Have You Heard...

• Coke Seeks Organic China Growth
• Chongqing Brewery Says European Beer Makers Made Bids
• Taiwan Won’t Ask U.S. to Fight Against China, Ma Tells CNN
• Expo Offers Shanghai a Turn in the Spotlight
• China’s Carmakers Court Japanese Engineers to Boost Exports
• Wal-mart looks for talent on campuses
• Bayer has the remedy for China

Coke Seeks Organic China Growth

Source: Wall Street Journal by Andrew Browne

SHANGHAI—Coca-Cola Co., rebuffed by Chinese regulators in its bid to buy one of the country's leading juice makers, is now "totally focused" on organic growth in China and is on track to achieve its investment targets, said Chief Executive Muhtar Kent in an interview Friday.

Mr. Kent shrugged off the decision last year by regulators to reject on antitrust grounds the company's $2.4 billion bid to acquire China Huiyuan Juice Group Ltd.

"We are the No. 1 juice company with or without Huiyuan," he said. Coke says that it has now climbed past Huiyuan to become the largest juice company in China in volume terms, with its Minute Maid Pulpy brand taking off among consumers.

In China, "we are totally focused on organic growth," he said.

Coke's high-profile setback was seen as an especially bitter blow considering it had spent millions of dollars on sponsorship of the 2008 Beijing Olympics, including the torch relay. Yet that has not deterred Coke from spending heavily on the Shanghai Expo, which opens on Friday. Coke is one of a small number of foreign corporations to erect its own pavilion at Shanghai's showcase event.

Asked how Coke measured its business returns from its Olympic outlays, Mr. Kent said: "The only way to measure it is long term."

The decision to block Coke's purchase of Huiyuan sent a chill through the foreign investment community since it suggested that authorities were now sensitive about any kind of foreign acquisition, not just those in areas regarded as strategic to the economy.

Some U.S. businesses in China are growing worried about what they perceive as rising market protectionism. Mr. Kent acknowledged that "there is some concern" about the investment climate in China, but he argued for a conciliatory approach, saying: "We need dialogue —and to understand why things are the way they are."

Last year, Atlanta-based Coke said it would invest $2 billion in China over three years—as much as the company had pumped into China over the previous 30 years. That plan is now "fully on target, if not ahead of target," Mr. Kent said.

Last year, Coke opened three bottling plants in China, its third-largest market after the U.S. and Mexico in terms of volume sales, and plans to open another two this year. Also last year, Coke opened a $90 million research and development center in Shanghai.

Mr. Kent said that Coke's business in China has been growing at double digits over the past five years. "China offers the greatest opportunity for us in the world," he said. The company does not break out its China revenue or give any details about its profit margins.

With U.S. sales still declining, Coke's business has been increasingly driven by emerging markets like China. But Mr. Kent said he believes consumer sentiment in the U.S. is improving. "The doomsday scenario is much further away from the brains of the U.S. consumer than 12 months ago," he said.

Source article: http://online.wsj.com/article/SB10001424052748703871904575215720901832434.html

Chongqing Brewery Says European Beer Makers Made Bids

Source: Bloomberg By Wing-Gar Cheng

April 30 (Bloomberg) -- Carlsberg A/S, Anheuser-Busch InBev NV and a Chinese venture of SABMiller Plc submitted bids to buy a 12.25 percent stake in Chongqing Brewery Co., the beer maker controlled by the government of China’s largest municipality.

Local-government-owned Chongqing Beer Group, which holds 32.25 percent of the Shanghai-listed brewer, wants to sell 59.29 million shares in the unit as part of a national government plan to shed listed assets, according to an exchange filing today. The sale is worth 1.87 billion yuan ($274 million), based on current prices. Carlsberg, based in Copenhagen, already owns 17.46 percent of the brewery.

Buying a stake in Chongqing Brewery would allow bidders to gain a share in the south-central Chinese beer market. Chongqing is the nation’s biggest municipality with 28.6 million residents, according to local government data.

“Getting the stake would help the international beermakers gain market share in the western parts of China,” Huang Shichuan, an analyst at Southwest Securities Co. in Chongqing said in a phone interview today. He recommends buying the stock. “Beer consumption is rising and it’s a good chance for the international beer makers to introduce new products to consumers,” he said.

Chongqing Brewery fell 2.7 percent to close 31.57 yuan in Shanghai today. The stock has risen 34 percent this year, compared with a 12.4 percent decline on the Shanghai Composite Index.

‘Continuing Consolidation’

“As the leading brewer in China, SABMiller’s associate CR Snow Breweries is an active participant in the continuing consolidation of the market,” Nigel Fairbrass, spokesman for the London-based drinks maker, said by email. Fairbrass declined to comment on the details of SABMiller’s interest in Chongqing.

China Resources Snow Breweries is SABMiller’s Chinese venture with China Resources Enterprise Ltd.

The brewer on April 26 posted net income that rose 5.3 percent to 34.4 million yuan ($5 million) in the first quarter as sales gained 2.4 percent to 453.7 million yuan.

Chongqing Brewery sold 1 million kiloliters (264 million gallons) of beer last year, or 2.4 percent of the total 42.4 million kiloliters sold in China, according to its 2009 earnings statement.

China Beer Consumption

The brewer aims to sell 1.12 million kiloliters of beer this year, according to its annual earnings statement. Per- capita consumption of the alcoholic drink in China was 30 liters in 2009, exceeding the global average of 27 liters, according to Seema International Ltd.

“The company will seriously consider the bids and the preferred choice will be selected based on how well it can build Chongqing Brewery into a bigger and stronger company,” today’s statement on the stake sale said.

Carlsberg would be the biggest shareholder in the listed company should it win the bid, according to data compiled by Bloomberg.

Carlsberg’s spokesman Jens Bekke confirmed the bid. “We don’t know exactly how long the process will take from here,” Bekke said.

Leuven, Belgium-based Anheuser-Bush InBev’s spokeswoman Natacha Schepkens declined to comment.

Chongqing’s population figures include city and rural residents living under the local administration. Counting only urban dwellers, Shanghai is China’s largest city.

Sourcea article: http://www.bloomberg.com/apps/news?pid=20601089&sid=aZPdveojqVg0

Taiwan Won’t Ask U.S. to Fight Against China, Ma Tells CNN

Source: Bloomberg By Tim Culpan

April 30 (Bloomberg) -- The U.S. should keep selling weapons to Taiwan to maintain confidence within Asia, Taiwan President Ma Ying-jeou said in an interview with CNN.

“We will purchase arms from the United States, but we’ll never ask America to fight for Taiwan,” Ma, 59, said in an interview broadcast by the U.S. network today. “If the U.S. reduced arms sales to Taiwan below the current level, it will reduce confidence in this part of the world.”

Ma, who returned the Kuomintang to power in 2008 eight years after its five-decade reign was ended, seeks closer ties with China to boost Taiwan’s economy and ease cross-strait military and political tension. The U.S. Defense Department said in January it plans to sell a $6.4 billion package of missiles, helicopters and ships to the island, part of a long-standing agreement to help it defend itself.

China considers independently-governed Taiwan as part of its territory and has threatened to invade if the government there makes moves toward formal independence. China’s military has more than 1,100 missiles pointed at Taiwan, according to the Pentagon.

The U.S. administration is legally required to provide armaments to Taiwan for its self-defense under the 1979 Taiwan Relations Act. China halted planned military exchanges with the U.S. in retaliation for the January Pentagon announcement.

Moves toward closer economic integration with China have helped relations between Taiwan, China and the U.S. become “the best in 60 years,” Ma said in the interview.

Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=a69pb0D_lSTI

Expo Offers Shanghai a Turn in the Spotlight

Source: New York Times By David Barboza

SHANGHAI — The World’s Fair may have lost the luster it brought decades ago to world capitals like Paris. But China has dusted off the concept in an attempt to give its second city, Shanghai, the same coming-out party that the 2008 Summer Olympic Games were for Beijing.

China has spent $45 billion — even more than it devoted to remake Beijing for the Olympics — to mount an elaborate World Expo, inviting 189 countries to showcase a polished, vibrant Shanghai that it envisions as a financial capital for the region, even the world.

The Shanghai event began Friday evening with a highly anticipated opening ceremony and fireworks display attended by China’s president, Hu Jintao, and dozens of other world leaders and dignitaries.

“Only we can hold such an Expo,” Fang Xinghai, director general of the Shanghai Financial Services Office, said before the Expo began. “There’s a bit of national pride in it. We want the world to come and admire our success.”

Preparations have been nothing short of monumental. After winning the bid in 2002 to host the event, Shanghai began clearing about two square miles along the Huangpu River. That involved moving 18,000 families and 270 factories, including the hulking Jiang Nan Shipyard, which employs 10,000 workers.

Today, the Expo site is crowded with scores of national pavilions, sculpture gardens, shops and a $270 million sports arena and performing arts center that is shaped like a flying saucer.

The $61 million United States pavilion is planning to show a Hollywood-produced film about the environment. The French pavilion is displaying seven “national treasures,” including works by Manet and Van Gogh.

The porcupinelike British pavilion — constructed of 60,000 transparent rods and called the “Seed Cathedral” — has already attracted widespread attention. And Denmark’s pavilion is showing off the country’s best-known national emblem: a bronze statue of the “Little Mermaid.”

But Expo preparations have not been without embarrassing moments.

Journalists have questioned whether the ubiquitous Expo mascot — a cartoonish figure called Haibao — is a copy of Gumby. And last week, when 200,000 people showed up on the first day of an Expo trial run, angry crowds pelted some pavilions with rocks, overran barriers and broke into fistfights after complaining of long lines, shoving and food shortages. (The fiasco was largely censored in the Chinese media.)

Expo organizers said adjustments were made, and visitors were more civil during the final days of the four-day “soft opening,” which attracted nearly one million visitors.

Now, with 25 million tickets sold, city officials are projecting that more than 70 million people could attend the 184-day event, which would shatter a record set in 1970, when 64 million people visited the Expo in Osaka, Japan.

To prepare for the onslaught, Shanghai has trained more than 1.7 million volunteers and adopted Olympic-level security measures, adding metal detectors to subway entrances and screening inbound cars. China has even temporarily closed borders as far away as its western one with Kazakhstan.

To prepare for the onslaught, Shanghai has trained more than 1.7 million volunteers and adopted Olympic-level security measures, adding metal detectors to subway entrances and screening inbound cars. China has even temporarily closed borders as far away as its western one with Kazakhstan.

Last week, the police here detained 6,000 people they said were involved in street crimes like theft and prostitution during a 12-day crackdown to prepare for the Expo. But human rights groups say some activists have been detained, as was the case during the Olympics.

The city has also introduced a series of sometimes comical etiquette campaigns to instruct residents to be welcoming. Among the pastimes discouraged is walking in public dressed in colorful cotton pajamas — something of a Shanghai tradition.

Shanghai’s infrastructure has been upgraded over the past several years with new roads, bridges, tunnels and airport terminals. Three weeks ago, a new 18.6-mile subway line opened in the western part of the city — the 11th since the city’s subway system first opened in 1995.

“After we won the right to host the Expo in 2002, we planned to construct 970 kilometers of underground track in the future and at least 400 kilometers by 2020,” said Zheng Shiling, who teaches at Tongji University in Shanghai. “But today, we already have 410 kilometers of underground track. We’ve fulfilled our plan 10 years early.”

Chief among the efforts has been a $700 million renovation of the riverfront promenade along the historic Bund and the refurbishment of the Art Deco Peace Hotel, which is expected to reopen soon.

Jeffrey N. Wasserstrom, a professor of history at the University of California, Irvine, and the author of “Global Shanghai, 1850-2010,” said the Expo would complete the “big event two-step” — the Olympics and the Expo — that many rising powers had carried out. But it also signals Shanghai’s rebirth.

“This is a city that sees itself reclaiming a status it previously had,” he said. “It was one of the hottest tourist destinations in the world in the 1930s. Dewey, Shaw and Chaplin came. It was a place you had to see.”

Many residents, though, complain about the city’s endless efforts to repave roads and paint the underbellies of bridges, the endless Expo promotions and the accelerated pace of city block demolitions ahead of the Expo.

Some say that what the city has gained in modernization it has lost in urban character — that many of the city’s old lane houses are being destroyed.

But city preservation officials have stressed that Shanghai simply has too many people to accommodate, and thus needs more skyscrapers and infrastructure.

When the Expo ends in October, most of the pavilions will be demolished and much of the site will be turned into office and retail space.

Ben Wood, an American architect who has worked here for years, said the plan, which did away with polluting factories, made sense.

“The Expo won’t make architectural history,” he said, a reference to the architectural gems of the Beijing Olympics. “But this is a more sustainable approach. The Water Cube is being eaten alive by acid rain. It will be a Kmart someday.”

Source article: http://www.nytimes.com/2010/04/30/world/asia/30shanghai.html?ref=asia

China’s Carmakers Court Japanese Engineers to Boost Exports

Source: Bloomberg By Makiko Kitamura and Yuki Hagiwara

April 30 (Bloomberg) -- Chinese vehicle makers, seeking to become successful exporters, are importing engineers from Japan.

Anhui Jianghuai Automobile Co. and Changan Automobile Group Co. aim to poach the talent nurtured by Japan’s top automakers. Making less-polluting cars is key to meeting a government goal of boosting exports of vehicles and parts to $85 billion by 2015 from at least $19 billion last year and the equivalent of 10 percent of the global auto trade by 2020.

“Emissions regulations are especially tough in Europe,” said Wang Wenjun, who heads a Tokyo recruiting and research center for Jianghuai Auto, the nation’s biggest exporter of light trucks. “What we really need is people to help us with environmental technologies.”

Hiromasa Torii was one of those people. Torii, a 65-year- old retired Japanese auto engineer, worked in eastern China’s Anhui province for three years through late 2009. He helped Chinese engineers select materials and experiment with different constructions to lighten vehicle weight and was paid as much as a million yen ($10,700) a month for his expertise.

“Until four or five years ago, Chinese carmakers were just known for their ability to copy foreign brands’ designs, but things have changed,” Torii said in a phone interview. “These days, they want the most advanced technology.”

Recruiting

Since Jianghuai Auto began courting Japanese engineers in 2006, “a few dozen” have been sent to China, said Wang. While Jianghuai Auto also employs Italians and Germans at its headquarters, about 80 percent of its foreign engineers are Japanese, he said.

Changan has a research center in Yokohama and held two recruiting rounds in Japan last year, said Zhang Baojun, a company spokesman. The carmaker has seven Japanese engineers working in China, he said.

Changan, based in Chongqing, central China, also plans to open centers in the U.K. and Germany “soon,” Zhang said.

“If they want to improve the exterior design, they go to the Italians,” said Akira Ami, president of Global Business Support Marketing, a consulting company that has been sending Japanese engineers to China since 2002. “But for the guts of the car, they are looking to the Japanese.”

Emissions

The European Union has a target of cutting greenhouse-gas emissions 20 percent by the end of this decade from 1990 levels and is phasing in caps on carbon dioxide from cars from 2012. California will require 3 percent of vehicles sold over a three- year period starting with 2012 models to be so-called zero- emission vehicles.

“I keep getting asked if I know anybody who’s an expert on rare metals,” said Kiyoshi Kondo, 73, a former engineer at truckmaker Isuzu Motor Ltd. who advised Chongqing Changan Automobile Co. until 2008. Rare metals are used in catalytic converters that help turn exhaust into less polluting compounds.

The trend mirrors growing investment in developing less polluting vehicles. Chongqing Changan is building a plant in Chongqing that will make as many as 600,000 low-emission and hybrid cars from 2012, according to the carmaker.

BYD Co., the Chinese automaker backed by Warren Buffett, began selling its F3DM plug-in hybrid car to individual customers in the city of Shenzhen on March 29 and has said it will introduce electric cars in the U.S. this year and in Europe next year.

Improved Quality

“The quality of cars made by Chinese makers has vastly improved,” Toyota Executive Vice President Takeshi Uchiyamada said at the Beijing Auto Show last week. “The speed of that progress is very fast.”

Competition for domestic sales of hybrids and electric vehicles may also heat up as China’s government is expected to announce subsidies for less-polluting cars this year.

General Motors Co. said April 12 it plans to sell its Volt plug-in car in China next year, and Toyota on the same day said it started selling a hybrid version of the Camry sedan in the country.

Chinese carmakers’ efforts to learn from Japanese engineers have caused the government to express concern about leakage of knowledge, said Watanabe of the Japan-China Automotive Association.

The engineers are often asked to help reverse-engineer Japanese cars to make it easier to copy their designs, said Ami, the consultant. Others have been asked to hand over technology secrets of their former employees, he said.

Kondo, the former Isuzu engineer, said he had no qualms about advising Chinese carmakers.

“One day, they are going to catch up with us,” he said. “There’s no point in me standing in their way.”

He compared the situation to his own experience 40 years ago, when he traveled to Detroit to learn the latest techniques in vehicle testing from Ford Motor Co., taking the knowledge back to Japan.

“China now is like Japan 30 to 40 years ago,” he said. “If my experience can be applied, I’d like to help out.”

Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=aED2ScXF.gJE

Wal-mart looks for talent on campuses

Source: By Hu Yang (chinadaily.com.cn)

Wal-mart China on Thursday officially launched its 2010-2011 "Management Trainee Program" targeting campus students. The retailer plans to recruit more than 2,000 talents from university campuses to join its management team in the next five years.

Wal-mart said this year it will hold recruitment fairs in more than 30 universities around China, offering over 300 job and internship opportunities.

Tsinghua University, the venue of Thursday's launching ceremony, was also the first stop of this recruitment program. Wal-mart CEO Ed Chan and Yang Bin, party secretary of Tsinghua's School of Economics and Management, attended the ceremony.

This year's program is meant to attract more high-level talent as a new subprogram is introduced for the first time. The subprogram will select three talented MBA student candidates and offer them internships in Wal-mart's American headquarters, preparing them to become future senior executives in Wal-mart China.

CEO Ed Chan said that Wal-mart is attaching great importance to develop local talent, as 99 percent of Wal-mart China's management force is indigenously Chinese. He also added that women account for 40 percent of the company's management.

Clara Wong, vice president of Wal-mart China for HR and administration said universities are an important channel for Wal-mart China to absorb talent. She also said she believes the retailer's campus recruitment can help to relieve university students' pressure to find jobs after graduating.

Wal-mart China introduced its management trainee program in 1998, and thus far has recruited 1,605 trainees from nearly 270 universities and colleges. It has been awarded the "best employer for university students" six years in a row by ChinaHR.com, a leading human resource recruitment service provider in China.

Source article: http://www.chinadaily.com.cn/bizchina/2010-04/30/content_9798317.htm

Bayer has the remedy for China

Source: By Karen Yip (China Daily)

BEIJING - Bayer Schering Pharma China, the pharmaceutical subsidiary of Germany-based Bayer Schering Pharma AG, expects to see strong sales growth this year on demand from Chinese patients and new product launches.

Chris Lee, head of Bayer Schering Pharma China, said an increase in research and development (R&D) activities to introduce new treatment options would cement the company's foundations in China. Bayer Schering has allocated more than 100 million euros over the next five years for research and development activities.

"We are excited to see above market growth in China for Bayer Schering Pharma. We hope to grow our business faster than the market for many years to come," he said.

The Chinese pharmaceutical market is expected to grow at a compounded annual growth rate of 23 percent from 2003 to 2012. By 2013, China is projected to be the third largest pharmaceutical market in the world.

An aging population, unhealthy diet, smoking and obesity will drive demand for pharmaceutical products as these factors are also the main cause of cancer. China's population aged 50 and over will reach about 500 million people by 2020, according to a report by consulting firm McKinsey.

An aging population, unhealthy diet, smoking and obesity will drive demand for pharmaceutical products as these factors are also the main cause of cancer. China's population aged 50 and over will reach about 500 million people by 2020, according to a report by consulting firm McKinsey.

The fastest growing Bayer Schering Pharma products include Glucobay, a diabeties drug, which showed 28 percent sales growth last year to 143 million euros. Another strong performer was high-blood pressure treatment Adalat, which soared 39 percent to 101 million euros in 2009 sales.

The healthcare conglomerate is planning to introduce new products in the area of speciality medicine, women's healthcare, diagnostic imaging and diabetes care in China this year.

To provide patients with earlier access to innovative medicines, Bayer Schering Pharma opened a R&D center in Beijing last year. The center will allow Bayer Schering Pharma to better supervise pre-clinical and clinical development in the region as it taps into an integrated network of science researchers and helps include more Chinese patients in the early phases of clinical trials.

The center also aims to accelerate drug approval timelines in China and enables the company to stay in tune with the needs of local regulatory authorities.

Bayer Schering Pharma reported its sales grew by 28 percent to 530 million euros in 2009.

Source article: http://www.chinadaily.com.cn/bizchina/2010-04/29/content_9792845.htm

Have You Heard...

• China Amends Law to Force Internet Companies to Help in Probes
• French President Urges China to Join Move on Sanctions
• Starbucks to take China by storm with instant coffee
• China Slaps Tariffs on U.S. Chicken
• Cosco Pacific to Pay Maersk $520 Million for China Port Stake

China Amends Law to Force Internet Companies to Help in Probes

Source: Bloomberg

April 29 (Bloomberg) -- China passed amendments to its state secrets law that requires the nation’s telecommunications carriers and internet companies to assist authorities with investigations of leaks.

Transmission of state secrets over public information networks must be stopped immediately once discovered, according to a copy of the amendment distributed at a press briefing in Beijing today. Network operators must also keep records of transmission and report possible leaks to authorities.

The new requirements may be an additional challenge to foreign technology companies in China such as Yahoo! Inc., Microsoft Corp. and Cisco Systems Inc., which have been criticized by U.S. lawmakers who say they help the Chinese government censor information. Google Inc. shut its China search site in March after saying it was no longer willing to censor content as required by Chinese law.

“Foreign companies may have some difficulties with these requirements on an ethics front,” said Edward Yu, chief executive officer of research company Analysys International. “It won’t have much of an impact on Chinese companies and users because it’s something they don’t have a choice about it.”

Changes to the law are aimed at making people, companies and organizations more responsible for protecting state secrets, according to the amendments that were passed by Chinese legislators today.

State-Owned Carriers

All of China’s telecommunications carriers are state-owned. China Mobile Ltd., the nation’s biggest wireless carrier with 539 million users, has more subscribers than the combined populations of the U.S. and Japan. China had 384 million Web users at the end of 2009, the most of any nation, according to the China Internet Network Information Center.

The amendments passed today also require network operators to keep records of transmissions and report possible leaks of state secrets to authorities. They must also delete information from networks upon government request.

“In my opinion, it is likely that we will witness an actual tightening of the state’s grip on information,” Flora Sapio, a lecturer on Chinese legal institutions at the University of Naples L’Orientale, wrote in an e-mail. “Given the broad definition of state secrets, another consequence may be a restriction of privacy rights in the name of security.”

The amendment’s definition state secrets includes items that damage the country in fields ranging from defense and diplomacy to “national economic and development” projects and technology. The government also has the power to label anything else a state secret, it said.

State Secrets

“State secrets without protection are not allowed to be spread on the public internet,” Du Yongsheng, deputy director of the National Administration for Protection of State Secrets, said at today’s briefing in Beijing. “This is a universal regulation all over the world.”

Google began redirecting traffic from its Chinese home page to its unfiltered Hong Kong site last month, after saying in January that the company would stop censoring search results. The Mountain View, California-based company opened its Google.cn Web site in China in 2006, agreeing to exclude links to content banned by the government.

China censors pornographic, gambling and political content by shutting locally based sites and blocking access to foreign ones such including those of Facebook Inc. and Google’s Youtube. The government control content in traditional media through state ownership of all newspapers, television and radio stations.

Former Yahoo Chief Executive Officer Jerry Yang apologized to the mother of an imprisoned Chinese dissident during a 2007 Congressional hearing looking into the company’s decision to give Chinese officials the man’s e-mail records. Executives from Yahoo, Google, Microsoft and Cisco were called to testify in 2006 before U.S. lawmakers on their activities in China.

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

French President Urges China to Join Move on Sanctions

Source: New York Times by Edward Wong

BEIJING — President Nicolas Sarkozy of France told President Hu Jintao of China that nations would have to impose new sanctions on Iran if it refuses to curb its nuclear program, official Chinese news organizations reported on Thursday.

Mr. Sarkozy’s efforts increased the pressure from a vigorous push by President Obama to get China and Russia to support a new round of sanctions.

“China hopes to use dialogue,” Mr. Sarkozy told Mr. Hu Wednesday during a visit to Beijing, according to China Daily, an official English-language newspaper. “France completely understands China, and we are willing to discuss this problem together at an appropriate time.”

Mr. Sarkozy added, “If dialogue does not work, then we can only use sanctions.”

France has joined with the United States and Britain in pushing for a new package of economic sanctions from the United Nations. Those countries accuse Iran of using its nuclear program to try to develop weapons. Iran has said it is interested in pursuing nuclear power, not arms.

Mr. Sarkozy’s trip to Beijing comes at a critical juncture in the campaign Mr. Obama is leading to win support for new sanctions. Earlier this month, Mr. Hu told Mr. Obama in Washington that China would take part in negotiations over a sanctions package, but made no specific commitments to support the kind of sanctions that the United States favors.

China, which imports nearly 12 percent of its oil from Iran, has long said that dialogue is the proper way to deal with that country in part because it is concerned that Iran would cut off oil shipments to China if Beijing were to support sanctions.

Iran’s nuclear ambitions were a priority in the talks between Mr. Sarkozy and Mr. Hu, but Mr. Hu did not comment publicly on the issue, China Daily reported.

The two leaders also spoke about global monetary reform, but Mr. Sarkozy did not press Mr. Hu to revalue the Chinese currency, the renminbi, according to the English-language edition of Global Times, another official newspaper. The Obama administration has said China is keeping the renminbi far below its actual value to give Chinese manufacturers an advantage in the global market. Chinese leaders have given no signals that they intend to revalue the currency.

“France’s belief is that it is totally unproductive to make accusations against one another,” Mr. Sarkozy said, according to Global Times. “It is far more intelligent to prepare the necessary evolution of the monetary system in the 21st century.”

Mr. Sarkozy was making his first visit to China since relations between France and China soured in 2008 over the issue of Tibet. The Chinese government and many Chinese citizens became incensed at France when pro-Tibet protesters marred the Olympic torch relay as the torch passed through Paris. Mr. Sarkozy agreed later to meet with the Dalai Lama, the Tibetan spiritual leader whom China labels a separatist and whom it blames for a widespread Tibetan uprising that took place in March 2008.

Mr. Sarkozy and his wife, Carla Bruni-Sarkozy, stopped in the city of Xi’an on Wednesday to see the terra cotta warriors before arriving in Beijing. Mr. Sarkozy was the first head of state to arrive in China to attend the opening of the World Expo on Friday in Shanghai.

Source article: http://www.nytimes.com/2010/04/30/world/asia/30beijing.html?ref=asia

Starbucks to take China by storm with instant coffee

Source: By Yu Tianyu (China Daily)

BEIJING: Global coffee chain Starbucks Corp is planning to launch instant coffee products in China, a region it believes will be its largest market outside the North America, surpassing Japan.

Wang Jinlong, chairman of Starbucks in China, told China Daily that the company is presently working on market surveys and customer preferences for such products.

Starbucks Chief Executive Officer Howard Schultz said the company expects to sell more than $1 billion of its instant coffee, called Via Coffee Essence, worldwide after it started offering the powdered mix in Japan, the world's biggest market for instant coffee since early this month.

The product is already available in the United States, Canada and the United Kingdom.

"During the last five decades, there have been very few new products, but great progress has been made in the world's instant coffee market," Wang said.

"Starbucks has taken over 20 years to revolutionize its offerings and we are offering high-quality instant coffee that customers can enjoy anytime and anywhere," he added.

Instant coffee accounts for just 2 to 3 percent of coffee consumption in the US, he said. But, the company is convinced of the huge potential in China and expects to launch the products soon.

According to market research firm Euromonitor International, coffee sales in China could reach $3.6 billion by 2011 from $2.4 billion in 2006.

Instant coffee currently makes up the biggest chunk of China's coffee industry with Nestle's Nescaf and Kraft's Maxwell House the major players in the market.

Starbucks operates more than 16,000 outlets in over 50 countries. Since entering the mainland in 1999, it has 376 outlets in 26 cities, mainly in coastal regions.

Wang said the company would focus more on inland cities in the future.

The company expects second- and third-tier cities to become significant markets after its expansion.

It has opened 14 outlets in Chengdu and 10 outlets in Chongqing.

Meanwhile, the company will look to further expand its presence in first-tier cities like Beijing, Shanghai and Shenzhen.

Schultz said earlier this month that the company expects to accelerate its growth in China and open thousands of new stores in the country over the next 10 years.

Wang said the company would integrate more Chinese elements into its product line-up as it gears up to promote its business in the country.

Starbucks launched a new line-up of locally relevant "black" beverages and food in China on Monday.

Prominent among these are the Black Sesame Green Tea and the Frappuccino blended creme. The new product tastes a bit like Chinese traditional sesame paste mixed with the aroma of green tea.

Shantel Wong, vice-president of marketing, category and communications of Starbucks in China, said the product gets its inspiration from black sesame, a popular ingredient used in Chinese dishes and desserts.

The new line-up also includes black sesame seed croissants and magic black bean muffins.

Source article: http://www.chinadaily.com.cn/bizchina/2010-04/29/content_9791093.htm

China Slaps Tariffs on U.S. Chicken

Source: Wall Street Journal by Aaron Back

BEIJING -- China said Wednesday it will impose a second set of tariffs on U.S. chicken products in less than three months, this time on the result of an investigation that found that subsidies had created an unfair advantage for U.S. chicken producers.

U.S. companies will face import duties of between 3.8% and 31.4%, the Ministry of Commerce said in a statement.

The new tariffs come on top of a February move to impose antidumping tariffs on U.S. chicken products, on a finding that such products were sold at less than the fair value. In that round, tariffs of between 43.1% and 80.5% were imposed on imports of chicken products from various U.S. producers. Both findings were preliminary, meaning that pending a final decision chicken producers pay a deposit to cover the tariffs.

It is not uncommon for antisubsidy and antidumping duties to be levied on the same product, said Matthew McConkey, an attorney specializing in international trade at law firm Mayer Brown JSM. In his view, the latest spate of chicken tariffs should not necessarily be seen as a significant ratcheting up of trade tensions between the U.S. and China.

He noted that antisubsidy and antidumping cases are initiated by industry players, rather than governments, and are then ruled on by government bodies.

"I don't see this as a budding trade war," he said.

Nonetheless, there has been a noticeable pickup in trade tensions between the U.S. and China, especially since the Obama Administration's decision in September to impose tariffs on Chinese tires.

That decision was particularly vexing to Beijing because it involved the rarely invoked "safeguard" provision of China's accession to the World Trade Organization, which is meant to give trading partners recourse in the event of a sudden surge of Chinese products without having to demonstrate unfair trade practices. In the U.S., safeguard cases, unlike other trade investigations, require the approval of the president for tariffs to be imposed.

China announced its investigations into American chicken products and certain automotive products just two days after the announcement of the U.S. tire decision.

Last week, China launched antidumping inquiries into imports of a chemical product and optical fiber from the European Union and the U.S., an apparent response to a move by the U.S. Commerce Department a day earlier to investigate whether certain forms of aluminum made in China are being unfairly subsidized and dumped.

Also last week, China finalized an antidumping ruling on some nylon imports from the U.S., the EU, Russia and Taiwan.

Under the new chicken tariffs, importers of the chicken products will have to pay a deposit to the customs office according to the level of subsidy that the U.S. company is found to have received starting on April 30.

Major chicken producers Pilgrim's Pride Corp. and Tyson Foods Inc. will face duties of 4.9% and 11.2%, and dozens of other chicken producers will face varying rates of up to 31.4%, the Ministry of Commerce said.

The tariffs apply to whole chickens, chicken parts and chicken by-products, regardless of whether they are shipped fresh or frozen, the statement said. But live chickens, canned chicken products, and cooked chicken products such as chicken sausages are exempt, the statement said. The list of products is identical to those subject to the earlier round of tariffs in February.

The move is likely to further hurt U.S. producers' sales of chicken feet, which fetch a comparatively high price as a prized delicacy in China rather than being sold for scrap in the U.S. Almost all chicken feet produced in the U.S. are sold in China.

In a separate statement, the Ministry of Commerce's Fair Trade Office said the tariffs were in response to considerable subsidies for chicken feed products such as corn and soy beans, which gave American chickens a price advantage in international markets.

The case involves over $700 million worth of imports from the US, which account for over 70% of China's total chicken product imports, the Fair Trade Office said.

Source article: http://online.wsj.com/article/SB10001424052748704423504575211590403206592.html

Cosco Pacific to Pay Maersk $520 Million for China Port Stake

Source: Bloomberg By Christian Wienberg and Mark Lee

April 29 (Bloomberg) -- Cosco Pacific Ltd., Asia’s third- biggest container-terminal operator, agreed to pay A.P. Moeller- Maersk A/S $520 million to acquire the Danish company’s stake in an investor in terminals at China’s Yantian port.

The acquisition will boost Cosco Pacific’s holding in Sigma Enterprises Ltd. to 20.55 percent from 6.85 percent, according to a statement to the Hong Kong stock exchange today. Sigma owns controlling stakes in ventures that operate phases 1 to 3 of the Yantian terminals, according to the statement.

Cosco Pacific will finance the acquisition internally and may raise funds through “capital market transactions when it is appropriate,” according to the statement. The Hong Kong-based company had cash and bank balances of more than $700 million at the end of last month, it said.

Terminals at Yantian, in the southern Chinese city of Shenzhen, handled about 8.6 million twenty foot-equivalent units, or TEUs, of containers in 2009, according to the statement.

JPMorgan Chase & Co. is advising Cosco Pacific on the transaction, according to the statement.

Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=aHfNjSBFGl18

Have You Heard...

• Coca-Cola to pop the top on 3 new factories in 2010
• China to Enforce New Encryption Rules
• Bank of China Reports 41% Rise in First-Quarter Net Profit
• Levi's To Launch New Global Brand In China
• China Ends Ban on HIV Visitors Before Shanghai Expo

Coca-Cola to pop the top on 3 new factories in 2010

Source: By Liu Jie (China Daily)

BEIJING - Beverage behemoth Coca-Cola has set organic growth as its key expansion strategy in China, with three new factories planned for this year.

"We have seen so many organic growth opportunities in China, and, right now, we are focusing on them," Coca-Cola's Chief Executive Officer Muhtar Kent said on Tuesday.

The soft-drink maker will also set up three new factories in China's Guangdong province, Hohhot, Inner Mongolia autonomous region, and Henan province in 2010. The Henan site will be one of Coca-Cola's largest manufacturing facilities in China.

Though Kent declined to reveal the amount of the investment in the new factories, he did say it is part of Coca-Cola's three-year $2 billion China investment plan announced last March. The Atlanta-based company has invested $1.6 billion since it returned to the mainland in 1979.

The $2 billion injection was slated to be invested in new bottling plants, distribution infrastructure, marketing, branding and innovation. Kent said that investment plan is now "well on track".

Coke had sought to purchase Hong Kong-listed China Huiyuan Juice Group Ltd in September 2008, but the $2.3 billion bid for the country's largest juice maker was blocked by the government last March, citing monopoly concerns.

Kent indicated that the company welcomes competition and "no mergers or acquisitions (of local companies) are under consideration now".

Coca-Cola opened three factories in China last year.

They are located in Wuhan of Hubei province, Xinjiang Uygur autonomous region and Jiangxi province. Its existing manufacturing facilities are also increasing production capabilities.

Last March, Coca-Cola established a $90 million global innovation and technology center in Shanghai. Kent said the facility is developing new products for both local and world markets.

One new beverage out of the center last November was Minute Maid Pulpy Super Milky, which combines fruit juice, milk powder, whey protein and coconut bits to create a creamy fruit-flavored dairy drink.

Coca-Cola's current strategy seems to be working as the company has achieved double-digital growth for 38 consecutive quarters in China.

The nation is now the third largest and the fastest-growing market for Coca-Cola.

"China will be the largest in a fairly short period of time and will top growth results for the next 10 years," said Kent.

The world's largest soft drink company and its rival PepsiCo, have both adopted the same tactic in China - organic growth.

In November 2008, Chairman and CEO of PepsiCo Indra Nooyi announced a three-year investment of $1 billion in the Chinese market, which will be used to add plants, develop agriculture bases, sales capability, branding and marketing.

Market research company Euromonitor's report shows Coca-Cola controlled 52.5 percent of China's soda market by volume in 2008, compared with PepsiCo's 33 percent.

This year, China's demand for beverages such as soda and bottled water may grow 9.8 percent to 60.4 billion liters, it said.

Source article: http://www.chinadaily.com.cn/bizchina/2010-04/28/content_9785089.htm

China to Enforce New Encryption Rules

Source: Wall Street Journal by Loretta Chao

BEIJING—China is set to implement new rules that would require makers of certain electronic equipment to disclose key encryption information to be eligible for government procurement sales, creating a possible showdown with foreign companies that are unlikely to comply.

Beginning Saturday, makers of six categories of technology products, including smart cards, firewall technology and Internet routers, will have to disclose encryption codes to authorities for certification to participate in bidding for government purchases. Such encryption information is closely guarded by companies, and industry officials say foreign companies that fall under the new rules are unlikely to comply, which could mean they are cut off from government contracts for those products.

The product categories covered by the encryption rules account for tens of millions, or possibly hundreds of millions, of dollars a year in government sales, industry officials estimate. That's a small fraction of the many tens of billions a year China's government spends on procurement. Still, the dispute is the latest illustration of recent tension between Chinese authorities and foreign businesses over a range of regulatory policies.

Disclosing encryption information is "something companies cannot and will not do," said Jorg Wuttke, president of the European Union Chamber of Commerce in China at a briefing last week, because such codes are often kept secret by companies for both competitive and security reasons. Mr. Wuttke said this is one of the most important issues facing European companies from the chamber's perspective.

Two companies that are likely to be affected by the rules are Gemalto NV, a maker of smart cards and other digital security products, and Cisco Systems Inc., the U.S. network-equipment giant. Cisco declined to comment on the new rules. Gemalto didn't immediately respond to a request for comment.

Industry observers who follow the issue say that the regulation appears to be part of a broader effort by Beijing to promote domestic enterprises. Foreign executives say such regulations make it increasingly difficult for foreign companies to compete fairly in one of the world's most important markets.

Chinese officials have said their policies aren't discriminatory, and have complained about alleged protectionist measures taken by the U.S. and other nations.

The encryption requirement has been scaled back significantly from when it was first proposed in 2008 by the General Administration of Quality Supervision, Inspection and Quarantine. At the time, authorities said that any uncertified security products wouldn't be permitted to be sold, imported or used in China.

But after protests from foreign industry groups, the officials narrowed the scale of the regulation to include only government procurement of certain products.

The General Administration of Quality Supervision, Inspection and Quarantine didn't respond to requests for comment on the rules. Nor did the Ministry of Finance, which funds government procurement.

Implementation of the regulation was delayed last year just days before it was to go into effect, and authorities could delay again. It's also unclear how the regulation will be enforced. People who follow the issue say the requirement could, for example, force the Ministry of Transportation to use only certified technology in the millions of transportation cards used in China's subway systems. If the scope of government procurement is interpreted to include state-owned companies as well, the requirement also could encompass bank cards.

As of Wednesday evening, a government list of companies certified under the rule listed only Chinese companies. Shenzhen-based telecom-equipment giant Huawei Technologies Co. and Internet security company Leadsec Technologies (Beijing) Co., a subsidiary of personal computer maker Lenovo Group Ltd., were among more than 20 companies listed.

Source article: http://online.wsj.com/article/SB10001424052748704423504575211842948430882.html

Bank of China Reports 41% Rise in First-Quarter Net Profit

Source: Wall Street Journal

SHANGHAI—Bank of China Ltd. Tuesday reported a bigger-than-expected 41% rise in its first-quarter net profit, due to higher net interest income following a rapid expansion in lending in 2009.

Analysts have said they expect Chinese banks to be more profitable this year than in 2009 as the government has been reining in lending while demand for loans remains robust, which will allow banks to charge higher interest on new loans.

State-run Bank of China opened what is expected to be a strong earnings season for major Chinese lenders when it reported net profit of 26.23 billion yuan (US$3.8 billion) for the three months ended March 31, up from 18.57 billion yuan a year earlier and above the average 25.46 billion yuan net profit forecast of five analysts polled earlier by Dow Jones Newswires.

The bank, which led the country's banking industry in new lending last year, said its net interest income rose 21% to 44.51 billion yuan in the first quarter, due to a larger loan base and improved lending profitability.

However, despite analysts' optimism about bank profitability this year, recent moves by Beijing to clamp down on mortgage lending to curb overly fast property prices as well as its scrutiny of local governments' borrowing have depressed banks' share prices.

Bank of China's shares fell 1.0% in Hong Kong to HK$4.04 on Tuesday. During the previous 11 trading days, the stock fell 7%. In Shanghai Tuesday, the bank's shares ended flat at 4.04 yuan.

Investors are worried that a potential collapse in property prices will bring a surge in defaults, and declining sales of land-use rights could hurt the ability of local governments' financial vehicles to repay their loans, said analysts.

"The recent tightening policies won't affect our forecast of a 20%-30% rise in net profit for Chinese banks this year, given their high provision coverage ratio, but asset-quality concerns will cloud the market for a long time and limit demand for banks' shares," Fortune Securities analyst Liu Zhiyan said.

China has announced a series of measures to rein in property prices in recent weeks, including allowing banks to stop issuing mortgages to home buyers who already own two or more properties, raising the minimum down payment on second-home purchases to 50% from 40% and requiring mortgage rates to be no less than 1.1 times benchmark rates.

Local government debt has also been a source of concern. Many city and provincial governments, which aren't allowed to raise debt, set up special investment vehicles to borrow money from banks to fund projects to build roads, subways and other infrastructure last year. Some of these vehicles are capitalized with land from local governments and benefit from credit guarantees from local governments.

The surge in credit unleashed by China's stimulus efforts last year didn't boost banks' bottom lines in 2009, as lower interest margins offset the benefit of higher volumes. However, since Beijing has curbed new lending this year, continued strong demand for credit has allowed banks to charge higher interest rates for new loans.

Analysts said banks' net interest income will likely continue to rise this year, especially if the central bank increases interest rates to curb inflation expectations.

Bank of China extended 402 billion yuan of new loans in the January-March period, and its outstanding loans as of March 31 were up 8% from the end of last year. The first-quarter expansion in new lending was smaller than the 16% spike the bank posted in the same period of 2009, as it said it would sharply reduce lending this year in response to repeated calls from regulators for slower loan growth.

In March, Bank of China said it targeted a 17% rise in local-currency loans this year, down from 50% in 2009.

As of March 31, the bank's nonperforming loan ratio was 1.30%, down from 1.52% at the end of last year, while its capital-adequacy ratio, which governs the minimum amount of funds banks must hold against risky assets, dropped to 11.09% from 11.14%, despite a 25 billion yuan subordinated-debt issue in March.

To maintain a capital-adequacy ratio of at least 11.5% between 2010 and 2012, Bank of China is planning to issue as much as 40 billion yuan worth of bonds convertible into its Shanghai-listed shares, and sell new shares equivalent to up to 20% of its existing Hong Kong-listed shares to raise around US$7 billion.

China's two biggest commercial banks, Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp., will issue their first-quarter results Thursday.

Source article: http://online.wsj.com/article/SB10001424052748704471204575209671232397284.html

Levi's To Launch New Global Brand In China

Source: China Retail News

The jeans brand Levi's has announced plans to launch a new global brand in China and other selected Asian markets in the autumn of 2010 and this is reportedly the first time that the brand is to be launched in markets outside America.

The company has not revealed the name of the brand, but said the prices of the new products may be lower than its existing products.

According to Tod Gimbel, the senior director for the corporate business of Levi's Asia Pacific, though the new products are designed for the Chinese market, they will also develop the new brand into one of its major brands. He added that the new brand targets well-educated young people between 18 and 28.

Levi's plans to open about 20 new stores under the new brand and will increase the number to 1,000 by 2015.

Source article: http://www.chinaretailnews.com/2010/04/28/3564-levis-to-launch-new-global-brand-in-china/

China Ends Ban on HIV Visitors Before Shanghai Expo

Source: Bloomberg By Tom Randall

April 28 (Bloomberg) -- China ended a decades-old ban on visitors with HIV days before the opening of the Shanghai Expo, the biennial fair designed to showcase different cultures.

The restriction, lifted yesterday, came as the government recognized it had a “very limited effect” on prevention and control, the state-run Xinhua News Agency reported, citing an official from the State Council, China’s Cabinet.

The World Health Organization called the decision a “significant step in the right direction” and said it was made in the lead-up to the May 1 start of the Expo, which Xinhua estimates may attract 4 million overseas travelers. Foreigners with sexually transmitted diseases and leprosy will also be allowed to enter China under the new travel rules, issued by the State Council in a statement on its Web site.

“People gradually realized that restricting the entry of foreigners with AIDS, sexually transmitted disease and leprosy to the country has very limited effect on the work of domestic disease prevention and control,” the official said in the Xinhua report. Such a ban “had become an inconvenience for China to hold various international activities,” it said.

China had an estimated 740,000 people living with HIV in 2009, UNAIDS, a Geneva-based United Nations agency, reported this month. About 54,000 people have died from the AIDS-causing infection in the country, it said.

Tuberculosis Patients

The latest rules also narrow the travel restriction on people with tuberculosis, to those with an infectious form of the lung disease. The government of China, which previously banned all mentally ill travelers from entering the country, said only severe cases are now barred.

Foreigners with other transmittable diseases that may harm public health won’t be allowed to enter China, the State Council said, without elaborating.

The country stipulated entry and exit rules in 1986 to ban foreigners who may “damage national security or social order.” Patients with HIV/AIDS, leprosy and sexually transmitted diseases were specifically barred in 1989.

“China’s decision to categorically remove HIV/AIDS from the list of conditions subject to entry restrictions is a significant step in the right direction,” Margaret Chan, WHO’s director-general, said in the statement. “This decision should inspire other nations to change laws and policies that continue to discriminate against people living with HIV.”

The U.S. in October eliminated a similar 22-year ban on HIV patients entering the country, enabling the nation to host the world’s biggest AIDS conference, the International AIDS Society, for the first time in 2012.

SARS Outbreak

China began acknowledging the importance of public health to national development and strengthened cooperation to fight contagious diseases after the 2002-2003 SARS outbreak, according to a study published yesterday in the Public Library of Science Journal, PLoS ONE.

“In a globalizing world, the Chinese government appears to have learned that its health policy will be scrutinized by the world,” researchers led by Lai-Ha Chan of the University of Technology Sydney said. “It has become more open to and actively participates in global health governance.”

Travel restrictions unnecessarily discriminate against patients and don’t protect people from infection, UNAIDS said in a statement yesterday. More than 50 countries and territories still impose travel restrictions on HIV patients, while 23 countries deport foreign patients when their HIV status is discovered, the UN agency said.

“It is an exciting time,” said Mitchell Warren, executive director of the New York-based AIDS Vaccine Advocacy Coalition, a nonprofit advocacy group, in an e-mail. The change “is pretty significant, especially for China and the U.S., where exchanges -- both scientific and more generally -- are increasingly important.”

About 70 million local and overseas visitors are expected at the Shanghai Expo, which takes place through Oct. 31.

Source aritcle: http://www.bloomberg.com/apps/news?pid=20601089&sid=avxJk1F.M7Qo

Have You Heard...

• China Seeks to Step Up Communication Monitoring
• Q+A: Why is Shanghai holding the World Expo?
• Google Loses Chinese Market Share
• Alibaba.com, eBay Reach PayPal Deal
• Ctrip.com Buys Sozhen.com To Expand Chinese Internet Travel Business

China Seeks to Step Up Communication Monitoring

Source: New York Times by Sharon Lafraniere

BEIJING — China is on the verge of requiring telecommunications and Internet companies to detect, stop and report leaks of state secrets by their customers, the latest in a string of moves designed to strengthen the government’s control over private communications.

The proposed amendment to the state secrets law, reported Tuesday by state media, loosely defines a state secret as information that, if disclosed, would damage China’s security or interests in political, economic, defense and other realms.

The wording of the amendment as cited by the state-run media suggested that Internet providers and telecommunications companies would have to take a more active stance in checking e-mails or text messages for leaked information. But it was not clear from the reports what, if any, penalties would be imposed on companies that failed to comply.

State-run media outlets characterized the new measure as part of a drive to further engage businesses in protecting state security.

But several analysts suggested it would have limited effect. Internet and telecommunications companies are already expected to cooperate fully with state security investigations.

In one well-known case, a Chinese journalist was sentenced in 2005 to 10 years in prison for violating the state secrecy law after the authorities obtained information from Yahoo about an e-mail message he sent regarding a confidential government document. Yahoo was later severely criticized in the United States for its role in the case, and the company’s founder, Jerry Yang, eventually apologized to the journalist’s family.

“Obviously, it adds another tool that authorities would have to snoop on people,” said Jeremy Goldkorn, publisher of Danwei.org, a Web site about Chinese media and the Internet. “But I don’t think anybody thinks that their communications are safe from the prying eyes of the government.”

Some Chinese legal experts, however, described the amendment as both a contradiction of the government’s pledge to be more open and a violation of China’s constitutional guarantees of privacy and freedom of communication.

Kan Kaili, a professor at Beijing University of Posts and Telecommunications, said, “If the government insists on doing that, I would suggest they rewrite the Constitution. Otherwise, it is clearly illegal.”

China’s determination to control mobile phone and Internet communications has been increasingly obvious in recent months. A new bureau has been set up to help the authorities monitor social networking sites and other user-driven forums on the Internet. Other measures have been taken to step up surveillance of cellphone text messages, individual Web sites, chat rooms, blogs and other venues.

The amendment was submitted Monday to the Standing Committee of the National People’s Congress, China’s legislature, for a third reading, the final step before being signed into law. Few measures reach that point in China without being adopted.

China has issued rules calling on its state-owned companies to strengthen protection of their commercial secrets, which it defined broadly to include information including acquisitions and technologies, Bloomberg News reported from Shanghai.

The State-Owned Assets Supervision and Administration Commission, which oversees more than 120 companies, defined commercial secrets as any practical information that is not publicly available and may potentially bring economic benefit to enterprises.

China’s definition of commercial secrets has fueled concern among foreign companies after a Rio Tinto employee and Australian citizen was sentenced to 10 years in prison last month for taking bribes and industrial espionage.

“It’s broad enough to cover every bit of business and technical information,” Nicolas Groffman, a partner at the law firm Mallesons Stephen Jaques who is based in Beijing, said of the new rules. “We don’t know more about the definition of commercial secrets, really.”

Source article: http://www.nytimes.com/2010/04/28/technology/28secrets.html?ref=asia

Q+A: Why is Shanghai holding the World Expo?

Source: Reuters

Shanghai will unveil to the world this week its six-month long World Expo, China's largest international event since the 2008 Beijing Olympics.

The country is trying to create an Expo on a scale never seen before, spending vast sums of money to make the event a blow out extravaganza for the expected 70 million visitors.

WHAT IS A WORLD EXPO?

A World Expo is a fair where countries and companies display their latest scientific achievements and technological advancements. Expos historically have been remembered for the creation of landmarks like the Eiffel Tower and the introduction of television and the ice cream cone to mass audiences.

While recent Expos have failed the fire the world's imagination much, Shanghai is creating great fanfare to put them back on the map. China has officially spent $4.2 billion, more than double what it spent on the Olympics, but Chinese media report the actual cost could be up to $58 billion.

WHAT DOES THIS EXPO MEAN FOR CHINA?

The Communist-run government is using the Expo as a means to highlight its authority and dominance internally, showing its citizens it is powerful enough to host two international events on such a grand scale and in such a short space of time.

Nearly 95 percent of visitors to the Expo are expected to be from China itself. Analysts say the Expo serves as a platform for the government to legitimize its role in power as well as exemplifying the country's fast economic development.

Foreign attention on the Expo has been minimal, and previous expos in Zaragoza and Hanover going largely unnoticed. China has tried to raise its Expo's global profile by inviting state leaders to attend.

WHY ARE COUNTRIES AND COMPANIES MAKING SUCH A BIG EFFORT?

The Shanghai World Expo is the biggest and most expensive Expo in history and countries and companies are making special efforts to improve commercial and political ties with China, the world's third-largest economy.

There are 191 countries attending the six-month long Expo and most have invested record amounts to build their pavilions. Saudi Arabia, for instance, spent $146 million to build its spaceship-like pavilion.

Countries are likely to reap only intangible gains by boosting their tourism appeal to the Chinese public. But they will gain valuable good will with Beijing by attending, especially smaller countries that rely on Chinese trade and aid.

Multinationals like General Motors and Coca-Cola Co are also making record efforts to cement their presence in China and using the Expo to target the huge domestic market.

DO EXPOS MAKE MONEY?

Very few Expos in history have actually turned a profit, with the World Expo in Hanover in 2000 estimated to have lost $1.1 billion, while Vancouver's World Expo held in 1986 estimated to have lost $33 million.

Shanghai officials say they are not aiming to make a profit but want instead to use the Expo to show China's achievements to the world and let Chinese people experience different cultures.

Source article: http://www.reuters.com/article/idUSTRE63Q0GH20100427

Google Loses Chinese Market Share

Source: Wall Street Journal by Loretta Chao

BEIJING—Google Inc.'s market share in China declined in the first quarter, a research firm said, showing how the U.S. company's clash with China's government is benefiting Chinese rival Baidu Inc.

Google's share of Chinese Internet search revenue dropped to 30.9% from 35.6% in the previous quarter, said Analysys International, a Beijing-based research firm. Google's share had increased in all but two quarters since 2006, according to Analysys data. The company said Baidu's market share in the latest quarter rose to 64% from 58.4% in the final three months of last year.

The data also suggest that other Chinese companies have yet to capitalize on Google's troubles in China. The Mountain View, Calif., Internet giant announced on Jan. 12 that it would stop obeying government censorship requirements on its Chinese search site, citing cyberattacks originating in China and worsening limits on Internet freedom. On March 22 it followed through by moving the Chinese site, Google.cn, to Hong Kong and halting self-censorship of its results.

Analysts have said that Baidu was sure to benefit from any scaling back or withdrawal by Google, and that it also faced competition from other Chinese companies. But those local rivals didn't perform well in the first quarter. Market share for Sohu.com Inc.'s Sogou dropped to 0.7% from 1%, and that for Tencent Holdings Ltd.'s Soso dropped to 0.4% from 0.7%, Analysys said. Overall search-market revenue in China dropped slightly to $285.6 million from $288.6 million.

Google's advertising resellers in China have complained that the months-long uncertainty before its March 22 move caused concern among ad buyers and affected their sales even before the move. Ads from China could still appear on the Hong Kong version of Google.cn after the March announcement, but some advertisers said they reacted by scaling back their spending because they didn't know how long the site would be available to their target audience in mainland China.

Some Google resellers said Monday that sales are starting to stabilize after the first-quarter decline.

Advertisers also expressed concern that moving the site outside of China's "Great Firewall" caused confusion and instability for users trying to access the site. Chinese authorities use technology to interrupt or block access to Web sites outside of China, including Google's Hong Kong site, in order to filter out politically sensitive content and pornography. The practice often discourages use of those sites because it can be cumbersome for users.

A Google spokeswoman declined to comment on the company's market share, but said the company is "continuing business as usual in China." "We understand that some partners may not be comfortable with our stance, but we've already seen that many others are offering support and want to continue working with us," she said.

Google's Hong Kong-based site remains accessible in mainland China. Aside from an unexplained block of its services for several hours on March 30, there doesn't appear to have been any additional backlash against the company for publicly snubbing the government's censorship policy.

Investors have continued to bet that Baidu will gain from the situation. On Friday the company's shares on the Nasdaq Stock Market closed at $645.76, up 64% from the day of Google's January announcement.

Google's loss of market share could continue, but analysts say the company will at least retain ad revenue from export-oriented companies in China who target users of Google's international sites.

Source article: http://online.wsj.com/article/SB10001424052748703465204575207833281993688.html

Alibaba.com, eBay Reach PayPal Deal

Source: Wall Street Journal by Loretta Chao

BEIJING—Alibaba.com Ltd. said it will accept payments from users of eBay Inc.'s PayPal service on Alibaba.com's new online wholesale platform, a deal that suggests the two companies are setting aside a longstanding rivalry to realize their global expansion goals.

Alibaba.com, the Hong Kong-listed unit of Chinese e-commerce company Alibaba Group, is a site for small-to-midsize exporters in China and other countries to list products for sale to buyers around the world. On Monday, Alibaba.com formally launched AliExpress, an online platform that lets those buyers directly purchase goods from those exporters, largely in smaller quantities. Alibaba.com Chief Executive David Wei said the company, based in Hangzhou, China, plans to invest $100 million to develop AliExpress "as quickly as possible."

The new deal with PayPal will let AliExpress clients sell goods to PayPal's 84 million active users around the world, including eight million merchants who could use the service to source from Alibaba sellers. It gives PayPal users a vast new selection of products. The companies said the deal could put AliExpress among PayPal's largest merchants in terms of product offerings, with three million products listed from at least 40 categories.

Alibaba Group has its own electronic-payment platform, called AliPay, but Mr. Wei said limiting users to one service "actually kills choices" for consumers and vendors. "Openness is very important," Mr. Wei said during an interview. "PayPal is one of the most important payment methodologies."

Alibaba.com had 74% of China's $237 million business-to-business market in the first quarter of 2010, according to research firm Analysys International.

The rivalry between eBay and Alibaba Group, of which Yahoo Inc. owns 39%, dates to the early part of last decade when Alibaba Group's Taobao unit, a consumer auction and retail site, gobbled up market share from eBay's Chinese unit, mainly by undercutting its commission fees. EBay largely withdrew from China in 2006. But eBay and Alibaba Group have shown signs of rapprochement, with Alibaba Group Chairman Jack Ma visiting eBay's headquarters in San Jose, Calif., in March of last year.

"The interesting thing about the Internet is that you have partnerships with different companies that you also compete with," Scott Thompson, president of PayPal, said in an interview. "You can partner together as two businesses, and as part of your business you can compete vigorously."

The new partnership is part of a broader international push by PayPal, including in China, home to the world's largest population of Internet users. PayPal, which has been supplying a growing share of eBay's revenue, announced plans last month to partner with China UnionPay Co., the country's largest electronic-payment-service provider, to let Chinese consumers shop from overseas merchants.

PayPal and Alibaba.com executives said the new partnership has been in the works since Mr. Ma's visit to eBay. They declined to say if further collaboration is planned.

AliExpress sellers, all of whom are currently in China, offer a wide range of goods, from $1 T-shirts and $5 novelty Web cameras to $60 foldable bicycles. AliExpress has been in testing since September, and Mr. Wei said it has attracted a higher percentage of U.S. buyers than Alibaba.com's main listing Web site.

For the new PayPal deal, instead of requiring its sellers to sign up for PayPal accounts, Alibaba.com will act as the PayPal merchant and will charge the sellers a fee to cover any commission paid to PayPal.

Alibaba.com, which reported revenue of about $567.4 million for 2009, earns the bulk of its money from fees to sellers for premium listings and services on its site. On AliExpress, product listings will be free for all Alibaba.com members, and a 3% fee will be charged per sale to members who pay for the premium service, while nonpaying members will pay 5% per transaction.

Source article: http://online.wsj.com/article/SB10001424052748704464704575207782010723048.html

Ctrip.com Buys Sozhen.com To Expand Chinese Internet Travel Business

Source: China Tech News

Chinese online tourism website Ctrip.com has reportedly acquired Sozhen.com, a website focusing on ancient Chinese town travel.

According to reports in local media, the terms of the deal have not been disclosed. Employees of Sozhen.com are quoted as saying the website will show some difference in the future, but it will not sell hotel rooms like Ctrip.com. Instead, it will still focus on the lower priced sales of rooms in village inns.

For Ctrip.com, the acquisition will add a low-end hotel business to Ctrip.com's product line to meet the various needs from Ctrip members. On the other hand, Sozhen.com has a great number of loyal users, and also maintains good partnerships with ancient Chinese towns' tourist attractions.

Sozhen.com was established in August 2005 and was one of the first and one of the most authoritative ancient town websites in China. In 2007 Sozhen.com started its inn reservation business aiming to be the first inn brand with chains in ancient towns.

Source article: http://www.chinatechnews.com/2010/04/27/11972-ctrip-com-buys-sozhen-com-to-expand-chinese-internet-travel-business

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China seen staking "middle" role at nuclear talks

Source: Reuters

China is likely to stake out a position between the big nuclear weapons states and the non-nuclear-armed countries at an international conference next month, a prominent Swedish think tank said on Monday.

The Stockholm International Peace Research Institute (SIPRI) said in a report that Beijing faces pressure over its nuclear weapons modernization after Washington and Moscow signed a treaty to cut their much bigger arsenals of atomic missiles.

For now, however, China is likely to fend off calls to formally curb its nuclear weapons development and could seek to use the conference on the nuclear Non-Proliferation Treaty (NPT) to push back by backing demands from non-nuclear-armed states for deeper cuts from Washington and Moscow, the report said.

"China is unlikely to take part in any unilateral or multilateral (nuclear) disarmament steps in the near- to medium-term," said the report written by Bates Gill, the director of SIPRI and an expert on Chinese security policy.

"On the contrary, Chinese steps to modernize its nuclear arsenal will stand out among the world's major nuclear weapons states," said the report.

President Barack Obama announced this month a shift in U.S. doctrine, vowing not to use atomic weapons against non-nuclear states that abide by the NPT.

CHINA'S AWKWARD POSITION

The deepening diplomacy over nuclear arms has thrown into relief China's awkward position in atomic diplomacy -- as a member of the club of five nuclear weapons states formally accepted by the NPT, but one claiming to share many developing countries' demands and grievances with that club.

Gill said that ambivalence is likely to play out at the conference throughout much of May discussing the NPT's future.

"Beijing will probably expect the United States in particular, but also Russia, to do much of the heavy lifting" over disarmament commitments, Gill said in an email.

China is also likely to use the conference to "defend the right of non-nuclear states, and particularly developing countries, to access nuclear technologies for peaceful purposes," said the SIPRI report.

Beijing faces growing calls from Western powers to support a fresh round of U.N. Security Council sanctions against Iran over its disputed nuclear activities. Although China has been discussing possible sanctions, it has also long stressed that Iranian demands for peaceful nuclear power must also be heeded.

Under their new treaty, the United States and Russia vowed to limit their deployed nuclear warheads to 1,550 each, 30 percent fewer than the limit set in a 2002 treaty.

The SIPRI has estimated that as of 2009 China possessed 186 deployed strategic nuclear warheads.

Since conducting its first nuclear test in 1964, China has said it will never be the first to use such weapons in any conflict.

But Beijing wants to preserve some leeway to upgrade its arsenal, insulating its deterrent against possible moves by potential foes, including the United States developing anti-missile technology.

China wants to have a limited nuclear "second strike" force to deter foes, the nation's main military newspaper said last week, spelling out the ideas behind the country's atomic modernization.

China has been replacing liquid-fueled ballistic nuclear-capable missiles with solid-fuel missiles, which will make launching them faster. It is also building new "Jin-class" ballistic missile submarines, capable of launching nuclear warheads while at sea.

"It remains too early to expect China to enter into official multilateral disarmament discussions with the other nuclear weapons states," Gill said in response to questions.

But if the United States and Russia were to contemplate cutting their strategic warheads to below 1,000 each, that would "depend on the other nuclear weapons states, and especially China, showing a willingness to engage in multilateral disarmament discussions," said Gill.

The report will be available on the SIPRI website (http://www.sipri.org/).

Source article: http://www.reuters.com/article/idUSTRE63P0GB20100426