42 edition magazine

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EditorialFM’s amazing move

Editor

According to news reports, China’sForeign Minister

Wang Yi has turned to a Hongqi H7 sedan as his

official car, instead of using any luxurious foreign

model.

The Hongqi H7 sedan, priced at between 299,800

Yuan ($48,950) and 479,800 Yuan, is a newly developed

sedan of the First Automobile Works Group Corp, mar-

keted to officials at the ministerial level or above.

at a time when China's domestic automobile indus-

try was going relatively weak, the decision by the Chi-

nese Foreign Minister to use local car for his official use

appears to be not merely a patriotic move but a bid to

promote country’s Auto sector and to restore local and

international confidence in abilities and capabilities of

Chinese carmakers despite the fact that the Chinese

government has already been introducing different

ways and means to promote the production of the local

Auto industry.

it remains a fact that most of China's official cars

are foreign made, despite the 2002 Government Pro-

curement Law stipulating that domestic brands should

be purchased.

In 2012, the Ministry of Industry and Information

Technology published an official car procurement man-

ual, which included more than 400 different Chinese-

made cars.

We believe that the decision that the Chinese FM

has taken and is being followed by his other colleagues

from the government is an amazing example to be fol-

lowed by the world leaders to promote their respective

local industries. We also believe that such decisions

would have a great impact on china’s economy in

coming years and it would come as a great booster for

the local industry.


08, 14 July 2013

Cover Story

Beijing to

have own

real Rubber

Duck

04

Go, dance, to

get stress relief

06

China's leaders seem to be

bracing for painful therapy in

return for sustainable growth,

as they are determined to

tame liquidity risks rather

than pacify cash-strapped

banks, which are the major

driver of an investment-ori-

ented economy.

in this issueMagazine_Layout 1 7/8/2013 6:24 PM

in this issuePBOC endscreditcrunch, togo further

New Canal alifeline forenergy

China beginsshift to sustainablegrowth

09 12

3G subscriberstop 300 million in

China


04

Society

Beijing tohave ownreal RubberDuck


CED Monitoring

BEIJING -- Besides the home-made roast duck, Beijing willgreet another well-knownduck this autumn. Dutchartist, “papa” of the giantyellow Rubber Duck, Floren-tijin Hofman signed anagreement with Beijing De-sign Week (BJDW) on theadvent of real and originalyellow duck in Beijing.

As a great gift fromBJDW’s guest city Amster-dam, the Rubber Duck willmake its Beijing debut in thisSeptember. The BJDW or-ganizer said the size of Bei-jing’s duck may be 10meters high, shorter than theone showcased in HongKong.

Another mission of Hof-man’s Beijing visit is to find asuitable place to show theduck. Zeng Hui, vice directorof BJDW Organizing Com-mittee, said the exhibitionsite is still under discussionbut it may be at the heart ofBeijing so duck admirers canhave an easy access.

Hofman created his firstduck in 2007, which is also

the world’s largest rubberduck. Since 2007, severalHofman’s ducks of varioussizes have visited 13 cities of10 countries. Before Beijing,Hong Kong is the first Chi-nese city that hosts theduck.

About eight millions ofHong Kong locals and visi-tors flocked to Victoria Har-bor to view the duck duringits one-month stay. Anabrupt and dramatic defla-tion incident of the duckcaptured more Chinesepeople’s eyes, thanks toweibo, a twitter-like Chineseservice.

“I always call it yellowcatalyst. It has differentmeanings and layers andyou can all project on it,”said Hofman.

The popularity of Hof-man’s duck catalyzed anarray of duck knockoffs inChina. It’s reported that thecopycat ducks have ap-peared in many citiesaround China such as Tian-jin, Hangzhou, Foshan,Wuhu, and Wuxi.

“It’s a surprise to me,what happened in Hong

Kong and cheap copiesaround China. To be honest,I don’t want to put manywords about the issue,copies and copycats. Theonly thing I would like to sayis Beijing will get the real,original Rubber Duck,” Hof-man responded after sign-ing with BJDW.

BJDW said they havemade anti-piracy meas-ures for the duck. The or-ganizer said they haveconfidence to make therubber duck artist feel res-olution and action of Bei-jing for copyright andcreativity protection.

“We can show Chinathat the originality and cre-ativity must be supportedand also it’s the aim of cul-ture. Without being creativeand original, culture and hu-manity may stay stagnant.So I’m very happy that theRubber Duck as a catalystcan show to people if youare original, if you are cre-ative and if you have a joy-ful mind, you will come tocreate yourself,” said Hof-man.

05

“We can show China that the originality and creativity

must be supported and also it’s the aim of culture. Without

being creative and original, culture and humanity may stay

stagnant. So I’m very happy that the Rubber Duck as a cat-

alyst can show to people if you are original, if you are cre-

ative and if you have a joyful mind, you will come to create

yourself


Society

06

Go, dance, toget stress relief


07

CED Monitoring

GUNANGZHOU-In the Oscar-win-ning movie Silver Linings Play-book, Pat, a monomaniac whorefuses to face the breakup withhis ex-wife, and Tiffany, a widowwhose life is a mess after her hus-band's death, heal their woundsby preparing for a dancing com-petition together.

They forget their troubleswhen they focus on practicingthe jumps and lifts. They build uptrust and love for each other withsilent touches rather than flashywords.

Dancing turns out to be amiracle drug for the two mentallyill people.

And it also has become atrendy antidote to stress amongyoung Chinese, especially urbanfemale white-collar workers, inthe past three years.

After a day of exhaustingwork, they go to "dance therapy"studios, which are usually in ornear their cities' central businessdistricts and thus not far from theiroffices; take off their high heels;and put on sportswear to learnabout their own bodies so as torelease the emotions locked inthe shells.

Wang Yuchi is the first dancetherapist in Guangzhou, capitalof Guangdong province, andhas been offering the service atthe Sun Flower Counseling Cen-ter since 2010.

She has given dance ther-apy courses to about 50 people,each 10-week course carried outamong a group of only five or sixpeople.

A weekly class begins withparticipants relaxing their bodiesby doing whatever movementsthey want to do. They are askedto put aside rational thinking and

to just follow what they feel.Then Wang will guide partic-

ipants to observe and imitateeach other's movements andshare what they guess theirteammates are feeling. "Remarksfrom others can help a self-re-strained person to crack openthe body to feel the emotions in-side," Wang said.

Only when trust is built withina group will Wang start individualcase studies. During a casestudy, the therapist designsmovements for a particular par-ticipant to follow based on previ-ous in-depth personal interviewsin order to put the person in a sit-uation similar to the one wherehe or she got the emotional scar.

The other members in thegroup surround their teammateto offer a sense of security, hold-ing the person's hand when he orshe gets too emotional and thusshakes and tumbles. They also lis-ten to the person baring the oldwound.

"The team's support is vital fordance therapy's effect," Wangsaid. "I shut down newcomersoutside a group. Otherwise it willharm the trust within the group.And I will suspend the class if anymember is absent."

Wang said dance therapy ismore than stress relief. It can helpbridge people's physical move-ment and mental activity to rootout the source of emotionalproblems. It is also an effectiveadjunctive therapy for mental ill-nesses.

Tony Zhou, co-founder andCEO of Inspirees Institute of Cre-ative Arts Therapy which offerstraining programs to professionalsin China to help them becomedance therapists, points outsome common misunderstand-ings about dance therapy.


08

Finance

"Some people think that onlyprofessional dancers are able todo the course. But dance ther-apy is not dancing performance.It doesn't require participants tostrike a ballet pose. How youmove your body is up to you.Self-expression is what matters,"Zhou said.

On the contrary, some peo-ple take dance therapy superfi-cially for the purpose of physicalrelaxation similar to yoga.

"What makes dance therapyspecial is its combination of artand science. Besides moderndance, it also involves psy-chotherapy and Laban Move-ment Analysis," said Zhou, amember of an international advi-sory board for the UK journalBody, Movement and Dance inPsychotherapy. LMA is a methodand language for describing, vi-

sualizing, interpreting and docu-menting all varieties of humanmovement.

"Dance therapy cures peo-ple's emotional problems bybridging their physical move-ment and mental activity. The in-consistency of the two is thecause of emotional problems."

Dance therapist Wang fur-ther explains this kind of creativearts therapy with a metaphor: If aperson is a tree, then his brain isthe crown, reaching out all thetime for sunlight and raindropsthat can nurture the tree'sgrowth. The roots are the person'semotions closely related to hisinner self. What is between thecrown and the root is the trunk —the person's body.

"A tree won't survive if thetrunk, the passageway throughwhich the crown and the roots

exchange the nutrition they'vegot, is blocked. Dance therapyaims at relaxing the excessive re-strictions on a person's body toconnect his rational thinking andemotional feeling," Wang said.

She added that dance ther-apy also aims at clearing the "rot-ted roots", referring to the oldwounds that the person ignores.

Chinese people's keen inter-est in dance therapy is alsoshown in the upsurge of work-shops across the country whereexperts from the US and Europeare invited to teach local dance-therapists-to-be the theories andskills. For example, IICAT sched-uled four such workshops andtraining courses in Beijing, Shang-hai and Hong Kong from April 25to June 16.

Faced with fast economicgrowth and social transitions,


09

many Chinese are exhaustedkeeping up with hectic urban lifeor feel lost in handling the socialchanges. Therefore, mentalproblems are becoming a com-mon health challenge in thecountry nowadays.

"China lacks a well-devel-oped psychotherapy system, sopeople don't have many optionsfor therapy. They will try on vari-ous ways to reduce their pres-sure, such as yoga andmedication. When dance ther-apy appeared as a new option,they were quickly attracted,"Zhou said.

Those pioneers who are pro-moting dance therapy in Chinaare optimistic about its prospectsin the country.

Hu Shenzhi, founder of SunFlower Counseling Center, of-

fered Wang the opportunityto carry out dance therapy athis center in 2010 because Hubelieved it is a tradition in Chi-nese culture for people toachieve physical and mentalhealth through moving theirbody.

"The tradition can be seenin tai chi and wuqinxi, a phys-ical exercise that imitates themovements of five animalsand is said to be created bynoted physician Hua Tuonearly 2,000 years ago. But atthat time, people didn't real-ize the connection betweenbody movement and mentalactivity yet," Hu said.

Zhou from IICAT points outthat dance therapy, if carriedout in groups, fits in with Chi-nese people's need to blend

into society."Chinese society is suffering a

credibility crisis, with people men-tally isolating themselves andlacking a sense of belonging,"Zhou said.

"Divided into groups to un-dergo dance therapy, patientscan learn how to blend into soci-ety through learning to blendinto the small groups first."

The advocate of dancetherapy hopes people can seeits potential of being applied in awider range of social groups be-sides stressed urban white-collars.

"For those who have diffi-culty in verbal communication,for example, autistic childrenand senile old people, dancing isa better way of self-expressionthan struggling for words andsentences," Zhou said.


10

Finance

PBOC endscredit crunch,to go further


11

SHANGHAI - China's central

bank has taken a sharp turn as it

has promised to inject money into

a temporary liquidity shortage

after rejecting banks' pleas for

cash over the past two weeks.

The move has been inter-

preted as regulators' decision to

end the credit crunch that caused

interbank rates to surge to double

digits and pounded the stock mar-

ket into bearish territory.

The People's Bank of China

(PBOC) has changed its stance, as

starving the financial system of

cash has been crippling the econ-

omy in a broader scope. The

Shanghai Composite Index re-

ported its biggest slump in four

years on Monday, after the PBOC

published an internal notice imply-

ing tight liquidity. The benchmark

further tumbled 6 percent Tuesday

before reversing the retreat on ru-

mors of a declaration of support,

which was issued by the bank ear-

lier.

"The market is full of fear and

rumors, and that let the govern-

ment smell financial risks," said

Zhang Zhiwei, chief China econo-

mist at Nomura Securities Co., Ltd.

The benchmark seven-day

fixing repo dipped 78 base points

to 7.22 percent as of 11:30 a.m.

Wednesday, and the Shanghai In-

terbank Offered Rate (SHIBOR)

overnight rate slid 18 base points

to 5.55 percent at the same time.

The SHIBOR overnight rate shot up

to 25 percent last week, when

banks rushed to each other for

money.

Banks with aggressive off-the-

balance-sheet lending felt the

pain of the cash squeeze when

they borrowed money at exorbi-

tant rates while watching stock

prices plummet.

"Regulators have successfully

warned the market," said Li Xunlei,

chief economist with Haitong Se-

curities. "Changing the stance is

the right decision. After all, the

central bank has an obligation

keep the financial system afloat

with liquidity."

China Minsheng Banking

Group, a mid-sized bank, prom-

ised to clear all excessive non-

standard assets in an investor

meeting held after its stock price

plunged 10 percent. In a report,

Barclays warned that medium and

small banks have higher interbank

assets as a percentage of their

total assets than large banks.

Another factor forcing the

PBOC to dial back its tight liquidity

stance was that the market re-

acted to regulators' call in a way

that was the opposite of what reg-


Finance

12

ulators had hoped for. In desper-

ate need of cash, banks rolled out

massive wealth management

products (WMPs) to attract de-

posits, and the yields of these in-

vestments grew much higher than

previous ones, thus posing greater

risks.

The average yield of WMPs

has been climbing for four weeks,

according to Bankrate, a WMP ag-

gregating website. Citic Bank is-

sued a four-month WMP with an

interest rate of 6 percent, while

Huaxia Bank produced a 72-day

WMP with a rate of 7 percent,

which doubled China's bench-

mark deposit rate.

The central bank relented on

its stance of a tightened credit

crunch, as economists warned

that a prolonged credit crunch

would put the brakes on the econ-

omy, which is already facing

mounting downward pressures.

Some banking executives told

the press that they will have to

raise interest rates if interbank

lending remains high. A rising in-

terest rate would be the last thing

Chinese companies want to see

during their battle with growing

overcapacity.

Goldman Sachs trimmed its

forecast on China's GDP growth

from 7.8 percent to 7.4 percent

due to the recent monetary tight-

ening. Meanwhile, Moody's

warned that keeping the banking


13

system short of liquidity would en-

tail risks that could have credit

negative implications.

"If liquidity tightening contin-

ues, the possibility of an economic

hard-landing will increase," said

Liu Ligang, chief China economist

at ANZ.

The stand-off in the money

market is believed to be part of the

PBOC's commitment to containing

runaway credit growth and reduc-

ing financial risks accumulated in

shadow banking. They have not

finished the job, but the battle is

nearing an end.

However, there will be more

rounds for regulators wrestling with

shadow banking.

Analysts say regulators must

be prepared to defuse the funda-

mental catalysts for the explosive

growth of shadow banking, which

would mean liberalizing interest

rates, curbing local governments'

wild investments and improving

the transparency of WMP sales.

Chinese banks are only al-

lowed to offer PBOC-guided rates

to depositors, and those interest

rates are flat with the rate of infla-

tion, which has bolstered Chinese

depositors' readiness to turn to

WMPs that offer higher returns.

Meanwhile, banks are

banned from lending money to

certain industries beset by overca-

pacity as well as local government

financing vehicles (LGFVs). So,


Finance

14

when borrowers from these cate-

gories knock on a bank's door for

money, they will be asked to get a

loan with a high interest rate from

money raised in WMP sales.

This is where risks creep in. A

huge proportion of local govern-

ment investments have not gener-

ated any cash flow, and the only

reason China has not seen mas-

sive defaults is that the projects re-

ceived either fiscal support or took

on new debts to repay the old

ones.

Investors, on the other hand,

have little information about where

their money goes when they buy

WMPs, and because the products

are sold over banks' counters,

many believe these purchases are

as harmless as putting money into

a savings account.

As the medium, banks further

complicate the issue by selling

short-term WMPs to finance long-

term projects, as longer maturity

yields higher returns. When the

WMPs are due, banks just go to the

interbank market and borrow

money to repay investors. The in-

terbank borrowing costs before

the credit crunch were around 3

percent, but banks can charge 10

percent interest on a loan to an

LGFV.

"To squeeze the pimple of

over-leverage, we need an over-

haul of the current fiscal system,"

said a well-respected researcher

at a think tank of the State Council,

who requested anonymity in dis-

cussing the matter.

"As the financing vehicles of

some governments in western

China can take on interest rates as

high as 18 percent, how can the

money go to the real economy?"

the researcher asked.(Agencies)


15


Finance

16

China begins shift to sustain-able growthBEIJING-China's leaders seem tobe bracing for painful therapy inreturn for sustainable growth, asthey are determined to tame liq-uidity risks rather than pacify cash-strapped banks, which are themajor driver of an investment-ori-ented economy.

Economists have interpretedthe move as evidence that a pol-icy shift from rapid growth to qual-ity growth has made the centralgovernment less sensitive to lowerGDP growth and more focused onadjusting the country's overall im-balances.

The authorities showed littlewillingness to pump fresh funds intothe financial markets despite aworsening cash crunch thatsqueezed banks and promptedthe country's key stock index torecord its biggest daily loss innearly four years on Monday.

The Shanghai CompositeIndex sank 5.3 percent to 1,963.24,the largest single-day loss sinceSeptember 2009. Hong Kong'sHang Seng Index slid 2.2 percent,extending six weeks of losses.

However, the People's Bank ofChina, or central bank, reiteratedon Monday its intention to main-

tain a prudent monetary stanceand strengthen liquidity manage-ment to prevent excessive debtgrowth.

"Currently, overall liquidity inthe domestic banking system is ata reasonable level," it said in astatement.

The statement came a dayafter a commentary from the offi-cial Xinhua News Agency that in-dicated the government is unlikelyto pump cash into the banking sys-tem to contain financial risks.

It blamed speculation andnon-bank lending, often called"shadow finance", for the problem.

The cash squeeze has seenbanks put the brakes on new lend-ing, which has in turn dragged onthe economy.

Economists say there is a likeli-hood that the new cabinet, led byPremier Li Keqiang, may tolerate alower growth rate in the remainderof 2013 while preparing to launchnew development programs andpolicies.

Over the past few weeks,nearly all major investment institu-tions have cut back their forecastsfor China's 2013 GDP, in somecases below the government's tar-

get of 7.5 percent.Most international investors

were confident of 8 percent-plusgrowth three months earlier "Liq-uidity tightening can be very dam-aging to a highly leveragedeconomy," said Zhang Zhiwei,chief economist in China with No-mura Securities. It can lead to risingfinancing costs and a slowdown infixed-asset investment, which isseen as the strongest driving forceof China's economy.

"While we expect GDP growthto slow only moderately to 7.4 per-cent in the third quarter and 7.2percent in the fourth, we now at-tach a 30 percent probability to ascenario in which growth fallsbelow 7 percent in either of thetwo quarters," Zhang said.

Chang Jian, a senior econo-mist with Barclays Bank, said unex-pectedly weak industrialproduction and an "export col-lapse" in May were among thefactors that could suggest a slow-down.

Downside risks were seen togrow when investment and outputof the industrial sector, which ac-counts for about 40 percent ofChina's GDP, gave negative sig-


17

China begins shift to sustain-able growth


18

Finance

nals in May and June.HSBC Holdings Plc released its

preliminary June Purchasing Man-agers' Index last Thursday. Theindex declined to 48.3 from 49.2 inMay, the lowest level in ninemonths and indicative of a con-traction in the manufacturing sec-tor.

Industrial output growthweakened to 9.2 percent year-on-year last month, compared with9.3 percent in April.

Exports in May increased only

1 percent from a year earlier, theslowest pace in 10 months, saidthe General Administration of Cus-toms.

Chang said that as themedium-term outlook for China'spotential growth has dropped to7-8 percent, the new leaders areincreasingly aware of this, andmay tolerate a growth rate of aslow as 7 percent.

She and other economistsbelieve that China should take theunavoidable pain of a period of

structural economic transition,with challenges from a deflatingof global demand and domesticinvestment bubbles. No aggres-sive stimulus is expected to propup growth in the short term.

The National Bureau of Statis-tics will release figures for second-quarter GDP growth on July 15.The world's second-largest econ-omy, a driver of global growth, ex-panded 7.8 percent in 2012, itsslowest pace in 13 years.

GDP grew a surprisingly weak


19

7.7 percent in the first quarter, wellbelow forecasts.

Duncan Freeman, a re-searcher at the Brussels Institute ofContemporary China Studies, sug-gested "the only way to sustainlong-term growth is through a re-form dividend", which has beenadopted by the government.

As any reform dividend willtake time to materialize, there areshort-term risks that could reducegrowth. This situation may forcethe government to use traditional

means to boost growth andweaken reform efforts, Freemansaid.He stressed that easing ad-ministrative burdens of the gov-ernment can boost businessesand jobs and sustain GDP growth.

Zhu Haibin, the chief Chineseeconomist at JPMorgan, is confi-dent about local governments'ability to repay debt even as eco-nomic growth further decelerates,as "the current debt level is withina healthy range".

"But we have more concern

about large companies with highdebt ratios. Once the economycontinues to slow, non-performingloans will rise and that may triggera financial crisis," Zhu added.

In the short term, a relativelymore efficient way to keep upgrowth is to promote infrastructureconstruction and increase prop-erty investment. However, pursu-ing that course will present a deepdilemma for policymakers whoneed to monitor systemic risks, headded.(Agencies)


20

IT

3G subscribers top 300 million in China


21

3G subscribers top 300 million in China


22

IT

CED Monitoring

BEIJING-According to the

Ministry of Industry and Infor-

mation Technology’s report:

from January to May this

year, the number of mobile

phone users kept the trend of

increasing ten million per

month. By the end of May, the

number of 3G subscribers in

China reached 304 million.

The 3G penetration rate

reached 26.1% and in-

creased 1 percent per month.

From January to May, both

telecom business volume and

revenue remained steady

growth. The growth rates were

7.9% and 8.7% respectively.

From January to May,

Mobile phone users in-

creased by 53.082 million and

reached a sum of 1.165 bil-

lion, which account for about

81% of the total number of

telephone users. The devel-

opment of 3G users is rushing

into the fast lane. In May,

China added 15.63 million

total net new 3G subscribers,

the TD-SCDMA subscribers

contributed 59.9% of the new

subscribers’ growth, and the

rate was twice as the same

period last year. During Janu-

ary to May, China added

71.569 million total net new

3G subscribers and the figure

of total 3G subscribers

reached 304 million.

From January to May, in-

ternet broadband users in-

creased by 9.477 million and

reached a total of 179 million.

The broadband speed effect

is still obvious. From January

to May, the proportion of 4M

broadband users reached

70.7%. 8M broadband sub-

scribers increased by 8.037

million and reached a total of

30.237 million, the ratio of 8M

broadband subscribers ac-

counted for the proportion of

the total broadband users

reached 16.9% from 16.0% in

the end of 2012.


23

Triple Play stepped to the

promotion stage from pilot

project this year. From Janu-

ary to May, IPTV business

users increased by 3.108 mil-

lion and reached a total of

24.851 million, with year-on-

year growth of 46.4% . Mobile

TV subscribers grew by 11.1%,

reached 55.907 million. The

figure of the Internet of things

end device and mobile

phone payment users

reached 26.601 million and

2.777 million respectively. The

user scale of converged serv-

ices brought fast growth of

revenue. From January to

May, IPTV business revenue

grew by 42.9% and reached

RMB 1.58 billion Yuan. Mobile

TV services revenue grew by

30% and reached RMB 1.03

billion Yuan.

The contribution rate of

data service growth was

close to 80%. The contribution

ratio of fixed and mobile data

services came to 1/5.6. The

revenue of data service and

Internet business reached

RMB 13.114 billion Yuan, with

year-on-year growth of 29.4%

, its contribution rate through-

out the whole industry

reached 79.5%, 18.6 percent-

age increased over the same

period last year. The revenue

proportion of data and Inter-

net business in the whole in-

dustry reached 28.1%, 4.4%

increased over the same pe-

riod last year. The revenue of

mobile data and internet

business reached 69.76 billion

Yuan, with year-on-year

growth of 56.8%. The growth

contribution rate of fixed and

mobile date services to the

whole data business were re-

spectively 15.1% and 84.9%.

The ratio between them in-

creased to 1/5.6 from 1/2.4 in

the same period last year.


24

IT

China’s Smart-phone shipmentsto exceed 460Mln Units


25

CED Monitoring

BEIJING-China’s mobile

phone shipments registered at

97 million units in Q1 2013, up

15% compared with the same

period in 2012, while China’s

smartphone shipments totaled

78 million units in Q1 2013, with

a growth of 117% compared

with the same period in 2012.

International Data Corpo-

ration (IDC) believes such a

high-speed growth of China’s

smartphone market would not

be possible without China Mo-

bile’s efforts.

According to IDC’s 2013 Q1

China Mobile Phone Quarterly

Tracker, shipments of TDMC-

based (Time Division Multiple

Access) smartphones reached

28 million units in Q1 2013, with

a year-on-year growth of 390%.

This resulted in the share of

smartphones in China’s mobile

phone market reaching a new

high of 79%.

From the perspective of

vendors, in terms of smart-

phone shipments, Samsung

continues to rank as No. 1 with

a market share of 19% and a

link relative ratio of 34%. Its

shipments of products under

USD 200 grew by 47%.

In Q1 2013, Apple ranked

the fifth with a market share of

9% and a link relative ratio of

21%. The shipments of iPhone4

(8G), which is an excellent per-

former, grew by 211% over the

previous quarter.

Except Huawei, despite the

recent release of their opera-

tor-subsidized products, other

large domestic mobile phone

vendors have not experienced

a prominent increase in their

Q1 shipments.

Antonio Wang, Associate

Director of Computing Systems

Research Group of IDC China,

says, “In China’s smartphone

market, Samsung has switched

its marketing focus from com-

peting with Apple for high-end

market to maintaining its high-

end market share, and is start-

ing to strive for market for

products under USD 200, which

has so far been dominated by

domestic brands. However,

Apple leverages the incentive

policies for channels to inspire

the shipments of iPhone4, fur-

ther expanding its user base.”

IDC predicts that, thanks to

operator subsidies and robust

consumer demands for new

phones, China’s smartphone

shipments will increase sharply

in 2013; in 2017, smartphone

shipments will exceed 460 mil-

lion units to reach a market size

of RMB 740.5 billion (USD 117.8

billion).

IDC research indicates that

the development of smart-

phones will inevitably drive the

innovation of the entire industry

chain, further promoting the

perfection of mobile communi-

cations and mobile internet

ecosystem.

James Yan, senior analyst

of IDC China, who is responsi-

ble for mobile phone market

research, predicts that the de-

velopment trends of China’s

mobile phone industry chain

will manifest in the following as-

pects in the next five years:

By 2017, 4G mobile phone

shipments will outnumber 3G

mobile phone shipments. IDC

predicts that, with an increas-

ing share of upstream 4G chip

vendors engaging in mass pro-

duction, the push by China’s

three major operators, and the

support from terminal vendors,

the shipments of 4G mobile

phones will outnumber those of

3G mobile phones in 2017.That

will further promote the devel-

opment of the entire mobile

communications and mobile

internet industry.


26

Industry

New Canal a lifeline for energy


27

New Canal a lifeline for energy


28

Industry

CED Monitoring

BEIJING-The Chinese business-man behind an ambitious planto build a waterway acrossNicaragua to rival the PanamaCanal has stressed that thenew canal will serve as a lifelinefor global energy trade whencompleted in 2020.

Wang Jing, 40, a Beijing na-tive, said at a news conferencethat the $40 billion projectwould break ground in late2014 and complete construc-tion within six years.

Hong Kong-based HKNDGroup, an infrastructure devel-opment company whollyowned by Wang, will be re-sponsible for financing the proj-ect before construction begins.But Wang said the projectwould also introduce global in-vestors, and he has also beenin touch with energy compa-nies.

The new canal is expectedto generate annual revenue ofat least $5.5 billion, accordingto an initial estimate, becauseof the increasing Chinese de-mand for coal and oil in the re-gion and the shift of US energypolicy to more exports, Wangsaid.

Although the PanamaCanal has invested $5.3 billionin an expansion project since2007, Wang said it couldn'tmeet the growing maritimetrade between East and West.

"The Nicaragua canal willbe broader, deeper and willallow larger vessels to pass,"Wang said, adding that thecanal is designed for 400,000-ton-class vessels, comparedwith the Panama Canal, whichonly allows vessels with capac-ities below 150,000 tons.

"The canal will accommo-date large LNG carriers and oil

tankers from the United Statesand Venezuela heading to-ward China," said Lin Boqiang,director of the China Center forEnergy Economic Research atXiamen University.

US shale gas exports toChina have little price advan-tage because of the high costof getting around Cape Horn —the southernmost tip of SouthAmerica — but a shortcut willboost the volume, he said.

"The new canal will be-come a lifeline in global energytrade," Lin said, adding thatmore imports from the Ameri-cas is also in line with China'sstrategy to diversify its foreignenergy dependence on theMiddle East.

"The canal will bring signifi-cant change to the global mar-itime trade. There will be vesselstailored for the NicaraguaCanal, and harbors renovatedfor these vessels," Wang said.

On June 13, Nicaragua'sCongress granted HKND Groupexclusive rights in developingand managing the NicaraguaCanal and other potential proj-ects, including port projects,free trade zones, airports andother infrastructure projects forup to 100 years.

Wang said he was given "alot of guarantees and a lot ofbenefits" by the Nicaraguangovernment in land use andtax incentives.

The Ministry of Foreign Af-fairs said last week the canaldevelopment was the "inde-pendent behavior of a com-pany", after the Ministry ofCommerce warned of the po-tential risks of getting involvedin local political disputes.

"We're grateful for thewarning of the Ministry of Com-merce — this is what a respon-sible government should do,"

Wang said, adding that theoriginal blueprint of the canalhas been altered to avoid po-tential territorial disputes.

But Liu Hui, an expert ofAmerican studies with the Chi-nese Academy of Social Sci-ences, said that the investmentin the Latin American countryshould pay attention to locallegal and political risks.

He gave an example ofChina's oil and railway invest-ment in Venezuela, which metstrong resistance from localunions.

Wang admitted that theproject has political, financingand engineering risks, but saidthe fact that HKND Groupstands out from other competi-tors was evidence of its thor-ough preparation.

HKND Group is working onthe feasibility report with lead-ing firms such as US-based McK-insey & Co, UK-basedenvironmental consulting serv-ices provider ERM Group Incand China Railway Construc-tion Corp, China's biggest con-struction company.

"Legal papers are alsobeing formulated, and thereare no risks of violation at thisstage," Wang said.

Besides his 40 percentstake in the Beijing Xinwei Tele-com Technology Co, Wangsaid he also has mining invest-ments with 100-ton gold re-serves worth about $5 billion intwo Southeast Asian countries.Wang's investment also involvesan aerospace company, whichis expected to be a future part-ner in the canal project.

Wang's canal investmentmay fulfill a century-old dreamfor Nicaragua, which has at-tempted to construct an inter-oceanic channel on severaloccasions since the mid-1800s.


29

Wang said the canal proj-ect will create more than40,000 local jobs, and a job-training program has already

begun."It is no longer a pure in-

vestment, it has become amilestone," Wang told re-

porters. "So I don't want it tobecome an international jokeor an example of a failed over-seas Chinese enterprise."


30

Industry

Profiting out ofAfrica comeswith risks


31

CED MonitoringBEIJING-A Hangzhou-

produced TV series willsoon be broadcast inAfrica so the locals canget a better understand-ing of the city, therebynurturing an interest inproducts made in theJiangsu province lakesidemetropolis.

The Desire of the OldDaddy was shortlisted inthe international promo-tion plan co-organized byChina Radio Internationaland local authorities ofZhejiang province. CRIwill recommend cele-brated actors in Africa todub voiceovers for the TVseries which will later bebroadcast on main-stream TV stations in Tan-zania.

In the meantime,makers of Hangzhoubrands that are being ex-ported to Africa andmeet the needs of localcustomers will make TVcommercials to go withthe TV series, said LyuBingkui, office director ofthe Hangzhou MunicipalForeign Trade and Eco-nomic Cooperation Bu-reau.

"At present, threeHangzhou companieshave made direct invest-ments in Tanzania andtwo in Zambia. The totalinvestment amounted to$15.75 million," said Lyu.

Fu Yang Jin DingNon-ferrous Metal Mate-rial Co Ltd of Hangzhoustarted to test the marketin Tanzania in 2007 withan initial investment of$500,000. The amountrose to $9.95 million in thefollowing year.

"Usually, private

Hangzhou companieswon't start their invest-ment with huge sums ofmoney in their capacityas State-owned enter-prises," said Lyu. "Presi-dent Xi Jinping's recentvisit to African countries isexpected to help im-prove the investment en-vironment in Africa,which is definitely goodnews for private compa-nies," said Lyu.

Statistics provided byLyu's bureau show thecity's exports to Africareached $1.6 billion in2012, up 11 percent year-on-year. The growth waseven more rapid in thefirst two months of thisyear, with the export vol-ume reaching $320 mil-lion, up 42.09 percentyear-on-year and ac-counting for 5.88 percentof the city's exports as awhole.

Although mostHangzhou companiesstarted by exploitingmines in Africa, there hasbeen little success so farand no mineral productshave been brought backto China, said Wu Jian,director of the foreigneconomic relations officeof the bureau, addingthat there are also highrisks in the mining indus-try.

"Therefore, most new-comers now are en-gaged in building powerplants, road works, watertreatment and other in-frastructure projects. Itcan be seen as part ofthe economic restructur-ing of Hangzhou's privatecompanies," said Wu.

Hangzhou LiangliangElectronic Lighting Co Ltd

Profiting out ofAfrica comeswith risks


Industry

32

set up a sales office in Dar esSalaam, capital of Tanzania, in2009.

"We have five Chinesemanagement executives andthree local staff working at the

Tanzania branch that mostlysell energy-saving lights andcables," said Wang Zuping,chairman of the company.

The company set up itsKenya representative office last

year. It generated sales ofmore than 40 million yuan($6.53 million) in Africa in 2012.

"Products made in Chinaare especially popular inAfrica. We do mainly wholesale


33

business there and managed toachieve an average annualsales growth rate of 30 percentin the past five years," saidWang.

Wu of the foreign eco-

nomic relations office addedthat Hangzhou companies aretrying to build their brands inAfrica.

"Automobile brands, suchas Geely, and some pharma-

ceutical products are ex-pected to find a market inAfrica. Some garment compa-nies are also seeking opportuni-ties there," he added.


34

Automobile

GM eyes 10% ofChina's luxurycar market


35

Bob Socia, headof GM's China opera-

tion, shared Cadillac'sChina growth targetin a roundtable with

reporters ahead of aground-breaking cer-emony for GM's new

Cadillac plant on theoutskirts of Shanghai.

"We are not onlyexpanding in tier-one

and tier-two cities,which would bepretty logical toCadillac, but ...

China's high-growthareas could be in tier-

three or even four,"he said.

GM, which sellsbrands including

Buick and Chevroletin China, has priori-

tized Cadillac sales inChina as it battles for

market share withother luxury brandssuch as BMW, Mer-

cedes and Audi.But the Cadillac's

sharp styling with in-fluences from US

stealth fighter aircrafthas failed to ignite

Chinese buyers' pas-sions, according to

analysts and Cadillacmarketers' them-

selves.GM sold 30,010

Cadillacs in China lastyear compared with149,782 in the UnitedStates. It is targetingabout 250,000 luxurycar sales in China by

the end of thedecade.

GM has been ton-ing down the look ofCadillac cars as partof an effort woo buy-

ers in China, whichCEO Dan Akerson told

reporters would ac-count for up to 40

CED MonitoringSHANGHAI--General Motors Co

has said that it aims to quadrupleits share of China's luxury auto

market to 10 percent by 2020 asthe US automaker launches newCadillac models and expands itsdistribution network in the world's

largest car market.


36

Automobile


37

percent of theworld's total lux-ury auto market

by the end ofthis decade.

With a re-freshed version

of the top-sellingCadillac SRX

crossover andlocal production

of the CadillacXTS sedan this

year, GM aims totriple Cadillac

sales in China to100,000 units

within two years.Cadillac's

China salesjumped 74 per-

cent year-on-year by volume

in May, afternearly doubling

during the previ-ous month, mak-ing Cadillac thefastest-growing

among GM'sbrands in the

country.China has

become a cru-cial market for

makers of luxurycars, with 2.7 mil-lion expected to

be sold thereeach year by

2020, overtakingthe United States

as the world'sleader in the

segment.GM plans to

introduce morethan 10 new or

upgraded prod-ucts in China on

average eachyear through

2016. GM and itsjoint ventures

sold a record 2.8million vehicles

in China in 2012,up 11.3 percentfrom a year ear-

lier.


Automobile

38

Chinese Auto brands looking overseas


39

Chinese Auto brands looking overseas


40

Automobile

CED Monitoring

SHANGHAI-Car exports fromChina rose more than 40 per-cent last year and were an ex-cellent antidote for the slowingmarket for domestic carmak-ers.

Some local firms are show-ing incredibly high levels of re-liance on exports. Lifan, forexample, exported 67,000 pas-senger vehicles, 43 percent ofits total sales.

Chinese automakers cur-rently focus on markets in SouthAmerica, the Middle East, Rus-sia and Eastern Europe.

Some have tried to tapmature markets.

MG, originally a Britishbrand now owned by SAIC, isan example. But it only man-

aged to sell 782 cars in the UKin 2012.

Yet many local brandshave announced ambitiousstrategies for overseas devel-opment, even for mature mar-kets including countries inWestern Europe.

The new Chinese brandQoros has scheduled plans tolaunch its products in Europeand China simultaneously,catching the eye of journalistsboth at home and abroad.

In 2012, Geely announcedplans to enter Western Euro-pean markets including Britainand Italy. But after failing crashtests in 2005, early attempts byChinese brands in the EU mar-ket proved to be nothing morethan wild goose chases.

Since then, Chinese car-makers have made great ef-forts to improve their safetystandards.

In 2011, both SAIC andGeely won high ratings in crashtests by the European safetyagency, leading to more peo-ple to believe that Chinesebrands have now eased someof the barriers to entering theEU market.

The real bottleneck hasturned out to be the sluggisheconomy in Europe.

The auto markets in West-ern Europe enjoyed a 10-yeargolden era from 1998 to 2007when annual sales reached ahistorical peak of 150 million.

Although the financial crisisin 1993 caused a 36 percent


41

decline in the market, it tookonly five years to recover, andsoon surpassed previous levels.

However, the impact of thefinancial crisis in 2008 hasproven more profound.

Western European coun-tries launched massive incen-tive plans to encourage newcar sales, which stabilized themarket temporarily in 2009.

But car sales shortly afterdeclined dramatically by morethan 40 percent due to a stag-nant market and Europe's sov-ereign debt crisis.

The market is not expectedto recover to its 1998 level untilat least 2020.

Italy seems to be the firststop for many Chinese brands,but the market is also slumping.

Following declines of 11and 12 percent in 2011 and2012, the car market is ex-pected to shrink a further 9 per-cent in this year.

Annual sales this year arelikely to drop to less than 1.3million units, from 2.5 millionunits in 2007.

In fact, all Western Euro-pean countries, with the ex-ception of the UK, willexperience significant down-turns again in 2013.

On the other hand, the Eu-ropean car industry is facingtremendous redundant capac-ity.

According to data fromthe first quarter in 2013, nearly40 percent of production ca-pacity in Europe remains idle.

With a shrinking marketand hungry automobile giantsin Europe, it is obvious a toughbattle for China's indigenousfirms to grab a slice of the cakein this sluggish Western Euro-pean market. In comparison tothe gloomy market in the EU,China's passenger vehicle mar-ket is still booming with a nearly20 percent increase in the firstquarter.

By 2020, we expect newcar sales in China to hit 25 mil-lion units, 11 million more thanin 2012. So it is unrealistic for in-digenous firms to rely on ex-ports to relieve their difficultpositions at home.

It would appear that afterall, the next gold mine is still inthe East, not the West.


Construction

42

CED Monitoring

BEIJING-China's rapidly growing builtenvironment is inspiring urban plan-ners to develop new ways of think-ing, said Mark Harrison, head ofurban planning in Asia Pacific at theUnited Kingdom's engineering con-sultancy Atkins.

"I think there are so many newideas being developed and testedout in China, because China is ur-banizing at such a rapid speed," Har-rison said.

Harrison said one example isthe incorporation of environmentalsustainability considerations into anew city or town at the point of con-struction, as opposed to introducingmeasures to reduce environmentaldamage after it has occurred,which was the case in many Euro-pean cities.

This is because Europe industri-alized early and the environmentalimpact of the built environment wassometimes not properly considered,

whereas China's newly built citieshave the advantage of learningfrom Europe's mistakes, Harrison said.

"As climate change becomesmore of a problem, it is increasinglyimportant to consider factors liketraffic, energy use, water use andwaste in new cities at the begin-ning," he said.

Harrison's team, which com-prises 150 urban planners, has com-pleted more than 800 projects inChina, in more than 100 cities.

One project is master planningfor Songjiang New City, an area richin history and culture near Shanghai,which was being turned into a newcity under the Shanghai govern-ment's One City, Nine Towns plan,passed by the Shanghai PlanningCommission in 2001.

"Songjiang has been devel-oped using the garden city con-cept, which originated fromEngland," Harrison said. "But differentfrom England, Songjiang has higher

density, which needed to be takeninto account in the master planningprocess.

"Songjiang also has many as-pects of traditional heritage and cul-ture which we have integrated intoour overall design."

The garden city concept, firstproposed by the UK's urban plannerEbenezer Howard in 1898, empha-sizes self-contained communities al-lowing residents to live harmoniouslywith their surroundings.

In the city plan Harrison's teamcreated, modern leisure and recre-ational features such as a golfcourse co-exist with traditional land-scape in a coherent manner"through careful consideration", hesaid.

The traditional landscape fea-tures have been incorporated intotourism locations, whereas moremodern facilities are mostly used bythe city's residents in their everydaylives.

URBANPLANNERS

EYEING CHINA'SCITIES


43


Construction

44

"The key thing is to respect theheritage, and not to destroy it, andalso to integrate them with theneeds of modern life, transport andfacilities," Harrison said.

Another feature in Songjiang inwhich Atkins helped with the archi-tectural, structural and civil engi-neering work is the ShimaoWonderland InterContinental hotel,being built on the site of a 90-meter-deep abandoned quarry.

The five-star hotel is striking be-

cause it uses the existing landscapein an innovative way. As water al-ready existed in the old quarry,Atkins has kept water as a maintheme, turning the lowest level ofthe hotel into a venue for watersports, with a spa and a swimmingpool. The underwater level is de-signed to host an aquarium.

"Because of the location, wecouldn't build a tall tower, so wewent down into the quarry and builtan interesting design."

Apart from new constructionprojects, Harrison said his team isheavily involved in many regenera-tion projects to help cities cope witha growing urban population andgive them a new look.

"Urban areas often just need anew look and refresh. Maybe theysuffer from transport problems as carownership increases rapidly. Theremay be other concerns such aswater quality or the quality of theurban environment."


45

Harrison said one of his team'sprojects is providing guidelines onthe regeneration work for Chengdu,capital of Sichuan province, a cityknown for its relaxed lifestyle butwhich has been transformed in re-cent years as a result of its fast-grow-ing high-tech industries.

Features of the regeneration in-cluded increasing greenery andbuilding more low-speed roads inthe city center, adding central is-lands to pedestrian crossings to en-

sure safety, adding more leisure fa-cilities such as shops and restaurantsaround big community parks, andincreasing the use of green materialfor important public sector buildings.

"The key is to identify the realcharacter of the area," Harrison said."Chengdu has many lively areas, es-pecially its markets. It also has manynatural landscape features, like rivercourses. It is important to make surethey are retained and not de-stroyed.

"So regeneration is about iden-tifying and building on the characterof a city to make it livable."

Harrison said one clear advan-tage Atkins has in the field of regen-eration is its engineering expertise inbrownfield development. As the of-ficial engineering design servicesprovider to the London Olympics lastyear, Atkins demonstrated its brown-field site regeneration expertise byturning an old industrial site into a vi-brant, safe sports venue.


46

Construction

CED Monitoring

BEIJING-China will invest 4.7trillion Yuan ($767 billion) inroad projects by 2030, stronglyboosting the domestic econ-omy, a senior official saidhere.

The country will havemore than 400,000 kilometersof national roads and high-ways by 2030, compared with173,000 km by 2012, DaiDongchang, chief planner ofthe Ministry of Transport, saidat a news conference.

The conference releaseda national plan for the coun-try's road network from 2013 to2030, approved by the StateCouncil in May.

Dai said that about 2.5 tril-lion Yuan would be allocatedto highway construction, withthe remainder going to non-toll roads.

He added that the fundswould mainly come from gov-ernment coffers, while diversi-

fied investment will also be en-couraged in highway con-struction.

According to the ministry,every 1,000 km of highway re-quires around 1 million metrictons of steel, 9 million tons ofcement and 800,000 tons ofasphalt.

"Road projects play a sig-nificant role in guaranteeingthe country's steady eco-nomic growth," Dai said.

When the global eco-nomic crisis erupted in 2008,around 1.5 trillion Yuan was al-located to building railwaysand roads, accounting for37.5 percent of the govern-ment's 4 trillion Yuan eco-nomic stimulus package.

Huang Min, director of thebasic industry department ofthe National Developmentand Reform Commission, said:"One obstacle confrontingthe nation's urbanization planis that road coverage inChina is far from sufficient and

fails to meet the needs ofrapid economic develop-ment and urbanization,"Huang said.

Premier Li Keqiang hascalled for people-oriented ur-banization, which is not simplyabout building larger cities,but the balanced develop-ment of small, medium andlarge cities across the country,which requires more infra-structure projects, especiallyroads.

Studies by the ministryshowed that the country's ur-banization program and eco-nomic development woulddrive people's demand forroads by three to four timesthe current level.

"The pressure that Chinafaces in its road construction isunprecedented globally dueto its large area and popula-tion," Dai said.

So far, around 900 of thenation's 2,800 counties are notlinked to national level roads,

CHINA TO INVEST BIG

ON ROADCONSTRUCTION


47


Construction

48

which have a negative im-pact on their economic de-velopment, according to theministry.

Huang said the nationalplan would prioritize roadprojects in those areas, mainlyin western regions, and pooror remote areas of the coun-try.

Dai said that the road

construction projects wouldrespect the environment andavoid ecologically fragileareas.

"Every road project willhave to pass a strict environ-mental impact assessmentprior to construction," Daisaid.

As of the end of 2012,China had 173,000 km of na-

tional-level roads, including105,000 km of common roadsand 68,000 km of express-ways. The national-level roadsaccounted for 4 percent ofChina's road network at alllevels, including national-level, provincial and ruralroads. The plan calls for theroad network to reach a sizeof 5.8 million km by 2030.


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