Have You Heard...

• China’s Wen Stays Silent on North Korea Blame, Focuses on Peace
• Beverage business economizes on water
• Shanghai Disneyland project ready to roll
• China warns debt woes threaten global recovery
• Hon Hai Repercussions Grow
• Tobacco control faces great opposition in China

China’s Wen Stays Silent on North Korea Blame, Focuses on Peace

Source: Bloomberg By Bomi Lim

May 31 (Bloomberg) -- China’s Premier Wen Jiabao ended two days of talks with his South Korean and Japanese counterparts with a call for calm in the region, resisting pressure to condemn North Korea.

The third annual three-nation summit had planned to discuss economic and political integration. Instead, the sinking of the South Korean warship Cheonan, blamed on Kim Jong Il’s regime, hogged the agenda as tensions on the peninsula rose to the highest in decades amid the North’s threat of “all-out war.”

China’s refusal to join international condemnation of its communist ally may undermine its ambition to counter U.S. influence in Asia by forging closer ties with South Korea and Japan. Secretary of State Hillary Clinton visited Seoul last week, standing alongside President Lee Myung Bak to spell out a “rock solid” commitment to the defense of South Korea.

“The Cheonan case provides a perfect opportunity for the U.S. to tighten its military grip on the region,” said Paik Hak Soon, director of inter-Korean relations at the Seongnam, South Korea-based Sejong Institute. “The U.S. would adamantly want to defend its position against increasing rivalry from China.”

South Korea may take its case against the North to the United Nations Security Council, where China has veto power, as soon as this week, Yonhap News reported yesterday. Lee cut trade ties and barred new investment in the North last week after an international panel concluded the warship was sunk by a North Korean torpedo.

‘War of Aggression’

The charge is a fabrication intended to justify “a war of aggression,” the North’s state-run Korean Central News Agency said yesterday.

North Korea cut off all ties with the South, threatening to sink ships that strayed into its waters and shell South Korean positions if the government went ahead with plans to use loudspeakers to blast propaganda over the border.

The escalating tension roiled financial markets last week. The won fell 3 percent on May 25, the biggest drop in 14 months. The Kospi index dropped 2.8 percent the same day, before recouping its losses later in the week.

“It is the most urgent task to gradually ease tensions following the incident, and especially to avoid conflict,” Wen said yesterday after talks with Lee and Japanese Prime Minister Yukio Hatoyama on the South Korean resort island of Jeju. China will “help resolve the incident in a way that benefits peace and security.” Wen later traveled to Japan for a further meeting today with Hatoyama.

Troop Presence

The U.S. has 28,500 troops in South Korea, who “are well prepared to deter aggression,” Lieutenant Colonel Angela Billings, a spokeswoman for U.S. forces in Korea, said last week.

Hatoyama cited security threats from North Korea as one of the reasons to stick to a 2006 accord to relocate the Futenma Air Base within the island of Okinawa, 950 miles (1,530 kilometers) south of Tokyo. Hatoyama said on May 28 that President Barack Obama agreed to deepen ties between the U.S. and Japan, where about 50,000 American military personnel are stationed.

The sinking helped “Japanese people to appreciate the importance of security for Japan,” Kazuo Kodama, press secretary of Japan’s Ministry of Foreign Affairs, said at a briefing on Jeju. “People tend to appreciate more than ever that because of the U.S.-deployed forces, Japan is protected.”

U.S. Defense Secretary Robert Gates and his Japanese counterpart agreed last week to work together on monitoring China’s navy after Japan in April raised concerns about the intentions of Chinese submarines and destroyers spotted in international waters close to Okinawa.

Blood Ties

The U.S. fought on South Korea’s side against North Korea and China during the 1950-1953 conflict, which ended in a cease- fire and left the Korean peninsula in a technical state of war. South Korea’s 680,000-strong military face off with as many as 1.2 million troops across the border in North Korea, which has also built atomic bombs and long-range ballistic missiles that it claims can reach parts of the U.S.

The U.S.-South Korea alliance “was literally born in blood,” according to the U.S. Strategic Digest published last year. That sentiment echoes ties between China and North Korea, also “bound by blood,” according to Paik.

China’s President Hu Jintao hosted Kim Jong Il earlier this month even as indications of the North’s role in the March 26 sinking were growing. Excluding inter-Korean trade, China accounted for 79 percent of North Korea’s international commerce in 2009, according to Seoul-based trade agency Kotra.

The U.S. is joining South Korea in blaming North Korea to “put China into an awkward position and keep hold on Japan and South Korea as its servants,” KCNA said May 28.

“Beijing looks at the region in terms of a zero-sum geopolitics that sees victory in terms of luring South Korea and Japan away from the U.S.,” said William Callahan, professor of international politics at the University of Manchester.

Beverage business economizes on water

Source: By Liu Jie (China Daily)

Drinks company Diageo puts the preservation of H2O at the top of its corporate social responsibilities list

BEIJING - Corporate social responsibility (CSR) for Diageo, a premium drinks company, is a very broad area with water featuring most significantly.

"Why water? Water is a universal need, a universal right. It's also incredibly important for our business," said Lin Menuhin, CSR director of Diageo Asia-Pacific, explaining that the company uses huge amounts of high-quality and clean water to produce alcohol. As such, conserving water and protecting the environment not only helps to protect the Earth and improve people's lives but also supports the sustainable development of Diageo.

Globally, London-based Diageo set a target to reduce the amount of water used to make each liter of its products by 30 percent between 2007 and 2015 via technological innovation.

In the Asia-Pacific region, the company reduced the volume of water required to produce 1 liter of alcohol from 2.4 liters in 2007 to 2.2 liters last year, which means a total of 22 million liters of water saved annually, with greater savings forecast for the future.

As Diageo has no production site in China so far, it is helping to protect water resources and enabling people to get a clean water supply.

In 2008, it joined hands with Worldwide Fund for Nature (WWF) on a two-and-a-half-year conservation program at east Taihu Lake, near Shanghai.

"This involved funding technical experts to work with local stakeholders, communities and government to reduce water pollution through scientific research and pilot schemes. We also established two centers to educate the community. It's just finished and been quite successful," said Lin.

The company also teamed up with the WWF in several counties badly affected by the Sichuan earthquake in 2008 to rebuild water delivery systems. It funded the construction of 18.5 kilometers of water piping to bring water to the area and construct wells to store water.

According to the CSR director, more than 1 million yuan from the company and its employees has been pooled into the Sichuan water project.

Amid the terrible droughts in southwestern China, Diageo contributed 100,000 yuan through the Foundation for Poverty Alleviation to build rainwater harvesting systems in disaster-stricken communities.

The premium drinks business is now looking to do more sustainable work in Gansu to develop a longer-term rainwater harvesting and delivery program for local communities.

According to Lin, Diageo employee volunteers have visited Sichuan to help with the post-earthquake reconstruction. They will go to Gansu in July.

The drinks company has carried out and is planning various kinds of CSR programs both globally and in China. When Diageo was formed over 10 years ago with the merger of Guinness and Grand Metropolitan, they settled on four main areas for their community investment agenda among the overall CSR strategies. In addition to water, the others are skills for life, community support and disaster relief.

Diageo brought its Keep Walking Fund to the mainland last November to support individuals who are pursuing their dreams to help others. It provided financial support and professional training to participants in the six-month "Powering Your Dream" campaign that ended last week.

Competitions were held in Beijing, Shanghai, Guangzhou and Chengdu. The company invited experts from various social sectors to form a panel of judges to evaluate entries based on the impact, foresight, feasibility and sustainability of proposed social service projects, as well as the practical experience of applicants.

Five winners have been selected. They will share a 1 million yuan award to fund their projects. The prize will be allocated in line with the financial needs of the winning projects. Diageo will supervise the winners to ensure their plans are implemented efficiently.

One of the five winning projects is on water conservation. The plan involves mobilizing local government, socially-conscious businesses and non-profit organizations as well as more than 2,000 volunteers in a joint effort to clean up sea-borne garbage. In addition to the clean-up, the garbage will be sorted and analyzed to build a monitoring database that will feed into the global efforts to clean up the oceans.

These actions are expected to influence government decision-making and build public interest and awareness in protecting the marine environment through action and examples.

"It shows that our efforts on water have got effects that can inspire people to pay attention to this issue," said Lin.

The global Responsible Drinking initiative has also been brought to China to encourage and help consumers drink alcohol healthily and safely.

Diageo is committing at least 1 percent of operating profit to community programs every year. Last year, the company invested about 23.5 million pounds worldwide.

"In China, we are working toward that same delivery. It's around 3 to 5 million yuan every year. That includes all projects," said Lin.

"The challenges are in identifying projects and programs where we can guarantee a more sustainable outcome", he added, saying that the traditional CSR method is just to give money and walk away. This leaves a long vicious cycle between the donor and the beneficiary of interdependency.

"We want to move toward more independence for the beneficiary, where they can sustain themselves long term. That is the future of development," he said, highlighting that his company will always "do" water, because it's so important to Diageo, and it will also always encourage responsible drinking, because it was its duty as a drinks company.

"We are also very flexible about the directions in building sustainable communities in the future," he said.

About challenges in the Asia-Pacific region, Lin said that it was a very heterogeneous geographic region full of different localized demands, so figuring out how to drive a strategy forward with a clear theme and yet at the same time address the needs of the people on the ground in these different markets was problematic.

Diageo is listed on both the London and the New York stock exchanges. It has more than 20,000 employees globally. Its alcohol brands include Smirnoff, Johnnie Walker, J & B, Baileys and Guinness.

Shanghai Disneyland project ready to roll

Source: Xinhua

Shanghai has taken a step closer to its Disneyland dream. The Pudong New Area government has almost completed resident relocations for the city's Disneyland project.

The land for the theme park is expected to be handed over at the end of next month when construction will begin.

About 99 percent of residents living in the 3.9-square-kilometer area planned for the Disneyland project have been relocated, a month ahead of schedule.

Construction of apartments specially for residents relocated due to the project began over the weekend and are expected to be ready for occupancy by August 2012.

More than 2,000 households and 297 enterprises at the site of the planned theme park will eventually be relocated.

The new residential site is in Pudong's Chuansha Town.

The residential project, which covers 324,000 square meters, will have more than 6,500 apartments, according to Pudong's Urban Construction and Communications Commission.

The high-end residential apartments will be equipped with kindergartens, elementary schools and middle schools as well as activity centers for senior citizens, according to district officials.

Last month, Pudong New Area Director Jiang Liang said more than 97 percent of negotiations with property owners were completed.

The Disneyland park will cover about 1.16 square kilometers, while facilities like parking lots and dining areas will take up to 2.74 square kilometers.

Jiang said it may take five or six years for the park to be opened to the public.

A branch route of Metro Line 11, which is now under construction, will link to Disneyland from Longyang Road. Building of the Metroline started in late Marchand is expected to be finished in 2012.

It will connect Longyang Road with Lingang New City, located in the former Nanhui District.

Shanghai announced last November that it gained central government approval for the Disneyland project.

The first phase of the theme-park project has been estimated to cost about 25 billion yuan (US$3.66 billion).

China warns debt woes threaten global recovery

Source: Reuters

(Reuters) - China warned on Monday that Europe's struggle to contain ballooning debt posed a risk to global economic growth, raising the specter of a double-dip recession.

Premier Wen Jiabao, addressing business leaders during an official visit to Japan, issued his warnings a day after France admitted it will struggle to keep its top credit rating and days after a downgrade of Spain's credit status again jolted financial markets.

Referring to the risk of a second dip in global economic growth rates, Wen said: "I believe that we can't say with absolute certainty, so we must undertake close observation and act to prevent it.

"The world economy is stable and beginning to revive, but this revival is slow and there are many uncertainties and destabilizing factors," he said, adding it was too early to wind down stimulus deployed during the 2007-2009 financial crisis.

Governments around the world ran up record debts during the $5 trillion effort to pull the economy out of its deepest slump since the Great Depression and now face a tough balancing act: how to reduce debt without choking off growth.

"Some countries have experienced sovereign debt crises, for example Greece. Is this kind of phenomenon over? Now it seems that it's not so simple," Wen said. "The sovereign debt crisis in some European countries may drag down Europe's economic recovery."

ECB Governing Council member Ewald Nowotny summed up the task.

"The big challenge is to prevent a vicious circle in which (a) crisis of the public sector again leads to crisis developments in the financial and real sectors of the economy," he told a conference hosted by Austria's central bank.

Greece stumbled into the global spotlight late last year when it sharply revised its budget deficit figures, provoking a series of credit downgrades and sending its borrowing costs soaring, which in turn fanned fears it may default on its obligations.

While a 110 billion euro rescue package put together by the European Union and the International Monetary Fund helped avert an immediate meltdown, it failed to dispel fears that other highly indebted euro zone members such as Spain, Portugal and Italy may face a similar fate.

POLITICAL BACKLASH

A massive 750 billion euro emergency scheme cobbled together by EU leaders early this month, again with IMF help, aimed to deter with its sheer size possible speculative attacks on the euro zone's weaker members and thus support the euro.

In return for the safety net, Athens, Lisbon, Madrid and Rome signed billions of euros in spending cuts and tax hikes to rein in debt, despite an outcry from trade unions and political backlash.

IMF Managing Director Dominique Strauss-Kahn praised Spain's austerity package in a newspaper interview, saying they should help restore confidence.

On Friday, Fitch became the second ratings agency to strip Spain of its top triple-A rating a day after it passed its austerity plan by a single vote.

However, recent opinion polls showing the ruling Socialists trailing badly behind the center-right opposition cast doubt whether the government will manage to muster enough support in parliament for its budget.

Such concerns, have been plaguing the euro, which is heading for its worst month since January 2009, down more than 7 percent against the dollar since the start of May and heading for the sixth straight monthly fall. It was steady in Asia on Monday.

"It is difficult to see a recovery in market sentiment as there are worries that further bad news about southern European countries may come out," said a currency trader at a Japanese bank.

Investors and policymakers around the world are also increasingly worried that Europe's efforts to cut debt will sap the continent's anemic growth, denting demand for exports from emerging economies and derailing the global recovery.

The fact that not just the fiscally weakest southern European countries, but also nations at the euro zone's core are under pressure to cut debt and deficits amassed during the financial crisis, is adding to those concerns.

On Sunday, France said keeping its AAA credit rating would be a stretch without some tough action on its deficit, while Germany indicated it might resort to raising taxes to bring its shortfall closer to the EU's limit of 3 percent of gross domestic product.

France, the euro zone's second-largest economy, expects the budget deficit to hit 8 percent of GDP this year, but aims to bring it down to the EU limit by 2013. Germany, Europe's biggest economy, expects its deficit to exceed 5 percent of GDP in 2010. In the future, major improvements are needed in the euro area to prevent bad fiscal behavior and to enforce effective sanctions in the case of breaches of fiscal rules, the head of the European Central Bank, Jean-Claude Trichet told the conference in Austria.

Striking a more optimistic note, China's Wen said the world's third-largest economy and its prime growth engine remained on course to meet its growth targets this year, though he added it would require Beijing to "maintain a certain level of intensity in its economic stimulus."

Hon Hai Repercussions Grow

Source: Wall Street Journal By Jason Dean and Ting-I Tsai

Chinese official calls for better conditions after spate of suicides; company plans 20% raise

The top Communist Party official of Guangdong called for companies to improve conditions for workers after a spate of suicides by employees of Hon Hai Precision Industry Co. in the southern Chinese province, state media reported.

The comments Saturday by Wang Yang, provincial party secretary, are the highest-level statement about the spate of worker deaths at Taiwan-based Hon Hai, the world's largest contract manufacturer of electronics. Ten workers have jumped to their deaths this year, and three more have been injured in suicide attempts, for reasons the company and outside experts have struggled to explain.

Mr. Wang, who also sits on the party's 25-member ruling Politburo, said party and government organizations and Hon Hai must "work together and take effective measures to prevent similar tragedies from happening again," the state-run Xinhua news agency reported.

The report didn't quote Mr. Wang assigning blame for the deaths to Hon Hai, which has announced a series of measures to improve conditions, including employee hot lines and nets on dormitories to prevent fatal jumps.

Mr. Wang spoke a day after a spokesman for Hon Hai, also known by its trade name, Foxconn, said the company has decided to increase wages for its factory workers in China by an average of 20%. Edmund Ding, the spokesman, said the decision wasn't driven by the suicides, but rather had been under discussion "for a long time" as a way to address concerns about a tightening supply of workers.

Mr. Wang's comments illustrate authorities' concern over the potential public fallout from the suicides, which have been the subject of intense discussion on the Internet and in the media. The deaths have also attracted global scrutiny to the secretive Hon Hai, which assembles personal computers and other gadgets for Apple Inc., Hewlett-Packard Co., Nokia Corp. and others.

Speaking at a conference in Shenzhen, the industrial city where the suicides have occurred and where Hon Hai employs more than 400,000 workers, Mr. Wang said "labor unions in private firms should be improved to facilitate better working conditions and more harmonious relations between workers and employers," Xinhua reported.

Mr. Wang called for more recreational and sports activities among workers to enhance communication. "Economic development should be people-oriented," Xinhua quoted Mr. Wang as saying.

Varying explanations have been offered for the Hon Hai deaths. They appear to be what is known as a suicide cluster, in which one suicide triggers copycat acts. Some researchers have said some in the current generation of workers are also more psychologically conflicted about their place in society than previous workers. Labor groups have said the suicides also reflect excessive overtime and overly intense work regimens at Hon Hai.

Hon Hai has defended its treatment of workers, while expressing regret over the deaths and vowing to do all it can to prevent further suicides.

Mr. Ding, the Hon Hai spokesman, said the company hasn't finalized the date to carry out the wage increases, but "it should be very soon." Hon Hai has authorized managers in different Chinese provinces to determine the size of wage increases. "It would be an average 20% increase, which means some areas will be more than 20%," he said.

Hon Hai employs more than 800,000 workers in several provinces in China. Workers at its giant Longhua plant in Shenzhen are paid a base monthly salary of 900 yuan, or about $132, the legal minimum wage in that district. But most work overtime, which can pay 1.5 times the standard hourly rate.

Citigroup analysts estimated that the wage increases might cost the company 2.7 billion New Taiwan dollars ($84 million) a quarter, likely slicing 10% to 12% off operating profit. But some analysts said it is too early to estimate the likely profit impact, as most of the related details aren't yet available. In 2009, Hon Hai's annual profit was NT$75.69 billion on revenue of NT$1.96 trillion.

Tobacco control faces great opposition in China

Source: (chinadaily.com.cn)

In an interview published on the WHO website, Yang Gonghuan shared her views about tobacco control in China.

Q: Has there been progress in tobacco control in China?

A: Before 2006, attempts at tobacco control were mainly research by health experts and basic health education. Since China joined the WHO Framework Convention on Tobacco Control (WHO FCTC), the government, media, research institutions and the public have acknowledged the need for tobacco control. The Ministry of Health has published an annual tobacco control report and there have been campaigns to increase the tobacco tax and warnings added to packaging. However, tobacco control faces great opposition. Tobacco control is not mentioned at all as a priority in the health reform plan, and the budget we have only accounts for 0.5% of the total budget for disease control and prevention.

Q: Which authorities in China are responsible for tobacco control?

A: The Ministry of Industry and Information Technology was appointed to lead the implementation of the WHO FCTC in China, a role that includes many ministries including the Ministry of Health. The State Tobacco Monopoly Administration controls the China National Tobacco Corp, which is a state-owned monopoly and the largest single manufacturer of tobacco products in the world. The administration is responsible for policy and enforcing regulations, such as those governing warnings on packaging. It does not involve health departments in policy-making, keeping that role for itself and the government departments it nominates.

Q: How does this work in practice?

A: The State Tobacco Monopoly Administration (which sits in the Ministry of Industry and Information Technology) issued regulations on cigarette package labeling that took effect in January 2009. These warnings on packaging fall well short of the requirements. According to the legally binding Article 11 of the WHO FCTC endorsed by China, warning signs should cover 50% of the display area; Chinese regulations require only 30%, and the warnings are in tiny characters. The WHO FCTC requires health warnings to describe the harm tobacco can cause, but Chinese warnings merely state: “Smoking harms your health,” and “Quitting smoking early helps reduce the risk.” By issuing domestic regulations on cigarette package labeling that flaunted Article 11, the State Tobacco Monopoly Administration hampered the best way for the public to learn about the harm caused by tobacco. The Administration’s strategy of dodging price increases also blunts the effect of tobacco tax increases by the Ministry of Finance. Meanwhile, the tobacco companies target young people. For instance, a primary school rebuilt after the Sichuan earthquake with funds from a tobacco company is named “Sichuan Tobacco Hope Primary School.” On the school walls is inscribed: “Talents are brewed by intelligence; tobacco helps you grow up and become accomplished.”

Q: What can be done to resolve this conflict of interest on tobacco control?

A: Tobacco control concerns quite a few ministries. At the very least, the ministry in charge of tobacco production should not be in charge of tobacco control as well. The Ministry of Health must take charge of implementing the WHO FCTC and the administration of tobacco control should be separate. If an entity can behave as both a private company and part of government, it will always have the economic leverage and policy-making power to thwart tobacco control efforts. We need to close the gaps between domestic laws and the WHO FCTC’s provisions. In fact, since 1992, the central government has made the separation of government and enterprise functions a goal. At each of China’s legislative conferences, delegates have proposed the separation of the State Tobacco Monopoly Administration and tobacco corporations. As our report Healthy China 2020 has pointed out, to achieve our health goals, a consensus must be reached not just within the health administration system, but at the national level, to resolve the essential obstacles. We suggest a National Committee on People’s Health be established to deal with health issues that are the responsibility of many ministries.

Q: Do you have difficulty getting public support?

A: Generating the political will to support tobacco control is crucial, but engaging the public is equally important. In October 2008, China’s Center for Disease Control invited more than 2,000 artists to take part in the Public Tobacco Control Campaign. Our online survey to gauge support for China’s implementation of the WHO FCTC generated 1.4 million “yes” votes within three weeks. We lobbied hard for the separation of government and the tobacco industry, the use of pictorial warnings on packaging, tax increases and legislation to control secondhand smoking. Yet the tobacco forces remain all-powerful. They once accused us of acting against the national interest by threatening economic growth; now they just ignore us. But I remain optimistic about progress, given the support we have had from central and regional government, the media and the public.

Q: What is China’s attitude to the WHO Framework Convention on Tobacco Control?

A: At the Durban session of the WHO FCTC in November 2008, I was one of the Ministry of Health’s representatives on China’s delegation, which was led by the Ministry of Industry and Information Technology. But as the director of the State Tobacco Monopoly Administration also sits on the party committee of the ministry, it was like having the Administration lead the delegation. The attitude toward tobacco control shown by the delegation was terrible. One speaker argued that Chinese tobacco packaging featured mountains, rivers and monuments, and placing “ugly” pictures beside such scenes would “humiliate the Chinese people.” But I don’t think these behaviors represent the essential attitude of China’s government. As we know, tobacco control can reduce the burden of chronic diseases, help solve the problem of limited medical resources and lead to economic development. The delegation’s behavior at the Durban session was merely a manifesto of the opposition from vested interest groups.

Q: What else needs to be done?

A: Tobacco control is by no means just the business of the Ministry of Health. Many parties need to promote advocacy and policies such as banning smoking in public venues, promoting tobacco tax increases, etc. There needs to be more research on the harmful impact of tobacco; precise monitoring of the prevalence of tobacco use; and criteria need to be developed for evaluating tobacco control.

Q: Is there support for tobacco control across government departments?

A: Most government departments support control measures. In December 2008, the Ministry of Civil Affairs was to award six tobacco companies with China’s National Charity Award. These firms had financed schools named after their brand, which in some cases was printed on student uniforms. We persuaded the ministry to drop the companies from its award list; the Shanghai Municipal Government declined a 200 million yuan sponsorship from Shanghai Tobacco Co. for the World Expo; and a project sponsored by the Bloomberg Foundation has reached 40 cities in 20 provinces, affecting 64 million people. All the mayors of participating cities have banned smoking in public indoor venues, and 16 cities have passed regulations banning smoking in offices, schools, restaurants and hospitals.

Q: What is the profile of smokers in China?

A: Smoking rates among Chinese men have been consistently high in recent history, comparable to those in Poland, the Republic of Korea and the Russian Federation a few decades ago. Other countries have achieved more in tobacco control while China out-puffs the Western countries. We found that in 2007, 57% of males smoked, although that was a decrease of 2% from 2002. This was attributed to smokers aged over 45 heeding doctors’ warnings to quit. In theory, it will take a generation to reduce the rate as youngsters are educated not to smoke throughout their lifetime. As for Chinese women, a strong prejudice against female smoking developed between the 1950s and the 1970s, resulting in low rates [3.7% prevalence]. Today, while more female students and educated career women tend to smoke, the overall rate remains low. We believe rates have hit a historical low and will likely increase.

Q: Which group is the most difficult to educate on tobacco control?

A: The rural population, because they receive the least health education and resources. The most important groups to reach, however, are the doctors and governmental officials at the local level. The officials in particular are given information about the effects of smoking but turn a deaf ear to it as they receive cigarettes as gifts, remnants of a social trend. That is why it is difficult to control tobacco smoking in China; it often goes beyond public health boundaries.

Q: Why is there such high exposure to secondhand smoke in China?

A: About 53% of non-smokers are exposed to secondhand smoke in China. Several social factors contribute to this. Gender inequality makes many women powerless to stop men from smoking at social gatherings. The National Tobacco Control Office has urged people not to provide cigarettes to guests or give them as gifts. Generally, smoking is far from being considered socially unacceptable.

Q: What was the reaction to a 2005 Beijing University study that found the health costs of tobacco far exceeded the profits from the tobacco industry?

A: No government department is discussing this research, even though the study and its conclusions are robust. Medical costs definitely exceed tobacco revenue, but it does not make sense for the government to compromise its revenue to reduce medical costs, which are mostly shouldered by the public due to inadequate health insurance. The workforce loss indicated by the study is a long-term problem, but most local governmental officials are focused on today’s issues.

Have You Heard...

• Factbox: Ties binding China and North Korea
• Big brewers fermenting deals in Southwest
• Taiwan Cuts Corporate Income Tax To 17%
• Pfizer Deal Highlights China's Clout
• Former Chinese Professor Appeals Group Sex Verdict

Factbox: Ties binding China and North Korea

Source: Reuters

Reuters) - Chinese Premier Wen Jiabao visits South Korea from Friday for bilateral talks and a regional summit sure to focus on escalating tension over North Korea, which Seoul says sank its warship, the Cheonan, in March.

China is North Korea's sole major economic and diplomatic supporter and Wen faces calls from South Korea, Japan and the United States for firmer pressure on Pyongyang over the sinking. Here is an overview of Chinese-North Korean ties.

COMRADES-IN-ARMS

Communist China was a crucial backer of North Korean Communist forces in the Korean War, and sent soldiers across the border into Korea from October 1950. The two neighbors had formally established relations in October 1949.

After the 1953 armistice, China continued supporting North Korea, helping with its post-war reconstruction.

In 1961, the two countries signed a Treaty of Friendship, Cooperation and Mutual Assistance, which calls for either to aid the other if attacked. It remains in force.

After China's rapprochement with the West and its establishment of formal diplomatic ties with South Korea in 1992, ties between Beijing and Pyongyang turned frosty.

In recent years, China has sought to shore up relations and increased aid to its poor neighbor.

In early May, North Korea's leader Kim Jong-il visited China on his first trip abroad since 2006. Both sides stressed hopes for stronger economic ties, and Chinese President Hu Jintao urged Kim to share his plans about major domestic and external issues.

Chinese Premier Wen visited North Korea in October 2009, when he was given an effusive welcome by Kim Jong-il. He was the most senior Chinese visitor since President Hu went in 2005.

SHIP SINKING

South Korea lost 46 sailors when its warship, the Cheonan, sank on March 26. Seoul said last week that an official inquiry found there was no doubt North Korea torpedoed the ship, but Pyongyang has denied it is responsible. Since then tensions between the two sides have jumped.

China has stayed low-key about the dispute, reflecting its desire to stay friendly with both North and South Korea. Chinese officials have voiced sympathy for the deaths but avoided publicly blaming Pyongyang over the sinking, instead urging restraint from all sides to avoid spiraling confrontation.

NOT ALWAYS IN STEP

Precedent suggests that China may nonetheless ultimately accept a statement, or even a resolution, from the United Nations Security Council regretting or criticizing the sinking. As a permanent member of the Council, China can block such actions.

In October 2006, North Korea held its first nuclear test explosion, defying public pleas from China. Beijing condemned the test and supported U.N. Security Council Resolution 1718, which authorized sanctions against North Korea and demanded it halt nuclear weapons and ballistic missile activities.

After the North held its second nuclear test on May 25, 2009 Beijing backed Security Council Resolution 1874, authorizing more sanctions on Pyongyang, including a ban on its arms exports.

SIX-PARTY TALKS

China has sought to defuse confrontation over North Korea by hosting six-party nuclear disarmament talks since August 2003.

The negotiations bring together North and South Korea, China, the United States, Japan and Russia, seeking to end the North's nuclear weapons ambitions in return for aid.

The six-party talks have been stalled for more than a year. In April 2009 North Korea said it was quitting them and reversing nuclear "disablement" steps it had agreed to, unhappy with implementation of an initial disarmament agreement reached at the talks in 2007. South Korea and the U.S. say resuming the talks will be impossible until the ship sinking dispute is settled.

ECONOMIC FLOWS

China's trade and aid have become crucial to North Korea's survival, especially as ties with South Korea have frayed.

In 2009, trade between China and North Korea was worth $2.7 billion, a fall of 4 percent compared with 2008 numbers, according to Chinese customs statistics. North Korea's exports to China rose by 4.3 percent to $793 million.

In 2009, China's bilateral trade with South Korea was worth $156.2 billion, according to Chinese statistics.

In the first three months of 2010, China's imports from North Korea -- which are mostly minerals, coal and seafood -- fell by 17.5 percent in value compared to the same time last year, despite China's frenetic economic growth. China's exports to North Korea grew by 17.2 percent.

REFUGEES

China's 1,415-km (880-mile) border with North Korea includes stretches of rivers that freeze over in winter, and in past years many North Korean refugees have crossed over, sometimes then making their way to other countries.

Outside groups have earlier estimated their numbers to be from tens of thousands to 300,000 or more. Beijing fears a collapse of Kim's government will turn this flow into a flood, one of the reasons it still offers firm support.

Big brewers fermenting deals in Southwest

Source: By Bao Chang (China Daily)

CHENGDU - The nights are certainly getting longer and louder in Jinli. No, it is not any geographical phenomenon, but the hustle and bustle of a typical summer night as more and more revelers head to the streets to chill out. Loud banter, music and sounds of "ganbei" ring the air in Jinli in Chengdu, one of the largest cities in southwestern China.

With the mercury sizzling, it is the chilled beverages that are selling like hot cakes. And for several years now beer has been the most popular beverage in Sichuan province.

The taste for beer also has its roots in the relaxed and easy life style of the region. So much so, that there is tremendous competition among the beer majors to boost investments and corner bigger market shares in the premium beer segment.

The popularity of beer can also be seen in the clutter of billboards displaying various brands dotting the streets.

"Most of our clientele come to have a drink after 7 pm, and we usually sell around 200 bottles of premium beer, priced at 15 yuan each, every day, even though our main business is food," said Xiao Li, a waiter at the Guan Jin bar in Jinli.

Molson Coors, the world's fifth-largest brewer is one of the biggest that have stepped up their investment pace here. The company recently spent $40 million to buy a 51 percent stake in a new joint venture with the Hebei Si'hai Beer Company. The joint venture plans to launch premium beers with lower production cost in China.

"Chengdu and Chongqing are among the cities that had the best sales figures last year for our premium brand Coors Light. We will consider making another new investment if the market keeps on growing," said Peter H. Coors, chairman of Molson Coors.

Companies like Molson Coors are also encouraged to expand as premium beer sales in southwestern China are five times larger than the Northern regions, said John Zhang, general manager (operations), China of Molson Coors.

The Guangzhou-based Molson Coors has been selling its premium brand, Coors Light, mainly in bars and night-clubs in southwestern China. The brand now accounts for 10 percent of China's premium beer market.

Molson Coors' competitor, Carlsberg, the world's fourth-largest brewer, is also planning new investments in the southwest. The brewer is currently waiting for the outcome of a bid to acquire 12.25 percent stake in Chongqing Brewery Company.

Carlsberg has also shown interest in the nation's southwestern market. Jorgen Buhl Rasmussen, president of Carlsberg, said he was planning to move the headquarters of Carlsberg China from Chengdu to Chongqing.

With competition heating up, there is also a price war. Both Carlsberg and Coors Light are priced the same, and sell at around 180 yuan per dozen in Guan Jin bar. "Carlsberg and Coors Light are the two best-selling brands due to their reasonable price and good taste," said Li.

The world's largest brewer Anheuser-Busch InBev's China arm started work on a new brewery in Ziyang, Sichuan province, this year.

Fu Meikai, president of Anheuser-Busch Asia-Pacific region, said: "Anheuser's production in southwestern China will mainly focus on the premium restaurants and bars.

Average beer consumption per person in southwestern China is 29 kilograms annually, below that of northern cities like Beijing, where beer consumption is 91 kilograms, according to China Jianyin Investment Securities.

"The beer industry in southwestern China is focused on premium beer due to the more relaxed and easy lifestyle here. In addition, the local economic growth and relatively low consumption base signifies huge growth potential," Huang Wei, a food and beverage analyst with China Jianyin Investment Securities, said.

Taiwan Cuts Corporate Income Tax To 17%

Source: Wall Street Journal By Alex Pevzner and Crystal Hsu

TAIPEI--Taiwan's legislature Friday approved a cut in the island's corporate income-tax rate to 17% from 20%, the second cut in 12 months, as the government seeks to make the island more competitive and attractive to foreign investors.

Taiwan's corporate income-tax rate will be on a par with Singapore's and slightly above Hong Kong's 16.5%. The gross margins of local companies will get a boost, analysts said, but the tax cut could put the island's credit ratings under pressure because of the likely dent to public finances.

The ruling and opposition parties had been divided over the size of the reduction, leading to a delay in the final vote to Friday from last month. The tax cut, which applies to any corporation earning annual income of more than 120,000 New Taiwan dollars (US$3,745), was delayed because it required a change to the island's corporate tax law, which lawmakers approved Friday, said an official at the legislature's Conference Department.

Lawmakers had previously lowered the tax to 20% effective Jan. 1 from 25% last year in an effort to turn the island into a financial and economic hub in Asia. But more needs to be done if the island wants to strengthen its position as a regional investment destination, analysts say.

Citigroup Taiwan Inc. economist Cheng Cheng-mount said it is too early to say how much additional foreign investment will result from the tax cut, but he said he doesn't expect domestic firms to increase their capital spending because of it.

"Government efficiency and policy consistency also come into play when firms plan their next moves," Mr. Cheng said. "The tax cut is a positive development but probably won't spur a change in the island's economic data in the foreseeable future."

The government will lose more than NT$34.3 billion in annual revenue as a result of the tax cut, Minister of Finance Lee Sush-der said in April.

"Taiwan's debt-to-GDP (gross domestic product) ratio is relatively high in the AA rating category," said Kim Eng Tan, director at Standard & Poor's Sovereign and International Public Finance Ratings. "Measures that could increase this ratio could affect the credit ratings. The current negative outlook reflects concerns of a near term deterioration."

David Peng, former secretary-general of the Retailers Association of Chinese Taipei, said the tax cut wouldboost corporate earnings, but the average consumer is unlikely to benefit.

"Shareholders of companies may expect to see an improvement in their portfolios," Mr. Peng said.

The tax cut will be retroactive to Jan. 1.

Pfizer Deal Highlights China's Clout

Source: Wall Street Journal by James T. Areddy and Dinny McMahon

SHANGHAI—The sale of a swine-vaccine business by Pfizer Inc. this week offers a peek into how China is exercising influence over the structure of global mergers, including setting conditions that may draw technology into the country.

Pfizer agreed to sell its China swine-vaccine business to a subsidiary of a large drug maker based in China's northeast, Harbin Pharmaceutical Group, the companies said. The transaction was designed to comply with a Chinese Ministry of Commerce antimonopoly review last year of Pfizer's merger with Wyeth, which required a divestment.

The deal is valued at about $50 million, according to people involved in the transaction, and is a minor aspect of a broad restructuring triggered by the $68 billion corporate combination, including factory closures and 6,000 layoffs announced this month.

The importance for global companies: The deal offers more concrete evidence of how Beijing intends to use its 2008 antimonopoly law to influence cross-border merger plans, a new hurdle as they become more complex. In judging how mergers affect its competitive landscape, Beijing is taking a page from regulators in the U.S. and the European Union, which also required Pfizer to divest certain animal-health operations in their merger reviews.

Beijing determined that the combination of the two U.S. pharmaceutical makers would leave them in control of nearly half the Chinese market for certain swine vaccines, a lucrative niche in a market of 500 million pigs.

Since the Chinese Ministry of Commerce's antimonopoly rules went into force almost two years ago, it has set conditions on at least five other big M&A deals, blocking one of them: a $2.4 billion Coca-Cola Co. bid for a Chinese juice maker.

The Pfizer deal is believed to be the first where China has required divestment of a local business. The ministry didn't respond to a request for comment.

Investment bankers said Harbin Pharmaceutical offered the highest price for the Pfizer business, which also attracted interest from Novartis AG and Eli Lilly & Co. Both Novartis and Eli Lilly declined to comment.

Yet, parameters set by the Commerce Department may also have made it most likely a Chinese buyer would emerge, people involved in the transaction said. For instance, the government invoked a non-extendable six-month timetable for Pfizer to complete a transaction acceptable to Beijing, or see a sale conducted by the ministry. Also, the global animal-health business is dominated by a handful of large non-Chinese companies, so any buyer would need to convince China it wasn't creating a monopoly.

"There will be a lot of similar cases in the future," said Euan Rellie, a New York-based senior managing director of Business Development Asia LLC, which represented Pfizer. "Chinese authorities will use the new antitrust regulatory controls to protect emerging local players from what China sees as dominant international companies," he added.

The deal is narrow, relating to the know-how for making and exporting to China branded vaccines to combat mycoplasma hyopneumoniae, a strain of pig pneumonia. Harbin Pharmaceutical will have access and training for three years to the Pfizer facility in Nebraska that produces and sells the vaccines, a person familiar with the transaction said. The technology could provide Harbin Pharmaceuticals a launch pad to produce other types of animal medicine.

(The recent H1N1 influenza outbreak in humans, which was initially described as "swine flu," is a type A influenza but antigenically different from influenzas found in pigs, according to the U.S. Centers for Disease Control.)

The buyer is about 45%-owned by an arm of the Harbin city government, as well as 22.5% by each of the U.S.'s Warburg Pincus LLC and Beijing-based Citic Capital Holdings Ltd., itself a venture of the country's sovereign wealth fund China Investment Corp. and state investment firm Citic Group.

"There's an open debate on whether MofCom is trying to protect domestic industry," said Ted Henneberry, a partner and antitrust specialist at Orrick, Herrington & Sutcliffe LLP, who wasn't involved in the Pfizer deal. "But using these tools as a remedy would be looked upon favorably by companies that MofCom will try and fix things rather than just say no."

Former Chinese Professor Appeals Group Sex Verdict

Source: Bloomberg By Debra Mao

May 28 (Bloomberg) -- Ma Yaohai, the first person jailed in 20 years in China for the crime of organizing sex parties, appealed his conviction today, his lawyer Yuan Xiaoyong said.

Ma signed and submitted the appeal this afternoon to officials at a detention center in the eastern city of Nanjing who will forward the documents to the Intermediate People’s Court, Yuan said. The 52-year-old academic was sentenced to 3 1/2 years in prison by the Qinhuai District Court on May 20.

Ma’s trial and conviction by the lower court attracted Chinese and international media attention, with the state-run China Daily reporting that the country’s laws on sex may have failed to keep up with social developments. “Organizing group licentiousness” is illegal under Article 301 of the Chinese criminal law.

Prosecutors said that between the summer of 2007 and August 2009, Ma, 13 other men and eight women used the Internet to meet up for swinger parties at his residence and hotel rooms in Nanjing. Ma participated in 18 encounters, according to court documents posted on the website of Yao Yongan, another of his lawyers.

China’s official news agency Xinhua reported that 18 other people were sentenced to jail terms of up to 2 1/2 years for the sex parties, and cited legal experts that this was the first criminal penalty imposed in 20 years.

In his ruling, Judge Wang Yingxin held that organized group licentiousness constitutes a breach of public order, irrespective of whether the activities took place in a public or private space.

Voluntary Adults

Ma, a former associate professor at the Nanjing University of Technology, argued that as all the participants were voluntary adults, they weren’t guilty of any crime.

Calls to the Nanjing Intermediate People’s Court today weren’t answered.

Prosecutors didn’t have sufficient evidence that Ma had been the lead organizer of several of the sex parties and that there were indeed “secret sex games” taking place, Yao said. “There’s no clear interpretation of this law,” he added, referring to Article 301.

“This prosecution has meant a loss of face for everyone involved,” Yao said. “And now we have to lose face overseas, too.”

Have You Heard...

• Beijing Is Shifting on Korea, U.S. Says
• China May Shield North Korea as Lee, U.S. Seek Action
• China boosts euro, Spain wins austerity vote
• Lenovo Profit Misses Estimates on Mobile Expansion
• Boeing CEO says China to continue to be US major market
• Credit card payment rises 70 pct in 2009

Beijing Is Shifting on Korea, U.S. Says

Source: Wall Street Journal by Jay Solomon and Andrew Browne

North Korea's new belligerence has exposed cracks in the thinking of Chinese officials toward their erratic neighbor, but leaders in Beijing appear to be edging toward criticizing Pyongyang for its alleged role in sinking a South Korean warship.

U.S. officials said Wednesday they expect China to move cautiously toward the stance taken by South Korea, the U.S. and others—that the North is responsible for sinking the South Korean warship Cheonan and must be held accountable.

China has taken pains in the two months since the sinking to remain neutral, calling for international restraint. A departure from that tack could signal a shift in the relationship between North Korea and China—the impoverished country's chief supplier of food, energy and arms and by far its biggest international backer.

The U.S. officials, who met with Chinese leaders this week in Beijing during U.S. Secretary of State Hillary Clinton's swing through East Asia, said they expected the shift to begin with Premier Wen Jiabao's visit to South Korea on Friday and Saturday for a summit with leaders from South Korea and Japan. "The thing that we have teed up very substantially is the visit of Wen Jiabao to South Korea," a senior U.S. official said.

U.S. officials said they sought to pursue a broad diplomatic approach toward punishing Pyongyang—engaging Japan, South Korea and Russia—as a signal to Beijing that it risked being isolated internationally on the issue. American diplomats also said they believed Beijing understood it was damaging its relationship with South Korea, a key trading partner and investor, by appearing to side with Pyongyang on the Cheonan incident.

"[The Chinese] have not appealed at all to South Korean sensitivities," the U.S. official said. "I think you will see them subtly and carefully move closer to the South Korean position" and begin discussing an appropriate international response. And I think you will see them begin a process of talking to the South Koreans about an appropriate international response."

U.S. officials have been vague as to what steps Washington hopes China will agree upon to punish Pyongyang. Mrs. Clinton stressed Wednesday in Seoul that the U.S. backed South Korea's plan to report the North to the United Nations Security Council over the attack. She didn't outline a timetable or say whether new economic sanctions would be sought.

Chinese leaders have often acted differently than the U.S. had anticipated, and have signed onto international efforts to sanction the likes of North Korea or Iran only to water them down later.

China's official views on North Korea have appeared divided, say the U.S. officials, who said they spent "hours" during their visit trying to gain China's insights into North Korea's recent actions and the mindset of its ailing leader, Kim Jong Il. "The Chinese seem frustrated" with Mr. Kim, said a senior U.S. official who took part in the talks.

Many Chinese analysts say they believe leaders in Beijing have grown exasperated with Mr. Kim, who embarrasses them with his nuclear theatrics and has shown little inclination to copy Chinese market-led overhauls, though Beijing has tried to dazzle him with tours of showcase cities and development zones.

Beijing's differing views on the North appear to be based both upon the age of Chinese officials and their place in government. One U.S. official said older Chinese officials who dealt with Mr. Kim's father, Kim Il Sung, remember him as largely predictable and responsive to Chinese influence. "He was more pliant," the official said they were told. Kim Jong Il, in contrast, appears to the Chinese as unpredictable and elusive.

U.S. diplomats acknowledged that the Chinese appeared reluctant to share too much information. A Chinese freeze on military-to-military relations with the U.S. means American officials are cut off from one of the best sources of intelligence on Pyongyang, the Chinese People's Liberation Army.

Washington accelerated its efforts to try to discuss North Korea with the PLA in 2008, under President George W. Bush, following reports that Mr. Kim had suffered a stroke. Washington sought to plan for the possible death of the leader and resulting political instability. The Pentagon still deploys 29,000 U.S. troops to South Korea to guard against a North Korean attack.

The Chinese leadership rebuffed those overtures, according to current and former U.S. officials. Earlier this year Beijing cut military-to-military communications with the U.S. altogether to protest an announced U.S. arms sale to Taiwan.

This week in Beijing, Mrs. Clinton included the head of the Pentagon's Pacific Command, Adm. Robert Willard, in her delegation. U.S. officials said Mrs. Clinton again hoped to signal to Beijing that Washington wants the PLA and the Pentagon to discuss the North Korea question.

Officials voiced confidence Wednesday that Mrs. Clinton's five-day China trip may have paved the way for more high-level military contacts. They said Adm. Willard was well received by Chinese officials.

They said the U.S. made clear to the Chinese side the White House's hope that Defense Secretary Robert Gates could visit Beijing next month as part of a planned Asia tour.

"I think we will see progress on a scheduled visit by Secretary Gates to China in the near term," said the senior U.S. official.

Beijing's response to Pyongyang has been further complicated by calculations over a looming succession to Mr. Kim, says Jasper Becker, the author of "Rogue Regime," a recent book on North Korea. "The thing they're really debating is what to do about the succession."

Mr. Kim is positioning his third son, Kim Jong Eun, to succeed him. Some analysts believe he was lobbying China to support his dynastic succession plans when he visited Beijing earlier this month to meet President Hu Jintao.

China has given no indication about its preferences on who should succeed Mr. Kim, although as Pyongyang's main supporter, it has a role to play, and its leverage is growing as South Korea, Japan and other countries turn their backs on Mr. Kim's beleaguered regime.

Beijing's strategic goal has long been to prevent a collapse of North Korea, which provides a buffer against South Korea and U.S. military bases there. Its nightmare is that internal chaos in the North could spill millions of refugees across its border.

Shi Yongming, a researcher at the International Strategy Research department of the China Institute of International Studies, says Beijing's support for Pyongyang is "not open-ended." He adds that China, which has long played the role of benefactor to North Korea, now sees long-term economic opportunity there. Its goal has become "equal benefits," he says.

Chinese companies are positioned to reap rewards from preferential access to North Korea's rich mineral resources, as well as operating ports and other facilities.

China May Shield North Korea as Lee, U.S. Seek Action

Source: Bloomberg

May 27 (Bloomberg) -- Chinese Premier Wen Jiabao is likely to resist pressure to acknowledge that North Korea torpedoed a South Korean warship when he flies to Seoul tomorrow to meet President Lee Myung Bak and Japan’s Yukio Hatoyama.

China hasn’t followed South Korea, Japan and the U.S. in blaming North Korea for the March 26 sinking of the Cheonan, which killed 46 sailors. Vice Foreign Minister Zhang Zhijun yesterday repeated a call for “restraint” by both sides and said China had no “firsthand information” on the sinking.

China wants to avoid a conflict on the Korean peninsula, and is concerned that taking South Korea’s side may provoke North Korea into further escalations and even lead to war, said Shen Dingli, vice dean of the Institute of International Affairs at Shanghai’s Fudan University.

“North Korea is dying, and we can make things worse,” Shen said. “We have assumed North Korea is not a rational actor.”

South Korea’s navy today began exercises off its western coast, including anti-submarine operations involving the firing of depth charges, a military official said. About 10 warships are participating in the two-day drill, the official said, asking not to be identified because of security concerns.

China has a big stake in stability in Northeast Asia. Japan and South Korea are China’s third- and fourth-biggest trading partners after the European Union and the U.S., with combined two-way trade reaching $485.1 billion in 2009, Chinese customs figures show.

Trade Imbalance

China’s two-way trade with North Korea, at $2.7 billion last year, is less than 1 percent of that total, even though the two countries share a 1,415-kilometer (880-mile) border and an alliance going back to China’s 1950 entry into the Korean War.

“If our region falls into chaos it will undermine the interests of all parties concerned,” Zhang said yesterday.

South Korea, Japan and the U.S. want the North to acknowledge its responsibility for the incident. An international panel on May 20 concluded North Korea was behind the attack. South Korea wants China to acknowledge the findings.

“They won’t be able to ignore the truth,” South Korean Foreign Minister Yu Myung Hwan said yesterday at a joint press conference with U.S. Secretary of State Hillary Clinton in Seoul. President Lee said on May 24 that “no responsible country in the international community will be able to deny the fact that the Cheonan was sunk by North Korea.”

Unified Response

Clinton is also working to bring China around.

“We expect to be working together with China in responding to North Korea’s provocative action and promoting stability in the region,” Clinton said May 25 in Beijing at the conclusion of two days of talks.

China’s government may conclude that taking South Korea’s side will only stoke a cycle of escalation, Shen said. Wen is scheduled to have talks with Lee and meet with both Lee and Hatoyama at a three-nation summit on South Korea’s Jeju Island May 29-30. He met with North Korean leader Kim Jong Il earlier this month in Beijing.

Wen will fly to Japan on May 30 and meet with Hatoyama the next day.

China may be willing to condemn the sinking of the Cheonan in a United Nations Security Council resolution provided that North Korea is not singled out for blame, Shen said. Such an outcome may end the cycle of escalation, he said.

Hand-Outs

Kim’s regime, which has been relying on handouts since the mid-1990s, is suffering from worsening shortages of goods after its botched currency revaluation late last year. Academics including Rudiger Frank, professor of East Asian Economy and Society at the University of Vienna, said that was aimed at rolling back an experiment with free markets that had loosened the state’s control over jobs, food and patronage.

The UN World Food Program said this month its food aid to North Korea will run out by the end of next month.

UN sanctions imposed on North Korea after its second nuclear test in May 2009 caused the country’s international commerce to shrink 9.7 percent last year, according to Seoul- based trade agency, Kotra. The North doesn’t release its own trade figures.

North Korea this week said it will cut all ties to the South in response to the findings of the panel. Kim ordered his military to be combat-ready, a Seoul-based dissident group said, sending the Korean won down 3 percent against the dollar on May 25, the biggest one-day drop since March 30, 2009.

Radio Propaganda

The South responded by resuming radio broadcasts into North Korea that it called the “voice of freedom.” The won was little changed yesterday at 1,252.28.

South Korea’s broadcasting of propaganda into North Korea was “a deliberate and premeditated provocation” aimed at pushing the peninsula “to the brink of war,” North Korea’s state-run Korean Central News Agency said yesterday.

In response to the sinking, the U.S. military is preparing exercises with South Korea in anti-submarine maneuvers and interdicting vessels. The U.S. has about 28,500 troops in South Korea, a legacy of its Korean War involvement in the 1950s.

“China is doing the thing that best suits China’s interests and everyone’s interest,” Shen said. “China is not pushing the envelope either on the North Korean side to be aggressive or on the South Korean to punish North Korea with warfare.”

China boosts euro, Spain wins austerity vote

Source: Reuters

(Reuters) - The euro rebounded on Thursday after China reaffirmed its long-term strategy of diversifying currency holdings away from the dollar and denied it was reviewing its holdings of euro sovereign bonds.

Spain's minority socialist government won parliamentary backing for its austerity program by a single vote in a drive to cut its budget deficit and regain market confidence dented by a euro zone debt crisis that began in Greece.

U.S. Treasury Secretary Timothy Geithner said after talks in Berlin on financial regulation and the euro crisis that the United States and Europe broadly agreed on the need for controls on risk taking but should ensure they do not impede recovery.

The People's Bank of China said in a statement that a Financial Times report that the State Administration of Foreign Exchange (SAFE) was concerned about its exposure to euro zone debt was groundless.

The central bank said Europe would remain one of China's main investment markets and Beijing would support actions to help the European Union resolve its debt crisis.

The 16-nation single currency, which has lost more than 8 percent against the dollar this month, rose more than 1 percent after falling to a day low of $1.2154 on the FT report.

European stocks also rose by nearly 2 percent after a 3 percent jump on Wednesday and U.S. stock futures pointed to a firmer start for Wall Street.

A Chinese government official earlier told Reuters Beijing's policy of diversifying its $2.4 trillion foreign exchange reserves "will not change," soothing nervy markets.

The Kuwait Investment Authority also denied a media report that the Gulf oil producer's sovereign wealth fund was reducing its exposure to the euro zone, saying there was no change to its long-term investment strategy in Europe.

Geithner took his campaign for coordinated action to calm markets to Germany, the key player that stunned investors last week with its ban on some speculative trades.

After talks with German Finance Minister Wolfgang Schaeuble, he played down differences on financial regulation, telling a joint news conference: "I think we all agree we want more conservative restraints on capital and leverage.

But regulation must be designed carefully so that it "makes the system more stable in the future but doesn't create a risk of financial headwinds to the recovery we are seeing happening."

Schaeuble acknowledged that Washington and European partners were critical of Berlin's ban on naked short-selling of euro sovereign bonds, credit default swaps and some financial shares.

TOP PAYMASTER

Geithner held dinner talks with European Central Bank President Jean-Claude Trichet in Frankfurt on Wednesday and has also met ECB governing council member Axel Weber, head of Germany's powerful Bundesbank and a fiscal and monetary hawk.

Weber has long warned of long-term pitfalls of extraordinary steps taken to fight the crisis and distanced himself from the ECB's move to buy government bonds and support a $1 trillion emergency euro zone/IMF plan to stabilize markets.

Washington has grown increasingly concerned that the effects of the Greek fiscal blow-out could spread well beyond Europe, with banks prone to a similar confidence crisis that roiled world markets during the 2007-2009 financial crisis.

Germany, Europe's biggest economy and its main paymaster, holds the key to any successful EU-wide action.

Its initial reluctance to bail out Athens was blamed for the EU's slow response once Greece's debt blow-out began morphing into a crisis of confidence in the euro zone as a whole.

But Geithner avoided any public criticism of Berlin's crisis management, saying he had enormous respect and confidence in German stewardship in meeting financial challenges.

Berlin blames speculators for aggravating the debt crisis with aggressive bets against the euro, but its short-selling ban was seen as largely symbolic because most of the targeted trades took place outside of Germany's jurisdiction.

Yet despite criticism, it looks determined to push through with the clampdown. A finance ministry document showed this week it was even considering widening the ban.

AUSTERITY CLUB

Berlin signed off on a 110 billion euro Greek rescue and the $1 trillion emergency scheme only in return for pledges of drastic spending cuts from potential beneficiaries.

Greece, Portugal, Spain and Italy have all agreed to push through multi-billion euro savings despite fierce opposition from trade unions and sometimes violent street protests.

Spanish Prime Minister Jose Luis Rodriguez Zapatero owed his wafer-thin victory on a two-year 15 billion euro ($18.42 billion) deficit-cutting plan to the abstention of Catalan nationalist lawmakers, underlining his precarious position.

Spanish trade unions were meeting to consider protest action over the planned public sector wage cuts, pension freeze and civil service hiring restrictions.

Elsewhere in the euro zone, French unions were staging a day of action against government proposals, still to be spelled out in detail, to increase the retirement age.

Italian Prime Minister Silvio Berlusconi sought to support the euro with a vigorous defense of his government's 25 billion euro ($30.65 billion) austerity package, approved by his cabinet in an emergency decree.

"The sacrifices required are indispensable to save the euro," Berlusconi said. "For years, Italy -- like many countries in Europe -- lived above its means. We are all in the same boat."

Lenovo Profit Misses Estimates on Mobile Expansion

Source: Bloomberg By Mark Lee

May 27 (Bloomberg) -- Lenovo Group Ltd., China’s biggest maker of personal computers, posted fourth-quarter profit that was less than half of analysts’ estimates as the company increased spending to expand in the mobile-phone market.

Net income was $13 million in the three months ended March 31, compared with a loss of $264 million a year earlier, the company said in a statement today. The Raleigh, North Carolina- based PC maker was expected to report profit of $30.7 million, the average of seven analysts’ estimates compiled by Bloomberg. Sales rose to $4.3 billion from $2.8 billion.

Lenovo re-entered the mobile-phone market in January, following bigger rivals including Acer Inc. and Dell Inc., to offer a wider range of consumer electronics products beyond PCs. The maker of Thinkpad laptops also increased spending to expand computer operations in India, Brazil and Russia to reduce its reliance on China.

“The traditional PC market is changing, and is converging more with the market for mobile devices, and computer makers need to review their businesses to compete effectively,” Galant Ng, who rates Lenovo shares “hold” at Tai Fook Securities in Hong Kong, said before the announcement.

Lenovo shares rose 3.9 percent to HK$4.77 in Hong Kong before the earnings announcement, which came after the market closed. The stock has fallen 1.9 percent this year, compared with the 11.2 percent decline in the city’s benchmark Hang Seng Index.

Outsell iPhone

In January, Lenovo paid $200 million to buy back Lenovo Mobile Communication Technology Ltd. after selling the unit in 2008. The company’s new Lephone smartphone is expected to outsell Apple Inc.’s iPhone in China, Chief Executive Officer Yang Yuanqing told reporters in Hong Kong today.

In smartphones, “our focus is to increase our market share quickly, rather than on profitability,” Yang said.

Products aimed at the mobile Internet market, such as smartphones and so-called netbooks, may comprise as much as 20 percent of Lenovo’s sales in five years, compared with a “low single-digit” percentage at present, President Rory Read said last month.

Revenue from China rose 67 percent to $2 billion, or 45 percent of the company’s total, Lenovo said. Sales almost doubled in its emerging markets division, which includes India, Brazil and Russia, according to the company.

Operating Expenses

Shipments of PCs in China climbed 47 percent last quarter, outpacing a 17 percent increase in the U.S., according to IDC.

Lenovo, which moved its headquarters from China to the U.S. after buying the PC division of International Business Machines Corp. in 2005, had a 7.2 percent increase in operating expenses last quarter, it said.

Sales in Lenovo’s mature markets division, which includes its operations in the U.S. and Western Europe, rose 33.7 percent to $1.6 billion.

Boeing CEO says China to continue to be US major market

Source: (Xinhua)

CHICAGO: China will continue to be both major market and partner to the United States, supporting thousands of US jobs and contributing significantly to the US balance of trade, said CEO of a Fortune 100 company in Chicago on Wednesday.

James McNerney Jr, chairman, president and CEO of the Boeing company, made the statement at a luncheon organized by The Chicago Council On Global Affairs as part of its Corporate Program: Focus on China.

McNerney started his speech by commending Secretary of State Hilary Clinton and Treasury Secretary Tim Geithner for the progress their teams made this week at the Sino-US Strategic and Economic Dialogue in Beijing.

"It is vitally important that US leaders are engaged in supporting US trade relationships. Expanded engagement in international markets, combined with the recovery of our financial service markets, is critical to accelerating our overall economic recovery," he said.

In 1972, then President Richard Nixon landed in Beijing aboard Air Force One - a Boeing 707 - marking the first visit of a US president to China. Boeing has been one of the few American companies present in China since diplomatic and economic channels were reopened.

"That Boeing 707 is truly the game-changing airplane of its time. China ordered ten Boeing 707 jetliners soon after the visit, setting in motion a tremendously productive relationship between a company (Boeing) and a country (China) - a relationship that continues today and in many ways has become symbolic of the four decades of cooperation between our two nations," McNerney said.

When talking about the significant changes in China, McNerney said, "One of the most important changes in China that I have witnessed - the rapid growth in personal incomes. A growing middle class in China is dramatically reshaping the country' s domestic economy and has global economic impact too."

Regarding Boeing's growing business with China, the CEO exclaimed, "China has bought more than any country in the world (except the US). It has a total of 1,560 airplanes (almost 53 percent of them are Boeing airplanes), and the average age of these planes is just six and a half years - meaning that China also has one of the youngest fleets in the region."

Commenting on the relationship between China and the United States, he noted, "I believe the US and China are already interdependent and growing more so every day. In fact, our interdependence with China is key to the US achieving President Obama' s goal of doubling America's exports over the next five years - an increase projected to support two million American jobs at a time when we really need them."

"I expect that the US-China relationship will always be complex, but that global interdependence in business will help keep both nations motivated to work out their differences constructively," he added.

McNerney gave an example to illustrate his point. "Despite ongoing debates on a number of issues, the two nations have worked very closely and effectively to navigate through the global financial crisis."

"The important concept here is maintaining dialogue between the two nations as well as between industry and the respective government, not only to address issues of concern but also to expand existing partnerships and create new ones," he added.

"The more we work with out counterparts in Chinese business and government, the more we will develop mutual understanding and influence."

McNerney has been chairman of the board, president and CEO of Boeing since July 2005. He has served as a member of the company's board since 2001. McNerney oversees the strategic direction of the 68.3-billion-dollar aerospace company.

With nearly 160,000 employees, Boeing is the largest manufacturer of commercial jetliners and military aircraft, with capabilities in rotorcraft, electronic and defense systems, missiles, satellites, and advanced information and communications systems.

Credit card payment rises 70 pct in 2009

Source: (Xinhua)

BEIJING: China's credit card transactions totaled 3.5 trillion yuan (512.45 billion U.S. dollars) in 2009, up 69.9 percent from a year earlier, said a report from the China Banking Association (CBA) Wednesday.

By the end of 2009, China had issued 186 million credit cards, up 30.37 percent from a year earlier, said the report.

Credit card transactions accounted for 27.9 percent of the total social retail sales in 2009, up from 11.2 percent in 2007, said the report.

The association warned of potential risks of the increasing overdue credit card debt, as the country's lenders continued to expand their credit card business.

China reported 5.27 billion yuan (765.30 million U.S. dollars) of credit card bad loans in 2009, up 78.68 percent from a year earlier, said the report.

The industry was taking measures to guard against risks as relative rules, laws and procedures in credit card markets were yet to improve, said Yang Ke, an official with the association and President of the Credit Card Center of China Minsheng Banking Corp. Ltd..

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North Korea threatens to cut last link with South

Source: Reuters

(Reuters) - North Korea threatened to close the last road link with the South if Seoul goes ahead with propaganda broadcasts across the militarized border, as Washington pressured China to help persuade the North to change its ways.

The mounting antagonism between the two Koreas has shaken investors, uncertain how far they are ready to take their bitter rivalry after the South accused the North of torpedoing one of its warships.

On Wednesday, shares and the local currency looked much more stable after sharp falls the previous day, but analysts said both remained under a cloud from North Korea, as well as the fallout from euro zone problems.

The won is now in its longest losing streak for 10 months while the stock market, though slightly higher, saw foreign net selling for the eighth consecutive session.

A day after saying it would cut all ties with the South, Pyongyang said it was considering closing a road link with the South which would threaten production at a joint industrial park that is a lucrative source of income for the North's government,.

"The South Korean puppet war-like forces would be well advised to act with discretion, bearing deep in mind that such measures of the KPA (army) will not end in an empty talk," North Korea's KCNA news agency quoted a top official as saying.

Washington is looking for ways to avoid the issue collapsing into conflict and U.S. Secretary of State Hillary Clinton pressed Beijing to coax its North Korean ally into changing course.

"There is a different path for North Korea and we believe it's in everyone's interest, including China, to make a persuasive case for North Korea to change direction," she told reporters in Seoul.

China, which almost single-handedly props up the North Korean government and its destitute economy, again called for calm and dialogue.

It has refused to give its backing to an international investigation that last week concluded North Korea in March sank the South Korean Cheonan corvette, killing 46 sailors.

Beijing is certain to block attempts to impose new sanctions on its ally which means the United States may have to accept no more than a carefully worded rap over the knuckles for Pyongyang.

Clinton said that the crisis brought on by the North's sinking of a South Korean warship required a strong but measured response and said Washington was considering additional options to hold Pyongyang accountable.

SEVERING TIES

The South has announced its own set of measures against Pyongyang for sinking the Cheonan. Those include resuming, after a six-year lull, the setting up of speakers near the border to broadcast propaganda and send messages across by balloon.

Despite its announcement that it was severing all ties with the South, the North on Wednesday allowed workers from across the border to enter their joint industrial park.

The move suggests the isolated North is being careful not to go so far as to cause material damage to itself despite some of the most ferocious rhetoric directed against the South in years.

But if it does cut the road link to the Kaesong industrial park, it will be unable to function.

Analysts say both Koreas, who have never repeated the open conflict of the 1950-53 Korean War, were unlikely to let their current hostility turn to war.

Apart from Kaesong, there is little economic relationship left between the two, their ties almost frozen since the South's conservative President Lee Myung-bak took office in 2008.

"North Korea is not closing up Kaesong immediately because it is saving the cards it needs in order to play the game," said Jang Cheol-hyeon, researcher at the Institute for National Security Strategy.

By paying the workers' wages directly to Pyongyang, Kaesong is one of the few major legitimate income sources for the North's secretive leaders, worth tens of millions of dollars a year.