it to the second round. AIA's flotation could be the largest in the world next year. It looks set to be the biggest equity fund-raising in the world since 2007. The company will raise US$5 billion to US$10 billion, depending on the size of the stake its parent, the stricken insurer AIG, decides to sell. AIG needs the cash after receiving US$180 billion of taxpayer-funded bailouts, which included US$85 billion of loans. Bankers pitching for roles on the share sale expect the deal fees to be 3.5 per cent of the total amount raised, or US$350 million if AIA raises US$10 billion.

The number of passengers and volume of cargo passing through the airport last month shrank by more than 10 per cent year on year as the global financial crisis and outbreak of human swine flu weighed heavily on the struggling aviation sector. According to the latest figures from Hong Kong International Airport, the number of passengers fell 12.7 per cent year on year to 3.6 million last month, while 259,000 tonnes of cargo were handled, down 17.6 per cent. "In May, both air-traffic movements and passenger throughput recorded significant drops, more than the average declines of 5.9 per cent and 4.3 per cent, respectively, for the first four months of 2009," Airport Authority chief executive Stanley Hui Hon-chung said. "The negative performance reflected largely the impact of continuing global recession and the new but serious impact of influenza A(H1N1) virus, further weakening the aviation market and resulting in airlines reducing flight frequencies. This prevailing trend in passenger traffic and air-traffic movements is expected to continue and will likely further deteriorate in June." The decline in passenger numbers was particularly pronounced for visitors travelling from Southeast Asia, the mainland, North America, Taiwan and Japan. The number of long-haul visitors has fallen steadily amid the downturn, while the number of short-haul arrivals has started to decline due to the outbreak of swine flu. For cargo, continued weakness in consumer demand in the United States and European Union accounted for May's poor exports, which dropped more than 20 per cent year on year, airport data show. The decline in cargo throughput last month showed a slight improvement, in a sign that the downturn may be stabilising. In April, cargo throughput dropped 19.8 per cent to 257,000 tonnes, although passenger traffic rose 4.1 per cent to 4.2 million.

Apologies as billed patient fights for life - The case of a seriously injured woman being charged almost HK$22,000 before being treated for internal bleeding has exposed a "gray area" that needs to be addressed, Hospital Authority chief executive Shane Solomon admitted yesterday. Wong Pui, 25, is fighting for her life in the intensive care unit of Queen Elizabeth Hospital. She was rushed to the hospital around noon on Friday with multiple fractures of the thighbone, pelvis and several ribs after being hit in Mong Kok's Sai Yeung Choi Street South by a minibus. Two people were killed in the accident and seven others hurt. Her family was asked to pay HK$21,856 for the drug NovoSeven, which is usually used to control bleeding in hemophilia patients. The family paid for the treatment by credit card. "The doctors said there was a certain drug that could stop my daughter's internal bleeding faster. So we paid immediately, though it was not a small amount for us and we don't know how much medical costs we may have to shoulder in the future," Mr Wong said. However, Wong admitted there was no suggestion the hospital would not treat his daughter if he did not pay. He said a nurse called yesterday to apologize and that the money would be refunded. Last night the hospital apologized to the family for "any confusion raised from the incident." NovoSeven is not on the general drug list, the Hospital Authority said. In his statement, Solomon said the medicine was off-label and the manufacturer recommended its use only for hemophiliacs. "The hospital incident reveals that our system needs to be improved to deal better with emergency life-threatening situations, and to support clinicians' judgments about the best treatment based on clinical evidence or experience," Solomon said. He said the authority's guiding principle is to save lives regardless of a patient's financial position, and that local patients should not be charged for necessary drugs in life-threatening situations. He said the authority will review the evidence of this drug's usage in life-threatening situations beyond hemophilia patients and come up with recommendations to standardize practices. People's Health Actions chairman Lo Wing-lok said he was shocked to hear about the incident, which showed the Hospital Authority was tied down by red tape. "I have been telling mainland medical officers that Hong Kong always puts patients first ... This incident broke common practice and is a serious step backward," Lo said. Such situations could recur if the authority does not work out a proper system, he warned. Legco health services panel member Fred Li Wah-ming said he will table a question on the incident at the next meeting.

Nearly 2,000 buildings along Victoria Harbour will either switch off or dim their lights for two hours from 8pm to 10pm on Sunday for the second annual Dim-It campaign. Initiated by Friends of the Earth, the campaign coinciding with Father's Day is being backed by more than 1,800 buildings and stores, dwarfing the 142 that participated in last year's inaugural event. More than 2.9 million people, 1,800 buildings, 600 companies and organizations, 160 schools and all the city's universities switched off their lights for the World Wide Fund for Nature's Earth Hour in March, resulting in a 5 percent drop in the city's electricity consumption. The Symphony of Lights that blazes nightly will be cancelled during the campaign. Joining the voluntary "blackout" are IFC II, HSBC headquarters, The Link's malls, Samsung's 115-meter-long billboard, the Bank of China's 218 branches and buildings and 291 Circle K locations. Other building owners should demonstrate their corporate responsibility to support the campaign to give people a chance to see the stars, FoE director Edwin Lau Che-feng said. The stars, he added, have been dimmed many years by air and light pollution. Pledging to continue their good light habits after the Sunday campaign, 1,001 organizations have signed the green group's Dim- it Charter, which pledges to switch off outdoor neon signs and decorative lights no later than midnight every day, starting on June 21. Joining hands with the International Year of Astronomy 2009 Hong Kong League, FoE is also organizing a large-scale stargazing event open to the public along the Tsim Sha Tsui promenade with 100 telescopes on loan from the Hong Kong Astronomy Society, including its 4.5-meter super-refractor telescope, capable of 500 times magnification. League president Bill Yeung Kwong-yu said the rings of Saturn should be visible during the event. According to University of Hong Kong assistant professor of physics Jason Pun Chun- shing, only the moon is visible in the night sky in most urban areas, with a handful of stars visible in less-lit areas. He said a 50 percent reduction would allow stargazers to watch dozens of stars and a few constellations. Hundreds of stars can also be seen at the High Island Reservoir, Sai Kung East Country Park, Shek O, Plover Cover, Lantau country parks and Cheung Sha.

Hong Kong doctors are writing false medical certificates that allow mainlanders to dodge the city's immigration rules and give birth here, the Sunday Morning Post (SEHK: 0583) has discovered. They are allegedly signing documents for mainland agencies that say the women have received medical checks within the first 28 weeks of their pregnancy - as required by the immigration policy - so they can secure a bed in a private hospital. The Post understands that one private doctor is being investigated by the Hong Kong Medical Council for allegedly issuing such a forged document. It is not known if this doctor was working with an agency. A Post reporter who approached the agencies posing as a mother-to-be was told they had doctors licensed in Hong Kong and on the mainland who visited Shenzhen to examine clients. Most of the agencies have offices in Shenzhen and offer various packages for pregnant mainlanders. The packages usually cover two prenatal checks in Hong Kong, one standard hospital bed, postnatal accommodation and nanny services, plus help in applying for a birth certificate that establishes the baby's right of abode in Hong Kong. The cost is about 90,000 yuan (HK$100,000). A woman calling herself Ms Zhang, who works for an agency called H. K. Love The Peaceful Household Service, said: "We have doctors who can come to Shenzhen with all their equipment to do the body check and they can prove the check was done, as required by Hong Kong. With the documents our doctor issues, you will have no problem crossing the border." It advertises two offices on its website, in Tai Kok Tsui in Kowloon and in Shenzhen. It claims to provide a one-stop service for women who want to give birth in Hong Kong. For those whose pregnancy is too advanced to be admitted to the city, it boasts: "We can arrange hospital certificates for them, without having them going to Hong Kong." Choi Kin, a former chairman of the Medical Association, said he understood a local doctor had been investigated for allegedly issuing false medical certificates. Dr Choi said the government should clarify whether Hong Kong doctors can cross the border and conduct health checks on mainland women. "Although Hong Kong doctors with a mainland medical licence can now in theory open clinics there under the Closer Economic Partnership Arrangement, nobody has so far practised on the mainland," he said. Leung Ka-lau, lawmaker for the medical sector, said it was illegal for Hong Kong doctors to work with agencies to provide a middleman service. "We can't stop mainland mothers getting middleman agencies to get them to Hong Kong, but Hong Kong doctors are not allowed to link up with such agencies." The government said it was not aware of the situation. The Immigration Department said only that it was an offence to forge a document or make a false representation to an immigration officer. The Health and Welfare Bureau said doctors who had a medical licence for the mainland could perform health checks on mainland woman for immigration purposes as long as the checks were conducted within 28 weeks of the pregnancy. "In the private hospital sector, as long as the hospitals allow the doctors to do so, we have no problem with that," a spokesman said. The Medical Council declined to comment on reports that a doctor was under investigation. Since February 2007, mainland women who are 28 weeks or more pregnant must show a certificate at the border checkpoint, confirming they are booked to give birth at a Hong Kong hospital, in order to enter the city. This is to ensure local women receive priority and to restrict the number of non-locals giving birth to avoid straining the health system.

Legco security panel chairman Lau Kong-wah (centre) and fellow legislators check out the HK$1.7 million CCTV system in Mong Kok. Security gates at the entrances to buildings could be installed at government expense and mobile surveillance cameras set up in Mong Kok to deter further acid attacks. Nine lawmakers made these suggestions after a tour to understand the operations of the "sky eye" surveillance camera system in the Mong Kok pedestrian precinct, which has been subjected to three acid attacks in the past seven months. "The 'sky eyes' are not flawless and there are some blind spots," chairman of the Legislative Council's security panel Lau Kong-wah said. "However, we cannot deny the effectiveness of the cameras, they have their use." He said the district council would consider if more cameras - including mobile ones that are not fixed and could be moved to different locations - should be installed. "Because there are so many blind spots, I think more CCTVs will help." Mr Lau's comments came a day after the police concluded that the bottle of acid thrown in last Monday's attack came from the rooftop of a building at either 58 Sai Yeung Choi Street South or 60 Sai Yeung Choi Street South. The lawmaker said neither building was as tall as the one next to it, making it a blind spot not covered by the HK$1.7 million camera system. He said the legislators in the tour also requested more police patrols in the area, as well as other pedestrian zones across the city, to ensure safety. Edmond Chung Kong-mo, chairman of Yau Tsim Mong District Council, said using mobile "sky eyes" could prevent their locations from becoming known. The lawmakers also suggested the government sponsor the installation of security gates, especially at buildings without owners corporations. People are now free to enter the buildings as there are no gates or the gates are not locked. However, some shop owners in those buildings were against the idea, saying that it would hurt business.

The government will spend up to HK$50 million on flu medicines after the city confirmed 11 new swine flu cases yesterday, including the first Filipino domestic helper. On the mainland, 24 new cases were reported, the most in one day. The Ministry of Health said the new cases were found in a number of provinces and cities - four cases in Guangdong and Fujian, three cases in Shanghai, Hubei and Sichuan, two cases each in Zhejiang and Hainan, while Jiangsu, Liaoning and Beijing each reported a case. Hong Kong officials warned that the city would probably see a significant rise in the number of cases soon and deaths could not be ruled out. Stocks of flu medicines, including Tamiflu, would cover 15 per cent of the population, said the controller of the Centre for Health Protection, Thomas Tsang Ho-fai. Ten of the 11 new cases were imported, the centre said. The source of infection for another female case has not been determined. The Filipino maid, 28, fell ill on Thursday and was admitted to hospital the next day. At least three other cases have been imported from the Philippines. In the latest confirmed cases, two locals, 17 and 21, were sent to hospital from the airport after they returned from Thailand and the US. A Canadian man, 27, also showed flu-like symptoms at the airport and was admitted to hospital. A 19-year-old woman, who had visited Jiangxi province and Guangzhou before falling ill in Hong Kong, had yet to be categorised as an imported or local case. These latest cases lifted the total number of confirmed cases in Hong Kong to 84. "We expect things to move pretty fast in the next few days in terms of new cases," Dr Tsang said. More locally transmitted cases would come to the surface after the centre finished testing a group of students from St Paul's Convent School in Causeway Bay. By yesterday, 14 students had been confirmed with the virus. Dr Tsang said that going on the US experience, the number of confirmed cases in Hong Kong could be the "tip of an iceberg". Gabriel Leung, undersecretary for food and health, said the peak for summer seasonal flu could arrive in two to four weeks. "There could be people or patients who suffer from complications or even die." The government will assess whether classes in kindergartens, nurseries, primary schools and special schools can resume from June 26. In Japan, a school closure did not put an effective stop to infections because students gathered at other places, Professor Leung said.

The WHO did not recommend school closures but stood by the measures taken by the Hong Kong government, its China representative said yesterday. On Thursday, the government announced a two-week closure of all 1,800 primary schools, kindergartens, child care centres and special schools after confirmation of the first cluster of local swine flu infections among 12 secondary school students. Hans Troedsson said he did not think the Hong Kong authorities had overreacted as it was a new type of flu virus and it was unpredictable. "You have to look at the context and specific situation," Dr Troedsson told a Beijing press conference held by the World Health Organisation and Ministry of Health. "The school environment is a vulnerable environment. To take action such as closing schools even when the school may not be directly infected ... I fully understand the decisions made. The important thing is when the decision is made it is made based on risk assessment, and I assume the Hong Kong government has done that," he said. Controversy has surrounded the government's move to suspend classes to protect young children. Dr Troedsson said the WHO did not recommend closing schools on the mainland as it was not yet necessary. There is a month to go before the school summer holidays. He said schools could consider advancing the start of the holidays to avoid the spread of the disease if there was a cluster of infections among students. He also urged teachers to take the chance to educate students on hygiene issues, such as frequently washing hands. Ministry of Health spokesman Mao Qunan said primary and secondary students on the mainland were the key group to protect and some preventive measures had been taken. "For example, in Beijing school students are required to have their body temperatures taken at home and have them checked again at school in the morning and report them," Mr Mao said. He said schools would be a key link in the next step of the ministry's strategy to prevent community infection. Schools were important for the prevention of disease as primary and secondary school students were more susceptible to a community outbreak, Mr Mao said.

Budget airliners are spreading their wings overseas by introducing low-fare flights from Shanghai to Hong Kong, Macao, South Korea and Japan, which, according to analysts, may trigger a price war in the aviation market soon. A number of budget airlines are poised to start international flights this year. In April, the Civil Aviation Administration of China, the nation's aviation regulator, said on its website that it had approved in principle Shanghai-based Spring Airlines' plan to start short-distance international cargo and passenger flights. Zhang Wu'an, spokesman with Spring Airlines, told China Daily that the airline still has to complete some application procedures to get full approval. "We will work step by step before launching the flights," he said. Zhang also indicated that the first outbound flight might not be to Hong Kong, as the market is already saturated there. "The flights we plan to launch will be based on previous market research, in order to extract the maximum advantage from the new flights," he said. Jin Air, Korean Air's budget affiliate, is also planning to start international flights soon to some cities in China and Thailand. An employee surnamed Kim from Korean Air said the airline has got permission to start international flights from July. However, due to the shrinking market demand, a final decision has not yet been made. "As a low-cost carrier, our ticket prices will surely be lower than competition," Kim said. Yet another Pusan-based low-cost airline is also planning to start flights to China and Japan by the end of this year, increasing competition in the short-distance tourism market. "We are already feeling the pressure from Air Asia and Tiger Airways, and the challenge will grow bigger. Though the companies have their own modes of operation and pricing, we are still confident of increasing our market share," said Zhang. Market observers expect the round-trip ticket prices between Shanghai and Hong Kong to fall below 1,000 yuan, once Spring Airlines starts its Hong Kong flights. The low fare trips are also expected to trigger a shopping boom in Hong Kong, often dubbed as the "shopping heaven" by mainland customers due to its duty-free luxury goods, said Zhang. "Low-cost flights in China are still in a fledgling state, and if they cannot expand their market share, their influence is limited," said Li Lei, an analyst with CITIC China Securities. Michael Peng, sales manager of Shanghai Business International Travel Service Co, feels that low-cost airlines would not pose a great threat to major carriers' business. "There are flights every single hour from Shanghai to Hong Kong. Limited by their resources, low-cost carriers such as Spring Airlines can hardly benefit a lot from the mainstream market. Not to mention the business travelers who prefer to pay more for superior services," Peng said. "The international flights we are about to operate will be aimed to satisfy those who cannot afford average international flight tickets. These clients are highly sensitive to the price. By providing more choices for diversified customers, we hope to co-exist with traditional flights that are targeted at business and high-end travelers. And we call this a win-win situation," Zhang said.

An exhibition booth of Beijing Tourism Group, parent company of Beijing Capital Tourism Co at the 2008 Beijing International Tourism Expo.[CFP] Though the spree of acquisitions and restructuring in the tourism sector has triggered a rally in related stocks, the surge could be short-lived due to the worse-than-expected reform plans and weak corporate fundamentals. In the last four weeks, Beijing Capital Tourism Co, OCT Holding Company in Shenzhen and Guangzhou Dongfang Hotel Co have announced restructuring plans. Beijing Capital Tourism surged 6.4 percent on Tuesday, before its shares were suspended for the temporary shareholders meeting called to discuss an acquisition plan announced on May 21. In a statement to the Shanghai Stock Exchange yesterday, the company said it plans to issue 60 million new shares of its common stock to a Beijing-based company managing State-owned assets at a price of 15.53 yuan per share. The latter, in return, has sold 100 percent and 77.68 percent stakes in its wholly owned Beijing Xinqiao Hotel Co and Beijing Heping Hotel Co to Beijing Capital Tourism for 526 million yuan. In addition, Beijing Capital Tourism will also inject 274 million yuan in cash to Xinqiao Hotel thereafter. "Mergers and acquisitions have become the in thing for fully-competitive tourism companies, " said Tang Jianwei, analyst, Guojin Securities. Last Monday, Dongfang Hotel said the Guangzhou city government has decided to transfer the company's 51.6 percent stake held by Guangzhou-based Yuexiu Group and Dongfang Hotel Group to Lingnan International Enterprise Group Co, controlled by the local government. Following the news the company's shares rose 2.4 percent to close at 8.6 yuan on May 26, the highest in a year. Broadly speaking, the tourism sector surged 5.54 percent on Tuesday to outshine all other industries, with Beijing Tour Co and Shenzhen OCT Holding Company soaring to their daily limits. "The premium of tourism industry to the major index is over 100 percent now, much higher than the average of 80 percent in history," said Wang Ding, analyst, GF Securities. According to Wang, share prices in the tourism industry rose nearly 51 times the earnings on average, while the P/E on major bourses was 24 times. "We don't see any strong profitability in the firms that announced the restructuring plans. Assets injected into these listed entities have shown poor performance in the past," said an analyst from Essence Securities based in Shanghai. Xinqiao Hotel, which was wholly acquired by Beijing Capital Tourism, for instance, lost 9.08 million yuan in the first quarter with liabilities of 497 million yuan. But Beijing Capital Tourism expects the newly added hotel to achieve profits of around 1.93 million this year. "The acquisition is a strategic move for the parent company to develop a hotel platform rather than directly lift its performance," said Tang. The acquisition is expected to dilute Capital Tourism's earnings per share to around 0.5 yuan in 2009, down from 0.75 yuan in 2008. Its shares sank 3.38 percent to 16.3 yuan yesterday.

China: The Shanghai Co-operation Organisation's economic strategy was expected to top President Hu Jintao's agenda as he left for Central Asia and eastern Europe yesterday. Mr Hu will take part in the organisation's annual summit and meet leaders of Brazil, India and Russia in the Russian city of Yekaterinburg before starting his official state visits to Russia, Slovakia and Croatia from tomorrow to Saturday. The usual political topics would come up, but economic issues would probably dominate the visits as China and its Central Asian and eastern European neighbours were fighting to keep their economies rolling amid the current global recession, analysts said. The organisation, launched in 2001 as a regional body to strengthen co-operation on anti-terrorist and regional security fronts, now gave more emphasis to economic co-operation as growth had overshadowed regional security, Jiang Yi , a researcher with the Chinese Academy of Social Sciences, said. "Issues such as anti-terrorism are still around, but economic co-operation has moved way up in terms of importance as those countries have huge potential in the bilateral trade sector but have yet to sufficiently capitalise on it," Professor Jiang said. Xinhua statistics showed bilateral trade among China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan jumped to US$67.5 billion in 2007 from US$12.1 billion in 2001. But trade volume dropped last year. "There are so many areas, such as energy and natural resources, and those countries could match very well in supply and demand, but they have yet to establish a proper trade mechanism to allow smooth transactions," Professor Jiang said. Deputy foreign minister Li Hui said last week that clearing trade and investment barriers among member nations would be an important task for the summit. The leaders were also expected to give attention to the deteriorating situation in Afghanistan, and Chinese and Russian leaders would exchange opinions on North Korea's recent nuclear test. The inaugural meeting of Brazil, Russia, India and China, known as "Bric", had also attracted worldwide attention as analysts called it a challenge by developing countries to established economies. "It's a clear sign that major developing countries have started to co-ordinate their positions as the world prepares to adjust its global trade rules and regulations," Zhou Dunren , economics professor at Fudan University in Shanghai, said. Even though Brazil and Russia have said they may sell their US dollars to diversify their foreign currency reserves, Professor Zhou said China and India were less likely to do so. "It's not in China's best interests to sell US dollars [given China's huge US dollar reserve], but those countries may launch some currency-swap kind of programmes to allow bilateral trade to be less dependent on US dollars," Professor Zhou said. Mr Hu's official visit to Russia is the first since its power reshuffle last year. To mark one of the longest diplomatic relationships of the People's Republic, which established formal diplomatic ties with the communist former Soviet Union just two weeks after its founding, both countries will stage a series of exchange programmes to highlight the "historically tested friendship", Mr Li said.

Beijing is expected to unveil subsidised prices for solar power production as soon as the second half to enable mass adoption of the previously prohibitively expensive green electricity on the mainland. The National Energy Commission of the National Development and Reform Commission was considering following the lead of developed nations in giving subsidised power prices to solar projects, said Zhao Yuwen, head of the China Renewable Energy Society's photovoltaic committee. The mainland is the world's largest producer of photovoltaic components, but more than 98 per cent of the output is shipped overseas because of a lack of state subsidies. Mr Zhao said the difference between the solar power prices to be determined and the respective regional average desulphurised coal-fired power prices would be paid for by a renewable energy fund collected from all electricity end-users in the form of a small surcharge based on usage volume. The fund has already been in operation for three years since the implementation of the Renewable Energy Law at the start of 2006, and is subsidising other clean energy production such as wind power. The law stipulates that the nation's two state-owned power distribution monopolies must purchase all renewable energy generated. China Singyes Solar Technologies Holdings (SEHK: 0750) chairman Liu Hongwei said: "The implementation of subsidised tariffs will come out very soon, likely in this year's second half." Commercial-scale solar power is generated either by large solar panel farms in sun-rich remote regions, or through so-called building integrated photovoltaic projects - the engineering of power generation systems into rooftops and facades of city buildings using solar panels embedded in building materials. Beijing planned to give a tariff of 1.09 yuan (HK$1.24) per kilowatt-hour (kWh) for solar panel farms, Shi Lishan, head of the renewable energy department of the National Energy Commission, reportedly said early this month. This is substantially lower than the 4 yuan per kWh tariff granted to two developers of pilot solar electricity projects last year, and is lower than the 1.50 yuan bids reportedly placed by most bidders in the 10 megawatt demonstration project in Dunhuang, Gansu province, tendered by the central government earlier this year. Mr Liu said the 1.09 yuan tariff was probably an average of various bids put in by developers, adding the lowest bid of 69 fen was uneconomically low. The tariff is higher than the 30 to 40 fen per kWh of coal-fired power and 50 to 60 fen for wind power, meaning a greater subsidy is required for solar power to compete with coal-fired power, compared with that granted to wind power. For building integrated photovoltaic projects, the Ministry of Finance and the Ministry of Housing, Urban and Rural Development in March rolled out a temporary policy to subsidise project costs by about half, or 20 yuan per watt-peak (Wp). Only projects of at least 50,000 Wp qualify and priority will be given to government buildings. Yang Rong, head of the Ministry of Housing, Urban and Rural Development's technology development promotion centre, said the ministry had received applications from more than 500 building integrated photovoltaic projects so far, involving more than 300 MWp of capacity. If subsidised tariffs are rolled out, industry people expect the temporary 20 yuan subsidy on project cost will be cancelled.

Visitors peer through a window at an aquarium in Beijing. Rapid development on the mainland has led to serious marine pollution around coastal areas, but there is little public awareness of the issue.

Beijing is preparing to exact a form of revenge after its failed attempt to grab a stake in global mining giant Rio Tinto. Its weapon: the country's new antitrust law that could now threaten Rio's planned iron ore venture with rival BHP Billiton. Fearful of an effective global monopoly in iron ore supply, mainland steelmakers are pinning their hopes on an antitrust investigation that could help block the establishment of the venture. Or Beijing could impose sanctions on its operation in China, the world's biggest producer of steel. Rio and BHP, the world's second- and third-largest iron ore producers, earlier this month reached a non-binding agreement to set up a 50-50 joint venture covering their Western Australian iron ore operations. The deal came after debt-ridden Rio cancelled a proposed US$19.5 billion tie-up with mainland state-owned Aluminum Corp of China (SEHK: 2600) (Chinalco) following political opposition in Australia. The Rio-BHP venture will cut costs for the miners but has provoked opposition from steelmakers in China, Japan and Europe, countries that are heavily reliant on imported iron ore. They say the tie-up would further concentrate supply in the hands of a few players in a market where prices of ore have quadrupled from 2004 to last year.

Chinese President Hu Jintao (2nd L) arrives in Jekaterinburg, Russia, on June 14, 2009, for a summit of the Shanghai Cooperation Organization (SCO) and a meeting of BRIC countries, namely Brazil, Russia, India and China.

Chinese President Hu Jintao (L) is welcomed by Russian Deputy Foreign Minister Alexei Borodavkin upon his arrival in Jekaterinburg, Russia, on June 14, 2009, for a summit of the Shanghai Cooperation Organization (SCO) and a meeting of BRIC countries, namely Brazil, Russia, India and China.

Egyptian President Hosni Mubarak (R), also chairman of Egypt's ruling National Democratic Party, meets with He Guoqiang, member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee and secretary of the CPC's Central Commission for Discipline Inspection, in Cairo, Egypt, on June 14, 2009. He Guoqiang, China's anti-graft chief, on Sunday met here with Egyptian President Hosni Mubarak, pledging to seek stronger bilateral ties. He, member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, first extended the cordial greetings of Chinese President Hu Jintao to 81-year-old Mubarak. He hailed Mubarak as "a respected old and good friend" of the Chinese people for he made great contribution to the development of bilateral ties. In their hour-long talks at the Presidential Palace, He reviewed the growth of bilateral ties. Back in 1956, Egypt was the earliest Arab and African country to establish diplomatic relations with China. Ten years ago, Egypt took the lead among Arab and African nations in forging strategic cooperation with China. "The CPC and the Chinese government would like to take the 10thanniversary of strategic cooperation as an opportunity to maintain high-level exchanges, enhance political trust, bolster substantial cooperation for a stronger growth of bilateral ties," said He, also secretary of the CPC's Central Commission for Discipline Inspection. He lauded Egypt's efforts to promote China-Arab Cooperation Forum and China-Africa Cooperation Forum, saying that China supported Egypt to play a bigger role in international and regional issues. As Egypt will host the fourth ministerial meeting of China-Africa Cooperation Forum later this year, He said China and Egypt should work more closely to make the meeting a success. He said China would like to increase contacts and coordination with Egypt and other members of the forum for a better China-Africa relationship. Mubarak said Egypt and China, both of which were countries with long histories and great civilizations, enjoyed a solid foundation in cooperation in various fields. The Egyptian president also said more and more Chinese businessmen invested in Egypt in recent years, which injected a new vitality into bilateral relations. He called for stronger bilateral cooperation under the new situation. Mubarak, also chairman of Egypt's ruling National Democratic Party, spoke highly of China's development path, saying the mode fits China's reality. Furthermore, Mubarak appealed for the ruling parties of both countries to learn from each other on how to run the government. Mubarak, who has visited China nine times, said he cherished deep and solid friendship with Chinese people and leaders and was looking forward to visiting China again. China's anti-graft chief arrived in Cairo on Saturday for a three-day goodwill tour, which will also take him to Spain, Jordan and Mongolia. Late on Saturday, He went to the suburbs of Cairo to visit assembling lines of vehicles, a cooperative project between Chinese car manufacturer Chery and an Egyptian car company.

Chinese actors Zhang Hanyu (L), Zhou Xun (C) and Li Bingbing attend the opening ceremony of the 12th Shanghai International Film Festival in Shanghai, east China, June 13, 2009. Over 300 actors from home and abroad arrived for the Shanghai International Film Festival on Saturday.

China may soon become the world's biggest luxury market, but cultural challenges to winning customers' hearts for certain types of products remain, industry executives said this week. Champagne house Taittinger said there were many places on the mainland where it could consider making high-quality sparkling wine - champagne can only be made in the northern French region - but Chinese palates were not accustomed yet to the pricey tipple. "It is probably a bit early," Pierre-Emmanuel Taittinger said. "There is not a strong [high-end] wine culture there yet." Hermes, whose chic handbags are handmade in France, would consider making goods on the mainland if it could find artisans to make original items but said it suffered from counterfeiting there. "When they see a counterfeit, they think it is genuine," said chief executive Patrick Thomas. Counterfeits cost luxury groups hundreds of millions of euros in lost sales every year. "The challenge in China is being able to explain to 1.3 billion people what your brand is about," said Van Cleef & Arpels chief executive Stanislas de Quercize. While the number of high-net-worth individuals in China is set to continue to rise steadily, the bulk of the country's population cannot afford upmarket western brands. But luxury groups agree that China, where consumers are very brand-conscious, will soon become the industry's No1 market and will be one of the few emerging markets to enjoy growth this year. "China will be one [of], if not the most important market in the middle, long run," said Scilla Huang Sun, who runs a luxury fund for Julius Baer. "Chinese will not buy the very high end, like the Russians, but there are so many Chinese ... [They] save a lot, and it's a huge country." Bernstein said this month its proprietary survey of Chinese luxury retailers suggested "demand resilience through the first and second quarter of 2009, most notably for mega-brands with high brand recognition". China has become the No 1 market for LVMH's Hennessy cognac and the second-largest for its fashion and leather goods maker Louis Vuitton. For Lamborghini, China will overtake Italy as the second-biggest market behind the United States within three to five years. "They love what is coming out of Europe," said chief executive Stephan Winkelmann. "What is European is something they want to possess." But the carmaker said the tradition of luxury chauffeurs, bigger than sports driving, made expansion on the mainland a challenge. Watchmaker Hublot, which has been on the mainland since January, plans to open 10 shops there by year's end. By 2012, it would like to see China as its third or fourth market, after the US, Europe and Japan. Tom Purces, the chief executive of British luxury carmaker Rolls-Royce, said: "I think there are a lot of people who comment on China as being pictured as the biggest premium market, because they see the growth from a very tiny base to a very large base. "We went from a handful of cars in China to over 100 cars there last year. That's immense in a very short period ... but I don't believe that growth will be sustained at that level."

A Chinese submarine smashed into a sonar device being towed by an American destroyer off the coast of the Philippines last week, the latest in a series of high-seas encounters between the two powers. A Pentagon spokesman confirmed yesterday that the USS John S. McCain "did have a problem with its towed array sonar" which was damaged in Thursday's incident near Subic Bay. He said the vessels did not collide but gave no other details. PLA Rear Admiral Zhang Zhaozhong, a professor at the National Defence University, dismissed the encounter as an "ordinary incident". However, no such incidents have previously been made public. CNN reported that the Chinese submarine crashed into the sonar array in an "inadvertent encounter". The US Navy did not consider it a case of deliberate harassment, the report said, since the cables attached to the sonar array - a surveillance device used to monitor submarines and map the sea floor - could entangle a sub's propellers. Admiral Zhang was quoted by the mainland Global Times newspaper as saying: "The incident took place in the international waters off Subic Bay. In fact, collisions between submarines and collisions between submarines and sonar arrays are ordinary incidents. [The] Chinese and US navies are no exception, they care about the activities of each other and they track each other." CNN's source refused to say whether the American warship was aware of the presence of the Chinese submarine before the collision. The incident comes three months after five Chinese vessels blocked the path of a US surveillance ship, attempting to snag the sonar array that it was towing through waters off Hainan. China said the American ship was violating maritime law, while the Americans said it was operating legitimately in international waters. A spokeswoman for the US embassy in Manila, Rebecca Thompson, said only that the USS John S. McCain was operating in international waters, refusing to even discuss whether the incident took place. University of the Philippines law professor Harry Roque said it was alarming if a Chinese submarine was operating close to Subic Bay, site of a former US military base. "There's always an American warship docked in Subic. But what's a Chinese submarine doing near Subic?" He said foreign warships were entitled to the "right of innocent passage" through Philippine waters, but submarines exercising such rights could not travel submerged.

Lenovo Group (SEHK: 0992) chairman Liu Chuanzhi yesterday said the company would emerge from its operational difficulties within a year if the global financial crisis did not worsen. "Lenovo now stands at a turning point ... but one year later, you will see a positive result," Mr Liu said in a speech to the Wharton Global Alumni Forum in Beijing. "I'm very confident in this expectation." He did not give specific company data to back up his forecast, nor did he clarify whether a "positive result" meant simply breaking even. The world's fourth-largest personal computer maker last month reported a worse-than-expected net loss of US$264 million for the quarter to March, compared with a US$140 million profit a year earlier. Analysts had estimated a loss of about US$200 million. It was the second consecutive quarterly loss for Lenovo, which was US$97 million in the red in the quarter to December. The chairman attributed the poor performance to the global financial crisis, which began in September. He said it had greatly eroded sales to large clients in the mature markets. For the full fiscal year to March, Lenovo booked a net loss of US$226 million, the biggest since the company's 25-year history, compared with a US$484 million profit a year earlier. Mr Liu said the economic crisis had exposed the management teams' poor performance. After the company's acquisition of IBM's personal computer operations in 2004, and with its continued expansion into global markets, Lenovo's management teams had been internationalised physically, but not culturally and mentally. He said the company had set up a core managerial panel - four expatriates and four Chinese - to straighten out the problems of its management teams across the world. "With this, we are intending to reshape a new management framework to truly fit Lenovo," Mr Liu said. "This work is now going on smoothly and well, as planned, which makes me very happy." But he said his optimism over the operations in a year's time was based on a basically stable world economic environment and he did not anticipate the crisis worsening much. "There should be no problem realising what I'm anticipating, but this to some degree depends on how and where the global economy will evolve," he said.

Archaeologists unearth a terracotta warrior buried for about 2,200 years inside pit one at the Qin Shihuang Terracotta Warriors and Horses Museum in Xian, Shaanxi province, yesterday, in the first excavation at the site in 24 years. Thousands of tourists flocked to witness the first excavation of the 2,200-year-old terracotta warriors in Xian in 24 years yesterday, after the previous excavation was cut short due to technical problems. The latest excavation, of 200 square metres of pit one - the largest of the three pits at the Qin Shihuang Terracotta Warriors and Horses Museum, is expected to take at least six months. Parts of yesterday's five-hour excavation, which began at 1pm, were broadcast live on China Central Television (CCTV) and a local television channel in Shaanxi province . Visitors could also buy tickets to visit the museum to watch the excavation. State media reported that a colored clay figure, two chariots, each drawn by four horses, and a small spearhead had surfaced in the first day of excavation. Xu Weihong , an archaeologist in the excavation team, told Xinhua that large areas of colored painting were found on the clay figure unearthed yesterday and the team was satisfied with the preservation of the colors. Cao Wei , the deputy curator of the museum, said: "The most important discovery today was two four-horse chariots standing in tandem, very closely. It is the first time we have discovered such a thing." Archaeologists expect to unearth 11 life-size terracotta soldiers in the area, part of the mausoleum of Qin Shihuang - the first king of a united China. The clay figures were discovered by a group of peasants who were digging a well in 1974 and 1,087 statues were unearthed during excavations in 1978 and 1985. Some 6,000 are believed to remain underground. The authorities aborted the excavation 24 years ago due to a lack of technology to preserve the detailed colors painted on the surfaces of the figures, which faded immediately after being exposed to the air. Since 1988, the museum has been working with the Cultural Relic Protection Bureau of the German state of Bavaria to find ways to preserve the colours. Xinhua said that if the technology proved successful, the State Administration of Cultural Heritage would approve further excavation. Yuan Zhongyi , a former curator of the museum, said he was confident the technology could prevent oxidation of the colours on the figures. TV footage showed archaeologists brushing color stabiliser onto the surface of a ring-shaped chariot component unearthed yesterday. Xinhua said further colour preservation work would be carried out in a laboratory. Museum staff member Zhang Tianzhu estimated that at least 10,000 tourists visited the museum yesterday. Jiao Nanfeng , a former director of the Shaanxi Provincial Archaeology Research Institute, said there were no plans to excavate other parts of Qin Shihuang's mausoleum due to technical constraints.

Tata Consultancy Services was profitable in China in 15 months and is now targeting local firms. Consultancy's Indian workers, a sign of the high priority the mainland has given to growing business ties with India. "The Chinese government has always rolled out the red carpet for us," said Girija Pande, the Asia- Pacific head of Tata Consultancy. Despite a long border dispute in which the two countries went to war in 1962, China is India's biggest trading partner in Asia. Some companies, like Tata Consultancy, hope these ties could prove more resilient to the impact of the financial slowdown than business with the United States and Europe, a sign of shifting global economic sands as Brazil, Russia, India and China grow in wealth and clout. "Entering China was part of our emerging-markets strategy," Mr Pande said. "And now we've seen that not only is growth faster, they have also fared better in the crisis." Bilateral trade between China and India, old partners along the Silk Road, is valued at US$38 billion now, and India has the potential to export US$157 billion in goods and services to China by 2020, Goldman Sachs has forecast. From textiles and chemicals to information technology, the mainland has unseated Japan and is expected to soon replace the US as India's top trading partner. That may happen sooner than expected, as the financial crisis has slowed information technology spending in developed markets. "Let's admit it: China is a large opportunity," N. Chandrasekhar, Tata's chief operating officer, said recently. "Yes, there will be conflicts and challenges, but the opportunity is so huge." Tata Consultancy, which gets more than half its revenue from North America, was the first Indian software firm in China, in 2002. The mainland had a thriving hardware industry and a small software sector it was determined to develop along the lines of India's US$60 billion a year world-class industry. So, in 2005, the mainland government invited Indian software firms to partner it in a joint venture. Tata Consultancy won that bid, and TCS China, of which the Indian firm owns two-thirds, was formed in 2006. Microsoft Corp later took a nearly 9 per cent stake in the venture. "When we first went in, we only had two concerns: Given we were an Indian firm, would we be able to recruit local people? And who would our clients be?" Mr Pande said. As it turned out, the mainland high-tech industry and students were well aware of Tata Consultancy, and the firm had no difficulty replicating its model of recruiting locals and training them. Starting with multinational clients such as General Electric, Motorola and Cummins, Tata Consultancy was profitable on the mainland in 15 months and is now targeting local companies as customers. "There are several large Chinese firms like Huawei and Haier that are going global. And everyone knows India and China are where the next multinationals will emerge," Mr Pande said. Business in car manufacturing, textiles and chemicals had risen, but it is in information technology that China and India were especially complementary, he said, with their focus on "cost-effective" hardware and software, respectively. Personal computer maker Lenovo Group (SEHK: 0992) has found a ready market in India, and Indian software firms including Infosys Technologies, Wipro and Satyam Computer Services have followed in Tata Consultancy's footsteps, after initial concerns about intellectual property rights. Asia makes up 12 per cent of Tata Consultancy's revenues now and will likely contribute about 15 to 17 per cent of revenues in five years, Mr Pande estimates, when the firm will be 5,000-strong in China. "The opportunity in China is for us to take," Mr Pande said. "We have grown steadily and slowly, following the old [Deng Xiaoping] saying that we have in all our offices there: `You cross the river by feeling the stones'."

Chinese actresses Zhang Ziyi (C) and Fan Bingbing (R) and South Korean actor So Ji Sub arrive for the opening ceremony of the 12th Shanghai International Film Festival in east China's Shanghai, June 13, 2009.

Chinese actress Zhou Xun (R) and actor Zhang Hanyu arrive for the opening ceremony of the 12th Shanghai International Film Festival in east China's Shanghai, June 13, 2009.

June 13, 2009

Hong Kong: Hong Kong woke up to the unusual sight of our younger citizens being everywhere but where they should have been – in primary schools, child-care centers, nurseries and special schools. On the first day of a two-week closure of all such schools and facilities sparked by the first local swine flu cluster, parents just stuck to their daily routines. They took the young ones, or got the grandparents to take them, for dim sum or breakfast at the cha chaan tengs or fast-food restaurants – before it was off to the parks to work off the extra calories and, in the case of the young ones, youthful exuberance. Chains such as Tao Heung were up to speed, opening up restaurant sections they would normally leave closed, in anticipation of the extra custom. Lines formed outside Hong Kong Disneyland, which is offering pupils ''unlimited'' visits between noon today and the end of the month for the usual one-day entry price for children, before its opening at 10.30am. Other parents said they were caught off guard by the suspension of classes and hadf no idea where to take their children. Schools are staying open to help children whose parents are unable to get time off to look after them. But for almost every one else there was no need for extra precautions, even as the world was put on a pandemic alert for the first time in 41 years. Lau Kin-fai, who owns a pharmacy in Wan Chai, said sales of protective masks have not increased, as most people had stocked up when the first carrier, a Mexican man, was discovered around six weeks ago. ''People bought more when there was the first confirmed case, but not now, they've bought all they need,'' the 34-year-old said. When the first case broke, the government quarantined a Wan Chai hotel with several hundred guests inside. But Kevin Ku, a supervisor at a mobile phone store, said he is not worried about the threat posed by H1N1, which has killed around 140 people since February, mainly in Mexico and North America. ''Not many people are dying, they just feel ill. SARS was different,'' said the 36-year-old, who is married but does not have children. But some people were put off their stride. CS Wong, a retired 63-year-old, brought his four-year-old grandson on his normal trip to the wet market after the youngster was stopped from going to his kindergarten. ''I don't think we need to close schools altogether. If it's in a secondary school, then close the secondary school,'' he said. ''I think we only have to close primary schools and kindergartens when it [the flu] is spreading there. ''It's really a mess now ... many parents need to work and have no time to take care of the children.''

As Hong Kong schools closed, pupils returned to the Fresh Fish Traders' School in Tai Kok Tsui yesterday rather than stay home alone. China faces increased risk of a mass outbreak of swine flu as it has failed to track the source of some cases, officials warned a day after the World Health Organisation declared it a new global pandemic. Mao Qunan , spokesman for the Ministry of Health, said in Beijing yesterday the outbreak on the mainland had entered a new phase, in which local infections with uncertain sources were occurring and spreading in the community. The warning came as Hong Kong's Centre for Health Protection confirmed 10 new swine flu cases yesterday - including two family members of infected secondary students in the city's first cluster of local infections and another student from the school where the cluster occurred. There were also seven imported cases - three from the Philippines, three from the United States and one from Canada - bringing the total of cases in the city to 73. Mr Mao would not reveal how many mainland cases had unknown sources - an important indicator that the A(H1N1) virus is now spreading in the community among those with no travel history - but said most of the cases were imported and had known sources. Experts were still investigating the source of some cases, he added. He said tracking down the source of infection would play an important role in limiting the outbreak and assessing where it might strike next. So far there was no evidence of significant mutation of the virus, he added. "The virus strain isolated in our country is the same as the strain isolated in countries such as Mexico and Canada." The mainland had seen an increase in imported cases and local infections since the first cases on May 10 and May 29, respectively, Mr Mao said. "Judging from this, the risk of our country having scattered local infections and causing continuous spread in the community has grown day by day," he said. Mr Mao said the country was prepared to adjust its prevention measures to reduce local infections and prevent community spread, particularly at border points, but he did not elaborate on details. "In the early stage we took measures of inspection and quarantine at the border points and it played an important role in detecting imported cases and effectively containing the spread of the outbreak," he said. The WHO has warned that the virus, while appearing moderate in developed countries, may take a heavier toll in developing countries where sanitary conditions and health facilities are poor. The Ministry of Health and WHO held lengthy talks on Wednesday to review and adjust strategies in case the global health body declared a fully fledged A(H1N1) pandemic. The central government's strategy of focusing on trying to stop, or at least detect, virus carriers at border points was a slight departure from the WHO's advisory, which suggests that nations "focus on caring for H1N1 patients instead of trying to contain the disease". Mr Mao defended the country's strategy, saying China's situation was different in that it had many fewer swine flu cases than seasonal flu ones and most of them were imported. By yesterday, the mainland had reported 141 cases of swine flu, including 16 new cases from Thursday. Sixty patients had been cured and released from hospital. There have been no reports of deaths. Hans Troedsson, the WHO's China representative, praised the mainland's efforts to contain the disease. He said the organisation had been in regular contact with the ministry to exchange information. "It's not possible to prevent it, but you can prepare for and mitigate the impact of a larger-scale outbreak," Dr Troedsson said. "In that respect, I think China is quite well prepared."

Kith and Mark Lau, aged five and three, show off Disneyland tickets. Hong Kong's children fanned out across the city on the first day of class suspension yesterday, accompanying their parents to work, going to shopping malls and adventure playgrounds, queuing in the rain for Disneyland - and even going back to school. It looked more like a Sunday than a Friday as more than 500,000 primary and kindergarten students started the enforced two-week break from their studies. But while the children may have relished such unaccustomed freedom, for many working parents it was a big headache. Several children were spotted at stalls at Mong Kok's Fa Yuen Street market, sitting around while their parents went about their business. "It will be tiring for me, sitting here every day," said nine-year old Ken Ng, perched on a stool in a stall that sells sunglasses. "I don't know what to do." Sam Siu Chuk-ho, a Primary Four student, helped his mother choose a hat during a shopping trip. He had just had lunch with his mother and grandmother. "The suspension of classes can't be helped. But they should warn parents ahead," said his mother, Joey Chung. "We keep away from playgrounds. I won't take him to Disney because there is a high risk." It was an even bigger headache for one father, who was arrested for allegedly going out and leaving his seven-year-old daughter at home. The 56-year-old, identified only as Leung, was reported to the police by his ex-wife who called the girl at her Kwai Chung home and found she was alone. The father, arrested on suspicion of neglecting or abusing a child under his care, was released on bail and will report to the police at the end of this month. The daughter was sent to Princess Margaret Hospital for a check-up. Although classes were suspended, some schools allowed children back while their parents worked. Leung Kee-cheong, headmaster of the Fresh Fish Traders' School in Tai Kok Tsui - where 24 students went yesterday - said it was better for children to go to school than stay home alone. "If parents go to work and leave their child at home unattended, they are breaking a law," he said. Primary Six student Cindy Li Tze-ying cooked instant noodles for her headmaster and schoolmates in her school's kitchen. In the morning, she also helped answer the phone in the school office. Others helped organise books in the library or did their own work, Mr Leung said. Most students stayed for an hour or two and left before lunch time. Mr Leung said that he had no clue where they went. "It is parents' responsibility to take care of their children ... we can't stop the students leaving because classes are already suspended," he said. Fifteen students at the Chiu Yang Kindergarten also returned to their school in Sheung Wan yesterday. "We are a full-day school and we always support parents who need to work," principal Chan Chor-hang said. "Although the Education Bureau ordered the suspension, if parents cannot take care of their children, they can take them to school." Some tutorial schools also held morning classes yesterday, placing students further apart than usual as a precaution. At Disneyland, long queues formed as visitors took advantage of a controversial special offer that gives unlimited access to students from kindergartens, primary and special-needs schools until June 30. The visitors were undeterred by an amber rainstorm warning issued by the Observatory in the morning and waited patiently for the park to open. Disneyland was criticised by the government on Thursday after announcing the special offer, which overlaps with the closure of classes. A Disneyland spokesman said: "Hong Kong Disneyland Resort from time to time launches promotional packages for different segments of our markets." He said the resort had a cleaning team that was more than 400-strong to take care of hygiene issues.

Former Citic Pacific (SEHK: 0267) chairman Larry Yung Chi-kin and Poly (Hong Kong) Investments together tapped the market yesterday, netting HK$1.588 billion from a dual sale of 460 million old and new shares, sources said. Mr Yung cashed out HK$879.8 million from a sale of 255 million shares or a 12.3 per cent stake in the developer at HK$3.45 each. The price was towards the top end of an indicative price range of HK$3.35 to HK$3.50. Poly sold 205 million new shares at the same price in the same placement, according to a sales document sent to fund managers. The overall offering was increased by 29.1 per cent to HK$1.588 billion from an initial maximum of HK$1.23 billion. Mr Yung originally planned to sell 200 million shares, while Poly offered 150 million new shares. Both tranches were increased not long after the market began trading in the morning, amid strong demand from institutional investors, sources said. "The order book has been multiple times subscribed after launching in the first three hours," said a source close to the offering. "Most of them are good and quality names. "Most investors only got a small allocation due to an aggressive scale back on orders." The sale price was at a discount of 7.26 per cent to the stock's close of HK$3.72 on Thursday. Before the share sale, it was estimated that Mr Yung's stake in the developer would fall to 1.8 per cent from 14.1 per cent. It was the second time Mr Yung has exited a Hong Kong investment over the past five weeks. Mr Yung sold a 2 per cent stake in Citic Pacific for HK$732 million after he left the red-chip conglomerate. Mr Yung resigned as chairman and director of the company in April along with managing director Henry Fan Hung-ling after police raided the company's office as part of a probe into wrong-way bets on foreign currencies. The offering yesterday translates into 24.1 per cent of Poly's outstanding shares and 21.5 per cent of the enlarged share capital. BOCI and Citigroup were the bookrunners. Both banks declined to comment on the transaction. Both the company and Mr Yung have agreed not to sell any further stakes for three months after the completion of the share sale. Poly would use the proceeds to fund future investment including the build-up of land banks and for general capital purposes, the sales document said. Mainland online video portal Vodone yesterday also raised HK$79.2 million by selling 144 million new shares to an institutional investor at 55 HK cents per share. The price represented a 15.38 per cent discount to the stock's close of 65 HK cents on Thursday. OCH-Ziff, a leading global asset management firm, bought the shares. Vodone said the net proceeds from the placement would be for general working capital.

Stanley Ho gets honour, and a nice pen - It's probably easy to give when you have billions from running a casino monopoly for decades. Nevertheless, Stanley Ho Hung-sun was honoured on Wednesday night for his philanthropy to arts and culture. Montblanc, which makes very nice pens, presented its annual cultural patronage prize at the InterContinental Hong Kong Hotel. This year the Macau mogul was selected for his funding of everything from the Arts Festival to the ballet to the University of Hong Kong and the Community Chest. Receiving the Montblanc de la Culture Arts Patronage award from the company's international chief executive, Lutz Bethge, Ho also got an expensive pen, plus a US$15,000 donation - pocket change for him - to the arts cause of his choice. He chose the Hong Kong Ballet, which reciprocated by sending a few dancers to pirouette during dinner. "I am very honoured to receive this award," the 87-year-old tycoon said, before making a couple of witty Cantonese jokes about ink pens. "My principle is always from society to society. "And supporting the arts is a life-long effort, but in a speech, the shorter the better." Everyone waiting anxiously for the main course applauded that sentiment heartily.

Savannah College of Art and Design officials, from left, preservation specialist Bob Dickensheets, John Rowan and Tom Fisher, at North Kowloon Magistracy, Shek Kip Mei. The American arts college awarded tenancy of the historic North Kowloon Magistracy says it hopes to recruit local teaching and administrative staff for the opening of its first Asian branch next autumn. Savannah College of Art and Design, which will convert the historic building into a campus for its Hong Kong branch, will begin with about 60 staff members, including 25 faculty members, college senior management said. Savannah chief academic officer Tom Fischer said recruitment of teaching staff had not yet begun, but faculty members at campuses in Savannah and Atlanta in the US, and Lacoste in the south of France had expressed overwhelming interest in teaching in Hong Kong. "Hong Kong is a great attraction because everyone knows that Hong Kong is looking into developing a creative economy," Mr Fischer said, adding that many teaching staff members had previously worked in Hong Kong and hoped to return. Mr Fischer said that once the curriculum was approved by the Education and Manpower Bureau, the college would officially begin a search for teaching staff, and it was hoped some would be found in Hong Kong. He said the Hong Kong curriculum would match those at other campuses. He said cultural factors would be important and that staff with Asian backgrounds, particularly those with a good knowledge of Hong Kong, would be welcome. Savannah executive director of strategic initiatives John Rowan said a ratio between local and overseas staff members had yet to be set, but he hoped there would be as many Hong Kong members of staff as possible. During its first year, the Savannah College of Art and Design will offer eight majors: animation; advertising design; graphic design; illustration; interactive design and game development; motion media design; photography; and visual effects. The college will also offer sound design as a minor. Mr Fischer said recruitment of students had not begun, but he expected the numbers would be relatively small, with class sizes no larger than 20. He was confident that the college would attract students from throughout the region as the majority of the college's international students, accounting for more than 20 per cent of its graduate programmes, were north Asians. He expected that other than traditional courses such as graphic design, digital media-related courses would be popular. "The future of animation and film is not in Hollywood but here," Mr Fischer said, adding it was hoped that such courses would prepare students to enter the movie industry. He said that students' works were promoted through public events and exhibitions such as the college's first community event, Silver & Ink, an exhibition of students' works created over the past academic year held at the Jockey Club Creative Arts Centre in Shek Kip Mei. Overseas students will have to rent their own accommodation rather than live on campus during the first years of the Hong Kong college. Mr Rowan said the college would help students find budget apartments if required. Future possibilities included collaboration with nearby Mei Ho House, which could become a Youth Hostels Association lodging under the revitalisation scheme. But nothing had been decided. The awarding of a historic building to a foreign institute stirred controversy when the news was announced in February. Mr Rowan said that since the college had registered as a non-profit-making, non-governmental organisation, its operation would be monitored just like other non-governmental organizations.

China: Guangdong's graft watchdog is investigating a group of judges who spent 480,000 yuan (HK$545,000) of public funds on an extravagant 12-day overseas "working tour". The provincial party committee's Commission for Discipline Inspection said the investigative group consisted of the officials from the commission and the Foreign Affairs Office of Guangdong. The one-sentence online statement did not give any further details of the case, such as how long the investigation would last and how authorities would announce the results. An official report on the tour drafted by Guangzhou Maritime Court was leaked online earlier this month. Netizens were angry to see the judges had visited some famed attractions in South Africa, Egypt and Turkey. The court defended the officials in a statement on Wednesday, saying the expenses for the group of six people "did not exceed the budget". The group consisted of the court's director, deputy director and four judges, who were invited by two courts and a bar association in the three countries in January. The purpose was to discuss legal issues related to ocean and land pollution, the statement said, adding that all arrangements of the tour had been approved by the Foreign Affairs Office, which is responsible for governmental overseas tours. But the court's statement only made one reference to what the judges learned, at a meeting in Johannesburg. It gave no details of what the judges did during the meetings with local judges and lawyers in Cape Town, Cairo and Istanbul. Netizens and some media also questioned why a delegation focusing on ocean and land pollution needed to visit a desert in Dubai. The statement explained that they had to change flights in Dubai and decided to visit the sea reclamation works and desertscape. Although the court insists its judges have done nothing wrong, it has launched an internal investigation to find out the particulars, which will be made public. Guangzhou travel agencies said the route was a popular package for tourists. It normally took 10 days and cost the traveller 20,000 yuan per person, Xinhua reported. It was at least the fourth time in six months that officials have caused a stir by using public funds to pay for overseas tours. Anti-graft authorities in Jiangxi , Zhejiang , and Guangdong's Zhaoqing censured dozens of officials. Some of them received administrative punishment, which included being sacked or suspended.

Societe Generale Asset Management (SGAM) will launch a US$100 million China fund targeting foreign investors next month, gunning for returns in mainland consumer industries with high barriers to entry. The country's urbanisation patterns and 4 trillion yuan (HK$4.54 trillion) economic stimulus plan would help build value for mainland equities over a long time horizon, Winson Fong, head of Greater China equities at SGAM, said yesterday. But immediate value was to be found in shifting short-term consumption needs and the mainland companies in high-barrier-to-entry consumer industries, such as vehicles and property, that serve those needs, Mr Fong said. "You have to know what Chinese want to spend on, what is on their minds every day - it's to buy a house, then a car," he said. "For housing and for vehicles, the government wants to encourage this kind of consumption. "It will strengthen their support of the government." SGAM's current China funds include carmakers, such as Dongfeng Motor Group (SEHK: 0489) and Geely Automobile Holdings (SEHK: 0175), and car parts companies, such as Minth Group (SEHK: 0425). The firm also likes mainland-focused property companies, such as China Overseas Land (SEHK: 0688) & Investment and Guangzhou R&F Properties. Mr Fong buys blue chips such as PetroChina (SEHK: 0857, announcements, news) and CNOOC (SEHK: 0883) as well, but he sees more value in smaller companies off the mainstream radar screen. Trendy consumer names such as China Mengniu Dairy (SEHK: 2319) and top juice maker China Huiyuan Juice Group offer less value to investors, he said. "They also have long-term potential, but the barriers to entry are low, so they will see continuous competitive pressure," said Mr Fong. "Other brands will rush in - they may not beat you, but they will disturb your margins." SGAM has about US$2 billion of assets under management in Hong Kong and Singapore and about US$7 billion in a joint venture in Shanghai focused on the A-share market.

Bayerische Motoren Werke has won approval to sell BMW-brand cars to central government officials, a move that can help challenge the dominance of its European rivals in the world's biggest vehicle market. Beijing spent 80 billion yuan (HK$90.71 billion) buying official vehicles last year, according to China National Radio, with Volkswagen's Audi and Daimler's Mercedes-Benz being the models of choice. Shares of Shenyang-based Brilliance China Automotive Holdings (SEHK: 1114) rose 15.38 per cent to 90 HK cents yesterday after BMW announced its mainland venture BMW Brilliance Automotive had been added to the government's procurement list. BMW started talks with Beijing back in 2007 seeking to put its vehicles on the government's shopping list. Foreign and domestic carmakers see fast-growing official car sales as an entry point to further expansion in the market. Beijing has started to replace its official cars, public transport and taxis with more environment-friendly vehicles. BMW, which builds the 3-Series and 5-Series sedans with Brilliance China, last year sold 65,822 cars on the mainland, up 28 per cent from 2007. The joint venture has started building a second factory in Liaoning province with an annual capacity of 100,000 vehicles last year. Audi, a joint-venture partner of Jilin-based First Auto Work Group, sold 118,118 vehicles on the mainland last year, up 17.08 per cent from 2007. "The approval will help BMW close the gap with Volkswagen's Audi," said Michael Tyndall, a vehicle specialist with Nomura Securities in London. Audi, which kicked off its China production in the early 1990s, was the first global brand serving high-ranking government officials with its hot-selling A6 sedans. The mainland government used to use the domestically produced Red Flag, or Hongqi, of FAW as official cars before the country opened its vehicle market to foreign players in the 1990s. The central government is constantly updating its vehicle procurement list. Besides the top global luxury brands, other domestic brands on the list include Hong Kong-listed Geely Automobile Holdings (SEHK: 0175), BYD and Anhui-based Chery Automobile.

In show business circles, they say all publicity is good publicity, but a star presenter for CCTV who has found herself accused of spying for Taiwan may beg to differ. Fang Jing , 38, has been forced to deny allegations she was duped into providing military intelligence by a Taiwanese boyfriend who was eight years her junior. A little-known Nanjing-based newspaper, the Oriental Guardian, broke the story on Thursday, claiming Fang had been arrested for spying as early as May 12. It cited a blog written by Peking University associate professor Zhou Yijun, better known as "Ayi" - a part-time television host. Fang started anchoring prime-time news bulletins on China Central Television's international channel at the age of 23, and she has hosted several of the national broadcaster's flagship programs. The newspaper said Fang applied to host Defence Watch, a panel discussion programme on military issues, in order to gather intelligence. Mainstream state media outlets scrambled to grab their share of the gossip. The People's Daily party mouthpiece ran the story on its website, and the China Daily confirmed yesterday on its front page that Fang was under investigation for spying, quoting Zhang Zhaozhong, an expert at the National Defence University. However, by last night the reports had been removed from the websites, and a Xinhua report quoting the China Daily had also disappeared. Professor Zhang noted that Fang last appeared on Defence Watch on March 1. Last night, Fang rejected the espionage accusations in a newly created blog and threatened legal action against "those behind the rumour". "No personnel from any department have questioned me on any issue whatsoever," she said. "The article [Ayi] wrote came from nowhere. I will use the law to protect my legal rights." She said CCTV bosses had assigned her to the military programme. She said it was an area in which she took no personal interest, but she refused to say why she had been absent from the programme since March. However, sources said rumours of investigations into the spying allegations had been around for a while. One journalist, who did not want to be named, said: "All I can confirm is that she has been investigated by state security police but was released without any concrete charges." A CCTV source said Fang was well connected at the national broadcaster and was frequently seen at expats' parties. "She is almost certain to lose her presenter's job, but it's not clear what other action she will face," the source said. The unusual saga underscored the crisis facing CCTV. It is being viewed as an industry bully, and is increasingly scrutinised and ridiculed for any glitches and scandals. In February, a fire at CCTV's new complex in downtown Beijing caused by illegal fireworks killed a fireman and sparked public anger at the broadcaster.

The Peking University associate professor who accused a China Central Television presenter of disloyalty has apologised on his weblog, writing that he had not said she was a spy for Taiwan, only that she was "leaking secrets". Zhou Yijun , of the School of Journalism and Communication, also said in his entry on Saturday that he did so only as a metaphor in an article about students cheating on the National College Entrance Exam. But Professor Zhou refused to say where he obtained the news and the details about Fang Jing. "I will keep my mouth shut. Please don't keep calling me," he wrote. "Even if I am being irresponsible, I only said [Fang] was leaking secrets instead of being a spy." The Oriental Guardian, based in Nanjing , reported that Fang had applied to host Defence Watch, a panel discussion programme on military issues, to gather intelligence. Fang said in a video interview with Web portal "I have no reason to betray my motherland [and] sell my soul. "I have unlimited love and loyalty to the country and its people ... The truth will prove it all." Fang, 38, said she heard of the "groundless rumour" in mid-May and read it in Professor Zhou's blog on Thursday after a colleague had her about it. "I was shocked when I read the news. I can't understand why a public figure would spread rumours in public." The Southern Metropolis News reported that Professor Zhou on Friday sent an e-mail to newspapers saying he was not in a position to give more details. "Wait for the information from the government, court and CCTV." Fang, however, said no one from any governmental department had approached her. She said she would not talk to interviewees, mostly military experts, before the cameras were turned on because she wanted to have a real interview with them. She said she obtained military knowledge via "open channels" like everyone else. "For example, if we talk about F-16 flights today, [I would] google it."

China's 8th riot squad leaves for UN peacekeeping mission in Haiti - Members of China's eighth riot squad for the United Nations peacekeeping mission in Haiti wait to depart at Capital International Airport in Beijing, capital of China, June 13, 2009.

People visit the 2009 Zhejiang (Shanghai) Travel Fair in Shanghai, east China, June 12, 2009. The fair kicked off in Shanghai on Friday, promoting Shanghai's neighbor, Zhejiang Province's tourist resorts, especially those related to the 2010 Shanghai World Expo.

Suzhou party secretary Wang Rong officially took over from disgraced Shenzhen mayor Xu Zongheng yesterday, pledging to push forward reforms and build a clean government, state media reported. Mr Wang was appointed as the acting mayor of Shenzhen. His nomination as mayor has to be approved by the city's legislature - which will not meet until next spring. The widely anticipated nomination was announced yesterday by He Zejun, head of the organisation department in Guangdong, at a meeting of all senior local officials. The meeting was chaired by Shenzhen party secretary Liu Yupu. Mr Wang, a Jiangsu native, pledged that he would push forward with economic and administrative reforms in Shenzhen, and ensure the special economic zone stays ahead of other cities as the mainland's most open economy. He also pledged to build a clean, efficient government that would be responsive to public opinion. Mr Wang's nomination came just a week after the downfall of Xu, who was officially sacked on Thursday for violating party discipline. Xu was detained last Friday, accused of corruption and trying to offer bribes for promotion. Mr Wang, 51, has also been appointed deputy party secretary of Shenzhen. He had been the Suzhou party secretary since 2004. An academic before joining the government, his rise to power has been rapid. He is also an alternative member of the powerful Communist Party Central Committee and even ranks ahead of his new superior, Mr Liu. While many believe Mr Wang will reshuffle the leadership in Shenzhen, his first priority is to bring stability back to a city shaken by the corruption scandal. Several high-ranking officials were linked by the media to Xu's downfall. Over the past few days, all have made public appearances, including Yan Xiaopei - who had been out of the public eye for months because of poor health. Shenzhen civil servants said they hoped the new mayor could quickly repair the city's damaged image and restore rank-and-file morale. "Shenzhen had always been known before this [scandal] for its openness and efficiency. This image has been greatly tarnished by Xu's corruption. I hope Mr Wang will be totally different from Xu," one government employee said. Another official said: "The city's development, particularly infrastructure construction, is lagging behind. We hope Mr Wang can do to Shenzhen what he has done to Suzhou." Suzhou underwent rapid development under Mr Wang's charge. While Beijing appears eager to see stability returning to Shenzhen, it is taking the chance to warn officials. "Let all those who are like Xu Zongheng tremble in fear. We are building a comprehensive anti-corruption network around these people. Like Xu Zongheng and Chen Shaoji [the disgraced former Guangdong police chief], more and more corrupt officials will fall. The storm has just started," read a commentary carried by the People's Daily a day before the formal removal of Xu as Shenzhen mayor.

Archeologists plans to start 3rd large-scale excavation of Terra-cotta Warriors - Photo taken on June 11, 2009 shows No. 1 pit of the Terra-cotta Warriors and Horses of Emperor Qin Shihuang, in Xi'an, capital of northwest China's Shaanxi Province. Archeologists have planned to start the third large-scale excavation of the Terra-cotta Warriors on June 13, China's fourth Cultural Heritage Day, after a halt of over 20 years.

The United States National Symphony Orchestra performs during a concert at the National Center for the Performing Arts in Beijing, capital of China, on June 11, 2009.

June 12, 2009

Hong Kong: The World Health Organisation declared a swine flu pandemic yesterday - the first global flu epidemic in 41 years - as infections in the United States, Europe, Australia, South America and elsewhere climbed to nearly 30,000 cases. The long-awaited announcement is scientific confirmation that a new flu virus has emerged and is quickly circling the globe. The WHO will now ask drug makers to speed up production of a swine flu vaccine, which is not expected before September. The declaration will also prompt governments to spend more to contain the virus. WHO director general Margaret Chan Fung Fu-chun made the announcement last night after the UN agency held an emergency meeting with flu experts. Dr Chan said she was moving the world to phase six - the agency's highest alert level - which means a pandemic, or global epidemic, is under way. "The world is moving into the early days of its first influenza pandemic in the 21st century," she said. "The virus is now unstoppable." She warned countries that have large numbers of swine flu cases to prepare for a fresh wave of infections. According to the WHO's pandemic criteria, a global outbreak has begun when a new flu virus begins spreading in two world regions. Yesterday, the WHO said 74 countries had reported 28,774 cases of swine flu, including 144 deaths. The swine flu pandemic would last for one or two years, WHO assistant director general Keiji Fukuda said. Dr Chan described the virus as moderate and said the declaration should not be a cause for panic. It did not mean the death toll would rise sharply. The UN agency has stressed that most cases are mild and require no treatment, but the fear is that a rash of new infections could overwhelm hospitals and health authorities - especially in poorer countries. The last pandemic - the Hong Kong flu of 1968 - killed about 1 million people. Ordinary flu kills 250,000 to 500,000 people each year. Many health experts say the WHO's pandemic declaration could have come weeks earlier but the agency had become bogged down by politics. In May, several countries urged the WHO not to declare a pandemic, fearing it would cause social and economic turmoil. Dr Chan said she called yesterday's emergency meeting with flu experts after concerns were raised that some countries, like Britain, were not accurately reporting their cases. She would not say which country tipped the world into the pandemic. "This is WHO finally catching up with the facts," said Michael Osterholm, a flu expert at the University of Minnesota who has been advising the US government. In the United States, where there have been more than 13,000 cases and at least 27 deaths from swine flu, officials at the US Centres for Disease Control and Prevention said the move would not change its policies. "Our actions in the past month have been as if there was a pandemic in this country," Glen Nowak, a CDC spokesman, said. Dr Osterholm said the declaration was a wake-up call for the world. "I think a lot of people think we're done with swine flu, but you can't fall asleep at the wheel," he said. "We don't know what's going to happen in the next six to 12 months." As Hong Kong's director of health, Dr Chan led the city's fight against bird flu and severe acute respiratory syndrome.

A woman wearing protective clothing is taken to the infectious diseases centre at Princess Margaret Hospital in Kowloon yesterday. Eight designated clinics will begin treating patients with flu symptoms from tomorrow, with the Hospital Authority expecting demand to increase sharply during a community-wide outbreak. Health officials yesterday said there were adequate stocks of the antiviral drug Tamiflu. The eight flu clinics are: Shau Kei Wan Jockey Club Clinic, Sai Ying Pun Jockey Club General Outpatient Clinic, Central Kowloon Health Centre, Kowloon Bay Health Centre, South Kwai Chung Jockey Club General Outpatient Clinic, Yuen Chau Kok Clinic, Fanling Family Medicine Centre and Yan Oi General Outpatient Clinic. Hospital Authority director (quality and safety) Leung Pak-yin said the designated flu clinics, which were being converted from public outpatient clinics, aimed to concentrate on the treatment of swine flu patients and share the burden which currently fell on the public accident and emergency departments. The clinics will target patients with flu symptoms such as a fever, body temperature of 38 degrees Celsius and above, coughs and sore throats. They will operate along the lines of general outpatient clinics and charge HK$45 per consultation. Each clinic can treat 120 patients a day. The authority will conduct laboratory tests on 50 patients daily. Dr Leung said: "The laboratory tests act as an important surveillance tool to help us understand how the swine flu spreads in the community. We want to know if the new (A)H1N1 virus is gradually overtaking the seasonal flu virus and we need that information to adjust our policy." The authority's laboratory network at six hospitals - Princess Margaret, Prince of Wales, Queen Mary, Queen Elizabeth, Tuen Mun and United Christian - has been providing a 24-hour service. The clinics will open from 9am to 5pm each day and their capacity can be increased by extending these hours. They will treat walk-in patients and those referred by private doctors. The number of flu clinics can be increased to 18 if the swine flu cases continue to rise. Dr Leung said patients with mild symptoms would be asked to stay at home and rest. Only three groups would be admitted to hospital: women more than 20 weeks' pregnant, children under two and patients with severe breathing difficulties. The patients will be given Tamiflu. Secretary for Food and Health York Chow Yat-ngok said the government had stocked up about 20 million doses of Tamiflu, which would be enough to treat 2 million patients. It has so far used up about 1,000 doses on swine flu patients and their contacts. Private doctors are being asked to refer all suspected swine flu patients to public clinics and hospitals. Dr Chow said the government would need help from private doctors if the virus spread in the city. President of the Hong Kong College of Family Physicians Gene Tsoi Wai-wang said doctors would spend more time on asking for the medical and contact history of flu patients to see if they had contracted the swine flu virus.

Chung Hwa Travel Service boss Jeff Yang Jia-jiunn hopes to boost academic exchanges between Hong Kong and Taiwan. The past year has brought a dramatic warming in ties between Hong Kong and Taiwan, the island's top representative in the city notes with satisfaction. Obstacles to Taiwanese officials visiting Hong Kong had almost been eliminated, while the number of Hongkongers visiting Taiwan on civil exchange tours had doubled, Jeff Yang Jia-jiunn told the South China Morning Post (SEHK: 0583, announcements, news) yesterday, five days after Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung completed a groundbreaking trip to Taipei. The changes, which emerged after the Kuomintang returned to power last year, marked improved communication, Mr Yang said. "It is just the start of the normalisation of the Taiwan-Hong Kong relationship ... there is still some time before a full normalisation, but I believe it will not be far if both sides make efforts." Mr Yang, managing director of Chung Hwa Travel Service - Taiwan's top representative body in Hong Kong - estimated that more than 90 per cent of applications by Taiwanese officials for Hong Kong visas had been successful over the past year. By contrast, more than 95 per cent of applications were routinely rejected in February last year. "Communication is smooth now," Mr Yang said. "When Taiwanese officials come, they state clearly their purposes of visit and the Hong Kong government does not block them as long as there is no doubt." The two administrations agreed during Mr Lam's trip last week that visits would become more frequent. Mr Yang said he hoped corresponding departments could build relations and exchange experiences. Civil organisations in Hong Kong had also become more enthusiastic about visiting the island, he said. "Relatively few Hong Kong groups wanted to visit Taiwan before May 20 [2008, the date of President Ma Ying-jeou's inauguration], because of political concerns." Since January, 1,500 residents have taken part in exchange activities in Taiwan organised with Chung Hwa Travel Service's assistance - a doubling of the 750 in the first half of last year. The total number last year was 1,913. These groups included charities, green groups and government environmental bodies, Mr Yang said. Commenting on two non-governmental committees to be established to oversee bilateral economic and cultural co-operation, he noted that they would serve as a good platform to take advantage of Hong Kong's position as an economic hub, before cross-strait interactions were fully normalised. The role of his organisation - the Bureau of Hong Kong Affairs under the Taiwan's Mainland Affairs Council - would not change with the introduction of the platform, Mr Yang said. His next goal was to help boost academic interactions, as they lagged well behind those between the mainland and Hong Kong. "There are over 200 professors with Taiwanese backgrounds teaching in Hong Kong's eight universities, but there have only been scattered scholarly exchanges," Mr Yang said. "Hong Kong could be an ideal hub for academics from the three places across the strait, because it has freedom of speech, a good geographic location and a common language."

Hong Kong Disneyland was accused of putting business interests ahead of public safety yesterday after it seemed to flout a government health measure by launching a ticket promotion for young children, who are at risk of spreading swine flu. Targeting kindergarten, primary and special-needs schools in Hong Kong, the promotion offers unlimited visits to the theme park from today until June 30 for just HK$250. This is the usual price for one-day admission for children between three and 11 years old. The government has closed such schools for two weeks in a bid to contain swine flu. "We have already informed Disney that it should not make use of this opportunity to do such a promotion," Secretary for Food and Health York Chow Yat-ngok said. "Closing the schools does not mean that they are on holiday and can go outside and play. As I have said, they should try to stay at home. If they go out, they should avoid crowded places." A Hong Kong Disneyland spokesman said the tickets would go on sale today. "Hong Kong Disneyland Resort has many open areas planted with over a million trees, which allow guests to enjoy fresh air," he said. "The safety of our guests and cast members is always our top priority." But Hong Kong Medical Association president Tse Hung-hing said the promotion was "improper" and went against government policy. "There are a lot of opportunities for indirect contact at the theme park, like holding on to handrails, taking a seat on a ride, queuing up and using utensils. Also, not all areas are open, so this argument is simply not sound," he said. "And what do trees have to do with human swine flu? Having trees does not mean you are free of it." Democratic lawmaker Fred Li Wah-ming called on the government to halt the promotion and warned of dire consequences if people became infected with swine flu at the park. Education Secretary Michael Suen Ming-yeung said: "The whole point of suspending classes is to ensure that there is no congregation of young children, as very often it is not easy for them to look after themselves or to take care of their own personal hygiene. We should make sure that there is no congregation of young children in large numbers. "So my advice to parents is that they should try as far as possible not to bring their children to places where there are large numbers of children, such as playgrounds and shopping malls."

The confirmation of the first local cluster of swine flu cases yesterday was a milestone for Hong Kong in adjusting its pandemic policy, the health minister said. Secretary for Food and Health York Chow Yat-ngok said the city had moved from the "containment" phase to an early "mitigation" phase in the control of swine flu. This means that, instead of trying to contain the disease by quarantining all patients and their contacts, the government will now concentrate resources on mitigating the spread of the virus and any serious illness or deaths it could cause. Closing schools, and stringent public hygiene are among the mitigation measures. Since the first imported swine flu case was reported in Hong Kong on May 1, involving a Mexican tourist, the Centre for Health Protection has been quarantining all swine flu patients and tracing their contacts. The patients have also been given supervised treatment with the anti-viral drug Tamiflu. Dr Chow said that since the city had moved to the early mitigation stage, the centre would no longer trace patients' social contacts. The centre would only investigate patients' close contacts, who had a high risk of becoming infected with the virus. He said if the virus was spreading widely in the community, the centre would eventually abolish supervised Tamiflu treatment and use Tamiflu solely to treat swine flu patients in serious condition. Dr Chow said control measures at border checkpoints, including health declarations and temperature scans and the daily reporting of new swine flu cases, would continue. Medical sector legislator Leung Ka-lau said it was reasonable for the government to close schools following the 12 reported swine flu cases at St Paul's Convent School in Causeway Bay, and move to mitigation measures. But Dr Leung said the administration's flu policy was inconsistent. "The outbreak at St Paul's Convent School showed that secondary students are subject to the risk of swine flu, but the government closes primary schools and kindergartens. Secondary schools should be closed as well," he said.

Supporters of Fernando Chui Sai-on can break out the champagne today as the former culture minister is set to win Macau's chief executive race after his major rival called it quits. Chief prosecutor Ho Chio-meng, widely seen as Dr Chui's only possible threat in the poll, has decided against running for the top job. A spokeswoman for Dr Ho's office yesterday confirmed that the chief prosecutor would remain in his job and not run in the election. Under Macau law, a principal official cannot run for chief executive unless he or she resigns before the nomination period, which, for the July 26 election, begins today and lasts until June 23. Eilo Yu Wing-yat, an assistant professor of government at the University of Macau, said it was almost certain Dr Chui would now become Macau's new leader. "I believe there won't be any third person coming out with the power to rival Chui," Professor Yu said. Finance minister Francis Tam Pak-yuen, once seen as having a slim chance of taking the top job, had made no resignation announcement by early yesterday evening. Professor Yu said it would be nearly impossible for Mr Tam to resign late last night as it would need central government approval to take effect. Dr Chui and four other Macau residents have picked up nomination forms from the election co-ordination centre. The other four, including a practitioner of Chinese medicine and a card dealer, are seen as having little chance of securing nominations. A candidate needs at least 50 nominations from the 300-member Election Committee. Political commentator Larry So Man-yum said Dr Chui could easily win over a majority of the 300 Election Committee members due to his close ties with them. Although Dr Chui is set to enter an uncontested election, it is still possible that a role player will join the race. In 1999, businessman Stanley Au Chong-kit took part in the race against current chief executive Edmund Ho Hau-wah, who was seen as the sure winner because he had apparently gained Beijing's nod. Dr Chui comes from one of the city's few ruling clans. His late uncle, Chui Tak-kei, was a staunch supporter of the Communist Party when Macau was under Portuguese rule. Gaming mogul Stanley Ho Hung-sun has declared his support for Dr Chui's candidacy. Dr Chui declared his candidacy and resigned as culture minister on May 14.

HSBC Holdings (SEHK: 0005, announcements, news) will become the first lender to separate its retail banking and wealth management departments after a public outcry over tellers selling risky financial products to customers. The move is expected to be followed by other lenders and follows recommendations by the Hong Kong Monetary Authority that banks tighten regulations on such high-risk investment products sales. The fallout from the Lehman Brothers Holdings minibond scandal, in which banks sold highly speculative products to inexperienced investors, has put selling practices in the industry under the spotlight. HSBC announced yesterday that three of its 100 branches in Hong Kong would separate its deposit-taking and investment service areas. The pilot branches are at Hopewell (SEHK: 0054) Centre in Wan Chai, and Pedder Street and Lyndhurst Terrace in Central. The scheme will be expanded to all branches by September. Peter Wong Tung-shun, the bank's executive director, said different designs would be used for the general banking and investment service areas to make sure customers could easily differentiate the two zones. Such clear zoning was in line with the HKMA's recommended measures and would enhance investor protection, he said. The HKMA received more than 20,000 complaints about mis-selling by staff of 20 banks, including products that are touted as alternatives to time deposits but were in fact risky credit-linked notes. About HK$20 billion of the Lehman products were bought by 48,000 Hong Kong investors. The products became worthless when the United States lender went bankrupt in September last year. Sales activities within the investment areas would be audio-recorded and the tapes kept for seven years, HSBC said. A Standard Chartered Bank spokesman said the bank was finalising its arrangements and would launch new measures by September. A spokesman for Hang Seng Bank (SEHK: 0011, announcements, news) could not be reached for comment. The HKMA suggested banks completely separate their wealth management businesses from ordinary banking business by October 1 and record sales activities with customers by July 1. Julia Leung Fung-yee, the Undersecretary for Financial Services and the Treasury, said yesterday the HKMA had received 500 complaints from people who had lost hundreds of millions of dollars on a complex credit-linked investment product called Octave notes, sold by US investment bank Morgan Stanley. Two-thirds of the notes, sold mainly through 16 retail banks between 2004 and 2007, have lost more than 90 per cent of their value. Hong Kong investors had bought HK$24.9 billion worth of structured products, including Lehman minibonds and Octave notes. Of the credit-linked products, HK$4.5 billion is still outstanding.

The Hong Kong Monetary Authority will consult the banking industry on proposals to revise the liquidity regime in phases before the end of next year, according to Karen Kemp, an executive director of the de facto central bank. "The current crisis highlights the importance of liquidity risk," Ms Kemp wrote in the authority's website yesterday. "This will be a challenging task. But as in the case of implementing Basel II, we are committed to strengthening the liquidity regime, which is another cornerstone for maintaining banking stability in Hong Kong." She said the HKMA would need to look at liquidity risk in the light of the severe strains experienced by the financial institutions and investment markets amid the current financial turmoil. Banks with sufficient capital normally can obtain cheap funding but the turmoil has made borrowing difficult as financial institutions are reluctant to lend to one another for fear of counterparty risk. "Even well-capitalised banks can face serious problems if they have not developed the capabilities to manage liquidity properly in an increasingly complex market environment," she said. Ms Kemp said liquidity risk is a supervisory priority of the HKMA so the authority would study how to ensure the local regulation regime would match the Basel Committee's principles. Under the Basel principles issued in September last year when the financial crisis deepened, banks need to have systems and procedures to identify and measure all liquidity risks. Banks also need to maintain a high level of liquid assets to withstand stress if their normal funding sources dry up and set up a stress test programme for the development of a contingency funding plan. The HKMA has co-ordinated self-assessments by banks to check if they comply with the Basel principles and is analysing the results. "Our objective is to identify gaps in the authorised institutions' liquidity-risk management and issues that might affect implementation of the sound principles," she said. "We recognise the importance of ensuring that banks in Hong Kong are resilient to market-wide liquidity shocks similar to those recently experienced by some of their overseas counterparts. The HKMA is reviewing its liquidity regime."

Film star Stephen Chow Sing-chi has sold a house in his joint-venture luxury residential project on the Peak for HK$41,500 per square foot, 21 per cent less than in his last sale before the global financial crisis. However, the unit price is a record for a Hong Kong residential project after the crisis began. A mainlander bought House No 18 at Pollock's Path, developed by Chow and Ryoden Development, for HK$300 million, property agents said. The three-storey house has a floor area of 7,229 sqft, with a private swimming pool, a garden and a view of Victoria Harbor. Bel Global Resources Holdings chairman Stephen Sy Chin-mong bought House No16 in the same four-house project for HK$380 million or HK$52,566 per square foot on September 11 last year, just before the bankruptcy of Lehman Brothers. It was the third-most expensive residential deal in Asia by unit price. The project is on the site of the former "Skyhigh" development, which was the one-time residence of former Hongkong Bank chairman Michael Sandberg and Yaohan International chairman Kazuo Wada. The developers acquired the site for HK$320 million in 2004. Simon Lo Wing-fai, the director of research at Colliers International, said there had been more transactions of houses worth HK$100 million and above in recent months as property prices rebounded significantly. It showed buyers had regained confidence in the real estate market and were willing to offer aggressive prices for luxury homes, he said. However, he did not believe the increase in luxury residential prices could be sustained while rents continued to fall. Mr Lo did not expect rents to catch up until the end of this year or early next year. Meanwhile, Pacific Century Premium Developments (SEHK: 0432) chief executive Robert Lee Chi-hong said luxury residential prices would rise 20 to 30 per cent in the next 12 months. "The property market will benefit from the limited new residential supply and low interest rates. The market will be more active in the second half," Mr Lee said after the company's annual general meeting.

Beijing, Shanghai and Hong Kong have jumped in a year to be ranked among the world's 30 most expensive cities for tourists and expatriate workers. The Chinese capital surpassed Hong Kong, a city well known for its lavish lifestyle, as it rocketed from 104th to 26th position in the latest cost of living survey by ECA International, a human resources company. Beijing costlier than HK, survey finds. Shanghai jumped from 111th to 28th position in the March survey and Hong Kong moved 69 places to become the world's 29th most expensive city. The survey found that as America and Europe bore the brunt of the recession, strong Asian currencies were pushing up the cost of living for staff assigned to major Asian locations. The survey, which featured 15 Chinese cities and is conducted twice a year, compares a basket of 125 consumer goods and services commonly purchased by international assignees in over 370 locations worldwide. Lawrence Ong, a foreigner working for a UN agency based in Beijing, said the capital was more expensive than he had anticipated. "A cup of coffee costs around 30 yuan ($4), about the same price I pay in countries such as Singapore," he said. "It is easy to find very expensive restaurants, or very cheap and affordable ones, but it is quite difficult to find mid-range places." Based on ECA's survey, the China News Agency conducted an online poll about money pressures in Beijing, Shanghai and Hong Kong. More than 80 percent of the 20,000 respondents said their monthly expenditure exceeded their income and that concern about housing costs topped worries about food, clothing and transportation. The ECA survey found Tokyo remained the most expensive Asian city. This was mainly because of the appreciation of the yen against other major currencies. "The strengthening of Asian currencies is the dominant factor contributing to the region being more expensive for visitors than it was 12 months ago," explained Lee Quane, regional director of Asia, ECA International. "In that period, the yuan has continued to strengthen while the yen has appreciated by almost 8 percent against the US dollar. "As a result, people coming from Western countries into Asia will notice a considerable difference in costs compared with 12 months ago," he said. In Hong Kong, although the effect of inflation has been more moderate than last year, the cost of goods and services is now higher, it found. The Hong Kong dollar is pegged to the US dollar. "The main reason is the strengthening of the US dollar over the year," he said. "Companies sending staff into Hong Kong and paying them in their home currency are likely to have seen the purchasing power of their staff adversely affected." Currency fluctuations played a major role in survey rankings, but falling inflation and, in particular, the drop in petrol prices from the record highs of last year, also had an impact.

The WHO chief declared here Thursday that the organization has decided to move its A/H1N1 flu alert level to phase six and the widely spreading flu has developed into a full pandemic. Margaret Chan told a news conference that the full pandemic in 41 years was assessed as a "moderate" one. "On the basis of available evidence, the scientific criteria for an influenza pandemic has been met. I have therefore decided to raise the level of pandemic alert from phase 5 to phase 6, the world is now at the start of the pandemic," she said. The WHO do not suggest closing borders and urge countries do not pose restrictions on movement of people, goods and services, she said. The chief said that more flu deaths are expected, but no sudden jump in the death toll. She also urged to stop production of seasonal flu vaccine and turn to A/H1N1 flu vaccine production. The decision was made following consultations with world experts through a teleconference. A WHO statement has been sent to the WHO's members. The declaration is expected amid concerns that the A/H1N1 flu virus, which originated from Mexico two months ago, has widely spread to Asia, Europe, and the Americas. The WHO has raised the alert level to five at the end of April, the penultimate level in its six grades, indicating a pandemic was "imminent." And many experts have been expecting the upgrade of the flu due to its fast-spreading nature. However, experts explained that the highest level by no means indicates the greatest severity of the disease, but simply indicates the geographical spread of this flu. This is the first global flu epidemic in 41 years. As of Wednesday, 74 countries have officially reported 27,737 A/H1N1 infection cases to the WHO, including 141 deaths.

Chief Executive Donald Tsang Yam-kuen, accompanied by government officals, announces the temporary closing of all nurseries, kindergartens and primary schools following the discovery of a cluster of local human swine flu cases. All Hong Kong kindergartens and primary schools would be suspended from Friday for two weeks — and the suspensions might be extended further, government officials said on Thursday. The announcement comes as 12 students from St Paul’s Convent School were confirmed with the H1N1 infection. A government spokesman said the students were now being quarantined in Princess Margaret Hospital. The first local transmission of the H1N1 virus, a 55-year-old man, was disclosed on Wednesday by the Centre for Health Protection (CHP). A 16-year-old girl from St Paul’s Convent School was also confirmed to be infected. Chief Executive Donald Tsang Yam-kuen said on Thursday afternoon that the suspension of classes was necessary to stop more children being infected with the swine flu virus. “In accordance with our contingency plans... all primary schools, kindergartens, child care centres and special schools would suspend classes for 14 days from tomorrow,” Mr Tsang said. The chief executive made the comments after a meeting of a special government steering committee on swine flu. “The steering committee has just confirmed the first cluster of local cases of human swine flu... but we are unable to identify the source of infection,” Mr Tsang said. “This means that they are indigenous cases. We now have to migrate from a current containment phase to a new medication phase,” he added. Food and Health Secretary York Chow Yat-ngok stressed that young children were more vulnerable to flu attack. Therefore, it was important to suspend classes. “We do not want to see young kids coming down with human swine influenza,” Dr Chow said. ”Past flu outbreaks have shown that young children, especially those under six with flu, are more likely to get complications and be hospitalised,” the health secretary added. He said it would also important to ease the fears of parents in Hong Kong. Education Secretary Michael Suen Ming-yeung said the government would evaluate whether it was necessary to continue the suspension of classes on June 23. “There are still a number of schools that have not completed their final examinations. So we have made arrangements with these schools so that if the government is able to announce the resumption of classes at the end of the 14-day period... there will be sufficient time for schools to arrange for the completion of these examinations,” Mr Suen said. He said schools would have to make individual arrangements for assessments if classes could not resume after July 10. The Education Bureau will cancel the territory-wide student assessments scheduled for June 17 and 18. The primary five examinations, which will help determine the allocation of places for these students when they move on to secondary one, will continue to take place, but only if classes resume before July 10. Mr Suen said if classes continued to be suspended after this date, the Education Bureau would make special arrangements with the Department of Health. The education secretary also rejected suggestions that the government had been slow to close schools. Dr Chow said the government had also informed Disneyland not to have new promotions while school classes were suspended. Some schools have prepared video teaching materials to be uploaded on school intranet systems to allow students to study at home while classes are suspended. The chief executive said the Hospital Authority on Saturday would open eight designated flu clinics. These clinics have already been set up to receive patients with influenza-like illnesses. “The authority might expand the number of clinics to 18 if necessary,” Mr Tsang added. The clinics include: Sai Ying Pun Jockey Club General Outpatient Clinic; Shau Kei Wan Jockey Club Clinic; Kowloon Bay Health Centre; Central Kowloon Health Centre; South Kwai Chung Jockey Club General Out-patient Clinic; Yuen Chau Kok Clinic; Fanling Family Medicine Centre; and Yan Oi General Out-patient Clinic. They will operate seven days a week, from 9am to 5pm, including holidays. Dr Chow said the virus had spread in the community. But he said health experts would not trace people who had social contact with patients. This was because they were at the same level of risk as ordinary people. Dr Chow also said the government has 10 to 20 million doses of Tamiflu. This was sufficient for two million patients. Later on Thursday, Hong Kong reported another imported swine flu case. This was confirmed around 2pm, Centre for Health Protection controller Thomas Tsang Ho-fai said. The infected patient is a 43-year-old man who had come to Hong Kong from Europe. Further details on the patient are not yet available.

A kindergartener washes her hands before going to class on Thursday. All of Hong Kong's kindergartens and primary schools will close on Friday for two weeks by government order.

Hong Kong would not need to make big changes to its swine flu pandemic strategy even if the World Health Organisation raised its alert level, the health minister said yesterday. York Chow Yat-ngok was speaking after WHO chief Margaret Chan Fung Fu-chun said she believed the world was already in the grip of a pandemic but she was reluctant to make the official declaration. Dr Chow, the secretary for food and health, said: "No matter what their decision will be, Hong Kong is already at the highest emergency alert level. Also, we have already made some long-term arrangements. Therefore, our current policy will not change greatly. But we will monitor what the implications are for other countries." Speaking in Geneva, Dr Chan, the WHO's director general, said it was only the "heavy responsibility" of the matter that was restraining her from officially declaring a pandemic. A sharp rise in swine flu cases in Australia might push the WHO to finally announce the first flu pandemic in 41 years. Its flu chief, Keiji Fukuda, said the agency wanted to avoid adverse effects if it announced a global outbreak of swine flu. Dr Fukuda said people might panic, or governments might take inappropriate actions if a pandemic was declared. Dr Chan said it was important to verify reports that the virus was becoming established outside North America before declaring a pandemic. "The decision to make a phase 6 announcement is a heavy responsibility, a responsibility that I will take very seriously, and I need to be convinced that I have indisputable evidence," she said. Dr Chan was holding a conference call with governments yesterday to verify some of the reports she had received, before making a formal announcement. "Once I get indisputable evidence, I will make the announcement," she said. The WHO said yesterday the virus had infected at least 26,563 people in 73 countries and caused 140 deaths. Most of the cases have been in North America, but Australia has seen a sharp increase in the past week. The WHO has called an emergency meeting of experts in Geneva today to discuss the spreading swine flu outbreak.

Singapore Airlines (SIA) said on Thursday it will start using the Airbus A380 superjumbo on its Hong Kong route starting next month. SIA, which operates five daily non-stop flights between Singapore and Hong Kong, said the A380 will replace an existing Boeing B777-300ER service. SIA, the launch customer for the superjumbo, currently flies the world’s biggest passenger plane from Singapore to Sydney, London, Tokyo and Paris. The giant plane can carry up to 853 passengers but SIA has chosen a setup with a maximum 471 seats. SIA currently has eight A380s in operation, while it also has a firm order for another 11 and options for six more, the carrier said.

Hong Kong's securities watchdog said it has sought court intervention to direct Lehman Brothers Asia to produce documents that could aid its investigation into the minibonds fiasco.

China: Environmental authorities issued a ban on the expansion of the mainland's two biggest power companies yesterday, vowing that the environment would not be sacrificed for economic growth, even during a global economic crisis. Also banned is the construction of hydropower stations in the middle reaches of the Jinsha (Yangtze) River in Yunnan province and steel factories in Shandong. The announcement yesterday on the website of the Ministry of Environmental Protection said it would no longer process applications for environmental evaluations submitted by China Huaneng Group, the country's biggest power producer, and China Huadian Group, also a major power generator - except those contributing to new forms of energy generation or environmental protection. Combined, the two companies generated nearly 20 per cent of the mainland's total electricity production last year. The decision was prompted by serious violations of environmental regulations, the statement said. It accused Huaneng of damming the Jinsha River in January, without ministry approval, to build its Longkaikou hydropower plant. In the same month, Huadian dammed the Jinsha to build its Ludila hydropower plant, also without approval. Both companies had breached the law and damaged the area's fragile ecology, it said. In addition, Huaneng deviated from its original design in the construction of one of its biggest coal-fired plants in Inner Mongolia , using water rather than air to cool its generators, without regard for the dwindling water supply in the arid region. The expansion of the Shandong iron and steel industry was stopped because the Rizhao Steel Company and the Weifang Steel Company had expanded their production lines without environmental officials' approval, using methods and equipment that were outdated, energy intensive and heavily polluting. Ministry spokesman Tao Detian said hydropower projects would ruin the ecology and economy of a community without proper facilities, design or management to deal with those issues. "The illegal construction of Huaneng and Huadian's hydropower plants has had an extremely bad impact on the environment," he said. The ministry needed to carry out further studies on the environmental impact of hydropower plants in the Jinsha's middle reaches and review the projects that had been approved in the past few years, he said. Until the results showed that hydropower plants' impact on the environment, such as fisheries, could be minimised, the ministry would stop approving new projects. A Huadian press officer said "this is certainly a drawback to our company's operations". The share prices of all listed companies in which the Huadian Group holds equity fell yesterday, although the price falls were small, in a range of 0.23 to 1.91 per cent. The Huaneng Group was not available for comment, but prices in shares of the group's listed arms also dropped.

Hosting the Americans last week. Visiting Russia next week. China's busy diplomacy amid the economic crisis reflects the growing sway some say has brought the moment for Beijing to don the cape of a full superpower. Many mainland observers think the woes besetting the wealthy west would help Beijing win a bigger global role, but that expectation comes tethered to warnings the country should not oversell its strength - above all, not imagine dislodging United States dominance or the dollar any time soon. "The leadership is fully aware that the United States will continue to dominate despite the financial crisis," said Zheng Yongnian, director of the East Asian Institute of the National University of Singapore. "China does see opportunities to accelerate its rise, but it's still far from becoming an overall superpower." That caution will be on display next week when President Hu Jintao visits Russia for the first summit of Brazil, Russia, India and China. The four fast-growing countries may discuss ways to reduce reliance on the US, but it is Moscow, not Beijing, that has been the most vocal about diversifying away from US government bonds and making the yuan a global reserve currency. Just last week, when US Treasury Secretary Timothy Geithner was in Beijing to reassure his hosts about the safety of their vast dollar holdings, the Chinese leaders made it clear they, too, wanted to see a strong US economy. China, however, knows well that the game has changed. Its growing prominence is rubbing against its ingrained preference for a muted international role. The line of foreign governments looking to Beijing for an economic boost has raised the question of how far the country should use its vast savings and continued growth during the global slump to advance broader national goals. "There was initially some uncertainty about the strategic impact of the financial crisis," said Yan Xuetong, an international relations expert at Tsinghua University in Beijing. "But now we are seeing clearly that the crisis will lift China's international status ... With countries asking China for its money, it has found its international influence has also expanded." The discussion is also about the right limits for the country's ambitions. The rejection of Aluminum Corp of China (SEHK: 2600)'s tie-up with global miner Rio Tinto last week underscored the pitfalls Beijing faces in extending its reach. While some nationalists say the economic slump marks the end of American pre-eminence, Mr Zheng said Beijing hopes to boost economic and resource security, regional influence and diplomatic reach without riling the US and its allies. "China will continue to climb up the ladder," he said. "But it does not want revolutionary change in the international system." The country is instead pursuing a more oblique strategy of expanding its network of bilateral and international economic lifelines to countries in trouble. "China's focus in countering the crisis will be on its regional neighbours," said Qin Yaqing, vice-president of the China Foreign Affairs University in Beijing and a government adviser. At the height of the global financial turmoil last September, Premier Wen Jiabao said China's biggest contribution to the world would be ensuring its own economy continued to grow. That domestic focus remains a cornerstone of the policy. But since then, Beijing has also unveiled a flurry of currency swaps, loan-for-oil deals and funding pledges that have shown the central government does not want to stand on the sidelines.

China's exports and imports declined in May, but this was offset by better-than-expected growth in urban fixed-asset investment - indicating the world's third-largest economy is well on the road to recovery. Exports contracted 26.4 percent year on year in May and were down 22.6 percent from April. Imports fell by 25.2 percent from a year ago and 23 percent from April. The trade surplus widened to US$13.4 billion (HK$104.52 billion) from US$13.1 billion in April, according to the statistics bureau. "For China's nascent economic recovery to be sustainable beyond the short-term, policymakers must take steps to ensure that consumption remains on a firm growth trajectory," said Jing Ulrich, managing director of China equities at JP Morgan. Goldman Sachs economists Song Yu and Qiao Hong wrote that falling exports "will become less of a drag on the overall economy, while the rebound in domestic demand seems to be getting stronger by the month ... We expect the trade surplus to narrow in the coming quarters." And Daiwa's Kevin Lai said: "Exports continued to trend lower on a year-on-year basis, but we expect them to recover over the next three months." Urban fixed-asset investment grew 32.9 percent in the first five months to 5.35 trillion yuan (HK$6.06 trillion) versus a pace of 30.5 percent in the first four months. Fixed-asset investment reached 1.64 trillion yuan in May, versus 1.35 trillion yuan in April. "Fixed-asset investment surprised again on the upside, underpinned by both government and non-government investment," Lai said. Bank of America Merrill Lynch said China is now at the bottom of a U-shaped recovery, adding that a new driver for May's FAI growth was property investment, which made up more than 20 percent of the total. Credit Suisse said the trend is likely to continue as real estate developers are starting to purchase land again. "The high FAI growth bolstered by aggressive government policies is neither necessary nor possible to sustain in the long term," Merrill Lynch warned. "But to expect an imminent slowdown or even a plunge of FAI is unrealistic," the US- based investment bank said.

Recently, Danish LM Glasfiber, the world’s largest wind turbine supplier, launched its production base in Qinhuangdao, a port city in north China. It will become China's largest production base for wind turbine blades. LM Glasfiber holds one-third of the world market for wind turbine blades. At present, the company has set up factories in Urumqi, the capital city of Xinjiang, and Tianjin. The program in Qinhuangdao will be completed in three phases, with a total investment of more than 300 million yuan. When the whole project is put into production in 2010,its output is expected to reach more than 700 pieces, which will exceed the total output of the two plants in Urumqi and Tianjin.

The fragile recovery in the Chinese and global economies has been dealt a blow with the H1N1 flu outbreak declared a pandemic Thursday night. Analysts and experts in China said the announcement would have a significant impact on the country's travel, tourism and foreign trade sectors. In Geneva, the World Health Organization (WHO) told members it was declaring a pandemic - the first global flu epidemic in 41 years - as infections climbed in the United States, Europe, Australia, South America and elsewhere. In a statement sent to health officials, the WHO said it decided to raise the pandemic warning level from phase 5 to 6 - its highest alert - after holding an emergency meeting with its flu experts. WHO chief Margaret Chan was expected to make a formal announcement later last night. In Beijing, Mao Qun'an, spokesman for the Ministry of Health (MOH), told China Daily last night that a press conference would be held in the afternoon today to explain the latest situation. Zeng Guang, top epidemiologist with the Chinese Centers of Disease Control and Prevention (CDC), said there is no need to panic. China braces for H1N1 pandemic fallout. The MOH is ready with countermeasures based on the specific epidemic situation, such as the closure of schools when multiple infections are detected, he added. Vivian Tan, spokesperson for the WHO Beijing Office told China Daily last night that China is categorized as a country with sporadic cases and a few small clusters of domestic transmissions. Tan also said the MOH told the WHO Beijing Office last month that the country has enough antiviral medication and is expanding medicine stockpiles. But it is the economy which looks set to bear the brunt of the announcement. Gao Shanwen, analyst at Essence Securities, said the travel, hotel, transport, retail sales and entertainment sectors will see a decline. "And if consumption falls in other countries, it may affect China's exports, which are already severely hit by the financial crisis. But considering historical experience, the flu's overall impact on the economy will be limited," Gao said. Gao Yaosong, director of the Shanghai Research Institute of International Economy and Trade, agreed the pandemic alert will deal a big blow to exports and imports, turning matters from bad to worse. A series of restrictions will be imposed on the movement of both people and goods, making it difficult for trade delegates to travel overseas freely, he said. "The news is the last thing we want to hear," said Zhang Qingzhu, marketing manager of China Comfortable Travel Services in Beijing. "The government might adopt stricter policies on travel, but what is worse is that people will have greater fear about travel. It will be a devastating blow for tour operators," she said. Li Xinjian, a professor at the school of tourism management of Beijing International Studies University, said that outbound tourism will be the most severely hit, because H1N1 infections are far worse overseas. The inbound market, however, will not suffer much more from the raised alert level, because even at level 5, many foreign tourists had already dropped plans to visit China because of strict quarantine measures, he said. Zhu Mei, a spokeswoman for Air China, said the raised alert level could further hit airlines' international flights. "At level 5, most group visits to North America were already cancelled now, all airlines face a further drop." The long-awaited pandemic decision by the WHO is scientific confirmation that a new flu virus has emerged and is quickly circling the globe. It will trigger drugmakers to speed up production of a vaccine and prompt governments to devote more money toward efforts to contain the virus. "At this early stage, the pandemic can be characterized globally as being moderate in severity," the WHO said in the statement, urging nations not to close borders or restrict travel and trade. The WHO also told countries it was in "close dialogue" with flu vaccine makers and it believed the firms would work "to ensure the largest possible supply of pandemic vaccine in the months to come". On Wednesday, the WHO said 74 countries had reported nearly 27,737 cases of swine flu, including 141 deaths. The agency has stressed that most cases have been mild and required no treatment, but the fear is that a rash of new infections could overwhelm hospitals and health authorities - especially in poorer countries. The last pandemic - the Hong Kong flu of 1968 - killed about 1 million people. Ordinary flu kills about 250,000 to 500,000 people each year. Many health experts say WHO's pandemic declaration could have come weeks earlier but the international agency has become bogged down by politics.

China said yesterday it would send more delegations to Taiwan to buy goods as a way of helping the self-governing island's export-dependent economy, which has been battered by the global financial crisis. Fan Liqing , spokeswoman for Beijing's Taiwan Affairs Office, said a visit by representatives from 35 firms this month resulted in deals worth more than US$2.2 billion, covering computers, LCD screens, chemicals and textiles. "This is the mainland's way of helping Taiwan overcome the unfortunate effects of the international financial crisis and a positive way of helping them overcome economic difficulties," Ms Fan said. Also, the mainland plans to build an undersea telecoms optical cable across the Taiwan Strait, she said. "We hope that both sides begin to carry out the project in a timely manner," Ms Fan said. Improving communications is the latest chapter in warming ties between the neighbours. In April, Taiwan's president, Ma Ying-jeou, announced that the mainland would allow the island's participation in a World Health Organisation body, a major goal in Taipei's campaign for international recognition. Taiwan's economy contracted at a record pace of more than 10 per cent in the first quarter from a year earlier, keeping the economy deep in recession. Exports last month fell by almost a third from a year earlier, but the fall was slightly less than expected as a slump in demand from the island's major trading partners showed tentative signs of easing. May exports totalled US$16.17 billion and imports were US$13.01 billion, leaving a trade surplus of US$3.17 billion. Mainland exports dropped 30 per cent from a year earlier, a modest improvement from a 33.6 per cent fall in April's data.

Shenzhen mayor, Xu Zongheng, was officially removed from office on Thursday pending investigations over graft. The mayor of Shenzhen, Xu Zongheng, has been removed from his post by Beijing after being investigated for serious disciplinary offences, Xinhua news agency reported on Thursday. In recent months, a growing string of officials in Guangdong province including Xu have been investigated in a spreading graft investigation. Xu was detained nearly a week ago. “Because of serious disciplinary violations, the Central Government has already decided to remove him [Xu] from leadership duties,” Xinhua news agency reported. The pro-Beijing Wen Wei Po newspaper reported earlier that Xu was involved in two alleged “economic crimes” including links to the former head of Gome Electrical appliances (SEHK: 0493), Huang Guangyu, now being investigated for alleged financial irregularities. GOome is China’s top home appliance retailer. Xu’s bank accounts along with those of various associates and companies have been frozen as part of the probe, the paper added. Xu, a former car technician, has been Shenzhen’s mayor since 2005 and is also a deputy secretary of the Communist Party’s Shenzhen committee. Described as a “hardliner” by mainland media, Xu was sent from his native central Hunan province to Shenzhen in 1993. He was also accused of murky ties to Shenzhen property developers, with the city’s red-hot property market particularly hard-hit during the financial crisis. “His blunt refusal to put a ceiling on the local housing market caused nationwide controversy over whether he was representing the interests of major real estate developers instead of the public, who found housing prices unaffordable,” the China Daily newspaper wrote. Some experts said Xu’s ousting also reflected a power struggle between Guangdong’s Beijing-backed Party Secretary Wang Yang and local officials, with Beijing keen to rein in the free-wheeling region that led China’s free market reforms almost 30 years ago. “Guangdong officials will be more well-behaved in future,” said independent Shenzhen-based political analyst Zhu Jianguo. Last year, Shanghai’s Communist Party chief Chen Liangyu was jailed for 18 years for corruption-related offences.

Passengers are seen silhouetted while two China Eastern Airliners prepare to take off at the Beijing Capital International Airport. On Thursday, a senior official said that China Eastern has set up a joint task force with Shanghai Airlines to proceed with a merger. China Eastern Airlines (SEHK: 0670) has set up a joint task force with smaller rival Shanghai Airlines to proceed with a merger, a senior executive said, paving the way for further consolidation of the country’s fiercely-competitive aviation market. “The two airlines have started discussing and working on the restructuring,” Liu Jiangbo, vice-president of China Eastern’s parent said on Thursday. China Eastern’s chairman Liu Shaoyong is the head of the joint task force, she said. Analysts are positive about the merger as it will give the combined carrier more than half of the market share in Shanghai, an aviation hub much sought after by both domestic and foreign carriers. “The move is long overdue as Shanghai is the only major city in China that houses two carriers,” said Li Lei, an analyst with China Securities. The two carriers both suspended trading of their shares earlier this week because of major restructuring moves. Anticipation of the merger helped push up Shanghai Air’s shares by 35.2 per cent this year to close at 5.92 yuan on Friday when it last traded. China Eastern’s domestically traded A shares rose 29.1 per cent this year to close at 5.33 yuan. After years of double-digit growth, mainland’s airlines are facing strong headwinds as the global financial crisis strikes home. Its top three carriers, Air China (SEHK: 0753), China Southern Airlines and China Eastern lost more than US$4 billion last year. Shanghai Air, which has been in the red for two straight years since 2007, will be delisted if it fails to turn around this year, according to mainland’s securities rules. Sources familiar with the situation said in October that the government was discussing the possibility of brokering a merger of China Eastern and Shanghai Air to create a dominant player with more than 50 per cent share of domestic flights in the financial hub. Conflict of interest between different government bodies and rejection from Shanghai Air had postponed the deal, but talks began to speed up after the debt-ridden carriers got financial aid from the government, an industry source said. China Eastern’s parent group has secured 9 billion yuan (HK$10.22 billion) in funds from the central government and has agreed to inject 7 billion yuan to the carrier through a share placement deal. Shanghai Airlines, controlled by the city government, said in February it received a cash injection of 1 billion yuan. To help nurse its ailing airlines back to health, Beijing also encouraged mainland carriers to cancel aircraft orders or postpone deliveries due this year and stopped approving new airlines before next year. “The government has done a lot already. A state-backed merger is perhaps the last thing it can do especially for China Eastern, the weakest of the big three,” said China Securities’ Li.

A visitor inspects an energy-efficient LED panel's construction at an exhibition in Taipei. Reports on Thursday said mainland officials have invited Taiwanese companies to supply ten selected mainland cities with ultra-bright, energy-saving LED lights. Mainland officials have invited Taiwanese companies to supply selected mainland cities with ultra-bright, energy-saving LED lights, the latest in a series of big business deals between the rivals. At a two-day conference that ended on Wednesday, mainland delegates asked leading Taiwanese light-emitting diode makers to participate in a mainland project to light up 10 cities with cutting-edge LED street lights. Wu Qing, an official of Heilongjiang Province, said Taiwanese makers can supply the lights in Harbin, capital of the northeast province known for its long winter nights. Cooler than standard bulbs, the LED lights could also be installed to light up sculptures in Harbin’s annual ice festival, she said. Mr Wu was among some 80 mainland officials and business people who attended the Taipei event, one of several conferences that have taken place recently in both Taiwan and mainland to promote business co-operation. Companies from Taiwan and mainland are moving ever closer as investment barriers fall between the sides under Taiwanese President Ma Ying-jeou’s initiative to build closer economic ties. Mr Ma wants Beijing and Taipei to set aside consideration of the island’s political status and focus instead on developing their economies. Beijing still considers the self-ruled island a part of its territory six decades after it split from the mainland amid civil war. Li Jinmin, director of mainland’s Institute of Semiconductors, said LED is one of the most promising fields for cross-strait cooperation. “Taiwan has the manufacturing power, while the mainland has talent and a huge market,” Mr Li said. “With the co-operation, we can jointly tackle the current energy crisis and the financial crisis.” Businesses from the two sides also signed a letter of intent to jointly develop new LED materials and technologies and possibly set up a “world-class joint venture” in the future. Chou Wan-shun, chairman of Taiwan’s I-Chiun Precision Industry, said Taiwan currently makes high-end and mainland’s low-end LEDs, and their co-operation could help them challenge world leader Philips Electronics NV of the Netherlands. Taiwan’s LED industry generated US$1.6 billion in revenues last year, second only to Japan, according to the Taiwan government. The industry produces illuminating appliances that consume less energy and have longer life spans. In addition to outdoor and automobile lighting, LEDs are used in mobile phones and digital cameras because of their compact size and ultra-brightness.

Beijing has no choice but to keep buying US Treasuries, Dai Xianglong, the chairman of National Social Security Fund (NSSF), said in remarks reported on Thursday. “It’s a necessary choice for China to buy US Treasuries when you weigh up the pros and cons,” the Financial News quoted Dai, a former central bank governor, as telling a forum in Tianjin. However, Mr Dai, whose fund manages about US$80 billion, said China should diversify its vast foreign exchange reserves. China should boost direct investment overseas and expand its Qualified Domestic Institutional Investor scheme to allow more portfolio investment abroad, Dai said. A number of senior officials have voiced concern recently about Beijing’s exposure to US debt, given what they see as mounting medium-term risk of inflation in the United States. About 70 per cent of mainland’s US$1.95 trillion in official foreign exchange reserves is held in dollar assets. The NSSF is a fund of last resort for mainland’s patchwork of underfunded provincial pensions schemes. It has about 6 per cent of its portfolio invested overseas currently, according to analysts, and is aiming to increase that share. Vice-Finance Minister Li Yong said at the same forum that Beijing would like to see a more “diversified” international currency system that is based on not only the dollar but also the euro, sterling and major Asian currencies. Mr Li added that reform of the global financial system would be a long process and “cannot be completed with a single step”, but that there are smaller steps that can be taken now as a start. “Because any dramatic adjustments to the international monetary system are not possible, we can, as the first step, find a mechanism to restrict and guide fiscal and trade deficits of the major reserve currency countries,” Mr Li said, in a thinly veiled reference to the United States. The transcript of Mr Li’s speech was published on China news portal Mr Li’s argument echoed that of many other officials, including central bank governor Zhou Xiaochuan, who has publicly discussed replacing the dollar as the world’s reserve currency in the long run. Wang Xiaoyi, deputy head of the State Administration of Foreign Exchange, said at the same event that mainland is seeing growing capital inflows, as the economy is showing signs of picking up. But Mr Wang also warned that financial risks may still last for a relatively long period, and that the impact on some parts of the world has been worse than expected. “We should take full stock of the uncertainties ahead and make good preparations for even greater and longer-term difficulties,” Mr Wang added.

June 11, 2009

Hong Kong: Hong Kong has reported its first domestic human swine flu case – bringing the city's total number of cases to 43, Centre for Health Protection (CHP) controller Thomas Tsang Ho-fai said on Thursday.

Workers disinfect the lobby of Block 43 at Heng Fa Chuen Estate, home of the city's first confirmed domestic swine flu case - a lawyer with no recent history of overseas travel. An announcement will be made today on whether all nurseries, kindergartens and primary schools will be closed for two weeks pending the investigation of what could be the city's first cluster of swine flu cases. The confirmed infection of a 16-year-old girl and suspected infection of her younger brother and 11 classmates was disclosed after health chiefs also announced the first local transmission of the new (A)H1N1 virus in a 55-year-old man. The Centre for Health Protection said last night that the girl, a Form Four student at St Paul's Convent School in Causeway Bay, had contracted the virus and that her brother and classmates had developed flu symptoms. Her mother was reported to be suffering from a fever yesterday. The girl, her brother, mother and 11 classmates were admitted to hospitals last night and all placed in isolation. The government said the girl had no recent travel history, but the source of infection was being investigated. Earlier, the centre said the first local transmission of the virus had been confirmed in a lawyer with no recent history of overseas travel who is believed to have caught the virus at a company cocktail party attended by a person infected overseas. He fell ill on Monday and was sent to Pamela Youde Nethersole Eastern Hospital yesterday. The Centre for Health Protection has classified the case as second-generation transmission arising from an overseas imported case. The Education Bureau ordered the St Paul's Convent School to close for 14 days from today. Last night, the school said it would close its primary, kindergarten and nursery sections for this period. Government workers went to the school last night and began cleaning and disinfection work. Chief Executive Donald Tsang Yam-kuen cut short a visit to Guangxi and returned to Hong Kong late last night to chair a steering committee meeting this morning. This will decide whether all nurseries, kindergartens and primary schools will be shut for 14 days to slow transmission of the disease. Centre controller Thomas Tsang Hoi-fai said his team would be working around the clock to interview the students and their families. "The information of whether these students have any travel history or contacts with any swine flu patients is of utmost importance to decide our next move," Dr Tsang said. The sick girl, who lives in Whampoa Garden in Hung Hom, showed flu symptoms on Sunday and her classmates started to fall sick on Sunday and Monday. The school told the centre on Tuesday. The younger brother, a student at Alliance Primary School in Kowloon Tong, suffered from flu between May 30 and June 4. Dr Tsang said it was uncertain if the girl contracted the virus from her brother, and tests were under way. University of Hong Kong microbiologist Ho Pak-leung said there should not be undue alarm even if the pupils turned out to be the first local cluster. "Hong Kong has done what it needs to do to prepare for a pandemic. During the Sars outbreak, we did not know the disease and there was no effective drug. Now we know the virus, and Tamiflu is effective. There is no need to panic." A 21-year-old woman and another woman, who flew in to Hong Kong from Britain and the United States, were confirmed with swine flu yesterday, taking the number of cases in the city to 49.

Hong Kong's first local case of the swine flu virus works at an international law firm and it is believed he contracted the virus at the firm's recruitment open day last Friday. Thomas Tsang Ho-fai, controller of the Centre for Health Protection, said the 55-year-old man caught the flu from another confirmed patient at a cocktail party. Timothy Hill, a Hong Kong partner at the international law firm Lovells, which employs more than 3,000 people in 27 offices around the world, confirmed that a member of the firm was yesterday diagnosed with the A(H1N1) virus. The virus is believed to have been transmitted to the man from a student who was invited to the firm's recruitment open day last Friday. The 20-year-old student is believed to be a Hong Kong resident who had travelled from Britain, where he attends university. Nine people who attended the party had been placed under a new treatment arrangement since Saturday, when the student's infection was confirmed, Dr Tsang said. The arrangement required patients, instead of being quarantined, to report daily to government clinics for a check-up and to take a supervised dose of the antiviral drug Tamiflu. However, the latest case was not one of those nine. In the wake of the latest development, all 40 of the guests and staff members at the gathering would be placed under the above treatment arrangement. So far, none of them showed any symptoms, Dr Tsang said. Mr Hill stressed that Lovells, which occupies three floors of One Pacific Place in Admiralty, was still open and operating as usual. "We are following the advice of the Department of Health and we will continue communicating with them," he said. Dr Tsang said the 55-year-old, who lives in Heng Fa Chuen, "had no travel history during the incubation period". He added that the 20-year-old student had been confirmed as a swine flu case on Saturday. The two are believed to have been in the same room for about 15 to 20 minutes, but it is not known whether they had direct face-to-face contact.

The Kwong Yuen Building at 4, Kam Lam Street in Mong Kok, is one of the buildings put forward for the repair subsidies. The government's initiative to repair dilapidated residential buildings has received an overwhelming response from building owners. About 1,100 buildings with owners' corporations have applied to take part in Operation Building Bright, more than double the places available, Secretary for Development Carrie Lam Cheng Yuet-ngor said yesterday. Under the scheme - launched in March - the government will spend HK$1 billion to renovate 1,000 residential buildings that are more than 30 years old - 500 structures with owners' corporations and 500 of those without. At the close of applications yesterday, the Development Bureau had received about 1,100 applications from buildings with owners' corporations, with applications from Yau Tsim Mong district topping the list at 27 per cent of the total, followed by those from Sham Shui Po district at 12 per cent. "Obviously our supply cannot meet the demand," Mrs Lam said. She urged lawmakers to approve an additional HK$1 billion for the programme, a sum the government is seeking as part of handouts announced last month, and which is tabled for Legislative Council discussion next month. The extra billion dollars is expected to benefit a further 1,000 buildings and create 10,000 more jobs. Mrs Lam said the sum should be enough to meet demand. Work will start in the autumn at the soonest. The district councils have nominated 500 buildings without owners' corporations for the scheme. Some of the 500 are among 226 blocks that will receive the subsidy, because they have already been earmarked for repairs by the Buildings Department. Yau Tsim Mong district councillor Hui Tak-leung urged the government to set up a central system to appoint contractors for the repair work to prevent corruption. Funds made available through the scheme will be used to repair common areas related to structural safety and sanitation, including concrete, external walls, windows, vent pipes and underground drainage. The owner of each unit of a building taking part in the scheme can receive - without going through asset or income means testing - a grant amounting to 80 per cent of the repair cost, subject to a ceiling of HK$16,000. Buildings in urban areas with an average rateable value exceeding HK$100,000 a year, and those in other areas with the value exceeding HK$76,000, are not eligible for the program.

The first mainland tour group traveling to Taiwan via Hong Kong on the city's home-ported cruise liner will sail on August 2. Star Cruises has tailor-made a six-day, five-night itinerary in response to the new initiative announced by the central government in April to allow mainland tour groups to travel to Taiwan by taking Hong Kong-registered vessels. Several mainland travel agents have already signed agreements with Star Cruises to organize tour groups for the voyage. Executive vice-president William Ng Ko-yin said Star Cruises has for years been studying and exploring the feasibility of sailing to the three places across two shores. The advanced planning led to the speedy launch of the special tour. Before cruising to Taiwan aboard the 51,039-tonne SuperStar Aquarius, guests can stop over in Hong Kong for sightseeing, dining and shopping. The six-day trip will also have stop in Tainan and Taichung before guests disembark at Keelung. The itinerary includes tours to the Anping ancient city, Cigua Salt Mountains, Sun Moon Lake, Taipei and National Palace Museum and the landmark Taipei 101 tower. Mainland tourists can opt to continue their journey on land upon arriving at Keelung. Taiwanese guests can also embark from Keelung and sail directly to Hong Kong. Commissioner for Tourism Margaret Fong Shun-man welcomed the new itinerary, saying it will enrich the travel experience of mainland visitors on the multi-destination trip. "This new measure will also add impetus to Hong Kong's development as a leading regional cruise hub," she said. The Tourism Commission, through the Advisory Committee on Cruise Industry and other channels, is working with the Hong Kong Tourism Board and the industry to jointly formulate strategies to strengthen Hong Kong's position as a cruise hub in the Asia-Pacific region.

More than 1,500 old buildings have been earmarked for a facelift which will create 20,000 jobs, Secretary for Development Carrie Lam Cheng Yuet-ngor said yesterday. Speaking to reporters after seeking an additional HK$1 billion from the Legislative Council for Operation Building Bright, Lam said the original intention had been to help renovate 1,000 old buildings, 500 of which belonged to owner corporations. However, more than 1,100 owner corporations applied for financial assistance under the scheme. "We are faced with an economic crisis and unemployment, especially in the construction sector, is very high. So we want to create more jobs for the construction sector," Lam said. The funding for the scheme will be expanded from HK$1 billion to HK$2 billion if given Legco approval, and the number of jobs created will increase from 10,000 to 20,000. About a quarter of applications were from the Yau Tsim Mong area. "I expect we will be able to meet each and every one of the 1,000-plus applications, provided that they meet the eligibility criteria," Lam said. The Buildings Department has approved 226 old buildings not covered by owner corporations and the 18 district councils have nominated 501 others. On June 19, there will be a lottery to decide which will be the first 500 buildings to be renovated. Work on the remaining buildings should begin in the autumn, after Legco approves extra funding, Lam said.

The prospects of the highest-level talks between the mainland and Taiwan for the first time since 1949 soared Wednesday with island leader Ma Ying-jeou set to become the chairman of the ruling Kuomintang (KMT) within months. Ma's move paves way to meet Hu Experts on cross-Straits studies sounded an upbeat note on a potential meeting between Ma and Hu Jintao, general secretary of the Communist Party of China (CPC) Central Committee, given that current exchanges are limited to party-to-party talks. At a joint press conference with incumbent KMT chairman Wu Poh-hsiung in Taipei Wednesday afternoon, Ma, who favors closer cross-Straits ties, announced he would run for a new term to head his party. Wu has agreed to step down from the post. No one else is seeking the job, and no challenge is expected ahead of the July election. Ma is expected to assume the post on Sept 12. Ma was elected KMT chairman in 2005, but resigned two years later when he was indicted on charges of corruption under the administration of former Taiwan leader Chen Shui-bian, who had been pushing the island toward formal independence. Although Ma has to visit Beijing in his capacity as KMT chairman and talk to Hu in his role as general secretary of the CPC Central Committee, the unprecedented meeting will signal "great reconciliation" between the mainland and Taiwan, experts on both sides told China Daily Wednesday. This political ambition was not realized during the era of former CPC leader Mao Zedong and KMT Chairman Chiang Kai-shek, said Li Jiaquan, former director of the Institute of Taiwan Studies at the Chinese Academy of Social Sciences (CASS). In early 1975, Chiang secretly invited Mao to visit Taiwan and the latter accepted, according to declassified documents. But the plan failed to materialize with the death of Chiang in April that year. "Whether history is made depends on political reconciliation on the island, which can be achieved," Li told China Daily following Ma's announcement, referring to secessionist forces' opposition to developing closer ties with the mainland. Lin Shou-shan, a senior KMT member, said the meeting is "very likely to become reality" with Ma's announcement, which will help remove all "technical difficulties". "Though there will still be political differences, the positions across the Straits are now crystal clear and reconciliation looks almost certain," Lin told China Daily from Taipei. But some experts worry that Ma's "dual role" may make him more cautious. "The dual role certainly offers him more control and flexibility in local politics, but it may also make him think twice before setting foot on the mainland," said Zhu Weidong, director of the Institute of Taiwan Studies at the CASS. Kwok Tsun-kee, executive director and head of Taiwan Cooperation, Monte Jade Science and Technology Associate of Hong Kong, said Ma's position as Taiwan's leader may lead to possible "awkwardness" in KMT's exchanges with the mainland. "He may not succeed in persuading Taiwan residents to let him visit the mainland," Kwok observed. The high expectations come amid growing signs of warming relations. On the eve of his bid for KMT chairmanship, Ma suggested that Taiwan may allow the use of simplified Chinese characters, widely used on the mainland but banned in Taiwan, in a move that may draw both sides closer culturally. The mainland announced Wednesday that it plans to build an undersea telecommunications cable across the Taiwan Straits. The construction of the fiber optic cable will improve telecom links across the Straits, Fan Liqing, spokeswoman for the State Council Taiwan Affairs Office, said. Fan also expressed hope for more active exchanges between the CPC and the KMT. "The KMT and the Communist Party of China, via a party-to-party exchange mechanism, have in the past few years conducted many fruitful activities which stimulated the peaceful development of cross-Straits relations," she told reporters. "We believe the exchange mechanism would further play an important and active role." Current KMT chairman Wu and former KMT chairman Lien Chan have both visited the mainland to meet with CPC chief Hu. Lien's first meeting with Hu was the first between top party leaders across the Straits since 1949.

Keiji Fukuda, right, acting WHO ssistant director, with Margaret Chan, left, WHO director general, attend an intergovernmental meeting on H1N1 flu preparedness in Geneva last month. WHO 'very close' to declaring H1N1 flu pandemic - The World Health Organisation (WHO) is on the verge of declaring the first influenza pandemic in more than 40 years, but wants to ensure countries are well prepared to prevent a panic, its top flu expert said on Tuesday. Keiji Fukuda, acting WHO assistant director-general, voiced concern at the sustained spread of the new H1N1 strain – including more than 1,000 cases in Australia – following major outbreaks in North America, where it emerged in April. Confirmed community spread in a second region beyond North America would trigger moving to phase 6 – signifying a full-blown pandemic – from the current phase 5 on the WHO’s 6-level pandemic alert scale. “The situation has really evolved a lot over the past several days. We are getting really very close to knowing that we are in a pandemic situation, or I think, declaring that we are in a pandemic situation,” Fukuda told a teleconference. Mr Fukuda said a move to phase 6 would reflect the geographic spread of the new disease. “It does not mean that the severity of the situation has increased or that people are getting seriously sick at higher numbers or higher rates than they are right now,” he said. A decision to declare a pandemic involved more than simply making an announcement, he said. The United Nations agency had to ensure that countries were able to deal with the new situation and also handle any public reaction. “One of the critical issues is that we do not want people to ‘over-panic’ if they hear that we are in a pandemic situation. That they understand, for example, that the current assessment of the situation is that this is a moderate level,” Mr Fukuda said. The WHO and its 193 member states are working hard to prepare for a pandemic, for instance developing vaccines and building up supplies of anti-viral drugs, he said. The disease, which has infected over 26,500 people in 73 countries, with 140 deaths, has been most severe in Mexico, which has reported the highest number of fatalities, more than 100. These include infections in otherwise healthy young people. A very real danger after declaring a pandemic was that hospitals could be overwhelmed by people seeking help when they did not really need it, while other patients requiring emergency treatment risked being neglected, according to Mr Fukuda. “In earlier pandemics, in earlier outbreaks, we have often seen that people who are in the category of being worried but who are not particularly sick, have overrun hospitals,” he said. Since the new flu strain first appeared, many people have stopped eating pork, pigs have been culled in some countries, trade bans on meat imposed, travellers quarantined, and some countries have discussed closing borders. “These are the kinds of potential adverse effects that you can have if you go out without making sure people understand the situation as well as possible,” Mr Fukuda said. Combining human, avian and swine viruses, the new strain has been dubbed ‘swine flu’, although scientists say this is misleading and stress there is no risk from eating pig meat. The world is better prepared but also more vulnerable to the adverse effects of a flu pandemic since the last one occurred in 1968, due to the speed and volume of international travel. An H3N2 virus caused an estimated 1-4 million deaths at the time, and became known as Hong Kong flu. But Mr Fukuda said the WHO would not name the new disease after a country or animal to avoid misleading stigmas. He voiced concern that Canadian Inuits had suffered disproportionately in the current outbreak, often needing hospitalisation. It was not clear if this was due to higher levels of underlying chronic disease, genetics or poverty. “Inuit populations were very severely hit in some of the earlier pandemics. This is why these reports raise such concerns to us,” he said.

A customer carries a Karstadt shopping bag inside a branch of the department store chain in Dresden, eastern Germany. Exporter Li & Fung on Wednesday said the insolvency of Arcandor, the parent company of Karstadt, would impact the company’s three-year plan to boost sales. Consumer goods exporter Li & Fung on Wednesday said the insolvency of one of Germany’s biggest retailers, Arcandor, would impact the company’s three-year plan to boost sales to US$20 billion. Shares in Li & Fung dropped 5.2 per cent to HK$21.90 by noon on reports of Arcandor’s insolvency following the German government's rejection of its plea for emergency state aid. Arcandor accounted for 5-6 per cent of the company’s last year sales revenue, but its contribution this year had been on the decline, Li & Fung group managing director William Fung said. Li & Fung, which is a buying agent for Arcandor, including its Karstadt, Primondo and Quelle businesses, earlier on Wednesday said the German company owed it around US$5.4 million in outstanding agency commissions. The company may also have to make provisions for the goodwill related to its 2006 acquisition of the sourcing business of Karstadt’s, Arcandor’s department store chain, Mr Fung said. Mr Fung, who said he was in New York working on a potential deal with an American company, said the company would “work hard” to fulfil its three-year plan through acquisitions and outsourcing deals in the US and Europe.

The government would seek Legislative Council’s approval for an extra HK$1 billion for its Operation Building Bright to help elderly property owners to renovate old buildings, Secretary for Development Carrie Lam Cheng Yuet-ngor said on Thursday. Mrs Lam said they are seeking extra funding for the project after they received overwhelming response from the owners’ corporations. “The deadline for application closed last Saturday and we have received an overwhelming response with a total of 1,100 buildings with owners’ corporations applying,” Mrs Lam explained. She said the extra HK$1 billion would support about an extra 1,000 more buildings. She also said the extra funding could help to create more employment opportunities in the construction sector for about 20,000 workers.

An artist's impression of how the outlet shopping centre would fit in near Chek Lap Kok airport. Plans to establish Hong Kong as a centre for premium outlet shopping could be realised soon as the government seeks ways to promote trade, tourism and economic growth in the economic downturn. The Outlet! Company is looking to set up shop near the airport, on a site between Terminal Two and the AsiaWorld-Expo venue. The site is currently occupied by car parks and a temporary golf course. Premium outlet malls sell merchandise, often surplus stock, of many brands at discounted prices. The concept allows retailers to move excess inventory. The Outlet! Company president Daniel Kelly said he thought the government was seriously considering a recommendation from its Task Force on Economic Challenges to develop a new premium outlet centre. "I think they're at a point now where they're looking to make a final decision," he said. "So I don't think it's far off." "The government, from the very early days, has been very supportive. They understand that it is a combination of commerce as well as tourism. They have offered land before but just not the right piece of land." Although Mr Kelly has been talking to various government departments about the privately funded project for about nine months, he said there was no concrete deal on the table yet. Outlet malls are not new to Hong Kong but have met with varying degrees of success. A number of major retailers have their own outlets, like Joyce Boutique and Lane Crawford. Swire Properties managed to rejuvenate Citygate shopping centre in Tung Chung by turning it into an outlet mall with year-round discounts of between 30 per cent and 70 per cent on more than 60 brands. The proposed site is already earmarked for commercial use, and a premium outlet mall would not interfere with AsiaWorld-Expo's expansion plans - but the final decision on the land use rests with the Airport Authority. An authority spokesman said it was working on its 2030 master plan and had not yet decided on the long-term use of its land. Under the proposal, a premium outlet shopping mall would be developed in phases. The first phase is expected to cover between 40,000 square metres and 50,000 square metres and feature 150 to 200 shops. The entire site of more than 150,000 square metres would include 300 street-level shops with some two-storey buildings. Investors interested in the project include Global Sources, which stages trade shows at AsiaWorld-Expo.

Mengniu milk product on display at a Hong Kong supermarket. On Wednesday, Mengniu said its sales are stabilising and the negative impact of the melamine scandal has faded. Mengniu Dairy (SEHK: 2319), one of the firms found to have sold tainted milk products last year, said on Wednesday its sales were 20 per cent lower than normal in the first five months of this year. But people were returning to more typical buying patterns for dairy products and the impact of the scandal was “basically over”, the chief executive officer of the top milk producer in the mainland told reporters on the sidelines of the company’s annual meeting in Hong Kong. “The [negative] impact is basically over,” Yang Wenjun said. “Our products are 100 per cent safe to consume. All our products are 100 per cent up to standard.” Mengniu was among several firms in mainland found to have sold milk contaminated with melamine last year. At least six babies died from drinking infant formula contaminated with the toxic industrial compound that can falsely raise the results on protein level tests. Mr Yang also said prices of Mengniu’s dairy products were stable so far and he expected them to remain so for the rest of the year. Chairman Jiao Shuge said demand for daily necessities, such as dairy products, has been less affected than spending on more discretionary items during mainland’s economic slowdown. In February, the milk producer said authorities had concluded that an additive osteoblast milk protein (OMP) in its milk products was safe to consume. The OMP incident triggered a drop in sales of Mengniu products, forcing it to lose some market share to rivals Yili and Bright Dairy, analysts said. Mengniu posted a 948.6 million yuan (HK$1.08 billion) loss last year compared with a 935.8 million yuan profit the previous year.

Home sales in Hong Kong's primary property market dropped more than 80 per cent at the weekend as the release by developers of newly launched projects slowed.

An example of the green trend in construction is One Island East, developed by Swire Properties. Developers need incentives to introduce green elements. In a service-based economy such as Hong Kong, the construction and ongoing occupation and use of buildings account for as much as 70 per cent of total greenhouse gas emissions. Since the real estate market - both property and construction - accounts for about a third of the city's gross domestic product, its disproportionate influence on the economy and environment therefore cannot be underestimated. Green buildings provide a better quality of living for users and the community while minimising environmental impact at the local, regional, and global levels throughout their full life cycle. The greening of property therefore has a triple bottom-line effect. There are barriers to green property development, however. One of the most notable being the initial green premium cost of providing a range of genuinely green features. To address cost and other barriers and jump-start green property development as a norm rather than an exception in Hong Kong, several conditions need to be in place.

A charity has served up a treat for TV celebrity chef Martin Yan by finally handing over the more than HK$400,000 he raised to Sichuan earthquake victims. ong Kong Red Cross confirmed on Friday it has received HK$262,552 from charity Cooking For Life, the day after The Standard revealed how proceeds from Yan's HK$25,000-a-table function had been withheld. The event raised HK$402,552 but, up until the latest payment, only HK$140,000 had been received by the Red Cross - in June last year. A confirmation letter from the Hong Kong Red Cross was posted on the charity's website. Speaking to The Standard last week, Cooking For Life chairman Philippe Bru claimed the HK$262,552 was held up because the Inland Revenue Department would not allow it to transfer the money outside Hong Kong. Bru said the charity had intended to share the remaining funds between the Red Cross in Beijing and Mianyang. The department refuses to comment on individual cases, but Tik Chi-yuen, who chairs another charity, Committee on Youth Smoking Prevention, said he has not heard of such a legal constraint. Tik said many charities have been donating money overseas without problems. Bru said he changed his mind after speaking to the person in charge of the Hong Kong Red Cross, and with his legal team. He said both he and Yan agreed the work done by the Hong Kong Red Cross in Sichuan is satisfactory. However, Bru refused to disclose over the phone how much the organization has raised by way of donations since it was granted charity status in February 2008, and how the money was spent. A spokeswoman for the InterContinental Grand Stanford Hotel, which had been urging the charity to donate the entire sum raised by Yan to the Hong Kong Red Cross, said it was unfortunate it took one year to complete the process. The Tsim Sha Tsui hotel was the venue for Yan's charity function on May 31 last year. "The InterContinental Grand Stanford is delighted that the funds it helped raise last year for victims of the Sichuan calamity have been turned over to the Hong Kong Red Cross," she said.

Drugs teen enemy No1, says Tsang - No effort will be spared in combating the youth drug problem, especially among students, Chief Executive Donald Tsang Yam-kuen pledged yesterday. "The quicker we act, the more students we can save," he said after an Executive Council meeting. "Young people are Hong Kong's most valuable asset. Drug abuse is their No1 enemy." The government will explore the possibility of an early launch for a pilot school-based voluntary drug testing scheme, the chief executive said. Tsang said he was deeply disturbed "like most Hong Kong people" by the reports of drug abuse among students. Saying the issue needed urgent attention and solution, he pledged more government resources to speed up the implementation of measures recommended by the task force led by Secretary for Justice Wong Yan-lung. "I understand some proposals are controversial, including drug tests for students," said Tsang, speaking before he left for Nanning in Guangxi for three days to attend the Fifth Pan-Pearl River Delta Regional Co-operation and Development Forum and Trade Fair. Secretary for Security Ambrose Lee Siu-kwong will hold talks with schools interested in voluntary testing, Tsang added. Hong Chi-keung, chairman of the Tuen Mun District Secondary School Heads' Association and principal of Ju Ching Chu Secondary School (Tuen Mun), said speeding up the school drug test scheme will help tackle drug abuse. But he warned that some schools, like his, may not be eager to join the pilot scheme as they were worried about the labeling effect. "We would be glad to conduct drug tests if the majority accepts it," he said, adding that schools will worry about being stigmatized if the tests are conducted selectively. Several teen drug abuse cases hit the headlines last week, including that of two 15-year-old girls found in a daze after allegedly taking ketamine on a Tuen Mun beach on Saturday. Last Thursday, three secondary students were found unconscious in a Tin Shui Wai park, also suspected of taking ketamine. Rosaryhill School admitted four students had taken psychotropic drugs in school on Tuesday last week.

China: China exports fell 26.4 per cent in May from a year earlier, while imports fell 25.2 per cent, the General Administration of Customs said on Thursday.

Some of the 1,000 terracotta warriors already excavated from the tomb of Emperor Qin Shi Huang. plans to excavate more of the terracotta warriors at the ancient tomb of the Emperor Qin Shi Huang outside Xian. Archaeologists hope to uncover more of the elaborately carved, life-sized officers to add to the 1,000-plus statues already excavated. Special care will be taken to preserve the figures' painted details, which have faded almost entirely in those already exposed to the air. The new dig is the third undertaken since the tomb was first uncovered in 1974, and will focus on the 2,000-square-metre patch within the tomb's main pit, which holds the bulk of the warriors. The emperor's tomb and its accompanying museum are among the mainland's biggest tourist draws, attracting hundreds of thousands of visitors each year. The fierce figurines with their enigmatic expressions were exhibited where they were found and protected inside a massive shed. Reproductions in sizes ranging from midget to full size are sold in gift shops around the country, and an exhibition of 20 figures and dozens of artefacts from the tomb broke ticket-sales records when it travelled last year to London, California, Houston and Washington. Tomb museum director Cao Wei said maintaining the figures and ensuring their paint did not oxidise would be far more challenging than the relatively simple task of excavating them. "The only difficulty lies in how to preserve them afterwards," Mr Cao said, adding that would be the responsibility of the Shaanxi provincial antiquities bureau overseeing the excavation. In all, the tomb's three pits are thought to hold 8,000 life-sized figures of archers, infantry soldiers, officers and acrobats, along with 130 chariots with 520 horses and 150 cavalry horses. It is believed they were created to protect the immortality-obsessed emperor in the afterlife. At between 1.83 metres and 1.95 metres tall, the statues weigh about 180kg each and are intricately detailed. No two figures are alike, and craftsmen are believed to have modelled them after a real army. The tomb was looted less than five years after Emperor Qin Shi Huang died in 210BC by a rebel army, which set a fire that destroyed the wooden structures housing the warriors, damaging most of them. Since their discovery, the figures have been subjected to mould due to humidity and decay from coal dust produced by local industry. A fourth pit at the tomb was apparently left empty by its builders, while the emperor's actual burial chamber at the centre of the complex has yet to be excavated. The emperor, a figure of fear and awe who died at the age of 50, created China's first unitary state by conquering rival kingdoms.

Company vice-president Luo Maofeng (left) and chairman Johnson Ko taking questions at the firm's results announcement yesterday. China WindPower Group, whose shares soared threefold in the past six weeks, plans to plough 500 million yuan (HK$567.15 million) into 10 projects that require a combined 5 billion yuan of investment. Completion of the projects, in which it has stakes of 25 to 60 per cent, would see its attributable capacity rise almost fourfold to 268 megawatts by March next year from 71 MW at present, said chairman Johnson Ko Chun-shun. Investors bought renewable energy project developers' shares aggressively in the past two months, pushing their valuations way ahead of the wider stock market, on speculation Beijing will roll out more favourable policies to encourage clean energy use. China WindPower closed at 95 HK cents, up from about 31 HK cents in late April. The latest price represented 46.8 times the past financial year's earnings, compared with 17 times for the Hang Seng Index. The mainland's installed wind power capacity roughly doubled in each of the past four years after Beijing ordered power distributors to buy all of the nation's wind power output and offered developers tax incentives. In spite of the explosive growth, some industry insiders said that shoddy equipment, a lack of power grid investment, poor project site selection and overly aggressive development rights bidding meant some projects never got built while others were unprofitable. Four of China WindPower's projects are in operation, while five others will come on stream this month. Chief executive Liu Shunxing said they all had linkages to power grids. The company yesterday unveiled a 16.7 per cent rise in net profit to HK$116.76 million in the year to March, primarily driven by a HK$28 million gain from sale of project stakes to Hong Kong utility CLP Holdings (SEHK: 0002). Profit from its wind power operation amounted to HK$15.24 million, up from HK$770,000 a year earlier. Its equipment making, plant engineering, construction and maintenance businesses turned in a profit of HK$63 million, compared with HK$66.3 million a year earlier.

TPV Technology (SEHK: 0903), the world's largest computer monitor maker, is seeing overall orders improve amid rising demand for flat-panel television sets, chairman Jason Hsuan said. The company's first-quarter net profit tumbled 67.2 per cent year on year to US$14.88 million, but beat brokerage CIMB's estimate of US$12.7 million. Revenue fell 42 per cent to US$1.379 billion. CIMB expected TPV's earnings to resume growth from the fourth quarter on stabilising flat-panel prices, cost-cutting and rising demand. Shares in TPV rose 7.59 per cent to close at HK$3.26 yesterday. Mr Hsuan said the business suffered as firms cut spending on information technology in the quarter. "The penetration rate of computers is still quite low and people need a bigger screen for leisure or entertainment in the longer term," he said. Research firm Display Search said global demand for LCD monitors would decline 4.2 per cent year on year to 160 million units this year and could remain flat next year. TPV's first-quarter overall shipments fell 7.3 per cent to 11.4 million units, while LCD monitor sales slid to 9.8 million units from 11.4 million units, but LCD television sales almost doubled to 1.5 million units. TPV said firm demand for LCD television sets in North America and Europe could generate 30 per cent of group revenue by year-end, up from 25.5 per cent in the first quarter. The average selling price of each LCD monitor fell to US$102.20 in the quarter from US$118.60 in the previous period, but gross margin rose to 4.5 per cent from 3.4 per cent. The average selling price of LCD television sets fell to US$239.20 from US$277 per unit, but gross margin improved to 5.1 per cent from 3.7 per cent in the previous quarter. TPV's vice-president of corporate finance Shane Tyau expected the average selling prices to be steady and gross margin to improve this year.

"We are working on laws and penalties to cut down garbage production in the capital and have sped up construction of new sanitary landfill sites," said Guo Weidong, the publicity division head of the commission. Beijing currently generates 18,000 tons of trash every day and the designed capacity of all garbage disposal plants is 11,000 tons, Guo said, adding all the plants were already overloaded. The volume of the city's trash is growing by 8 percent annually and the total amount of garbage produced will reach nearly 12 million tons by 2015, figures show. So far, two of the 13 plants have already met their maximum capacity and will soon stop operations. Nie Yongfeng, a professor from Tsinghua University's College of Environmental Sciences and Engineering said developed countries deal with the problem by "waste incineration", which is the only solution to the problem, but seldom used in Beijing for fear of the pollution it generates. "If waste incineration is not applied immediately, garbage disposal will become a huge problem in the near future," Nie said. On March 11, the national environment agency called off the construction of a controversial waste-fuel power plant in the capital because nearby residents were worried it would pollute water aquifers. Other large cities such as Shanghai and Chongqing are also facing similar challenges with regard to waste disposal. On April 11, hundreds of Shanghai residents marched to protest the expansion of the Jiangqiao garbage incineration plant. The city's Changshengqiao sanitary landfill plant is expected to be full in 15 years, about two years ahead of schedule, officials said. The amount of garbage Shanghai generated in 2007 was five times the size of the Jinmao Tower, the third tallest building in the world and the tallest in China, the Northern Weekly reported in April. On Nov 12, garbage disposal facilities in Jiaxing, Zhejing province, were given a thorough overhaul in response to complaints from the public. The country's annual urban waste per capita is currently 220 kg, with 8 billion tons of trash already piled on disposal sites or in landfills in 600 cities, the Southern Weekend reported. As part of efforts to battle the emerging crisis, public and private sectors are pushing for more ways to reduce waste output. Xie Zhenhua, deputy director of the National Development and Reform Commission, said the ban on free distribution of plastic bags imposed last June has reduced polythene waste by at least 65 percent. Wang Xiaojun, director of the environmental group Greenpeace China, said: "We must reduce, reuse and recycle if we're serious about minimizing pollution."

Zhuhai is speeding up its construction of highways in a bid to become a traffic center in the western Pearl River Delta (PRD) area, the local transportation authority said. The city will invest more than 14 billion yuan ($2 billion) in 10 highway projects. The work will start this year and continue until 2012, said Zheng Chaolong, director of Zhuhai’s transportation bureau. The highways will link harbors, airports and checkpoints between Zhuhai and Macao, helping develop the city into an important transportation hub in the western PRD region, Zheng said. This year alone, the city has earmarked 3.7 billion yuan for urban provincial highway projects, he said.

The tone and nature of US Treasury Secretary Timothy Geithner's maiden trip to China was markedly different from the visits by his predecessor, Henry Paulson. Heated talk of the valuation of the yuan and trade imbalances was set aside for praise and hopes for a co-operative relationship. Part of that is down to Mr Geithner's at times meek demeanour, but it can mostly be attributed to the changed circumstances of global economics. Beijing, not Washington, now holds the cards. That was apparent in the statements issued after Mr Geithner met President Hu Jintao and Premier Wen Jiabao yesterday. The Chinese leaders exuded confidence. The American thunder of old was replaced by a willingness to please. China was on the world stage beside the US and being treated as a friend and equal. This is how the relationship should be. The world's leading developing and developed nations should work closely together. Each has a perspective and advantage in helping resolve global challenges. This cannot happen effectively without a partnership. America's economic woes are largely driving the shift. Trillions of dollars of foreign goodwill is being used to fund US President Barack Obama's efforts to pull his country out of the financial chasm it has fallen into. China is the biggest foreign owner of US Treasury bonds. As of March, it held US$768 billion of such debt. Beijing's US-denominated government and corporate paper investments could well be twice that amount. Mr Geithner's visit was not to negotiate deals or sign pacts. His main goal was to assure Beijing that his country's monetary policy and ballooning deficit would not undermine the value of the US dollar and paper bonds. Yesterday he repeated pledges he made on Monday: that the assets were safe and American spending would be disciplined once a recovery took hold. Just how deep the global financial crisis will be remains uncertain. Individual pieces of data showing a monthly, quarterly or year-on-year improvement do not in themselves constitute a recovery. Mr Wen rightly reminded Mr Geithner that China's stability and growth needed to be assured through tightening oversight of international reserve currencies. The Obama administration needs to keep this firmly in mind because America's return to economic health is in China's interests as much as its own. Trust, respect and co-operation are key. Mr Geithner, Secretary of State Hillary Rodham Clinton and, last week, House of Representatives Speaker Nancy Pelosi, have kept the necessary tone during their visits and meetings. Understanding is essential to building a sound working relationship. Both sides have to be open and transparent. Mr Hu and Mr Obama announced the setting up of a cabinet-level economic and strategic dialogue after meeting in April. The first meeting will be in Washington next month, it was revealed yesterday as Mr Geithner flew out of Beijing. This is a significant and worthy step. There is no better way to further build the ties that are needed. China and the US are equally influential nations. They share common interests and goals. Significant inroads can be made in solving the world's economic, environmental and strategic problems through their working together. It is a relationship that the two have shown an interest in building and one that, regardless of the economic climate, they must remain dedicated and committed to.

Starwood Capital Group, headed by hotel king Barry Sternlicht, founder of the Starwood Hotels empire and the W Hotels, plans to expand its reach to the mainland and Hong Kong after raising a war chest of US$2 billion. In a five-year plan, Starwood Capital plans more than 20 new properties under the "Baccarat" and "1" Hotel and Residences brands either through management agreements, equity investments or by forming joint ventures with domestic developers. Next week, the group's first managed Baccarat Residences developed on the mainland at 8 Ji Nan Road, Xintiandi in Shanghai, will be put up for sale. The 308-unit twin tower project formerly known as Residence 8 was relaunched as Baccarat Residences. The upmarket development offers fully furnished units, a signature Baccarat chandelier in the lobby, a "crystal tea room", and a wine room with an eight-metre table based on the piece at the Maison Baccarat in Paris for private cocktail parties. Mr Sternlicht, who created the Baccarat Hotel and Resorts brand in 2007, said his confidence in the mainland was bolstered by the good response to the sale of Baccarat Residences Shanghai, which was managed by the group. Fifteen units at the Baccarat Residences East Tower have been sold at between 80,000 yuan (HK$90,860) and 100,000 yuan per square metre before the official launch. Added to previous sales since 2007, 140 of the 154 units at East Tower have now been sold. The 154-unit West Tower will be officially launched next Monday. "We are also looking at a Baccarat Hotel in Shanghai, and a couple of opportunities in Beijing," said Mr Sternlicht. The group is due to open its first Baccarat Hotel in Hawaii next year and it will also open a Baccarat Hotel and Residences in Dubai in 2011. On the mainland, the group is also working on "1" hotel - a luxury green brand for the world's eco-conscious travellers - in Shanghai, Mr Sternlicht told the South China Morning Post (SEHK: 0583). He aims to open 10 to 20 properties under the "1" Hotel and Residences brands in the next five years, with at least one to three Baccarat Residences in each major mainland city. Hotel projects would be invested under its recently closed US$1 billion global hotel fund, and residential projects would be invested under another US$1 billion non-hotel fund. "We can do anything from US$10 million to US$200 million. We are not really capital-constrained but more opportunity-constrained," he said, singling out high pricing as one of the difficulties in concluding deals on the mainland. As a result, the group had not been able to feel comfortable about achieving the targeted rates of return of 12 to 20 per cent a year that it could achieve in other countries such as the United States, he said. "We were recently looking at an old hotel in Shanghai, but the price traded way beyond what we thought." So far, the group had no direct investment in the mainland property market, said Mr Sternlicht, but Starwood Capital had bought about 3 per cent of Jinjiang International Hotels Development, the mainland's largest hotel operator, before it listed in 2006. In Hong Kong, he has established good relationship with major developers such as Sun Hung Kai Properties (SEHK: 0016), which owns the W Hotel at International Commercial Centre in Kowloon Station. "We love to be in Hong Kong, but [property] is very expensive."

Beijing plans to dramatically increase its use of wind and solar power, aiming to generate up to one fifth of its energy from renewable sources by 2020, a senior official told Britain's Guardian newspaper. “We are now formulating a plan for development of renewable energy,” Zhang Xiaoqiang, vice-chairman of China’s national development and reform commission, said in an interview in London published on Wednesday. “We can be sure we will exceed the 15 per cent target. We will at least reach 18 per cent. Personally I think we could reach the target of having renewables provide 20 per cent of total energy consumption.” China’s stated goal is for 15 per cent of its energy consumption in 2020 to come from renewable sources, which Beijing says include large hydropower projects and nuclear plants. The Guardian reported Mr Zhang as saying that a significant part of China’s economic stimulus package would be invested into low-carbon investment, and that accompanying reforms would see increased demand for renewable energy. “Due to the impact of the global financial crisis, people are all talking about green and sustainable development,” Mr Zhang told the paper. “Enterprises and government at all levels are showing more enthusiasm for the development of solar for power generation, and the Chinese government is now considering rolling out more stimulus policies for the development of solar power.” US climate envoy Todd Stern met with top officials in Beijing this week to press for a commitment to cutting greenhouse gas emissions under the next treaty on global warming, to be hammered out in Copenhagen in December. In a meeting on Monday, Vice Premier Li Keqiang reiterated to Mr Stern that developing countries like China should be held to a different standard, according to a statement posted on the Chinese foreign ministry’s website. Mr Zhang said China was pursuing a “constructive and a positive role” in negotiations for Copenhagen, and as part of the agreement, developing countries would have to pursue a “sustainable development path.” He added that China was open to the idea of limits on the carbon intensity of its economy, or setting restrictions on its emissions per unit of output.

Guangzhou will follow Beijing's blueprint for clear skies at next year's Asian Games by shutting down major polluters and banning vehicles that produce high levels of emissions. The capital adopted stringent anti-pollution measures to prevent smog from marring the Olympic Games in August. In the seven years up to the Games, Beijing spent nearly 60 billion yuan (HK$68 billion) on environmental protection. Guangzhou Mayor Zhang Guangning said the city would close or relocate 123 heavily polluting manufacturers by the end of the year, which would help reduce emissions of sulfur dioxide and other pollutants. Mr Zhang urged his subordinates to learn from Beijing's experiences before the Games in November next year. He said officials should implement environmental protection policies and punish polluters, Guangzhou Daily reported. The report said vehicles that failed to reach basic environment standards would be banned, and those without up-to-date exhaust systems would be barred from some districts. The city's air quality had improved in the first five months of this year, with more than 93 per cent of the days qualifying as "good", the report said. The city's environmental protection watchdog said late last month that the city would invest 2 billion yuan in air protection projects. Yang Liu , deputy director of the Guangzhou Environmental Protection Bureau, said the government would be responsible for 30 per cent of the funds while the rest would come from the private sector. The city is keen to use the Games as an opportunity to invest in environmental protection. The announcement last year of plans to spend 40 billion yuan on water-cleaning projects from early this year until next July sparked widespread media and public concern over transparency.

China's consumer price index (CPI),the main gauge of inflation, fell 1.4 percent year on year in May, the National Bureau of Statistics (NBS) said on Wednesday.

Award-winning Chinese actress Zhou Xun says she had suffered emotional breakdown while trying to portray her role in the WWII espionage film "The Message". "I often felt exhausted, and literally collapsed several times," the Asian Film Awards' best actress said Sunday at a press conference in Beijing, where producers announced October 1, China's National Day, as the film's release date. Calling "The Message" the most challenging film she has ever been involved in, Zhou says much of the time she had to rely on alcohol and sleeping pills. The pressure was also felt by other crew members, according to co-director Gao Qunshu. Difficulties mainly come from the incomplete scripts. "The Message", set in Japanese-occupied China in 1942, tells a story of a Japanese spy chief trying to identify a Chinese agent, Lao Gui, from a gathered group of suspects. Zhou Xun's character, a code-breaker named Gu Xiaomeng, is among them. To ensure the film's biggest attraction, the actor who plays Lao Gui has been kept under wraps and is not in the script. Zhou Xun says like their characters, the actors were always guessing who Lao Gui was while trying to fit in the story. Gao Qunshu and Kuo-Fu Chen, who are co-directing the film, have reportedly prepared several versions of the ending, and will decide Lao Gui's impersonator when they edit the film, based on each actor's performance. "The Message", produced by leading entertainment producer Huayi Brothers, is the company's tribute to the 60th birthday of the People's Republic of China.

June 10, 2009

Hong Kong: The Executive Council has allocated HK$700 million for a new human swine influenza vaccination program, Secretary for Food and Health York Chow Yat-ngok said on Tuesday. Dr Chow said it would provide free vaccinations to people who are considered most vulnerable to the virus. He said Exco has also approved another vaccination program for people aged 65 and above. This is to protect them against the ordinary flu virus and streptococcus infections. This program is estimated to cost about HK300 million. Dr Chow said although the swine flu virus did not appear to be too virulent, it could become more powerful if it mutated during the winter influenza season. “Based on the development of swine flu in the Southern Hemisphere... and imported cases in Hong Kong, some experts think it is inevitable that Hong Kong will have local swine flu infections,” Dr Chow said. The health secretary said because Hong Kong manufacturers could not yet produce a swine flu vaccine, the government would ensure an adequate supply of vaccines from overseas. “We will seek the approval of the Finance Committee of the Legislative Council by June 19,” said Dr Chow. He said there were four types of people who will be eligible to receive free swine-flu vaccines. “They are health workers; children aged from six months to six years old; senior citizens aged 65 and above, and people with certain pre-existing medical conditions,” added Dr Chow. “We expect about two million people to benefit from the program and we will order five million vaccinations for them,” he said. Since Monday, Hong Kong has reported another three cases of swine flu. This brings the total number of imported cases to 41. The new cases include two women who recently travelled to Las Vegas via Los Angeles in the US and a man studying in Switzerland, a government spokesman said.

Hong Kong Secretary for Food and Health York Chow said Tuesday the government will provide free influenza A/H1N1 vaccines for about two million of the population. Speaking at a press conference Tuesday afternoon, Chow said that the executive council has decided to initiate immediately the process for procurement of A/H1N1 flu vaccines for four target groups in the city recommended by the Scientific Committees of the Center for Health Protection of Hong Kong. The four target groups includes: healthcare workers in both the public and private sectors; children aged six months or above and below six years old; elderly persons aged 65 and above; and persons at higher risk of death and complications from the new strain flu due to pre-existing medical conditions. Since each person requires two doses, the government will order four million doses of vaccines for the above groups which involved about two million people. While an extra one million doses will be ordered for those who wanted to pay for the vaccination. The total cost for the vaccination program, which is entirely voluntary, is estimated to be about 700 million HK dollars (about 90.4 million U.S. dollars), according to Chow. He said that the government will continue to gather facts from various vaccine manufacturers on the quality, availability and price of the vaccines, to prepare tender for the eventual procurement of the vaccines, and to seek funding approval from the Finance Committee of the Legislative Council later this month. Besides, Chow told that the executive council also decided to give those elderly aged 65 and above pneumococcal and seasonal influenza vaccines for free. The decision was made because the two vaccines play an important role alongside A/H1N1 flu vaccine in mitigating the impact of an influenza epidemic in Hong Kong by reducing hospitalizations and deaths among elderly people when infected, he said.

Chief Executive Donald Tsang Yam-kuen, accompanied by Secretary for Food and Health Dr York Chow Yat-ngok (left), speaks to the press on Tuesday morning. Chief Executive Donald Tsang Yam-kuen on Tuesday condemned Hong Kong's acid attacker in Mong Kok as "cold blooded and evil". Mr Tsang was speaking to reporters after the latest acid attack on Monday night in one of the city’s busiest shopping districts – popular with tourists and locals alike. Around 8pm on Monday, a bottle of acid was hurled onto a Mong Kok street – injuring 24 people. It is the third attack of its kind in Hong Kong in six months. “The person who carried out these series of acid attacks in Mongkok was cold blooded and evil,” Mr Tsang stressed. “We strongly condemn these attacks and I hope the people who were injured will recover soon. The police are out in full force to catch the attacker as soon as possible,” the chief executive added. On Tuesday, more than 100 police officers were searching the Mong Kok pedestrian area where the latest attack occurred. The attack came just five hours after four surveillance cameras costing HK$1.7 million were installed the bustling shopping area. The surveillance camera system began operating at 3pm on Monday. The 24 injured people included young children and tourists. They were 12 males and 12 females. All were rushed to the Queen Elizabeth and Kwong Wah hospitals for treatment for burns to their faces, shoulders and limbs. Some were released later. Hong Kong people are stunned by the third such attack in the area in just six months. Monday’s attack occurred near the junction of Nelson Street and Sai Yeung Choi Street South at 7.50pm. This is about 200 metres from the site of the previous attack on May 16 which injured 30 people. It is about 90 metres from a December 13 attack in which 46 people were hurt. Kowloon West Regional Headquarters Police Senior-Superintendent Leung Ka-ming said on Tuesday police were now offering generous rewards for information about the attacks. “We will add HK$300,000 for information relating to yesterday’s attack or for either of the two previous cases, which means we are offering a total of HK$900,000 for anyone who might have such information,” explained Mr Leung. He said police experts needed more time to analyse new images captured by CCTV cameras. “After I saw the images, I found they were not clear as it was getting dark last night, so the experts have to use more time to enhance the brightness of the images captured by the CCTV,” Mr Leung said. The senior-superintendent said he did not rule out the possibility that the same person was behind all three attacks. He said government chemists would compare the acid bottles used from last night’s attack with ones used in the previous attacks. Mr Leung said if necessary, police officers would carry out more tests and experiments in the area. Officers had carried out such tests after the earlier attacks. In other developments, police closed off the Nelson Street and part of the Sai Yeung Choi Street on Tuesday, local media reported. Officers have stepped up patrols in the area and have been gathering new information from residents and shopkeepers.

The Chinese University of Hong Kong has set up the city's first specialist school dedicated to turning out biomedical scientists. The first batch of 31 postgraduate students in the School of Biomedical Sciences will start their three-to-five-year programs in September, leading to either master's or doctoral degrees. "Before we admit students, we make sure they are really interested in research rather than just trying to escape the economic downturn," said Professor Chan Wai-yee, the head of the new school. The school has five major research areas: stem cell and regeneration; neuro-degeneration and development; vascular and metabolic biology; cancer biology and inflammation development; and reproduction and endocrinology. Biomedical sciences have been a hot field of endeavor in the scientific world. Between 1998 and 2003, the US Congress ordered a doubling of the biomedical research budget, while the mainland's national science and technology plan for 2006-2020 also places more importance on biomedical research. "It is never too late to build a school of biomedical sciences. This is different from studies in literature, which have a longer history," Chan said. "As long as our students are innovative and the Hong Kong government is willing to invest in new facilities, we will be able to catch up very rapidly." Chinese University will be competing against the Hong Kong University of Science and Technology which, two years ago, introduced an undergraduate program for molecular biomedical sciences in its School of Science. Hong Kong University does not have a specific program for biomedical sciences, but offers it as a subject in the medicine stream. Polytechnic University only runs a few courses in its department of health technology and informatics. Chinese University has a medical school with a strong foundation in medical research to back its development of biomedical sciences, Chan said. Chan, who moved from the National Institute of Health in the United States to CUHK's new biomedical school, said no country in the region has so far been able to establish an international reputation in biomedical research. He hopes Hong Kong may be able to establish a reputation comparable to Harvard, Johns Hopkins and Stanford in the United States. "We hope one day people will associate biomedical sciences with the Chinese University," said Chan, who graduated from CUHK in the 1970s with an honors degree in chemistry.

The staff turnover rate and number of new job positions in Hong Kong have hit their lowest level for six years, a new manpower survey released on Tuesday showed.

Ten taxi drivers – who had blocked a North Lantau highway during a strike and who had been charged with public interference – were sentenced on Tuesday to jail terms ranging from seven weeks to two months in the Tsuen Wan Magistracy. The defendants said they would lodge an appeal. They were released on HK$5,000 bail each on Tuesday, local media reported. Magistrate Lee Ka-chai said the protests had been “pre-meditated and threatening”. He said the drivers had annoyed members of the public and inconvenienced other road users. The magistrate noted that the 10 taxi drivers did not have previous convictions and so he commuted their sentences. But representatives from different taxi organisations said their punishment was too severe. The strike occurred on December 3 last year. The taxi drivers were protesting a new fare structure. After they took the action, 24 drivers were detained overnight. This was because they had blocked a main artery between Hong Kong International Airport and the city centre. Fifty red taxis had later joined the protest, blocking two of Wong Nai Chung Road’s three lanes. This occurred after horse racing ended at Happy Valley. Other green taxi drivers staged a similar protest at the Lok Ma Chau border after midnight that day. The protest was sparked by an incident when the driver of a green New Territories taxi complained that an airport security guard had told a passenger heading to Tuen Mun to choose a red taxi. This had greatly angered green taxi drivers who were already disgruntled about a new fare structure – which made longer trips by red taxi drivers cheaper than those by New Territories drivers.

Revenue generated by Hong Kong hotels for each of their rooms per day in the first quarter fell more than 22 per cent year on year to about US$121 as demand remained weak amid the depressed global economy, analysis by business adviser Deloitte has found. The decline is relatively mild compared with those of other regional markets, such as India, where hotels in Mumbai and New Delhi recorded revenue falls for each available room per day of more than 50 per cent. For the region, including Australia, such revenue dropped by almost 30 per cent, or about US$26, to US$69, with occupancy levels at 57.9 per cent. Revenue per available room is the most important industry measure of performance in the hotel sector. It considers both occupancy levels and room rates. Falls in such revenue indicate lower occupancy levels, falling room rates or a combination of both. In 1997, as economic growth peaked, such hotel revenue in Hong Kong reached HK$937 before dropping to HK$395 the following year and improving to HK$581 in 2000. Local room rates averaged US$166 in the first quarter, with hotel occupancy levels at 72.8 per cent, Deloitte said, citing statistics from STR Global, which provides market data to the hospitality industry. There are more than 56,000 hotel rooms in Hong Kong. "Asia-Pacific, like all world regions, is being affected by the global economic downturn and is currently the second-most-affected region in the world after Europe in terms of hotel performance," said Marvin Rust, Deloitte's global hospitality managing partner. Regional data for April indicated a continued deterioration in overall revenue per available room, which was down 45.4 per cent, while overall occupancy level fell by more than one-third. A recent study by a Polytechnic University team that forecasts Hong Kong tourism demand estimated that demand for hotel rooms would drop by between 1.55 and 10.55 per cent this year. "The general conclusion of the forecasts is that the hotel sector in Hong Kong will have a relatively tough time in 2009," the university report said. "However, the industry as a whole will likely come out of negative growth from 2010. Mainland China continues to be a growing source market for all types of accommodation in Hong Kong for the next five to six years."

More than 100 police officers were searching the Mong Kok pedestrian area last night after a bottle of acid was thrown down onto a street, injuring 24 people, in the third attack of its kind. The attack came just five hours after a HK$1.7 million surveillance camera system installed as a result of the previous attacks went into operation. It occurred near the junction of Nelson Street and Sai Yeung Choi Street South at 7.50pm, about 200 metres from the site of the previous attack on May 16 that injured 30 people, and 90 metres from a December 13 attack in which 46 were hurt. Officers found a container of acid usually used as a drain cleaner that appeared similar to those found in two previous attacks. Senior Superintendent Edward Leung Ka-ming said it was possible the same person had carried out all three attacks. Police will review tapes from the cameras today for leads. The other attacks happened on Saturdays at the same time - 5pm. Criminologist Dennis Wong Sing-wing said it was likely the same person committed all three crimes. He fears more attacks, saying the suspect appears to have become addicted to carrying them out. Police Commissioner Tang King-shing said: "We are highly concerned about this latest attack, and we condemn such a serious crime. We will investigate this case with full strength." Mr Leung said all five teams in the West Kowloon crime unit were on the case, along with anti-triad and police tactical unit officers. Those injured yesterday - 12 males and 12 females - included a four-year-old girl. All were treated at the Queen Elizabeth and Kwong Wah hospitals for burns to their faces, shoulders and limbs, and were later released. Some of the injured washed their hair and faces with water on the roadside before receiving first aid. Most were able to walk to ambulances, but some were carried on stretchers with their limbs bandaged. Pinky Leung, a 22-year-old Polytechnic University student whose face and arm were injured, said: "I was on my way to dinner. Suddenly there was a `bang' and smoke was coming from the ground. "I felt heat on my nose and people were screaming `acid! acid!'. I ran to find water and washed my face. I will never, never pass by this area again." A witness working in a nearby shoe shop said: "We saw people running around while we were working ... and I saw injured people. Some tourists were standing in front of our door. There were holes in their clothes." Police earlier posted rewards totalling HK$600,000 for information about either of the two previous cases. They have set up a 24-hour hotline, 2761 2401, and appealed for anyone who knows anything about the attacks to call.

The number of mainland tour groups visiting Macau is dropping amid a crackdown on low-fare tours that involve compulsory shopping. A Macau tourism industry leader estimates that the number of group visitors fell 30 per cent last month as a result of the crackdown, although official figures are not available. A regulation passed by the State Council forbids travel agencies from operating tours at fares below their operating costs. The Regulation on Travel Agencies, which took effect on May 1, says below-cost fares and compulsory shopping are not allowed, with violators subject to a fine of 100,000 to 500,000 yuan (HK$113,000 to HK$565,000). It applies to all mainland-registered travel agencies, including those run by investors from Hong Kong, Macau and Taiwan. Andy Wu Keng-kuong, president of the Travel Industry Council of Macau, said the regulation appeared to have been strictly enforced. He said the swine flu scare and the crackdown on low-fare tours had caused the number of tour groups last month to fall 30 per cent. "Consumers are doubtful when they see travel agents raising the price for a Hong Kong and Macau tour, say, from 1,000 yuan to 2,000 yuan," Mr Wu said. Before May, the cost of a Hong Kong and Macau tour was as low as 1,000 yuan, but most travel agencies now charge 2,000 to 3,000 yuan per traveller. Last year the central government restricted mainland residents visiting Macau under the Individual Visit Scheme, which allows travel independent from tour groups, in an effort to stop civil servants gambling. This dealt a blow to the city's tourism and gaming sectors and forced them to try to bring in more mainland visitors in tour groups. In the first quarter, 1.06 million mainlanders visited Macau in tour groups, up 22.5 per cent year on year, although overall mainland visitors fell 14.2 per cent to 2.76 million. Macau received a total of 1.37 million tour-group visitors from various regions in the first quarter. There are now fewer tourists to be seen in the area around the ruins of St Paul's, one of the most popular attractions in Macau. Only a few people were on the old cathedral steps late yesterday morning. Workers at souvenir shops in the area complained about sluggish business. Linda Chao, a local tour guide leading a group of visitors from Jiangsu province in the area near the cathedral ruins, said the crackdown on low-fare tours had cut into her income. "Before the regulation took effect, I led on average 15 groups a month, but last month I led just six groups," she said. "The fare regulation and swine flu have both hit our business." Mr Wu said it would take some time, perhaps two more months, for travel agents and their customers to adapt to the fare regulation. He said that under the new regulation group tourists were not spending much more than they had in the past, if their expenses throughout the trip were taken into account. It was not unusual for tourists on low-fare trips to end up spending a lot of extra money in Hong Kong and Macau. "It's not that travel agencies are charging more," Mr Wu said. "What happens now is that you pay once, rather than several times." He said mainland tourists would eventually realise that the new regulation had no major impact on their overall travel expenses. In April, 897,335 mainland tourists visited Macau, down 13.5 per cent year on year.

Alfred Tsoi sees a clearer profit picture in Yahoo HK's increased adoption of broadband mobile services with always-on 3G connection. Yahoo Hong Kong, which last month marked its 10th consecutive year as the city's leading portal, is sharpening its focus on growth opportunities in the mobile internet arena and smarter ways for advertisers to reach their target customers online. "Despite the economic slowdown, we have consistently topped our previous [financial] targets," said Alfred Tsoi, the managing director at Yahoo Hong Kong since 1999. "That has encouraged us to continue investing in key products and link more closely our different online properties." Mr Tsoi declined to elaborate on Yahoo's results over the years other than to say they were consistently in "the high double digits". According to internet marketing research company comScore, Yahoo's Chinese-language services ranging from search, e-mail, news, finance, auctions, blogs, music, sports and games, rank No1 in Hong Kong. Next month, the portal operator is set to make available for free the Chinese-language version of Yahoo Mobile for the Web on iPhone-maker Apple's online iTunes Apps Store. The Yahoo Mobile for the Web application was introduced to the iPhone and about 300 other internet-ready mobile-telephone models in April. The application brings mobile search and editor-selected content, access to e-mail and social network accounts from the most popular Web providers, instant messaging, address book and calendar tools, and links to other favourite websites in a single location. Mr Tsoi said: "The increased adoption of broadband mobile services, with always-on 3G connection, is allowing us to replicate our success on the desktop on handsets and even netbooks." Mobile information services - including news, search engines, location-based navigation, thesaurus and similar offerings - raked in revenue totalling US$5.2 billion across 13 markets in the Asia-Pacific last year, according to research from Frost & Sullivan. As the economy continues to put pressure on advertising budgets, marketers are looking for increased accountability for every dollar they spend. So Yahoo has launched search retargeting, enhanced retargeting and enhanced targeting, all of which enable online advertisers to target display advertising based on user search activities. "Our business model aims to get more and more people to our site, providing our advertisers greater opportunities to reach customers," Mr Tsoi said. The firm's agenda mirrors the approach of Yahoo chief executive Carol Bartz, who has maintained the company will thrive without software giant Microsoft Corp as a new owner. Microsoft offered as much as US$47.5 billion for the company last year. Jerry Yang, Yahoo's co-founder, was chief executive at the time and saw Yahoo lose two-thirds of its market value after rejecting the Microsoft deal. Mr Yang stepped down in November and was replaced in January by Ms Bartz, who was the long-time chairman and chief executive of 2D and 3D design software supplier Autodesk. Ms Bartz has led a management reshuffle at Yahoo and laid off 700 employees, or about 5 per cent of the company's workforce, as part of her efforts to reduce bureaucracy and sharpen the company's technology. "Yahoo actually has a bright, bright future - possibly clearer and simpler - without the Microsoft connection," Ms Bartz said. When the topic continued to come.

China Mobile is the only commercial TD-SCDMA service provider. The Taiwan trial networks will boost the technology's global recognition. Three Taiwanese mobile operators are negotiating to build trial networks based on the TD-SCDMA technology, a move that will significantly boost the mainland's homegrown 3G standard. An industry association disclosed the talks after the Industrial Technology Research Institute of Taiwan, an official research organisation, and Datang Telecom Technology, the mainland company that owns the TD-SCDMA patent, signed an agreement last week to study the possibility of building a TD-SCDMA trial network on the island. The TD-SCDMA Industry Alliance, a mainland industry organisation pursuing development of the technology, yesterday said negotiations were in progress with Chunghwa Telecom and Far EasTone Telecommunications on a possible partnership in the trial network. "We can confirm that we are in talks with the Taiwanese operators on a possible alliance in building a TD-SCDMA trial network in Taiwan," said Yang Hua, the secretary-general of the industry alliance, in a telephone interview yesterday. However, he declined to comment on the details of the discussions, as no final agreement has been reached yet. It is understood that Vibo Telecom, the smallest mobile operator in Taiwan, is also interested in the project. A trial network in Taiwan will be a milestone for the homegrown 3G standard as it seeks to gain overseas recognition. South Korea was the first country outside the mainland to have a TD-SCDMA trial network, which has been in operation since 2007. In 2006, Hong Kong set up a small-scale TD-SCDMA trial network at Cyberport for application developers to test their products. "The overseas expansion of the TD-SCDMA technology can strengthen the homegrown technology to compete with the other two well-established technologies, namely WCDMA and CDMA 2000," said Liu Qicheng, a telecommunications analyst. The Taiwan research institute and Datang Telecom next year will launch another trial network based on TD-LTE, an upgraded version of the TD-SCDMA technology. The network will be the island's trial and technology authentication centre for all TD-SCDMA-related products. Taiwan telecommunications equipment makers can submit their TD-SCDMA products to the centre for quality checks. Once they are cleared, the products can be sold on the mainland. China Mobile (SEHK: 0941, announcements, news) , the nation's biggest mobile operator, is the sole operator providing commercial TD-SCDMA service. The company kicked off commercial operations earlier this year with more than 800,000 subscribers. Telecommunications research house BDA said it believed TD-SCDMA data cards for laptop computers would continue to give the TD-SCDMA market a boost this year because China Mobile had made them a high priority. China Mobile's average subsidy this year for the data cards is 20 per cent higher than that of the handsets.up, Ms Bartz finally said: "Forget about the Microsoft stuff, it's honestly not that relevant."

One of Hong Kong's top shools will not expel four students at the centre of a drugs scandal but suspend them for two weeks instead. The move comes as officials continue to draw up plans for voluntary drug testing in schools amid growing concerns over youth narcotic abuse. Secretary for Security Ambrose Lee Siu-kwong said detailed planning was necessary as the government had to consider the views of society, as well as take into account the privacy of students and the labeling of drug abusers. His comments came as Rosaryhill School on Stubb's Road said it had suspended four secondary students caught taking drugs on the school premises last Tuesday. Yesterday, the school held a special assembly, during which the harmful effects of drug taking was stressed. Social workers and two psychologists from the Education Bureau were on hand to provide counselling. Many students said the two-week suspension for taking ketamine was fair but a few thought it was too lenient. Lee said he will discuss with Commissioner for Narcotics Sally Wong Pik-yee how the voluntary drug testing scheme can be speeded up. The government hopes to use a consultancy firm to test public opinion in September. The security chief also called for Mui Wo residents to support the relocation of Christian Zheng Sheng College, the city's only private school dedicated to help young drug addicts. "The school has been helping young people get [off] drugs, so they can turn over a new leaf and return to school," Lee said. "It is making a positive contribution. I hope residents of Mui Wo will weigh up the situation and support the school's relocation within the community." Lee said apart from stepping up law enforcement, society as a whole must do more to identify and help young people with drug problems. "They are just teenagers. How many times can you arrest them? You don't want them to sink. You want them to [kick] the drug habit," he said. Meanwhile, a 20-year-old woman caught with two 15-year-old girls suspected of taking drugs in Golden Beach in Tuen Mun last Saturday appeared in Tuen Mun Court yesterday. Yung Wun-yin is accused of possession of ketamine in a plastic bag, a piece of folded paper, and a straw. The case was adjourned to July 6, and Yung remanded in custody.

China: China's stellar growth could help pull the world out of its current economic slump, the head of the World Bank said overnight on Monday, while hailing the yuan’s progress toward becoming a global reserve currency. With mainland growth in the first quarter of this year exceeding most expectations, World Bank president Robert Zoellick said mainland could act as a catalyst for a global economic resurgence. “Any forecast in this environment is hazardous, but I think China is likely to surprise on the upside,” the former US trade envoy said, speaking at a conference in Canada. “By and large [China’s growth] has not only been a stabilizing force, but a force that will pull the system [out of the downturn].” Mainland’s meteoric rise as a global economic player has boosted world trade in manufactured goods and provided western companies with an enormous new market for their products and services. Mr Zoellick, who once headed US efforts to reach a new set of global trade rules at the World Trade Organisation, urged countries not to hamper this now “symbiotic relationship”. “In this environment, if you had protectionism burst out on one side or the other, or have some doubt put in about financial markets, those are the type of factors that could take a fragile situation and make it worse.” Mr Zollick also praised mainland’s central bank for its efforts to develop the yuan as a global currency. “Ultimately, that’s a good thing. And ultimately it’s good if you’ve got, I think, some multipolarity of reserve currencies to create, to make sure that people manage them well,” he said. The IMF and World Bank also said the path to global economic recovery is rife with risks and the onus is on policymakers to avoid runaway inflation and other pitfalls that could derail the process. At the forum in Montreal, International Monetary Fund chief Dominique Strauss-Kahn and Mr Zoellick turned their focus to life after the crisis, issuing a list of “do’s and don’ts” for governments as they try to nurse their economies back to health. Mr Strauss-Kahn maintained his forecast for a global economic recovery in early next year, with the turnaround starting in September and October of this year. “We still believe, as we’ve said for months, that the most credible scenario is that the recovery will take place in the first half of next year with the turning point in September, October, beginning of growth at the end of this year, and then really the first positive quarter as Q1 or Q2 next year,” he said. But he warned that the biggest risk to his outlook is countries taking too long to cleanse toxic assets from their banking systems. “You never recover until the cleansing of the balance sheet of the financial sector has been completed,” Strauss-Kahn said. For confidence to return, banks should disclose not only losses related to US subprime mortgages but other losses linked to the economic slowdown. Amid encouraging “green shoots” suggesting the worst of the global recession is over, Mr Strauss-Kahn reminded policymakers that the same policies that helped them through the crisis will cost them dearly in years to come as fiscal and monetary stimulus is withdrawn. The threat of spiraling inflation tops the list of concerns. “The risk of very rapid inflation at the end of the crisis is a real risk. How are we going to dry up all the markets?” he said. “The world after the crisis is not that simple.” The prospect of bulging government deficits for years to come is another reason to start acting with restraint now, Mr Zoellick said.

China's foreign exchange regulator on Tuesday said it would launch more supportive rules to facilitate overseas investment by local companies. The State Administration of Foreign Exchange (Safe) said it would allow qualified mainland companies to use their retained capital, either denominated in yuan or foreign currencies, to buy forex to fund overseas subsidiaries. Mainland companies were already allowed to use their retained capital to support overseas operations, but the new rules appear to be part of a push to simplify approval procedures for outbound investment and to encourage more companies to look abroad. Safe said at a press conference that the new rules would take effect on August 1. Mainland has ample cash on hand to support overseas investment, with US$2.9 trillion in foreign financial assets, including both official forex reserves and private holdings, at the end of this year. Mainland’s outbound investment has been very tepid compared with inflows from foreign investors, but the pace has started to pick up, nearly doubling to US$52.2 billion last year from US$26.5 billion in 2007. The government’s easing of outbound investment rules is only one part of the equation, as mainland companies have run into obstacles on several major investment attempts. Just last week global miner Rio Tinto scrapped its proposed US$19.5 billion tie up with Chinalco.

Ping An Insurance (2318) is to raise its stake sharply in privately held Shenzhen Development Bank in a deal worth about 125 billion yuan (HK$141 billion), sources said.

President Hu Jintao is to visit Russia next week to take part in the first-ever summit of leaders of BRIC countries, the foreign ministry said on Tuesday. Mr Hu will leave China on Sunday for a five-day trip to Yekaterinburg in western Russia, which will also incorporate a state visit and regional security meeting, foreign ministry spokesman Qin Gang said in a statement. The summit of BRIC (Brazil, Russia, India and China) leaders is the first of its kind and comes as the four rapidly-developing countries increase their global clout amid the global financial crisis. A similar meeting was held in May last year, but only the foreign ministers of the four nations participated, as opposed to the heads of state taking part next week. The Chinese government in May denied the forthcoming meeting would be between leaders, insisting foreign ministers would be taking part. Mr Hu will also be going to Russia to attend the Shanghai Cooperation Organisation meeting – a security-based grouping comprising the host nation, China and four central Asian republics. He will leave Russia on June 18 for Slovakia and Croatia for state visits there, Mr Qin said.

Chinese Vice Premier Li Keqiang (1st R) meets with Todd Stern, U.S. special envoy for climate change, at the Great Hall of the People in Beijing, capital of China, on June 8, 2009. Chinese Vice Premier Li Keqiang met with U.S. special envoy for climate change Todd Stern on Monday, calling for more dialogues and substantial cooperation with the United States on climate change. "China has noticed the change of the U.S. government on climate change as well as the positive measures it has taken," Li told Stern during their meeting in the Great Hall of the People. To strengthen dialogue and cooperation between the two countries helps the growth of China-U.S. ties and benefits the international cooperation to fight against climate change, the vice premier said. Stern said his country is ready to enhance dialogue and cooperation in energy, environment and climate change areas and work closely for the success of the Copenhagen Conference at the end of this year. A new protocol was expected to be born in Copenhagen by the end of this year to replace the Kyoto Protocol to prevent global warming and climate change. Li said China approves the fulfillment of the Bali Roadmap as the key mission of the Copenhagen Conference, and also approves promoting the implementation of the UN Framework Convention on Climate Change and the Kyoto Protocol in a comprehensive, efficient and consistent way. China would like to maintain the principle of "common but differentiated responsibilities" among developed and developing countries, actively participate in negotiations and play a constructive role to promote positive results from the conference, Li added. Stern expressed appreciation for China's achievements in recent years in fighting climate change. Li told the guest the Chinese government promotes sustainable development amidst efforts to address climate change, with conserving energy and protecting the environment as its national strategy.

The central government rejected 473 billion yuan (HK$537.5 billion) of polluting projects last year, as developed nations urged the world's biggest producer of greenhouse gases to adopt limits for heat-trapping emissions. The government turned down 156 highly polluting industrial projects last year, Deputy Environment Minister Zhang Lijun said yesterday at a conference on renewable energy in Tianjin. The country was also developing clean energy to meet its carbon-reduction goals, he said. Beijing says it will improve energy efficiency and increase the use of renewable sources of power rather than accept caps on carbon emissions, which may hinder economic development, as part of a new climate-change treaty to be negotiated at a UN summit in December in Copenhagen. The central government was committed to lessening pollution and energy use, Mr Zhang said. Developing nations outside the Organisation for Economic Co-operation and Development will account for 97 per cent of the increase in carbon emissions by 2030, International Energy Agency executive director Nobuo Tanaka said at an oil and gas conference in Kuala Lumpur yesterday. The mainland, the world's third-largest economy, produces 80 per cent of its electricity from coal. It is trying to cut pollution by 15 per cent by the end of next year from 2005 levels. The country has pledged to boost its ability to produce electricity from clean sources to about 35 per cent of total capacity by the end of 2020. The development of so-called green businesses would also help boost the economy, Mr Zhang said. For example, Vestas Wind Systems of Denmark planned to boost the number of employees on the mainland to 3,000 by year's end from about 2,000 last year, China-unit president Lars Andre Andersen said at the Tianjin conference. And China National Petroleum Corp, the country's biggest oil producer, plans to tap methane found in coal deposits, chief financial officer Wang Guoliang said. The Beijing-based company is also building four liquefied natural gas terminals. The government is drafting a long-term plan to develop renewable energy to replace coal and oil. Details will be released "soon", Han Wenke, head of energy research for the National Development and Reform Commission, said last month.

China refiner Sinopec (SEHK: 0386) is in preliminary talks on acquiring Canadian oil and gas exploration company Addax Petroleum Corp, reports said on Tuesday. The potential takeover bid is the latest effort by mainland energy and resource companies to expand and diversify overseas assets as Beijing seeks to secure resources for the country’s future growth. Addax, whose shares are listed in Toronto and London, issued a statement noting speculation over a possible acquisition after its shares soared on Monday. “Addax Petroleum acknowledges that it has held preliminary discussions with third parties expressing an interest in a potential transaction with the corporation,” it said without naming Sinopec or any other names. It said there was no assurance the talks would succeed and that the company would not issue any further comments unless a deal is reached. The state-run newspaper China Business News, citing unnamed Sinopec sources, reported on Tuesday that the takeover would be worth about US$8 billion. However, reports of earlier acquisition overtures valued the company at about US$3 billion. Beijing-based Sinopec urgently needs to expand its upstream international assets to help cushion against spikes in global crude oil prices that have caused it to post billions of dollars in losses in recent years due to caps on domestic fuel prices. Earlier this year, unconfirmed reports named Chinese offshore oil and gas company CNOOC (SEHK: 0883), Japan’s Mitsubishi and India’s Oil & Natural Gas Corp. as potential suitors for Addax. Sinopec’s shares were down 1.1 per cent at 10 yuan by late Tuesday morning. Addax’s shares surged 10.4 per cent on Monday to C$39.75 Canadian dollars (HK$275). The company’s shares have more than tripled since hitting an annual low of C$12.13 in late November. Addax’s oil and gas exploration and production is based mainly in west Africa and the Middle East, including joint operation of the Taq Taq field in Iraq’s self-ruled Kurdish region with Turkey’s Genel Enerji. The company reports it produced 134.7 million barrels a day of crude oil in the first quarter of this year.

A lone cyclist negotiates her way through a traffic dominated by automobiles in Beijing. On Tuesday, the China Passenger Car Association said mainland’s auto sales could hit a record 11 million units this year. China’s auto sales could hit a record 11 million units this year, state press reported on Tuesday, as government stimulus measures to encourage buying kick in. The forecast came after figures showed strong growth on purchases for the first five months, the China Daily said, citing the China Passenger Car Association (CPCA). Sales of passenger vehicles – including minivans, sports utility vehicles and multipurpose carriers – hit a monthly record of 812,178 in May, up 54.7 per cent year on year, according to CPCA data. That brought total passenger car sales in the first five months to 3.64 million units, up 29.6 per cent from the same period last year, the data showed. “The growth in the passenger car segment will probably continue in June to hit a new monthly record,” said Rao Da, CPCA’s secretary-general, adding sales in the second half are expected to be much better than in the first six months. The association said sales this year will “definitely” break the 10 million mark and could reach 11 million units, according to the China Daily. Mainland’s auto sales outstripped the United States to become the world’s largest car market for the first time in January, helped by Beijing’s incentives to boost domestic consumption. These measures included slashing purchase taxes on cars with engines smaller than 1.6 litres and subsidising alternative energy vehicles. Ailing US auto giant General Motors said last week its sales in mainland jumped 75 per cent year on year in May to a monthly high of 156,000 units, mainly boosted by strong sales of minivans, which enjoy government subsidies. In last year, sales of vehicles in mainland rose about eight per cent to 9.4 million units – a modest growth rate by mainland standards as demand was hit by the global downturn.

China Metal Recycling (Holdings), the mainland's largest scrap metal recycling company by revenue, is seeking up to HK$1.55 billion from its Hong Kong float. The Guangzhou-based firm plans to offer 300 million shares at a price ranging between HK$3.98 and HK$5.18 per share, according to market sources. The range represents 9.5 times to 12.3 times the earnings per share of 42 HK cents for the year ended December 31. Subscriptions will open from tomorrow to June 15, with trading debut scheduled for June 22. China Metal posted net profit of HK$294.4 million in 2008, more than double the previous year's HK$137.7 million. The company, which recycles both ferrous and nonferrous metals, such as iron, steel and copper, said it plans to invest HK$134 million this year, mainly on building new recycling plants to boost capacity. Meanwhile, furniture maker Hing Lee (HK) Holdings said it plans to raise HK$51 million by listing 50 million shares. It is set to go public on June 22. Another listing candidate, Lumena Resources Corp, which aims to reap up to HK$1.48 billion, saw its institutional tranche three times oversubscribed. Retail subscriptions were nearly fully covered as five brokers got about HK$147 million in margin financing orders. Trading is due to start on June 16.

A member of the special police reacts during an anti-terrorism drill in Hohhot, capital of north China's Inner Mongolia Autonomous Region, June 9, 2009. China on Tuesday started a national anti-terror exercise "Great Wall-6", which composes a series of specialized drills and will be carried out in the Inner Mongolia Autonomous Region and Shanxi and Hebei provinces. China held an anti-terrorism drill Tuesday afternoon to test its police forces' ability to handle a bomb containing radioactive contaminants. The drill, held in northern Inner Mongolia Autonomous Region's capital Hohhot, kicks off a series of drills in the autonomous region, Shanxi and Hebei provinces that surround Beijing. The exercise, codenamed "Great Wall-6", is aimed at improving the police forces' abilities to deal with possible terrorism attacks and other emergencies for the security of celebrations to be held in Beijing around Oct. 1 which marks the 60th founding anniversary of the People's Republic of China. In the first drill, special policemen and armed policemen confronted "terrorists" in the city's square and the "terrorists" triggered the bombs which spread radioactive contaminants. Through close cooperation with the city's health and environment authorities, the police forces successfully controlled the situation, according to the exercise's command headquarters. The exercise will last through the middle of this month.

HNA Group, parent of China's No. 4 carrier Hainan Airlines, launched a joint venture called Tianjin Airlines Monday in the northern port city of Tianjin. The joint venture, Tianjin Airlines, has a registered capital of 1.3 billion yuan (190 million U.S. dollars), the company said in a press release. The company was renamed from Grand China Express Co. after receiving a 200-million-yuan investment from Tianjin Port Free Trade Zone Investment Co. HNA Group holds a 83.15 percent stake and Hainan Airlines holds a 1.47 percent stake. Tianjin Port Free Trade Zone Investment Co. takes the remaining 15.38 percent stake. Chen Feng, chairman of HNA Group, said Tianjin Airlines would expand its fleet and service to consolidate its position as Asia's largest regional airlines. By 2012, the carrier would double its fleet size to more than 100 and provide an air service to 100 domestic and overseas cities.

June 9, 2009

Hong Kong: Secretary for Security Ambrose Lee Siu-kwong said on Monday the government was speeding up the implementation of its voluntary drug-testing scheme in schools. Speaking in response to cases of recent drug abuse among students, Mr Lee said the scheme merited in-depth research before its implementation because it involved privacy and human right issues. He said the government hoped to hire private consultants in September to examine the issue. He also stressed that the government was paying close attention to teenage drug problems. The Narcotics Division would soon put into effect more than 70 anti-drug measures suggested by Justice Secretary Wong Yan-lung in November. The security secretary called on support from parents and school, in addition to law enforcement by the police, to combat drug abuse problems. Mr Lee also appealed to residents in Mui Wo for support in relocation of the Christian Zheng Sheng College. The city's only school that provides help for young drug abusers suffers from a lack of space in its current Chi Ma Wan location. A plan to moving to an empty school in Mui Wo faces intense opposition from the local residents. Concern about young people taking drugs intensified last week after several pupils from Tin Shui Wai Pak Kau College and Rosaryhill School reported to be using drugs. Three girls were also sent to hospital after snorting ketamine at the Golden Beach in Tuen Mun.

Lantau's Ngong Ping 360 cable car service will be suspended for about two weeks from Monday for its annual inspection and maintenance. A spokesman for Ngong Ping 360 said surveyors from Europe would test the cable car's ropeway system during the closure. "The date for a resumption of the service would be announced after the inspection is completed," he said. "During the annual servicing period, Ngong Ping Village will remain open. Visitors may go to the village by bus or taxi," he said. The Ngong Ping cable car travels between Tung Chung and Ngong Ping. The cable car journey covers 5.7 kilometres and takes about 25 minutes. It enables people to see the Tian Tan Buddha Statue, North Lantau Country Park, Tung Chung Bay and Hong Kong International Airport at Chek Kap Kok. The cable car was built and originally operated by Skyrail-ITM. The project cost some HK$1 billion and took two years to complete. Initially, it was plagued by difficulties. Its launch had to be postponed in 2006 after a breakdown during testing left 500 visitors stuck in cabins for about two hours. Originally set to open on June 24, 2006, it finally opened on September 18, 2006. On June 11, 2007 the cable car closed for some time after a cabin fell 50 metres to the ground. No one was hurt, but Skyrail-ITM was sacked after an investigation into the incident.

Top China developer China Overseas Land (SEHK: 0688) said it has agreed to pay a HK$1.18 billion land premium to the government for a low-density residential development in the New Territories. Investment for the development would total HK$3 billion, including construction costs of HK$800 million, the developer said in a statement over the weekend. The development, comprising 260 units, was scheduled to be completed in the second quarter of 2012, it added. Shares of China Overseas Land rose 2.1 per cent to HK$16.44 on Monday morning. Recent strong flat sales in the territory have prompted developers to speed up promotion activity and raise sale prices moderately. Analysts said the willingness of developers to pay a land premium was indicative of their outlook on the property market.

Scrapping wine duties was "good tax policy" for Hong Kong, according to Timothy Forbes, chief operating officer of Forbes Inc. "I think Hong Kong's circumstance in particular demonstrates the virtue of good tax policy - that, in eliminating that duty, Hong Kong has become a market hub," Mr Forbes said. "There's no question, good tax policy stimulates economic activity." The scion of the Forbes family, which built a publishing empire, is hoping the government's decision to do away with wine duties last year will pay off when he puts "a fraction" of his extensive wine collection up for auction in Hong Kong for the first time at a Zachys sale on Saturday. The selection accounts for almost a fifth of the 803 lots on offer, with an estimated value of between HK$5.7 million and HK$8.7 million. "It's something I'd been thinking of doing for some time," Mr Forbes said. "In fact, if the world hadn't had the credit crisis in September, I probably would have done it in the fall. But I decided, no, that was a bad time. So I was going to wait. The market [in Hong Kong] is quite vibrant. Certainly New York, at least, is quite strong now as well after taking a severe dip at the end of last year." About half a dozen auction houses launched regular wine sales in Hong Kong after the abolition of wine duties. Although wine prices were dragged down by the global financial meltdown, they have since recovered quite well. Mr Forbes said Hong Kong's positioning as a wine hub was a natural consequence of scrapping the duty. "When I really began to buy in earnest, I kept assuring my wife that this was very solid investing," he said. "Actually, even with the relative moderation in prices, the money I spent on wine has been better than most of my financial investments."

The government's relief measures are sufficient to battle against the financial crisis this year, according to Financial Secretary John Tsang Chun-wah. Mr Tsang noted that more than HK$70 billion had been handed out since last year and described it as "a huge amount". "I believe, as of now, it should be sufficient for this year," he told China News Service in St Petersburg, where he was attending a forum. More than 40,000 jobs were lost in Hong Kong in the first six months of the economic turmoil in 1998, he pointed out. Comparatively, because of government relief measures, the city lost about 30,000 jobs in the first six months since the financial crisis started in September, he said. Mr Tsang's comments came nearly two weeks after he unveiled HK$16.8 billion in relief measures in the fourth phase of government handouts. He said pressure on the unemployment rate and economy had started to ease because of the handouts. Some legislators have said the package is inadequate while others said residents could not benefit from the measures. Economist Richard Wong Yue-chim said local entrepreneurs had to be tougher to engage the mainland outside the Pearl River Delta region so that Hong Kong's economy and export market could recover soon. Professor Wong said they could co-operate with mainlanders - who had sufficient capital and understanding about the local market - to explore the mainland market. Mr Tsang said Russia was a new market with potential, so Hongkongers should learn more about the country and expand their businesses there. "We need to understand more about Russia [so that] we can do more business with it in the future." At the forum yesterday, Mr Tsang took part in a session to discuss possible changes to the world's financial architecture. He leaves for Stockholm this morning.

Taiwan’s exports in May fell by almost a third from a year earlier, however the fall was slightly less than expected as a slump in demand from the island’s major trading partners showed tentative signs of easing. Falls in exports to the United States and Europe improved from April, when declines in both markets were the weakest in years. Mainland’s buying slump was less steep, while falls in Japan braked sharply. A drop in electronics exports also eased. In a further sign of improvement, DBS economist Ma Tieying calculated that Taiwan’s May exports rose a seasonally adjusted 5.8 per cent from April, the first growth since February. Still, the annual fall in overall exports of 31.4 per cent showed global demand remained weak, suggesting a recovery was still some way off even if consensus is growing that the worst of the world-wide slump has hit bottom. “Numbers are still soaked in negative territory,” said Sue Ann Lee, an economist at Forecast in Singapore. “And while there may be signs that data in key Asian export countries have somewhat seen a bottom, the question now is how long this export downturn is going to last. With the current sluggish environment, we are likely to see exports weakness continuing for a couple of months before we see a recovery.” Taiwan’s economy contracted at a record pace of more than 10 per cent in the first quarter from a year earlier, keeping the economy deep in recession as exports demand slumped globally. The central bank has slashed its policy rate to a record low of 1.25 per cent, in line with a rapid spree of rate cuts by authorities world wide as policy makers scrambled to support their economies in the face of the worst global downturn in decades. However, in an acknowledgement that the worst of the global slump may be over, the head of Taiwan’s central bank, Perng Fai-nan, said on Monday he would closely monitor core consumer prices. The comment reinforced the view that the central bank is done cutting rates. It cut rates seven straight times between September and February as it fought to shield the economy from the global financial tsunami triggered by the collapse last year of Lehman Brothers. The exports slump in May of 31.4 per cent was slightly smaller than the median forecast in a Reuters poll for a decline of 34.0 per cent and compared with April’s slide of 34.3 per cent. Taiwan’s May imports slumped 39.1 per cent from a year earlier, broadly in line with expectations for a fall of 39.2 per cent and compared with a drop in April of 41.2 per cent. May exports totalled US$16.17 billion and imports were US$13.01 billion, leaving a trade surplus of US$3.17 billion, bigger than a forecast of US$2.6 billion. Mainland exports dropped 30.0 per cent from a year earlier, a modest improvement from a 33.6 per cent fall in April’s data. US shipments fell 28.0 per cent, after falling in April 33.7 per cent, which was the biggest drop since September 2001. European shipments slumped 36.3 per cent, marking a slightly smaller fall than 37.0 per cent in April, which was the largest fall since records began in 1989. Japanese demand in May fell 24 per cent from a year earlier, compared with 32.3 per cent in April’s figures. Overseas sales of electronics fell 14.3 per cent in May from a year earlier, easing from a fall of 21.3 per cent in April.

China: China announced more tax rebates on exports of machinery, toys and some 600 other types of goods on Monday in an effort to boost slumping foreign sales. Beijing has repeatedly raised rebates of value-added taxes on exports to help producers compete abroad by cutting prices. Economists say the strategy is likely to do little to boost sales at a time of record-low global demand and might antagonise mainland’s trading partners. The latest increase will give a full rebate of mainland’s 17 per cent value-added tax to exporters of television transmission gear and weaving equipment, the Finance Ministry said. It said exporters of other goods will receive VAT rebates ranging from 5 to 14 per cent. The new rebates are retroactive to June 1, the ministry said. It gave no details of rebate rates for individual products before the increase, but those for weaving equipment were raised in January to 14 per cent. In a statement on its website, , the ministry said exporters of corn starch and alcohol would also benefit from the increased refunds. Exporters of sewing machines will now be refunded the full VAT rate of 17 percent. Rebates on suitcases, shoes and hats, toys and furniture increase to 15 percent. Refunds on various plastic, chinaware and glassware products go up to 13 percent. Exporters of selected steel products will receive an increased VAT refund of 9 percent, while the rebate on alcohol rises to 5 percent. The ministry did not give the old rates. Mainland’s exports plunged 22.6 per cent in April from a year ago, the sixth straight monthly decline, according to government data.

China Eastern Airlines and its smaller rival Shanghai Airlines were moving towards a merger deal and on Monday the trading of shares of both the carriers were suspended in the Shanghai exchange. Shares of China Eastern Airlines (SEHK: 0670) and smaller Shanghai Airlines were suspended on Monday after reports that the two loss-making carriers were close to a merger deal. South China Morning Post (SEHK: 0583, announcements, news) earlier had reported Shanghai Air vice-president Feng Xin as saying the two Shanghai-based carriers got instruction from the government to consolidate their assets. The highly anticipated move that would give the combined carriers more than half of the market share in Shanghai, a fiercely-competitive city among domestic and foreign carriers. China Eastern executives said the carrier would issue a statement later in the day to clarify the situation. “I am not saying that merger is a cure-all, but at least it gives them a chance to work together rather than fighting with each other especially at a time like this,” said Li Lei, an analyst with China Securities Co. After years of double-digit growth, mainland’s airlines are facing strong headwinds as the global financial crisis strikes home. The top three carriers, including Air China (SEHK: 0753, announcements, news) and China Southern Airlines, lost more than US$4 billion last year. Shanghai Air, which has lost money for two straight years since 2007, will be delisted if it fails to turn around this year, according to China’s securities rules. The merger talks began speeding up after the debt-ridden carriers got financial aid from the government, an industry source said.

The mayor of New Orleans, Ray Nagin, was being held on Sunday in a hotel in Shanghai, after a fellow passenger on his flight to China fell ill with a suspected case of swine flu, US media reported.

China issued rules on Monday for a planned stock exchange to nurture smaller, innovative companies, indicating the board might be launched soon. The Growth Enterprise Board rules take effect July 1, said an announcement by the Shenzhen Stock Exchange, where the board will be located. It gave no details on when companies could apply for listing or when trading would begin. Authorities have promised for several years to create an exchange to nurture smaller and private companies that struggle to raise money in a system where state-owned banks lend mostly to big state-owned companies. Companies on the new board will face stricter disclosure requirements and limits on stock sales than those on mainland’s two main stock exchanges in Shanghai and Shenzhen. The board also will require that companies already be profitable, unlike exchanges abroad for new enterprises that accept applicants that have yet to turn a profit. Analysts say creation of the new board shows Beijing’s eagerness to revive stock market activity and help to ease a financing squeeze that hit small and midsize companies due to the global economic crisis. The mainland market regulator announced earlier the new board would debut on May 1 but that date passed without a launch. Companies can list on the new board with annual net profits of at least 10 million yuan (HK$11.36 million) in the previous two years, or 5 million yuan for one year with sales of at least 50 million yuan, the China Securities Regulatory Commission announced in April. By contrast, companies on the Shanghai and Shenzhen exchanges must have net profits of at least 30 million yuan in the previous three years or total sales above 300 million yuan.

Small mainland developer SPG Land (SEHK: 0337) (Holdings) has diversified from being a purely residential developer into a builder of projects that include hotels, shopping centres and office blocks in a bid to survive in a highly competitive market. While conceding that the company cannot bid against big-money players in the market, SPG Land says it is able to use its expertise in planning and design to secure high-value development sites. Five years ago, the company teamed up with Hongkong and Shanghai Hotels (SEHK: 0045) to secure a prime site on the Bund in Shanghai, where the Shanghai Peninsula project is now under construction. "It was the most-sought-after site in the city at the time, as it was the first plot of land put up for sale there since 1930," said SPG Land managing director Stones Tse. The 50-50 joint venture has a total gross floor area of 92,520 square metres and comprises the 325-room Peninsula hotel, the 39-unit Peninsula Residence, and the Peninsula Arcade. The soft opening of the Peninsula hotel is scheduled for September while the Peninsula Residence would be offered for private sale by the end of the year. "Our list of potential buyers is getting longer. They come from all over the world, including Hong Kong's rich families, as it is the Peninsula's first managed residential project available for sale," said Mr Tse. Prices had not been finalised but would likely set a benchmark for a super-deluxe residential project in Shanghai, he added. In June last year, Shui On Land (SEHK: 0272) offered its upmarket Casa Lakeville in Shanghai's much-sought-after Xintiandi district at 70,000 yuan (HK$79,408) to 100,000 yuan per square metre, with units facing the lake generating 140,000 yuan per square metre. Mr Tse said prices at the Peninsula Residence, which is better located, should be pitched higher than Casa Lakeville. "The Peninsula brand will allow the apartments to be marketed for up to 30 per cent more than other luxury residential projects." Lau Tak-yeung, the managing director of property consultant Savills in Shanghai, believes the Peninsula Residence prices will set a record in the city. "Its quality and premium will definitely make it one of the most expensive developments," he said. Mr Tse said pre-leasing of the Peninsula Arcade was strong. SPG Land planned to increase its recurrent income to 30 per cent from less than 5 per cent over the next few years to avoid volatility in earnings, he said.

June 8, 2009

Hong Kong: A possible pay cut for 160,000 civil servants this year remains uncertain after some staff unionists threatened not to endorse key pay trend findings crucial to the annual adjustment ahead of a showdown meeting today. A police staff union said it would be very difficult to agree with this year's survey findings, while the largest civil service staff union, the Chinese Civil Servants' Association, said it was still undecided on the matter. The pay trend committee is to meet again today after some staff unionists questioned the figures in a meeting two weeks ago. Apart from the survey findings, the government will take into account a number of considerations - civil service morale, financial situation and economic status - before making a final decision on salary adjustments for civil servants for this financial year. The administration's pay trend survey found private sector wages had dropped 0.17 per cent for lower-paid staff, 1.34 per cent in the mid-range and 4.79 per cent for high earners. Civil servants in the lower, middle and upper bands could face pay cuts of up to 0.96 per cent, 1.98 per cent and 5.38 per cent, respectively. Tony Liu Kit-ming, chairman of the Police Inspectors' Association, said it was very difficult to endorse the survey findings, which he criticised for failing to follow long-established rules. The key bone of contention is the inclusion of a company from the financial sector with 15,000 staff. Mr Liu said that because of its large size, the firm's pay cut might have swung the survey's results for high earners by 1 or 2 percentage points and results for mid-range earners might jump to a positive figure. Mr Liu denied claims that any disagreement with survey results was merely due to negative findings. "We are professionally trained and cannot accept something dishonest. We will make it clear to the public and lawmakers that we are not questioning the findings just because of the negative indicators," he said. Covering a 12-month period starting from April 2 last year, the survey results reflect the pay trend in 121 companies covering 185,321 employees. Among the companies surveyed, 88 are larger firms with more than 100 staff. Deputy secretary general of the Chinese Civil Servants' Association Li Kwai-yin said an endorsement would depend entirely on whether the investigation team could erase doubts over the survey. "We insist the survey be conducted under an established and consistent mechanism. Companies which cannot meet with the established requirements should be excluded," she said. Ms Li said staff unions which refused to endorse the findings could exclude the survey results from their pay claims. So Ping-chi, chairman of the Hong Kong Senior Government Officers Association, said his union agreed to endorse the survey findings but said the investigation system should be reviewed. "While the inclusion of one company could result in an obvious change to the final survey findings, the mechanism needs to be reviewed before next year's survey," he said. James Sung Lap-kung, a political analyst at City University, said the government might have to carry out the annual survey again if some staff unions refused to endorse the present findings. But he said there was slim chances of the staff side remaining in disagreement with the survey findings, with the government lobbying behind the scenes.

The Education Bureau is preparing guidelines on how schools should handle pupils with drug problems. On Saturday the lawmaker for the education sector, Cheung Man-kwong, voiced shock at the failure of police to act in a case of drug abuse at Rosaryhill School in Stubbs Road. The commissioner for narcotics, Sally Wong Pik-yee, said yesterday: "The Education Bureau will issue a more detailed guideline to schools about how to handle students with drug-abuse problems. At present, school management should inform the bureau, police school-liaison officers, social workers stationed at schools, and teachers after spotting students with drug problems. "Schools can also inform the counselling centre for psychotropic-substance abusers if more help is needed. Also, schools should inform parents and students." As to whether schools should call in police for drug incidents and the pupils involved be prosecuted, she said: "They should be handled case by case depending on the nature of each incident." Rosaryhill School said four girls were found to be high on ketamine last Tuesday. It was reported to police but no action was taken. Responding to a number of recent drug cases involving students, Ms Wong said the government had always been concerned and was studying plans to introduce voluntary drug testing at schools. "But we should not rush to introduce the scheme at schools. We must first clarify some issues such as human rights and privacy," Ms Wong said. "Trust between students, teachers and social workers might be affected by drug tests." She said the government was aware there was an increasing trend of teenage drug abuse. Daniel Shek Tan-lei, chairman of the Action Committee Against Narcotics, said more studies should be carried out before voluntary drug testing was introduced at schools. "Time is needed to tackle some legal and technical issues. Also, we have to think how to help students with drug problems after they are spotted," he said. Professor Shek said consultant companies would be invited this month to bid for a research project to study the introduction of voluntary drug tests at schools. The research was expected to be finished in 2011. "A public consultation on compulsory drug testing by law-enforcement officers in the city will be held in the fourth quarter of this year." Meanwhile, Mui Wo residents yesterday used a forum to voice their objections to an application by Christian Zheng Sheng College to use the vacant New Territories Heung Yee Kuk Southern District Secondary School. The college, the city's only private school for young drug abusers, applied to the Education Bureau in December 2006.

The government will soon launch company law consultations that include the revision of the controversial "headcount" rule on privatization schemes, sources in the administration said. "The government holds no position on the issue but will offer a few options for the public to consider," one source said. One option is to adopt the Australian model, giving courts the discretionary right to approve a privatization bid if it is proven that minority shareholders rigged the vote in order to veto a deal. The consultation is scheduled for the last quarter of the year and the government hopes to table it in the Legislative Council for debate by the end of next year. Legco is expected to approve any changes in the law in 2012. The government has been seeking to update the Company Ordinance but discussions on rules governing privatization gained prominence in the wake of the recent PCCW (0008) saga when major shareholders failed in their bid to buy out the firm. In April, Richard Li Tzar-kai's Pacific Century Regional Development, the mother company of PCCW, won the approval of 75 percent of minority shareholders to privatize the telecom firm. But the buyout plan was rejected by the Court of Appeal over alleged manipulation of the headcount rule. According to section 166 of the Company Ordinance, a firm's privatization bid can succeed only if it gains the approval of shareholders holding 75 percent of shares by market value, as well as half of the shareholders present at the vote. Government sources said the consultation on section 166 will be part of the entire ordinance revision exercise. But overseas experience will play a role in how this particular section can be amended. "As current rules allow the court to reject any privatization plan if major shareholders are found to be involved in `vote-rigging,' the government thinks it could strike a balance for all shareholders if it adopts the Australian model, which will be one of the options offered for consultation," a source said.

Ma Ying-jeou (right) warms up for more than the Deaflympics. Taiwanese President Ma Ying-jeou is poised to take over the chairmanship of the ruling Kuomintang after present chairman Wu Po-hsiung retires in September, a newspaper reported yesterday. Mr Ma is certain to run for the chairmanship in an election on July 26, the Chinese-language Liberty Times reported. Mr Wu said yesterday he would not run again, and his tenure expires in September, which would leave Mr Ma unchallenged for the post. "I want to help him get re-elected in the 2012 presidential polls," Mr Wu said, dismissing claims that he hoped to swap party leadership for a government job. Presidential office spokesman Eddy Tsai declined to comment on the report, saying Mr Ma would brief the media on the issue only after the party began to consider applications for its chairmanship next Monday. Observers said that if elected to its leadership, Mr Ma would have greater power from within the party than before and find it easier to push through government policies in a parliament dominated by the Kuomintang. Mr Wu visited Beijing for the first time as party chief in May last year, when he met President Hu Jintao and built on historic agreements reached in 2005 between the Kuomintang and the Communist Party, its former arch-enemy. In 2005, Mr Wu's predecessor, Lien Chan, became the first Kuomintang leader to visit the mainland since the civil war ended in 1949. During that trip, he met Mr Hu and formally ended his party's hostilities with the communists. Ties between Beijing and Taipei, which split in 1949, have improved dramatically since Mr Ma, whose party is Beijing-friendly, came to power last year in May. The two sides have signed a raft of agreements that have led to regular direct flights and greater co-operation across the Taiwan Strait. Mr Ma's predecessor, Chen Shui-bian, frequently irked the central government with his pro-independence rhetoric. Beijing views Taiwan as part of its territory awaiting reunification, though Mr Ma has held to a no-reunification stance.

A high-level think-tank is expected to propose running Hong Kong-style schools in the Pearl River Delta for children of Hongkongers and allowing the city's universities to set up wholly owned institutions on the mainland. The Greater Pearl River Delta Business Council will also urge a rethink by the government on the issue of portability of public benefits for Hongkongers. Cheng Yiu-tong, convenor of the council's sub-group on livelihood issues, said the Hong Kong government could not turn a blind eye to the education needs of thousands of children of Hongkongers living in the delta region. "The policy banning the transfer of public subsidies across the border was made by the colonial government [before 1997]," said Mr Cheng, who is also an executive councillor. "It should be revised, as Hong Kong has reverted to Chinese rule." The council, a government-appointed think-tank of business leaders and professionals, will submit its report on how to capitalise on opportunities arising from Beijing's planning guidelines for reform and development in the delta to the Hong Kong and Guangdong governments next month. The guidelines, released by the National Development and Reform Commission in December, spell out the central government's determination to make the delta an international metropolis. Mr Cheng said portability of education benefits could ease the burden of social welfare borne by the Hong Kong government and facilitate the flow of people across the border. "There will be no need for new mainland arrivals to rush to Hong Kong if their children can enjoy Hong Kong-style schooling north of the border," he said. The Hong Kong government should also provide other public benefits such as medical services and public housing for Hongkongers living in delta cities, Mr Cheng said. Fellow business council member Chan Wing-kee said members had explored the feasibility of transferring public benefits across the border. "I think from a cost-benefit analysis, granting education subsidies to children of Hong Kong people living in Guangdong is a good idea," he said. "The cost of providing education services in Guangdong is much lower than in Hong Kong. It would ease the burden of social welfare on the Hong Kong government." Mr Cheng also suggested that the Guangdong authorities retain the residency permits of people migrating to Hong Kong for two years, so that they could return to their hometowns if they failed to adapt to Hong Kong society. Currently, mainlanders lose benefits they are entitled to under their residency permits once they migrate to Hong Kong. The council's report is also likely to suggest measures to encourage factories in the delta region to reduce emissions. It will recommend that Hong Kong universities should be allowed to set up wholly owned institutions on the mainland. The universities are legally regarded as foreign, and can establish branches only with mainland partners.

Drugs at top school: police inaction faulted - Fears over ketamine use grow - Police, lawmakers and social workers yesterday warned youth drug abuse was spreading, and a legislator voiced shock at the failure of police to act on drug-taking at one of the city's top schools. Senior police officers questioned whether it was appropriate to continue giving schools the discretion as to whether to call in police over drug incidents. They spoke as a spate of ketamine abuse by youngsters continued, with three teenagers found to have taken it at a beach. Rosaryhill School, on Stubbs Road, said four girls were found to be high on the drug at lunchtime on Tuesday. While the school reported the situation to police, no action was taken. The Catholic school's vice-principal Kitty Ho said the girls had confessed to taking the drug in a changing room. She said Rosaryhill had contacted the Wan Chai police school liaison officer that day. Since no drugs were found on the girls and they did not become ill, the officer thought the school could handle the case, she said. No formal report was made to police. Education sector lawmaker Cheung Man-kwong said he was outraged that the police took no action. "It is hard to believe that the police school liaison officer asked the school to handle the case themselves," he said. "They must take action to find the dealers and trace the drug sources if they are to prevent the students taking drugs again." Mr Cheung said he would file a complaint to Police Commissioner Tang King-shing about the handling of the case. A police spokesman said the school liaison officer could not take follow-up action on the day "as no concrete details were provided". Officers would go to the school tomorrow and hold an anti-drugs seminar there on Wednesday. Rosaryhill is one of the city's most exclusive schools. Former pupils include Bernard Chan, until recently an executive councillor, singer Kelly Chen Wai-lam and Twins singer Charlene Choi Cheuk-yin. Mr Cheung said youth drug abuse had spread to privileged schools and society must address the problem. After the school went public yesterday, two 15-year-old schoolgirls and another teenager were found dazed on a beach in Tuen Mun at about 4pm. They were suspected to have taken illegal drugs. The three were arrested with a woman, 21, who was charged with possessing drugs. On Thursday police arrested three pupils of Pak Kau College, Tin Shui Wai, on suspicion they had taken ketamine after they fell ill in a nearby park. Police caught a schoolmate who allegedly sold the ketamine to the three. A veteran police officer said "grey areas" in the handling of drug cases should be done away with. "Unlike smoking a cigarette, taking psychotropic drugs will kill abusers and damage their brains," he said. "We should let the courts decide what rehabilitation program is suitable for drug abusers." Another senior officer, with more than 20 years' experience, said enforcement should be used if education and social work failed to control the problem. Deputy Secretary for Education Betty Ip Tsang Chui-hing said schools might not intend to hide drug problems, and should be allowed flexibility as to whether or not to report cases to the police. Lawmaker James To Kun-sun agreed schools, not police, should be allowed to handle minor cases to help students' rehabilitation. Police figures show 17 students were found taking drugs at schools in the first three months of this year, compared with 24 in the whole of last year and 37 in 2007. The leader of a team of Caritas outreach social workers, Forest Chan Chi-sing, said the number of students taking drugs and involved in drug trafficking was growing.

More than 10 per cent of primary school students say they are unworried by the possibility that abuse of psychotropic drugs could wreck their future. The figures came to light in a survey by the Barnabas Charitable Service Association of about 2,700 Primary Four to Six students from 39 schools in the New Territories, which began last September. Almost 20 per cent of respondents said taking ketamine or Ecstasy would not harm their reputation among their peers, while 12.3 per cent reckoned that psychotropic drug abuse would not ruin their future. About 2 per cent of respondents said they would consider taking ketamine or Ecstasy when they encountered hard times while nearly 3 per cent believed the drugs could ease nervousness and moodiness. Association chairman Samuel Wong Wing-fai said the findings reflected a potential danger and the government should consider beginning drug education in primary schools. "Drug abusers are getting younger and younger," he said. "If teenagers do not develop a resistance to drugs when they are young, they may try to use them when they grow up. The consequences can be beyond their imagination." He said the association, which runs a drug rehabilitation centre on Lamma Island, had found drug abusers as young as 14 last year. Mr Wong said the survey also found that the more students learnt about drugs, the less they were likely to abuse them. "Those who score high in questions on their knowledge of drugs are also getting high scores on questions about their resistance to drugs. But we also note that more than one-fifth of primary students admitted that they could not control their emotions. We see that as an important signal as most teens take drugs when they are under the influence of peers or during emotional downturns."

Stephen Lam meets the minister in charge of Taiwan's Mainland Affairs Council, Lai Shin-yuan, in Taipei. Hong Kong's secretary for constitutional and mainland affairs, Stephen Lam Sui-lung, yesterday met Taiwan's minister for mainland affairs, and became the first official from the Chinese mainland to set foot in an office of the island's government. The location of the low-profile meeting between Mr Lam and Mainland Affairs Council chairwoman Lai Shin-yuan went against the convention in cross-strait talks that representatives from the Chinese mainland avoid any arrangement that could imply recognition of a Taiwanese "national" government. In November, a historic meeting between Beijing's top negotiator on cross-strait affairs, Chen Yunlin, and Taiwanese President Ma Ying-jeou took place at the Taipei Guest House. Mr Chen addressed Mr Ma simply as "you", avoiding the use of a title. But Mr Lam referred to Dr Lai as "the MAC chairperson" as he spoke to the media after yesterday's meeting. In a Chinese-language press release published on its website on Tuesday, the Hong Kong government referred to Mr Ma as "president" when announcing Mr Lam's trip to Taipei. "The chairperson warmly welcomed the fact that Hong Kong-Taiwan relations had been elevated, particularly in the course of the past year," Mr Lam said after paying his courtesy call to the MAC's office in the Joint Central Government Office Building in Taipei. Both sides denied there was any political implication behind the choice of venue for the meeting. Asked whether his visit to Taiwan's central government office was in conflict with the one-China principle, Mr Lam said all Hong Kong-Taiwan talks were held in accordance with the seven principles laid down by former vice-premier Qian Qichen. MAC spokesman Johnnason Liu Te-hsun said the office was where Dr Lai usually received guests. "As MAC vice-chairman Fu Don-cheng agreed with the Hong Kong side on a new bilateral co-operation mechanism yesterday [Friday], it was very natural for Minister Lai to meet with Minister Lam. There is nothing special [in the choice of venue]." The one-hour closed-door session was omitted from Mr Lam's Taipei itinerary as released to the media. It came to light only after reporters saw the minister's car entering an underground car park at the MAC office in the morning. Mr Lam said he did not mean to keep the meeting secret. "It was always in our plan to visit the chairperson at the end of the trip, and to release the news and photos. I also knew I would meet you [reporters] here so that I could tell you about the meeting," the minister said as he arrived at Taipei's National Palace Museum for a visit. He also dismissed a report on the website of the Hong Kong Economic Journal that Chief Executive Donald Tsang Yam-kuen was planning to visit Taiwan in the next two or three months. "This time in Taiwan I have not raised with the Taiwanese side the possibility of the chief executive visiting Taiwan, nor have I discussed with the other side a time frame. Insofar as Hong Kong and Taiwan are concerned, we will continue to promote bilateral co-operation and visits. But this will depend on developments." Mr Lam returned to Hong Kong yesterday. During his talks with Mr Fu on Friday, the two sides agreed to create two committees to boost exchanges in areas including trade, investment, tourism and culture.

About 80 per cent of the 2,000-plus retail outlets affected by the levy on plastic bags to be introduced next month had registered with the Environmental Protection Department, environment chief Edward Yau Tang-wah said yesterday. Speaking on a radio program yesterday, Mr Yau said that the public should now be ready for the levy. "We have been encouraging shoppers to bring their own bags for 10 years. In a previous survey 70 to 80 per cent of respondents supported the plastic-bag levy," he said. Mr Yau expected preparatory work to be completed by the end of the month. Notices had been designed and sent to shops, which would be posted next to the cashiers to remind customers of the levy of 50 HK cents for a plastic bag. Publicity to remind the public of the levy would continue, he said. Meanwhile, the department is organising a "My Dream Shopping Bag" design contest for students. Winners will be named next month. The Product Eco-responsibility (Plastic Shopping Bags) Regulation was endorsed by the Legislative Council on April 23. Taking effect from July 7, it requires certain retailers to charge customers not less than 50 HK cents for each shopping bag. Major shops and supermarket chains, convenience stores, personal health and beauty stores, and department stores fall under the regulation. They must sign up with the Environmental Protection Department by June 5 as a "registered retailer" before they can continue doling out plastic shopping bags after July 7. The levy is the first scheme to be implemented under the Product Eco-responsibility Ordinance. The ordinance, enacted by the Legislative Council in July last year, is a piece of "framework" legislation that provides a legal basis for implementing producer responsibility schemes in Hong Kong. Mr Yau said that the recovery and recycling of old electrical and electronic products would be the next target of the waste-reduction initiative. Measures that require retailers to introduce product-recovery measures or encourage shoppers to take back used appliances when buying new ones might also be considered. He said the government had funded social enterprises to recover used electrical appliances, and a voluntary product-recovery scheme had been launched with major retailers and distributors of electrical appliances and electronics products. The government was examining overseas experience in requiring the recovery and recycling of such products through legislation. Mr Yau expected that a proposal would be ready for consultation with the public and relevant sectors next year.

Franco Dragone says the as-yet untitled performance he is directing for Macau's City of Dreams will tell the story of Macau's discovery after a Portuguese shipwreck. The creative genius behind Cirque du Soleil's Las Vegas spectaculars has thrown open the door to rehearsals in Belgium for a production intended to transform Macau's latest gambling paradise. Star producer Franco Dragone's upcoming epic is expected to sell almost one million tickets within its first year at Macau's just-opened City of Dreams complex, with a budget of €200 million (HK$2.16 billion). Dragone, who transformed French-Canadian singer Celine Dion into a Vegas icon, is fine-tuning the underwater show in what the Antwerp studio hosting preparations describes as "the world's biggest rehearsal space". The Italian is putting some 80 artists from 20 countries, chosen from more than 1,000 candidates, through their paces. The US$2.4 billion complex opened last Monday in Macau's Cotai Strip, after years in the making, in a high-stakes gamble amid the global economic recession. Backed by scions of two gaming dynasties, it will eventually offer more than 500 casino tables and 1,500 gambling machines, as well as top-end restaurants, boutiques and hotels - as part of a bid to usurp Las Vegas as a global travel destination. Dragone's untitled but extravagant production is planned to sit at the heart of a lavish, 2,000-seat entertainment venue with a giant swimming pool forming the heart of the Macau "stage" when the show starts. City of Dreams is a joint venture between Lawrence Ho Yau-lung, son of Macau casino tycoon Stanley Ho Hung-sun, and James Packer, son of the late Australian media and gambling magnate Kerry Packer. Dragone's mission is to complete a total entertainment experience. Macau's casinos already take in more dollars than those of Las Vegas and Atlantic City combined, but worries over money laundering and corruption, and unease about Chinese cash being vacuumed up by foreign operators led mainland authorities last year to stem the flow of visitors. "The spectacle will tell of Macau's discovery after a Portuguese shipwreck," Dragone, 57, said. "The hero, a young stowaway, and his valet, the only survivors, will encounter a strange and wonderful world - Chinese civilisation." Dragone says he will lean on work of the likes of late French mime legend Marcel Marceau and Italian Nobel laureate Dario Fo, best known for his 1970 play The Accidental Death of an Anarchist. As his young stars and starlets leap, dive and pirouette in the rehearsal hangar's pool, professional divers offer underwater security for the performers while also doing the work of traditional stagehands. "Among loads of other issues, we've had to teach them to perform under water - sometimes even to swim," casting chief Mathew Jesner said of his performers. More than 50 million tickets worldwide have been sold for Dragone's shows to date, which include 10 Cirque du Soleil seasons. The new show is to be staged 10 times a week when phase two of City of Dreams opens later this year.

The Court of Appeal will hear an application by PCCW (SEHK: 0008) and its Singapore-listed associate company, Pacific Century Regional Developments (PCRD), for leave to appeal against an earlier court decision to block the HK$15.93 billion buyout of PCCW by Richard Li Tzar-kai, the controlling shareholder of both firms. Minority shareholders of Hong Kong-listed PCCW oppose the continuation of the legal battle over the telecommunication company's controversial privatisation, on the grounds that they have to share the legal costs, estimated to be in the tens of millions of Hong Kong dollars.

Hopson Development Holdings (SEHK: 0754), riding on revived investor interest in mainland property stocks, raised as much as HK$1.68 billion yesterday through a placement of new shares, the latest company to take advantage of a surge in liquidity to boost capital. Hopson was selling 120 million new shares at HK$13.30 to HK$14.03 each, representing as much as 8.02 per cent discount to yesterday's close of HK$14.46, according to a sales document obtained by fund managers. The new shares would not qualify for the final dividend to be approved at the upcoming annual general meeting, the document indicated. The mainland developer has agreed not to sell any new shares for three months after the completion of the placement. UBS is the joint bookrunner. The offer represents 8.1 per cent of the existing outstanding shares and 7.5 per cent of the firm's enlarged share capital. Meanwhile, fund managers said investment banks had stopped lobbying Guangzhou R&F Properties for a share placement. The Guangzhou-based developer had been tipped as the next candidate in the latest round of fund-raising activities. "They have submitted [the application] of a mid-term yuan bond issue and are awaiting the reopening of the A-share market for new money, so they are not keen on tapping the [Hong Kong] equity market," said a source. Shares of Hopson rose 4.18 per cent yesterday, in line with other mainland developers which have seen a continued rise as investor interest returned to the sector. Hopson has surged 307.84 per cent in the past three months, a faster pace than other major mainland developers such as China Overseas Land (SEHK: 0688) & Investment and China Resources (SEHK: 0291) Land. Mainland developers with weaker fundamentals usually traded at bigger discounts to their net asset values. Recently, some investors have chased the laggards after they regained confidence in the sector, said David Ng, the head of regional property research at Royal Bank of Scotland Group. Mr Ng said it was sensible for mainland developers to take the opportunity to raise fresh capital. Last month, CR Land tapped the stock market for HK$3.3 billion through a top-up placement. In February, Hopson plunged as much as 50.62 per cent in one day after a report that chairman Chu Mang-yee was implicated in the criminal investigation of Wong Kwong-yu, the former chairman of Gome Electrical Appliances Holding (SEHK: 0493). It had been reported that Mr Chu was under investigation by law enforcement agencies in Dongguan because he was suspected of being involved in the Wong probe. In April, Mr Chu did not show up at the results announcement for the company, which posted a 12.56 per cent decline in underlying profit.

China: Hillary Rodham Clinton has been working the phones for donations to ensure a US presence at Shanghai's World Expo 2010 - ahead of a deadline for pavilion construction to begin by the end of this month. While the US Secretary of State is making calls around the United States, pavilion project leaders "have intensified discussion with US companies in Hong Kong in recent weeks, and increasingly found a responsive audience", Frank Lavin, chairman of the USA pavilion steering committee, said. "There's a strong awareness in the US business community in Hong Kong of the importance of a successful US pavilion in Shanghai." Mrs Clinton had been personally appealing to American business leaders to ask them to support the US$61 million undertaking, he said. Only US$6 million has been raised so far to pay for US participation in what organisers hope will be the biggest and most expensive Expo in the event's 158-year history. "One of the turning points came [last month] ... when Hillary Clinton made phone calls for us," Mr Lavin said. "So she is picking up the phone and calling some corporate executives and asking them to look at this." News of such high-level commitment to the project will come as a relief to Expo organisers, who are concerned about US participation in the six-month show, due to begin in less than a year. The US pavilion is intended to be one of the highlights of the 5.28 sq km Expo site, and one of the largest national pavilions - but the US has yet to formally confirm that it will be in attendance. Shanghai officials worry that the United States - which cannot legally use public funds to build the pavilion - may fail to raise enough money in time and back out of the Expo. Countries have only until June 30 to break ground on self-built pavilions. If they fail to do so, Expo organisers will offer a simple prefabricated hangar which countries can rent and decorate. In late April, Shanghai Expo director general Hong Hao admitted that Argentina, Brazil and "certain" other countries had already backed out of building their own pavilions. Shanghai government sources have said they have a list of as many as 20 nations in addition to the US which may scale back their plans. South Africa, Malaysia, Croatia and Venezuela are understood to be among the countries on the list. "We believe that what happens to the US pavilion will have a big influence on what these countries decide," one official said. "If the US doesn't build its own pavilion, many of them may follow suit." The official feared that if too many countries opted for rented pavilions rather than self-built structures with their own unique design, the Expo might not live up to expectations. "The Expo is supposed to be about architecture. We'd like to see lots of different types of buildings," the official said. "Rented pavilions aren't architecture; that's just interior design." Jean Ravel, the Venezuelan consul general in Shanghai, admitted that the world recession had had an impact on its plans. "Venezuela is an oil producer," he said. "Last year the oil price reached US$140 a barrel. Venezuelan oil is now around US$50 a barrel." However, Mr Ravel insisted his country's pavilion plans remained on track. "We hope to begin construction on the pavilion this month. We have completed the master plan. It has not changed." A spokesman for the Malaysian Department of Tourism in Shanghai, which is "facilitating" the country's pavilion, said he was not at liberty to discuss the project without approval from Malaysia. There was no response from the South African and Croatian embassies in Beijing.

Bain has been reported to be eyeing an 18 per cent equity stake in Gome at a 40.17 discount to the stock's last traded price of HK$1.12. Gome Electrical Appliances Holding (SEHK: 0493), the mainland's top home appliance retailer, is expected to announce the sale of a stake to US private equity investment giant Bain Capital as early as this week, according to sources. Bain had signed an agreement to buy a substantial stake for about US$430 million, but Gome's former chairman - embattled tycoon Wong Kwong-yu - would remain the major shareholder, sources familiar with the deal said. The US investor would buy new shares and subscribe to convertible bonds, one source said. It would be Bain's biggest investment on the mainland. Dow Jones reported yesterday that Bain would take up an 18 per cent stake at 67 HK cents for each new share, a 40.17 discount to Gome's last trading price of HK$1.12 per share. However, a source close to the company said that there were conditions for the new share pricing. "Such a huge discount is unfair to Gome shareholders, particularly minority shareholders, so this is not the whole picture," he said. There is also speculation Gome chairman Chen Xiao would offload his 7.28 per cent stake. Referring to the rumours, Mr Chen said things would be clearer after "several days". He said he was fully committed to Gome and looked forward to leading the company for several years. The shares have been suspended from trading since November 24 last year, when Wong was detained on allegations he had manipulated trading in Sanlian Commercial and Beijing Centergate Technologies. South China Morning Post (SEHK: 0583, announcements, news) reported on Saturday that Shenzhen mayor Xu Zongheng and his wife have been implicated in Wong's illegal activities and put under shuanggui - a form of detention for party officials. Market watchers expect Gome to slump when trading resumes, unless the firm has secured funding from investors without a big discount to its last trading price. "It is possible for Bain to get a big discount on the new share price as there's downward risk when trading resumes and the risk of buying a stake in Gome is huge because of Wong's case," said one market watcher. Dow Jones also reported that Bain would subscribe to seven-year bonds with a conversion price at HK$1.18, giving Bain an extra 12 per cent stake. Gome is under pressure to repay 4.6 billion yuan (HK$5.2 billion) worth of convertible bonds in May next year. ABN Amro analyst Yang Lei said the bond price slumped about 40 per cent after news that Wong was under investigation but had since edged up.

Vice-Premier Wang Qishan (left) and Japanese Foreign Minister Hirofumi Nakasone address the media. China and Japan have jointly pledged to promote recovery in the slumping world economy and called for an early end to talks on global trade liberalisation. Vice-Premier Wang Qishan and Foreign Minister Hirofumi Nakasone made the announcement after a one-day economic ministerial meeting in Tokyo yesterday. "In the current context of the grim challenges posed by the ever spreading international financial crisis, it is necessary for China and Japan to vigorously follow through the consensus of the G20 [Group of 20] summit in Washington and London, and adopt more effective measures so as to ensure financial market stability while helping our respective national [economies] and the global economy to resume growth," Mr Wang said at a news conference with Mr Nakasone. "Both sides underline the need to assume a consistent and responsible attitude to step up regional and international economic and financial co-operation." His Japanese counterpart said: "On the global economic and financial crisis, both countries agreed to implement what was agreed at the London summit swiftly and in a solid manner in order to realise a global economic recovery soon." Developed and emerging economies of the G20 agreed at their London summit in April to commit US$1 trillion to the International Monetary Fund and other global bodies to help struggling countries. They also agreed to push for greater regulation of the global financial system to fight the deepest world crisis in decades. Both China and Japan wanted an early conclusion to the Doha Round of trade-liberalisation talks under the World Trade Organisation "so that the global economy will return to a track of sustainable growth", Mr Nakasone said.

Shenzhen authorities kept silent on the whereabouts of Mayor Xu Zongheng after news of a graft investigation hit the headlines in Hong Kong. Spokesmen for the Shenzhen and Guangdong governments have declined to comment on whether Mr Xu and his wife have been investigated by the Communist Party's anti-graft watchdog. The spokesmen could not explain Mr Xu's absence from the Shenzhen Mayor's Award for Environmental Protection ceremony on Friday and censors have been unusually tolerant of intense speculation that the mayor is under shuanggui - a form of detention imposed on party officials - that have circulated in major mainland internet chat rooms. Various sources said Mr Xu's fall was linked to billionaire Wong Kwong-yu, the founder of the Gome electrical appliances group, who had been arrested for share price manipulation earlier. The investigation is expected to trigger a political storm in Guangdong province and all eyes are on who will succeed Mr Xu and whether the central government would send an official to take over the role. Mr Xu was the first Shenzhen mayor promoted locally. Meanwhile, Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung refused to comment on the impact of Mr Xu's alleged downfall on cross-border co-operation. But he said the two cities' collaboration was long term and would not be affected by personnel changes. Mr Xu, Shenzhen's mayor since 2005, was hard at work the day before rumours of his detention began to spread among netizens. On Thursday, he met visiting businessmen and chaired a government meeting. Mr Xu had been criticised over skyrocketing real estate prices and for turning a blind eye to a poor-quality, government-funded, cheap housing project for struggling families. In the three months leading up to Mr Xu's disappearance, a string of high-profile party officials were brought down by their links to Wong. They included Chen Shaoji , former chairman of the Guangdong Chinese People's Political Consultative Conference, and Wang Huayuan , chief of the Communist Party's disciplinary body in Zhejiang.

China Resources (SEHK: 0291) Land said yesterday that solid demand from both investors and end-users boosted contract property sales for the first five months by almost 600 per cent. Managing director Wang Yin said contract sales during the period totalled 973,000 square metres, up 578 per cent from last year. Revenue amounted to 8.68 billion yuan (HK$9.85 billion), accounting for 80 per cent of annual sales target. Including projects sold but not completed last year, as well as sales on projects that are expected to be completed this year, the company already has achieved 12.2 billion yuan sales in the first five months. Under international accounting standards, a company can only recognise revenue from property sales upon a project's completion. "In addition to end-user demand, we also see investors entering the market, which is a positive sign," said Mr Wang. He said the outlook was good as the economy grew and the stock market stabilised. He added that the stimulus measures would also underpin the market. The company plans to launch six to eight new projects in Shanghai, Chengdu, Shenzhen and Shenyang for the rest of the year, offering 1.1 million sqmetres of saleable area. Mr Wang said current land prices were reasonable and the company would continue to build up its land bank. It will look for opportunities in major cities, including Beijing, Shanghai and Hangzhou. Shui On Land (SEHK: 0272) chairman Vincent Lo Hong-sui said he expected land prices would not jump significantly in the short term. His comment came a day after Shimao Property Holdings (SEHK: 0813) chairman Hui Wing-mau warned that sites were being sold for excessively high prices. Mr Lo is also the chairman of Shui On Construction and Materials (SEHK: 0983, announcements, news) . Socam said so far 72.3 per cent of shares had voted in favour of the proposed privatisation of its 42.9 per cent-owned China Central Properties before today's deadline.

Chinese Premier Wen Jiabao (2nd L front), who is also a member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, talks with students at a human resources service center in Lianhu District of Xi'an, capital of northwest China's Shaanxi Province, June 5, 2009. Wen paid a visit to Xi'an from June 5 to 7. Chinese Premier Wen Jiabao has urged the country's college students to find grassroots jobs in less developed regions as the economic downturn increases pressures in employment market. Visiting Xi'an, capital of central Shaanxi Province, from Friday to Sunday, Wen said employment was one of the government's priorities for the sake of the country's economy and for the future of individuals. "College students, laid-off workers and migrant workers waiting for jobs are my biggest concern," Wen told job hunters at an employment center. He encouraged graduates from universities and colleges to find work in grassroots regions, and called on employers to create more jobs. Since the second half of last year, the government has implemented a series of policies to create jobs. The State Council, or Cabinet, also decided to give living allowances to graduates who went to the central and western regions for internships. Everyone should have a resolute belief that they should try their best no matter what their job was, Wen told students at Xi'an Jiaotong University.

An ARJ21 (Advanced Regional Jet for the 21st Century) plane is assembled at Shanghai Aircraft Manufacturing Co., Ltd in Shanghai, east China, June 6, 2009. The Final Assembly Center of the Commercial Aircraft Corporation of China, Ltd (COMAC), based on the Shanghai Aircraft Manufacturing Co., Ltd, was formally inaugurated on Saturday. Commercial Aircraft Corporation of China Ltd. (COMAC) unveiled its manufacturing and assembling center here Saturday, the latest step towards the goal to manufacture China's homegrown large aircraft. The Final Assembly Center of the COMAC was based on the Shanghai Aircraft Manufacturing Co., with a registered capital of two billion yuan (292.7 million U.S. dollars), said COMAC's general manager Jin Zhuanglong. It was one of the COMAC's three key entities which were responsible for aircraft design, manufacturing and service. Jin said the Final Assembly Center's new base in Shanghai's Pudong area will be constructed within this year. By 2010, the center will be able to produce 30 ARJ21-700 model planes a year, and the capacity will be expanded to 50 jets by 2012, Jin said.

June 7, 2009

Hong Kong: Mental patients living in the community in Hong Kong may be forced to seek medical treatment if a proposal being discussed by medical experts is endorsed by the government. Under the proposal, those who flouted orders to attend outpatient clinics for regular treatment would be readmitted to hospital. Such compulsory treatment orders would target so-called revolving-door patients - those who miss consultations after being discharged from hospital. The idea was disclosed by Hung Se-fong, president of the College of Psychiatrists and chief executive of Kwai Chung Hospital, days after a schizophrenia sufferer appeared in court over the chopping to death of a three-year-old boy in Sham Shui Po. Dr Hung acknowledged that the plan was controversial and would trigger heated debate about how to strike a balance between the rights of individual patients and the public interest. It is understood that the government's working group on mental health policy, set up in 2006 under the chairmanship of Secretary for Food and Health York Chow Yat-ngok, will discuss the proposal, among other measures. The working group is expected to release a mental health policy for Hong Kong this year. The boy's death raised concerns about the lack of support for mental patients in the community. Dr Hung said if community treatment orders were introduced, the government would have to provide more resources to support the policy. Lee Sing, professor of psychiatry at Chinese University, said such orders would not help patients much if the city's mental health services remained "second-class". "It is a passive and piecemeal measure. If we have the power to force the patients back to the clinic but doctors only have a few minutes to see them, it won't help the situation," Professor Lee said.

Richard Li, Isabella Leong and their son Ethan, who was born in North America on April 26. Tycoon Li Ka-shing's family's fortunes have increased with the arrival of a grandson. Actress-singer Isabella Leong Lok-sze, the partner of Mr Li's son, Richard Li Tzar-kai, gave birth on April 26. Their son, Ethan, weighed more than 3.17kg. The baby's Chinese name, Cheung-chi , which means "long reign", was given by his grandfather Li Ka-shing, Hong Kong's richest man. Despite the birth, Richard Li, the 42-year-old chairman of PCCW (SEHK: 0008), said he had no plans yet to marry the 20-year-old actress. Mr Li told the South China Morning Post (SEHK: 0583, announcements, news) that the baby was born in North America and that mother and child were still there. When asked if Leong and the baby would return to Hong Kong, Mr Li, who did not conceal his excitement over the birth of his first child, said that he wanted to keep things low profile, which was the reason Leong and Ethan remained overseas. But he said it was a planned pregnancy and he would take the child to see his grandfather. When asked if he would marry Leong, Mr Li replied: "[I have] no plans at this time." Li Ka-shing said he was delighted by the birth of Ethan, his fifth grandchild. Elder son Victor Li Tzar-kuoi has four children. When asked about how the family would celebrate the birth, Mr Li said: "We always keep things low profile. We did not have big banquets to celebrate the birth of my other grandchildren. Having a family dinner is good enough." Leong's publicist, Michelle Loo, said Leong had opted for natural childbirth and was accompanied by Richard Li during the delivery. Leong had handled the delivery and subsequent breastfeeding well, and had recovered well. Ms Loo said Leong's mother had been keeping her daughter company. "Isabella felt very blessed by the arrival of Ethan, who delights the family with his pleasant smiles," a statement from the publicist said. Despite being generally recognised as one of the most promising young actresses in Hong Kong, and having won the best actress award at the Fantasporto film festival in Portugal with her 2006 film Isabella, Leong "wants to focus on raising the child and has no plans to return to showbiz". Ms Loo said Leong had been studying English and taking lessons in dance, kung fu and horse riding to equip her for her show business career, but everything had been put on hold after she became pregnant. "But she continued to take English lessons during her pregnancy," Ms Loo said. "She has turned down a lot of local and international offers ranging from films, stage performances and commercials." Leong is from a single-parent family and grew up in Macau. She reportedly met Mr Li during the filming of The Mummy: Tomb of the Dragon Emperor, when Mr Li visited his friend, Leong's co-star Michelle Yeoh Choo Kheng, on set. Last year Leong began a legal battle with her former management company, Emperor Entertainment Group, to whom she became contracted when she was 12. Emperor intended to seek damages from Leong for breaking her contracts, while Leong argued that the contracts were unenforceable and unconscionable. The case settled out of court. This year, Forbes said Li Ka-shing, 80, was Hong Kong's richest man and Asia's third-richest man, with estimated wealth of US$16.2 billion.

Secretary for Constitutional and Mainland Affairs Stephen Lam (left) meets the vice-mayor of Taipei, Wu Ching-ji, yesterday. Two non-governmental committees will be set up as a platform for economic and cultural talks between Hong Kong and Taiwan, officials have agreed. The news was announced during Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung's groundbreaking visit to Taipei. Mr Lam met Mainland Affairs Council vice-chairman Fu Dong-cheng yesterday for a two-hour, closed-door meeting. The pair said afterwards that two panels would be formed as soon as possible to boost exchanges in trade, investment, tourism, culture and other areas. Explaining the communication channel, Mr Lam cited Taiwan's Straits Exchange Foundation and the mainland's Association for Relations Across the Taiwan Strait, which serve as the top negotiation bodies across the strait. "They have these two associations that interact and co-operate with one another. Henceforth, Hong Kong and Taiwan will also have this bilateral co-operation committee structure to facilitate the work as our relations progress." In Hong Kong, the Hong Kong-Taiwan Business Co-operation Committee will be set up under the quasi-official Trade Development Council, with representatives from the commercial sector as members. Senior officials including Mr Lam, and possibly one of a higher rank, will form a board of advisers. Its Taiwanese counterpart will be the Economic Co-operation Committee, which is to be set up under the future Taiwan-Hong Kong Economic and Cultural Co-operation Council. Mr Fu said Taiwanese officials would take part in the council's work "in an appropriate mode and capacity". "Hong Kong-Taiwan relations is not the same as cross-strait ties," he said. "In both relationships it is impossible to arrive at the destination in one step. Work must be done step by step on a good foundation." Mr Fu said Taiwan would explore more measures to build a closer relationship with the city when conditions matured. Mr Lam, the first Hong Kong minister to visit Taiwan in an official capacity, said Beijing was supportive of his trip but added that the new platform was a result of discussions between Hong Kong and Taiwan. Mr Lam said "visits can change history", and he expected more principal officials from Hong Kong to visit Taiwan. Asked whether Chief Executive Donald Tsang Yam-kuen would go to the island, Mr Fu said: "When the time and the conditions are appropriate, I do not rule out any possibility." At a separate meeting, Mr Lam invited Taipei city officials to attend an Inter-City Forum in Hong Kong next year. Vice-mayor Wu Ching-ji replied that he hoped to go. Yang Hsiao-tung, head of Taipei's Department of Information and Tourism, said fewer Hong Kong filmmakers had made movies in Taiwan in recent years and he hoped they would return. Cheng An-kuo, former chief of Chung Hwa Travel Service - Taiwan's top representative body in Hong Kong - said: "In 1997 I advocated that Taiwan-Hong Kong relations should be normalised. Mr Lam's visit today is a big step in the normalisation." Mr Lam will return today after visiting the National Palace Museum.

China: Shenzhen mayor Xu Zongheng is being investigated by the Communist Party's anti-graft watchdog for his alleged links to Wong Kwong-yu, the billionaire founder of the Gome electrical appliances (SEHK: 0493) group arrested for share-price manipulation, sources said yesterday. Mr Xu and his wife are understood to have been put under shuanggui - a form of detention imposed on party officials - on Thursday night, several sources confirmed. His fall took many people by surprise. As late as Thursday afternoon, he made a public appearance, chairing a regular government meeting. But he failed to show up yesterday afternoon for the annual Shenzhen Mayor's Award for Environmental Protection. The award ceremony has always been chaired by Shenzhen's mayor and Mr Xu's absence sparked intense speculation. Various sources confirmed that Mr Xu, who turns 54 next month, had been implicated in Wong's corruption scandal and illegal gambling activities on casino ships. Mr Xu, who has been Shenzhen's mayor since 2005, is the latest Guangdong official brought down by the Gome scandal. Earlier, former Guangdong police chief Chen Shaoji was detained and then sacked as chairman of the Guangdong Chinese People's Political Consultative Conference. His former colleague Wang Huayuan , chief of the Communist Party's disciplinary body in Zhejiang province , was also sacked. Both Mr Chen and Mr Wang were also said to have been implicated in Wong's corruption problems. Various sources in Shenzhen said yesterday that Mr Xu's fall had come amid speculation an intense power struggle was being waged between the mayor and Shenzhen party secretary Liu Yupu. "It [his detention] must have something to do with economic irregularities ... but it could also have something to do with a power struggle," a government source said. One source said Mr Xu had been subject to party criticism for Shenzhen's relatively slow economic growth over the past three years. He was also blamed for a disco fire in September that killed 43 people. Mr Liu became Mr Xu's superior after he was appointed Shenzhen party secretary in January last year, taking over from Li Hongzhong , who served as Shenzhen's mayor and then its party secretary before moving to Hubei in 2007. Mr Li is now the governor of Hubei province. Mr Xu, who was Shenzhen's executive vice-mayor before succeeding Mr Li in 2005, was the first mayor to be promoted locally. He started working in Shenzhen in 1994. All the Shenzhen mayors before him were parachuted in from other places. A Hunan native, Mr Xu holds a master's degree in law.

The central government yesterday announced policies to speed up the development of the mainland's bio-industry. The State Council released a detailed blueprint to hasten the development of biotechnologies in the pharmaceutical and agricultural sectors, as well as for energy and environmental protection, to turn the sector into one of the country's key industries. The cabinet promised to provide more funds for research and development, preferential tax measures for related companies, and encouragement for firms to seek listings. Analysts and scientists viewed the support as an important step in developing value-added mainland industries. However, they said things would not change overnight. The promotion of biotechnologies lags developed economies like the United States, Europe and Japan in areas such as finance for research and development, nurturing large-scale biotechnology firms and commercialising scientific projects, despite pledges of government support. "To speed up the development of the bio-industry is an important strategy for us to take advantage of the technology revolution in the new century and build an innovative nation," the State Council said. Apart from providing funds and tax breaks, the blueprint asked local governments to spur private investment in the industry, set up related industrial funds and help firms gain better access to bank loans. Gideon Lo Wai-yip, an analyst at DBS Vickers Securities, said in terms of proportion to gross domestic product, the bio-industry would take a long time to become a key industry but had huge potential. Biopharmaceutical sales made up about 10 per cent of total drug sales on the mainland, but they were growing faster than the industry average of 15 to 20 per cent a year, Mr Lo said. Unlike foreign drug giants, which are allowed to earn fat profits by selling expensive drugs because patients have better insurance coverage, mainland pharmaceutical firms cannot afford huge research and development costs and investors have less appetite for them because the returns are low and the risks high. China Academy of Sciences expert Zhu Zheng, a specialist in transgenetic hybrid rice, said there was a bottleneck in developing biotechnology in agriculture because of the difficulty in making it commercial. "We do have a high level of pure [bio-agriculture] technology research, but we can't effectively commercialise it," said Mr Zhu, "There are two major reasons for this: strict government regulations and the lack of large-scale and financially sound firms in the sector."

Shares of the mainland's top five electricity producers all benefited yesterday after two of them secured better than expected domestic coal supply contracts. Huadian Power International saw its share price jump 12 per cent, or 26 HK cents, to HK$2.43, the highest since last September, while Huaneng Power International (SEHK: 0902, announcements, news) , the listed arm of the country's largest power producer China Huaneng Group, climbed 5 per cent, or 27 HK cents, to HK$5.66. The two power producers sealed coal contracts with mines in Shandong and Henan at 460 yuan (HK$521.87) a tonne which, although 4 per cent higher than last year, was way below market expectations of an at least 10 per cent rise, analysts and brokers said. "It's like the first rain in a long drought," Fulbright Securities general manager Francis Lun Sheung-nim said. "Power producers have waited for a long, long time for such favourable contract terms." In a chain reaction, other power stocks also rose. China Power International (SEHK: 2380) Development, headed by former premier Li Peng's daughter, Li Xiaolin, jumped 12.65 per cent, or 30 HK cents, to its year high of HK$2.67. Datang International Power Generation (SEHK: 0991) shares gained 7.15 per cent, or 31 HK cents, to an eight-month peak of HK$4.64. China Resources Power Holdings (SEHK: 0836) shares rose 3.79 per cent, or 68 HK cents, to HK$18.60 after lowering significantly its debt owed to unlisted parent China Resources (SEHK: 0291) Holdings through a HK$5.92 billion rights share sale. Some analysts remained cautious about the possibility of other provinces following the decisions of the Shandong and Henan provincial governments to refrain from raising coal prices sharply to share the cost burden of loss-making independent power producers. Despite pressure from the National Development and Reform Commission on local governments to keep coal price increases to a minimum, contract negotiations between state-owned suppliers and independent power producers had been deadlocked since the beginning of the year. "It is good news for independent power producers," an analyst with a European brokerage said. "We believe this is a decision by individual provinces. We are watching closely if major coal miners and suppliers such as China Shenhua (SEHK: 1088, announcements, news) will offer lower price rises, which needed to be as much as 18 per cent to sustain profitability." However, any increases of this magnitude would add salt to the wounds of independent power producers, which plunged into the red last year as on-grid tariffs were raised too little and too late to offset a steep increase in coal prices. Citibank analyst Pierre Lau said Huadian's purchase represented about 20 per cent of its total consumption of the fuel this year, which provided more certainty to the power producer's potential turnaround in profitability this year from a 2.56 billion yuan net loss last year. In the first quarter, Huadian returned to a net profit of 191 million yuan after losing money in the previous three quarters. The turnaround was helped by a 16.7 per cent drop in coal costs and an 11 per cent rise in on-grid tariffs.

China Construction Bank's board chairman Guo Shuqing (2nd R), Richard Neiman (1st R), superintendent of banks of New York State Banking Department, Chinese Consul-General to New York Peng Keyu (2nd L), and Fan Yifei (1st L), vice governor of China Construction Bank (CCB) attend the opening ceremony of the New York branch of CCB in New York, the United States, June 5, 2009. The opening ceremony of the New York branch of CCB was held on Friday. China Construction Bank Corporation (CCB), the world's second largest bank by market value, opened its New York branch on Friday. The New York branch, CCB's first branch in the United States, extends CCB's global presence and marks a significant milestone in CCB's global strategy, said CCB's Chairman Guo Shuqing told Xinhua after the opening ceremony. The establishment of CCB's branch in New York, the world's largest financial center, will significantly improve CCB's ability to provide worldwide services to its customers, he added. The New York branch will engage in wholesale banking activities, including lending, acceptance of wholesale deposits, trade finance, U.S. dollar clearing and treasury, according to the CCB. As the initial operating platform in the United States, the New York branch will use CCB's extensive financial resources, robust global network and solid infrastructure to provide premium financial services to its clients, including multinational corporations and financial institutions. "The new branch will also enable CCB to better facilitate Chinese-American economic and trade investment and financial cooperation and will help CCB to make significant progress towards its vision of becoming a truly global bank," said the chairman. CCB is one of the largest commercial banks in China, ranked second in terms of market capitalization among all listed banks in the world, and is among global industry leaders in terms of profitability. Chinese Consul General to New York Peng Keyu, Deputy Mayor of New York City Robert Lieber, superintendent of Banks of the New York State Banking Department Richard Neiman, CCB Chairman Guo Shuqing, CCB Vice President Fan Yifei and some 400 local guests attended the opening ceremony.

June 6, 2009

Hong Kong: Hong Kong's previously supercharged office rents are in a tailspin, slumping almost 30 per cent in the first quarter as the global financial crisis continued to hit home. The city recorded the third-biggest decline in office occupancy costs after Singapore and New York in the first three months of the year, according to a global survey by property consultant CB Richard Ellis. With downsizing and cost-cutting measures continuing apace, occupancy costs in Central dropped 29.9 per cent year on year to HK$97.14 per square foot per month, CBRE said. Occupancy costs include not only net rent, but related costs such as management and maintenance fees and property taxes. Singapore topped the chart with an annual decline of 34.4 per cent, outpacing even the 31.5 per cent drop seen in New York - the epicentre of the global financial crisis. The three cities are now on a downward spiral from the exceptional office rental growth experienced during boom years that were underpinned by buoyant stock markets and robust initial public offerings. Central office rents soared 503 per cent to HK$120 per square foot between 2003 and the third quarter of last year, data compiled by investment bank CLSA shows. But the collapse of Lehman Brothers in September last year signalled the beginning of the end of the good times for commercial property landlords. Agents said monthly rents for office space in International Finance Centre in Central reached HK$220 per square foot last year. Last month, the highest rent recorded in the district was HK$111 per square foot in Chater House. Hong Kong's first-quarter correction was sharper than the 21.7 per cent drop recorded in the third quarter of 1998 when the economy was reeling from the Asian financial crisis. The record for the sharpest drop was the second quarter of 2003 when the Sars outbreak gripped the city. Occupancy costs in Central dropped 39.9 per cent from HK$32.80 per square foot in the second quarter of 2002 to HK$19.70, according to CBRE. Still, some analysts say the stabilising stock market and better than expected economy performance point to better times ahead for the rental market. Aaron Fischer, the head of Asia property research at CLSA, maintained his forecast for a 38 per cent drop this year but narrowed the projection for next year from a 25 per cent decline to 10 per cent. He previously expected Central office rents to fall 60 per cent between the peak of 2008 and 2010. "The better than expected economic growth outlook in China should have some positive impact on Hong Kong and therefore the office market," said Mr Fischer. Despite the sharp correction, Hong Kong's Central business district still boasts the fourth-most expensive office space in the world in terms of occupancy costs. Comparable rankings for last year were not available because of changes in methodology, CBRE said. The inner central areas of Tokyo were the most expensive with annual occupancy costs of US$183.62 per square foot, followed by the West End of London and Moscow, with occupancy costs at US$172.62 and US$170.24 per square foot, respectively. Singapore and New York ranked as the 15th and 21st most expensive cities.

Hong Kong Exchanges and Clearing (SEHK: 0388, announcements, news) chief executive-designate Charles Li Xiaojia yesterday vowed to enhance the city's reputation as an international financial centre by attracting more overseas companies to list here. The investment banker, currently the chairman of JP Morgan China who will become the first mainlander to run the exchange, said: "Listing of overseas issuers is an area that I would like to further strengthen." Mr Li will leave the US bank next month and join the exchange from October, working with chief executive Paul Chow Man-yiu for three months before taking over the reins. Much has been made of picking him because of his mainland connections as Hong Kong faces up to Shanghai being groomed by the central government as the country's main international financial hub. Mr Li said he was looking forward to the challenge. "Competition has always been the driver of Hong Kong. We should not be scared of it. Competition is not a zero-sum game. It is about getting a bigger share from a growing piece of the cake." On being the first mainlander to head the exchange, he said: "I see myself as a Hong Kong citizen. I have been living in Hong Kong for 10 years and hold an HKSAR passport. Hong Kong has always been an open society that allows anyone to compete, to achieve and to be rewarded on their own merits. "That is why such a tiny city has been able to attract talent from around the world, be they mainlanders, Taiwanese or Europeans." Mr Li added that he took on the job because it was "very challenging and attractive" and offered a dual role of being involved in a listed company and a regulator. Exchange chairman Ronald Arculli, who headed the six-member selection committee that unanimously chose Mr Li, said his 20-year investment banking experience and connections would help attract not only mainland companies but also more overseas firms to list in the city. "Hong Kong is not just facing competition pressure from Shanghai, it is also facing competition from other financial centres such as London and New York," said Mr Arculli, who is now in St Petersburg to promote the Hong Kong market. He addressed brokers' concerns about Mr Li's lack of regulatory experience by saying: "Although Mr Li has not worked on any regulatory bodies, he helps clients to deal with many regulatory issues as a lawyer and an investment banker. Paul Chow is a good leader and will help Mr Li to a smooth transition." Secretary for Financial Services and the Treasury Chan Ka-keung said: "I hope Mr Li will lead the HKEx executive management team to foster Hong Kong's position as an international financial centre. "I would like to thank Paul Chow for his outstanding contributions over the past six years." Securities and Futures Commission chief executive Martin Wheatley said Mr Li's mainland connections would strengthen the ties of the local market with the mainland.

An anti-money-laundering bill that would give financial sector regulators more clout is expected to be tabled by next June.

Veteran actor Sek Kin, known for his portrayal of villains in Chinese cinema, died yesterday. He was 96. Born on January 1, 1913, Sek acquired his acting skills by performing in stage plays in the late 1930s and 1940s. He began his film acting career after the second world war. Sek, who practised martial arts as a remedy for his poor health, became known for always playing villains in films in the wuxia genre. One of his most memorable roles was the villainous enemy of Chinese folk hero Wong Fei-hung in the long-running film series of the same name that began in the 1940s. Through these films, Sek earned himself the nickname "Villain Kin". Sek was also memorable for his role as a villain in Buddha's Palm in 1964 and for fighting Bruce Lee in Enter the Dragon in 1973, which earned him a fan base in America. Sek's achievements were widely recognised. In 2003 he was presented with a professional achievement award at the Hong Kong Film Awards. He said then: "I'm so glad that people still remember me." Film historian Law Kar said that although Sek made his name playing villains, he hoped that people would not overlook Sek's versatile acting skills, which were fully showcased during his years in television. Sek began shooting television series with TVB (SEHK: 0511) in 1975 and became a TVB contract actor in 1976. He played a hotel boss in the popular series Hotel, his first performance after signing the contract. During his time with TVB, he made a number of popular programmes and left the station in March 1992. "Apart from playing those action roles, he also portrayed a wide range of characters - from a military general to a kind father. His TV time was the best showcase of his acting talent," Law said. The government offered its condolences. Secretary for Home Affairs Tsang Tak-sing praised Sek for the contributions he had made to the film and television industry. Greg So Kam-leung, the acting secretary for commerce and economic development, also expressed his sadness, saying that Hong Kong had lost an outstanding talent in the performing arts.

The baddie who battled the legendary Wong Fei Hung in countless movies and later took on Bruce Lee has died of kidney failure. Shek Kin, whose real name was Shek Wing- cheung, died at Queen Elizabeth Hospital at about 4pm on Wednesday. He was 96. The Hong Kong-born actor became famous as Wong Fei Hung's nemesis "Bad Guy Kin" in a series of movies from the 1940s to the 1980s. Born in 1913, Shek began practicing martial arts in childhood. During the Japanese occupation of Hong Kong he joined a drama club and turned to show business. In his first movie made just after the war, Flower in a Sea of Blood, he played the role of a Japanese spy - which propelled him into bad guy roles. However, his fame started to grow in 1949 when he played "Bad Guy Kin" to actor Kwan Tak-hing's Wong Fei Hung. The two were to star in more than 70 films. Kwan, who was later awarded the MBE for his role in the movie industry, died in 1996, at the age of 90. After the Wong Fei Hung series ended, Shek continued his bad-guy action in a string of movies. He later claimed he was recognized on the streets of Los Angeles after playing an arch villain in Bruce Lee's Enter the Dragon (1973). In all, Shek appeared in more than 300 films in a career spanning almost half a century. With the decline in the Hong Kong movie industry following Lee's death in 1973, Shek switched to television in 1975. He joined TVB where he played various roles including that of a tycoon, a grandfather and even a kung fu hero. One of his more classical roles was that of blind martial arts master Golden Hair Lion King in the 1978 TV series The Tale of Heaven-Reliant and Dragon-Slayer, which was based on an ancient kung fu novel. In the late 1980s he was invited to star in a TV commercial for a natural herbal relief for coughs and sore throats. Shek retired in 1993. He was presented with the Professional Achievement Award at a Hong Kong Film Awards ceremony 10 years later. Between December 2006 and February 2007, the Hong Kong Film Archive showcased Shek's films and TV series in its special retrospective titled More than a Villain: Shek Kin. Acting Secretary for Commerce and Economic Development Gregory So Kam-leung expressed deep regret at the actor's death. "With his death, Hong Kong has lost an outstanding performing arts talent," said So, while expressing his bureau's deepest condolences to Shek's family.

Construction of the controversial new MTR West Island Line has been given the green light despite accusations by lawmakers that a "feeble" government gave in to bullying tactics by the rail operator. A Legislative Council subcommittee discussed the funding for the project which has ballooned to HK$15.4 from the original estimate of HK$8.9 billion. MTR Corp chairman Raymond Ch'ien Kuo-fung told a shareholders' meeting yesterday that the 73 percent surge in costs was due to heritage conservation such as retaining the tree walls and soaring construction costs in the past three years. To meet the additional costs, the government will inject HK$12.7 billion and MTR Corp HK$2.7 billion. The administration earmarked HK$6 billion in 2007 and MTR Corp, HK$2.9 billion. Lawmakers slammed the government over the extra HK$6.7 billion yesterday. The Democratic Party's Andrew Cheng Kar-foo said the government was feeble in the face of a bullying MTR. But Secretary for Transport and Housing Eva Cheng Yu-wah hit back. "The West Island Line is not an ordinary investment. The administration would like to see the works commence as soon as possible without further dispute," she said. According to calculations, the line may not be profitable in the coming 50 years and therefore the injection was justified, she added. A motion on the construction of the line was supported by most of the subcommittee members, but they demanded the government keep the financial arrangement under review. Construction is scheduled to start in the middle of this year, creating 5,500 new jobs. The line is expected to open in 2014.

In an unprecedented move, mainland e-commerce company (1688) said yesterday it will waive the lock-up restrictions on its cornerstone investors, allowing the immediate sale of HK$2.2 billion worth of stock.

Hutchison Whampoa (0013), the ports-to- telecoms conglomerate controlled by Li Ka- shing, said yesterday its US$1.5 billion (HK$11.7 billion) debt-buyback plan got US$337.77 billion in tenders by the deadline.

Cathay Pacific Airways (0293) said its cargo business is stabilizing but a recovery depends on demand from US and European markets. The carrier has no plan for a rights issue, said chief executive Tony Tyler.

China: Mining giant Rio Tinto on Friday cancelled its controversial tie-up with mainland’s Chinalco in favour of a joint venture with fierce rival BHP Billiton and a US$15.2 billion rights issue. Shares in the Anglo-Australian firm soared nearly 12 per cent after the announcement, which spared Australian Prime Minister Kevin Rudd from making a politically risky decision on whether to approve the Chinalco deal. Rio chairman Jan du Plessis said commodities prices had recovered since Chinalco made its bid to invest US$19.5 billion in Rio, making that deal less attractive. “Since we announced the Chinalco transaction in early February, financial markets have seen a significant improvement,” he said in a statement. “This has had two consequences – firstly, the financial terms of the Chinalco transaction become markedly less valuable, and secondly our ability to raise a level of equity appropriate for our needs on attractive terms has improved very considerably.” The government had been due to rule on the deal this month, but Treasurer Wayne Swan denied the protracted approval process for the deal that sparked heavy opposition in Australia had put the Chinalco bid at risk. “I completely reject that,” Mr Swan told reporters, adding it was purely “a commercial matter between the partners”. “Australia welcomes foreign investment. It is very important for this country and we welcome proposals from foreign countries provided they are in the national interest,” he said. Rio has been searching for extra funds after its purchase last year of Canadian aluminium group Alcan, which saddled the company with some US$38 billion of debt. But Chinalco’s emergence as a suitor sparked a political firestorm here over ownership of Australian assets, leaving the government with a difficult choice – to risk angering either its electorate or China, a key market. “We are very disappointed at this outcome,” Chinalco president Xiong Weiping said in a statement on the company’s website. Rio said it would pay Chinalco a break fee of US$195 million to pull out of the deal, which had been set to be a record investment by a state-owned mainland firm. The dual-listed Rio will now issue 21-for-40 deals in London and Sydney at 1,400 pence and A$28.29 (HK$175.84) respectively, its statement said. The company also unveiled an iron ore joint venture with rival BHP Billiton, the world’s biggest miner, under which the two companies will share equally their vast assets in Western Australia. BHP, which abandoned a hostile takeover bid for Rio in November, will hand over US$5.8 billion to Rio as part of the deal, which is expected to yield US$10 billion in savings. “The synergies in this combination are so substantial that both companies have been investigating ways to combine these operations for more than a decade,” said BHP head Marius Kloppers. Rio chief executive Tom Albanese said the deal, which requires shareholder approval, was a “natural fit”. Rio shares surged 11.9 per cent to A$74.86 soon after the announcement, while BHP Billiton was up nine per cent to 38.27.

Wind power capacity in China is expected to reach 30 million kW by the end of 2010 based on the current growth rate,said Shi Lishan, vice director for the Department of New and Renewable Energy Resources of the National Energy Administration. Shi disclosed that wind power capacity in China has been doubling in recent years. By the end of 2008, wind power capacity had reached 12.17 million kW, far beyond the goal of 5 million kW expected in the "11th Five-year Plan". This capacity now ranks 4th in the world. According to the "Long-run Plan for the Development of Renewable Energy Resources" published in Sep, 2007, wind power capacity will reach 5 million kW by 2010 and 30 million kW by 2020. By the end of 2002, wind power capacity in China was only 450 thousand kW. With technology development and the support of government policy, construction of wind power facilities has been developing rapidly with the annual growth rate of wind power capacity at over 70%. In 2008, increase of wind power capacity was 6.14 million kW and wind power generating units were 14.8 billion hours. This could satisfy the needs of residential electricity consumption of 10 million households a year if every household consumes 1500 Kilowatt-hours of electricity every year. Wind power capacity has been growing rapidly on an upward trend, with annual growth rates approaching 30%. According to rudimentary statistics provided by Global Wind Energy Council, new increase of wind power capacity in the world was around 27.06 million kW in 2008. By the end of 2008, world wind power capacity had exceeded 120 million kW. At present, the US, Germany and Spain rank the top 3 for wind power capacity. China jumps from the 5th in 2007 to the 4th, taking up 10% of the market. It is said that promoting the rapid development of the wind power industry is an important item in the development plan of new energy resources that the National Energy Administration is now enacting. In addition to promoting the development of land-based wind power, China will also promote the development of sea-based wind power. For example, Jiangsu province will build large-scale wind power plant on its coastal areas and gradually form the wind-power station on a scale capable of producing millions of kilowatt-hours.

Guangdong communication authorities have turned down a provincial CPPCC delegate's request to bind the identities of mobile phone users with their numbers, arguing it is impractical, the Guangzhou Daily reports. "As the regulation to bind the identity of a citizen with a phone number would affect every user in the whole mobile phone network, no province, region or city has the ability to enforce it," the Guangdong Communication Administration wrote. Tong Chun-yip, a delegate to the Guangdong People's Political Consultative Conference and a former Hong Kong actor, submitted a proposal in March urging authorities to verify customers' identities when they purchased mobile phone SIM cards, because he was deeply troubled by insulting calls and messages from unrecognised numbers. "I have not been cheated yet, but there are many friends who suffered dearly because of mobile phone fraud," Mr Tong said. "Binding a phone number with a real name can effectively reduce such crimes." Despite the rejection, the administration said the Ministry of Industry and Information Technology was co-operating with the Ministry of Public Security to enact a regulation to tackle the issue, and it was waiting for approval from the State Council. "Once the central government releases the regulation, our administration will work actively with other government agencies on implementation," it said. But some industry sources said the regulation had been submitted to the State Council as early as 2006, but Beijing had not shown any interest. Mobile-phone-related crimes are becoming serious as the total number of mainland users reached 540 million last year, many of whom were retirees or farmers in isolated villages who stumbled into the information age only recently. One of the most popular frauds was called "one beeper". A stranger calls a phone and hangs up before it is answered. If the call is returned, it is forwarded to expensive lines that sometimes charge more than 50 yuan (HK$57) per minute. While many believe an identity verification check could prevent fraud, some argue that the cost would be greater than the benefit. The biggest opponents are operators. China Mobile (SEHK: 0941, announcements, news) , the world's biggest mobile service provider, earned more than 70 per cent of its income from Easy Own, a prepaid card that consumers can buy at stores and newspaper stands in most cities. Those users, accounting for more than 75 per cent of China Mobile's total consumer base, were anonymous. "The Easy Own brand will be ruined if identity verification is required. It will be a marketing catastrophe," a China Mobile employee said. "It would also be an operational nightmare to collect the personal information of so many existing users, and the cost would be huge. The regulation would provoke a social upheaval far more serious than phone crimes do."

China would take the 35th anniversary of Sino-Malaysia ties to promote cooperation, said Chinese President Hu Jintao during a meeting with visiting Malaysian Prime Minister Najib Tun Razak in Beijing Thursday.

The Industrial and Commercial Bank of China (ICBC), the world's largest lender by market value, Thursday announced it would buy a 70-percent stake in a Canadian subsidiary of the Bank of East Asia (BEA) for 80.25 million Canadian dollars (73 million U.S. dollars). In return, BEA would buy out ICBC's 75-percent stake in ICEA Finance Holdings Ltd. for 372 million Hong Kong dollars (48 million U.S. dollars), ICBC said in a notice on its website. ICEA, a joint venture of ICBC and BEA, would become a wholly-owned subsidiary of BEA after the transaction. ICEA's main businesses included provision of securities brokerage, underwriting and futures contracts dealing. By the end of 2008, its net assets totaled 451 million Hong Kong dollars. "The two transactions will create a mutually-beneficial situation for both parties," said ICBC chairman Jiang Jianqing. "The acquisition of a 70-percent interest in BEA Canada will enable ICBC to establish its banking business and customer base in Canada, which will provide a strong platform to further expand our businesses and network across North America." "We are confident that the two transactions will further strengthen our financial services and enhance the diversity of our offering in Hong Kong," said David K.P. Li, chairman and chief executive of BEA. However, the transactions still needed regulatory approvals from the Chinese mainland, Hong Kong and Canada.

The undated file photo shows the exterior of the Large Sky Area Multi-Object Fiber Spectroscopy Telescope (LAMOST) in Xinglong, Hebei Province, north China. The LAMOST of the Xinlong Station of National Astronomical Observatories under Chinese Academy of Sciences passed the national examination on June 4. The telescope with a reflecting Schmidt corrector MA and a spherical primary mirror MB is the largest of its kinds in the world. The size of MB is 6.67m x 6.05m, while that of MA is 5.72m x 4.40m, and the effective aperture in diameter is 3.6m-4.9m. The LAMOST will be able to observe 4,000 astronomical spectrum during a period of 1.5 hours in a single night.

Students participate in a catwalk show to display dresses made from recycled materials at a primary school in Chuzhou, Anhui province, Thursday, one day before World Environment Day. Chinese and US envoys will meet in Beijing on Monday to talk about ways the countries can advance the fight against climate change. The talks will take place at the same time as UN negotiations on the same subject in Bonn, Germany. Li Liyan, a deputy division director of the Climate Change Department under the National Development and Reform Commission, told China Daily that US climate envoy Todd Stern will meet his Chinese counterpart, Xie Zhenhua. Li refused to go into details about the agenda. China, US to continue green talks Stern will be joined by White House science adviser John Holdren and assistant energy secretary David Sandalow. While both China and the US have played down the bilateral talks, a reliable source told China Daily the US delegation will be in China for four days. "He (Stern) will arrive on Sunday, start official talks on Monday and leave on Wednesday afternoon," he said, adding that the envoys may meet representatives of non-governmental organizations, industry leaders and academics. China and the US, the world's biggest emitters of greenhouse gases, will play an important role in producing a climate change deal in December to replace the Kyoto Protocol. "The importance of the bilateral talks is as clear as crystal," the source said. "It is held while 181 UN members are negotiating in Bonn at the same time," the source said.

Rumors about the impending merger of two Shanghai-based carriers, China Eastern and Shanghai Airlines have been doing the rounds despite denials by managements of both the companies. This time the rumors have been attributed to a journalist who claims to have overheard China Eastern Chairman Liu Shaoyong confirming the news at a recent dinner party. The incessant merger news has also had an impact on the share prices of the two carriers. Shares of the smaller Shanghai Airlines rose 0.35 percent to 5.67 yuan in the past three days, while those of the ailing ST China Eastern fell 1.86 percent to 5.27 yuan in the same period. Analysts said despite the slight fall in China Eastern shares, both companies have gained from the rumors. "The share prices of the two airliners showed that the market is expecting something big to happen. Otherwise, the two debt-stricken carriers cannot carry such a high price, or we can say they are over-valued," said Yao Jun, industry analyst, China Merchants Securities. "It is true a merger between the two will be an opportunity for the carriers to get out of the current problems," Yao said. The idea of merging the two airlines was first broached in 2002 by the Shanghai municipal government, as it was keen on building a superpower local carrier. Although the proposal has been dogged by political and inter-regional complicities, the stock market has never given up its imagination of a super airline based in China's busiest air traffic hub. The latest merger rumors have been denied by both companies. Luo Zhuping, board secretary with China Eastern, said he has not heard of any new development on the merger front, while Xu Junmin, board secretary of Shanghai Airlines denied any knowledge of an impending merger. "Our airline has been operating normally as usual," he said. Plagued by fluctuations in fuel prices and falling demand due to the financial crisis, the two carriers have required massive government bailouts. Falling demand along with hefty losses on hedging contracts saw China Eastern report a net loss of 13.93 billion yuan in 2008, a free fall from previous year's 604 million. Its debt-to-equity ratio hit 115.13 percent by the end of March. Shanghai Airlines is in no better situation, with its net loss widening to 1.25 billion yuan in 2008 from 2007's 435.12 million yuan. The carrier's debt-to-equity ratio touched 97.26 percent in March. Analysts said that there are a number of ways that the two carriers could be restructured. China Eastern could acquire Shanghai Airlines or else downsize itself to a local enterprise controlled by the State-owned Assets Supervision and Administration Commission of the Shanghai government. There is a third proposal to merge selective assets of China Eastern and Shanghai Airlines. The forthcoming World Expo 2010 will provide a golden opportunity for Shanghai-based carriers. If they can produce a win-win merger this time, they can benefit from the surging demand triggered by the expo, analysts said. Li Lei, aviation analyst, CITIC China Securities, said: "China Eastern currently has a 33 percent share of the Shanghai market, while Shanghai Airlines holds around 20 percent. A merger would guarantee the dominant position in Shanghai for the resultant entity."

China expects its shipyards to have 50 million deadweight tons (DWT) in annual capacity by 2011 and account for at least 35 percent of the global total by then, a detailed industry stimulus plan issued by the Ministry of Industry and Information Technology (MIIT) yesterday outlined. The government is keen that hi-tech and high value-added ships would account for at least 20 percent of the total number of ships it produces. Domestically made parts, such as middle-speed diesel engines, should account for at least 60 percent of the total parts in these ships, the government plan noted. It also wants to turn the Bohai Bay Rim into a world-class shipbuilding base, according to the plan. The three-year plan revealed that the government would encourage qualified shipyards to float shares and issue corporate bonds to raise funds. It will also accelerate the pace of establishing a shipbuilding industry investment fund, the plan said, without elaborating on a time frame and the size of the proposed fund. The government will extend credit support to shipyards that were hit hard by plunging orders and will offer loans to foreign companies buying China-built ships and vessels, the plan said. The specific plan, whose draft has already been approved and issued by the cabinet, comes at a time when the shipbuilding industry globally is being heavily battered by plummeting new orders as a result of the global financial crisis. China's shipbuilding industry, the world's second biggest behind South Korea, has also been hit hard since the second half of last year, although it fared relatively better than its overseas peers. New orders placed with the country's shipyards fell 95 percent during the first four months of this year to 990,000 DWT, MIIT said last month. New orders reached 200,000 DWT in April, bringing to 195 million DWT the total order books at the end of April, 7 percent higher than a year earlier, the industry regulator said. Currently, Chinese shipyards have a combined production capacity of 28.81 million DWT, accounting for 29.5 percent of the world's total, MIIT figures showed. The latest move, analysts said, was likely to boost some of the country's large shipyards, such as China CSSC and Guangzhou Shipyard, as the plan calls for mergers and acquisitions in the fragmented industry. "The plan is going to beef up Chinese shipyards' competitive edge in the long run," Industry Securities said. The plan, analysts and industry watchers said, was unlikely to lessen shipyards' pain immediately and an overcapacity problem was likely to emerge. "As the orders at shipyards have been falling in the past seven months consecutively, shipyards' capacity is going to run idle in the coming years and the problem of overcapacity is likely to surface next year," the China Association of the National Shipbuilding Industry, an industry body, said.

June 5, 2009

Hong Kong: Property developer Shui On Land (SEHK: 0272) on Thursday said its contracted sales for the first five months of this year totalled over 1 billion yuan (HK$1.13 billion), slightly up from the same period a year earlier. “Sales were higher [so far this year] because very few projects were launched in the same period last year, not until June,” managing director Aloysius Lee said. But sales for the first half would be lower than last year because of the number of projects launched in June last year, Mr Lee said without giving figures for comparison. The company said sales picked up in the first quarter compared with the fourth quarter of last year because of the improved market environment following Beijing’s economic stimulus measures and as mainland buying power had improved. Looking ahead, Shui On Land said it would launch more projects in the second half, but did not expect a sharp rise in offer prices. “Prices will not go too high as developers are not aggressively raising prices. They will increase prices in accordance with market conditions and the locations of projects,” said chairman Vincent Lo. Asked if the pick up in activity in the mainland property market could create a bubble, Mr Lo said: “I don’t believe there is a bubble as many potential buyers are cash-rich and don’t even need financing to buy property.” He said the Shanghai-focused developer, which has a relatively low gearing of about 25 per cent compared with other developers, had no plans to increase its land reserve, but would buy sites adjacent to its developments if opportunities arose. Shares of Shui On Land fell 1.93 per cent to end at HK$5.60 on Thursday, against a 0.4 per cent fall in broader Hang Seng Index. The stock had advanced more than 156 per cent this year through Wednesday.

Tens of thousands of people attend a candlelight vigil at Victoria Park Thursday evening to mark the 20th anniversary of the military crackdown on the pro-democracy movement in Beijing. In the only commemoration of the military crackdown on Chinese soil, Victoria Park was thronged with people young and old. Organisers said 150,000 people attended, while police put the figure at 62,800. The vigil has become a touchstone both for the movement for democracy in China and for the campaign to overturn Beijing’s official verdict condemning the 1989 demonstrations. Organisers said before the event they were hoping 100,000 people would attend, more than double last year’s turnout. But crowds were still pouring into the park 40 minutes after the first candle was lit. “This rally will tell the world... that we still remember the Tiananmen Square democracy movement,” Xiong Yan, one of the student leaders of the protests who was surprisingly let into Hong Kong on Saturday, said. The Tiananmen crackdown − which left hundreds, possibly thousands dead − remains a taboo subject in China and authorities have moved aggressively to make sure the anniversary is not marked publicly anywhere on the mainland. But Hong Kong, which has a separate legal system from most of China as part of the agreement that returned the city to Chinese rule in 1997, remains a centre for dissident activity because of its enshrined right to free speech. The huge crowd was shown images from the six weeks of protests in Tiananmen Square, as well as footage of those injured in the military crackdown. A recording of former Chinese Premier Zhao Ziyang was played over the loudspeakers, as a sea of flickering candles lit up the park. The main stage was festooned with a huge banner written in Chinese that said: “June 4th, 20 years − passing the fire to the next generation.” Martin Lee, a veteran Hong Kong democrat, said he was moved by the huge turnout. “I don’t have many wishes, the only wish I have is to be a proud Chinese. But because of tonight I think there is hope in China,” he said while sitting at the front of the huge crowd. Hong Kong, which in 1989 was still under British control, provided crucial support to the Tiananmen protesters. Major fundraising activities in the city helped provide food and tents for those in Tiananmen Square. An underground organisation then helped smuggle many of the protest leaders out of China after the crackdown. Han Dongfang, a leading protester in 1989 who now fights for workers’ rights in China, said the sharp increase in the number of protests in the mainland over the past 10 years showed the spirit of Tiananmen had lasted. “Today, countless Chinese people see protest as a means of realising their modest dreams of affluence, or reclaiming their usurped economic rights from corrupt officials, crooked businessmen and unscrupulous employers,” said Mr Han, who is based in Hong Kong. “Though it has little to do with democratic theory or sloganeering, this process has become unstoppable. Is this not a continuation of the campaign we launched 20 years ago?” Beijing has never apologised for the way it ended the more than six weeks of democracy protests in Tiananmen Square, the centre of political power in China. The government on Thursday rejected calls for a review of the crackdown, saying the matter had already been settled. “When you look at how China wants to eliminate even the memory of June the 4th, just by remembering, this event has a moral power to push for changes,” another event organiser and legislator, Lee Cheuk-yan, said. Bao Pu, son of leading Chinese dissident Bao Tong and editor of a recently released memoir by Zhao Ziyang, the Chinese premier purged during the protests, said the dissident campaign would endure. “We will never fail, because we will never give up,” said Mr Bao.

China: Beijing on Thursday voiced "strong dissatisfaction" over US Secretary of State Hillary Clinton’s call for Beijing to publish the names of those killed or missing in the Tiananmen crackdown in 1989. “The US remarks, which disregard the facts, make groundless accusations against the Chinese government,” foreign ministry spokesman Qin Gang told reporters at a regular briefing. “We express strong dissatisfaction to that. We urge the US to put aside its political prejudices and correct its mistakes so as to refrain from undermining bilateral relations.” Mrs Clinton on Wednesday urged China to publish the names of those killed 20 years ago or who went missing, and called for the release of prisoners still detained for taking part in the peaceful pro-democracy protests. Hundreds, perhaps thousands, lost their lives when China’s army opened fire on unarmed protesters in Beijing the night of June 3-4, 1989, but the government has never given a full, detailed account of the casualties. “A China that has made enormous progress economically and is emerging to take its rightful place in global leadership should examine openly the darker events of its past and provide a public accounting of those killed, detained or missing, both to learn and to heal,” Mrs Clinton said in a statement. Qin further called those comments “a gross interference in Chinese internal affairs.” Mrs Clinton also urged Beijing to end harassment of the Tiananmen Mothers, a group of bereaved relatives campaigning to know more about the incident and for authorities to bring those responsible to justice. The US Congress made a similar appeal in a nearly unanimous resolution approved the day before. China has imposed a security clampdown to stop any event marking Thursday’s anniversary in the face of renewed calls to account for the bloodshed, with tens of thousands of people expected to rally in cities around the world. Security was extremely tight on Tiananmen Square as police officers searched bags and even the pockets of thousands of Chinese and foreign tourists streaming through checkpoints to visit the giant plaza.

An employee walks in the office of Tengzhong Heavy Industrial Machinery in Xinjin, Sichuan province. General Motors official on Thursday said GM does not expect US regulatory scrutiny to hold up its tentative agreement to sell Hummer to a mainland machinery maker. General Motors does not expect US regulatory scrutiny to hold up its tentative agreement to sell Hummer to a mainland machinery maker, GM chief financial officer Ray Young said on Wednesday. GM also expects the reorganised company that will be created from its fast-track bankruptcy process to emerge with more than US$10 billion in liquidity, a projection that the US Treasury has endorsed, Mr Young said in an interview. “When the new General Motors emerges we expect to have very healthy cash balances, well in excess of our minimum requirement of US$10 billion,” Mr Young said. Under its reorganisation plan, the US government will have a 60.8-per cent stake in the new GM. The government will provide US$50 billion in total financing to GM and US$33 billion in bankruptcy financing. Mr Young said the GM cash projection for the leaner company expected to be sold out of bankruptcy by August took into account the need for the automaker to close plants and pay early retirement incentives to a share of its 54,000 remaining hourly workers. “We’ve worked through these numbers with the US Treasury,” Mr Young said. “They’re very comfortable with our numbers. And we expect that this liquidity will be sufficient to get us through this downturn.” In its first announcement of an asset sale since entering bankruptcy, GM said on Tuesday that it had reached a deal to sell the Hummer brand of gas-guzzling SUVs to Sichuan Tengzhong Heavy Industrial Machinery, a little-known heavy machinery maker with no experience in the auto industry. “We don’t expect any problems in terms of the sale process,” Mr Young said. “In fact, we’re feverishly working to finalise agreements.” He added: “We’re very excited that this will allow the Hummer brand to continue both in the United States and globally. Also, we are hopeful that this will preserve over 3,000 jobs here in the United States.” The deal to sell Hummer after a year-long auction process is expected to generate less than US$500 million for GM, but it has attracted widespread attention because it marks the first time that a Chinese buyer has connected with one of the cash-strapped US automakers. Some cross-border deals involving Chinese buyers have run into difficulty. In 2005, US regulators vetoed the sale of Unocal to mainland’s offshore oil specialist CNOOC (SEHK: 0883). GM is also trying to sell its Saturn distribution network. Mr Young said GM believed it had a set of “serious investors” interested in Saturn and was working to narrow the list of potential partners. GM said this week that 16 investors had expressed an interest in Saturn, a brand that GM launched in 1990 in a failed bid to take on Japanese automakers in the passenger car market. In a break from established practices in the auto industry, some Saturn dealers have lobbied for opening the network to overseas automakers who could supply low-cost and fuel-efficient or electric-drive vehicles. Penske Automotive Group, the No. 2 US dealership group, has said it is interested in acquiring Saturn. An investor group that includes private equity firm Black Oak Partners and some Saturn dealers said it approached GM about buying the assets of the brand. In one of the more controversial aspects of its planned restructuring, GM plans to cut the number of its US dealerships from near 5,200 to near 3,600 by the end of next year. US auto dealers, who are independent businesses operating under franchise with GM, have objected to that plan and faster-moving cuts at bankrupt Chrysler, saying it will hurt sales at both automakers. Mr Young said that GM’s target of 3,600 US dealers would still be three times the number of Toyota dealerships and could end up being higher once final decisions are made. “There may be some wiggle room there,” Mr Young said. “It’s more art than science.”

The president of Taiwan told Beijing on Thursday to face up to the truth about the Tiananmen Square crackdown 20 years ago, a departure from his usual conciliatory tone.

China's largest private carmaker, Chery Automobile, said on Thursday it sold shares worth 2.9 billion yuan to several domestic investors to fund new vehicle projects.

June 1 - 4, 2009

Hong Kong: Charles Li Xiaojia, Hong Kong Exchanges and Clearing (SEHK: 0388) 's new chief executive and its first from the mainland, will work with incumbent Paul Chow Man-yiu for three months before taking the reins on January 16. The investment banker's appointment last month by the stock exchange was approved by the Securities and Futures Commission yesterday. An HKEx source said last night that the bourse was counting on Mr Li's cross-border connections to help it fend off competition from Shanghai. Mr Li, 48, who had stints as an oil worker and a journalist before becoming a lawyer and then a banker, is chairman of JP Morgan's China division. He will join HKEx on October 16 as chief executive-designate on a three-year contract. The exchange did not disclose his salary. Mr Chow was the highest paid regulator in the city last year, earning HK$12 million. Mr Li, born in Beijing and raised in the northwestern province of Gansu, is no stranger to Hong Kong, having worked in banking in the city for 15 years, sealing deals for state-owned firms. Hong Kong Stockbrokers Association chairman Kenny Lee Yiu-sun said last night: "Mr Li has strong mainland connections, but many brokers worry that he does not have a regulatory background." To address their concerns, HKEx has arranged for three senior managers to remain in their positions to help Mr Li, who speaks Putonghua and English but not Cantonese. Mr Li was an offshore oil driller in the 1970s before gaining a degree in English literature from Xiamen University . He became a reporter and editor for the China Daily in the mid-1980s, and gained a journalism degree from the University of Alabama and a law degree from Columbia University in New York. He worked for two New York law firms, then spent eight years as US bank Merrill Lynch's China managing director and president before joining JP Morgan in 2003.

Disgraced celebrity Edison Chen Koon-hei told his first serious girlfriend about the collection of salacious pictures taken of himself engaging in sex acts with various female starlets about six months before the scandal broke last year. Speaking publicly for the first time about the controversy with Anjali Rao on CNN's Talk Asia programme, Chen admitted that he "went a little too overboard" in taking the photos more than four years ago. But he said he deleted all the pictures. "When you're a teenager, and when you're young and when you're a celebrity, and you have this and that, I think maybe you go overboard a little bit. And I think that maybe, you know, I just went a little too overboard, a little too wild I guess. "I had actually told her that some of these things had happened before. She was quite upset and she actually told me to delete them." Chen did not identify the girlfriend in the interview, but she is understood to be Vincy Yeung Wing-ching, niece of entertainment tycoon Albert Yeung Sau-shing. Some of the photos were leaked on the internet after Chen's laptop had to be serviced. He was asleep when someone called him about the photos. "I was shocked. I was in disbelief. I don't even know how to put that feeling in words. It was like everything just got sucked out of me." Chen said he had forgiven the computer technician, who was jailed for 8-1/2 months for copying the sex photos. "I don't exactly know if the person who stole the photos, and [who] distributed and put them on the internet are the same person, but I definitely think that these people had something malicious towards me. It was a malicious act. It was purposefully done to hurt," Chen said. He has gradually emerged from hiding since the scandal and helped promote The Sniper, his first movie since the scandal broke, in Singapore. He had received death threats. "I've tried to move on with my life and I think that, you know, it's kind of like forgive and not forget, but it's like I want to forget too. 'Cause I've had to forgive myself ... I had to go home and look at myself in the mirror and see what kind of man I am. And, you know, I came to learn to come to terms with myself. I feel more comfortable as the Edison now than I was the Edison before, and I don't know how that makes people feel."

A designer who helped develop the Hong Kong and Paris Disneylands will head the authority in charge of building the city's arts hub, officials have announced. The decision by the West Kowloon Cultural District Authority board drew criticism that it failed to meet expectations for a leader with arts experience. The announcement yesterday confirmed a South China Morning Post (SEHK: 0583, announcements, news) report that Angus Cheng Siu-chuen, who set up "Imagineering" operations for Hong Kong Disneyland in 2001, would be appointed as an executive director. Mr Cheng, who is to head the project delivery department, will draw up the development blueprint and oversee public consultation. He will also develop strategies to attract creative industries, and a business strategy to ensure dining and retail facilities will meet users' needs. The authority said five other executive directors would be hired this year. All of them are to work under the chief executive officer. "Mr Cheng will take charge of the authority's operations until the CEO arrives," the authority's spokeswoman said. Mr Cheng declined to comment before he takes office on Monday. He was picked from 67 candidates from the arts, engineering and architecture sectors for the post, which pays HK$1.5 million a year. Mr Cheng graduated with a business administration degree and earned a master's in urban design in the US. He worked for eight years with construction company Dragages, which handled infrastructure projects in Hong Kong, and then for Sino Land and the MTR Corporation (SEHK: 0066). He joined Disneyland to lead its master planning, development, design and engineering. Civic Party lawmaker Alan Leong Kah-kit said the appointment confirmed his worries that the government wanted to build the site as a "cultural and arts theme park". Mr Cheng had a track record in construction but not in the arts, he said, while people were expecting a visionary leader to lead discussions about what to put in museums. Oscar Ho Hing-kay, a consultation panel member at the authority, asked: "Where is the artistic vision? What will the executive director refer to when he takes up the operational tasks? A cultural district is not a Disneyland where you can copy the existing ones. It looks like [the authority] is avoiding anything artistic and visionary ... It is disturbing." Culture critic Mathias Woo Yan-wai said he was worried that the arts hub might become only a provincial project instead of a world-class one. Wong Kam-sing, of the Institute of Architects' arts hub taskforce, said he hoped Mr Cheng would develop the place in an environmentally-friendly and sustainable manner. A government source insisted that the executive director's role was not to shape the cultural positioning of the arts hub, but to focus on day-to-day administration and lay the foundation for the chief executive and the two artistic directors.

Green groups have given a cautious welcome to a proposed wind farm off Sai Kung, with some worried about the impact on the environment. Prentice Koo Wai-muk, a Green- peace campaigner, said: "The project is clearly a milestone, though it has come a bit late compared to what has been achieved in China and Europe." The 200-megawatt wind farm, proposed by CLP Power (SEHK: 0002) and Wind Prospect, would be situated 10km off Sai Kung, with up to 67 wind turbines built on a muddy seabed 30 metres deep. The power generated would amount to about 1 per cent of the city's electricity demand. An environmental impact assessment report on the project released yesterday said the site chosen was one of a few remaining areas found suitable to accommodate the farm because of physical limitations. James Wong, a member of the Sai Kung Association, said that while in principle it supported renewable energy, he was cautious about the ecological impact of the project. The association will further study the report with other concern groups. "A brief study into the impact assessment report gives me the impression that the project is too good to be true. But we still have doubts as to what extent the report reflects the real situation. Sometimes, the devil is in the detail," he said. WWF Hong Kong senior conservation officer Alan Leung Sze-lun questioned whether a bird survey in the assessment was detailed enough. "One of the problems is that the survey was only conducted in daytime, while most birds actually migrate in the nighttime," he said. According to the report, about 57 bird species were found in the survey, including the locally rare white-bellied sea eagle. But it said the birds' flight path would not cross the wind farm and the risks of collision with the wind turbines were low. The assessment also found marine mammals around the work area, such as the finless porpoise and false killer whale. But it said such sightings were few and sporadic. Some coral communities were found near the work site at Victor Rock. The report proposed mitigation measures when laying an undersea power cable linking to the grid in Tseung Kwan O.

Most small exporters and importers in the region expect trade to be slightly better in the next three months, thanks to the massive economic stimulus measures launched by various governments, an HSBC survey shows. In last month's survey of more than 2,000 companies in seven markets, most respondents, especially those from the emerging markets of Vietnam and the mainland, were optimistic of bigger trade volumes, while Hong Kong firms were the most pessimistic. "Compared with North America and Europe, Asia is more positive on business outlook," Hongkong and Shanghai Banking (SEHK: 0005) Corp global head of trade and supply chain Lawrence Webb said yesterday. "The US$700 billion economic stimulus packages across Asian countries will spur intraregional trade and the region's economic recovery." Mr Webb said many stimulus measures centred on infrastructure, which fuelled demand for commodities, raw materials and services. "A lot of companies which relied on trade with the US and Europe saw more intraregional trade between India and China," he said. "There are opportunities to diversify from the west, where demand remains low." Despite the optimism about trade, most firms in the poll said they were still worried about the risk of buyers defaulting on payments and suppliers failing to honour contracts. This had led to more companies, especially in Hong Kong and Singapore, demanding advance payments, while many mainland respondents said they had taken out export credit insurance. For the Hong Kong respondents, one of the thorniest problems to emerge from the crisis was the volatility in the foreign exchange market. "This is interesting as it calls for hedging solutions to minimise risks," Mr Webb said. He added that a planned yuan settlement scheme in Hong Kong would provide an alternative to alleviate currency risks.

Hopson Development Holdings (SEHK: 0754), riding on revived investor interest in mainland property stocks, raised as much as HK$1.68 billion yesterday through a placement of new shares, the latest company to take advantage of a surge in liquidity to boost capital. Hopson was selling 120 million new shares at HK$13.30 to HK$14.03 each, representing as much as 8.02 per cent discount to yesterday's close of HK$14.46, according to a sales document obtained by fund managers. The new shares would not qualify for the final dividend to be approved at the upcoming annual general meeting, the document indicated. The mainland developer has agreed not to sell any new shares for three months after the completion of the placement. UBS is the joint bookrunner. The offer represents 8.1 per cent of the existing outstanding shares and 7.5 per cent of the firm's enlarged share capital. Meanwhile, fund managers said investment banks had stopped lobbying Guangzhou R&F Properties for a share placement. The Guangzhou-based developer had been tipped as the next candidate in the latest round of fund-raising activities. "They have submitted [the application] of a mid-term yuan bond issue and are awaiting the reopening of the A-share market for new money, so they are not keen on tapping the [Hong Kong] equity market," said a source. Shares of Hopson rose 4.18 per cent yesterday, in line with other mainland developers which have seen a continued rise as investor interest returned to the sector. Hopson has surged 307.84 per cent in the past three months, a faster pace than other major mainland developers such as China Overseas Land (SEHK: 0688) & Investment and China Resources (SEHK: 0291) Land. Mainland developers with weaker fundamentals usually traded at bigger discounts to their net asset values. Recently, some investors have chased the laggards after they regained confidence in the sector, said David Ng, the head of regional property research at Royal Bank of Scotland Group. Mr Ng said it was sensible for mainland developers to take the opportunity to raise fresh capital. Last month, CR Land tapped the stock market for HK$3.3 billion through a top-up placement. In February, Hopson plunged as much as 50.62 per cent in one day after a report that chairman Chu Mang-yee was implicated in the criminal investigation of Wong Kwong-yu, the former chairman of Gome Electrical Appliances Holding (SEHK: 0493). It had been reported that Mr Chu was under investigation by law enforcement agencies in Dongguan because he was suspected of being involved in the Wong probe. In April, Mr Chu did not show up at the results announcement for the company, which posted a 12.56 per cent decline in underlying profit.

Television celebrity chef Martin Yan is well known for being able to cook up a storm. But the one now brewing between InterContinental Grand Stanford Hotel and the charity Cooking For Life over money Yan raised for Sichuan relief last May is not of his making. In fact, it now appears the Inland Revenue Department is also involved, though a spokesman said he could not comment on individual cases. Yan hosted a HK$25,000-a-table function at the hotel on May 31 last year, raising HK$402,552 for relief work in earthquake-devastated Sichuan. However, the hotel claims the Hong Kong Red Cross had only received HK$140,000 with the rest being held by Cooking For Life. For its part, the organization's chairman, Philippe Bru, said the Inland Revenue Department was to blame for the delay as it had prevented Cooking For Life from sending money out of the territory. Hotel director of communications Tina DiCicco told The Standard the hotel had deposited the money raised from the function into Cooking For Life's account on June 19, 2008. It was agreed proceeds would immediately go towards rebuilding Sichuan but that since then the Hong Kong Red Cross had only received HK$140,000. Bru said he told the hotel a solicitor had called the IRD on behalf of the organization in June 2008. He was told that under current laws, the charity was not able to donate money outside Hong Kong. Bru said the donation was intended to be divided between the Red Cross branches in Hong Kong, Beijing and Mianyang. Although he recognized there was an immediate need to help the victims in Sichuan, the organization could not pressure the government into giving it a speedy green light. Once the donation was approved, the money would be sent. He stressed the money could not be given entirely to the Hong Kong Red Cross because it was Yan's intention to help set up a community center in the mainland. "I don't understand why Tina DiCicco is making such a scandal over this," Bru said. An IRD spokesman confirmed Cooking For Life has been granted tax exemption status since February 18, 2008. The tax guide classifies charities in four categories - relief of poverty, advancement of education, advancement of religion, and other purposes of a charitable nature beneficial to the community not falling under any of the first three headings. Under the last category, an organization will be regarded as a charity only if it benefits the Hong Kong community.

Same-sex couples will be included in a revamped amendment of the law regarding domestic violence. But in a bid to avoid a backlash from conservative and religious groups, Secretary for Labour and Welfare Matthew Cheung Kin-chung said the amendment - to be gazetted tomorrow and tabled at the Legislative Council on June 17 - does not amount to a recognition of same-sex marriage. He said the decision to extend the scope of The Domestic Violence (Amendment) Bill 2009 to cover not only heterosexual cohabitants but also same-sex couples is to provide them with additional civil remedies on top of the current criminal legislative framework. Cheung said the proposed amendments will not affect the government's policy of not recognizing same-sex marriage, civil partnerships or any same-sex relationship as a matter of legal status, nor will it involve or affect other existing legislation. The Legislative Council panel on welfare services was consulted last December. Two special meetings were convened in which nearly 100 deputations and 45 individuals attended to express their views. "After careful and thorough consideration of the views of Legco members and different quarters of our community, we have adopted a three- pronged approach in preparing the proposed legislative amendments to address the concerns of religious and parent groups," Cheung said. The new legal framework will give a new definition to "cohabitation relationship" as it will be devoid of any reference to "marriage," "spouse" or "husband and wife." "Specifically, we propose to define it as a relationship between two persons who live together as a couple in an intimate relationship and include such a relationship that has come to an end," Cheung said. Structural changes will be made to clearly delineate the three categories of protected persons - spouses, former spouses and their children; persons in immediate or extended familial relationships; and cohabitants, former cohabitants and their children. Also, the short title of the Domestic Violence Ordinance will be amended to read Domestic and Cohabitation Relationships Violence Ordinance, Cheung said. The government last August extended the scope of the DVO to include former spouses, former heterosexual co- habitants and other immediate and extended family members. Joseph Cho Man-kit from Nutong Xueshe, a support group for homosexuals and bi-sexuals, said the amendment is "pragmatic."

Tycoon Richard Li Tzar-kai's Pacific Century Group is actively considering joining a Franklin Templeton-led consortium in exclusive talks to take over AIG's asset-management business, sources told The Standard. "The group is actively studying the opportunity, but the level of involvement is not determined yet," a source close to Pacific Century Group said. Li is considering joining the consortium after being invited by Franklin Templeton, a person familiar with the situation said. Shares of Li's Singapore-listed holding company, Pacific Century Regional Developments, jumped 8.9 percent to close at 24 Singapore cents (HK$1.29). Turnover in the usually sleepy stock was over six times Tuesday's level. Franklin Templeton has teamed up with New York-based private-equity firm Crestview Partners to bid for AIG Investments, which manages US$85 billion (HK$663 billion) in assets on behalf of pension funds and insurance companies, media reports said. Temasek Holdings, the Singapore state-owned investment fund, is also considering joining the consortium as a financial backer, the reports said. The buyers are expected to offer about US$500 million and a deal could be completed by the end of June, according to the reports. A Hong Kong-based investment bank analyst said Li will probably join the consortium purely as a financial investor, in order to take advantage of low prices. "He's not really interested in running the business," the analyst said. "I think he's just an asset trader who wants to take this opportunity." Fulbright Securities general manager Francis Lun Sheung-nim said AIG's asset-management business would be a good investment if Li can buy into it at distressed prices. "What he's trying to do is diversify away from telecoms," Lun said. "That's what he's been trying to do all along." Bidders had initially offered as much as US$800 million for the unit, but some bidders dropped out after AIG Investments' assets under management fell significantly. Meanwhile, Taiwan media reported yesterday that AIG has lowered the asking price for its Taipei- based Nan Shan Life unit to between US$1.8 billion and US$2 billion, from earlier expectations of US$2 billion to US$2.5 billion. AIG, which has been bailed out four separate times, has been trying to sell off businesses to pay back loans from the US government. Li previously owned a local insurance company, which was later sold to Fortis.

China: Beijing has relaxed import restrictions on a raft of so-called "prohibited" commodities in the latest attempt to revive the struggling manufacturing sector. The Ministry of Commerce said yesterday it had removed 79 types of processing trade commodities from the controlled list, including plants, light industrial products, chemicals, steel and non-ferrous metals. Such products, usually imported to produce goods for re-export, were originally placed on the list as part of efforts to discourage highly polluting and low-cost manufacturing. Beijing is now loosening those restrictions as a slump in exports threatens growth in the world's third-largest economy. The new rule means processing trade manufacturers will no longer have to pay value-added taxes and import tariffs on the materials. It also entitles them to value-added tax rebates on the exported goods they produce. Any processing trade commodity categorised as "prohibited" attracts import tariffs as well as a non-refundable value-added tax of 17 per cent on export goods containing the material. It is the second adjustment of the "prohibited category" in five months. Tax experts said the move would ease the cost burden on thousands of Hong Kong exporters across the border but marked a backdown on a policy on limiting resources-consuming, emission-prone and energy-consuming manufacturing activities. "The adjustment will give breathing space to exporters and lower their costs," KPMG tax partner Bolivia Cheung said. Federation of Hong Kong Industries deputy chairman Stanley Lau Chin-ho welcomed the government's decision but added too many exporters were chasing after fewer orders. "It is good news and a vote of confidence for exporters," Mr Lau said. "But the biggest problem now is insufficient overseas orders." The latest adjustment to the "prohibited" category still leaves the number of products remaining on the list at 1,770. Beijing has lifted value-added rebates on exports eight times since August last year as the manufacturing sector started to feel the pain of weaker demand in the United States and Europe. Some export products such as textiles and garments have their value-added taxes almost fully refunded now. Some economists said the latest trade policy adjustment underlined how weak exports were despite recent signs of improvement. Merrill Lynch economist Lu Ting forecast last month's exports would decline 25 per cent from May last year, compared with a 22.6 per cent drop in April. Mr Lu expected a gradual improvement in exports despite some green shoots of recovery in developed economies. He said imports would recover sooner, driven by the 4 trillion yuan (HK$4.54 trillion) investment programme and lower commodity prices.

Yi Xiqun (left) says Beijing Enterprises Holdings may buy green technology assets from its parent company. With him is Zhang Honghai. Infrastructure company Beijing Enterprises Holdings (SEHK: 0392) is planning to acquire more gas and water treatment projects this year to take advantage of low asset valuations. The company did not disclose a budget for the acquisitions but said 60 per cent would go to gas projects and the rest, waste-water treatment assets. Top executives said yesterday the group would also spend 3.5 billion yuan (HK$3.97 billion) to 4 billion yuan this year. "Assets other than those owned by the parent company will be our targets this year, as asset prices are relatively low," said vice-chairman and chief executive Zhang Honghai. Chairman Yi Xiqun said it was possible the company would buy assets from its parent to develop green technology, but would wait until the technology matured. The company said it had sufficient internal resources to fund the planned acquisitions. Beijing Enterprises has about HK$8 billion cash on hand after it issued HK$2.18 billion worth of convertible bonds last month. "We chose to raise capital at that time because of the low financial costs," said Mr Yi. He said Beijing Enterprises' focus at the moment on the development of utilities was a defensive strategy amid the economic downturn. For last year, the strong performance of its piped-gas operations lifted the company's profit from continuing operations 96.79 per cent to HK$1.96 billion. Beijing Enterprises said its shareholders would not be affected by the new dividend income tax levied on non-resident enterprises. Shares of the firm closed 0.75 per cent down at HK$33 yesterday. The stock has risen only 4.59 per cent so far this year.

US House Speaker Nancy Pelosi has expressed high hopes of co-operation between the United States and China, the two biggest emitters of greenhouse gases, ahead of talks on climate change.

A Chinese takeover of General Motors Corp's Hummer brand, the quintessential United States gas guzzler, is expected to run into opposition from Beijing officials pushing a more green line for the country's vehicle industry. The move by privately owned Sichuan Tengzhong Heavy Industrial Machinery to acquire the rights to the marque has raised concerns it does not tie with Beijing's policy for a "green" and environment-friendly vehicle industry. Tengzhong, a heavy industrial machinery equipment maker, has not disclosed its investment and whether it will bring the Hummer to the mainland, despite confirming the tentative deal on Tuesday. The vehicle, which rose to fame during the first Gulf War, is an unusual fit for a company that has no carmaking experience. Tengzhong is reportedly planning to invest between US$100 million and US$500 million in the deal. A spokesman said the firm had enough cash to proceed with the deal and had no plans to raise additional funds. Hunan's Changfeng Automobile, which withdrew from talks with Hummer in August last year, said the brand was too expensive, given the low consumer demand and high oil prices. "I do not know anything about Tengzhong and I do not think the government will approve the deal," said analyst Chen Qiaoning at ABN Amro Teda fund. "It raises questions about why GM is passing its Hummer business to a company not familiar with vehicle-making." Troubled GM is actively looking for buyers to take over its Hummer, Opel and Saab brands in order to generate cash. The acquisition of Hummer by Tengzhong was announced after GM filed for bankruptcy protection on Monday. The acquisition, which is being advised by Credit Suisse, Shearman & Sterling and Citi, is subject to regulatory approvals in both the countries. Tengzhong expects the deal to be finalised by the third quarter. A lawyer working in a US law firm said the Department of the Treasury had given the nod to the deal, but the acquisition still had to go through an anti-monopoly review and receive approval from the Committee on Foreign Investment in the US. "The US is so eager to shed its brands," said the lawyer. "Deals can be done easily when the economic environment is turbulent." According to a joint statement from GM and Tengzhong, Hummer will continue to maintain its headquarters and operations in the US, and will continue to be managed by the existing leadership team. More than 3,000 US jobs will be secured if the transaction is successful, which will be fundamental for the company to embark on a more aggressive global expansion. "Possibly Tengzhong will be a financial investor in Hummer by injecting cash into the carmaker to sustain its operations," said analyst Zhang Xin at Guotai Junan Securities. "It's definitely not possible for Tengzhong to bring the brand to China as this is not something the country wants now."

Apple, a niche player in the mainland computer market, is eyeing a greater stake in the country's education sector while building up its domestic retail presence. "We're working on a tighter relationship between our education and retail strategies in China," said John Couch, the vice-president for education at Apple. Market analysts, however, say Apple's domestic expansion efforts have a long way to go, especially against the more established mainland personal computer suppliers. The United States-based maker of the iPod, iPhone and MacBook has quietly developed a network of partner schools and universities on the mainland over the past few years, with a view to fostering the broader use of its Macintosh platform and the development of new digital content and learning initiatives. "[Since 2006,] we have stepped up our collaboration to more than 12 schools in various cities including Beijing, Shanghai, Tianjin, Suzhou, Nanjing and Hangzhou," Mr Couch said. The Western Academy of Beijing International School, which has primary and high school students, was Apple's first partner academic institution on the mainland. Veronica Wu, Apple's director of channel strategy and education in Asia, said the company aimed to collaborate with as many as 40 schools in the region by next year. Apple, which opened its first mainland store in Beijing's Sanlitun district in July last year, planned to boost education-linked programmes at the store and in future retail outlets across the country. "We're in the business of education, so it's not just about selling devices," Mr Couch said. He said Apple's online "iTunes U" programme, for example, offered free audio and video content from top universities, famous museums, public media stations and other cultural institutions. Dave McMaster, the head of the Canadian International School of Hong Kong, said its partnership with Apple had helped the school integrate advanced, media-rich digital learning into its curriculum, equipping students with the skills and knowledge to cope in a fast-changing world. But for most mainland buyers, Apple's stylish personal computers running the Macintosh operating system remain out of reach, as they are more expensive than computers based on Microsoft's Windows. Bryan Ma, the director of personal systems research at market analysis firm International Data Corp (IDC), said Apple continued to be a minor player on the mainland. "In the first quarter of this year, Apple had a 0.35 per cent market share on the mainland, compared with 0.3 per cent in the previous quarter and 0.27 per cent a year ago," Mr Ma said. "Its first-quarter market share in the domestic education sector was also small at 0.25 per cent." By comparison, Lenovo Group (SEHK: 0992, announcements, news) secured a 16.9 per cent share to lead the domestic market in the quarter, according to IDC. The mainland's largest computer maker had a 38 per cent share of the education segment. "The central government has had huge education sector tenders in recent years, which have been dominated by the large domestic manufacturers such as Lenovo, Founder and Tongfang," Mr Ma said. "Apple has a long way to go." He noted, however, that education-sector demand at the provincial level could offer some opportunities for Apple.

Treasure hunting has begun in Shanghai's Nanhui district, south of Pudong, as investors lay bets that last month's announcement of the integration of the two districts will spark new property developments. To help drive Shanghai's effort to develop into a major international financial and shipping hub by 2020, the State Council on May 6 said the district authorities of Pudong could enlarge the size of the area under its control by adding Nanhui to its turf. The concept of creating a "Mega Pudong" immediately raised the prospect of accelerated development in Nanhui which has major developments in Yangshan International Deepwater Harbour and Pudong International Airport. On the cards, investors expect, would be the extension into the area of tax breaks and streamlined investment procedures, now enjoyed in Pudong. "Sales in Nanhui are gaining momentum as buyers believe the new plan will bring an influx of capital to upgrade the area's infrastructure and in turn boost property prices," said Yang Hongxu, a researcher at property consultant and information provider E-House China Holdings. Boosted by the positive news prices and transaction volumes in the core location of Nanhui - where home values were 20 per cent to 30 per cent cheaper than Pudong - had increased by between 10 and 15 per cent in less than a month, Mr Yang said. Besides end-users accelerating their purchase decisions, he said, investors had also turned to the area in search of bargains. "Investors from other provinces such as Wenzhou have started to look for residential properties to bet on price appreciation in the area," he said. But Mr Yang said after rapid gains in less than one month it was likely that the market would pause for a breather, and he advised caution. The integration will more than double Pudong's land area to 1,210 square kilometres from its present 533 sq km and boost its combined economic output and population. The gross domestic product of the Pudong New Area amounted to 315 billion yuan (HK$358.21 billion) last year, while Nanhui's GDP was 54.8 billion yuan. "Nanhui is equivalent to Hong Kong's Sheung Shui where prices still lag behind other areas. Any positive news will give a boost to property sales," said Peter Li, a deputy general manager at Centaline China's Pudong branch. Since the announcement of the merger, the number of secondary transactions handled by the firm in the area had shot up 15 per cent, said Mr Li, and average transaction prices were up by the same margin to between 8,000 and 11,500 yuan per square metre. Apartments closer to the Pudong New District were being offered at above 10,000 yuan per square metre, while further out, some cheaper units were being offered at 6,000 yuan per square metre. "While most clients were end-users, some enquiries were made by investors," Mr Li said. Sales in the secondary market are now focused on standard units priced at between 800,000 and 900,000 yuan, while transaction prices for villas range from 3.5 million to 10 million yuan, depending on location. Mr Li said in the Nanhui district the residential markets of Zhupu, Kangqiao and Linggang New City would likely show the most active trading later this year since they stood to benefit most from the merger plan. In Zhupu and Kangqiao, new projects were on sale for between 9,800 and 10,800 yuan per square metre, while villas were pitched at about 12,500 yuan per square metre, according to property website Soufun.

A Chinese-born engineer stole trade secrets critical to the US space program and passed them to Beijing for three decades without detection, prosecutors said in the first economic espionage case to reach trial in the United States. Prosecutors laid out their case against Dongfan "Greg" Chung in US District Court in Santa Ana, California. Chung, 73, denies charges of conspiracy, economic espionage, lying to federal agents, obstruction of justice and acting as a foreign agent. Assistant US Attorney Greg Staples said on Tuesday Chung gained the trust of Boeing and his previous employer, Rockwell International, and used his job as a stress analyst at the companies to steal more than 250,000 pages of sensitive documents. They included trade secrets on a phased array antenna for the US space shuttle and on the Delta IV booster rocket, the government claims. Defense attorney Tom Bienert said the government will be unable to prove his client has done anything wrong, particularly after 2003, when the defense says the statute of limitations expired. Bienert also downplayed the importance of what Chung allegedly took for Beijing. He showed the judge pictures of his client's house with papers and books on every available surface, stacked on the floor and overflowing the bathtub. He said that explained why FBI agents found a quarter-million pages of Boeing documents there. "What you're going to find is that my client is a pack rat," Bienert said. "With all respect to my client, his house gives new meaning to clutter." The government believes Chung began spying for China in the late 1970s, just a few years after he became a US citizen and was hired by Rockwell. Prosecutors say they discovered Chung's activities while investigating the case of another suspected Chinese spy, Chi Mak. Searches of Mak's house turned up an address book containing Chung's name. Mak was convicted in 2007 of conspiracy to export US defense technology to China and sentenced to more than 24 years in prison.

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

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