Magazine 39 edition

Magazine_Layout 1 6/18/2013 9:00 PM

News Editors

Summer WongJi Long

Mike LincolnJenny Alvin

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EditorJamshed Ullah

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Co-ordination

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Research & Analysis

Wang AiguoHe Cheng

Shi Chengweileon LudwigUzma Zafar

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EditorialA Powerful financial

indicator

Editor

According to a globally credible survey report,China has emerged as the most financially se-cure country in an index jointly launched by PICC

Property and Casualty Co Ltd, the largest non-life insur-ance company in the Chinese mainland, and Gen-worth Financial Inc, a Fortune 500 insurance holdingcompany.

The report that surveyed 13,000 households in 14 Eu-ropean countries, and five Latin American countries andChina. China scored 78 out of 100, the highest score ofany country and the highest since the index waslaunched in 2007.

Only 3 percent of Chinese households are finan-cially vulnerable, whereas the same figure for Germanyis 22 percent and 26 percent for France, according tothe report.

Of more than 1,000 households surveyed in Beijing,Guangzhou, Shanghai and Wuhan, only 1 percent saidtheir financial situation will worsen over the next 12months. Only 3 percent believed they were financiallyvulnerable, while 97 percent said that they have rarelyexperienced financial problems or had a positive out-look for the future.

Digging deeper into the survey's underlying results,some 39 percent said they had seen their total house-hold income fall due to several factors. Forty-eight per-cent reported it was due to a drop in level of income,20 percent reported it was due to stopping work forhealth reasons, and 12 percent said it was due to jobloss.

The majority of Chinese household assets were inproperty. PICC and Genworth's report cautioned thatChinese households were too focused on property in-vestments, and said their investment portfolio should bediversified.

We believe that this report is a very powerful indica-tor with regard to future of China’s economy and for-eign investments in this emerging financial capital of theworld.


16, 23 June 2013

Cover Story

Beijing toexpand out to7th Ring Road

04

Ministriescampaign tosave streetchildren

06

Chinese airlines' first

Boeing 787 Dreamliner jet-

liner arrived at Guangzhouon Sunday, almost fiveyears behind schedule

amid production delays -

including an international

grounding of the planesearlier this year after two

battery fires.

in this issueMagazine_Layout 1 6/18/2013 9:00 PM

in this issueShandong,Hk pledgetoaccelerate growth

China Mobile

launchesnew App,

subscriberstop 1 billion

The'Chengduphenomenon'becomesnew modelfor growth

09 12

ANDROIDCApTuRES HALf OfCHINA'S SMART pHONE MARkET


04

Society

Beijing to expand outto 7th Ring Road


CED Monitoring

BEIJING-Beijing, the Capitalcity of China, is planning tobuild its 7th Ring Road jointlywith neighboring Hebeiprovince to ease the trafficand environment stresscaused by massive trafficfrom other provinces.

The 940-kilometer high-way is expected to be inau-gurated in 2015. Beijingwould only cover 90 kilome-ters, linking the city’s distantdistricts, and the rest will ex-tend into Hebei province. Itwill be connected to manyexisting highways, includingthe Beijing-Shenyang Lineand Daqing-GuangzhouLine.

The highway is designedto encircle Beijing, as itspredecessors do, and there-fore will be called the city's7th Ring Road.

Beijing is a busy traffichub as the transit center forChina's northwestern cargosgoing to the coast andnortheastern cargos goingto the South. Passing carsfrom outside provincesworsen the city's already ter-rible traffic and air pollution.The highway, devised to shiftpart of southwest Beijing'sinter-city traffic, is expectedto ease the strain.

05


Society

06

Ministriescampaign tosave streetchildrenCED Monitoring

BEIJING-Government organiza-tions have pledged to undertakejoint efforts to help street childrenget back to a normal life withspecial attention given to guar-antee their right to education.

Civil affairs authorities mustevaluate every street child theywork with and determine thechild's individual needs and fam-ily background before decidingon the best way to help, said anotice jointly released by 10 min-isterial-level departments, includ-ing the Ministry of Civil Affairs andMinistry of Education.

"Previous efforts focused onsending street children home,while the children's individualneeds, the ability of their families

to take them back and the emo-tional impact of their lives on thestreet were not given enough at-tention," said Dou Yupei, Vice-Minister of Civil Affairs, "As a result,some of those children soon re-turned to the street."

Because many children wholive on the street are runningaway from unbearable situationsat home, government depart-ments should provide financialsupport and family counseling tohelp the parents to raise theirchildren, the notice said.

Some guardians who havedifficulties fulfilling their responsi-bilities can give up custody, andcivil affairs authorities should ap-point a temporary guardian forthe children or send them to fos-ter families, it said.

For older street children whoprefer to work, labor authoritiesshould provide free vocationaltraining and offer work opportu-nities in public sectors for thoseaged 16 or above.

Teachers and school admin-istrative staffs should improvecommunication with families toprevent students leaving schoolbecause of poverty and endingup living on the street. Educa-tional authorities should establisha system of monitoring of schooldropouts, according to the no-tice.

China has seen growingrates of divorce, crime and vio-lence within families and massivemigration of the rural populationto urban areas. Amid these con-ditions, "it is often children who


07

suffer the worst", said ChristianVoumard, former China repre-sentative of the United NationsChildren's Fund.

Street children are "all at risk,not only of physical harm throughcontact with drugs, child labor,gangs and trafficking, but theyare also excluded from society,discriminated against and liableto come in conflict with the law",he said.

The Ministry of Civil Affairsarranged for seven street chil-dren rescue centers in majorcities, including Beijing,Zhengzhou and Wuhan, to sendout leaflets about their work andtogether to exhibit artwork bystreet children in Beijing's Xidan

Cultural Square on Saturday tomark International Children'sDay. Throughout June, activitieswill be held across he nation toraise public awareness of theplight of street children.

The ministry also announcedon Saturday that each June 19will be an "Open Day" at all Chi-nese rescue centers for homelesspeople, to help the public to su-pervise rescue institutions' work.

There are 261 rescue centersfor minors across China and theyhelped about 1.36 million streetchildren from 2003 to 2012, ac-cording to the ministry.

Zhang Li - not his real name -a hairdresser with a decent in-come in Zhengzhou, capital of

Henan province, was rescued asa child from a life on the streets.

At age 11, Zhang was aban-doned by his divorced father ata train station, and he had to liveon the street.

The 19-year-old said his lifegot back on track after workersin a mobile rescue van met himon the street and persuaded himto go to the Zhengzhou StreetChildren Protection Center in2008. Zhang received some infor-mal education at the center andhe later went to live with a fosterfamily. The center sponsored himto study haircutting at a voca-tional school and helped him toland a job in a salon two yearsago.


08

Finance

Shandong,Hk pledge toaccelerategrowth


09

HONG kONG-Guo Shuqing, acting governor of

Shandong, has emphasized the province's

determination to promote the service sector,

especially its financial services industry..


10

Finance

"Shandong ' s fu tu reneeds f i nanc ia l suppor t , "sa id Guo in a roundtab lebreakfas t meet ing w i th Ex -ecut i ves o f lead ing f i -nance compan iesinc lud ing B lacks toneGroup and Go ldmanSachs (As ia) in Hong Kong.

" Shandong w i l l t reatdeve lop ing i t s se rv ice in -dus t ry as the major meansto chang ing i t s g rowthmode l and ad jus t ing eco-nomic s t ruc tu re , and thef inance indus t r y w i l l bethe top p r io r i t y , " headded.

The meet ing was oneimpor tant event o f the2013 Shandong-Hong KongT rade and Inves tmentWeek.

The p rov ince hasach ieved sa t i s facto ry re -su l t s in i t s f inance indust ry .In 2012, the sector ' s va lue-added output reached201.8 b i l l ion Yuan ($33 b i l -l i on ) , up by 19 pe rcent ,tak ing 4 pe rcent o f GDP.Tota l soc ia l f inanc ing was928 .4 b i l l i on Yuan , an in -c rease o f 118 .2 b i l l i onYuan.

The re were 237 l i s tedcompan ies i n Shandongby the end of 2012 , wh ichra i sed 304 .8 b i l l i on Yuan .Up to now, 91 compan iesa re l i s ted over seas , w i thtota l f inanc ing of 80 .6 b i l -l ion Yuan.

Guo sa id that the cu r -ren t number fo r l i s tedcompan ies i s compara-t i ve ly sma l le r , g i ven thela rge number o f compa-n ies , and he expects morecommun icat ion in the f i -nanc ia l sector s .

"We expect more in -ves tment in Shandong' s f i -nanc ia l i n s t i tu t ions ,commerc ia l banks , i n su r -ance compan ies and in -dus t r y funds , " he sa id ,add ing that o the r i nves t -ment i n s t rument s , such asequ i ty and debt , a re a l soneeded in the rea l econ-omy, inc lud ing t ranspor ta-t ion and energy .

In 2012 , Shandong in -ves ted 1 .52 t r i l l ion Yuan inthe se rv ice indus t ry , up by13 percent f rom 2007 . The

prov ince a ims to inc reasethe se rv ice indus t ry ' s GDPcont r ibu t ion f rom 40 pe r -cent in 2012 to more than50 percent by 2020 .

Antony Leung Kam-chung, cha i rman of B lack-s tone Group in Greate rCh ina , and fo rmer f i nan-c ia l sec re ta ry o f HongKong, sa id there cou ld bemore room fo r fu r the r co-operat ion between thecompany and Shandongin the se rv ice secto r . "Wehope the p rov ince can


11

p rov ide p re fe rent ia l po l i -c ies fo r p r ivate equ i ty (PE)f i rms . "

As an in te rnat iona l f i -nanc ia l center w i th s t rongf inanc ing capab i l i t y andunobs t ructed channe l s toover seas market s , HongKong has a l ready p ro -v ided a sound p lat form forShandong-based bus i -nesses to ra i se money andgo in te rnat iona l .

By the end o f 2012 , 39Shandong companies hadl i s ted on the Hong Kongstock market , ra i s ing capi -ta l o f $7 .13 b i l l ion .

Char le s L i X iao j ia ,ch ie f execut i ve o f HongKong Exchanges & C lear -ing L td , says the p roce-du re i s comparat i ve lys imp le and more s tan-dard i zed fo r companies toget l i s ted in Hong Kong.

" The re has been be-n ign bus ines s i n te ract ionbetween Hong Kong andmain land companies . AndI hope we wi l l see more inthe fu tu re , " sa id L i .

On the same day , ato ta l o f 81 ma jo r dea l sw i th a combined inves t -ment o f $26 b i l l i on wereagreed at the 2013 Shan-dong-Hong Kong T radeand Inves tment Week.

The dea l s , i nc lud ing$11 b i l l i on in cont ractua lfo re ign capi ta l , cover sec-to r s rang ing f rom ad-vanced manufactu r ing ,u rban cons t ruct ion , mod-e rn se rv ices , c lean en-e rgy , log i s t ic s , emerg ingand h igh - tech indus t r ie s ,to cu l tu re as we l l a stour i sm.


Finance

12

The 'Chengduphenomenon'becomes new

model for growth


13

CED Monitoring

CHENGDU-China's fastest-grow-ing inland city Chengdu willhost the largest Fortune GlobalForum ever this month with rep-resentatives from 442 of themagazine's Global 500 compa-nies slated to attend, accord-ing to local media reports.

Against the backdrop of asluggish world economy, manycoastal cities have been se-verely challenged by falling ex-ports and rising labor costs.

But Chengdu's advantagesin geography, industrial struc-ture and urban planning havehelped boost exports and theinflow of foreign capital, talentand big international compa-nies, said a leading Chinese ex-pert.

"Last year, the actual useof foreign capital flowing intoChina decreased by 3.7 per-cent but it rose 31.1 percent inChengdu," said Fan Jianping,chief economist at the State In-formation Center, a govern-ment think tank.

Fan said the "Chengduphenomenon" is mainly drivenby IT products that dominatedits 32.4 percent growth in ex-ports last year.

"Modernization of the city'sindustrial structure is very obvi-ous. On the global IT industrialchain, Chengdu has become avery important base for bothmanufacturing and R&D," henoted.

Over the last 10 years,Chengdu has risen to be thefourth center for IT products fol-

lowing the Yangtze and PearlRiver deltas and the Bohai Eco-nomic Rim.

Industrial transferAs well, the city's geo-

graphical advantage hasbrought benefits at the sametime coastal areas are chal-lenged by soaring costs. Manu-facturers are seekingopportunities in inland cities,which provides a big chancefor Chengdu, said Yi Xianrong,an economist and former re-searcher at the Chinese Acad-emy of Social Sciences.

"The trend is coastal pro-ducers moving some manufac-turing industries to Central andWest China, which soon will be-come new growth points forthe nation's economy," he says.

Some of those migrating


Finance

14

businesses enable Chengdu tocompete with developed citiesworldwide in cutting-edgetechnology and emerging in-dustries, said Yi.

"Worldwide, a new wave ofglobal economic structuraltransformation and technolog-ical innovation has started - thesame opportunities brought toChengdu by industry transferand technological innovation,"he said.

The opportunities are allur-ing, but how to sustain devel-opment after Chengdureceives transferred industries iscrucial.

Lu Suiqi, a finance profes-

sor at the School of Economicsat Peking University, said that ifthe city wants to find new de-velopment space, it first has togrow to be a leader in thosekey industries.

To realize sustainablegrowth, Chengdu needs tocontinually upgrade its indus-trial structure and choose in-dustries rationally.

"The most privileged indus-try is IT, but I hope Chengdu willnot confine itself to it," Lu says.

And the city does havemany other advantages includ-ing agriculture and tourism.

Lu said Chengdu shouldalso transform traditional indus-

tries. One way is to combinedevelopment with its abundantresources, but over-exploitationshould be avoided, he said.

It also has more trumpcards. The home of giant pan-das is famous for its agreeableliving environment, which hasgradually become an increas-ingly important element for acity to attract talent and com-panies. By the end of last year,233 Global 500 companies hadbranches or plants in Chengdu.

The local government hasplans to develop a new urban-ization mode - a harmonious re-lationship between thecountryside and town, and a


15

pastoral living style for resi-dents.

Jia Kang, director of theResearch Institute of Fiscal Sci-ence at the Ministry of Finance,says that as the developmentleader of West China,Chengdu not only representsthe west, but has gained moreattention from around thecountry due to its people-ori-ented urban planning.

"It is unfortunate that toomany Chinese cities look similarafter urban planning," he said."Chengdu is a city rich in cul-ture and history, which shouldnot be cast away during devel-opment.

"Urban planning and de-velopment should avoid ex-cessive expansion. Sometimesbeing small but f ine can beeven more attractive," Jiasaid.

He said that if Chengdu isto lead the regional economy,it must have its own character-istics and advantages broughtthrough innovation of institu-tions. An outstanding policythat Chengdu should continueis the space it has left for thedevelopment of farms, Jiaadded.

Chen B ingcai , a re-searcher with the Nat ionalSchool of Adminis t rat ion,

st resses the bui ld ing of " softpower" in a city.

He says Chengdu shouldtake the development oft ransportat ion as a pr ior i ty ,whether ins ide the ci ty orouts ide connected to otherci t ies . I t wi l l not only of fsetChengdu's d isadvantage asan in land ci ty , but a lso wi l limprove the ci ty ' s opera-t ional eff ic iency.

He added that the cityshould also pay more attentionto the development of tourismand education, and try to offermore support for the elderly,which all are elements that canattract multinationals.


IT

16


17

ANDROIDCApTuRES

HALf OfCHINA'S

SMART pHONE

MARkET


18

IT


19

CED MonitoringSHANGHAI-Google's mobile OSreached a milestone at theend of the first quarter as itgobbled up a 51.4 percentslice of all smartphones ownedin China, Kantar WorldpanelComTech said on Friday. Thatfigure showed a gain of 2.8percent over the fourth quar-ter of 2012.

Among all Android ven-dors, Samsung proved thefastest growing with a 15.2percent share among Chinesesmartphone owners. And Kan-tar expects more growth onthe way.

"Samsung has recentlylaunched the Galaxy S4, sel l-ing over 10 mil l ion units glob-ally in less than one month,"Craig Yu, consumer insight di-rector at Kantar WorldpanelComTech, said in a statement."We predict the launch ofGalaxy S4 Mini in the not toodistant future wil l greatly in-crease its product reach inurban China."

Nokia's Symbian took theNo. 2 spot in China last quarterwith a market share of 23 per-cent, down 2 percent from theprior quarter. As Nokia phasesout its older mobile OS, Kantarexpects Symbian to drop tothird place sometime in thenext two quarters. Apple's iOScame in third with a 19.9 per-cent share.

Smartphones in generalcontinue to see heavier de-mand among Chinese buyers.Smartphone ownershipreached 42 percent in Chinalast quarter, up 1.2 percentfrom the prior quarter. Much ofthat growth came from ownersof feature phones upgradingto smartphones. Almost half offeature phone owners whochanged their devices lastquarter opted for a smart-phone.\

"Feature phones are losingtheir price advantage as An-droid smartphones are rapidlybecoming more affordableand delivering better value,"Yu said. "We expect to see ac-celerated smartphone adop-tion in China in the comingmonths."


20

IT

China Mobile launch-es new App, sub-

scribers top 1 billion


21


22

IT


23

HONG KONG-Market research firm In-fonetics Research released

excerpts from its latest 2G, 3G, 4G Mo-bile Infrastructure and Subscribers in

Japan and China market share and forecast report, which tracks

GSM, W-CDMA, TD-SCDMA, CDMA2000, and LTE equipment

and subscribers in Japan and China.


24

IT

CED Monitoring

“As we predicted, 2012 was THELTE year in Japan following ayear marked by 3G reconstruc-tion efforts after the greatearthquake and tsunami. LTErevenue in Japan soared 188%and will keep its momentum thisyear, driven by acceleratedrollouts and the increasing will-ingness of service providers toshut down 3G,” notes StéphaneTéral, principal analyst for mo-bile infrastructure and carriereconomics at Infonetics Re-search.

Nokia Siemens Networks is#1 in LTE infrastructure revenuemarket share in Japan, fol-lowed by NEC and Ericsson

Infonetics expects theJapanese mobile infrastructuremarket to stay positive thisyear, plateau in 2014, andeventually decline by 2017 asLTE deployments wind down

“Mobile infrastructuresagged in China in 2012, butwe expect the market tobounce back nicely as the Chi-nese government gears up toaward 4G licenses and ChinaMobile prepares for a massiveTD-LTE rollout with potentialcommercial service by year’send,” says Téral.

The mobile infrastructure(2G, 3G, 4G) market in Chinafell 4% year-over-year in 2012,dragged down by GSM, W-CDMA, and CDMA2000

China Mobile’s rollout of20,000 TD-LTE eNodeBs during4Q12 prevented the wholemarket from falling farther

China is home to theworld’s largest mobile sub-

scriber base, with a total of 1.1billion subscribers

Huawei entered the Beijingmarket for the 1st time in 2012,winning ? of China Mobile’s 13-city TD-LTE network project

Infonetics forecasts LTE inChina to grow at a 38% CAGRfrom 2012 to 2017.

Meanwhile, China Mobilehas developed a new applica-tion called Jego to challengerivals such as Microsoft Corp'sSkype service.

The app mainly targetsoverseas customers, allowingthem to make free or low-costcalls to mobile phones andlandlines. Jego was launchedon June 1 and can be used onmobile devices running AppleInc's iOS operating system orGoogle Inc's Android platform.

Analysts see China Mobile'smove as "a necessary step toexplore the international mar-ket".

Because of the prices oflong-distance calls, an increas-ing number of customers haveswitched to voice over Internetprotocol, or VoIP services,thanks to the efforts of compa-nies such as Skype, said FuLiang, an IT industry insider inBeijing.

Due to their huge numberof users and sound networks,Chinese telecom carriers havea chance to grab market sharefrom existing market players, Fusaid.

China Mobile InternationalLtd, a China Mobile fully ownedsubsidiary based in Hong Kong,is responsible for operating theJego service.


25


26

Industry

Chinaremains a magnetfor foreigninvestment


27

CHENGDU - Wearing staffbadges, workers are grabbinga bite to eat at a McDonald'srestaurant in the center ofTianfu Software Park inChengdu, provincial capital ofSouthwest China's Sichuanprovince.

They are a small portion ofthe 40,000 people working inthe industrial park, home tomore than 400 Chinese andoverseas companies.

"Many companies followedthe footsteps of Intel and cameto Chengdu. But ten yearshave passed. We no longer at-tach such great importance toone single company's reloca-tion," said Yuan Xin, secretarygeneral of Chengdu Associa-

tion of Enterprises with ForeignInvestment.

To help further boost localdevelopment, the FortuneGlobal Forum will be held fromJune 6 to 8 in Chengdu. "Theforum can mark the start of anew decade," Yuan said.

Yuan said Chengdu's mu-nicipal government hosts theforum four times a year with topexecutives of foreign-fundedfirms in the city, in order to an-swer their needs and fix anyproblems. The forum has beenheld 52 times.

"It has proved to be a goodinvention of the local govern-ment for serving investors," saidYuan.

Official data showed that

western and central Chinaused 19.21 billion U.S. dollars offoreign investment in 2012, ac-counting for 17.2 percent of thecountry's total. Chengdu alonehad $8.59 billion of foreign in-vestment paid in, up 31.1 per-cent year on year.

According to Yuan, com-panies in information technol-ogy, automobile, engineeringmachinery and aviation nowhave a strong presence in his204-member association.

Companies are alreadyseeing the benefits of being lo-cated in Chengdu.

"Many Chinese cities cangenerate huge demand but weselected Chengdu because ofits business environment, help-


28

Industry

opened a global servicecenter in Chengdu threeyears ago.

The central governmenthas revised an industry cata-logue to encourage foreignfirms investing in labor-inten-sive industries in central andwestern China while con-forming to requirements ofenvironmental protection.

That may bring new op-portunities for the local gov-ernment and foreign firms todeepen cooperation andachieve win-win results.

China's economicgrowth slowed to 7.8 per-cent in 2012, the lowest levelsince 1999. But a latest Am-Cham China business cli-mate report showed thatover two-thirds of its respon-dents still listed China as atleast a top-three destinationfor global investment.

Cui Wei , d i rector andCEO of S ino-S ingapore(Chengdu) Innovat ionPark Development Co. ,Ltd. said pol i t ical stabi l i tyand a steady Chinese cur-rency appeal to global in-vestors , as wel l as animproved ru le of law andciv i l servants with an in-creasingly global v is ion.

Midha said Dell has notwitnessed bias or obstaclesin China's market, especiallyafter the country's WTOentry. Industrial regulationsare being completed andthe government is usinggood practices from devel-oped industries, he said.

"Trade barriers and dis-crimination against foreigncompanies -- whether inChina, the U.S. or in Europe -- is poison for trade," said Es-kelund, who also urgedChina to continue focusingon creating transparency,eliminating barriers and re-maining cost competitive.(XINHUA)

ful to the shop's daily opera-tion and good for long-termdevelopment," said ZhangLianlian, local market man-ager at IKEA's Chengdu out-let, the Swedish furnituregiant's only shop in westChina.

According to Zhang, theoutlet topped 300 IKEAstores worldwide with a 135-percent growth rate in thefiscal year 2010. Its robustgrowth has prompted the re-tailer to consider opening ashop in Chongqing, the mu-nicipality bordering SichuanProvince.

Local and central gov-ernment are taking activesteps to keep attracting in-vestment in a sustainableway.

Amit Midha, president ofDell Asia Pacific and JapanRegion, said the local gov-ernment is committed to es-tablishing a world-classsupply chain ecosystem.

Midha said Dell'sChengdu global operationssite will help attract world-wide suppliers and helplocal suppliers grow and ex-pand. As part of its overalllayout in west China, the ITgiant's own manufacturingline will be put into opera-tion in Chengdu on June 7.

Jens Eskelund, MaerskChina Ltd. senior director,said the logistics industry iscomparatively open inChina and foreign compa-nies have benefited sincethe country's accession tothe World Trade Organiza-tion (WTO).

"The Chinese govern-ment is recognizing thevalue foreign logistics com-panies can bring to the de-velopment in China andthat is a great basis for dis-cussing collaboration tomutual benefit," said Es-kelund, whose company


29


30

Industry

Boeing deliverscountry's first

787 Dreamliner


31


Industry

32

CED MonitoringGUANGZHOU-Chinese air-

lines' first Boeing 787 Dreamlinerjetliner arrived at Guangzhouon Sunday, almost five yearsbehind schedule amid produc-tion delays - including an inter-national grounding of theplanes earlier this year aftertwo battery fires.

China Southern Airlines CoLtd, the largest airline in Chinaby fleet size, is the first Chinesecarrier and 10th in the world touse the 787 Dreamliner.

China Southern ordered 10Dreamliners, eight of which willbe delivered by the end of

2013, said Tan Wangeng, gen-eral manager of China South-ern Air Holding Co.

"All 10 new aircraft areslated for delivery to our fleetby the close of 2014," headded.

The first Dreamliner will getthree days of test flights beforebeing put into service on theairline's Guangzhou-to-Beijingroute.

The carrier also plans to flyits Dreamliner fleet fromGuangzhou to internationaldestinations - including Paris,Vancouver, London and Auck-land, New Zealand - after the

aircraft and air crews are pre-pared for long-haul routes, Tansaid.

The Dreamliner, with about250 seats, uses new, fuel-effi-cient engines, and 50 percentof the craft is made of compos-ite material, reducing theweight of the jetliner andadding to its fuel efficiency.

The aircraft is suitable forlong-distance routes, and Boe-ing Co predicts that about 700aircraft will be sold in China forthat purpose over the next 20years.

China Southern now is theworld's only airline with both


33

the Dreamliner and Airbus SAS'A380, the world's largest jet-liner.

The carrier pins its hope onthe two advanced aircraft togrow on the international mar-ket, but some aviation analystssuggested the carrier shouldmake a choice.

China Southern alreadyuses the A380 on itsG u a n g z h o u - t o - L o s - A n g e l e sroute, but the new aircraft maybe more suitable for that flight,said Su Baoliang, an analyst atCITIC Securities.

"The Boeing 787 is definitelya better choice for the carrier

on the route from Guangzhou,"Su said.

Su said the Dreamliner, withfewer seats, can meet the de-mand of non-hub airports, andthe A380 is too large forGuangzhou's.

The superjumbo can beprofitable in the hub airportswith a huge passenger flow,such as Beijing and Paris, butChina Southern would have dif-ficulty entering those markets,he said.

China Southern is negotiat-ing with Air China Co Ltd onusing an A380 on the Beijing-to-Paris route. Those talks haven't

yet yielded a deal.Meanwhile, other Chinese

airlines waiting for the Dream-liner are also preparing routesfor their jetliners.

Hainan Airlines Co Ltd, thefourth-largest airline in China,also will get its Dreamliner bythe end of June, Boeing ChinaPresident Marc Allen said.

The carrier made 10 ordersand plans to put the aircraft onits Beijing-to-Chicago route,which will be launched in Sep-tember.

The Dreamliner had 41 or-ders in China from four airlinesby the end of 2012, although


34

Industry

A Boeing 787 Dreamliner flight lands at Baiyun International Air-

port in the South China city of Guangzhou on Sunday morning.

China Southern Airlines marks the country's first airline to operate

the flight.


35

some Chinese airlines switchedtheir orders to other airplanesdue to the delivery delays.

The US aircraft manufac-turer delivered the first Dream-liner in September 2011 to AllNippon Airways Co Ltd, thelargest airline of Japan, after a

delay of three years.The aircraft was grounded

globally in January after alithium-ion battery caught firein an empty, parked Dream-liner in Boston, and after smokefrom the same type of batteryled to an emergency landing

of another Dreamliner inJapan. Boeing announced inApril that the battery problemhad been fixed.

Boeing plans to improvethe production rate of the newjetliner to 10 per month by theend of 2013.

The US aircraft manu-facturer delivered the first

Dreamliner in September2011 to All Nippon Air-

ways Co Ltd, the largestairline of Japan, after a

delay of three years.


36

Automobile

fAW aims to reviveiconic Chinesebrand


37

CED MonitoringSHANGHAI-China's First Auto-mobile Works Group Corphopes to revive the flaggingfortunes of its iconic Hongqibrand with Thursday's launch ofits newly developed H7 model.

The Hongqi H7 sedan,priced at between 299,800Yuan ($49,000) and 479,800Yuan with two choices of en-gine displacements, a tur-bocharged 2.0L and 3.0L, willinitially target officials at theministerial level or above, com-peting with German luxurybrand Audi's A6L, said the com-pany. FAW said this was due tolimited production capacity.

"Focusing on fleet cus-tomers is a correct strategy torevive such an iconic brand,"said Yale Zhang, director of au-tomobile consulting companyAutoForesight (Shanghai) CoLtd.

Moreover, Zhang said the"central government's strongsupport for the development ofdomestically branded vehiclesand calling for domesticbrands to be used as officialcars provide an opportunity forHongqi's revival".

FAW's Beijing showroom forits Hongqi brand will open tothe public in June.

The 500-square-meter

cle for business use and a mid-sized limousine coach for cere-monies and parades.

Born in 1958 as China'sprime protocol car, Hongqimade its name thanks to its useby top national leaders such asMao Zedong and Deng Xiaop-ing, as well as important foreignpolitical guests including thenUS President Richard Nixon dur-ing his icebreaking visit toChina in 1972.

However, the brand be-came a memory when produc-tion was halted in the 1980sbecause of high costs.

FAW tried to revive thebrand in the 1990s by resumingproduction using foreign tech-nology, but this bid failed as aresult of poor sales.

Hongqi's major competitorAudi, which has dominatedChina's official car sector since1996, said that no more than 10percent of its total sales camefrom government purchases.However, analysts said that itsimage as an official car hasdriven its sales to business lead-ers and for private use.

"Hongqi is finding it hard tocompete with Audi in the pri-vate market at the moment. Soit needs to focus on official useand gradually improve its qual-ity and brand," said Zhang.

showroom is located on JinbaoStreet, China's most eye-catch-ing shopping street, which iscrowded with stores fromworld's most expensive luxurybrands especially car brands,including Rolls-Royce, Lam-borghini, and Aston Martin.

Hongqi's store is next to Ital-ian super sports car brands Fer-rari and Maserati, and oppositeluxury brands Gucci andBurberry.

"The model is still what I re-membered from many yearsago, indicating its prestige as acar for national leaders," said apasserby. "It's hard to imaginewho, as an individual con-sumer, would purchase such anofficial car."

Zhang said: "With only onemodel, it's still too early to setup a distribution channel for in-dividual customers. Afterreaching a certain level ofsales in the official car sector,Hongqi should develop moresmaller and cheaper modelsfor the private market."

According to FAW Chair-man Xu Jianyi, over the nextfive years, the State-owned au-tomaker will invest 10.5 billonyuan to improve Hongqi's re-search and development ca-pability and launch two SUVmodels, a multi-purpose vehi-

"The model is still what Iremembered from manyyears ago, indicating itsprestige as a car for na-

tional leaders


Automobile

38

LEADING LIGHTS INNORTHERN REvIvAL

The BMW plant in Shenyang

has rejuvenated the city, which

30 years ago was a hub of

heavy industries in China.


39

CED MonitoringSHANGHAI-From being a

tattered notch on China's rustbelt not so long ago, Shenyangtoday is polishing itself up tobecome one of the brightestbuttons of the nation's devel-opment program.

The capital of the north-eastern province of Liaoningwas once a titan of heavy in-dustry. At its peak in the 1970s itwas among the top three in-dustrial centers with Shanghaiand Tianjin, before decliningrapidly the following decade,when it found it difficult toadapt to the structural reformsof the new market economy.

The city of 8 million wasdecimated by factory closuresand suffered unemployment asheavy as its main industries -steel and machinery.

Rejuvenation only beganto be seen this century when in2003 the central governmentlaunched its "Revitalize North-east China" campaign. Thiscovered the three northern-most provinces and part ofInner Mongolia, and waslargely aimed at taking advan-tage of the region's strategicposition neighboring Russia,Mongolia and the KoreanPeninsula.

More importantly, as far asShenyang was concerned, thecity's character and identity,and its old heavy industries,would be revitalized too.

Crucial to the transforma-tion, however, was the need toattract foreign investment.American and German com-panies in particular had beeninterested in the city in the

1990s because it aligned withthe needs of their own chang-ing heavy industries.

But it was mainly the Ger-mans who lasted the course,and one company in particularsaw the mutual benefits to begained by Shenyang andChina's rapid economic andtechnological development -BMW.

The same year the Chinesegovernment announced itsnortheast revitalization plan,the German luxury car makerand Brilliance China Automo-tive Holdings Ltd formed a jointventure.

BMW Brilliance AutomotiveLtd (BBA) built a plant in thecity's Dadong district to pro-duce BMW 3 and 5 Series mod-els, with production capacityset at 10,000 units per year. In


40

Automobile

A worker at a BMW assembly line installs tires to

the body of a car.


41

2004, it sold 8,661. But with salescontinuing to grow rapidly, pro-duction would rise to 100,000 ayear by 2010.

Realizing the huge poten-tial, with increasingly affluentChinese taking to the roads indroves, BBA that year raised itsinvestment from 560 millionEuros ($722 million) to 1.5 billionEuros to build its second factoryin Shenyang's Tiexi district, theold industrial heart where manyfactories were built during thestate's first five-year plan (1951-56). This time, it has added atest center, more manufactur-ing facilities, warehouses andproduction lines for the SAV X1.

The Tiexi plant opened in2012, and is gearing up to pro-duce 200,000 units per year.This year BBA is building a newengine factory nearby with aplanned production capacityof 400,000 engines in 2015.

More significantly forShenyang, BMW's success hasrevved up many other compa-nies from Europe looking to in-vest in the city.

There are now 53 Germancompanies operating inShenyang, 21 of them dealingin automotive parts or in re-lated businesses.

German companies suchas Draexlmaier Group, ZFFriedrichshafen AG and WurthGroup have all moved produc-tion lines to Shenyang to supplyautomobile parts to BBA. ZFLemoore Automotive Systems(Shinnying) Co Ltd operates anindependent workshop supply-ing gearboxes to BBA's Tiexiplant.

German conglomeratessuch as Siemens, chemicalgiant BASF and steel heavy-weight Heraeus have alreadybuilt a strong presence inShenyang, with Siemens elec-tronic components also beinglargely used in BBA's plants.

"Shenyang used to be oneof China's hubs for domestic

production 30 years ago, pro-ducing a huge amount of ma-chinery," says Gu Shaoqing,director of Shenyang municipalbureau of foreign trade andeconomic cooperation. "Intoday's global economic envi-ronment, the new governmentnow wants to focus on domes-tic consumption again, so this isthe time for Shenyang to takethe opportunity to move on."

Consequently, with thismajor industrial gear changefrom reverse to top over thatperiod, and a change as towho is in the driving seat, BMWthrough BBA recognizes theneed to improve its localizationstrategy.

BBA's T iexi plant has pro-moted more than 70 Chinesestaff f rom ass i s tant man-agers to section managers inthe past year, responsible forproduct ion, logis t ics , com-municat ion, and t ra in ing ofthe 4,000-st rong workforce.BBA has a total of 12,500 em-ployees in China.

"Another important step ofaccelerating localization is thatBBA announced a new brand,the Zinoro, which will be the firststage of a new-energy vehi-cle," says Olaf Kastner, presi-dent and CEO of BBA.

Produced at the Tiexi plant,the electric-drive vehicle isscheduled to be unveiled atthe Guangzhou Motor Show inNovember, with a marketlaunch planned for early 2014.

BBA becoming a majorplayer in Shenyang also bene-fits Chinese companies, ofcourse. Chinese parts suppliersand business partners in-creased to 320 in 2012, withBBA purchasing 12.5 billionYuan (1.58 billion Euros, $2 bil-lion) worth of auto accessoriesand services from local compa-nies.

Not so much on the backof, as rolling underneath BBA'ssuccess, foreign tire producers,

such as Japan's Bridgestoneand France's Michelin, alsohope to turn China into theirbiggest market by makingmore investment in Shenyang.Michelin spent $1.45 billion(1.18 million Euros) to build atire factory last year, andBridgestone has enlarged itsmanufacturing facilities.

Huang Taiyan, president ofLiaoning University, says build-ing up the automobile and re-lated industries means a lot toShenyang in transforming itstraditional heavy industries intohigh-tech machinery manufac-turing.

The city's service sector willalso be improved significantlyalong with its long-term goal ofbecoming a top-tier city inChina, he says.

"The growth of BMW inShenyang reflects that moreGerman companies are opti-mizing their resources to China,which hasn't been severely hitby the global debt crisis," saysYan Bingzhe, director ofShenyang's Tiexi district.

"We are negotiating invest-ment details with four otherGerman companies whichwant to build an auto partsplant, representative officesand a hotel in Shenyang overthe next two years."

Yan says China's othermajor trade partners SouthKorea and Japan also benefitfrom growing German influ-ence in Shenyang because oftheir close proximity to the re-gion.

"While China, Japan andSouth Korea increase coopera-tion to expand investment, fa-cilitate trade flows and reducetrade tariffs among the threeneighboring nations, South Ko-rean and Japanese consumerscan purchase BMW cars fromShenyang, which could be rel-atively cheaper than buyingthe same type of vehicle intheir home markets."


Construction

42

SHANGHAI DISNEyRESORT TO GOENvIRONMENT

fRIENDLy


43

CED Monitoring

SHANGHAI-The under-constructionShanghai Disney Resort will adopta new green technology to supplysome of its energy, boosting the re-sort's environment friendly creden-tials, the Shanghai Disney ResortManagement Company has an-nounced.

The new technology usingnatural gas as the primary energysource will supply the resort withheating, power, cooling and com-pressed air via distributed energysystems, thereby increasing theoverall energy efficiency of the re-sort three-fold, according tosources with the company.

The utilities will be co-gener-ated by a combined cooling andheating plant, to be built and op-erated on the resort site by theShanghai International Tourismand Resort Zone New EnergyCompany Limited, a joint-venturecompany owned by HuadianFuxin Energy Corporation Limited;

Shanghai Shendi (Group) Co,. Ltd;and Shanghai Yiliu Energy GroupCo., Ltd.

The plant is a grid-tied, gas-fired power facility which co-gen-erates cooling and heating viaengine waste heat, and producescompressed air by self-generatedelectricity.

With a total investment of 520million yuan (84.8 million U.S. dol-lars), the project will supply hotwater and chilled water for heat-ing and cooling, domestic hotwater, and all compressed airneeds for Shanghai Disney Resort'sdaily operation in the most energy-efficient and environmentallyfriendly way.

The project is designed, con-structed and operated by theShanghai International Tourismand Resort Zone New EnergyCompany Limited, and will be-come operational in time to sup-port the resort's opening,scheduled for the end of 2015.

Upon completion, the primaryenergy utilization rate of the proj-ect will be up to over 80 percent,much higher than that of conven-tional energy resources, whichstands at around 45 percent, saidHuo Guangzhao, vice president ofthe Huadian Fuxin Energy Corpo-ration Limited.

It is expected to generate 170million kilowatt-hours of on-grid en-ergy annually, which can saveabout 20,000 tones of standardcoal and reduce 75,000 tones ofcarbon dioxide emissions, accord-ing to Huo.

"Shanghai Disney Resort hasbeen devoted to seeking newtechnology and business solutionswhich reduce our impact on theenvironment, save resources, andpromote sustainable technology,and to supporting all kinds of co-operation with our local partners,"said Howard Brown, senior vicepresident overseeing develop-ment of the resort.


Construction

44

SINO-SINGApOREANpARk MAkING

HEADWAy


45

CED Monitoring

BEIJING-Construction hasalready begun on the first20 projects of the Singa-pore-Sichuan Hi-Tech Inno-vation Park, leaders of thepark announced recently.

These projects include10 trunk roads and localroads. Some of the roads inthe park opened to trafficat the end of May.

According toChengdu Hi-Tech Invest-ment Group Co Ltd, whichis responsible for the con-struction of the park, invest-ments in infrastructure areexpected to exceed 970million Yuan this year.

The first 20 projectsunder construction includefacilities like substations, aninvestment center andschools.

According to thegroup, there will be a hos-pital, 13 kindergartens,seven primary schools, twomiddle schools, two policestations and four gas sta-tions in the park. And 17.5percent of its area will becovered by grass andtrees.

An executive with thecompany said asphaltpaving on a 2.8-kilometerroad connected to thepark was completed at theend of May.

Three other roads willbe open to traffic in the firsthalf of this year, with an-other 10 set to open in thesecond half.

In addition, there arealso plans to construct afurther of 720,000 squaremeters of trunk, secondaryand local roads in the park.So far, nearly 260,000 sq mof roads have alreadybeen put on the agendafor construction.

A park official saidthat as of the end of April,nearly 30 companies hadshown an interest in settlingin the park.

Currently, companiesare in talks with the park'smanagement about theirplans to launch commer-cial property projects andset up R&D centers there.

Located inside TianfuNew Area in Zhonghetownship, the park has atotal area of 10.34 squarekilometers and its total

The first 20 projects underconstruction include facilitieslike substations, an investmentcenter and schools.


46

Construction

planned investment is 100 billionYuan.

About 20 billion Yuan will beprovided by Sino-Singapore(Chengdu) Innovation Park Devel-opment Co Ltd, the developer ofthis joint program betweenChengdu and Singapore. Thesefunds will be used for infrastructureconstruction and public amenities,and the project will span eightyears.

Cui Wei, board director andCEO of the company, said the

park will focus on developing eightpillar industries, including IT, serviceoutsourcing and new digitalmedia.

"Upon completion, the parkshould have a modern urbanlifestyle in addition to modern in-dustries," Cui said.

"It should be an innovativemodel city where industry, cultureand nature all co-exist in perfectharmony with on

Cui said there are sevenautonomous c lusters wi th in

the park - the T ianfu Gate-way, the High-Tech Area, theBusiness Center, the Biomed-ical Center , R&D Showcase,Serv ice Outsourcing and In-novat ion, and X inchuanHeartbeat.

Chengdu Metro Line 1 andLine 6, which are currently stillbeing planned, will pass throughthe park and have eight stationslocated within. A looping tramservice will provide seamless con-nections between the various clus-


47

ter cores.Addit ional ly , inte l l igent

inf rast ructure and publ icamenit ies wi l l be avai lable inthe park to make sure peo-ple res id ing and work ingthere have convenient ac-cess to l iv ing, le i sure andstudy faci l i t ies.

The park also lies within thecore startup zone of the TianfuNew Area, a special economiczone approved by the Chinesegovernment that has preferential

policies in terms of taxation, talentrecruitment and land use.

The 2013 Fortune GlobalForum, which will take place inChengdu from June 6 to 8 underthe theme of "China's New Future",will offer a new opportunity to de-velop the park.

To date, senior executives ofmore than 200 leading interna-tional companies, including someFortune Global 500 companies,have confirmed their participationin the forum.

Dur ing the forum, execu-t ives f rom some of the For-tune 500 companies wi l l beinvited to vis it the Tianfu NewArea and the park.

The park can use the event asan opportunity to attract more For-tune 500 companies to settle therein order to form a cluster of top-notch companies from the bio-medical sector and otheradvanced industries and to makethe park a benchmark for industryclusters in western China.


Real Estate

48

CED Monitoring

BEIJING-Sales of up market res-idential apartments in Beijingsoared after the governmentlaunched tightening measuresin March to cool the market, areport found.

Sales valued at more than10 million Yuan ($1.61 million)

accounted for 39 percent ofhigh-end sales in April, muchhigher than the same periodfor last year, according to a re-port by Yahao Real Estate Sell-ing and Consulting SolutionAgency.

The Beijing municipal gov-ernment said it will not grantsales licenses to projects priced

“much higher” than the aver-age rate in the region.

The price limit is one of rea-sons for high-end projects at-tracting higher prices as mostof them are completed apart-ments that are not subject tothe new regulations, accordingto the report.

SALE Of HIGH-ENDApARTMENTS SOARS

IN BEIjING


Magazine 39 edition

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