Have You Heard...

• Some Yahoo email accounts hacked in China, Taiwan
• China Is Least of Google’s Woes as Slowdown Looms
• Google Runs Into China's 'Great Firewall'
• Huawei Profit More Than Doubles
• McDonald's opens training site in China
• Lianhua Supermarket Boosts Turnover by 16%, Profit by 30%
• Tommy Hilfiger to Assume Direct Control of Distribution in China

Some Yahoo email accounts hacked in China, Taiwan

Source: Reuters

Yahoo email accounts of some journalists and activists whose work relates to China were compromised in an attack discovered this week, days after Google announced it would move its Chinese-language search services out of China due to censorship concerns.

Several journalists in China and Taiwan found they were unable to access their accounts beginning March 25, among them Kathleen McLaughlin, a freelance journalist in Beijing. Her access was restored Wednesday, she told Reuters.

The compromised accounts include those of the World Uyghur Congress, an exile group that China accuses of inciting separatism by ethnic Uighurs in the frontier region of Xinjiang.

"I suspect a lot of information in my Yahoo account was downloaded," the group's spokesman, Dilxat Raxit, told Reuters Wednesday. He said the email account, which was set up in Sweden, has been inaccessible for a month.

"A lot of people I used to contact in Lanzhou, Xi'an and elsewhere have not been reachable by phone for the past few weeks," he said, adding he had used the Yahoo email account to contact them in the past.

Andrew Jacobs of the New York Times in Beijing said on Wednesday his Yahoo Plus account had been set, without his knowledge, to forward to another, unknown, account.

In late 2009 and early this year, several human rights activists and journalists whose work related to China had similarly discovered their Gmail accounts had been set to forward to unfamiliar addresses, without their knowledge.

Google cited the Gmail attacks in January, when it announced a hacking attack on it and more than 20 other firms. It cited those attacks and censorship concerns in its decision to move its Chinese-language search services last week to Hong Kong.

Yahoo did not comment on the nature of the attacks on its accounts, or whether they were co-ordinated or isolated incidents.

"Yahoo! condemns all cyber attacks regardless of origin or purpose," spokeswoman Dana Lengkeek said in an email response to a Reuters query.

"We are committed to protecting user security and privacy and we take appropriate action in the event of any kind of breach."

Google's announcement of the hacking attacks drew unprecedented outside attention to cyber-security and China's Internet controls, used to limit discussion of topics deemed sensitive or threatening to "social stability."

Google said Wednesday said it had identified cyber attacks aimed at silencing opposition to a Vietnamese government-led bauxite mining project involving a major Chinese firm. The attacks were separate from, and less sophisticated than, those at the heart of the company's friction with Beijing.

SPORADIC DISRUPTION

China's control of the Internet and media has intensified under the current leadership and reflects a lack of understanding of the Chinese public, said Hao Xiaoming, a China media expert at Wee Kim Wee School of Communication and Information in Singapore.

"China is going back rather than going forward in terms of information and control. That reflects the lack of confidence in the (current) Chinese leaders," Hao said.

"China's Internet has become a controlled Internet, an internal Internet rather than linked internationally. It defeats the whole purpose."

Tuesday, Internet users in mainland China were sporadically unable to conduct searches through Google's portal in Hong Kong, a disruption that Google attributed to changes in China's Internet filtering configuration.

It said it did not know whether the stoppage was a technical glitch or a deliberate move in confrontations over Internet censorship.

China's Ministry of Industry and Information Technology gave no immediate reply to a request for comment on the disruption.

Google said it was monitoring the situation but it appeared the access problem had been resolved. Access has been patchy since Google shifted to Hong Kong, underscoring the vulnerability of Google's business in the world's most populous country.

Very few of the other firms mentioned by Google in January as having been affected by the attack have identified themselves.

A source at the time told Reuters that Yahoo knew it had been a target of attacks and discussed them with Google before Google went public.

Yahoo said at the time that it was "aligned" with Google's position, a statement that its Chinese partner, e-commerce giant Alibaba Group, called "reckless."

Unlike Google, Yahoo keeps some of its email servers in China. It was criticized by the U.S. Congress when it released to Chinese authorities information relating to the account of Shi Tao, a Chinese journalist who was then sentenced to 10 years in jail for revealing state secrets.

Source article: http://www.reuters.com/article/idUSTRE62U0O520100331

China Is Least of Google’s Woes as Slowdown Looms

Source: Bloomberg by Ari Levy, Brian Womack and Joseph Galante

Google Inc.’s feud with the Chinese government may be the smallest of its challenges as the search leader contends with slowing growth, regulatory scrutiny and a shift in ad spending.

While Mountain View, California-based Google has the biggest share of online search at home and in Western Europe, it has been leapfrogged by social network Facebook Inc. as the most popular U.S. Web site. Google’s ventures in mobile, video and display ads have failed to match the success of search, and regulators may thwart efforts to expand through acquisitions.

As sales gains diminish, some investors are concerned that Google has begun to resemble Microsoft Corp., which generates billions of dollars in cash from its mature flagship business yet has struggled to conquer new markets. Google’s sales increased 9 percent last year after almost doubling in 2005.

“They were the new kid on the block and everyone thought they were great,” said Daniel Morgan, a money manager at Synovus Financial in Atlanta, which oversees about $7.5 billion, including 27,720 Google shares, Bloomberg data shows. “That kind of euphoric, love-at-first-sight status has changed.”

Last week, after a two-month dispute with China over censorship issues, Google shut its mainland Chinese search engine and redirected users to its Hong Kong site. Google was second in the Chinese search market, behind Baidu Inc.

Google shares, which doubled last year, had dropped 8.6 percent in 2010 before today, the sixth-biggest decline among the 75 technology stocks in the Standard & Poor’s 500 Index. The stock, 24 percent below its peak of more than $740 in 2007, fell $2.89 to $563.82 at 9:34 a.m. New York time in Nasdaq Stock Market trading.

Google spokeswoman Jane Penner declined to comment.

Facebook Rivalry

One of Google’s biggest challenges comes from Palo Alto, California-based Facebook. This month, Facebook surpassed Google as the most visited Web site in the U.S., accounting for more weekly visits than Google.com, according to research firm Hitwise.

Facebook’s gains at Google’s expense weren’t lost on Levi Strauss & Co. The closely held maker of blue jeans and Dockers pants is advertising on Facebook this year for the first time, while its budget for search, Google’s mainstay, is staying about the same as last year, said Megan O’Connor, director of digital marketing.

Earlier this month, the San Francisco-based company sponsored events at the South by Southwest music festival in Austin, Texas. Levi advertised across Facebook for two weeks leading up to the event, targeting 18- to 34-year-olds who identified themselves as music fans, O’Connor said.

“We are looking at social as a new place for us to spend,” O’Connor said.

Starbucks, JetBlue

The same goes for advertisers including Starbucks Corp. and JetBlue Airways Corp., which are eager to get their marketing messages in front of Facebook’s 400 million users and like Levi are spending more on social media while holding steady on search. “Facebook is not an experiment for us anymore,” said Chris Bruzzo, vice president of brand, content and online at Seattle-based Starbucks. “It is a key part of how we go to market.”

Ford Motor Co. also is boosting spending on social networks at a faster pace than search.

“We provide a platform for marketers to create an authentic, two-way connection with their customers that has not been possible at scale before,” Facebook spokesman Brandon McCormick said.

To catch up in social media, Google added a social- networking feature called Buzz to its Gmail e-mail, letting users share photos, comments and clips from its YouTube site. The site drew criticism over privacy, prompting Google to scale back some of Buzz’s features.

Dealmaking

Google, with almost $25 billion in cash and marketable securities, also bought Aardvark, a site that lets users pose questions and receive answers online. And its Orkut social network has gained wide followings in India and Brazil.

Even with rising competition, Google will benefit as advertisers shift spending to the Web, where consumers are spending more time, said Jeff Donlon, an analyst at Manning & Napier Advisors Inc.

“Google will keep making improvements to search and display, allowing advertisers to get a higher return on their investment,” said Donlon, whose Fairport, New York-based firm manages more than $25 billion and owns about 1 million Google shares.

Mobile, Display Ads

Google has also made headway in efforts to expand into mobile and display advertising, where rival Yahoo! Inc. took an early lead. In mobile, Google is taking on Apple Inc.’s iPhone with its Android operating system. Some 6.8 million Android- powered phones were sold in 2009, accounting for 3.9 percent of the global market, according to researcher Gartner Inc.

Most analysts remain bullish on Google. Of analysts surveyed by Bloomberg, 32 have “buy” ratings, eight rate it a “hold,” and none recommends that investors sell the stock. By contrast, 15 analysts rate Yahoo a “buy,” 21 have it as a “hold,” and one has a “sell.”

To bolster mobile advertising, Google announced plans in November to buy AdMob Inc. for $750 million. The U.S. mobile-ad market may more than triple to as much as $3 billion by 2013, according to a Sanford C. Bernstein & Co. report last year.

Android Gains

“They need to show how they’re going to monetize things like Android, where they seem to be taking good mobile market share,” said Richard Parower, manager of the $533 million Seligman Global Technology Fund at J.W. Seligman & Co. in New York, which holds Google stock. “How can they turn that into operating profits?”

Google spent a combined $4.9 billion on YouTube and DoubleClick through 2008 to increase sales of ads in videos and help customers create and measure Web advertising campaigns. Those deals may generate $2 billion to $3 billion in sales next year, Citigroup Inc. analyst Mark Mahaney said.

As ambitious as Google’s expansion efforts may be, the high end of that range represents less than 10 percent of Mahaney’s forecast for total sales. Microsoft too has tried with mixed results to expand beyond its main market, business software, into such areas as video games, online search and mobile operating systems.

Parallels to Microsoft don’t end there. Google has been piling up cash faster than it can find ways to spend it. Its cash and marketable securities surged 54 percent to $24.5 billion at the end of 2009 from a year earlier and made up 60 percent of total assets, up from 50 percent. Meanwhile, research and development costs rose only 1.8 percent to $2.8 billion.

Hemmed In

That means Google is spending about 12 cents of every sales dollar on research and development, comparable with 15 cents for Microsoft. Jack Evans, a spokesman at Redmond, Washington-based Microsoft, declined to comment.

Microsoft’s sales surged during the 1990s, lifted by the growing adoption of personal computers and new versions of the Windows operating system. Revenue climbed 46 percent in fiscal 1996 as users embraced Windows 95. By 2002, the pace of growth had slipped to 12 percent.

At Google, sales growth has slowed in each of the past seven years, to 9 percent in 2009 from 409 percent in 2002.

Also like Microsoft, Google faces regulatory obstacles to efforts to break into faster-growing markets. The Federal Trade Commission is investigating whether the AdMob deal would squelch competition in the mobile ad market.

'Greater Scrutiny’

The U.S. Justice Department also has raised antitrust concerns over a proposed $125 million legal settlement between Google and a group of publishers and authors. The agreement, if approved by a judge, would create the world’s largest digital library. In Europe, Google is under scrutiny for possible privacy, antitrust and intellectual property violations.

“Google has enjoyed an extended period of unfettered growth,” said Jonathan Zuck, president of the Association for Competitive Technology, a Washington trade group that represents technology companies. “Between Washington and Brussels, it’s clear that they’re now in a time where their explosive growth will be under greater scrutiny.”

Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=aWKMcaQSS0a8

Google Runs Into China's 'Great Firewall'

Source: Wall Street Journal By Jessica E. Vascellaro and Loretta Chao

Google Inc.'s search sites in China abruptly stopped working Tuesday, but the explanation for the outage shifted as the day wore on. The Internet giant first blamed itself, citing a technical change, but later reversed course and pointed to the heavy hand of China's "Great Firewall"—even as service appeared to be back to normal.

The evolving explanation whipsawed Google watchers and showed how fraught with confusion the relationship between China and Google remains. The episode risks escalating their battle a week after Google stopped censoring its search engine in China.

Google struggled to discern the cause of the massive disruption, in which users in China received error messages for Google searches on the company's Hong Kong-based search site, Google.com.hk, and—at least for many users—on Google.com. Google began routing Chinese Internet users to its Hong Kong site last week as it said it would no longer comply with China's censoring policies and wouldn't run a censored Chinese search engine.

Later in the day, Google reversed itself, saying it had made those changes a week earlier. "So whatever happened [Tuesday] to block Google.com.hk must have been as a result of a change in the Great Firewall," the company said.

Separately, the Foreign Correspondents Club of China said Wednesday that it had confirmed eight cases in which journalists based in China and Taiwan had their email accounts hacked in recent weeks. Several of the accounts, on Yahoo Inc., were disabled March 25 as a result of the attacks. In one case, the club said, a Beijing-based journalist's account had been modified to forward all of the journalist's emails to an unknown recipient.

Google said late Tuesday afternoon that its search traffic in China had returned to normal. "For the time being this issue seems to be resolved," it said.

The incident added to the sense of confusion over Google's relations with China. Google said Monday that its mobile services in China were being partially blocked, but it wasn't clear how extensive that blockage was, nor that the Chinese government was definitely behind it.

The disruption Tuesday was broader, if not entirely complete. Users of the Hong Kong site in at least a half-dozen Chinese cities said they could reach the search page, but that any term entered in the search window yielded a browser error message, often causing their access to Google to be severed temporarily. Users in some cities also said they couldn't access Google.cn, which since last week has automatically sent users to the Hong Kong site.

Many Chinese users reported that even searches of innocuous terms like "happy" or "tree"—on Google's Hong Kong site produced an error message saying the page couldn't be opened.

The disruption was similar to how analysts expected a crackdown by China's Internet censors would look. It also shed light on the role of the censorship regime in filtering results for China-based Web users. The system is opaque and unpredictable.

Wang Lijian, spokesman for the Ministry of Industry and Information Technology, one of China's main Internet regulators, said he was unaware of any Google disruption.

Any permanent blockage of Google's searches by China would deal a blow to Google's hopes of continuing to run part of its business there after dismantling its censored Chinese site. Google said last week it hoped to keep its music-search and map services in China, along with sales and research-and-development operations.

Beijing has expressed anger at Google for publicly flouting its censorship regime, and a decision to block access to Google entirely has always been considered possible. Many analysts have believed Beijing would stop short of that for fear of infuriating Google's tens of millions of regular Chinese users and foreign businesses that require access to information.

Because Google censored its old Chinese site, Google.cn, in accordance with government rules, that site wasn't filtered by the government's firewall. Its international sites, such as the Hong Kong one, have always been subjected to filtering, meaning that Chinese users' searches of some sensitive terms—like those related to the 1989 crackdown on pro-democracy protests, the initials RFA, for Radio Free Asia, or even the names of top leaders—might trigger an error message from the browser instead of a results page.

Source article: http://online.wsj.com/article/SB10001424052702304739104575153360362231700.html

Huawei Profit More Than Doubles

Source: Wall Street Journal by Aaron Back

BEIJING -- Chinese telecommunications-equipment provider Huawei Technologies Co. said Wednesday its 2009 net profit more than doubled because of rising sales and exchange-rate gains, and that it expanded from its traditional strongholds in emerging markets into developed markets like North America.

Huawei has steadily gained on global telecom-equipment giants due to its lower prices, even as the quality of its products has closed in on Western rivals, and according to a report by research firm Gartner Inc. it captured the No. 2 market-share position behind L.M. Ericsson Telephone Co. last year.

The closely held company said its net profit for the year rose to 18.27 billion yuan ($2.68 billion) from 7.85 billion yuan in 2008. Revenue rose 19% to 149.06 billion yuan from 125.22 billion yuan.

Huawei did not provide a geographic breakdown of its sales, but a spokeswoman said that the company experienced strong growth in both developed and developing markets. The company's contract sales rose 53% in North America and 43% in Asian markets excluding China, she said.

In its annual report, the company said the surge in net profit was due to cost-control measures,which improved operating margins, and exchange-rate gains.

Huawei's global market share last year rose to 14.2% from 11.5% in 2008, Gartner said.

Gartner analyst Sylvain Fabre said that the pricing gap that has helped Shenzhen-based Huawei and cross-town rival ZTE Corp. gain ground on Western firms is narrowing in mature markets. The Huawei spokeswoman said that the company's main cost advantage is over the total lifetime cost of equipment, rather than the initial selling price.

Mr. Fabre said that the quality of the Chinese vendors' equipment is quite similar to the gear offered by Western rivals.

Norway's Telenor ASA said in November when it selected Huawei for a six-year contract to supply a new wireless network that the Chinese company's technology and services were now in line with European vendors. The network Huawei is building in Norway replaces gear supplied by Ericsson and Nokia Siemens Networks, a joint venture between Finland's Nokia Corp. and Germany's Siemens AG.

Huawei posted a 6.973 billion yuan ($1.02 billion) foreign exchange gain in 2009, and said that without that gain, its 2009 net profit would have increased 26.5%.

The company did not elaborate on what was behind the foreign-exchange gain. In 2008, the company reported a $776 million foreign-exchange loss due to the rise of the yuan against the dollar and other currencies that year. China halted the gradual appreciation of the yuan in July 2008 and has held the exchange rate steady since then as part of its response to the global financial crisis.

With the yuan virtually unchanged against the dollar for all of 2009, Huawei's foreign-exchange gain could be explained by sales in other currencies that rose against the dollar last year, but the Huawei spokeswoman declined to confirm this.

To hedge its foreign-currency risks, the company primarily relies on simple "natural hedging" strategies such as the use of foreign-currency loans, rather than the extensive use of dividends or other more complex strategies, the spokeswoman added.

Huawai says it is majority-owned by employees. The company doesn't disclose all details of its ownership structure or its financial performance.

Huawei said it sees its business momentum continuing in 2010 and expects revenue to grow 20% this year.

"Driven by the development of broadband in 2010, particularly the advancement in mobile broadband, Huawei will continue to maintain a strong and steady momentum across our key business areas," Chief Executive Ren Zhengfei said in the report.

Total revenue growth slowed in 2009 from 33.5% in 2008 due to adverse economic conditions, the company said.

The firm's operating margin rose to 14.1% from 12.9% in 2008 due to cost controls. The company said it sought cost reduction opportunities "in such areas as product development, procurement, manufacturing, delivery and service."

Source article: http://online.wsj.com/article/SB10001424052702304739104575154611913957120.html

McDonald's opens training site in China

Source: Restaurant News By Mark Brandau photo: Associated Press

McDonald's opened its first Hamburger University in mainland China, where the company expects to train an estimated 5,000 managers over the next five years as part of aggressive growth plans for the Chinese market.

Tim Fenton, president of McDonald’s Asia/Pacific, Middle East and Africa division, said the company plans to open as many as 175 McDonald’s units this year in China, where it already has 1,146 stores.

Since McDonald's opened its first location in Shenzhen, China, in 1990, it took 19 years for the chain to reach 1,000 stores in China, Fenton said, and the only country to hit that milestone faster was the United States. McDonald’s aims to open an additional 1,000 restaurants in China in six years, he added, which underscores the importance of the management training offered at the new Hamburger University, located at McDonald’s national headquarters in Shanghai.

“It’s a testament to our commitment to growth in China,” Fenton said in an interview with Nation’s Restaurant News. “It’s the fastest-growing market in the system. Before, the Chinese had to come to Hong Kong [to study at HU], and now everybody comes to the epicenter of the market.”

Fenton, who went through HU at McDonald’s Oak Brook, Ill., headquarters in 1978 and 1988, said the value of the program is the “opportunity to share best practices from all over the world and to be with peers who deal with the same issues day in and day out.”

HU China’s curriculum will focus on restaurant operations management and business leadership, and faculty members will come from mainland China, Hong Kong and Taiwan.

“Ever since we opened our first restaurant in China 20 years ago, we have been strongly committed to giving back to society, developing local talent and contributing to the needs of the restaurant sector,” said Kenneth Chan, chief executive of McDonald’s China. “HU China will help us in attracting, retaining and developing local talent for the next twenty years of growth in China.”

While China presents unique cultural differences and aggressive growth projections, the curriculum at HU China doesn’t differ much from classes taught at campuses in McDonald’s other areas of the world, Fenton said.

“The curriculum doesn’t change much country to country beyond dialect and language,” he said. “We have 38 countries, 16 time zones, and 800 languages and dialects in APMEA. But we all speak McDonald’s. Scheduling is scheduling, training is training. We have a system that doesn’t matter if you’re in Tokyo, Sydney or Los Angeles -- you know what the expectations are.”

He said more than 80,000 people have graduated from one of Hamburger University’s campuses, which are located in the United States, the United Kingdom, Japan, Australia, Germany, Brazil and, before HU China’s opening, Hong Kong.

“Hamburger University China provides a comprehensive range of curriculum so that our employees can learn, grow and realize their career dreams,” said Susanna Li, dean of HU China. “We are also pursuing partnerships and joint accreditation programs with China’s top business schools and educational organizations.”

One such partnership will be with the China Cuisine Association to develop a food safety and quality control program.

Fenton told BusinessWeek recently that McDonald’s was increasing its investment in Asia by about 20 percent compared with 2009.

Year-to-date through Feb. 28, 2010, same-store sales in McDonald’s APMEA region had increased 7.2 percent, compared with a 3.6-percent increase in the company's global same-store sales, which also reflected a 0.1-percent decrease in the United States and a 4.8-percent uptick in its European division.

According to The NPD Group's CREST service, which tracks commercial foodservice trends in several countries, Chinese consumers increased their total visits to restaurants and foodservice establishments by 3 percent in the fourth quarter of 2009, compared with the third quarter of last year. Their frequency rose to 8.9 visits to a restaurant every two weeks.

China's economy grew 8.7 percent in 2009, compared with 2008, NPD found. Prices remained stable, the research firm added, and while China's consumer price index rose modestly in the fourth quarter, it decreased by 0.7 percent for all of 2009. NPD also indicated that per capita disposable income in China grew 8.8 percent in 2009, exceeding growth in GDP for the first time.

McDonald’s operates or franchises more than 32,000 restaurants in more than 100 countries.

Source article: http://www.nrn.com/breakingNews.aspx?id=381294

Lianhua Supermarket Boosts Turnover by 16%, Profit by 30%

Source: JML Pacific Epoch

Lianhua Supermarket Holdings (0980.HK) reported turnover of RMB 24.02 billion in 2009, representing an increase of 16.01% year-on-year, the company announced on March 31. Net profit was RMB 507 million in the same period, up 30.5% compared to the corresponding period of last year. The company attributed the growth to its continual improvement in operation and effective mergers and acquisitions.

Lianhua's overall same store sales (SSS) dropped slightly by 0.24% year-on-year, among which hypermarket SSS rose 0.44%, while supermarket and convenience store SSS dropped by 1.02% and 2.08% year-on-year, respectively.

The company added 1,058 new outlets during the period, bringing its total to 4,930.

Source article: http://www.jlmpacificepoch.com/newsstories?id=1623772_0_5_0_M

Tommy Hilfiger to Assume Direct Control of Distribution in China

Source: PRNewswire-Asia

The Tommy Hilfiger Group today announced it has entered into an agreement to assume direct control of its wholesale and retail distribution in China from its licensee Dickson Concepts (International) Limited, beginning March 01, 2011.

Dickson Concepts (International) Limited will continue to operate as the Company's licensee in China through February 28, 2011, and will remain as the licensee for other territories in the Southeast Asian region, comprising of Hong Kong, Macau, Taiwan, Singapore and Malaysia, under an extended agreement that continues through to March 31, 2019. Terms of the transaction have not been disclosed.

"This acquisition is in line with our strategy to consolidate brand management and approach the market in the most coordinated manner possible," said Fred Gehring, Chief Executive Officer of the Tommy Hilfiger Group. "There is tremendous potential in China to cultivate the Tommy Hilfiger brand. Over the years, Dickson Concepts (International) Limited has firmly established Tommy Hilfiger as a premium lifestyle brand in the region. By assuming direct control of the brand operations in China, we will now be in a better position to support the development and expansion of the business in this important growth market."

Tommy Hilfiger products, including men's, women's, denim and childrenswear, are currently sold through 103 points of sale in China.

SOURCE Tommy Hilfiger Europe B.V

Have You Heard...

• China welcomes smoother U.S. ties, nudges Iran
• China shows new divisions on yuan
• China's Baidu.com, Sun Yat-sen University Jointly Launch Search Engine Marketing Course
• McDonald's Sees 2,000 Stores in China by 2013
• Volvo Seeks to Wean China Officials From Audis to Boost Sales
• Eli Lilly to launch 15 new products in China in 5 yrs
• Ship builder CSSC net profit down 40% in 2009

China welcomes smoother U.S. ties, nudges Iran

Source: Reuters

China on Tuesday sought smoother ties with the United States and welcomed President Barack Obama's call for a positive relationship in a meeting with Beijing's new ambassador to Washington.

The conciliatory words from the two powers, which have been through a bout of strains, came after Chinese envoy, Zhang Yesui, met Obama and U.S. Deputy Secretary of State James Steinberg on Monday.

"The president also stressed the need for the United States and China to work together and with the international community on critical global issues including nonproliferation and pursuing sustained and balanced global growth," said a statement by White House spokesman Robert Gibbs after Obama's meeting with Zhang.

Since the start of the year, China and Washington have traded criticisms over Beijing's controls on the Internet, U.S. weapons sales to Taiwan and Obama's meeting with Tibet's exiled spiritual leader, the Dalai Lama.

China regards the self-ruled island of Taiwan as an illegitimate breakaway from its territory, and deems the Dalai Lama, Tibet's exiled Buddhist leader, a "separatist."

Most recently, U.S. complaints that China is keeping its yuan currency, and its goods, too cheap have drawn angry rejoinders from China, raising market worries that the world's biggest and third-biggest economies are entering turbulent trade waters.

While those tensions have not evaporated, Chinese Foreign Ministry spokesman Qin Gang indicated that his government wanted to lower the temperature of contention.

"China appreciates President Obama's and Deputy Secretary of State Steinberg's positive stance on promoting China-U.S. relations," Qin told a regular news conference in Beijing.

Qin did not give any details of Zhang's discussions with Obama and Steinberg. But Qin said his government "took seriously the U.S. side's reiteration of its principled commitments on the Taiwan and Tibet issues."

China says the United States must accept that Taiwan and Tibet are part of "one China." Washington has urged Beijing to address those disputes through peaceful dialogue.

"Recently, there have been uncalled for disturbances in China-U.S. relations, and this does not suit our common bilateral interests," added Qin.

"Healthy China-U.S. relations suit the fundamental interests of both countries and their peoples, and is beneficial to the peace, stability and prosperity of the Asia-Pacific region and the world," he said.

FIRMER WORDS ON IRAN

The Chinese spokesman Qin said his government opposed Iran acquiring nuclear acquiring nuclear weapons, but stopped short of backing the new sanctions on Tehran that Washington has urged.

Beijing faces rising calls from Western nations to approve proposed new U.N. sanctions on Iran, which maintains that its nuclear program is for peaceful ends.

China has said repeatedly that it does not believe sanctions are the "fundamental way" to solve the dispute. But Qin suggested that China also wants Iran to make concessions.

"China opposes Iran possessing nuclear weapons, but at the same time we believe that, as a sovereign state, Iran has the right to peacefully develop nuclear energy," said Qin.

"At present, we hope that all sides will make substantive efforts and demonstrate flexibility over the Iran nuclear issue," he added.

China has urged Tehran to accept a proposal from the International Atomic Energy Agency that would involve swapping Iran's low-enriched uranium for higher-grade nuclear fuel for a Tehran reactor producing medical isotopes.

Source article: http://www.reuters.com/article/idUSTRE62T1BU20100330

China shows new divisions on yuan

Source: Reuters

China displayed new divisions on Tuesday over how to respond to mounting U.S. pressure to let its exchange rate rise.

Two new advisers to the central bank called for the yuan to resume its gradual appreciation, but they were slapped down by Commerce Minister Chen Deming, who said a stronger currency would not wipe out China's trade surplus with the United States.

"It has been proved both in theory and practice that the appreciation of a nation's currency provides little help for improving the balance of payments," Chen said in a detailed defense of China's trade policy.

The clock is ticking down toward an April 15 ruling by the U.S. Treasury on whether China is deliberately manipulating its currency to keep its exports competitive and gain an unfair advantage in global markets.

Separately, U.S. lawmakers have said they will introduce legislation to impose tariffs on Chinese goods unless Beijing allows the yuan to climb.

"It does not help if one side, driven by its political agenda at home, puts pressure on the other with unwarranted threats of trade sanctions," Chen said.

To better get its point across, the ministry issued Chen's statement in English as well as Chinese.

ACT BEFORE SEPTEMBER

Beijing allowed the yuan to rise 21 percent against the dollar between July 2005 and July 2008 before effectively repegging the currency, also known as the renminbi, near 6.83 to the dollar to help exporters ride out the credit crunch.

The Ministry of Commerce is a staunch defender of Chinese export industries and has repeatedly warned that many would be ruined if they had to cope with a stronger exchange rate.

The central bank, by contrast, would benefit from having an extra tool in its policy kit if the exchange rate were able to rise and fall to help absorb economic shocks.

"(China) should resume the pre-crisis managed floating exchange rate as quickly as possible," Xia Bin, a researcher with the Development Research Center, a think-tank under the cabinet, told Reuters.

Xia was one of the three economists named on Monday as members of the People's Bank of China's monetary policy committee, a key advisor in framing monetary policy.

Big decisions on exchange and interest rates, however, are taken by political leaders, not the central bank.

Li Daokui, another new member of the advisory body, said China should scrap its peg to the dollar before September.

"One way of relieving pressures on the renminbi exchange rate is to make an adjustment on China's own initiative," Li, an economist at Tsinghua University, was quoted by Caijing magazine as saying.

Li singled out September as a deadline so that political debate over the yuan does not boil over in the run-up to U.S. mid-term elections in November.

In a cover story, Caijing cited unidentified sources as saying that Beijing was studying the option of dropping the yuan's peg as soon as next month.

WASHINGTON AND TOKYO

If the administration of President Barack Obama does name China as a currency manipulator, it would be required to open intensive talks with Beijing on the issue.

Obama told China's new ambassador to Washington that he wanted to "further develop" a positive relationship with China.

Asian governments have been far more reluctant than those in the West to pressure China to let the yuan strengthen for fear of economic or political repercussions. China's strong rebound from the crisis has helped the entire continent recover much faster than Europe or the United States.

China's exchange rate could also be on the agenda when Japanese Finance Minister Naoto Kan visits Beijing this weekend.

Asked whether the yuan would come up at his talks with Chinese officials, Kan said: "I have not yet decided what to do at this point, but we may discuss this topic depending on the course of dialogue.

Many economists warn that criticism from the West could make Beijing shy away from loosening its grip on the currency, though policymakers are widely expected to allow some yuan appreciation this year if the economy continues to recover.

Offshore forward markets on Tuesday were pricing in an expected rise of 2.6 percent in the yuan over the next 12 months. A Reuters poll last week pointed to 3 percent appreciation in the coming year.

Huang Haizhou, a managing director of China International Capital Corp, the country's leading investment bank, joined in the chorus of calls for a stronger yuan.

"An appropriate appreciation of the renminbi would be to China's own benefit," Huang wrote in the March issue of the International Economic Review, a Chinese-language policy journal.

"This could increase the flexibility of monetary policy, develop financial markets, expand domestic consumption and promote structural adjustment of the economy, helping to keep a balance between inflation and exchange rates.

Source article: http://www.reuters.com/article/idUSTRE62T0VT20100330

China's Baidu.com, Sun Yat-sen University Jointly Launch Search Engine Marketing Course

Source: China Tech News

Chinese Internet search engine firm Baidu.com and the School of International Business of Sun Yat-sen University in Guangzhou have jointly announced the launch of an elective course in search engine marketing.

Wu Peiguan, deputy director of the School of International Business, told local media that the Internet has developed rapidly in recent years and university students should update their knowledge and skills in accordance to the changes of the environment. By cooperating with well-know domestic Internet enterprises such as Baidu.com, Sun Yat-sen University hopes to provide the most advanced Internet knowledge and skills to its students.

Lu Shucheng, general manager of the Guangzhou branch of Baidu.com, said that search engine marketing is a professional subject with high practicality and it focuses on the practical use behind utilizing search engines to build brands online. In the current market business course system in China, there are few reliable courses that cover the systematic instruction of search engine marketing.

The joint program aims to provide education to tackle the imbalance between recruitment vacancies and lack of qualified talents in search engine marketing fields. The course lasts for 10 weeks, with three study sessions in each week. The teaching group is constituted of the staff from Baidu.com and academic staff from the School of International Business.

Staring from June 2009, Baidu.com jointly launched search engine marketing training courses with Beijing Normal University and Hunan University. Apart from the cooperation with universities, it also supported professional vocational training institutes to implement search engine marketing training.

These courses will invariably focus on using Baidu's own search engine services for marketing in China, as rival Google recently announced plans to redirect mainland China users from its Google.cn site to its website in Hong Kong. In addition, Google's search engine partners such as Tom.com and Tianya have dropped Google i recent days and are expected to move to services offered by Sogou.com and Baidu.com.

Source: http://www.chinatechnews.com/2010/03/30/11817-chinas-baidu-com-sun-yat-sen-university-jointly-launch-search-engine-marketing-course

McDonald's Sees 2,000 Stores in China by 2013

Source: Reuters

McDonald's Corp expects China to be the engine of growth in the Asia Pacific over the next five years and predicts a good first quarter for same-store sales in the Asia, Middle East and Africa region.

The firm expects to have more than 2,000 stores in mainland China by the end of 2013 and 1,300 at the end of 2010, Tim Fenton, McDonald's president for Asia, Pacific, Middle East and Africa told Reuters on Tuesday.

"Asia, Middle East and Africa is the fastest growing area in the world and of that, China is the fastest growing country," Fenton said, adding that he plans to open a total 520 new stores in the region this year.

McDonald's reported a better-than-expected 4.8 percent rise in February sales at established restaurants as Asia helped offset softness in the United States and Europe.

The firm is due to report its March sales on April 21.

"We are a little bit ahead of what we had planned to do, so that's always nice ... but we do see things changing. We see the economy getting better," Fenton said.

"We will have a good first quarter," he said of his region's same-store sales.

Fenton was in Shanghai to open McDonald's first Hamburger University in mainland China.

McDonald's said in January it expects to boost its capital investment in China by about a quarter this year and open 150 to 175 restaurants in the mainland to tap the growth of the world's third-largest economy.

McDonald's will roll out between 40-50 McCafes in China this year, up from the three it currently has to capitalise on the country's increasing taste for coffee.

McDonald's boom in China is due to its growing middle class affluence that has led to high growth in the fast food and casual dining industry, Fenton said.

Quoting third party data, he added that China's fast food and casual dining industry, growing at 10 percent, could reach $310 billion this year. That compared with $460 billion in the United States, expanding at 2 percent, and $470 billion in Europe, with flat growth.

"Just China alone, if you do the math, in 5-10 years, they could surpass the U.S. and or both Europe," Fenton said.

China's contribution to the group's revenue will continue to grow at double digit rates. China will also surpass the group's stated sales growth target of 3-5 percent and income growth target of 5-7 growth.

McDonald's competes with Yum Brands' KFC in the United States and China, and Ajisen (China) in the mainland, a noodle restaurant chain operator.

The company said it had 1,135 stores in mainland China as of the end of 2009.

Some foreign business are feeling jittery about China since Google Inc's high profile tussle with Beijing over censorship that led to its shutdown of its China website.

But McDonald's, which has been in China for 20 years and is one of the most successful foreign businesses in China, does not find operational conditions on the mainland any tougher.

"China has been, in my experience, one of the easier countries to do business in," Fenton said.

"But like any country, you do business within the laws of the land and we abide by the laws in the land. It's certainly easier doing business today than 20 years ago."

Source article: http://www.flex-news-food.com/pages/29257/McDonald/mcdonalds-2000-stores-china-2013.html

Volvo Seeks to Wean China Officials From Audis to Boost Sales

Source: Bloomberg

Zhejiang Geely Holding Co., having won backing from Chinese officials to buy Volvo Car Corp., will now seek to wean bureaucrats from Audi AG sedans to make the deal a success.

Geely intends to boost Volvo sales in China, the world’s largest auto market, ninefold to 200,000 a year within five years, Chairman Li Shufu said on March 28, after the company agreed to buy Volvo from Ford Motor Co. for $1.8 billion. A key market may be the Chinese government, which spent 80 billion yuan ($12 billion) on official vehicles in 2008.

“Volvo has an image of being high-end and low-key, which is perfect for a government official’s car,” said Yu Bing, an analyst with Pingan Securities Co. in Shanghai. “It may pose more of a threat to Audi and BMW.”

Volvo’s Chinese ownership may boost the brand’s appeal to local bureaucrats who were criticized by the public last year after Germany-based Bayerische Motoren Werke AG and Daimler AG’s Mercedes-Benz were added to a list of approved car vendors. Volkswagen AG’s Audi, the biggest supplier of official cars in China, get about 20 percent of local sales from the government.

“Geely’s got very strong support from both the central government and local government,” said John Zeng, a Shanghai- based IHS Global Insight analyst. Winning official car orders is “the first step” in turning Volvo around, he said.

Geely intends to invest $900 million in Volvo operations as it works to revive the unprofitable automaker, Li told reporters today in Beijing. He didn’t comment on government sales.

China Plant

The automaker intends to complete the acquisition of Volvo in the third quarter. The company has begun seeking a site for a Volvo plant in China, the first in the country. The Swedish carmaker’s headquarters will remain in Gothenburg and Ford will continue to supply some parts and other support.

Geely Automobile Holdings Ltd., the company’s listed unit, fell 0.2 percent to HK$4.15 in Hong Kong trading today. It has risen more than sixfold in the last 12 months.

Luxury carmakers have increased their focus on China as economic growth and surging incomes have helped the country withstand a slump in global premium-sedan sales. Audi’s China sales jumped 33 percent last year to 157,188 units, according to the China Association of Automobile Manufacturers.

China will likely pass Germany as the automaker’s biggest market by around 2012, with sales of 250,000 a year, Audi has said.

“Of course, we’re following the developments,” Audi spokeswoman Esther Bahne said by phone from Ingolstadt, Germany. Volkswagen AG spokesman Michael Brendel wasn’t available for comment.

VW China Ties

Audi’s parent Volkswagen AG is the largest overseas passenger-car maker in China having opened a venture in the country in 1984, one of the first backed by a foreign automaker. Volkswagen now has tie-ups with the two biggest domestic Chinese automakers, Shanghai government-controlled SAIC Motor Corp. and China FAW Group Corp.

That history and existing fleets of official Audi cars may hamper Geely-Volvo’s efforts to break into the government sector, said Zhang Xin, an analyst with Guotai Junan Securities Co. in Beijing.

“It makes sense for government agencies to stick to Audis because it is easier for them to manage and repair vehicles,” he said. “It won’t be easy for Geely to challenge Audi’s leading position.”

BMW, Mercedes

BMW and Mercedes were added to an approved list for central government officials’ cars last year, sparking complaints on Web sites. The list comprises more than 35 automakers, including local carmakers, Geely, SAIC and Chery Automobile Co. Volvo wasn’t on the list, which is updated each year in June by a central procurement office.

A telephone operator declined to connect a call to the procurement center, saying the number isn’t available to the public. Local authorities have separate lists of suppliers.

The government planned to cut official expenses on vehicles by 15 percent in 2009 from the average of the past three years.

Mercedes-Benz deliveries in China jumped 65 percent to 70,100 vehicles last year. Global sales fell 10 percent. Daimler AG’s Beijing-based spokesman Trevor Hale declined to comment on possible competition from Volvo.

BMW China

BMW’s China sales surged 38 percent last year to 90,536 units, according to the company. It has forecast a “strong double-digit” percentage gain there this year.

“We don’t see much impact on us from Geely’s acquisition of Volvo,” said Duan Yi, a Beijing-based BMW spokeswoman. “China’s market has always been very competitive and we will follow our own development strategies.”

China overtook the U.S. last year as the world’s largest auto market with sales surging 46 percent to 13.6 million, according to the association. Volvo sold 22,405 vehicles in the country last year. It currently has cars built in China under contract by a Ford-Mazda Motor Corp. venture. Geely sold 329,104 vehicles last year, predominately low-cost compacts, such as the KingKong.

Chinese ownership may deter individual buyers in China seeking to show off their wealth by purchasing expensive foreign cars, said Koji Endo, managing director at Advanced Research Japan in Tokyo.

“Whether rich people really want to pay a premium to buy Chinese luxury cars is a big question,” he said. “The branding power of the Europeans is what they are spending a fortune on.”

Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=ajm6z21lJHmQ

Eli Lilly to launch 15 new products in China in 5 yrs

Source: (Agencies)

SHANGHAI - US drug maker Eli Lilly plans to launch 15 new products in China in the next five years, chief executive John Lechleiter said on Tuesday, while urging China to be more vigilant on intellectual property rights.

Lechleiter said Eli Lilly, which opened its first non-US office in Shanghai in 1918, has the largest product pipeline in its history.

"We are investing aggressively in China," Lechleiter told Reuters at the sidelines of a pharmaceuticals conference in Shanghai.

He declined to comment on how much Eli Lilly was investing in China but said they had invested more than 2 billion yuan ($293 million) since the late 1990s.

Lechleiter, who took the helm of the Indianapolis-based firm in April 2008, said Eli Lilly planned to grow significantly in the next few years after achieving sales of $270 million in China last year. Lechleiter said China was expected to have $40 billion in annual sales by 2013.

Eli Lilly's $100 million venture capital fund focused on life sciences and healthcare in China is one of the most active venture capital investors in China's biopharmaceutical industry, Lechleiter said.

"In the two-and-a-half years since it started, Lilly's Asian venture has made 6 investments and deployed more than $40 million."

Lechleiter said Eli Lilly had established positions in the fastest growing therapeutic areas in China including oncology and diabetes and was investing in the education of Chinese doctors so they would be ready to pursue future roles in clinical trials.

Home to more people with diabetes than any other country, China has more than 92 million adults already diagnosed and nearly 150 million developing it, a medical report said in January.

Lechleiter said while China had made significant progress in developing a patent regime in line with international systems, it needed to more actively enforce intellectual property rights.

"Regulatory agencies need to play a role as an enforcer for any registration of generics when the patents are in place."

Source article: http://www.chinadaily.com.cn/bizchina/2010-03/30/content_9663473.htm

Ship builder CSSC net profit down 40% in 2009

Source: (Xinhua)

BEIJING - China State Shipbuilding Co (CSSC) Holdings Ltd, the country's leading ship builder, announced Monday that net profits in 2009 shrank by 39.88 percent due to declining orders and prices hit by the global economic slowdown.

The Shanghai-based firm said in its 2009 annual report that its net profit fell to 2.5 billion yuan ($366.2 million).

Its annual business revenue dropped 8.74 percent to 25.2 billion yuan last year from 2008, according to the report.

Its A-share stock price gained 2.25 percent to 72.39 yuan per share on Monday, with the benchmark Shanghai Composite Index advancing 2.09 percent to 3,123.8 points.

Source article: http://www.chinadaily.com.cn/bizchina/2010-03/30/content_9661374.htm

Have You Heard...

• China Moves Ahead With Vetting System for Mergers
• Europe unlikely to join any new yuan offensive
• Ford Sells Volvo to Geely in China’s Biggest Overseas Auto Deal
• McDonald’s Targets Asia’s Beef Eaters With 20% Spending Boost
• China Construction Bank Teams With Microsoft For Online Banking Services
• Verdict for Rio Tinto trial handed down
• Milestone merger reshapes Suzuki

China Moves Ahead With Vetting System for Mergers

Source: Wall Street Journal by Andrew Batson

BEIJING—China's government is moving forward with a new system to vet foreign acquisitions of local companies for national-security concerns, officials and lawyers say, as tensions grow with international businesses that feel increasingly unwelcome in a fast-growing market.

The government's plan to establish a formal process for reviewing national-security issues around merger deals has been known since 2008, when new antitrust legislation providing for it came into effect. But the government never followed up with details implementing such a process.

In recent weeks, top officials have indicated that the government plans to complete setting up a formal review process this year, although no date has been announced for the system to take effect. Premier Wen Jiabao, in his annual work report earlier this month, said the government aims to "quickly establish a security-review system for mergers and acquisitions involving foreign investment."

While government officials can express security concerns now, the addition of another type of government review could make it harder for foreign companies to invest in Chinese companies.

"The definition of national security is bound to be somewhat broader than what people think of as national security in the U.S.—it's going to be economic security and economic development and stability," said Peter Wang, a partner with law firm Jones Day in Shanghai. The planned review system is "not unexpected, and it's not necessarily unreasonable, but it's certainly not making things any easier."

Mr. Wen emphasized that China still wants to attract foreign investment, and said the government will "encourage the use of foreign investment for restructuring, upgrading, merging and reorganizing Chinese companies." In more-recent public comments, Mr. Wen has pledged to maintain foreign business confidence in China and to meet more regularly with international executives.

The government said in 2008 it would create a "joint ministerial meeting" system for investigating security concerns raised by foreign companies' acquisitions in China. The planned committee would include two of the ministries that currently review mergers—the National Development and Reform Commission, or NDRC, and the Ministry of Commerce—as well as other agencies. Rules for how the system will function haven't been published yet.

China's government already has wide latitude to block merger deals, and usually doesn't have to give a formal legal justification. Foreign transactions have gotten particularly close scrutiny since 2005, when the planned sale of construction-machinery maker Xugong Group to private-equity firm Carlyle Group generated a public outcry. That deal was eventually abandoned. Last year, Chinese regulators rejected a bid by Coca-Cola Co. for China Huiyuan Juice Group Ltd., saying it could crowd out smaller companies and raise consumer prices, even though the two combined held just a fifth of China's juice market.

Chinese officials have said it's appropriate for China to review mergers for national-security concerns since many other countries already do so. National-security reviews by the U.S. and Australia have blocked or limited several planned Chinese acquisitions in recent years. But Chinese officials have also described security reviews as a way to maintain the position of key state-owned enterprises.

"As a socialist country, China must put its own interests first when opening up and keep a firm hold on the right to lead core industries," Zhang Xiaoqiang, a vice chairman of the NDRC, said in a December speech that also called for speeding up work on the security-review system.

The joint-review system planned by China seems to resemble in some ways the Committee on Foreign Investment in the U.S., a 12-agency panel that checks foreign deals in the U.S. for security concerns. But a similar panel in China would be part of a government that has much greater direct influence on businesses than in the U.S. Recent trends haven't been encouraging for multinational companie seeking to do business in China.

A number of regulatory changes over the past several months, affecting industries from information technology to express delivery, have started to worry foreign businesses, said Myron Brilliant, vice president for Asia at the U.S. Chamber of Commerce. "The concern we have is whether China may be adopting policies that may make it difficult for foreign investors to compete in this market," he said.

There's little clarity how the planned security reviews—which would be separate from the antitrust review that major deals must go through—would in practice affect foreign companies' deals in China. In the best-case scenario, lawyers say, it could allow security concerns to be aired in a more predictable and transparent fashion than they are now. In the worst case, the review would add another layer to what is already a very complex bureaucratic approval process.

Source:article: http://online.wsj.com/article/SB10001424052748703416204575145292672441012.html

Europe unlikely to join any new yuan offensive

Source: Reuters

If Washington picks a fight with China over the weakness of the state-managed currency, it will do so without European reinforcement, not least because the euro has weakened in tandem with Greece's debt crisis.

Preparation of a U.S. Treasury report that could potentially brand China a "currency manipulator" is rekindling tensions with Beijing prior to mid-April publication and raises questions as to how broad international support will be if things turned uglier.

The saber-rattling is growing in volume since U.S. lawmakers said they were crafting proposals to allow import duties to be slapped on Chinese goods on the grounds that American jobs are being lost and Beijing must now budge.

Despite the fact that governments in Europe also believe the yuan is undervalued, giving China an unfair edge in global trade competition, there appears to be little appetite here to up the ante simply because tempers are fraying in Congress, potentially weakening the U.S. diplomatic push.

Additionally, negotiations on an aid plan for Greece not only eclipsed most other policy issues in recent months but also exposed strains among euro zone governments that will hardly sharpen desire to renegotiate their position on China so soon.

"The view here (in Europe) is that this is a red flag to the Chinese. They sense it's not going to be very productive," said an official involved in preparation of a meeting of G20 finance ministers that will bring all sides together later this month.

German Economy Minister Rainer Bruederle signaled last week that Berlin understood nothing would happen overnight. He told export executives Berlin wanted to see a fully flexible Chinese foreign exchange rate "one day" but that he realized the shift would be difficult for China.

Likewise, EU trade commissioner Karel De Gucht highlighted the contrast with the United States when he said in comments to the Financial Times newspaper: "At this moment, it is less of a political issue in Europe."

China and the United States have been at odds in 2010 over many other issues such as Google's decision to defy Chinese Internet censorship, Tibet, U.S. weapons sales to Taiwan, and sanctions against Iran over its nuclear program.

For many industrialists, the focus is often on more concrete issues of export access to China markets than the less tangible benefits a stronger yuan should confer in terms of the relative price competitiveness of euro zone firms on world markets.

THAT'S NOT THE ONLY REASON

While important, the diplomatic subtleties of how hard China can be cajoled into yuan appreciation is one of many considerations and the list of other motives has if anything lengthened, strengthening the case for further soft-peddling from Europe's perspective, officials and economic analysts say.

The most obvious is that the Greek debt crisis has produced a positive by-product to the extent that the euro exchange rate has weakened in tandem, providing some relief in theory even if it may prove temporary.

That, as French Finance Minister Christine Lagarde has said, can only be considered welcome news by euro zone exporters.

"Given the 15 percent fall we've seen in the value of the euro since July 2008 against the yuan as well as the pressing domestic issues facing the region at present, it is hardly surprising that Eurozone politicians have little appetite to tackle Chinese currency policy issues at present," said Simon Derrick, currency analyst at Bank of New York Mellon.

The euro has shed about eight percent versus the yuan since this year alone, primarily because it has retreated by roughly similar amount against the dollar, to which the yuan is pegged right now.

More strikingly, for much of the decade before the downturn and collapse in global trade in 2008, exports from the euro zone to China appear to have risen more or less continuously in spite of the yuan's increasing weakness vis a vis the euro.

Another development the Europeans should worry about is that a broad Asian exchange rate appreciation could in fact trigger a further bout of dollar weakness versus the euro, Brendan Brown, chief economist at Mitsubishi (UFJ) Securities, said.

"It is better to keep quiet and hope that the Chinese get away with only small currency changes," said Brown. "European exporters are doing very well anyway."

China revalued the yuan by 2.1 percent against the dollar in July 2005 and then let it climb nearly another 19 percent before calling a halt in mid-2008 to help exporters weather the global financial crisis.

Europe if anything had more cause for complaint during that period because the reform did not lead to a yuan rise versus the euro. Indeed the euro rose roughly 10 percent versus the yuan in that period.

But in 2009, when the industrialized world was struggling to pull out of recession, China offered Europe a helping hand. Euro zone exports to China grew four percent while exports to Britain and the United States fell close to 20 percent, according to data collated by EU statistics office Eurostat.

That, combined with the desire to avoid public sparring and play for yuan appreciation in the longer term, may explain why European Central Bank President Jean-Claude Trichet and other senior euro zone officials had little to show from their last visit to China to discuss the matter back in November.

Trichet is more likely worried that China's currency policy is not sustainable in the long-term if Beijing is serious about efforts to achieve a more balanced global economy and to discuss the necessary adjustments in the G20 forum.

There too, there is no mood to rush at China over the issue.

Canadian finance minister Jim Flaherty, whose country hosts a G20 summit later this year, said this week "there's no point in sweeping important issues under the rug."

But in private, G20 officials, including from Canada, have cautioned against expecting any kind of currency pronouncements before June or maybe even November, when another G20 summit is scheduled in South Korea.

And even if it proves to be a blip, China is tipped to post a trade deficit in March that would be the first since April 2004, which Beijing could at the very least exploit as proof that caution is needed when calling for yuan change.

"Although the timing of the (trade deficit) announcement may be political, the trend toward a sustained trade deficit is very real," Albert Edwards of Societe Generale banks global strategy team said in a note.

Source article: http://www.reuters.com/article/idUSTRE62S2L520100329

Ford Sells Volvo to Geely in China’s Biggest Overseas Auto Deal

Source: Bloomberg By Ola Kinnander and Keith Naughton

Ford Motor Co. agreed to sell Volvo Cars to Zhejiang Geely Holding Co. for $1.8 billion in the biggest overseas acquisition by a Chinese automaker, capping sales talks that began more than 18 months ago.

The price includes a $200 million note and the remainder to be paid in cash, Ford Chief Financial Officer Lewis Booth said yesterday in Gothenburg, Sweden. The companies expect to finish the deal in the third quarter after getting regulators’ approval, Geely Chairman Li Shufu said.

Divesting Volvo completes Chief Executive Officer Alan Mulally’s strategy of exiting European luxury lines to focus on Ford’s namesake brand after the 2007 sale of Aston Martin, and of Jaguar and Land Rover to Tata Motors Ltd. for $2.4 billion the following year. Booming sales made China the world’s largest car market in 2009, generating profit that’s allowing automakers to reach out to Western markets and technologies.

“If I were a competitor to Geely in China and all of a sudden I would lose ground to my competitor because they acquired Volvo, I would look to do the same,” Mike Tyndall, an automotive specialist with Nomura Securities in London, said in a telephone interview.

Ford fell 19 cents, or 1.4 percent, to $13.67 at 9:35 a.m. in New York Stock Exchange composite trading, after the automaker said today that a United Auto Workers trust would sell 362.4 million warrants. Each represents the right to purchase one share of Ford common stock at an exercise price of $9.20.

Geely Automobile Holdings Ltd., the automaker’s listed unit, gained 1.5 percent to HK$4.16 in Hong Kong trading.

Ford Supplies

Yesterday’s agreement includes terms regarding intellectual property rights and supply as well as research and development, Geely said. The Chinese company will help Volvo, whose headquarters will stay in Gothenburg, tap China’s growing market, Li said at a joint press conference with Ford.

“I see Volvo as a tiger: it belongs to the forest and shouldn’t be contained in the zoo,” Li said in Mandarin. “The heart of the tiger is in Sweden and Belgium,” he said, referring to the two countries where Volvo has its main plants. “Its paws should extend all across the world.”

Volvo plans to produce 390,000 cars this year, compared with 330,000 in 2009, CEO Stephen Odell said. Geely will restore profitability to Volvo, according to Ford’s Booth.

Ford will continue to supply Volvo powertrains, stampings and some vehicle components. It also agreed to provide engineering and technology support, and access to tooling for common components for an unspecified period.

The Swedish carmaker’s S40 model is built on the mechanical foundation of the Ford Focus now sold in Europe. Volvo supplies diesel engines for Ford’s European lineup.

‘Image Boost’

“We have continued to invest in Volvo, just as we did at Jaguar Land Rover, to make sure that our employees and now our ex-employees at Jaguar Land Rover are going to be working in a place that has good potential for the future,” Booth said in a March 24 interview.

Geely first approached Dearborn, Michigan-based Ford about buying Volvo in mid-2008, two people familiar with the talks have said. Ford named Geely its “preferred bidder” in October and said on Dec. 23 that they had agreed on the major terms of the transaction.

The cash portion of the purchase price will be adjusted for Volvo’s pension deficits, debt, cash and working capital, which could mean a “significant decrease” in proceeds to Ford, the U.S. carmaker said.

Volvo Loan

The European Investment Bank approved a 200 million-euro loan to Volvo last year, pending a Swedish state guarantee for the credit. Sweden later put on hold that process, citing Volvo’s uncertain ownership. Industry Minister Maud Olofsson said in an interview yesterday that the government is willing to revisit the loan. Geely hasn’t decided whether it will apply for the credit, Li said.

Li, Geely’s founder, has said he is seeking to have half the company’s sales from overseas markets by 2015. He aims to sell 200,000 Volvos a year in China, up from 22,405 last year, and has been seeking locations for a new plant there.

Sales-tax cuts for smaller vehicles combined with rural subsidies boosted nationwide auto sales in China 46 percent last year to 13.6 million, helping it supplant the U.S. as the world’s largest auto market.

Volvo sold 334,808 cars worldwide last year, down 11 percent from 2008 and 27 percent from a 2007 peak of about 460,000, according to the company. U.S. sales have climbed for 9 months in a row and rose 40 percent this year through February.

The Swedish carmaker has about 20,000 employees worldwide, including almost 14,000 in Sweden. It has about 2,500 dealers in 100 countries. The unit’s pretax loss narrowed to $934 million last year from $1.7 billion in 2008, Ford said on Jan. 28. Volvo’s last annual pretax profit was $377 million in 2005.

Ford ended three years of losses with net income of $2.7 billion in 2009 and was the only major U.S. automaker to avoid bankruptcy. Ford paid $6.5 billion for Volvo in 1999.

Citigroup Inc. and JPMorgan Chase & Co. are advising Ford on the deal. N.M. Rothschild & Sons Ltd. is advising Geely.

Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=acIQ2SN3oe.Q

McDonald’s Targets Asia’s Beef Eaters With 20% Spending Boost

Source: Bloomberg By Wing-Gar Cheng

McDonald’s Corp., the world’s largest restaurant company, may boost investment in Asia by at least 20 percent this year as consumer spending recovers, moving into “beef eater” markets such as South Korea.

The seller of Big Macs will invest $415 million in Asia, the Middle East and Africa this year to add 520 restaurants, Tim Fenton, head of the chain’s regional business, said in an interview in Hong Kong. Spending in the region was about $350 million in 2009, he said.

“McDonald’s is really the only company with the best portfolio of markets around the world,” Joel Silverstein, president of Hong Kong-based restaurant consultant East West Hospitality Group Ltd., said in phone interview. “In Asia, they are still growing.”

Oak Brook, Illinois-based McDonald’s last year generated 19 percent of its sales from the region, an increase from 18 percent in 2008 and 15.8 percent in 2007. Sales from the Asia Pacific, Middle East and Africa increased 2.5 percent in 2009, compared with declines in the U.S. and Europe, as rising incomes in China drove consumer spending and diners in Japan and developed countries chose less-expensive meals.

McDonald’s may “aggressively start expansion” in South Korea, where comparable sales growth has been “double-digit” in the past four years, Fenton said in the interview, which took place March 26. The company operates 227 outlets in the country.

South Korea Investment

“Korea is a big market for us: you’ve got 48 million people, a $30,000 average household income and beef eaters,” Fenton said. McDonald’s plans to invest $15 million in the country this year, and twice that in 2011, he said.

McDonald’s rose 0.5 percent to $67.26 in New York trading on March 26, boosting its gain this year to 7.7 percent.

“Asia Pac is growing faster than any other area of the world, faster than the U.S., faster than Europe,” said Fenton. “China is a numbers game too, look at the population, the evolution and the growth of the middle class.”

The region’s same-store or comparable sales, which strip out the effects of newly opened outlets, rose 10.5 percent in February, compared with 4.8 percent globally, Fenton said, declining to give a breakdown by country. China is the fastest- growing market globally for McDonald’s, he said.

The restaurant chain operates 8,482 restaurants in the region. This year, the company plans to add as many as 175 in China, 100 in Japan, 65 in the Middle East, 40 in Australia, 17 in Malaysia and 14 in Korea and the rest in India and Africa, he said in the interview, which took place March 26.

China Stores

McDonald’s will add 200 outlets, the biggest addition on a global scale, in China next year, and aims to have 2,000 in the nation by 2015, Fenton said. The company, which opened its first restaurant in Shenzhen in 1990, now has 1,146 stores in the world’s third-largest economy.

“It took us 19 years to get to 1,000 and it’ll take us six more years to get to 2,000,” Fenton said. In pursuit of this goal, it’s accelerating its franchising program to add to the six independently owned restaurants it now has there, he said.

In China, the chain is “recruiting and building up our inventory” of franchisees, Fenton said, declining to specify the scale of the expansion. Still, McDonald’s may have trouble finding investors for its franchises, Silverstein said.

“China is not a proven market where franchising can make any sense yet,” Silverstein said. “If they were making huge returns on investment, they wouldn’t need to franchise.”

Spicier Sauces

McDonald’s will be “doing a little bit more” this year to will diversify its menu to appeal more to local palates by adding spicier sauces in its burgers, Fenton said. The core offerings remain unchanged, unlike the restaurants of KFC Corp., owned by Yum! Brands Inc., which serve congee and egg tarts.

“We’re never going to get away from the core because people come to the Golden Arches for familiarity,” he said. “Our customers have told us to be McDonald’s.”

The cost of opening new stores has been steady even as property prices rebound in some parts of the region, Fenton said. McDonald’s has been able to take over some locations abandoned by retailers, he said.

“As a tenant, landlords like us: we pay on time, we’re a cash business, we’re usually in it for 20 years with options to extend,” Fenton said. “We’re good tenants.”

Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=aSMAJWThHxHs

China Construction Bank Teams With Microsoft For Online Banking Services

Source: China Tech News

China Construction Bank and Microsoft China have signed a strategic cooperation memorandum and the two parties will jointly establish a new generation of online banking based on Microsoft's technology platform to improve the security and convenience of online banking applications.

Under the memorandum, China Construction Bank and Microsoft China will work together to research the next-generation USB Key technology to enable online bank users to install the software and devices without any click. They will also enhance cooperation in the security area and reinforce protection of online banking clients with Microsoft's latest security technologies.

In addition, according to local media, based on Microsoft's Internet Explorer browser, the two parties will jointly develop a customized browser for the online bank of China Construction Bank. The new browser will feature optimized certificate management, deployment of browser security control, and multi-language abilities.

China Construction Bank has maintained a close relationship with Microsoft and it claims to be the first Chinese business bank that fully supports Microsoft's Windows 7 operating system. With the signing of the memorandum, the two parties will set up a long-term communication system to help China Construction Bank improve its development capacity of products related to the technologies and platforms of Microsoft.

Source article: http://www.chinatechnews.com/2010/03/29/11810-china-construction-bank-teams-with-microsoft-for-online-banking-services

Verdict for Rio Tinto trial handed down

Source: Xinhua

Four defendants in the Rio Tinto case, including Australian national Stern Hu, got jail terms from seven to 14 years for bribery and stealing commercial secrets, court sources said Monday.

The verdict was handed down Monday afternoon by the Shanghai No.1 Intermediate People's Court.

According to the court, Stern Hu, born in 1956, was sentenced to 10 years in jail for bribery and stealing commercial secrets, with his assets confiscated and a fine of 1 million yuan (146,413 U.S. dollars) imposed.

Wang Yong, born in 1969, got a jail term of 14 years, with his assets confiscated and a fine of 5.2 million yuan imposed.

Ge Minqiang, born in 1975, was sentenced to eight years in jail, with his assets confiscated and a fine of 800,000 yuan imposed.

Liu Caikui, born in 1978, received a jail term of seven years, with his assets confiscated and a fine of 700,000 yuan imposed.

All of their illegal earnings should be recovered, according to the court.

The court found that Hu took bribes of 6.46 million yuan, and Wang took bribes of 75.14 million yuan. Bribes taken by Ge were 6.94 million yuan, and those by Liu, 3.78 million yuan.

The court verdict says that from 2003 to 2009, the four used improper means to acquire commercial secrets from Chinese steel companies. The information they obtained was used as a bargaining chip to jack up the price that China paid for its iron ore imports.

According to the court, last year 20-plus Chinese steelmakers paid an extra advance totaling 1.02 billion yuan for their iron ore imports because of the crimes committed by the four.

During the investigation into the case, Hu, Ge and Liu confessed the details about the bribes.

The trial, from March 22 to 24, involved two parts. One was a closed-door hearing for the charges of stealing commercial secrets, and the other, an open-door, public hearing for the bribery charges, which was attended by immediate families of the defendants, local legislators and political advisors, staff with the Australian consulate-general in Shanghai and journalists.

Source article: http://www.china.org.cn/business/2010-03/29/content_19707001.htm

Milestone merger reshapes Suzuki

Source: By Yu Qiao (China Daily)

Joint venture partners will become a single entity

Japanese automaker Suzuki Motor Corp's two joint ventures in China are expected to soon be combined into a single entity after a milestone merger between its Chinese partners.

A top executive from State-owned Chang'an Motor Corp, China's third-biggest auto group, said "we are studying" the amalgamation between Chang'an Suzuki and Changhe Automobile Co Ltd. "We will make it soon."

Chang'an Suzuki operates in Chongqing municipality in the nation' southwest, while Changhe Suzuki has its production facilities in East China's Jiangxi province.

In November, Chang'an signed an agreement with Aviation Industry Corp of China (AVIC), a State-owned aircraft maker, to take over its main auto assets including Changhe, the joint venture Changhe Suzuki and others.

In return, AVIC received a 23 percent stake in the enlarged Chang'an from the carmaker's parent China Weaponry Equipment. The deal represented the biggest merger in China's auto industry.

In preparation for merger of the two joint ventures, Chang'an reshuffled the top management at Changhe.

In January, Zou Wenchao, former vice-president of Chang'an and executive vice-president of the group's joint venture with Ford Motor Co, was named chairman of Changhe.

Li Li, also former vice-president of Chang'an, was designated general manager of Changhe.

A top official from Suzuki China recently announced that the Japanese automaker supports the merger of Chang'an Suzuki and Changhe Suzuki. The Japanese company expects to combine sales networks as the first step.

Chang'an Suzuki, formed in 1993 with a registered capital of $190 million, produces Suzuki's SX4, Swift and Alto micro and subcompact cars. It now has an annual production capacity of 200,000 vehicles and 200,000 engines. It has more than 3,000 employees.

Sales by the joint venture rose by 21 percent last year to 150,069 vehicles. It aims to move 180,000 units this year, according to data from market research firm JD Power.

Changhe Suzuki was established in 1995 with a registered capital of $251.8 million. It has the capacity to manufacture 200,000 micro buses and cars as well as 150,000 engines.

It has almost 2,000 employees. Its sales grew by 26 percent to 89,968 units last year.

Source article: http://www.chinadaily.com.cn/bizchina/2010-03/29/content_9655056.htm