China.Hawaii Chamber of Commerce ®
Hong Kong.Hawaii Chamber of Commerce ®
Hong Kong.China.Hawaii Chamber of Commerce ®

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How to Do Business with China, through Hong Kong & Setting up Business in China?
Hawaii Failed Business Image and Continue Missed Opportunities

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  Listen to MP3 Business Beyond the Reef” to discuss the problems with imports from China, telling all sides of the story and then expand the discussion to revitalizing Chinatown - Special Guest: Johnson Choi, MBA, RFC. President - Hong Kong.China.Hawaii Chamber of Commerce (HKCHcc) and Danny Au, Manager, Bo Wah Trading

BRENDA FOSTER, PRESIDENT OF THE AMERICAN CHAMBER OF COMMERCE IN SHANGHAI; "An Update of the Business Climate in China" to the Hong Kong China Hawaii Chamber of Commerce (HKCHcc) at the Pacific Club 2/14/2008

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Chinese New Year - Year of the Tiger - February 14 2010

Holidays Greeting from President Obama & Johnson Choi

Jan 29, 2010

Hong Kong*: The Anglican Church in Hong Kong has been ordered to pay HK$180 million in outstanding tax on a joint development which turned a Tai Po site into a luxury residential zone.

Net profit of Hang Lung Properties (0101) soared 13-fold to HK$17.3 billion thanks to strong sales and fair value gain. Underlying profit for the six months to December rose fourfold to HK$5.5 billion after excluding related tax and a HK$16.1 billion revaluation gain. The builder and landlord declared an interim dividend of 17 HK cents, up 13 percent from a year ago. Hang Lung sold 425 homes at HK$14,000 per square foot in August. This lifted property sales up from HK$11 million last year - when no project was launched - to HK$7.5 billion. "It has always been the market which tells us when to sell our units," said executive director Terry Ng Sze-yuen. "After The Long Beach in October 2007, we did not launch any project until this [financial] year." Chairman Ronnie Chan Chi-chung said the firm is "in no rush" to sell the remaining 284 homes at The HarbourSide, and 1,200 flats at The Long Beach. There is no property bubble in Hong Kong, Chan said, adding that small and medium homes are still affordable. He noted the government has become significantly more lenient with land applications. "I just don't believe developers are braver under the current adverse conditions than the boom market two years ago." Problems will definitely arise if the government does not sell land, Chan said, but he is hopeful that the supply of affordable flats will rise. While Ng finds Hang Lung's local rental increase of 5 percent reasonable, Chan said rental contribution from the mainland will exceed that from Hong Kong within two years. Retail complex Palace 66 in Shenyang, which will be completed in mid-2010, already has 80 percent committed tenancies. Chan expects annual returns of 5-6 percent in the first three years at the project. Returns on Hang Lung's two Shanghai malls topped 40 percent while rentals were at least twice that of its neighbors. The firm's land bank comprises 20 million square feet in prime mainland commercial locations.

The US consulate has taken an interest in the pan-democrats' by-elections plan, according to a League of Social Democrats official. "I have the feeling that their biggest concern was whether we would win or lose the seats," league vice-chairman Andrew To Kwan-hang said yesterday of his meeting with consul for political affairs Benjamin Weber, which he said took place two or three months ago. The consul did not offer any support, and the league would reject it even if he did offer any, To said. "In return, I also asked him how the United States viewed our referendum. He said his country had democracy and that `Hong Kong has enough smart people to deal with it'," To said. Weber asked for a meeting with league chairman Wong Yuk-man - in whose office the meeting with To was held. A meeting between the two has not been arranged since the talks. To said Weber was the only diplomat to approach the league about the resignations plan. "It was the first time I had official talks with the US consulate. They had never approached us before ... I think they have regular contacts with the Civic Party and the Democratic Party, but not the League of Social Democrats," To said. Without confirming or denying the meeting, a spokesman for the consulate said: "In pursuit of our official duties, consulate general officials routinely meet with leading government and non-government figures across the full range of political views, including academics, journalists, businesspeople, politicians and NGO leaders." Civic Party vice-chairman Alan Leong Kah-kit, one of the five legislators to resign yesterday, said he was not aware of any consulate asking his party about the campaign. He said lawmakers regularly gathered with guests from different countries and discussed issues of concern. Liberal Party executive committee member Michael Tien Puk-sun - who had expressed his intention to contest the by-elections the resignations will trigger but will not do so now after his party's decision not to contest the polls - said no foreign consulate had approached his party regarding the by-elections. "I am not surprised that the US consulate is interested in this matter. It has always been interested in Hong Kong and China politics," said Tien, a National People's Congress deputy.

HSBC Group Chief Executive Michael Geoghegan poses in front of HSBC headquarters in Central as he starts his first day of work on Wednesday. HSBC Holdings (SEHK: 0005) chief executive Michael Geoghegan said on Wednesday that tougher United States regulations to limit the size and activities of America’s largest banks would have little impact on HSBC. US President Barack Obama has proposed significant limits on how banks can operate. This includes stopping retail banks using their own money in investments. Banks may instead be limited to investing their customers’ funds. Geoghegan made the comments to reporters on his first day of work with HSBC in Hong Kong – after re-locating from London. “We have a surplus in our banks in America and Canada. So, I don’t think this [the proposed changes to banks] would affect us too much,” the 56-year-old British-born banker said. Geoghegan said that when the new regulations become law they might be “slightly different” from what some people were now advocating. “We would encourage the regulators – the Basel Committee – and others, to think carefully about the changes they want to make,” he said. The Basel Committee on Banking Supervision, made up of central bankers and regulators from nearly 30 countries, is putting together a package of stricter financial rules in response to the credit crisis. “Everybody wants a strong banking system and to make sure it’s a level playing field. But that’s not easy to achieve. That will take it some time,” he added. On Wednesday, Geoghegan was welcomed by over 100 HSBC staffers. He said HSBC was a truly international (SEHK: 0732) operation. “We have a chief executive in Hong Kong and a chairman in London. The chief executive now runs the entire group and the team is spread all over the world. Some are in London, some are in New York and some in Brazil and Mexico,” he said. Geoghegan said he would meet Hong Kong’s major political officials and clients later. HSBC announced its decision to move its chief executive from London to Hong Kong last September – a move that indicates it is focusing more on the mainland in future. The bank has also hired financial advisers to prepare a listing on the Shanghai Stock Exchange. Michael Geoghegan joined HSBC in 1973 and previously led the group’s South American and European operations. He is the first chief executive based in Hong Kong since William Purves in the early 1990s. HSBC Holdings has been headquartered in London since 1993.

A typical two-axle double-decker which will be introduced by Kowloon Motor Bus next month to save costs and to protect the environment. The new model meets Euro V emission standards. Kowloon Motor Bus will introduce a new two-axle double-decker in a bid to cut costs and reduce pollution. The new model, to be introduced next month during non-peak hours, meets the Euro V emission standard, which means it releases at least 40 per cent less nitrogen oxide emissions than most buses on the road. Most Hong Kong buses are 12-metre double-deckers with three axles. The two-axle buses are not only cleaner but are more cost efficient. However, they do have a smaller capacity of 88 passengers, compared to over 140 for larger models. "We could deploy these smaller and greener buses during non-peak hours, when patronage is low," KMB's principal engineer, Kane Shum Yuet-hung, said. The new model has an intelligent gearbox that adjusts automatically to the best shift under different road environments and changes in loading, while its air conditioning adjusts every four seconds. The new model costs about HK$2.5 million - cheaper than the average price of HK$3 million for three-axle buses, but its mass production will have to wait until the first model completes road testing in the next three quarters of this year. New World First Bus also plans to introduce the same model next month. Meanwhile, KMB insists it has no plans to increase fares in the near future. Bus companies can make a fare rise application when a formula consisting of figures on wage-index changes, the composite consumer price index and the company's productivity gain calculate to an outcome higher than 2 per cent. KMB managing director Edmond Ho Tat-man said the latest calculation - taking into account last July's salary increase for bus drivers - gave an outcome of just 0.59 per cent. "At present, we have no plan to raise fares," Ho said. "If we can rationalise more bus routes, it would further ease our pressure for a fare rise." The Environment Bureau is consulting the public over an air quality objective that includes 19 proposals to improve the city's air quality. They include bus route rationalization and quicker replacement of old bus models - which officials estimate may push bus fares up by 15 per cent.

Harbor City in Tsim Sha Tsui expects double-digit growth in Lunar New Year sales from improving sentiment and mainland tourists. Shopping centre operators in the city are forecasting double-digit sales growth over the Lunar New Year to be fuelled by mainland tourists continuing their buying spree. With just less than three weeks to go before the festival, Maureen Fung Sau-yim, the general manager for leasing at Sun Hung Kai Real Estate Agency, expects the firm's 12 shopping centres to have 11.7 million customers in the build-up to the holiday. This would boost turnover by more than 13 per cent to HK$240 million for the period, she said. At Sun Hung Kai's apm mall in Kwun Tong, operators plan to organise 30 themed shopping tours, such as "wedding tours", "property purchasing and shopping tours" and "hotel guest shopping tours". Fung estimated they would attract about 1,500 people who would be spending an average of HK$3,000 to HK$3,500 per person. Harbour City shopping arcade in Tsim Sha Tsui, one of the city's largest, also hopes to see double-digit growth for the period. Canis Lee Lai-yi, an assistant general manager of leasing at Harbour City, said buying sentiment rebounded quickly in the second half of last year, as consumers had saved money during the financial crisis and the human swine flu outbreak. The shopping centre's annual turnover surged 16 per cent to HK$15.5 billion last year, with average turnover per square metre rising to a record HK$2,384 in December. Lee said mainland shoppers contributed significantly to those figures, with HK$5.3 billion of retail sales being settled by the mainland's electronic payment network China Union Pay last year, up 65 per cent from HK$3.2 billion a year earlier. The amount represents about an eighth of the HK$42 billion total paid by China Union Pay cards in Hong Kong last year. The shopping arcade had an occupancy rate of 98 per cent, with the remainder under renovation, Lee said. She also expected double-digit growth in rents this year. Tenants are paying a base rent ranging from HK$200 to HK$600 per square foot. Official data shows the city had about 18 million mainland visitors last year, up 6.5 per cent from 2008. A further 7.5 per cent rise is expected this year.

The Hospital Authority revealed for the first time that it needs 600 nurses, but the nurses union said the figure was arbitrary and would not solve the manpower shortage.

Single smart card to cover HK and Shenzhen purchases later this year - Millions of commuters in Hong Kong and Shenzhen will be able to use a single stored-value card to pay public transport fares and make small-value purchases in the two cities starting later this year. A card with two chips - integrating the Octopus card and the Shenzhen Tong smart card - will be introduced, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said yesterday. The use of cash-free transactions would in future be expanded to the entire Pearl River Delta region, he said. Speaking at a forum on integration between Hong Kong and the Delta region, Chan said a "two-in-one card", with chips for the Octopus card and Shenzhen Tong, was technically simple. "But there is a need to issue new cards and tackle the issue of value uploading involving different currencies," he said. Another feasible proposal would be development of a common card reader for use in Shenzhen and Hong Kong, including the Octopus card, Shenzhen Tong and Shenzhen Bank Card. There are more than 20 million Octopus cards in circulation in Hong Kong, while 6.5 million Shenzhen Tong cards have been issued. More than HK$90 million worth of transactions are made each day with Octopus cards, but they are accepted only at 11 fast food outlets in Shenzhen and four duty-free shops at the Lo Wu and Huanggang control points. Chan said mutual use of e-money in Hong Kong and the delta region would be conducive to creating a world-class Pearl River Delta metropolis. Tan Gang, vice-president of Shenzhen-based think tank the China Development Institute, said integration of stored-value cards would bring huge convenience for cross-border travellers. "It will encourage more Shenzhen residents to travel to Hong Kong and stimulate consumption there," he said. "It will also serve as a new platform for further co-operation between Hong Kong and Shenzhen." Visitors to Hong Kong from the mainland are among the top spenders, parting with an average of HK$5,676 last year, compared with HK$5,439 overall for overnight visitors, HK$2,138 for same-day visitors and HK$1,498 for all visitors, according to the Hong Kong Tourism Board. Octopus Holdings has been studying a possible merger with the Shenzhen smart card since 2008, but little progress has been made due to technical and operational obstacles, while there are also concerns over currency exchange. The company's chief executive, Prudence Chan Bik-wah, said last year that putting both chips in one card could cause the systems to interfere with one another. But a company spokeswoman said there had been breakthroughs. "We still need to perform tests over the next few months on the new card's technical viability."

Rusal chief executive Oleg Deripaska toast with Ronald Arculli, chairman of the Hong Kong Stock Exchange, during the Russian company's listing debut at the Hong Kong stock exchange on Wednesday. Russian metals giant Rusal plunged on its Hong Kong stock market debut on Wednesday but the controversial firm’s boss expressed confidence about tapping the resources-hungry mainland market. The world’s largest aluminium producer closed at HK$9.66 per share, a 10.56 per cent fall from its initial public offering (IPO) price of HK$10.80. Rusal chief executive Oleg Deripaska told reporters the listing price, which was at a premium to rivals in the sector, was “reasonable”. “You see what’s happening in markets all over the world,” the 42-year-old, who is dogged by unproven allegations that he has links to organised crime, told reporters at the Hong Kong exchange. The billionaire oligarch – once Russia’s richest man before metals prices plummeted last year in the global financial crisis – said debt-laden Rusal was a good long-term bet as it taps the fast-growing market in mainland. “We believe in the growth in Asia,” he said. “This company is best in class.” Moscow-based Rusal became the first Russian firm to list in Hong Kong. Its IPO, worth US$2.2 billion, was the city’s biggest by a company from outside Asia. “We believe this is the first step – there will be more Russian companies on the Hong Kong Stock Exchange,” Deripaska said. “More Russian money will come into Hong Kong.” But Howard Gorges, vice-chairman of Hong Kong-based South China Securities, said Rusal’s prospects could be dim, noting that its trading debut tumble was “a warning to punters”. “Just because the company is listed now, I don’t think it means a lot of people will be rushing into it,” he said. “Rusal has had a cloud hanging over it.” Controversy swirled around Rusal’s share sale after the exchange repeatedly delayed approving its IPO amid concerns about its huge debt of US$15 billion. In a highly unusual move, the city’s Securities and Futures Commission effectively restricted the IPO to institutions and so-called professional investors by mandating a minimum investment of about HK$1 million. Rusal reached a deal to restructure its debts with creditors last year. But its 1,100-page IPO prospectus outlined a laundry list of possible risks, including potentially crippling lawsuits, its debts, and even the company’s demise should metals prices plunge again. Helen Lau, senior research analyst at OSK Asia Holdings, said Rusal is a low-cost producer that will benefit from stronger demand for metals. But she warned that its problems are a red-flag for investors, especially when compared with rivals such the “stable” Aluminum Corp of China (SEHK: 2600). “Rusal does have an attractive upside,” she said. “Hopefully all these political and legal disputes can be settled as soon as possible.” The state of Rusal’s balance sheet marks a fall from grace for Deripaska, who was among a small group of entrepreneurs who scooped up formerly state-owned assets after the Soviet Union’s collapse in 1991. Among those assets was the Sayansk aluminium smelter in Siberia, the flashpoint in a bloody feud known as the “aluminium wars” that saw gangland slayings and private armies battle it out for control of the sector. In 2004, Deripaska bought out his then-partner, current Chelsea football club owner Roman Abramovich, and merged Rusal with rival firm Sual and the aluminium operation of Switzerland-based Glencore. The move created the world’s biggest aluminium concern in 2006 which now employs 75,000 people in 19 countries, and accounts for 12 per cent of the world’s aluminium output. Along the way, Deripaska locked horns with fugitive Israeli businessman Michael Cherney, who is suing him for US$4 billion over a disputed stake in Rusal. Cherney is wanted by Interpol over Spanish allegations of money-laundering. Separately, the West African nation of Guinea is suing Rusal for US$1 billion in damages stemming from a privatisation dispute. Deripaska and Rusal have dismissed both legal actions as without merit.

Compulsory en bloc acquisition of units in old and neglected blocks in Hong Kong for redevelopment could be sped up by policy changes the government is proposing in a bid to get rid of buildings that pose "a serious threat to public safety". The changes are contained in a bill published last week that calls for the introduction of mandatory inspection every 10 years of buildings that are more than 30 years old, and mandatory checks on windows in such buildings every five years. The bill will be debated in the Legislative Council on February 3 and, if passed, the provisions are likely to take effect late next year. The bill provides that owners of units in old blocks will be required to engage qualified inspectors to check their buildings and windows, and to undertake the necessary repair works specified by the inspectors. The move follows the lowering of the minimum number of sales acceptances by unit holders to 80 per cent from 90 per cent before a developer can compulsorily acquire a building more than 50 years old. The lower threshold will take effect from April this year. Property analysts say as a result of the changes, more flat owners could consider selling their units to developers rather than paying for the mandatory repair works. Tsim Chai-nam, the director of Clerk of Works Services, estimates the inspection cost at HK$4 to HK$5 per square foot, possibly reaching HK$4,000 per household if the inspection includes common areas. Repair costs could begin at about HK$3,000 for the repair of drainage systems, rising to HK$50,000 if external walls and windows need repair. One occupant of an old building, Chinese medicine practitioner Kwan Chi-yee, welcomed the proposed mandatory inspections. Kwan opened a clinic in a 600 square foot flat in a 40-year-old building on Hennessy Road 20 years ago. "This is a good policy. Many people have been hit by falling concrete and windows from old buildings in the last few years. The policy can ensure the safety of pedestrians," he said. But he worries construction firms and inspectors could raise their fees if the policy is introduced. Sito Lai-jin, 82, who lives alone in a 500 sq ft flat in a building more than 40 years old at Fuk Wa Street in Sham Shui Po, worries about the plan. "I am retired and have no income. How can I afford the inspection and maintenance costs? I hope the government will offer a subsidy," she said. Charles Chan Chiu-kwok, the managing director of Savills Valuation and Professional Services, says repairs on old buildings could cost unit owners from HK$10,000 to HK$100,000. He believes the new policies will encourage flat owners to sell their units rather than pay the cost of mandatory repairs. "Changing windows and [fixing] drainage will not help flat owners sell their units at a higher price. Spending on repairs cannot be offset by gains in property prices," he said. "But flat owners can improve their living environment by selling their units at a good offer from the developers. It will also be easier for the flat owners to sell their units after the sale threshold has been cut to 80 per cent of the total ownerships." Tsim said Clerks of Works would benefit from the policy changes but he worried flat owners might suffer. "I expect many construction firms will provide free property inspection to lure flat owners. They may overstate the problem of the buildings to get more renovation jobs," he said. Standards were another problem. "Some construction companies may not fully repair the buildings so if the problems recur, they can get another job. Thus it is important to monitor the standard of repair works," Tsim said. He said most flat owners might be willing to renovate their buildings in the early stage of discussions. "However, they will have different opinions when they negotiate the costs. Some will try to lower the costs by cutting some of the works while others may insist on a complete repair."

It's a real tough life in HK - If you think you've got it tough - you have. That's the view of life in Hong Kong from across the border, where a poll has just put the SAR top of the most formidable places to live in all of China. Among minuses in the quality of life seen for white-collar workers here: Work is at breakneck pace because of a fear you won't make ends meet; Love must take a back seat - and if you are married the pressures of life can wreck the partnership; and Health is sacrificed in the chase to earn. The grim views from the mainland comes with a poll by Xinhuanet, an online arm of the national news agency. Hong Kong is "the most toilsome" of Chinese cities, ahead of Suzhou, Shenzhen, Taipei, Guangzhou and Shanghai. With the unenviable ranking are jarring remarks about the place Xinhuanet says merits the "vibrant and dynamic" tag, though for plenty of wrong reasons. "Working overtime is a catchword of the Hong Kong people," it says, and "very few people shop around during working hours. The streets are usually packed with mainland tourists." The turnover rate of the labor force is high - in part due to mass layoffs and fierce wars for talent among companies. Although people are plugged up with earphones, it goes on, many workers do not have time to watch television, but wives could well be TV junkies. Nor is there time to seek true love, resulting in a drop in the number of marriages and a higher rate of divorce. "The trend is that single women live together while men want to get married," it says. Health is another casualty in the money chase. The more people work the less often they work out. There's certainly no time to enjoy a good meal - reflected in the spread of fast-food joints. Although Xinhuanet fails to give details of the method and size of its poll, an associate professor of sociology at the Chinese University of Hong Kong does not find the message surprising. "Hong Kong's economy has been developing far longer than most mainland cities," Chan Hoi-man says. "People here generally have to face complex problems at work and suffer enormous pressure." Hong Kong is more comparable with cities such as Tokyo and New York, he added, while the living standard is generally higher than in mainland cities. And as for the promotion of a five-day week, that does not help much as the workload of most people is as heavy as ever. Leung Hon-chu, a principal lecturer in sociology at Baptist University, goes along with views that job security is lacking and workers tend to use every chance to earn more money. Indeed, Leung says, there's no time to enjoy life.

China*: China has centralized its energy strategy within a new government agency launched on Wednesday, aiming to co-ordinate policy-making that previously was shaped by a tangle of agencies. Premier Wen Jiabao will be the head of agency and Vice-Premier Li Keqiang will be the deputy, according a central government notice. “The National Energy Committee (NEC) is established to step up energy strategic decision-making, overall planning and coordination,” the central government said in a notice published on its website ( It is responsible for working out national energy development strategy, reviewing energy security and major energy issues as well as planning domestic energy development and international cooperation, it added. Mainland’s plan to create a “super ministry” to steer the energy sector was put on hold in 2008 due to the difficulty of reaching a consensus between big energy firms and existing energy agencies. Instead, the national parliament approved the establishment of the National Energy Administration (NEA) and the NEC in early 2008. The NEA was officially launched in July 2008, but still lacks real power to carry out many of its assigned tasks as responsibility for the energy sector is currently dispersed among a number of departments. The NEC committee has 21 members, consisting mainly of ministers from a wide range of ministries such as the Finance Ministry, the Commerce Ministry and the central bank. Zhang Ping, head of the National Development and Reform Commission, will work as the head of NEC’s general affairs office while Zhang Guobao, head of NEA, will act as Zhang Ping’s deputy in NEC. The NEA will also be responsible for handling specific works of NEC, according to the notice. Analysts said that the launch of the committee is aimed at creating an authoritative body to better organise the scattering power distributed between different ministries.

Gates: Net curbs in China very limited - Microsoft Corp chairman Bill Gates has described Beijing's efforts to censor the Internet as "very limited", saying corporations which operate in China should abide by the local law. In an interview on ABC's Good Morning America on Monday about Google's dispute with China, Gates said the Internet is subject to different kinds of censorship around the world, noting that Germany forbids pro-Nazi statements that would be protected as free speech in the United States. "And you've got to decide: Do you want to obey the laws of the countries you're in, or not? If not, you may not end up doing business there," Gates, the world's richest man, said without mentioning the search engine giant by name. "The Chinese efforts to censor the Internet have been very limited and so I think keeping the Internet thriving there is very important." He declared he was unimpressed and a bit perplexed by Google's recent threat to shut down its operations in China, citing disagreements with government policies and unspecified attacks. One may or may not agree with the laws in China, Gates said, but nearly all countries have some controversial laws or policies, including the United States. "What point are they making?" Gates asked. "Now, if Google ever chooses to pull out of the United States, then I'd give them credit." Google is currently in delicate negotiations with the Chinese government to continue its presence in the world's most populous Internet market. Its top lawyer said on Monday that the issue would probably be resolved in weeks, but cautioned it could take months. Google's complaints have received backing from the White House with Washington soon raising Internet freedom to the level of a major facet of its human rights agenda. Beijing has tried hard to play down the row with Washington over the issue, insisting that the Google case is just a legal and technical matter that should not be linked to bilateral ties. Observers agree with Gates' remarks on following local rules, noting the US bans child pornography while France bans Internet access to Nazi imagery. Fan Jishe, a scholar in US studies at the Chinese Academy of Social Sciences, said every country has its own way of online supervision. He said the Google dispute is only an excuse for the Obama administration to criticize China on Internet freedom. He said even if the Google issue had not come to the fore, Obama would have exerted pressure on Internet freedom sooner or later. He noted that Obama had held up the United States as a model of free flow of information during his visit to Shanghai last year. He Jingchu, a professor at Southwest University of Political Science and Law said in an article yesterday that Obama's over-interpretation of the issue is aimed at diverting domestic attention from his unsatisfactory political achievements to the Sino-US relationship, the world's most important.

Li Na reacts after beating Venus Williams at the women's quarterfinals at the Australian Open in Melbourne on Wednesday. Li Na has set her sights on breaking into the world's top five after stunning sixth seeded Venus Williams in the quarter-finals of the Australian Open on Wednesday. Sixteenth seed Li made it two Chinese players into the semi-finals when she came from a set down to upset Williams 2-6, 7-6 (7/4), 7-5 in an error-strewn match. She will now face either defending champion Serena Williams or Belarusian seventh seed Victoria Azarenka for a place in the final after seeing off Williams in two hours, 45 minutes on Rod Laver Arena. “It’s the best day of my whole life,” an exuberant Li, who joins countrywomam Zheng Jie in the final four, said. “It’s good for both players and it’s good for Chinese tennis.” The 17th ranked Li set herself a goal for this year of breaking into the top 10, and will now achieve that ranking after reaching the semi-finals. “It’s so exciting, maybe I’ll have a beer tonight,” a smiling Li said. “I don’t know, because the goal, my goal this year was top 10, but now it’s only January, so, it’s come quickly.” When asked whether she will dream about reaching the top five she replied: “Maybe – why not?” Li and Williams made 110 unforced errors between them in a poor quality match that will be best remembered for the drama of the fluctuating third set, which featured nine breaks of serve. Li started nervously and seemed overwhelmed by the occasion as she wilted badly in the first set against the power of the American. She was broken in her first two service games and although she managed to get one back, Williams broke once more at 5-2 to take the first set in only 30 minutes. The start of the second set followed a similar pattern but things changed at 2-4 when Li suddenly began to play with far greater freedom. Williams tightened up as her forehand went to pieces and she was broken twice, the second time when serving for the match at 5-4. Li pounced in the tiebreak to level the match as a nervous Williams came up with a host of unforced errors. “Actually I was nervous in the first set, I mean, Venus played aggressively in the first set,” Li said. “She didn’t miss a lot of balls. I was feeling more pressure in the first set. Then in the second set I was feeling a little bit better, but still was like 5-3 down. Then I just tried to get more balls back.” Li’s tiebreak win signalled the start of a see-sawing final set in which both players struggled to hold serve – at one stage there were six consecutive breaks. Li finally held and came out to serve for the match, only to be broken, but Williams dropped her serve straight away, giving Li another chance. This time she made no mistake as another unforced error from the American gave her the match. Li, who started her sporting career in a Chinese badminton program but was told by her coach to give tennis a try, has now beaten two top 10 players in a row following her fourth round win over over fourth seed Caroline Wozniacki. It was also her second win in as many matches against Williams – she beat her in straight sets at the Beijing Olympics. Williams gave her credit. “Obviously, I think I was playing good tennis – I don’t think it has anything to do with whether I was playing good,” she said. “I have to give her a lot of credit for playing well and picking her game up.”

China sought to head off concerns about curbs on Google phone technology on Wednesday, as US business groups urged Washington to tackle "alarming" measures against foreign high-tech companies in China. Google’s threat to quit China this month over hacking and US criticism of China’s internet censorship has irritated ties between the two economic giants, already hurt by disagreements over currency exchange, trade and US arms sales to Taiwan. In soothing words for investors, a mainland official said Beijing would not seek to stand in the way of Google’s Android mobile phone platform in the mainland market. The spokesman for China’s Ministry of Industry and Information Technology, Zhu Hongren, was responding to a question about whether use of the Android application in China would be affected by the Internet giant’s complaints against China. “I think there should be no limit on the use of any system as long as it complies with regulations in China, it has sound negotiations and co-operation with telecom operators and obeys relevant rules and requirement,” Zhu told a news conference. “The Chinese telecommunication market is an open market.” The ministry oversees China’s mobile telephone sector. Zhu’s remarks appeared to underscore that the Chinese government does not want to scare investors by directly attacking Google, and is instead directing its ire at the US government, which state-run newspapers have accused of “politicising” the dispute. Two weeks ago, Google threatened to shut its Chinese portal and pull back from China, citing problems of censorship and a hacking attack from within the country. It is still filtering sensitive content on The Obama administration backed Google’s criticisms. Last Thursday US Secretary of State Hillary Clinton urged China to drop Internet censorship and investigate the hacking. US business groups have fired their own broadside at China, calling on top US officials to pressure Beijing on moves to keep out foreign high-tech companies. The appeal, in a letter to top US officials including Clinton, comes as China formulates regulations for policies meant to encourage domestic industry to ascend the value chain. Foreign industry fears that incentives for government purchasers to prioritise domestically developed products could lose them valuable contracts. “For several years, the Chinese government has been implementing indigenous innovation policies aimed at carving out markets for national champions and increasing the locally owned and developed intellectual property of innovative products,” the business groups said, according to a text made public by the Business Software alliance. “We are increasingly alarmed by the means China is using to achieve these goals.” Signatories urged the Obama administration to make the issue a top priority and work with the business community and foreign governments to develop a “strong, fully co-ordinated response to the Chinese government.” A showdown between Google and the Chinese government could possibly hurt mobile phone makers who had bet on the Android system to increase sales in the world’s biggest mobile market. Motorola has bet its turnaround on Google’s mobile software and China. Phones running on Android, an open-software platform for mobile applications, are also being developed by several Chinese firms, including ZTE (SEHK: 0763) Corporation and Huawei. Last week, Google postponed the launch of two mobile phones in China that use its Android platform. After first fending off criticisms from Google and Washington, Chinese officials and state-run media have launched toughly-worded warnings to the Obama administration that have the hallmarks of a concerted counter-campaign. The People’s Daily, the main mouthpiece of China’s ruling Communist Party, said on Wednesday that the Google dispute had added to strains that have created a rocky start for China-US relations this year. “All of this means that Sino-US relations face severe challenges,” said the paper. It said the worries included US arms sales to Taiwan, trade, and speculation that President Barack Obama may meet exiled Tibetan leader the Dalai Lama. “If these issues are mishandled, they will have a powerful destructive effect on Sino-US relations, and may even affect the broader development of relations.”

Greece is wooing mainland to buy up to €25 billion (HK$274 billion) of its bonds in its efforts to avert one of Europe’s biggest debt crises, two newspaper reported on Wednesday.

China, Switzerland voice opposition against trade protectionism - Chinese Vice Premier Li Keqiang(4th L) attends the joint press conference with President of the Swiss Confederation Doris Leuthard(4th R) in Bern, capital of Switzerland, on Jan. 26, 2010. Li Keqiang arrived in Zurich on Monday, kicking off his formal visit to Switzerland.

XAIC extends contract with Boeing - A Boeing 737 aircraft parked at Jinan Yaoqiang International Airport. The deal will help XAIC in its efforts to become a strategic partner for Boeing. Xi'an Aircraft International Corporation (XAIC) yesterday delivered the 1,500th vertical fin for Boeing's best-selling B737 aircraft and signed an extended contract to supply another 1,500 units to the US aircraft manufacturer. The new order is the largest subcontracting agreement in terms of volume the Chinese aviation manufacturing industry has ever received. "The extension of the contract showed that XAIC is capable of producing large-size aircraft components in large volume for leading international aviation manufacturers. It is a milestone in XAIC's efforts to become a strategic partner for Boeing and Airbus," said Meng Xiangkai, president of XAIC. Vertical fins are typically found on the aft end of the fuselage and are intended to reduce aerodynamic sideslip. XAIC, a subsidiary of Aviation Industry Corporation of China (AVIC), signed the first contract for producing 1,500 units of B737 vertical fins in 1996 and is currently able to produce 21 to 24 units of vertical fins per month. Boeing manufactures 31 B737 planes per month. Nearly two-thirds of the B737 worldwide fleet are equipped with vertical fins produced by XAIC. Boeing and XAIC did not reveal the total value of the contract. "Since the 1980s, Boeing has purchased parts and components worth more than $1.5 billion from China. That (the purchasing volume) will more than double in the coming years," said George Maffeo, vice-president for supplier management, airplane programs, Boeing Commercial Airplanes. Boeing's archrival Airbus is also expanding industrial cooperation in China. The total annual value of Airbus' procurement in China reached over $100 million in 2008 and is expected to touch $200 million this year and $450 million in 2015. XAIC also produces wings for Airbus A320 airplanes. The A320 wing is the largest and most complicated aircraft component a Chinese company has ever made. China is Airbus' only wing manufacturer outside Europe. XAIC is a major supplier to China's homegrown regional jet ARJ21 and large commercial passenger aircraft C919 by manufacturing fuselage and wings. AVIC is using XAIC as a platform to consolidate its commercial aircraft manufacturing businesses by injecting assets worth 8 billion yuan into the Shenzhen-listed company.

Jan 28, 2010

Hong Kong*: The value of Hong Kong's total exports year-on-year increased in December 2009 by over 9 per cent, new statistics released on Tuesday showed. The Census and Statistics Department figures revealed that in December 2009, the value of total exports – comprising re-exports and domestic exports – increased by 9.2 per cent over a year earlier to HK$224.8 billion. “Within this total, the value of re-exports increased by 9.7 per cent to HK$219.7 billion in December 2009, whereas the value of domestic exports decreased by 7.0 per cent to HK$5.2 billion,” the department said in a statement. Concurrently, the value of imports increased by 18.7 per cent over a year earlier to HK$258.3 billion in December 2009. “A visible trade deficit of HK$33.4 billion, equivalent to 12.9 per cent of the value of imports of goods, was recorded in December 2009,” the statement said. Comparing December 2009 with December 2008, total exports to Asia as a whole grew by 17.7 per cent, the figures showed.

Lawmakers, from left, Albert Chan Wai-yip, Alan Leong Kah-kit, Tanya Chan, Leung Kwok-hung and Raymond Wong Yuk-man sign their resignation letters outside the Legislative Council building in Central on Tuesday. Five pro-democracy lawmakers from the Civic Party and the League of Social Democrats (LSD) tendered their resignation letters on Tuesday to Legislative Council secretary general Pauline Ng Man-wah. The group, includes all three lawmakers from the league – “Long Hair” Leung Kwok-hung for New Territories East constituency; Raymond Wong Yuk-man for Kowloon East; and Albert Chan Wai-yip for New Territories West. They were joined by two lawmakers from the Civic Party, Alan Leong Kah-kit, who represents Kowloon East geographical constituency and Tanya Chan, who represents Hong Kong Island. The legislators shook hands with Ng after submitting their resignations. The five said they planned to discuss their resignations in the Leglislative Council on Wednesday if Legco president Jasper Tsang Yok-shing allowed it, local media reported. Flanked by journalists and supporters, the lawmakers again explained that by resigning, they hoped to force by-elections. This is to trigger a de-facto referendum to promote full democracy in Hong Kong. Alan Leong said the resignations were necessary. “I have to keep my election promise and strive for real universal suffrage.” LSD chairman Raymond Wong said he and his colleagues were not worried about the consequences. “We have nothing to fear. We have to make sacrifices for the successful [implementation of universal suffrage],” he told reporters. Civic Party leader Audrey Eu Yuet-mee stressed that democracy was ultimately “about the people” of Hong Kong. “What we are trying to do is to give the opportunity back to the people – to vote for real democracy and to vote for the abolition of functional constituencies,” she told reporters. “This is something we cannot do alone in the Legislative Council,” Eu said. “There’s no reason to fear the people’s will.” Eu said they were lawmakers were looking forward to contesting the by-elections so they could debate the early implementation of universal suffrage. Before the lawmakers submitted their resignation letters, Executive Council member Anthony Cheung Bing-leung said he believed they should not have resigned. But Chinese University of Hong Kong political scientist Ma Ngok said: “They are doing this partly out of frustration. They feel they need to do something more radical, [to] try something new,’’ he said.

New mortgage loans approved in Hong Kong in December fell 6.2 per cent from November for a sixth consecutive month-on-month decline, but were up 132.1 per cent from a year earlier, data from the Hong Kong Monetary Authority (HKMA) showed. Month-on-month figures, however, are not seasonally adjusted. New loans approved in December totalled HK$24.2 billion, compared with HK$25.8 billion in the previous month, the HKMA said. Approvals for loans for new property decreased 3.1 per cent, while loan demand for mortgages on existing property dropped by 4.1 per cent. Approvals for refinancing loans declined by 14.6 per cent. The number of new mortgage applications rose 6.59 per cent to 15,368 from the previous month’s 14,418, the statistics showed. The value of new mortgage loans drawn down was HK$19.7 billion, down 5.8 per cent from the previous month.

A top score in Hong Kong's new school-leaving diploma is worth more than the highest grade in the much-vaunted International Baccalaureate exams, a study has shown. Information released by the examinations authority yesterday shows the diploma examinations compare favorably with other international exams using the British centralized universities admission system's yardstick. The data was based on benchmark matching of grades in the Hong Kong Diploma of Secondary Education exams and Britain's General Certificate of Education A-level exams. Examinations authority chief Francis Cheung Wing-ming, who announced the benchmark matching results for the diploma exam and British A-level yesterday, says the results of the research are very positive. However, a comparison of the benchmarks for the three examinations shows the new diploma exams do not measure up to the Hong Kong Advanced Level Examinations (HK A-level) as far as assessment grades are concerned. The Hong Kong Examinations and Assessment Authority two years ago asked the British national qualifications agency UK Naric to do the benchmark matching of the British A-levels and Hong Kong A-levels. Yesterday's results were based on research done by Britain's Universities and Colleges Admissions Service (UCAS). "Overseas universities see Britain's GCE A-level as a reference when they lay down admission requirements," Cheung said. "UCAS' benchmarking tables involve around 40 international exams including the United States' advanced placement tests and International Baccalaureate [IB]. Our Level 3 is higher than the Level 3 for IB. Our Level 5* is equivalent to IB's highest grade Level 7, but we still have a higher grade, which is 5**." However, the diploma exams do not compare favorably with the HK A-level, the school-leaving examinations under the old system. A Level 3 in the diploma exams is equal to an F - or fail - under the HK A-level, and Level 4 is equivalent to an E for the HK A-level. An examinations authority spokeswoman stressed the diploma exams could not be compared with the HK A-level. "You study six years for the diploma but seven years for HK A-level. The duration of schooling, curriculum and assessment methods are different for the two exams," she said. Under the diploma, students leaving secondary school will be graded Levels 1 to 5, with the highest possible score being Level 5**. Katherine Forestier, the director of education and science services at the British Council, said depending on institutions' own admissions requirements, students achieving the minimum of two Level 3s will be able to enroll in British undergraduate programs.

China*: China implemented a planned increase in required reserves for some banks on Tuesday, sources said, sparking knee-jerk selling of Asian stocks which underscored how sensitive global investors are to Beijing’s tightening of monetary policy. The punitive increase in the amount of reserves some banks have to set aside, which was ordered last week, also came after a newspaper report said mainland’s efforts to curb bank lending were meeting with mixed success, fuelling fears that policymakers may take more aggressive action soon. Mainland banks extended 1.45 trillion yuan (HK$1.65 trillion) in new loans during the first 19 days of the year as they scrambled to front-load lending, the 21st Century Business Herald reported, suggesting that Beijing is finding it hard to slow robust credit growth which the government fears could lead to the economy overheating. The People’s Bank of China has been withdrawing funds from money markets over the past several weeks, and earlier this month started pushing short-term bill rates higher. Beijing’s moves to tighten liquidity and rein in bank lending, with an eye on accelerating price pressures and asset prices, have spooked investors around the world who worry the global recovery may lose momentum as authorities unwind back emergency stimulus policies put in place to combat the global recession. The central bank surprised markets on Tuesday by leaving yields unchanged in its closely watched one-year bill sale, but analysts said it was likely only a pause in tightening aimed at leaving enough cash in the system for the Lunar New Year holidays next month. “The auction result shows the central bank wants to stabilise expectations a bit to avoid large market swings. So it is pausing the uptrend in bill yields,” said Liu Jinyui, analyst at China Merchants Bank (SEHK: 3968) in Shenzhen. Taiwan’s benchmark Taiex index suffered its biggest one-day drop in six months while the Shanghai Composite dropped 2.4 per cent and Hong Kong’s Hang Seng index fell nearly 2 per cent in a broad Asia equity retreat. Commodities and higher-yielding currencies also took a hit and the yen jumped. Reports last week said that Citic Bank, the country’s seventh-largest bank, and Industrial and Commercial Bank of China (SEHK: 1398) (ICBC), the top lender, had been instructed to raise their reserve ratios after excessive lending. The crackdown on banks followed the PBOC’s first moves to wind down the ultra-loose monetary conditions that had helped fuel the economy’s rapid rebound, which in turn buoyed the economies of many of its Asian neighbors. But the PBOC may be keen to ensure enough cash is available through the week-long holiday which starts on February 14, when many workers pull money out of the bank to spend on gifts or bring home to their families, traders said. It may also be trying to ensure that any stepped-up draining of excess liquidity is done in a gradual way for the next few weeks, to avoid creating more volatility in markets after a series of tightening steps in the last few weeks. The PBOC auctioned 10 billion yuan of one-year bills at a yield of 1.9264 percent, below forecasts of about 1.97 per cent and flat from last week, after increasing them by about 8 basis points in each of the previous two auctions. The central bank also refrained from draining funds from the money market through short-term bond repurchase agreements, traders said. But the impact of the special reserve requirement increase on Tuesday will serve as a drain on money market liquidity. The implementation of those selective higher reserve requirements pushed the weighted average 7-day repo, the key measure of short-term liquidity, up to as high as 1.5334 per cent, up about 20 basis points from Monday’s close and the highest since the end of December. Those higher reserve requirement ratios for some banks come on top of the overall 50 basis point increase in reserve requirements that went into effect on January 18.

World Bank economists yesterday warned about the risks of asset bubbles in China even as the government tries to hold back excessive lending and keep prices stable. Asset price inflation, or increases in housing prices in particular, is potentially "very dangerous" for China because they are self-reinforcing, made possible by "very cheap credit", said Hans Timmer, director of the development prospects group at World Bank. "Asset price rises bear more risks (than consumer inflation)," he said at a press conference yesterday in Beijing. "If the price in a grocery store goes up, then demand comes downs; but if the housing price goes up, then actually demand might increase because people expect further increases," he said. "This is a much more dangerous phenomenon." Housing prices in 70 major Chinese cities increased by 7.8 percent year-on-year in December, the fastest pace in 2009, according to official data. But many people complain that price rises are much higher than indicated in the index and have become unaffordable. Economists, meanwhile, are worried about "house price bubbles" bursting, which could affect the balance sheets of banks and the health of the overall economy. "I can't say there are (asset) bubbles at the moment," Timmer said. "But there's a risk it is an area where you have to keep your eyes peeled." Dong Yuping, senior economist at the Chinese Academy of Social Sciences, said: "Although house prices rose very fast in some big cities last year, it is hard to say if bubbles have already formed. There are few widely-agreed standards for us to decide whether there are bubbles or not." He said, however, that policymakers must be cautious. "If house prices continue to rise faster than people's income growth, the risk of bubbles would be higher." Timmer said the Chinese government has taken appropriate measures to keep the risk under control. "The first step is to recognize this is a potential issue and be willing to act, and the Chinese government does both." The government has raised taxes on sales of second-hand homes and tightened land transfer rules, among others, to hold back surging prices. "The government is concerned about property prices rising too rapidly and sensitive to middle-class discontent about housing affordability," said Wang Tao, head of China economic research at UBS Securities. "However, in an overall environment of weak global demand, the government will be cautious very careful to avoid dampening overall activity in the sector." The government is expected to tighten monetary policy to reduce the scale of lending and prevent liquidity-fueled inflation. Last year, new yuan lending increased to 9.6 trillion yuan ($1.4 trillion), almost double that of the previous year. Timmer said China is yet to see a real threat of high inflation, although the consumer price index (CPI), a key gauge of inflation, rose sharply by 1.9 percent in December, compared with 0.7 percent a month earlier. "I'm not that afraid that there'll be a fast inflation rise," he said. Timmer said China's CPI growth since last November has had a lot to do with the surging international commodity prices that plunged at the end of 2008. "It's not necessarily a sign of ramping inflation," he said. Some economists have warned that the CPI could rise to 5 percent or even higher this year, although most analysts believe that the government can keep it under 3 or 4 percent. The World Bank also suggested China tackle some long-term issues, such as structural reforms, to make its economic growth more sustainable.

PetroChina (SEHK: 0857)’s rapidly expanding international trading network will soon include the Middle East when it sets up an energy trade desk in the regional financial and commodities trading hub of Dubai, industry sources said. Asia’s largest oil and gas producer, PetroChina is also studying the option of either acquiring or building an oil terminal facility in the United Arab Emirates, the sources said. “They have approached us to discuss the economic feasibility of developing a terminal in the UAE,” a trader based in the Middle East said. “They have not yet taken a decision, but they have been studying the option for about a year now.” The energy giant was also expected to set up a three-man crude trading desk this year in Dubai, which is fast becoming a regional oil and commodities trading hub rivalling the likes of New York, London and Singapore, sources said. Recently US oil firm ConocoPhillips and a unit of Thailand’s PTT joined the likes of Vitol, BP and Lukoil to open Gulf trading outposts. Shell’s trading arm has also expanded its trading desk in Dubai, along with Trafigura who have also added new staff in the past year. Sources familiar with PetroChina’s plans to set up operations in Dubai said the mainland firm has already relocated a crude trader from Singapore to the emirate. “They are now looking at setting up an office here, they are in that process of getting the logistics in order,” a Middle East based trader said. “Initially they will have three crude traders, and then the office will likely expand, but they haven’t really showed their cards as to what they will be doing here.” Most of the region’s producers, including Saudi Arabia, Iran and Kuwait effectively bar their customers from trading their crude. But they take a far more lenient view of refined fuels like gasoline and diesel, for which import demand has risen as a petrodollar revenue boom in recent years has fuelled strong consumption growth. “They may be positioning themselves for the possibility that there will be some form of commercial crude business developing once Abu Dhabi completes its pipeline into Fujairah,” a crude trader from a Gulf Arab producer said. The United Arab Emirates will complete a pipeline allowing the world’s third-largest oil exporter to pump around 60 per cent of its crude exports to Fujairah, a port on the Gulf of Oman. The mainland oil giant is flexing its muscle all across the world, making sure it is strategically placed to exploit new commercial business that could emerge in the region because of new refining capacity. The firm’s trading operations are now located in Asia, the United States and Europe. PetroChina is presently in talks to take over about 5 million barrels of heavy oil storage in the Caribbean, which was formerly leased by Saudi Aramco. “At the moment it [office in Singapore] could serve as a listening post for the company, and then it will slowly develop to something more,” a Middle East based trader said. “They probably anticipate Dubai evolving into a price setting hub for the Middle East, the way Singapore has for Asia.” But with mainland’s growing importance on the global refined fuel markets, as its refineries run at full tilt and hit fresh export highs for distillates, PetroChina could also be looking for an outlet for its products into the less mature East African markets. “There is still quiet a bit of potential in the region, they could be looking to grab market share in Africa,” a Singapore based trader said. “Everyone is out to lay claim to new incremental demand, Africa is still untapped, risky business for some, but not so much for a company like PetroChina.”

China banks extended 1.45 trillion yuan (HK$1.65 trillion) in new local currency loans in the first 19 days of the year, as they scrambled to front-load lending before policy tightening shuts the door on them, the 21st Century Business Herald reported on Tuesday. If the reported figure is accurate, it would suggest that officials are still finding it difficult to rein in credit issuance despite taking increasingly assertive actions to clamp down on banks. People’s Bank of China’s vice-governor Su Ning was the latest to remind banks that their actions are under the microscope, calling on them to avoid big swings in lending, the official Financial News reported on Tuesday. “Banks must master their lending rhythm, ensuring that loans are balanced and avoiding abnormal volatility at the end of the month or the end of the quarter,” Su was quoted as saying, a nearly word-for-word reiteration of previous central bank statements. Sources said last week that banks had lent 1.1 trillion yuan in the first half of January. The central bank raised reserve requirements on January 18, locking up about 300 billion yuan that banks would otherwise have been able to lend, and had also instructed some banks to restrict their lending. Regulators have called on banks to report their lending figures on a daily basis in order to allow them to closely monitor loan growth, the newspaper quoted a bank executive as saying.

Worker welds the interior of a car at the Geely auto factory in Ningbo in this file photo. On Tuesday, reports said Geely aims to build a new factory in Beijing, capable of producing up to 300,000 Volvo cars a year. Zhejiang Geely Holdings will produce up to 300,000 Volvo cars a year at a new factory in Beijing as part of its plan to pull the Swedish brand out of the red by next year, a source said on Tuesday. Zhejiang Geely, parent of Hong Kong-listed Geely Automobile, aims to complete the purchase of Ford’s Volvo unit for up to US$2 billion by May, according to the source and to a document submitted to regulators by Geely. The addition of such capacity would nearly double Geely’s current output, which reached 321,900 units last year for the entire group, up 45 per cent from a year earlier. Geely has set an ambitious annual sales target of 2 million cars by 2015. Analysts said the 2011 break-even target could be a stretch for Geely, which has no experience running a foreign company. “I think it’s optimistic to break even next year as it needs to build a plant first and it might take time for Chinese buyers to accept a made-in-China Volvo,” said John Zeng, an analyst with IHS Global Insight. “It will break even eventually but that’s going to take time.” Geely Automobile Holdings (SEHK: 0175) is mainland’s largest private car maker. Its charismatic founder, Li Shu Fu, sometimes likened to Henry Ford, has shown global ambitions for Geely, which means “lucky” in Putonghua. Ford, the only major US automaker to avoid bankruptcy last year, is selling its luxury Swedish brand to free up cash as it climbs out of the industry’s worst ever downturn. The deal would see Geely acquire Volvo for US$1.5 billion to US$2 billion, with an expected closing date in May after the signing of the initial agreement next month, according to a copy of the Geely document. Geely said in December it was near such a deal, and later added it had strong support from the central government for the purchase. Geely will set up a separate company with registered capital of 8 billion yuan (HK$9 billion) to buy Volvo. Foreign strategic investors and the Hong Kong-listed Geely will hold a 51 per cent stake of the company. Geely shares were down 3.7 per cent, amid a broader market sell-off and following a run-up that saw the shares more than double since mid-September on hopes for a Ford deal. The purchase would be the biggest in a recent spate of similar acquisitions of distressed global assets by mainland carmakers, which have thrived during the global downturn due to strong incentives for their industry under Beijing’s 4 trillion yuan stimulus plan. Under the deal, Geely will keep the brand and operations in Sweden, including Volvo’s headquarters, production facility and research centre, intact after the acquisition. “[Geely] will keep the core value of Volvo as a luxury brand unchanged, while improving it with the development in emerging markets, and add more fashionable, dynamic and passionate international elements,” said the document. Volvo is expected to post earnings before interest and tax (EBIT) of US$703 million in 2015, the document said. A Geely representative declined to comment. Among other deals involving mainland vehicle makers, Sichuan Tengzhong Heavy Industrial Machinery is in the process of buying GM’s Hummer brand, though that deal has yet to close and GM said earlier this month it is still awaiting approval by mainland regulators. Last month, Beijing Automotive Industry Holding Corp (BAIC) sealed a deal to buy technology from GM’s Saab unit for US$200 million, saying it would use the technology to launch an aggressive campaign to develop its brand both at home and overseas. The buying spree comes as mainland zoomed past the United States to become the world’s largest auto market last year. Vehicle sales in the country jumped 46 per cent to a record 13.6 million units for the year, according to the China Association of Automobile Manufacturers, well above the 10.4 million cars and light trucks sold in the battered US market. Analysts expect mainland’s car sales to continue growing this year under renewed government incentives, though they expect the growth rate to slow to about 10 per cent.

Experts from China and Taiwan on Tuesday launched the first round of talks aimed at paving the way for a major trade pact between the one-time rivals, both sides said. Zheng Lizhong (R), executive vice president of the Chinese mainland's Association for Relations Across the Taiwan Straits (ARATS), shakes hands with Kao Kung-lian, vice chairman and secretary general of Taiwan's Straits Exchange Foundation (SEF), during the first expert discussion in talks on the Economic Cooperation Framework Agreement (ECFA), an economic deal which is expected to boost the cross-Taiwan Straits economic ties, in Beijing, capital of China, Jan. 26, 2010.

Chinese vice premier calls for closer economic ties with Switzerland - Chinese Vice Premier Li Keqiang (L) shakes hands with Gerold Buehrer, president of Economiesuisse during a dinner party held by the Economiesuisse, the Swiss Business Federation, at Zurich on Jan. 25, 2010. Li Keqiang arrived here on Monday for a four-day official visit to Switzerland, during which he will also attend this year's World Economic Forum (WEF) annual meeting in Davos.

China has already reduced emissions of major pollutants by 10 per cent below 2005 levels, meeting its target a year ahead of schedule, Xinhua news agency said on Monday.

The tug of war between government and residents over controversial incinerator projects in Guangdong is showing no signs of easing, with protests in two cities in the past two days.

Changjia Group, a mainland developer with a focus on high-end residential projects in Shanghai, plans to raise between US$500 million and US$600 million via its Hong Kong listing in March, sources familiar with the situation said on Tuesday. Changjia, headquartered in Shanghai, has hired Swiss bank UBS and US bank Citigroup to jointly handle its initial public offering of shares, said the sources.

Premier Wen jiabao visits blizzard-hit Xinjiang, promising relief measures.

Avatar's success brings fame to Chinese mountain - This photo shows the floating Hallelujah Mountains in the film "Avatar" (left) and a mountain in China's Zhangjiajie area. The global blockbuster Avatar is so successful that local residents in central China want their mountains to be named after the floating rocks in the movie, "the Hallelujah Mountains." Hundreds of locals in ethnic Tujia costumes launched an "official ceremony" Monday to rename the Qiankunzhu mountains, prototypes for "the Hallelujah Mountains." The peak is 1,074 meters above the sea level and one of more than 3,000 mountains in the Yuanjiajie Scenic Spot, the core area of the World Natural Heritage Wulingyuan Scenic Zone in Zhangjiajie City, Hunan Province. Hollywood photographers spent four days shooting there in 2008. His pictures became the prototypes for many elements in "Avatar", said Song Zhiguang, director of the Yuanjiajie Scenic Spot Administration.

Workers are seen on the Bund in Shanghai municipality of east China, Jan. 26, 2010. The reconstruction of the Bund, the landmark of Shanghai and EXPO 2010, is to finished by the end of March.

A worker walks on the Bund in Shanghai municipality of east China, Jan. 26, 2010. The reconstruction of the Bund, the landmark of Shanghai and EXPO 2010, is to finished by the end of March.

A worker is seen on the Bund in Shanghai municipality of east China, Jan. 26, 2010. The reconstruction of the Bund, the landmark of Shanghai and EXPO 2010, is to finished by the end of March.

The Bund is seen in Shanghai municipality of east China, Jan. 26, 2010. The reconstruction of the Bund, the landmark of Shanghai and EXPO 2010, is to finished by the end of March.

A local farmer airs newly-made red lanterns at a big yard in Hongmiao Village in Huairou District in Beijing, the capital of China, Jan. 26, 2010. The mountain village enjoyed a long history for producing Chinese traditional red lanterns in winter to meet the large demand from the festival market as the Spring Festical, the Chinese lunar new year, approaching.

Jan 27, 2010

Hong Kong*: The big mainland banks are planning to tap the market for a combined 400 billion yuan (HK$455 billion) as they follow Beijing's orders to shore up their capital and pay for a profligate lending spree over the past year. Bank of China's announcement on Friday that it would issue convertible bonds worth 40 billion yuan is expected to open the floodgates for other mainland lenders that need to boost capital bases. "The BOC (SEHK: 3988)'s fund-raising plan was just a curtain-raiser," Orient Securities analyst Jin Lin said. "It will be a kind of political task for banks to raise funds as the regulator places them under closer scrutiny." The aggressive fund-raising could be a fresh sign Beijing is concerned that the loose lending policies of the past two years could come back to haunt banks in the form of bad loans, putting a dampener on the mainland's buoyant economy. The fund-raising plan came as Beijing increased pressure on lenders to boost their capital adequacy ratio as fears of an asset bubble in the property market, and inflation, grow, analysts say. Mainland banks extended total loans of 9.6 trillion yuan last year, nearly double the minimum target of 5 trillion yuan. Liu Mingkang, chairman of the China Banking Regulatory Commission, said last week that the government had to step in to rein in wild credit growth. In addition to the mainland fund- raising, BOC, China's largest foreign exchange lender, is expected to raise about HK$50 billion through a refinancing plan on the Hong Kong stock exchange. It told analysts yesterday the plan had not been finalized. ICBC and China Construction Bank (SEHK: 0939) , among the mainland's big four lenders, are expected to raise 100 billion yuan each via the capital market or bond market, according to Li Yamin, an analyst at Shenyin Wanguo Securities. Bank of Communications (SEHK: 3328), the mainland's fifth-largest lender, will raise at least 30 billion yuan to shore up its capital base, analysts predict. Agricultural Bank of China, the only non-listed lender among the big four, is tipped to net 100 billion yuan on the Shanghai A-share market through an initial public offering. "The BOC and the BoCom are in bad need of fresh capital to ensure their financial health," Wang Yifeng, an analyst at TX Investment Consulting, said. "The impact to the stock and property market will be huge based on the massive fund-raising plans." The banking regulator requires the mainland's big lenders to have a capital adequacy ratio of 11 per cent, up from the previous 8 per cent. Capital adequacy refers to ratio of capital banks have put aside to cover their lending. The CBRC originally planned to raise the ratio to 13 per cent but decided to take the middle road in an apparent effort to allay concerns that a flood of new fundraising deals would lead to a stock market collapse. Analysts predicted the banks would grant combined loans of 7.5 trillion yuan this year as Beijing ensures the economy keeps growing.

Hong Kong deficit may swell to $28b - The government is expected to record a deficit of HK$28.21 billion in the 2010-11 fiscal year as it splurges on economic relief and infrastructure projects, according to KPMG partner Jennifer Wong.

Hongkongers might get faster help if they run into trouble overseas under an Immigration Department idea to keep details about travellers' itineraries and their emergency contacts. The details would be submitted on a voluntary basis and put into a new electronic database, which officials said could help locate travellers in dangerous areas. The initial idea is to send alerts via mobile text messages and leave information about emergency assistance, deputy director Chan Kwok-ki said yesterday. At present, the department does not keep a record of outbound travellers' destinations or their contact information. In urgent cases, officials contact the families. "We want to give swift aid to travellers in emergency situations and we need to know where they are," he said. It would be up to individuals to decide whether to supply the information, Chan said. Director Simon Peh Yun-lu said the department would also make improvements to its 1868 hotline - an emergency number for travellers overseas - this year. Teams would be set up to provide additional manpower to handle assistance calls and public inquiries in emergencies. The assistance to Hong Kong residents unit, which handles the hotline, received 1,519 calls from residents last year, 62 of which related to traffic accidents and 551 concerned the loss of travel documents. Launched in August 2005, the hotline has received more than 5,000 calls from residents who ran into trouble abroad, including those relating to a fatal traffic accident in Egypt in 2006 and the Sichuan earthquake in 2008. Meanwhile, about 100 officers received training last year in preparation to take over management and operation of the Castle Peak Bay Immigration Centre, Chan said. The detention facility, currently managed by the Correctional Services Department, holds immigration law offenders who are awaiting deportation. The Immigration Department is expected to assume responsibility by April. Chan said the officers had received tactical training and been taught the necessary skills to maintain order at the facility, including how to use handcuffs, pepper spray and other weapons. "Our use of such equipment will be on a par with Correctional Services," he said.

Former CITIC Pacific boss Larry Yung Chi-kin emerged victorious yesterday after three minority shareholders suing him said they will discontinue their action. The move came after the Small Claims Tribunal agreed to a bid by Yung to move the lawsuit to the High Court. "The case involves complex legal issues that the tribunal didn't have the resources to investigate," Hong Kong Small Claims Tribunal adjudicator Wong Lai-wing said. Legal representation is not allowed in the tribunal, which hears claims for less than HK$50,000. Yung, 67, the son of late Vice President Rong Yiren, faced two retirees and a housewife, who were claiming a combined HK$115,516 in losses on CITIC Pacific shares after the company disclosed losses related to unauthorized currency bets. The claimants argued against a move to the High Court, saying they could not afford the legal fees to fight there. "I feel so disappointed about the result, this [tribunal] is supposed to be the place where we can find justice," minority shareholder So Wai-ching said after the hearing. "We don't have the money to pursue a lawsuit in the High Court, we just have to give up," the retired civil servant added. A CITIC Pacific statement dated September 16, 2008 and signed by Yung, said company directors were not aware of any material adverse change in the financial or trading position of the group. The claimants called that statement false and misleading information and said they lost money when they sold shares after CITIC Pacific disclosed its currency trades. The three shareholders had each bought 5,000 CITIC shares in October. The adjudicator said the claimants' belief that Yung was responsible for the company's action is an oversimplification of the law. "The circular was issued by the company, not the defendant," said Wong before ordering the case to be transferred to the High Court. Yung said in his filing to the tribunal that he signed the September 16 statement on September 5, before he was aware of CITIC Pacific's potential losses from bets the Australian dollar would gain against the US dollar. CITIC Pacific, which makes steel and develops property, bought currency contracts to fund an A$1.6 billion iron ore mine in Australia. The stock slumped 55 percent on October 21, 2008 in Hong Kong trading, six weeks after the board was informed of its currency troubles. That prompted two investigations and a bailout from its mainland state-owned parent, CITIC Group. Police are still investigating the case for possible prosecutions, Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung said last week. The Securities and Futures Commission, which has concluded its investigation, may consider civil proceedings if criminal charges are not brought, according to Chan.

Former ATV chief executive Feng Xiaoping was yesterday ordered by the High Court to pay debts of HK$300 million to Bank of China and to surrender properties he used as guarantees for loans.

Hong Kong Disneyland is considering issuing annual passes for Guangzhou residents in an attempt to boost the park's attendance and income, its managing director said yesterday. Speaking at the Legislative Council's economic development panel meeting, Andrew Kam Min-ho outlined the park's strategies for bringing in more mainland visitors. "We'll increase our sales offices in the mainland - including a new one in Chengdu - to increase our coverage in China," Kam said, adding that promotion campaigns would be held in 24 mainland cities. "For the Shenzhen and Guangzhou market, we're considering issuing an annual pass to increase their spending in the park." Currently, overseas tourists can buy an annual pass in Hong Kong and on the internet. The cheapest adult pass costs HK$650 and is valid on most weekdays; the deluxe one is priced at HK$1,300; the premium pass, with no entry restrictions, costs HK$1,800. The one-day admission fee for adults is HK$350. But Michael Wu Siu-ieng, chairman of Travel Industry Council, said issuing annual passes for non-residents of the city would be useless in boosting park attendance. "Even Shenzhen residents who have the multi-entry permits to visit Hong Kong mainly come here to go shopping. They only go to the park once a year," he said. "The annual pass should be a privilege for locals." The park pledged yesterday to boost attendance and the occupancy rate of hotels, especially in the off season. Secretary for Commerce and Economic Development Rita Lau Ng Wai-lan told legislators that although the park had yet to break even, it had brought a lot of tourists and economic benefits to the city. Lau said more than 700,000 visitors came to Hong Kong because of the theme park last year, up 17 per cent compared to a year ago. Lawmakers urged Disneyland to disclose more information to further increase the park's transparency, and the park said it would inform its shareholders of the request. The meeting was the first time lawmakers had discussed Disneyland's performance after it opened its books this month, disclosing a net loss of HK$4.4 billion in the three years to October.

The Hong Kong University of Science and Technology's (HKUST) business school has emerged as the first Asian school to advance to the top 10 on the annual Financial Times rankings of the world's top 100 MBA programs. Overall, the MBA program at HKUST was ranked ninth and was tied with the University of Chicago. It was placed 16th last year and 17th in 2008. HKUST was also ranked sixth for the "international experience" its program offered students. Its ranking for "international mobility", as measured by employment movements within three years of graduation, moved up two notches to 15th. This year's rankings also saw for the first time three Chinese schools making it to the top 30. Besides HKUST, the Chinese University of Hong Kong (CUHK) was also on the list, at 28th. Shanghai's China Europe International Business School was 22nd. The dean of the HKUST business school, Professor Leonard Cheng Kwok-hon, said: "We are delighted to have made this remarkable achievement ... [it] proves that schools in Asia, with determination and sufficient resources, are well-positioned to play a leading role in global business research." The dean of the CUHK's faculty of business administration, Professor Wong Tak-jun, said the ranking was a significant recognition of the faculty's efforts over the years. "Leveraging our faculty's China focus and extensive alumni network, we aim to nurture our students' insights in China," Wong said. This year, the faculty has launched new courses, including corporate risk management, to equip students on how to cope with the changing global business landscape, he said. The university said in a statement that despite the financial crisis last year, 47 per cent of its MBA graduates found jobs globally, in 13 countries. Meanwhile, the London Business School again took the top position in the Financial Times rankings. Last year, its MBA program shared the top ranking with the Wharton School of the University of Pennsylvania. Wharton came in second this year. Professor Sir Andrew Likierman, the dean of London Business School, said: "Our school is an institution of which we can all be proud." Of the students last year, 81 per cent found jobs within three months of graduation. "Considering the economic conditions over the previous year, we are pleased and proud of our graduates' impressive achievement," Likierman said.

Hong Kong Exchanges and Clearing (SEHK: 0388) will expand yuan-related business and attract more overseas companies to list in the city over the next three years, according to new chief executive Charles Li Xiaojia. "The internationalisation of the yuan would be the most eye-catching development in the global financial market over the next 10 years," Li said. "Hong Kong could be the best place for China to expand the role of the yuan into an international currency." The yuan is not yet freely convertible but senior mainland officials have declared an ambition to liberalise trade of the currency and allow it to act as a reserve currency for other central banks over the long term. "This will be a difficult and lengthy process but this is how Hong Kong can contribute to the development of China," Li said. Li compared the HKEx's development of yuan-related business to the introduction of H shares in Hong Kong in 1993 by then stock exchange chairman Charles Lee Yeh-kwong. "When we drink the water, we have to think of the one who dug the well," he said. "If Charles Lee had not dug the well in 1993 to bring H shares to Hong Kong, how would we have got so many H shares listing here? "We have to dig a well for the yuan business to let our next generation have the water to drink." But Li declined to disclose a concrete plan on how the exchange would develop the yuan business, only saying it would be a long-term strategy. Li and other senior HKEx management had a brain storming two-day meeting on Friday and Saturday to collect ideas for the bourse's new three-year strategy. Another meeting will be held next month. The meeting has set yuan business as a focus for the next three years. Besides that, the bourse has also reiterated its ambition to attract more international firms to list here. "Hong Kong is an international financial centre and it is very important for us to have more international firms to list here," Li added. Li again said Hong Kong and Shanghai were not competing against each other but were running a marathon together. "Hong Kong should run faster and we also want Shanghai to run faster. We should not want the others to run slowly to let us win the game,'' he said.

China*: Beijing aims to build itself into a "world city" on a par with Hong Kong, upgrading its status from an "international city", its mayor says. "Currently the national capital has entered into a new historic stage of building an all-round modernised international metropolis, Guo Jinlong said yesterday in a keynote speech to the city's annual legislature session. "Now we should have our eyes on building a world city." In a global commercial campaign in recent years, Hong Kong has claimed to be "Asia's world city". Guo would not elaborate on Beijing's objectives or put forward an agenda, but Huang Yan, the director of the Beijing Municipal Commission of Urban Planning, told Xinhua yesterday the government hoped to achieve the transformation into a "world city" by 2050. The international community generally regarded a world city as having a per capita gross domestic product exceeding US$15,000 a year while Beijing had just surpassed the US$10,000 mark last year, she said. Huang said a world city usually had a global influence on politics, economy and culture. It would be a favourite destination for headquarters of influential international organisations. Guo promised his government would "vigorously entice multinational corporations to set up their regional headquarters in Beijing". In his speech Guo said the capital faced an "extremely serious" pollution problem despite the improvement two years ago when the country invested massively in the city's environment to stage a "green" Olympics. He unveiled a target for "blue-sky days" this year of 73 per cent, or 266, on which air quality will be judged excellent or fairly good. That compares with the 285 such days achieved last year, which exceeded the target of 260. The capital spent 140 billion yuan (HK$159.3 billion) to combat chronic pollution and create a clean, green Beijing ahead of the 2008 Olympics, which included moving many high-polluting plants out of the city. Partly as a result of the clean-air initiatives Beijing has made the top 10 list of the most liveable cities in China in a popular annual housing market report by the China Academy of Social Sciences. However the average monthly pollution index has been rising since the Olympics, mostly because of a boom in private cars in the past two years and the reopening of some polluting industries that had been closed before the Games. "We will control the total quantity of pollutants generated and undertake trial reforms in the trading of pollution discharge rights," Guo said, without elaborating.

Beijing denied any state involvement in cyber attacks on Google and accused the United States of "double standards" as a row over internet freedom intensified. The central government fired off its latest salvo after the White House said President Barack Obama was "troubled" by Google's statements it had been attacked by China-based hackers. The internet giant has threatened to abandon its Chinese search engine. The "accusation that the Chinese government participated in any cyber attack, either in an explicit or inexplicit way, is groundless and aims to denigrate China," a government spokesman said. "China's policy on internet safety is transparent and consistent," he added, saying the country is itself the "biggest victim" of hacking. Separately, Microsoft chairman Bill Gates said the internet needs to thrive in China as an engine of free speech and described official censorship by Beijing as "very limited."

Wang Zihua's last pay rise was two years ago, and the 56-year-old Harbin post office worker is concerned that his 1,200 yuan (HK$1,365) monthly salary is being eaten away by rising prices. Mainland inflation remains tame, but prices have been creeping up in the past few months and policymakers may not only have to step up their rhetoric, but also the pace of monetary tightening, to prevent Wang's fears from becoming a reality. "I really worry that prices may rise more quickly in the future, especially for rice, meat and vegetables. After all, we can skip buying things like clothing and entertainment, but we can't skip food," Wang said. Inflation picked up to 1.9 per cent last month, its highest in 13 months, although still low by international standards. Some economists have dismissed the rise as a result of volatile food prices and bad weather, but these factors could profoundly affect consumer and corporate behaviour, in turn determining how fast prices may rise over the next few months. The central bank has been trying to fulfil its promise to manage inflation expectations by cracking down on speculation in the property market, curbing rampant loan growth, guiding market rates higher and lifting bank reserve requirements. However, double-digit economic growth in the fourth quarter of last year, accelerating consumer price rises and surging exports all shorten the odds that the central bank will go further and raise interest rates, perhaps as early as this quarter. "It's safe to say that this will only increase inflationary expectations, and inflationary expectations can be self-fulfilling. So there's no point for them to wait," said Qu Hongbin, the chief China economist with HSBC (SEHK: 0005) in Hong Kong, of last week's batch of strong economic data. In fact, food prices rose more than 5 per cent last year - with food accounting for a third of the consumer price basket - the country is particularly vulnerable to food price shocks. In 2008, food prices rose more than 14 per cent after pig stocks were hit by the blue ear disease, driving overall prices 5.9 per cent higher. What should be particularly unsettling for the People's Bank of China is that its own survey results for the fourth quarter show an index of future price expectations outstripping another of future income confidence by the biggest margin in two years. "If workers expect inflation to increase, they may argue for higher wages. If corporations see costs going up, they may want to raise prices," said Peng Wensheng, the chief China economist with Barclays Capital in Hong Kong. "That channel is particularly important given what happened last year - expansion of bank credit. That in itself already generated some inflation expectations." Mainland growth has led the global economic recovery, so how aggressively Beijing tightens policy is crucial for world markets. Last week, investors pulled a net US$348 million out of China-focused equity funds, the most in 18 weeks, fund tracker EPFR Global said in a report. Whether the country is too slow in responding to the inflation threat is hotly debated, although analysts agree that it faces a huge challenge. After mainland banks doled out a record 9.6 trillion yuan in new loans last year, they added 1.1 trillion yuan worth of credit just in the first two weeks of this month, causing the central bank to take punitive action against some lenders. Furthermore, with inflation creeping up, deposit rates provide only 35 basis points worth of incentive for consumers to keep their money in the bank. That may keep driving savers to equity and real estate markets in search of higher returns, confounding Beijing's efforts to tame asset price inflation. Managing inflation expectations is a long established facet of modern central banking. They are a useful gauge of real borrowing costs and public understanding of monetary policy. However, measuring where people and businesses expect prices to go is more art than science on the mainland. It lacks a market for inflation-linked securities and has few established surveys to track consumer and business views. Yu Song, a Goldman Sachs economist, expects prices to rise 3.5 per cent this year - assuming the government decisively tightens policy. He is concerned the mainland will not adjust its exchange rate enough to matter and exports will keep growing rapidly this year. That means the government will try to cool domestic demand using incremental steps that may be insufficient to keep prices pressures bottled up. "We may see inflation continuing to rise despite an apparently tightened policy stance," he said in a research note.

Confucius, now rehabilitated, may be back at centre stage of mainstream culture on the mainland but the ancient sage lags far behind blue-skinned aliens living in the fictitious world of Pandora when it comes to cinema pulling power. Confucius has taken 38 million yuan (HK$43.25 million) at the box office since its nationwide premiere on Friday. That pales in comparison with Hollywood blockbuster Avatar, which raked in 110.5 million yuan in its first three days. Avatar's box office takings on the mainland now stand at more than US$100 million, making it the most popular movie there. Even though the authorities have cut Avatar's run short in many cinemas to give more screen time to domestic films, it is highly unlikely that Confucius will ever come close to the US movie's record. With a production cost of 150 million yuan, Confucius aims to capture the hearts and minds of the younger generation, who are increasingly losing interest in traditional culture. The movie is fast-paced and action-packed, with the leading role played by Chow Yun-fat - the Chinese-speaking world's most iconic movie star. One of the mainland's sexiest actresses, Zhou Xun , plays Confucius' lover. Mainland authorities clearly hoped it would turn out to be a big hit. They made 2,500 theatre copies of Confucius, almost 1,000 more than for The Founding of a Republic - a political propaganda film released last year. However, the film is not arousing much interest among the young. "It sounds too boring to me. When I go to the cinema I'm looking to relax and have fun, not be lectured about Confucian teaching," said Chen Jinni , a Shenzhen bank clerk. He said he would rather watch a comedy, or Avatar in 3D. Sixteen-year-old Li Hua said: "Chow Yun-fat is too old. He's not popular any more. Watching Avatar is the coolest thing. "I won't waste my money. Our school organised for us to watch The Founding of a Republic in September. Maybe the school will organise for us to watch Confucius." Those who did watch it came back disappointed. "I love history so I went to watch the film. But I was totally lost ... My boyfriend even fell in sleep in the middle of it," said Helen Wu, a journalist in Guangdong, Beijing yesterday reiterated rules that see most screen time given to domestic films. The State Council also called for steps to boost the mainland film industry, such as building more digital cinemas and having studios raise funds through bank loans and by issuing shares and bonds. The statement came after the 2D version of Avatar was pulled ahead of schedule from cinemas on Friday amid charges that it had been shunted aside to make way for Confucius.

Jan 26, 2010

Hong Kong*: Bank of China is mulling a new share sale in Hong Kong to raise capital but has ruled out any additional equity issuance in Shanghai, according to analysts briefed by the bank on Monday. The bank, mainland’s largest foreign exchange lender, announced on Friday that it would issue as much as 40 billion yuan (HK$45.5 billion) worth of six-year convertible bonds to shore up its capital base and maintain its lending capacity. The Beijing-based lender also said it had received a general mandate to issue new equity equivalent to as much as 20 per cent of its existing shares to raise even more capital. Bank of China president Li Lihui told analysts in a teleconference on Monday that the lender had no plans for additional fund-raising in the Shanghai, or A-share, market, apart from its convertibles issue. He said, however, that the bank might sell new shares in the Hong Kong, or H-share, market. Li said the timing and size of any H-share offer was undecided, according to two separate analysts who participated in the call. Bank of China’s Hong Kong-listed shares were down 2.06 per cent at midday, while its Shanghai-listed shares were up 0.24 per cent. The bond and equity fund-raising proposal is subject to approval at a meeting of shareholders on March 19. The bank is majority-owned by the state. Bankers and analysts have identified Bank of China, the country’s fourth-largest lender by assets, as one of the banks most in need of an infusion of funds to meet the capital adequacy ratio mandated by regulators and so support a torrid pace of lending. According to calculations by Bocom (SEHK: 3328) International analysts, Bank of China will need to raise about 63.5 billion yuan on top of its convertible bond sales to reach an 11.5 per cent capital adequacy ratio by the end of 2012. By selling new equity equivalent to 20 per cent of its outstanding shares, it could raise 75.8 billion yuan in Shanghai and 32.4 billion yuan in Hong Kong, the analysts said. Bank of China was in talks with investment banks to raise as much as US$15 billion in new funds to meet tougher capital guidelines set by Beijing, sources familiar with the matter said in November. Lending by mainland banks totalled 9.6 trillion yuan last year, about twice as much as in 2008, supporting the government’s massive economic stimulus package but prompting concern that banks would need to raise fresh capital. Mainland banks went on a renewed lending binge at the start of the year, lending 1.1 trillion yuan in the first half of January alone, banking sources said last week, citing central bank data.

MTR Corporation (0066) is inviting developers for expressions of interest in two residential sites atop its Austin station - the first such move by the railway operator since the onset of the financial crisis in 2008.

The yuan business in Hong Kong could be more "market-oriented" with the market deciding how the Chinese currency should develop, said Joseph Yam Chi-kwong, former chief executive of the Hong Kong Monetary Authority. In an exclusive interview with Sing Tao Daily, sister publication of The Standard, Yam suggested that mainland regulators allow the yuan to trade and appreciate according to market demand. This, he said, will speed up the currency's internationalization. Yam was recently appointed executive vice president of the China Society for Finance and Banking - a research unit under the People's Bank of China. In his first media interview since retirement, Yam said he understood Beijing's concerns but said the authorities should put their minds at ease. "We are confident that the yuan's offshore market won't have much impact on its onshore market under a logical arrangement." The yuan business should not be limited to Hong Kong residents, or only mainland banks and their Hong Kong branches allowed to issue yuan bonds in the SAR, he added. "We should manage risks, rather than avoid them. There will be reward after the risk," said Yam, who has focused on developing the yuan business in Hong Kong since he headed the SAR's de facto central bank. In the early years of the decade, Beijing approved a series of yuan-related businesses including deposits, remittances and credit cards. Now the yuan can be settled globally through Hong Kong's real-time payment system, providing an efficient and safe platform for transactions. Yam also believes 2010 could be "a year for an exit policy, as loose monetary policies cannot be maintained amid inflation and fiscal deficit." And the government should also pay attention to hot-money fluctuations. Yam said Hong Kong will benefit from China's support. The mainland has achieved its target of 8 percent GDP growth last year. Hong Kong will be able to exit smoothly from stimulus measures if China winds down its stimulus successfully and maintains economic growth. Yam said when he was HKMA chief he had a host of aides to help him. Now he takes him two hours to do something than once took just 30 minutes. But retired life is relaxing.

In Hong Kong, a new year usually requires new money. As the Lunar New Year approaches, the Hong Kong Monetary Authority and the city's note-issuing banks are busy printing about 200 million new bills - mostly HK$20 notes - for a total of more than HK$4 billion in new currency to be used in lai see packets. Most Hongkongers want newly printed banknotes for their lai see packets, traditionally given to unmarried people as a gift and blessing in the Lunar New Year. In recent years the Monetary Authority and banks have been asking customers to accept "almost new" banknotes instead for environmental reasons. But their advice has not taken hold and new lai see money is still a big production. It takes roughly 266 tonnes of cotton to make 200 million banknotes, which occupy 333 cubic metres of storage space and could fill 13 20-foot containers, according to the authority. "The three note-issuing banks need to arrange 500 trips with security escorts to transport these brand-new notes," a spokesman said. In 2006, the authority introduced the so-called "ying-san note" or "good-as-new" note, hoping to lower costs and support environmental protection, the spokesman said. "Ying-san notes are perfectly suitable for use as lai see money. Using brand-new notes for lai see consumes a great deal of resources. Ying-san notes may help to reduce the resources and logistics involved." Authority statistics show that on average about 200 million new banknotes are printed to prepare for the New Year. If they were all HK$20 notes, the most common type for lai see, the amount would reach at least HK$4 billion. But considering that some people use HK$50, HK$100 or HK$500 bills in lai see packets, and others use the ying-san notes, bankers believe total lai see money may well amount to about HK$10 billion a year. Authority statistics seem to bear this out. Cash in the form of notes and coins circulating in the city during the Lunar New Year in January last year increased to HK$203.45 billion. This was up HK$17.66 billion on the HK$185.79 billion in circulation a month earlier. Then in February, after people opened their lai see packets and put the money back in the bank, the cash circulating in the city dropped back to HK$190.78 billion, or HK$13 billion less. During the two to three weeks leading up to the Lunar New Year, banks start letting customers queue up to exchange old bills for new lai see notes. Many banks refused to disclose figures, but Bank of East Asia (SEHK: 0023) said it needs about HK$400 million in lai see money, with the most popular bills HK$20 and HK$50. Banks also encourage customers to use ying-san notes. HSBC (SEHK: 0005) imposes a quota on new notes but not on ying-san bills. "Many customers are environmentally aware and choose to opt for the ying-san note over the new notes," a spokesman for HSBC said. But not everyone. "Some customers are not willing to accept non-newly printed notes," a spokesman for BEA said. "It is difficult to change tradition overnight. For environmental protection, we hope our customers can gradually change the habit of using only new notes for lai see." Derek Yung Kai-ming, chief executive of Prudential Assurance Hong Kong, said he would not mind using good-as-new ying-san notes. "The lai see packets are to send out your blessing to the others in the Lunar New Year and I do not think it needs to be brand-new money," Yung said. Most Chinese companies will also give a "start working lai see" to all employees on the first day back at work after the Lunar New Year. Prudential, for example, gives lai see to all its 4,000 agents. "I do not think the staff or agents will mind if the banknotes are brand new or not," Yung said. "For environmental protection reasons, maybe we should use the ying-san notes more." Max Chan, an executive of a listed company, said he would usually like to use newly printed bills for lai see packets but he would accept the ying-san notes provided they were in good condition. "However I would not accept the very old and dirty HK$20 notes because it is not good to send out very shabby banknotes in the Lunar New Year," Chan said. On the other hand, "if I send out lai see packets with HK$100, I would not care if they are new notes or not. The value is high enough to make sure the one who receives the lai see will be happy".

The finance chief has defended his comic-book bid to generate young people's interest in his upcoming budget. John Tsang Chun-wah also says he does not mind being turned into a "spirit" by netizens because it creates discussion. Tsang was slammed last year for using a comic strip to solicit views. However, he said in his blog the response to his move is good and he feels the end justifies the means. Distribution of 30,000 free copies of this year's financial comic strips to schools and the 18 district offices began two weeks ago. "Some people say it is not sufficiently serious to conduct consultations by means of a comic, fearing that some concepts may be too simplified," Tsang wrote in his blog. "But I believe that this kind of consultation is meaningful as long as we truly want to know the views of the public." His budget, due to be released on February 24, is widely expected to have measures to help the poor. Chief Executive Donald Tsang Yam- kuen hinted as much earlier this month when he told legislators during a question-and-answer session he is studying further relief measures to help the poorly paid and exploring more communication channels with youngsters. John Tsang also said in his blog he does not mind being turned into a spirit in a separate budget consultation advertisement that has been modified by one or more netizens. In a modified advert on YouTube, Tsang first pops up as a spirit between two diners discussing social welfare measures in a Hong Kong-style cafe, or cha chaan teng. He then appears as a headless spirit who can be recognized from his speech, in another clip featuring two fencers in action and a spectator voicing the hope more resources can be put into education. Later, Tsang appears with his arms extended and his face turning a bluish- green as two office workers express the hope government will boost the economy and improve the job market. In response to the 31-second video, which has so far attracted more than 46,000 hits, he said: "I definitely don't mind. My goal has been partially achieved as the promotional video has aroused public interest and discussion." This year's budget comic, written by Keith Ho and illustrated by manga artist Michael Fong, continues the adventures of main character Yat, who faces problems when preparing the budget of a university students' engineering club. In the story, Yat travels back to the Three Kingdoms era, 220AD to 280AD, to seek insights.

New Horizon Capital, whose co-founders include Wen Yunsong, son of Premier Wen Jiabao, aims to raise a US$1 billion private equity fund for investment in domestic industry leaders ready to make initial public share offerings. This would be the third and largest private equity fund for New Horizon Capital, which had about US$500 million under management since it was established in 2007, according to sources with direct knowledge of the matter. New Horizon Capital recently completed raising between US$600 million and US$700 million for its latest fund by the “first-closing” period, with capital commitments from investors including Japan’s Softbank Corp and Singapore’s state investor Temasek Holdings, the sources said. New Horizon Capital started pitching the fund as early as 2008. It encountered fundraising difficulties as a result of the financial crisis, and so suspended the fund until early last year, the sources said. “That was very tough time, but now people are willing to pour money into the fund again since China is still the focus worldwide,” said a source. Softbank, run by influential Japanese business tycoon Masayoshi Son, and Temasek Holdings were long-time investors since the firm launched its first fund in 2007, the source said. The sources declined to be identified because of the sensitive nature of Wen’s family background. A representative for New Horizon Capital could not be immediately reached for comment. Wen Yunsong, also known as Winston Wen, helped form New Horizon Capital in 2005, a few years after graduating with an MBA from Kellogg School of Management at Northwestern University in the United States and returning to mainland, according to the sources close to Wen. Between graduation and the launch of New Horizon Capital, Wen founded a telecommunications equipment maker whose key clients included large banks and securities firms, according to media reports. Wen later sold the company. Beijing, which has historically viewed private equity firms as speculators, is becoming more welcoming of foreign private equity funds to boost investment in the country, thereby creating more jobs, viewed by the government as a key issue in maintaining social stability. Despite Wen’s background, New Horizon Capital is considered a foreign fund because of its legal structure and the foreign sources of its dollar capital. New Horizon Capital’s first fund was launched in 2007. Soon afterwards, Wen and his management team, which includes long-time friends from Wen’s days in the United States, made some quick investments in privately-held mainland enterprises with the potential to become market leaders. “They have a very stable team … They were school-mates or old friends. They know each other very well,” said another of the sources. More recently, New Horizon Capital bought a large stake in Shenzhen-listed wind power producer Xinjiang Goldwind Science & Technology Co, a leading wind power equipment maker in the country. Goldwind is seeking to raise US$1.5 billion via a Hong Kong listing this year, it was reported last week.

A new online submission system and the launch of an international competition for short films has resulted in a dramatic increase in the number of films seeking a place at this year's Hong Kong International Film Festival, more than doubling last year's tally to 804. However, fierce competition between the films is expected because only about 200 will be accepted by the festival, which celebrates its 34th anniversary this year. Organisers said films from North and South America, Europe and Australia were mainly responsible for the increase in submissions. The 804 films come from 69 countries and regions, compared to last year's 365 films from 50 countries and regions. Among them, 602 are feature films. Some 202 short films have been submitted, up from last year's 59. The executive director of the Hong Kong International Film Festival Society, Shaw Soo-wei, said the number of submissions reflected the city's important position in the Asian film market. "Hong Kong being at the crossroads of commerce with a long history in filmmaking, the HKIFF represents a destination to capture the fastest-growing markets, co-production opportunities and film project financing in Asia," Shaw said. The artistic director of the society, Li Cheuk-to, said the sharp increase in submissions was largely because of the inaugural short film competition, which opens a new door to many young filmmakers. Li said the new online submission channel helped filmmakers, allowing them to upload their films online rather than having to send DVDs. Although Asia, particularly China, was a growing market for films, the increase in the supply of films from the region was not as strong as that from Western countries, Li said. "It shows that Western countries, especially developed English-speaking countries, are still major suppliers of films, and the Asian market is a good market for them," he said. This year's submissions cover a much wider variety of themes than in previous years, Li said, adding that he held high hopes for the short film competition. Since the organisers have decided to cut this year's festival by six days to 17 days, only about 200 films will be shown, compared to 300 in previous years. Li said the shortening of the festival brought it into line with its duration when it was operated under the Leisure and Cultural Services Department. As well as selecting films from submissions for showing, organisers will invite specific films to participate in the festival. The programme will not be published until February 25. However, one film has been confirmed - the Asian premiere of the fully restored version of Fritz Lang's masterpiece Metropolis, to screen on April 1. The screening of the silent film, which had its world premiere in Berlin 83 years ago, will be accompanied by the live performance of the original score by Gottfried Huppertz, a close collaborator of Lang. The Hong Kong Sinfonietta, directed by renowned conductor Frank Strobel, will perform the score. The festival will run from March 21 to April 6.

Hong Kong Disneyland's net losses of HK$4.4 billion in the past three years is at "the high end of the scale", but could be corrected by reinvestment and increased market penetration, a theme park veteran says. "By the third year a park should be profitable," Darrell Metzger, the International Association of Theme Parks and Attractions' immediate past chairman said in an interview. Metzger worked in the Disney resorts in California and Tokyo for 10 years before running Ocean Park from 1991 to 1995. He also managed Sentosa Island Resort in Singapore for nearly seven years from 2001. Based on information revealed by Disneyland last week and a confidential document, which was seen by the South China Morning Post earlier, the theme park's HK$4.4 billion in losses does not include its first year when its loss was believed to be HK$1 billion or more. "Substantial losses for three years would indicate a more fundamental problem," Metzger said. He said Hong Kong Disneyland had found it difficult to "steal" loyal clients from Ocean Park and had to rely on broadening the market. One area Disney had to look at was its hotel occupancy rate, which dropped to 70 per cent last year because of the prevalence of human swine flu. By comparison, Disney hotels in Orlando and Tokyo usually had occupancy rates of between 80 per cent and 90 per cent. Metzger said Disney themed hotels required a higher occupancy rate because they had the added costs of providing entertainment such as appearances by Disney characters, which was more expensive than any five-star competitor would dare to spend. Hong Kong Disneyland last year attracted 4.6 million guests, with each visitor spending an average of HK$552. Raymond So Wai-man, associate professor of finance at Chinese University, estimated that the park could break even if it boosted either the attendance figure or average spending figure by 50 per cent to HK$828 per capita spending or 6.9 million guests. "Obviously, it's impossible to achieve that in a year," So said. "Under the most optimistic scenario, the number of guests will surge to 6.9 million visitors by 2014 if the attendance increases by 10 per cent year on year from now on." Disneyland's management has forecast that it will break even after 2014 when a HK$3.63 billion expansion is completed. Metzger agrees with this projection, saying the theme park "will be approaching break-even or mild profits in the next five years". Now based in California, he said the challenge to increasing attendance was in luring more visitors during non-peak dates, which required a solid and consistent marketing and sales strategy. Metzger expects Disneyland to be a must-see Hong Kong attraction for tourists in 10 years. He believed the park helped enrich Hong Kong as a tourist destination and was "characteristically ahead of the curve" with Singapore opening Universal Studios this month and South Korea in 2014, as well as Shanghai Disneyland opening in several years. Legislators will discuss Disneyland's performance at today's meeting of the economic development panel.

What goes around comes around. Having angered hundreds of people with the editing of the live broadcast of the Hong Kong Film Awards last year, TVB (SEHK: 0511) has finally lost the game to ATV, which will be airing the awards show for the first time in 14 years. According to a person familiar with the situation, ATV has won the tender for the exclusive rights to broadcast this year's awards show on free terrestrial television by default. The source said TVB lost the rights not because it was unwilling to pay the seven-digit fee for the rights, but because it made some technical mistakes when submitting its tender. He did not elaborate on the mistakes. The news of ATV winning the rights was welcomed by many in the industry, the source said. "Many have been unhappy with TVB's treatment of the Hong Kong Film Awards as it showed a lack of respect to the organisers and the film industry while scoring a lot of advertising dollars with an awards show funded by public money," the source said. The Hong Kong Film Awards received a HK$5.85 million subsidy from the Film Development Fund last year. Hundreds of viewers complained to the Hong Kong Film Awards Association about TVB's handling of last year's awards show, in which a segment paying tribute to filmmakers who had died in the past year was edited out to accommodate commercials. TVB, which ended its three-year contract with the association after last year's ceremony, also shortened Josephine Siao Fong-fong's acceptance speech for a life-time achievement award and cut out a speech by ATV veteran actress Nina Paw Hee-ching, who won best actress. The association subsequently held an open tender for this year's broadcast rights. ATV said it will assist in producing the ceremony but the association will call the shots. The broadcaster said it will not edit out any segments without the organisers' consent. TVB could not be reached for comment. The association said details of this year's broadcast rights will be announced at a February 9 press conference, at which the year's nominations would also be unveiled.

Plans by US President Barack Obama to curb risk-taking by banks are unlikely to adversely affect Asia's risk-averse financial institutions, analysts say.

Health chief urges pregnant women: Get the jab - Worried mothers-to-be are being urged to set aside unproven concerns that the human swine flu (H1N1) vaccination can hurt the unborn and to go ahead and get the jab. The plea was made as Hong Kong's health chief said it would have been "irresponsible" if the government had not advised pregnant women to get vaccinated against H1N1 for they have a much greater risk of serious illness than most people if they are stricken with the pandemic flu. Secretary for Food and Health York Chow Yat-ngok was defending the vaccination policy after two women suffered stillbirths on a single day last week. That was just weeks after they received the jab. A 33-year-old woman lost her 37-week unborn baby on Tuesday after receiving the vaccine on December 27. But she was suffering from gestational diabetes when admitted to Queen Elizabeth Hospital, health authorities said at the weekend. On the same day, a 37-year-old woman suffered a stillbirth at Tuen Mun Hospital. She got the jab on December 28. "We still have not been able to confirm the cause of death," Chow said of the Tuen Mun case, but he insisted no evidence has been found to connect the stillbirth to the vaccine. Investigations for common causes of stillbirths - including infection and genetic and metabolic disorders - are being carried out in both cases. From 150 to 220 stillbirths are recorded in Hong Kong every year. Meanwhile, Chow said there is no scientific evidence and therefore no reason to change the vaccination policy for high-risk groups. Pregnant women have 10 times the risk of serious complications from the flu that require hospital attention, he said, and in some cases the virus means death. "If we did not have [this policy] it would be irresponsible," he said of the recommendation that pregnant women be vaccinated. Worldwide, there has not been confirmation of any flu vaccine causing fetal deaths - a fact that had Chow cautioning: "We must be very careful to draw conclusions." Chow's plea was echoed by Shane Solomon, chief executive of the Hospital Authority. He urged pregnant women to receive the jab because the risk of them needing intensive care in hospital is 10 times greater than that other people face. While pregnant women remain high on the flu fighters' worry list, fears are easing over youngsters because many have built up an immunity to H1N1. If recommendations by scientific committees of the Centre for Health Protection are accepted, primary school children will not be a target of a mass- vaccination program. The committees examined "local serology data, which show that about half of the children have adequate antibody levels," a spokesman said. That suggests "a substantial number" already have immunity against the coming second wave of flu. So "the scientific committees do not regard primary school children as a special target group recommended for vaccination."

A security row is cooking after pictures of teens posing in restricted areas of Government House surfaced on Facebook. The group posted on the internet 40 pictures of themselves having fun at the expense of somber officialdom. The group of around 10 teens, a child and a dog is believed to have been attending a barbecue in the staff quarters of Government House when they were given access to the restricted zones of Donald Tsang Yam-kuen's official residence. They made the most of their photo opportunity by posing everywhere - in a ballroom, the kitchen, and next to senior government officials' private lockers. Others included some of the youngsters pretending to be the chief executive hosting senior officials and at a mock flag-raising ceremony. Some photos were taken in front of a present of calligraphy by former president Jiang Zemin that read "Tomorrow will be better," as well as close-ups of Tsang's pet koi. Their green "visitor" badges were clearly visible in a picture taken in the kitchen, although the date of their recent visit is unknown. A Chief Executive's Office spokesman said it is investigating how the group gained access to forbidden and private areas of the chief's home. The youths had been guests of a resident domestic worker. "We will talk to the domestic worker [today] to investigate why such photos were taken," the spokesman said. "The chief executive is totally ignorant of the incident." He added that staff living in the dormitory are allowed visitors though the photos appear to suggest someone was showing them around restricted areas. "Government House is a somber place which all visitors should respect," he added. It is the first known incident of a breach of restricted zones of Government House, though there have been several such incidents overseas. In November, a couple gatecrashed a White House state dinner and met President Barack Obama and his deputy Joe Biden. The US Secret Service only knew of the "scoop" after the couple uploaded their pictures with some of the most powerful people in the world on Facebook. In May, a royal chauffeur gave two undercover journalists a tour of Queen Elizabeth's stable of cars at Buckingham Palace. They got into the grounds without being searched and walked right past a uniformed police officer in a security booth.

Hong Kong actor Chow Yun-Fat and Chinese mainland actress Zhou Xun pose during a news conference for their movie "Confucius" in Hong Kong January 25, 2010.

China*: Five Chinese companies are targeting up to a combined US$1.1 billion from initial public offerings in Hong Kong this week, reinforcing the fundraising wave that made it the world’s No 1 IPO market last year. The companies came after Russian’s Rusal, the world largest aluminium producer, priced its US$2.2 billion deal in the mid-point of the range last week, and several of this week’s deals are quite small. With a number of companies expected to float shares on Hong Kong markets this year, mainland will be represented by International Mining Machinery (IMM) and Chu Kong Petroleum & Natural Gas Steel Pipe, which plan to raise up to US$427 million and US$237 million respectively, from Hong Kong initial public offerings. Both companies are kicking off formal marketing roadshows on Monday, planning to set the trading debut for February 10. Coal mining machinery maker IMM, backed by private equity firm The Jordan Company, is set to sell 520 million new shares at an indicative price range of HK$4.88-HK$6.38 per share, according to a term sheet sent to investors. The issue will be priced on February 3 New York time and UBS and BOC (SEHK: 3988) International are handling the deal. Chu Kong plans to sell 300 million shares, including 83.3 per cent primary shares and 16.7 per cent secondary shares, at an indicative price range of HK$4.50-HK$6.15 apiece. JPMorgan and ICBC are underwriting the deal. Roadshows were launched last week for the other IPOs, which include property developer China SCE Property Holdings, which is set to raise up toUS$255 million, and reinforced materials maker Sija Group Company, aiming for up to US$133 million. Sportswear maker Meike International also plans to raise up to US$46 million. The Hong Kong Stock Exchange generated over US$30 billion in IPO proceeds last year, more than any other bourse, and plans to attract more foreign companies to diversify a listing pipeline currently dominated by mainland firms. Analysts expected Rusal’s listing could be the springboard for other Russian firms to tap into fervent demand from Asian investors. Several major IPOs are set for later this year, including American International Assurance’s (AIA) US$10 billion Hong Kong offering and Australia’s Resourcehouse plans to raise up to US$3 billion. There were five IPOs that raised just US$183 million in the first two months of last year, when markets were reeling from the financial crisis, according to Thomson Reuters data.

China last year overtook Japan to become the world's second largest diamond market behind the United States, with trade on the Shanghai diamond exchange rising 16.4 percent to more than US$1.5 billion (HK$11.7 billion).

Beijing widened its attack against US criticisms of internet censorship on Monday, raising the stakes in a dispute that has put Google in the middle of a political quarrel between the two global powers. China has stepped up its defence of curbs on the internet nearly two weeks after the world’s biggest search engine provider, Google, said it wanted to stop censoring its Chinese website and was alarmed by online hacking attacks from within China. Google’s complaints received backing from the White House, but China countered with accusations that Washington was using the internet to support subversion in Iran. The dispute has stoked friction between Beijing and Washington, already wrestling over trade, US weapons sales to Taiwan and human rights. The rising heat over the internet feud could narrow room for both sides to back down quietly while they seek to cooperate on broader financial and diplomatic worries. “The more this case takes on high-level political import for the Chinese government, the more likely it is to stick to its guns,” said David Wolf, president of Wolf Group Asia, a Beijing-based company that advises investors on China’s media and telecommunications sectors. “The Chinese government can’t be seen as backing down on such a fundamental issue,” said Wolf. US Secretary of State Hillary Clinton last week urged China and other authoritarian governments to pull down internet censorship, drawing a sharp rebuke from Beijing. After Google first made its criticisms, Beijing was tight-lipped. Now Chinese officials have decided to swing back at Washington. In the latest jab, a spokesperson for China’s State Council Information Office said the nation “bans using the internet to subvert state power and wreck national unity, to incite ethnic hatred and division, to promote cults and to distribute content that is pornographic, salacious, violent or terrorist”. The comments from the unnamed spokesperson were issued on the central government’s website. “China has an ample legal basis for punishing such harmful content, and there is no room for doubting this. This is completely different from so-called restriction of internet freedom,” the spokesperson said. The government comments were accompanied on Monday by scathing official newspaper commentaries aimed at Washington. “This year, we’re seeing problems over trade, the Dalai Lama, and US weapons sales to Taiwan coming to the surface,” said Jin Canrong, a professor of international relations at Renmin University in Beijing. “The politicisation and ideological turn of the Google case could make it more difficult to work together. The basic need for co-operation, economically and diplomatically, hasn’t changed, but each of these issues could disrupt co-operation from day to day.” President Barack Obama may meet the Dalai Lama, Tibet’s exiled Buddhist leader, in coming months. Beijing calls the Dalai Lama a dangerous separatist for seeking Tibetan self-rule, and is sure to be angry about such a meeting. Washington has also unveiled arms sales to Taiwan, the self-ruled island Beijing regards as a renegade province. The State Council Information Office is the cabinet arm of China’s propaganda apparatus, which is steered by the Communist Party, and is one of several agencies behind internet policy. The latest comments from China made no direct mention of Google or Clinton. They appeared intended to amplify the government’s case that its internet controls are for it to decide, and expressing non-violent views online can be a crime in China. China has jailed dissidents and advocates of self-rule in Tibet who have used the internet to challenge Communist Party policies and one-party rule. Late last year the country’s most prominent dissident, Liu Xiaobo, was jailed for 11 years on charges of “inciting subversion”, largely through essays he published on overseas internet sites. On Sunday, the People’s Daily, the mouthpiece of the Communist Party, accused the United States of exploiting social media, such as Twitter and YouTube, to foment unrest in Iran. On Monday, the paper said Washington was hypocritical about internet controls, noting the US has laws seeking to restrict images and words that can be seen by children. “This ‘internet freedom’ that is being promoted everywhere is nothing more than a foreign policy tool, a fantasy of freedom,” said a commentary in the paper. Since Google said it could pull back from China over censorship and hacking, the company has stressed it wants talks with Beijing seeking ways to defuse its complaints. But, especially in ideologically-sensitive sectors such as the internet and media carefully watched by the Communist Party, foreign companies can find political uncertainties never far from the negotiating table. “Google may look back and see it pursued an ill-advised course by bringing in the US government in such high-profile way,” said Wolf, the industry consultant. China has blocks YouTube, Twitter and Facebook, and imposes a “Great Firewall” of filtering to stop citizens seeing banned images and ideas on overseas websites. On Monday, China’s Ministry of Industry and Information Technology, rejected suggestions the government was behind the sophisticated hacker attacks described by Google.

Li Na upset Caroline Wozniacki 6-4, 6-3 to join compatriot Zheng Jie in the Australian Open quarter-finals on Monday, the first time two Chinese players have made the last eight of the same grand slam. In a match in which both players struggled to hold serve, the big-hitting Li grabbed the momentum to seal the first set then raced to a 2-0 lead in the second.

The Taliban have freed four Afghans abducted in the north earlier this month along with two Chinese engineers, who remain in militant custody, a police official said on Monday.

Hundreds of protesters in Guangdong donned masks to protest a planned incinerator plant, the latest grassroots initiative to target polluting projects in the region.

A tower constructed by China's state-owned television broadcaster as part of its new headquarters, gutted in a spectacular fire last year, will be rebuilt and not demolished, state press said on Monday. Much of the north tower of the new China Central Television (CCTV) complex will be stripped of everything but its main structure, which was not seriously damaged in the deadly blaze, and rebuilt, the Beijing News said.

The World Bank said on Monday recent moves by mainland to clamp down on rampant lending were the “best way” to tackle the problem of rising inflation and the threat of asset bubbles.

SAIC Motor Corp, mainland’s biggest automaker, plans to sell its UK-made MG cars in Europe at the end of the year as it moves to revive the British vintage brand it took over three years ago. SAIC, which has had initial success selling its own-brand cars domestically, has joined the rush of mainland automakers, including Geely Automobile Holdings (SEHK: 0175), hoping to make a name globally.

Travel peak for upcoming Spring Festival starts in E China.

The Chocolate Wonderland will finally open to the public on the square at the north side of the Bird's Nest Stadium on January 29th. As the first chocolate theme park in China, the Chocolate Wonderland will feature artifacts made from 80,000 kilograms of chocolate. Aside from enjoying a visual feast of chocolate-made famous Chinese sculptures, visitors will also be able to learn how to make chocolate and taste their creations during the three-month display. The 20,000-square-meter chocolate wonderland consists of five indoor halls, including the World's Chocolate Hall, World's Candy Hall, Wonderland Theme Hall, Sweet Experience Hall and Sweet Gift Hall, and outdoor activity areas Sweet Stage and Sweet Shopping Street. The chocolate exhibition includes the largest chocolate replica of the Great Wall in the world; life-sized chocolate replicas of the Terracotta Warriors and chocolate waterfalls. Zheng Yaoting, general manager of Beijing-based Artsource Planning Company, says all the chocolate comes from Belgium, and costs more than 200 yuan a kilo. A regular ticket for the Chocolate Wonderland will cost 80 yuan, while it will be 60 yuan for the elderly and other concessionary groups.

Chinese Premier Wen Jiabao (3rd L) visits Kazak shepherds at a village in the suburbs of Altay, northwest China's Xinjiang Uygur Autonomous Region, on January 23, 2010. Wen visited blizzard-hit Xinjiang on Saturday and Sunday. Chinese Premier Wen Jiabao has promised to take effective measures to help people through the worst snow in Xinjiang in six decades, said a statement from the State Council General Office Monday. Wen visited Altay and Tacheng, two regions in northwest China's Xinjiang Uygur Autonomous Region, on Saturday and Sunday, the statement said. "The Spring Festival (China's Lunar New Year holiday) is drawing near. We must implement well relief measures and make sure that people in blizzard-hit regions will have a peaceful and happy festival," said the Premier at a meeting with Xinjiang officials on Saturday evening. The central government would provide more support to affected regions, including funds and relief materials, he said.

Jan 25, 2010

Hong Kong*: A price war has broken out, to the delight of iPhone users in the city, as Smartone-Vodafone becomes the second telecom operator to offer 3G iPhone services. Rival operator 3 Hong Kong sweetened its subscription plans yesterday in response to Smartone's launch of such services on the same day. "We are entering into a price war with Smartone," said Max Wong, a spokeswoman for 3 Hong Kong. "After reviewing Smartone's current price plans, we've come up with new plans." The mobile operating arm of Hutchison Telecommunications (SEHK: 2332), which had been running 3G iPhone services since mid-2008, added 500 minutes of basic airtime to each of its price plans for such services. The airtime in 3 Hong Kong's HK$138 monthly plan with a 16-gigabyte iPhone 3GS, for example, was increased to 900 minutes to beat a Smartone subscription that features the same monthly fee and same handset model. Smartone's plan offers a basic airtime of 800 minutes, twice the basic airtime under 3 Hong Kong's old subscription plan. The Smartone plan charges HK$3,680 for the handset, on a par with the old 3 Hong Kong plan. n response, 3 Hong Kong lowered its handset price by HK$100 to HK$3,580. A spokesman for Smartone-Vodafone said he did not see any need to engage in a price war over the 3G iPhone services. "There is a large demand for smartphones. People who want to use iPhones are looking for services provided by a quality network," he said, adding that the Smartone prices were already very competitive. He said Smartone was known for its reliable and high-speed data transmission. A technology jointly developed by Smartone and Chinese University enabled iPhone 3G users to watch video clips of a wide range of formats with ease, the spokesman said. Hundreds of people queued up yesterday to subscribe to Smartone's iPhone 3G services at New Town Plaza in Sha Tin, where the operator was hosting a launch party. In the same shopping mall, 3 Hong Kong hired 30 models to hand out discount coupons for its services. Apple's iPhone models come in storage capacities of 8GB, 16GB and 32GB. An 8GB iPhone 3G normally costs HK$4,488 if bought independently of a service provider plan, while the top-of-the-line 32GB iPhone 3GS model sells for HK$6,288. The 3GS is said to be the fastest and most powerful iPhone to date, with a data processing speed twice that of the iPhone 3G.

Guangzhou Automobile Group Co, the Chinese partner of Japanese car giants Toyota and Honda, plans to sell shares in Hong Kong, seeking foreign capital to boost its domestic expansion. China's sixth-largest automaker will go public in Hong Kong through a backdoor listing using its Denway Motors unit, Denway said in a statement to the Hong Kong Stock Exchange on Friday. However, the listing would not offer shares for public subscription, said Denway. Denway shares, which doubled last year, jumped 7.58 percent to HK$4.97 (64 cents) in Hong Kong on Friday after the announcement and amid expectations Guangzhou Auto would pay a premium to take it private. Guangzhou Auto now holds a 37.9 percent stake in Denway, a Hong Kong-based investment company controlling units and associates engaged in vehicle manufacturing and trading, according to the company's website. Guangzhou Auto will also exchange shares for stock in Denway Motors Ltd which may or may not be at a premium to Denway's current trading price, said Denway, adding that the ratio of the share exchange would be determined after the Hong Kong bourse approves the listing. Guangzhou Auto submitted an application for a share sale to Hong Kong's stock regulator on Jan 19, according to the statement. "A backdoor listing would not generate any cash for the moment, but Hong Kong is obviously an ideal funding platform for the automaker in the long term," John Zeng, an analyst with IHS Global Insights, was quoted by Bloomberg as saying. Such a listing would also allow Guangzhou Auto to simplify its structure for investors by taking away its listed Denway unit, and replacing it with shares in the parent company. Last year, Guangzhou Auto started aggressive expansion initiatives in the mainland in the hope of raising its competitive edge among the over 100 industry players across the country. In May, it bought a 29 percent stake in sports utility vehicle maker Hunan Changfeng Motors Co to become the firm's biggest shareholder, promising to triple its annual production capacity within three years.

Cheung Kong (Holdings) (SEHK: 0001) has outbid seven developers to win a small residential site in Sham Shui Po, underscoring the demand for urban sites. The developer outbid rivals including Sun Hung Kai Properties (SEHK: 0016) and Henderson Land Development (SEHK: 0012) for the 36,000 sq ft Urban Renewal Authority (URA) site at the junction of Lai Chi Kok Road, Kweilin Street and Yee Kuk Street. It can build three residential blocks with about 390 units, including 60 with facilities for the elderly. "Strong interest is expected as urban sites are always sought after," said Pang Shui-kee, the managing director of surveyor SK Pang. He estimated that the total investment cost would be HK$1.45 billion, or HK$4,500 per sq ft. Janny Chan, an assistant sales director at Midland Realty in West Kowloon, said new projects in the area were going for HK$4,800 to HK$5,200 per sq ft as Sham Shui Po was popular with first-time buyers. Home prices in Sham Shui Po have jumped as much as 30 per cent over the past 12 months, Chan said. "Prices for some 20-year-old units have increased to HK$1.3 million from HK$1 million early last year." According to the tender document, the winning bidder has to share profits with the URA once the project's turnover reaches HK$2.2 billion, the proportion of profit to be shared ranging from 20 per cent to 50 per cent.

It would have been standard for many boys and girls in Hong Kong - parents nagging them to stop reading comics or watching cartoons and do something useful. But for Arnold Wu King-lok, Japanese animation was the inspiration for a life-long passion for building electronic robots. Wu's favorite is the Juohmaru series, and it is one of his aims to build a robot based on the character. Juohmaru is a fictional model robot in a 1983 Japanese television series, Plawres Sanshiro. What impressed Wu about the series was the main character's ability to control his robot with a notebook computer, so he vowed to build a similar prototype. A quarter of a century has passed but the 36-year-old still has the same goal. In 2008, he set up a workshop in Kwun Tong, where he and a couple of dozen other enthusiasts gave vent to their passion. Wu beams with pride as he displays a small army of his robots, each meticulously hand-assembled and fitted with dozens of servo motors and integrated-circuit chips connected by bundles of colourful cables. One of these, probably Wu's favorite, is imposing and menacing, with a pair of eye-like LEDs. Wu says his hobby is fairly affordable as each figure costs a few hundred to a couple of thousand dollars to build. And the components can be reused to build new models. "The greatest satisfaction comes more from the process of building the robot rather than the end product," Wu said. "You start with an abstract concept, then you design and build the circuitry, joints and body parts. After countless trials and errors, and solving one problem after another, you finally succeed. That is a very satisfying experience." Wu says robot-building is not a nerdy loner's pastime, and he has used it as an opportunity to build a wide social network. Two years ago, he started the RoboDream Workshop in an industrial building in Kwun Tong, with heavy-duty drills, oscilloscopes and other equipment which enthusiasts use when they meet to assemble robots. But he insists that his family comes first. "Sometimes, my wife will complain. But the hobby does not affect my family life," he said. Wu's experiment with robotics began in 1986 when he bought an Apple IIe computer. Unlike other fledgling computer enthusiasts at the time, many of whom were busy writing programs for computer games, Wu was more interested in using his state-of-the-art machine to manipulate electronic toys. Among his earlier projects that were exhibited at the Hong Kong Joint School Electronics and Computer Exhibition, one involved a robot arm and a device that printed the Braille alphabet for the blind from ordinary text. At the age of nine, Wu took an illustrated book of electronic projects from a rubbish bin, and began to build gadgets from it. And in secondary school, he was chairman of an electronics club. Wu learned metalwork and carpentry at a technical school, and is a self-employed interior designer. Sometimes, he is able to apply the skills of his hobby to real life, like when he helped a friend build robot elves for a Christmas event in Disneyland's Small World. And he wants to apply his robotics skills to help others, such as those with disabilities, he said. Maily Liu, of the Hong Kong University of Science and Technology, who helps organise the Robocup Junior Hong Kong, an annual robot tournament for students of all levels, says the hobby of building robots has grown in popularity. "Last year, there were more than 130 teams from 69 secondary and primary schools participating in the competitions," she said. "In the past, the robots' movements were a bit stilted, but recently, the motions have become more human-like."

For 72-year-old Yu Tai, scattering her husband's ashes into the sea yesterday after a simple, 10-minute ceremony seemed a natural choice. "Humans belong to nature. It's good to return to nature when you die," Yu said. Yu was a member of one of six families on the government's first free ferry service for burials at sea. After the 35-minute boat ride from the Sai Wan Ho public pier to the east of Tung Lung Chau, the families prayed and burned joss sticks. The vessel paused as each family took about 10 minutes to perform a simple ceremony. They scattered the ashes of their cremated relatives into the sea, using a 1-1/2-metre half-tube. Only human ashes and a handful of flower petals were allowed to be scattered into the water. Lau Oi-wan, who scattered her mother's ashes from the ferry, said sea burials were cheaper and saved waiting for an urn in a columbarium. "It takes a long time to get an urn. I don't come from a rich family - we would need to save up to buy one, they're very dear," she said. The new service will run every Saturday at 9am. Each boat trip will take up to 10 family groups, limited to seven family members, relatives or friends. The free boat service has been contracted out for a year at a cost of about HK$180,000. Tang Pui-han, who was also aboard the ferry, said sea burials had a practical advantage - saving space. "You need space to build columbariums. It wastes land. But sea burials save land so that it can be used for other purposes," she said. However, Food and Environmental Hygiene Department director Cheuk Wing-hing said sea burials would not replace urns. "We will try our best to provide more urns to meet public needs," he said. "We are not using sea burials to replace urns - we're just providing another choice." The Hong Kong Sea Burial Service Centre has provided ferry services for sea burials since 2006. Centre social worker Chan Fuk-chi said the government should loosen regulations for memorial services at sea. "People have different religious beliefs. Christian families want to have a pastor present, while other religions want to burn offerings. The department's memorial ceremony is too simple. We should respect the wishes of the deceased," he said. Cheuk said allowing pastors on board would be considered in a review of the service. St James Settlement social worker Gary Sham Chi-wing welcomed the free service and said it would help poor families. "Those families who have financial difficulties will benefit," he said. "But sea burials will not solve the urn shortage issue. The government should act to solve that." Since July 2007, Hongkongers have been able to apply to scatter the ashes of relatives at three maritime locations: areas east of Tung Lung Chau and Tap Mun and one south of the West Lamma Channel.

Locals dominate Bruce Lee contest - Architects from Hong Kong, Poland and Shanghai were named the winners in the professional category of a competition calling for ideas on the best way to restore Bruce Lee's former home in Kowloon Tong. Hongkongers made a clean sweep of the open category. The Ideas Competition for Bruce Lee's Residence drew more than 140 entries from around the world. It was jointly organised by the Institute of Architects, the Institute of Planners and the Institute of Surveyors, with support from the Tourism Commission. However, the organisers said the designs were just ideas and would not necessarily become a reality. Secretary for Commerce and Economic Development Rita Lau Ng Wai-lan said the entries reflected one of Lee's best-known quotes: "As you think, so shall you become." She said the strong response from more than 20 countries - including African nations, Greece and the Netherlands - showed Lee's widespread influence. With the competition wrapped up, Lau would not disclose whether the two-storey house at 41 Cumberland Road, which was at one time a love hotel, would be restored as a memorial hall for the film and martial arts legend. Lee spent his final years there before his death in 1973 at the age of 32. Current owner Yu Pang-lin has agreed to donate the HK$100 million property. He said he had been negotiating with the government on the restoration plan and hoped it could go ahead as soon as possible. "I'm in my 80s now, and I hope to see this project completed in my lifetime," Yu said. Hong Kong team Jimmy Yuen Gi-tsun and Cheung Kwai-yin's Journey of Little Dragon won first prize in the professional category. Yuen, a 34-year-old landscape architect, said he was a fan of Bruce Lee. The local team's design - featuring an undulating structure resembling a dragon's body - caught the eyes of judges, including Lee's daughter, Shannon. "I'm very excited. This is totally unexpected," Yuen said, after receiving a trophy and the HK$50,000 prize. Polish architect Witold Opalinski's design won second prize and HK$25,000. It also resulted in his first trip to Asia, and today he will visit Lee's former home for the first time. Opalinski, 31, said he admired Lee and had spent nearly three months working on his design, which incorporates the concept of yin and yang. The third prize was awarded to a team from Shanghai. Yu had planned in 2008 to sell the house and other properties to raise funds for Sichuan earthquake victims, but he decided not to go ahead with the sale after receiving pleas to preserve the property. He later proposed to increase the floor space to 30,000 sq ft and turn it into a museum complex with a cinema, library and martial arts center. All entries are on show at City Hall until February 4, the Hong Kong Cultural Centre from February 9 to 16, and the Sha Tin Town Hall from February 23 to March 6.

One of the features of the 2008-09 global financial crisis was the decline in prices across asset classes as investors shunned risk, casting doubt over the benefits of diversification. Currency was an exception. Since currencies have relative prices, it is impossible for all to decline at the same time: whenever one falls, its counterpart rises. This is why currency diversification is a good investment strategy even in the worst of times. Last year, most currencies rose against the Hong Kong dollar in the second and third quarters in tandem with the US dollar, which stabilised in the last quarter of 2009 and into 2010. Jan Friederich, a Hong Kong-based senior economist with the Economist Intelligence Unit, says the fundamentals are set for a "mildly stronger US dollar this year" as there is a shift to tightening in the United States. The prospect of a stronger Hong Kong dollar diminishes the appeal of the higher interest rates earned on currencies such as the Australian and New Zealand dollars. Last year the aussie and kiwi strengthened by 29 per cent and 24 per cent respectively against the US dollar, placing them among the best performers of the world's most traded currencies, along with the Brazilian real and South African rand. Any weakening this year could easily offset the higher interest rates earned by holding deposits in these currencies. The Reserve Bank of Australia became the first G20 central bank since the recession to raise rates, in October last year, raising the benchmark from 3 per cent to 3.25 per cent, then to 3.5 per cent in November and 3.75 per cent in December, resulting in a widening interest rate differential between Australia and other countries. Once other countries start to raise rates, the prospect of a narrowing interest rate differential may see the aussie weaken. One fear is that tightening in the US will see the greenback-aussie carry trade unwind. In 2007-08, the aussie was bid up as speculators borrowed cheaply in yen at extremely low interest rates to buy the currency. Last year, extremely low interest rates in the US encouraged speculators to borrow cheaply in US dollars to buy the aussie. Countries which send a large proportion of their exports to China - like Australia and Brazil - last year saw their currencies outperform those which trade mainly with the US and EU. This year, says Bilal Hafeez, global head of FX strategy at Deutsche Bank, "US-linked currencies may outperform China-linked currencies", referring to countries which will benefit most strongly from a recovery in US demand. Nevertheless, while China has moved early to slow bank lending this year, BNP Paribas senior strategist Chin Loo Thio notes that "there is still support for commodity currencies such as the Australian dollar this year" since the China growth story is still intact. There is a strong overlap between currencies referred to as "China-linked" by analysts and those referred to as "commodity currencies", given the importance of Chinese demand to the price of commodities ranging from iron ore to copper. Two currencies which will benefit strongly from a recovery in the US are the Canadian dollar and the Mexican peso and can be viewed as "US-linked currencies" although both countries are also oil exporters. This is because news about the US economy has a more direct impact on them than news related to China's economic performance. Forecasts for both the loonie and the peso are, however, mixed for 2010. Analysts expect the loonie to remain flat this year (albeit with more potential to rise than fall) while the peso is being boosted by many analysts who are promoting it as one of the cheapest emerging-market currencies. Mexico's currency has rebounded strongly so far this year. As in other markets, timing is crucial when it comes to forex, too. Uncertainty over the outlook for inflation around the world suggests that investors should avoid locking into longer-term time deposits this year, opting for shorter-term (up to three months) fixed deposits rather than longer periods. Forecasts for the year hinge on how markets will react to the withdrawal of the unprecedented measures in response to the crisis. Some estimate that these non-conventional measures are likely to start to be removed in the US as early as March, well before interest rates are actually raised by the Federal Reserve. The US dollar may strengthen up until the point that tightening is perceived (by the markets) to have actually begun and then reverse. Consequently, a period of relative US dollar strength may provide Hong Kong investors with an opportunity to buy currencies that will benefit from the recovery in the US. Most importantly, investors should take care to reap the benefits of diversification. For Hong Kong investors already invested in the mainland's stock market, beware that buying Australian dollars is essentially the same bet. Exposure to emerging-market equities may best be accompanied by increasing holdings of developed-market currencies. Asia's capital controls mean it is easier to speculate on an improvement in an emerging market's economic prospects by buying shares traded on that country's stock exchange. In contrast, betting on a developed country by buying its currency can offer a better return than buying shares, and at lower transaction costs.

Hong Kong's public housing estates are going green. In recent years, the Housing Authority has been using its public housing estates as laboratories for the latest green technologies, a move that could help reduce Hong Kong's air pollution and encourage more sustainable building practices. Some of the authority's latest efforts can be seen in Yau Lai Estate, a newly built housing estate in Yau Tong that opened last year. Standing near the estate's main entrance are three green walls covered in a mix of grass and climbing plants. While the walls also serve a decorative purpose - the arrangement of red and green plants on one is based on a drawing of a fish made by Yau Tong schoolchildren - a study completed last November found that the greenery cooled temperatures on the walls' exterior surface by up to 16 degrees Celsius. Temperatures on their interior surface dropped by 1.5 to 3.5 degrees. If the green walls are adopted on a widespread basis, they could significantly reduce housing estates' energy consumption by cutting air-conditioning costs, said the Housing Authority's chief architect, Clifford Cheng Chiu-yeung. They would also help cool the outside ambient temperatures. That in turn would reduce Hong Kong's urban heat-island effect, which has been making summer weather even hotter and more unstable than normal. The walls are part of a collection of tools the Housing Authority is using to green its estates. Ten green roofs have been built over the past few years, mostly on low-rise structures within the housing estates, such as wet markets and rubbish depots. Twenty per cent of each new housing estate land area is now required to be devoted to greenery, and the authority plants one tree for every 15 residents. "We've begun to rethink how we should build," said Ada Fung Yin-suen, the authority's deputy director of development and construction. "Slowly and gradually over the past 10 years, we've increased the greening ratio of our properties by planting more trees and gardens, but also by looking into things like green roofs." Each green wall and green roof is a testing ground for different types of plants and maintenance techniques. Before planting, a root barrier and several drainage layers are built on the roof, followed by a lightweight soil mix. At Choi Ying Estate in Kowloon Bay, a layer of grass was laid on top of a shopping centre. In nearby Diamond Hill, Fu Shan Estate's wet market was covered by different-coloured species of sedums - a small, water-retaining shrub - arranged in the pattern of a fish, a design meant to symbolise prosperity (SEHK: 0803). Hong Kong's long, hot summers limit the number of plants that can be used. According to Evans Iu Po-lung, the Housing Authority's chief landscape architect, only three of 50 species of sedums can survive here. In one experiment at Ching Ho Estate in Sheung Shui, a green roof covered in sedums was not watered for three months in an experiment meant to test the plants' durability. More than 70 per cent died. "Originally, we used some decorative plants in our greening projects, but we were criticised by ecologists, so we're exploring more native species," said Iu. One local species of wedelia, a creeping plant, was rejected for use on roofs and the ground because it attracted rats, but it has proven effective for vertical greening. The Housing Authority's willingness to experiment has been a boon for local developers of green building technologies. The walls at Yau Lai Estate make use of a newly patented green panel technology developed by Strongly International. Having a high-profile public body like the Housing Authority as a client has helped the company demonstrate that its technology is feasible, said its technical director, Jaime Yeung. Strongly's products use a soil substitute made from a mixture of organic materials such as bark and recycled paper. It weighs 90 per cent less than natural soil, and does not settle and harden when wet. For a green wall, the soil is placed in small plastic pots that are plugged into brackets on a steel frame. About 30 different plants can be used, depending on wind conditions, the local microclimate and how much maintenance a client is willing to perform, said Yeung. Strongly's own studies have shown that a green wall can reduce interior temperatures by as much as 8 degrees, he said. But it is harder to estimate how much of an impact a green roof or green wall has on the city's wider environment. "The heat-island effect in Hong Kong is more severe than in other parts of the world because it's very congested and the ventilation is poor because of all the high-rises," he said. "But the impact depends on the density of installations. If you only have a 10-square-metre wall in an area like Mong Kok, it won't make much difference. It really depends on government policy to make it more commonplace." The problem is that green-panel technology is expensive to implement and maintain. A green wall that Strongly developed for Sau Mau Ping Estate in Kwun Tong cost HK$6,000 per square metre to build. Annual maintenance can cost 3 to 8 per cent of the wall's initial construction cost. For the Housing Authority, which draws most of its revenue from rental income, the expense of building green walls and green roofs means that only a handful of projects can be completed each year. "We want to green everything possible, but we can't do it extensively unless costs come down," said Fung. Jim Chi-yung, a professor of geography at the University of Hong Kong, is currently performing a vertical greening experiment on the roof of the university's main library. "Very few people are willing to invest millions of dollars to green a wall," he said. "Some developers are trying to put flower pots on walls, basically. We should make use of nature's climbers without having to put soil on the walls. Otherwise the methods used are so expensive." Another problem is public awareness. Hong Kong has been slow to embrace green technologies, said Iu, because many people in Hong Kong still are not aware of the city's environmental challenges. In one estate, he said, residents who were allergic to pollen from native cottonwood trees asked the Housing Authority to chop the trees down; it refused. "Most people brought up in such an urban environment have no knowledge of nature," he said. "Many people are scared of caterpillars, without realising they are harmless, for example. We need to change the mentality of people towards greening if we want to go forward. The most critical thing is to get our residents to accept and agree with what we're trying to do." For that reason, the Housing Authority is investing in so-called environmental "software" to complement hardware like green roofs. Last year, it invited tenants to grow their own plants in estate gardens. Back at Yau Lai Estate, the green walls have been well received. Oscar Wong, 19, was walking to the MTR when he stopped to gaze at one of them. "I think it's good for the environment," he said. "In Hong Kong the air is very polluted, and maybe this can help make it cleaner."

China*: China on Friday firmly dismissed accusations by the United States that Beijing restricts Internet freedom and warned such claims were damaging to relations between the two nations. "The US has criticized China's policies to administer the Internet and insinuated China restricts Internet freedom," said Ma Zhaoxu, spokesman for the Foreign Ministry. "China's Internet is open and managed in accordance with law." His remarks followed a speech on Thursday by US Secretary of State Hillary Clinton in which she spoke out against Internet censorship and urged China to investigate a wave of cyber attacks against Google. Search engine giant Google last week threatened to end its operations in China, citing disagreements with Chinese government policies and cyber attacks it claims originated in China. The Internet and other technologies are critical to US foreign policy, and those who engage in cyber attacks should face international condemnation, Clinton said. Beijing has played down the row with Washington over the Google issue, and leaders insisted it is simply a legal matter and should not be linked to China-US relations. However, Ma on Friday urged the US to stop using the so-called freedom of the Internet to make groundless accusations against China, which he said is also threatened by cyber attacks. China is one of the countries most active in developing the Internet, while Chinese citizens' freedom of speech is protected by the Constitution, said the spokesman. Ministry refutes US claims China restricts InternetAccording to official statistics, China has 384 million netizens, including about 180 million bloggers. Both China and the US should "enhance dialogue and communication to handle rifts and sensitive issues appropriately, protecting the healthy and stable development of relations", Ma said. His comments suggest China does not want the dispute to overwhelm cooperation with the Obama administration, which has sought Beijing's backing on economic policy and diplomatic standoffs, Reuters reported. Chris Adams, minister counselor for trade affairs at the US embassy in Beijing, told reporters on Friday that the Google issue is an individual case, although it is of great concern to the US. Google has made the decision based on the business environment in China and the rest of the US community has to decide how to go forward in China given the conditions, including cyber security issues, Adams said. Fu Mengzi, a researcher for the China Institutes of Contemporary International Relations, said sovereign nations must supervise Internet content to maintain social security. "Every country has rights to protect its national security and the US is no exception," he said, adding that Chinese netizens have sufficient access to the information they need in line with laws. What China did is to safeguard the security of information flow on the Internet, he said. "It's wrong to set up a false dichotomy between Internet freedom and supervision," he said. Fu also pointed out that Google has broken Chinese laws by providing links to pornographic sites and infringing intellectual property rights. However, Sun Zhe, a professor on international studies at Tsinghua University in Beijing, advised China to speed up the process of unveiling fresh policy on Internet freedom. China "needs a stable legal framework to set the standard for domestic enterprises and international companies", he said. Google must understand and respect China's Internet supervision policy, even if it does not agree with it, he said. "If Google is convinced the hackers who launched these cyber attacks against them came from here, it should provide any clues it has to the government. China will be glad to help find the attackers," he said.

A Chinese doctor examines an injured girl in Port-au-Prince January 23, 2010. The second group of 15-strong Chinese doctors will arrive at the Haitian capital on Monday to take the place of another 15 medical staff sent among the first 50-person Chinese rescue team.

China will have two players in the last 16 of a grand slam for the first time after Li Na beat Daniela Hantuchova at the Australian Open yesterday to join her compatriot, Zheng Jie, in the fourth round. Li, who in recent years has vied with Zheng for top-player status in China, passed the milestone with a hard-fought 7-5, 3-6, 6-2 win over the Slovakian, and will face Caroline Wozniacki, Denmark's fourth-seed, for a place in the quarter-finals. "It was not easy to play against [Hantuchova] because we are friends, so it was a little bit of a different feeling, but still you can see we were both fighting a lot on the court," the 27-year-old said. Li, who became China's first title-winner in 2004 and first to reach the last eight of a grand slam with her run to the quarter-finals at Wimbledon in 2006, has become used to milestones, and was not all that fussed about passing another. "I didn't play last year. If I had played, I think it would have happened last year," Li, whose friend Zheng reached the fourth round in 2009, said. "I think it's very good [for] Chinese tennis, [for] women. It's because we are working so hard and never giving up in every match ... step by step." Li, who boasts a powerful forehand, reached the quarter-finals at the US Open last year, where she was stopped by eventual champion Kim Clijsters, but the 16th seed has never gone further than the fourth round at Melbourne Park. In preparing for her next match, Li will be more careful about dining out, after a visit to Melbourne's Chinatown left her feeling sick. "I was looking around Chinatown, so every day I've found a different Chinese restaurant; I prefer Chinese food," said Li, who hails from Wuhan, the Yangtze town known for sweltering summers and where hot food is popular. Li said she had found the "best" spicy restaurant in Chinatown, but may have overdone it. "I ate there two days in a row, but now my stomach feels so bad," she said. Wozniacki, who beat Israel's Shahar Peer 6-4, 6-0, conceded she would have to be at her best against Li, after the Chinese number-one beat her in the first round in Sydney a week earlier. "I'm going to do my best. She's a great player; she beat me last time," the 19-year-old Dane said. "It's going to be a tough fight." Elsewhere yesterday, American sixth-seed Venus Williams, a finalist in 2003, beat local favourite Casey Dellacqua 6-1, 7-6 (7-4).

When wealthy Beijingers bought flats in one of the city's most exclusive apartment complexes, they claim they weren't told a four-lane highway would be built beneath their windows. Now hundreds of them are threatening legal action against secretive Hong Kong billionaire Hui Wing-mau, the founder and chairman of the Shimao Group. The residents of Shimao Olive Garden say they will sue the property tycoon - also known as Xu Rongmao - unless his Shimao Property (SEHK: 0813) company helps stop construction of the highway. The block, with its exclusive views over the Olympic National Park, is considered among the five most desirable places to live in the capital. "We were duped into buying our homes because Mr Hui's company did not disclose the land around our complex was subject to future development," said Ruben Liu, a financial investor who is spearheading the residents' protest. "We stand to have our quality of life ruined by an expressway and will lose millions of yuan because our properties will drop in value." Peter Wong, an American business owner married to a Chinese national who is also co-ordinating the campaign, said: "We have been cheated. We were led to believe by the Shimao Group that our homes were built on protected green belt. But we have been given government documents that claim the Hong Kong developer was made aware that future construction had been approved and was likely. You don't expect such deception from a Hong Kong company." A spokeswoman for the Shimao Group in Hong Kong said the company's Beijing office had been in contact with the residents. "It's the first we have heard about this issue at headquarters [in Hong Kong]. We are investigating the complaints and will work with the residents for a solution," she said. More than 100 residents staged a protest this month, unfurling a large banner calling for a halt to construction and for the Shimao Group and Beijing government "to protect our rights". They also used a 40-strong fleet of cars - including Maseratis, Ferraris and Mercedes-Benz - adorned with protest stickers to block construction vehicles and halt work for several hours. A poster campaign around the complex calls on its 6,000 affluent residents to take action. It also calls on them to pour funds into a legal war chest in readiness for a court showdown with Hui, a justice of the peace who is ranked sixth on the latest Forbes China 400 Rich List with a net worth of US$3.85 billion. Wong said: "We have the support of 300 residents so far. We are determined to get justice. We are not out to make trouble, but we know our rights and cannot be cheated like less well off citizens. We will seek compensation from Mr Hui if the road is completed. But our aim is to fight to have it stopped." The expressway will link a new mass-housing complex 1.5 kilometers away in Changping district to the Olympic park in Chaoyang district. Both district administrations and the developer claim construction of the road is legal. As part of their well-organised and well-funded protest, the Olive Garden residents have targeted municipal urban planning officers. But their act of middle-class militancy has rattled the authorities. On January 11, police vehicles blocked the road when 60 residents boarded three coaches taking them to the offices of the municipal urban planning department for a protest. Seven residents were allowed to meet senior officials, who handed over an official document - since seen by the Sunday Morning Post (SEHK: 0583) - that states construction of the road was approved in 2000. Government officials said the Shimao Group was made aware of future building projects before it broke ground in 2003. In an official letter issued two weeks ago, the Beijing government "suggested" the construction be stopped. But Wong said work continues around the clock. "The government's reaction has been meaningless," he said. The flats were sold on the strength of their quiet, green and prime location and stunning views. A brochure states: "Excellent quality makes you feel at home ... Shimao noticed the remarkable regional, ecological and viewing value of the national forest park." The flats sold for between 15,000 and 20,000 yuan (HK$17,000 and HK$22,700) per square meter in 2005. Property agents say prices have doubled since then. A bridge being built across the Qing River is the focus of protests. Speaking from her 33rd floor penthouse Angela Chui said: "We saw the diggers and workers move in at the start of December. We thought they were building another footbridge, but then we saw the protest posters and were told by other residents the expressway will come within 10 meters of the complex. "We were told the land around us was protected by the government. The work is taking place on what we believe to be green belt. We have to fight to stop it." Wong said: "We have been brushed off by officials and the Shimao Group. But we will not be ignored."

US and Chinese diplomats have held several meetings to discuss the alleged China-based cyber attacks on Google, including one with the Chinese ambassador, according to the US State Department. "We are having high-level meetings and we will continue to have meetings, and we will continue to press this issue aggressively," spokesman Philip Crowley said. "We will continue to seek an explanation from China." The confirmation of meetings between the two sides was made as US President Barack Obama said he was "troubled" by cyber attacks on Google and wants answers from China. Crowley said the latest US-China meeting was between Kurt Campbell, US assistant secretary of state for East Asian and Pacific affairs, and Chinese ambassador Zhou Wenzhong . The discussions covered a speech on internet freedom by Secretary of State Hillary Rodham Clinton which drew a sharp reaction from Beijing, the cyber attacks on Google and the "broader aspects of our relationship", he said. "We have a broad relationship with China," Crowley said. "We think it is far more stable than it has been in some time. That said, we have a range of issues where we have, you know, disagreements." A White House spokesman said Obama was also looking to Beijing to shed light on the cyber attacks, which prompted Google to say it will stop censoring Web search results in China, a move that may force it to leave the country entirely. "As the president has said, he continues to be troubled by the cyber-security breach that Google attributes to China," White House deputy spokesman Bill Burton said. "As Secretary Clinton said, all we are looking for from China are some answers." Clinton urged Beijing to conduct a thorough and transparent probe into the cyber attacks on Google and criticised China and other nations for censoring the Web and restricting the "free flow of information". Her comments drew the strongest reaction to date from Beijing in the dispute over Google, with the foreign ministry saying the United States should "respect facts and stop using the so-called internet freedom issue to criticise China unreasonably". Crowley said the US had "taken note" of the Chinese foreign ministry's statement but had no further comment. He also said Washington had not yet made a formal request to Beijing, known as a "demarche", asking for an explanation for the cyber attacks on Google. Beijing has also stepped up publicity to defend its internet policies. China needs no lessons about its internet from the United States, Beijing Association of Online Media chairman Min Dahong told official media yesterday. "How China's internet develops and how it is managed are Chinese people's own affairs," Min said in an interview with "On the internet question, China doesn't need any lessons from the United States on what to do or how," he said. Xinhua also quoted Zhou Yonglin, deputy director of the operational department in the national computer network emergency response technical team (CNCERT), as saying China is the largest victim of internet hacking. Google has not yet stopped censoring search results on, but Google chief executive Eric Schmidt said on Thursday it would happen soon. "We continue to follow their laws, we continue to offer censored results. But in a reasonably short time we will be making some changes there," he said. Google, the world's top search engine, said it may shut its Chinese-language website and offices in China after alleged cyber attacks originating from China, which also targeted other firms and human rights campaigners using its Gmail service.

The unloading volume of imported alumina at Lianyuanggang Port has reached some 300,000 tons in Jan., and its unloading volume of imported alumina totalled 2.6 mln tons in 2009, ranking atop of China.

Zhou Taocan's garment company had few customers during the first half of last year. But now, as his business is picking up, he can't find enough workers. "Businesses are bouncing back. We are looking for more workers," said Zhou, general manager of a Hong Kong-funded garment company based in the manufacturing city of Dongguan. The company cut its employees from 500 to 300 in the first half of last year due to reduced overseas orders following the global financial crisis. "But we faced a shortage of workers in the second half of the year since businesses are picking up," Zhou said. Zhou's company is not alone. Many factories in the Pearl River Delta region in Guangdong province, a major economic powerhouse in South China, cannot find enough workers as their businesses recovered in the second half of last year. "We found it hard to hire skilled workers in the last year, especially at the year's end, as a growing number of workers returned to their homes earlier than before," a manager surnamed Chen with Guangdong Aihua Group. The Shantou-based company, which mainly produces woolen garments, is in need of more workers this year as it has expanded production lines, Chen said. Sources with Guangdong foreign economic and trade authorities said Guangdong's exports will see an annual increase of 10 percent this year, which means more workers are needed as orders increase. "We have to upgrade technology and facilities to reduce the use of more workers. And we will increase salaries and welfares to attract skilled workers," Chen said. Sources with Dongguan labor and social security authorities said that the job requirement rate in the city hit nearly 1:2 last month, which means one worker is offered two jobs. "It is unusual since the rate used to be lower in previous years," Chen Weibiao, general manager of Dongguan Sanhe Human Resource Center, told China Daily. Only about 1,000 workers were looking for jobs at a job fair last month in Zhongshan, another manufacturing city in Guangdong. At the fair, companies were offering about 5,000 jobs. "We are planning to organize more job fairs for local companies to hire workers," Chen said. At Guangzhou railway station on Friday, a 35-year-old migrant worker surnamed Zhou said he would not come back to the province after the Spring Festival. "I want to find a job in inner regions or probably open my own business," said Zhou, carrying two bags at the railway station and preparing for a train back to his hometown, Anhui province. "My salary was not increased last year. Friends have told me my current salary is almost the same as theirs in my hometown," said Zhou, who has been working in a toy factory in Shenzhen for three years. The shortage of workers may drag small- and medium-sized enterprises into a "crisis" because the economic rebound has not been based on a solid foundation, said Liang Guiquan, a researcher with Guangdong provincial situation study and research center. But Liang said that the worker shortage may help speed up industry upgrading and migrant worker utilization in the Pearl River Delta area. "Companies, if they want to hire fewer workers, should do more in facilities and technology upgrading," Liang said.

Lenovo chief executive Yang Yuanqing announces the company's LePhone smartphone, which runs on a version of Google's Android. Lenovo Group (SEHK: 0992) , dismissing any impact of Google's likely exit from China, says sales of its mobile internet devices will one day surpass those of personal computers in its core mainland market. The world's fourth-largest maker of personal computers insists the conflict between Google and the mainland government will not affect its new business, noting the collaboration with local technology suppliers on its latest handheld products. Chief executive Yang Yuanqing yesterday unveiled three mobile internet devices, including a smartphone that runs a version of the Google-developed Android operating system. This came days after Google postponed the launch of two new Android-based mobile telephones, made by Motorola and Samsung Electronics, for 3G network operator China Unicom (SEHK: 0762). That led to heightened tensions over Google's dispute with Beijing about censorship at its Chinese-language internet search service and online attacks that targeted the company and other large foreign enterprises on the mainland. He Zhiqiang, the chief technology officer at Lenovo, said the company's new LePhone handset used a customised version of Android that was developed by a local partner. "We are co-operating with other major Chinese internet services providers, including Sina, Sohu and Tencent (SEHK: 0700)," He said. The LePhone will be released on the mainland in May and on international markets later in the year. Lenovo also presented its Skylight smartbook, a blending of smartphone and netbook, and the IdeaPad U1 hybrid notebook, which features a detachable screen that can be used as a multi-touch tablet computer. The Skylight, which will debut in April in the United States, and the U1, which will be available in the third quarter, run on customized versions of the free Linux operating system. Shares of Lenovo climbed steadily in yesterday's trading to close 4.2 per cent higher at HK$5.65. "Their mobile internet device line-up looks pretty good, but the most difficult part now is execution in the consumer market to make these successful," JP Morgan Securities analyst Charles Guo said. Yang announced yesterday the approval by shareholders of Lenovo's plan to reacquire for US$200 million the handset manufacturing company it sold in 2008. The computer maker would buy in cash and shares 100 per cent of Lenovo Mobile Communications Technology from an investor group led by Hony Capital, the private equity arm of parent firm Legend Holdings.

Cold weather hits N China's Inner Mongolia

Jan 23 - 24, 2010

Hong Kong*: A leading member of the Basic Law Committee, Maria Tam Wai-chu, on Friday criticised the Civic Party and the League of Social Democrats for telling people to “rise up” when promoting their by- election campaigns to force a “de-facto referendum” for universal suffrage. On Thursday, Civic Party leader Audrey Eu Yuet-mee said Hong Kong had reached a critical juncture in constitutional development and people had to “rise up” against an unjust system. But Tam said she took issue with such an expression, explaining that it was the wrong choice of words. “It is unfortunate that she [Eu] used the word ‘rise up’ - because the word refers to someone who wants to use force to over throw the government.” Pro-Beijing businessman and deputy to the Ninth National People’s Congress of China Chan Wing Kee was also critical of the mass resignation plan. He appealed to the Democratic Alliance for Betterment of Hong Kong (DAB) not to send any candidates to contest the by- elections. “If people treat it as a mock de-facto referendum, then it is better not to participate,” said Chan. “Because it would seem they are also supporting a de-facto referendum which contravenes the Basic Law.” Audrey Eu Yuet-mee on Friday again defended the plan, saying the pan-democrats had to take a stand. “You have to come out and fight for yourself and the next generation,” she said. On Thursday, the two pan democratic parties announced five lawmakers would resign from the Legislative Council by next Tuesday to trigger by-elections and force a “de-facto referendum” on democracy. Their resignations would come into effect by next Friday. The lawmakers set to resign are Alan Leong Kah-kit and Tanya Chan of the Civic Party, and “Long Hair” Leung Kwok-hung, Raymond Wong Yuk-man and Albert Chan Wai-yip of the League of Social Democrats.

Nicole Ip Wing-shung poses with the new kind of tomatoes in the city at FarmFest 2010 in Mong Kok on Friday. More than 250 stalls would offer fresh organic agricultural and fishery products at Fa Hui Market in Mong Kok from Friday, a government spokesman said. FarmFest 2010 is the largest market for local farmers to sell organic products. The event is expected to attract over 100,000 visitors. The three-day event has been organized by the Agriculture, Fisheries and Conservation Department, Vegetable Marketing Organization, Fish Marketing Organization and the Organizing Committee of FarmFest. The market will resemble a Tai O fishing village, with a running waterfall and stilt-houses as the backdrop, the spokesman said. “Of the 250 booths, more than 150 will sell local premium produce, including fresh organic tomatoes, lettuces and cabbages, seafood and ornamental plants,’’ he said. About 100 booths will also sell local delicacies and gourmet food. Cultural performances and cooking demonstrations will also be shown. The festival is open from Friday to Sunday, from 10am to 8pm. Admission is free.

More than 260 overseas companies established bases in the territory last year, Director-general of Investment Promotion at Invest Hong Kong Simon Galpin revealed on Friday. In 2009, Invest Hong Kong spent about HK$110 million organising seminars and study tours for overseas and mainland investors. This was to promote investment in the city. “This has helped 265 companies set up or expand their businesses in Hong Kong,” said Galpin. “The mainland continued to be the single largest market by source of completed projects, followed by the US and UK,” Galpin said. He expects new companies would help create more than 6,000 new jobs within their first two years in Hong Kong. Hong Kong remains the base in Asia from which overseas, mainland and Taiwanese companies prefer to expand their business,” Galpin said. He noted that 2009 had been a “very challenging” year due to the global economic crisis.

Owners who refuse to have their buildings inspected by the government may face a HK$50,000 fine and a year in jail. Under new proposals, buildings 30 years or older must be inspected every 10 years while those 10 years and above face window safety tests every five. To ensure compliance, the Buildings Department will issue inspection orders to owners of around 2,000 premises every year, the Development Bureau said. There will be also be a fixed penalty of HK$1,500 for those who refuse to have their windows inspected. Repeat offenders will be subject to a maximum fine of HK$25,000 and three months' imprisonment. Director of Buildings Au Choi-kai said about 15,000 buildings will be subject to mandatory inspection while the windows of 30,000 others will come in for closer scrutiny. A bill on the mandatory scheme will be gazetted today and submitted to the Legislative Council on February 3. To encourage compliance, the Housing Society will provide subsidies to owners of buildings for their first inspections. However, Secretary for Development Carrie Lam Cheng Yuet-ngor said the government has no plans to introduce a means test. She said such tests would not be cost- effective since the cost of inspections will be just HK$400 to HK$2,400 per home depending on building size. To ensure public money is appropriately spent, government subsidies will not cover luxury blocks. But even then, about 80 percent of buildings will enjoy subsidies, Lam said. It will take seven to 10 years to complete the inspection of all buildings under the proposed scheme. Lam hopes the scheme will take effect in the fourth quarter of next year, provided the Legislative Council passes the bill. The government will also table another bill to lower the threshold of compulsory land-sale applications from 90 percent to 80 percent for buildings that are 50 years old or older. "Our purpose is not to speed up the pace of tearing down buildings," Lam said. "However, we are trying to lift the barriers as some buildings are already badly dilapidated but developers cannot move [in] because of the current threshold." Much-required redevelopment will help rejuvenate these areas and improve residents' living environment. The details of the bill were arrived at after a thorough public consultation, Lam said. `We initially planned the policy to cover buildings 40 years and older but we eventually made it 50 years after hearing public views."

China*: Beijing hit back at US criticism of internet censorship and hacking on Friday, warning that relations between the two global heavyweights were being hurt by a feud centred on web giant Google. US Secretary of State Hillary Clinton on Thursday challenged Beijing and other authoritarian governments to end internet censorship, an issue that has jumped to the heart of US-China ties after Google threatened to quit China due to hacking and web restrictions. China’s Foreign Ministry said the US criticisms could hurt relations between the world’s biggest and third biggest economies, already strained by disagreements over trade imbalances, currency values and US weapons sales to Taiwan. “The US has criticised China’s policies to administer the internet and insinuated that China restricts internet freedom,” said spokesman Ma Zhaoxu. “This runs contrary to the facts and is harmful to China-US relations. “We urge the United States to respect the facts and cease using so-called internet freedom to make groundless accusations against China,” Ma said in a statement carried on the Foreign Ministry website. But the spokesman also indicated that his government did not want to see the dispute overwhelm cooperation with the Obama administration, which has sought Beijing’s backing on economic policy and diplomatic standoffs, such as Iran and North Korea. Ma said each side should “appropriately handle rifts and sensitive issues, protecting the healthy and stable development of China-US relations”. On Thursday, Chinese Vice Foreign Minister He Yafei played down the dispute with Google and indicated that his government was more worried about broader economic and political disputes that could flare up in coming months. Clinton’s speech criticised the cyber policies of China and Iran, among others, and demanded Beijing investigate the hacking complaints from Google. Facebook, Twitter and YouTube are blocked in the mainland, which uses a filtering “firewall” to prevent internet users from seeing overseas web sites with content anathema to the Communist Party. “Sino-US ties have been impacted,” Shi Yinhong, an international relations professor at Renmin University in Beijing, said of Washington’s push on internetcontrols. “China has admitted there are areas where it can improve, and then Clinton made her comments in a public venue, comparing us to Egypt and Saudi Arabia,” he added. “So I think over the past year Clinton’s speech is the most undiplomatic thing she’s said.” Some sections of the Chinese media were quick to criticise Clinton’s remarks. But many of the mainland reports were themselves cut from websites within hours of appearing. It was unclear why they were removed, but mainland websites often adjust or cut content based on propaganda authority instructions, especially for volatile issues. Many cyber-experts suspect that the hacker attacks from China on Google and other targets were so sophisticated that official involvement was likely. Ties between China and the United States have been put to the test in recent months over trade, currency, climate change and arms sales to Taiwan. With the two giant nations joined at the hip economically, Sino-US tensions are unlikely to escalate into outright confrontation, but could make co-operating on global economic and security issues all the more difficult. Earlier this month, China denounced the US sale of Patriot air defence missiles, capable of intercepting Chinese missiles, to Taiwan, which Beijing claims as its own. China announced its own anti-missile test soon after. Beijing has warned that more US weapons sales to Taiwan could badly bruise relations with Washington, and has urged President Barack Obama not to meet the Dalai Lama, the exiled Buddhist leader of Tibet who Beijing denounces as a separatist. “I think over the short haul [the Google issue] is going to go away because other problems that the US and China face are rather numerous,” said Niu Jun, an international studies expert at Peking University. “I think economic and trade issues are still more important.”

WTO director general Pascal Lamy says trade friction between US and China is bound to rise but said his institution was up to the task of ensuring that Washington and Beijing never get into an all-out trade war. Trade friction between the United States and mainland over everything from cars to chemicals will increase in the coming years as the world’s biggest importer and exporter buy and sell more of each other’s goods, the World Trade Organisation’s director general said Thursday. Pascal Lamy said his institution was up to the task of ensuring that Washington and Beijing never get into an all-out trade war that could have devastating consequences for the global economy. The WTO will be challenged over the next two years as unemployment figures remain high and test the free trade credentials of world leaders, he predicted. “There is no risk of slipping into a trade war,” Lamy said in an interview. Placing the US-China relationship in a historical context, Lamy compared it with the tensions that existed between Washington and Tokyo in the 1980s and between the US and Europe over different periods in recent decades. In these cases, disagreements increased as the value of their trade expanded, he said. But the international trade body with its negotiations and rules for settling legal disputes defused the tensions. The United States and mainland are engaged now in a series of trade spats over issues such as steel, poultry, patents and Hollywood films. Google’s threat to pull out of mainland over concerns about censorship and security also could sour relations between the two countries. “The question is not whether there is friction, the question is whether it is handled the right way,” Lamy said. The 62-year-old Frenchman, a former European Union trade commissioner, is now in his second term as director general of an organisation that resolves international commercial disputes and negotiates new rules for export of farm produce, manufactured goods and services. In the 4½ years since Lamy entered office, healthy economic growth has been replaced by a crippling global slowdown. Annual trade crashed by 10 per cent after 16 years of uninterrupted growth. And the vision of a 150-nation deal to tear down trade barriers around the world has been partly replaced by the immediate challenge of preventing countries from erecting new obstacles to each other’s goods. Lamy credited the WTO’s close monitoring of countries last year for preventing a slide into global protectionism where countries break the rules to shield domestic jobs from foreign competition – pressure that was only natural, he said, as financial markets collapsed and whole economies teetered on the edge. “We are certainly not out of the woods on protectionism,” Lamy said. “The fundamental reason there is a protectionist impulse has to do with the job market. We know that unemployment will remain high this year, maybe even next year.” He didn’t elaborate, but some trade observers believe the danger could be even greater in 2010 as governments shift their focus to job creation plans from last year’s stimulus packages and financial bailouts. As governments try to make it easier on national companies to hire people, free-trade principles may be sacrificed along the way, with the ultimate risk being a worldwide descent into a trade war as happened during the Great Depression, the argument runs. Lamy has been pushing governments to complete what he says is the final lap of the Doha global trade round, which could add billions of dollars to the world economy. The negotiations launched in Qatar’s capital in 2001 aim to reach a binding treaty that would slash subsidies and cut tariffs in agriculture and manufacturing, including for new economic powerhouses like China, India and Brazil. But the talks are mired in disagreement. The round is already six years behind schedule, and even a completed accord would have to win parliamentary approval in most countries and Senate ratification in the United States. With unemployment over 10 per cent and President Barack Obama’s Democratic Party showing weakness, it is unclear how committed the United States is to finishing the round. Lamy said he believed Washington was committed to a pledge it made with other countries last year to wrap up an agreement by the end of this year. Whether the Americans would take on such a challenge in the current environment, he declined to answer. “That’s more a question for them, than a question for me,” Lamy said. “They tell me ... they want to conclude the Doha round by the end of this year.”

China First Heavy Industries, the country’s second-largest maker of heavy machinery, said it will launch an initial public offering in Shanghai next week to raise at least 8.4 billion yuan (HK$9.54 billion). First Heavy was joined by five other smaller companies, all due to list on the Shenzhen Exchange, in announcing IPO plans on Friday, as the government steps up share sale approvals to cool surging asset prices. State-owned First Heavy, which makes equipment for steel mills, power producers and refiners such as Baosteel Group and Sinopec (SEHK: 0386), will issue up to 2 billion yuan-denominated A shares, or 30.59 per cent of its expanded capital, the company said in a statement to the Shanghai Stock Exchange. First Heavy’s IPO announcement comes just days after China XD Electric, the country’s largest maker of electricity transmission and distribution equipment, raised 10.3 billion yuan in mainland’s first major IPO this year. Rival China Erzhong Heavy Industries is also holding an IPO in Shanghai that will raise up to 2.55 billion yuan and will start taking retail subscriptions on Friday. The flood of IPOs announced in recent months reflects Beijing’s worries about surging prices in the property and stock markets, with the benchmark Shanghai Composite Index up 80 per cent last year, amid fears that an influx of speculative funds from overseas may help to fuel asset price bubbles. Mainland this year is expected to see a further pick-up in the pace of IPOs, which PricewaterhouseCoopers forecast would raise more than 320 billion yuan for the full year, up 73 per cent from last year. Agricultural Bank of China and HSBC (SEHK: 0005) are among multibillion-dollar listings expected in Shanghai this year. The new supply has weighed on share prices, with the mainland’s key index down almost 1 per cent on Friday, but coming off a one-month intraday low. Analysts expect the market to remain generally buoyant as mainland’s strong economic growth bolsters corporate earnings. “The IPOs would have a short-term impact on the market, but in the longer term, ample liquidity, rising corporate profits and good economic fundamentals are still likely to push the index up,” said Zhang Yidong, strategist at Industrial Securities. The fattening pipeline of big mainland IPOs has nevertheless cooled investor enthusiasm for new listings and led companies to set more modest price ranges, after several large firms’ shares recently slumped below their IPO prices within just a few weeks or months of listing. XD Electric on Wednesday priced its shares at the top of a lower-than-expected indicated range, while Erzhong Heavy Industries has also set a modest price range for its IPO. Analysts have said First Heavy’s IPO may be priced at similar valuations to Erzhong, which gave an indicated range of 7.20 to 8.50 yuan, or 28.8 to 34 times 2008 earnings on a diluted basis. First Heavy posted a 999 million yuan net profit in 2008, up 20 per cent from a year earlier, according to its IPO prospectus. The company, based in northeastern Heilongjiang province, will use the IPO proceeds to upgrade technology, manufacture equipment and supplement working capital. It has hired BOC (SEHK: 3988) International as its lead underwriter and will begin book-building next Monday. It will take retail subscriptions one week later on February 1.

Standard Chartered’s private equity unit, mainland conglomerate Fosun Group and three other bidders are vying to buy two mainland retailers and other assets from investment firm Global Mart in a deal expected to fetch about 500 million yuan (HK$568 million), people familiar with the matter said. Global Mart, founded in 2005 by several Australian investors targeting mainland’s retail sector, is selling its 80 per cent stake in Joindoor Hypermarket and 100 per cent of Whacko supermarket as part of an effort to repay US$75 million in debt, the sources said. Both retailers are based in central Hunan province. Global Mart could not immediately be reached for comment, while Fosun and Standard Chartered declined to comment. An investor relations official at Your-Mart, which the sources said was also among the competing bidders, said she was not aware of such a bid plan. Proceeds from the sale would be used to repay creditors and note holders including Australian investment firm Keybridge Capital and Philippine conglomerate JG Summit Holdings, the sources added. Buying Joindoor and Whacko would give investors a strong foothold in central and western areas of mainland, as the central government boosts domestic consumption to counter a slump in exports and bolster economic growth. South Korea’s No 2 retailer Lotte Shopping, which last October agreed to acquire mainland supermarket operator Times, also looked into the deal but has walked away, one of the sources said. Lotte could not be reached immediately for comment. Your-Mart, which in 2006 sold 80 per cent of Joindoor Hypermarket to Global Mart for 150 million yuan, is now joining the bid to buy the stake back after raising money from an initial public offering last year, one of the sources said. Global Mart has invested about US$100 million in mainland, the source said, as it sought to benefit from the country’s rapid economic growth and rising consumption, although some of its investments have run into difficulty. In 2005, it bought supermarket chain Seastar from XiAn Seastar Modern-Tech Co, but it shut the business down last year following legal disputes with the mainland seller over price and debt issues, according to stock exchange filings by XiAn Seastar and local media reports. Foreign investors are also finding mainland’s retail market increasingly competitive as global giants including Wal-Mart Stores, Carrefour and Tesco expand aggressively in the world’s third-largest economy. Joindoor, founded in 2000, is a household name in Hunan and one of the biggest supermarket chains in the province, generating about 1.5 billion yuan of sales annually. Fosun, mainland’s biggest non-state conglomerate with businesses ranging from steel to real estate and retailing, already owns stakes in retailers Shanghai Yuyuan Tourist Mart Co and Shanghai Friendship Group. It plans to expand investment in consumer-related businesses over the next few years, chief executive Liang Xinjun said in November. Standard Chartered’s private equity unit joined the bidding recently, having started due diligence, one of the sources said.

Property sales on the mainland soared 75.5 per cent year on year to 4.4 trillion yuan (HK$5 trillion) in 2009, heightening the fears of many that a massive property bubble is building. "In the eyes of many market participants, the public or even the policymakers, the market to a certain extent has gone over the top. There is a property bubble," said Xavier Wong, director and head of research for property consultant Knight Frank's Greater China division. While the figures, issued by the government, show the value of sales skyrocketed, sales as measured by floor area expanded by only 42.1 per cent, according to the National Bureau of Statistics. The significant difference suggests there has been a big increase in property prices. This, in turn, casts doubt on the official announcement last week that home prices rose just 7.8 per cent year on year in December. "Go ask anyone on the street, and no one will believe that home prices have gone up just 7.8 per cent," said Lee Hing-yin, director of research and advisory for property agents Colliers International - East China. Wong said that "from the difference between the sales value and sales volume, overall property prices rose about 24 per cent last year." The jump triggered fresh concern a nationwide property bubble is inflating. Premier Wen Jiabao yesterday repeated his pledge to regulate the property market by tackling speculation and increasing the supply of mass housing and so-called economic housing for the needy. Underpinned by a sharp rise in mortgage lending and strong pent-up demand, the total value of home sales grew by 80 per cent year on year and that of office space by 66.9 per cent. The biggest growth in sales by value was seen in the wealthy eastern seaboard province of Zhejiang, where prices rose 129.7 per cent, and in Shanghai, where they were up 125.9 per cent, the statistics bureau said on its website yesterday. The booming market was reflected in record-high sales commissions at Centaline Property Agency's branch in Shenzhen, where general manager Andy Lee said home prices in major districts increased by about 80 per cent last year. "This is the busiest year I have ever experienced since I was stationed in Shenzhen in 1996," Lee said. "The market has gone to the top, especially in November. None of our 300 property agents was allowed to take a day off that month." Commission on sales of homes in the secondary market at Centaline's Shenzhen branch were 100 million yuan in November, compared with a monthly average of between 60 million and 70 million yuan, Lee said. "Obviously the government figure on home price growth is understated," he said. Average home prices in Shanghai's urban areas rose more than 60 per cent, to about 20,000 yuan per square metre in December, from 12,000 yuan in January last year, said Lee Hing-yin of Colliers. Looking ahead, Andy Lee at Centaline said home prices and sales volumes would drop in the first three months of this year as a result of the central government's austerity measures. To counter property speculation, Beijing has tightened lending standards for mainland banks from this week, requiring them to set aside a higher proportion of deposits as reserves. The market reacted swiftly, with sales volumes falling 6 per cent in Beijing and 38 per cent in Shenzhen in the past two weeks compared with the two weeks prior to that. But Wong of Knight Frank and Lee Hing-yin of Colliers did not expect a dramatic decline in home prices. "It is unlikely that the growing bubble will burst given the strong demand for property, the fast pace of urbanisation and developers' low inventory of unsold properties," Wong said.

In 1998, computer science engineer Li Yanhong developed Rankdex, an experimental search engine that ranked websites according to their relevance to each other. At around the same time, Google Inc's Larry Page and Sergey Brin were tinkering with an algorithm that would make their search engine the largest in the world. Li, known by his English name Robin, grew Rankdex into what would become the world's third-largest search engine and China's "Google-killer" - Baidu Inc. In an archetypal rags-to-riches tech story, 41-year-old Li started Baidu in a 3-star hotel room in Beijing. His search giant now dominates the world's biggest internet market, with more than 60 per cent share by revenue and about 75 per cent by traffic. Baidu raked in US$468 million in revenue in 2008 and Li, described by his peers as geeky and low-key, is worth US$2.1 billion, according to Forbes' 2009 rich-list. Baidu vaulted into greater prominence after Google's shock announcement last week that it may leave China amid censorship and hacking concerns. Analysts said Baidu stands to be a big winner whether or not Google quits China - as it would be in a stronger position to negotiate prices with advertisers, who may be leery of working with Google if it stays. Since Google's announcement, Baidu's Nasdaq-listed shares have gained around one-fifth in value and hit a record US$470.25 last Friday. However, Baidu warned in October that its shift to a new advertising system, Phoenix Nest, would lead to softer revenues in the first quarter of this year. Analysts also noted that other players such as Tencent Holdings (SEHK: 0700), China's largest internet firm by market value, but which has only a tiny search presence, would also be battling for business if there was a Google vacuum. Li grew up during the Cultural Revolution, when many intellectuals were branded dissidents and university students were forced to work in the countryside. He started his search firm believing in the transformative power of the internet, and said in 2005 that China would have the world's biggest internet market, and other search firms should watch out for Baidu. Referring to a 2005 comment by billionaire Microsoft founder Bill Gates that Google was becoming influential, Li said: "If he is worried about Google, he will probably be more worried about Baidu somewhere down the road." With his technical background and local understanding, Li looks set to rule the Chinese market for now. Li's views on censorship are largely unknown, but Baidu, named from an ancient Song Dynasty poem, co-operates with Beijing censors to leave out politically sensitive search results. "He's pretty even keeled about it," said a source close to Li. Li, whose parents were factory workers in China's coal-mining Shanxi province, studied information management at the prestigious Peking University and later studied in the United States, receiving his Masters degree from the State University of New York. Baidu's advantage may be that it does not have Google's idealism, and early on, was clearly keyed into knowing what Chinese users wanted - music. "At that time, MP3 search was getting critical mass and it was a major boost in the early days for Baidu," said Mark Natkin, managing director of Marbridge Consulting. "Even after Google launched its catalogue of music downloads, it was limited compared to Baidu's MP3 search."

Sales persons from a Taiwan company introduce their tea products to mainlanders at a farm produce fair in Fujian Province - A Breakthrough Year in Cross-Straits Relations - In the first 11 months of last year, a total of 547,000 mainlanders visited Taiwan and it has been estimated they brought revenue of $1 billion to the island's tourism industry.

Government plans to make China's southern island province of Hainan an international tourist resort have cut the supply of housing as owners and developers hold out for huge profits. More than 200 property buyers had arrived everyday since the end of last year when the government unveiled plans to turn the tropical island into a top international destination by 2020, said Li Zhuo, a salesman with Rongyu Project in Haikou, the provincial capital. Prices were rising by about 1,000 yuan (164 U.S. dollars) per square meter each day on some properties and properties that had been selling for 15,000 yuan a square meter at the beginning of the year were now asking20,000 yuan, he said. The Shanhuwan real estate project in Haikou had sold 600 of its 643 apartments in two weeks despite prices jumping almost 50 percent, said salesgirl Min Xia. In the popular tourist destination of Sanya, the average price of Shanyuhu project had soared from 13,000 yuan a square meter in November, to 28,000 yuan as of Thursday, and was almost sold out. The tourism promotion blueprint, which was officially announced on Jan. 4 and is expected to be approved by the National Development and Reform Commission, drew real estate developers and investors from home and abroad, driving up the property market to fever and causing property bubble fears. "Many home developers and owners suspended sales, expecting higher prices and profits," said Liu Haiyi, assistant general manager of Hainan Jintai Real Estate Development Co., Ltd. In an effort to clamp down on potential speculation, the provincial government on Jan. 15 suspended the leasing of land and approval of projects, which worsened speculation concerns. The suspension was aimed at cooling the overheated sector, but it may have led to a second wave of price hikes, said a property agent surnamed Wu. "Sufficient housing and land resources could be provided to fulfill demands of the market and the tourism promotional campaign," Wei Liucheng, secretary of Hainan Provincial Committee of the Communist Party of China, said Tuesday. "We will blacklist real estate developers who seriously disturb the property market order and not approve any new land for them," he said. Official statistics show 58,489 commercial homes, totaling almost 6 million square meters, were on the market in Hainan's major cities as of Monday. In the first half of 2009, Hainan had approved development of 3,164.7 hectares of land, including 1,522.65 hectares already under construction, according to the provincial administration of land, environment and resources. Wei said homes for local residents were a priority. The authorities should conduct comprehensive supervision campaigns and work out plans for land approval for residential purposes. Strict penalties should be meted out to those who violated land use and transfer regulations. Hainan is one of the five special economic zones. Agriculture and tourism are its pillar industries.

Jackie Chan, an ambassador of the Shanghai World Expo, sings at a gathering at the Shanghai Grand Stage on January 21 to mark the 100-day countdown to the Expo. More than 50 incumbent heads of state will visit Shanghai to see the World Expo which opens on May 1.

People have free porridge distributed during the Laba Festival at the Yonghe Lamasery, or the Lama Temple in Beijing, January 22, 2010. The Laba Festival, which falls on the eighth day of the twelfth month of the lunar Chinese calendar, commemorates the date of Sakyamuni Buddha's enlightenment. The tradition of eating "laba porridge" is believed to bring good fortune.

Price tag for land in Beijing soars - China's booming property sector may be about to slow some time this year. Fengtai property may retail for 30,000 yuan per sq m. Property prices may have hit a new high in one Beijing district after China Overseas Property Co Ltd snapped up a parcel of land for a staggering 17,153 yuan ($2,512) per sq m yesterday. China Overseas Property, one of the country's largest real estate firms, paid 5.97 billion yuan for the 348,000 sq m piece of land. The closing price was 200 percent higher than the owner's original asking price, thus pushing property prices to a record high in Beijing's Fengtai district. Despite government efforts to cool down the overheated property market, Shenzhen-based Vanke and Shanghai-listed Poly Real Estate were among 14 developers jostling over the plot, located near the southwest side of Beijing's Fourth Ring Road. "Even with a conservative estimate, the selling price of residential units on this plot will surpass 30,000 yuan per sq m," said Meng Qi, a market analyst with US-headquartered real estate brokerage, Century 21. Neighborhood apartment prices currently range from 17,000 yuan to 18,000 yuan per sq m. "The appearance of the new pricing high indicates real estate companies are still optimistic about property sales this year," Meng said. After intensive efforts by the government to tighten real estate policies, most property developers haven't changed their strategies and still plan to raise prices. William Kwok, director of Cheung Kong Real Estate Limited, said his firm will likely increase the price of a residential property project in Beijing by 10 to 15 percent, but sales will target homeowners and not speculators. Moreover, Cheung Kong plans to offer more Hong Kong properties to domestic investors, hoping to capitalize on the growing buying power of mainland residents. For instance, the company has recently began pitching a commercial property in Tsim Sha Tsui district called "1881 Heritage" to lure buyers in Beijing and Shanghai. According to Kwok, China's property prices are likely to stabilize in 2010 after a stronger-than-expected rebound last year. "In cities where the price has soared more than 50 percent in 2009, a price adjustment may occur, but a tumble is not likely to happen given that demand remains robust," he said.

Energy firms gear up to meet demand - Employees of Anhui Huaibei Power Company investigate power supply issues amid heavy snow last month. Demand for power will rise rapidly this year because of brisk industrial activity. China Huaneng Group (Huaneng), the country's largest power producer, plans to increase electricity production 11 percent and coal production 29 percent this year, in a move to meet rising domestic demand. Power production in 2010 is expected to be 466.5 billion kWh, and coal output 56.86 million tons, the company said yesterday. The company hopes to increase its sales revenue to over 200 billion yuan ($29.29 billion) this year, it said. "We will further expand our portfolio and improve our business structure to increase competitiveness," said Huaneng General Manager Cao Peixi. Huaneng, which produces approximately 11.6 percent of the country's total energy, increased its power capacity and coal production by 21.5 percent and 75 percent respectively last year. China's power supply will continue to see solid growth this year, said Xue Jing, director of the statistics and information department under the China Electricity Council (CEC). Demand for power will rise rapidly this year because of brisk industrial activity, she added. "China is expected to see a balance between supply and demand this year, but some regions may experience temporary blackouts," she said. Following a sharp decline in the first half of 2009, demand on power has risen dramatically over the past few months due to increased industrial activity. "We believe this growth will continue," said Xue.

US automobile parts maker ArvinMeritor has said that it would channel the bulk of its investments to China over the next three years to capitalize on the demand arising from extensive infrastructure construction, said a top company official. The Troy, Michigan-based company would also make considerable investments to grow its off-highway business in China, said its Asia-Pacific President Tim Bowes. "Over the next three years, a majority of our investments would be in China, our biggest market in the Asia-Pacific region," said Bowes. ArvinMeritor and its Chinese partner Xuzhou Construction Machinery Group (Xugong) are investing $10 million in their joint venture Xuzhou Meritor Axles Ltd (XMAL) in Xuzhou, Jiangsu province. The US firm holds a 60 percent stake in the joint venture, and it is the biggest independent off-highway axle producer in China, with a 20 percent market share. It provides axle products for most of the major original equipment manufacturers. "The investment reinforces ArvinMeritor's strategy to expand its off-highway business globally as well its long-term commitment to China," said Bowes. The additional investment would boost XMAL's overall annual production capacity by more than 20 percent. "The investment we are making in XMAL is the first phase of our strategic development plan that is expected to help us improve our off-highway manufacturing and product capabilities in China as well as support our efforts to grow this business in one of the largest off-highway markets in the world," said Bowes. ArvinMeritor would decide the details of its second investment between March and April this year, after XMAL achieves its target of 20 percent capacity improvement. China contributed nearly 58 percent of ArvinMeritor's revenue in the Asia-Pacific region. "Off-highway and Asia-Pacific, particularly China, are two key areas of our company's overall growth strategy," said Bowes. "Therefore, it's our plan to continue to invest in the off-highway business in China." China's off-highway market has seen huge demand of late due to the infrastructure construction spree triggered by the 4 trillion yuan stimulus package. According to Bowes, the off-highway vehicle market is much larger than the passenger vehicle market, especially in emerging economies such as China and India. The century-old company also plans to launch 50 new axle models and more global technologies in China over the next three years, and reinforce its local research and development capability. The company has three manufacturing bases in the country, at Shanghai, Shiyan in Hubei province, and Wuxi in Jiangsu province.

Jan 22, 2010

Hong Kong*: The job market is looking rosier, with a recruitment survey showing more than half of employers plan to increase hiring and three in four will pay discretionary year-end bonuses. "It's encouraging because it shows a steep increase in sentiment," James Carss, general manager at recruitment firm Hudson, said. "The figures are higher than expected." The company interviewed 500 executives across different sectors in November. Slightly more than 50 per cent said their companies would hire more staff this quarter, up from 35 per cent in the previous quarter. Carss said the quarter-on-quarter gain was the largest since the firm started the poll in 2003. "The Hong Kong economy is quite resilient and it recovered quickly last year," Carss said. "The increase in hiring sentiment ... has a lot to do with the financial services sector, because many companies restructured or froze hiring last year, and they are now more active." Three-quarters of respondents said they would pay discretionary bonuses this year, with 46 per cent expecting to pay bonuses of more than 10 per cent of annual income - up from only 17 per cent of respondents last year. Another 16 per cent said bonuses would be a fifth of annual pay. "This is to reward the hard work and loyalty of employees during the tough times of 2009," Carss said. "The second really important priority this year is retention, and bonuses play a large part in this." The study indicates raising salaries and bonuses is seen as the best way to keep employees happy and retain top talent after the difficult cost-cutting measures of 2009, ranging from pay cuts to unpaid leave. "It's recognition of staffs' performance for the year. It helps comfort staff and increase their sense of belonging," Dr Felix Yip Wai-kwong, president of the Hong Kong People Management Association, said. Companies should put more effort into training staff during the economic recovery to meet future needs when business further improves, Yip said. Hudson expected employees to be more interested in job hunting after the Lunar New Year, when bonuses are paid. It found most respondents expected to have to pay higher starting salaries to attract good staff.

About 10,000 MTR passengers were left stranded last night after a system glitch shut down all the trains on the East Rail Line for about an hour. The case is believed to be the most serious disruption to services on the line in recent memory. The MTR Corporation (SEHK: 0066)'s head of operations, Choi Tak-tsan, said the shutdown at 7.20pm was caused by a data network transmission failure that occurred at an operation control centre at Fo Tan. He said the centre immediately suspended train services on the line to ensure safety. A spokeswoman said about 10,000 people were affected by the shutdown and the failure was a first for the line. Ticketing windows at various stations were crowded with passengers, many of whom yelled at station staff as they complained about refund arrangements. Services from Hung Hom to Lo Wu and Lok Ma Chau were brought to a standstill until 8.20pm, when engineers succeeded in re-establishing the data network. The MTR arranged for buses to take passengers to other stations along the line, but long queues for the buses quickly formed at Hung Hom, Mong Kok East and Kowloon Tong. The rush-hour shutdown frustrated people trying to get home after work. Some were seen shouting at station staff, while others asked for refunds when they were told to leave the station and take the connecting buses. A woman passenger at Mong Kok said: "The announcement about the signal system failure came after I had been waiting in a train for 30 minutes, and there was no information about how long we would have to wait or the arrangements for us." Another woman passenger at a connecting bus stop at the station said she was confused over the transport arrangements. "They asked us to leave the station," she said. "I don't know where the buses go." Choi said a further investigation would be conducted to determine the cause of the transmission failure. The Transport Department said it had asked the MTR to submit a report on the case as soon as possible. The Electrical and Mechanical Services Department said it would monitor how the operator ensured there would not be a repeat failure. On August 1 last year, about 1,200 passengers were affected when train services between Mong Kok East and East Tsim Sha Tsui shut down for 40 minutes after a transformer station at Ho Man Tin malfunctioned. Chaotic scenes were also seen then, with passengers complaining to station staff.

Hongkongers will soon be able to enjoy the most spectacular view yet of Victoria Harbour - 383 metres up on the 100th floor of the International Commerce Centre in Kowloon. The observation deck of the highest building in Hong Kong, which towers to a height of 483 metres, will be open to the public by the end of the year. "I believe this building with 118 levels will be the new landmark of Hong Kong," the chairman of the Hong Kong Tourism Board, James Tien Pei-chun, said, adding that the board would promote the Kowloon station development again when the deck opened. The observation deck will offer a 360-degree panoramic view of Kowloon and the harbour. It will be the first of its kind in the city and will open in the fourth quarter of the year. Four express lifts will take visitors from the second floor of the ICC to the deck in one minute. The general manager of the observation deck, Elaine Tsui, said there would be multimedia exhibitions documenting the changes in the city's lifestyle and development. A tourist information centre will also be set up. The public will be able to buy tickets to visit the deck. Prices have not yet been decided, but Tsui said that they would take into account prices at similar tourist spots in other Asian cities. The only public space that offers a view of the harbour from a higher altitude is The Peak. But visitors still have to walk around the hill to get a 360-degree view. "The view from The Peak is different ... both Kowloon and Hong Kong Island can be seen from the ICC observation deck located in the city centre," Tsui said. Only two towers in the world have observation decks higher than the ICC one. The viewing point on the Burj Khalifa in Dubai is on the 124th floor at 442 metres above sea level. The three decks in the Shanghai World Financial Centre are on the 94th, 97th and 100th floors, at 423, 439 and 474 metres. The ICC deck is higher than the one at Taipei 101, which is on the 89th floor at 390 metres. But Taipei 101 is a taller building at 508 metres. Businesses have progressively moved into the office space in the ICC below the deck. The Ritz-Carlton, the highest hotel in the world, will open this year above the observation deck on the 102nd to 118th floors. Fine-dining restaurants will open on the 101st floor. The observation deck has not yet been named. The ICC is inviting the public to submit proposed names for it to www.shkp (SEHK: 0016) by March 5.

The Hong Kong and Shanghai stock exchanges have agreed to co-operate more on regulatory issues and jointly develop derivative products and exchange-traded funds. At a meeting of officials from both bourses in Hong Kong yesterday, HKEx (SEHK: 0388) chairman Ronald Arculli said: "According to an old Chinese saying, a single tree cannot make a forest. Jointly with our mainland counterparts, we can accelerate China's growth and financial development in a prudent manner." Listing division executives from the two exchanges will meet every two months to discuss issues of disclosure and other regulatory matters. This was to enhance regulation for companies listed in both places and boost shareholder protection, said Charles Li Xiaojia, the chief executive of the Hong Kong exchange. "This is a great beginning," he said. Li also sought to play down fears of Shanghai posing a threat to Hong Kong. "We're not fighting. We're not in that kind of a relationship. We're running a marathon together." Shanghai Stock Exchange president Zhang Yujun said although Shanghai would introduce an international board, it would not compete with Hong Kong. "This is not a zero-sum game. Both stock exchanges would like to grow the market for China together," Zhang said. "Our goal is to make the cake bigger so that everyone in the market will be able to share more." Zhang said there were enough companies in China to keep all its bourses busy. Demand for the services of securities exchanges by companies would only grow as governance and accounting practices improved, he said.

Swire Properties will continue looking for investment opportunities to expand its presence on the mainland even as Beijing imposes tougher measures to deal with a property bubble.

The Hong Kong Diploma of Secondary Education Examination - two years away from becoming part of the SAR's scholastic system - is on its way to being accepted and backed by authorities in Britain, the United States and Australia. Hong Kong is now seeking support for the diploma from Canada. The diploma will set standards for the first time in 2012, replacing the Hong Kong Certificate of Education Examination and Hong Kong Advanced Level Examination. Secretary for Education Michael Suen Ming-yeung said yesterday that Britain's accreditation agency, the National Recognition Information Centre, has evaluated the diploma at Hong Kong's request and found the pass level required is "relatively higher" than its GCE A-Level. It also matches the Advance Placement level in the United States and High School Certificate in Australia. Suen also said that Britain's Universities and Colleges Admission Service found the diploma to be as good as the International Baccalaureate. While the diploma is attaining recognition, Suen added: "The enrollment standard will depend on each institution or university. The student will be accepted according to their capability." The government will discuss accreditation with Canada authorities in March. The Education Bureau introduced a mock examination to evaluate 70,000 students in 2007. About 60 percent attained Level 2 in five subjects, while 20,000 had "3-3-2-2" scores - Level 3 for Chinese language and English language and Level 2 for mathematics and liberal studies. "I want to stress that the HKDSE cannot compare directly with the HKCEE and the HKALE," Suen said. "In addition, the new system takes only six years to complete, compared with five and seven years for the previous exam system." Under the new system, each level will reflect a student's ability. Education officials are still in discussions with the Civil Service Bureau about the recruitment requirement level. The Education Bureau will help make videos to introduce the new system to prospective employers. Permanent Secretary for Education Raymond Wong Hung-chiu said private universities will determine their own enrollment requirement, but he revealed that some agreed to refer to the "3,3,2,2" standard. Secretary General for Hong Kong Examinations and Assessment Authority Francis Cheung Wing-ming said students can apply for universities in the UK directly with HKDSE results. Local universities will announce the minimum requirements for subjects by next year.

China*: China economy regained its pre-crisis strength last quarter by resuming double-digit growth, putting the nation on track to overtake Japan as the world's second-largest economy but also setting the stage for further monetary tightening. Gross domestic product expanded 10.7 per cent year on year in the fourth quarter, compared with growth of 6.2 per cent in the first quarter, 7.9 per cent in the second and 9.1 per cent in the third, according to data released yesterday by the National Bureau of Statistics. The economy expanded 8.7 per cent last year, surpassing the government's target of 8 per cent. That goal was seen as crucial to fostering job creation and staving off social unrest in a nation of 1.3 billion people. However, the 2009 performance represented the slowest growth rate since 2001. With its faster growth in the fourth quarter, China is likely to replace Japan as the world's second-largest economy after the United States, probably later this year. It has already leapfrogged Germany to become the world's No1 exporter. China's fastest quarterly growth in two years prompted Ma Jiantang, the country's top statistician, to warn that Beijing faces a "considerable challenge" in curbing inflation and preventing an asset bubble while balancing economic growth. Economists said the data signalled a need to end its pro-growth policy. "The economic recovery is not only gaining momentum but also broadening," Sun Mingchun, chief economist with Nomura International, said. Tom Orlik, a China analyst with Stone & McCarthy Research Associates, said: "The time for stimulus is over, the time for tightening has begun." Asian stocks fell immediately after the data release, before recouping losses. Hong Kong stocks fell 1.99 per cent to their lowest level in more than three months, while the Shanghai Composite Index staged a mild 0.22 per cent rebound. Ben Simpfendorfer, chief economist with the Royal Bank of Scotland, said the latest figures "will harden fears of tightening". Sun said: "Given the strong recovery, we expect further tightening measures to be introduced." Analysts said a low-base effect at the end of 2008 had played a part in boosting the fourth-quarter figures. Ma, the NBS' commissioner, attributed the recovery mainly to the government stimulus package designed to cope with the global financial crisis. "Thanks to government efforts to deal with difficulties, the economy ended an accelerating slide and began to recover," Ma said after releasing the data. A four trillion yuan (HK$4.52 trillion) fiscal stimulus package was complemented by an unprecedented surge in lending by state banks, ensuring that China was the first major economy to decisively recover from the worst global downturn in half a century. Describing last year as a "harvest", Ma said the latest figures confirmed a V-shaped recovery. The consumer price index rose 1.9 per cent year on year last month. Authorities are already clamping down on bank lending and raising borrowing costs to keep a lid on price pressures. "We need to prevent the overly fast increases in prices," Ma said, but added inflation this year should be "mild and controllable". Ha Jiming, the chief economist with China International Capital Corp, expects the central bank to raise interest rates in the first quarter, as the CPI would increase to 3 per cent this quarter and 5 per cent in the second. Premier Wen Jiabao signalled this week that Beijing was carefully monitoring the risks associated with its hefty pump-priming last year. Retail sales jumped 17.5 per cent during the year to December, accelerating from the 15.8 per cent recorded in November. Fixed-asset investment grew 30.1 per cent last year, compared with 25.5 per cent in 2008, while industrial production growth slowed to 18.5 per cent from 19.2 per cent. Asked whether the government would end its pro-growth policy, Ma said: "A key point of macro-regulation this year would be to balance the tasks of ensuring stable and relatively fast economic growth, adjusting the economic structure and regulating inflation prospects."

China power output surged last month, a sign of economic expansion many observers say is a more reliable indicator of revival than the big increase reported yesterday in gross domestic product. The 25.9 per cent year-on-year jump in electricity generation - the strongest growth in a non-holiday month in 12 years - indicates Beijing's 4 trillion yuan (HK$4.54 trillion) stimulus program has lifted the mainland from the trough of the global downturn. More than 70 per cent of the electricity the mainland generates is used by industry, primarily in the steel, cement, aluminium and other heavy industrial sectors. The National Bureau of Statistics unveiled fourth-quarter GDP growth of 10.7 per cent and December consumer price inflation of 1.9 per cent - both slightly higher than expected. The figures, coupled with sharp gains in housing prices last year and runaway bank lending this month, stoked fears that the economy may be overheating. Many economists predict interest rates will be increased earlier than expected to pre-empt a full-blown asset bubble. With gross domestic output of 33.5 trillion yuan last year, China will surpass Japan as the world's second-largest economy this year, analysts believe. Nevertheless, it still lags far behind Japan in total consumption and economic output per capita. The growth in power output is partly explained by a cold snap which began in December and extended into mid-January. Analysts expect mainland power output will continue to grow strongly year on year in the first half of 2010 because of the low base for comparison during the depths of the global financial crisis. "The low-base effect means we could see a 25 per cent to 30 per cent rise in electricity generation for January and 15 per cent for the first half of this year," Citigroup Asia Pacific utilities analyst Pierre Lau wrote in a research note. For the whole year, he expects power generation growth to be 12 per cent, the high end of the 6 per cent to 12 per cent range forecast by nine brokerage analysts polled. The China Electricity Council, which represents generators, tipped a relatively conservative 7 per cent. Stronger power demand, the aggressive closing of older, polluting plants and a slowdown in new plant construction is expected to absorb excess generation capacity for the first time in four years. Analysts expect power plant utilization hours to grow between 2 per cent and 5 per cent this year, against declines of 6 per cent last year. This is positive for the industry, which has been suffering falling profits since September's 40 per cent increase in spot-market coal prices.

A sharp fall in mainland home sales this month could herald a short-term downward correction in deals and prices this year, according to agents and analysts.

Jan 21, 2010

Hong Kong*: Hong Kong has again been ranked as the world's freest economy for the 16th consecutive year, according to a new study released by the Heritage Foundation and The Wall Street Journal on Wednesday. The Heritage Foundation’s latest Index of Economic Freedom this year ranked Hong Kong as the world’s freest economy – giving the city a score of 89.7. Singapore was in second place and Australia third. The foundation praised Hong Kong’s low tax regime, respect for property rights and flexible labour market. It noted that the city’s educated and highly motivated workforce had made it one of the world’s leading business centres. Heritage Foundation spokesman Terry Miller said he was very concerned about recent debate regarding the introduction of a minimum wage in Hong Kong. He said he would be monitoring the issue closely. A government spokesman said they welcomed the Heritage Foundation’s ranking. “Hong Kong has been ranked the world’s freest economy for the 16th consecutive year,” he added.

HK$2 billion in public money up for grabs in a city-wide scheme to subsidize the upkeep of buildings is ripe for attack by corruption syndicates, an anti-graft advisory panel has warned. Operation Building Bright, run by the Development Bureau, was launched last year to provide subsidies for maintenance to 2,000 buildings. Michael Sze Cho-cheung, chairman of the Independent Commission Against Corruption's Operations Review Committee, descrined the scheme as "big meat" for syndicated corruption. Building management accounted for about one- third, or 924 cases out of a total of 2,183, of the private sector complaints received by the ICAC last year. "Since more buildings are getting old and subject to mandatory repair order, it poses a risk for corruption, especially as there's a subsidized scheme," Sze said yesterday. The ICAC has also suggested that private sales of properties should be kept at a minimum to reduce the risk of corruption and complaints about new flats. Anissa Chan Wong Lai-kuen, acting chairman of the Corruption Prevention Advisory Committee, said the ICAC made the suggestion to the Real Estate Developers Association of Hong Kong, in response to complaints received about unfair practices in the primary sale of residential properties. The association had adopted several suggested measures, including requiring developers to provide timely information contained in the provisional Agreement for Sales and Purchase, and to set out in the price list the unit rates based on the flat's saleable area and gross floor area. The ICAC received 73 corruption reports related to real estate and property transactions last year, of which 63 were pursuable. This compared with 91 reports in 2008, of which 79 were pursuable. A year after the financial crisis, the number of corruption reports did not surge as feared.

Liu Mingkang, chairman of the China Banking Regulatory Commission, addresses the Asian Financial Forum in Hong Kong on Wednesday. banking authorities have instructed some major banks to curb their lending over the rest of this month, official media and banking sources said on Wednesday, sending shares sharply lower. The central bank told some individual lenders, including Citic Bank and Everbright Bank, to increase their reserve requirement ratio by half a percentage point, banking sources said. A surge of new lending in January has triggered a series of intensifying actions by authorities to rid the financial system of excess cash that can fuel inflation and asset bubbles. Last week, mainland’s central bank raised bank reserve requirements for the first time since June 2008. “The question now is not whether we need to control credit and money supply but when and how to control it,” said Chen Xingdong, chief China economist with BNP Paribas in Beijing. “Policy will not be a straight line,” he said. Mainland banks doled out a record 9.6 trillion yuan (HK$10.9 trillion) in new loans last year. The lending surge, combined with Beijing’s 4 trillion yuan stimulus plan helped kick-start the economy after a late 2008 slump, but aroused fears of overheating, with data due on Thursday expected to show double-digit growth again. Zhu Baoliang, chief economist at a government think tank, also said consumer inflation has accelerated significantly in December. Confusion lingered surrounding the full scope of authorities’ actions. The official China Securities Journal on Wednesday cited unnamed banking sources as saying that some banks had been told to stop all lending for the rest of the month. However, a source at the China Banking Regulatory Commission who spoke on condition of anonymity said the CBRC had not ordered banks to halt lending for the rest of January. “It is our long-standing principle banks that do not meet regulatory requirements must not lend any more,” the source said. A senior official with China Merchants Bank (SEHK: 3968) and a senior executive with Agricultural Bank of China said that their banks would stop approving new loans until the end of this month. Worries over the impact of lending curbs knocked Shanghai’s benchmark index down 2.9 per cent, weighed on the rest of Asia-Pacific and hurt the Australian dollar. Shares of mainland banks traded in Hong Kong were hit.

Chairman of Orient Overseas (International), Tung Chee-chen, seen here on a file photo, said on Wednesday that its recent sale of mainland property would generate the company a US$1 billion profit this year. Orient Overseas (International) (SEHK: 0316) (OOIL) will seek M&A opportunities with the US$2.2 billion in cash it raised from the sale of its China property assets to Singapore’s CapitaLand earlier this week, a company executive said. Tung Chee-chen, chairman of OOIL, was speaking on the sidelines of the Asian Financial Forum in Hong Kong on Wednesday. The sale to CapitaLand came as the money-losing Hong Kong company seeks to raise cash and focus on its core shipping business. OOIL said the sale of residential, hotel, and retail properties in mainland would generate a US$1 billion profit this year after it posted a net loss in the first half of last year after being badly hit by the global economic crisis. Some analysts predicted the company would use the cash to pay a dividend. Tung said the company would review all options, including paying a dividend, but had made no plan yet. The company would also consider raising freight rates in May, he said. However, even with a rate increase, he cautioned that the industry would still not reach breakeven because of rising fuel costs. Overcapacity was also a worry, he said. “There is still around 11 per cent of capacity idle,” said Tung. “Even with demand back, there is concern of oversupply in the industry.” He said that the “worst is over” for the shipping industry, but cautioned that the situation had not returned to normal. Earlier in a statement, the shipping group said total revenues for the fourth quarter of 2009 sank 22.7 per cent, suggesting a slump in global trade continued to affect sea carriers. Orient Overseas Container Line (OOCL) posted total revenue of US$1.07 billion in October-December, taking total revenue for the year to US$3.84 billion, down 35.2 per cent, it said in a statement on Wednesday. Average revenue per TEU (twenty-foot equivalent unit) decreased by 19.4 per cent in the fourth quarter from the same period last year, and the average revenue per TEU was down 24.7 per cent for the full year of 2009, it said in an unaudited operational update. OOCL’s load factor fell 3.8 per cent for last year despite a 9.6 per cent decrease in loadable capacity, it added.

When Hong Kong Disneyland opened in September 2005 it was viewed as a major tourism cash cow that would help drive the city's economy. The wholly government-owned Ocean Park, with a mandate to provide public recreation and education, faced intense competition. But it has risen to the challenge. For the past three financial years it has beaten Disneyland on number of visitors, and has also made - with the exception of last year - increasing net profits. The figure has risen from HK$119.5 million in 2005-06 to HK$204.7 million in 2007-08. Even in 2008-09, despite the financial downturn, it still registered a net profit of HK$98.6 million. Visitors to Ocean Park have grown from 4.38 million in 2005-06 to 4.8 million in 2008-09. Hong Kong Inbound Tour Operators' Association chairman Simon Hau Suk-kei said Ocean Park had certain advantages over the Disney venue. It had been established for 33 years and was better known to overseas visitors, whereas Disneyland had only been operating for four years, he said. An Ocean Park visit is now a fixed itinerary for many inbound tours from the mainland, whereas a trip to Disneyland is optional. "Visitors would have to pay an extra HK$400 and, given the location, they have to spend a whole day at Disneyland. Many therefore do not often choose to go," Hau said. But he said that with the launch of the solo visitor scheme, many visitors from Guangdong were coming to Hong Kong specifically to spend a day or two at Disneyland. "Currently, about half of these tourists will visit Ocean Park, compared with 20 per cent for Hong Kong Disneyland. There is a huge potential for growth for Disneyland." He added: "An average visitor spends between HK$1,000 and HK$2,000 at Disneyland, but would only spend HK$200 to HK$300 at Ocean Park." Dr John Ap, an associate professor of tourism at Hong Kong Polytechnic University, said it had taken about 30 years for Ocean Park to reach an attendance of nearly 5 million, while the Disneyland venue had been open for less than five years. "Don't be too pessimistic. We have to wait five more years to get a better picture [of Hong Kong Disneyland]," Ap said, adding that theme parks usually recorded no profit in the first few years. Lawmaker Fred Li Wah-ming said the Disney venue suffered from a bad start, which affected its reputation and popularity. "Hong Kong Disneyland was, until recently, governed by foreigners who do not understand the local culture or the characteristics of mainland visitors," he said. "Now the management has changed, but it will still take time for the park to change."

Hong Kong Disneyland has for the first time revealed its financial performance - and the numbers make for grim reading. The park made a net loss of HK$4.4 billion in the three years to October, and Disney says it may not now break even until after 2014. When the government announced 11 years ago that it intended to pour HK$23 billion of taxpayers' money into the Lantau theme park for a 57 per cent stake, it said the venture could break even as early as 2009 and no later than 2011. Now Walt Disney's regional chief Bill Ernest, who used to run the park, says it may break even after three new themed areas open in mid-2014. The park's management yesterday issued figures for the two years to October - their publication a condition of the HK$3.63 billion deal sealed with the government in June to expand the attraction at Penny's Bay. They showed its losses over two years were HK$2.88 billion. A confidential document seen by the South China Morning Post (SEHK: 0583) shows it lost a further HK$1.51 billion in 2006-07, its second year of operation. Ernest, president and managing director of Walt Disney Parks and Resorts in Asia, said the park's financial situation "is going to turn a corner" following its expansion and it might break even then. However, the park's managing director, Andrew Kam Min-ho, said it might break even next year. He noted that its loss before interest, taxes, depreciation and amortisation fell by 57 per cent last year, to HK$70 million. "The park has been open for only about four years and it's still developing infrastructure," Kam said. In that time it had built a "stable" financial foundation. The government, legislators and academics expressed disappointment at Disneyland's performance. "We note obviously as a shareholder the performance as delivered by the theme park company is certainly falling short of our general expectation," said Secretary for Commerce and Economic Development Rita Lau Ng Wai-lan. She said the government would continue to monitor its performance and press the management to make improvements. Leung Wai-kin, a professor at Chinese University's school of hotel and tourism management, said the performance was "very bad" and a surprise. "The project is a failure," Leung said. "It's benefit-cost ratio is too low." Paul Chan Mo-po, legislator for the accountancy sector, said: "The worst is over but it's still bleeding." He complimented the park for its efforts to control costs - to which the management attributed the reduced losses in the last financial year - but urged it to take steps to boost attendance. Government figures show the attraction has generated more than HK$24 billion in additional spending in the city since it opened and has been responsible for boosting Hong Kong's gross domestic product by slightly more than 0.2 per cent a year. Dr John Ap, an associate professor of tourism at Polytechnic University, said there were no benchmarks against which to measure Disneyland's performance. "At this point, we don't need to panic because theme parks don't generally generate a profit within the first few years of operation," Ap said. "But in the long term, we want to make sure it's a success." He called upon the government - which, following the expansion deal in June owns 52 per cent of the park, with Walt Disney holding the other 48 per cent - to be more transparent by providing the public with more information about its performance. The park has received more than 19 million visitors since it opened in September 2005, which is well short of the government's 1999 forecast of at least 23 million visitors. Attendance last year rose by 2 per cent over the previous year, to 4.6 million, though ticket sales were hit by the global outbreak of swine flu and the financial crisis. Occupancy rates at the park's hotels fell 8 percentage points year on year, to 70 per cent. The management said the park's business over the last few months had been improving and was back to the level seen before the swine flu outbreak began in May. However, the park will face competition for regional and international visitors from other new parks in the region, such as Singapore's Resorts World at Sentosa, which opens today.

The Hong Kong Tourism Board expects visitors to the city this year to rise by just over 5 per cent, or 1.5 million, to 31 million, and that they will spend HK$174 billion, 7 per cent more than last year's arrivals. The forecast follows better-than-expected visitor arrivals last year, which grew 0.3 per cent to almost 29.6 million; the board had predicted the total would fall by 1.6 per cent. Anthony Lau Chun-hon, the board's executive director, said arrivals rose last year thanks to a 6.5 per cent year-on-year increase in mainland visitors, to almost 18 million, despite the swine flu outbreak between May and July. He said the easing of restrictions on non-Guangdong residents of Shenzhen visiting Hong Kong in tour groups last month also helped. The board expects a further 7.5 per cent increase in mainland visitors this year, and Lau said the mainland market would remain the growth driver in the city's tourism sector. It expects 19.3 million to visit this year, meaning six in every 10 visitors will come from across the border. The number of visitors from elsewhere is expected to rise by only 1.7 per cent given the slow pace of recovery from the global economic crisis. The board will set aside about HK$18.8 million, or 10 per cent of its budget, to promote the city's attractions in emerging markets such as India, the Middle East and Russia. The number of visitors from Taiwan fell 10 per cent last year, and the board expects a drop of another 12 per cent because direct flights between the island and the mainland has reduced the need for passengers to transit through Hong Kong. The board plans to tap into green tourism in Hong Kong by promoting hiking trails and the city's first geopark, and to highlight Hong Kong as an arts hub in the long term. It also plans to promote Hong Kong as a festive city by dividing the year into six periods, each emphasising traditional festivals. One will be the annual Hong Kong International Dragon Boat Regatta, which will become a three-day event and include a beer festival. To mark its 35th anniversary, the regatta will return to the Tsim Sha Tsui East waterfront. The board is also promoting multi-destination tours with partners in Guilin, Yunnan, Xian, Guangdong, Shanghai, Beijing and Hainan. It will look at the opportunities to draw visitors to the World Expo in Shanghai - and Asian Games in Guangzhou - to Hong Kong before and after those events.

A mainland property tycoon is believed to be nearing a deal to buy a controlling stake in ailing broadcaster ATV from Payson Cha Mou-sing. Cha intends to sell all of his stake in Asia Television to Wang Jing, The Standard has learned. Cha will hold a press conference today. The price involved is not known, however, if the deal goes through Cha will have lost money on his investment, according to sources. Complicating the matter is an agreement Cha has with Taiwan company Want Want China Holdings (0151) chairman Tsai Eng-meng, another major ATV shareholder. Tsai has first refusal on Cha's stake, but the two are involved in an acrimonious standoff, with the Taiwanese tycoon publicly blasting Cha recently for not keeping his word in handing over the broadcaster's controlling stake to him. If the deal with Wang goes through, legal action by Tsai is likely. The battle between Tsai and Cha prompted the resignation of ATV chairman and director Linus Cheung Wing- lam last month. Cheung, hired by Cha just over year ago, was said to have been under intense pressure in the months before he quit to secure a deal between Tsai and Cha. Wang, who has Hong Kong residency and is in his 40s, first came to prominence in the mainland over a land deal. He found fame at the age of 28 for selling a prime plot of land in Shanghai for 170 million yuan (HK$193 million). Educated at Shanghai University with a major in Russian, Wang came to Hong Kong shortly after graduating. He has been investing in property in the SAR. Under Hong Kong law, the holders of free-to-air television broadcasting licenses must be Hong Kong residents. Cash-strapped ATV, long in the shadow of city rival Television Broadcasts, is now facing fresh challenges with a number of firms seeeking free-to-air licenses. ATV has fired hundreds of staff in the past year in a desperate bid to slash costs, with losses said to be as much as HK$1 million a day. Cha struck back at some of Tsai's accusations just before a shareholders' meeting last month. According to reports, Tsai had agreed to invest HK$1 billion in ATV but put in only HK$200 million and stopped investing. "When Tsai bought a stake in ATV, he agreed to inject capital of HK$1 billion, but whether the promise was verbal or in black and white, only the two parties would know," a source close to Cha said. Tsai denied making any agreement.

China*: Honda Motor said on Wednesday its car venture with Dongfeng Motor Group (SEHK: 0489) Co will build its second mainland plant costing 1.15 billion yuan (HK$1.30 billion), as it speeds up expansion in the world’s biggest auto market. Earlier, a mainland media report said that Volkswagen plans to build its fifth plant in mainland in Guangzhou, with an initial annual production capacity of at least 200,000 units. The Honda plant, scheduled to start operations in the second half of 2012, will have an initial annual production capacity of 60,000 units, the company said in a statement. Designed capacity of the facility, based on the outskirts of Wuhan, is 240,000 units, it said. Honda said it also plans to raise the capacity of Dongfeng Honda’s existing facility by 40,000 units to 240,000 units. Total capacity of Dongfeng Honda, the maker of CR-V, Civic and Spirior models, will reach 300,000 units when the new plant is up and running by 2012, it said. The new facility planned by Volkswagen will make their Seat model, the 21st Century Business Herald said on Wednesday, citing an unnamed executive from Volkswagen’s China operations. Volkswagen and FAW Group already operates four plants in the cities of Shanghai, Nanjing, Changchun and Chengdu, making Jetta, Bora, Golf, Sagitar, Audi among others. The automaker also has a tie-up with SAIC Motor Corp making Passat, Santana, Polo and Skoda models. Volkswagen’s China spokesman said he had no knowledge of the new plant. Volkswagen, the biggest foreign carmaker in the country, is stepping up its presence in the country, which in 2009 overtook the United States as the world’s biggest auto market. It had in late last year unveiled a plan to invest US$5.71 billion in mainland till 2011 to expand its production capacity and shore up its R&D. Winfried Vahland, president and CEO of Volkswagen’s China operations, also pledged late last year to more than triple its sales in southern China by 2018 as a main driver for its strategy to double sales to 2 million units in the country by that time. The European automaker sold 1.4 million cars in mainland and Hong Kong last year, up 36.7 per cent from a year earlier. Arch-rival General Motor sold 1.83 million vehicles in the country last year, up 66.9 per cent. The total tally, however, included 1.06 million relatively cheaper mini vans and pick-up trucks.

President Hu Jintao and other top leaders attended a lavish state funeral on Wednesday for eight Chinese peacekeepers killed in the Haiti earthquake, the single biggest loss of life in the history of Beijing's participation in UN missions. The ceremony at the exclusive Babaoshan Revolutionary Cemetery was broadcast live on national television, highlighting the state media’s portrayal of the eight police officers as models of self-sacrifice and martyrs to the cause of world peace. Hu, Premier Wen Jiabao, and the seven other members of the ruling Communist Party’s all-powerful politburo standing committee circled the flag-draped coffins to the strains of a funeral march before paying their respects to family members. They were followed by other state leaders and scores of uniformed police and military officers. On Tuesday, thousands of mourners lined the Beijing streets to pay their respects as a convoy carried the bodies from the capital’s airport to Babaoshan, where former state leaders and national heroes are interred. The deaths have been the top news story in China for days, with a headline Wednesday in the official People’s Liberation Army Daily stating: “Peacekeeping heroes, the fatherland greets you on your return home.” “Sacrifice, service, loyalty, selflessness, their spirit inspires all police officers and soldiers to make new efforts for national security and world peace,” the paper said. About 125 Chinese police were in Haiti as part of a 9,000-strong UN peacekeeping mission seeking to maintain stability in the impoverished and politically volatile nation. The eight had been in a meeting with the head of the UN peacekeeping mission when the 7.0-magnitude quake struck on January 12, bringing down the UN’s five-story headquarters building. The eight were formally named revolutionary martyrs, an honour that confers additional financial compensation for their families, as well as assistance with employment and education. The seven men and one woman, aged 35 to 60, included four members of the peacekeeping contingent and four members of a delegation from the Public Security Ministry’s equipment, finance and international cooperation departments. Their bodies were pulled from the rubble over the weekend by a Chinese search and rescue team. The oldest member of the delegation, Guo Baoshan, was just months away from retirement and had planned to return to his hometown in the northeastern province of Liaoning for the Lunar New Year holiday in mid-February, said a relative quoted by Xinhua news agency.

The head of sovereign wealth fund China Investment Corp (CIC) said short-term capital flows into emerging markets were adding pressure on governments and that it would be some time before the global economy recovered from the financial crisis. “At present, global liquidity is a little bit excessive,” CIC head Lou Jiwei said at the Asia Financial Forum here on Wednesday. “Short-term and frequent capital flows into emerging markets brought big pressure on governments to manage capital.” Shares in Shanghai and Hong Kong fell on speculation that the government had told some major banks to stop lending for the rest of January, in a further attempt at keeping the surging economy from overheating. Policymakers in much of Asia and in other emerging economies have been worried that so-called “hot money” could create destabilising asset bubbles in property or stock markets, while pushing up their currencies and making their exports less competitive. CIC, established in 2007 and with about US$300 billion under management, has been aggressively investing across the globe since it was formed. The fund was burnt by some of its early investments in the US financial industry. “I think it may still take a while for the global economy to recover to a normal level,” Lou said. “How to drive domestic consumption is now not only a theme for countries in emerging markets but also for developed economies.” Taking lessons from substantial paper losses on investments in Blackstone Group and Morgan Stanley, CIC has more aggressively sought deals in the energy and commodities sectors since last year. Lou, a former vice-finance minister, said: “All countries should strengthen coordination on and improve liquidity management and maintain prudential monetary policy.” CIC spent US$2 billion buying distressed US assets from property to infrastructure via three funds, including one managed by Goldman Sachs. Last year, CIC also poured up to US$2 billion into US mortgages under a US Treasury-backed plan. Lou said that CIC would be focusing more on investing in Asia this year. “We will maintain our current portfolio and will also target different currency zones to diversify the categories of our investments,” said Lou in response to a question about CIC’s investment focus in 2010. He declined to specify further. “Given that our money is from China’s foreign exchange reserves, we cannot make investments at home, which is a pity. As you know, China is the fastest growing economy in the world now.”

Property developers have reacted with alarm to reports that Beijing plans to enforce a nationwide crackdown on developers found guilty of leaving sites idle for speculative land banking purposes. "The government will strictly crack down on any illegal use of land and hoarding of sites meant for development to resell the land for profit," Yun Xiaosu, deputy minister of Land and Resources, said last week.

Leading makers of liquid crystal display (LCD) in South Korea and Taiwan are headed for a robust first half this year on improving demand for flat-screen television sets, but their performance for the final quarter of last year is likely to be hit by seasonal weakness and a strong currency. The LCD industry rebounded from a downturn last year, thanks to China's television-buying spree and a shortage of key glass output that kept screen prices firm. The outlook is bright for the next few quarters as strong Chinese demand for screens used in televisions is lifting the sector from the seasonal downturn earlier than expected. "We are heading into strong sales season in China, starting from the Lunar New Year holidays to Labour Day," said Mirae Asset Securities analyst Lee Hak-moo. "There are also the Super Bowl, the Winter Olympics and the World Cup lined up in the coming months. Those sports events can bolster television demand and could bring strength in the first half." DisplaySearch recently upgraded its global LCD television shipments forecast for this year to 171 million units, a 22 per cent increase over the estimate last year. "China is a hot growth engine for the global flat panel television market as the transition from cathode ray tube to LCD and plasma continues to drive market growth," the research firm said. China is set to become the world's biggest LCD television consumer next year and LCD makers are pumping in billions of dollars to build factories to cash in on its huge potential. But LCD makers' earnings deteriorated in October-December after peaking in the third quarter, as seasonal weakness dented panel prices. The stronger Korean won is also expected to have weighed on earnings at Samsung Electronics and LG Display, the world's top two producers of LCD screens. No 2 player LG Display is set to report an operating profit of 445 billion won (HK$3.06 billion) in the fourth quarter, Thomson Reuters says. But according to StarMine SmartEstimates LG Display's operating profit is likely to drop 21 per cent. Taiwan's AU Optronics Corp is expected to swing to a small profit in October-December from a year-ago loss, Thomson Reuters says. On a consolidated basis, Samsung's LCD business would likely swing to an operating margin of about 8 per cent in the fourth quarter, from a loss of 5 per cent a year ago, but down from a 15 per cent margin in July-September, analysts said. Samsung reports earnings on January 29. In the past two months, LG Display shares have jumped 30 per cent and Samsung's have risen 12 per cent, compared with a 6 per cent gain in Seoul's broader market. AU rose 26 per cent, against a 7.5 per cent rise in Taiwan's benchmark. Beside the confidence in Chinese demand, analysts also bet the global economic recovery would spur demand for larger LCD televisions in developed markets longer term. "Thirty-inch-level TVs were the mainstream in 2009. When the economy recovers on a fuller scale, demand will grow for bigger 40-inch levels - likely from the second half," said Park Hyun, an analyst at Prudential Investment & Securities.

Jan 20, 2010

Hong Kong*: Hong Kong's unemployment rate fell to below 5 per cent in the October-December quarter last year, latest statistics released on Tuesday showed. The Census and Statistics Department figures record that the (seasonally-adjusted) unemployment rate decreased from 5.1 per cent in September-November 2009 to 4.9 per cent in October-December 2009.

Chief Executive Donald Tsang Yam-kuen told anti-rail link protesters who acted "irresponsibly" in the heated clashes outside the Legislative Council to reflect on their actions. Speaking for the first time after Saturday's attempt by some protesters to storm Legco, Tsang said: "The act of some protesters who irresponsibly tried to storm into the Legislative Council was in breach of the the core values of Hong Kong's society, the principle of the rule of law and overall interests [of the city]. The government and the general public definitely cannot accept it." He said the protesters have to reflect on what they did. But in the wake of the scuffles, Tsang pledged to explore more ways of consulting the public on large infrastructure projects in future. He said funding approval for the Guangzhou-Shenzhen-Hong Kong Express Rail Link "demonstrated that the Legislative Council is able to decide on this matter and it has also reflected that we are determined to proceed with a project supported by the majority view of the public." James Sung Lap-kung, academic coordinator at the City University's School of Continuing and Professional Education, said Tsang's attitude is understandable. "The government may think that its authority will be undermined if protesters wrongly believe that they can demand a dialogue with officials by surrounding Legco," he said. Sung also said Tsang's remarks are aimed at showing Beijing that his administration can keep a rein on the situation. Chan King-fai, a core member of the Post-80s Anti-Express Railway Group, said the core values of Hong Kong's society include people's pursuit of more freedom. Also yesterday, Secretary for Security Ambrose Lee Siu-kwong said: "These kind of violent acts have violated our stability and law and order. These acts will not be accepted and agreed with by the majority of the community." In response to accusations that police failed to give any warning before repeatedly using pepper spray, Lee said the officers were very restrained and used minimal force to control the situation that day. "It could be clearly seen on television that our police officers were scolded and provoked by some protesters. They used violence in an attempt to breach police lines and tried to take away the metal barricades. These were already illegal acts," he said. Meanwhile, a Metro Broadcast news reporter came under fire from netizens on after she criticized the protest on Facebook. The reporter, Iris Hui, wrote: "What I oppose is they did not know what they were doing when they rushed to confront the police." The 20-page comments on the forum condemned Hui as too narrow- minded and encouraged other netizens to dig into her background.

Minnie and Mickey Mouse pose at the Hong Kong Disneyland Park, which reported on Tuesday that it made a net loss of HK$1.315 billion in 2009, partly because of the “unfavourable impact” of the H1N1 swine flu outbreak. Disney's troubled Hong Kong Disneyland theme park made a net loss of HK$1.315 billion last year while attracting 4.6 million visitors, in its first major admission of its financial performance since opening in 2005. Since opening to great fanfare in 2005, Disney’s first magic kingdom in China has struggled to attract the expected flood of visitors from the mainland, although its performance was difficult to gauge given Disney’s initial refusal to fully disclose key results and attendance figures. In a legislative paper by Hong Kong’s Tourism Commission to local lawmakers, however, it said Hong Kong Disneyland (HKD) made a net loss of HK$1.315 billion in 2009, partly because of the “unfavourable impact” of the H1N1 swine flu outbreak. The paper added that the park made a net loss of HK$1.574 billion in 2008. “We would like to point out that HKD is a long-term asset that grows over time and it is still in its early years of development,” the paper said while noting the park’s continued cost containment efforts. The paper added that Hong Kong Disneyland had brought Hong Kong well over HK$30 billion in economic benefits over the past four years. The park’s attendance last year was 4.6 million, 2 per cent more than 2008, generating revenues of HK$2.541 billion. The theme park, Disney’s smallest, is now undergoing a US$468 million expansion aimed at bolstering its competitiveness with a rival Disneyland that is scheduled to open in Shanghai by 2013. As part of the expansion deal, partly financed by the Hong Kong government, Disney pledged to boost the transparency of its operations by releasing annual operating and financial results. Hong Kong Disneyland managing director Andrew Kam said the losses were contained last year mainly because of cost-cutting efforts and growth in attendance. Kam said that the Disney park is expecting to boost attendance and break into profit when the construction of three new themed areas are completed by mid-2014. Asked whether the Shanghai Disneyland would pose a threat to Hong Kong’s theme park, Kam said he believed China’s market was large enough to have two Disney parks. Secretary for Commerce and Economic Development Rita Lau Ng Wai-lan on Tuesday said she was disappointed about the business performance of Hong Kong Disneyland. “As a shareholder, the performance delivered by the theme park company is certainly falling short of our general expectations. It is very important for management to control costs and improve the efficiency of its operations, with a view to boosting the performance of the company,” she told local media.

Dumping that broken washing machine may cost you HK$200 in future, and you may be looking at HK$100 to get that old TV out of the door. Under the "polluter pays" principle, which is the theme of a three-month consultation paper released yesterday, you will likely start paying for the recycling or dumping at the start of an appliance's working life. For a key point of the government paper points to a levy when you make a purchase, along with an end-of-life fee. The aim is to come up with legislation to reduce the dumping of electronic waste in landfills, and not just because of space considerations. For much of what makes an appliance tick - lead, copper and mercury are common - is hazardous to health, with youngsters particularly susceptible to many toxic substances. In outlining what it calls the proper management of waste electrical and electronic equipment - WEEE is the striking acronym that bureaucrats have come up with - the government does not offer specific levies for various items. However, experience elsewhere suggests HK$100 for a small TV set and HK$200 to HK$250 for bulky appliances, because size does matter in planners' thinking. So computer products will cost less, though many are packed with poisons. The consultation paper quotes a recent poll that points to a fee of up to 2.5 percent of the retail price being levied. There is neither a timetable for the scheme nor a date for when a recycling and treatment plant will be up and running, but officials have lately been hoisting danger signals over landfills. Hong Kong generates around 70,000 tonnes of WEEE every year, Secretary for the Environment Edward Yau Tang-wah said yesterday, and this increases by 2 percent annually. "By introducing the proposed producer responsibility scheme, we can on the one hand avoid the negative impact that WEEE might bring about on the environment, and on the other promote the recycling of waste and the reuse and recovery of useful materials," Yau said. Currently, 80 percent of such waste is recovered by secondhand dealers, who export parts to developing countries to process and reuse. Hong Kong Electronic Industries Association chairman Chan Kei-biu agreed with the thrust of the scheme but believes the prepay option is unfair. "A user may not dispose of an item for many years, leaving the importer holding the levy that may never be used," Chan said. But Cheung Yiu-shing, chairman of the Hong Kong Waste Electrical and Electronic Equipment Recycling Association, said it would be fair for importers, recycling companies and consumers to share the costs. Retailers of electronic appliances look likely opponents of the scheme. Small companies could not afford the additional work that handling the levy would entail, said one.

Any attempt to conduct a de facto referendum on Hong Kong's electoral reform would be inconsistent with the Basic Law, Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung said yesterday, three days after Beijing sent the same message to pan-democrats. Five lawmakers from the Civic Party and League of Social Democrats plan to resign, triggering by-elections they will contest on a platform of genuine universal suffrage and the scrapping of Legco's functional constituencies. They say the exercise will be a de facto referendum. On Friday the State Council's Hong Kong and Macau Affairs Office said any "so-called referendum" would be inconsistent with Hong Kong's legal status and a "blatant challenge" to the Basic Law and the central government's authority. Lam said electoral changes could only be carried out using procedures prescribed by the Basic Law. "Any arrangements to promote a referendum outside these constitutional procedures would not be consistent with the Basic Law," the minister said. "Also, whatever the outcome of this movement for five legislators to resign from geographical districts, it will not change our constitutional procedures for adopting new electoral arrangements." Lam was asked whether the proposal by the two pan-democratic groups was unconstitutional, but he sidestepped the question. He also said the Hong Kong government would not propose a law to allow referendums. Under the two parties' plan, five pan-democratic legislators - one from each of the geographical constituencies - will announce next week that they are resigning. They say the subsequent by-elections will allow residents to express their position on constitutional reform through the ballot box. However, there are still uncertainties about the arrangements for by-elections. Some Beijing-friendly lawmakers say they may block the government's application for financing to conduct them. The Constitutional and Mainland Affairs Bureau has estimated that the by-elections will cost HK$150 million. Wong Kwok-kin, vice-president of the Federation of Trade Unions, said: "People may mistake the by-elections for a referendum. Endorsing such expenditure may just add heat to the debate." Two pro-government political parties, the Democratic Alliance for the Betterment and Progress of Hong Kong and the Liberal Party, said they had not yet decided whether to support the financing proposal. Liberal Party chairwoman Miriam Lau Kin-yee said: "It is a waste of taxpayers' money." Hong Kong delegates to the National People's Congress and the Chinese People's Political Consultative Conference are expected to discuss constitutional reform today at their annual meeting, which is being held in Zhuhai. It will be hosted by Qiao Xiaoyang, deputy secretary of the National People's Congress Standing Committee.

Richard Li Tzar-kai wants to try his hand in Hong Kong's free-to-air television market, just three days after a local pay-TV operator filed a similar application. The telecoms giant PCCW (SEHK: 0008), which Li controls, says it is going to apply for a free-to-air TV licence. Observers believe the move, if approved by the government, may enhance competition in the television market. In a brief statement yesterday, PCCW said: "With its ubiquitous terrestrial and wireless networks, taken together with its quality local content production, PCCW has decided to apply for a [free-to-air] TV licence." However, the company did not give a timeline, nor did it mention how much it was prepared to invest. It only said an application would be submitted "in the near future". A spokesman said yesterday PCCW was not prepared to elaborate further on the plan at this stage. PCCW's move came after two other local pay-TV operators, City Telecom (CTI) and iCable Communications, recently submitted applications for free-to-air TV licences. PCCW owns NOW TV, a pay-TV service transmitted through the broadband network. It is unclear if this will breach the so-called cross-media ownership restrictions under the Broadcast Ordinance. The restrictions are meant to minimise conflicts of interest and prevent development of a media monopoly and editorial uniformity, according to the Broadcasting Authority. The Commerce and Economic Development Bureau, which oversees Hong Kong's broadcasting policy, declined yesterday to comment, saying the government had not received any application from PCCW. However, a spokesman said: "The government and the [Broadcasting Authority] welcome those who intend to operate a free-to-air TV service to submit their applications ... and there is no pre-set ceiling on the number of licences to be granted. "All the applications will be assessed on their individual merits." Li became embroiled in a cross-media ownership controversy in 2006 when he wanted to acquire the Chinese-language daily Hong Kong Economic Journal. But a subsequent investigation by the Broadcasting Authority concluded that PCCW Media, in which Li holds an interest via holding company PCCW, had not contravened the cross-media ownership provisions. The authority was satisfied Li was not exercising control of PCCW Media. Broadcasting policy observer Charles Mok said any increase in competition in the local TV market, which is now dominated by Television Broadcasts (SEHK: 0511) (TVB), was welcome. The other free-to-air TV station is Asia Television (ATV). Mok also urged the government to review the cross-media ownership restrictions. "In the information age, the influence of cross-media ownership might not be as big as it was in the last century," he said. "One can hardly influence the public, even if you own many newspapers and many TV stations." His views were shared by legislator Samson Tam Wai-ho, who said he believed the Hong Kong market could accommodate more than two free-to-air TV stations. He added that spectrum availability would not be a big problem given the development of digital broadcasting. Dr Lo Wai-luk, an associate professor at Baptist University's school of communications, was more sceptical. "Running a TV station should not be a long-term target of Mr Richard Li," Lo said. A TVB spokesman said yesterday TVB welcomed fair competition. ATV was not prepared to comment.

Mainlan d wind power producer Xinjiang Goldwind Science & Technology Co has chosen China International Capital Corp (CICC) as lead underwriter for a Hong Kong initial public share offering aimed at raising US$1.5 billion in the first half of 2010, sources close to the plan said on Tuesday. The strong post-IPO performance of China Longyuan Power Group Corp, the world’s fifth-largest wind power generator, could herald a wave of public offerings from Asia’s renewable energy sector. Longyuan shares have traded 33 per cent above the offering price since listing in December last year. Longyuan raised US$2.2 billion, making it the largest wind power IPO in 2009. Xinjiang Goldwind’s US$1.5 billion IPO looms largest in the pipeline for 2010. “There are definitely more renewable energy IPOs in the making, given that this is what Beijing is seriously looking to grow,” said one of the sources. Goldwind, already listed in Shenzhen, said in October last year that it planned to float shares in Hong Kong, with an eye toward expansion, but did not give financial details. Goldwind was seeking approval from the mainland securities regulator in Beijing for a Hong Kong IPO, said the sources, who declined to be identified as they were not authorised to speak to the media. CICC, partly owned by US investment banking giant Morgan Stanley, declined to comment. Other global investment banks, including UBS, were pitching to Goldwind in the hope that it would hire at least one more sponsor, said the sources. Haitong Securities, one of mainland’s 10 biggest brokerages, which helped Goldwind list in Shenzhen, was also expected to be appointed to handle part of the company’s H-share offering, another of the sources said. Goldwind planned to issue no more than 15 per cent of its enlarged equity capital in the Hong Kong offering, the sources said, with a 15 per cent over-allotment option in case of strong demand. Based on Monday’s close of 28.53 yuan (HK$32.38) for Goldwind’s Shenzhen-listed shares, its Hong Kong offering could raise up to 7.93 billion yuan. The first source added that CICC bankers had suggested that Goldwind should wait “for a while” until its Shenzhen-listed share price rose to a more attractive level, which would benefit pricing for the Hong Kong IPO. Goldwind also needs approval from its A-share investors for the Hong Kong IPO plan.

Orient Overseas (International) Ltd (0316) is selling its mainland property business for US$2.2 billion (HK$17.16 billion) to Singapore developer Capital and and expects to book a profit of about US$1.055 billion.

Finnish engineering group Wartsila said it would cut 1,400 jobs and move production to China to boost competitiveness as it enters a challenging year. The company also said on Tuesday, its sales for last year rose 14 per cent, with underlying profitability improving versus a year ago, sending its shares 10 per cent higher in early trading. “The world has dramatically changed in a short period of time. China has become a strong maritime centre and its growth will continue,” Wartsila chief executive Ole Johansson said in a statement. “Competition in the market will intensify. By developing our manufacturing footprint and our businesses for the future key markets Wartsila will further improve its competitiveness and service to our customers in the tightening markets,” he said. The company said some 570 jobs would be slashed in the Netherlands as it planned to close plants in Drunen and Zwolle, while in Finland it plans to close down its plant in Vaasa. Wartsila forecast its net sales for the current year to be 10-20 lower versus last year, with an operating margin before non-recurring items of around 9-10 per cent, at the upper end of the firm’s long-term range.

Kowloon Motor Bus has stepped up random checks on buses to ensure their drivers are not speeding. Since the Tseung Kwan O tragedy last November, in which two people were killed and 34 injured, laser gun checks on buses have increased from five to 12 times a month, with about 100 buses being "gunned" each time, a KMB spokesman said. The company said a cross-department safety committee was also set up last month to educate drivers about speeding. Before the accident, laser gun checks were carried out only twice a month. This was increased to five in December in some areas. The spokesman said the number of drivers complying with speed limits has improved from 89.28 percent in November to 92.7 percent in December. On average, around seven per 100 checked were found to be speeding, the spokesman said. KMB operations director Tim Ip Chung-tim said drivers may sometimes be unaware they are speeding when traveling down a slope. "It is hoped that such detections will remind drivers of their responsibility," Ip said. Drivers found speeding will be sent warning letters and called to face-to-face meetings with the management. Plans are also afoot to install black boxes in all KMB-operated buses. A driver's handbook will be issued to emphasize proper driving attitudes and to remind drivers to pay special attention to situations on the road. A database of potentially hazardous areas will also be established and uploaded onto the staff website, he added.

China*: For the first time, Chinese investment in United States companies has eclipsed US purchases of mainland entities, a trend analysts say is fuelled partly by depressed American assets. Last year, Chinese buyers snapped up US$3.9 billion of US assets, nearly four times the level in 2008, said Dealogic, a data-tracking firm. By comparison, US buyers ploughed US$3 billion into Chinese entities last year, down 80 per cent from 2008. It is too early to tell whether this pattern will hold. Chinese buyers represented only 3 per cent of the US$118.7 billion in US foreign investment last year. Yet China ranked as the ninth-largest foreign investor in the US, and among the minority that lifted its stake amid a sputtering global mergers-and-acquisitions market. The development comes at a time when China has overtaken the US as the world's top car market and is expected to soon edge out Japan as the world's second-largest economy, behind the US. Analysts said that as China's economy grows, so does its desire to expand its global presence through acquisitions. "It's a tremendous phenomenon that the Chinese are exporting capital aggressively," said Lawrence Chia, the head of Deloitte China M&A Services. "There's a big push towards domestic consumption, so they're going after brands for their market." US companies are attractive targets because of slumping stock prices that make investment less expensive. By buying up US assets, China was also hedging its currency risks, analysts said, since it holds a significant portion of its foreign reserves in US dollar-denominated assets. "The US dollar has lost value, so it's better to put it in hard assets," said Greg Miao, a partner at Skadden Arps Slate Meagher & Flom law firm. Globally, China has shown significant interest in acquiring natural resources and industrial firms in engineering, cars and technology. Recent Chinese investment in the US, however, has favoured the financial sector. The central government took high-profile stakes in private-equity firm Blackstone and financial giant Morgan Stanley a few years ago. David Chin, UBS' joint head of investment banking in Asia, said he did not expect a "huge amount" of additional Chinese investment in the financial sector in the near term due to relatively onerous US investment rules and the possibility of more asset write-downs by institutions. Analysts said some firms were wary of bidding on high-profile US assets after state-owned CNOOC (SEHK: 0883)'s unsuccessful 2005 bid to buy Unocal.

Beijing said on Tuesday it was making an all-out effort to rescue two Chinese engineers kidnapped in Afghanistan, and seeking to verify reports that they were seized by the Taliban.

Relatives of one of the UN peacekeepers killed in the recent earthquake in Haiti walk with his portrait during a ceremony at the airport in Beijing on Tuesday. Beijing angrily denied accusations on Tuesday that its rescue team in Haiti was only searching for Chinese nationals missing after last week's devastating earthquake. “Concerning the comments that Chinese rescuers only rescue Chinese, these comments are false and are made out of ulterior motives,” foreign ministry spokesman Ma Zhaoxu told reporters. “The Chinese rescue team departed China immediately after the quake. They not only found the bodies of the Chinese peacekeepers, they also found the bodies of UN officers in Haiti and many others.” The 60-strong Chinese medical team in Haiti has already treated more than 200 locals and China has air-lifted rescue supplies and aid to the devastated country, he said. “These actions are not selfish and brook no accusations. The accusers should be accused,” Ma said, after media reports about China’s contribution to the humanitarian operation in Haiti. “Our rescue team and Chinese peacekeepers have made a great contribution to the relief efforts. We have won high appraisal from relevant parties, including the secretary general of the United Nations.” Tens of thousands were killed in the 7.0-magnitude quake that struck Haiti on January 12, with an estimated quarter of a million injured and 1.5 million left homeless. Ma said China would consider a UN request for nations to help provide an additional 3,500 peacekeepers to help maintain order in Haiti, but made no firm commitment. The bodies of eight Chinese peacekeepers killed in the quake were on Tuesday repatriated and given a state funeral, including a procession down the Avenue of Heavenly Peace, the capital’s main thoroughfare, past Tiananmen Square. “They sacrificed their lives for the maintenance of peace. Here I would like to express deep condolences,” Ma said.

Industrial and Commercial Bank of China (SEHK: 1398) plans to buy a 50 per cent stake in Cathay Financial’s life insurance unit in mainland, in what would be the first purchase by a mainland company of a stake in a Taiwanese financial firm, a source with direct knowledge of the situation said. ICBC, the world’s largest lender by market value, was in talks to buy the stake for about 400 million yuan (HK$454 million) from China Eastern Airlines (SEHK: 0670), the source said on Tuesday. “As long as Cathay is not opposed, ICBC could buy China Eastern’s stake in the life unit,” the source said. “This is just one option ICBC and Cathay Financial are considering. The ultimate goal is for ICBC to invest in Cathay Financial,” said the source, who was not authorised to speak to the media and declined to be identified. ICBC had been in talks to buy a stake in Cathay Financial in a potential US$3.4 billion deal that would be the first direct investment by a mainland bank in a Taiwan financial group, reports said in December last year. ICBC declined to comment, while Cathay officials were not immediately available for comment. The talks come days after a landmark financial deal signed by Taiwan and Beijing took effect, opening the possibility for financial firms on both sides to invest in each other. The planned stake purchase, which would allow Cathay to access mainland’s biggest banking branch network, is subject to regulatory approvals in Taiwan and mainland. ICBC chairman Jiang Jianqing is currently visiting Taiwan, where he is due to speak at a local economics forum later on Tuesday.

Happy life of Expo pandas at new home

Brilliant pavilions greet 100-day countdown to 2010 Expo

Indoor decoration in China Pavilion of World Expo starts

Former Vice President of the Supreme People's Court, Huang Songyou (left) seen in a visit to Hong Kong in July 2006.  A mainland court sentenced a former top Supreme Court judge to life in prison on Tuesday for taking bribes and other graft charges, a court official and state media said. Huang Songyou is the latest top official snared in a stepped-up campaign against corruption, which President Hu Jintao has described as one of the greatest threats to the legitimacy of Communist Party rule.

Banks lent 38.93 billion yuan to buyers of new homes and 60.65 billion yuan to buyers of second-hand homes in Shanghai last year. Mainland banks in Shanghai's red-hot housing market lent 99.58 billion yuan (HK$113.2 billion) in new mortgages last year, up dramatically from 5.8 billion yuan in 2008, as home seekers rushed to buy and prices hit new highs. The banks lent 38.93 billion yuan to buyers of new residential properties and 60.65 billion yuan to buyers of second-hand homes, the Shanghai office of the People's Bank of China said yesterday. Lending soared more than 1,600 per cent compared with 2008, when the property market and overall economy were hit hard by the global financial crisis, the central bank said. Analysts said the sharp increase in the city was in line with the national surge in home mortgages. "At the end of 2009, outstanding medium- and long-term consumer loans [nationwide] stood at 4.9 trillion yuan, an increase of 1.588 trillion yuan from the end of the previous year," Xavier Wong, the director and head of research of property consultancy Knight Frank's Greater China division, said. "In 2008, outstanding medium- and long-term consumer loans increased by only 345 billion yuan. Housing mortgage loans account for about 99 per cent of medium- and long-term consumer loans in China." The increase was helped by lower tax charges and looser credit policies introduced by the central and local governments in late 2008, he said. In November, the average price of new homes in urban Shanghai was 31,209 yuan per square metre, up 68 per cent from 2008, Knight Frank said. Nationwide, prices in many cities rose more than 40 per cent, Wong said. Looking ahead, he said, some uncertainties hung over the market, which was facing continued growth in liquidity but also suffering from tightening administrative measures. Liao Qun, a senior vice-president and chief economist at Citic Ka Wah Bank, expects mortgage loan growth in Shanghai and the country as a whole to slow in the first half as the property market slows amid the austerity measures. But prices and sales volume would pick up in the second half owing to strong demand, he said. In order to pre-empt surging residential prices from creating a property bubble, the central government issued directives early last month intended to curb speculation in the residential market. Among these were a resumption of the 5.5 per cent business tax on second homes bought and sold within five years. The lock-up period had been reduced to two years last year to shore up the market during the financial crisis. On December 31, the Shanghai government announced related measures. It further tightened criteria for concessions on deed taxes and individual income taxes and made mortgage terms more stringent for buying a second property. Property consultancy Colliers International says the residential market probably faces a moderate correction, with price re-alignment in different districts in the short term, but Colliers does not expect a sharp correction. Given the government's pledge to maintain the continuity and stability of economic policies, Colliers does not expect widespread policy reversals adverse to the property market this year, it says in a research report. Taking into account a continuation of the government's "moderately loose" monetary policy, Colliers says the residential market is not expected to experience a sharp relapse this year.

Jan 19, 2010

Hong Kong*: The government was interested in seeking people's views on a new mandatory scheme for disposing of electronics waste, Secretary for the Environment Edward Yau Tang-wah said on Monday. Yau said it is important that Hong Kong find a more environmental friendly way to deal with electronics waste. He said Hong Kong annually generated around 70,000 tonnes of waste electrical and electronics equipment. “Although 80 per cent of locally generated electrical and electronic equipment is waste-recovered by second-hand dealers – and usually exported to developing countries for re-use – this strategy is not environmentally sound and not sustainable. “Moreover, the volume of such waste has been increasing at the rate of two per cent annually” Yau said. The government was mainly concerned about large quantities of electronics waste, such as television sets, refrigerators and air conditioners; as well as computers. The consultation document can be downloaded from the Environmental Protection Department People can write to the EPD’s Waste Management Policy Group at Room 4522, 45th floor, Revenue Tower, 5 Gloucester Road, Hong Kong; or e-mail: Yau also said that electronics waste contained hazardous components and were harmful to the environment and the public’s health if not treated properly. The consultation period would last for up to three months up to April 30. The government would seek public’s views on how to provide proper treatment for waste electrical and electronics equipment and how to share the cost of the scheme. An environmental levy has already been introduced for plastic shopping bags. In his 2009-10 Policy Address, the Chief Executive identified the electronics waste as the next target for a producer responsibility scheme.

The introduction of margin trading and index futures in the mainland could speed up the launch of yuan-denominated products in Hong Kong and give the local equity market a further boost, said Tse Yung-hai, president of the Chinese Securities Association of Hong Kong. The SAR, to grasp opportunities and complement Shanghai as one of China's two international financial centers, should aim to be a wealth and yuan offshore center by luring more mainland financial institutions to set up headquarters here, said Tse, who is also deputy chief executive of BOC International. Tse sees no need for mainland firms to trade Hong Kong shares in yuan, but the possibility of listing yuan-denominated derivative products is high. "Listing yuan-denominated derivative products based on mainland indexes could help eliminate the exchange risks for investors," Tse told The Standard. "Products such as the CSI 300 index derivatives could trade in Hong Kong in yuan ... the market would be big, since hedging cost would be low and many people would be interested." The launch of margin trading and index futures would help narrow the gap between A- and H-shares through arbitrage and also improve the convergence of both the mainland and local markets. But as Shanghai and Hong Kong are both financial centers, firms may choose to be listed in either one or both. A shares should continue to trade using the yuan and H shares with the local dollar, he said. Tse also urged the SAR government to be more proactive in promoting the city as a wealth management center by attracting more financial institutions to set up their headquarters here. His call came right after JPMorgan and billionaire George Soro's flagship investment arm, Soros Fund Management, announced plans to set up offices in Hong Kong. Tse said Hong Kong should also target mainland banks. "Hong Kong should build awareness and seize every opportunity to develop before [the yuan is] freely convertible and Shanghai becomes an open market. "There are 400,000 people in China whose net worth is more than 1 million yuan (HK$1.13 million) each, but there are insufficient financial planners and financial products there," Tse said. With all its professionalism, efficiency and good regulatory system, Hong Kong "should fight very hard for the market." Hong Kong also has dozens of enterprises, like BOCI, which are familiar with the situation in the mainland. Tse said one of the roles of the Chinese Securities Association of Hong Kong - which was set up last month - is to help the city capture the growing market. Nineteen mainland brokerages, with a 9 percent share of the market, are founding members of the association.

Hong Kong Fashion Week, Asia's largest fashion event, opened in the city on Monday, showcasing the industry's newest collections, looks and products and attracting exhibitors and buyers from all around the world. The 41st edition of Hong Kong Fashion Week for Fall/ Winter 2010 and the 8th World Boutique is held from Monday to Thursday at the Hong Kong Convention and Exhibition Center. The twin events feature altogether over 2,000 exhibitors from 30 countries and regions, a 17 percent increase over last year, as well as close to 5,000 buyers from 39 countries and regions, according to the Hong Kong Trade Development Council. During four days of the two flagship fairs of Asia's fashion industry, there will be a series of runway shows, presenting ideas from leading local and overseas designers. Fair highlights include the Hong Kong Fashion Extravaganza on Monday, featuring four celebrated fashion designers, including Dorian Ho from Hong Kong, Guo Pei and Xie Feng from the Chinese mainland, as well as Japan's Toshikazu Iwaya. The events also offer 25 special seminars to address current fashion topics, including a forecast of 2011-2012 Fall/Winter fashion influences. Hong Kong Fashion Week for Fall/ Winter has a worldwide reputation for showcasing the newest collections, looks and products in the industry. The event features 1,700 exhibitors from 24 countries and regions, with Russian and South African exhibitors joining for the first time. World Boutique showcases the latest fashion brand collections, including apparel, watches, shoes, fashion jewelry, home fashion and lifestyle products. The event also includes such global fashion names as Vivienne Westwood, which will take the spotlight at a runway show. The Netherlands, famous for its design capabilities, also hosts a country pavilion for the first time this year.

A model presents a creation by Japanese designer Tokshikazu Iwaya at the Hong Kong Fashion Week for Fall/Winter 2010 January 18, 2010.

Members of the "post-80s" generation are less happy and more anxious than those of the older generation. That's according to a survey by the Hong Kong Christian Service, which interviewed 400 respondents from September to November last year. It found the happiness score for those between 20 and 28 is 4.14 points, compared to an average of between 4.5 and 5.5 points for the whole group. The "happiness index" included the qualities of determination and strategy to strive for a better future. The "post- 80s" group did better among the interviewees aged 20 to 63 on determination but not on strategy. The survey also found 40 percent of respondents between 20 and 28 years old showed symptoms of moderate or severe anxiety, which was twice that of the older groups. About 20 percent of those interviewed belong to the "post-80s" group, according to survey organizer Natalie Cheung Yu. Cheung said most of the "post-80s" respondents received tertiary education and are unhappy with their jobs which have low salaries and long working hours. "They think they have high a education qualification but the salary is not satisfactory and the chance of promotion is slim." She said the new generation feared worse than Generation X, those who were born between 1961 and 1980, when faced with salary cuts during the economic turmoil. Another survey by the Hong Kong Research Association found that those of the "post-80s" generation are more pessimistic about the future. Of the 1,075 members of the group interviewed by the association from January 7-13, 32 percent said they are pessimistic about the future - 8 percent more than those who consider themselves optimistic. It also found that 43 percent are dissatisfied with the government's performance and only 14 percent said it is satisfactory. In response to radical actions by the "post-80s" such as protesting in front of the Legislative Council building as the Finance Committee discussed the funding of the express rail link, 37 percent said they accepted their behavior while 39 percent said they did not. The survey organizer said the result shows the "post-80s" have mainly negative feelings and urged the government to review the youth policy and provide more communication channels.

Secretary for Transport and Housing Eva Cheng Yu-wah said on Monday she had considered having direct discussions with protesters outside Legco on Saturday night, but had been advised against doing so by police.

Secretary for Security Ambrose Lee Siu-kwong speaking to the media on Monday defended the tactics used by police, saying his officers had used “minimum force” against radical protesters. Secretary for Security Ambrose Lee Siu-kwong on Monday condemned anti-rail protesters - saying some of actions taken by them at the weekend had "seriously undermined" the rule of law in Hong Kong. Dramatic protests erupted after lawmakers on Saturday approved funding for a costly high-speed express rail link to the mainland. This sparked clashes between police and thousands of demonstrators outside the Legislative Council building. After months of often bitter debate, lawmakers finally approved the HK$67-billion project by 31 votes to 21. Almost immediately, thousands of mostly young protesters tussled outside with hundreds of police and riot police. They also tried to prevent officials and lawmakers leaving the Legco building. Police used pepper spray on protesters who attempted to breach their cordon and formed a ring around the car of Transport Secretary Eva Cheng Yu-wah, while trying to clear a path for her to leave. Ambrose Lee on Monday defended the tactics used by police. He said officers had only used “minimum force” against radical protesters. “Police were very restrained and only had to use force when some protesters intentionally broke through police barriers and blocked roads,” he told reporters. Speaking at a press conference on Monday afternoon, Donald Tsang also condemned the actions of the protesters. Tsang said the rail link project was supported by the majority of people. "It is important for the government to implement the project because of its long-term benefits to Hong Kong,'' the chief executive added. Earlier, Secretary for Transport and Housing Eva Cheng Yu-wah said she had considered having direct discussions with the anti-rail protesters outside Legco. But Cheng said she changed her mind after being advised against the idea by police. She said the government would continue working to help the 3,600 residents of Tsoi Yuen Tsuen re-locate to other areas. But Choi Yuen Tsuen Concern Group vice-chairman Lo Ming-kwong said about 70 families living in the village said they would stay in the village until the government demolishes it, local radio reported on Monday. Lo hopes Chief Executive Donald Tsang Yam-kuen and Eva Cheng would visit the village to meet residents. Choi Yuen Tsuen is home to about 3,600 people. It has to be demolished to make way for a rescue station and railway sidings of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link. The government has said it would compensate villagers by re-housing them or providing them with compensation. The compensation package would cost about HK$2 billion.

Financial Secretary John Tsang Chun-wah said on Monday he would try to produce a budget that was fiscally responsible, but also one that would help Hong Kong citizens. Tsang was discussing his February budget at a closing ceremony for Operation Santa Claus on Monday afternoon. “I shall endeavour to strike the right balance between stimulating economic growth, improving people’s livelihoods and achieving the best possible fiscal position,” he said. Tsang said the unemployment rate had peaked at 5.4 per cent last summer – and the jobless rate was now falling. “It currently stands at 5.1 per cent. I hope it will go down further. This compares with the 6.4 per cent unemployment rate during the Asian financial crisis a decade ago,” he said. Tsang appealed to companies to accept more social responsibility. He suggested they conserve energy, use electric or hybrid vehicles, solar and heating and energy efficient buildings. Tsang also hailed the success of Operation Santa Claus 2009 – a charity campaign co-founded by the South China Morning Post (SEHK: 0583) and RTHK. “Even during these difficult economic times, companies, associations and individuals have shown great community spirit through their generous donations,” he said. This year, Operation Santa Claus raised more than HK$9,989,702 from different organisations. Over the years, it has raised over HK$130 million for different charities.

Orient Overseas (International) (SEHK: 0316) (OOIL) has sold US$2.2 billion in mainland property to Singapore’s CapitaLand as the loss-making Hong Kong company seeks to raise cash and focus on its core shipping business. The sale of residential, hotel, and retail properties in mainland will generate a lump sum of cash for OOIL which posted a net loss in the first half of last year, badly hit by the global economic crisis. CapitaLand, which raised US$1.8 billion from the listing of its CapitaMalls shopping malls unit in November, has been increasing its footprint in mainland. “This proposed acquisition is timely and an excellent strategic fit for CapitaLand,” Richard Hu, chairman of CapitaLand, said in a statement on Monday. “It also fits into our stated goal of growing our assets size in China from the present 28 per cent of total assets to 45 per cent over the next five years as we remain very confident of the long term future of the country.” The US$2.2 billion deal includes the portfolio value of the seven sites of approximately US$2 billion and cash within the business of about US$262 million, CapitaLand said. The deal with CapitaLand, Southeast Asia’s largest property developer, is expected to be completed by the end of the first quarter with the approval of OOIL shareholders, CapitaLand said. Trading in shares of OOIL, a Hong Kong-based container ship operator, and CapitaLand, were suspended on Monday pending announcements, the companies said. On Friday, OOIL’s stock ended at HK$5.15, while CapitaLand shares closed at S$4.28 (HK$23.86). OOIL posted a net loss of US$231.9 million in the first half of last year versus a net profit of US$158.3 million in the year earlier period. The loss came as the global economy was still suffering through the financial crisis, taking a major toll on shipping companies that rely heavily on trade. OOIL, which is controlled by the family of former Hong Kong chief executive Tung Chee-hwa, made a US$5.1 million loss from its properties in the first six months of last year against a US$5.9 million gain a year earlier. The company had 1.4 million square metres of total gross floor area under development at the end of 2008 with the focus on cities like Shanghai, Beijing and Tianjin. OOIL also holds a stake in Beijing Oriental Plaza, which comprises a retail mall, office towers, service apartments and a five-star hotel, and Wall Street Plaza, in New York City’s financial district but those assets were not included in the deal.

The new social welfare chief has promised to enhance home-care services for the elderly. Patrick Nip Tak-kuen said he is aware of public concern over the quality of services at elderly homes after a senior nursing assistant was jailed for six months and fined HK$3,000 last month for forcing a woman with dementia to eat her own feces. The director of social welfare said he understands that many families are now hesitant to send their seniors to elderly homes following high-profile coverage of the case. The strengthened services - which the Social Welfare Department is now working on - are meant for senior citizens whose health is not too frail and who prefer to live with their families instead of moving to elderly homes. These will include more day-care and home- care services. "There is quite a large population of seniors whose health is poor but have not reached the stage where they have to move to homes for the aged," Nip said. Some families also want to live with their parents and grandparents and take care of them at home. At the same time "they may not be able to spare the time or find a full-time helper," Nip noted. Currently the department and welfare agencies are providing a variety of support services for the elderly and their families. Nip also said the department will commission a consultant by the middle of the year to work out guidelines for welfare agencies to improve their services. The consultant will look into three aspects: human resources management, financial management and corporate governance. "We are talking about public funding for these agencies," he said, adding they have to make sure the agencies can operate to meet public expectations.

Three agreements leading to closer cooperation between Taiwan and the mainland in banking, insurance and securities came into effect over the weekend. The three memorandums of understanding, which were signed in November, are the latest steps in rapidly improving ties across the strait after Ma Ying- jeou became Taiwan's president in May 2008. Taiwan's Financial Supervisory Commission said the MOUs followed pressure from the island's finance industry for greater access to the mainland market. With the MOUs, "Taiwan's financial industry can not only serve Taiwanese companies in the mainland but also tap the mainland market," the commission said. Taiwan businesses have channeled about US$150 billion (HK$1.17 trillion) into China since Taipei eased an investment ban in the early 1990s. China took US$83.7 billion of the island's total exports in 2009, or 41 percent of the island's overseas sales. The MOUs provide for thresholds and preferential policies for both sides to enter each other's financial markets.

China*: China XD Electric, the nation’s largest electricity transmission and distribution equipment maker, plans to raise as much as 10.27 billion yuan (HK$11.67 billion) in the country’s first major initial public offering this year. XD Electric, which is selling up to 1.3 billion shares in its Shanghai IPO, said it had fixed the price range for the share offer at 7.10 to 7.90 yuan. That compares with the 7.4 yuan-9.6 yuan range forecast by its underwriter, China International Capital Corp (CICC). The pricing will give XD Electric a maximum price earnings (PE) ratio of 34.17 times its 2008 net profit per share on a fully diluted basis, it said in a statement to the Shanghai Stock Exchange published in official newspapers on Monday. That would give XD Electric’s offer a relatively low valuation, as mainland’s lacklustre stock market has recently weakened IPO share demand and less feverish debuts of new listings have forced companies to think twice before setting very expensive IPO prices. Mainland firms typically set the PE of their IPOs at very high levels, often around 50 times their historical earnings, because new listings have traditionally attracted huge speculative interest in mainland’s nascent stock market. The debuts of two IPOs in Shanghai over the past month – train maker China CNR Corp and building firm China National Chemical Engineering – were weak, as the IPO pipeline has filled up and high valuations started raising eyebrows. XD Electric, based in Xian, has previously said it needed 7.72 billion yuan in IPO proceeds for expansion and technical upgrading. It appointed CICC as the IPO’s lead underwriter. XD Electric will take subscriptions from institutions on Monday and retail investors on January 19. It will sell 40 per cent of the IPO to institutions and the rest to retail investors. The stock regulator has been adding huge new share supplies to help the government’s campaign to clamp down on excessive asset prices since early December. Dozens of other firms, including China First Heavy Industries and Huatai Securities, have won regulatory approval and are now on the waiting list for an IPO. The clampdown was partly sparked by a 27 per cent jump in the key Shanghai Composite Index in less than three months since early September and has effectively cooled trading.

The 2010 IPO market will also begin with the strong performance of Chinese companies - two out of five companies scheduled to make their IPO debuts this week are from China, according to Renaissance Capital, a Connecticut-based market research firm.

Mazda and Ford will dissolve their joint venture in China by 2012, a move that would further weaken the ties between the two auto makers, Japanese media reported Sunday.

Volvo sold 22,405 cars in China last year, a surge of 77 percent over 2008, making it one of the fastest-growing mainstream premium brands in the world's biggest vehicle market. Geely's expected merger with Volvo will not hamper but boost China operations by the Swedish premium carmaker, according to Volvo's top China executive. "The merger will not change Volvo's plans in China. Instead, it will enhance them," said Alexander Klose, chief executive officer of Volvo Cars China, at a press briefing last week in Beijing, Klose said Volvo will focus on the Chinese market by putting in more investment after the deal with current owner Ford Motor Co is complete. Another major positive for the Swedish brand is that "Chinese authorities will lend support to Volvo as they have chosen the auto industry as a key sector for the economy", he said. Volvo will have the same brand direction after the merger and Geely will not sacrifice the quality of Volvo cars for short-term cost savings, he said. Klose added that Geely would possibly register a company in Beijing to own Volvo. In December, Geely and Ford announced they expect to sign a final agreement on sale of Volvo. Klose did not reveal details about the deal, noting that he is "not a part of negotiations". Volvo sold 22,405 cars in China last year, surging 77 percent from 2008, making it one of the fastest-growing mainstream premium brands in the world's biggest vehicle market. In 2009, segment leaders Audi and BMW moved almost 160,000 and more than 90,000 cars in China respectively. Volvo: Brighter future after merger Volvo's compact S40 and large-sized S80 are being made at Ford's joint venture in China with Chang'an Motor Corp and Japan's Mazda Motor Corp. "We will carry out localizing additional cars in China," Klose said, without revealing details. Volvo's long-term strategy is to build cars in China that are also exported to other countries, he said. The company said it will import its renovated C30 and C70 to China in the first quarter of this year. An all-new S60 sedan, which is to debut at the Geneva motor show in March, is also expected to be brought into China later this year. Klose said Volvo will continue to expand its sales network in China to propel sales and will further penetrate into second and third-tier cities like its competitors.

China's top appliance maker TCL Saturday started building a 8.5-generation LCD production line in the southern city of Shenzhen to meet the rising demand for flat-screen TVs. The plant, in which TCL and Shenchao Technology Investment Company each hold a 50 percent stake, involves an investment of 24.5 billion yuan ($3.6 billion). It covers an area of 600,000 sq m. The fund includes 10 billion yuan from TCL and Shenchao, bank loans and also investment from domestic TV makers and overseas LCD panel producers, the two investors said. The plant has a full capacity of 14 million LCD panels per year with an estimated output value of 16.9 billion yuan ($2.48 billion). Its initial phase is expected to be put into operation in August 2010 and start mass production at the end of 2011. The second phase will start mass production one year later. TCL, founded in 1981, sold 14.28 million color TVs globally last year. Shenchao Investment, owned by the Shenzhen government, runs businesses including investment in projects related to integrated circuits and flat screens.

Developed countries may slip back into recession if they exit strategies taken to battle the global financial crisis too early, the head of the International Monetary Fund warned on Monday.

Rescue workers were evacuating thousands of rural residents from parts of northwestern China after extreme cold and blizzard conditions killed four people and left half a million snowed under, meteorologists said on Monday. Some 100,000 homes were either flattened or damaged by the storms in Xinjiang, and more than 15,000 head of livestock were killed by the cold front that set in Sunday night. Herders moved thousands of others to safer pastures at lower altitudes ahead of the latest storm front, which is expected to last until Wednesday. Temperatures in parts of Xinjiang are set to plunge to minus 45 degrees (minus 43 Celsius) by midweek, according to Xinjiang Meteorological Station forecaster Wei Rongqing. Wei said snow was falling in the region’s Altay district, where accumulations had already risen to 3 feet (94 centimetres). Altay lies in China’s extreme northwestern corner, 1,600 miles (2,600 kilometres) northwest of Beijing, the capital. “Livestock raising has been hit hard. Both wild animals and livestock haven’t been able to find food, but now forage has been allocated by the central government,” Wei said. Some 500,000 people in total were affected by the harsh weather, he said. The figure includes those who suffered property damage and supply shortages or were isolated by snow drifts and icy roads. Direct economic losses were being estimated at 300 million yuan (US$44 million) as of Thursday and were expected to continue rising, Wei said. “We’re taking emergency measures, including evacuating remote areas,” Wei said. Parts of northern China are seeing their harshest winter in decades, with Beijing this month receiving its heaviest one-day snowfall in 59 years. Temperatures in the capital were due to rise above freezing this week.

Motorola is planning to launch five to six smartphones in mainland this year with one model ready to be unveiled shortly, officials of the US mobile phone maker said on Monday. “In China, we’ve already launched two models last month, and there will be another one very very shortly, and probably another four or five later,” John Gherghetta, Corporate vice-president and general manager of Mobile Devices Business, told reporters in Seoul. Motorola is betting on smartphones after losing market share to rivals for more than two years and has reorganised its mobile business around developing phones running on Google’s Android operating system. Gherghetta was speaking at a news conference for the launch of its ’Motori’ smartphone in South Korea, to be offered by SK Telecom. The new model has a bigger camera and more media features than its Droid model sold in the United States, according to Motorola. “There will be a version of this phone in China in the first half,” Gherghetta said. He declined to identify which mainland operator would offer the new model. Spiros Nikolakopoulos, vice-president of Mobile Devices in charge of Asian and international retail distribution, said Motorola was planning “at least” 20 models across the world this year, “probably four to five in every country”. Motorola executives also said it was open to developing devices with other platforms, such as Microsoft’s Windows Mobile. Partner China Mobile (SEHK: 0941) in October said it would introduce eight smartphone models from Motorola this year using a lower-cost platform called OPhone. Worldwide factory shipments of smartphones are expected to rise about 28 per cent in 2010, according to iSuppli.

Health advocates and mainland officials are campaigning to enforce smoking bans in seven major cities, the latest sign of rising health awareness in the world's largest tobacco-consuming nation. The drive organised by the government’s Centre for Disease Control and Prevention seeks to enforce a ban on indoor smoking in public places and close loopholes in the law. Cities targeted include some of China’s biggest commercial centers – such as Tianjin on the northern coast and the mega-city of Chongqing in the southwest – where smoking and breathing in secondhand smoke add to health threats from traffic, industrial waste, and polluted air and water. China accounts for more than one-quarter of the world’s 1.3 billion smokers, with 2 trillion cigarettes sold in the country every year. About 60 per cent of Chinese men smoke, and offering cigarettes remains an important part of gatherings and social interaction. The project “would help save millions of lives through lowering tobacco consumption and reducing secondhand smoking,” said Sinead Jones of the International Union Against Tuberculosis and Lung Disease, which is co-sponsoring the campaign. Jones, the union’s director of tobacco control, was quoted in the China Daily newspaper on Monday. China has nominally banned smoking in public places indoors, but the restrictions are poorly enforced and undermined by official exceptions and government policies that sometimes even encourage tobacco use. A rural county in central Hubei province last year sparked a public outcry after it proposed a rule urging its officials to smoke more than 230,000 packs of locally produced cigarettes a year to boost tax revenues. The government said the campaign was an attempt to crack down on fake cigarettes and illegal cigarette smuggling, but called it off in the face of public criticism. While urban officials have pushed to rein in smoking, spitting, littering and other unsanitary behavior, government finances remain addicted to tobacco. Taxes from tobacco sales topped 416 billion (US$61 billion) last year, up 26.2 per cent from 2008, according to a report issued last week by the state tobacco industry regulator. Interest on government loans to the industry added another 97 billion yuan (US$14 billion). “The big increase in tax income from the tobacco industry is actively contributing to the security of government finances,” a spokesman for the regulator, Zhang Xiulian, was quoted as saying on its website.

Shares in China Eastern Airlines (SEHK: 0670) surged on Monday after the firm said it expected to return to the black in 2009 due to the rebound in the aviation industry and lower fuel costs. The nation's third-largest carrier in terms of fleet size saw its Shanghai-listed shares jump by the daily trading limit of five per cent to 6.65 yuan. “The results of the Company for 2009 will substantially grow compared to the same period last year,” China Eastern said in a statement filed with the Shanghai Stock Exchange over the weekend. “The results of the company for 2009 are expected to turn from loss into profit.” The airline, which posted a net loss of 13.9 billion yuan (HK$15.79 billion) for 2008, did not give specific figures for its earnings last year in the preliminary announcement.

Chinese peacekeepers and rescuers bid farewell to the bodies of Chinese victims in Port-au-Prince, Haiti, on Jan. 17, 2010. The bodies of eight Chinese police officers who died in the Haiti quake would be brought home by a chartered plane of China Southern Airlines.

Hu Jintao (4th R), general secretary of the Central Committee of the Communist Party of China, Chinese president and chairman of the Central Military Commission, inspects Shanghai Synchrotron Radiation Facility (SSRF) project, in Shanghai, east China, on Jan. 16, 2010. Hu Jintao made an inspection tour in Shanghai on Jan. 14-17. Hu visited scientific research bases, industrial parks and workshops of enterprises during the four-day tour, making investigations and research on the transformation of the mode of economic growth and work to promote sound and fast economic and social development. Hu stressed promoting independent innovation and making breakthroughs in core technologies. Such breakthroughs would provide strong support for the transformation of the mode of economic growth, he said. During his visit to Commercial Aircraft Corporation of China, Ltd., Hu said that the Communist Party of China (CPC) Central Committee had made a strategic decision to develop large passenger aircraft. He expressed hopes that the company stick to independent innovation and succeed at an early date. At the Spreadtrum Communication, Inc., a high-tech company founded by returned overseas students, Hu said independent innovation is the lifeline of a company. He told the company staff "I hope you could make further breakthroughs in core technologies, so as to boost China's communication industry."

More resident-friendly remedies to congestion being sought as expo nears - Car ban? You must be choking, say officials - With dedicated Shanghai Expo traffic plans being rolled out, the city hopes it won't need to resort to the odd and even-licensed plate system used by Beijing to keep private cars off the roads on alternate days during the Olympics. In fact, organizers are banking on 90 percent of Shanghai's 70 million visitors to rely on public transportation in traveling to and from the expo site, to prevent the roads from over-clogging with cars. To keep traffic moving on the roads, nearly 100 one-way streets are being created. Sixty-two one-way streets will be set up in the city core while another 31 will be marked around the 5.28-km expo area. "The plan is aimed at minimizing congestion around the central urban district of Shanghai, but the lengthy delays we see each day will be reduced," said Han Hao, a professor from the College of Transport and Communication at Shanghai Maritime University. A number of dedicated expo-bound routes are also being mapped out. Only specially permitted vehicles will be allowed to use a 104-km stretch of road within the Middle Ring Rd. The city is also mulling a temporary ban on the use of government-licensed vehicles as 200,000 of them currently share the roads with 1.6 million privately owned vehicles. Expanded and new subway lines will be added to the city's existing tracks to help bring visitors to and from the expo site. Fifty percent are expected to travel by metro. When the expo opens on May 1, Shanghai will be home to 420 km of subway track, making it the largest underground metro in the world. Lines 4, 6, 7, 8 and 9 will have stops located within close proximity to the expo site, where free shuttle buses will take visitors the rest of the way. Accommodating up to 100,000 riders per hour during peak times, the subway lines will operate under extended hours, meaning visitors can catch their last train home at midnight.

A bride-to-be poses for pictures at the riverside of Songhua River in Jilin City, northeast China's Jilin Province, Jan. 15, 2010. The beautiful rime scenery along the Songhua River attracted lots of lovers to take wedding photos.

Lovers pose for pictures at the riverside of Songhua River in Jilin City, northeast China's Jilin Province, Jan. 15, 2010. The beautiful rime scenery along the Songhua River attracted lots of lovers to take wedding photos.

Jan 18, 2010

Hong Kong*: Lawmakers from the pro-establishment camp yesterday signed a joint statement condemning the filibustering tactics of the pan-democrats in the debate on funding for the high- speed rail link to Guangzhou. They pledged to review the rules of procedure to prevent similar scenarios in the future.

Functional seats plan mooted a month after Deng, MacLehose met - The British government conceived the preliminary idea of functional constituencies in 1979, a month after the historic meeting between Deng Xiaoping and Hong Kong governor Murray MacLehose. A report prepared by the Foreign and Commonwealth Office in April that year stated there was a need to give Hong Kong people a greater say in their own government in the 1980s without sparking resentment from Beijing. "It is difficult to imagine the Chinese being prepared to tolerate a democratically elected government in Hong Kong with full responsibility for internal affairs," the report said. "Nevertheless, as time goes on it could become increasingly embarrassing for the British government to have to defend in parliament the maintenance of an undemocratic and non-elective system of government [in Hong Kong], particularly if there is significant pressure for more democracy among the people of Hong Kong." The report, entitled "Hong Kong in the 1980s", was recently declassified by Britain's National Archives under the 30-year rule. Most government records are transferred to the National Archives and made available to the public after 30 years. The paper considered British interests in Hong Kong and set out some of the issues likely to arise in the 1980s that would affect the formulation of British policy. The Foreign and Commonwealth Office said the majority of Hong Kong people seemed mainly interested in a rising standard of living, decent housing and good education. "Such evidence as we have suggests that they [Hong Kong people] are generally satisfied with the present form of government," the report stated. "But we cannot take it for granted that this state of affairs will continue indefinitely. "Improved education at the secondary and university levels will result in an increasingly articulate public opinion. The growing student population may become less docile. "The problem will be to devise a means of giving the people of Hong Kong a greater say in their own government without causing alarm in Peking. "There could be a case for electing more local bodies and introducing elections into some functional bodies," the report said. The recommendation was in line with Britain's policy of rejecting any idea of full democracy for Hong Kong to avoid triggering resentment and suspicion from Beijing. The document was written a month after the historic meeting between Deng and MacLehose in Beijing at which Deng left open the options of taking back Hong Kong in 1997 or allowing the status quo to continue after the expiry of the New Territories lease. Sir David Akers-Jones, secretary for the New Territories in the late 1970s, agreed that the British government had functional constituencies in mind when it mentioned "functional bodies" in the document. Akers-Jones, one of the architects of functional constituencies, said the idea was not surprising, as MacLehose had already made a more deliberate attempt in the late 1970s to appoint people from different professions to the legislature. "Why not elect them, because most were members of substantial organisations?" Akers-Jones said. In a white paper on the further development of representative government in 1984, the colonial government decided that 12 legislators would be returned by nine functional constituencies the following year. The constituencies were commercial, industrial, financial, labour, social services, education, legal, medical and engineering. "Full weight should be given to representation of the economic and professional sectors of Hong Kong society, which are essential to future confidence and prosperity (SEHK: 0803, announcements, news) ," the paper stated. The election of the first group of functional constituency legislators - including names such as Martin Lee Chu-ming and Szeto Wah - in 1985 marked the beginning of democratic changes in the Legislative Council. The fate of functional constituencies has emerged as the thorniest issue on the path to universal suffrage. The pan-democrats have been calling for the abolition of these trade-based seats by 2020, the earliest date for electing the legislature by universal suffrage. But the government-friendly camp is making a concerted effort to retain the seats.

A proposal by Hong Kong Exchanges and Clearing (SEHK: 0388) (HKEx) to revamp its listing procedures for resource companies and bring in new guidelines has not gone far enough, according to some market participants. The main criticism involves the proposal to maintain the existing ban on listing applications by early-stage explorers of natural resources, which they warn could see HKEx lose out to rival exchanges.

China is expected to raise interest rates and let its currency appreciate in the coming months as policymakers resort to more aggressive measures to prevent the economy overheating, analysts said. Moves by the central bank in the past two weeks to rein in a surge in bank lending signalled a policy shift that would help the world's third-largest economy avoid Japan's boom-bust experience of the late 1980s, they said. "I believe we are at the beginning of a new phase of policy tightening - we will see more tightening in the next few months," said Peng Wensheng, the head of China research at Barclays Capital in Hong Kong. After repeated calls for banks to moderate their lending activity, the People's Bank of China took action last week, raising the minimum amount of money that banks must keep in reserve for the first time in more than a year. It has also in recent days raised interest rates on one-year and three-month treasury bills in a bid to curb record lending. The fiscal tightening moves caught analysts by surprise and came after state media reported banks had extended a massive 600 billion yuan (HK$681.96 billion) in loans in the first week of January. That amount was not far off the combined 674.6 billion yuan in new loans given out in November and December. New loans nearly doubled in 2009 from a year previously to 9.59 trillion yuan. The central bank did not give a reason for its moves but analysts said they showed the government wanted to rein in a credit expansion that has led to concerns over inflation, asset bubbles, bad loans and economic overheating. "Growth was last year's problem - it is dealing with the consequences of growth and the policies that China successfully reflated the economy with that are the issues for 2010," said Eric Fishwick, an economist at CLSA Asia Pacific. "China no longer needs to have a hyper-stimulatory policy." In addition to more bank reserve ratio rises, Beijing is expected to raise interest rates and allow the currency to appreciate in the coming months, analysts said.

A proposed United States act that would require banks in Hong Kong and around the world to identify their American customers could be passed into law as soon as Congress reconvenes this week following a holiday break. Already approved by Congress, one of the provisions of the Tax Extenders Act of 2009 is that non-American banks and trusts will be charged a 30 per cent withholding tax on income earned from US financial assets if they fail to disclose the nationality of their account holders. Two leading US senators have pledged to resume discussion on the act "as quickly as possible in the new year". The act now awaits a vote in the Senate.

More international brands are now keen to secure shop space in Hong Kong's malls and tourist areas. Foreign retailers, who previously bypassed Hong Kong when setting up their Greater China operations, are now moving to the city despite a shortage of options and high rents, property agents say. In the past two years, big international brands were reported to be setting up shop elsewhere on the mainland, citing the absence of well-located and reasonably priced retail space in Hong Kong. Now they are reviewing that strategy. One such case is Japanese dessert maker and retailer J-Sweets, which rolled out a Mochi Sweets outlet in Shanghai in late 2008. The outlet sells sweet glutinous rice. Having built up a chain of 40 outlets on the mainland, the firm decided it needed to expand into a more mature market like Hong Kong. In October, it opened its first Hong Kong store at the apm shopping centre in Kwun Tong, and more stores were planned despite high rents, said Cheng Kye-wai, the firm's co-owner. "Rents here are much higher than on the mainland," said Cheng, referring to the six-digit rent demanded for a 160 sq ft shop in the Tsim Sha Tsui MTR station. But the benefit of opening in a city that boasted higher disposable incomes was that prices could be higher to offset rents. Cheng expected a Hong Kong store to sell 2,000 desserts a day, at a cost of HK$10 each, compared with five yuan (HK$5.68) to seven yuan on the mainland. "That's why we've come here. We see the potential for making a bigger profit," he said. The firm was now planning to open four stores, in Tseung Kwan O, Kowloon Bay, Mong Kok and Kwai Fong, but would not be leasing street-level shops, he said. United States clothing retailer American Apparel also went directly to the mainland in 2008 and has opened one shop in Beijing and one in Shanghai. Now, according to property agents, the chain is looking for a 30,000 sqft space to open a flagship store in Hong Kong. Terence Chan, a director of the retail department at property consultancy Jones Lang LaSalle, said the monthly rent for a large street-level shop in a prime location could easily be between HK$5 million and HK$6 million a month. "Having a flagship store in an international financial centre such as Hong Kong will be more like a brand-building exercise for them ... the problem is whether they can find the right space," he said. Chan expected retail rents in Hong Kong to increase by as much as 10 per cent in prime locations this year given an overall improvement in the economy and stronger retail sales.

A woman gets a facial laser treatment in a cosmetic surgery clinic in Taipei. Mainlanders have created a medical tourism boom in Taiwan. Beijing entrepreneur Li Jinxun's first trip to Taiwan was a life-changing experience, but not because of the sightseeing. The 46-year-old took advantage of a short trip to the island last month to have minor cosmetic surgery at a clinic in Kaohsiung city, something he said had made him feel younger and better looking. "I'm very satisfied. I feel better already," he said. Li, who runs a construction firm, is among a new wave of affluent mainlanders eager to fit a bit of nip and tuck into their trips to Taiwan, where they can expect to find better medical staff and facilities than back home. "I think the doctors in Taiwan are more skilful, the clinic is comfortable and the service is more cordial" than on the mainland, he said. The 30 members of Li's tour group paid NT$100,000 (HK$24,000) on average for a nine-day trip covering sightseeing and cosmetic enhancements, according to the Kaohsiung Aesthetic Medical Tourism Promotion Association. They opted for simple procedures, such as teeth whitening, Botox injections to smooth wrinkles and surgery to remove bags under the eyes or create double eyelids - a popular procedure in Asia aimed at making the eyes look bigger. "The demand from China is much higher than what we'd expected, and the visitors just keep coming in," said Chen Chun-ting, secretary-general of the association, which plans to host three 100-member mainland groups in January. "As China gets richer, more and more people are paying attention to their appearance and are willing to spend money in this area." The growing interest in medical tourism coincides with an influx of mainland visitors to the island, under more relaxed rules introduced since Beijing-friendly President Ma Ying-jeou took office in 2008. More than 480,000 tourists arrived from the mainland from January to November 2009, nearly five times as many as during the same period in 2008, according to government figures. Industry watchers are upbeat that Taiwan, which has been promoting medical tourism for two years, can hold its own against competitors in the region such as Japan, Singapore, South Korea and Thailand. The prospect is greatly boosted by Taiwan's advantage in attracting mainland clients. Their common language, the island's geographical proximity and competitive pricing all help, they said. "We had a late start compared with our competitors, but we're confident we can achieve as much. There is a lot of room for growth," said Shih Chung-liang, head of the bureau of medical affairs at the island's health department. In 2008, around 5,000 visitors came to Taiwan for health check-ups and cosmetic surgery, creating an industry worth US$40 million to US$50 million, according to Shih. "Our main target has been mainland Chinese since cross-Strait ties improved," he said. Shih said the island's medical tourism market was expected to grow by 20 per cent annually. Private sector forecasts are even higher, with one group of 30 hospitals expecting its business to more than double to US$95 million this year, according to its chief executive officer Wu Ming-yen. The potential clientele from the mainland is huge, as there are now around 100 million mainlanders who can boast spending power equivalent to the average consumer in Taiwan and Hong Kong, Wu said. "China is picking up in surgical skills as its economy rises but it still trails behind Taiwan in services. Unlike China, most hospitals in Taiwan are private and very competitive," he said. Li, the 46-year-old Beijinger, is already planning his second visit to Taiwan, this time bringing along his wife. "As we get older we need to look after ourselves more carefully. I want to have my teeth whitened and get a face-lift for my wife."

The government may have won a pyrrhic victory yesterday over funding for the HK$66.9 billion express rail link, as thousands of young protesters angered by its approval laid siege to the Legco building and repeatedly clashed with police. Transport chief Eva Cheng and her officials were trapped inside for hours as the protesters demanded to speak to her and tried to force their way into the building. At one point, riot police and uniformed officers had to repel the crowds with pepper spray. The project - believed to be the world's costliest rail line per kilometre - has sparked disputes in and out of the Legislative Council chamber for the past four weeks. Professional groups sparked a war in the media with adverts for and against the line, and several lawmakers traded insults during the funding debate, which ran for 25 hours. On Friday hundreds of young protesters disputed the turf outside Legco with the project's supporters, then swarmed Government House's gates.

Paddling Home, by artist Kacey Wong, may be a tiny Hong Kong flat but it has stunning harbor views. The sampan behind him is a work by Stanley Wong, called Heaven on Earth, meant to act as a pastoral counterpart to Wong's piece. Both are included in a biennale jointly held with Shenzhen. The Hong Kong section is at the West Kowloon Reclamation site until the end of next month.

Scenes from the Hong Kong version of the True Crime video game, featuring images of the city's iconic skyline - It's a world full of crime and punishment, where the lines between good and evil are often blurred. Gun battles rage on the streets, drug deals go down in darkened alleyways - and you never know just who you can trust. It's a world that looks very much, at times, like Hong Kong. Welcome to the new edition of True Crime, the wildly successful video game that has in the past taken players through the mean streets of Los Angeles and New York. The LA version of the game alone sold more than 300,000 units in its first two weeks of release in 2003 and ended up selling more than two million. When it resurfaces this autumn, True Crime will be set in Hong Kong, following a morally challenged police officer as he works both sides of the law. No prizes for guessing where the inspiration came from, either. Like Martin Scorsese before them - with his Oscar-winning The Departed - the people at the Vancouver-based United Front Games (UFG) have looked to Hong Kong's multi-award-winning Infernal Affairs. "First, we wanted to tell a police story, and as fans of Hong Kong cinema, knew the city was a perfect location for an action-packed undercover saga," Stephen van der Mescht, executive producer at United Front Games, said. "There are so many quality references we drew from - one of the biggest, and probably the one that most Western audiences would know, is Infernal Affairs, on which The Departed is based." UFG picked up the contract to work on the game from its initiators Activision Publishing and have been working on the final product over the past two years. "We felt Hong Kong was the perfect city for an open-world game because it has a strong visual identity and enough architectural range to provide new and exciting game-play opportunities," Van der Mescht said. "You've got the iconic skyscrapers of the Central financial district set against the island's mountain, bustling neon-filled streets, crowded markets - there's a ton to play with. [Also] it's just a cool place that really felt to us like a 21st-century city. "We love the blend of old and new, the fusion of east and west, and just the sheer density of buildings, people and traffic. "We're looking forward to have gamers check out our `HK'," Van der Mescht said. Local gamers have been wowed by the game's trailer - and by its visuals - but stress the only time a real appraisal of any game's merits can be made is after it has been played. "Well the second True Crime game was not so great, so we'll have to see," said Miko Van Chong, a 28-year-old IT technician from North Point, who says he has been playing video games "all my life". "Every single game that is set in an open-ended city will be compared to Grand Theft Auto anyway but the visuals I've seen of this one look amazing. "There will be a buzz here definitely, simply because it is set here and it looks spectacular. But we'll have to play it before deciding," he added. UFG will no doubt be hoping the Hong Kong version of True Crime will find its way on to the lucrative mainland video and online gaming market - but it remains to be seen whether or not it passes through the censors. According to the Shanghai-based data research firm iResearch, there are between 60 to 70 million gamers in China, which accounts for around one-fifth of all internet users. The mainland online gaming industry alone is worth around 27 billion yuan a year. "This game is a full reboot of the True Crime franchise," Van der Mescht said. "From a game-play perspective, you can expect a mix of fast-paced martial arts combat, explosive gunfights, high-speed driving - and intense free running chase sequences."

A new term has entered the city's ever-fluid vocabulary, "post-80s generation", which supposedly describes youth driven to rash and radical extremes by frustration over diminishing opportunities for upward mobility. The public discussion about them - spurred by the radical edge of some recent protests - has revived popular interest in Hong Kong University sociology professor Lui Tai-lok's 2007 booklet Four Generations of Hong Kong People, a personal observation on the characteristics and circumstances surrounding four main age groups of Hongkongers. Lui's first generation is those people born in the 1920s or 1930s, many of whom escaped to Hong Kong from the mainland during the Sino-Japanese war. Generally quiet and hard-working, they were able to survive in hard times. They created the liberal-minded environment in which the second generation was free to develop. That second generation comprises the post-war baby boomers born between 1946 and 1966, who gave the city its current shape. Those born between 1967 and 1975 belong to Lui's third generation of Hongkongers, while his fourth generation was born between 1976 and 2000 - or "post-80s", for short. The post-80s live in an age of material abundance and economic affluence, Lui notes. But their life's paths are severely constrained by their overprotective and supervisory second-generation parents, who are determined to prepare them for the competitive world at an early stage. "In fact, they do not have options. They can choose [for example] which musical instrument to learn, but they cannot just choose to listen to music and not play any instrument," he wrote. "Individuality is a luxury." A more rebellious image of this generation was etched into the minds of many when a group of post-80s protesters against a high-speed rail link to the mainland confronted police at the central government's liaison office after a demonstration on New Year's Day. Since then, many young people have argued that the public's view of them is mistaken; they consider themselves reasonable and moderate. But Lui said the situations faced by the third and fourth generations were not his focus and, in fact, he was not even interested in the discussion. "The purpose of my book is to give credit to the first generation, who provided the liberal environment and freedom for us to develop," he said. He counts himself among the second generation. Lui wrote his booklet around the time of his father's death. He wanted to pay tribute to the people of his father's generation, who had left so much room and opportunity for their children to develop. "They allowed us to explore and to try out different ways of life even though they did not approve of them," he said.

China*: A high-speed railway linking Xian with Chengdu has won approval from the National Development and Reform Commission, the nation's top economic planning agency, the China Railway (SEHK: 0390) First Survey and Design Institute has said. Trains will travel at more than 250km/h. The rail link will help cut the travel time between the two major cities to less than three hours, from the current 13, the designer said. Construction work would begin on part of the line this year, the institute also said, without giving details. Another section of the line has been under construction for more than a year. The Xian-Chengdu railway, which will cost 68.8 billion yuan (HK$78 billion), is scheduled to be completed in 2014, the designer said.

Chinese travel abroad increases - China's statistics from 2009 are expected to show its first deficit in tourism, due to a weak global economy and a strong travel incentive at home, a senior researcher said. China Tourism Academy, the think tank for the country's tourism authority, said that mainland tourists spent some $42 billion in overseas destinations including Hong Kong, Macao and Taiwan last year. At the same time, overseas tourists spent only $38 billion on the mainland, down by 7 percent year-on-year. Though official statistics for 2009 are yet to be released, the academy estimated that the tourism deficit will stand at $4 billion in 2009 - the first ever tourism deficit in China. "The deficit in tourism service trade is a new sign saying that China is turning into a notable tourist source market, in addition to being an important destination," Dai Bin, deputy head of China Tourism Academy, told China Daily. The deficit will enable China to have more say in the global travel market, and also help lift the pressure on China for renminbi appreciation, he said. The booming outbound travel also will encourage domestic enterprises to "go out" and purchase more shares in foreign travel businesses, he said. Some 47 million trips were made by mainland tourists to overseas destinations in 2009, up 3 percent year-on-year, the academy estimated. In contrast, 126 million overseas tourists visited the mainland last year, down by 3 percent year-on-year, it estimated. Though the inbound tourists far outnumbered the outbound, apparently mainland tourists, with swelling wallets and eagerness for shopping, have spent much more overseas. "Chinese tourists have a different spending concept from others. They could endure staying at a three-star hotel and eating at a not-so-good restaurant, but would never go back home empty-handed," said Zhang Wei, general manager of the outbound department with the China International Travel Service head office. Also, since many imported goods are sold on the Chinese mainland at much higher prices, many tourists shop for expensive watches, clothes and cosmetics overseas, she said. Beijinger Gao Xuenan, on her trip to Europe last month, spent some 13,000 yuan ($1,900) on a Louis Vuitton bag and a purse, and spent another 2,000 yuan on a Burberry scarf. "The prices of these goods are much higher in Beijing. The scarf, sold at more than 4,000 yuan, is even out of stock in Beijing. I kind of feel I would suffer a loss if I don't buy them in Europe," she said. A survey by AC Nielson in 2008 said each Chinese tourist spent an average $987 per trip. Those travelling to Europe spent an average $1,781. But foreign tourists usually do not shop for such expensive items in China, she said. Besides, the global economic downturn has made many foreign tourists slash their China shopping budgets, said Dun Jidong, spokesman for the China Travel Service. "But (the economic meltdown) had less impact on mainland tourists, who traveled with confidence in China's economy," he said. The number of Beijing tourists joining outbound tour groups through China Travel Service still grew at a double-digit pace last year as usual, he said. From another view, after years of promoting China as a tourist destination, the wealthy foreigners who used to be the primary group visiting the Chinese mainland have been replaced by ordinary tour groups and backpackers, who spent less in China, Dai Bin with the academy said. But the average GDP per capita has hit $3,000 in China, "a level that industry experts agree sends a signal that the country is entering a stage of explosive growth in travel consumption", he said. The academy forecast that 54 million trips will be made by mainland tourists to overseas destinations in 2010, an increase of 15 percent year-on-year. "Compared to the average western tourist traveling at least seven times a year, Chinese tourists travel only once a year. We have a market with huge potential," he said.

Business beats pleasure this New Year - Liu Zheng, who owns a flower shop in Beijing, has a dilemma. She could either lock her store on one of the most lucrative days of business and travel to her husband's hometown for a family reunion, or she could keep her store open and face the wrath of her husband and his family. "Why did Valentine's Day have to coincide with the Chinese New Year this year?" she asked, already aware it is a coincidence that the dates overlap. Liu's flower shop is located near Xidan commercial district, one of the busiest areas of the capital. "I make a lot of money on Valentine's Day," she said. "But my husband hopes we can go back to his hometown in Shandong province and be with his family. I want to stay here and keep my store open." Liu said the final decision, however, is her daughter's to make. "But she would probably want to go and stay with her grandparents because she wouldn't want to miss out on yasuiqian," Liu said. Yasuiqian is money children receive from older members of the family during Spring Festival. The overlapping dates of Chinese New Year and Valentine's Day has forced many storeowners like Liu to choose business over family reunions. Shopkeeper Wang, who sells stuffed toys in the capital's popular Wantong New World Shopping Mall, said he and his wife decided to keep their store open and not meet their daughter, who lives with her grandparents in another town. "Every February, as Valentine's Day approaches, I sell at least 100 stuffed toys on a daily basis. It's not feasible to keep my store locked at the most profitable time of the year," said Wang, who refused to give his full name.

An orbiter is launched by a Long-March-3III carrier rocket from the Xichang Satellite Launch Center in southwest China's Sichuan Province, Jan. 17, 2010. It was the third orbiter that China has launched for its independent satellite navigation and positioning network, also known as Beidou, or Compass system. China took one step forward in its ambition to build an independent global navigation network capable of rivaling foreign congeneric systems with the successful launch of a new orbiter into space early Sunday morning. Boosted by a Long-March-3III carrier rocket into a geostationary orbit from the Xichang Satellite Launch Center, it was the third orbiter China has launched for the network, also known as Beidou, or COMPASS system. It will join another two already in orbits to form a network which will eventually have a total of 35 satellites, capable of providing global navigation service to users around the world around 2020. The new orbiter and the carrier rocket were researched and developed by Chinese Aerospace Science and Technology Corporation and Chinese Academy of Carrier Rocket Technology respectively. The network will have five satellites in geostationary orbit and another 30 in non-geostationary orbits, according to a plan for the COMPASS system. According to the plan, the system will firstly provide navigation, time signal and short message services in the Asia and Pacific region around 2012. The COMPASS system will provide both open and authorized services, according to China's satellite navigation project center. The open service will be free of charge for the system's users within service area with a resolution of 10 meters for positioning, an accuracy of 10 nanosecond for time signal and an accuracy of 0.2 meter per second for speed measurement. The authorized service will provide more accurate services for authorized users. China started to build up its own satellite navigation system to break its dependence on the U.S. Global Positioning System (GPS) in 2000 when it sent two orbiters as a double-satellite experimental positioning system, known as the Beidou system. The Beidou system, China's first-generation satellite navigation and positioning network, made the country the third in the world after the U.S. and Russia to have an independent satellite navigation system. The original Beidou system provide regional service for telecom, transport and disaster relief within the country, and has played important roles especially in the Beijing Olympics and relief work for the 8.0-magnitude Wenchuan earthquake in May 2008. The country started to upgrade the Beidou into the second-generation system by launching two new orbiters into space in 2007 and 2009 respectively. A statement from the COMPASS system's special management office said that China will make its own global navigation system compatible and interoperable with other international competitors, including the U.S. GPS system, the EU's Galileo Positioning Systemand Russia's Global Navigation Satellite System (GLONASS). The compatibility and interoperability, under the framework of the International Committee on Global Navigation Satellite Systems(ICG) and International Telecommunication Union (ITU), will make all users benefit from the progress of the satellite navigation's development, it said. China is willing to cooperate with other countries to improve the COMPASS system's compatibility and interoperability with other satellite navigation systems and promote an all-round application of the system's services, the statement said. Sun Jiadong, an academician with the Chinese Academy of Sciences and the COMPASS system's chief designer, told Xinhua after the third orbiter's launch that the system would play a major role in providing services for national security, environment, traffic, logistics and other economic activities. "There is nothing could not be accomplished by the COMPASS system," said the 80-year-old Sun at the launch center, who was crowned China's top science and technology award by President Hu Jintao last week. The Beidou experimental system with two satellites in geostationary orbit completed in 2000 was the first successful stage which helped Chinese scientists gain lots of experience in constructing the COMPASS system, Sun said. According to him, the blueprint to build China's own global navigation satellite system in three stages was initiated in the 1980s and 1990s. "The successful launch of the COMPASS system's third orbiter today marked a substantial step for the system to function within the Asia Pacific region by 2012 as the second stage," he said. With promising application in social and economic activities, the COMPASS system will also boost the development of China's information technology, the chief designer said. "In a few years, people would find some new application of the COMPASS system that they have never imagined before." With the steady progress to add launch satellites into space, the development of ground-based supporting facilities and equipment to explore the system's application is comparatively limited and should be considered as priority, the space expert said. Civilian application of the U.S. GPS system in China is limited. Only a few companies sell GPS maps for portable or vehicle-mounted positioning and navigation devices. Sun proposed that the government should issue regulations and policies to encourage more Chinese enterprises to participate in the development of the system's application chain so as to make maximum possible use of those satellites. Enditem

Taobao, the operator of China's leading internet shopping portal, will invest 10 million yuan (HK$11.36 million) a year to expand its new business - an online store for retail software applications. The company said this would help fund efforts of small independent software developers to build programs for its eponymous App Store, at, which was launched yesterday. Wang Wenbin, the vice-president of the Taobao Open Platform fund, said the online store would serve "as an incubator of innovative technology" for the online merchants and consumers who use the mainland's fastest-growing online retailer. Privately held Taobao, a unit of e-commerce giant Alibaba (SEHK: 1688) Group, provides the most comprehensive product offering on the mainland online market and had served more than 170 million registered users as of the end of last month. A report from Goldman Sachs said the firm's high-turnover categories included garments, household products, mobile phones, consumer electronics and cosmetics. Wang said the new App Store would offer programs across a range of categories, including applications for sellers and buyers, tools to extend's community sites, tools for product recommendation and mobile-phone applications. Last month, Taobao teamed up with network operator China Telecom Corp (SEHK: 0728) and handset makers TCL (SEHK: 1070) Communication Technology Holdings and Lenovo (SEHK: 0992) Mobile Communications Technology to launch handsets custom-designed for e-commerce. Wang said software developers would be able to generate revenue from their applications through subscription fees, commissions or advertising. Goldman Sachs, which valued Taobao at US$8.7 billion, estimated the company had 80 per cent of the mainland consumer retail e-commerce market. By next year, Taobao's gross merchandise volume is expected to hit 400 billion yuan.

Chinese peacekeeping police wait for the return of their buried colleagues in Port-au-Prince, capital of Haiti, Jan. 16, 2010. Six bodies of eight Chinese peacekeeping police buried in the debris of Haitian earthquake have been found by the press time.

Chinese Premier Wen Jiabao, who is also a member of the Standing Committee of the Political Bureau of the Communist Party of China Central Committee, talks with local residents at a supermarket during his inspection in Beijing, Jan. 16, 2010.

A visitor experiences extracting the grain from the imperial grain-storing cask on display inside the Imperial Granary Museum of Ming Dynasty of Nanxingcang Barn, which has been opened to public visitors, in downtown of Beijing, Jan. 16, 2010. Affluent exhibits reenacting the history of grains transport through the Grand Canal and the imperial barns storage are accessible to visitors, who can also experience the quern of stone mill some 600 years ago.

Jan 16 - 17, 2010

Hong Kong*: China on Friday denounced a move by Hong Kong’s opposition legislators to pressure Beijing for full democracy by resigning their seats, calling it a challenge to its authority over Hong Kong. Two Hong Kong opposition political parties announced recently five of their legislators — one from each of Hong Kong’s five major electoral districts — will resign on Jan. 27. The parties will then field candidates in the subsequent special elections, the idea being the territory-wide by-elections will serve as a de facto referendum on democracy. The two political parties are the League of Social Democrats and the Civic Party. The Chinese government said in a statement on Friday that Hong Kong doesn’t have a referendum law, and as part of China, Hong Kong doesn’t have the authority to launch a referendum without Beijing’s approval. “When some people promote the so-called ’five-district referendum movement’, challenging the Hong Kong constitution and the decision on democratic reform by the standing committee of the National People’s Congress, it will only cause dispute,” the Chinese government’s Hong Kong and Macau affairs office said in statement carried by the official Xinhua News Agency. “We express our serious concern,” the statement said. Organizers of the resignation plan responded by saying China forced their hand by delaying full democracy in Hong Kong. “The reason we launched the five-district referendum is the central government has stalled the pace of democratization in Hong Kong,” said Andrew To, vice chairman of the League of Social Democrats. Civic Party chairwoman, legislator Audrey Eu, said the two parties were acting legally because there were no laws banning their lawmakers from resigning at the same time. “Our five-district referendum movement is constitutional, legal and reasonable,” Eu said.

Riot police officers stand guard during a protest outside the Legislative Council building in Central on Saturday night after funding for the controversial express rail link to Guangzhou was approved by lawmakers. Shortly after the funding was approved, a group of demonstrators tried to break through a security cordon, but they were rebuffed by police using pepper spray.

Paul Chow bids farewell yesterday after his long run at the helm of the stock exchange. He thanked all those who had supported him.

Hong Kong Exchanges and Clearing (SEHK: 0388)'s new boss, Charles Li Xiaojia, will receive an annual basic salary of HK$7.2 million, about HK$600,000 or 7.69 per cent less than his predecessor, Paul Chow Man-yiu, the exchange announced yesterday. Li, the first mainland-born chief executive of the exchange, takes the helm from 63-year-old Chow, who retired yesterday as the longest-serving chief executive of the bourse

Hong Kong delivers baby solution for rich - The flood of Beijing women traveling to Hong Kong to give birth resumed on Jan 1 when hospitals in the special administrative region (SAR) began accepting mainland moms again. Many of the women who travel there do so to have a second child, something that is forbidden for most women on the mainland, said an officer, surnamed Zhao, from one of the agencies that connects Beijing women with hospitals in the SAR. An official, surnamed Xi, with the Beijing municipal commission of population and family planning, confirmed that the road-trip is popular with women wanting a second child. "If the child does not need to get a Beijing ID, even though they will be taken to Beijing to grow up, we cannot control them at all because they are not Beijingers," said Xi. According to Beijing government policy, parents who have a second child ordinarily must pay a penalty of up to 240,000 yuan. But babies born in Hong Kong become 'permanent residents' of the special administrative region and do not have to pay the penalty. The Beibeian consulting agency is one of the three biggest in Beijing that help women give birth in Hong Kong. A manager from the agency, surnamed Dong, said it has helped 15 women since Jan 1, 25 percent more than the same period last year. "Our office has been busy with women coming for consultations and to sign contracts," Dong said. Official Hong Kong government statistics say around half of all births in Hong Kong are to mainland mothers. Dong estimated that about 10,000 Beijing babies were born in Hong Kong last year. The Hong Kong government refused to accept pregnant women from the mainland between Oct 8 and Jan 1 because there was so much demand that Hong Kong women were having difficulty finding beds. "We are having to book a bed six months ahead of the arrival of the baby," Dong said. The strong demand led some Hong Kong hospitals to raise prices from HK$60,000 to HK$100,000. Agencies charge between 80,000 and 150,000 yuan and pass on the fees to the hospitals. "The price was reasonable," said a mother, surnamed Sun, who earns more than 500,000 yuan a year and who gave birth to a girl in July 2009. She said babies born in Hong Kong enjoy all the rights of SAR residents, such as free medicine and a free visa to 135 countries. Anthony Wu Ting-yuk, president of the Hong Kong hospital authority, said women from the mainland can save money by avoiding agencies. "It is easy to give birth in HK and not dependant on agencies," Hu told the Southern Metropolis Daily on Jan 5. "It costs around 40,000 HK dollars, including the operation and three-day delivery in hospital if everything goes well," Hu told the newspaper.

Friday's debate by the Legislative Council's Finance Committee on funding for the HK$67-billion high-speed rail link to Guangzhou ended without a vote. By the time meeting adjourned at about 9:30pm, 10 lawmakers were still waiting for their chance to raise their concerns and questions. The debate will resume in Legco tomorrow at 9am on Saturday. Government-friendly lawmakers were unhappy with the way that Finance Committee chairwoman Emily Lau Wai-hing handled the meeting. Independent legislator Chim Pui-chung accused Lau of helping her allies in the democratic camp to delay the meeting. Lawmaker Paul Tse Wai-chun who represents the tourism sector, also exchanged angry words with Civic Party lawmakers, calling them “actors” and criticizing the quality of their questions.

Employees at Television Broadcasts (SEHK: 0511) (TVB) threatened to step up industrial action as they dressed in red yesterday to vent their anger against management for ignoring demands for pay rises and bonuses. "The company is ignoring us and we don't know what they think about our requests," Lau Shun-on, chairman of the TVB Staff Association, said. "We chose to wear red today because we work so hard it's as if we are bleeding for our jobs." More than 200 staff joined the red-clothes rally yesterday, followed by a protest outside the broadcaster's headquarters in Tseung Kwan O. The association also embarked on a signature campaign. The series of actions came after 200 technicians and props workers protested in November, demanding a 5 per cent pay rise, an extra increase for employees in the props unit, and a bonus equaling one month's salary. Pointing out the company usually adjusted staff salaries in January, Lee accused the company of using delaying tactics and ignoring employees' requests. "No matter whether the company thinks our demands are reasonable or not, it should have given us a response," he said. Ng Koon-kwan, organizing secretary of the Hong Kong Confederation of Trade Unions, which supports the actions, said it was disappointing that TVB did not value staff's opinions and contributions. TVB's deputy controller of external affairs Tsang Sing-ming said the company had taken note of the requests. "We have told them that salary adjustments and bonus payouts require the approval of the board of directors ... and we're still waiting for its approval," he said. Citing the free-to-air broadcaster's financial reports, the unionists said TVB recorded a net profit of HK$300 million in the first half of last year, after pocketing HK$1 billion in 2008, while staff salaries were frozen last year. The association also said the starting salary for a TVB prop maker is about HK$6,000 a month, compared with about HK$10,000 at Cable TV and RTHK.

The chief executive yesterday conceded that the government had failed to communicate with young people and urged the public not to polarise the post-1980s generation. In the Legislative Council's question time, Donald Tsang Yam-kuen also admitted for the first time that social and political problems, not only economic issues, were behind the deep-rooted conflicts that state leaders said Hong Kong should handle better. Tsang's remarks came on the eve of a climax in the campaign against the high-speed rail link - spearheaded by a group of young people in their twenties. They started their protest outside the Legco Building yesterday ahead of today's marathon meeting of the Finance Committee to debate the twice-delayed vote on funding for the proposed HK$66.9 billion express rail link to Guangzhou. They oppose the project because it will involve the relocation of Tsoi Yuen Tsuen villagers. In his opening remarks at question time over the post-80s generation, Tsang said adults must ask themselves whether they had become "more conservative" in a changing society. "We really have to better understand young people, listen to their voices and understand their aspirations, visions and expectations towards society and the government, even when they have disappointment and grievances on some issues," Tsang told lawmakers. "The generation after [the second world war] pursues efficiency and economic growth, while young people today are after values and self-fulfilment. But we should not simply see the views of the two generations as pitched against each other." The issue struck a chord with Gary Chan Hak-kan, of the Democratic Alliance for the Betterment and Progress of Hong Kong, who accused the government of lacking in its communication with young people. Tanya Chan, of the Civic Party, and Leung Kwok-hung of the League of Social Democrats, challenged Tsang to put words into action and meet the young protesters outside. "The youngsters outside are peaceful and rational ... do you not go out and talk to them simply because you are too nervous yourself?" Chan said. Tsang admitted that the government was lagging behind in talking to youngsters, saying the conventional method of district consultations may be seen by young people, who are more familiar with online networking sites like Facebook and Twitter, as embarrassing. "It is true that our present communication method and what we have done have not been enough ... But in any case, the basic principle for good results is to remain rational, calm and respect the truth." Tsang said the government would try to use the passion and ideals of young people in building society. Addressing the concerns of Premier Wen Jiabao over Hong Kong's "deep-rooted" conflicts, Tsang, who had insisted the conflicts were solely about the economy, admitted for the first time that social and political problems were also to blame. "In terms of social conflicts, these mainly appear in the problem of poverty and the demands of young people ... We all know that people on low incomes are still in difficult situations, and there are many grievances among the middle-class and youth." He said he would make it a priority to create more jobs and improve the economy, and would consider introducing measures to relieve the burden on low-income families. But Albert Ho Chun-yan, chairman of the Democratic Party, said acknowledging that political reform was part of Hong Kong's fundamental problem was not enough. "The key to the problem is how you are going to resolve it," Ho said, saying the government could not bring change because of the lack of a democratic system. "Sorry, Hong Kong cannot wait longer to resolve these problems."

MGM Grand Paradise, the Macau joint venture between Pansy Ho Chiu-king and loss-making Las Vegas gaming giant MGM Mirage, is auditioning investment banks to work on a Hong Kong initial public offering in which it may raise up to US$1 billion. People at two Wall Street banks said they had been to see Grand Paradise to discuss the flotation. One said he had visited the company twice. The financiers said the company had not reached the second stage of the bank selection process, where companies send a so-called request for pitches to a shortlist of potential advisers. Both said they anticipated this would happen just after the Lunar New Year holiday in mid-February. A Grand Paradise spokesman declined to comment. Grand Paradise is a 50-50 joint venture between MGM Mirage and Ho, the daughter of Macau casino magnate Stanley Ho Hung-sun. It owns the MGM Grand Macau. The joint venture would be the last of Macau's six licensed casino operators to list in Hong Kong. Wynn Macau and Sands China raised a combined HK$33.9 billion selling shares late last year. Last October, MGM Mirage chief executive and chairman Jim Murren hinted a Macau stock sale was on the cards. "Both partners have discussed it, and we believe it's a very viable and attractive option," Bloomberg reported Murren as saying. Oppenheimer gaming analyst David Katz wrote in a research note last month that the Las Vegas company was close to launching the deal, citing a briefing by MGM Mirage management. Oppenheimer said the Las Vegas firm expected to reap US$300 million-US$500 million from the joint venture selling a 20-30 per cent stake. That implies Grand Paradise would raise up to US$1 billion, valuing it at up to US$5 billion and making Pansy Ho a paper multi-billionaire. The proceeds would also help the Las Vegas partner tackle its US$12.5 billion debt mountain. Grand Paradise may face two major challenges: a pending US regulatory hearing and Hong Kong's listing requirements. Last May, gaming regulators in New Jersey found after a four-year investigation into the probity of MGM's joint venture with Pansy Ho found the partnership "unsuitable". The state's Casino Control Commission will hold a public hearing on whether to uphold its investigators' recommendations. Should the commission do so, MGM Mirage could be forced to choose between a future in Atlantic City, or in Macau. A Hong Kong market listing for Grand Paradise could also need a waiver from the exchange's profitability test, which requires firms to have stayed in the black for three years. Grand Paradise booked a net loss of 251.06 million patacas on 9.12 billion patacas in revenue in 2008, according to an annual report released by the Macao Gaming Inspection and Coordination Bureau. The company was technically insolvent at the time, as its 10.274 billion patacas in liabilities exceeded its total assets of 10.271 billion patacas. But surging casino revenue in Macau in the second half of last year boosted business at the MGM Grand Macau to a record US$50 million in operating income. In the US, MGM Mirage posted a third-quarter net loss of US$750.4 million in November.

Chief Executive Donald Tsang Yam- kuen has hinted more relief measures are on the way for low-income earners to solve the "deep-rooted" conflict in the city. In a Legislative Council question and answer session yesterday, Tsang said he is "seriously studying" further relief measures to help the poorly paid. "Since January 1, public utilities raised their tariffs and low-income groups are facing an even worse situation," he said. "I promise the government will seriously consider some measures to help them deal with their difficulties. Creating job opportunities is also the most important part of our policies." He added that low-income groups still face many difficulties although the unemployment rate has dropped from its peak and the local economy has showed early signs of recovery. Tsang said the administration has handed out more than HK$87 billion in relief measures since the financial crisis and most of it went to the underprivileged. "Besides Comprehensive Social Security Assistance, we also have subsidies for public housing, electricity, rates allowances and old age allowances, et cetera," he said. But he said the number of poor aged 59 and below had dropped 40 percent between 2004 to 2008,while those getting by on an income of less than HK$5,000 a month had dropped 50 percent. Tsang said income disparities are a way of life in an open economy and that the problem can only be solved by an economic improvements in the long run. Yesterday was the first time Tsang has hinted at new relief measures after he said in a forum in Beijing last month that Hong Kong might face a double dip in the economy in the middle of this year. He is now "cautiously optimistic" about the economy amid the early signs of recovery but said exports to European countries and the United States is expected to be difficult. "The governments of the world and the central government are now exiting from the financial market and it brings uncertainty to the global and local economy," he said. "The interest rate will increase and the US dollar exchange rate will fluctuate. These pose challenges to a stable recovery." In response to the "deep-rooted" conflict mentioned by the Premier Wen Jiabao last month, Tsang admitted the conflict is not only about economic transformation in the city. "Of course there are many deep- rooted problems in Hong Kong. It is not economic transformation only but also political and social conflicts," he said. He said social conflict was shown in the poverty problem and the demands from young people.

Singapore Exchange enjoys high operating margins but lags Hong Kong and other Asian rivals in terms of the value of its listed firms. Singapore losing fight to lure IPOs - Asia's second-largest bourse struggles as Chinese firms look for higher valuations - Singapore is fast losing its charm for Chinese companies, which once drove its initial public offering bandwagon, threatening its status as a major Asian bourse and posing a big challenge for new SGX chief executive Magnus Bocker. Singapore Exchange (SGX), Asia's second-largest bourse by market capitalisation, enjoys high operating margins and has a successful derivatives business. But it lags behind Hong Kong and other Asian bourses in terms of the value of its listed firms. "If SGX is unable to secure large listings, the long-term threat to Singapore will be severe," said Ernest Kan, head of the IPO Group at accounting firm Deloitte & Touche in Singapore. Being a small country, Singapore needs to attract listings from abroad and one way of doing that is to boost the valuation of foreign firms listed on SGX through steps such as improved investor education, says Kan. While bigger rival Hong Kong is leading the world with multibillion-dollar share offerings, many of them from the mainland, Singapore exchange is struggling to attract and retain the Chinese firms that once dominated its listing pipeline. Aberdeen Asset Management strategist Peter Elston says the British fund manager owns SGX shares because the Singapore bourse operator is well managed and has a 40 per cent return on equity. There is also potential for the exchange to grow its commodities trading business. "[But] the long-term growth prospects for SGX are not as good as Hong Kong," he said. "Singapore is always going to struggle because it doesn't have a hinterland like Hong Kong has." SGX shares have risen 60 per cent in the past 12 months, lagging both the 65 per cent jump in the benchmark Straits Times Index and a doubling of Hong Kong Exchanges and Clearing (SEHK: 0388) shares. Goldman Sachs said Bocker, who joined in December, had been "surprisingly quiet on the issue of attracting more offshore IPOs, an area that we believe SGX risks erosion", and hoped he would talk about plans at the operator's quarterly earnings due on Monday. Industry players say they expect at least 10 initial offerings in Singapore worth more than US$100 million each this year, led by India's top developer DLF which is floating a real estate investment trust (Reit) to raise up to US$1 billion. The exchange is, however, losing some of its better-quality China companies, which suffer from low valuations due to a spate of corporate scandals involving Singapore-listed Chinese firms. Several firms were taken private last year, while others such as XLX Fertiliser and abalone producer Oceanus now have secondary listings elsewhere in what may be a prelude to an eventual delisting. Singapore's stock market is valued at 3.5 times its gross domestic product, the highest ratio in Asia after Hong Kong. SGX is by far the biggest stock market in Southeast Asia but is smaller than Shanghai, Shenzhen, Mumbai, Seoul and Taipei. Industry players say Singapore is losing the fight to attract China listings because Chinese firms command higher valuations in Hong Kong and other parts of Greater China. China has made it easier for mainland firms to list locally. Oceanus last month priced Taiwan depositary receipts at a 16 per cent premium to its share price, sparking a rally in its Singapore shares. Singapore's flotation market came alive in November last year with the listing of CapitaMalls Asia, which raised more than US$2 billion and was the city state's biggest in 16 years. Excluding CapitaMalls, however, the biggest IPO last year was worth a mere US$21 million. Singapore only had one offering in 2008 that raised more than US$100 million. Industry players say that while SGX is losing the battle for Chinese firms, it remains attractive to real estate investment trusts (Reits) from the region because of tax incentives and the presence of many property fund managers in Singapore. "Investors who qualify can enjoy virtually tax-free income yield from their investment in a Reit," said Ng Joo Khin of Stamford Law, the legal adviser for Oceanus' Taiwan offering and Tiger Airways' ongoing share sale. ARA, the Singapore property fund management affiliate of Hong Kong's Cheung Kong (Holdings) (SEHK: 0001), plans to launch two property trusts - an Islamic Reit with Qatar property and a regional logistics Reit with warehouse operator CWT. Each property trust will hold assets worth about S$1 billion (HK$5.58 billion) and their share sales will be managed by DBS, a source involved in the transactions said. Mapletree Investments, a property firm owned by state investor Temasek, may also float a Reit with up to US$2.8 billion worth of assets including VivoCity, Singapore's largest mall. Outside the Reit sector, SGX is also able to attract overseas listings in areas such as plantations, mining, oil services and logistics. Tiger is on an investment roadshow for a US$196 million offering, while British private equity firm 3i is likely to divest its stake in oil services firm Franklin valued around US$250 million.

China*: The mainland's foreign exchange reserves surged to a record US$2.399 trillion at the end of December, the central bank said on Friday. The reserves, already the world’s largest, grew 23.3 per cent from a year ago, the People’s Bank of China said in a statement on its website. The central bank had said previously its reserves were at US$2.27 trillion as of the end of September. Mainland’s forex reserves have ballooned in recent years, fuelled by strong foreign investment, large trade surpluses and inflows of “hot money” – short-term speculative funds in search of quick profits. The data marked an increase in forex reserves of US$453.1 billion from a year earlier, the bank said. Mainland’s exports, a key driver of its forex reserve hoard, softened in 2009 but have since rebounded, according to government data released on Sunday. The central customs bureau said the nation’s exports surged 17.7 per cent in December to snap a 13-month falling streak. Data out of Germany earlier in the month showed mainland overtook Europe’s biggest economy in November to become the world’s top exporting nation. Foreign direct investment in mainland doubled year-on-year last month to US$12.1 billion, officials said on Friday. Mainland has invested a large portion of its vast reserves in US dollar assets, such as safe low-yielding US Treasury bonds, but amid the financial crisis Beijing has tried to diversify its investments to improve returns. One way Beijing has been doing this is through its US$200 billion sovereign wealth fund, China Investment Corp, which has been investing heavily in resources companies. Trade-related data such as forex reserves have long been a source of friction with trading partners such as the United States. Experts have said a resurgence in mainland trade will likely bring renewed pressure on Beijing to let its currency appreciate. Mainland’s western trading partners say Beijing keeps the yuan’s value low to boost its exports. Beijing has recently said it will not bow to foreign pressure to adjust its currency policy.

Domestic consumption has replaced exports and capital investment as the chief engine fuelling growth on the mainland, the Ministry of Commerce said yesterday. At the same time, the government's policy of subsidising farmers has paid off, with rural consumption outstripping that in urban areas for the first time. Farmers spent a total of 160 billion yuan (HK$181 billion) on about 90 million home-appliance units last year, the ministry said. "Overall, consumption may contribute 51 per cent of last year's growth in gross domestic product," said ministry spokesman Yao Jian at a briefing in Beijing. He added that 2009 was the best year for retail sales since 1986. Domestic consumption includes private and government spending and Yao said its increase last year had offset the slowdown in exports. Of the three forces driving China's economy - consumption, investment and exports - the contribution of consumption is steadily gaining importance. Due to the lack of social security, widening economic disparity and heavy tax burdens, the level of consumption has been low until now. However, despite consumption showing a significant improvement on the 48.6 per cent contribution to China's gross domestic product in 2008, it is still a lower component in the overall economy when compared with countries such as Britain and the United States, where personal spending makes up about 75 per cent of GDP. Increasing domestic spending was one of the primary goals of Beijing's massive fiscal and monetary stimulus last year to buffer the impact of the financial crisis. Stripping out price fluctuations, retail sales growth last year likely accelerated to the highest since 1986, Yao said, adding: "Consumption is playing a stronger role in driving China's economic growth." The four trillion yuan stimulus package, which is focused on boosting private spending and capital investment in infrastructure, helped the country emerge from the financial crisis as the world's fastest-growing major economy. Yet, with the worst of the crisis over, the government is putting more resources into subsidies to support consumer spending. That short-term focus on boosting purchases of vehicles and home appliances, critics say, does little to address the longer-term challenge: weaning the economy off exports and finding new sources of growth in domestic consumption. Spending by China's increasingly prosperous consumers is now one of the most closely watched trends in the global economy, as it could help offset cutbacks by US households. China's official policy since 2004 has been to get more economic growth from household consumption, but the goals had been rarely met until recently.

New World Department Store China will open as many as six stores on the mainland this year to benefit more from the stimulus driving the nation's growth. The retail arm of New World Development plans to open two stores each in Beijing and Shanghai this year and might open one each in Shenyang and Zhengzhou, chief operating officer David Lin said.

Foreign direct investment (FDI) to China more than doubled in December, in the latest sign of economic recovery in the world's fastest-growing economy. FDI skyrocketed by 103.1 percent from a year earlier to $12.14 billion, compared to the 32 percent year-on-year growth in November, the Ministry of Commerce said on Friday. The foreign investment, which excludes investment in the financial sector, jumped for five months since August. However, if full-year data is taken into account, China's FDI and newly approved foreign enterprises fell by 2.6 and 14.8 percent to $90.03 billion and 23,435 respectively. Ministry spokesman Yao Jian said the latest figure signals foreign investors' confidence in the Chinese market despite the financial crisis. Last year, 52 percent of foreign investment went to the manufacturing sector and 42 percent went to the service sector. But Yao said the service sector will attract more investors, who are expected to resort to mergers and acquisitions more often. Yao called China "a most attractive FDI destination" and said the country's investment situation is getting better. Chinese analysts echoed Yao's claim. "As China's economic growth gains speed, the nation gains more trust from global investors," said Li Jianfeng, a macro-economy analyst at Shanghai Securities. "The global economic recovery is also helping push up the surge," he said.

Nissan Motor Co's factory in central China is making cars almost 24 hours a day, yet Pan Xiaowei still waited three months for her new Tiida compact to arrive at the dealership. "It wasn't like this a couple of years ago," said Pan, 34, whose husband runs a property development company in Shandong province. "We used to buy and get a car straight away, and now you have to pre-order and wait." China overtook the US last year as the world's largest automobile market with sales surging 46 percent to 13.6 million, according to the China Association of Automobile Manufacturers. Nissan, Ford Motor Co and Honda Motor Co are running their Chinese factories at full capacity, with overtime and weekend shifts, and still can't deliver enough cars. "Based on our current growth rate and planning assumptions, the capacity of our two facilities will not be able to accommodate the expected future demand for our products," said Nigel Harris, general manager of Ford's venture with Chongqing Changan Automobile Co. About 99.7 percent of cars made in China through November last year were sold, the association said. Foreign automakers are expanding assembly lines as buyers in secondary cities beyond Beijing and Shanghai benefit from government subsidies of at least 5 billion yuan ($732.38 million), a sales tax cut and 8.9 percent economic growth. China reported 65,000 kilometers of highways designed for fast traffic by the end of 2009, second only to the United States, said Li Shenglin, Minister of Communications, on Friday.

China's Internet users hit 384 million by the end of 2009 due to the expansion of Internet access in more areas and a rapid increase of mobile phone Internet users, according to the latest report by China Internet Network Information Center (CNNIC). The number registered a 28.9 percent jump since the end of 2008. Mobile Internet users increased by 120 million to reach a total of 233 million. More people have chosen to access the Internet through mobile phones since the Chinese government issued third-generation (3G) licenses to major telecom operators in January last year, which enables high-speed connectivity to the Internet. About 8 percent of all Internet users access the Internet only through mobile phones. By November last year, the government had used 277.3 billion yuan ($40.62 billion), part of its 4-trillion yuan stimulus package, to develop telecommunications infrastructure. Also, the government-funded project to sell household electric appliances in rural areas at lower prices contributed to more Internet coverage in the country.

Mercedes-Benz marked 2009 as their "best year ever" in China with sales in the mainland soaring 77 percent to 68,500 vehicles, German-US auto giant Daimler Chrysler said Tuesday.

A customer selects sweets in a supermarket in Taiyuan, capital city of north China's Shanxi province January 14, 2010. According to major markets and food stores in the city, the prices of Spring Festival goods such as sweets, candied fruits and nuts remain stable despite price hike of materials like sugar and oil.

Beijing on Friday sought to play down a threat by Google to quit the country on hacking and censorship concerns, saying any decision by the internet search giant would not affect US trade ties. The United States said it was too soon to tell how economic ties would be affected, but added free information flow was crucial to China’s maturing economy. A spokesman for China’s Commerce Ministry said there were many ways to resolve the Google issue, but repeated that all foreign companies, Google included, must abide by Chinese laws. “Any decision made by Google will not affect Sino-US trade and economic relations, as the two sides have many ways to communicate and negotiate with each other,” spokesman Yao Jian told a regular news briefing in Beijing. “We are confident about developing healthy trade and economic ties with the United States.”

Lenovo Group (SEHK: 0992) posted the highest percentage gain in personal computer shipments last quarter, beating bigger rivals as the industry returned to double-digit growth on strong global demand. The world's fourth-largest supplier of PCs recorded a 42 per cent increase in shipments last quarter to 7.87 million units, up from 5.55 million units the previous year, according to separate preliminary estimates released yesterday by market research firms International Data Corp (IDC) and Gartner. The expansion was enough for the mainland computer giant to raise its global market share to 9.2 per cent from 7.5 per cent a year earlier, noted IDC. Gartner, by comparison, calculated Lenovo's market share at 8.7 per cent, up from 7.5 per cent. News of the company's solid performance helped its shares climb 7.86 per cent to HK$5.90, their highest closing price since June 6, 2008, when it reached HK$5.91. "The [global PC] market has weathered a storm which looks to be behind us," said Jay Chou, the research analyst for IDC's Worldwide Quarterly PC Tracker report. Led by huge demand for laptops and a holiday season featuring price cuts of unprecedented duration, worldwide PC shipments surpassed 90 million units for the first time to register a 22.1 per cent gain from 73.7 million units the previous year, according to Gartner. Mikako Kitagawa, a principal analyst at Gartner, described the industry's performance during the past three months as the strongest quarter-over-quarter growth rate the worldwide personal computer market has experienced in the last seven years. "These results indicate the recovery of the PC market on a global level," Kitagawa said. IDC, however, saw more modest growth. It said personal computer shipments grew 15.2 per cent last quarter to reach 85.8 million units from 74.5 million units a year ago. Hewlett-Packard, Acer and Dell remained the world's top-three personal computer suppliers, each with more than 10 million units shipped in the quarter to December. Still, analysts maintained that Lenovo benefited from buoyant sales in its core China market. Kitagawa said China, where personal computer shipments rose 44.4 per cent year on year to 27.1 million units last quarter, accounted for more than 61 per cent of sales in Asia-Pacific. Chou said Lenovo also had strong demand in the Europe-Middle East-Africa market and Japan. At the International Consumer Electronics Show held in Las Vegas last week, Lenovo's product showcase spurred greater interest in the company and the range of new devices it will release this year. Chief executive Yang Yuanqing launched what the company hopes to be the next big thing - a "smartbook" called Skylight, which combines the best features of smartphones and netbooks. Lenovo had achieved a net profit of US$53.1 million in its fiscal second quarter ended September to rebound from three consecutive quarters in the red.

Chinese Premier Wen Jiabao (R) meets with visiting German Vice Chancellor and Foreign Minister Guido Westerwelle in Beijing, capital of China, Jan. 15, 2010. Chinese Premier Wen Jiabao on Friday called for stronger ties with Germany and welcomed its investment. "China and Germany should take a long-term view, enhance mutual trust and deepen cooperation to bring bilateral relationship to a new high," Wen told visiting German Foreign Minister Guido Westerwelle. Westerwelle, also German Vice Chancellor, is leading a delegation of lawmakers and business executives on a two-day visit to Beijing. It is his first China trip since he took office in October. Wen said China and Germany had maintained a positive and upward momentum of relations, citing both countries' joint efforts to tackle the global economic downturn and enhanced communication. Despite global economic downturn, China and Germany maintained strong trade relations as trade volume in 2009 totalled 105. 73 billion U.S. dollars, down 8.1 percent from previous year. With complicated international situation and grim challenges ahead, Wen called on both countries to keep the big picture in mind and push the bilateral partnership. Westerwelle said his country paid much attention to China relations and would like to deepen bilateral cooperation in politics, economy and other fields and jointly address global issues and challenges. Wen pledged more dialogue and cooperation with Europe to ensure shared interests of Chinese, Europeans and the world people. Westerwelle said Germany would make positive efforts to push Europe-China relations. In a brief address to business executives who accompanied Westerwelle, Wen introduced China's efforts to implement its opening-up and reform policy. "China will create a more open and favorable environment for investment and encourage foreign businesses to invest in high-end manufacturing, technology, services, new energies and energy efficiency," Wen said. Wen appealed for more foreign investment in China's central and western regions and vowed to protect the legitimate rights of foreign investors. "You are welcome to invest and run businesses in China," Wen told the German executives. Earlier Friday, Chinese Foreign Minister Yang Jiechi held talks with Westerwelle on bilateral relations, Iran nuclear relations and climate change. Yang attributed the sound ties to mutual support on issues concerning each other's unification, sovereignty and territorial integrity, extensive common interests, mutual respect and equal dialogue.

China's inbound foreign direct investment fell in 2009 for the first time in four years, with cash-strapped firms outside the country undoubtedly affected by the financial crisis. China drew US$90 billion from foreign companies investing in the country’s factories and other productive assets last year, 2.6 per cent less than in 2008, a Commerce Ministry spokesman said on Friday. In December alone, China attracted US$12.1 billion in FDI, up 103 per cent from a year earlier, spokesman Yao Jian said at a news conference. December has often reflected rises in inbound FDI for accounting reasons. China attracted a record US$92.4 billion in non-financial FDI in 2008, an increase of 23.6 per cent from 2007. Inflows, which surged in the years after the country joined the World Trade Organization in 2001, are in the midst of recovering after being hit hard late in 2008 by the global economic slowdown.

China's car buyers in Beijing and Shanghai will soon get handouts from the government if they pick green vehicles, the Shanghai Securities News said on Friday. Residents in Shenzhen, Changchun and Chongqing will also be eligible for state subsidies as part of Beijing’s pilot program to cut fuel emissions, the newspaper said citing unnamed government sources. Details of the rebates for private car buyers will be announced later in the month, but they are believed to be similar to those for fleet buyers.’ Beijing unveiled a trial scheme earlier this year to promote the use of electric, hybrid and fuel-cell vehicles by public transport operators, taxi firms and postal and sanitary services in 13 cities. Subsidies will be based on the gap in prices between more energy-efficient vehicles and those with traditional engines, with rebates running up to 600,000 yuan (US$87,880) for fuel cell-powered large commercial buses. The government said in December it would expand the programme to 20 cities and hand out rebates to private green vehicle buyers in select cities, but did not name the cities. Many mainland carmakers, such as BYD – 10 per cent controlled by US billionaire investor Warren Buffett’s Berkshire Hathaway – have unveiled their self-developed electric or hybrid models. A recent survey of Shanghai residents conducted by McKinsey showed that early buyers of green cars were “trendy green” and “running cost sensitive” types, rather than bargain hunters. In Shanghai alone, electric vehicle penetration will likely reach 100,000 by 2020, McKinsey said.

An annular eclipse is observed in Zhengzhou, capital of central China's Henan Province, Jan. 15, 2010.

Home prices in large and medium mainland cities in December rose at the fastest pace in 18 months, but analysts said activity in major cities had fallen sharply more recently after the central government moved to cool the sizzling real estate market. They predicted that prices could fall if the decline in sales volume continued. Capital values of new and second-hand homes in 70 cities rose 7.8 per cent from a year earlier, the National Development and Reform Commission said yesterday. That topped a 5.7 per cent gain in November. Prices increased by an average of 1.5 per cent month on month, compared with a 1.2 per cent month-on-month gain in November. "This is a big rise, taking into account the 1 to 2 per cent rise a few months ago," said Li Wenjie, general manager at Centaline Property Agency's Beijing office. Analysts said the rapid increase explained the central government's urgency in tightening credit and increasing supply to curb speculation. On Sunday, the central government issued a new directive to the nation's financial watchdogs, ordering them to tighten their scrutiny of bank lending to prevent illegal inflows of funds into the market. They will also move to prevent foreign "hot money" from affecting the market, according to a circular by the State Council published by Xinhua. On Wednesday, the central government said it would build more subsidised homes and planned to increase the supply of small units in private housing projects and to provide more land for development, which should help rein in rising prices. Boosted by looser liquidity and strong demand from home-seekers and investors, prices of new homes rose 9.1 per cent year on year. Guangzhou topped the list with 19.9 per cent, followed by Shenzhen, with 14.3 per cent, and Haikou, with 13.4 per cent. Second-hand homes rose 1 per cent month on month but 6.8 per cent annually. Shenzhen had annual growth of 23.9 per cent, followed by Hangzhou, with 13.9 per cent, and Xiamen at 13.2 per cent. Li of Centaline said the figures did not reflect current market conditions, saying transaction volume in Beijing in the first 13 days of January was only one-third of that in the same period in December. There were about 1,000 transactions clinched in December, but only 300 in the first 13 days of this month, he said. In Shanghai and Shenzhen, transaction volumes fell about 30 per cent in the first 13 days of January compared with the same time in December, agents said. Samuel Kong, the head of Midland Realty's Shenzhen branch, said the fall in transactions had not led to lower prices just yet. It takes time, according to Li. "Transaction activity usually will react first." Jing Ulrich, chairman of JP Morgan China equities and commodities, said in Beijing that high-end home prices in Beijing and Shanghai could fall 10 to 15 per cent if transaction volume continued to shrink, according to mainland media.

Bank of China will apply to set up outlets in Taiwan once details regarding a financial pact between Beijing and Taipei have been announced, the bank said on Friday. Bank of China has completed preparation work for establishing branches in Taiwan, spokeswoman Zhao Rong said in a statement on its website (www.boc (SEHK: 3988).cn “Bank of China hopes to be among the first batch of mainland commercial banks to set up branches in Taiwan,” she said. In a related development, Taiwan government sources said on Friday that mainland’s qualified domestic institutional investors (QDII) will be allowed to buy local stocks worth about US$500 million. The moves come a day before a historic financial deal sealed by mainland and Taiwan takes effect on Saturday. Business ties between the former rivals have warmed since Beijing-friendly President Ma Yin-jeou took office in 2008.

An alignment of miniature chocolate sculpture of some 560 terracotta warriors of Emperor Qingshihuang is on display at the World Chocolate Dream Park inside the Beijing Olympic Park, in Beijing, Jan. 14, 2010. A batch of elaborate chocolate sculptures, including the miniature replicas of Great Wall, the Terracotta Warriors, and traditional Chinese painting of Panorama Along the Upper River During the Qingming Festival in the same size to the original, are exhibited to visitors.

Two craftsmen are engaged in building up a 12-meter-long miniature chocolate sculpture of the Great Wall, at the World Chocolate Dream Park inside the Beijing Olympic Park, in Beijing, Jan. 14, 2010. A batch of elaborate chocolate sculptures, including the miniature replicas of Great Wall, the Terracotta Warriors, and traditional Chinese painting of Panorama Along the Upper River During the Qingming Festival in the same size to the original, are exhibited to visitors.

A ship is fastened in the frosen sea near Sanshan Island, Laizhou city, East China's Shandong province on January 15, 2010. The worst sea ice in 30 years is threatening shipping and the livelihoods of fishermen on China's eastern coast. The situation is expected to get worse in the upcoming week, with about 40 percent of Bohai Sea surface frozen already.

Residents in Wenchuan, the epicenter of the 8.0-magnitude earthquake that killed nearly 90,000 people in Sichuan province in May 2008, raise money on Friday for the victims of the earthquake in Haiti.

Jan 15, 2010

Hong Kong*: Chief Executive Donald Tsang Yam-kuen said on Thursday the mass resignation plan of the League of Social Democrats and the Civic Party could not be accepted as a "referendum on democracy" and it was not supported by the public. Tsang appeared in the Legislative Council for his first question and answer session of the year. He discussed recent political developments, including protests held by the Post 80s group of teenagers opposing the development of the Hong Kong section of Guangzhou-Shenzhen-Hong Kong Express Rail Link. Tsang noted that some political parties had said lawmakers from five geographical constituencies would resign on January 27 to trigger by-elections to create a "de facto referendum" on democracy. But he said this was not supported by the majority of Hong Kong people. "In fact, the Basic Law does not say Hong Kong can have such an arrangement," Tsang added. "Therefore, any such referendum has no legal basis and the SAR government would not recognise it," he said. Tsang said that it was important that Hong Kong achieve universal suffrage for electing the chief executive by 2017, and for the Legislative Council by 2012 in accordance with the Basic Law. He urged lawmakers not to argue over the abolition of functional constituency seats. Tsang said Hong Kong was facing "deep-rooted problems" brought on by economic, political and social pressures. He said the government was doing its best to try to resolve these issues. Discussing the construction of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, Tsang said most Hong Kong people wanted the rail link to proceed. He said he hoped the Leglative Council's Financial Committee would vote to approve funding of the project as soon as possible.

Three companies, or their key shareholders, are tapping the market for a combined HK$4.51 billion by placing shares after they rebounded following Wednesday's plunge. Chen Qiyuan, chairman of Chinese herbal shampoo maker Bawang (1338), and his wife Wan Yuhua, yesterday placed up to 200 million existing shares, raising as much as HK$1.03 billion. The couple's investment firm Fortune Station is selling 150 million Bawang shares, with an option to top up another 50 million shares, at between HK$5 and HK$5.15 apiece, representing a discount of 6.4 to 9.1 percent on Bawang's closing price of HK$5.50. ZTE Corporation (0763), the mainland's second-biggest telecoms equipment producer, raised around HK$2.59 billion for general working capital by placing 58.29 million new H shares, the company said. The shares were sold at HK$45 each, a 13 percent discount on the closing price of HK$51.70 on Wednesday, the last trading day before the announcement. ZTE shares fell 2.03 percent yesterday to HK$50.65. Cement maker TCC International (1136) sold 256.6 million new shares at between HK$3.26 and HK$3.43 a share, a discount of 8 to 12.6 percent from its closing price of HK$3.73. "[Placements] are normal activities considering the large liquidity and daily turnover in the Hong Kong market," said Redford Securities head of research Kenny Tang Sing-hing. "Some companies may need funds to develop new businesses." The placements should not have a major impact on the market, although the stock price of the companies involved might feel some pressure, he added.

Soros Fund Management, billionaire investor George Soros’ flagship investment company, is looking to set up an Asia presence in Hong Kong amid a resurgence in the region’s hedge fund industry, said a source familiar with the matter. The fund firm, which was no longer actively managed by Soros, would relocate some senior managers from its US offices to Asia, the source said. In November, Soros spokesman Michael Vachon Vachon dismissed as “rumours” reports about the fund’s plans to open an office in Hong Kong. Another Soros source said that month that the fund had no such plans. But an industry source in Hong Kong on Thursday said the fund had hired a manager from Tiger Asia Management in New York to run its Asian office, which was likely to become operational in the first quarter of 2010. Vachon was not immediately available for comment on Thursday. The source, who requested anonymity because he was not permitted to speak to the media, said he did not know the name of the Tiger Asia manager. Bloomberg reported on Thursday that James Chang of Tiger Asia in New York and current Soros manager Dai Jixin were expected to relocate to Hong Kong to open the Soros Fund office.

Pro-government camp forces two-hour extension to rail debate - Twelve hours have been set aside for debate on the twice-delayed vote on funding for the HK$66.9 billion express rail link to Guangzhou, instead of the 10 hours scheduled earlier. The extension, which followed pressure from 33 government-friendly lawmakers, has been agreed by Emily Lau Wai-hing, chairwoman of the legislature's Finance Committee. However, this is far shorter than the lawmakers' request for a 20-hour extension. Lau said on Tuesday that the debate would resume with a six-hour session tomorrow and would continue on Saturday for another four hours if there was no outcome. But lawmakers backing the project believe 10 hours is a serious underestimation, as some legislators had said they would attempt to delay the funding vote for a third time. "As these lawmakers will exhaust all means to delay the meeting, it was almost certain that the time you set down for it would not be sufficient," the 33 government-friendly lawmakers stated in a petition to Lau yesterday. They demanded that a total of 30 hours, from tomorrow until Sunday, be set aside to resolve the issue. However, Lau only agreed to extend the meeting by another two hours on Saturday. "We came up with 10 hours after a thorough consultation with all lawmakers. If some lawmakers choose not to believe them now, they shouldn't have demanded such a poll in the first place," she said. The Legco Secretariat had polled all lawmakers, except Lau and Legco president Tsang Yok-sing, since Monday on the nature and number of questions they planned to ask, and concluded that this should take only seven hours 25 minutes. "They didn't have to tell us [what questions they planned], but everyone replied to us in a sincere and co-operative manner," Lau said. Up to yesterday, the government had received more than 10 written questions from lawmakers, most understood to be from the pan-democratic camp. Ip Kwok-him, one of the 33 lawmakers who signed the petition, said whether the funding could be passed this time hinged solely on Lau's attitude. "If she will not stop lawmakers from asking repetitive or irrelevant questions, we will seek to move her [from her post]," he said. However, it is clear that Lau and the pro-government camp differ on the definition of a repeated question. "If someone asks about the same topic more than once, that does not necessarily make a repeated question," she said. "However, when it comes to a point where the government has nothing new to answer, I will ask if they still want to continue asking, or advise them not to." The committee chairwoman has no right to stop lawmakers from asking questions unless they are repeated or irrelevant. Professional Commons, a think-tank and consultant for lawmakers from the Civic Party, said it was impossible for the government to give a definite answer to at least five problems posed by the link - including a joint-location immigration inspection system, so the administration should retract the project. But transport secretary Eva Cheng said immigration clearance would not be a big obstacle for the link's effectiveness, as there were many efficient alternatives to joint-location inspections - such as electronic advance immigration clearance, or on-board inspections. However, she believed the government should improve the public consultation in the future to include more voices other than those of direct stakeholders. MTR Corp chief executive Chow Chung-kong said any further delay to the project would increase the cost.

The express rail fight may be serious business inside the Legislative Council chambers today and tomorrow, but that will not be apparent outside. Supporters of the mega project are planning a samba party and lion dances. Not to be outdone, the anti-railway group will be handing out rice balls to signal their hopes for a happy ending, as well as holding a workshop on farming and Chinese culture. Travel Industry Council executive director Joseph Tung Yao-chung said dozens of agencies will be staging the samba party and lion dances to lighten the atmosphere. He expects about 500 people to turn out. Support Express Rail convener Lui Dik-ming expects 400 to 500 more to turn out to sing in chorus for the project. With Legco's Finance Committee set to resume its contentious debate at 3pm today, around 100 young people turned up the heat on legislators by camping out in the cold in Chater Garden last night. The camp is organized by the Post-80s Anti-Express Railway Group and the Anti-Express Railway Alliance. Six core protesters -- who on Tuesday started a fast they hope will end tomorrow with news of defeat or delay of funding for the project were doing well but were not appeased by Chief Executive Donald Tsang Yam-kuen's pledge to listen to their views. One of them, Wong Hin-yan, 24, said: "He is just putting on a show. We urge him to shelve the high-speed railway project, but now he has shifted the focus to us." Alliance core member Bobo Yip Po- lam expects a stronger turnout than last week. They will be joined by more than 70 members of the Association of Engineering Professionals in Society, said the senior vice chairman Yim Kin-ping. The group also placed advertisements in newspapers today. On the eve of today's showdown, an advert signed by 110 trade associations was placed in newspapers to express support for the project.

Police are asking mainland authorities to help identify a suspected plain-clothes public security officer who crossed into Hong Kong territory during a protest last month. The Hong Kong police request was sent before last Friday's Legislative Council security panel meeting where Secretary for Security Ambrose Lee Siu-kwong told lawmakers there was no evidence to show mainland officers crossed the border to take enforcement action. Yesterday, a police spokeswoman said: "We have sought the assistance of the mainland authorities in identifying a person in plain clothes. A written request was sent to the mainland authorities to identify the person [accompanied by photographs] before the special Legco meeting on January 8." Police said the suspected plain-clothes mainland officer was seen crossing over to the Hong Kong side of the Lo Wu bridge and removing a banner from an activist during the protest in support of jailed dissident Liu Xiaobo. The man stepped back and appeared to have lost balance as the protester struggled. A uniformed Hong Kong policeman, who was among a team of Police Tactical Unit officers watching the protesters on the Hong Kong side, extended a hand to prevent the man from falling, before the man rushed back to the Shenzhen side, police said. Twenty-one people staged a protest on the bridge on December 27 in support of Liu. Four protesters and two journalists were detained on the mainland for three hours. Hong Kong police were accused of failing to stop mainland officers from dragging protesters across to the Shenzhen side of the bridge. Hong Kong police initially said they had not seen any mainland public security officers exercise jurisdiction on the Hong Kong side of the border. They later revised that statement to say they did not see any uniformed mainland law enforcement officers exercise jurisdiction on the Hong Kong side. Police suspect that the man is a public security officer or an official from another mainland authority. "Except for this man, there is no indication to suggest other mainland officers entered Hong Kong and made arrests in the case," a senior officer from police management said. The border at the Lo Wu bridge which crosses the Shenzhen River, is demarcated by a grille in the middle. Law enforcement agencies on both sides clearly know this is the border and should not cross the line. The incident caused an uproar, with lawmakers and human rights activists saying it undermined Hong Kong's jurisdiction.

China*: Fitch Ratings on Thursday warned mainland’s credit boom was “unsustainable”, adding that stimulus spending in response to the global financial crisis risked creating serious financial distress.

BYD plans to sell electric cars in US by end of year - After a disastrous year for the United States car industry, manufacturers are working hard to exude optimism and confidence at this year's Detroit car show. On that score alone, the winner may be the mainland company BYD, which created a stir this week by announcing that it planned to start selling an electric car in California by the end of this year. It would be the first company to sell Chinese-made vehicles in the United States. It would require the firm to overcome numerous hurdles, including crash and emissions testing that can sometimes take years, not to mention arranging a network of dealers. But BYD, which was founded just seven years ago, is fond of setting ambitious goals. An introductory video played before the company made its announcement said, almost as a side note, that BYD intended to be the largest carmaker in the world by 2025. "We've been talking for years about the imminent arrival of the Chinese, and it still seems to be imminent," said Jeremy Anwyl, chief executive of, a website that gives car-buying advice to consumers. "It always seems to be `later this year'." But Anwyl said BYD and other Chinese carmakers were making rapid progress, to the point that the quality and styling of their vehicles were less problematic than the difficulty of breaking into a large, mature market like the US. "They've got a long-term view, and they've certainly got the will," he said. "When they do come, it's going to almost be as disruptive as when the Japanese came." The rest of the vehicle industry is closely watching China. Many carmakers have already become familiar with BYD and other Chinese manufacturers by competing against them in that country, which overtook the US as the world's largest car market last year, with sales of 13.6 million vehicles. General Motors, Ford Motor and others know it is only a matter of time before those companies begin challenging them on their home turf, too. Later this year, China's biggest private carmaker, Geely Automobile Holdings (SEHK: 0175), expects to close a deal to buy the Volvo brand from Ford, and GM could conclude the sale of its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery. "China's going to be a force going forward," Ford chief executive Alan Mulally said at a conference in Detroit. BYD executives said the first vehicle they wanted to sell in the US was a battery-powered, five-passenger crossover vehicle called the e6. The company claims the car will have a range of 330 kilometres. Drivers will charge the battery by plugging it into an outlet at home or at fast-charging stations, which do not exist yet. The e6 costs about US$40,000 to make, so government incentives would be important to making it affordable at first, said Henry Li, the general manager of BYD's vehicle export trade division. US consumers would buy the vehicle at stand-alone BYD dealerships, which had not been established, Li said. Under repeated questioning by sceptical reporters, Li said that none of the obstacles would be insurmountable for BYD, which counts Warren Buffett among its investors. "I think the market now is looking for electric cars," Li said. But he cautioned: "We don't expect high volumes." Li said the e6 complied with all Chinese vehicle standards and executives were confident it would ultimately meet the far more stringent US regulations. "In the design, we already considered these requirements," he said. This is BYD's third consecutive trip to the Detroit car show. A year ago, the company listed 2011 as its target for selling the e6 in the US, and it listed a higher range, acceleration and top speed for the vehicle. Other Chinese carmakers have visited Detroit in the past, only to find that their vehicles - like the rhombus-shaped sedan with wheels on three axles and a bamboo interior in 2007 - were not taken seriously, and they have not returned. Many of the Chinese contenders seemed to market themselves on the idea that they could undercut competitors on price, regardless of quality or design. That is not the strategy at BYD, which already makes many of the batteries used in mobile phones and other electronics. "The product," Li said, "has to be good."

A Chinese rescue team with sniffer dogs prepare board a plane in Beijing to leave for quake-hit Haiti on Wednesday. Eight Chinese peacekeepers working in Haiti were missing after being buried by a building collapse in a massive earthquake that decimated the Caribbean country's capital, the mainland government said on Thursday. The State Council and the Public Security Ministry said in separate statements late Wednesday that the eight Chinese peacekeepers were in a meeting with UN officials inside the headquarters building for the UN peacekeeping mission when it collapsed in the magnitude 7.0 earthquake. The ministry did not say if the missing were believed alive or dead, and says the rest of China’s 142 peacekeeping police in Haiti are safe. The State Council said the Red Cross Society of China has pledged to donate US$1 million of emergency aid to Haiti. China has deployed a team of 60 relief personnel to Haiti that includes search and rescue crew, medics and seismological experts. The team will bring rescue, communications and security equipment as well as 10 tons of food, medicine and other supplies. The earthquake was the most powerful to hit Haiti in more than 200 years.

An energy-saving technologies exhibition in Beijing. The merger of China Energy Conservation Investment Corp and China New Era Group Corp is regarded as a win-win deal to enhance the two companies' 'green' portfolios. Two centrally administered State-owned Enterprises (SOEs) are to be merged soon to increase their input in energy conservation and environmental protection, an industry source revealed. The government has approved the merger of China Energy Conservation Investment Corp and China New Era Group Corp, two companies under the administration of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), said a source close to the matter, without elaborating. The move is in line with efforts to build an environmentally-friendly economy, said the source, who asked not to be named. "I believe after the merger, the resources of the two companies could be better used to enhance the portfolio on green business," said Zhao Xiao, who is a former director of the Macro Economy Department of the Economic Research Center at SASAC. It is also in line with SASAC's move to reduce the number of centrally administered SOEs while improving their competitiveness, he added. Established in 1988, China Energy Conservation Investment Corp (CECIC) is the only centrally administered SOE concentrating on the energy saving and environmental protection business. Its portfolio now covers three main areas: energy conservation, environmental protection and clean energy development. The company aims to achieve a turnover of 50 billion yuan and a profit of 5 billion yuan by 2012, according to its website. By that time its energy saving capacity will reach 4.25 million tons of coal equivalent and 400,000 tons in chemical oxygen demand reduction annually. Established in 1980, China New Era Group Corp focuses on trade in military products. "It is a win-win cooperation. The merger would enable CECIC to get more funds to develop its green business. It would also help China New Era, which focused on trade previously, to expand its portfolio," said an industry insider who asked not to be named.

China's move to raise bank reserve ratio draws global response - The decision of the People's Bank of China to increase the deposit reserve requirement ratio has drawn worldwide attention and fluctuations in global markets. The PBOC decided on Tuesday to raise the deposit reserve requirement ratio by 0.5 percentage points as of Jan. 18, which analysts translated as a move to manage inflationary expectations and avoid a recurrence of the lending boom.

The Chinese flag flutters beside Google headquarters in Beijing, On Thursday, Beijing’s first official reaction after Google threatened to quit China over cyber-attacks, gave no indication that China would give ground.

Google's threat to pull out of China over what it claims to be cyber attacks has left millions of Chinese users concerned - and analysts described the move as the company's strategy to put pressure on the Chinese government. Google - the world's largest search engine - said in a statement yesterday that it is considering exiting China after the company had been hit in December with major cyber attacks that it believes originated in the country. It is not clear whether users in China, including many foreigners, would continue to access services such as Gmail and Google Map, should the company shut its service. David Drummond, Google's chief legal officer, said in an unusual statement posted online that the company had detected a highly sophisticated and targeted attack from China that resulted in the theft of the company's intellectual property. "These attacks ... led us to conclude that we review the feasibility of our business operations in China." He said Google will no longer continue censoring results on, a Chinese-language website it launched in 2006, and is discussing with the Chinese government the possibility that it operate an unfiltered search engine within the law. "We recognize that this may well mean having to shut down, and potentially our offices in China," he added. The statement marks a shift in the company's China strategy for the past five years, which is to provide censored results under Chinese law through its domestic search engine in exchange for a presence in the world's largest online population. That strategy helped Google take about 35 percent of China's search engine market in the fourth quarter of last year, according to domestic research firm Analysys International. Jiao Jian, an office worker who uses both Baidu and Google every day, said the possible shutdown of the Google search engine will have little impact on his life as many other firms provide similar services. "But it's hard to find alternatives to Google's other services, such as Google Map, Google Earth and Gmail," he said. He also expressed concerns over the availability and safety of his Gmail account if Google exited the country.

China's health ministry has urged vulnerable groups to get swine flu vaccinations or limit travel during the upcoming Chinese Lunar New Year holiday due to the spread of the A(H1N1) virus. “Pregnant women, children, the elderly, obese people and those with chronic diseases should avoid public travel during the peak period of Spring Festival travel,” the ministry said in a statement posted on its website late Wednesday. Such vulnerable groups should also get swine flu vaccinations and steer clear of crowded public places and people showing obvious flu symptoms, it said. The ministry also urged for prevention measures to be stepped up, including wearing face masks, frequently washing hands and getting early medical checkups for coughs and other flu symptoms, it said. Tens of millions of people are expected to pack into trains, planes and buses during the upcoming Lunar New Year travel period when Chinese return to their hometowns and villages for annual family reunions. This year’s travel period extends from January 30 to March 10. Lunar New Year’s Day, or the start of the traditional Spring Festival, falls on February 14. Last week, the ministry announced it had recorded 659 swine flu deaths in China last year, nearly all of them in the last two months of the year, and warned that the danger of mass outbreaks still existed in certain areas. The total number of A(H1N1) infections recorded last year stood at 120,940, it said. At the end of October, the reported death toll stood at just six. The number of recorded deaths then spiked, reaching about 180 at the start of December and 659 by the end of the month. On Wednesday, the ministry said it had recorded 2,173 new cases of the swine flu and 51 deaths due to the disease from January 4 to 10.

An assessment of the People's Liberation Army Navy inadvertently released by the US Office of Naval Intelligence suggests the mainland will build a naval force over the next 10 to 15 years that is equipped for operations "well beyond its traditional operating areas around Taiwan and the South China Sea", Jane's Defence Weekly reported. The ONI report said the overall size of the PLA's navy might remain relatively steady as Beijing put emphasis on quality over quantity. It expected future naval fleets to "include one or more aircraft carriers" and many modernised attack submarines. It said the government would speed up the building of submarines and naval air forces "in the next five to 10 years before levelling off". The PLA would add approximately 10 modern submarines to the force, the report said. It said preparing for possible armed conflict over Taiwan would remain the navy's top priority. But the need to secure vital sea lanes for the mainland's growing commercial fleets, combined with rising domestic and international pressure for Beijing to take up greater security responsibilities in the region, would drive the navy to expand its operations beyond Taiwan, the American intelligence report concluded. It said East Asia contained "numerous hot spots and potential conflicts that challenge China's interests". The report, titled A Modern Navy with Chinese Characteristics, was briefly placed online as an open-source document by the ONI in November before being withdrawn from public view, Jane's said. The report noted that while the PLA had been adding impressive new ships and hardware to its naval fleet, the command-and-control structure had "yet to catch up with the sophistication of the PLA's newest surface platforms [warships]". The ONI believed the navy, as a next step, would focus more on improving the command structure, providing better training and modernising tactical doctrines. Air defence also remained the weakest link for the navy, it said. The PLA's rapid military build-up over the past few years has attracted worldwide attention. On Monday, the PLA tested a missile interceptor in space, prompting the Pentagon to ask Beijing for clarification over its plans and intentions. US State Secretary Hillary Rodham Clinton yesterday called on China to step up military exchanges with the US to build confidence. "The relationship China has with its neighbours as well as the United States and the rest of the world will be crucial to what happens in the 21st century," Clinton said in Hawaii. "Similarly, we hope that there will be increasing trust-building between our militaries ... We each have our national interests. We each have to be primarily responsible for our own people. But I honestly believe that both the Chinese and American people will be safer and more prosperous in the future if we have a good, solid relationship between our two countries," she said.

Jan 14, 2010

Hong Kong*: Li Ka-shing has signed up as a cornerstone investor in the controversial HK$20 billion initial public offering of indebted Russian aluminium giant United Co Rusal Limited. Cheung Kong (SEHK: 0001) Holdings, Li’s main investment vehicle, will invest US$100 million in Rusal, people involved in the transaction confirmed. Vnesheconombank, the Russian state development bank also known as VEB; NR Investments, the principal investment company of aristocratic European hedge fund manager Nathaniel Rothschild; New York hedge-fund manager Paulson & Co and Malaysian billionaire Robert Kuok, the controlling shareholder of Kerry Group (which owns the South China Morning Post (SEHK: 0583) have also agreed to buy HK$6.86 billion worth of shares in the IPO. The Securities and Futures Commission, however, has banned Hong Kong retail investors from participating in Rusal’s share offer. Market observers say this was because Rusal has US$14.7 billion of debt and is considered high-risk by the SFC. The SFC was also concerned by media reports that Rusal’s chairman, Oleg Deripaska, has only been allowed to enter the United States on a restricted visa in recent years because of his alleged links to organized crime. Rusal has vehemently denied the reports.

Lam Woon-kwong, the former director of the chief executive’s office, has been named new chairman of the Equal Opportunities Commission (EOC), a government spokesman said on Wednesday. Lam, 58, replaces former EOC chairman Raymond Tang Yee-bong after Tang’s contract expired on January 11. Lam’s term will last for three years, commencing on February 1. “An open recruitment exercise was conducted to select the new EOC chairman and a selection board was appointed to consider the candidates and make recommendations to the chief executive. Lam has accepted the appointment,” the spokesman said. He said Lam had extensive experience in public administration and had served in a number of senior positions within the government. This includes working as secretary for home affairs and as a director of the chief executive’s office.

The chairwoman of the legislature's Finance Committee says it aims to complete the twice-delayed vote on funding for the HK$66.9 billion express rail link to Guangzhou by Saturday. Emily Lau Wai-hing made the comment yesterday as lawmakers who back the project planned a move to oust her if the timetable is not met. After consulting Legco's secretariat, Lau decided yesterday to set down 10 hours - six on Friday and four on Saturday - to complete discussions and to vote on funding. "Ten hours should be more than enough. If lawmakers cannot finish questioning on Friday, a vote should come on Saturday," she said. "I got this impression from the secretariat. We should have trust in our colleagues." A second meeting on funding was adjourned at 10.45pm on Friday after six hours of debate. Lau said that if proceedings dragged on on Saturday the meeting could be extended for a further four hours, with lawmakers' approval. Legco secretary general Pauline Ng Man-wah said all lawmakers - excluding president Tsang Yok-sing - had been polled in the past two days about the number and nature of questions they planned to ask, and they had concluded that this should take seven hours and 25 minutes. "We set aside another two hours for anything unforeseeable happening," Ng said. "Lawmakers will also file written questions for the government." Lau, without mentioning names, said some lawmakers wanted to move a vote of no confidence against her as committee chairwoman. But as such a motion must be submitted six days ahead of the meeting it is unlikely to be processed in time for Friday, unless Lau shortens the notification period. "I am an easygoing person. If someone sees the need for it, I will think about it," she said. The 23 pan-democrat lawmakers who oppose the funding said they did not want a vote of no confidence. But Ip Kwok-him, of the Democratic Alliance for the Betterment and Progress of Hong Kong, said Lau needed to improve the way she handled repetitive and irrelevant questions. "At some point, you must make a decision and draw a line," he said. Ip said many of the 76 questions asked at two previous meetings of the committee were not about funding, but were about domestic issues such as location and ways to dump construction waste from the railway. He said such issues were not dealt with by the Finance Committee. The chairman of the Democratic Party, Albert Ho Chun-yan, said earlier that two or three of its members still had questions. Alan Leong Kah-kit of the Civic Party has six or seven questions, while his colleague Ronny Tong Ka-wah said the number of questions he wanted to ask depended on how the government answered them. Albert Chan Wai-yip, of the League of Social Democrats - who is preparing to table 31 motions with his two colleagues when the questioning is over - said 10 hours may not be enough, as he expected each of his motions to take about an hour. But Ng believes tabling of the motions will only take about four minutes each if they fail to gain the consent of more than half of the lawmakers. She said she had set aside 150 minutes for tabling of motions. However, when Tong proposed adjourning the funding discussion at the first meeting members discussed the issue for about an hour. Lau said she would act to end the debate when lawmakers starting to repeat their questions. Supporters of the link continued their publicity campaign, with the MTR Corp running a full-page advertisement in all major Chinese-language newspapers yesterday. Several executive councillors and former government official Sir David Akers-Jones made public calls for funding for the project to be passed soon. Persistent delays to the project have done no harm to the popularity of transport minister Eva Cheng. A telephone survey of 1,011 people between Monday and Saturday last week by the University of Hong Kong's public opinion program found 38 per cent of respondents supported Cheng, up five percentage points from the previous poll late last year.

Executive Council members Leung Chun-ying, Anthony Cheung Bing-leung and Ronald Arculli yesterday defended the government's HK$66.9 billion express rail project and called on lawmakers to "act responsibly" in voting on the funding for it. They denied their remarks indicated the government and the council are getting impatient and intended to pressure the Legislative Council into approving the funds. "Legco has the right to ask the government for more information. But its mechanism should not result in some issues dragging on without a resolution. Our society hopes a decision will be reached," Cheung said. Exco convenor Leung warned of the impact of further funding delays on the city's economy. "We should take a macroscopic view of the issue and consider whether the future development of Hong Kong will be marginalized," he said. He said the government will do its best to answer any technical questions raised by lawmakers, but there must be a time when questions end and action begins. Leung said similar doubts were cast on other major infrastructure projects, such as Chek Lap Kok airport, but the government was eventually proven right. Had Hong Kong insisted on using the old Kai Tak airport, it would not be able to meet today's surging demand, he said. Arculli said the express rail is very important for the future of the city's economy, especially in connecting with mainland cities. Legco Finance Committee chairwoman Emily Lau Wai-hing said she did not feel any pressure from Exco members.

Hong Kong does not have to worry about its place in the financial world, according to retiring Hong Kong Exchanges and Clearing (0388) chief executive Paul Chow Man-yiu. The city's proximity to the mainland will take care of that, Chow said. In his last official media event yesterday, Chow said less intervention is the key to continuing success for the local bourse. In reflecting on his almost two decades in the stock market, Chow said he counts himself "lucky" to have met so many people and gained their support. "I am gratified and treasure their friendship," he said. Chow has been the chief executive of the bourse twice since 1989, serving in that capacity for about 15 years, a record for the HKEx position. Chow attributes key achievements made by the stock market, including being ranked No 1 in fundraising and seeing its market value grow by 30 times in 20 years, to team effort at HKEx as well as market participants. As long as businesses develop according to market needs, the success will continue, Chow said. Looking ahead, Chow believes HKEx may grow together with other mainland markets such as Shanghai and Shenzhen. As long as the Chinese currency is not freely floated, and overseas investors are not allowed to buy mainland stocks, the Hong Kong market has the advantage of "being close to home," Chow said. "Chinese enterprises will still come to Hong Kong for listing." The HKEx is also ready to handle yuan products at any time, he said, but warns the market against high expectations. "We're able to support yuan products if the policy is in place, and incoming chief executive Charles Li [Xiaojia] will work on those products in the next few years," Chow said. "We should not expect them to come in a great way in the next few years," Chow said. "It takes time. But we are ready, if the market is ready." Chow said strong foundations allowed the HKEx to weather the financial crisis caused by the Lehman Brothers collaps in 2008. The stock exchange will on Monday kick off the first stage of its AMS/3 system, which will see the speed at which orders are matched and executed increase. Chow said capacity by orders per second will increase to 1,500 from 200. The second stage will be launched in the second half of 2011. Chow free real time quote services are expected to be available to all applicants by the end of next year. It now offers the free services to three Hong Kong portals and three mainland portals. Meanwhile, Li, who will assume duties on January 16, restated the bourse's gratitude to Chow for his nearly two decades of service.

Cathay Pacific (SEHK: 0293) yesterday said that with increasing air traffic demand in sight, it is increasing its fleet this year. The carrier said it would take delivery of five airliners this year, including four Boeing 777-300ERs and an Airbus 330-300 - the same number of new planes as last year, one of the peak years for aircraft delivery. The carrier also deferred the mothballing of one of two Boeing 747-400s that it had been planning to retire. "Most people believe that 2010 will be a better year than 2009, and I agree," Cathay chief executive Tony Tyler was quoted as saying in the internal CX World magazine. "However, it's not going to be an easy ride." The International Air Transport Association (Iata) predicts the global aviation industry would see large losses for the year, but the deficit would shrink to US$5.6 billion compared with the US$11 billion last year. "Despite the signs of returning travel and freight demand, airlines have continued to be extremely cautious about capacity," Iata said in a report released yesterday. Since early 2008, passenger capacity has been cut by 7 per cent on international markets and freight capacity by 10 per cent. Restoring rates and fares to their previous levels is the top priority of airline executives. Average air fares started to rise during the second half of last year but were still 10 to 15 per cent below the 2008 average, the airline trade body said. Cathay finished 2009 with the highest passenger and cargo yield in December. It carried 5 per cent more passengers last month compared with the same period in 2008, paring the drop for last year to 1.6 per cent. The Hong Kong division of Cathay attained the best performance in 16 months in December, as holiday travellers filled up 84 per cent of the flights to popular getaway destinations during the 15-day Christmas and New Year period. Forward bookings for January and February were "promising", the company said. Because of the robust demand for air cargo, tonnage at Cathay surged 25 per cent year on year to 144,000 tonnes in December against a 3.3 per cent drop in capacity a year earlier. The four new B777s will be used on flights to Toronto and Los Angeles after the summer schedule begins on March 28. The carrier will increase the number of weekly flights to Toronto to 10 from seven and add three more weekly flights to Los Angeles, making it 17 times a week.

Cathay Pacific Airways (0293) expects healthy traffic during the Lunar New Year after ending 2009 with a bang. Cargoes at Cathay and its wholly owned subsidiary Dragonair last month surged 25 percent year on year, while passenger volumes jumped 5 percent. "The year ended well, with stronger passenger demand leading to an improved load factor and yields at the highest level of the year," said Tom Owen, general manager for revenue management. Improved yields from economy class and a gradual improvement in the number of premium passengers were the main drivers, Owen said. But for the whole of the year, the airlines carried 1.6 percent fewer passengers while cargo tonnage fell 7.1 percent. Flight numbers last year were cut by 5.6 percent from 2008 to 56,442. Cathay expects another challenging year ahead, following the International Air Transport Association's forecast the industry may lose US$5.6 billion (HK$43.68 billion) this year. "If IATA's forecasts are correct it's not going to be an easy ride," said Cathay chief executive Tony Tyler. "Our business last year fell far and fast, and recovery is likely to be slow and gentle at best," he said. Cathay will step up capacity and frequencies on US and and European routes. Cathay shares edged up 0.58 percent to HK$13.86 yesterday.

Taiwan plans to cut eight ministry-level agencies and eliminate tens of thousands of jobs in the biggest revamp of its cabinet system in six decades, the government said on Wednesday.

Le Prestige, the second phase of the Lohas Park project in Tseung Kwan O, is among the developments targeted by mainland buyers. The focus of China's property buyers has shifted in recent months from Hong Kong's luxury housing market to mass-housing units selling for range of between HK$2 million and HK$5 million. The number of deals by mainland buyers in this price range rose by 41 per cent last year, according to data compiled by mReferral Mortgage Brokerage Services. A range of factors were behind the big jump, said Sharmaine Lau Yuen-yuen, mReferral's chief economic analyst, including rising rentals and low interest rates. Against this backdrop, mainlanders living and working in Hong Kong were persuaded to buy instead of renting. "They are not in the millionaire class that can afford to pay HK$20,000 per square foot for an investment. But they are real buyers," said Lau. Typical of the new wave of mainland property buyers in Hong Kong is Xue Li, who recently paid HK$3.8 million for an apartment in Le Prestige, the second phase of the Lohas Park residential project in Tseung Kwan O. A Chinese-language teacher at a secondary school in Cyberport in Pok Fu Lam, Xue bought the 900 square foot flat in December by arranging a 90 per cent mortgage. "I have worked in Hong Kong for 3-1/2 years and have no plans to move back to my home city Wuhan before my 13-year-old daughter graduates from university," said Xue. "Rentals are high so I decided to rather buy a flat taking into account the low interest rate." Xue is paying about HK$9,000 rent and will now pay a similar amount on mortgage repayments. "Any mainlander who plans to stay in Hong Kong will now be considering whether to buy," she said. Julia Wang, a researcher at a Hong Kong university, also recently bought a 1,070 sq ft unit at Monte Vista in Ma On Shan for HK$3.8 million. "I will stay in Hong Kong and will not go back home. The property market in Hong Kong is steady and so I bought the apartment instead of continuing to rent," said Wang. Paul Louie, the regional head of property research at Nomura International (Hong Kong), said the deals were part of a buying trend by mainlanders into the market. "This trend is underway and if it is sustained the increase in mainland buying interest in the lower-priced category could have broad implications," said Louie. Lau said buyers of homes worth between HK$2 million and HK$5 million were generally end-users, while investors targeted more expensive units since buying a property priced above HK$6.5 million offered Hong Kong residency through the capital investment entrant scheme. At the end of September last year, 33,482 mainlanders had taken residence in Hong Kong since the mid-2003 introduction of a scheme to attract mainland professionals. Some mainlanders also target cheaper homes as investments. Rain Wang, a garment trader in Guangzhou, said she had signed up for an 830 sq ft flat in Nathan Road for HK$2.8 million. With HK$1 million on deposit, she is arranging a loan of HK$1.8 million that requires her to pay HK$9,000 a month. "The original owner separated the flat into nine rooms and rents them out, reaping combined monthly rental of about HK$20,000. I bought the unit with the leasing contract," said Wang. This is the third property she has bought in Hong Kong as long-term investments. The other two are rented out in a similar manner. Last month, a group of about 20 buyers from Fujian ,and Wenzhou in Zhejiang bought 20 units in Le Prestige, for HK$6 million to HK$7 million each, said an agent. According to a recent survey by Nomura International (Hong Kong), the number of plus-HK$10 million flats sold last year rose by six percentage points from 21 per cent of deals to 27 per cent.

China*: A rarely seen 400-year-old map that put China at the center of the world and identified Florida as "the Land of Flowers" has gone on display at the Library of Congress in Washington. The map created by Matteo Ricci was the first in Chinese to show the Americas. Ricci, a Jesuit missionary from Italy, was the first Westerner to visit what is now Beijing in the late 1500s. Known for introducing Western science to China, Ricci created the map in 1602 for Emperor Wanli. The Ricci map gained the nickname the "Impossible Black Tulip of Cartography" because it was so hard to find. One of only two in good condition, it was bought by the James Ford Bell Trust in October for US$1 million (HK$7.8 million), making it the second most expensive rare map sold. It had been held for years by a private collector in Japan and will be housed at the University of Minnesota. No examples of the map - which measures 3.6 meters by 1.5m and is printed on six rolls of rice paper - are known to exist in China, where Ricci was revered and buried.

Members of a Chinese rescue team are ready to depart for quake-hit Haiti, at the Capital International Airport in Beijing, capital of China, Jan. 13, 2010. A 50-member Chinese rescue team is ready to depart for quake-hit Haiti later Wednesday afternoon, hours after the 7.0-magnitude earthquake rattled the Caribbean country on Tuesday local time. The team consists of search and rescue personnel, who have conducted many rescue tasks of this kind in the past years, and three sniffer dogs, Liu Xiangyang, deputy chief of the National Earthquake Disaster Emergency Rescue Team, told Xinhua at the Beijing Capital International Airport. "Most of the members are very experienced," said Liu, waiting for the departure. The team will also take some food, equipment and medicine with them.

China Construction Bank (CCB) and Europe's second largest lender Banco Santander, are planning to set up a joint financial holding company and open 100 village banks in the country over the next three years, people familiar with the matter told China Daily. The joint venture is likely to be set up with a registered capital of 3 billion yuan and this could eventually go up to 5 billion yuan in three years. CCB would invest 1.8 billion yuan and hold a 60 percent stake in the joint venture, while Santander would hold the balance, the sources said. The holding company would hold a 51 percent stake in each of the newly set up village banks. Village banks are financial institutions set up primarily for farmers and should have a registered capital of at least 1 million yuan. They can accept deposits and also conduct lending activities. The CCB proposal, which would create the first financial holding company in the country, and a new model to develop rural finance, is yet to be approved by the State Council, according to the sources. "The model could help to create a unified plan to develop China's rural financial services network. It would also help to introduce foreign banks' advanced experience in rural financing," the sources said. During the financial crisis, Spanish bank Santander became the largest lender in the euro zone with a market value of 54 billion euros by the end of 2008. Its subsidiary, Banesto Bank, has a strong presence in rural financial services. The bank has around 1,900 branches in Europe, with nearly one-third of them in rural areas. Currently foreign banks are not permitted to hold more than 20 percent stake in Chinese financial institutions. However, the stipulation does not exist for village banks invested by foreign lenders.

Commercial Aircraft Corporation of China employees adjust a C919 airplane model at the 2009 China International Industry Fair held last November in Shanghai. The nation started work on an aircraft engine research and development center yesterday. Yesterday's ground breaking of an aircraft engine R&D center in Shanghai may help the city in its bid to become the nation's aircraft-manufacturing hub. The ceremony, located in the city's Minhang district, was held by AVIC Commercial Aircraft Engine Company Co (ACAE), a joint venture with the Aviation Industry Corp of China (AVIC). AVIC develops and manufactures military aircraft and components for both military and civilian aircraft. The R&D facility will serve as a center for air-worthiness testing, customer service and international communications. In addition, it will serve as the headquarters for ACAE. Total investment in the R&D center will be 3.23 billion yuan, with construction to be completed by 2013, according to ACAE general manager Zhang Jian. The center will focus on engine research and manufacturing for China's home-grown, 150-seat aircraft project, the C919. Future plans will also include researching larger jet engines. The Shanghai municipal government and AVIC reached a strategic cooperation agreement in November 2008 to co-invest in ACAE and help make Shanghai into a manufacturing center for Chinese development of passenger-aircraft engines. China's first jumbo jet, the C919, will initially be equipped with foreign-made engines for the plane's maiden flight in 2014. ACAE will domestically produce C919 engines once it masters the necessary techniques. According to Zhang, the first homegrown engine is expected to come off the assembly line in 2016. The engine, which makes up 20 percent of an aircraft's total cost, and is traditionally regarded as the heart of an airplane. So far, China has not developed its own engines, which has stifled its growth in the aviation industry. Last December, Commercial Aircraft Corp of China Ltd (COMAC), the company in charge of the C919 passenger airplane program, signed a deal with CFM International, a joint venture between General Electric and Safran of France. Under the agreement, the C919 will be equipped with Leap-X1C turbofan engines.

China food and retail group Bright’s US$1.4 billion bid for CSR, Australia’s largest sugar refiner, could see mainland eventually emerge as a major new market for the country’s sugar exports. Currently Indonesia, Malaysia, Japan and South Korea take the bulk of Australia’s supplies, with mainland buying around 10,000 tonnes out of total imports of around 1 million tonnes a year. CSR, which accounts for around 60 per cent of Australia’s 4.2 million tonnes of raw sugar last year, markets its output through Queensland Sugar under a contract that would last to 2012, Sugar consultancy Kingsman’s analyst Tom McNeill said. But longer-term more Australian sugar could be exported to mainland. Bright, one of the world’s largest food groups, said the acquisition would provide CSR with a direct route to the mainland market, where the mainland company could leverage its existing distribution network to distribute CSR products. It sees the purchase of CSR Sugar as a first step in further developing Australia’s sugar industry, with potential for further significant investment in milling and refining infrastructure. This could reverse a trend of falling Australian sugar production from as much as 5.45 million tonnes in 1999 as farmers switched to higher yielding crops. “Bright Food would look to work closely with cane growers and would be open to inviting CSR’s cane growers to take some form of ownership interest in CSR Sugar,” Macquarie Group said in a research note. If Bright decided not to extend its contract, then Queensland Sugar’s own future could be in doubt as it would have far less sugar to market. “You would expect there could be some implications if there are say half a million tonnes or one million tonnes going off to one buyer in China that owns 40 per cent of the milling infrastructure in Queensland,” said McNeill. Bright’s proposal comes as the world is facing a global shortage of the sweetener for the second straight year, sending prices to the highest level in nearly three decades. Kingsman estimates the deficit next year could be between 8 million to 9 million tonnes following a 15 million tonnes deficit last year. It expects prices to remain high as there are few stocks to fall back on. Analysts said the implications of Bright’s proposed purchase remain unclear as mainland is generally self-sufficient in sugar though this year it faces a shortfall even though it has reserve stocks. “China is not traditionally a large importer of sugar but this year they’ve had a little bit of a crop failure so the expectation is that they’re going to take in two to four million tonnes,” said Scott Briggs, an agriculture commodities specialist at ANZ Banking Group. Mainland usually produces 14 million or 15 million tonnes a year. CSR, a sugar, building products and aluminium conglomerate, last year said it planned to spin-off its sugar and renewable energy business either through a trade sale or a separate listing as part of a group restructuring. Bright Food believes its potential offer, which would be in cash, is a much more attractive and secure alternative than CSR’s demerger plans. Its approach demonstrates mainland’s increasing appetite for Australian commodities outside mining assets.

Major mainland cities rushed to announce plans to boost the supply of low- cost homes after the central government outlined 11 policy directions to contain price surges. But experts feel the municipal moves will have limited impact. ICBC International analyst John So noted that a similar pledge last year from major mainland cities saw poor execution. "For every 100 homes expected [countrywide], fewer than 30 were built eventually. The execution was not so effective, with the exception of Shanghai," So said. Beijing deputy mayor Chen Gang said the city has earmarked 30 billion yuan (HK$34 billion) this year for the construction of low-cost housing, while the corresponding land supply will account for more than 50 percent of the total supply, People's Daily reported. Huang Xinjing, vice director of Guangzhou's Housing Guarantee Office, said the city will invest 3 billion yuan in building affordable homes this year, with 56,000 such homes hitting the market in the first half. Nanjing will start building 6.5 million square meters of low-cost homes this year. Centaline (China) vice managing director Lai Kwok-keung said: "The current focus on low-cost homes cannot cool down the market. These homes have no investment value, whereas many homebuyers are indeed investing." Both Beijing and Shanghai vowed to ensure steady growth in land supply. The capital plans to develop no less than 100 billion yuan of land to deliver 280 million sqm of private homes, while Shanghai will speed up the clearing of idle land and reduce the size of each public plot available. Lai said even though the new plots are likely to be far from city centers, the increase in supply will signal to buyers that they do not necessarily have to put up with existing price levels. The State Council on Sunday issued a 40 percent downpayment requirement for all second-home buyers, reducing chances of upgraders getting the small leeway they enjoyed earlier.

In a surprise move, Beijing yesterday jumped in to put a brake on runaway bank lending. The central bank raised the reserve requirement ratio for lenders by 50 basis points - to 16 percent - triggering a slide in European stocks and the Australian dollar. The People's Bank of China also boosted the benchmark one-year bill yield to 1.8434 percent in the morning - the first increase in the past five months. Market watchers interpret the moves as the first step of China's exit from its stimulus plans, reversing the world's loose monetary policy prevalent since the Lehman Brothers collapse in September 2008. The Aussie dollar decreased for the first time in three days, falling 0.6 percent to 92.37 US cents. London stocks were down 47 points in late trade while the Paris benchmark was 34 points lower. Economists said bank lending of 600 billion yuan (HK$681.1 billion) in the first working week of the year - nearly double the monthly average last year - alarmed Beijing, prompting the sudden action. Analysts expect lending in January to exceed 1 trillion yuan. The reserve ratio - the percentage of deposits that banks are not allowed to lend - at top mainland banks will rise to 16 percent, effective from Monday, the central bank said. The 50 basis points increase could mop up about 200 billion yuan from the banking system, economists said. China is expected to incrementally raise the reserve ratio further - up to 17.5 percent - the level before the onset of the 2008 financial crisis. So far, no interest rate hikes have been forecast, but these may follow if lending remains unabated, economists said. Tao Dong, chief regional economist at Credit Suisse, said the larger-than- expected first-week lending caused Beijing to be concerned about excess liquidity that could fuel possible asset bubbles in both the stock and property markets. "[The reserve ratio hike] is definitely related to the January credit growth, for the first-week figures show not much adjustment by banks in lending," Tao said. He predicts there will be two or three more hikes in the reserve ratio until it climbs back to 17.5 percent. Shenyin Wanguo Securities chief economist Gui Haoming agrees, saying the reserve ratio could climb by another 150 basis points this year. Both Tao and Gui said yesterday's hike marks Beijing's first step to withdraw from the 4 trillion yuan stimulus plan Premier Wen Jiabao launched in November 2008 to rescue the economy. "The central government is a bit worried about the liquidity in the market. It prefers to have early control of it despite [lingering] uncertainties about economic growth," Gui said. But Tao and Gui see no imminent increase in interest rates. "Only when credit growth is not under control [will rates rise]," Gui said. Citi Investment Research economist Shen Minggao forecasts the central bank will wait until the third quarter to raise interest rates, unless bank lending sharply boosts inflation. BNP Paribas chief economist Chen Xidong said interest rates may go up by the second quarter if further hikes in the reserve ratio fail to temper bank lending.

Chia Tai Enterprises International has obtained syndicated bank loans of 327 million yuan (HK$371.4 million) and US$202 million (HK$1.57 billion) for refinancing and to expand its mainland supermarkets. Three Thai banks granted two six-year-term loans to Chia Tai (0121), which runs the Lotus Supercenter chain in the mainland. The yuan loan is onshore in nature while the offshore US dollar loan carries an interest rate of LIBOR plus 200 to 300 basis points. Chia Tai chief executive and executive vice chairman Soopakij Chearavanont said the firm learned a costly lesson when the Thai baht depreciated during the Asian financial crisis. To minimize risks, Chia Tai now pays suppliers in their local currency. Chia Tai has identified 40 locations to open supermarkets and department stores, he said. "We try to use the minimum to invest in properties," explained Soopakij. "We try to encourage the landlord to build the property according to our own design." Chia Tai is also looking for brand sponsors for appliances such as refrigerators to cut costs. All the Thailand-based firm's 45 mainland branches have a positive cash flow, Soopakij added, and 41 are profitable. He said the average profit for its Shanghai stores was 20 million yuan last year, with the best-performing outlet recording 42 million. Chia Tai is targeting a profit margin of at least 4 percent as it draws more high-end clients.

USA Federal and state watchdogs in the United States have opened a new front in the campaign to keep poisons out of Chinese imports, launching inquiries into high levels of cadmium in children's jewelry, while Walmart pulled many suspect items from its store shelves.

Google's threat to quit the mainland over censorship and hacking intensified frictions between Beijing and Washington on Wednesday as the United States said internet control was a serious issue and demanded an explanation from China. Beijing has not made any significant comment since Google, the world’s top search engine, said it will not abide by censorship and may shut its Putonghua website because of attacks from the mainland on dissidents using its Gmail service and on companies. Authorities in Beijing were “seeking more information on Google’s statement that it could quit China”, the official Xinhua news agency reported, citing an unnamed official from China’s State Council Information Office, or cabinet spokesman’s office. Differences over the internet now seem sure to intensify tensions between the US and China, joining issues like climate change, trade, human rights and military ambition. “This is a clash of behemoths. This is a big country and this is a big company,” said former US Department of Justice computer crimes chief Mark Rasch. With the mainland the largest lender to the US, holding US$800 billion in Treasury bills, these internet tensions will make steering this vast, fast-evolving relationship all the more tricky, especially with the US Congress in an election year. Beijing has said it does not sponsor hacking. Its officials have also accused the west of seeking to undermine its one-Party rule by backing dissidents and campaigns against censorship. Now Google is at the heart of those tensions. Pressing China for an explanation, US Secretary of State Clinton said: “The ability to operate with confidence in cyberspace is critical in a modern society and economy. “We have been briefed by Google on these allegations, which raise very serious concerns and questions,” Clinton said in a statement in Honolulu. “We look to the Chinese government for an explanation.” Economic analysts said the issue had snowballed beyond Google and its problems. “If this becomes heavily politicised, and there are signs that it is, and people in the Chinese government say, ‘This is good. It serves you right, and we won’t bow our heads to the United States, then there’ll be no way out,” said Xie Wen, a former executive in the mainland for Yahoo and other big internet companies, who is now a prominent industry commentator. “The impact on China’s image will gradually also affect the enthusiasm of investors,” he added. “It’s not the pure economic losses – a billion or so – it’s the deteriorating environment.” The burst of statements from the US underscored how tightly it is bound to the mainland, both economically and politically. Beijing’s policy of filtering and restricting access to web sites has been a frequent source of tension with the US and tech companies, such as Google and Yahoo Inc. Google’s announcement suggested the recent intrusions were more than isolated hacker attacks. “These attacks and the surveillance they have uncovered – combined with the attempts over the past year to further limit free speech on the web – have led us to conclude that we should review the feasibility of our business operations in China,” Google chief legal officer David Drummond said in a statement posted on the company’s blog. Some 20 other companies also were attacked by unknown assailants based in China, said Google. RBC Capital Markets analyst Stephen Ju said the move was a turnaround for Google. “Just about every earnings call recently has been that they are focused on the long-term growth opportunities for China and that they are committed.” Google shares dipped 1.3 per cent although an executive described China as “immaterial” to its finances. Shares in Baidu, Google’s main rival in the mainland, surged seven per cent. A Google spokesperson said the company was still investigating the attack and would not say whether Google believed Chinese authorities were involved. Analysts have noted that US President Barack Obama, during a visit to China in November, told an online town hall that he was “a big supporter of non-censorship”. Eurasia Group said US-China relations were the top risk of next year. “We’ll see significant deterioration in US-Chinese relations in the coming year,” it said, citing economic, security and cyber-security pressures. After the Google announcement, searches on its search engine on Wednesday could turn up images and sites previously blocked, including bloody pictures from the 1989 crackdown on pro-democracy protests in Beijing. The ruling Communist Party, wary of the internet becoming an uncontrolled forum for the country’s 360 million users, is unlikely to allow Google to avoid repercussions. If shuts down, Beijing may also seek to restrict access to Google’s main search engine, which can also carry out searches in Puthongua, although China’s “firewall” of internet filters blocks many users from opening up the results. “The general tendency over the past year has been to accuse foreigners of having a Cold War mentality and being anti-China and aiding and abetting China’s enemies,” said Rebecca MacKinnon, an expert on the Chinese Internet at the Open Society Institute. “How exactly they are going to react to this, I cannot anticipate, but it’s likely that it will not be pretty.”

China's mid-space missile interception test may seem less fancy than when it knocked out an ageing satellite with a missile three years ago, but its practical implication and technological achievements are far greater. The success shows China is gradually closing the military gap with the United States, thanks in part to the People's Liberation Army's ability to learn from mistakes at the Pentagon. China is now the only nation after the US that has successfully intercepted a supersonic incoming missile outside the atmosphere - a feat that not only attests to its sophisticated missile technology but also demonstrating it has acquired complicated radar tracking systems. In 2007, China shocked the world when it knocked out one of its ageing weather satellites with a missile, raising concerns that it may target the satellites of other countries. But according to General Xu Guangyu , a retired officer at the PLA's General Staff Headquarters, the satellite test was low-tech compared with the experiment announced on Monday. Xu said the 2007 test was relatively straightforward, as the satellite's mass and orbit were already known, and it had no defence system. It was also unable to make any emergency manoeuvres. Monday's test was anything but straightforward. The defence system had to identify the location and trajectory of the missile. Because of the speed of the warhead, the time for response including detection, aim and launch was a matter of minutes. "Satellite interception is like shooting a beer bottle. Missile interception is like shooting ducks," Xu said. "Monday's announcement marked a milestone in China's active defense strategy. Mid-course missile interception requires superior technology and equipment. As China is becoming one of the most powerful countries in the world, the development is natural." There was suspicion that the test may have been a computer simulation, but the US Department of Defense confirmed detection of abnormal activities in space. "We detected two geographically separated missile launch events with an exo-atmospheric collision also being observed by space-based sensors," Major Maureen Schumann, a Pentagon spokeswoman, was quoted as saying by the Associated Press. "We are requesting information from China regarding the purpose for conducting this interception as well as China's intentions and plans to pursue future types of intercepts." The race between China and the US to weaponise space is something akin to the tortoise and the hare. The US has a huge lead, but slowly and surely China is starting to catch up. The cause of the Pentagon's recent slow progress is not complacency, but rather serious technical issues. More than US$100 billion has been invested in its ground-based mid-course defense (GMD) system, but last year new tests were cancelled because of delays. According to unclassified military research papers, China has been closely monitoring and studying US technology for more than a decade, and the army, air force and navy each has a ballistic missile defense program. Piecing together information from intelligence networks, academic journals and even media reports, Chinese military researchers have discovered a number of flaws in the GMD system that should be avoided. Colonel Wang Guoyu of the PLA's Luoyang -based electronic equipment testing centre wrote in a 2005 paper that the GMD system had a weakness in mid-course interception that the PLA should address. According to the paper, the US space-based infrared satellites could not effectively tell the difference between a real missile and the decoys that it released. The decoys could be as small as a balloon coated with metallic paint or as large as a cloud of aluminium foil. The satellite's infrared sensors had technological limits and could not obtain enough information to distinguish between them. As a result, the defence system has to rely mainly on ground-based radar stations to analysis the invading objects. This is a time-consuming process and sophisticated missiles can be hard to detect. Xu said Monday's test did not mean that the construction of China's missile defence system was completed. "In comparison with the US, we still have a lot of work to do," he said. "In particular, we need more better and more powerful early warning satellites. The missile defense system's base should not be on the ground, but in space."

A cargo ship loaded with containers disembarks from the Tianjin Port in this file photo. Mainland’s Maritime Safety Administration said on Wednesday ice floes were threatening operations of major ports like Dalian, Tianjin and Qinhuangdao. Ports along the northern China coast face a cold front in the coming days that threatens to disrupt operations by expanding the worst sea ice floes seen in three decades, officials said on Wednesday. Mainland’s Maritime Safety Administration said 30-cm thick ice floes were now closing in on the Bohai and northern Yellow Sea coast, the location of major ports like Dalian, Tianjin and Qinhuangdao. The administration said the situation was likely to get worse in the next few days. Another cold front is forecast that may seriously impact port safety and operations in Shandong province, which receives major daily shipments of iron ore and delivers coal to energy-poor southern regions. Smaller facilities have been hit badly, with ships already prevented from entering the Haimiao port in the city of Laizhou, which lies at the south of Bohai Bay, the administration said. But other ports say business has continued more or less normally so far. “There are still queues of iron ore ships along the east coast,” said a trader based in Tianjin. “We are seeing a slight slowdown in shipments from Australia but this was not caused by the weather.” A shipping company official in Rizhao, mainland’s second biggest coal port, said the situation had not seriously slowed business. “I think further north, at Qingdao and elsewhere, the sea ice problem is more serious, but Rizhao has not yet felt the impact. Our business carries on as usual,” he said. Officials at Qingdao, also in Shandong, as well as Dalian in Liaoning province, said shipping had not yet been interrupted by the freezing conditions. However, an official at the Qinhuangdao port, mainland’s biggest coal distribution centre in Hebei province, said temperatures of minus 26 Celsius have slowed down operations considerably. “The low temperatures have interrupted our operations and affected our equipment,” he said. He said problems at the port, rather than the ice on the water, had delayed coal shipments to southern parts of the country. A statement posted on the website of the Hebei Province Maritime Safety Administration said authorities in Qinhuangdao are working to guarantee thermal coal deliveries.

Beijing plans to spend up to 374 billion yuan over the next five years cutting emissions, with about 80 per cent of the money earmarked for developing hybrid and electric car technology. According to a document posted on the National Development and Reform Commission's website, the central government will invest a total of 300 billion yuan in hybrid and electric vehicle technology. In a guideline released on Monday, the government stated that 11 sectors, including petrochemical, non-ferrous metals, steel, textile and machinery, are expected to employ more fuel efficient technologies. Besides "green" vehicles the petrochemical and non-ferrous metal sectors are also in line for significant investment to improve energy efficiency. Analysts said the policy maker is targeting emission-intensive industries to use more efficient technology to abate rising demand for energy, increasing greenhouse gas emissions, and deteriorating natural resources like land and water. China did not make substantial commitments during the Copenhagen climate summit last month, but said in November that it would aim to reduce its "carbon intensity" by 40 to 45 per cent in 2020. The government estimated that a total of 41.17 million tonnes of coal equivalent (tce) will be saved if the 11 main sectors of the economy used more energy-efficient technologies. China, the world's largest car market with sales of 13.6 million vehicles, is also struggling to limit oil consumption. The NDRC estimates there will be three million hybrids and 1.5 million pure electric vehicles on the roads in 2015. According to a report by consulting group McKinsey, annual emission from the mainland's road transport sector will grow to 1.8 gigatons of carbon dioxide equivalent in 2030 from 0.4 gigatonnes in 2005, while petrol and diesel consumption will increase to almost 500 million tons in 2030 from 110 million in 2005.

McKinsey said if light, medium and heavy duty vehicles used more energy efficient power sources, including hybrids, electric vehicles and biofuels, the country would save the equivalent of 600 megatons in carbon dioxide emissions in 2030. This also represents a reduction of about 200 to 300 million tons in demand for petrol and diesel on the mainland. According to the official website for the mainland's oil and petrochemical sectors, demand for refined oil reached 206.68 million tons in the first 11 months of last year, up 7.8 per cent year-on-year. Beijing has just started to replace public vehicles, such as buses and taxis, with hybrids. Wan Gang, the Minister of Science and Technology, a driving force for green technology, said the government's ultimate aim is to see the development of pure electric vehicles on a commercial scale. Wan also called for joint efforts by Chinese carmakers to develop core technologies, like batteries for alternative-fuel vehicles. Carmakers like BYD, which is 10 per cent held by Warren Buffett, Chery Automobile, SAIC Motor Corp and First Auto Work Group, which makes the hybrid Prius with Toyota, have joined the race to develop hybrids or pure electric vehicles. But large-scale commercialization has yet to be realized. Miao Wei, vice-minister of Industry and Information Technology, said earlier the government would offer a subsidy to individuals to help encourage them to choose alternative-fuel vehicles.

Yuan funds, or private equity funds formed in China and denominated in the domestic currency, have captured the attention of international real estate investors and fund managers. In this opening of a two-part examination of the funds, we take a look at recent developments in the sector and the opportunities these have created for foreign players. Next week we will examine the structures under which such funds may be established. Yuan funds are already a prominent feature of the developing domestic private equity industry and increasing foreign involvement in the sector, either in the form of fund management or direct investment, has become possible as a result of changing policies and programs. The increased interest in the funds is also an adjustment by foreign players to the rise of China-based institutional investors and the massive increase of domestic liquidity, which has made it increasingly difficult for international investors to compete with domestic players for deals. Foreign investment in mainland real estate from offshore is strictly regulated and the laws governing foreign investment in real estate put cross-border foreign investors at a severe competitive disadvantage to domestic investors with yuan funding sources. A foreign investor wanting to buy mainland property is required to set up a special legal entity, a foreign-invested enterprise (FIE) in China in order to purchase and own the real estate. The establishment of the FIE is extremely time consuming and requires numerous governmental approvals, onerous minimum capitalisation requirements, burdensome debt to equity ratios, and strict currency conversion and repatriation requirements. FIEs are typically project-specific companies so each investment requires the establishment of another FIE and a repeat of the governmental approval process. In contrast, domestic players are not subject to the same extensive governmental approvals and entity restrictions. Domestic players can simply move more quickly and effectively on deals. In the circumstances, some foreign investors and fund managers believe that by coming onshore by way of a yuan fund with cash resources in the currency available for deployment, they may avoid the complexities associated with making each investment through the establishment of an FIE. Moreover, to foreign fund managers a yuan fund represents an opportunity to tap the mainland's ever-growing pool of individual and institutional investors. With such a fund, a fund manager can raise and manage funds domestically in China from new sources and at the same time earn management fees and carried interest. For a new entrant to the sector, the first major consideration when establishing such a fund is the structure of the fund vehicle. Though various options are available, much of the current attention on foreign-invested or foreign-managed yuan real-estate funds is focused on a limited-partnership structure. A limited partnership formed under Chinese law is attractive because it shares some of the features with limited partnership vehicles found in other jurisdictions, such as general partner management, limited liability of limited partners, operational flexibility and pass-through tax treatment. Foreign investor and manager involvement in limited partnerships has only recently become increasingly feasible due to changes in the partnership laws and the introduction of local-government programmes designed to promote the private equity industry. As a result, many foreign real estate investors and fund managers desiring to compete in China now view yuan funds established under a limited partnership structure as the "next opportunity". For those wishing to take this route there are essentially two different paths for foreign party involvement in a limited-partnership yuan fund. They are a foreign-invested limited partnership or a domestic limited partnership.

Nanluoguxiang in downtown Beijing is ranked as one of the 25 best Asian flavored tourist destinations recently in Time Magazine. It is famous for its boutiques, restaurants and bars along both sides of the hutong laneways which give a cultural flavor.

The Chinese mainland and Taiwan are likely to open tourism representative offices on each side of the Taiwan Strait around the Lunar New Year, said a mainland spokesman Wednesday. The offices were expected to open around the Spring Festival that falls on February 14, said Yang Yi, spokesman with the State Council Taiwan Affairs Office, at a press conference in Beijing. The mainland had become the second largest source of tourists to Taiwan, he said. Last year, 606,200 mainland tourists in 23,289 groups toured Taiwan.
Mainland, Taiwan likely to exchange tourism offices in February Taiwan colleges to admit mainland students
But Yang gave no details about the offices at the press conference. Taiwan lifted the ban on mainland tourists in June 2008, and the first group of mainland tourists arrived in July that year. Last year saw a "healthy and orderly" development of tourism across the strait thanks to close cooperation between the two sides, Yang said. In 2009, the mainland allowed residents from 25 provinces and municipalities to travel to Taiwan, up from 13 in the original agreement. Taiwan reduced the minimum members of a mainland travel group from 10 to five persons and extended the maximum stay from 10 to 15 days. However, the industry complained of restrictions such as residence permits. A mainland resident has to join in Taiwan tour packages in the place where he holds a permanent residence permit, instead of where he actually lives. "As the business just started for one and half years ago, many things are in the early stage," Yang said. "The tourism department will lift restrictions on tourist residence permits step by step, based on the development of the business." When the conditions were ready, it was also likely to allow mainland residents to travel independently, he said.

Jan 13, 2010

Hong Kong*: Local spending is expected to help Hong Kong's economy expand by about 5 per cent this year, according to University of Hong Kong forecasts. But the impact of lacklustre global demand and frugal US consumers will continue to weigh heavily on the city's recovery. Year on year, the university projects that real gross domestic product grew by 0.8 per cent in the fourth quarter of last year - less than its previous estimate of 1 per cent, because of a reduced need by overseas buyers to replenish their stocks and inventories. Growth of 5 per cent is estimated for this quarter, mainly due to a low base of comparison a year ago rather than a strong recovery, said Professor Richard Wong Yue-chim, director of the university's Asia-Pacific Economic Co-operation Study Centre. Full-year real GDP is forecast to expand by 4 per cent to 5 per cent in 2010 after shrinking by an estimated 3.2 per cent last year. The official projection for last year is a contraction of between 3.5 and 4.5 per cent. The Hong Kong General Chamber of Commerce expects the economy to have shrunk by 3 per cent last year and to grow by between 3 per cent and 4 per cent this year. The economy has contracted since financial markets collapsed in September 2008. Alan Siu Kai-fat, the center's director, said that to maintain the trend growth rate of 4 per cent to 5 per cent a year, the economy should expand by at least 9 per cent to 10 per cent this year. "Growth of 5 per cent for the first quarter or for the year as a whole is not cause for celebration, because the economic hole Hong Kong is in is too deep," Siu said. "If Hong Kong can only grow by 5 per cent, by the end of this year the GDP level will only be around the 2008 level." Siu said he expected private consumption spending to account for 2.6 percentage points of this quarter's projected 5 per cent growth, underpinning the slow recovery in exports and imports. Investment in land and infrastructure would be robust, rising 15.3 per cent this quarter with work starting on huge projects such as the bridge linking Hong Kong, Zhuhai and Macau as well as the expansion of Hong Kong Disneyland. Economists with Hang Seng Bank (SEHK: 0011) also do not expect a rapid or strong recovery for the export-oriented economy, with real GDP projected to have fallen 3 per cent last year and to rise 3.5 per cent this year.

Chief Justice Andrew Li inspects a police guard of honour in a ceremony at City Hall in Central to mark the opening of the legal year yesterday. Chief Justice Andrew Li Kwok-nang emphasised Hong Kong's separation of powers and the role of an independent judiciary as a guardian of rights and freedoms yesterday. His remarks, at the opening of the legal year, came weeks after a top Beijing official lauded Macau's "co-operative" judiciary for being socially constructive. It was Li's 13th and final speech at the opening of a legal year. He will step down in eight months. The lead topic of his speech, the independence and role of the judiciary, went to the heart of Hong Kong's greatest concerns since the resumption of mainland sovereignty - the preservation of the rule of law and an independent judiciary within a sovereign state with one-party rule. "Each jurisdiction has its own constitutional arrangements distributing power between the executive, legislative and judicial branches ... the arrangement for one jurisdiction may not be appropriate for another," Li said. "It is important for the role of the independent judiciary in Hong Kong to be reiterated and strongly emphasised and for its role to be clearly understood. The Hong Kong system involves checks and balances between the executive, the legislature and the judiciary. "The independent judiciary has a vital constitutional role to ensure that the acts of the executive and the legislature fully comply with the Basic Law and the law and that our fundamental rights and freedoms, which are at the heart of the Hong Kong system, are fully safeguarded." During a visit in July 2008, Vice-President Xi Jinping said the three branches of government should give each other mutual support and understanding. Last month, Zhang Xiaoming, a deputy director of the State Council's Hong Kong and Macau Affairs Office, praised the Macau judiciary for co-operating with the Macau government and legislature, saying it was "constructive" for society. Li later said he was not responding to anyone. "But I did want to take this opportunity, since it was my last public speech, to emphasise the role of Hong Kong's independent judiciary. I feel that this needs to be clearly explained for everyone's understanding, whether for the Hong Kong public, or for people outside of Hong Kong." In his speech, Russell Coleman SC, chairman of the Bar Association, said: "In Hong Kong, we enjoy and we prize the separation of powers. Comparisons with some other countries, or other special administrative regions, are not apt. "No greater co-operation is required of any judge in Hong Kong than that he or she should exercise his or her judicial powers independent of any interference, whether from the executive or legislative branches or anywhere else." Li also stressed that comparisons should not be made between Hong Kong and Macau. "Macau also works under the 'one country, two systems' concept, but Macau's legal system ... is absolutely not suitable for Hong Kong," he said. Li was given a standing ovation to mark his final speech at the opening of the legal year. He used his address to comment on several topical issues affecting the Hong Kong public and the legal community, including the increasing number of of judicial reviews, the progress of civil justice reform and mediation services and the need for better access to justice.

An independent judiciary is crucial for safeguarding the fundamental rights and freedoms of the people of Hong Kong – and ensuring the executive and legislature comply with the constitution and the law, Chief Justice Andrew Li Kwok-nang tells judges and lawyers at City Hall yesterday in his 13th and final speech at the opening of the legal year.

After 32 years in the property industry, Shih Wing-ching yesterday retired as the chairman of Centaline Group, the largest property agency in Hong Kong. The city's best known and most vocal property expert, Shih, 61, is also recognized for his wide-ranging interests and philanthropy. He writes a daily column in the free newspaper he founded, covering real estate, business and politics, which he says he will continue. Once a Marxist, he remains friends with the controversial politician "Long Hair" Leung Kwok-hung and is a strong advocate of corporate social responsibility. He once even held a seminar on sex. Many in the industry see Shih's retirement as a loss for the city's property industry. "The outspoken attitude of Shih Wing-ching helped to raise the social status of property agents in the past few years," said Henderson Sunlight Asset Management chairman Tony Tse Wai-chuen. He said one of Shih's major contributions was pushing agents towards a corporate standard. Shih's firm also set up a database with market and transaction data for buyers. Shih formed Centaline Property Agency in 1978 with a staff of four. It now has 21,700 employees. "I have changed the practices of the real estate agency and advocated the improvement of market transparency," said Shih. "I'm proud to say the transparency of Hong Kong's property market is higher than in other cities." Most Chinese companies are inherited by the children of the major shareholder, but Shih donated his stake in Centaline Group to the charity fund he runs in March 2008. The foundation runs poverty alleviation programmes in mainland rural areas and disaster relief projects. His portion of the profit generated by the group will be transferred directly to the fund. His shares in AM730, a free newspaper he founded, will also be donated this year. Shih postponed his plan to retire two years ago when the global financial crisis erupted in 2008. Centaline and listed Midland Holdings are the two largest property agencies in Hong Kong. "The monthly turnover of Centaline Property Agency surpassed that of Midland in 2009," said Shih. "We will strengthen our Hong Kong agency business this year and plan to widen the gap." Commission income of the group soared 69 per cent to more than HK$7.5 billion last year and it generated a profit of HK$1.2 billion. With the strong profit growth and "saturation" of the agency business in Hong Kong, Shih said yesterday he had decided to step down from the Hong Kong operation. He will continue to be involved in the mainland business in the short term and will focus on his charity after that. Shih expects Hong Kong property prices to surge 20 per cent in the first half on the influx of liquidity and rise in small unit prices, but said prices would drop in the second half if the economy improved as government support measures dwindled. Former Centaline vice-chairman Sherman Lai Ming-kai was named chief executive of Centaline Group and head of the Hong Kong and mainland agencies.

Air cargo throughput via Hong Kong in December surged 38.5 per cent from a year earlier, rising for a third straight month and indicating the rebound in global trade flows is accelerating, data from Hong Kong Air Cargo Terminals Limited (Hactl) shows. For all of last year, however, air cargo volume fell 8.3 per cent to 2,323,605 tonnes, Hactl said. “Last year was a year of ups and downs,” Lilian Chan, Hactl’s general manager of marketing and customer services, said in a statement. “We do not have a crystal ball to predict the market condition, but we are expecting a more stable year this year.” Cargo exports from the city in December increased 43.7 per cent from a year earlier, but export volumes for the whole of last year dropped 11.6 per cent. Exports to the United States and Europe continued to improve in December, surging 39.9 per cent and 38.6 per cent, respectively. Exports to the mainland jumped 58.6 per cent from a year earlier, Hactl said. December cargo imports rose 46 per cent from a year earlier, whereas imports for the full year fell 3.1 per cent. Hong Kong is a re-export centre for trade between Asia and the rest of the world. Air cargo volumes through Hong Kong in December totaled 232,476 tons.

Shanghai's burgeoning initial public offering (IPO) market is shaking Hong Kong's status as the world's fundraising king and will challenge the latter's role as China's international financial center as the country moves toward a convertible currency, market observers said. "It is certain that Shanghai will surpass Hong Kong in 2010 as the world's largest IPO center," said Terence Ho, strategic growth markets leader of accounting firm Ernst & Young. Chinese companies are expected to raise $55.7 billion on the Shanghai Stock Exchange in 2010 while in Hong Kong the figure is expected to be $47.7 billion. Last year, Hong Kong raised approximately $30 billion in new listings with Shanghai's $27.3 billion closely behind, according to Bloomberg data. Analysts said it would be a matter of time for Shanghai to eat into Hong Kong's share in the IPO market as China is moving toward a convertible currency. "The yuan's internationalization could be a threat to Hong Kong as foreign capital could then flow freely into the mainland's A-share market," Ho said. "Global fund managers will also increase the percentage of their investment on the mainland." China is on the way to reforming and improving its capital market by introducing new financial tools including stock index futures, margin trading and short selling. Shanghai is also preparing itself for an international board that will allow foreign companies to raise capital in the mainland. Foreign companies HSBC and global exchange group NYSE Euronext are keen to become the first batch of overseas companies to list on the A-share market. However, Ho pointed out that Hong Kong in the short term will maintain its advantage of high international exposure and market liquidity. "In the short term, Shanghai is unlikely catch up with Hong Kong in terms of international exposure and liquidity," he said. "Currently, the two places have different roles. Hong Kong caters to millions of international investors while Shanghai mainly targets domestic investors." Ho noted that although the yuan's internationalization may jeopardize Hong Kong's role as China's gateway to the global financial market, it may create new opportunities for Hong Kong as more capital will be pumped into Hong Kong from mainland investors. To maintain its status as world-leading IPO market, Hong Kong needs to work on attracting more mainland companies and keep the existing ones, analysts said.

With a flurry of IPOs last year, Hiong Kong stock market led the global market for companies listing first, but doubts about the credibility of some new comers is casting a shadow over the bourse. Hong Kong’s stock exchange was the world’s hottest IPO market last year with more than US$30 billion in new listings, but it stands accused of sacrificing quality for quantity. The bourse is keen to stay ahead of rival Shanghai and attract non-Chinese companies, but criticism has mounted after the controversial approval of Russian aluminium giant UC Rusal’s share sale and a string of listing debacles. The exchange repeatedly delayed approving Rusal’s US$2.6 billion initial public offering (IPO). Unproven allegations that chief executive Oleg Deripaska has links to organised crime dogged the world’s biggest aluminium maker in its attempts to become the first Russian company to list in Hong Kong. And when the listing was finally approved last month, the Securities and Futures Commission (SFC) stepped in with what observers call “unprecedented” restrictions for the IPO. The SFC stipulated a minimum investment in Rusal equivalent to about US$130,000 – reportedly a bid to shield small investors from the complicated offering. “It was quite a surprise that the SFC agreed to Rusal’s listing,” said Raymond Chan, acting director of the Centre for Corporate Governance and Financial Policy at Hong Kong Baptist University. “I think the exchange and SFC are aware of the quality problem.” Chan warned that the exchange could be putting its reputation at risk. “Listing in Hong Kong would be associated with low quality.” Concern over the issue spiked after a string of mainland companies shocked the market with less-than-full disclosure last year. “We list a lot of fairly sub-standard companies here – just look at the listings in the past year,” said a corporate governance expert who requested anonymity. “It doesn’t do anything for this exchange.” Trading in shares of Asian Citrus, the mainland’s largest orange plantation owner, was suspended on their debut amid claims that executives had misrepresented the company’s value. Aluminium producer China Zhongwang Holdings raised more than US$1 billion in April and then was also accused of misrepresenting details in its share sale prospectus, and obscuring its links to mainland’s military. The company said last week that it had been cleared of wrongdoing after an independent review by accounting giant Ernst & Young. It did not make that report public and China Zhongwang has since suspended trading in its shares without explanation. China Metal Recycling, which also listed in Hong Kong last year, saw its shares plunge almost 50 per cent when its chief financial officer quit, saying he was denied access to company financial records. Chan said Hong Kong was perceived as a good place to list because of the lighter regulatory touch. “That’s one reason why many mainland companies select the city as their first overseas exchange – the regulations are not too tight for them, especially compared with the US,” he said. “But the transparency and disclosure in Hong Kong is less stringent than in most western exchanges. “We need to improve that to get the same standard as other exchanges.” For its part, the exchange said it had joined a general trend away from so-called merit-based listings to a disclosure-based regime, putting the onus on company directors for the accuracy of information flowing to investors. Loss-making Rusal did not meet the bourse’s profit test, but companies can still list if they meet other criteria, including positive cash flow, an exchange spokesman said. “HKEx (SEHK: 0388) agrees entirely that good corporate governance is of paramount importance and therefore over the years has committed itself to building a quality market,” the spokesman said. “A quality market will result in a virtuous cycle which attracts issuers and investors.” But a high-profile critic questioned the adequacy of the exchange’s disclosure rules, with no requirement for quarterly financial reports. “Virtually every place in Asia requires quarterly reporting now,” said shareholder activist David Webb. “Some people think that the easier we make it to list, the better. If that’s the case, we might as well just trade on eBay without any regulation at all.”

Mainland property developer Shanghai Forte Land is in talks to buy a high-end residential property in Shanghai from Goldman Sachs in a deal worth more than US$200 million, two people familiar with the situation said. Foreign investors including Goldman, Morgan Stanley and Macquarie Group have been reducing their property holdings in the mainland during the past year, taking advantage of the country’s real estate market rebound as the global financial crisis weakened some western banks. Forte is in the final stages of negotiations with Goldman to buy Shanghai Garden Plaza, after rival bidders such as Poly Real Estate Group quit, the sources said. Goldman bought the residential complex of villas and serviced apartments in 2007 for US$190 million, according to real estate agency CB Richard Ellis. Shanghai Forte spokeswoman declined to comment. Goldman spokesperson could not be reached immediately for comment. Mainland has vowed to curb speculative inflows, punish land hoarding and speed up home supplies in a bid to cool a property market boom fuelled by loose monetary policies and last year’s nearly 10 trillion yuan (HK$11.35 trillion) in new bank lending. Mainland’s mature property market is losing lustre for foreign investors as yields decline due to surging prices and falling rental income, Grant Ji, director of global real estate agency Savills said on January 6. Last July, Macquarie’s investment unit sold Shanghai luxury property City Apartments for about US$44 million. Morgan Stanley also exited some mainland projects last year, including high-end residential property Chateau Pinnacle in downtown Shanghai.

Hong Kong's toy exports went down 10 percent to 88.55 billion HK dollars (11.35 billion U.S. dollars) in the first 11 months of 2009, according to figures released by the Hong Kong Trade Development Council Monday at a toys and games fair. Toy exports to Russia fell 57.1 percent while exports to Czech rose 58.2 percent. Exports to the U.S. dropped 23.6 percent and that to the European Union dipped 8 percent. As for baby products in the first 11 months of 2009, the exports reached approximately 6 billion HK dollars (726 million U.S. dollars). Its top export markets were the U.S., the U.K., Macao, Italy and France. The 36th Hong Kong Toys and Games Fair, Asia's largest toy show, opened on Monday featuring about 2,000 exhibitors from 38 countries and regions.

A proposed "sunshine law" requiring Macau officials to disclose their wealth faces a hurdle in the form of complex business interests at high levels of the government, analysts say. Chief Executive Dr Fernando Chui Sai-on said last week he was considering a sunshine bill, echoing President Hu Jintao's call for a cleaner Macau government. Jose Coutinho, a legislator and head of the Macau Civil Servants Association, said the biggest challenge facing enactment of such a law came from within the government. It would be difficult to introduce because some people may not want their assets to be disclosed, he said. "Full disclosure will prompt questions about their sources of income." Under Macau's existing asset declaration law, top officials only need to report their wealth to the Court of Final Appeal, and the public is barred from accessing the files on their assets. Political commentator Professor Larry So Man-yum of the Macau Polytechnic Institute said the plan to enact a sunshine law in Macau was ultimately driven by the central government. "Clearly, there's the central government's will behind it, as President Hu's call was followed by a quick response from Macau," So said. Building a clean and efficient government was among the "four hopes" expressed by the president when he attended the inauguration of the new Macau government last month. Chui mentioned his plan for a sunshine law when he met academics and experts on various social issues on Tuesday last week, in a meeting seen as part of the preparations for his policy address in March. He said he would increase the transparency of officials' assets, which should be made "adequately open" to the public. He said he was considering making such information on officials' wealth accessible to the public. Chui said he had discussed the plan to improve transparency with Fong Man-chong, Macau's new Commissioner Against Corruption. Macau is a tiny and close-knit city with the interests of its influential citizens often interlinked. Chui's family, one of Macau's ruling clans, has widespread business interests in the city, covering property, construction, tourism and commodities. When he ran for chief executive in an uncontested race in July last year, Chui tried to convince the public that he could avoid conflicts of interest arising from his family business background. "It's hard for one to choose one's family background, but after getting educated and serving society, one can obey the law," he said in May last year. In a controversial land deal in 2006, a company associated with Chui Sai-cheong - the chief executive's elder brother and a legislator - acquired a 100,000 square metre site on Taipa island from the government for below market price. The company acquired the site for 231 million patacas, which property consultants said was half its market value. So said successful enactment of a sunshine law would help ease the public's doubts over Chui's impartiality. But he said the devil was in the details and the law must come with clauses ensuring full disclosure and high accessibility of information disclosed. "We'll have to see whether the law will apply to an official's spouse, what types of assets will be subject to disclosure and whether the public can access the information," So said. Coutinho said a sunshine law alone was not enough and an accountability system must be introduced to ensure a clean government. In April last year, former secretary for transport and public works Ao Man-long was jailed for 28 years and six months on 81 counts of bribe-taking, money laundering and other crimes involving hundreds of millions of patacas. The scandal fuelled campaigns against "businesspeople ruling Macau" - a play on the phrase "Macau people ruling Macau", enshrined in the city's Basic Law.

Three men and two women from Hong Kong appeared in Kwun Tong Court on Monday accused of stealing HK$25 million worth of luxury watches and jewellery from a shop in Tokyo's Ginza district between December 31 and January 2. The male defendants are surnamed Choi, aged 50; Chan, 52; and Chow, 53. The women are surnamed Chan, aged 37, and Lai, 36. No pleas were entered. In court, police requested more time to collect evidence. As a result, the defendants were instructed to appear in court again on Friday. All five were not granted bail and remain in police custody. The defendants were arrested in Hong Kong last Thursday and Friday. Luxury watches worth more than HK$18 million were recovered from apartments in Sha Tin and Sau Mau Ping and from a safety-deposit box. The other stolen goods have not been accounted for. Police believe the group posted six parcels containing the stolen watches and jewellery from Tokyo to Hong Kong by airmail. Police are investigating whether an attack on two postmen at Po Tat Estate in Sau Mau Ping last week, is connected to the case. During the attack, two mail bags were stolen.

Actor Jackie Chan poses next to a wax figure of himself during the unveiling of the figure at Madame Tussauds Hollywood in Los Angeles on Monday, Jan. 11, 2010.

China*: China plans to build the world's highest airport in its Himalayan region of Tibet, at an elevation of nearly 4,500 metres, state media said on Tuesday. Construction of the airport on the so-called “roof of the world” is projected to start next year at a cost of 1.8 billion yuan, the Xinhua news agency said, quoting a local planning official. The airport will be built in the Nagqu prefecture at an elevation of 4,436 metres (14,639 feet) – 102 metres higher than Tibet’s Bamda facility which since 1994 has been regarded as the world’s highest, Xinhua said. Nagqu, Tibet’s biggest prefecture, sits near the middle of the Tibet-Qinghai plateau and is home to a mostly ethnic Tibetan population of about 400,000, the report said. “With the airport, Nagqu, which is also on the Qinghai-Tibet railway line, is expected to become the centre of an economic hub in the plateau region,” Xinhua quoted prefecture commissioner Tan Yongshou as saying. The airport, to be located about 230 kilometres (140 miles) north of the regional capital Lhasa, will be the sixth in the remote region which has been ruled by China for almost six decades. Critics of China’s rule say new infrastructure such as the recently completed railway and new airports are allowing its ethnic Han majority to flood Tibet, exploit its resources and consolidate political control. But Beijing has insisted that such projects will raise the standard of living in the remote region. Xinhua quoted Nagqu economic planner Xu Jian as saying at a parliamentary session in Lhasa that construction would take three years. “The civil aviation network in Tibet has taken shape. The objective for the next stage of development is to open direct air routes from Tibet to south Asian countries,” he added. China has ruled Tibet since sending in troops in 1951 to “liberate” the region. Tibet’s spiritual leader, the Dalai Lama, fled to India in 1959 as an uprising failed, and established his government-in-exile in Dharamsala.

Beijing confirmed on Tuesday that an espionage probe into an Australian executive with mining giant Rio Tinto was complete and defended its handling of the case, which has strained ties with Canberra. “Shanghai police have completed their investigation into the Rio Tinto case and the case has been turned over to Shanghai prosecutors,” said foreign ministry spokeswoman Jiang Yu. However, Jiang declined to comment on whether Australian passport-holder Stern Hu and three Chinese colleagues would eventually face trial. The four were arrested in July and initially accused of stealing state secrets. The allegations were later watered down to industrial espionage, centering on alleged bribery during talks over iron ore contracts. “The case has all along been handled according to relevant Chinese laws, legal processes and China-Australia consular agreements. I believe this case will result in a lawful and just outcome,” Jiang added. The spokeswoman said it was up to prosecutors in Shanghai to decide whether and when to bring the case to trial. Australia said on Monday that it had been notified by Beijing that the case had been turned over to prosecutors. Hu’s arrest soured diplomatic relations with Australia and raised questions about business deals with rapidly industrialising China, the world’s biggest iron ore consumer. It came just weeks after Rio Tinto snubbed a massive cash injection from a mainland state firm, and coincided with annual iron ore contract talks. The tense negotiations later collapsed.

US Open finalist Caroline Wozniacki crashed out in the first round of the Sydney International on Monday to China's Li Na while Japan's Kimiko Date Krumm continued her renaissance. Li upset fourth seed Wozniacki, 2-6, 6-3, 6-2, while Date Krumm battled to a 6-3, 5-7, 6-4 victory over world number 20 Nadia Petrova of Russia.

US network equipment maker Cisco Systems is restructuring its management in Asia to create a new segment for China, in a nod to the region’s increasing importance.

The People's Bank of China, the central bank, announced on Tuesday to raise the deposit reserve requirement ratio by 0.5 percentage points from Jan. 18 this year.

People queue up in the rain for tickets for the American science fiction movie "Avatar" at the Heping Cinema in downtown Shanghai January 10, 2010. The cinema which holds the only one IMAX screen in Shanghai provides 24-hour ticket service to meet the increasing demands from the public.

Cycle maker gets Buffett share bump - The chairman of Chongqing Zongshen Power Machinery Co Ltd, Zuo Zongshen, test rides one of the company's new motor cycles. Media reports said Warren Buffett has expressed an interest in the Shanghai-listed firm. The chairman of Chongqing Zongshen Power Machinery Co Ltd, Zuo Zongshen, test rides one of the company's new motor cycles. Media reports said Warren Buffett has expressed an interest in the Shanghai-listed firm. Everything that Warren Buffett mentions an interest in turns magically to gold, or at least it appears to in China. The most recent beneficiary of Buffetts' influence over Chinese markets is Zongshen Power Machinery Co Ltd, a Chinese motorcycle maker that has captured market attention after media reports said the US investment guru had shown an interest in the company. Just last Friday a rumor that company's chairman Zuo Zongshen was heading to the US to meet with Buffett this month sent the company's shares soaring to hit the 10 percent trading limit, closing at 20.1 yuan. The market value of the company skyrocketed to 1.1 billion yuan and trading volume also surged substantially that day. Yesterday, Zongshen confirmed the meeting but declined to provide additional details. Its stock was suspended from trading yesterday. Zongshen Power's ambitious energy sector expansion plan is believed to be the main reason for the meeting between its chairman Zuo and Buffett. It remains to be seen whether Buffett will invest in the company or not. Last November, Zuo announced his company's plan to expand into the business of new energy, including the production of lithium batteries and electric motorcycles. The company is also actively seeking long-term strategic partnerships in the field, taking advantage of China's booming green revolution. There has been widespread speculation that Zongshen Power could become another Buffett-backed stock after Chinese electric car-and-battery maker BYD and suit maker Dayang Trands. Both firms saw a sharp surge in their share prices after Buffett's endorsement. The stock price of BYD has undergone a six-fold leap since September 2008 when MidAmerican Energy - a unit of Buffett's Berkshire Hathaway - agreed to buy a 10-percent stake in BYD for $230 million.

Shanghai Airlines, which is scheduled to merge with China Eastern, said yesterday it is seeking to delist its shares from the Shanghai Stock Exchange. The company's shares were suspended from trading following the notice. Shanghai Airlines was officially listed on Oct 22, 2002. The company's shares closed at 10.82 yuan last Friday, up 51.75 percent from their debut price some seven years ago. At the end of the third quarter of 2009, total assets of Shanghai Airlines amounted to 16 billion yuan, on a debt ratio of 93.1 percent and quarterly losses of 253 million yuan. Despite the merger, Shanghai Airlines is expected to retain an independent operational license. According to the announcement, Shanghai Airlines' shareholders can choose between accepting 1.3 China Eastern shares for each Shanghai Airlines' share, or sell their Shanghai Airlines' shares to China Eastern for 5.5 yuan each, 35 percent below the current price. Dissenting shareholders of China Eastern can also convert their stock to cash at a rate of 5.28 yuan per share. Analysts say most shareholders will not accept the cash option because of the substantial price discount. The major shareholders of Shanghai Airlines, including Best Prospect Overseas Limited and Jinjiang International, have vowed to pass on the cash option. Shanghai Airlines' shareholders that opt for the share exchange option stand to enjoy a 12 percent premium based on Friday's closing price of China Eastern shares at 6.1 yuan each. China Eastern shares will not be available to stakeholders until the merger is completed. After the merger, China Eastern will have a fleet of over 300 airplanes and connect 150 cities. Ji Lijun, an analyst at Shanghai Securities, said the two combined companies would reshape the airline market. "The new China Eastern will occupy a market share second only to China Southern Airlines," Li said. "It will also benefit from the busy Beijing-Shanghai air route."

Thousands of officials have fled China over the past 30 years with some US$50 billion dollars in public funds, state media said on Monday, as the government scrambles to stem the tide of corruption. As many as 4,000 officials have disappeared, using criminal gangs, mainly in the US and Australia, to launder their ill-gotten gains, buy real estate and set up false identities, the Global Times said. A joint task force involving 15 government ministries has been set up to choke off graft in civil service ranks, the paper said. Authorities investigated 103 cases involving the outbound travel of more than 300 officials, the paper said, citing a party official responsible for disciplinary issues. In one case, the disappearance to France last year of Yang Xianghong, a top Communist Party official in Wenzhou city, led to the arrest of his wife, who was charged with trying to launder 20 million yuan (HK$22.7 million), it said. The paper did not detail how the US$50 billion dollars were funneled overseas, or how the officials were linking up with criminal gangs abroad. President Hu Jintao has for years made fighting official corruption a priority, saying that the scourge is a matter of life and death for the ruling Communist Party. In recent years, the mainland has sought to negotiate more extradition treaties with Western nations to help it repatriate and punish officials fleeing overseas with public funds.

The mainland, the world's third-biggest producer of wind power, has dropped a rule stipulating that more than 70 per cent of wind turbines must be made domestically, whether by foreign or local companies. The policy had been scrapped recently and there was no longer a quota, said Shi Lishan, a deputy director of renewable energy at the National Development and Reform Commission. Overseas companies had lost out on wind-energy projects because bidding criteria made it impossible for them to compete with domestic developers, the European Union Chamber of Commerce in China said last year. But Shi said last month the mainland still relied on foreign expertise for wind-turbine design and development and locally made components had yet to meet global standards. Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong, said: "If China has to wait for the quality of their wind turbines to catch up with foreign countries, it'll have to wait for a while. "Countries like Spain and Denmark are already very successful in wind power generation. If China can immediately apply the technology, that could speed up its plan to increase wind in their energy mix." The mainland aims to increase its capacity to produce power from wind fivefold by 2020 to help combat climate change. The mainland's wind-power capacity will rise to 100,000 megawatts by then from at least 20,000MW this year, National Energy Administration chief Zhang Guobao said on May 26. The mainland has 70 wind- turbine makers with a capacity of about 15,000 megawatts a year, Hong Kong-based CLSA analyst Dave Dai said in September.

Fashion designers challenge traditional Western couturiers - The Devil along with countless Chinese people may wear Prada but there is a growing feeling that the world's second-biggest consumer of luxury goods could start looking closer to home for fashion accessories. China is on the verge of fielding high-end fashion that can compete with anything coming out of Paris, New York, London or Milan, say observers. "It is very likely to be the next birthplace of another luxury brand because of the country's cultural history, booming market and a big number of talented designers," said Luee Sun, a London-based buyer who purchases fashion items for department stores. From Dec 1, 2007, to the end of January 2009, China consumed $8.6 billion in luxury goods, surpassing the US last year to become the second largest luxury goods market in the world behind Japan, according to the US-based World Luxury Association (WLA). A forecast from Bain & Co showed a stronger-than-expected rise in luxury sales for Asia, especially China, amid the worst ravages of the financial crisis. It predicted in 2009 luxury-goods sales in the Chinese mainland would jump by 12 percent from a year earlier. However, the road ahead will be long and hard for fledgling Chinese fashion gurus competing with Western rivals, say experts. Daisy Wu, a 28-year-old postgraduate of University of the Arts London, quit her job as a design assistant at a top luxury goods company in London and returned to China with the ambition of creating her own products. "During my previous job I was always being asked to contribute some Chinese elements and inspirations to the western design pieces. Chinese characteristics are increasingly being used in all kinds of luxury products, ranging from clothes to jewelry," Wu said. "I was wondering why we didn't create a Chinese luxury brand by leveraging our own history and culture." As she spoke, Wu took off her favorite Armani suit and Hermes scarf, put aside her Chanel handbag and changed into the hoodie and sneakers more favored by dispossessed youth. The young woman visits a wholesale fabric market at least twice a week seeking inspiring materials. "The market is chaotic and buying materials is really a fight," Wu said. "Good fabric at appropriate prices is always in strong demand. When I find it I grab it and press the money into the seller's hand." Wu opened a six-square-meter store called "Red" at Dongsi, in Beijing's Dongcheng district, selling the clothes and accessories that she designs. It's a far cry from the 200-sq-m studio she used to work in. Every day, Wu has to argue with tailors, asking them to obey her designs precisely on every detail and burn the midnight oil to adjust garments stitch by stitch. The average price of a "Red" brand designer piece is about 1,000 yuan but, despite the cost, Wu has won a great number of fans. She said: "All luxury brands started with a small workshop and I will contribute my talent and life to create the history of my brand." "However, it requires a long time to develop the philosophy behind a new brand. Furthermore, it will take generations to gain the worldwide acceptance of designers, the fashion media and, of course, fashion enthusiasts. It is the same for all luxury brands." Kevin Yeung, chairman of Hong Kong Fashion Designers, said China shouldn't rush into the business of luxury branding because of the length of time it takes to build up popularity and reliability among consumers, encouraging them to accept the brand's philosophy and inevitable high prices. Unlike Daisy Wu, middle-aged Ji Pingsheng, also known as Mouse Ji after his designer suits, is further advanced in the luxury goods business. Ji was the first Chinese designer to have his brand sold at the Galleries Lafayette, the top luxury department store in Paris, France. The "little mouse" products are displayed next to those of Liu Jo, Armani and many other examples of design "royalty". Ji proudly says Mouse is one of the best sellers. Ji has opened more than 600 stores across Europe and many top luxury department outlets have courted him. "Ji is the family name I inherited from my ancestors while Mouse is the year I was born. I tend to integrate the two Chinese cultural symbols into my brand," said Ji, who majored in the art of porcelain at university. "However, pure Chinese elements cannot gain global popularity: You need to go international."

China's foreign trade in 2009 dropped 13.9% to $2.21 trln and its trade surplus last year slid 34.2% year on year to $196.1 bln.

The first phase facilities of Tibet's largest thermal power plant started production on Saturday to help relieve the winter power shortage on the chilly plateau. The first phase facilities of Tibet's largest thermal power plant started production on Saturday to help relieve the winter power shortage on the chilly plateau. To bridge a 30 percent of gap between demand and supply in the region, the China Huaneng Group, the nation's leading power generator, invested 300 million yuan ($43.94 million) in building up contingency projects in Lhasa and Ngari. The projects involved nine sets of diesel generators with a capacity of 100,000 kW in Lhasa and 10,000 kW in Ngari. After the first four sets of equipment start working, the other five will function as of the Lunar Spring Festival and the Tibetan New Year, or Losar, which will fall on Feb 14, the company said. All the facilities will be transferred to the Tibet autonomous regional government after the project is completed. By then, Lhasa will not suffer blackout anymore.

Cars line up during heavy traffic at a city highway in Beijing in this file photo. Figures released on Monday showed that China overtook the United States as the biggest auto market in 2009. China auto sales surged past the United States to reach record levels last year on government incentives, and automakers are poised for solid but slower growth in the world’s fastest growing major auto market in 2010. After a landmark year in which the country zoomed past the United States and mainland automakers made key acquisitions abroad, Beijing’s renewed policy incentives to bolster demand will likely keep it as a bright spot for car manufacturers battered by the financial crisis. Vehicle sales in the country came to a record 13.6 million units in 2009, the China Association of Automobile Manufacturers said on Monday, well above the country’s previous target of 10 million units. That compared with annual sales of 10.4 million cars and light trucks sold in the United States, the lowest level in 27 years. The mainland tally, which also includes heavy vehicles, is still higher than that of the United States after deducting roughly 650,000 units of heavy trucks, Orient Securities said. “Sales have been extremely hot in most parts of last year with little seasonal changes. Many people have to wait for weeks or even months to get their cars,” said Qin Xuwen, an analyst with Orient Securities. Mainland’s passenger car sales jumped 52.9 per cent to 10.3 million units in 2009, rebounding sharply from single-digit growth a year earlier, official data showed. Sales in December surged 88.7 per cent to 1.1 million units, topping 1 million units for monthly sales for the third time this year. Analysts attributed the boom largely to Beijing’s policy initiatives, which had effectively lifted market sentiment and attracted buyers back to showrooms. A low comparative base in 2008, when car sales slowed to a single-digit growth rate for the first time in at least 10 years, also helped inflate the 2009 growth rate. The market, they said, would return to a slower but more rational growth rate of roughly 10 per cent in 2010 on continued policy support from the government even though the renewed tax incentives for small cars were not as aggressive as expected. Industry executives themselves, including Chen Hong, president of SAIC Motor Corp, mainland’s biggest automaker and a GM partner, remain sanguine about the outlook for next year, due largely to pent-up demand in smaller cities where cars are no longer a luxury item as wealth grows. BYD, 10 per cent owned by Warren Buffett’s Berkshire Hathaway, raised its 2010 sales target last week after achieving its 2009 sales goal ahead of time. It now aims to sell 800,000 vehicles next year, up from a previous target of 700,000 units, Paul Lin, manager of the company’s marketing department, said. Mainland is now a safe haven for industry heavyweights battered by a sharper-than-expected industry downturn, which had forced two of Detroit’s big three automakers into bankruptcy in 2009. General Motors, still majority-owned by the US federal government, agreed late last year to cede control of its flagship car venture to partner SAIC Motor Corp. Volkswagen also pledged to invest US$5.8 billion in mainland through 2011 to expand its production capacity and shore up its R&D. Ford Motor, a relatively latecomer to mainland and a cautious player, broke ground in September for its long-contemplated $490 million third mainland plant. “China used to be the one that was eager to attract big, outside investment, but it’s the other way around now,” said Zhang Xin, an analyst with Guotai Junan Securities. “It’s a market too important to ignore.” The past year has seen mainland automakers venturing on to the global stage for the first time in a major way, ready to snap up big-name brands, such as Volvo and Hummer, which they previously admired from afar. Zhejiang Geely Holding Group, parent of Geely Automobile (SEHK: 0175), is on the verge of acquiring Ford’s Volvo car unit, following Beijing Automotive Industry’s purchase of some Saab platforms in December. Sichuan Tengzhong Heavy Industrial, an obscure machinery maker, has also agreed to take over GM’s Hummer brand. But mainland automakers are still facing an uphill battle to become truly global players, industry observers said. The short-cuts they have taken, hoping to lead them to the hall of fame, may turn out to be a long and arduous journey. “It’s no surprise China’s auto industry wants to go international,” said Klaus Paur, director of global industry consultant TNS’s North Asia Automotive division. “But I have the impression they are getting too ambitious. There are a lot of question marks here as they don’t even have a solid brand in their home market.”

China banks rushed to extend 600 billion yuan (HK$681 billion) in loans in the first week of this year amid speculation of imminent policy shifts aimed at curbing inflation, state media said on Monday. The strong burst in credit, which was larger than the combined 547.8 billion yuan in new loans given out in October and November, has “set off alarms” in Beijing, the Economic Information Daily reported. The central bank is expected to possibly implement a rise in the reserve requirement ratio, or the amount banks must set aside in reserves, soon after the Chinese New Year on February 14 to rein in credit, it said. That would be the first hike in the deposit reserve ratio for commercial banks since June of last year. Such a policy would work to fight inflation by requiring banks to hold on to more of their funds and lend less, keeping prices down. Mainland’s consumer price index, a key gauge of inflation, rose in November after an almost year-long bout of deflation, stoking fears that Beijing could start tightening monetary policy in the coming months. The People’s Bank of China on Thursday raised the interest rate on its three-month treasury bills for the first time in nearly five months, which was taken as “clearly a tightening signal”, the newspaper said. Mainland banks tend to lend quickly at the beginning of each year to boost their balance sheet and then gradually slow down the pace in the following months. The nation’s new bank loans reached a massive 7.4 trillion yuan in the first half of last year, including a record 1.89 trillion yuan in March, as banks heeded Beijing’s calls to pump money into the world’s third-largest economy to pull it out of the worst slump in years. The figure declined significantly to 355.9 billion yuan in July before rebounding in August and September amid concerns that much of the money had been funnelled into stocks and property, risking a spike in asset prices. December lending data is due to be released in mid-January.

As northern China braces for another drop in temperatures, vehicles drive through a newly cleared road in Fuyun County of Altay Region in Xinjiang. More than 5,400 people were evacuated after the province was hit by a strong blizzard that left one person dead and 800 home destroyed, reports said on Sunday. The cold front is expected to send temperatures plummeting to minus 35 degrees Celsius in northern Heilongjiang province, and then grip the area for most of the week, the central weather bureau said. The temperature in Beijing – which hit the lowest point since 1971 last week – is set to drop to minus 15 Celsius by Tuesday before edging up to around zero degrees on Friday, the station said. Frigid weather has gripped most of the north of the country since the start of the year, with heavy snows disrupting air, road and rail traffic last week, and the plunging temperature causing a spike in power use. The government was rushing tents and other relief supplies to its northwestern Xinjiang region after heavy snow killed one person and forced the evacuation of nearly 5,500 others, state media said at the weekend. Snowstorms, which raged until Friday, also “flattened” 799 houses and damaged nearly 5,000 others, the report said. The situation has caused several provinces and regions to ration electricity or take other power-saving moves to reduce strain on electricity supply grids as residents turn up the heat to stay warm. The spike in energy demand has also resulted in a 15 per cent increase in coal prices as compared with a month ago, the Beijing News reported. Production in the major coal region of Shanxi has fallen due to the widespread closure of mines under a new safety reform plan, further pushing prices upwards, the Yangcheng Evening News said. But due to the shortages and rising prices, end-users were seeking cheaper coal from small mines, the paper said, indicating that a black market for the fossil fuel was already developing and mines were opening illegally. Meanwhile, coal transport prices fluctuated wildly, rising 12.4 per cent at the Shanghai Shipping Trade Centre last week when shipments were hampered by snow before falling by more than 11 per cent this week, the Beijing Times said. According to Xinhua, the cold snap has resulted in the most severe sea ice in north and eastern China in three decades, with ice breakers working to keep sea lanes free and navigable. A large portion of the coal from north is shipped to the south by sea.

Passengers buy train tickets at a ticket office of Nanjing Railway Station, in Nanjing, capital of east China's Jiangsu province, January 10, 2010. The station began to sell the first batch of train tickets for the Spring Festival travel period on the day. The National Development and Reform Commission has predicted the nation's railway network will carry 210 million passengers during the Spring Festival travel period, which lasts from January 30 to March 10.

Jan 12, 2010

Hong Kong*: Leading local online dining guide is taking on an international flavour with the recent launch of an English website in addition to its Chinese platform. The move was seen as a serious challenge to the world-famous Michelin Guide, which landed in the city in late 2008, in the battle to lure gourmets who cannot read Chinese. Ray Chung, founder of, said the idea of a bilingual diners' guide was to meet growing demand for food recommendations from expatriates and tourists. "Hong Kong restaurants offer a stunning array of cuisines from around the globe, and we are loyally showing the comments on Japanese, French and Italian restaurants in the eyes of the locals," he said. "It sets different criteria to other famous food guides like Michelin Hong Kong, which recommends mostly high-end dining places." Launched in 1999, has emerged to be the most popular food guide in Hong Kong, with 1.6 million visitors every month browsing its pages. Now the online dining guide contains information on more than 20,000 restaurants, gathering up to 350,000 restaurant reviews posted by local food lovers. The new English platform was presented with a fresh outlook in December. Similar to the original Chinese platform, it categorises restaurants by cuisine, district and price range with their English reviews in the previous archives. New comments and reviews in English would be shown in both platforms. Food critic Walter Kei said and the Michelin Guide adopted different systems serving different audiences, so they might not compete with each other directly. But Kei complimented s user-friendly system of restaurant searching. "Everyone can say what they like, and the sampling size for cheaper restaurants is much bigger online, so the judgment is more reliable," he said. "But people are more likely to write good things about expensive restaurants because they don't go to these restaurants all the time, and they might have saved money for a long time to dine there." The online food guide was born bilingual but its original English mirror site was scrapped six years ago due to poor response. Chung would not predict the amount of traffic the new English site would receive, but he was optimistic given that there was a much larger audience base than before.

Chan $2b private hospital plan is counting on promised land - Former legislator Bernard Charnwut Chan has set his sights on building a HK$2 billion, 300-bed private hospital in Wong Chuk Hang, Aberdeen. Chan, president of insurer and medical services operator Asia Financial Holdings, said he is looking forward to serving Hong Kong patients by applying his family's more than 20 years of experience in running medical services in Thailand. Chan said the biggest hurdle in running private hospitals in Hong Kong had been the high cost of land. "So here is a very rare chance for the government to release its land for building private hospitals. We believe the news would attract many investors from overseas," Chan told Sing Tao Daily, The Standard's sister newspaper. Last month, the government announced seven special requirements for those submitting "expressions of interest" to develop private hospitals at Wong Chuk Hang, Tseung Kwan O, Tai Po and Lantau. Companies have until March 31 to submit documents. Chan expressed particular interest in Wong Chuk Hang because of its proximity to the University of Hong Kong's medical school and Central district, where most private doctors have their clinics. It would be convenient for both patients and their doctors to travel to Wong Chuk Hang, he added. Chan also disputed the perception that mainlanders are the major clientele of the city's private hospitals. "Mainland mothers come to Hong Kong to give birth not because they prefer the medical services here ... there are other reasons," he said. Chan said medical tourism is a success in Thailand, while Singapore's market is also maturing. Chan warned the medical cost in the city - which is 30 percent more than Singapore and double that of Thailand - is too high to be competitive.

Hongkongers continue to fear further acid attacks despite the arrest early on Sunday of a 39-year-old man on the roof of a building believed to be the site from which acid was thrown onto shoppers in the Temple Street night market late on Saturday. That attack, in which 30 people were injured, was the eighth acid attack in the city in 13 months and took the number of injured to more than 100. All occurred on busy streets packed with shoppers, with five cases involving injuries. By 7pm yesterday, the arrested man - the first person arrested in connection with any of the attacks - was still in police custody but no charges had been laid. He was found on the roof of a building from which police believe two bottles of acid were hurled into Temple Street at about 9.30pm. Chief Executive Donald Tsang Yam-kuen condemned the acid attack yesterday. "It is very frustrating ... it is also very sad," he said. He hoped the public could help police find the culprit. "I believe this incident can be ended soon so the public do not have to worry," he said. Police have offered rewards totalling HK$1.5 million for information leading to the capture of the culprits behind the acid attacks. Yau Tsim Mong District Council will hold a meeting today with the government to discuss how to improve safety in Temple Street and other busy streets in the district, including Mong Kok's Tung Choi Street, known as Ladies' Market. "Yes, a man has been arrested, but then we are not sure if he really did it," councillor Hau Wing-cheong said. "And even if he did, will there be other attackers?" Hau said he hoped the attacker would be caught soon and that he feared the target of the next attack would be Tsim Sha Tsui. "You can see all these incidents are aimed at busy areas. The attacker tries to get the most attention possible," Hau said. Councillor Chan Wai-keung urged the government to consider registering everyone who buys acid. "By doing so, we can easily trace the culprit if such incidents occur," Chan said. "Nowadays, people also have to report their personal details when getting mobile phone services. In the wake of the recent spate of incidents, something has to be done to safeguard the public." But Hau disagreed with imposing registration. "Many people buy acid to clean their toilets. Recently I talked to shops selling this product and they all said [a register] would bring many troubles to their business." Both councillors said security measures of tenement buildings in the district should be improved. "Many such buildings do not even have security guards, and people can go in and out without any interference," Chan said. Hau said: "The government should install more surveillance systems in the district. Then not only can it trace the suspect, but it can also pose a deterrent effect." Police yesterday gave questionnaires to shops on Temple Street and took videotapes from surveillance cameras. Officers also checked the bags and registered the personal details of everyone entering or leaving two buildings at the junction of Nanking and Temple streets, either of which they believe the acid could have been thrown from. Forensic detectives were also seen collecting samples, including fingerprints, from many parts of the buildings.

Donald Tsang and his wife Selina attend the starting ceremony for the Community Chest Hong Kong and Kowloon Walk for Millions at the Hong Kong Stadium in So Kon Po yesterday. Chief Executive Donald Tsang Yam-kuen has waded into the row over construction of the HK$66.9 billion high-speed rail link to Guangzhou after a vote on funding for the project was delayed again on Friday. Yesterday, Tsang said he understood the concerns of lawmakers and the villagers of Tsoi Yuen Tsuen who would have to leave their homes for the project, but stressed the rail link would bring economic benefit to Hong Kong. "We respect the right of lawmakers to raise questions, and my colleagues will continue, with great patience, to answer those questions. But the Finance Committee has already held two relatively long meetings. "I hope very much that in the next meeting, this issue can be decided upon, and that this plan goes ahead as soon as possible," he said. A vote on the funding had initially been expected in mid-December, but pan-democrats' concerns over the cost-effectiveness and the environmental impact of the project, combined with the Christmas holiday, meant an additional meeting was held on Friday. But after more than six hours' debate, and with many questions remaining unanswered, the meeting ended without a vote. Another meeting will be held on Friday this week. The government considers construction of the 26-kilometre line the most important infrastructure project since Chek Lap Kok airport, and is desperate to start work as soon as possible. Even if work is completed by 2015, as scheduled, it would already be two years after completion of the rest of the link across the border. However, Tsoi Yuen Tsuen residents, combined with an increasing number of discontented young people, who see the project as another indication of the government failing to respect their values of sustainable development and heritage preservation, have exerted sufficient public pressure to derail the construction schedule. Environmental concern group Green Sense yesterday said it would begin mobilizing heritage supporters from a wider age range, including high school students born in the 1990s, to oppose the government's plan. Green Sense president Roy Tam Hoi-pong said he would send letters to about 500 teachers to organize school trips, and expects 50 to 100 to respond positively to his suggestion. He said he would stage exhibitions on Hong Kong's environment and the government's obsession with the rail project. Yesterday, Legislative Council president Tsang Yok-sing refrained from criticizing lawmakers for delaying tactics, saying the public would judge for themselves. "It's normal for lawmakers to raise questions of the government over public matters, although of course to use the raising of questions as an excuse to delay proceedings would contradict the public's expectations of the legislature." Finance Committee chairwoman Emily Lau Wai-hing said the Legco secretariat was seeking lawmakers' views on to how to proceed with this Friday's meeting, in order to decide on how to set time limits. The government will submit its suggestions today.

While some cities make much of their "tallest" buildings, Hong Kong is being advised to do the opposite by using underground space to cater for the pressing demand for land from the growing population in the next 40 years. We may not have to live and work 30 metres underground. But we may commute and shop at depth to allow a less dense and greener environment on the surface, if a university's proposal to be submitted to the Development Bureau this month is realized. "Urban sites will no longer be available in the coming years. Without reclamation, we have to come up with an alternative," said Cheung Kwok-pun, a University of Hong Kong architecture professor who is leading a study sponsored by the university's development fund. The study suggests constructing underground developments beneath reclaimed land along the harbor, covering about 410 hectares in West Kowloon, Kai Tak, Quarry Bay, Central and Wan Chai. It proposes a five-storey basement under the reclaimed land, incorporating new commercial floor areas, a traffic network, car parking and an energy centre to support the needs of the underground facilities. The underground developments would be connected by environmentally friendly transport such as a monorail, electric vehicles and even cross-harbour tunnels specially designed for pedestrians and cyclists. "The linkages will provide synergy to second business districts like Kai Tak and West Kowloon and increase accessibility," Cheung said. "People will park their cars at the traffic hubs and ride on public transport." The study team said the concept was technically and financially sound. Reclaimed areas are chosen because they are encumbered with fewer hard rocks, cables and pipelines, making the construction cheaper. Cheung said redevelopment was expected to be more frequent in West Kowloon in the coming decades, providing new opportunities for a more sustainable and creative development approach. "Instead of increasing the density above ground continuously, we can transfer some commercial areas from the surface to underground, including facilities and infrastructures causing air pollution and creating eyesores," he said. Preliminary financial assessment shows a development of 150 hectares under West Kowloon, extending from Lai Chi Kok to the new arts hub would cost about HK$350 billion. The financial model assumes development under public-private partnership, with the underground space provided by the government at no cost. The development cost could be recovered in five years under this condition, with an annual rental income of HK$68 billion generated from the underground commercial areas. Land revenue generated from surface development will be higher as the environment is improved with less density and more green space. "It's time to look at it [a new approach]," Hong Kong Institute of Engineers president Andrew Chan Ka-ching said. "The proposal provides impetus for our community to discuss the city's visions for 2050." The proposal, far-fetched in some eyes, offers a possible solution to over-congestion and prompted suggestions that future developments should not proceed without a long-term planning strategy for 2050. Chan said going underground in urban areas was not the only solution. An alternative was housing more of the city's population in the New Territories. "Without a population policy, I don't know where we are going and what we are planning for," he said, urging the government to draw up a road map for the city's growth. As the deputy chairman of global engineering consulting firm Arup, which has realised numerous world-renowned projects, Chan said accessibility and attractiveness were the keys to success for underground developments. The firm's 610-metre Guangzhou TV tower by the Pearl River became a landmark in the city last year. Some 10.9 metres below the tower and its surrounding public park are two extensive sunken plazas for cultural and tourist activities, connecting the iconic museum, opera house and public library designed by veteran architects on the other side of the river. The plazas of more than a million square feet are twice the size of City Plaza in Taikoo Shing, linking to an underground transport interchange. Many examples of underground developments are found overseas for purposes of heritage conservation and relieving density, including the Louvre's underground museum complex in Paris and an extensive underground shopping mall in Osaka. But Chan warned that underground developments could use more energy for ventilation and lighting, and space was also required for effective evacuation and gradient of roads going up to the surface. "It will require careful designs," he said.

"Bubble tea" from Taiwan is taking off in Hong Kong, but already some are asking when the bubble will burst. Small takeaway shops selling Taiwanese-style beverages, including the island's bubble tea - a drink made with Chinese tea and milk and served with tapioca balls - have sprung up in the city in recent months. However, competition among vendors is also white-hot. The latest player to join the "tea wars" is Share Tea, a bubble-tea franchise brand owned by the United International Business Corp of Taiwan, which opened its first Hong Kong shop next to Kowloon City Plaza last Friday. The company says it plans to open three more shops later this month - in Mong Kok, Tsuen Wan and Hung Hom - and expects to have between 30 and 40 outlets this year. "If we can make it, we will probably become the biggest bubble-tea brand in Hong Kong," said Angus Lai, the general manager of the company, which runs 150 Share Tea counters through franchisees in Taiwan. However, the task may not be easy because of competition from the existing bubble-tea retailers as well as many more seeking to enter this potentially profitable business. Bubble tea made its first appearance in the city last summer and thanks to a variety of flavours and relatively cheap prices, usually ranging from HK$10 to HK$20, the drinks have quickly become a favorite. According to Lai, the newly opened shop in Kowloon City recorded daily turnover of between HK$12,000 and HK$15,000 during a trial run last week, selling between 900 and 1,000 cups every day. "Based on our experience, daily sales can rise to between 1,500 and 2,000 cups in the summer," said Lai. Driven by high demand and considerable profit margins, the bubble-tea business has since flourished, with Mong Kok, Causeway Bay and Tsuen Wan being the favourite locations. In Mong Kok, several bubble-tea stalls operate on the same street, sometimes in adjoining shops. Despite the claims of "unique flavours" and "outstanding quality" on big banners, their menus look similar, with several fixed categories that include bubble tea, milk tea, fruit juice and pure tea. In Causeway Bay's Cannon Street, there are six Taiwanese-style bubble-tea shops on the 100-metre strip. One is Gong Cha, a leading franchise brand from Taiwan. Shop manager Elisa Mak Yee-man, who previously operated three shoe shops in Mong Kok, sold two of her shoe shops last summer and raised more than HK$1 million to open a beverage counter in Causeway Bay. "I take it as an investment, though it's a high-risk one," said Mak, who noted there were only three bubble tea shops in the vicinity when she opened for business. "But I think my real rivals are the other two Gong Cha outlets, in Wan Chai and Aberdeen. It is unavoidable that they will divert part of the loyal customers of our brand." Just a stone's throw away from her outlet, a snack stall also launched self-made bubble tea, selling for only HK$6 per cup. However, the price did not seem to impress customers, who were prepared to queue at the other franchise chains during the busy business hours in the afternoon. "It will cost you seven or eight bucks to buy a coke in a convenience store. Yet with just a little bit more money, you can get a freshly made, clean and healthy drink. That's why people love it," said Mak. But Mak said she did not plan a long stay in this business. "People may get tired of bubble tea one day, just as they did with Japanese cheese cake and Macau egg tarts in the past. I think I will sell my shop before the craze wanes," she said. Another bubble-tea franchisee, Franco Lee, was one of the early starters, joining the beverage chain East Sunrise in June last year. The Taiwanese franchise now has 10 outlets in the city. Previously a marketing professional in a multinational retailing company, Lee believes a small business such as bubble tea will have a big market in Hong Kong. "In the past, bubble tea was mostly sold in small family-run restaurants or food stalls," he said. "Now it's different. Many smart businessmen or those with marketing expertise are engaged in this industry. You know, people make the business." But Lee noted that competition was tough, and even unhealthy in some places. "I think quite a number of brands are likely to be washed out of the market over the coming one or two years. Only quality ones will survive," he said.

Hong Kong Exchanges and Clearing (SEHK: 0388)'s new chief executive, who starts work this week, is expected to push more aggressively for new listings as the bourse battles stiffer competition from mainland markets. Charles Li Xiaojia takes over on Saturday from Paul Chow Man-yiu, the longest serving chief executive of the stock exchange. Chow will host his final press conference tomorrow where he will review his tenure. Brokers said Li, one of the mainland's most highly regarded investment bankers, was likely to be more commercial in his approach and would be more aggressive in fighting for new business. Chow was seen as more of a regulator who emphasised market reform and operational smoothness. Li told brokers at an economic summit last month that he would put his focus on lobbying Beijing to allow mainland investors to invest in Hong Kong and to attract more international firms to list here, according to William Lee Yiu-wing, chairman of Hong Kong Securities Association, who attended the event. "This would be the right direction as this would ensure Hong Kong becomes a much bigger international market in future," Lee said. Mainland investors cannot directly trade in the local market at present except through the qualified domestic institutional investors (QDII) scheme. "Paul Chow established a good foundation for the stock market in the past two decades by setting up good regulation, trading and clearing platforms," Lee said. "This will allow Charles Li to shift the focus from regulatory and operational matters to focus more on attracting more new listings and more business." In June last year after he was elected to the top job, Li told the South China Morning Post (SEHK: 0583) that "listing of overseas issuers is an area that I would like to further strengthen." Li, a former JP Morgan China chairman, is the first mainland-born chief executive of the exchange. He speaks Putonghua and English but not Cantonese. By comparison, Chow was a home-grown Hong Kong success story. Born and raised in the city, he graduated from the Hong Kong University and had worked more than a decade at Sun Hung Kai Securities before joining the stock exchange to head its clearing department in 1989. Chow was chief executive of the stock exchange from 1992 to 1997, and left to head HSBC (SEHK: 0005) Asset Management for six years before returning to head the enlarged Hong Kong Exchanges and Clearing - which was formed in 2000 to hold the local stock exchange, futures exchange and clearing houses - from 2003 until this Friday. When Chow first joined the exchange, Hong Kong had just passed through the 1987 market crash and the market did not have good regulatory standards. Trading and clearing were still done manually. Chow's focus was on building up electronic trading and clearing systems and introducing corporate governance practices. His biggest achievement was to introduce mainland companies to the exchange in 1993. More than 300 mainland firms have since listed here, representing 58 per cent of market capitalisation and 70 per cent of turnover. Under Chow, the number of listed companies has increased four-fold from 413 in 1992 to over 1,319 now, with market capitalisation increasing from HK$1.33 trillion in 1992 to HK$17.87 trillion now. The trading system can now handle more than HK$200 billion a day. "It is very hard to find a regulator like Paul Chow who understands exchange affairs so well,'' said Kenny Lee Yiu-sun, chief executive of brokerage First China Financial Group. "But Charles Li's mainland background and network, and investment banking skills could also lead HKEx to another stage by having more international firms to list here." Li, 48, has helped several state-owned firms seal big foreign investment deals over a 15-year career. Unlike Chow, Li does not have a regulatory background. Before joining the HKEx in October to work with Chow, Li was a senior executive at JP Morgan. Born in the mainland he has had a varied and colourful career, ranging from an offshore oil driller at a state-owned oil company in the 1970s to a journalist at China Daily in the 1980s and then a lawyer and investment banker in the 1990s. He has degrees from the University of Alabama and Columbia University School of Law. He practised law in New York with Davis Polk & Wardwell and Brown & Wood before moving to become an investment banker at Merrill Lynch in Hong Kong in 1994 and moving to JP Morgan in 2003. HKEx chairman Ronald Arculli, who headed the six-member selection panel to choose Li, said Li's 20-year experience in investment banking and mainland connection were the reasons for his appointment. Brokers believe Li's new leadership is needed as HKEx is now facing increased competitive pressure. While HKEx has played a key role as a fund-raising centre for mainland firms over the past decade, Shanghai is catching up fast. The HKEx also faces competition from so-called dark pools, which are trading platforms that allow fund managers or institutional investors to trade electronically with no need to disclose their identity. Li has said he was not worried about the challenges ahead. "Competition has always been the driver of Hong Kong," he noted. "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." Chim Pui-chung, legislator for financial services sector, hoped Li would take into consideration the interests of all parties. "I hope Charles Li would listen to all the concerns of the market players and adopt a fair treatment of international firms and local brokers," Chim said. "If he could ensure Hong Kong is not over-regulated and has transparency, he should be able to attract more international firms to list here."

China*: The central government has issued a new directive to the nation's financial watchdogs to help cool the mainland property market, which saw home prices rise strongly last year. The People's Bank of China and the China Banking Regulatory Commission will tighten their scrutiny of bank lending to prevent the illegal flow of funds into the market. They will also move to prevent foreign "hot money" from affecting the market, according to a circular by the State Council published by Xinhua yesterday. Both measures are seen as part of the government's latest pledge to regulate the property market. Home prices in 70 medium and large cities rose 5.7 per cent in November from a year earlier, after six consecutive monthly advances that saw values grow at the fastest annualized rate in 16 months. The State Council ordered governments of cities that saw sharp rises in home prices to follow the central government's directive to increase the supply of low-cost housing and homes for the poor. Local authorities should closely regulate the market to prevent developers from manipulating property supply through hoarding land sites or withholding homes to push up prices, the statement said. Liao Qun, a senior vice-president and chief economist at Citic Ka Wah Bank, said the circular did not announce any new measures, reflecting the government's desire to stabilize the property sector rather than see a big price correction. He believes the central and local governments will strictly enforce the measures and he expects home sales to drop in the first half. Premier Wen Jiabao on December 27 said excessive property price rises in some cities could prompt the government to use land supply and financial and tax measures to regulate the market. He also reiterated Beijing's intention to increase the supply of affordable housing to low-income groups. Last month, the central government announced the withdrawal of a tax incentive introduced in 2008 to revive the property market. This year, the lock-up period for the resale of a property will revert to the original five years, after it was shortened to two years under the 2008 incentive. That meant owners could resell a property after two years without paying a 5.5 per cent tax. It has been rumored that loan conditions for buyers of second homes would be tightened with down payments raised to 50 per cent from 40 per cent. But the statement published yesterday said the down payment for a second property for those who had borrowed to buy their first home should still be 40 per cent of the property's value. Local governments should strictly execute tax charges on first-time and second-time buyers, it said. Liao said the market should be pleased down payments on second homes did not rise to 50 per cent. Lee Wee Liat, a senior property analyst at Nomura International (Hong Kong), said the circular did not reveal any new policies but details to differentiate first-time and second-time homebuyers. He expects home presales to rise in the second half of the year as the government has stressed lifting supply by stopping land hoarding.

China's cabinet Sunday issued a notice, saying the down payment requirement for those families applying to buy a second or more houses backed with loans should be no less than 40 percent.

Saudi Arabian King Abdullah bin Abdul Aziz al-Saud (R) shakes hands with Chinese Minister of Commerce Chen Deming during their meeting in Riyadh, capital of Saudi Arabia, Jan. 10, 2010. Saudi King Abdullah bin Abdul-Aziz held talks on Sunday with visiting Chinese Commerce Minister Chen Deming on further boosting economic and trade cooperation between the two countries. The king said Saudi Arabia and China enjoy deep traditional friendship and substantial exchange, and that the strategic friendly relations between the two countries have been consolidated and deepened. China's economy develops rapidly, and the two countries should further their cooperation in various fields, such as in dealing with the fallout of the global financial crisis, he said. The king said Riyadh welcomes the Chinese enterprises to actively participate in Saudi economy as the Gulf Arab country is speeding up construction in the petrochemical industry, infrastructure, education and health fields. Abdullah said that he believes that the Saudi-Sino economic and trade cooperation will have a brighter prospect. The Chinese minister said Chinese President Hu Jintao last year paid a successful visit to Saudi Arabia, which has vigorously boosted the economic and trade cooperation between the two countries. As this year marks the 20th anniversary of the establishment of diplomatic ties between China and Saudi Arabia, the Chinese government is expecting to expand the bilateral economic and trade cooperation, in hopes of boosting the bilateral trade volume to 60billion U.S. dollars by 2015, Chen added. Chen said the Chinese government appreciates the trust of the Saudi king and the Saudi government in Chinese enterprises, and will work together with the Saudi side to support contract projects and investment cooperation between enterprises of both countries in the electricity, railway and new energy fields. Also in the day, Chen, together with Saudi Minister of Finance Ibrahim bin Abdel Aziz al-Asaf, convened the fourth meeting of China-Saudi joint committee on economy and trade in the Saudi capital. Chen arrived in Riyadh on Saturday and will visit Ethiopia, Mozambique and Tanzania later.

German auto giant Volkswagen AG posted a 36.7 percent surge in 2009 China sales to maintain the top position it has held for more than 20 consecutive years. The company said in a recent statement that it sold a total of 1.4 million vehicles on the Chinese mainland and in Hong Kong last year.

Beijing will complete its construction of five new subway lines and start work on another four this year, authorities said yesterday. Liu Yinchun, deputy director of the Beijing municipal commission of development and reform, said the five new lines ready this year are Yizhuang line, Daxing line, Changping line, Fangshan line and the first phase of line 15, making a total track length of more than 300 km. The city will also kick off the construction of another four subway lines. They are line 7, line 14, Xijiao line and S1 line - the first railway in China to handle medium and low speed maglev trains. The S1 line will run from the west fourth ring road to the center of Mentougou district. It will be able to handle maglev trains capable of speeds of 160 km per hour, twice as fast as standard underground trains, and is scheduled to open in 2015. Liu said Beijing now has nine subway lines under construction, totaling another 209 km. "I don't think any other city in the world can surpass Beijing in terms of subway line construction speed," Liu said at a news conference yesterday at the commission. The average number of daily subway passengers in Beijing was 4.8 million in 2009, accounting for 34 percent of the total number of passengers that use public transport. "We aim to lift the percentage to over 50 by the end of 2015," Liu added, "At that point, the total length will exceed 561 km." Beijing has long faced a serious traffic problem from its enormous population and a flawed public transport system. The government invested 10.3 billion yuan in various transport programs in 2009, equaling 75 percent of the whole infrastructure investment. Liu admitted that Beijing's transport system continues to drag behind the ever-increasing demand, but the government has decided to maintain the high investment rate. Most Beijing residents are looking forward to seeing more subway lines open this year. Zhao Yan, a 25-year-old girl who lives in Shunyi district, said she usually takes the bus to office, but will start using line 15 when it opens. Gregor Lippe, a German who has lived in Beijing's Gulou Street for over six years, said the subway lines are good news. "I prefer to take the subway because I don't drive. It's faster and safer," he said. But not everyone is happy about the current plan. "Nine lines are far from enough for a city of this size," Li Xiaobin, a 27-year-old subway guard in Yonghegong subway station, told METRO yesterday. "And I don't think the new lines will help much because more people will just decide to take them."

A Chinese entrepreneur who made a record donation of almost US$9 million to Yale University has caused a stir among mainland internet users after he attributed his success to postgraduate studies at the Ivy League school. Zhang Lei, the founder and managing partner of Beijing-based Hillhouse Capital Management, last week gave the auspicious figure of US$8,888,888, the largest amount the university's management school has ever received from a "young" alumnus. Zhang, who graduated from the school with a master's degree in business administration and a master's in international relations in 2002, said he decided to make the donation because Yale's educational system had "changed his life". But this comment - and his decision to give money to a foreign university - appears to have ruffled feathers back home, prompting a flurry of angry posts on the internet. By yesterday evening more than 1,500 anonymous messages had been posted on, which first broke the story on the mainland, and the vast majority were aggressively worded and even abusive. "This bird-student will have a horrible death!" wrote one, using a slang term for students who study overseas. Others called Zhang a dog, a traitor or suggested he must have mental problems. Many expressed disgust that Zhang - who studied at Renmin University in Beijing before going overseas - did not appear to value his school and undergraduate education. "You spent more than 10 years studying in Chinese universities; if it weren't for the Chinese higher educational system, you wouldn't be anything at all," wrote one poster. Others appeared to consider the prospect of Chinese money going overseas as some sort of personal affront. "You made this money in China after you graduated, so any donations should go back to China," wrote one. Though the online comments are only a straw poll of the most opinionated readers, the strength of the reaction was unmistakable. Even so, a minority did speak out in support of Zhang's decision. "Well donated! If you donated that money [in China], then more than half would fall into the wallets of corrupt officials," wrote one. Others also commented that it was a sorry indictment of the mainland educational system when a celebrated "prize student" like Zhang - who ranked first out of 100,000 students in his provincial university entrance exam - thought only his time at Yale had contributed to his success in life. Zhang set up his company - which is named after Hillhouse Avenue, the main street running through the Yale management school's campus - in 2005 using an endowment from the management school. He began managing a fund of US$30 million, but that pot has since swollen to US$2.5 billion. Zhang is also a member of the Yale management school's board of advisers and its board of China advisers. In a statement posted on its website, Yale said the donation would be used primarily to help build a new campus for the management school but "a portion of the gift" would also be set aside for scholarships and "a variety of China-related activities". Speaking at an event in Beijing last Monday, the president of Yale, Richard Levin, said the donation was a "truly extraordinary gift" that reflected Zhang's "deep commitment to Yale".

In what is becoming a potent mix of business and regional politics, Air China (SEHK: 0753) and China Southern Airlines are jostling for the controlling stake in Shenzhen Airlines, following the arrest of its largest shareholder last month for "economic crimes". The cost of failure for China Southern - whose main hub is in Guangzhou - will be high. It can lose its dominant position in south China if Beijing's Air China gets the lion's share of Shenzhen Air, the mainland's fifth-largest airline. Air China will press hard after failing to take control of Shenzhen Air in 2005. But the complexities of the contest go far beyond a simple commercial acquisition. Whoever wins the 65 per cent stake in Shenzhen Air that is up for grabs will need the blessings of the nation's airline regulator, the provincial government of Guangdong and the central government. Air China, which already owns a 25 per cent stake in Shenzhen Air, looks like a sure bet at first glance. When the 65 per cent stake in Shenzhen Air was first put out for tender in 2005, Air China joined the Shenzhen State-owned Asset Supervision and Administration Commission to bid for the stake, only to be defeated by a consortium led by Shenzhen Air's majority owner Li Zeyuan after 49 bids. Li, however, was arrested for alleged economic crimes last month, reportedly for committing fraud during the tendering process. The media have reported that he failed to pay in full for the stake and that about 20 per cent of that stake remains with the Guangdong government's investment arm. Shenzhen Air is among the few mainland carriers that have been profitable. It reported 49.94 million yuan (HK$56.73 million) profit in the first half of last year. It operates 84 aircraft and has assets valued at more than 20 billion yuan, according to the company's website. On Christmas Eve, the Shenzhen municipal government and Guangzhou-based China Southern, the largest mainland carrier, signed a comprehensive co-operation pact. The Shenzhen government, which owns 10 per cent of Shenzhen Air, said it would support China Southern to build its own passenger terminal in Shenzhen Airport and invest in the cargo terminal and ground handling business at the airport. Details of the support have not been disclosed. The Shenzhen government also said it would offer undefined "concession measures" to facilitate China Southern's passenger and cargo business in the city. "It's a signal that the Shenzhen government is encouraging China Southern to go for the stake in Shenzhen Air," said an airline executive. China Southern has vowed to double its fleet size in Shenzhen in five years to increase its international and domestic connection there. "If Air China takes over Shenzhen Air, which has a 50 per cent market share in that southern city, China Southern's dominant position in south China will face unprecedented challenge," said Kelvin Lau, an analyst at Daiwa Securities SMBC. Guangzhou's airport - where China Southern has a 50 per cent market share - is already poised to be marginalized by the proposed high-speed rail that will connect the airports in Hong Kong and Shenzhen. Air China, the most profitable carrier on the mainland, has abundant resources to help Shenzhen Air expand its international and domestic network, which would put China Southern's 30 per cent market share in Shenzhen at risk, Lau said. "Air China's plan to get Shenzhen Air will be derailed again if the Shenzhen government supports China Southern to acquire Shenzhen Air," said a market watcher. It is not the first time that the Shenzhen government has invited China Southern to reinforce the competitiveness of Shenzhen airport. At the beginning of last year, when the air traffic demand was heavily dampened by the financial crisis, the Shenzhen government spearheaded a program called "fly via Shenzhen" by consolidating the aviation resources of Shenzhen Airport and Shenzhen Air with China Southern. Rather than letting Beijing's Air China come into the market, the Shenzhen government is tipped to back a consolidation between Shenzhen Air with China Southern to strengthen the air hub in Shenzhen. By doing so, the combined market share of China Southern and Shenzhen Air will amount to 80 per cent in Shenzhen. "But Air China, which owns a 25 per cent stake in Shenzhen Air, is the largest obstacle for China Southern to go ahead with the plan," said Lau. "The co-operation between Cathay [Pacific Airways] and Air China is not very intimate," said a market observer. "So it is very important for Air China to get the control of Shenzhen Air to gain a foothold in south China."

Asia Cassava Resources Holdings, the largest importer of the starchy plant's dried roots into China, reported sales volume doubled in the nine months to December on the back of rising demand from makers of liquor, chemicals, and ethanol fuel. The Hong Kong-based and listed company had cassava sales of just over one million tonnes in the period, up from around 500,000 tons in the year-earlier period, chairman Chu Ming-chuan said. Around 60 per cent of annual sales are typically recorded in the second half of the financial year, which ends on March 31, he said. The company is the biggest grower and exporter of cassava in Thailand and about 20 per cent of sales are to makers of ethanol fuel, with the rest sold to makers of liquor and chemical producers in China. Chu attributed the growth in sales to new customers and increased demand from existing customers. The company's largest customer is Henan Tianguan Ethanol Fuel, which is 40 per cent-owned by the nation's largest oil producer China National Petroleum Corp. Henan Tianguan is one of four firms tasked by Beijing to build pilot plants to make ethanol fuel from plant materials as a cleaner-burning alternative to petrol. Due to concerns that overzealous investment in ethanol fuel production capacity would drive up grain prices and inflation, Beijing in 2007 stopped approving new plants that use wide-acre grain crops as raw material. Those that use plant sources such as cassava are encouraged. Ethanol fuel production is still a nascent industry whose viability is heavily dependent on state subsidies and sustained high oil prices. Demand depends on how fast Beijing pushes the expansion of ethanol fuel pilot programs via subsidies and fuel price control policies. For example, state control on domestic petrol prices saw Shenzhen-listed Anhui BBCA Biochemical post an operating loss of 315 million yuan (HK$358 million) in the first nine months of last year amid low oil prices. But owing to 574 million yuan of subsidies, it booked a net profit of 188 million yuan on 3.68 billion yuan of sales. Ethanol prices are also state-stipulated and are slightly cheaper than petrol prices. Ethanol is mixed into ordinary petrol to produce ethanol fuel, with ethanol making up not more than 15 per cent of the content. Chu said cassava's higher starch content meant it is more competitive than corn, the main raw material for ethanol production on the mainland. This is because it takes only 2.8 tons of cassava to make a tonne of ethanol, compared to 3.15 tons for corn. The corn price, at HK$1,900 a ton, is also around 20 per cent more expensive than cassava at HK$1,550 yuan a ton. But in Thailand, state fuel price controls and a lack of subsidies meant the ethanol fuel industry had not yet been developed, Chu said. It is the world's third largest cassava producer with output of 29.1 million tons last year, according to the UN Food and Agriculture Organization. China produced 4.5 million tons. Chu said cassava demand is expected to rise since Beijing has targeted to raise ethanol fuel output to 10 million tons by 2020 from 5.2 million tonnes this year. Asia Cassava plans to spend HK$10 million to expand its procurement and logistics facilities in the six months to March 31, and HK$8 million to retrofit its new procurement center in Cambodia. It has five procurement and warehouse centers in Thailand and one in Cambodia. To cut logistics costs the company recently agreed to buy a US$5.95 million vessel capable of moving 43,500 tons of cassava from Thailand to mainland ports ten times a year. Chu expected the investment to be recouped in less than three years, based on a freight saving of US$40 per tonne for each trip, assuming the vessel returns to Thailand empty. The company plans to add one or two procurement and warehouse centers annually. "The key to encourage farmers to grow more cassava is to set up procurement facilities near them," Chu said. "Our centres are open for business 365 days a year and will buy as long as their product meets our quality standards and they are willing to take the prices we set."

Jan 11, 2010

Hong Kong*: The official foreign currency reserves of Hong Kong amounted to 255.8 billion U.S. dollars at the end of December, compared with 256.3 billion U.S. dollars one month earlier, the Hong Kong Monetary Authority said Thursday. Including unsettled forward contracts, the foreign currency reserve assets also stood at 255.8 billion U.S. dollars at the end of December, 2009. Based on the latest figures, Hong Kong is the world's seventh largest holder of foreign currency reserves. The total foreign currency reserves of 255.8 billion dollars represent about ten times the currency in circulation, or 55 percent of Hong Kong dollar M3, the broadest measure of money supply in Hong Kong.

Model display costumes during the pre-show of World Boutique, Hong Kong in Hong Kong Convention and Exhibition Center, south China, Jan. 5, 2010. The show, believed to be the biggest fashion show in Asia consists of Hong Kong Fashion Week and World Boutique Hong Kong, will be held on Jan. 18 - 21, 2010. Global fashion talents will be on hand here for Asia's largest fashion event later this month, the Hong Kong Trade Development Council said on Tuesday. Hong Kong Fashion Week for Fall/ Winter and World Boutique will be held from January 18 to 21 at the Hong Kong Convention and Exhibition Center, featuring altogether over 2,000 exhibitors from30 countries and regions. During four days of the two flagship fairs of Asia's fashion industry, there will be also a series of runway shows, presenting ideas from leading local and overseas designers, and professional seminars addressing current industry issues. The 41st edition of Hong Kong Fashion Week for Fall/ Winter has a worldwide reputation for showcasing the newest collections, looks and products in the industry. The event features 1,700 exhibitors from 24 countries and regions, with Russian and South African exhibitors joining for the first time. The 8th World Boutique showcases the latest fashion brand collections, including apparel, watches, shoes, fashion jewelry, home fashion and lifestyle products. The Chinese mainland will have a strong new presence at the Quanzhou Pavilion featuring ten top brands from the Chinese mainland. The Netherlands, famous for its design capabilities, will host a country pavilion for the first time this year. The Hong Kong Fashion Extravaganza will also return this year, featuring four celebrated fashion designers, including Dorian Ho from Hong Kong, Guo Pei and Xie Feng from the Chinese mainland, as well as Japan's Toshikazu Iwaya.

Sham Shui Po's annual Hong Kong Computer Festival, organised by the Chamber of HK Computer Industry, no longer received council funding, a district councillor said yesterday amid tension among businesses in the district over the festival. Lo Wing-man said that while the council had assisted the festival in 2002 and 2003, it had been self-funding since and bore the risk of losses. His statement follows an announcement by the Hong Kong Computer Association that it will hold the first Sham Shui Po Computer Festival in four shopping malls over the same period as the chamber's event - January 15 to 18. The association's permanent honorary president, Wilson Shea Kai-chuen, said earlier this week that expo-style festivals hurt small businesses in the area. Chamber chairman Leung Ding-kau said some festival profits were put back into the community via programmes to help the needy learn about computers. On claims that expo-style festivals hurt local small businesses, he said 60 per cent of booths were run by local businesses. Leung said 500 businesses had applied for booths in the festival - four times the number available. Applications were drawn out of a hat for fairness, but the system was weighted in favour of local businesses.

A glum-looking transport minister Eva Cheng and lawmaker Raymond HoChung-tai (right) after the meeting ended without a vote. Cheng appealed to lawmakers to approve funding for the rail line next week.

A blind person negotiating the streets with a guide dog is a common sight in many cities around the world. In Hong Kong, however, the blind must make their way around a crowded city littered with hazards, armed with nothing but a cane. But that's about to change. For the first time since 1972 an attempt is being made to introduce guide dogs into Hong Kong. Four people with impaired vision will be selected to go to the United States to choose a dog and receive training - all for free. The project is being organised by the Hong Kong Society for the Blind (HKSB) and the Ebenezer School and Home for the Visually Impaired. The HKSB recently launched a fund-raising drive aimed at large corporations to raise the HK$1 million needed to get things started. Once the money arrives, the school will fly in an expert to select the four and fly them to Michigan for training. "At the training centre, they can choose the dog they like," said project researcher Ben Fong Tin-tai, Ebenezer School's senior orientation and mobility instructor. The idea is to improve quality of life for some of the city's 122,600 visually impaired. "These blind people will no longer need to rely on a cane to find their way and feel obstacles, and the guide dog can lead them around much quicker," Fong said. As a bonus, they also get a good companion. "We will notify all groups for the visually impaired and everyone can apply. The four will be from different ages and backgrounds to increase fairness and versatility." With a limited budget, Fong said they would initially choose those with basic proficiency in English so they do not need to hire a translator. Priority will also be given to dog lovers with a good sense of direction. Fong said he was not worried about regular funding to sustain the project, citing guide dog centres overseas that easily raise money with donation boxes in the street, charity walks, and dog sponsorship - methods they will copy. When they raise more money the plan is to set up a local training school and train instructors to teach the dogs and their users. The project is a dream come true for the chief executive officer of Ebenezer, Dr Simon Leung Man-on, who first proposed the idea more than two decades ago. "I studied in Germany and saw many blind people had a guide dog. I thought 'why can't Hong Kong blind people have them?'" But without much support in rehabilitation circles, Leung could not realise his dream. Then a few years ago public interest was stirred by the Japanese movie Quill, featuring a blind person and a guide dog. This inspired the school to start a feasibility study in 2006. This involved sending Fong and his colleague Piers Kuan to research guide dog centres in Australia, South Korea, and Taiwan. Fong believes Hong Kong can follow Taiwan's example and set up a small, self-funded guide dog training center. "Tokyo, Seoul, and Taipei are not much bigger than Hong Kong," he said. "If they can do it, Hong Kong can too." Tony Shing Li-lim, of the Hong Kong Federation of the Blind, said the dogs could help the visually impaired integrate in society. He urged the government to amend the Building Ordinance to allow guide dogs in more buildings and he called on the Social Welfare Department to start an allowance for visually impaired dole recipients with guide dogs. Leung said although public transport systems allowed guide dogs, a new law and public education were needed to give guide dogs access to all public places. A spokeswoman for the Housing Department said guide dogs were allowed in public housing. A spokeswoman for the Equal Opportunities Commission said denying access and refusing service to a guide dog violated the Disability Discrimination Ordinance.

Hutchison Whampoa (SEHK: 0013), controlled by Li Ka-shing, is offering to take its unprofitable subsidiary, Hutchison Telecommunications International (SEHK: 2332), private for HK$2.20 a share, or about HK$4.23 billion. News of the takeover terms helped propel Hutchison Telecom's share price to a record yesterday, climbing 28.5 per cent to HK$2.12. About HK$491.62 million worth of its shares changed hands, the largest amount in more than a year. "Investors are betting that the privatization can be successfully finished," said Patrick Yiu Ho-yin, the managing director of CASH Asset Management. Hutchison Whampoa's shares reached as high as HK$56.85 in yesterday's trading before settling at HK$56.35, unchanged from the previous session. The conglomerate's cash buyout offer, arranged by Goldman Sachs, represents a 37 per cent premium over the subsidiary's closing share price the day before trading was suspended on January 4, according to a joint statement filed yesterday with the exchange. Shares of Hutchison Telecom - which runs loss-making mobile network operations in Thailand, Sri Lanka, Vietnam and Indonesia - closed at HK1.60 on December 31 and HK$1.65 on Monday. Trading of the shares resumed yesterday. "Based on our valuation, the [Hutchison Whampoa] offer is pretty fair," said Gary Pinge, the senior vice-president of industrial conglomerates and transportation research at Macquarie Securities. "The privatization will help make decisions [on Hutchison Telecom's business] much easier." Hutchison Telecom posted an unaudited HK$285 million loss in the first half of last year, compared with a HK$1.17 billion profit for the same period in 2008. It had been divesting strategic assets in Israel, India, Hong Kong and Macau over the past three years. Hutchison Whampoa said the deals had helped the subsidiary maximize returns to shareholders. The network operator is estimated to have generated total returns of 178 per cent for shareholders, or an annual return of about 22 per cent to the end of last year. But those divestments also shrank Hutchison Telecom's market capitalization to HK$7.9 billion from a high of HK$95.6 billion in January 2007. The company is in discussions to exit Thailand by selling its stake in Hutchison CAT for an undisclosed sum to the state-owned CAT Telecom, its joint-venture partner. Investments in other emerging-market operations - Hutchison Telecommunications Lanka, Vietnamobile and Hutchison CP Telecommunications - will continue, according to Hutchison Whampoa. It said those investments "will position Hutchison Telecom's businesses to compete more effectively in their markets and better tap the potential opportunities there". Hutchison Whampoa anticipates the subsidiary's accumulated cash will be used for further network investments, meaning there will be no surplus cash for dividends. Li expressed his concern in May last year about the difficulty of privatizing companies in Hong Kong, noting it was easier to close a business than deal with shareholders "stirring up issues" against such a transaction. Hutchison Whampoa's buyout bid comes less than a year after Li's younger son, Richard Li Tzar-kai, failed to privatize PCCW (SEHK: 0008).

The boring machine, weighing 650 tons, was designed in Germany and made for both rock and soft-ground tunnelling. A HK$100 million boring machine will today begin cutting a drainage tunnel to solve the problem of flooding in West Kowloon. The machine - named Dae Jang Geum after a popular female character in a Korean TV drama - will create a drainage tunnel in Lai Chi Kok that runs for 3.7 kilometers. The tunnel will divert rainwater from higher ground before it runs downstream to Lai Chi Kok, Cheung Sha Wan and Sham Shui Po and discharge it into the harbour near Stonecutters Island. The tunnel will start underneath Tai Po Road, run under Ching Cheung Road and outfall to Victoria Harbour, near Stonecutters Island. The whole project is costing the Drainage Services Department HK$1.7 billion. Construction work began in November 2008 and will be completed by the end of 2012. The boring machine, weighing in at a massive 650 tonnes, was designed in Germany and made there and on the mainland. Made for both rock and soft-ground tunnelling, Dae Jang Geum costs 10 per cent more than machines that can only drill through hard rock. The cone-shaped boring head is 5.7 metres in diameter and will tunnel through 10 meters a day. It is a tradition in the industry to give boring machines a female name. Dae Jang Geum was chosen for her passionate and fearless character. Intercepting rainwater costs more than improving existing drainage networks in urban areas, but it causes less disruption to commercial activities, said Tsui Wai, assistant director of the department. On average, the Lai Chi Kok tunnel will be 40 metres underground. The depth increases the difficulty of construction work, Tsui said. Since 1998, the department has spent HK$3.3 billion on improving the drainage network in West Kowloon. Two other major drainage projects - in Tsuen Wan and on Hong Kong Island - are still in progress and will finish by 2012 at a total cost of HK$4.2 billion. Tsui says that by then most areas in Hong Kong will be free from flooding problems. "Even if an area is hit by storms bringing the highest rainfall in 50 years, the system will be able to cope with it," he said. But low-lying areas such as Tai O could still be troubled by floods.

Henderson Land Development (0012) and New World Development (0017) will pay a land premium of HK$2.5 billion on their Tai Tong Road project in Yuen Long, market sources said. It represents an average land premium of HK$2,000 per square foot, down from the initial government estimate of HK$3,000 psf. It is also much lower than the HK$3,253 psf premium Henderson paid for its Lok Wo Sha project in Wu Kai Sha in October. The total amount of land premium to be paid is 27 percent lower than the government's earlier request of HK$4 billion. The two developers will officially send their acceptance letter to the government today. This is the first land premium project in the New Territories since the auction of two plots in Tai Po on December 28. The Tai Tong Road project has a total site area of 478,900 sq ft, with gross floor area of 1.17 million sq ft, which could accommodate 13 buildings with 1,700 units. As most of it was agricultural land, the developers have to pay a land use conversion premium. Henderson Land has a 79 percent stake in the project, while New World holds the rest. Henderson's Lok Wo Sha project in Wu Kai Sha cost nearly HK$9.6 billion in land premium in October, with a price of HK$3,253 psf, a record. Further similar deals are expected between developers and the government over premiums on New Territories land. Other large-scale projects being negotiated with the government include Henderson Land's projects in Yuen Long and Sang Wai, Cheung Kong's (0001) Fung Lok Wai project, and the integrated development project in Yau Tong led by Henderson Land.

Billionaire Li Ka-shing is optimistic about the local economy, but warns that even though there are no signs of a property bubble uncertainties still abound. The chairman of Cheung Kong (Holdings) (0001) and Hutchison Whampoa (0013) did not specify the uncertainties. "There are a lot of worries, which people will regard as jokes if I disclose them publicly," Li said. "But as the highest person of a group you have to take these into consideration, right?" On the possibility of a double-dip recession, Li said: "We have to be very cautious with every move. After the 2008 financial crisis, anything can bring about a shock, which can last for years." He expects the property market to remain rosy this year, but said prices of metals, oil and building equipment have started climbing. Li said unless there are major unforseen circumstances, he is optimistic about business prospects. He also said "90-odd percent" of his employees have had salary increases based on their performance. "There is no way to shun salary increments." The group has a low average land acquisition cost and is confident of generating good returns on property developments, Li said. With a gearing ratio below 12 percent, it also has HK$50 billion to invest. He rejected claims there is a property bubble, saying people are more careful after the financial crisis. Li confirmed that Hutchison Telecom (2332) is set to go private. "Anything that is beneficial to shareholders has to be done in spite of difficulty." Li said his successive shareholding increases in the group has nothing to do with the privatization, as the mobile carrier's market capitalization - HK$7.94 billion - is small. This compares with Cheung Kong's HK$235.09 billion and Hutchison's HK$240.88 billion. Li said he will invest more in the two companies. He said global stock markets ran ahead the curve during the economic rebound last year. Li added that he is careful and is picking stocks this year based on their net asset values, price-earnings ratios and development potential.

Hong Kong pop singer Sandy Lam presents a Chi-pao at a press meeting for her 2010 Shanghai vocal concert, scheduled on February 19, in Shanghai.

Actor Jackie Chan poses for a portrait during a press day for his upcoming movie "The Spy Next Door" at the SLS Hotel in Los Angeles January 8, 2010.

China*: China's securities regulator said Friday the State Council had approved "in principle" the launch of stock futures and a trial run of margin trading, in an attempt to boost the stable and healthy development of the capital market.

A ceremony celebrating the establishment of the China-ASEAN Free Trade Area is held on January 7, 2010 in Nanning, capital of southwest China's Guangxi Zhuang Autonomous Region - Experts give advice for SMEs to better cope with CAFTA - The key for small- and medium-sized enterprises'(SMEs) success in coping with the China-ASEAN (Association of Southeast Asian Nations) Free Trade Area is to study and understand the rules and take advantage of them, a senior expert suggested. Zhang Yunling, Director of the Institute of Asia-Pacific Studies under the Chinese Academy of Social Sciences, made the remarks in an exclusive interview with Beijing Review at the Forum on the China-ASEAN Free Trade Area (CAFTA) on January 7 in Nanning, capital of southwest China's Guangxi Zhuang Autonomous Region. CAFTA, which started operation on January 1, 2010, covers a population of 1.9 billion and involves about $4.5 trillion in trade volume. It is the world's largest FTA for developing countries and the third largest FTA after the North American Free Trade Area and the European Union. The average tariff on goods from ASEAN countries to China has fallen from 9.8 percent to 0.1 percent. Zhang said the establishment of the FTA promotes closer cooperation between China and ASEAN in a more comprehensive way, including trade, investment and services. However, a recent survey showed that the percentage of enterprises implementing CAFTA is relatively low due to their lack of understanding of FTA rules and details. Hence, the government should help them in this regard, Zhang said. "Enterprises, small- and medium-sized enterprises (SMEs) in particular, should not see ASEAN as purely an export market. They should study local markets, set long-term goals and find their positions. Cooperation among enterprises will be more helpful than marketing alone," Zhang noted. Zhang's view was echoed by Mirzan Mahathir, President of the Asian Strategy and Leadership Institute, Malaysia. Mahathir said that a lot of encouragement is required to get SMEs to "look beyond their national borders." "It is important to assist SMEs through incentives, concessionary funding and opportunities to network with potential partners so that they can make the changes necessitated by implementation of CAFTA," Mahathir said. With the theme of "Win-Win Results and Greater Success," the two-day event, proposed by Chinese Premier Wen Jiabao at the 12th China-ASEAN Summit in October 2009, aimed at celebrating the establishment of CAFTA, discussing and exploring closer cooperation in trade and investment, and creating more opportunities for regional economic cooperation. Events held in conjunction with the forum included the launch of a China-ASEAN business portal website, the opening of the Qinzhou Free Trade Port Area and the Nanning Bonded Logistics Center in Guangxi, and a signing ceremony for 18 projects between China and ASEAN worth a total of $4.89 billion.

Chinese auto market overtakes US as world's largest - China's passenger vehicle market ended last year with a 59 percent year-on-year sales increase to surpass the United States as the world's largest auto market for the first year, thanks to the central government's stimulus package. The domestic sales of cars, sports-utility vehicles (SUV), minivans and multi-purpose vehicles (MPV) hit 10.26 million units last year, surging from 6.4 million units in 2008, said Rao Da, secretary-general of the China Passenger Car Association on Friday. The growth is also the highest in the country's auto history, with total automobile sales expected to surge 44 percent year-on-year to 13.5 million units in 2009. Statistics from the US consulting institution Center for Automotive Research showed that new car sales in the US last year plunged 21 percent year-on-year to a 27-year low of 10.43 million units, more than 3 million behind China. The China Association of Automobile Manufacturers (CAAM) is expected to release detailed market figures of the country's automobile industry on Monday. The spike in vehicle sales was largely boosted by the government's stimulus policies for lifting market demand, which included tax cuts on small-displacement automobiles, subsidies for trade-ins and subsidies for farmers to buy vehicles. A low comparative base in 2008, when car sales growth slowed to 6.7 percent with 9.38 million vehicles sold, also helped boost 2009 figures. To further support the world's fastest growing auto market, the Chinese government said last month it will extend stimulus measures in the automobile industry for one more year. The purchase tax for smaller cars will be lifted from the current 5 percent to 7.5 percent of the total vehicle price. The government also decided to raise the subsidy for trade-in cars from between 3,000 and 6,000 yuan ($440 to $880) to between 5,000 yuan and 18,000 yuan per vehicle. The government's continued support for the industry promises to fuel its rise for the coming years. Automobile industry consulting firm Sinotrust predicted that vehicle sales will reach 15.13 million units this year, with a year-on-year growth rate of 15.2 percent. According to the Ministry of Public Security, until the end of last year, almost 200 million Chinese people are able to drive a vehicle, making up about 15 percent of the country's 1.3 billion population. "Natural demand will continue to expand in the next few years," said Lang Xuehong, chief auto industry analyst at Sinotrust. Chinese automakers launched a record 221 new passenger vehicle models last year, with a majority of them upgraded models and less than half being new ones, according to the latest statistics from the CAAM.

Chinese automakers are expected to launch about 100 new models this year. The brisk sales have also brought challenges to China's appeal for a green society. However, a number of analysts said the sales may also speed up automakers' efforts to develop next-generation energy-efficient and emission-free vehicles. Moreover, "the revised policy for this year, with tripled subsidies to encourage the replacement of outdated vehicles with high emissions and unstable driving performance, will contribute to an environmentally friendly society in which the automobile industry has a heavy responsibility," said Yale Zhang, director of the Greater China Vehicle Forecasts for US auto industry consultancy CSM Worldwide. Still, Chinese cities may face worsening traffic as the car boom puts an increasing number of people behind the wheel, with a number of local governments already expressing concern about the rising number of cars. Zhang Gong, director of Beijing's municipal commission of development, said the capital will enter the "automobile age" when every 100 families own 66.1 cars. The capital is rated in a survey of more than 5,000 Web users as the most crowded Chinese city in November.

Chinese Premier Wen Jiabao(R) talks to Li Youlan, wife of late vice premier and defense minister Zhang Aiping during a symposium held in Beijing's Great Hall of the People to mark the 100th anniversary of the birth of Zhang Aiping, Jan. 9, 2010.

Post-graduate entrance exam 2010 kicks off - Students enter into the post-graduate entrance examination center at Huazhong University of Science & Technology (HUST) in Wuhan, central China's Hubei province, January 9, 2010.

Candidates wait at Shanghai Normal University campus before entering into examination rooms on January 9, 2010. The annual national post-graduate entrance examination kicks off on Saturday. There are 1.4 million candidates taking part in the exam this year, an increase of 13% from 2009.

A worker atop metal scaffolding at a construction site in Shanghai. Global investors have played down fears of overheating in China's property sector and said they would continue their investments. International investors do not anticipate any burst in the property bubble for now and continue to remain bullish even as the government is taking steps to cool the sector. Noted investor Mark Mobius, who oversees $34 billion of developing-nation assets at Templeton Asset Management Ltd, said in Singapore on Friday that he plans to increase holdings in Chinese stocks by purchasing shares that benefit from consumer demand, including developers and raw-material suppliers. "Property prices are high, but I don't see a crash," said Mobius. "The Chinese are watchful and they are not going to let things get out of control. They want the growth to continue at a measured pace and there's nothing wrong with that." China's property prices climbed in November at the fastest pace since July 2008, fueling concerns of asset bubbles. Residential prices in 70 major cities rose 5.7 percent from a year earlier, compared with a 3.9 percent increase in October. The State-owned Assets Supervision and Administration Commission on Thursday asked enterprises under its supervision to be careful while venturing into the real estate and stock markets amid the complicated and fickle economic conditions. Meanwhile, the central bank on Thursday raised the auction yield of its three-month bills for the first time since mid-August and is set to drain 137 billion yuan ($20 billion) from the market this week, as it intensifies the pace of quantitative tightening to curb excessive market liquidity. The China Banking Regulatory Commission may further increase the down payment from the existing 40 percent to 50 percent for second-home buyers to curb speculative purchases, said sources. Andrew Mattock, who manages the $342 million Henderson Horizon China Fund, said he would stay "fairly aggressive" on property stocks as the risks of curbing loan growth are already priced in. The Shanghai index of property stocks has dropped nearly 28 percent in the year through Jan 7 after reaching a one-year high in July. Shenzhen-based Vanke, the country's biggest publicly traded developer, and Guangzhou-headquartered R&F Properties Co are among the worst performers on the MSCI China Index in the last six months. The measure has climbed 23 percent during the period, lagging behind a 35 percent gain in the MSCI Emerging Markets Index.

Beijing is on course to tighten liquidity and exit from its stimulus plans, economists said following the latest signals from the capital. New loans in the mainland this year would be about 7.5 trillion yuan (HK$8.52 trillion), down from almost 10 trillion yuan last year, the China Securities Journal reported yesterday, citing unnamed sources. This projected amount, and an increase in the yield on three-month bonds announced by the central bank yesterday, indicate that Beijing wants to mop up excess liquidity in the banking system and end its loose monetary policy, economists said. The People's Bank of China this week issued bills of up to 130 billion yuan to drain liquidity. It also set the yield on 60 billion yuan worth of three-month bills offered yesterday at 1.3684 percent, from 1.3280 percent at the end of December, the first increase in 19 weeks. The higher yield was announced one day after the release of the central bank's annual work meeting report in which it said it would aim for a "moderate" expansion in lending but set no target. Economists said the central bank may also raise interest rates or the reserve requirement ratio in the second half. The PBOC may want to show its determination to control inflation, and it is a signal to tighten liquidity, Jiang Chao at Guotai Junan Securities told Bloomberg. Hang Seng Bank's (0011) research team says Beijing is concerned about inflation after nine months of deflation. Surging home prices worried mainland authorities the most. "For the government, the recent surge of house prices in some cities poses a more immediate threat," Hang Seng economists Bill Leung and Joanne Yim wrote in a report. Beijing is highly concerned about the heavy dependence of bank portfolios on property-related lending, they said. In the third quarter last year, almost half of new loans totaling 1.29 trillion yuan went to property developers or mortgages. In the fourth quarter, average house prices rose 20 to 70 percent across the country from a year earlier, according to the National Bureau of Statistics.

With goods worth US$1.07 trillion shipped abroad in the first 11 months of last year, China has become the world's largest exporter. China has overtaken Germany as the world's largest export market earlier than expected. Germany said yesterday its exports dropped 19.9 per cent to €734.6 billion (HK$8.16 trillion) in the first 11 months of last year, during which China's exports stood at US$1.07 trillion (HK$8.35 trillion). Some economists, who had expected China to surpass Germany in exports this year, said the latest figures showed the mainland had fared better than other nations in weathering the global financial crisis. "Although China leads exports with a small margin, on a bigger picture the country will rise further," Barclays Capital Asia economist Peng Wensheng said. "It is likely to become the world's second-biggest economy this year." China, which replaced Germany as the world's third-largest economy in 2007, was expected to surpass Japan as the world's No 2 economy after the United States this year. China's December export figures have been forecast to end a 13-month contraction. Shipments rose 5 per cent from a year earlier, according to the consensus in a Bloomberg poll of economists. Imports may have surged 32.5 per cent, leaving a trade surplus of US$20 billion. China is expected to announce full-year trade figures on Monday. Deutsche Bank chief economist Ma Jun forecast China trade would rebound sharply this year on gradual recovery in overseas demand and the central government's increased efforts in spurring domestic consumption. "As the country's economic importance in the global arena grows, many emerging countries will look to China for negotiations in issues like currency and carbon emissions reduction," Ma said. "It has a bigger role in the international stage." He said China would have to be flexible in the yuan exchange rate along with strong exports this year. He added that the yuan value could appreciate by an annualised 4 per cent against the US dollar this year even though state leaders promised to maintain a "stable regime". The yuan has hovered at 6.82 to the dollar since the beginning of last year. Even with an anticipated recovery in exports, some economists expect China to beef up domestic consumption to reduce reliance on foreign trade. Peng expected imports would jump at least 13 per cent this year, faster than an estimated 11 per cent rise in exports. He also said figures for last year would show a decline of 16 per cent in exports and a 12 per cent fall in imports. In addition to the two trillion yuan economic stimulus package this year, the central government offers preferential taxes for car buyers and subsidies for buying home electrical appliances in rural areas as key measures to fuel domestic demand. UBS economist Wang Tao said China's economy would grow 9 per cent this year, more than the country's target of 8 per cent.

Photo taken on Jan. 7, 2010 shows the brillant cable-membrane structure of the Expo Axis during a trial illumination in Shanghai, east China. The Expo Axis is a large, integrated commercial and traffic complex, which also serves as the main entrance to the World Expo 2010 site.

The ceremony marking the start of building its third generator of Ningde nuclear power plant is held in Ningde, southeast China's Fujian Province, Jan. 8, 2010. Ningde nuclear power plant, the first in Fujian, started building its third generator Friday. With an investment of 50 billion yuan (6.8 billion U.S. dollars), the Ningde plant would be equipped with four 1-million-kilowatt generators in the first-phase construction. Its first generator would be installed in 2012.

Chief economist of the World Bank Justin Yifu Lin delivers a speech at a forum about the forecast and views of Chinese economy held at the New York Stock Exchange in New York, the U.S., Jan. 7, 2010. He said stopping importing from China may result in an increase in the U.S. trade imbalance. Stopping importing from China may result in an increase in the U.S. trade imbalance, chief economist of the World Bank Justin Yifu Lin said during a speech here on Thursday. Addressing the audience at a forum about the forecast and views of Chinese economy held at the New York Stock Exchange, Lin said the imbalance between the United States and China actually "reflects some kind of specialization due to the state of development." The type of products that China exported to the United States are labor-intensive living necessities that the United States will never produce anymore and has no competitive advantages, Lin said. "If China will not export those type of labor-intensive products, U.S. will have to import from other middle income or lower income countries," he added. "And very likely, the cost of importing from other countries will be higher." Lin said U.S. companies always have a free choice to import from China or other countries, and they currently choose China is because the cost is lower. "If U.S. has to switch the source of the import from another country, (U.S.) people will have to pay for them no matter how high the price is because that is a definite necessity," Lin said," that means most likely the trade imbalance in U.S. may increase."

The annual per capita GDP in Beijing was expected to top 10,000 U.S. dollars in 2009 as the national capital expected an over 9.5 percent economic growth for the same year, said an official with the municipal economic planning agency Thursday. Beijing expected to rake in financial revenue totaling 202.7 billion yuan (about 29.8 billion U.S. dollars), up 10.3 percent year on year, said Zhang Gong, head of the Beijing Municipal Development and Reform Committee. The income of urban and rural residents were estimated to rise by 9 percent and 12 percent respectively in 2009 compared to 2008 figures, said Zhang. Government policies and investment had helped boost local industries amid the global downturn, Zhang said. The city's industrial added value was expected to grow by about 8 percent and the service sector by more than 10.5 percent in 2009, accounting for 73.5 percent of Beijing overall economic strength. Beijing also strengthened infrastructure construction in 2009 to raise its capability for sustained development, Zhang said. The length of highways and track traffic lines in operation reached 884 kilometers and 228 kilometers respectively currently. The city still has 276.7 kilometers of track traffic line under construction, he said. The annual per capita GDP in Beijing was more than 9,075 U.S. dollars in 2008 and the figure was 7,370 U.S. dollars in 2007.

Morning commuters in New York Times Square walk past a Weatherproof Garment Company advertisement depicting US President Barack Obama standing along the Great Wall of China January 6, 2010. The White House spokeman says this company hasn't obtained the authorization, and warns the company to remove all related billboard.

Billboard of Weatherproof Garment Company depicting US President Barack Obama standing along the Greet Wall of China shows along the roadside of New York Times Square, January 6, 2010.

Jan 9 - 10, 2010

Hong Kong*: Central Liaison Office director Peng Qinghua appealed for rational and peaceful expressions of opinion, in the first official comment by Beijing on New Year's Day scuffles. At the end of a march by pro- democrats and others to the liaison office on Friday, several activists broke through a police cordon and charged the building. No arrests were made. Peng said radical means do not match public expectation and he hopes Hong Kong people will conduct rational discussions of important political, economic or social issues. "We respect the public using different means to express their views and demands," he said. "We hope it will be conducted in a rational and peaceful manner." Speaking after a radio program yesterday morning, executive councillor Cheng Yiu-tong said Beijing was "shocked" by the scuffles. "The status of the liaison office is similar to an embassy in a foreign country. The [incident] is very shocking for Beijing. Yet it can't speak out as it happened in Hong Kong," Cheng said. But he later retracted his statement, saying that he did not remember using the term "shocking." Cheng added it was his personal opinion and not that of Beijing. He also warned the incident will only backfire on the cause for democracy. Democratic Party vice chairwoman Emily Lau Wai-hing disagreed. "The imprisonment of dissident Liu Xiaobo is even more shocking for Hong Kong," Lau said. "Cheng should distinguish what incidents are really shocking." Civic Party chairwoman Audrey Eu Yuet-mee also criticized Cheng for putting the blame on young people who are fighting for democracy. Democratic Alliance for the Betterment and Progress of Hong Kong chairman Tam Yiu-chung said he did not know whether the central government was shocked by the protest. But Tam said: "Any violent act against the Central Liaison Office in Sai Wan is wrong." Separately, Heung Yee Kuk legislator Lau Wong-fat said drastic and aggressive moves will have a negative effect on the SAR's constitutional development. Meanwhile, Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung said although the government will conduct a by-election if some lawmakers resign en masse it will not be regarded as a de facto referendum.

The demand by mainlanders for Hong Kong homes showed no signs of abating in the fourth quarter of last year, while the city's property policy changes gave local buyers pause, according to a report. Buying interest from across the border increased throughout all Hong Kong's residential property types, with mainlanders accounting for 14 per cent of transactions last month, up from 11 per cent in September, a study by Nomura International shows. The brokerage house examined 625 recent deals totalling HK$8.6 billion in the 25 housing estates selected in a previous survey in September. Nomura looked at the 25 latest transactions in each of the selected estates that closed on or before December 15. Corporate buying rose to 27 per cent from 23 per cent, while local buyers accounted for 55 per cent, down from 62 per cent. About 5 per cent was by foreigners. All figures are rounded off. "It is unknown how many corporate buyers are from the mainland. If we exclude corporate buyers, individual mainland buyers accounted for 20 per cent of the purchasers," said Paul Louie, the regional head of property research at Nomura. That figure is up from 15 per cent in the previous survey. The increase in part reflected a decline in buying from Hong Kong. "Bear in mind that the past three months saw active government fine-tuning of its housing and lending policies," Louie said. "The reduced loan-value ratio for luxury properties, tougher pre-sale rules and threats of additional policy tightening may have given the local population pause, triggering the reduced transaction velocity for the overall market." Mainlanders, who are less reliant on financing and are accustomed to dealing with policy interventions, could be less sensitive to policy tweaks, he said. They still preferred luxury properties with each worth an average HK$10 million, but they were shifting to mass housing, Louie said. Mainland buyers are also active in the primary market. "Up to 30 per cent of buyers of new residential properties in Hong Kong are mainland investors, with many viewing Hong Kong real estate as a good long-term investment," said Benedict Ma, an associate director of CB Richard Ellis' research department. Victor Lui Ting, an executive director of Sun Hung Kai Real Estate Agency, a unit of Sun Hung Kai Properties (SEHK: 0016), also agrees mainlanders are still keen on Hong Kong luxury homes. Lui said the company recently sold units at the Cullinan development at Kowloon Station at between HK$20,000 and HK$25,000 per square foot. Some buyers came from the mainland. Ma said: "In 2009, we noticed strong demand from mainland investors for Hong Kong residential real estate, given the low interest rates and ample liquidity." Their purchases helped boost luxury prices an estimated 6.8 per cent over the fourth quarter on Hong Kong Island to an average HK$18,700 per square foot, compared with an increase of 17.6 per cent in the third quarter, according to CBRE. Sales volumes in Hong Kong remained stable during the quarter at about 9,000 transactions per month, but moderated compared with monthly sales of 11,000 to 12,000 in the third quarter. "I would not be surprised to see greater investment interest from mainland investors in Hong Kong residential property this year, given the rising concern of the government about potential asset bubbles on the mainland and recent moves to help cool the property market," Ma said.

Hongkongers may be a step closer to getting a public holiday for Confucius' birthday. Lawmaker Chan Kam-lam will move a Legislative Council motion next Wednesday demanding the government make the day a holiday, and yesterday the Confucian Academy said other religious leaders would back the proposal. But it does not mean Hongkongers would have an additional day off each year. Instead, the academy suggests replacing the public holiday on Easter Monday - the last day of the Easter holiday - with Confucius' birthday on August 27. Confucius, a philosopher and teacher, was born more than 400 years before Christ. "Do not do to others what you do not want done to yourself" is one of his most quoted teachings. "There is a holiday for Qu Yuan [a third-century scholar and patriotic poet]. Why shouldn't there be one for Confucius?" Tong Yan-kai, president of the academy, said, referring to the Tuen Ng Festival, a day when people remember the death of Qu Yuan. The academy has been lobbying for a public holiday in honour of Confucius' birthday since 1997. It says Christian, Buddhist, Taoist and Muslim leaders in the city support making Confucius' birthday a holiday called Teachers' Day. Tong said Protestants had formerly opposed the plan, but were now ready to support it. Scrapping the Easter Monday holiday and adding a new holiday on August 27 would be the best option, he said. If there were objections to this proposal, the government could retain the Easter Monday holiday but rename it in honour of Confucius' birthday. Despite the academy's passion for Confucius, it seems the government is not enthusiastic about making his birthday a new holiday. There are 17 general holidays a year, of which 12 are statutory holidays. Any amendment would affect the public and their consent should be sought, a spokeswoman said. No information was available that showed the public had reached a consensus that Confucius' birthday should be made a holiday, she said. "It's not the best time at this stage to consider their recommendation." Shortening the Easter holiday would cause inconvenience for the business sector, Federation of Hong Kong Industries deputy chairman Stanley Lau Chin-ho said. Europeans and Americans all enjoyed Easter holidays and to stay connected with the international market, it would be best if there were the same holidays in Hong Kong, he said. It would be inefficient if businessmen worked when their clients were on holiday. Easter was also something that made Hong Kong special in the eyes of mainland tourists, Lau said. Many tourists were attracted by Easter sales in Hong Kong, he said. Employees could be disappointed if their long weekend holiday at Easter was cut short, he said. Peter Koon Ho-ming, secretary general of the Anglican Church in Hong Kong, said that, since Easter falls on a Sunday and religious celebrations take place on that day, scrapping the Easter Monday holiday would not greatly affect believers.

City hospitals are preparing for a new surge of mainland women wanting to give birth here, after maternity agents who offer special Hong Kong packages slashed their prices. Fierce competition has seen mainland-based agents cut their fees by nearly half from 30,000 yuan (HK$34,067) to 16,800 yuan, after the Hospital Authority last Friday lifted its restrictions on mainland mothers booking its maternity services. About a quarter of the 40,000 babies born in public hospitals in 2008 were children of non-Hong Kong residents. Until October last year, about 8,300 babies were born to non-local mothers out of a total of 33,320 born in public hospitals. A Hospital Authority spokesman said it will carefully monitor the use of maternity services by both locals and non-locals. The authority does not rule out reinstating measures to ensure there are enough beds for local mothers. In a fiercely competitive market, agents offer add-on services, such as cord blood storage and fung shui consultancy, to choose baby names. One of the agents claimed on its website it can even make arrangements for women who have been blacklisted from giving birth here by the Immigration Department. But the fee for the "special service" is 120,000 yuan. Some also offer "luxurious one-stop service packages" costing from 200,000 yuan to 300,000 yuan. The "luxurious package" promises a suite in a private hospital and assistants to accompany the woman from prenatal checkup to her discharge from hospital. The package also includes arrangements for the baby's vaccinations, a 10-day stay in a luxury hotel room with full sea view, health-care insurance, the baby's medical checkup after birth - and even baby formula. Other agents also said they provide home-made meals for the mothers-to-be during their stay in Hong Kong. Kwong Kwok-hay, deputy medical superintendent of the private Hong Kong Sanatorium and Hospital, said the hospital will accept women regardless of their nationality. "We serve them like any other locals as long as we have vacant beds for them and they are referred by our affiliated obstetricians," Kwong said. About 30 percent of babies born at the hospital are to mothers who are non-locals. Over the years, the influx of mainland women giving birth here has been blamed for the severe shortage of maternity beds for local women. The number of babies born in Hong Kong to mainland parents has increased 24 percent from 10,567 in the first half of 2008 to 13,105 in the same period last year. One of this year's crop of new year babies was the boy of a Fujian couple born at Hong Kong Baptist Hospital.

Economists are optimistic about Hong Kong's economy this year, and unlike Chief Executive Donald Tsang Yam- kuen they do not think there will be a double-dip. Peter So Kwok-kin, managing director and head of CCB International Securities, said the territory will benefit from excess liquidity from the mainland and overseas, low interest rates and strong corporate earnings. Interest rates in Hong Kong will not increase until the second half of 2010, and by no more than 0.5 percent, So projected. Although investors are concerned that developed countries may wind down their economic stimulus packages, So believes the Hong Kong market will continue to be attractive this year. He estimates the Hang Seng Index to reach 29,000 by the end of the year and the China Enterprises Index to hit 17,000. David Lui, vice chairman of Schroders Investment Management (Hong Kong), says the benchmark is likely to hover between 18,000 and 28,000 points, depending on the pace of economic recovery, the timing of any interest rate increase and capital flows. Catherine Cheung, head of investment strategy and research at Citibank Global Consumer Group, said Hong Kong companies might register a 21 percent year-on-year profit growth because of the low interest rate. The latest HSBC Hong Kong Purchasing Managers' Index showed a marked improvement in business conditions during past five months. The index was at 55.2 in December, staying above 50 despite a marginal easing since November. New orders growth continued to support the overall expansion, while demand from the mainland remained a key growth driver. HSBC's China Services PMI recorded a three-month high of 57.7 in December, pointing to a further strong rise in private sector output.

Legislators Chim Pui-chung and Wong Yuk-man had to be separated by security guards in the Legco chamber, after a heated shouting match broke out during a debate on the funding for the express rail link to Guangzhou on Thursday. Legislators on Thursday afternoon rejected a request by the Professional Commons think-tank to appear before Legco’s finance committee on Friday to present an alternative proposal for the construction of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link in a more cost-effective way. The chairman of the Professional Commons and Civic Party vice-chairman Albert Lai Kwong-tak on Wednesday said their proposed plan to build a terminus in Kam Sheung Road – instead of West Kowloon – would help the government to save at least HK$30 billion – instead of using HK$66.9 billion to construct the rail link as proposed by the government. Lai argued that there was already a station in Kam Sheung Road and, by building a terminus there and an express line link to Tsing Yi, the length of the project could be reduced by half – saving billions of dollars. He also argued passengers could easily use other stations to link to the rest of the city from there. Lai said, as the government has not shown any genuine interest in their proposal, it was vital for them to present their ideas during a 30-minute session before Legco’s finance committee – ahead of the legislators vote to approve funding for the project. But their bid was rejected by the chairman of the committee, Emily Lau Wai-hing after a debate. During that debate, Chim Pui-chung of the financial services functional constituency – a supporter of building the rail link – and Wong Yuk-man, chairman of League of Social Democrats (LSD), had a heated argument and swore at each other – actions which led Emily Lau Wai-hing to call a halt to the proceedings on two separate occasions. The two lawmakers had to be separated by security guards in the Legco chamber and continued their argument during one recess, local media reported. However, after the meeting, the pair shook hands in front of journalists outside Legco building and apologised to the public for exchanging insulting words. “We shouldn’t set a bad example to the younger generation,” Chim said. Outspoken lawmaker Wong Yuk-man also apologized. “As a public figure and an adult, I really regret my actions. It doesn’t look good... I am really sorry,” Wong said. In another development, the government, chambers of commerce and the Post 50s campaign group continued to run advertisements in local newspapers on Thursday urging lawmakers to vote in favor of funding the project. Chief Secretary Henry Tang Yin-yen and the Secretary for Transport Eva Cheng Yu-wah on Thursday continued to try to persuade the lawmakers to pass the motion. “The government’s proposal has been designed to bring the maximum economic benefit to Hong Kong in the long term while keeping the impact to villagers and the environment to a minimum... We will try our best to explain the proposals to the lawmakers,” Cheng told local media.

Hainan is poised to become a top international tourism destination by 2020, complete with gaming options that may include horse racing. That, together with the promise of duty-free shopping for mainlanders, could affect Hong Kong in the long term, though provincial leaders played down this aspect at a press conference in Beijing yesterday. A mainland paper, the Information Times, reported Hainan may be developed as a trial base for gambling options such as casinos and horse racing. Gambling on horses in the mainland was outlawed in 1949. And a modern racecourse in Guangzhou was closed in 2001 after local newspapers exposed the gambling activities taking place there. Another racecourse was opened in Wuhan in 2007 but gaming is restricted to picking two winners from five races. Winners get scratch coupons offering prizes from a few yuan to 4,000 yuan (HK$4,540). Hainan's Communist Party chief Wei Liucheng said the process of turning the island into a tropical holiday paradise will begin this year. And he promised that people will be greatly impressed with the changes in just 10 years. Governor Luo Baoming said the island has much to learn from Hong Kong and that he does not think the tax- free shopping will affect the SAR. He said gambling options, including a sports lottery, will be developed on an experimental basis, adding the island may have legal boundaries that are less strict than the rest of the mainland. However, Luo insists Hainan will not overstep the law. "If entertainment elements are not introduced, something will be missing in Hainan's promoting itself as an international tourist destination," Wang Yongsheng, from the Regional Tourism Development of the Regional Science Association of China told China Securities Journal. Wang said there are regional precedents for the trial. "Gambling is forbidden in South Korea, but overseas passport holders can gamble at Walker Hill in Seoul; this fits the country's policies and also meets the entertainment needs of overseas visitors," he said. But Hong Kong may yet have cause for worry. Several travel agencies in Chongqing said they will organize shopping trips to Hainan once the policy, proposed by the State Council, is approved. "It'll be much more convenient to purchase luxury goods in Hainan than Hong Kong, as the return flight tickets and price of local hotels are cheaper, and tourists don't need to apply for an exit permit in advance or choose international flights," China Travel Service Group general manager Liao Wei told Chongqing Business News. Peking University urban planning professor Dong Liming said the island is currently underdeveloped and most of the tourists are domestic travelers. "A gambling industry and tax-free service will contribute to the economic growth of the island," he told Global Times.

Lawmaker and Beijing loyalist Cheng Yiu-tong on Thursday was forced to clarify remarks he made on Wednesday morning that a march by local activists to the central government liaison office on New Year’s Day had "shocked Beijing". Cheng, a trade unionist who sits on the Executive Council and a National People’s Congress delegate, speaking to local media on Wednesday morning after a radio interview said that such protests could make Beijing doubt whether Hong Kong was ready for universal suffrage. He also said that radical protesters were in the minority and that “if the majority of people are like that, Beijing will have to send troops here.” On Thursday, Cheng said his comments were only his “personal analysis” of the thoughts of Beijing officials. “I have no intention of denying the comments I made yesterday, and I still think that I haven’t said anything wrong. I can’t remember whether or not I mentioned that [it was a personal opinion] during the radio programme,” Cheng said. “This was not the first time [protesters had marched on the liaison office], and based on my understanding of matters in Beijing, I am sure [these actions] would easily arouse suspicions among officials in Beijing. “They must wonder why the Hong Kong people’s focus has shifted from away from lobbying the SAR government to Beijing instead,” he said. Cheng was referring to scuffles that broke out between police and pro-democracy protesters on New Year’s Day after about 10,000 people marched from Chater Garden to central government offices to call for universal suffrage – and more jobs to help low-income people. Despite heavy police security around the liaison office, about 10 radical protesters, mostly supporters of the League of Social Democrats, broke through the police cordon and attempted to enter the building. Joseph Cheng Yu-shek, a political science professor at the City University of Hong Kong and political commentator, said Cheng Yiu-tong was not speaking directly on behalf of Beijing on Wednesday and his comments didn’t necessarily represent the views of Beijing. “Members of the pro-Beijing unit, like Mr Cheng Yiu-tong, shouldn’t try to represent Beijing and pass on information or messages to the public. This is not healthy as it only serves to damage the image of the central government, and may affect the principles of ‘One country, two systems’ in Hong Kong,” Joseph Cheng told “If the government in Beijing wants to send a message to the people of Hong Kong, either Beijing officials or officials at the central government liaison office should convey those messages. Members of the pro-Beijing unit should simply shut up or just speak on their own behalf,” he added.

While less than half of local households have bought high-definition televisions, entertainment industry giants overseas are well down the highway in ushering 3-D programmes into the home. US-based sports broadcaster ESPN and science network Discovery Channel have both unveiled plans to launch new 3-D networks in the next two years. ESPN will roll out its network as early as June with a plan to air a minimum 85 live sporting events in the first year, including 25 games from the World Cup. Discovery Communications, which distributes the Discovery Channel, has joined Sony and theatre firm IMAX in a bid to launch a dedicated 3-D network in the United States next year. The network will feature films and natural history, space and exploration programs. The moves follow the success in cinemas around the world of the 3-D epic Avatar. Many believe that the technology is poised to take over the home market. Analysts say the technology has existed for decades but has been held up by a lack of 3-D programmes. Some TV viewers have also complained about eye fatigue after watching 3-D TV. While special glasses are needed to watch Avatar and other 3-D films, there are now TV models that enable viewers to experience the effects without them. "The technology now enables real-life depth-of-field effects," said one local industry veteran. Dr Kenneth Lam Kin-Man, an image processing expert at Polytechnic University, said the technology in recent years had reduced the cost of producing 3-D programs. In the past it could take several days to produce a few seconds of footage, and special equipment was needed, he said, but computers had made things easier. But Lam said the key to success was solving the problem of eye fatigue. "After all, Hong Kong people want to relax when they watch TV," he said, noting that 3-D TV required viewers to concentrate hard. This could tire the eyes within half an hour. Hong Kong is in the middle of its transition from analogue TV to digital TV, which offers high-definition channels. No local TV broadcasters have stated an interest in introducing 3-D TV. Analysts in the US expect that one household in 30 may embrace 3-D in-home technology by early next year, and up to 20 per cent by 2015.

Hong Kong-based WaterfrontAir, which originally planned to operate a seaplane service between the city and Macau, will launch seaplane flights from Shenzhen to Macau and Guangzhou in the fourth quarter of this year. WaterfrontAir and Shenzhen Airport Ferry Terminal Services Company, a subsidiary of the Shenzhen Airport Company, yesterday signed a memorandum of understanding to provide seaplane services from the Shenzhen Airport ferry pier to neighbouring cities in the Pearl River Delta. WaterfrontAir, which will have its headquarters in Shenzhen, hopes to launch seaplane services from Hong Kong to Shenzhen, Guangzhou and Macau next year. The company will start with seaplane flights from the special economic zone to Macau and Guangzhou. The firm, set up by entrepreneurs Michael Agopsowicz of Canada and Peter de Kantzow of Australia, will lease a fleet of 18-seater DHC-6 Twin Otter floatplanes for the flights. WaterfrontAir has been pressing ahead since last year with the plan to operate a scheduled seaplane service between a new Kai Tak waterfront aerodrome and the Pak On ferry terminal near Macau's Cotai Strip. The Tourism Commission and the Tourism Board have given their backing for the proposal, saying it will enhance Hong Kong's appeal. But the project needs to pass an assessment of its environmental impact. Scheduled seaplane services operated between Hong Kong and Macau between the 1930s and 1950s. "It takes a long time to get approval for launching seaplane flights in Hong Kong, and we have decided to start our operations in Shenzhen as the city happened to be a lot faster in granting the green light," Agopsowicz said. The company intends to commission an environmental impact assessment and a noise impact assessment in the first half of the year. "If things proceed smoothly, we expect to launch seaplane flights between Hong Kong, Shenzhen, Guangzhou and Macau next year," said de Kantzow, the son of Cathay Pacific (SEHK: 0293) co-founder Sydney de Kantzow, who also set up Macau Air Transport Company in 1948. The flight from Hong Kong to Shenzhen will take 15 minutes, compared with 45 minutes for the Hong Kong to Guangzhou trip. The flight from Hong Kong to Macau would take 20 minutes. The firm plans to charge about HK$2,800 for a one-way trip between Hong Kong and Guangzhou.

Taiwan, a major producer of microchips and other electronics, said on Thursday exports had hit the highest growth rate in nearly 20 years in December due to recovering global demand.

Full body searches are being carried out on all those flying to the United States from Hong Kong - and controversial X-ray-like body scanners may be on the way amid heightened security fears. The new "full pat-down" searches and extensive carry-on luggage checks by airline staff follow a security directive issued by Washington in the wake of the failed Christmas Day "underwear bomber." Officials at Chek Lap Kok insist the checks - which take place immediately before boarding - will not add journey time for passengers. The United States singled out 14 "high-risk" nationalities for the checks but Hong Kong has decided to search everyone, regardless of nationality, both for logistical reasons and to avoid accusations of discrimination. It is also looking at introducing controversial scanners that are capable of peering through clothes to create three- dimensional images of passengers to reveal any concealed weapons or explosives. Authorities in Britain, Canada, the Netherlands and Nigeria have faced a public backlash over the scanners amid privacy fears. Sidney Chau Foo-cheong, the executive director of Avseco, Chek Lap Kok's security provider, said the 14 high-risk countries are Afghanistan, Algeria, Cuba, Iraq, Iran, Lebanon, Libya, Nigeria, Pakistan, Saudi Arabia, Somalia, Sudan, Syria and Yemen. But Chan added: "It is very difficult to separate them and it will be very bad in terms of discriminating against people and delaying them. "It is difficult in Hong Kong and it is also manpower intensive to separate these nationals. Therefore, the airlines have decided that they will conduct 100 percent pat-down searches of everyone." He said there have been no complaints from passengers so far. "We explain to them it is for their own safety. The passengers in general don't welcome it but they understand the situation." The searches are conducted at the entrance to the airbridge near the boarding gate or on the airbridge itself. It means all passengers on the nine daily flights to the United States will undergo two security checks, one after clearing immigration, and the new one. A spokeswoman for the Airport Authority said: "Hong Kong International Airport maintains its general security measures while respective airlines operating flights to the United States will conduct extra body and baggage searches in front of the boarding gates." Among the carriers who fly stateside from Hong Kong are American Airlines, Delta Airlines, Cathay Pacific, Continental, United and US Airways. On December 25, Umar Farouk Abdulmutallab, 23, tried to bomb Northwest Airlines Flight 253 from Amsterdam to Detroit by detonating explosives hidden in his underwear. The device failed, only setting off a fire in his seat.

China*: China central bank surprised markets on Thursday by raising the interest rate on its three-month bills for the first time since mid-August, intensifying its grip on liquidity a day after it promised to keep credit growth in check. The move, which was accompanied by the biggest weekly net drain from money markets in 11 weeks, prompted concerns that the central bank could be getting ready to use more forceful measures to cool growth and fight inflation, such as raising benchmark lending rates. That prospect sent offshore non-deliverable interest rate swaps up across the board and hit a range of commodities, as investors feared a tougher policy stance from Beijing could weaken the appetite of the world’s third-largest economy for steel, copper and other resources needed to fuel it. But analysts said the move should be seen more as an effort by the People’s Bank of China (PBOC) to even out the flow of liquidity into the system, in particular to press banks not to repeat the start-of-the-year rush to lend that marked 2009. “We don’t read much into this as this is a one-off case,” said Chris Leung, economist with DBS in Hong Kong. “Monetary accommodation will remain in place and though overall bank lending will be lesser this year than the last, it is still too early to talk about a withdrawal.” The PBOC sold on Thursday three-month bills at a yield of 1.3684 per cent, up 4.04 basis points from 1.3280 per cent last week, the level it has kept over the past four months, sparking worries about a possible imminent interest rate hike. The prospect sent offshore one-year NDIRS to a 16-month intraday high of 2.19 per cent, up 14 basis points from 2.05 per cent at Wednesday’s close and the 10-year NDIRS up as much as 14 bps to 4.39 per cent. Shanghai’s key stock index fell 1.9 per cent as the PBOC’s bill yield hike sparked worries of quicker-than-expected monetary policy tightening. Commodities bore the brunt of the investor exodus, with Shanghai copper futures losing all of a near-5 per cent gain to snap a 10-day winning streak. London Metal Exchange copper fell almost 2 per cent at one point to US$7,640 a tonne from a 16-month peak near US$7,796. The PBOC is also set to mop up a net 137 billion yuan (HK$155 billion) from the money market via bills and bond repurchase agreements this week, its biggest weekly drain in more than four months. “Let’s put this in context,” said Robert Rennie, chief strategist for Asia at Westpac Banking Corp in Singapore. Over the past eight months, the PBOC’s assets, or its reserves, have risen by around 1.6 trillion yuan while its liabilities – bills, bonds, repurchase agreements and reserve requirements – were roughly unchanged, Rennie said. “So the fact that the PBOC has drained 137 billion yuan and raised rates by 4.04 bps suggests they are moving to withdraw some of this very rapid rise in liquidity,” he said. “But it is very hard to describe this as a tightening in my view.” Traders said the PBOC’s move appeared to be aimed at banks as a warning that it would not tolerate excessive lending in the early months of this year like the banks did in the same period of last year. Concerns about rising inflation and asset bubbles in the key property sector were also among reasons for the move, they said. “Market talk is that some banks have intentions to lend some 50 per cent of their planned new loans for next year in the first quarter so as to offset the impact of possible monetary tightening later in the year,” said a senior dealer at a state bank in Shanghai. On Wednesday, mainland’s central bank said that it would pay particularly close attention to the property market next year while managing inflationary expectations.

China's commerce minister stresses yuan stability, concerned about U.S. dollar value - Chinese Commerce Minister Chen Deming (L) meets with Turkish State Minister Zafer Caglayan in Ankara, capital of Turkey, on Jan. 7, 2010. China's Commerce Minister Chen Deming said here Thursday the stability of the Chinese currency contributes to the recovery of the world economy while voicing concerns over the strength of the U.S. dollar. "The Chinese government has stated on many occasions it will keep the exchange rate of the yuan, or Renminbi, basically stable," said Chen during a visit to the Turkish capital Ankara, adding "We feel that is an important support and contribution for the world economy, which is undergoing a crucial period of recovering."

Three dairy executives could face trial as early as next month for selling tainted milk products, prosecutors said on Thursday, admitting the case had been under investigation for months. The case against the general manager of Shanghai Panda Dairy and his two deputies comes after “illegally high” levels of melamine were found in powdered and condensed milk, a spokesman for Shanghai prosecutors told reporters. “We will file the case with the court in around half a month,” the spokesman said, asking not to be named due to the sensitivity of the case. The three – who face charges of producing and selling toxic and hazardous food – could face trial before the end of February, he added, saying the case would take at least a month to reach the courtroom from the time of filing. Shanghai Panda Dairy was shut down and put on a “black list” during a tainted milk scandal last year, in which at least six infants died and nearly 300,000 were made sick by milk products laced with melamine, a toxic chemical. Panda Dairy’s products were found to have the second-highest levels of melamine in the nation, behind the now bankrupt Sanlu Group, the Shanghai Daily reported last week. Authorities had allowed Panda Dairy to resume production, but the latest probe revealed it had re-used tainted condensed milk that had been recalled from the market, the spokesman said. He admitted government inspectors had discovered the products contaminated with melamine, which gives the appearance of a higher protein content, months before the media first reported the dairy’s closure last week. “The case was uncovered quite early, actually,” the spokesman said. “Quality supervision authorities found the problem in a February-April inspection. The case was then handed to the police in April and the related people were detained by the police in April,” he said. He did not comment on why authorities waited so long to make the investigation public, but the media have suggested the case was concealed out of fear that the revelations could damage the country’s economic recovery. A total of 21 people have been convicted for their roles in that scandal. Two were executed and former Sanlu boss Tian Wenhua was given life in prison. One other person was given a suspended death sentence, a punishment that is routinely commuted to life imprisonment, while 15 others were jailed for two to 15 years. Sanlu, once one of the largest dairy manufacturers on the mainland, was declared bankrupt in February this year after having amassed 1.1 billion yuan (HK$1.25 billion) of debt, Xinhua reported at the time.

Resorts, lotteries coming to Hainan - Government loosens regulations to spur island province's development - Lottery regulations are being relaxed in China's tropical southern island province of Hainan to help it become a global resort within a decade, marking a big step forward for the country's lottery business. The State Council, China's Cabinet, gave permission to Hainan on Monday to "explore and develop" pari-mutuel sports lotteries and instant sports lotteries on large international events, which is expected to enrich Hainan's tourism resources. It aroused media speculation that horseracing is likely to be introduced to the island, or that Hainan would even become China's answer to Las Vegas. "Hainan has been given more space than other parts of China to explore the lottery market, but it does not mean Hainan will break China's laws," Hainan Governor Luo Baoming told a press conference yesterday. He declined to confirm whether pari-mutuel horseracing would be introduced to the island. Gambling is illegal on the Chinese mainland, according to Chinese laws. Welfare and sports lotteries were permitted two decades ago to raise funds for welfare and sports causes, and a regulation was passed last year to legalize the lottery business in China, said Wang Xuehong, director of the China Center for Lottery Studies based in Peking University. Previously, pari-mutuel sports lotteries could only bet on the results of foreign basketball and football games, not domestic games, out of fear of match fixing and other unfair practices, she said. "Now the rules allow pari-mutuel sports lotteries to bet on the results of domestic and international sports events that are held in Hainan, which will be a big step forward for China's 22-year-old lottery business," she said. Biking, sailing, beach volleyball and horseracing, as long as they are held in Hainan, could all be the subject of the pari-mutuel lottery in the future, she said. The lotteries, as well as duty-free shopping, a broadened visa-free policy and a harsher crackdown on illegal tourism practices to improve Hainan's image, are expected to work together to attract more tourists from home and abroad. Hainan is expected to become a global tropical island resort destination by 2020, and the tourism industry is expected to contribute 12 percent of GDP in Hainan by then. To support the island's development, the State Council has given the nod to Hainan to explore the possibility of allowing domestic tourists outside of Hainan to do duty-free shopping on the island. The Ministry of Finance is leading a feasibility study on the practice as well as giving tax refunds to overseas tourists in Hainan. The news, however, worried some who fear Hainan might shake Hong Kong's position as the shopping paradise. To reject the concern, Hainan Party chief Wei Liucheng said Hainan is only in the experimental stage, and it will take a period of time for Hainan to build and develop a shopping environment matching the level of Hong Kong. "In the period we can foresee, a strong competition between Hainan and Hong Kong is not going to take shape," he said. Hainan will also attract tourists by further extending its favorable visa-free policy to five other nations - Finland, Denmark, Norway, the Ukraine and Kazakhstan - from the previous 21 nations including the United States, Japan and Canada. The requirement on tour groups from Russia, the Republic of Korea and Germany will also be loosened to require a minimum of two people, and they can stay for a maximum of 21 days in Hainan. "Sanya in Hainan province is already in the top few cities in China in terms of tourism facilities and service quality," said Tang Yibo, supervisor of the holiday department of, China's leading online travel service. "Now with the central government's policy support, I believe Hainan will elevate itself in many aspects, such as infrastructure and service, to an international level. It will benefit tourists more," he said. Hainan received some 750,000 overseas tourists in 2007, mostly from Russia and South Korea. In total, it received 18.4 million tourists from home and abroad in 2007.

Bottles of Corona and Carlsberg are lined in the window of a bar in Beijing. Enforcement officials recently broke up a gang selling fake liquor and warn that counterfeit beers could pose a health risk.

Ice sculptures are displayed at the International Ice and Snow Sculpture Festival in Harbin, in Heilongjiang province. Fairy tale palaces, towering pagodas, and an Egyptian Sphinx - all carved from ice - are among the sights at the 26th annual event. A recent cold spell has benefited the festival, but has caused havoc in other parts of northern China.

A Shenzhen police officer faces investigation and public outrage after holding a wedding banquet for his daughter with 110 tables of guests who tucked into lobster and abalone. Liu Shenqiang is deputy chief of police at Shenzhen airport. News reports, internet comments and now official investigators have asked how he could afford hundreds of thousands of yuan for the wedding feast on Sunday, the Legal Daily reported yesterday. Liu does not stand especially high in the official hierarchy, and critics have seized on the banquet as a glimpse into the perks that even minor power can bring in a top-down political system presiding over a booming economy. The banquet cost at least 440,000 yuan (HK$500,000), with the mainly seafood menu priced at 4,000 yuan a table, the Legal Daily reported, citing Shenzhen media reports. The paper said authorities were investigating the feast, with its suggestions of questionable income or favour-trading. Wedding guests often give cash gifts to the bride and groom, which help offset celebration costs. Liu said earlier he had to hold such a big wedding celebration to accommodate many relatives and friends from his home village and his stint in the army. "There was nothing I could do about it," the Legal Daily quoted him as saying. "I hope everyone will excuse me, and understand it from my perspective." Many internet users were not convinced. "Any public figure has to accept scrutiny and scepticism," one comment said.

Beijing yesterday brushed off concerns that its plans to develop Hainan Island would worsen a territorial dispute considered one of Asia's potential flashpoints. The central government wants to transform the province into a major tourism destination over the next decade and expand oil and natural gas exploration in the area. While Hainan's sovereignty is not contested, island chains that Beijing says fall within Hainan's jurisdiction remain in dispute, most notably the Paracel and Spratly groups. "We will only develop tourism and economic and social growth within our territory and territorial waters. I don't think our development will have any impact on others," said Wei Liucheng, Communist Party secretary of Hainan. "We will not encroach upon the interests of others through our development." The island chains are also claimed by Vietnam. On Monday, Vietnamese Foreign Ministry spokeswoman Nguyen Phuong Nga said Beijing's plan "seriously violates Vietnam's sovereignty ... causes tension and further complicates the situation". Chinese forces seized the western Paracels from Vietnam in 1974 and sank three Vietnamese naval vessels in a 1988 sea battle. The sides have yet to demarcate their sea border. China and Vietnam both cite historical and archaeological evidence to back up their claims to the islands, and Beijing has increasingly sought to cement its hold through international maritime law. Taiwan, Malaysia, Brunei and the Philippines also claim all or part of the Spratlys. Wei said plans to develop tourism in Hainan were still under discussion. Energy development will focus on building up the "resource service industry" in the South China Sea, he said. The Spratly and Paracel chains are surrounded by rich fishing grounds and are believed to sit above large oil and natural gas reserves.

Lenovo Group is wading into the smartphone market with a thin, touchscreen device based on Google’s Android operating system, following the footsteps of PC rivals like Dell and Acer.

American carmaker Ford, whose Chonqing factory is seen in this file picture, said on Thursday that sold 440,619 vehicles in mainland in 2009. Ford Motors posted a 44 per cent jump in its mainland vehicle sales last year and aims to outpace growth in the world’s largest auto market this year, banking on continued state policy incentives to drive demand. Ford, which broke ground for a US$490 million new plant in September, sold 440,619 vehicles in the country in last year. That compared with 306,306 units in 2008 and marked an acceleration in annual growth from 32 per cent in the first nine months of 2009, the company said in a statement. “We think there will be something like 8 per cent growth of the market this year,” Nigel Harris, head of Ford’s sales and marketing in mainland, told reporters. “Our ambition is to sell more than 8 per cent.” Ford is the latest auto firm to report strong sales growth in the country, where automobile demand rebounded strongly last year thanks to Beijing’s aggressive cuts in sales taxes on small cars and subsidies for buyers in rural areas. Larger rival General Motors, sold 1.83 million vehicles here last year, up 67 per cent. Sales of Toyota Motor rose 21 per cent to 709,000 units during the period. Harris attributed Ford’s record sales last year partly to its popular Focus sedan, which racked up a tally of 134,336 units, or nearly a third of its overall sales. Sales of its all-new Fiesta small car, rolled out in March, came to 47,358 units, company data showed. Ford also makes Mondeo, S-MAX, Volvo S40 and S80 among other models in a three-way tie-up with Chongqing Changan Auto Co and Mazda Motor. Overall sales of the venture soared 55 per cent to 315,791 units last year. Sales of Ford’s Transit light commercial van, made at its partly owned Jiangling Motors Corp, rose 22 per cent to 33,585 units, it said. Ford, the only Detroit automaker that has steered clear of emergency federal funding and bankruptcy, is a relatively latecomer to mainland, where GM and Volkswagen lead. However, it is speeding up expansion in the country with a 150,000 unit new car plant in Chongqing, scheduled to start operations in 2012. The number 2 Detroit automaker has also expanded its service warranty programme for cars to 3 years/100,000km, effective on January 1, compared with 2 years/40,000km previously company executives said. Ford had in October named the parent of Geely Automobile Holdings (SEHK: 0175) the preferred bidder for its premier Volvo car unit and aimed to complete the deal in the first quarter. Company executives declined to say whether Volvo S40 and S80 models will continue to be manufactured at Ford’s mainland venture after the sale. Ford sold more than 15,000 locally manufactured Volvo cars in mainland in 2008, or 3.4 per cent of is total sales in the country, according to Jeffery Shen, president and CEO of Ford’s China car venture.

Jan 8, 2010

Hong Kong*: Legislators want more transparent guidelines for appointing the next head of the city's anti-corruption body following the "secret" rehiring of Timothy Tong Hin- ming after he retired from the civil service last year. The lawmakers said they are concerned there was no open recruitment, or any announcement about Tong's contract renewal as commissioner of the Independent Commission Against Corruption. Tong told the Legislative Council's security panel yesterday he was appointed to head the ICAC on July 1, 2007, but retired from the civil service last year when he reached 60. He said he was immediately rehired on a contract basis, with the new deal running until June 30, 2012. Democratic Party lawmaker Cheung Man-kwong asked if the government deliberately concealed Tong's rehiring. Acting director of the Chief Secretary for Administration's Office Shirley Yung Pui-man said the ICAC commissioner was appointed by the central government, and the contract renewal made no real impact as Tong would simply continue to serve in the same post. "Tong just retired from the civil service and, as it makes no real difference to his work, we did not announce the change," she said. Tong also insisted that nothing really changed. "Basically, the terms are the same," he told the panel. "The responsibility and salary package are the same. Even the number of holidays have not changed."

ICBC (Asia) (0349) assured the public that banks have not been driving mortgage rates down due to fierce industry competition. Director and deputy general manager Stanley Wong Yuen-fai said banks have, as a whole, agreed on the same mortgage rates. He rejected claims that banks have cut their mortgage rates. "Most banks had adopted prime rate [5.25 percent] minus 3 percent by the end of last year," Wong said. "It's not true to say they cut prices further in 2010." Banks are keen to make mortgage loans since the weighted average risk is low across the property cycle and, therefore, their capital returns are higher than other loans, Wong explained. He added competition has not heightened, as there was a time last year when the mortgage rate was as low as prime minus 3.2 percent. After the Monetary Authority warned in October that some aggressive mortgage plans may incur losses, lenders soon raised their rates, according to Wong. He said both the US and global economies appear to be getting out of the financial crisis and. since the United States is set to raise its rates in the second half, there is no room for any decrease in mortgage rates in the city. Wong expects Hong Kong interbank offered rates to increase accordingly. He added there is still a considerable difference between the common mortgage rate of 2.25 percent and the three- month HIBOR of below 0.5 percent, so banks will be able to cope with the associated risks as long as the increase is not too big. Higher US rates and a better global economy may drive out of Hong Kong capital which is seeking risk shelter for other investment opportunities, said Wong. There will then be less liquidity in the city. Meanwhile, the Land Registry said home sales in the territory fell to the lowest level in eight months in December after the government expressed concern over potential asset bubbles and took steps to cool surging house prices. Sales slid 9 percent to HK$34.7 billion in December from November. The number of transactions dropped 1.1 percent to 9,108 units from 9,213 units.

Daphne International(0210), the Hong Kong-listed female footwear retailer, is to buy a 60 percent stake in high-end mainland shoe distributer Full Pearl International for HK$195 million. The transaction is expected to be completed in the first quarter of this year. "We are delighted to become a major shareholder in Full Pear," Daphne chairman Chen Ying-chieh said. "It will give us an immediate presence in shopping malls and enhance our market position." Full Pearl owns more than 200 stores, mostly in shopping malls in China. It sells its own brands, which include AEE, a high-end female shoe brand based in Shanghai. It also distributes brands including ALDO and Jessica Simpson. Daphne said the company would pay HK$130 million to subscribe to new shares. The acquisition represents a 40 percent holding in Full Pearl and Daphne will pay another HK$65 million to its existing shareholders for the remaining 20 percent stake. Full Pearl's brand will be managed alongside Daphne's own brands, including AREZZO and SOFFT, after the acquisition, the company said. Daphne shares surged 4.37 percent and closed at HK$6.68 yesterday after the acquisition news was released in Taiwan during the morning session.

U.S. player Michael Chang of the Americas team speaks at a press conference in Hong Kong, south China, Jan. 4, 2010. The Hong Kong Tennis Classic 2010 tournament will be held in Hong Kong on Jan. 6-9. Top tennis stars would represent four teams, namely Europe, Asia Pacific, Russia and the Americas in the tournament.

Maria Sharapova of the Russia team attends a press conference in Hong Kong, south China, Jan. 4, 2010. The Hong Kong Tennis Classic 2010 tournament will be held in Hong Kong on Jan. 6-9. Top tennis stars would represent four teams, namely Europe, Asia Pacific, Russia and the Americas in the tournament.

National education at local schools will receive a big boost in 2012 with the incorporation of modern Chinese history into the primary curriculum and the launch of a new junior secondary subject aimed at strengthening students' national identity. Benjamin Yung Po-shu, principal education officer in curriculum development with the Education Bureau, says the measures are being rolled out in response to calls for the boosting of national education in Chief Executive Donald Tsang Yam-kuen's past two policy addresses. Yung said knowledge about modern China's social and economic development and its impact on society would be incorporated into general studies in primary schools. Primary school students currently study China in various subjects, including Chinese and general studies, with a stronger focus on softer elements such as Chinese tradition and customs. At the junior secondary level, a new subject, life and society, will replace economic and public affairs and social studies. The new subject will be divided into three parts: individual, society and country. Yung said the subject would be taught under the "one country, two systems" framework. "A step-by-step approach will be adopted," he said. "Students will first learn about themselves and Hong Kong laws and systems and extend to Hong Kong's relationship with China and China's economic and political systems." Yung said the government would fund more exchange trips to the mainland so that students could learn about the nation's development and history. This month, 2,500 senior secondary students from more than 200 schools will visit six historic cities, including Beijing and Xian , on a five-day trip that will cost HK$17 million. Each student will pay HK$900 for the HK$5,500 trip, with the government subsidising the rest. Yung said the number of places on such trips would be expanded to 10,000 in three years. Ada Cheung Wai-ching, principal of St Bonaventure Catholic Primary School in Diamond Hill, which sent 36 students on a government-organised three-day trip to Guangdong in November, said such trips could strengthen students' affinity with the nation. "They feel that they are Chinese after the trip," she said. "That sense of identity couldn't be nurtured through such activities as flag-raising." However, education sector lawmaker Cheung Man-kwong said the government's move smacked of indoctrination. "All that teaching about China's development and systems seems like the government is helping the central government to explain its policies," he said. "It does not inspire much critical thinking." He said that making Chinese history a compulsory subject for all junior secondary students would be more effective in strengthening national identity than organising a host of trips to the mainland. "Learning about the 5,000 years of Chinese history through textbooks is much more effective than spending several days in China doing sightseeing," he said. Cheung and the heads of school councils also called for the inclusion of sensitive political subjects like the June 4 incident in 1989 in the primary and secondary curriculums.

Asia's largest fashion event, this month's Hong Kong Fashion Week, will see a big increase in the number of exhibitors over last year's event, with more big-name European labels taking part. About 2,000 exhibitors from 30 countries and regions will participate in Hong Kong Fashion Week for Fall/Winter and World Boutique, which both run at the Convention and Exhibition Centre from January 18 to 21. This represents a 25 per cent increase on last year's 1,600 exhibitors. The big-name European brands joining the fashion events for the first time include Britain's Vivienne Westwood and Spain's Mango. The gradual economic recovery in the West could be the reason behind the welcome increase in European participants, the deputy executive director of the Trade Development Council, Benjamin Chau Kai-leung, said. Vivienne Westwood's creative director, Andreas Kronthaler, and the brand's marketing and merchandising director, Christopher di Pietro, said a seminar during Fashion Week would "decode" the English fashion icon. Vivienne Westwood would also use the Hong Kong events to make the world debut of its crossover series with Lee Jeans. Russian and South African exhibitors will take part in Fashion Week for the first time. Two new zones - intimate wear, and testing, certification and inspection - will be set up at the trade fair. World Boutique, which showcases designer labels in particular, has attracted 250 exhibitors from 19 countries and regions. Appearing in the city for the first time will be The Underground Quarter by Londonedge, a group of 11 exhibitors from the United States and Europe that features alternative, rock or street fashion. Also for the first time, the Netherlands will host a country pavilion. A total of 25 fashion shows will take place at the two fairs and about 3,800 overseas buyers will be present for the events. Chau said the Trade Development Council spent HK$80 million bringing overseas buyers to Hong Kong throughout 2009. The number of exhibitors at the year's fairs was up 1 per cent compared to 2008, and the number of buyers was up 2 per cent. The council would continue to spend money on encouraging overseas buyers to come to the city, but he did not spell out the exact amount. The council would emphasise Asian markets such as Indonesia and India in its trade promotion work. Boby Chan Yum-kit, the chairman and managing director of exhibitor Moiselle, said the company saw double-digit growth in sales during the Christmas holiday period compared with last year. The purchasing power of mainlanders had surged in the second half of 2009, he said.

HK talent short amid film industry's golden period on mainland - The mainland film industry has hit a high and in the process created a shortage of filmmaking professionals in Hong Kong. Jack So Chak-kwong, the chairman of the Hong Kong Film Development Council, said that the industry had reached a peak on the mainland, setting box office records with a fast-rising number of cinemas, and Hong Kong filmmaking talent had become highly sought after. Speaking at the opening ceremony of the Hong Kong Baptist University's Academy of Film yesterday, So said that there was not enough talent to meet the demand, and there was an urgency to speed up training of professionals. He said that most industry practitioners - from the lighting to the post-production processes - had been employed because of the favorable environment on the mainland, with more investors investing in the market. So said that mainland box office takings in 2009 reached 6 billion yuan (HK$6.96 billion), 40 per cent more than the 4.3 billion yuan in 2008, and cinemas had been increasing at a rate of two new screens per day. "But it's also worrying because we do not have enough talent," he said. Wilfred Wong Ying-wai, council and court chairman of the Baptist University and a board member of the Film Development Council, said that as local TV stations no longer provided much training for filmmaking talent, an academy focusing on talent grooming could play a key role. Cheuk Pak-tong, the film academy's director, said it would focus on training professionals to meet industry needs with courses focusing on production management, scriptwriting and post-production. The Film Development Council has given HK$3.4 million to support the development of the Academy of Film. The academy has about 300 undergraduate students, 100 students studying for the master of fine arts degree and 30 pursuing high diplomas. Meanwhile, the Hong Kong International Film Festival Society said that 25 projects from 17 Asian territories had been shortlisted for this year's Hong Kong-Asia Film Financing Forum.

China*: Beijing is warning officials to brace for a possible new wave of human swine flu (H1N1) infections as the country enters the busy Lunar New Year travel period. The holiday period this year runs from late January into February. "During the New Year and Lunar New Year period, various factors such as spring travel, tourism, shopping, and other group activities will increase the risk of H1N1 infection," the Health Ministry said in a bulletin posted on its website yesterday. "Disease prevention measures must remain rigorous." The mainland has already taken severe measures to control the spread of the virus, quarantining large numbers of travelers and setting up temperature checks at virtually all schools and public buildings. Experts differ on how effective those steps have been and the ministry said China had recorded more than 120,000 cases of infection by the end of last month, including 648 deaths. It said 447, or 69 percent, of those deaths occurred in December alone, a spike attributed partly to a rise in virus fatalities among expectant mothers from 8.8 percent of November's total to 18.6 percent of all December deaths. Those with chronic illnesses and the obese also succumbed to the disease in larger numbers. Underscoring the striking rise in the death toll, new H1N1 cases for last month accounted for only 23 percent of the total. But the ministry said it has not discovered mutations in the virus or the emergence of drug-resistant strains, appearing to put much of the increase in deaths down to seasonal factors. While it said numbers of cases have fallen strikingly in Beijing, Shanghai and other major cities, rural areas will likely suffer the brunt of a renewed outbreak. Almost 50 million people have received the H1N1 vaccine.

China has raised solemn representations to the United States government and urged it to cancel and cease arms sales to Taiwan, Foreign Ministry spokeswoman Jiang Yu said Tuesday.

The Chinese government will continue encouraging outbound investment while attracting foreign investment in 2010 for "stable and relatively fast" growth of the country's economy, a government official has said. Outbound investment, or "go-global" strategy, should aim at making use of overseas resources, market and advanced technologies, so as to help facilitate development of China's domestic economy, Zhang Xiaoqiang, vice minister in charge of the National Development and Reform Commission, said in the speech posted on the commission's website Tuesday. The remarks were made at a conference held in Beijing on foreign investment on Dec. 11, but was not released until Tuesday. In the first three quarters of 2009, China saw its investment overseas at 32.87 billion U.S. dollars, up 0.5 percent year-on-year, according to the Ministry of Commerce (MOC). The country would also continue to attract foreign investment, he said. "Social stability, huge potential market and low cost of productive resources are still advantages for foreign investment," he said. The country would see more advanced technologies and talents from foreign countries and foreign investment would better serve the structural reform of the country's economy. Zhang said the government would stress national economic security while seeking to increase foreign investment. "We have to properly handle new challenges and situations when further opening sectors, including finance and telecommunications." China's foreign direct investment shrank 14.26 percent from the same period last year to 63.77 billion U.S. dollars in the first nine months as foreign companies cut spending amid the global economic downturn, according to the MOC. In the speech, Zhang also said China's currency was facing renewed pressure to appreciate because of the quantitative easing monetary policy in developed countries, a weakening dollar and recovery of China's economy. The pressure would likely spur massive inflow of speculative money, making liquidity management more difficult. Premier Wen Jiabao also said in December in an interview with Xinhua that the yuan faced appreciation pressure. "China will not yield to foreign pressure for the appreciation of its currency yuan in any form," Wen said. "A stable Chinese currency is good for the international community," Wen said.

The Chinese government said on Monday that it aims to build the southern island of Hainan into a top international tourism destination by 2020. The country also plans to develop the only tropical island province to be a platform for international economic cooperation and cultural exchanges, according to a statement of the State Council, or the Cabinet, released on, the official web portal of the Chinese government. The island will also become a base of agricultural production and a base for developing resources and services in the South China Sea, said the statement. The government said it would maintain the healthy development of the island's property sector and encourage developers to build premium hotels and resorts. It also supports family-run hotels and property-rental services. The plan also includes measures to promote modern tropical agriculture in Hainan, including tropical fruits, aquatic products and others, and expand its agricultural cooperation with Taiwan. The government will further extend its favorable visa-free policy to five other nations including Finland, Denmark, Norway, Ukraine and Kazakhstan from the previous 21 nations including the United States, Japan and Canada. The statement also said the government would boost the island's development by expanding oil and gas exploration, offering more duty free services, improving transportation networks, developing logistics, reducing pollution, building more information networks and infrastructure. The government plans to lift the value-added output of tourism in Hainan to more than 8 percent of its gross domestic product (GDP) by 2015 and more than 12 percent by 2020, the statement said. Figure of how much value-added output of tourism accounted for in the province's GDP in 2008 was not available. Hainan's preliminary GDP stood at 145.9 billion yuan (21.36 billion U.S. dollars) in 2008, up 9.8 percent year on year.

Photo taken on December 2009 shows the panorama of a construction site of a tourist resort in Qionghai of south China's Hainan Province. The southernmost island province will be shaped into a world top class tourist destination by 2020, according to a State Council announcement released on Monday. The government said it would maintain the healthy development of the island's property sector and encourage developers to build premium hotels and resorts. It also supports family-run hotels and property-rental services. Efforts should also go to the financial sector in the island by pushing forward the trial program of cross-border trade RMB settlement and backing qualified tourism firms to get listed in the stock market.

Hainan Beach - The government said it would maintain the healthy development of the island's property sector and encourage developers to build premium hotels and resorts.

Beijing's largest diamond marketplace "Make Lumer Shopping Plaza" opened for business during the New Year's Day holiday. With a floor space of 10,000 square meters and located in Solana, M&L plaza, they offer diamond categories that could be 20 times that of traditional diamond shopping centers. And it also offers buy-back services for diamonds with a weight more than 0.3 carat. Industry statistics show China, which saw a 15 percent growth of diamond consumption last year, is the only country that experienced an increase in diamond consumption in the global financial crisis. China has been a major consumer for diamonds in the world. The transaction value of Shanghai Diamond Exchange, the only diamond exchange in China, reached $1.37 billion in 2008.

China may export its controversial maglev train expertise to Malaysia as it ramps up efforts to be one of the world's leading railway builders. Mainland firms including CNR Tangshan Railway Vehicle are in the running to win billions of dollars of railway contracts in the Southeast Asian country as part of the sector's "going out" policy. The Ministry of Railways signed a contract on Monday with Industrial and Commercial Bank of China (SEHK: 1398) to help companies win projects abroad. But questions are being asked about whether the magnetic levitation project is the right choice to showcase the country's train-building prowess. The German-developed technology uses powerful magnets to suspend a train above a track and propel it at speeds of up to 450km/h. Shanghai's 30km maglev line - the only one in commercial operation in the world - is suffering from both significant financial losses and criticism from nearby residents. It was built at a cost of 10 billion yuan (HK$11.36 billion) - 3,300 yuan per centimetre. CNR Tangshan sales chief Wang Dianwu said the company had been in talks with parties in Malaysia over various railway projects but he declined to comment on a Malaysian newspaper report that it was in talks to build a cross-sea maglev rail link between Georgetown on Penang island with Butterworth on the West Malaysian peninsula. If this project becomes a reality, it will be China's first export of its maglev railway system. CNR Tangshan is a subsidiary of China CNR Corp, a state-owned rolling stock manufacturer that listed in Shanghai last month. Keretapi Tanah Melayu (KTM), the Malaysian railway company, is expanding capacity and in the next six months is expected to call for an open tender to buy 38 six-car trains worth two billion ringgit (HK$4.58 billion). KTM president Aminuddin Adnan reportedly said it was looking at companies from China, Japan and Europe to supply the trains, to be delivered over 18 to 24 months. But Aminuddin indicated KTM does not appear eager to buy the Chinese maglev. He told the Malaysian newspaper Star: "I would rather wait for the second-generation trains to come before we seriously look into this. Otherwise, we may be investing in a technology which is still at an early stage." Penang Chief Minister Lim Guan Eng told the Edge newspaper he had not received any proposal for a maglev rail link between the island and the peninsula. CNR Tangshan was reportedly in talks to build the maglev rail link between Penang and the peninsula, as well as two 350km/h rail links, one connecting the Malaysian capital, Kuala Lumpur, with Johor Bahru and another linking Kuala Lumpur with Kuantan. "My personal view is Malaysia won't use maglev. It's much cheaper to build high-speed rail than maglev," said Jiong Shao, the head of China equity research at Nomura. The higher cost of maglev railway is due to the special elevated tracks that need to be built. "China also doesn't own its technology for maglev. It's from Siemens." Under Beijing's plan to expand rail exports, the railways ministry will provide political guidance and support to firms in their efforts to win contracts overseas while ICBC will provide financing to foreign projects undertaken by Chinese firms.

Jan 7, 2010

Hong Kong*: As much as HK$400 billion may be raised through new listing activity in Hong Kong this year, backed by the continuing capital inflow to the city, said PricewaterhouseCoopers. Mainland bourses in Shanghai and Shenzhen may reap 320 billion yuan (HK$363.5 billion) from initial public offerings - up 72 percent from last year. "When taking market uncertainty into account, the local market is expected to reap HK$300 billion this year from new listings which will surely be among the top three largest IPO markets in 2010," said Edmond Chan Chiu-kong, a capital markets services group partner at PwC. But the amount may be higher if market conditions are favorable. About 60 firms are expected to tap the market for HK$300 billion, which is 23 percent more than the HK$243.7 billion raised in IPOs last year. "With growth potential in the mainland economy and a reasonable price-to-earnings multiple, investors are keen to take equity interests in companies with exposure in the Chinese market," Chan said. Listing candidates will mainly come from firms involved in finance, mainland property, basic materials, mining, retail and consumer goods, he said. Russian aluminum giant UC Rusal plans to raise as much as HK$20.13 billion by this month. More than half of an estimated 55 listing candidates on the main board are expected to price shares at over 15 times their price-earnings ratio and raise a combined HK$299.5 billion. Five IPOs on the Growth Enterprise Market will raise HK$500 million this year, according to PwC estimates. It forecasts that 145 companies will go public in the mainland, with 130 of them listing in Shenzhen and 15 in Shanghai. Chan expects Shanghai's international board to be launched this year and may attract five overseas firms, which together might raise about 100 billion yuan.

Supporters of the proposed express rail link project to Guangzhou make their voices heard in a march in Central Thursday. Construction of the HK$66.9 billion high-speed rail link project faces the threat of further delay, with lawmakers opposed to it planning to hijack today's funding vote by tabling at least 30 motions for discussion. But even if the pro-government majority manages to deal with these and passes the funding by the end of the six-hour meeting at 10pm, lawmakers who support the project will still face thousands of protesters who have vowed to surround the building. Even before tonight's showdown, scuffles between supporters and opponents of the project broke out in several places yesterday. At a special Legislative Council Finance Committee meeting to discuss whether transport experts from the Professional Commons group, which opposes the project, should be allowed to present a counter-proposal at today's meeting, independent lawmaker Chim Pui-chung, who backs the project, engaged Wong Yuk-man of the League of Social Democrats in a shouting match. The pair shouted derogatory remarks for several minutes, calling each other names such as "beggar", "prisoner" and "someone with a triad background", until the meeting's chairwoman, Emily Lau Wai-hing, ordered them to stop. Soon afterwards, they shook hands and apologised for their behaviour. "I regret what I did. It looks bad and sets a bad example for the young," Wong said. "I hope Chim will not take my words to heart." Project supporters from the Association of Engineering Professionals in Society were surprised when three Professional Commons members stormed into a press briefing yesterday, challenging them to a debate and handing out leaflets to reporters. Association senior vice-chairman Yim Kin-ping said: "They have had enough discussion ... This man [Paul Zimmerman] is not even an engineer," Yim said, while a colleague snatched leaflets from reporters. He said the Professional Commons' proposed alternative - moving the terminus from West Kowloon to Kam Sheung Road and connecting it to the Airport Express - could not possibly be better than the government's plan, which had taken billions of dollars and years of study by numerous experts to complete. The Finance Committee rejected the Professional Commons' request to speak at today's meeting. Lawmakers said they had had at least two chances to present their proposal to legislators since November. Lau pledged to stop lawmakers from repeating questions today, but said she could not deprive them of their right to speak. "I will conduct the meeting according to the procedure, in a fair and open manner," she said. She has scheduled another meeting for next Friday in case today's fails to bear fruit. Albert Chan Wai-yip, of the League of Social Democrats, said he and his colleagues would keep tabling motions to prevent a vote on funding. "We will invite discussions on subjects such as whether there will be any noise mitigation measures for properties along the line," he said. "Each affected housing estate can be made a separate motion." Ronny Tong Ka-wah, of the Civic Party, who successfully delayed the last vote on December 18, said he would not seek an adjournment today. "Many questions are still left unanswered. I believe today's meeting may not be long enough to cover all of them," he said. Tycoon Li Ka-shing said funding would be passed eventually because Hong Kong people were intelligent enough to know what was good for them.

The entire, 800-strong police tactical unit will be on standby for tomorrow's vote on funding for the multibillion-dollar express railway project, with opponents threatening to surround the Legislative Council building with 10,000 protesters. The last time the entire police tactical unit was placed on standby was during protests by Korean farmers at the World Trade Organisation meeting in 2005. Police negotiation experts will also be on standby for tomorrow's showdown in case tempers start to fray. The negotiators have previously only been deployed for major public events such as the WTO meeting and the Olympic equestrian competition in 2008. Police are concerned about the impact of the protest on traffic and public order in Central, especially since 800 people have joined a Facebook group to chat about their "readiness for commotion and bloodshed" during the protest. The protest's organiser - an alliance of the Justice and Peace Commission of the Hong Kong Catholic Diocese and a group of youngsters who call themselves the Post-80s Anti-Express Railway Group - said opinions would be expressed in a peaceful and rational manner. Organiser Huck Yuen, who denied any links with the Facebook chat group, said: "A lot of people and groups are planning their own actions right now. "We will be peaceful and show restraint but there is no way we can know or prevent actions others may take." More than 100 police from the quick reaction team and uniformed officers from Central district will be deployed to manage the crowd. Supporters and opponents of the HK$66.9 billion high-speed rail link to Guangzhou have been lobbying support since November. A survey of 1,018 people by the University of Hong Kong found that 45 per cent opposed the project or demanded its suspension, almost triple the 16 per cent in a similar survey in May. Only 47 per cent of respondents supported the project, down from more than 80 per cent in May. Nearly 60 per cent said they had little knowledge of the project. Pan-democrat lawmakers, meanwhile, are finalising tactics to delay tomorrow's vote. Albert Chan Wai-yip, of the League of Social Democrats, said he and his two colleagues - Leung Kwok-hung and Wong Yuk-man - would each propose a motion during the six-hour meeting, such as urging the government to reconsider moving Tsoi Yuen village to another place. The Transport and Housing Bureau has already ruled out that option, saying that rebuilding the village would recognise the legality of unauthorised squatter huts and cause upheaval to existing land policy. Professional Commons - a group of experts closely connected to the Civic Party - is demanding time to talk about its alternative proposal during the meeting. "The taxpayers are paying an unnecessary HK$13.4 billion if the project begins now because the building tender works price is rising in light of the many infrastructure projects on the go," group spokesman Albert Lai Kwong-tak said. Lawmakers had suggested Lai speak at a Legco rail subcommittee meeting instead but he refused that offer. Legco will hold a meeting today to decide if the group should be allowed to address tomorrow's meeting. More than half of lawmakers have expressed support for the project. This means that delaying funding is all the pan-democrat camp can do to prevent construction of the link, which would hook up to the national high-speed rail network by 2015. But Chan said they would fight until the last minute and would walk out of the meeting in protest when the council voted on the government's HK$2 billion compensation package for Tsoi Yuen Tsuen land owners and residents. The Finance Committee can conduct another special meeting to continue deliberation of the project's funding if tomorrow's meeting fails to yield an outcome.

Agricultural Bank of China (ABC), the only bank among the Big Four State-run lenders yet to float shares, is planning to raise up to 150 billion yuan ($21.97 billion) through a dual listing in Shanghai and Hong Kong as early as April this year.

Further delays in the construction of the Guangzhou-Shenzhen-Hong Kong Express Rail Link could cost the taxpayer dearly, Secretary for Transport Eva Cheng Yu-wah warned on Tuesday. She appealed to legislators to vote on Friday in favour of the HK$67-billion funding for the rail link that will connect Hong Kong via Guangzhou with the national express rail network on the mainland. Cheng was speaking after she travelled from Wuhan to Guangzhou on the new high-speed railway between the two cities on Tuesday morning. The rail link, which opened on December 26 and is estimated to have cost 116.6 billion yuan (HK$132.3 billion), has shortened the travel time by nine hours. It is part of a national express rail network connect infrastructure networks across the mainland. The Secretary for Transport, along with Director of Highways Wai Chi-sing and a group of local reporters departed Wuhan at 9am and arrived in Guangzhou before noon. Speaking after her arrival, Cheng said the construction of the Hong Kong to Guangzhou section should be completed as soon as possible. “We are seeking funding for the Hong Kong section of the express rail link and it is estimated it would be completed by 2015. By the time the Wuhan-Guangzhou high-speed railway has been operating for five years, the Beijing-Guangzhou high-speed rail link will have been running for two years. We hope Hong Kong will be able to enjoy the economic benefits brought by [access to] the high-speed railway [network],”Cheng said. Cheng said if the construction of the railway was further delayed, taxpayers in Hong Kong could be losing HK$5 million per day. She also argued that the high cost of constructing the rail link was reasonable because the price of commodities had risen sharply over the past few years.

A teenage psuedo-model was placed on probation for 12 months by the Eastern Magistrate's Court on Tuesday after she pleaded guilty to possessing ketamine. Dressed in a black t-shirt, sweaters and trousers, Monique Chau Hoi-ying, 17, a form five student and a part-time model, appeared in Eastern court accompanied by her relatives. Appearing at a press conference on Tuesday afternoon, Chau repeatedly bowed and apologized for her actions. She said she understood that taking drugs can harm people's health and affect their prospects. Chau said she also hoped that young people would learn from her mistakes. On November 17 last year, Chau was caught with a small amount of ketamine in a lavatory at her North Point school. Acting Principal Magistrate Bina Chainral placed Chau on probation for 12 months and ordered her to pay HK$500 in court fees. Chau was also ordered to visit a drug rehabilitation treatment centre, if her probation officer deems necessary.

Hong Kong's consumer confidence continued to improve significantly over the last three months, according to a fourth quarter survey released by the Bauhinia Foundation Research Centre (BFRC) on Tuesday. The BFRC interviewed 1,070 residents from December 1 to 5 last year. It found that the Bauhinia Hong Kong Consumer Confidence Index (BHKCCI) increased significantly from 115.4 in the previous survey in September to 127.1 in December last year. Chairman of the BFRC Anthony Wu Ting-yuk said the rise in the BHKCCI shows that local consumers’ optimism regarding the city’s economy and its short-term prospects have increased. “This will be translated into higher consumer spending and investment over the next three months,” he said. Respondents’ expectations for the property market over next three months have also improved. “Hong Kong’s property market has slowed down since last October because of rising concerns over speculation and possible asset bubbles. Nevertheless, our survey suggests that more respondents are likely to buy flats in the short-term future,” he said. However, Wu said consumers were still cautious regarding the long-term outlook for the state of the economy.

The government plans to include two Hong Kong Island sites worth billions of dollars on the application list this year in response to market calls for premium plots, a source said. The first site is 8-12 Deep Water Bay Drive and the other is 47 Sassoon Road, the source told Sing Tao Daily, sister publication of The Standard. Midland Surveyors director Alvin Lam Tsz-pun said the Deep Water Bay Drive parcel with mountain views can sell for nearly HK$2.8 billion, representing a land cost of HK$12,000 to HK$13,000 per square foot. He expects the Sassoon Road lot to be worth HK$15,000 psf where developers can build houses of up to three stories. The residential project Glendale now occupies the Deep Water Bay parcel and is a civil servants quarters, as is the case with the Sassoon Road site. According to the Lands Department, some homes will be on lease until the end of August. It covers 110,000 square feet and can deliver a gross floor area of over 230,000 square feet under a plot ratio of 2.1. Up to 14 stories are allowed at the site. Lam said Glendale is still nice in appearance and hence he believes it is likely that government would let developers renovate the buildings for sale. Glendale is only 20-odd years old and the source said the government may invite public tenders, just as it did earlier with block A of Wylie Court in Yau Ma Tei and blocks B and C of Winfield Building in Happy Valley. Concerning the news, a spokesperson from the Lands Department said there are still tenants living in Glendale and for now none of them have failed to renew their contracts. The government has been looking into launching luxury Hong Kong Island sites in recent months, including two projects in North Point and one in Kennedy Town.

China automobile franchiser Zhongsheng Group and mining equipment company International Mining Machinery (IMM) are planning to raise capital through Hong Kong initial public offering in first quarter of 2010, sources close to the companies said. Zhongsheng, based in harbour city of Dalian, aims to raise between US$800 million and US$1 billion, aiming to tap the robust growth in the country’s auto market. The company mainly provides sales, spare parts, services and surveys businesses for major international automobile brands, including Audi and Toyota in mainland, now the world’s biggest car market. Morgan Stanley and UBS are handling Zhongsheng’s IPO. IMM aims to raise about $500 million from initial public offering by February, sources close to the deal said on Tuesday. IMM, backed by private equity firm The Jordan Company, mainly designs and manufactures coal mining equipment. “IMM plans to seek Hong Kong listing committee approval in the middle of January, and aims to list next month,” one of the sources said. Swiss bank UBS and BOC (SEHK: 3988) International, the flagship investment banking arm of Bank of China, were handling IMM’s Hong Kong IPO, said the sources.

Calling for the abolition of functional constituencies in the Legislative Council as part of electoral reforms would be reckless because the system had operated smoothly for the past 23 years, the deputy chairwoman of the Basic Law Committee said. In a surprise reference to former governor Chris Patten, Elsie Leung Oi-sie said that instead of calling for an end to the seats, people should look at how Patten's reform of 1995 expanded the franchise from 69,825 registered voters to 1.15 million by creating nine new functional constituencies. Speaking at a constitutional reform seminar, Leung said references could be drawn from Patten's move, which was condemned by Beijing, to make functional constituencies compatible with universal suffrage when it is introduced. "It would be reckless if we just call for the scrapping of a tried and tested system, which has been running smoothly for 23 years," Leung said. Patten's nine new constituencies were abolished after the handover, when the legislature was disbanded and a new structure introduced. "After 15 years, reference can today be drawn from this model, and also 15 years later in 2020. Some people have pointed out the deficiencies of functional constituencies. In fact, these problems can be resolved," she said. The former secretary for justice was hitting back at the call by critics to abolish the trade-based constituencies, which now comprise half of the 60-seat legislature. Critics say the seats allow industry groups to hold too much power, and lawmakers are chosen in a small-circle election. Introduced in 1985, these seats, representing about 230,000 voters, have long been criticized for placing unequal weight on business and professional bodies. While toeing the government's line that these constituencies, in their current forms, did not comply with the principles of genuine universal suffrage, Leung said they could be improved when universal suffrage was introduced to elect the legislature in 2020. Leung's comments followed suggestions floated recently by pro-government figures who hinted that functional constituencies should stay beyond 2020. On the plan by the Civic Party and League of Social Democrats for one lawmaker from each of the five geographical constituencies to resign in order to trigger a de facto referendum on universal suffrage, Leung said it would not be effective, as Hong Kong had no referendum mechanism. Her remarks were attacked by pan-democrats, who cited them as evidence of their fears that Beijing was trying to keep the functional seats indefinitely. "Functional constituencies have always been a transitional measure," Civic Party leader Audrey Eu Yuet-mee said. "That's why we have to fight harder, or they will remain forever." At a district consultation forum last night, most speakers, who were from the Beijing-loyalist camp, supported the government reform proposals, despite a protest by pan-democrats outside and inside the venue in Tsuen Wan. Chief Secretary Henry Tang Ying-yen urged people to support the proposal to achieve democracy incrementally in 2012, while Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung said whether functional constituencies should be scrapped was something to be decided after 2017.

Conglomerate Hutchison Whampoa (SEHK: 0013), controlled by Li Ka-shing, has offered to take subsidiary Hutchison Telecommunications International (SEHK: 2332) private. The buyout bid apparently shows a renewed faith by Li in privatizing local companies, a process he described as difficult several months ago. In a statement to the Hong Kong exchange yesterday, Hutchison Telecom said parent Hutchison Whampoa had approached it about "a possible general offer to the company's shareholders and option holders". Hutchison Telecom, which runs mobile-telephone networks in emerging markets such as Indonesia and Vietnam, said an announcement "may be imminent" and requested trading of its shares be suspended. Trading was suspended in the afternoon after rising 2.5 per cent to HK$1.65, which valued the company at HK$7.94 billion. "The offer should be a positive development for both the parent firm and subsidiary stocks," said Danie Schutte, the head of research for China and Hong Kong at CLSA. He expected Hutchison Whampoa to offer a premium of 5 to 10 per cent of Hutchison Telecom's share price. "Hutchison Whampoa has experience in privatizing companies and unlocking their value," Schutte said. "It can crystallise Hutchison Telecom's value whenever it sees fit to do so" amid the improving economy. The possible takeover would give Li greater access to the US$1.4 billion that Hutchison Telecom raised from the sale last year of a controlling stake in Partner Communications, Israel's second-biggest mobile-telephone carrier. Li controls 67 per cent of Hutchison Telecom's shares through a 60.4 per cent stake held by Hutchison Whampoa, and personal holdings. "Hutchison Telecom's stock price has been undervalued for a while, given its strong cash position," said Kenny Tang, an analyst at Redford Securities. The deal will provide Hutchison Whampoa increased ownership of the subsidiary's businesses in the faster growing emerging markets. According to a disclosure filed with the stock exchange yesterday, Li bought a total of 1.54 million Hutchison Whampoa shares in three separate transactions late last month that allowed him to boost his stake in the company to 51.74 per cent from 51.7 per cent. The buyout bid comes less than a year after Li, who is also chairman at flagship firm Cheung Kong (Holdings) (SEHK: 0001), expressed reservations about privatisations in Hong Kong. At Cheung Kong's annual general meeting in May, he said privatising a company in Hong Kong was so difficult that it would be easier to close it down. Under stock market rules, any privatisation offer must be accepted by the holders of at least 90 per cent of minority shares for it to succeed. Under such circumstances, Li said: "Whenever there are people stirring up issues, privatization will be impossible. The easiest way to do it is to announce a complete closure of the company. "Some laws in Hong Kong follow those of Britain and the United States. Very often, some of these laws are still kept even when overseas countries have abolished them," he said. At the time he said that his comments were not made in response to younger son Richard Li Tzar-kai's failed bid to privatize PCCW (SEHK: 0008).

More migrant workers living in Guangzhou are expected to flood Hong Kong's tourist spots following a further relaxation of travel restrictions that is on the cards. The Individual Visit Scheme will be extended to non-permanent Guangdong residents, a mainland source told Sing Tao Daily, sister paper of The Standard. The news comes less than a month after non-Guangdong residents living in Shenzhen were allowed to visit Hong Kong from December 15. Previously, they had to apply in their home provinces. The source said the new move should help Hong Kong's economy and boost its retail trade, but the source could not estimate how many will be eligible in the extended scheme. The Individual Visit Scheme was first introduced in four Guangdong cities - Dongguan, Zhongshan, Jiangmen and Foshan - on July 28, 2003 under CEPA, the Closer Economic Partnership Arrangement. Over the years, it has been expanded to dozens more cities covering the whole of Guangdong province, and also Beijing, Shanghai and Tianjin. According to figures revealed in the 2009 budget speech, over 35 million mainlanders had visited Hong Kong under the scheme since its 2003 launch and it was described as being an important stimulus for the city's various consumer industries. Meanwhile, the number of tourists to Hong Kong rose slightly by 0.3 percent to almost 2.96 million last year, with mainland tourists showing the biggest jump at 6.5 percent from the previous year. Currently, mainland tourists account for more than half of the visitors to Hong Kong. The figures were released by the Tourism Board which had originally forecast a possible 1.6 percent drop last year because of the financial tsunami. But the number of tourists from places other than the mainland has dropped in general. Meanwhile, outgoing chairman of the Travel Industry Council Ronnie Ho Pak-ting said the biggest challenge faced by the sector is the growing trend of online booking of air tickets. Airlines nowadays encourage travelers to book online instead of through travel agents and are also reluctant to hold seats for such agents, said Ho. This would lead to tour groups becoming smaller and tours more costly, pressuring travel agents to raise fees, he warned.

Macau casino revenue rose 48 per cent to 11 billion patacas in December compared with a year earlier, according to a report seen on Tuesday. Shares of Macau casino operators rose on Tuesday on reports that gambling revenues in the enclave in December rose 48 per cent from a year earlier, signalling sustained growth in the world’s largest gambling market. Shares of Sands China, the Macau unit of Las Vegas Sands, rose as much as 6.53 per cent to a near three-week high, while Wynn Macau, the Macau unit of Wynn Resorts advanced 5.13 per cent to a three-week high of HK$9.89. SJM Holdings, gambling tycoon Stanley Ho’s flagship firm, gained as much as 5.7 per cent to its highest level in more than two months in early trade. Macau casino revenue rose 48 per cent to 11 billion patacas (HK$10.5 billion) in December compared with a year earlier, according to a report from Susquehanna Financial that cited Portuguese news agency Lusa. “The first half will be very strong; we should see momentum maintain,” said Aaron Fischer, CLSA’s head of Asian consumer and gaming. “We believe the earnings will surprise significantly on the upside,” Fischer said. “Revenue growth has been very strong for the last few months and these companies have been cutting costs a lot.” Fischer expects Macau gambling revenues to rise 17 per cent next year. In this year, gambling revenues rose 10 per cent from a year ago. Fischer’s top picks are Wynn Macau, which is slated to open a new Macau resort on April 1, and SJM, Macau’s biggest casino operator by market share, thanks to the recent opening of its latest property, “Casino Oceanus”. Shares of Galaxy Entertainment Group (SEHK: 0027) and Melco International Development (SEHK: 0200) also rose to their highest level in more than two weeks.

China*: PetroChina (SEHK: 0857) has pulled out of a US$40 billion deal to buy natural gas from a project off Australia, leaving Woodside Petroleum looking for new customers. Woodside informed Australia’s stock exchange on Monday that an early stage agreement for the Browse Basin liquefied natural gas project off Western Australia state had not been settled by a December 31 deadline and had now lapsed. Under the September 2007 agreement, PetroChina would potentially buy up to three million metric tons of LNG per year from the project for up to 20 years. At the time, the agreement represented one of Australia’s largest export deals with an estimated worth of A$45 billion (HK$315 billion). Woodside had hoped the Browse project would be in production by 2012, but the company said on Monday this timeline was no longer realistic, and a final investment decision by partners including Woodside, Chevron, BHP Billiton and Royal Dutch Shell would not be made until mid-2012. Woodside said an agreement for CPC Corporation Taiwan to buy up to three million metric tons of LNG per year for up to 20 years from the Browse project was still in place, and the company was looking for more customers. “Woodside remains in ongoing discussions with other Asia-Pacific LNG customers in relation to potential sales from its portfolio of Australian LNG developments, including the Browse project,” Woodside said in a statement. A spokesman for PetroChina in Beijing, Liu Weijiang, said he had no information on the deal and asked a reporter to call again later.

Heavy snow has brought more travel chaos to northern China, stranding thousands of truckers for two days on a Beijing highway and 1,400 rail passengers in Inner Mongolia, state media said on Tuesday. The snow that blanketed the region at the weekend has ended in Beijing but the national weather centre said the mercury dipped Tuesday to -15.6 degrees Celsius (4 degrees Fahrenheit) – the coldest temperature in more than two decades. The freezing weather was expected to continue until Thursday for the Chinese capital, nearby Tianjin and Inner Mongolia, with temperatures forecast to fall as low as minus 32 degrees Celsius, it said on its website. On the outskirts of Beijing, truck drivers were forced to sleep in their vehicles for two nights on a highway when snow made the road impassible, causing a 20-kilometre (12-mile) back-up, the Beijing News reported. The newspaper, citing transit police, said the highway would only be cleared on Tuesday – after two chilly nights for the drivers, some of whom said they were afraid to sleep for fear of dying of exposure. Others said they were prepared for the traffic mess. “We brought food as we expected the jam,” said one trucker, who had two cases of instant noodle and one thermos of water on board. The heavy snow and freezing temperatures have led to hundreds of flight cancellations and delays in Beijing, shuttered schools on Monday and snarled traffic throughout the capital. In Inner Mongolia, a train hit a wall of snow more than two metres (6.5 feet) high on Sunday, leaving 1,400 travellers in the dark and without heating overnight before they could be evacuated, the China Daily reported on Tuesday. “Though snow stopped yesterday, the temperature was -28 Celsius, freezing the doors,” the paper quoted Zhang Jianwen, a police officer involved in the rescue effort, as saying. Nearly 2,000 people including police and local farmers were mobilised to dig out the train, which was heading from the city of Harbin in Heilongjiang province to Baotou in Inner Mongolia, the report said. Central China was now under a snow storm warning until Wednesday, stretching from Henan to Hunan provinces, the national weather bureau said on its website.

The Foreign Ministry is about to project a younger, softer side. A reshuffle yesterday saw the last of the sixtysomethings moved on, and three diplomats in their fifties promoted to vice-ministers. Ambassador to Japan Cui Tiankai , ambassador to Britain Fu Ying and former ambassador to Libya Zhai Jun are the new faces. They replace current vice-ministers Wu Dawei and He Yafei. The departure of Wu, 63, means all the principal officials in the Foreign Ministry - the minister, seven vice-ministers, two assistant ministers and one disciplinary secretary - are in their fifties. Fu, 57, is the most colourful of the new faces. Of Mongolian ethnic origin, she was the first female ambassador from an ethnic minority and is also only the second woman vice-minister since 1949. Her resume is solid, with wide experience in the Asia-Pacific region - from ambassador to the Philippines and Australia to involvement in multilateral negotiations regarding Cambodia, North Korea and the Association of Southeast Asian Nations - before she was made ambassador to Britain in April 2007. It is her signature use of "soft" diplomacy mixed with outspokenness that has set her apart from most other Chinese diplomats. After the Olympic torch relay in London last year was disrupted by thousands of pro-Tibet protesters, Fu wrote an article in The Sunday Telegraph criticising Western media for demonising China - but it was far from the usual Beijing rhetoric. "They were convinced that the people here were against them. One girl remarked she couldn't believe this land nourished Shakespeare and Dickens," Fu wrote of young athletes who flew in from Beijing for the relay. She frequently accepted interviews or wrote for British media, from the BBC to The Guardian - and even tabloid newspaper The Sun. He, 54, who has enjoyed a smooth career progression so far with North American affairs as his major responsibility in the past decade, is likely to take over from Zhou Wenzhong as ambassador to the United States. Cui, 57, was in office when President Hu Jintao paid a visit to Japan in April 2008, the first presidential visit in 10 years. Zhai, 56, who has also been stationed in Yemen and Saudi Arabia, is known for his African experience.

Every British teenager should have the chance to learn Putonghua due to the growing importance of the mainland in world events, the UK government said on Monday. One in seven secondary schools, which teach pupils aged 11-16, currently offer Putonghua and Schools Secretary Ed Balls said he wanted to extend this through language partnerships between schools. “In this new decade our ties with emerging economies like China will become even more important and it's vital that young people are equipped with the skills they need, and British businesses need too, in order to succeed in a rapidly changing world,” he said. “That's why we want all secondary pupils to have the opportunity to learn up-and-coming languages like Putonghua if they choose, either at their own school or a nearby school or college.” Businesses are increasingly interested in staff who speak Putonghua, according to a poll published last year by the CBI business lobby group. It found that 38 per cent of employers were looking for Putonghua or Cantonese speakers, compared to 52 per cent for French and 43 per cent for German. According to last year’s results for GCSEs, the compulsory exams taken at age 16, a total of 3,469 candidates took Putonghua – 16 per cent more than the previous year. The take-up may also increase after the biggest exam board in the country began offering Mandarin GCSE last September, with the first pupils expected to complete the two-year course in June next year. However, the opposition Conservative Party expressed scepticism at the government’s aspirations, noting that take-up of modern foreign languages has fallen since ministers made the subject optional at GCSE in 2002.

Giant pandas for the 2010 Shanghai World Expo are seen at the Shanghai Zoo in Shanghai, east China, Jan. 5, 2010. Ten giant pandas selected for the world expo by the Chinese giant panda protection and research center were flown to Shanghai on Jan. 5 from the center's Bifengxia base in Ya'an City, southwest China's Sichuan Province. They will be shown to the public late this month after two weeks of quarantine.

The Peru-China Free Trade Agreement will come into force on Jan. 15, slightly earlier than planned, after Peru accelerated the ratification process in hopes of reaping early benefits from the bilateral accord, the Peruvian trade ministry said Monday. The Peru-China FTA, originally scheduled to take effect on Feb.1, will now enter into force on Jan. 15, according to the Peruvian ministry. "Initially we had estimated that the free trade agreement would be effective from the first of February," Peruvian Minister of Foreign Trade and Tourism Mercedez Araoz said. Peru ratified the accord through a supreme decree signed by President Alan Garcia and Foreign Minister Jose Antonio Garcia Belaunde. "I have talked with the foreign minister... The protocol between China and Peru to propose the date of application of the FTA will be realized this week," President Alan Garcia said. The president said he hoped the FTA would deliver the order of an additional 800 million U.S. dollars worth of exports and imports in trade with China in the first year of the FTA pact. China is Peru's second largest trading partner, with two-way trade in 2008 reaching 7.5 billion U.S. dollars, a 2 billion dollars rise over the previous year.

A man displays his newly-bought Tiger stamp pasted on a postcard in Tianjin January 5, 2010. According to the Chinese lunar calendar, the year of the tiger begins on February 14, 2010.

Jan 6, 2010

Hong Kong*: Nineteen flights between Hong Kong and Beijing have been delayed and two flights from Hong Kong to Beijing have been cancelled as a result of freezing conditions in Northern China, a spokeswoman for Hong Kong International Airport said on Monday. Thousands of travellers heading to Beijing flocked to Hong Kong International Airport, hoping to secure a seat. Some had originally planned to fly on Sunday, but became stranded because of delays and cancellations to flights destined for the capital. Flights from Hong Kong to Dalian and Tianjin were also delayed, the spokeswoman said. She advised people considering flying to contact individual airlines to find the latest flight information before leaving for the airport. “I came earlier to wait for a stand-by seat to Beijing, but I will take whatever seat they offer,” a Hong Kong man, surnamed Lee, told local media. Record snowfalls disrupted air and road travel in northeast Asia on Monday, grounding dozens of planes in Northern China and South Korea. On Sunday Beijing received its heaviest daily snowfall in nearly six decades, Xinhua news agency reported. The Central Meteorological Administration said that up to 30 centimetres of snow had fallen on Beijing and Tianjin over the weekend. While skies were clear in the capital on Monday, more snow was expected in the northeast of the country. At Beijing Capital International Airport (SEHK: 0694) – where nearly 1,200 flights were cancelled or delayed on Sunday – workers had cleared the runways and the situation was returning to normal by Monday afternoon, an airport spokesman told reporters. More than 100 flights were nevertheless delayed and two dozen cancelled as of early Monday, the spokesman said, adding that workers needed to remove ice from the snow-covered planes that were stranded at the airport over the weekend.

Financial Secretary John Tsang Chun-wah cancelled a trip to Beijing because of severe weather conditions in the capital, he told local media on Monday. Tsang said he will reschedule his discussions with officials in Beijing relating to financial, monetary and trade matters later this week. Tsang was originally scheduled to visit Beijing on Sunday to meet with the National Development and Reform Commission, the People’s Bank of China and the China Securities Regulatory Commission. However, Tsang’s trip was postponed until Monday because of bad weather. A spokesman for Hong Kong International Airport said as of 11am on Monday eight flights scheduled to arrive from Beijing and four flights departing from Hong Kong or the capital had been delayed. Two Dragonair flights to Beijing had also been cancelled.

Hutchison Telecom said on Monday that it has been approached by controlling shareholder Hutchison Whampoa (SEHK: 0013) on a possible bid to take the company private. “The board of directors of Hutchison Telecommunications International (SEHK: 2332) Ltd has received an approach from the company’s majority shareholder, Hutchison Whampoa Ltd, regarding a possible general offer to the company’s shareholders and option holders,” Hutchison Telecom said in a statement to the Hong Kong Stock Exchange. It added that an announcement on the matter “may be imminent”. Shares of Hutchison Telecom, which is about 60 per cent owned by Hutchison Whampoa, were suspended on Monday afternoon pending the release of an official announcement. Billionaire tycoon Li Ka-shing controls majority of Hutchison Whampoa shares. The stock was up 2.48 per cent at HK$1.65 prior to the suspension. During the morning session, it had risen as high as HK$1.68 per share.

Shares in Sands China climbed 5.18 per cent after Citigroup and UBS initiated coverage on the Macau unit of US casino operator Las Vegas Sands with “buy” ratings. Citigroup issued a target price of HK$12.50 on Sands China, saying that the company would benefit from its large exposure to the mass-market gambling segment in Macau and a strong presence on the Cotai strip. The stock rose as much as 6.3 per cent to their highest level in more than two weeks earlier. “Overall, we see SCL [Sands China Ltd] as having the most scope for expansion within the “managed-growth” constraints set by the Chinese government,” said Citigroup analyst Anil Daswani in the report on Monday. UBS also initiated coverage on the stock with a “buy” rating on Monday, a UBS spokesman said, declining to give more details. Citigroup’s Daswani forecast total revenue in Macau, the world’s largest and fastest-growing gambling market, to grow by 8 per cent next year and 11 per cent in 2011. But he issued a “sell” recommendation on Wynn Macau, the Macau unit of Wynn Resorts, citing the company’s focus on VIP gamblers, which has lower margins than the mass market segment, and a lack of expansion plans on the Cotai strip.

China said on Monday it would soon launch a stock index covering 500 firms listed in the mainland, Hong Kong and Taiwan to enhance financial co-operation in the Greater China region. China Securities Index Co, established by the mainland’s two bourses in Shanghai and Shenzhen, will start to publish the CSI Cross-Straits 500 Index on January 18, the company said in a statement. With the signature of three memoranda of understanding between mainland and Taiwan in November, “the co-operation in financial sectors across the straits is now entering a substantial phase”, it said. The documents – on banking, insurance and securities – are expected to help pave the way for Taiwan’s finance industry to gain greater access to the huge mainland market and open up the possibility of more investment activity. The new index “caters to investors’ need to observe and invest in markets in the three places and provides a basic instrument for developing index-related products and derivatives,” according to the statement. A number of domestic and overseas institutions are making “proactive” preparations to develop investment products based on the new index for the Greater China region, it added, without giving more details. The company will publish the index denominated in yuan, US dollars, Hong Kong dollars and Taiwan dollars, and the components will have a combined market value of around 3.2 trillion yuan (HK$3.6 trillion). It covers 75 per cent of the total market capitalization of the stock markets in mainland, Hong Kong and Taiwan, and 53 per cent of the combined trading volume.

Colombia is well-known for its coffee, beauty queens and drug-related violence. But it rarely earns a mention for artistic and culinary flair. One of the country's entrepreneurs now hopes to change that, having successfully combined art and cuisine in a new restaurant business that is about to venture abroad with the help of Washington-based Small Enterprise Assistance Funds (SEAF), an investment firm providing growth capital and operational support to businesses in emerging markets. With SEAF's help, Macau could one day become a destination of the new Colombian export. Hector Rondon, the director-general of the Colombia unit of SEAF, said the private equity firm in July 2008 bought a stake of about 20 per cent in Inmaculada Guadalupe y Amigos en Compania, which runs one of Colombia's most well-known restaurants - Andres Carne de Res, whose literal translation means Andrew's Beef. SEAF manages US$500 million of funds that invest in 30 nations in Central and Eastern Europe, Latin America and Asia, and plans to launch a new fund in Africa. Its investment destinations include some of the riskiest and less sought-after markets such as Afghanistan, Macedonia, Georgia and Serbia. The restaurant's founder and biggest shareholder, Andres Jaramillo, opened for business 26 years ago in Chia, about 35 minutes drive north of Colombia's capital Bogota, in partnership with his wife Stella. Born in Medellin, Jaramillo dropped out of economics studies in university and later a machinery sales job which required him to wear a suit. "One day while on a bus, he saw a girl who was scared by his attention. But he chased her three blocks and today she is his wife," said Rondon. "He is the type of person who gets what he wants." With a loan from his uncle equivalent to US$500 in today's money, Jaramillo started a restaurant with two tables, serving beef cooked by his Argentinian sister-in-law. Today, the restaurant has expanded into an entertainment complex with 1,100 seats that can serve up to 3,000 people when packed. It expanded by gradually buying up neighbouring properties one by one. The walls and ceilings of the restaurant are adorned with arts and crafts made from recycled materials such as bottle caps, old chandeliers and road signs, which are being continually changed, giving it notoriety as "the restaurant that is never finished". Its festive atmosphere is enhanced by performances by artists, musicians, comedians and pranksters in costumes. Guests are handed newspaper-style menus and the bill comes in a treasure chest. Operating only from Thursday to Sunday with a menu of 800 items, it has became noted for family gatherings during the day and a discotheque at night on weekends, as well as a place frequented by politicians, movie stars and sports figures. Today, the restaurant compound includes a 2,000-square-metre playground that can handle 500 children, and a workshop with 90 artists designing and making metal and wooden decoration materials and restaurant utensils and tableware. The company has 1,000 staff in Chia, plus its own warehouse, packaging and meat-processing facilities. With SEAF's cash injection and management input, Inmaculada Guadalupe last year opened a second restaurant in downtown Bogota, called "Andres D.C.". The new restaurant occupies three floors and the rooftop of a shopping centre and can seat 786 guests. Rondon said Inmaculada Guadalupe was now considering whether to export its business model overseas, first to other Latin American communities in Mexico and Miami and later to other parts of the world. It has already received 20 business plans from different places, including Madrid and Dubai. "We have also been approached by international hotel-casino chains operating in Macau, and we are talking to funds that specialise in the entertainment sector on possible overseas expansion there," Rondon said.

China*: China factories cranked up production in December on the back of bulging order books, but the strong demand also pushed prices higher and raised the spectre of inflation, according to a manufacturing survey. The HSBC (SEHK: 0005) purchasing manager index (PMI) rose to 56.1 in December, up from 55.7 a month earlier and the highest since the survey began in April 2004. A reading above the watershed mark of 50 indicates an expansion of manufacturing activity. It capped a remarkable turnaround for mainland factories, with the PMI averaging its highest quarterly reading in survey history in the final three months of this year after plumbing a record low a year earlier. The findings were largely consistent with mainland’s official PMI, released on January 1, which surged to a 20-month high in December. “The second-round effect of stimulus measures is filtering through to substantially benefit the manufacturing sector,” said Qu Hongbin, chief China economist at HSBC. Heavy public spending on infrastructure launched in the depths of the global financial crisis in late last year has catalysed private investment in factories and property, driving demand higher for manufactured goods from drain pipes to electrical wire.

A worker shovels snow to clear a basketball court at a school in Beijing on Monday. The capital dug out from the weekend's heavy snowstorms, seeking to restore flights and reopen highways and rail lines covered by drifts. Schools were shut down, flights delayed and traffic snarled in Beijing on Monday following two days of heavy snow in northern China – with even more frigid weather forecast. Up to 30 centimeters (12 inches) of snow fell in the capital and nearby Tianjin on Saturday and Sunday, the Central Meteorological Administration reported – the biggest snowfall in January in the region in more than 50 years. Although snow was not forecast in the capital in the coming days, snowstorms were expected in northeast China and eastern Shandong province on Monday as people returned to work following the New Year holiday, the administration said. A Siberian cold front meanwhile could bring historic low temperatures of between minus 20 and minus 32 degrees Celsius (minus four and -26 Fahrenheit) to Hebei province and Inner Mongolia on Tuesday and Wednesday, it said. Temperatures in Beijing were expected to drop to minus 16 degrees Celsius on Monday, the coldest in the capital in decades, the China Daily reported. In China’s coldest region of Heilongjiang province, the mercury has already plummeted to minus 36 Celsius, the paper said. More than 3,500 schools in Beijing and Tianjin were forced to shut their doors on Monday, giving more than 2.2 million students an extra day of New Year’s holiday, state media reported. At Beijing’s international airport – where nearly 1,200 flights were cancelled or delayed on Sunday – workers had cleared the runways and the situation was returning to normal, an airport spokesman told reporters. More than 100 flights on Monday morning were delayed and two dozen cancelled, the spokesman said, adding that workers needed to de-ice the snow-covered planes that were unable to take off over the weekend. Up to 30 highways in Beijing and the surrounding regions were still closed to traffic or only partially opened on Monday, the China News Service reported. Inner city roads in the capital remained icy and covered with snow on Monday, but traffic was flowing, albeit at a slow pace. The city has mobilized 300,000 people to clear the snow, the China Daily reported. The nation’s rail network was operating normally, but long-distance bus services in north China were disrupted, the paper said. The frigid air from the north was also expected to send temperatures plummeting below the freezing mark in much of central China, where heavy fog could cause problems for air and road travellers, the weather bureau said.

Visitors look at minivans at a GM joint venture dealership in Chengdu, Sichuan province in this file photo. The American automaker said on Monday that their sales of vehicles in mainland jumped 57 per cent last year. General Motors’ China vehicle sales last year jumped 66.9 per cent from a year earlier, the company said on Monday as Beijing’s policy initiatives drove customers to showrooms. General Motors, which competes with Volkswagen AG and others, sold 1.83 million vehicles in the country in 2008 and expanded its market share to an estimated 13.4 per cent, up from 12.1 per cent at the end of last year, it said in a statement. Shanghai GM, its flagship car venture with SAIC Motor Corp, sold 727,620 cars last year, up 63.3 per cent from a year earlier, it said. SAIC-GM-Wuling, GM’s commercial vehicle tie-up with SAIC and Liuzhou Wuling Automobile, sold 1.06 million vehicles in 2008, up 63.9 per cent. FAW-GM Light Duty Commercial Vehicle Co, a tie-up with FAW Group set up in August, sold 34,510 light trucks and vans up to the year-end. “We are proud of our performance this year,” Kevin Wale, president and managing director for GM’s mainland operations, said in the statement. “Chinese consumers responded enthusiastically to our line-up of modern, fuel-efficient and stylish products,” GM launched several new models in mainland last year, including the new Buick LaCROSSE and new Regal, popular among the business elite. It had said that it planned to roll out 30 new or revamped models in the country.

The construction of the Lanzhou national petroleum reserve base which will have a capacity of 3 million cubic meters began in Yongdeng County of Lanzhou City, Gansu province. The reserve base is another large-scale national petroleum base in Western China following the one in Dushanzi.

People visit an ice sculpture for the upcoming 26th Harbin International Ice and Snow Festival at a park in Harbin, Heilongjiang province, January 3, 2010. The festival will kick off on January 5, 2010, local media reported.

Jan 5, 2010

Hong Kong*: Hong Kong's total exchange fund assets reached 2.235 trillion HK dollars as of Nov. 30, up 197.1 billion HK dollars from October, the Monetary Authority said Thursday. According to the agency, Hong Kong's foreign currency assets rose 196.3 billion HK dollars and the Hong Kong dollar assets grew by 800 million. The rise in foreign currency assets was mainly due to the purchases of foreign currencies with Hong Kong dollars, an increase in unsettled purchases of securities and valuation gains on foreign currency investments. Meanwhile, the growth in Hong Kong dollar assets was attributed to valuation gains on Hong Kong equities.

Hong Kong shoppers are brimming with confidence for the year ahead and are prepared to spend almost twice as much as they did last year, according to the organizer of the 44th Hong Kong Brands and Products Expo in Victoria Park. Top-ticket items have been selling well, and while the attendance is almost the same as last year, some stalls are reporting a 50 percent increase in business. From December 12 to mid-afternoon yesterday, more than two million people had visited the Victoria Park event. Chinese Manufacturers' Association chairman David Wong Yau-kar predicted the total attendance would equal last year's record of 2.2 million by the time the expo closes today. Wong said sales figures were not yet available but indications are turnover will exceed last year's record of HK$270 million. "The atmosphere is better than last year. People seem to have more confidence in the year ahead," he said. A dry seafood and drugs vendor said business was up 50 percent on last year. "People are clearly more willing to spend this year," said Hung Sau-san, a promoter for Nam Pei Hong Sum Yung Drugs. "High-priced products are selling very well." Hung said said stocks of the company's abalone were sold out yesterday. She said many customers bought two sets of items on special sale, instead of one, mainly because of the price cuts and special offers that have come into effect as the expo winds down. "Many customers from the mainland said they were shopping at the expo because they wanted genuine products." Hung expects the price of dried seafood and instant noodles to be slashed for today with many shops offering "buy one, get one" bargains. A shopper, Ms Leung, who was accompanied by her husband and two daughters, said it was her second visit to the expo. She was looking for instant noodles, oyster sauces, power-saving light bulbs and had spent between HK$3,000 and HK$4,000. "The products are one third or about half the retail price, though they are a bit more expensive than the last expo," she said. Last year nearly 3.5 million packets of instant noodles, 500,000 fishballs and 250,000 egg tarts were snapped up at the expo, according to organizers.

Now is a good time to take a fresh look at Sa Sa International Holdings (0178) which has had a good track record in recent years. The cosmetics wholesaler and retailer also provides beauty and health club services. For the six months ended September 30, the group's retail and wholesale business had a turnover of HK$1.76 billion, up 8.3 percent year- on-year. The overall gross profit margin increased to 43.9 percent from 42.7 percent. Earnings per share were 8.9 HK cents. Dividend per share was 9 HK cents, including a 6 cents special dividend. The dividend payout ratio is more than 100 percent. As of September 30, it had 69 Sa Sa (including eight in Macau), one La Colline specialty store and one Elizabeth Arden counter. Hong Kong can expect more mainland tourists as non-Guangdong residents in Shenzhen qualify for visas. This will boost cosmetics sales in the SAR. Sa Sa has distributed special dividends in the last few years. With its healthy cash flow and HK$480 million cash without debt, it will be able to maintain a high dividend payout ratio. Sa Sa closed on Thursday at HK$5.14 with a dividend yield of 4.4 percent. Brokers give Sa Sa a target price ranging from HK$5.20 to HK$6.50. Wait for the price to drop near HK$5 before showing interest. Dr Check and/or The Standard bear no responsibility for any investment decision made based on the views expressed in this column.

Shops, restaurants and hotels looking to cash in on high-speed rail link - Most of the mainland visitors travelling to Hong Kong on high-speed trains in the first two years of the rail service's operation are likely to be making their first trip to the city, tourism trade observers say. Given that first-time mainland travelers generally tend to spend more and stay longer in the city than the typical tourist or repeat visitors, shops, restaurants and hotels can expect a business boost as the mainland fulfils its high-speed rail link ambitions. Mainlanders are already among the top spenders among visitors to Hong Kong, parting with an average of HK$5,676 each last year, compared with HK$5,439 overall for overnight visitors, HK$2,138 each for same-day visitors and HK$1,498 for all visitors, according to Hong Kong Tourism Board data. But Hong Kong Retail Management Association chairwoman Caroline Mak Sui-king believes the real figure is higher at between HK$5,000 and HK$8,000 or much more. The tourism boost could lead to a double-digit percentage increase in the number of mainland visitors arriving once high-speed trains connected less accessible regions of the country to the city, Michael Wu Siu-ieng, the chairman of the Hong Kong Travel Industry Council, said. Almost 16.9 million mainlanders visited Hong Kong last year. The trains, which travel at more than 300km/h, run between Wuhan and Guangzhou and between Tianjin and Beijing. The mainland plans to overhaul its railway system with high-speed lines by 2012. Hong Kong will link with the mainland network if the Legislative Council backs a controversial government plan to operate high-speed trains to Guangzhou by 2015 at a cost of about HK$67 billion. Lawmakers will discuss the project's financing on Friday. Like the construction industry, which stands to benefit from the creation of thousands of jobs, the tourism trade is keen to see the project go ahead as soon as possible despite arguments by some academics and politicians that the city's first high-speed train service would come at too high a social cost. Many New Territories villagers would need to be relocated to accommodate the rail line. Michael Li Hon-sing, the executive director of the Federation of Hong Kong Hotel Owners, said that over the longer term, connecting to the mainland's high-speed railway network would reap economic benefits for Hong Kong. Relatively fast travel and check-in times would foster tourism and business as high-speed trains made it easier and more convenient for people to do business with the mainland, where many factories and manufacturers are located. Meanwhile, more than 100 people - including Tai Kok Tsui residents and Tsoi Yuen villagers - marched yesterday in protest against the high-speed rail project. Chanting slogans and waving banners, they marched from a park in Tai Kok Tsui to the shopping precinct in Mong Kok, passing through some of the areas that would be affected by the project. The protesters urged legislators to veto the funding request when it is put to a vote on Friday. The spokesman for the protest organizers said: "We shall fight to the end to protect our homes. We want to make it very clear. The government cannot destroy people's homes just because their homes are on the land it wants to take."

A top-level police reshuffle is expected soon with more than half of the force's 21 most senior officers retiring in the next two years, sources say. Deputy Police Commissioner (management) Andy Tsang Wai-hung - who is widely tipped to take over from Commissioner Tang King-shing when he retires in May next year - is in line for a move. He will probably replace Deputy Commissioner (operations) Peter Yam Tat-wing, who retires in March, sources said. In his 31 years with the force, Tsang, 51, has mainly focused on criminal cases. He was promoted to head the Organized Crime and Triad Bureau in 2000 and in 2003 helped arrest Kwai Ping-hung, the then most wanted person in Hong Kong. John Lee Ka-chiu, 52, director of crime and security, is expected to be promoted to Tsang's current position, sources said, and is being groomed to succeed Tsang in the top post in the future. However, a senior officer has still to be identified as a future commissioner as the force has no one in mind after Lee. Lee, who joined the force as an inspector in 1977, has worked in a wide range of posts at divisional, district, regional and headquarters level. Most of his career has been spent in criminal investigation and intelligence work. Lee, who holds a master's degree in public policy and administration, has commanded various crime units. In 2003, he attended the Royal College of Defense Studies in London. He was promoted to assistant commissioner in the same year. In July 2005, he assumed command of the crime wing. In January 2007, he was promoted to senior assistant commissioner and took up his current post as director, responsible for policies and strategic direction in the areas of crime and security. Since Director of Operations Henrique Koo Sii-hong and Director of Personnel and Training Richard Tang Hau-sing will retire later this year, and with Lee being promoted, there will be three vacancies in the rank of senior assistant commissioner. Four current assistant commissioners are likely to compete for these posts. They are Kowloon West regional commander Tang How-kong, Hong Kong Island regional commander Paul Hung Hak-wai, Hong Kong Police College director Albert Cheuk Chun-yin and New Territories South regional commander Tse Shu-chun. Four chief superintendents are then expected to be promoted to assistant commissioners.

Hong Kong exporters are bracing for a rise in Guangzhou's minimum wage, with factory owners in the Pearl River Delta saying there is growing speculation it will be raised to as high as 1,000 yuan (HK$1,135) a month, up from 860 yuan. A rise of that magnitude - 16 per cent - would align Guangzhou's minimum pay with that of Shenzhen, which has among the highest salaries on the mainland. Hongkongers own an estimated 50,000 factories on the mainland employing an estimated 12 million workers, a legacy of Beijing's policy of opening up to foreign investors in the late 1970s. "There is talk among government officials about the increase," said Leon Lam Hing-chau, chief financial officer of Pacific Textiles Holdings, which produces mid- to high-end fabric at its production base in the Panyu district of Guangzhou. A pay rise would add to the operating costs of manufacturers, which are still battling the repercussions of the global financial crisis. However, bigger pay packets are good news for tens of millions of migrant workers and would support the central government's hopes of increasing domestic consumption. Dennis Ng Wang-pun, who runs a jewellery factory in Panyu, said he had heard talk of a possible wage increase, but made the point labour shortages had been so severe over the past couple of years that many factories were already paying more than the minimum requirement. "Any increase below 10 per cent is manageable for factory owners, but a sharper increase will be damaging," Ng said. "There have been more orders recently, but this is an illusion of a turnaround in exports." Toy and electronics makers reported a stronger inflow of orders last month, but Ng said the orders would usually have been placed earlier in the year. Federation of Hong Kong Industries chairman Cliff Sun Kai-lit warned the central government not to withdraw too early measures designed to help factory owners, such as the freezing of administrative charges and corporate contributions to social welfare funds. "The global financial crisis has not yet bottomed out," Sun said. "Exporters are still recuperating from the export slump." He said Shenzhen municipal government officials had reached "an internal consensus" to keep the minimum wage unchanged for another year. The minimum wage was frozen last year to help manufacturers battered by the downturn following a directive by the Ministry of Human Resources and Social Security in November 2008. Nelson Siu Nai-sun, the president of the Hong Kong Professionals and Executives Association, a human resources body with 2,500 corporate members in Hong Kong and the mainland, said a rise in the minimum wage in Guangdong was necessary because of rising living standards and looming inflation. "There is a genuine need to raise it, otherwise workers can't catch up with rapidly rising living standards," Siu said. "It will also be an incentive to lure migrant workers back to the south." He anticipates Guangdong's minimum wage could jump between 10 per cent and 20 per cent a year for the next few years. The last rise was in 2008, when the rate rose 12.9 per cent. Siu said labor shortages had worsened in Guangdong since October after a larger than expected number of orders caught factories off guard.

Many of Hong Kong's longer-term investors have an innate trust of physical share certificates. HK investors turn away from paperless scrip - Tangible proof of shares preferred. For Hong Kong's senior citizen investors, share certificates are as much a sign of wealth as cash or gold bars. With so many arriving in the city from the mainland as refugees, it is perhaps easy to see why they are distrustful of anything they cannot carry easily. That may explain why after more than two decades, a proposal to move to a scripless, or paperless, share market has so far foundered.

Despite higher turnout, exhibitors at the Hong Kong Brands and Products Expo are looking back at last year's event during the economic downturn with nostalgia because bargain hunters seem to be spending less this time around. The expo attracted a record 2.18 million punters by the end of its 23rd day yesterday, said a spokesman for Chinese Manufacturers' Association of Hong Kong, which organizes the fair. Some 2.16 million people attended last year's event, which ran for 23 days and was also in Victoria Park. Shoppers yesterday jostled for goods in anticipation of exhibitors slashing prices over the final days to clear stocks. Shopping carts, large bags and boxes strapped to trolleys thronged the park as bargain hunters toted their purchases and sought more deals. The fair was so crowded that the swarms of eager shoppers, some eating ice cream or curry fish balls, often came to a standstill and waited for minutes for the congestion to ease. However, brand manager Yung Hau-ming of Sun Shun Fuk Foods Co which sells Sau Tao noodles, said sales were down. "With still one day to go, I think business is going to be a little worse than last year." Despite the pessimism, Yung did not expect the company to offer more discounts because prices were already low. She blamed the dampened sales on strong interest in bargains during last year's economic slump and the fact that last year's fair was nearer Lunar New Year. Elsie Lung Yin-foon, sales manager of food service for Lee Kum Kee sauce company, said fewer people visited her store this year and business was down. The firm was offering a bottle of its seafood XO sauce and a bottle of oyster sauce for HK$30. But John Mak, brand manager for Imperial Bird's Nest, said business was up, as he expected. "There are more big-spenders than last year," he said, adding he did not expect to have to offer discounts today. Sitting beside two full carts, a Mrs Chan said she was at the fair yesterday for the third time this season. She said she spent about HK$2,000 on health food - half of what she spent last year. "Things were cheaper last year. I bought a lot. Many of the things I got last year I still haven't opened so I'm buying less this time." The expo started on December 12 and was closed at 10pm Sunday.

Bai Chunli says the government might need to create more jobs in scientific research, and schools could train more youngsters. Hong Kong is lagging the mainland in creating the atmosphere for the pursuit of science, according to a leading scientist from the Chinese Academy of Sciences, who is urging the government to offer more jobs in the field. In a session with about 600 Hong Kong students yesterday, Bai Chunli, a nanotechnology expert and the executive vice-president of the academy, thought more could be done to encourage scientific research in the city. "Hong Kong is an energetic city with remarkable inputs in innovation. But comparing it with the mainland, I can see room to enhance the atmosphere in scientific research," he said. Bai said one of the major concerns of young researchers was their careers, with the city renowned for its strengths in the finance, trade and property sectors. "If Hong Kong wants to boost its economy by innovations, the government might need to create more jobs in scientific research and, in the long run, the tertiary institutes could train more youngsters for the field," he said. Bai said many opportunities had emerged on the mainland for talented people who wanted to devote their careers to science. He added that the academy would also launch open recruitment later this year. Gwen Wong May-wan, the wife of Nobel laureate for physics Charles Kao Kuen, had earlier said Hong Kong did not have the vision to support scientific research that took time to bear fruit. Young innovator Chan Yik-hei, who met Bai yesterday, said many people developed their interests in science when they were young but gave up later for career concerns. Chan, now a student at the University of Science and Technology, plans to fine-tune one of his old inventions - a watch that can monitor body signals, such as blood pressure and temperature - for use by the elderly this year. "To me, doing science is an entertainment," he said. "I hope my ideas can help others."

Corporate sponsorship of the arts is on the rise in Hong Kong despite the tough economic times, largesse that may help dispel the city's former reputation as a cultural desert. The coffers of the annual Hong Kong Arts Festival, the city's largest and longest-serving cultural event now in its 38th year, are expanding, thanks to the business community. The rise in sponsorship comes amid a global financial crisis that has hit hard the bottom line of many companies. The city also has a tax deduction scheme for companies supporting the arts that is less generous than that in other countries. Altruism is not only the motivation for the generosity. Brand building and feting of important clients at festival cocktail parties are also important for corporate sponsors. The corporate sponsorship fee for the Arts Festival amounted to HK$16.36 million for the 12 months to June last year, up 25 per cent from a year earlier. Sino Land group general manager Nikki Ng Mien-hua said the financial crisis had not affected the developer's spending on the arts. "We have increased the amount of money for art sponsorship because we want to support the event amid the financial crisis," Ng said. "As we can afford to pay, we would like to do more to support the festival to prevent any financial stress it may face." The group also allows artists to use its shopping centers to host exhibitions free of charge. The festival, partly funded by the government but which has long historical links with business, includes hundreds of music, opera, dancing and other performances running for about two weeks every February to March. "The festival was first started by business leaders including Sir Run Run Shaw and Sir Kenneth Fung," said Charles Lee Yeh-kwong, the chairman of the government-funded Hong Kong Arts Festival Society, which manages the annual event. "It is indicative of their vision that they saw the need for the festival as an integral part of life in Hong Kong. I am very glad that many business leaders of today also understand the importance of the festival and give it strong support." In general, corporate sponsorship makes up about 20 per cent of the festival's annual expenditure with government funding and box-office sales taking care of the rest. The Hong Kong Jockey Club, Swire Properties, HSBC Holdings (SEHK: 0005, announcements, news) , Hang Seng Bank (SEHK: 0011) and businessman Stanley Ho Hung-sun are other key supporters. Sino Group has been a committed backer since 1992 and this year will sponsor the Nina Simone Tribute Concert, Cafe de los Maestros and the Mariinsky Ballet's Don Quixote. Ng said the company liked to choose programs that attracted a mass audience so as to help brand building. From the corporate point of view, arts sponsorship is an important marketing tool but generally expenditure fluctuates with the economic cycle. While property developers such as Sino Land have largely escaped the worst of the crisis, many United States and European banks and insurers have been hard hit and seen their budgets for art sponsorship slashed. One US insurance company's chief executive, who does not want to be named, said his firm had to turn down a proposal for arts sponsorship because of the financial crisis. "When I have had to cut down spending and fire some of my colleagues due to the financial crisis, how can I agree to spend millions of dollars to sponsor an art program?" he said. Local lender Bank of East Asia (SEHK: 0023) had considered cutting its sponsorship of the Arts Festival, but finally decided against it. "We consider it important to show BEA as a company which takes its social responsibility seriously," a spokesman said. Hang Seng, which used to sponsor the finale program of the arts festival, is now supporting a program that enables full-time students to attend any festival event at half the price. "This is in line with Hang Seng's direction of nurturing more local youth to appreciate arts," said Walter Cheung, the head of corporate communication. Nearly 10,000 students benefit from this scheme each year. Tisa Ho, an executive director of the Hong Kong Arts Festival, said that without corporate sponsorship, the event would not be sustainable. "We would have to raise ticket prices or compromise on the quality of our programming, both of which are counter-productive to the festival and Hong Kong as a whole," Ho said. Corporate sponsorship of the arts in countries such as Britain and the US is not only a way to give back to the community but is a method of reducing taxes. Governments generally provide generous tax reduction incentives for corporations to sponsor arts programs. In Hong Kong, such deductions are not as generous. If companies donate money to subsidize student tickets or if they directly donate funds to a particular creative project, they are able to enjoy a tax deduction. But actual sponsorship of programs does not attract the same concession. "It would be helpful to the arts scene in Hong Kong as a whole if corporate sponsorship could be encouraged," Ho said. "In some places, tax incentives have been quite effective, even where tax rates are relatively modest." How does sponsorship actually work? Corporate sponsors pick a program they would like to sponsor and discuss the actual funds with the festival organizers. The amount could range from half a million to several million dollars. In return, the company is named in the program leaflet and other promotional materials for the festival. In addition, a number of complimentary tickets are given to the sponsors to entertain their guests and staff. Some firms also host cocktail receptions for their guests. Sponsorship fees for the festival's opening and the finale programs are usually higher because they are larger-scale performances.

China*: Huaneng Power International (SEHK: 0902) has agreed to pay 8.63 billion yuan (HK$9.8 billion) in cash to acquire two electricity producers in a bid to boost its competitiveness and profitability. The two companies to be acquired are Shandong Electric Power Corp and Shandong Luneng Development Group, which do not have any connection with Huaneng, according to a company announcement. Shandong Electric has a paid-up capital of 9.86 billion yuan. Shandong Luneng has a registered capital of 2.01 billion yuan. The acquisitions will allow Huaneng Power to enter the power market in Yunnan province and strengthen its position in Shandong province.

Western train makers are wrestling with the dilemma of tapping into China's booming rail market at the cost of helping to transform their new Chinese partners into future rivals on global markets. If foreign rolling-stock manufacturers wish to make and sell products in China, they are required to be minority partners in joint ventures with Chinese rolling-stock makers and sell or transfer technology to their Chinese partners. Siemens of Germany, Alstom of France and Bombardier of Canada have formed joint ventures to manufacture trains with China South Locomotive & Rolling Stock Corp (CSR) and China CNR Corp, the only two Chinese firms allowed to sell trains on the mainland. "We are definitely seeing a shift in the nature of the relationships between China rolling-stock manufacturers and their foreign partners, which is being driven by China's ability to provide technology compliant with international standards to markets in the Middle East and elsewhere," said Iain Carmichael. Carmichael, a managing director of Lloyd's Register Rail (Asia), an international transport risk management organisation, said the dynamics of the relationships had shifted away from the Chinese side being dependent on their foreign partners to the foreign partners now needing the Chinese manufacturers. "With this shift, Chinese rolling stock has become internationally competitive, and the nature of the relationship will continue to shift from one of collaboration to one of increased competition," he added. Foreign firms can hardly ignore the size and growth of China's rolling-stock market. Nomura estimates 450 billion yuan (HK$511 billion) will be spent buying trains in China from 2009 to 2012, more than double the spending in the past five years. "Is there tension between European and Chinese train makers? Yes, obviously. The Catch-22 is if the foreign firms don't do the joint ventures, they don't participate in China's market - but if they do, the China-made products become their competition overseas," said a former infrastructure consultant. One example of competition between Chinese rolling-stock makers and their Western partners is in Poland. CSR is competing with Siemens and Bombardier in a tender for 11 electric locomotives for Koleje Mazowieckie, a Polish train operator, according to a European trade article. CSR submitted the lowest bid at €34.98 million (HK$387.71 million) , while Bombardier offered €40.52 million and Siemens €44.03 million. The winner will be chosen later this year. The inroads by Chinese train makers into Europe have, meanwhile, generated tension. One Chinese rolling-stock manufacturer was recently planning to tender for an electric train project in Europe, for which the Chinese firm wanted to buy electric traction systems from European suppliers. "All the European companies refused to supply this equipment, presumably because they were worried about the Chinese company winning this order," said a British rail executive. "Our channel checks reveal Chinese rolling-stock vendors are in a good position to supply the high-speed trains that may be needed in the US and Britain within two to three years," wrote Jiong Shao and Stephen Chow in a Nomura report. Chinese trains were sold for the first time in developed countries in the first half of 2009, when CNR won deals to supply rolling stock to Australia and New Zealand. CNR won US$660 million of overseas orders in the first half of 2009, while CSR won at least US$740 million for the whole of 2009. In developing markets like eastern Europe and Africa, the market share of foreign firms would decline in two to three years, said a Hong Kong equity research analyst. "There is no doubt CSR and CNR are already a threat to European train makers. In developing markets like Africa and the Middle East, not too many countries need trains faster than 300km/h, so they are willing to buy slower trains from China." Chinese companies will capture at least 10 per cent of the international rolling-stock market outside China, predicts Nomura. In the US$110 billion global rolling-stock market, "we are starting to see the China brand gain traction overseas, backed by a perception of quality comparable to overseas offerings but at lower prices", it said. Chinese rolling-stock companies had a price advantage of 20 to 50 per cent over their overseas competitors, Nomura added. "But this is more than just price. After several technology transfers, Chinese rolling-stock suppliers now have the technology to produce high-speed trains running at 350km/h." For example, Siemens is the main technology partner of CNR Tangshan, a subsidiary of CNR which produces 350km/h high-speed trains, the world's fastest operational trains. The technology transfer from foreign firms to their Chinese partners has not been a smooth ride. "The Chinese Ministry of Railways invited international groups to work with domestic factories to raise standards and improve products, but the result has been quite disappointing," said the British rail executive. Railways Minister Liu Zhijun criticised CNR Tangshan for substandard quality during his inspection of the company in June last year, accusing CNR Tangshan of not properly absorbing Siemens technology. "If there are weaknesses in the high-speed trains built by CNR Tangshan with technology from Siemens, this is because either not all the information has been disclosed or the product was weak in the first place. In either case, the responsibility lay with Siemens and if CNR Tangshan is at fault, it is in not asking sufficient questions," said the British rail executive. "When Siemens and Alstom have been transferring technology, they have been careful not to give everything away, sometimes transferring last-generation technology and sometimes leaving gaps in the training. The relationship between the international and domestic partners may be a bit strained." Tensions between Alstom and its Chinese partners surfaced in early 2009. In January 2009, Alstom Transport chief executive Philippe Mellier told the Financial Times that China was restricting its rolling-stock market to foreign firms and suggested other countries should not open their markets to Chinese trains made with foreign technology. Later that month, China's Ministry of Railways denied Mellier's claims. "The Chinese authorities and [internet users] were upset. What is funny is Alstom retracted its position later," said the former infrastructure consultant. In a press conference in Beijing in February 2009, Alstom chairman and chief executive Patrick Kron said Mellier's remarks did not represent his company's position, and added: "We have no complaints whatsoever with our Chinese partners and we are not experiencing any problems in the use of technologies by our partners." To resolve the tension between staying in the lucrative China market and giving too much competitive advantage to Chinese partners, some foreign partners were more comfortable transferring their non-core technology, said the former consultant. "Nearly all of them are cautious in transferring their most advanced technologies. The Chinese may not get the best technology. "Foreign firms like Siemens are smart companies. They know that after transferring their technology, it will hurt them, but gaining the China market will compensate for their loss of market share in their home turf." Siemens said it expected 20 billion yuan of orders from China's stimulus measures from 2010 to 2012 in various businesses, including rail, energy and health care. In December last year, Bombardier reaped 941 million yuan from an order to supply trains to Shanghai's Metro Line 12. Siemens and Alstom did not reply to requests for comment.

In the highest profile judicial corruption case since the founding of the People's Republic, a top Beijing judge accused of abusing his power by accepting bribes is due to stand trial after a year-long internal investigation. Huang Songyou , former vice-president of the Supreme People's Court, will face charges of taking more than four million yuan (HK$4.54 million) in bribes, the China Business Journal reported yesterday. Citing an informant, the Journal said the investigation into Huang's case had entered its final stage, and would move to a judicial hearing no later than the National People's Congress and Chinese People's Political Consultative Conference in March. Huang, 52, worked in Guangdong's top court for almost 20 years before being promoted to Beijing in 2002. He is the highest ranking Supreme Court judge to be investigated by the party's top anti-graft watchdog, causing a major shake-up in the mainland's judiciary sector. His downfall casts unprecedented doubt on the authority and credibility of the mainland's judicial system. The internal investigation generated an anti-corruption storm in the judiciary last year, when corruption cases involving judiciary officials increased by 51 per cent from 2008. According to the 2009 working report of the Supreme People's Procuratorate, more than 13,000 corrupt officials were found nationwide. Of them, 2,620 were from the judicial sector - about 32 per cent of them judges and 10 per cent prosecutors. Last June, a major judicial reshuffle was launched in a bid to combat rampant corruption and injustices following a raft of scandals that began last year. Huang has been under shuanggui - a Communist Party internal disciplinary procedure under which party members are detained and interrogated - since October 2008 for allegedly severely violating party discipline. He was removed from his positions and expelled from the party in the same month. In October last year, his case was passed on to the Supreme People's Procuratorate. Mainland media reported that Huang led a lavish lifestyle, abused his power and accepted large bribes. Four other senior Supreme Court judges were involved in Huang's case, with one placed under shuanggui and the other three pending further investigation. One, senior Supreme People's Court judge Li Jun , received a three-year sentence for taking 100,000 yuan in bribes, according to the Journal. The other three judges were not identified. Huang also had a role in a land-sale corruption case in Guangdong that brought down several of the province's top court officials. It also led to the detention of the province's top enforcement court official, Yang Xiancai , last July. In October 2008, former Beijing district court president Guo Shenggui was sentenced to death, with a two-year reprieve, for bribery and embezzlement. He illicitly amassed 7.97 million yuan between 1998 and 2008. Huang formally supervised the civil cases division and the Office of Enforcement of Supreme Court Decisions before he was removed from the post.

In the hectic last week before she became US secretary of state, Hillary Rodham Clinton squeezed in a Bon Jovi benefit concert in New York, part of a frantic effort to pay off the debt from her presidential campaign. No sooner had she arrived at the State Department than Clinton discovered she needed to start raising money all over again. This time, the cash-starved beneficiary was not her own campaign but the United States, which needed US$61 million to finance the construction of a national pavilion at the World Expo in Shanghai. Under federal law, no public money could be used for the project. And Clinton, as a federal official, could no longer solicit private financial donations herself. So she turned to her well-established network of Clinton fund-raisers, and after negotiating with the State Department's lawyers about what she could legally do herself to support the project, she mounted an ambitious fund-raising campaign that has netted close to US$54 million in barely nine months. With multimillion-dollar pledges from PepsiCo, General Electric, Chevron and other American corporations, the US is on track to open a sleek, 60,000-square-foot pavilion at the Expo, which runs from May until the end of October. The prospect of the nation's chief diplomat asking for money worried government lawyers, according to officials. Referring to the first secretary of state, one lawyer asked: "Would Thomas Jefferson do this?" They imposed strict limits on the kinds of calls or other contacts she could make, allowing her to promote the pavilion but prohibiting any one-on-one appeals for cash. Despite those restrictions, and a dismal economy, Clinton is closing in on her US$61 million goal. She is clearly proud of the effort, which staved off what could have been a rupture in American-Chinese relations. In a year in which she has mostly worked to prove herself a loyal member of the Obama team, the campaign also showcases her enduring political drawing power. "The idea, for many people, of raising more than US$50 million would seem really daunting," Clinton said. "Maybe because I had participated in raising so much money in the past, I wasn't daunted by it. I knew it was going to be hard under the circumstances." By all accounts, the effort to build a national pavilion was near death at the end of the Bush administration. The near-collapse of the global economy, the proximity of the expo to the Beijing Olympics in 2008 and the general ambivalence of the State Department had left USA Pavilion, the non-profit group in charge of the project, with little support or money. There is a sense in the US that Americans got disenchanted" with world's fairs, said Nick Winslow, a former Warner Bros executive who is the president of USA Pavilion. With deadlines passing, the Chinese advanced the Americans money to conduct technical work for the pavilion. They raised the issue with former president Jimmy Carter when he visited China last January. Enter Clinton, who made her first trip as secretary of state to Beijing in February and was eager to talk about trade, climate change and the North Korean nuclear threat. Instead, she got an earful about how bad it would be if the United States did not have a presence at the Shanghai Expo. Shanghai is spending US$45 billion to transform the city, and nearly 200 countries have signed on to take part. "I was dumbfounded that so little attention had been paid to it," Clinton said. "Everyone knows China is going to be an enormously powerful player in the 21st century. They have an expo, which is a kind of rite of passage that countries like to do to show they have arrived. We're not there? What does that say?" She said she did not relish the prospect of more fund-raising - "When would it ever end?" she recalled asking herself - but she promised Chinese officials she would try to raise the money. There was little support for it within the State Department. So Clinton turned to two major fund-raisers with long ties to the Clinton family: Elizabeth Bagley and Jose Villarreal. Hillary Clinton appointed Bagley to be the department's special representative for global partnerships, a job that involves rounding up private support for public projects. Villarreal, a well-connected San Antonio lawyer, has raised money for Hillary Clinton as well as for Bill Clinton, former vice-president Al Gore and Senator John Kerry. In July, Hillary Clinton named him the commissioner general to the expo. To kick off the effort, Clinton held a conference call with 10 prominent chief executives. Chevron, PepsiCo and General Electric each pledged US$5 million. Indra Nooyi, the chief executive of PepsiCo, made calls to other chief executives. Bagley and Villarreal called companies with operations in China. "In the beginning, we had to use a patriotism argument," said Kris Balderston, Bagley's deputy. "The second wave of argument was commercial diplomacy. All of a sudden the companies understood it would be good for them." Although Bagley is a State Department employee, she said she was advised she could solicit contributions. Her experience in the political trenches made a difference, Villarreal said. "Any other diplomat would not have had the broad base of contact," he said. Clinton said it was easier raising money for this project than to pay off campaign debt. "I'm much better at raising money for other people and other causes than I am for myself anyway," she said, adding: "Even though I've obviously raised a lot of money."

Shanghai, Guangzhou move to cool red-hot property market - The Shanghai city government says it will increase land supply to take some of the heat out of the booming housing market. Shanghai and Guangzhou are the first cities to respond to the central government's efforts to restrain sizzling house prices, announcing a withdrawal of incentives for home purchases and tougher measures against developers hoarding land. Analysts said the moves could affect sentiment in the short term but they do not expect to see any major correction in the industry. The Shanghai local government said that from today, the resale lock-up period for a property would go back to the original five years after it was shortened to two years under an incentive programme introduced in 2008. The incentive announced in 2008 meant owners could resell a property after two years without paying a 5.5 per cent business tax. In addition, only first-time buyers of units smaller than 90 square metres in Shanghai can continue to enjoy the preferential deed tax of 1 per cent, according to the Oriental Morning Post. Non-first time buyers will be required to pay 1.5 per cent. The Shanghai city government also said it would increase land supply to take some heat out of the market. The Guangzhou government announced tougher penalities for developers hoarding land, with developers required to pay a one-time penalty of 20 per cent of the land cost. Previously, they were only required to pay instalments every month. The measures come after Premier Wen Jiabao recently issued warnings that the government could use land supply and financial and tax measures to regulate the market. Wen also reiterated Beijing's intention to increase the supply of affordable housing to low-income groups. The central and local governments' moves come as home prices in key cities have risen dramatically over the past year amid an environment of loose credit policy. In November, the average price of new homes in urban Shanghai, Beijing and Shenzhen was 31,209 yuan, 22,798 yuan and 19,851 yuan per square metre, respectively, Knight Frank said. These represent growth rates of 68 per cent, 66 per cent and 50.8 per cent from 2008, according to Xavier Wong, the director and head of research of the property consultant's Greater China division. Transaction volumes in the mainland's housing market, which hit a new high last year, would not be sustained in the coming year, as many policies that over the past year effectively boosted investment and speculative demand had been and would be scaled back, Wong said. "A mild correction in home prices in certain cities may be seen in the first half of 2010, but a major correction in home prices similar to that in 2007 and 2008 is not expected, as residential inventory has been substantially reduced after bumper sales over the past year," he said. David Ng, the head of property research at Royal Bank of Scotland, said the announcement of measures by the central government cleared the uncertainties clouding the market. However, he believes that political leaders are still not comfortable with economic growth and will tolerate a heated property market a while longer.

Financial Secretary John Tsang Chun- wah was among thousands of passengers affected by one of the worst snow storms to hit Beijing as 15 flights between Hong Kong and Beijing had to be canceled and 19 delayed. The Hong Kong Airport Authority said eight inbound flights were canceled and nine delayed while seven outbound flights were canceled and 10 delayed. But heavy snow at Beijing Capital Airport caused about 90 percent of all flights to be delayed or canceled, China Central Television said. Over 500 flights were delayed and about 400 flights were canceled, stranding thousands of passengers, it said. To ensure safety, only one of the airport's three runways was operating much of yesterday, reports said. Tsang, who was supposed to leave for Beijing for a series of meetings with central government financial officials, re- starts his trip today. The Airport Authority said 18 flights had been scheduled to arrive in Hong Kong from Beijing yesterday while another 18 were to fly from Hong Kong to the capital. Jacky Hui Chung-ki, senior EGL Tours marketing manager, said about 100 customers in three of its tours were forced to stay in Beijing last night while about 100 in four tours could not head for the capital as scheduled. "We have yet to hear any complaints from our clients. I think they understand that it is out of our control," he said. Daniel Chan Kin-pang, deputy general manager of Hong Thai Travel Services, said more than 60 travelers in two tours had to spend one more night in Beijing at their own expense. He said an outbound tour of some 20 travelers to Beijing suffered a six-hour delay and their flight finally took off around 4.30pm yesterday. Hundreds of passengers stranded at Hong Kong International Airport were angry about the delays and cancellations. "I came here for sightseeing. Now I don't know where to stay tonight. The airlines said it is none of their business," a mainland tourist complained. Snowstorms snarled New Year traffic and air travel in the mainland where the lowest temperatures in decades are forecast.

China International Capital Corp (CICC) topped the rankings of the underwriters of China's initial public offerings (IPOs) in 2009, making an estimated 1.23 billion yuan from fees, Bloomberg data showed. The earning of the country's largest investment bank was boosted by underwriting the China State Construction Engineering Corp's 50.1 billion yuan IPO, the world's second-largest in 2009. CICC also took two other heavyweight companies public, China Shipbuilding Co Ltd and China CNR Co Ltd, raising 14.7 billion yuan and 13.9 billion yuan respectively. CITIC Securities, the top underwriter in 2008, fell to the No 2 spot in the ranking, making 855 million yuan from IPO deals totaling 28.7 billion yuan, according to Bloomberg data. The third slot went to Orient Securities, which earned 258 million yuan from IPO deals worth 11.9 bllion yuan. IPOs are among the most lucrative advisory businesses for Chinese securities firms as China has witnessed an IPO boom since it reopened the market last June after a 10-month halt blamed on the widespread global credit crunch. Chinese securities companies saw an exponential growth in their revenues from the IPO business, making a total of 4.76 billion yuan from underwriting fees, doubling the 2.35 billion yuan in 2008. But the earnings still lagged far behind the 7.61 billion yuan made during the pre-crisis period in 2007. Last year, 43 Chinese securities firms helped 111 companies go public on the mainland's A-share market, raising 202.2 billion yuan. The value of the IPO deals taken by the top 10 underwriters accounted for more than 70 percent of the total IPO values. Market insiders said the IPOs of heavyweight companies will remain the target for large investment bank and securities companies such as CICC and CITIC Securities next year while small and medium securities companies will make start-up board ChiNext their primary focus. Stock prices of listed securities companies soared sharply in the past two weeks, mainly stimulated by unconfirmed reports that China's State Council has given the final nod for the introduction of index futures in 2010. Analysts said Chinese securities companies would likely see a surge in revenues this year after the regulators announce a clear timetable for the launch of the index futures, margin trading and short selling. "The new products will certainly boost the earnings and valuations of the brokerage stocks," said Cheng Binbin, an analyst with Qilu Securities "It not only means strong profit growth for securities firms in the future but also a gradual transition toward a more risk-diversified business model." It is forecast that margin trading and short selling will likely contribute 9.41 to 14.3 billion yuan in revenues of securities companies in 2010 while index futures will contribute 5.76 to 6.34 billion yuan. The net profit of China's brokerage industry may reach 90 billion yuan in 2009, a year-on-year increase of 90 percent, according to an estimate by Guotai Junan Securities. Meanwhile, foreign banks also grabbed a share of the lucrative pie of China's booming capital market last year with Swiss bank UBS ranked the largest underwriter of Chinese overseas IPOs. The bank contracted $728 million in underwriting fees from Chinese companies that sought IPOs in the Hong Kong market, worth a total of $26 billion last year, Bloomberg data showed. Mergers and acquisitions (M&As) made by the Chinese companies remained the traditional cash cow for foreign investment banks in 2009. Morgan Stanley was the No 1 financial advisor in M&A deals worth $20.9 billion on the Chinese mainland and Hong Kong, according to Bloomberg data. The largest M&A deal in 2009 made by a Chinese company was the $7.5 billion acquisition of Swiss oil company Addax Petroleum by China's largest oil refiner, Sinopec.

Jan 4, 2010

Hong Kong*: Lawyers are worried about their business prospects after the city's first guidelines to promote mediation came into effect yesterday. To minimize waste of court resources and litigants' time and money on unnecessary legal battles, the courts have been advising civil case litigants, whenever appropriate, to adopt alternative dispute resolution such as mediation since April's Civil Law Reform. Litigants who reject the court's advice without sound reason may lose their rights to legal costs despite winning. However, veteran solicitor Daniel Wong Kwok-tung doubts the effectiveness of mediation. The lawyer specializes in conveyancing and probate disputes - the areas most suitable for mediation - and fears mediators may snatch some of the lawyers' jobs. "Solicitors may be left with less business [amid competition from mediators]," Wong said. "But for those willing to do mediation, they might actually earn more. We will wait and see." Out of 6,548 practizing lawyers registered with the Law Society, only 300 have taken mediation courses so far, and only one third of them have gained accreditation from the recognized legal institutions in Hong Kong. "There are still many questions unanswered," Wong said. "Are mediators exempt of liability like when judges make rulings in court? Do insurance companies indemnify the clients of their losses when mediators make mistakes?" Oscar Tan Khain-sein, a mediation co-ordinator with the Law Society, said many lawyers still had misconceptions about the procedure. "A mediator is not a judge, he doesn't rule and is not supposed to give his opinion. He just helps the two sides reach a solution themselves." Insurance agencies also indemnify the parties of losses incurred by mediators' mistakes, providing the mediator works for a firm. Independent mediators, however, would have to negotiate the terms individually with insurance providers. The courts began promoting mediation in the wake of the Civil Law Reform in April. Not only is it cheaper as the cost is split between the parties, but it usually takes just 13 hours to resolve a case, whereas court litigation can drag on for years. However, the shorter time required to handle a mediation means a lower profit margin for lawyers. "Suppose a mediator charged HK$2,000 an hour. For 13 hours of service, it makes HK$26,000," Tan said. "A lawyer charges an hourly rate of HK$3,000 and many items are charged separately." But Tan said he believed lawyers could also benefit from mediation if they were willing to blend into the system. "They can advise their clients on ways to reach a better agreement, or prepare the written agreement for them." Tan said a Taiwanese study on the nation's development in mediation had found that 80 per cent of their lawyers suffered no reduction in income. High Court judge Mr Justice Johnson Lam Man-hon said earlier that the purpose of the civil law system was not to create a meal ticket for lawyers, but to help litigants seek justice in a way that best suited their interests.

Hang Seng Bank, the second-largest bank in Hong Kong, today announced it has received permission from the Guangdong branch of the China Banking Regulatory Commission (CBRC) to open its first cross-city sub-branch. The sub-branch, located in Foshan, Guangdong, is among the first group of cross-city sub-branches approved by CBRC's Guangdong branch under the Closer Economic Partnership Arrangement between the mainland and Hong Kong. Hang Seng has submitted an application to establish another sub-branch in Zhongshan, Guangdong, the bank said. Hang Seng China has opened 37 banking outlets in 12 cities on the mainland, including 16 in Guangdong province.

Top-tier schools widen the net - Elite institutions seek non-Chinese speakers - St Paul's head, Anissa Chan, inspects extension works. Two elite English-medium schools offering the local curriculum have drawn up bold expansion plans that will enable them to admit children from non-Chinese-speaking families. St Paul's Co-educational College and Diocesan Boys School are setting up boarding houses and International Baccalaureate programs and have devised adapted Chinese-language programs for pupils who are not native speakers of Chinese. The moves will permit the Direct Subsidy Scheme schools, which require all pupils to study Chinese language, to widen their nets to include children from English-speaking families, as well as foreign pupils and ethnic minority children. Currently, almost all pupils at the schools, which are obliged to offer the local curriculum and will run the IB Diploma alongside it, have Chinese as their mother tongue and most are permanent residents. DSS schools have discretion in setting their own curriculums and language policies and the government has recently given them further autonomy in line with its policy of developing Hong Kong as an education hub. The Executive Council decided late last year to allow DSS schools to set up boarding houses at their own cost, provided at least 50 per cent of places are reserved for non-local pupils. St Paul's Co-educational College will launch an adapted Chinese-language program for junior secondary pupils in September, targeting children who have attended English-medium primary schools and speak a little Chinese. It coincides with the start of a one-year preparatory course that will lead into the IB diploma, which will be taught in a HK$300 (US$38.8) million 13-storey extension - currently under construction - that also includes a dormitory for 80 children. Principal Dr Anissa Chan Wong Lai-kuen said: "This new language program opens up our admissions to a wider range of students. We want to attract all students who are interested in studying at St Paul's, irrespective of their background. "We very much want to be a key player in Hong Kong's role as an education hub. But we are not establishing an international stream. At St Paul's we have one big, integrated community. We have an ethnically-blind admissions policy and we want to enrich the diversity of our student body to encourage international-mindedness and intercultural awareness." The Macdonnell Road school's Chinese language and culture program is taught at native-speaker level and leads to a Hong Kong Diploma of Secondary Education exam (HKDSE). Pupils taking the adapted program will instead take an easier International General Certificate of Secondary Education (IGCSE) alongside the other HKDSE courses or take Chinese as a foreign language under the International Baccalaureate diploma. Diocesan Boys School in Mong Kok began offering an elementary Chinese program for non-native speakers two years ago, leading to a General Certificate of Secondary Education exam in Chinese for foreign-language learners. Last year, the school opened a new dormitory block with space for up to 220 pupils and in September it launched a one-year course leading to the IB diploma program, which is due to start this year. Headmaster Terence Chang Cheuk-cheung said: "Diocesan Boys is ready to go international once the government gives the green light. But we won't sacrifice the interests of local boys for the sake of internationalization. "The local boys should always be our first priority. However, we can see that eventually we might have to take some boys from overseas as well as from the mainland. "I predict most of them might come from the mainland. "At the last meeting of our school committee's working group ... we decided that we have to formulate a policy on admission of mainland and international students to follow the IB program." It would cover language teaching, recruitment, admissions and the quota for non-local pupils. Mark Bray, director of Unesco's International Institute for Educational Planning in Paris, who is an expert on international schooling in Hong Kong, said the new options would provide a "middle path" in the education system. "I think this should appeal greatly to many expatriate families who increasingly see Chinese as an important language and would like their children to speak it," he said. "And I think there is some potential for these elite schools to attract bright students from across the region." The programs would also provide a way for Hongkongers returning from abroad who spoke English at home to ensure their children would "integrate with society" and "keep in touch with their heritage". In the last school year, international schools provided places for 19,251 primary pupils and 15,347 secondary pupils. About 15,000 pupils are studying with the English Schools Foundation.

Famous British school looks to create leaders at HK offshoot - Leadership will be on the curriculum when Hong Kong's first international boarding school opens its doors in three years' time under a franchise arrangement with a leading English public school. With an illustrious history dating back to 1243, Harrow School has produced eight prime ministers and countless statesmen, and its Hong Kong offshoot is aiming to carve out an equally prominent future role. Executive headmaster Dr Mark Hensman said: "Our hope is that students from Harrow Hong Kong go on to become famous leaders in their fields in Hong Kong, Asia - and the world - be they musicians, scientists, humanitarians or politicians." Harrow International Management Services, which runs international schools in Beijing and Bangkok, won a government tender in August for a boarding school on the site of a former military barracks in Tuen Mun. Unlike its parent school in Britain, which is only for boys, the Hong Kong school will be co-educational. Hensman, who is leading the project, said plans for the HK$500 (US$64.52) million building were well advanced and the school was due to open in 2012 offering an education leading to British A-levels. "The great icons of Harrow - Winston Churchill, Nehru, and King Hussein of Jordan - very much represent what Harrow can do for people," he said. "The Harrow experience by its very breadth gives students huge exposure to a wide range of experiences through which they can learn leadership skills. "What we want to do is make that explicit. So we will have a leadership program embedded in the curriculum as well as the co-curricular program for the school." Leadership studies - involving skills such as time management and organization - would be offered as a subject and "leadership for a better world" would be one of three main strands in the curriculum. Programs for students aged seven to 16 would be strongly oriented towards the humanities, especially subjects such as geography, history, politics, religious studies, media studies and sociology. "These are subjects that help students to understand their world, which we believe is crucial to having any kind of leadership role," Hensman said. The school's site - on a hill in a remote northwest suburb of the city - echoes the location of its parent school, which sits on a hilltop high above the sprawling suburbs of northwest London. But while Harrow's complex of historic buildings and playing fields is spread across 162 hectares, its Hong Kong offshoot will occupy a site of just 3.7 hectares. Hensman said: "Harrow on the Hill is a very picturesque location. This site is also very attractive. It's small but its elevation and view of the harbor make it quite attractive. "We are being quite innovative, both in terms of the space and in terms of ensuring that it is physically attractive. The sports field will form the centre of the school. "We are having to create space by going up. It will be six to seven stories high and we are also having to create large indoor spaces. For example, the swimming pool will be indoors." Like their counterparts in Britain, students at Harrow International School Hong Kong will wear boaters - the wide-brimmed straw hat that is the school's hallmark - and the Harrow blazer. And both day pupils and boarders will be allocated to one of eight houses - the traditional pastoral system of the English public school - with one house occupying each floor of the boarding block. The management company's sole franchise arrangement with Harrow - which has been nicknamed "boater diplomacy" - gives it right of first refusal on all proposals for Harrow international schools in Asia. Land for the boarding school was provided by the government and the construction project is being bankrolled by Daniel Chiu, executive vice-chairman for Hong Kong, of oil and gas supply firm Fortune Oil. "Fees will be commensurate with the top international schools in Hong Kong," Hensman said. "Whatever is the highest end of the fee structure, we will be towards the upper end of that." The company was also looking at charging debentures - long-term capital instruments that help to meet school building costs - in Hong Kong. The highest fee charged by an international school is currently HK$153,000 (US$19,780) a year and debenture prices range up to HK$1.6 million (US$206,451).

Deng kept his HK options open in 1979 - Deng Xiaoping left open in 1979 the options of taking back Hong Kong in 1997 or allowing the status quo to continue after the expiry of the New Territories lease, according to Britain's declassified record of a meeting between Deng, then China's paramount leader, and Hong Kong governor Murray MacLehose 31 years ago. During the historic talks in Beijing on March 29, 1979, Deng told MacLehose that China "might" take over Hong Kong by 1997 but it would respect the city's "special status". "[Deng said] they had not taken over Macau so far. There were two solutions by 1997, to take Hong Kong over, or to allow present realities to remain," the record said. Deng's apparently flexible position on the resumption of sovereignty differed from his unequivocal declaration in 1982, during talks with then British prime minister Margaret Thatcher, that China would take over Hong Kong in 1997. The record of the earlier meeting was compiled by Britain's Foreign and Commonwealth Office and was recently declassified from the Britain's National Archives in London under the 30-year rule. MacLehose returned to Hong Kong after the trip, triumphantly bearing a message from Deng to "ask investors in Hong Kong to put their hearts at ease" and that the Chinese leaders attached great importance to the value of the city to the mainland's modernisation program. But the governor said in public at the time that he did not intend to reveal details of his conversation with Deng. Amid growing fears among Hongkongers over post-1997 arrangements, the landmark visit by MacLehose to Beijing, the first official visit by a Hong Kong governor, was hailed at the time as the prelude to extensive Sino-British negotiations on the future of the colony. The meeting between Deng and MacLehose was the first occasion in which the future of Hong Kong was put on the agenda in high-level talks between Britain and China. During the one-hour meeting at the Great Hall of People, Deng said: "China has a consistent policy: sovereignty over Hong Kong belonged to China. But Hong Kong has her own special status....When the two sides [Britain and China] discuss the question, China will respect the special status of Hong Kong." Deng was vice-premier but effectively paramount leader of the country at the time. MacLehose raised the land leases in the New Territories with Deng, saying the problem could not be overcome by generalised assurances. The land leases were due to end in 1997, when Britain's 99-year lease on the New Territories expired. The British government warned at the time that business confidence in Hong Kong would be undermined if the Hong Kong government did not issue commercial leases beyond 1997. "The Governor said what he had in mind is replacing the leases valid to 1997 with leases valid as long as Britain administered the New Territories. This would get rid of the date," the record of the talks said. "Deng commented that it would be best to avoid wording which mentioned continuing British administration. It would be better to say that, since the Chinese Government has expressed its political view, all would be well for investment." MacLehose reassured Deng that what he proposed would not affect the Chinese government's position on Hong Kong. A report by the Foreign and Commonwealth Office described Deng's reaction to MacLehose's proposal as "non-committal but not negative" while the governor believed Deng's comments had been favorable. Bill Quantrill, a Foreign and Commonwealth Office official, believed it was possible that Deng wanted the reference to British administration removed because he thought the leases should be phrased so that they could continue in force in a scenario he envisaged in which "Hong Kong would pass nominally under Chinese sovereignty, while continuing to be run on its present basis". According to Lu Ping , former director of the State Council's Hong Kong and Macau Affairs Office, Deng told MacLehose that the lease issue was not a subject for discussion because Hong Kong's sovereignty belonged to China. But the British files do not mention that remark. In July 1979, Britain's ambassador to China, Percy Cradock, explained the proposed solution to China's Ministry of Foreign Affairs. Beijing told Cradock two months later that the proposal was "unnecessary and inappropriate" and Britain then stopped pursuing it. While reiterating China's long-standing position that the sovereignty of Hong Kong belonged to China, Deng spelled out his preliminary idea of "one country, two systems" during the meeting with MacLehose, three years before he outlined his full-fledged blueprint for resolving the future of Hong Kong. "In this century and in the beginning of the next century, Hong Kong will be continuing with a capitalist system, while China is continuing with a socialist system," Deng said. He added that there were two solutions by 1997, to take Hong Kong over or to allow present realities to remain. In a telegram to the Foreign Office in April 1979, Cradock, who joined MacLehose for the meeting with Deng, wrote that the essence of what Deng said was that sovereignty certainly belonged to China but that the time when sovereignty might be exercised was uncertain. "On this he kept his options open ... It is the essence of our position that we are in fact paving the way for a continuation of the political situation beyond 1997," Cradock wrote. David Wilson, then political adviser to the governor, who also attended the meeting, noted in a telegram to the Foreign Office that the special status Deng envisaged for Hong Kong was the continuation of the existing economic and social system. Wilson served as governor of Hong Kong from 1987 to 1992. Deng's flexible stance may be attributable to the fact that Beijing had not formed a firm view by the late 1970s on the timing of resumption of Hong Kong's sovereignty. The State Council's Hong Kong and Macau Affairs Office was set up in 1978 to plot strategy on the Hong Kong question. From the founding of the People's Republic of China in 1949, Beijing had maintained the position that Hong Kong was part of China and the Hong Kong question would be resolved "when the time was ripe". During a talk with Thatcher in Beijing in September 1982, Deng said unequivocally that Beijing would take back Hong Kong in 1997 and rejected her formula of exchanging the sovereignty of Hong Kong for continued British administration after the lease on the New Territories expired. During the meeting with MacLehose, Deng suggested improving living standards in Guangdong to curb the massive flow of mainland immigrants into Hong Kong in the late 1970s. More than 100,000 people came to Hong Kong from the mainland legally and illegally in 1978, putting pressure on public services. The Hong Kong government estimated that nearly 100,000 illegal immigrants slipped into Hong Kong in 1979.

Lam Man-tin, a managing director of Aeon Stores, says consumer sentiment has greatly improved since the fourth quarter of last year. Department store operators say 2010 looks like being markedly better than last year, although 2009 ended on a healthy note, with shoppers out in force over Christmas. Aeon Stores (Hong Kong), the operator of 32 outlets including six Jusco general merchandise shops in the city, recorded a 13.3 per cent rise in sales between December 25 and 27 last year, which was higher than usual over recent years. The Japanese retailer said average spending per person rose 3.6 per cent and customer traffic increased 10 per cent over the period. Lam Man-tin, a managing director of Aeon Stores, said consumer sentiment had greatly improved since the fourth quarter of last year as the economy recovered. "We forecast that Hong Kong's gross domestic product will turn positive this year. Given a better economy, we believe we can achieve a high single-digit rise [in sales] this year," said Lam. To further boost sales, the company has launched a one-dollar promotion, which runs until Monday, enabling shoppers to redeem selected products with HK$1 under certain conditions after they have bought a certain quantity. Lam said they also ran the one-dollar promotion during the last New Year holidays when the market was reeling from the financial crisis and credit crunch. "The difference is that we didn't set any purchase requirement last time for customers to purchase the HK$1 products. It was aimed at attracting more people when the economy was bad," he added. Last month, the company opened a fifth Jusco supermarket, with an area of 60,000 square feet, in Tseung Kwan O. "Its turnover in the first two weeks is far better than our original estimate, which is also a sign of the robust recovery of the retail sector," said Lam. Talking about the marketing strategy this year, he said more high-end food and apparel products would be offered on shelves to boost customers' average spending. Meanwhile, the cash-rich retailer also plans to expand to other parts of the city. "We don't have any limit for the number of new shops, as long as we can find appropriate sites," he said. Another Japanese department store, Yata, in New Town Plaza in Sha Tin, also released sales figures yesterday. Its turnover increased 5.8 per cent over the past year, with travel-related products and baby stuff seeing the highest sales growth. The store's senior manager Rebecca Tse said the local economy had fully recovered at the end of last year and the consumption momentum would remain strong this year. The company expected a 10 per cent rise in sales this year and a 2 to 10 per cent pay rise for its employees. Hong Kong Retail Management Association chairwoman Caroline Mak Sui-king said the retail sector had rebounded fast after being hit hard by the financial crisis early last year. Many Hongkongers, who had cut budget on daily consumption, became generous this Christmas with a stronger confidence in the economy, she said. "We are pretty optimistic for the market of 2010. Despite the pressures of rising labour and leasing costs, this year should be a good year for local retailers," Mak said.

Hong Kong property prices will go up this year, but the gains will not match the sizzling pace of 2009, say real estate experts. Home prices this year were likely to grow 10 to 15 per cent in the wake of the continued hot money inflow from the mainland and the United States, said Benny Wong at Pan Asian Mortgage, which specialises in mortgage origination and capital market financing. But he and other property professionals say prices will not rise by the nearly 30 per cent rate of last year - when a heavy inflow of hot money drove up values. David Ng, the head of regional property research at Royal Bank of Scotland, also does not expect a sharp rise in home prices. "Last week's land auction result reflects that developers are more cautious about the market than the individual luxury-home buyers," he said. On December 28, Sino Land bought a 2.09-hectare residential site in Tai Po for HK$5.15 billion. Sino Land's 85 per cent joint venture also picked up an adjacent residential site of the same size for HK$5.25 billion. The remaining 15 per cent of that plot is owned by KWah International Holdings. The plots were sold for an average HK$7,214 per square foot, far lower than the HK$9,000 some analysts had forecast. But the price tag is not low when compared with the HK$4,668 to HK$6,368 per square foot fetched by nearby plots in 2007. "The auction outcome is a wake-up call for the market and a clear warning that the existing disconnect between the property sector and the pace of recovery of the economy cannot continue indefinitely," said Nicholas Brooke, the chairman of Professional Property Services. Property owner and investor Teddy Tse says the auction result has removed his concern about a potential asset bubble in the market. "It's a good sign. It indicates that the market will not go crazy, but rationalise," said Tse, a senior manager at a US-based commodity firm. In anticipation home prices will rise 10 to 15 per cent this year, Tse is eyeing units of about 700 sqft and valued at about HK$4 million to HK$5 million for investment. Tse's view is in line with analysts who forecast that housing prices will grow but at a much slower rate. However, analysts sometimes get it wrong. At the beginning of 2009, there was consensus that the global financial crisis would force a continued decline in prices and rents. According to the data compiled by Centaline Property Agency, housing prices rose 29 per cent from January 1 to December 28 last year. On average, prices are now 73.23 per cent of the price level in 1997, it said. In terms of total housing transaction volumes, 115,229 property deals were lodged with the Land Registry as of December 30, according to Ricacorp Properties. This is a gain of 19.68 per cent from 2008. Total residential sales value over the period amounted to HK$432.1 billion, an increase of 23.5 per cent, Ricacorp said. But much of those gains came from the huge flow of funds into the city. According to the Hong Kong Monetary Authority, more than HK$640 billion of hot money flowed into the city from October 2008 because of low interest rates and loose monetary policies around the world. Moreover, the increase in prices may be skewed by high sales of luxury housing. Buying by wealthy Hongkongers and mainlanders saw high transaction prices in luxury projects such as 39 Conduit Road, Mid-Levels, the Masterpiece in Tsim Sha Tsui and Westminster Terrace in Yau Kom Tau, near Tsuen Wan. But Ng of RBS said this did not reflect the overall market sentiment. Property purchases above HK$10 million are usually made by wealthy Hongkongers or mainlanders, not first-time local homebuyers or those upgrading for the first time. Demand is therefore not coming from the mainstream buyers, which means a surge in sentiment from luxury property sales can only have a short-lived effect on the overall market. Ng said transactions below HK$3 million accounted for 74 per cent of the secondary market. "A 5 per cent increase in home prices at best is a sensible forecast for this year," said Ng. That lower assessment is partly a reflection of the sober outlook for the economy. Chief Executive Donald Tsang Yam-kuen on Tuesday warned of the risk of a W-shaped - or double-dip - recession in 2010, reflecting continued uncertainties about the state of the global economy. Hong Kong had just recorded its first year-on-year growth in exports since the global financial crisis. Exports in November surpassed HK$240.7 billion, up 1.3 per cent from November 2008. The year-on-year contraction in gross domestic product eased from 7.8 per cent in the first quarter to 3.6 per cent in the second and 2.4 per cent in the third. Unemployment dropped to 5.1 per cent in the September-November period, having hit a peak of 5.4 per cent between April and August. But Tsang says Hong Kong's economic recovery will not be a smooth one. "I am a bit pessimistic on the pace of recovery and we may experience a double-dip in the middle of next year," he said.

The US dollar's fall against other currencies poses questions over its reserve status. The US dollar lost much of its lustre over the past decade as its status as a global reserve currency was challenged and its value against most key currencies saw erosion. On the foreign exchange market, the euro was virtually at parity with the dollar on December 31, 1999, but a decade later the greenback has fallen 30 per cent against the single European currency. The euro, launched on January 1, 1999, ended in New York trading at US$1.4323 on Thursday, the last trading day of the year. The dollar's rapid fall against the euro is ironic as the United States Federal Reserve had to come to the rescue of the faltering single European currency in September 2000 as part of a co-ordinated market intervention by leading central banks. The greenback also faced the same misfortune against other key currencies. While it was roughly stable against the British pound, it has lost nearly 10 per cent against the yen and a hefty 35 per cent against the Swiss franc in the past decade. The trade-weighted US dollar index, a measure of the unit's value against other world currencies, has lost 11 per cent in the past 10 years. According to recent figures from the Bank for International Settlements, which serves as a bank for central banks, the share of transactions involving the dollar fell to 88 per cent in 2007 from 91 per cent in 2001. On December 31, 1999, the International Monetary Fund estimated the share of dollar-based assets held by governments, excluding the United States and China, was 74.9 per cent. However, on September 30 last year, it dipped to 70.2 per cent. Some sceptics had doubted the euro could rise to the challenge as a common European currency. "The euro is already beginning to challenge the US dollar's status as the world's primary reserve currency and it is an understatement to say that over the past 10 years, the euro has come a long way," said Kathy Lien, the director of currency research at Global Forex Trading. In 1999, it was inconceivable to ask the head of the IMF whether the dollar's status was being threatened. Today, he talks about it himself. "I expect the dollar to remain the principal reserve currency for some time," IMF managing director Dominique Strauss-Kahn said in November in Beijing. In 1996, the Fed found "over 60 per cent" of US coins and dollar notes abroad but the share dropped to "approximately 50 per cent" in 2007.

Hong Kong television viewers could soon have more choice, with two companies seeking licenses to operate new free-to-air services that would break the 30-year duopoly enjoyed by TVB (SEHK: 0511) and ATV. Telecommunications firm City Telecom has lodged its license application, and cable-television broadcaster Cable TV also plans to apply soon. "We believe the current duopoly limits innovation, and Hong Kong is falling behind other more liberalised markets around the world," City Telecom said yesterday after filing its application with the Broadcasting Authority. "The company is determined to provide the public with more choice of free-TV programs." The company expects to invest a maximum of HK$210 million in the venture. Its content would include news and infotainment, programmes covering arts and culture and programming for children, young people and the elderly. A spokeswoman would not reveal how many channels would be offered. Pay television operator Cable TV is also planning to enter the free-to-air market, though it has said nothing publicly about what it is proposing, nor given any indication of what it would show were the government to approve its bid. It hopes to submit an application within days. Its vice-president for external affairs, Garmen Chan Ka-yiu, said City Telecom's application would not affect Cable TV's plans.

Chinese President Hu Jintao (R) talks with Tung Chee-hwa, vice-chairman of the Chinese People's Political Consultative Conference (CPPCC) National Committee, during a New Year tea party held by the National Committee of CPPCC, in Beijing, China, on Jan. 1, 2010.

Fireworks explode in the sky near the International Finance Center in Hong Kong, south China, Jan. 1, 2010, to celebrate the New Year.

Fireworks explode in the sky near the International Finance Center in Hong Kong, south China, Jan. 1, 2010, to celebrate the New Year.

China*: A Chinese dairy shut down during the 2008 tainted milk scandal has been closed again after tests found some of its products contained the same toxic chemical, state media reported yesterday. Shanghai Panda Dairy was closed and three executives arrested on Thursday after an investigation found eight batches of its powdered milk and condensed milk had "illegally high" levels of melamine, the Shanghai Daily said. Panda Dairy was put on a blacklist during the 2008 scandal after its products were found to have the second-highest levels of melamine in the nation, the report said. The now-bankrupt Sanlu Group had the highest. Authorities allowed Panda Dairy to resume production after it promised to "lift its game". But the latest investigation revealed the dairy had reused contaminated condensed milk that was recalled from the market and also used "suspect raw material" for its milk powder, the report said. Melamine, an industrial chemical, is added to milk products to give the appearance of a higher protein content. In 2008, at least six infants died and nearly 300,000 were made sick by milk powder contaminated by melamine. Altogether 21 people have been convicted for their roles in that scandal. Two have been executed and former Sanlu boss Tian Wenhua was given life in prison.

A metal parts shop in Shanghai. Copper almost doubled during 2009 while the S&P GSCI Index of 24 raw materials rose 50 per cent, the most since at least 1971. Commodities posted the biggest annual gain in four decades, led by a doubling in copper, sugar and lead prices, as Chinese demand compensated for the longest slump in the global economy since the second world war. In 2009, the S&P GSCI Index of 24 raw materials rose 50 per cent, the most since at least 1971, and commodities drew record investment of US$60 billion this year, Barclays Capital estimated. The MSCI World Index of stocks in 23 developed nations climbed 27 per cent last year, and United States treasuries fell 3.5 per cent, according to Bank of America Merrill Lynch indices. China, the biggest consumer of commodities such as copper and iron ore, expanded 8.5 per cent for the year, according to the median estimate of economists surveyed. The nation imported record amounts of both raw materials, making up for slack demand in the US and Europe. "If you look at the theoretical or global portfolio of assets that are out there, the percentage of commodities allocation is tiny, less than 1 per cent," said Kevin Norrish, a commodity analyst at Barclays Capital in London. "If you look at what investors think that they should have, clearly that would suggest there's a lot of potential for growth." In 2009, the Reuters/Jefferies CRB Index of 19 raw materials advanced 23 per cent, the most since 1979. China's central bank would maintain a "moderately loose" monetary policy because 2010 would be a crucial year for strengthening the recovery, the bank's governor Zhou Xiaochuan said. Among industrial metals traded in London, lead posted the biggest gain. Since the end of 1999, the metal more than quadrupled, leading gains among 36 exchange-traded raw materials in the US, Europe and Asia. Copper also doubled during the year, leading gains in the CRB gauge. The metal climbed almost fourfold in the decade. In 2009, gold futures in New York rose 24 per cent, the ninth consecutive annual gain. The US dollar's slump spurred demand for precious metals as an alternative investment. Crude oil advanced 78 per cent. The Organization of Petroleum Exporting Countries, accounting for 40 per cent of global supply, reduced output in response to the worldwide economic slump. Raw-sugar futures in New York more than doubled for the year, trailing only copper's advance in the CRB index. Cane harvests in Brazil and India, the biggest producers, were hurt by adverse weather.

President Hu inspects Hebei, underlines efforts to support agriculture - Hu Jintao (C, front), Chinese President, general secretary of the Central Committee of the Communist Party of China (CPC) and chairman of the Central Military Commission, shakes hands with a family member of villager Zhang Futai during an inspection tour at a village of Liqizhuang Town, Sanhe City, north China's Hebei Province, on Jan. 1, 2010. Hu Jintao made the inspection tour in Sanhe City on Friday.

Shanghai's first modern streetcar line begins operation in the east China city on January 1, 2010. There are 15 stations along the 9.8-kilometer route with a flat ticket fare of 2 yuan. It connects with Shanghai Metro Line 2 at Zhangjiang High Tech station.

A former senior police officer faces investigation on charges of taking massive bribes, official media reported on Thursday, in a development that appears to be linked to a broadening stock manipulation scandal. Zheng Shaodong, who as assistant minister of public security was in charge of handling economic crimes, was formally dismissed from his post and from the ruling Communist Party, the website of the People’s Daily newspaper reported. “An investigation found that Zheng Shaodong abused his position,” said the report. “He accepted huge bribes, and his relatives took massive cash payments from others.” The “suspected economic crimes have been handed to judicial organs for handling”, said the report, using words that suggest Zheng is likely to stand trial. The brief report was a glimpse into the intermingling of power and wealth in today’s society, a mix that has toppled other senior officials and, critics say, tainted more who remain in their jobs. The report did not say precisely how much money Zheng is accused of taking in bribes, and nor did it say who bribed him. Earlier news reports linked his fall to an investigation into alleged stock manipulation by Huang Guangyu, the founder of the home appliance retailer GOME, who has also been detained. Zheng Shaodong was detained in January at the beginning of the investigation of Huang. Once China’s richest man before falling from grace, Huang is also being investigated on suspicion of committing crimes separate from the original stock manipulation accusation, Beijing prosecutors said last week.

FTA with ASEAN comes into force - The world's largest free-trade area (FTA) came into being on Friday, an initiative that analysts said gives a shot in the arm for global trade troubled by rising protectionism.

Luxury housing prices go through the roof - Gray-slate-clad villas surrounded by an imposing stone wall and an ostentatious main gate flanked by thick Roman columns are making history by setting record sale prices despite repeated government warnings of overheating in the property market. In the latest sale at Forbes Park estate in the Gubei area, a villa of about 700 sq m was sold to an anonymous buyer at about 190,000 yuan per sq m. It is an all-time high for residential properties in Shanghai, nearly double the earlier record of 100,000 yuan per sq m for Tomson Riviera apartments in Lujiazui financial center of Pudong district. The annual average disposable income of Shanghai residents in 2008 was 26,675 yuan, which means it will take seven years' income for someone to buy a single square meter in the complex. Most of the tenants in the complex are overseas Chinese from Hong Kong and Taiwan, plus a few expatriate executives in multinational firms, said a saleswoman at the estate's sales office. Luxury housing prices go through the roof - The upmarket area is particularly favored by Taiwan industrialists and Hong Kong investors, and the estate is developed by Wan Te Yuan, a relatively little-known company which has been involved in this project of 21 villas and two tower blocks since 2004. The salesperson at Forbes Estate said that a total of 18 villas have been sold and the apartments in the two tower blocks have either been sold or are for rent. Forbes Park, according to property agents in the vicinity, was not a hot property because it is not located in Gubei's prime area. "Far from shops and supermarkets, Forbes Park definitely is not the star property in our district," said Liao Tao, the manager of the Gubei branch of Great Town Real Estate. But "timing is everything in this market", he said. "There are too many big spenders chasing too few quality properties in the inner city," he said. "In December 2004, only one property - by Rich Gate in downtown Luwan district - was sold for over 50,000 yuan per sq m, but in 2009, 1,460 units were sold above this price, showing robust growth in the high-end market," said a report by local property agent E-House. "The units are too expensive for most Chinese, but not for those who are used to luxury accommodation and high living overseas," said Xue Jianxiong, an analyst with E-House (China) Holdings Ltd. "Compared with upscale housing in cosmopolitan cities around the world, there is upward potential. Hong Kong's most expensive property was traded at 700,000 yuan per sq m in October, while top luxury properties are priced about 690,000 yuan per sq m in London," he added. Property prices in Shanghai and in most other major mainland cities have risen to levels fewer and fewer people can afford. More than 80 percent of urban residents cannot afford to buy homes, said the latest report from the Chinese Academy of Social Science. In December, the central government introduced various measures to moderate the property prices, including tighter mortgage conditions policies for second-home buyers. Li Qin, an employee at Tomson Riviera told China Daily that the developer is to release a batch of independent villas near the city's Tomson Golf Club in Pudong New Area next year, but refused to be pinned down on prices. "It should not be lower than 100,000 yuan per sq m," Xue Jianxiong said.

This year will be critical if the central government is to deliver on commitments on energy intensity and pollution control, says renowned mainland environmentalist Ma Jun , even as it considers new targets for cutting emissions for the next five years. China pledged in 2006, as part of a five-year plan, to cut energy consumption per unit of gross domestic product by 20 per cent and two key air and water pollutants by 10 per cent before the end of this year. Officials have admitted falling short of interim targets, but insist the five-year pollution control and energy efficiency drive is on track to meet the goal. "It remains a tough race to the finish line, with only a year to go to meet those ambitious targets," says Ma, director of the non-government Institute of Public and Environmental Affairs. He says 2010 will probably be a defining year not only because of the significance of the ongoing campaigns, but also due to the fact that Beijing has started compiling the next five-year blueprint, which will map out key development policies and set growth targets for the period between 2011 and 2015. Ma says rolling out detailed measures to deliver on its first carbon emissions target, pledged last month, will become a critical test for the central government. The pledge was made amid mounting international pressure in the lead-up to the UN climate talks in Copenhagen. Premier Wen Jiabao promised at the climate summit that progress towards slashing carbon intensity - the amount of carbon dioxide produced per unit of gross domestic product - by 40 per cent to 45 per cent from 2005 levels by 2020 would be a mandatory target in the new five-year plan. Ma says China, the world's biggest emitter of greenhouse gases, is expected to remain in the international limelight after the disappointing failure at Copenhagen last month to cut a new global deal to tackle climate change. "The pressure is unlikely to recede as long as China still refuses an absolute cut in carbon emissions," he says. Although China refused mounting calls for international supervision of its self-claimed progress in combating pollution, the government looks set to take further steps to improve transparency in government-controlled environmental information, including carbon-related statistics. "China may insist that the matter remains its own domestic affair, but the pressure has been building up both at home and abroad for more accountability and transparency in the fight against pollution as well as global warming," Ma says. The mainland public is also expected to push the government and polluting enterprises to become more transparent and unveil key information deemed essential to protect public health, he says. Disputes over toxic chemical leaks and the siting of garbage treatment plants have sparked a spate of mass protests and even violence on the mainland in the past few years. "People are becoming more sensitive to any health risks in their backyards and it remains a top challenge for authorities to address growing public concerns over the high environmental price of dazzling economic growth," Ma says.

Economic growth on China looks set to accelerate into the New Year, with booming factories driving a December manufacturing survey to a 20-month high while South Korea’s exports to the country surged on strong demand. The survey released on Friday also showed the rapid pace of activity pushed up prices of inputs such as labour, raw materials and capital to a 17-month high, potentially complicating efforts of officials who want to maintain growth-friendly policies without driving inflation expectations. The official Purchasing Managers’ Index (PMI) jumped to 56.6 in December from 55.2 in the previous month, the China Federation of Logistics and Purchasing said. It was the 10th consecutive month of expansion and the biggest monthly rise since March, reflecting that manufacturers, far from plateauing after a recovery, have actually gathered momentum heading into next year. “We expect China’s strong economic growth momentum to continue next year, with the major source of growth coming from a broad-based improvement in private consumption, and further strengthening in private housing investment, and a solid recovery in exports,” Jing Ulrich, chairman of China equities at JP Morgan in Hong Kong, said in a research note. Demand on the mainland has given a welcome boost to the economies of many neighbouring Asian countries over the last year as the region’s traditional Western markets remain weak. South Korea, Asia’s fourth-largest economy, said on Friday that its exports to China between December 1 and 20 were up 74.4 per cent to US$54.23 billion, while exports to the US in the same period grew only 8.7 per cent to US$19.04 billion. Overall Korean trade figures for December rose much faster than expected from a year earlier, indicating world trade was recovering quickly from the financial crisis and paving the way for an interest rate increase in Korea soon. Exports during the final month of this year grew 33.7 per cent from a year earlier to US$36.24 billion, blowing away the median expectation for 25 per cent growth. Imports gained 24.0 per cent over a year earlier to US$32.94 billion. South Korea, home to global suppliers of ships, cars and electronics gadgets, is the first major exporting economy in the region to release monthly foreign trade figures and is an early indication of trends in North Asian trade. “The export figures indicate an economic recovery is spreading to developed countries from emerging markets. The overseas momentum will boost Korea’s overall growth, of course, including domestic demand,” said Song Jae-hyeok, an economist at SK Securities in Seoul. “That will confirm views of an interest rate rise in the first quarter, probably in February.” The Bank of Korea indicated on Thursday that rates will rise next year at an appropriate pace. By contrast, China’s central bank said this week that monetary policy will remain loose, though flexibility will increase, a reference to slightly tighter controls on bank lending. Indeed, a slower expansion of new export orders for the second straight month in December supported the cause of officials who have been extremely cautious in winding down pro-growth policies. “The fall in the indicator for new export orders warrants attention, as it shows we must avoid undue optimism about the improvement in the international market place,” said Zhang Liqun, a researcher at the State Council’s Development Research Centre who comments on the PMI for the logistics federation in Beijing. China’s economy is expected by some analysts to grow by more than 9 per cent next year, increasing worries among some economists that deflation experienced through most of this year will quickly flip to inflation. However, the State Council Development Research Centre, a leading national think tank, said in a report on Friday that China’s gross domestic product would expand by 9.5 per cent next year, thanks to robust real estate investment and mild inflation. China’s economy shot back to nearly double-digit growth this year after nearly standing still at the end of last year, giving a lift to Asia and countries such as Australia which have been able to feed its voracious appetite for commodities. The country’s 4 trillion yuan stimulus package, complemented by a record surge in bank lending, propelled the economy to 8.9 per cent year-on-year growth in the third quarter of this year and put it on track for even faster expansion this year.

A New Year tea party is held in Beijing, China, on Jan. 1, 2010, by the National Committee of the Chinese People's Political Consultative Conference (CPPCC). Chinese President Hu Jintao (C) and other leaders Wu Bangguo, Wen Jiabao, Jia Qinglin, Li Changchun, Xi Jinping, Li Keqiang, He Guoqiang and Zhou Yongkang, all members of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, attended the tea party. Chinese President Hu Jintao on Friday urged maintaining steady and relatively fast economic development in a speech he made as he and other senior leaders celebrated the New Year's Day with political advisors Friday morning in Beijing. Hu and Wu Bangguo, Wen Jiabao, Jia Qinglin, Li Changchun, Xi Jinping, Li Keqiang, He Guoqiang and Zhou Yongkang, all members of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, attended the tea party held by the National Committee of the Chinese People's Political Consultative Conference (CPPCC). Hu said that the year 2010 is the last year of the country's 11th Five-Year Plan period and steady and relatively fast economic development is crucial for pulling the country fully out of the financial crisis. He said the country will continue to implement a proactive fiscal policy and a moderately easy monetary policy, while increasing the policies' flexibility and pertinence to fit changing situation. He also said all-out effort will be made to maintain social stability and the government will put more efforts into solving livelihood issues such as health care, education and employment. Hu added that the country will stick to the guidelines of "one country, two systems", "Hong Kong people governing Hong Kong", "Macao people governing Macao" and a high degree of autonomy to maintain long-term prosperity and stability of Hong Kong and Macao. He said the policy of "peaceful reunification and one country, two systems" will be adhered to and exchanges and cooperation across the Taiwan Strait will be enhanced to bring more benefits to people on both sides. The party was presided over by Jia, chairman of the CPPCC National Committee. The leaders were joined by members of the central committees of non-Communist parties, senior members of the All-China Federation of Industry and Commerce, personages without party affiliation, officials of the central authorities and representatives from all walks of life and all ethnic groups in Beijing.

A customer picks up bananas at a fruit market in Jakarta, capital of Indonesia, on Jan. 1, 2010. China and the Association of Southeast Asian Nations (ASEAN) on Friday kicked off the world's largest free trade area (FTA) embracing developing countries. The China-ASEAN FTA covers a population of 1.9 billion and involves about 4.5 trillion U.S. dollars of trade volume. China and the Association of Southeast Asian Nations kicked off free trade area Friday. From Friday, the average tariff on goods from ASEAN countries to China is cut down to 0.1%.·Six original ASEAN members will slash average tariff on Chinese goods from 12.8% to 0.6%. China and the Association of Southeast Asian Nations (ASEAN) kicked off their free trade area (FTA) on Friday. The world's largest FTA embracing developing countries covers a population of 1.9 billion. The average tariff on goods from ASEAN countries to China is cut down to 0.1 percent from 9.8 percent. The six original ASEAN members, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, will slash the average tariff on Chinese goods from 12.8 percent to 0.6 percent. By 2015,the policy of zero-tariff rate for 90 percent of Chinese goods is expected to extend to the four new ASEAN members, Cambodia, Laos, Myanmar and Vietnam. Dozens of trucks, mostly carrying dragon fruit from Vietnam, thronged border markets Friday morning, waiting to be unloaded at the Tianyuan Fruit Trade Market, one of China's largest market for fruit import, at the Pingxiang Port in Guangxi Zhuang Autonomous Region. "The establishment of the free trade area is really good news for me," said Liu Yuzhen at the Tianyuan market, who has been trading fruits for 16 years. She now sells more than 10 tonnes of apples, pears, oranges and other fruits to southeast Asia every day, and hopes her business will expand as the FTA will facilitate the customs clearance and reduce the logistics cost. Gu Xiaosong, vice president of the Guangxi Academy of Social Sciences, said both ASEAN members and southern China provinces abound with tropical primary products like rubber and tropical fruits, and thus competition in the earlier stage of the FTA will be unavoidable. "But such competition will eventually lead to optimization of the agricultural and industrial structures in the region, which will help form a more competitive entity in the global market," he said. There is a provision in the FTA for a temporary delay in tariff reduction by reclassifying goods as "sensitive" and "highly sensitive" products.

Local residents gather at The Place Square to celebrate the upcoming New Year together in Beijing, China, on Dec. 31, 2009.

Local residents gather at The Place Square to celebrate the upcoming New Year together in Beijing, China, on Dec. 31, 2009.

Local residents gather at The Place Square to celebrate the upcoming New Year together in Beijing, China, on Dec. 31, 2009.

The neon lighting showing the 121-days countdown to the Shanghai 2010 World Expo appear on the grand commercial building at the Lujiazhui Finance and Trade Zone, in Pudong District of Shanghai, east China's metropolis, Dec. 31, 2009. A magnificent new-year eve neon illumination is shown on 18 grand edifices at Lujiazhui Zone to mark the countdown to the advent of the new year.

Fireworks explode in the sky above the Olympic Sailing Center in Qingdao, east China's Shandong Province, on Dec. 31, 2009, to celebrate the upcoming New Year.

Brightening fireworks flare and scintillate over the Hanshan Temple, during the 31st Suzhou New Year Eve Bell Ringing &Felicity Worshipping Activity at Hanshan Temple, a major pilgrimage and tourism event with some 80,000 local citizens and visitors from both home and overseas taking part in, in Suzhou, east China's Jiangsu Province, Jan. 1, 2010.

Chinese Hong Kong star Jackie Chan poses beside a Chinese float during a preview of the Tournament of Roses in Pasadena, California, the United States, on Dec. 31, 2009. Jackie Chan and Chinese basketball player Yao Ming came to Los Angeles to promote the Shanghai 2010 World Expo float, which is the first float ever made to appear at the Pasadena Rose Parade in the history of the World Expo.

Chinese Hong Kong star Jackie Chan (L) and Chinese basketball player Yao Ming rest beside a mascot of Shanghai 2010 World Expo during a preview of the Tournament of Roses in Pasadena, California, the United States, on Dec. 31, 2009.

Lianhuanhua, printed by the Shanghai People's Fine Arts Publishing House, depicts stories of the Monkey King seeing through all the disguises of the white-skeleton demon—first, a beautiful girl, then an old lady and an old man—and finally killing it.

Jan 1 - 3, 2010

Hong Kong*: Special traffic arrangements will be implemented from Thursday afternoon as police expect about 400,000 people to celebrate New Year's Eve on both sides of the harbor, a spokesman for the Transport Department said on Thursday. “As police expect some 400,000 people to flock to both sides of the Victoria harbor to watch the fireworks and for the New Year countdown celebrations, road closures and traffic diversions will be implemented from 5pm on Thursday in Causeway Bay, Lan Kwai Fong, Wan Chai and Tsim Sha Tsui,” he said. There will be numerous New Year celebrations held along the harbor front. A fireworks show in the harbor will take place at midnight and will be launched from 10 buildings on Hong Kong Island. New Year countdown celebrations will also be held in Times Square, the World Trade Centre in Causeway Bay and along the Tsim Sha Tsui waterfront between the Avenue of Stars and the Hong Kong Cultural Centre. To facilitate crowds celebrating in Lan Kwai Fong, D’Aguilar Street between Wellington Street and Wyndham Street will be designated as pedestrian precincts from 5pm on Thursday until 4am on Friday. There will be road closures in Causeway Bay, Wan Chai, The Peak and Tsim Sha Shui in phases as well. The spokesman advised the public to avoid driving to the affected areas. The Mass Transit Railway will also extend their service hours and will be operating around the clock on Thursday night. Some bus services will be extended and Hong Kong Tramways and the Peak Tram will also be extended until 2pm and 3pm respectively. Police will implement road closures and traffic diversions from Chater Road pedestrian precinct in Central to Connaught Road West in Western district from 3pm on Friday to facilitate a public protest. For more information of special traffic arrangements during New Year holidays, visit the Transport Department’s website at

The city skyline is ablaze with fireworks as Hong Kong welcomes the new year - and new decade - with a bang. About 400,000 revellers gathered along both sides of the harbour to see in the start of 2010, with a further 20,000 people celebrating in Lan Kwai Fong and a record 100,000 at Times Square, in Causeway Bay, police said. Hongkongers' were in the mood to party, with optimism for the coming year at a high not seen since 2004.

Hong Kong Island will be the greyest, while new towns will be the most youthful. The workforce will have shrunk and some of us will have to work longer. Sai Kung, Yuen Long and Kowloon City will be growing the fastest. Those are among the Planning Department's projections for the city's population in 2018, as interpreted by the Elderly Commission. "The increasing number of elderly people is not necessarily a burden on society. But proper measures should be in place to ensure the city has a big enough workforce," said Leong Che-hung, chairman of the commission, which advises the government on policies affecting the elderly. He said the government must start encouraging employers to show flexibility on the age of retirement. While there is no mandatory retirement age in Hong Kong, most employers take their lead from the government and require staff to retire at 60. According to the projection, the population is expected to increase from 6.98 million in 2008 to 7.59 million in 2018, of which 16 per cent will be over 65, with their number having risen from 878,900 to 1.23 million. By 2018, people living on Hong Kong Island will have a median age of about 44 - two years older than the rest of the territory. North Point and Chai Wan will have the largest proportions of elderly residents in the city. They will account for 21 per cent of the population in Eastern District. The proportion of people of working age will shrink from 74.5 per cent to 71.6 per cent. Mainland immigrants, who will be the major source of population growth in Hong Kong, will be concentrated in the new towns of Tseung Kwan O, Tin Shui Wai and Tung Chung; Sai Kung, Yuen Long and Kowloon City districts will see the fastest population growth. Leong urged the administration to take the lead in introducing a flexible retirement age in the government and governmental organisations. "The current retirement age for civil servants is 60. But it's a waste of resources, as people at this age are still healthy and active nowadays," he said. Leong noted that the British government was considering extending the retirement age from 65 to 67 to increase the country's workforce. Leong said a flexible retirement arrangement would allow people's talents to be used according to their ability and their employer's needs. "These experienced leaders can step aside as an adviser or a consultant. The younger generation will still be promoted," he said. Paul Yip Siu-fai, professor of social work at the University of Hong Kong, said the poor quality of the future workforce might aggravate the problems of the ageing population. It was often too difficult for young migrants to catch up with the local education levels, Yip said, and even if some mainland migrants were professionals, their qualifications were not recognised in Hong Kong. Yip suggested streamlining the queue for one-way permits - which allow mainland residents to migrate to Hong Kong - so that children arriving from the mainland could be admitted to school at an early age as possible. "It's far easier for them to catch up with school work and avoid becoming a dropout if they start the local education from kindergarten," he said. Yuen Long District Council chairman Leung Che-cheung said districts with the most workers, such as Tin Shui Wai, needed more educational facilities and government support. "The future workforce might not be able to match the city's occupational demands if the government does not plan carefully now," he said.

Drug control in Hong Kong is poised to be overhauled with the creation of a new safety office following a series of drug-related blunders this year. The setting up of the office was recommended yesterday by a government-appointed review committee, which is proposing that it be in place by 2011. All controlled drugs would be labelled "prescription drugs" or "drugs to be supervised", while pharmacy owners could be prosecuted if they breach a code of practice. Drug manufacturers would be inspected more often, and customers able to obtain refunds during drug recalls. The measures are among 75 recommendations the drug review committee made yesterday. The Food and Health Bureau is expected to accept most of them after a final report from the committee is published in the next week. The new office will employ 94 pharmacists, 20 scientific officers and 14 doctors. They would primarily handle Western medicines, William Chui Chun-ming, vice-president of the Society of Hospital Pharmacists of Hong Kong and one of the committee's members, told the South China Morning Post (SEHK: 0583) . He said the government had promised to establish a centre for drug safety in the long run, which would oversee both Chinese and Western medicine, but no timetable was available yet. Permanent Secretary for Food and Health Sandra Lee Suk-yee the 75 recommendations would enhance drug safety in Hong Kong if implemented. Some would require legislative amendments. She said the administration had decided to set up an office for drug safety because government regulation of Chinese medicine was still in the initial stages.

Hundreds of extra police officers will hit the streets tonight as up to a million revelers welcome in the new year. Police will mobilize 2,000 officers to step up security in the wake of a series of acid attacks in crowded areas. The latest in a spate of attacks left six people injured after acid was thrown from a high-rise building in Causeway Bay on December 12. No one has been arrested. The main focus of celebrations will be the fireworks display and light show over Victoria Harbor. The number of pyrotechnic firing points on 10 landmark buildings has been increased by 50 percent - from 6,000 last year to 9,000. Prime viewing spots are the Avenue of Stars, West Kowloon Waterfront Promenade, the waterfront at Golden Bauhinia Square in Wan Chai and the area around the Central piers on Hong Kong Island. Pre-countdown entertainment will also be staged at the viewing deck of the Hong Kong Cultural Centre and projected onto its facade. And as the last minutes of 2009 tick away, Causeway Bay's Times Square - which is throwing a fancy dress bash entitled "Love Hong Kong" - is expecting at least 100,000 partygoers to usher in 2010. The nearby WTC More also expects the same number of revelers to crowd into the alleyways and side streets around the mall. Restaurants along the harborfront say bookings for tonight are very heavy, and bar managers are expecting a hectic night. But amid all the expected revelry, there were words of warning on drink- driving from the government yesterday. Secretary for Transport and Housing Eva Cheng Yu-wah appealed to drivers to either stay away from alcohol or their cars. She said the administration is also considering granting police the power to suspend the licenses of motorists charged with drink-driving and awaiting trial. Special traffic arrangements will be implemented tonight in Times Square, Causeway Bay typhoon shelter, Lan Kwai Fong, Two IFC and the area fronting Central Piers 7 and 8.

Drug tests using hair will be piloted in clinics and rehabilitation centers next year - but the process is unlikely to be introduced into schools. Commissioner for Narcotics Sally Wong Pik-yee was yesterday briefed on the hair method developed at the Government Laboratory. "The government is gearing up for preparatory work in the hope that a pilot service can be introduced in 2010," she said. Samples for a hair test are easier to collect and store than urine samples. About 4cm of hair from the root can reveal the amount of drugs taken in the preceding three months. Between 20 and 60 pieces of hair are needed for each test. In urgent cases, results can be generated in eight hours. The drawback is the higher costs compared to urine tests because of the use of more sensitive equipment. Wong said the pilot hair test will be voluntary like the Trial Scheme on School Drug Testing, but she did not rule out the possibility of using hair-test results as evidence in court cases. The Government Laboratory dealt with about 6,800 drug cases and examined about 17,000 drug samples between January and November. The most commonly found drug is ketamine followed heroin, cocaine, ice, cannabis and ecstasy. Wong also said the trial school drug test scheme in Tai Po has identified some drug users, but she declined to disclose the number because it is too small and might expose the identities of the students involved. She insisted the scheme has been effective in protecting student privacy. Urine samples submitted to the Government Laboratory carry only a code and the laboratory has no information which could identify an individual. She also added some frontline anti- drug campaigners in Tai Po reported the number of cases seeking help has doubled since the launch of the drug-test scheme. The number of arrests related to drug abuse has gone down slightly as well, reflecting the effectiveness of the scheme. Wong said the government will organize talks and workshops for private labs to share the hair-testing technology and assist them with obtaining the relevant accreditation. Hong Kong Lutheran Social Service Cheer Ever Green Center supervisor Tang Kam-biu backs hair drug-test technology, but is worried the cost is prohibitive. "The hair test helps trace longer drug-taking history and provides more evidence and convenience for abusers, but the center would not be able to afford the high cost, which I heard is about HK$1,000," Tang said.

The share sale is seen a defensive deal by BEA chief David Li (left) against Guoco owner Quek Leng Chan, who has been building his stake. Bank of East Asia (SEHK: 0023) yesterday announced the sale of HK$5.11 billion in new shares to two banks in a move analysts say is aimed at protecting it from a hostile takeover. "There is no doubt this is a defensive transaction," said Louis Tse, a director at VC Brokerage. "This will make it more difficult and more expensive for Guoco to incrementally build up its stake in the market." Guoco Group (SEHK: 0053), a conglomerate owned by Quek Leng Chan, surprised the market when it snapped up a 5 per cent stake in BEA in January this year and has since increased its holding to about 8 per cent. The new placement shares have been issued to BEA's two main strategic shareholders. Spain's Criteria CaixiaCorp is buying 120.8 million new shares to raise its stake from 9.8 per cent to 14.99 per cent. Japan's Sumitomo Mitsui Banking Corp will buy 46.3 million shares, increasing its equity holding from 1.91 per cent to 4.05 per cent. The two banks will pay HK$30.60 each for the shares, a 2.1 per cent discount to BEA's closing price yesterday of HK$31.25. Quek's rapid accumulation of an 8 per cent stake caught market attention as it is unusual for the Malaysian financier to remain satisfied with a minority stake. After selling Dao Heng Bank to Singapore's DBS Bank in 2001, Quek tried to buy International Bank of Asia in 2002, Chekiang First Bank in 2003 and Asia Commercial Bank in 2006. After the issue, BEA's total capital adequacy ratio and tier-1 capital adequacy ratio rises to about 16 per cent and 11.7 per cent respectively. The share sale to Criteria Caixia falls within an agreement it signed with BEA in June that allows the Spanish bank to raise its stake to a maximum of 20 per cent. BEA boosted its tier-1 capital with a US$500 million hybrid instrument comprising subordinated bonds and preference shares. On completion of yesterday's placement, the holdings of BEA chairman David Li Kwok-po drop to 2.29 per cent from 2.49 per cent. The market has long viewed BEA as ripe for takeover because of the relatively weak grip by the Li family, although its position has for the moment been bolstered. Although only Hong Kong's fifth-biggest lender, BEA's attraction lies in its strong position on the mainland. BEA China has the largest banking network in Guangdong province among all foreign banks, with a branch each in Shenzhen, Guangzhou and Zhuhai and 18 sub-branches. In the first half of this year, BEA China contributed 40 per cent to the group's pre-tax profit and about 35 per cent of its loan portfolio. BEA expects loan growth on the mainland to easily surpass that of its Hong Kong units and contribute more than 50 per cent to its loan portfolio in coming years. It will probably be one of the first banks to list on the mainland.

Sales of HK$1.3 billion a year make Citicall one of the city's top retailers of consumer appliances and computer products.

Donations have been pledged for the establishment of a school of veterinary medicine at City University, the university's president, Kuo Way, said. The university had earlier unveiled plans to set up the school in collaboration with Cornell University in the United States. The plan is backed by the municipal government of Shenzhen, where a farm and veterinary hospital will be set up. CityU will model the school's program on the existing curriculum offered at Cornell, which will send professors and doctoral students to Hong Kong to teach. Professor Kuo says the unsolicited donation will come from a staunch supporter of the planned veterinary medicine program. "We didn't ask for it. He made the pledge of his own accord," Kuo said. A spokeswoman said CityU would not reveal the identity of the donor and the amount pledged so as not to affect its application to open the veterinary medicine school. A University Grants Committee spokesman said the panel received CityU's application in August. "We are consulting various government departments on the plan and will announce our decision later," he said. CityU's plan for the school did not receive positive response from the Education Bureau, which ruled out in March plans to launch such a programme for the time being. A Society for the Prevention of Cruelty to Animals spokeswoman expressed reservations about the plan. "A veterinary student has to learn about all kinds of animals like poultry and dolphins. If Hong Kong offers such a program, students might not have the chance to get exposed to all kinds of animals," she said. The Veterinary Surgeons Board of Hong Kong says there are 520 registered veterinary surgeons in the city, compared with 361 four years ago. While there are no figures showing pet ownership in Hong Kong, the Agriculture, Fisheries and Conservation Department says 80,000 dogs have been registered for chip implants over the past three years. Hong Kong Veterinary Association member and veterinarian Phillip Mak Chi-kin, who owns the pet clinic Peace Avenue, says the market can absorb graduates from CityU. "If Hong Kong has its own vet school, local people don't have to go overseas. The school can also attract mainland students and make Hong Kong the hub of veterinary medicine in Southeast Asia," Mak said.

More than two decades after the idea was first proposed, Hong Kong's stock market may in 2012 finally adopt so-called scripless shares, abandoning physical certificates in favor of electronic recording of shareholdings. Although the Hong Kong stock exchange is the world's seventh-largest by market capitalization, the law still requires all companies to issue physical share certificates. In Australia and on the mainland, all investors have their shareholdings in electronic records. Since 1996, Britain has allowed investors to opt for electronic records or physical share certificates. In a third attempt to start a scripless market, the Securities and Futures Commission and Hong Kong Exchanges and Clearing (SEHK: 0388) yesterday jointly launched a consultation paper on the subject. It would allow investors to turn in their existing share certificates, creating electronic records in an account under their own names or the names of their brokers in the Central Clearing and Settlement System. The proposal also allows investors to keep their share certificates. They could also opt for turning the electronic record back into physical shares at any time. In the case of initial public offerings, investors could choose to receive physical share certificates or an electronic record. This dual system would be in place for some years before any attempt would be made to abolish share certificates. SFC executive director Keith Lui Kei-kwong said it was hard to predict when Hong Kong would abolish share certificates entirely since experience overseas showed some investors preferred holding certificates. Australia turned all share certificates into electronic records in 1999, but there are still certificates in use in the United States and Britain. Lui said there were still nine million investors holding share certificates in Britain, 13 years after the move to go electronic. Introducing the scripless market is the last major proposal of the Ian Hay Davison Report, which suggested a range of reforms for the local market in 1988. The SFC had the first consultation on a scripless market in 2002, followed by an HKEx consultation in 2003. But both failed to proceed due to the lack of support from investors and brokers. "This may be the right time to propose the scripless market as many more investors are trading through the internet than 2003," Lui said. "The proposal is more environmentally friendly as it would reduce the number of trees needed to be cut to produce the share certificates." The consultation will last three months. A more detailed plan for a consultation will then be prepared for a change in law.

The government will name two buildings in honor of Nobel Prize winner in Physics Dr Charles Kao Kuen and renowned Chinese scholar Jao Tsung-I, a spokesman said on Wednesday. “In recognition of the outstanding achievements of Nobel laureate Professor Charles Kao and renowned Chinese scholar Professor Jao Tsung-I, the government will name a 288-seat auditorium and a forum in the Hong Kong Science Park as Charles Kao Auditorium. A centre to promote Chinese arts and culture in the former Lai Chi Kok hospital will be named the Jao Tsung-I Academy,” he said. Chief Executive Donald Tsang Yam-kuen said this naming of the buildings was intended as a tribute to both academics' distinguished contributions to Hong Kong and the world. “Hong Kong is proud of their achievements. The naming arrangement is to pay tribute to them on behalf of the Hong Kong people and to bring lasting honor to them,” Tsang said. Tsang said he hoped the naming of an auditorium and a forum after Kao in the Science Park would help inspire new home-grown technology in Hong Kong. The government plans to seek funding support for the revitalisation of the buildings from Legco next year. The project is expected to be completed by mid-2012. Dr Charles Kao Kuen – known as the “father of fibre optics”, received this year’s Nobel Prize for Physics from King Carl Gustaf of Sweden on December 10 for his discovery of the properties of glass fibre, which has revolutionised global communication. Professor Tsung-I is a world-renowned scholar who has attained achievements in Chinese and Oriental Studies as well as arts and culture. He received many prestigious awards, including the Order of Arts and Letters, Ministry of Culture of France, the Grand Bauhinia Medal, and a Prize for Special Contributions to the Protection of Dunhuang Relics.

Director General of the World Health Organisation Margaret Chan speaks to reporters at the WHO headquarters in Geneva, Switzerland on Tuesday. The H1N1 flu pandemic may not be conquered until 2011 and continued vigilance is required against the virus which can still mutate, the head of the World Health Organisation said on Tuesday. WHO Director-General Margaret Chan also warned that although countries have shored up their defences against the first influenza pandemic in more than 40 years, they remain ill-prepared for mass outbreaks of the deadlier bird flu virus. “It is still premature and too early for us to say we have come to an end of the pandemic influenza worldwide. It would be prudent and appropriate... to continue to monitor the evolution of this pandemic for the next six to 12 months,” Chan told a year-end news conference. “The one thing we need to guard against is a sense of complacency,” she added. Countries including Britain, Canada and the United States have passed peaks of a second wave of H1N1, but outbreaks are intensifying in India, Egypt and elsewhere, according to Chan. H1N1 has now spread to more than 200 countries, with nearly 12,000 deaths confirmed in laboratory, but it will probably take two years to establish the true death toll, she said. Millions of people have been infected with the virus which emerged in April, most recovering without special treatment. But young people, pregnant women and people with underlying health conditions such as heart or lung disease are more vulnerable and often require intensive care in hospital. Influenza viruses are notoriously unpredictable and can mutate into more severe forms, according to the WHO chief. Chan, who admitted she had not received her own H1N1 flu shot yet but would have it soon, said: “I am a bit more relaxed, but I will never let down my guard.” Rich countries and drug companies have pledged to donate 190 million doses of H1N1 vaccine for use in some 90 developing countries, she said. Her United Nations agency plans to start distributing the first doses in Azerbaijan and Mongolia in early January, to be followed by Afghanistan, she added. On recalls of some H1N1 vaccine – by AstraZeneca’s MedImmune unit and Sanofi-Aventis SA – she said they were because they were not as potent as they should be but posed no risk. “The recalls are not related to safety of vaccines,” she said, saying the issue had been dealt with in an “ethical way”. Chan, noting the world’s financial crisis and weak health systems in some countries, said: “The fact that the long overdue influenza pandemic is so moderate in its impact is probably the best health news of the decade.” But Chan, who fought avian flu and Sars while serving as health director in her native Hong Kong, said the world was still not ready to combat a pandemic of the H5N1 bird flu virus, noting it was “more toxic and deadly”. “No, the world is not ready for a pandemic to be caused by H5N1,” she said.

Photo showing a visitor looking at vehicles at a BYD dealership in Chengdu, Sichuan province. On Wednesday, the electric car maker said it plans to sell 800,000 cars in the coming year. China battery and car maker BYD, whose stakeholders include billionaire investor Warren Buffet, said on Wednesday that it has raised its next year sales target, as it prepares to roll out its first electric cars. The company had lifted its sales target for next year by 14 per cent to 800,000 cars, from a previous target of 700,000, said Paul Lin, manager of the company’s marketing department. He attributed the revision to robust demand from Chinese consumers under Beijing’s 4 trillion yuan (HK$4.5 trillion) economic stimulus plan, which includes several measures specifically aimed at boosting car sales. “The company already reached its this year target of 400,000 cars in November, so now we are setting our next year target to double that number at 800,000 cars,” Lin said, adding that this year’s final sales should come in at around 440,000 cars. He added that BYD’s highly anticipated e6, its first electric car, had passed government safety inspections and received other necessary permits. The company planned to start selling the e6 in mainland in the first quarter of next year, aiming to export them to the United States by the end of next year, he said.

Bank of East Asia (SEHK: 0023) said on Wednesday that it will sell HK$5.11 billion in new shares, raising proceeds to strengthen its capital position to support business development initiatives. The bank said it would sell 167.1 million shares at HK$30.60 each. The issue price represents a 2.12 per cent discount to Wednesday’s closing price of HK$31.25. As part of the deal, Negocio de Finanzas e Inversiones I, SLU, a unit of Spain’s Criteria, would buy 120.837 million shares, raising its stake in the bank to 14.99 per cent after the deal, from 9.81 per cent, BEA said in a statement It also said Sumitomo Mitsui Banking Corp would buy 46.267 million shares, raising its stake in Bank of East Asia to 4.05 per cent from 1.91 per cent. After the issue, Bank of East Asia’s total capital adequacy ratio (CAR) and Tier 1 CAR will increase to about 16.0 per cent and 11.7 per cent respectively.

The annual Hong Kong Computer Festival will be moved to a new venue because of safety concerns stemming from the tens of thousands of shoppers who jammed the streets of Sham Shui Po during last year's event. The four-day festival has been held near Apliu and Yu Chau streets since 2002, and the area was flooded by 450,000 visitors in December last year. The venue for the next show is the Cheung Sha Wan Playground. It will be held in mid-January, the dates having been changed to avoid a clash with the East Asian Games. District councillor Lo Wing-man said the decision to change the venue was made before a series of acid attacks from buildings began in the area, in June. The building nearest to the park is about 100 metres away, and Lo said he was confident that the police could monitor the event closely. The theme this time is "Green I.T. for Business Opportunities". About 140 booths will be set up, compared with 89 for the last event. Organisers will increase the number of security guards by 20 per cent, to 100. Despite the economic downturn last year, exhibitors achieved total sales of HK$230 million. Leung Ding-kau, chairman of the Chamber of Hong Kong Computer Industry, anticipates a 10 to 15 per cent increase in sales this time. About 40 new models of hi-tech equipment are expected to be released. Leung said new releases would be more expensive than last year, when prices were cut because of the downturn. But they will still be around 10 per cent cheaper than those sold outside the festival. The festival will be held on January 15-17 from 11am to 10pm, and on January 18 from 11am to 9pm. Admission is free.

Rusal adds Robert Kuok as cornerstone investor - Aluminium giant signs up Malaysian tycoon for HK listing - After months trying to add a famous Asian investor to its planned US$2 billion Hong Kong share sale, indebted Russian aluminium giant Rusal has signed up Malaysian tycoon Robert Kuok as a cornerstone investor, according to people connected to the deal. Rusal was close to securing sovereign wealth fund China Investment Corp as a long-term backer. However, this fell through because CIC did not want to be locked into Rusal for the six months required of cornerstone investors in Hong Kong, people involved in the deal said. A spokesman for Kuok's conglomerate vehicle Kerry Group, which also owns the South China Morning Post (SEHK: 0583), declined to comment. The Securities and Futures Commission has banned retail investors from participating in the share sale. While the regulator gave no specific reason for doing so, Rusal's cornerstone investors, which also include European financier Nathaniel Rothschild and United States hedge fund billionaire John Paulson, appear to be swallowing a lot of risk. The aluminium firm, controlled by Russian oligarch Oleg Deripaska, owes its banks US$14.7 billion after it gobbled up rivals during the commodities boom of 2007. Rusal faced bankruptcy last year before winning a life-saving debt restructuring deal with its 72 lenders early this month. Initial research from Rusal's financial advisers and independent stockbrokers obtained by the Post shows analysts are deeply split on the firm's future financial health, with some predicting it will have to sell assets or raise cash after the share offer. A Macquarie report, which is only published in draft form and has not been made public, forecast that Rusal "will require some capital injection or asset sale" to meet its debt repayments. The note was dated December 7. Rusal signed its debt restructuring deal on December 3. The Australian bank said Rusal needed to pay a minimum of US$3 billion to its foreign lenders, which are owed US$7.3 billion, by 2011. But Macquarie added Rusal would not generate enough free cash - money left over after business expenses - to meet these payments unless depressed global aluminium prices rose above the bank's own forecasts. The analysts said that to repay its debt, Rusal must generate US$1.045 billion in free cash flow next year and US$1.37 billion in 2011. They also forecast Rusal needed aluminium prices to stay at or above US$2,300 per tonne during this period to hit that target. As the global financial crisis has caused aluminium to pile up in warehouses all over the world, Macquarie reckons the metal's price will only hit US$1,984 next year and US$2,094 in 2011. It is unclear whether Rusal sanctioned these forecasts. A Macquarie spokesman said the report might change substantially before the final version was sent to potential investors. Other analysts have published conflicting accounts of Rusal's future debt payment schedule. London stockbroker Liberum Capital, in a research note dated December 22, says Rusal will generate US$7 billion of free cash in the next four years and "meet its financial obligations with Russian and international lenders". BOC (SEHK: 3988) International puts a very different complexion on Rusal's borrowing conundrum. It says the firm's foreign lenders have asked it to repay US$5 billion of its US$7.3 billion debt by the end of 2013. BOCI says if Rusal cannot meet this target, it will repay the international banks in warrants - rights to buy shares at a set price in the future. Rusal owes US$4.5 billion to Russian government-owned bank Vnesheconombank and US$2.98 billion to other Russian lenders. Banks also have wildly different estimates of what Rusal is worth. BOCI values the company at up to US$26.7 billion. Renaissance Capital, a London stockbroker, values it at US$24.4 billion.

Heavyweight IPO candidate UC Rusal has lured four heavyweight cornerstone investors to its initial public offering in Hong Kong, market sources said. Malaysian tycoon Robert Kuok Hock Nien, whose family controls Kerry Properties (0683), is among the big names who will invest in the world's largest aluminum maker for a six-month lock-up period. Nathaniel Rothschild's NR Investments and New York hedge fund Paulson & Co will also be participating in the deal, sources revealed. Rusal plans to raise about US$2 billion (HK$15.6 billion) from selling a 10 percent stake in SAR and Paris to repay debts. Vneshekonombank, a Russian state bank, is also one of the cornerstone investors. Rusal is tipped to turn profitable in 2009 by investment banks arranging the share sale. The firm will kick off pre- marketing next Monday, aiming for a listing on January 29. Book building will begin on January 12, with the offer price to be set on January 21, a banking source said.

The world's biggest aluminium company, Rusal, has a stark warning for investors in its Hong Kong stock offering: unless prices for the metal rise and the US dollar strengthens against the Russian currency, it could default on its loans and be declared bankrupt. The warning is one of many contained in the company's listing document, published yesterday, which runs to more than 1,000 pages and spells out the risks and the opportunities of participating in the offer. The listing of the first Russian company on the Hong Kong Stock Exchange is already one of its most controversial. The exchange's listing committee several times sought more documentation from the company, and the Securities and Futures Commission has blocked participation in the offering by retail investors. Rusal, the world's largest aluminium company, is aiming to raise up to HK$20 billion via the issue of 1.6 billion shares, which will be sold at between HK$9.10 and HK$12.50. The proceeds of the listing, one of the largest in Hong Kong in the past two years, will all go to paying off the company's huge US$16.8 billion debts. It only recently completed a restructuring - the biggest in Russian corporate history. Rusal expanded rapidly in the boom years prior to 2008. It plunged into debt following the onset of the financial crisis as the price of aluminium plummeted form its peak of US$3,122 per tonne to US$1,300 per tonne in March 2009. Its warning about the risk of default and bankruptcy is based on the December 2 price of US$2,126 and an exchange rate of 29.4 roubles to the US dollar. Retail investors will only be able to take part in the initial offer if they are prepared to invest a minimum of HK$1 million. They will have to buy the shares from financial intermediaries such as brokers and banks and provide assurance they are knowledgeable investors. Shares can only be traded in the secondary market in board lots of HK$200,000. The listing document carries an unusual warning in large red type on its cover noting that Rusal "does not meet the profit test to qualify for listing ... and has been admitted on the basis of its large market capitalisation, revenue in excess of HK$500 million and positive cash flow from operating activities". It further warns: "The group continues to have significant debt obligations and is subject to stringent covenants and repayment schedules that severely limit its operations and ability to incur new financing." The document notes a decline in the price of aluminium of 20 per cent would make it difficult for the company to meet its restructuring agreements. A 50 per cent decline in the price would mean it was unable to meet most of its obligations and make it, along with the rest of the aluminium industry, unprofitable. Despite the dire warnings to investors, the company believes that, based on its operating assumptions and the outlook for the sector, it will be able to reduce its debts over the next four years to an extent that it will be able to refinance the remainder. The document also draws attention to the risks to the company arising out of chief executive Oleg Deripaska's looming court action in London. Former business associate Michael Cherney claims he was cheated out of