Cola maker sues Pepsi over deal that fizzled

Source: Shanghai Daily by By Jin Jing

A DOMESTIC soft-drink maker is suing the Chinese unit of Pepsi because the company says its former joint-venture partner is illegally using its brand and business secrets.

Chongqing-based China Tianfu Cola Group Corp also said yesterday it is preparing additional legal action charging the beverage giant with contract breaches that caused the JV to go into debt.

The relationship between Tianfu group and Pepsico China Investment Co Ltd began in 1994 when they set up Chongqing Pepsi-Tianfu beverage Ltd Co to produce soft drinks under both the Tianfu and Pepsi brands.

Tianfu group contributed land, factories and production facilities valued at about US$7.32 million and took a 40 percent stake in the JV.

But the venture failed to turn a profit, and in 2006 the Chinese company sold its stake to Pepsi for 130 million yuan (US$19 million). Now it wants its product back so it can resume making the brand on its own.

Free ride

"The formula and some manufacturing know-how behind Tianfu Cola were not included in the investment, and Pepsi never paid us anything for using them during our cooperation," Qian Huang, general manager of Tianfu Cola Group, said in a telephone interview yesterday.

"The core business technologies of Tianfu Cola have been retained by Pepsi, and even after we quit the venture, it is still producing the products, which is illegal."

The Chongqing No. 5 Intermediate People's Court accepted the case early this week. A Pepsico China official last night declined to comment, saying the company's legal department was reviewing the matter.

Qian said the Chinese company is also asking for "several million" yuan in compensation. In the future, that figure could go higher.

More suits on tap

"We are also preparing to file a series of lawsuits against Pepsi for breaching partnership contracts and transferring profits that caused the joint venture to fall into deep debt," Qian said.

Government regulators said in 1995 that the output of Tianfu-brand beverages should be no less than 50 percent of the JV's total output.

"Pepsi increased the production of its own products while cutting the output of Tianfu beverages," Qian said. "Pepsi turned the venture into its own bottling plant."

Tianfu Group was one of China's leading beverage makers in the early 1990s and had a strong presence in south of China. It owned 108 plants nationwide and turned out 200,000 tons of soft drinks a year. But most of the plants have been shut down.

"We gained nothing from the JV," Qian said. "The Chinese company is near collapse."

Source article: http://www.shanghaidaily.com/article/?id=418064&type=Business

iPhone sets up Apple cart for crazy fans

Source: By Gan Tian and Wang Xing (China Daily)

Cliched undoubtedly, but the early bird did catch the Apple worm and fortune did favor those who braved Friday's cold and rain with a trendy gadget called iPhone.

In Beijing, a large crowd gathered at The Place shopping center many hours before the much-hyped iPhone was officially launched on the Chinese mainland.

A few hundred people queued up at The Place, with Henan province native Zhi Xianzhong in the front. The 32-year-old became the first person to get the iPhone from China Unicom, Apple's partner, at 7 pm after weathering the cold and rain for 7 hours and 40 minutes.

The handset, which Zhi said would be a gift for his wife, came with a certificate.

Liu Xinling, 25, too got a certificate from China Unicom, for she was the first to book a handset online at 00:02 am on Oct 1.

"I kept refreshing the Unicom website continually before logging on to book the handset," she said.

An iPhone 3GS handset (without connection) costs 4,999 yuan ($733), more than half of the country's per capita urban disposable income, and about 25 percent more than what it sells for in Hong Kong.

But the high price did not scare away iPhone fans, who love the gadget for its "creative functions, breathtaking design and faster speed".

Hundreds of fans cheered when the Apple store in Sanlitun opened sales at 8 pm. Zhao Xin, 31, a salesman, became the first to buy the iPhone from the store.

With pop music, flashlights, fashionistas and shoppers, the Sanlitun store became a big party venue for buyers. The store had made arrangements for its staff to help buyers install software and know more about it. The proud new owners also got help from the slides in the three giant iPhones hanging from the glass walls.

Soon, Apple fans were seen "helloing" each other and making plans for celebrating their luck.

Li Liang, 25, bought an iPhone even though he was not happy that the official handset was not equipped with WiFi.

"I know a lot of fans are like me. They have a touch of iPod, which has WiFi, and they buy an official iPhone that has some localized functions," Li said.

Luo Baohuang, a public relations manager, and a few iPhone fanclub members even threw a party at a restaurant to celebrate the occasion after they bought the official iPhones online. Luo, 29, has been using Apple's products for about eight years.

iPhone's official debut on the Chinese mainland has encouraged fans a lot, he said. "We no longer have to go to Hong Kong or the US to buy them," Luo said.

The launch, however, has put users of unauthorized iPhones in a dilemma. It is estimated that the mainland has 700,000 to 1 million unauthorized iPhone users, who smuggled the sets from overseas.

Wang Hongliang is glad that she resisted buying a pirated set. "An unauthorized set has no guarantee of after-purchase service, and you need to re-install its system from time to time, so I waited for the official one," she said.

Some fans are considering giving up their unauthorized phones and buying a "real" one because it has all the functions, Huang Luxia, a 25-year-old white-collar worker, said.

Apple first held talks with China Mobile in 2007 to introduce iPhone on the mainland. But it later turned to China Unicom, which adopted the 3G standard that Apple's iPhone 3G and iPhone 3GS are compatible with.

Experts said China's ban on the WiFi function in cellphones, the amount of handset subsidy, and Apple's insistence on running its store in China were the major obstacles that had kept iPhones out until Friday.

China Unicom wished the stylish handset to boost its 3G service, launched earlier this year, and help attract elite users from rival China Mobile.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/31/content_8876971.htm

iPhone Will Be A Gamble For Apple In China

Source: China Tech News by By ChinaTechNews.com Editorial Team

If history is an indication for how Apple will fare in the future in China, the company should be prepared for some rough riding as it starts selling its iPhone in China tonight.

Apple's iPhone goes on sale through China Unicom, a smaller competitor to behemoth China Mobile. China Unicom claims only a tad more than 140 million subscribers, while China Mobile has about 508 million subscribers. Since Apple announced its deal with China Unicom, China Mobile has responded with its own weapon: a device ingeniously named the OPhone.

Even if the OPhone never existed, Apple would still be competing with an even tougher rival — itself. With an estimated two million unlocked iPhones already being used in China, these black market phones offer better value to consumers. The unlocked phones are cheaper and they have Wi-Fi. A black market iPhone 3GS with Wi-Fi can be purchased in Shanghai for CNY5400, but a similar phone will be sold by China Unicom for CNY6999. China Unicom wants legitimate iPhone users to pay to cruise the Internet, so Wi-Fi availability has been nixed from Apple's approved phones — that black market iPhone 3GS is both cheaper and has more features than its approved, more expensive brother.

Apple has had growing pains as it tried to understand the Chinese market and the myriad ways of doing business in the Middle Kingdom. It was only in 2008, days before the start of the Beijing Olympics, that Apple finally, officially, opened its first self-owned store in the Sanlitun area of Beijing. Prior to its opening, Apple operated through a network of Chinese resellers who were frequently scorned by Chinese netizens for poor after-sales services.

That store's opening came almost two years after the December 23, 2006, media reports about Apple's unfair after-sales service for iPods sold in China. But Apple learned its lesson and reportedly sent a letter to Shanghai Municipal Consumer Interest Protection Commission in which it stated it would make improvements on its after-sales service.

A potential headache for Apple in the future is what happens when owners of unlocked iPhones purchased on the black market now seek Apple's after-sales service to fix those unlocked phones. Will Apple fix black market phones? In China's technology markets in Beijing's Zhongguancun or Shanghai's Xujiahui, there is little distinction between approved and unapproved phones.

Apart from its retail focus, Apple's operational history in China has been scrambled with its manufacturing relationships. A few months ago, Chinese media reported that Sun Danyong, a 25-year-old employee in Shenzhen of Foxconn, the manufacturer for Apple's iPhone, committed suicide allegedly over mistreatment he received after an iPhone prototype was lost. Foxconn quickly suspended staff related to the incident and provided a high level of transparency to Chinese media.

But those reports came three years after Britain's Mail on Sunday newspaper reported that Chinese workers were being mistreated in a Foxconn factory that manufactured the iPod. Apple dispatched an audit team comprised of members from its human resources, legal and operations groups to carry out a thorough investigation of the conditions at the Foxconn manufacturing site. Apple says it found Foxconn to be in compliance in the majority of the areas audited.

By choosing a smaller company as its partner and by placing itself in the unenviable position of competing with itself, Apple already is at a deficit. How it reacts to Chinese consumers in the coming months will either be a continuation of its ongoing saga or the rewriting of a new book on how the obstinate company plans to do business in China.

Source article:

http://www.chinatechnews.com/2009/10/30/10952-iphone-will-be-a-gamble-for-apple-in-china

China Plans to Build Advanced Nuclear-Power Plant

Source: The Wall Street Journal

SHANGHAI -- China will start building its first large nuclear-power reactor with home-developed "fourth generation" technology in 2012-13, a senior engineer involved in developing the system said.

The Experimental Fast Reactor will have a designed annual power-generating capacity of 800 megawatts, and is due to come online around 2020, according to Xu Mi, chief engineer with the China Institute of Atomic Energy's Fast Reactor Experiment Department.

The project underscores how China is trying to take a lead in developing cutting-edge nuclear technologies at a time it is planning a massive buildup in its fleet of civil nuclear reactors. Fourth-generation technology represents an improvement over designs currently being rolled out in terms of cost, fuel efficiency and safety.

One problem China will face, even if it develops and employs more-advanced reactors, is the lack of enough uranium at home to supply them. That means that China will become increasingly reliant on imports to fuel its economy, which in turn means it is likely to intensify its buying of foreign assets -- a scenario already playing out with its other energy sources: oil, gas and coal.

China, which gets less than 2% of its power-generating capacity from its 11 nuclear reactors, plans to build dozens more reactors by 2020, bringing the sector's share to 5% of its generating capacity, or about 70,000 megawatts.

In May, China's top energy official, National Energy Administration head Zhang Guobao, said under longer-range plans China is expected to have more than 100 reactors in 20 years, matching the current level of the U.S.

The fourth-generation fast reactor, to be located in Fujian province's Sanming city, will be 51%-owned by China National Nuclear Corp., the nation's top nuclear-power developer by capacity, Mr. Xu said. The China Institute of Atomic Energy is a research unit run by CNNC.

Another Chinese company, utility China Huaneng Group, also is doing a trial of its own fourth-generation reactor, but it is designed on a much smaller scale, of around 100 megawatts.

China is already at the forefront. In March it started to build the world's first AP1000 third-generation reactor, pioneered by Westinghouse Electric Co. of the U.S., a unit of Toshiba Corp. It is located in Sanmen in Zhejiang province, and has a designed power capacity of 1,250 megawatts.

In 2007, China agreed to buy four third-generation pressurized water reactors from Westinghouse -- two in Sanmen and two in Haiyang city in Shandong province. The pact involved the transfer of AP1000 technology. China also has access to advanced French nuclear technology. France's Areva SA in November 2007 signed an €8 billion ($11.8 billion) contract to build and supply fuel for two third-generation nuclear reactors in China.

China will need to become a significant uranium importer to power all of the reactors it plans to build, Mr. Xu said.

China doesn't publish uranium output data, but CNNC said in August it aims to raise its domestic uranium output to 2,000 tons a year by 2020. Five uranium mines now operate in China, producing about 840 tons a year, according to the World Nuclear Association.

In November 2008, China's Ministry of Commerce approved Guangdong Nuclear Power Holding Co. as the second company allowed to import uranium for civil use. With an eye on future uranium needs, Guangdong Nuclear in September bid for control of Australia's uranium-exploration company Energy Metals Ltd.

CNNC next year will ship home a batch of 700 tons of the fuel from its mine in Jordan, marking a first from overseas projects it has in six countries.

Source article: http://online.wsj.com/article/SB125683823531916471.html

China's Self-Styled Nasdaq Shines in Debut

Source: The Wall Street Journal by Shen Hong

With Stocks' Gains Ranging From 76% to 210%, However, Some Observers Fear Speculative Bubble

SHANGHAI -- ChiNext, China's Nasdaq-style stock market, opened with a roar as its initial batch of companies logged gains of as much as 210%, underscoring China's investors' appetite for new listings.

ChiNext was set up as a fund-raising venue for small, innovation-driven firms, which were largely closed out of China's recent lending boom. The share gains fueled concerns that the exchange would mirror the performance that tends to define new listings in China: large initial gains followed by a brutal pullback.

At the end of the day, the market capitalization of ChiNext as a whole stood at 140 billion yuan ($20.5 billion), more than double the 68.6 billion yuan total based on the firms' IPO prices. The board had trading volume on the first day of 21.9 billion yuan, compared with 120 billion yuan for the benchmark Shanghai Composite Index.

The explosive debut, which left the exchange's stocks trading at around 100 times earnings, comes as broader concerns that lower interest rates, huge fiscal stimulus and a growing appetite for risk amid improvements in the global economy are causing potentially dangerous asset bubbles across Asia. Property and stock markets in China and other countries have been rising quickly, and China has seen an increase in inflows of speculative "hot money."

Within hours of the trading start, all 28 ChiNext stocks had risen to the point where one after the other they were forced into temporary trading halts by the Shenzhen Stock Exchange, which hosts the upstart venue.

But by afternoon, some profit-taking had emerged and analysts warned of a sharper correction in coming sessions. "ChiNext is everyone's focus right now and the stocks all have small capitalization. That makes the stocks ideal targets for speculators," said Wang Junqing, an analyst at Guosen Securities.

All the ChiNext stocks finished the day with robust gains, led by Chengdu Geeya Technology Co., a cable- and digital-TV equipment maker, which rose 210% to 35 yuan from its initial public offering price of 11.30 yuan. The other 27 stocks logged gains ranging from 76% to 195%.

While the new board, launched after nine years of preparation, is designed to help technology and start-up firms raise funds, the initial batch of debutantes are mostly well-established and financially less risky companies.

Some companies may have turned to ChiNext amid the longer waiting period to get approval for a mainboard listing. The firms include state-owned enterprises: For example, 53.9% of Lepu Medical Technology (Beijing) Co., a medical-appliances maker, is indirectly held by China Shipbuilding Industry Corp. through two of its units.

A Shanghai-based individual investor said he sold all his ChiNext-listed shares on Friday, on concerns the stocks' high valuations wouldn't be sustainable. "I had expected the stocks to rise," he said, "but I hadn't realized that they could rise that much."

Source article: http://online.wsj.com/article/SB125687962237018131.html

Don't fret over high PE numbers, says Greifeld

Source: By Liu Yiyu (China Daily)

Chinese regulators and investors should be more concerned about issues like market transparency and fairness rather than worry too much over the high price-to-earnings (PE) ratios of ChiNext, China's NASDAQ-style second board, according to NASDAQ Chief Executive Officer Robert Greifeld.

"In a high PE scenario, the expectations are high on the company's growth rate as well as the management's ability to sustain it. When that expectations falter, we see high volatility in the stock price," Greifeld said in an interview in Beijing on Thursday.

The first batch of 28 firms, which debuted on Friday at the Shenzhen Stock Exchange, had priced their IPOs nearly 56 times over 2008 earnings. The much-disputed sky-high valuations of start-ups on China's NASDAQ-style board also raised concerns that excessive speculation will hobble the fledging market.

Greifeld said a PE number alone cannot reflect the valuation of a company and it would be a misnomer to assume so. It's important to use multiple measurements of valuation and not just one indicator.

"The more investors know, the better they will be able to make investment decisions and the better the market will be served. It is important for investors to understand what is implicit in this high PE," Greifeld said, adding that "valuations will become more consistent in the time to come".

The NASDAQ CEO, however, said regulatory measures should be more focused on improving corporate governance and market transparency rather than PE numbers.

"I don't believe that there should be regulatory moves with respect to PE and we just think there should be increased efforts to encourage more education and information on the performance of the listed companies," he said.

"The advantage we have today is that information can be transmitted to all investors very quickly," said Greifeld. "If you provide enough information on the perils and opportunities of investing in private enterprises and have transparency on the financial performance of the listed enterprises, you will have a market starting the proper price sooner rather than later."

"We strongly encourage full transparency," he said.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/31/content_8877104.htm

Auto imports from US under scanner

Source: China.org.cn by China Daily

China has officially kicked off anti-dumping and anti-subsidy investigations into automobile imports from the US, the nation's top trade official confirmed yesterday.

The move is a significant and timely decision to show the country's clout on the global economic stage, analysts and officials said separately.

Commerce Minister Chen Deming said that his ministry was carrying out a probe on some vehicle imports from the US, based on requests from Chinese automakers.

The confirmation was made during high-level talks to resolve trade disputes between the two countries yesterday in Hangzhou.

The investigations, which were first proposed last month to challenge the Obama administration's plan to impose a 35-percent tariff on imported tires from China valued at about $1.8 billion, could lead to new duties on vehicle imports.

Chen also said the probe would be carried out in accordance with Chinese laws and World Trade Organization (WTO) rules.

He Weiwen, a member of the China Society for American Economy Studies, said the investigation was "fair and proper" and conformed to WTO regulations.

"Launching the investigation on such an occasion, during the two countries' trade negotiations and before the US president's visit, is undoubtedly a kind of pressure tactic by our government, which is hoping that the US will not frequently investigate other trade matters in the future," a Ministry of Commerce official, who declined to be named, told China Daily.

"It's a reasonable self-defense for China, which is battling the US government's unfair case over tire imports," said Fu Donghui, deputy general manager of Allbright Law Firm. "If China still keeps silent under the current situation, other countries will follow the lead of the US."

The officials and analysts, however, all believed that the investigation would not impact US auto exports much.

"The action won't seriously impact Sino-US trade relations, and only lightly hit the US auto industry's exports to China," said He.

Zhong Shi, an independent auto analyst based in Beijing, agreed. "The investigations are more of a signal that China is exerting pressure on the US' trade protectionist moves."

"And, the investigations may only impact General Motors among the US Big Three automakers, as Ford is not on the US government subsidy list and Chrysler doesn't do much business in China," Zhong said.

GM, which signed a $607-million purchase deal with its China joint venture Shanghai GM in September to export complete vehicles, vehicle kits, machinery and equipment from the US, said in a statement earlier that "GM will make sincere efforts to promote mutual understanding between the US and China and minimize trade conflicts between the two countries".

It is also "confident that the current trade-related disputes can be resolved in a constructive manner", GM said.

Statistics show that, in the first seven months, China imported 182,200 vehicles, 26.51 percent less than last year. However, Reuters, citing the American Automotive Policy Council, said that the Big Three US automakers exported only about 9,000 vehicles to China.

Source article: http://www.china.org.cn/business/2009-10/30/content_18795764.htm

Smartphone wars heat up

Source: By Wang Xing (China Daily)

In China's 3G-market arena, China Mobile has always been the front-runner. It was the first carrier to launch 3G services, the first to run an online application store, and the first to release its own mobile operating system.

But the world's largest cellphone operator now seems likely to lose the numero uno status for launching the first 3G handsets.

Even as the second largest carrier China Unicom plans to launch the much talked about iPhone today, China Mobile has delayed the launch of its first 3G Ophone, the Lenovo Mobile O1.

Wang Yan, general manager of Lenovo Mobile, confirmed to China Daily yesterday that the carrier has deferred the online purchase of the 3G Ophone, which was originally sold at 4,999 yuan, the same as China Unicom's iPhone.

Wang said since China Mobile had not yet finalized the final subsidy plan for the handset, it put on hold last week's plan to launch 3G Ophones.

The company will now start rolling out the handsets as early as next week, he said.

"As it is an important product for both companies, we want to make the product as appealing as possible to consumers," he said. Wang said the Lenovo Mobile O1 would be sold through China Mobile's own distribution channels in the first three months after the product is launched and the price could be as low as free, on condition that consumers choose specific subscription packages.

China Mobile yesterday declined to confirm Wang's remarks.

As the first handset to support China Mobile's 3G network, Lenovo Mobile O1, dubbed the iPhone killer, is expected to be one of the most important products that would help China Mobile fend off competition from China Unicom.

Although China Mobile has a dominant position in China's 2G market, its advantage has been challenged in the 3G segment. China Mobile's TD-SCDMA standard has got less support from handset vendors than the WCDMA standard that China Unicom has adopted.

During the past few months, China Unicom has aggressively pushed its 3G service and introduced Apple's popular iPhone, which has a huge fan base in the world's largest mobile population. Industry experts estimated that there are 700,000 to 1 million unauthorized iPhone users in the country.

Pang Jun, an analyst from research firm GfK China, said iPhone and Ophone actually do not have direct competition. "China Unicom regarded iPhone as a perfect marketing logo to promote its 3G services and does not want to make it affordable to ordinary users," he said.

"But the success of Ophone is critical to China Mobile, which means it has to be affordable," Pang said.

China Unicom, the country's second-largest mobile operator by subscribers, said earlier this month that it would offer eight iPhone subscription packages costing between 126 and 886 yuan a month. The company also provides stand-alone handsets, with the cheapest at 4,999 yuan, about 25 percent higher than the same handset sold in Hong Kong.

Wang Yuquan, a senior consultant at research firm Frost & Sullivan, said compared with the competition between iPhone and Ophone, the biggest challenge actually comes from the smuggled handsets.

"For starters, China Mobile cannot make the Ophone as cheap as its current 2G handsets while China Unicom is not willing to reduce the iPhone pricing," he said. "In addition, considering both China Mobile and China Unicom made compromises on the Ophone and iPhone such as WiFi functions and the App store, I think the winner is likely to be the 'smuggled phone'."

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/30/content_8871453.htm

All stocks trigger suspensions on ChiNext's debut

Source: China Daily by (Xinhua)

All 28 stocks on China's new Nasdaq-style market for small and medium-sized companies had been temporarily suspended within the first two hours of trading on its opening day Friday.

The stocks on the ChiNext exchange in Shenzhen, Guangdong province, had all been suspended at least once by 11:20 am under rules to prevent wild fluctuations in share prices.

To reduce speculation, the Shenzhen Stock Exchange issued special suspension rules if any stocks fluctuate too wildly on the first day of trading on ChiNext.

Under the rules, if any stock fluctuates beyond 20 percent from its opening price, it will be suspended for 30 minutes; if a stock fluctuates again beyond 50 percent of its opening price, it will be suspended for 30 minutes; and if a stock fluctuates more than 80 percent from its opening price, it will be suspended until 2:57 pm, three minutes before daily trading ends.

All stocks reported rises from their IPO prices after trading began at 9:30 am Friday.

Film production firm Huayi Brothers Media Corp was the biggest winner, more than doubling by 122.74 percent from its IPO price, to open at 63.66 yuan ($9.32) per share.

Zhongyuan Huadian Co Ltd increased the least by 46.26 percent from its IPO price to open at 47 yuan per share.

ChiNext is aimed at providing fund-raising channels for small and medium-sized high technology businesses with high growth.

The central bank and the financial system would continue to support ChiNext, said Zhou Xiaochuan, governor of the People's Bank of China, the central bank, at the opening ceremony.

IPO launches in China have often seen steep price hikes followed by even steeper falls as investors snapped quick profits.

Chinese shares opened higher on Friday morning, with the benchmark Shanghai Composite Index up 1.58 percent to open at 3,007.25.

The Shenzhen Component Index rose 1.92 percent to open at 12,427.1.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/30/content_8874366.htm

Sinopec, Addax and a New Iraqi Quagmire

Source: (Caijing Magazine) By staff reporter Chen Zhu

Misunderstood signals for investing in the Kurdish region of Iraq may have jeopardized Sinopec's chances for future contracts.

China Petrochemical Group (Sinopec) recently completed the largest overseas takeover ever for a Chinese petroleum enterprise. Since then, rather than savor the success, the company has been mired in time-consuming complications that threaten to dash its hopes for future oil business in Iraq.

The trouble began when the central government of Iraq decided to strip Sinopec of the right to bid for postwar oil and gas service contracts. The decision came two months after the Chinese company in August bought Switzerland-based Addax Petroleum (Addax) for US$ 7.2 billion.

The acquisition angered the Baghdad government because Addax controls oil interests in northern Iraq's semi-autonomous Kurdish region.

Later, an announcement on October 13 seemed again to reflect the Iraqi government's suspicious attitude: The Iraqi Oil Ministry promised to hand development rights for Iraq's fourth largest oilfield Zubair to Italian conglomerate ENI Group -- but only if ENI cast off its consortium partner Sinopec and bid as an individual firm.

The ENI decision clearly worried Sinopec. During an October 15 phone interview with Caijing, Sinopec International President Zhou Yuqi repeatedly stressed the company's strong interest in participating in bidding for Iraqi government oil contracts.

"We fully value this opportunity," said Zhou.

Since then, Sinopec has been trying to use alternative channels to seek face-to-face contact with officials at the Iraqi Oil Ministry. Company officials hope to explain their position and win the ministry's understanding.

Beyond the public relations crisis, Sinopec is in a race against time for access to valuable resources. According to the ministry's plan, a second round of oilfield bidding is scheduled to begin at the end of this year. A number of contracts from the first round of bidding will likely be settled, one by one, in the next few months.

Risky Path　

Sinopec and Addax, which controls abundant oil interests in the Middle East and West Africa, have worked together in Nigeria, and the companies know each other well. So reaching their agreement was remarkably simple, taking only six months.

But things apparently went too well. On October 19, a Reuters report quoted Abudul-Mahdy al-Ameedi, an official responsible for oil contracts at the oil ministry, as saying his office "has been waiting for some time for Sinopec to explain themselves in terms of their acquisition of Addax."

Sinopec sent a letter to the ministry no later than September 16 saying it had gone through international capital markets to acquire Addax, and that the interests in Iraq's Kurdish region were part of the deal. Sinopec also said Addax's assets in the region were comparatively "miniscule."

Some non-Chinese media speculated that the company was planning to use Addax's resources in the Kurdish area for a foothold in Iraq. But most of Addax's core assets are in Nigeria and Gabon. According to Addax's second quarter financial report, the company's crude oil output was 143,000 barrels per day, of which 72.2 percent came from Nigeria. Only 8.3 percent came from the Kurdish region.

As of mid-October, Sinopec had not received a formal written reply from the ministry and sensed the gravity of the situation. If the ministry had taken a moderate view of the acquisition, it would not have demanded ENI drop its consortium partner Sinopec and undertake oil field development in Zubair on its own.

"Normally, Sinopec would not make this kind of mistake," said an official at another Chinese energy company who has managed overseas projects for years, speaking with Caijing.

In February 2007, Iraqi Oil Minister Hussein Shahristani declared oil contracts negotiated between the Kurdish regional government (KRG) and foreign oil companies as illegal. He also said all foreign oil companies that sign contracts with KRG would lose the opportunity to participate in future bidding organized by the oil ministry.

Iraqi authorities view this provision as a matter of principle. Even western oil companies have been forced to resist the temptation of rich oil resources and withdraw from the Kurdish area. Presently, most of those engaging in exploration and drilling in the area are small, independent oil companies. Many brokers have promoted Kurdish oil projects to other Chinese oil companies, but most have been too worried about political ramifications to seriously consider the offers.

A source who had been close to Addax during the early stages of the Sinopec deal told Caijing that, while considering the acquisition, the Chinese company's management did consider the sensitivity of Addax's oil interests in the Kurdish region.

"However, possibly because there was a general feeling within the company to leave some things to luck and take a gamble, Sinopec officials assumed they could resolve any issues through diplomacy and that Iraq's central authorities would approve of the deal in the end," the source said.

The source went a step further, saying before Sinopec made the decision to buy Addax, it consulted numerous concerned parties including Addax shareholders and management, investors, consulting companies, China's Ministry of Foreign Affairs and Iraq's central and local governments.

"Perhaps during the talks, one or more party gave Sinopec a relatively positive signal," the source said. "Or maybe during this process, Sinopec just failed to find the right direction."

Supporting the positive signal theory was an incident last spring June in Iraq. In May, to increase revenues, the oil ministry officially approved oil export rights for the Kurdish region, and on June 1, President Jalal Talabani attended a ceremonial oil valve event with KRG President Massoud Barzani. Their mutual attendance was read by some as a sign that the Iraqi government and KRG had reached an understanding on controlling oil resources.

If this was indeed reconciliation, then Sinopec's acquisition of Addax and subsequent entry into Kurdistan would make sense. The Chinese oil giant could have been the early bird catching the worm.

Caijing found that two of six oilfields offered for bidding by the oil ministry June 30 were located in disputed regions: the Kirkuk and Bai Hassan fields between Kurdistan and Baghdad. KRG holds the position that it has shared rights to the oilfields, and if Iraq's central government individually enters into agreements with foreign companies, KRG would likely not acknowledge them.

Taking this into consideration, while China National Petroleum Corp. (CNPC) was sifting through potential projects, they removed Kirkuk and Bai Hassan from the list. Later, however, Sinopec coincidentally participated in bidding for these oilfields. Sinopec, Conoco Phillips and China National Offshore Oil Corp. (CNOOC) formed an allied consortium to bid on the contract for Bai Hassan, while Sinopec, Shell and CNPC formed an allied consortium to bid on the Kirkuk contract.

If this was not a coincidence, Sinopec must have seen a coexistence of challenge and opportunity offered by the Kurdish region and surrounding areas. And as soon as they received approval from Iraq's central and local governments, they may have thought, all risk and anguish would translate into high returns.

Some analysts doubt Sinopec's current lobbying efforts will succeed. Not only are there complex internal interests in Iraq, but Sinopec's competitors -- especially international energy companies left empty-handed after the first round of bidding -- are closely watching the oil ministry's every move.

Watermelon or Sesame

Reactions to the oil ministry's decisions have met with mixed reactions at Sinopec. Some think it's not worth dropping a watermelon to pick up a sesame seed, as the Chinese saying goes.

For example, an official at Sinopec's Economics and Development Research Institute said it would be better for the company to consider selling Addax's interests in Kurdistan as a way to maintain long-term prospects in Iraq.

On the other hand, some so-called pragmatists find it difficult to differentiate between the watermelon and sesame seed. An analyst at an international energy consulting organization told Caijing that Sinopec "might as well give up on the second round of bidding for Iraq's oil contracts" because "they are the same as the first round, and the new round of bidding still includes service contracts with meager rewards for each barrel, accompanied by high risk."

In the first round of bidding after CNPC won the Rumaila oilfield contracts, the company was surprised to discover that there were no bidders for seven subsequent contracts, the analyst said. "Now it looks as if Iraq is not a grand banquet after all, but rather a difficult place to actually earn a profit.

"If a company reaches its scheduled output quota, the rewards are meager. And if the company cannot meet minimum output standards, it will be penalized."

Another analyst at an international consultant in Beijing told Caijing profits derived from oil projects are often directly correlated with the economic model. Under the Rumaila contract, the Iraqi government cut the payment offer from US$ 3.99 per barrel to US$ 2. This meant "the entire project's schedule and development plan needed to be readjusted."

The low cost of CNPC's service team and the company's ability to rapidly readjust have become critical factors in terms of the company's ability to turn a profit.

"With this project, time equals money," the analyst said "And if CNPC can meet minimum output standards a year early, overall cash flow will greatly improve, and the company will gain added flexibility with regard to bidding service fees."

The deal's potential may not be as promising as CNPC hoped. The Iraqi government has considered using protectionist measures, while restricting labor imports. And if CNPC cannot rapidly put together strong exploration and drilling teams, a big question mark will be left hanging over the project's profitability.

Moreover, even though costs for oil exploration in Iraq are low, much of the country's oil equipment was destroyed in the long war or as a result of international sanctions. Other equipment is seriously outdated, or poses a target for insurgents.

If Sinopec participates in the bidding process, it will come face-to-face with these kinds of issues. Iraq's central government has already clearly expressed that it will not make any substantial compromises in the second round of bidding in terms of the contract structure and per-barrel payments.

One analyst thinks oil interests in Kurdistan that Sinopec inherited from Addax are small compared with other Iraqi Oil Ministry projects up for bid. Yet progress in tapping the oilfield has been smooth, and Sinopec can profit. Thus, the analyst said, abandoning the Kurdish interests would be unfortunate.

"Actually, Sinopec can also put their energy into continuing to develop their business in Western Africa," said the analyst. "This approach would definitely be better than taking a huge risk by entering Iraq.

"Moreover, from a China national strategic standpoint, CNPC already has a considerable foothold in the market," said the analyst.

Advancing, Retreating

The question remains, Will Sinopec participate in the second round of bidding?

"We participated in the first round of bidding in Iraq, and Sinopec's name is on the roster for the second round as well," said Zhou Yuqi, head of Sinopec's overseas exploration and production unit, in an interview with Caijing. "We are still actively preparing for the second round of bidding."

In the end, China's oil industry policymakers will likely ignore short term gains and losses when weighing the value of a particular project. A high-level CNPC official responsible for overseas operations told Caijing: "From a strategic standpoint, even if we have low profits or a losing situation, we still must enter the market. Only if we put our foot in and hold our ground is there any hope for us to gain more interests in the future.

"Our strategic intent is very clear, and that is that we must gain a strong foothold in the market."

The CNPC official thinks China has to participate in contract activities or risk being excluded from the inner circle of companies doing business in postwar Iraq. CNPC set an example: After winning a bid, it has gradually integrated exploration, drilling and pipeline construction tasks.

"Postwar Iraq left many issues that must be dealt with, and it is a huge market," the official said. "Many Middle Eastern countries' oil resources are still undeveloped. If Iraq wasn't so heavily engaged in postwar reconstruction and desperate for foreign capital to raise oil output levels, these kinds of opportunities wouldn't exist."

Sinopec has also taken Iraq's development status into consideration. But in terms of developing interests overseas, it is under more pressure than CNPC. As Asia's biggest oil refiner, the company controls only one-fifth the reserves held by CNPC. Currently, Sinopec must buy 75 percent of its refined fuel oil from other companies.

Company President Wang Tianpu said September 21 that Sinopec's "in-house resources are insufficient, and it is becoming more difficult to stockpile reserves. In the future the company's degree of self-sufficiency in terms of crude oil will continue to decline" and the company "urgently needs to expand its resource base."

Associate Director of Sinopec's Strategy and Development Research Institute Chang Liliang told Caijing that, considering Sinopec's relatively weak position domestically, the company has to purchase from abroad. He said Sinopec has a bold plan for realizing total output from overseas interests of 100 million tons of oil per year by 2015.

The total 2008 output from China's overseas oil interests was 40 million tons, with CNPC contributing 30 million tons and Sinopec contributing more than 9 million tons. Increasing total output from overseas interests by 10 times in seven years cannot be accomplished by following a conservative path, so Sinopec will have to continue looking at all available opportunities.

The international consultant expert said if Sinopec doesn't want to miss the second round of bidding in Iraq, though, the company must quickly resolve the issue over Addax's interests.

One option could be to directly engage with Iraqi authorities and take an initiative by accepting fines and paying additional reparations. If this solution doesn't satisfy the Iraqi government, Sinopec would have no choice but to sell the interests or enter into an exchange agreement with another energy company to avoid further angering the Iraqis.

Reuters quoted an executive at a Western oil company bidding on Iraq's oil contracts as saying that if Sinopec wants to return to the negotiating table, Beijing may have to get involved. "Government-to-government negotiating might resolve the situation easier," the executive said.
Another insider refuted this statement, though, saying government intervention "will only complicate matters."

Now, the final decision rests with Sinopec, for whom the clock is ticking.

Source article: http://english.caijing.com.cn/2009-10-30/110298686.html

U.S. and China Ease a Range of Trade Restrictions

Source: The Wall Street Journal by James T. Areddy

Beijing Allows Pork Imports, Washington to Let In Chickens, as Joint Commission Resolves Some Disputes Before Obama Visit

HANGZHOU, China -- The U.S. and China agreed to relax restrictions on agriculture, technology, travel and other trade restrictions ahead of President Barack Obama's first visit to Beijing next month.

The two sides made "solid progress" that helps "both of our countries achieve balanced and sustainable growth," U.S. Trade Representative Ron Kirk said Thursday at the end of a meeting of the U.S.-China Joint Commission on Commerce and Trade, or JCCT.

Chen Deming, China's commerce minister, said the two sides will "jointly oppose trade and investment protectionism."

As China and the U.S. emerge as each other's second-largest trading partners, the ties are strained by a $147.3 billion trade surplus in China's favor, based on numbers through August.

The imbalance carries risks for each side and sets the economic backdrop for the summit in Beijing.

Mr. Chen said the solution is "not to restrict imports from China but to promote balance."

The JCCT is a forum for dealing on nuts-and-bolts trade items, and the agreements announced Thursday could have important implications for individual sectors.

Agriculture was a highlight, with agreements paving the way for the resumption of U.S. pork exports to China, which were halted in May on Chinese fears about H1N1 influenza, known as swine flu. U.S. pork exports to China had been growing quickly, reaching $560 million last year.

In exchange, the U.S. agreed to ease a six-year-old restriction on Chinese poultry exports to the U.S. The lifting of the pork ban could result in, at best, a modest rise in sales, said industry participants. China has increased domestic production and likely won't need to import U.S. pork.

Reflecting the Obama administration's green-energy and technology priorities, the U.S. said it won easier access for foreign companies to sell wind-power technology in China.

The U.S. also said China will take steps toward improving intellectual-property protection by re-examining an Internet music-distribution protocol and beefing up protection from piracy of academic journals at Chinese libraries.

More broadly, China agreed to ease "local content" restrictions on products sold to Chinese government agencies, as well as regard products made in China by foreign companies as domestic-made items.

In a move likely to unlock Chinese spending power to the benefit of U.S. airlines and other companies, tourists from around two-thirds of Chinese provinces will be able to obtain visas to visit the U.S. in travel groups, up from a third now, officials said.

As U.S.-China trade has fallen this year -- two-way trade is down about 15% from 2008 -- disputes have grown.

On the eve of the Hangzhou talks, Beijing took preliminary steps that could increase tariffs on U.S.-made luxury vehicles, according to an official from China's Ministry of Commerce. The measure could affect several thousand vehicle exports.

"The relevant government authorities have to protect China's companies and market based on World Trade Organization rules," said Mr. Chen, China's commerce minister.

Mr. Kirk said the two sides aren't engaged in tit-for-tat trade retaliation, saying both Beijing and Washington are "acting on their legitimate rights" to enforce their trade rules.

Source article: http://online.wsj.com/article/SB125680121414515403.html

PBOC likely to adopt a tighter monetary policy: report

Source: By Qiang Xiaoji (chinadaily.com.cn)

The People's Bank of China (PBOC), the central bank, continued to withdraw liquidity through open market operations this week, with a net drain of 133 billion yuan from the market, sending the net withdrawal in October to 156 billion yuan ($22.85 billion), the biggest monthly drain since February, the China Business News (CBN) reported today.

The PBOC yesterday initiated the selling of three-month bills worth 80 billion yuan at a yield of 1.3280 percent and soaked up 50 billion yuan from the interbank market through 91-day repurchase arrangements, with the interest rate remaining at 1.33 percent, according to the China Securities Journal.

Though the interest rates stayed stable, the central bank has been draining large sums of funding from the financial system over the past three weeks. Analysts said October might be the turning point of the monetary authority's open market operations, changing their strategies from loose to tight, the newspaper said.

156 billion yuan in October

According to the PBOC statement, the central bank drained 130 billion yuan through Thursday's open market operations by issuing three-month bills and 91-day repurchase agreements.

The statistics released by Wind Info, a Chinese financial data provider, showed with bills worth 55 billion yuan maturing this week, the central bank soaked up 188 billion yuan, or a net withdrawal of 133 billion yuan. In the previous two weeks, the PBOC drained 73 billion yuan and 160 billion yuan respectively.

Other statistics showed the central bank's net withdrawal in October totaled 156 billion yuan after it drained money from the open market for three weeks in a row.

Turning point

Analysts said this month might be the first turning point of the central bank's open market operations since the fourth quarter of 2008.

The central bank had injected money into the financial system for five consecutive months before October. The net injection in September even reached 279 billion yuan thanks to factors like IPOs and the National Day holidays, the report said.

But as the central government recently made it clear to well manage "inflation expectations", the monetary authority is now intensifying efforts to take previous injections back.

As China's economy began to show recovery in the second half of this year, mainstream organizations had previously made predictions about possible shift of the central bank's policies, but remained vague on the timing of the policy changes, the report said.

Worldwide, Australia and Norway recently raised interest rates, and India also announced this week the hike of the reserve requirement ratio. The changing external monetary environment would also affect China's monetary policies, according to the report.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/30/content_8876041.htm

Auchan opens Two Stores on Average Every Month

Source: CCFA

"Business Week" recently reported that the major French supermarket chain Auchan is growing rapidly in China, Russia and other markets. It has become a new global rival for Wal-Mart.

Over the past decade, Auchan has made a quick entry into China, Russia and Eastern Europe. It is now the world's 14th largest retailer with 1,200 supermarkets in 12 countries. And its annual sales are about 59 billion U.S. dollars.

Auchan is only part of the huge retail empire controlled by the Mulliez family. The company declined to comment on its global development plans. Clearly, however, its overseas operations have created half of its sales. And this has become a Gospel in the global economic downturn.

Although its stores in Western European countries didn’t make growth or declined in sales in 2008, in other areas there was growth. "particularly in Russia and China, where household consumption lags behind the economic recession." Chirstophe Dubrulle, the Group's general manager said in the 2008 annual financial report.

Source article: http://www.chinaretail.org/shownews.asp?id=1200

Blackstone Launches Shanghai Unit

Source: The Wall Street Journal by Joy C. Shaw and Ellen Sheng

SHANGHAI -- U.S. private-equity firm Blackstone Group LP formally launched a Shanghai investment unit Friday, and signed its first local investor for a new Chinese yuan-denominated fund.

The firm signed a preliminary agreement with Lujiazui Financial Development Co., a government-backed financial company. Financial terms weren't disclosed.

Blackstone said in August it was planning a yuan-denominated fund. The Blackstone Zhonghua Development Investment Fund aims to raise five billion yuan ($732.3 million) and focus mostly on investments in Shanghai as well as neighboring areas in the Yangtze River Delta.

In a signing ceremony that took place in Shanghai's Pudong district Friday, Antony Leung, chairman of Blackstone in China, said that fundraising is underway "in stages."

Though the yuan fund will give priority to investments in and around Shanghai, it will also aim to invest in China nationwide, said Rob Yang, a principal at Blackstone.

The fund can invest in any sectors, Mr. Yang said, but will focus on alternative energy-, environment- and medical-related companies.

Blackstone is one of a handful of foreign firms that have received approval to establish an onshore presence in China through a Shanghai subsidiary.

Setting up yuan denominated funds on behalf of Chinese investors is expected to ease regulatory requirements for deals because the investments can be treated as domestic. Offshore private-equity funds are subject to some restrictions and need approval in order to make investments in certain sectors.

Blackstone, Prax Capital Management Co., CLSA Ltd. and First Eastern are among the first batch of foreign firms to set up Shanghai subsidiaries.

Source article: http://online.wsj.com/article/SB125687469275218029.html

Tsingtao Q3 net jumps on lower barley prices

Source: (Reuters)

Tsingtao Brewery (0168.HK) (600600.SS), China's best known beer brand, said on Thursday its net profit jumped 93 percent in the third quarter, as barley costs remained soft and the country's beer consumption continued to recover.

Analysts had been expecting Tsingtao, which competes with Heineken (HEIN.AS), Carlsberg (CARLb.CO), Kingway Brewery (0124.HK), and Snow Beer brands, to post strong growth in earnings due to the lower price for barley.

The Chinese brewer had earlier this month forecast a 75 to 85 percent increase in January-September profit from a year earlier as it boosted domestic sales, improved brand integration and product mix and lowered its costs.

Analysts are generally positive on Chinese brewers including Tsingtao due to a faster-than-expected recovery in China's beer market. They said Tsingtao's volume growth was basically in-line with the market.

UBS said last week that profit growth for top breweries in China would maintain their momentum from the first half as barley costs continued to come down in the third quarter while a lowering barley price for 2010 is likely a positive as well.

Tsingtao, the second largest brewer in China by volume, said its net profit rose to 615.18 million yuan ($90.09 million) for the three months through September, from 318.69 million yuan a year earlier.

Deutsche Bank said in a research note that an improved gross margin and lower effective tax rate were set to help the strong growth of Tsingtao as its fundamentals improved.

Analysts polled by Thomson Reuters I/B/E/S expect on average for Tsingtao's profit for 2009 to rise about 60 percent to 1.11 billion yuan.

Shares in Tsingtao rose 19 percent in the third quarter, outperforming a 14 percent rise in the benchmark Hang Seng Index .HSI during the 3-month period. (US$1=HK$7.75=6.827 yuan)

Source article: http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSHKG26450420091029

China Resources says to buy hypermarket chain, brewery

Source: (Reuters)

China Resources Enterprise Holdings (0291.HK) said it aims to focus on the rapidly growing consumer market on the mainland through an asset swap with a major shareholder, in a deal valued at nearly HK$5 billion ($645 million).

"The proposed group reorganisation represents a further step in the company's strategy to be a market leader in its core consumer business, namely retail, beverage, food processing and distribution," executive director Lai Nihium said in a statement.

As part of the deal, the conglomerate will transfer its interest in a textile division and 10 percent interest in each of the two container terminal operations in Hong Kong and China's Yantian, valued at HK$4.78 billion, to its major shareholder China Resources (Holdings) Co Ltd, in exchange for a hypermarket chain and a brewery in Shandong, valuing HK$4.94 billion.

The conglomerate will pay another HK$30 million in cash to settle the deal.

Lai said the hypermarket chain, which has 75 stores operating in northern and central China, is expected to break even this year and may contribute to profit in the years ahead.

The major shareholder will also transfer a brewery to the company's brewery unit China Resources Snow Breweries Ltd in a move to expand the distribution network and production capacity in Shandong province.

Lai also said the company was in talks with various potential buyers for its stake in a joint venture with Esprit (0330.HK) but he declined to elaborate.

Last week, China Resources said it would speed up sales of assets, including a textiles business, a 51 percent stake in an Esprit China joint venture and a stake in Hongkong International Terminals (HIT) -- and buy a mainland hypermaket chain as it transforms into a pure Greater China consumer play.

Source article: http://www.reuters.com/article/rbssRetailApparelAccessories/idUSHKG72820091029

A/H1N1 accounts for 80% total flu cases

Source: China Daily by (Xinhua)

BEIJING - The A/H1N1 influenza virus is responsible for nearly 80 percent of China's total flu infections and most of the mass cases occurred in schools, according to a senior official with the Ministry of Health (MOH).

"As the weather keeps getting colder, many regions are entering the traditional period of possible flu outbreak, and prevention and control work is becoming tougher," Liang Wannian, vice director of the health emergency office under the MOH, said Thursday during an online interview with the official website of the Chinese government.

According to Liang, as of Wednesday, a total of 1,502 mass cases were reported in 31 provinces, municipalities and autonomous regions of the Chinese mainland and 96.4 percent occurred in schools.

Liang said the country would act faster in providing vaccines for more people as it was still the most effective way to protect vulnerable groups and keep patients' illness situation from deteriorating.

On Wednesday Beijing reported an A/H1N1 death case of a university student, also the fourth on the Chinese mainland.

Liang revealed that, based on clinical experiments, at least 85 percent of people receiving the vaccine would get protection from the virus and the effectiveness duration would last till this winter or next spring.

So far the side effects of the vaccine had been mostly slight, such as temporary fever and exhaustion, and the benefits from receiving the vaccine were "far greater" than harms.

Statistics from the ministry show that the Chinese mainland had reported 42,009 confirmed cases of the A/H1N1 flu by 3 p.m. Wednesday.

A total of 30,854 patients had recovered. Twenty-two of 66 patients in serious conditions had been cured, the ministry said.

Source article: http://www.chinadaily.com.cn/china/2009-10/29/content_8870110.htm

Guangdong Nuclear approved to buy Oz uranium miner

Source: China.org.cn by China Daily

Australia has approved China Guangdong Nuclear Power Holding Corp's (CGNPC) 70-percent stake purchase of uranium explorer Energy Metals Ltd, following last Friday's conditional approval of Yanzhou Coal Mining Co's takeover of Felix Resources Ltd.

CGNPC subsidiary China Uranium Development Co's A$83.6-million ($76 million) offer for Energy Metals Ltd has received notification from the Australian Foreign Investment Review Board, the Australian company said in a statement yesterday.

The offer remains conditional on Chinese regulatory approval, with the remaining stipulation being 50.1 percent acceptance by Energy Metals shareholders, said the statement.

On Oct 23, Australia gave the green light for Yanzhou Coal Mining Co's A$3.5-billion ($3.2 billion) takeover of Felix Resources Ltd. It is also so far the largest acquisition by any Chinese company in Australia.

Analysts said that with the rapid development of China's nuclear sector, the country needs more overseas uranium resources to power its nuclear power plants.

According to the National Energy Administration, China has approved nuclear power plants with total capacity of 25.4 gW this year, with further capacity of 13.35 gW under construction. China now has 11 nuclear power units under operation, with a total capacity of around 10 gW. The government plans to increase nuclear capacity to around 70 gW by 2020.

With large reserves in uranium mining resources, Australia is an ideal place for domestic nuclear power companies to invest, said analysts.

"It is certain that the two countries' cooperation in energy will see more progress, as both countries are large energy producers and consumers," said Xia Yishan, an expert at the China Institute of International Studies.

Some high-profile transactions in Australia made by domestic companies failed because they were not flexible and failed to complete the transaction on time, said Mike Elliott, global mining & metals sector leader of Ernst & Young.

"Chinese companies are in a strong position to secure mining and metals investments around the world, but face strong competition from rising equity markets, dedicated resource funds, sovereign wealth funds and from investors in India and Japan," said Elliott.

Source article: http://www.china.org.cn/business/2009-10/29/content_18787219.htm

Disney shares on boil again

Source: By Ma Zhenhuan and Xiao Xu (China Daily/Agencies)

The high volatility of Disneyland-related shares in Shanghai has made individual investors wary of such stocks on fears that the frequent tremors would benefit only institutional investors.

An example of this is the report that appeared on Tuesday in Securities Times. The report said the Shanghai Disneyland project had passed "the verification stage set by top decision-makers" and would be officially announced by the end of the month.

The Shanghai-based National Business Daily reported yesterday that US President Barack Obama's impending China visit in mid-November could have been the trigger for fast tracking the Disneyland project, citing insiders.

Shares of companies like Zhonglu Co Ltd, Shanghai Jielong Industry Group Corp Ltd, Shanghai Zhangjiang Hi-tech Park Development Co Ltd and Shanghai Shenda Co Ltd were among the prominent gainers.

The project was announced in March 2006 and has since then been the favorite of market speculators, even as both Disney and Shanghai municipal government remained tight lipped on the issue.

Ge, a retired stock investor in Shanghai, said yesterday that the Disneyland project has long been a hot topic for investors, as it is expected to boost the realty and other relevant sectors in Shanghai.

"However, I believe that the speculation has proven to be a windfall only for institutional investors," she said, adding that such stocks would not hold much appeal for her.

Wang Jianrong, a home-based investor, said such kind of "conceptual" speculation has occurred several times in the past three years.

"There is nothing new, these are only rumors. It may just be some speculators spreading news and taking advantage. As an individual investor, I won't risk investing in such shares."

Lu Qilin, a researcher with Shanghai-based Uwin Real Estate Research Center, said the rumors often follow news reports in securities newspapers.

"They (the newspapers) publish a Shanghai Disneyland-related story almost once every month without ascertaining the facts. I won't rule out the possibility of speculation and it reminds me of the story of the boy who cried wolf. So when the actual official announcement is made in the future, the market may not react that violently," he said.

"The speculation started long ago, and will end only after an official announcement is finally made," said Li Kongyi, an analyst at Essence Securities.

"These kind of reports will not have any long-term impact on the market performance of these firms. At the same time they will not also create any negative impact," he said.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/29/content_8865153.htm

Kaixin001.com sues rival for millions

Source: By Shen Jingting (China Daily)

Kaixin001.com, known as the "Chinese Facebook", sued Qianxiang Hulian, the former operator of Kaixin.com in Beijing yesterday, alleging copyright infringement and demanding 10 million yuan ($1.5 million) in compensation.

Qianxiang Hulian denied the charge, saying Kaixin.com is now under the control of Qianxiang Wangjing, another subsidiary company of Oak Pacific Interactive Co.

"Before we heard the charge, we had already transferred the operating rights to Qianxiang Wangjing in accordance with group's long-term development goal. We applied in April and got the approval from Beijing Communications Administration in May," Cai Ming, public relations manager of Oak Pacific Interactive Co, told METRO yesterday.

"We have not avoided their charge or stalled for time in our response, like Kaixin001.com stated in court, because we received the summons in June," Cai Ming added.

Qianxiang Hulian also defended itself by saying the company bought the domain name through legal channels.

In addition to asking for 10 million yuan of compensation and a public apology, Kaixin001.com also wants Qianxiang Hulian to stop using Kaixin.com, the name Kaixin, or anything similar.

Kaixin001.com claimed in court it was "dishonest competition" because netizens could not tell the difference between the two sites, which caused a decline in numbers of registered users.

"Kaixin001.com has lost many potential users and suffered a heavy loss," a lawyer for Kaixin001.com argued in court.

The lawyer expressed a desire to settle the matter in court, but Qianxiang Hulian declined.

"If Kaixin001.com has any new ideas or suggestions, we are willing to have further negotiation," Cai told METRO yesterday. He insisted Kaixin.com would not accept Kaixin001.com's request to close their website.

Beijing Second Intermediate People's Court failed to reach a judgment yesterday, and did not reveal a date for the result.

Kaixin001.com was opened in March 2008 by Cheng Binghao, the former head of technology at Chinese media group Sina Corp.

It has more than 40 million users and more than 1 billion daily page views in August 2009, with an increase of 200,000 new registered members per day.

Seven months after opening, Qianxiang Hulian, a subsidiary company of Oak Pacific Interactive, launched Kaixin.com. It has the same Chinese name, a similar homepage design style, and the same network services.

"No matter what the final result it is, the lawsuit will not affect the regular service to millions of Kaixin users," Yu Yi, an analyst at Analysys International and an expert in social networking site market research, said.

There are now almost 10,000 social networking sites in China. Kaixin001.com occupies 38 percent of the market share and tops the list among Chinese social networking service providers, with Kaixin.com ranked fourth and holding a 6.5 percent market share.

Oak Pacific Interactive, the owner of Kaixin.com, is the largest operator of social networking sites in China. It also runs Mop.com, Renren.com, and information technology portal Donews.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/29/content_8865205.htm

CIC getting decent returns, chief says

By Wang Bo (China Daily)

China Investment Corporation (CIC), the nation's sovereign wealth fund, has invested half of its $110-billion available capital in the overseas market and has gained decent returns from it so far, its head said yesterday.

"We have reaped not bad returns from our investment so far this year," said Lou Jiwei, the CIC chairman, adding he would not be able to guarantee that those returns would still be 'good' by year-end, as this depended on various factors.

The nation's $200-billion fund, which has been on a bumpy road since it was established over two years ago, stepped up its overseas investments from the second quarter of the year when the global financial market started stabilizing and investor sentiment bounced back, Lou said.

"We mainly invested in publicly traded assets through experienced external fund managers this year, and also made some direct investments in the mining, energy and real estate sectors," Lou told the 2009 Tsinghua Management Global Forum in Beijing.

CIC has made a string of investments in commodity-related companies globally so far this year, including the recent $500-million investment in SouthGobi, a Canada-based company that mines coal in Mongolia. This has raised market suspicion that the fund might have shifted its focus to direct investments, according to Lou.

"Actually, there has been no significant change in our overall investment strategy, as the bulk of our investments is still on publicly traded financial products," Lou said, adding that such an investment allocation was time-efficient and could maximize returns.

Li Xiaogang, director of the Foreign Investment Research Center at Shanghai Academy of Social Sciences, said this was the best time for the sovereign fund to ramp up its overseas investments, as the global economy was picking up and the financial crisis had brought global asset prices back to a fairly reasonable level.

"But more importantly, CIC's investment story would hopefully help mobilize overseas investment from the nation's private sector, which is still weak at present," Li said, noting that some countries were still reluctant to accept investments from sovereign wealth funds.

In response to such concerns, Lou clarified that the fund's main purpose was to seek optimal investment returns for the nation, rather than being driven by a national strategic agenda of controlling global resource assets.

"Our investment is to make money. I don't care how many tons of oil we can ship home, what I do care about is the stock price," Lou stressed.

However, Lou, who is also a member of the advisory board of the School of Economics and Management of Tsinghua University, warned that there was still a "small bubble" in global asset prices and many currencies were facing depreciation pressure.

"Our investment in commodity-related assets and the real estate industry is a measure to hedge against inflation in the medium term," he said.

As some fundamental problems of the global financial market remained unresolved, the CIC chairman said he could not rule out the possibility of a "second dip" in the global economy. "In that case, we will seek to exit from these offshore investments as soon as possible."

Like many other sovereign wealth funds across the world, CIC, which manages part of the nation's colossal foreign exchange reserves, has seen part of its investments sour during the global financial tsunami.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/29/content_8865081.htm

Wal-Mart settled in Guangzhou

Source: CCFA

The world's largest retailer Wal-Mart today formally settled in Guangzhou. The first Sam's Club store in Panyu held a grand opening ceremony. At the same time distinctive American Goods Festival also began. This is not only Wal-Mart's first store in Guangzhou, but also the 163rd store opened in 87 cities of China, marking the Wal-Mart's market development in southern China has taken an important step, and also a milestone of approaching consumers in Guangzhou.

The U.S. Commerce Secretary Gary Faye Locke, the U.S. ambassador to China Mr. Hong Bopei, Guangzhou mayor Zhang Guangning, as well as many local government officials, the U.S. government officials, partners, representatives and Wal-Mart China President and CEO, Mr. Chen Yaochang attended the opening ceremony and participated in the ribbon-cutting ceremony for American Goods Festival.

It is understood that Wal-Mart entered the Chinese market in 1996. At present, Wal-Mart operates a number of business formats, including shopping plaza, Sam's Club stores, and community stores. Wal-Mart's Sam's Club store is a membership-based warehouse-style business model, with its spacious and comfortable shopping environment for business members and individual members to provide quality products at competitive prices and excellent service.

The newly completed Wal-Mart's Sam's Club stores in Panyu is the fourth Sam's Club stores, with more than 1,000 parking spaces, selling more than eight thousand kinds of goods, of which imported goods accounted for 25%. The store is also the first one to adopt large-scale energy-efficient LED lighting in shopping malls. All together, there are 6,700 LED lamps. Following the Wangjing store in Beijing, this is Wal-Mart’s second high environment protection and energy store in China.

Source article: http://www.chinaretail.org/shownews.asp?id=1195

A Closer Look at A Flamboyant Yao Chen

Source: China.org.cn

Chinese actress Yao Chen poses for the cover photoshoot of a fashion magazine. The star boasting voluptuous lip and a trendy hat takes her fashion sense to a whole new level.

Tudou.com expects to break even in 2010

Source: Shanghai Daily

TUDOU.COM announced today it will invest 100 million yuan (US$14.75 million) in content and expects to breakeven next year, thanks to the booming advertising income and expanded mobile business.

The major Chinese video Website will probably the first firm to turn black in the fiercely competitive Chinese online video market, which has attracted millions of dollars of venture capital in the past few years.

Meanwhile, Tudou has signed with China Mobile to launch video content on handset for more than 700 million Chinese mobile phone users.

"Content is king," said Gary Wang, Tudou's founder and chief executive. "We are ready to invest heavy strategically and financially to bring Tudou from UGC (user-generated-content) sharing to an online video powerhouse within the next 12 months."

Tudou is expected to reach break-even by the end of 2010 while rivals like Youku.com haven't announced a timetable to profitability.

Tudou's main income still comes from advertising, which is expected to rebound after the financial crisis, analysts said.

In 2009, Chinese online advertising revenue is expected to reach 21.64 billion yuan, a 27.2 percent growth year-on-year, according to iResearch, a Shanghai-based IT consulting firm.

Source article: http://www.shanghaidaily.com/article/?id=417745&type=Business

Vaccine makers shine on bourses

Source: By Wang Ying (China Daily)

Shares prices of domestic vaccine makers rose sharply yesterday on surging orders for vaccines, as fears grew over a fresh outbreak of the H1N1 flu, even as the benchmark Shanghai Composite Index fell 2.83 percent

Vaccine producer Hualan Biological rose 2.47 percent to 57.7 yuan ($8.45) in Shenzhen yesterday, while Layn Natural Ingredients rose 2.93 percent to 44.94 yuan.

Zhejiang CONBA Pharmaceutical Co Ltd increased 6.13 percent to 12.12 yuan while Shenzhen Neptunus Bioengineering Co jumped 9.24 percent to 15.85 yuan in Shenzhen.

China Meheco Corporation closed at 20.98 yuan yesterday, up 10 percent.

The shares of the five companies had hit the daily limits of 10 percent on Monday.

"The recent gain is mainly underpinned by government orders for vaccines," said Cai Jianjun an industrial analyst at Guodu Securities.

Health Minister Chen Zhu warned last month that China faced a grim situation in containing the disease as the number of cases has risen. As of Oct 26, China reported 35,664 H1N1 infections with three deaths. In the US, President Barack Obama declared H1N1 a national emergency on Oct 24.

Xi Xiuming, an expert with the Ministry of Health's expert panel, said cautious steps and alertness is needed, but there is no reason for any panic.

The central government has also hastened its steps for purchasing H1N1 vaccines. Yesterday, Hualan said it won an order for 11.21 million doses of its flu vaccine from the central government. Beijing Tiantan said it has won an order for 3.02 million doses.

Sinovac Biotech Ltd said it received an additional order of 5.19 million doses for its H1N1 influenza vaccine.

The New York-listed company gained 7.61 percent to close at $8.06 apiece on Monday. All the doses ordered are due for delivery by Dec 12.

Cai, however, feels that the sudden boom in H1N1 vaccine stocks stems largely from speculation. "Actually, only two domestic listed companies, Hualan and Beijing Tiantan, can benefit from the new orders, while the rest are cashing in on the market euphoria for such firms," he said.

Li Yingpeng, an analyst at Galaxy Securities, said this is not the first ever rally of the vaccine sector.

"Ever since the outbreak of H1N1 in Mexico in March this year, pharmaceutical shares have risen several times. The strengthened share prices, however, does not completely reflect their true performance," said Li.

"However, for those companies that have won vaccine orders, there will be substantial improvements in balance sheets. For instance, if a single dose is priced at 20 yuan, Hualan's latest order alone can earn it 200 million yuan, which may bring about 100 million yuan of profit," Li said.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/28/content_8859328.htm

Baidu's stumble offers rivals opportunities

Source: (China Daily/Agencies)

Baidu's hasty move to a new Internet advertisement system marks a rare stumble for China's dominant search engine, opening a window of opportunity for others salivating for a piece of the country's fast-growing online market.

Baidu, whose name is practically synonymous with Internet search in China, surprised investors when it revealed transition to its new Phoenix Nest system will lead to softer revenues into next year as customers adjust, sending its stock down sharply.

The news was music to others, such as Sina Corp and global search leader Google, looking for a bigger piece of the pie in the world's biggest Internet market with 235 million search users in June, up about a third from a year ago.

"In the short term, Baidu could possibly lose market share to Google," said JP Morgan analyst Dick Wei.

"From the end user perspective, they aren't going to see much of a difference, but from the advertisers perspective, if you look at monetization market share, it (Baidu's market share) could be a bit lower in the next few months," he said.

Baidu expects to lose some customers and have lower revenue in the near term after the system is fully rolled out.

Baidu shares, which shed 0.5 percent to close at $432.97 during regular trading hours in New York, fell over 13 percent in after-hours trade to $375.99 after the company gave its revenue forecast that was well below Wall Street estimates.

The glitch isn't the first for Baidu, which was previously accused by some of the world's biggest music companies of allowing illegal trading of copyrighted songs over its system.

But the stumble could have more serious implications as it relates directly to the company's revenue generation model.

Baidu, whose name comes from an ancient Chinese poem, is just one of a growing field of upstart firms seeking to cash in on China's rapidly growing Internet, home to a search market valued at 1.8 billion yuan ($263.60 million) in the second quarter.

Online game companies such as Shanda Games and NetEase vie for dominance in the country's Internet gaming market worth nearly $1 billion in the second quarter, while portal operators such as Sina and Sohu.com also spar for dominance in the portal space.

In an Internet market where two or three names usually control each space, Baidu stands out because of its single-handed dominance of Internet search sector in China.

Several Chinese Internet firms such as NetEase, Perfect World and Baidu, have seen their share prices skyrocket this year. However, softer-than-expected fourth quarter guidance from two other companies may further dampen investor sentiment.

Sohu and its recently listed gaming unit Changyou.com warned on Monday that current-quarter revenue would come in below Wall Street estimates, sending shares down.

Baidu had 61.6 percent of China's search market in the second quarter, according to Analysys International, compared with Google's 29 percent. Baidu controls 29.4 percent of all Web advertising in China, while Google gets 13.9 percent.

Baidu, which will discontinue its old keyword bidding system and fully implement its new Phoenix Nest advertising system on Dec 1, said its fourth-quarter revenue will come in at $174-180 million, more than 10 percent below analyst's estimate of $204.7 million.

"We still feel that in Q1 there will be a material impact from this switch," a top Baidu executive said in an earnings conference call yesterday after the company reported its results, adding it will take a few quarters for the situation to normalize.

Baidu's shares have more than tripled since the start of the year, as the company appeared positioned to benefit from the economic recovery and a pick-up in advertising spending in China, the world's largest Internet market.

Revenue in the three months ended Sept 30 totaled $187.3 million, a tad below the average analyst estimate of $189 million but nearly 40 percent higher than the $135.4 million a year earlier. Third-quarter net income rose to $72.2 million, from $51.2 million a share, a year ago.

Source article: http://www.chinadaily.com.cn/bizchina/2009-10/28/content_8859360.htm