Friday, April 29, 2011

Cheap toys that teach good stuff

Universally flattering colours for clothes

China's yuan rises past 6.50 against the US dollar

China's currency has been climbing against the US dollar.

China's currency, the yuan, strengthened past a key level against the US dollar on Friday, as part of wider efforts to contain inflation on the mainland.

The yuan broke past 6.50 against the dollar, a level not seen since 1993.
Traders and currency strategists believe the move is a sign that China's central bank is prepared to allow the currency to appreciate further.
A stronger currency means imported products become cheaper in China.
"The market is very excited," said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB.
"Clearly, the People's Bank of China is pushing for a stronger pace of appreciation."
China's central bank actively guides the level of the yuan, by effectively setting the rate at which it is allowed to trade.
Mr Kowalczyk said the yuan had gained by 0.9% against the dollar so far in April, roughly equivalent to its entire gain in the first three months of 2011.
Gradual appreciation
Friday's gains mean the yuan has strengthened by 27.5% since 2005, when Beijing revalued the currency, effectively ending its peg against the US dollar.
That policy of gradual appreciation was temporarily frozen in the aftermath of the financial crisis in 2008.
Now, the spectre of rising prices in China has prompted its leaders to speed up the pace of appreciation, according to analysts.
"High inflation means you need to do more than just raise interest rates," said Thio Chin Loo, a Singapore-based currency strategist at BNP Paribas.
"This just compounds the kind of dollar selling we've been seeing."
China imports a great deal of food and fuel.
A more valuable currency would help reduce those costs, making daily essentials more affordable for the country's 1.3 billion people.
Inflation is a growing social and political problem in China. It hit a high of 5.4% in March.
Mr Kowalczyk believes that if the yuan continues to appreciate at the current rate, it may gain as much as 10% by the year end.

Thursday, April 28, 2011

China census shows population aging and urban

China's census shows its population grew to 1.34 billion people by 2010, with a sharp rise in those over 60.

Nearly half of all Chinese now live in cities and people over the age of 60 now account for 13.3% of the population, up nearly 3% since 2000.
But the figures reveal that China's population is growing more slowly than in the past.
That could affect the economy, as the number of potential workers, especially from rural areas, could shrink.
The proportion of mainland Chinese people aged 14 or younger was 16.6%, down by 6.29 percentage points from the last census in 2000.
The number aged 60 or older grew to 13.26%, up 2.93 percentage points.
Chinese snapshot
When China carried out its first census in 1953 it had a population of 594 million, less than half the current figure.
This census, the first in 10 years, comes after a decade of rapid economic growth that has led to significant social change.

Analysis

Michael Bristow Beijing

The census figures announced by the Chinese government were not particularly surprising - they show trends that were identified long ago.
But they do reveal some of the challenges and problems the government will have to tackle over the coming decades.
Chinese society is ageing. That means more pensioners, who will have to be looked after by fewer workers. China's family planning policies that limit many families to just one child is partly the cause.
There are now nearly twice as many migrant workers as 10 years ago, when the last census was taken. These are farmers who travel to the country's booming towns and cities to find work. But in their new homes they have only limited access to services, such as healthcare and education for their children.
Officials have also revealed that there are now nearly six boys born to every five girls. Traditionally, Chinese families have preferred boys. But this will lead to problems for some when they grow up and try to find a wife.

The results revealed that almost half of all Chinese - 49.7% of the population - now live in cities, up from about 36% 10 years ago. Many have been drawn to jobs in China's factories and coastal industrial zones.

The census for the first time counted migrant workers where they were living, rather than where they were registered. It found that more than 220 million Chinese had worked away from home for over six months in 2010, almost double the previous figure.
The government's strict controls on family size, including its one-child policy for most urban families, have reduced annual population growth to below 1% percent. The rate is projected to turn negative in coming decades.
There has been growing speculation in the country's media about the possibility that the government will ease the policy - introduced in 1980 as a temporary measure to curb surging population growth - and allow more people to have two children.
As it currently stands, most urban couples are limited to one child and rural families to two. The average household now numbers 3.1 people, down from 3.44 a decade ago.
Some demographers have said that the limits on family size may now threaten China's economic future, with fewer people left to pay and care for an older population, as well as to work in the factories that have transformed the country into the world's second largest economy.
"The data from this census show that our country faces some tensions and challenges regarding population, the economy and social development," said Ma Jiantang, head of the National Bureau of Statistics.
"First, the ageing trend is accelerating, and second the size of the mobile population is constantly expanding."
He said China would have to "actively respond to the new challenges in demographic development".
But state-run Xinhua news agency said President Hu Jintao told top party lawmakers on Tuesday that China's family planning policy would remain unchanged and the low birth-rate be maintained.

Wednesday, April 27, 2011

Thugs

Shanghai Thugs Forcibly Remove Shanghai Residents. Why This Matters For YOUR Business.

Posted by Dan on April 16, 2011

Le Monde has a series of captioned pictures documenting beatings inflicted on Shanghai residents who developers wanted cleared out (h/t Shanghaiist). The police were called but never came.
Beyond the fact that this sort of treatment is morally objectionable, here is why you should care:
1. Though China is relatively safe, one should absolutely not write off the possibility of violence in one's business dealings in China. My law firm has been called in at least a half dozen times where violence was either threatened or occurred. We tell our clients that if they owe money to a Chinese company or are involved in any sort of dispute with anyone in China (partner, employee, etc.), they should avoid meeting to discuss the dispute/problem anywhere other than in a neutral, very public place in the day time. A high end hotel lobby in Shanghai or Beijing is a good choice.
2. Know where the land came from on which you are locating your business. Make sure that you will not be hit up for compensation of someone displaced or that some higher-up government authority will not shut you down for the land having been acquired illegally. Do your due diligence on this and even considering putting something in your lease to better protect you. Beijing has been making a lot of noise lately about wanting to make its eminent domain policies fairer and as it does so, you can expect more problems to arise for those on illegally acquired land. There are huge swaths of land in China that were illegally acquired, particularly in third and fourth tier cities.

Exporting

Everything You Always Wanted To Know About Exporting (To China Too).

Posted by Dan on April 17, 2011

For years now, I have recomended the U.S. Commercial Service book, A Basic Guide to Exporting, to clients who are starting out in exporting their products overseas from the United States. Like so much of what the U.S. Commercial Service puts out, it is low cost (or free), helpful, accurate, and clearly written. I just learned from reading Laurel Delaney's Global Small Business Blog (of which the same adjectives used in the previous sentence apply) that an audio version of this book can be found for free on Michigan State's website, globalEDGE.
The audio version is divided into the following modules:

The World is Open for Business
Developing An Export Strategy
Developing a Marketing Plan
Export Advice
Methods and Channels
Finding Qualified Buyers
Using Technology Licensing and Joint Ventures
Preparing Your Product for Export
Exporting Services
International Legal Considerations
Going Online: E-Exporting Tools for Small Businesses
Shipping Your Product
Pricing, Quotations, and Terms
Methods of Payment
Financing Export Transactions
Business Travel Abroad
Selling Overseas and After-Sales Service
Analyzing a Company's Ability to Export

For anyone at all new to exporting, I highly recommend you go here and give this book a listen.

Litigation in China

What You Should Know About China Litigation.

Posted by Dan on April 17, 2011

The China Law Insight Blog has a very thoughtful post entitled, "Evidence Collection and Alternatives to "Discovery" in P.R.C. Litigation." The post does an excellent job explaining the lack of pretrial discovery in China court cases and why American companies and lawyers tend to be so ill-prepared for this. To grossly summarize and oversimplify the article, foreign (especially American) companies need to know the following three things about litigating in China:

Once a case begins in a Chinese court, things move fast. Very fast. Within a month or so of filing a case the court will issue a notice of the evidence production period and that period is usually 30 days. This means you will need to provide the opposing party and the court with enough evidence to win the case and that evidence must be translated into Chinese.
Chinese courts strongly favor documentary evidence over other kinds of evidence, including live testimony.
Chinese courts do not have discovery as we know it in the United States.

I am going to add one non-procedural item to the list of things that Americans should know about Chinese courts and that is that the courts tend to look much more at the equities of a case (as opposed to the law) than do American courts.
All of the above mean that American companies involved in litigation in China must engage in the following strategies so as to increase their chances of prevailing;

If you are going to pursue litigation in China (or if you are sued in China), you need to gather up your evidence and have it translated as quickly as possible.
Your case is likely going to rise or fall on the strength of your documentary evidence and if you do not have strong documentary evidence you probably should not bring the case. And as I discussed in the post, "China Contracts. Email Not Usually Included," Chinese courts in determining the terms of a contract typically stay within the four corners of a signed document and tend to give little credence to email or oral "understandings."
You should not count on being able to get evidence from your opposing party.
Think about the equities of your case, not just the law. Ask what is fair and what would be good for China.

If you want to read more about litigating against Chinese companies (in China or elsewhere), check out the following:

Chinese commerical law books in English

Chinese Commercial Law Books In English. The Good Ones.

Posted by Dan on April 19, 2011

Clients (particularly those involved with Human Resources) and law students are always asking me what English language books I recommend for learning about Chinese law. Many years ago, I would tell them there were none. Now I usually respond with the following four:

1. The Legal System of the People's Republic of China in a Nutshell. Yes, this is part of West's Nutshell series, but before you law students and lawyers start keeling over in laughter, let me explain. I am always telling law students that they should read "the nutshell" of their course before they go to their first class in any given subject. I suggest they read the nutshell book from cover to cover as though they are reading a novel. In other words, they should not stress too much over the points they do not understand and they should not worry about retaining anything.
I advocate reading nutshell books because they are a superb and fast and relatively painless way to get a big picture view of a topic. Getting the big picture view first then allows you to put the pieces you learn later into their proper place.
The China nutshell (I read a previous edition a long long time ago) does a great job of giving its readers a feel for Chinese law and a quick read of it will help you immeasurably in thinking like a Chinese lawyer. Will it tell you what you need to do to get from point A to point E in forming a China WFOE? No, but that should not be why you read it. You should read it because it is a very good first introduction to Chinese law.
It is written by Daniel C.K. Chow, a law professor at Ohio State University who is eminently capable of publishing more weighty works on Chinese law as well.
2. Chinese Commercial Law: A Practical Guide. This book was written by Maarten Roos, a Holland trained lawyer who practices in Shanghai. I find this book very useful as a good first source on Chinese legal issues. It does a good job touching on the major legal issues foreign investors typically face in China. Its Amazon page accurately describes it as follows:

He clearly describes the opportunities and pitfalls exposed as a foreign investor engages with such elements of business in China as the following:

negotiating a detailed written contract;

performing a legal and commercial due diligence on a prospective partner;

resolving disputes through negotiation, arbitration or litigation;

establishing and enforcing trademarks, patents and other intellectual property rights;

investing in China;

considering the joint venture structure;

expanding through a merger or acquisition;

restructuring or liquidating an operation;

designing and implementing effective corporate governance;

retaining, managing and terminating employees;

arranging funds into and out of China;

ensuring both tax efficiency and tax compliance; and

avoiding criminal liabilities in the course of doing business.

I agree and I think this book makes for a great nuts and bolts introduction to the various topics it covers and it also serves as a great initial legal reference as well.
3. Understanding Labor and Employment Law in China. I gave a very favorable review of this book when it first came out and my appreciation for it has only grown. This is what i said then:

I am three-quarters of the way through the book, Understanding Labor and Employment Law in China, by Ronald C. Brown. Brown is a Professor of Law and the Chair of the Pacific-Asian Legal Studies Committee at University of Hawaii Law School and can confidently state that it is a great book.
But it is not for those seeking merely a light dusting on Chinese labor and employment law. Not at all.
It is 332 page exposition on the current state of China's labor laws. It was just published so it is quite current. Its appendix consists of translations of the key Chinese laws relating to labor and employment.
Who should read this book?
-- Academics interested in China labor laws? Check.
-- Private practice lawyers seeking a deeper understanding of China's labor laws? Check.
-- In-house lawyers wanting to better understand China's labor laws? Check.
-- HR personnel with businesses operating in China? Probably check.
-- Lawyers who actually practice labor law in China? Maybe check.
-- The general businessperson doing business in China? Maybe check.
Let me explain my maybes.
Any lawyer actually doing employment law in China must be able to speak and read Mandarin fluently and so that lawyer probably does not have much need for a book like this, written in English. If you are going to be writing employee manuals and employment contracts in China or giving advice regarding China's labor laws, you absolutely must know how to read and write Mandarin. You have to know how to read it because so many of the employment laws are local, rather than national, and because there is no substitute for reading a law in its original language. You have to know how to write in Mandarin because your employee manuals and your employment contracts pretty much have to be in Chinese if you have any Chinese employees.
This book is probably too intense, too thorough, too long, too deep, and too complicated for the typical businessperson seeking a general background on Chinese employment law and I do not think it was ever intended for that purpose.
If you are looking for an English language book that really details China's labor and employment laws, this is the book.

I am now of the view that HR personnel should buy this book, so long as they realize that it is just a first step towards deciding what to do in each individual instance. I have come to this view after having recommended it to a number of HR people with whom my firm works and seeing how they use the book. I have come to believe this book is a great resource for HR people because they are using it to help determine whether they might have a legal issue in doing such things as firing someone who is pregnant, reducing vacation time, asking someone to work a weekend out of town, etc., rather than using it for the definitive answer to their very specific situation.
4. China Law Deskbook, A Legal Guide for Foreign-invested Enterprises. This book is by James Zimmerman, a very respected China lawyer. I do not own and I have not read this book. I nonetheless list it here because many lawyers and clients tell me how much they like it and how helpful they have found it to be and many consider this to be the definitive practical guidebook for Chinese law.

China's Serivce sector will reign

China's Service Sector Will Reign. Part XXI. The USCBC Confirms It.

Posted by Dan on April 19, 2011

The mere fact that this is part 21 of the series ought to tell you that we have been beating the drum for a long time on the opportunities for foreign service businesses in China. It seems we just got a bit more and quite august company on this.
The very influential United States-China Business Council just came out with its China guide for the 112th Congress (United States), entitled, "China and the U.S. Economy: Advancing a Winning Trade Agenda," and what I found most interesting about it was its upbeat section on China's burgeoning service sector:

Though overshadowed by issues surrounding trade in manufactured goods, the dramatic expansion of trade and investment in services between China and the United States has benefitted both economies substantially and will continue to do so for the foreseeable future. Though trade in manufactured goods is often viewed, rightly or wrongly, as benefitting one or the other country in terms of jobs and balance of payments impact, trade and investment in the services sector is overwhelmingly positive for both countries.

The USCBC sees substantial and profitable future growth for United States service companies in China:

The expanding market for service-based jobs is important to China’s ability to absorb the large numbers of young workers and college graduates entering the job market each year. For the United States, which is the world’s largest service economy, trade and investment in services with China translates directly to high-wage US jobs and increased profits from investments in China that lead to further investment and job creation in the United States. The more open the Chinese market for US service providers becomes, the more US services can be sold in China.

In 2010, the United States exported more than $20.1 billion in services to China and imported just $9.7 billion, resulting in a surplus of $10.4 billion.
And there is room for substantial growth.

The report details the types of service providers best positioned for growth in China:

Who are these service providers? They include major US banks and financial institutions, law firms, insurance companies, engineering firms and providers of tourism, business advisory, computer express delivery, and medical and healthcare services, among others. Collectively, service industries account for 80 percent of private sector jobs in the United States. Increasingly, these companies are being allowed to set up operations in China for sales in China. It is a major area of opportunity for US companies that includes additional jobs at their home base.

The report talks of how even when a U.S. company goes to China for manufacturing, its doing so usually creates all sorts of service revenue for the United States:

For instance, when a US engineering firm builds a power plant or manufacturing facility in China, much of the high-value conceptual design and engineering- which is considered a services export- is done in its American offices, and the detailed design might be developed in its offices in China. In addition, the firm will send project managers and support personnel from the United States to manage the project’s construction, without which the engineering might not be exported. The United States has a rapidly expanding services trade surplus with China; the more the Chinese market opens to US service providers, the more US services can be sold in China.

I completely agree because that is exactly what we have seen in terms of our clients. Two to three years ago, the majority of our law firm's clients were manufacturers. Today, the majority are service providers (I am counting software as a service). I expect this trend to only continue.
What are you seeing out there?

Notarizing documents in China

Notarizing U.S. Documents In China

Posted by Dan on April 20, 2011

Every so often, my law firm gets contacted by an expat in China asking us what we charge to provide them with a U.S. notarization. If it is a phone call, I sometimes jokingly tell them that we will do it for free so long as they come to our United States office to have it done.
And therein lies the problem.
It makes no sense for someone in China needing a United States notarization to fly to the United States to get that. So what are they to do?
Go to the United States Embassy or to one of the U.S. Consulates, both of which will provide U.S. notarization on English language (only) documents that will be used in the United States. All you will need are the documents needing notarization, proof of your identity (your passport), and fifty dollars in cash, RMB equivalent cash, or credit card. If what you are doing also requires a witness, you will need to bring that too.
The Embassy and the Consulates are also the place to go to get Chinese documents authenticated for use in the United States. If you want a Chinese document authenticated by a United States Embassy or Consulate, you must first get those documents authenticated by the Notarization and Authentication Division of Consular Affairs Department of the Chinese Ministry of Foreign Affairs.
For more information on these things, check out the website of the applicable consulate or the embassy

4 essentials for sourcing from China

The Four Essentials For Sourcing From China.

Posted by Dan on April 21, 2011

Got an email the other day from a friend whose company is getting ready to source from China. The email asked me what the company needed to know "to protect their butts in China." I told them they needed to know/do the following four things.
1. Choose a good factory. This is the sine quo non of China sourcing. I am always saying that I can write the world's best contract, but if the party on the other side is a thief, the contract will have no value. How do you pick a good factory? The first thing you do is make sure that you have actually picked a factory, and not a broker claiming to be a factory. The best way to pick a good factory is to go and look at it yourself. The second best way is to have a qualified person you trust go and look at it. The third best way is to rely on the views of others.
2. Use an OEM Agreement suited for your situation. You need a good written contract between you and your supplier, the official version of which should be in Chinese. For more on this, check out "China OEM Agreements. Why Ours Are In Chinese. Flat Out." This agreement is the road map between you and your Chinese supplier. It will do at least three things for you:

It will make clear to both you and your Chinese supplier the terms and conditions of your relationship.
It will let your Chinese supplier know exactly what it must do to comply with your requirements and to stay within the law. By doing so, it will greatly decrease the likelihood of your having problems with your Chinese supplier.
It will position you well should problems arise.

3. Set up a Quality Control System. Even with a good supplier and a good contract, you will almost certainly still face at least some quality control problems. The big question is when will you discover them. If feasible, check for quality before you pay for you product and before your product is shipped.
4. Register your trademark in China. When it comes to trademarks, China is a first to file country. This means that, with very few exceptions, whoever files for a particular trademark in a particular category gets it. So if the name of your company is XYZ and you make widgets and you have been manufacturing your widgets in China for the last three years and someone registers the XYZ trademark for widgets, that other company gets the trademark for widgets. And then, armed with that trademark, that company has every right to stop your XYZ widgets from leaving China because your widgets violate that other company's trademark. Trust me when I say that many foreign companies have incurred massive damages by failing to take the simple and inexpensive step of registering their trademark in China.
If you abide by the above, you almost certainly will do just fine.
What do you think?

China's 12th Five year plan

This preliminary review is based on those documents and on government and research institutes that have been published in China in response to those documents.
I. China’s Ten Major Challenges
The goal of the Chinese regulators is for China to become a moderately prosperous country by the year 2020. The current five year period will be critical in meeting that goal. China has recently reached a level where its per capita GDP equals $US4,000. The goal is to achieve a $US10,000 per capita GDP by the year 2020. This is a critical transition. It is generally believed to be relatively easy for a country to achieve the $4,000 number. It is common, however, for countries to stall out in GDP growth and never achieve the $10,000 goal.
The goal of the 12^th Five Year plan is to prevent China’s growth from stalling. In the Opinion, the CPC identifies 10 factors that threaten the continued development of the Chinese economy

Resource constraints: energy and raw materials.
Mismatch in investment and imbalance in consumption.
Income disparity.
Weakness in capacity for domestic innovation.
Production structure is not rational: too much heavy industry, not enough service.
Agriculture foundation is thin and weak.
Urban/rural development is not coordinated.
Employment system is imbalanced.
Social contradictions are progressively more apparent.
Obstacles to scientific development continue to exist and are difficult to remove.

II. The Theoretical Solution
Before discussing the concrete outline of the plan, the party sets out the theoretical approach that will serve as the guide:
A. The Main Theme: Scientific Development
1. “During the period of the 12^th Five Year Plan, economic development remains the key to resolution of all problems.” (Wen Jiabao, quoting from the Opinion)
2. Development must be “scientific”:Practical (unconstrained by ideology), human centered, and sustainable.
B. The Main Line: “China must rapidly engage in a complete transformation of its form of economic development.”
It cannot be stressed sufficiently how radical is the proposed remedy. The idea is not to refine the current system, but to completely transform the current system in only five years. This is a bold goal.
The focus of transformation is as follows:
1. From export led consumption to domestic led consumption.
2. From excessive reliance on exports to balance between export, import and domestic consumption.
3. From reliance on foreign technology to reliance on domestic innovation.
4. From reliance on “old” energy, and materials and industries to creation of a low-carbon /new-materials based economy.
III. Ten Point Outline of the 12^th Five Year Plan
A. To address the ten challenges, and in accordance with the theoretical approach, the CPC proposes that the 12^th Five Year Plan focus on ten major areas, as follows:
1. Expand domestic consumption while maintaining stable economic development.

a. Unleash domestic consumption. This will be done through the measures at item seven below.

b. Coordinate consumption, investment and export to create a balanced economy.

2. Modernize agriculture to create the new socialist rural village. .

a. Modernize agriculture through mechanization and measures that allow larger farms.

b. Invest in agriculture infrastructure, especially in waterworks.

c. Create non-agricultural rural employment.

d. Improve legal and financial development mechanisms.

e. Improve agricultural service business in areas such as wholesaling, warehousing, processing, transportation and marketing.

3. Develop a modern, balanced industrial and trade structure.

a. Develop service trade. Services currently contribute to less than 40% of GDP. The goal is to raise this number to 70% or higher.

b. Develop modern energy and integrated logistics.

c. Develop marine resources.

4. Advance the integration between regions and encourage stable urbanization.

a. Combat regional disparities.

b. Eliminate the urban/rural distinction. Cities at the second tier and lower must accept rural migrants. The goal is to provide for industrial/service employment for agricultural laborers in areas close to their current residence. This will be done to avoid a mass migration of rural residents into the cities.

5. Promote energy saving and environmental protection.
Currently, for every 1% increase in GDP, China’s energy use increases by 1% or more. If this rate of use were to continue, China would need to increase its energy consumption by 2.5 times to achieve its 2020 economic goal. To put this into perspective, this would mean increasing the current consumption of coal from the current 3.6 billion tons per year to an astronomical 7.9 billion tons a year. No one in China thinks this can be done. One major way to reduce the amount of energy required for the Chinese economy is to implement energy saving practices throughout the economy. A second way to reduce is to shift from hydrocarbon based energy to alternative energy sources. The new plan advocates an all out program in this area.
6. Create an innovation driven society by encouraging education and training of the workforce.
The plan seeks to shift China from its role as the factory of the world to a new role as a technological innovator for the world. There are two components to this approach:

a. China will seed to become a domestic innovator in all areas of current modern technology, with an emphasis on practical industrial applications.

b. Where China is not capable of domestic innovation, China will continue to import technology from advanced economies. However, China will seek to actively domesticate that technology through a program of “assimilate and re-invent.” The recent program for production in engines for high speed rail is offered as an example of the “assimilate and re-invent” approach.

7. Establish a comprehensive public social welfare system.
In order to meet the goal of unleashing domestic consumption, China has to move to a policy that puts more disposable income in the hands of its citizens. The plan proposed the following approach:

a. Labor and employment.

China must provide jobs for a growing workforce. There are two key areas:

1. It is estimated that over the next ten years, 200 million persons will be shifted from agricultural labor to urban industrial/service labor. Jobs for these persons consistent with their training must be provided.

2. Currently, China’s colleges produce far more graduates than its economy can absorb. Entry level jobs for college and technical school graduates must be provided. Education must also be adjusted to accord with the realities of the job market.

            b. Wages
Chinese wage are abnormally low. Most planners are pushing for tripling of the average wage for factory workers during this 5 year plan.
            c. Provide comprehensive government benefit programs, especially retirement pensions.
            d. Provide government funded medical services with comprehensive basic coverage by the end of 2011.
            e. Maintain active population control.
It is interesting to note that two major issues are not effectively considered in the plan: the first is the cost of housing and the second is the cost of high school and college education. Though there has been some discussion of constructing low income housing, the measures proposed will do little or nothing to address the problem of affordable housing in China’s major cities.
8. Encourage cultural production in order to increase China’s “soft power”.
China will seek to make its case for the world to avoid misunderstanding of China’s goals and role within the world economy.
9. Increase the pace of reform of the economy.
            a. Financial market reform, especially the RMB.
            b. Energy price reform and price reform of other economic inputs (raw materials).
10. Continue with liberalization and “opening-up” to the outside, but on a new track.
            a. Shift from export only to a balance between export and import.
            b. Shift from inbound investment only to a balance between inbound and outbound investment. China will continue with its “going out” policy.
            c. Actively participate in international economic governance.

Medication in China

NANJING, April 23 (Xinhua) -- At a time when almost every commodity in China is getting more expensive, the dwindling cost of medicine is a rarity.

Zhang Jinkui, a hypertension patient, buys medicines from the community health center of his neighborhood in Changzhou, a city in east China's coastal Jiangsu Province. His prescription list includes Aspirin Enteric-coated tablets, down to 1.4 yuan from 4.7 yuan (0.7 U.S. dollars) per unit, and Fosinopril Sodium Tablets, down to 41.39 yuan from 51.6 yuan per unit. Both drugs are found on the essential drug list unveiled in 2009. The list names the 307 most common western and traditional Chinese medicines, which are heavily subsidized so hospitals can sell them at cost price.

All essential medicines are listed by their generic names, and drug producers compete to supply essential medicines through public procurement. Due to a long history of low government funding for state-run hospitals, which often covers only 10 percent of the hospitals' operating costs, doctors have generated income for hospitals by aggressively prescribing expensive, and sometimes unnecessary, medicines and treatments.

The essential medicine system and the reform of publicly funded hospitals, two pillars of China's health reform, are designed to address high medical costs and low accessibility of medical services. In April 2009, China kicked off health reforms aimed at correcting these long-standing problems facing China's health system and easing public grievances.

Two years later, the essential medicine system has reduced drug prices, but still fails to please hospitals, patients and drug producers.The system requires government-funded grassroots health clinics, including urban community health centers and rural clinics, to prescribe only essential medicines and to sell these medicines at cost price, rather than with the previous 15 percent mark-up.Such policies have brought hard times to grassroots health clinics, especially in cash-strapped areas.

Song Wenzhi, a public health professor at Peking University, said "Grassroots health clinics, without the expertise to perform operations and other treatments, rely heavily on selling drug," adding that these hospitals have found themselves scraping by due to the zero percent mark-up policy.Wang Zhiying, Vice Director of the People's Hospital of Anxiang County in the city of Changde, Hunan Province, said four grassroots hospitals in Changde tested the essential medicine system as pilot projects, but the zero percent mark-up policy took away 60 to 70 percent of the hospitals' revenue.

Wang was quoted by "Health News," a newspaper run by China's Ministry of Health, as saying that, due to financial difficulties, the county government had not yet channeled the 8 million yuan (1.2 million U.S.dollars) in support funds into the hospitals' accounts, resulting in the resignations of many doctors.The essential medicine system covers 60 percent of government-funded grassroots hospitals and drug prices have fallen by an average of 30 percent, said Sun Zhigang, Director of the Health Reform Office under the State Council, or China's Cabinet.

According to the health reform plan for 2011, the essential medicine system will cover all government-sponsored health institutions at the grassroots level by the end of the year and drugs will be sold there at a zero percent mark-up.

Song Wenzhi said the key will be the commitment of local governments to health reform and their financial input. This way, essential medicines can benefit the public without bankrupting grassroots health institutions.

"That would be a great sum of money." said Song, citing his own studies. "There are roughly 5,000 government-funded hospitals in China. One third of them make profits, one third barely break even, and still one third rely heavily on government subsidies."

To maintain the poorest hospitals, central and local level governments would need to invest 15 billion yuan (2.3 billion U.S. dollars) each year, according to Song's estimate.

LESS EXPENSIVE, BUT HARDER TO FIND

While some patients benefit from the less expensive drugs, others find that some drugs have disappeared from the shelves of neighborhood clinics. To get medicines they need, sometimes they have to go to higher-level hospitals.

Li Jian, a retiree from the coastal port city of Tianjin, suffers from asthma. Li uses an anti-inflammatory inhaler that costs about 300 yuan. Since the essential medicine list came into effect, his local clinic has stopped carrying his prescription inhaler.

"Doctors in the community clinic are reluctant to prescribe drugs that sell for over 100 yuan for fear of being accused of aggressive prescribing, so I have to travel farther to a larger hospital to buy the spray," said Li.

BIDDING PROCESS RAISES QUALITY CONCERNS

Pharmaceutical companies are not happy, either. Some argue that the essential medicine procurement system distorts market competition.

Across China, essential medicines are procured by provincial governments through bidding, and distributed to hospitals at all levels.

Some drug producers complain that only companies offering the lowest prices can win bids, thus driving producers of quality drugs out of market.

Liu Gexin, CEO of Sichuan Kelun Industry Group, a pharmaceutical company, submitted a proposal to adjust the current procurement system of essential medicines during the annual legislative session this year.

Liu said some companies might compromise drug quality to lower production costs. For example, Liu said, Fufangdanshen, a traditional Chinese medicine tablet, has a market price of 5.6 yuan, but the government procurement of Anhui Province prices it at 0.95 yuan.

"The bidding price is significantly lower than the cost of raw materials, supplements and packaging," said Liu, calling for changes in the current tender system that only favors low prices.

Song Wenzhi said that, in a country with 1.3 billion people, a quickly aging population and a grave shortage of healthcare resources, it's natural for problems to surface as health reforms sail into uncharted waters.

"In the end, health reform heads in the right direction," said Song.

Chinese Union Leaders meet other Labour leaders from around the world

BEIJING, April 26 (Xinhua) -- Wang Zhaoguo, chairman of the All-China Federation of Trade Unions (ACFTU), met with foreign labor leaders who came to take part in the 2011 International Forum on Economic Globalization and Trade Unions on Tuesday.
During a meeting with executive directors of the International Labour Organization (ILO) Assane Diop and J.M. Salazar-Xirinachs, Wang said China's trade unions have always actively participated in activities organized by the ILO and are willing to play a bigger role in the ILO's decision-making process.
During another meeting with labor leaders from the World Federation of Trade Unions (WFTU), the Organization of African Trade Union Unity (OATUU) and the International Confederation of Arab Trade Unions (ICATU), Wang reviewed the ACFTU's friendship and cooperation with those organizations.
He said the ACFTU will continue to work closely with those organizations and promote the healthy relations between international trade unions.
Noting that international trade union movements are confronting new challenges and problems, Wang called on the trade unions of the world to increase dialogue and coordination in an effort to meet these new challenges and safeguard the legitimate rights of the world's laborers.
China's trade unions are ready to work with international trade union organizations to promote a relationship based on mutual respect and cooperation and push international trade union movements in a more just and fair direction, he said.
The International Forum on Economic Globalization and Trade Unions was established in 2004 and aims to promote mutual understanding and cooperation between the world's trade unions in the context of economic globalization.

Document on President Hu's Harmonious society

http://bit.ly/fH1Q0u

Impressions of China

China is growing at a fast pace and the inevitable outcome of these changes is the changing society. Though the real change started from the time reform and opening up got a "go" signal in 1978, to me the real effect of the visible change began in 1990s. This was the first time I landed in China. Hence, now when I am again in China for a longer duration, I could feel and see many more differences among the attitude, life style, and habits of the Chinese. The Chinese society then was an evolving new society and now is a developing new society. The difference I see in these 15 to 20 years is for real and probably a way towards making a new dynamic and harmonious society. The term harmonious out here I use strictly to point to the peaceful coexistence of man with nature.

My perception of Chinese society: Then and Now

The author Geeta Kochhar. [Photo provided to chinadaily.com.cn]

My first impression of Beijing in 1995 was that the sky may be blue but without birds singing, life exists on earth but without the existence of animals and other forms of creatures, human beings survive on land but without emotions. A perplexed person I was, wondering why cannot I see birds fly; why cannot I see dogs and cats roaming on streets; why cannot I see policemen ever smiling. Anything to everything was as if designed by computers and no manipulation allowed. I was happy in my own world, but still felt uneasiness. Today, I see a changed China.

One of the industries that flourished rapidly in China in these years is the pet-industry. Whether one sees this from the point of increasing loneliness among the aged or from the angle of accentuated love for the animals, the figures of pets are soaring in China. According to some estimates there are more than 150 million dogs and more than 10 million cats as pets in China. Besides, there is special love for different kinds of birds as pets that were just visible in selected parks in the 90s. As one walks on the lanes and by-lanes of Beijing, a special care for these pets is visible. More important is the fact that many love to cater to these animals as stray animals. Probably the new found love for animals and birds is also a mark of expanding middle and rich class in China that places pets as status symbol.
Another major change I feel is in the eating habits with a greater love for milk and milk products. Coming from India, drinking milk and eating yogurt was a daily routine for me. However, as I landed in China, all milk related products were in scarce quantity with no one keen on buying such products. A different China now shows greater love for drinking milk everyday with a variety of tastes flooding the market. In particular, yogurt is served in almost all buffets of a Conference or in the mess of almost all institutions. Yet, a plain simple yogurt without sweetness and eating butter is not trendy. Young girls prefer yogurt more due to its linkage with beauty and the dieting trend that runs high on minds.

Residence even in the 90s was linked more to the work place and so isolation from the world beyond one’s own community was unavoidable. Compact community life had greater sense of reliance on each other and also a greater knowledge of other's life. Commercial housing was just taking shape in the 90s and there was aversion to accepting the price one had to pay. Today, housing has become a major issue in China and higher cost of owning a place of residence has become a headache for many. Yet, there are many who have shifted to newer commercial locations that provide bigger space and higher living standards. What is compromised in the new demarcation of rich and poor living is "community life". The only link being the residential committees that organizes and arranges some events. More of the residences are rented out and the bond of "one work place" has been broken. Hence, there are very few residential areas that now provide reliance on and communication with next door neighbor. In my case for months, I could not even see my next door neighbor until one day they knocked on my door for some reason.

Tiananmen is a place that attracted me then and even now. Probably it is also a place that every foreigner wants to visit often and witness the change. Even though the greater change is not here that one can find, but a fresh and free air blows now. My first impression of Tiananmen was a huge manifestation of power and a dedicated lot of people. Uniformed police was on constant vigilance with no smiles and interaction with people. Foreigners, in particular, were aliens in the square walking to destroy its peace. Peace of what sort was unknown, yet calmness prevailed. Walking through Tiananmen was like feeling the stones and hearing the stories they narrate. People were just a blank sheet on them with no reaction to anything. I found it amusing to take a photo with a uniformed police person, which was refuted with no words uttered. Are humans alive, I wondered? However, years have gone by and I have policemen coming and chatting with me. Rather, a few indulging in teasing you in the areas that are highly protected zones. Is it that the market drive has greased their joints or is it that the freedom they enjoy now is greater? A new friendly image where people can at least talk and walk in relaxation is on board, albeit within specific limits.
China is changing and changing at a speed beyond imagination. However, the change is not just the higher GDP ratios, but an overall style of living. Globalization and increased market penetration has introduced many new facets of living to the Chinese life that was once closed to the outside world. Now the Chinese create and make own style statement, which probably is more inclined to the western world. The diminishing factor is the very own Chinese culture that overtakes a western living. The spread of a culture that still fascinates many beyond China is overshadowed by the growing middle class that wants to create a new living. Children being trained to speak in English, survive on western food and clothing, and to adopt the latest Asian looks. The good thing however is a new dynamic society is developing with a sense of harmonious living.

Dr. Geeta Kochhar is a Visiting Fellow at Chinese Academy of Social Sciences in Beijing. She is an Assistant Professor at the Center for Chinese & South-East Asian Studies, School of Language, Literature & Culture Studies, Jawaharlal Nehru University in New Delhi, India.

China's railways to rise to 120,000 km by 2015

Updated: 2011-04-27 09:28

(Xinhua)

BEIJING - China's total mileage of railways open to traffic will increase to 120,000 kilometers by the end of 2015, including 50,000 kilometers of railways in the western regions, an official said Tuesday.

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China currently has 91,000 kilometers of railways, said Sheng Guangzu, railway minister, at a meeting celebrating the 150th anniversary of Zhan Tianyou's birth.
Born in 1861, Zhan was a distinguished Chinese railroad engineer, nicknamed the "Father of China's railroad". He was the chief engineer responsible for construction of the Imperial Beijing-Zhangjiakou Railway, the first railway built in China without foreign assistance.
Sheng said all railway engineers and workers should use Zhan as their model to achieve the goal of modernizing the nation's railways as soon as possible.

Tuesday, April 26, 2011

China / US economic talks in May

China and US plan talks to solve currency issues

The value of the yuan has become a hot political issue between China and the US

China and the US will hold economic talks next month as the two countries work towards reaching a common ground on currency policy.

The US has accused of China on keeping the value of its currency, the yuan, artificially low in order to help its exporters.
China has said that a sudden rise in its currency will be detrimental not only to its export sector but also to its overall economy.
China is the world's largest exporter.
The growth of the Chinese economy over the past few years has been powered by the success of its export sector.
However, China's major trading partners, notably the United States and the European Union, have raised concerns that the government in Beijing has been engineering an economic strategy that gives an unfair advantage to the country's manufacturers, by keeping the yuan artificially low.
A lower valued currency makes Chinese goods cheaper in foreign markets compared with other competitors.
However as the pressure from its trading partners has increased, Beijing has allowed the yuan to slowly appreciate against the US dollar, but not as much as the decision-makers in Washington and Brussels would like.
The Chinese currency has gained almost 5% against the US dollar over the last year.
However, analysts say that despite that gain, the yuan remains undervalued, compared to currencies like the euro and US dollar.

Monday, April 25, 2011

China, Japan, South Korea seek trade pact

Trade ministers of Japan, South Korea and China

Asian economies have been looking to increase trade among themselves

The trade ministers of China, Japan and South Korea have agreed to step up efforts towards forming a trilateral free trade agreement.

The ministers said that free flow of trade and investment between their countries was key to sustaining growth.Asian economies have been looking to increase trade among themselves.
Demand from key markets like the US and Europe has fallen as countries on both sides of the Atlantic try to recover from the financial crisis. The trade ministers met in Tokyo.
The three countries have already set up a Joint Study Committee (JSC) involving government officials, businesses and academic participants to look into the feasibility of a trilateral free trade agreement.
Japan recovery China and South Korea are among Japan's largest trading partners and a speedy recovery in Japan's economy is vital to their growth.A decline in demand from Japan, in addition to a shortage of some manufactured products, has had a big effect on their economies.
The disruption caused to Japan's supply chain by last month's earthquake and tsunami has seen many Japanese firms curb production, both at domestic plants and factories abroad, because of disruption to supplies of parts.
Toyota has already announced that its factories in China will function at 30-50% of capacity until 3 June because of a shortage of parts.
While the trade ministers from China and South Korea urged their Japanese counterpart to restore the supply chain as soon as possible, they stressed that increased trade between the three countries will play a vital role in Japan's recovery process.

Friday, April 22, 2011

Women's shoes in China

CHENGDU - Chengdu, capital of southwest China's Sichuan province, is constructing a women's shoes export base to receive orders directly from foreign buyers.
With an investment of 300 million yuan ($46.05 million) and covering an area of more than 300 mu (20 hectares), the export base is located in Chengdu's Wuhou dstrict. The project is scheduled to start operation in October 2012.

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Dubbed "the capital of China's women's shoes" by the China Light Industry Federation and the China Leather Association in 2005, Wuhou district holds more than 1,000 shoe manufacturers and about 150,000 people are working in the shoe-making industry. The district produces about 140 million pairs of shoes per year.

The exporting base will provide not only export ordering and services, but also product design, development, advertising, e-commerce and personnel training.
In recent years, the pressures of rising raw material costs and increasing labor shortages have forced many shoe manufacturers and related industries formerly based in China's coastal areas to shift inland.
Enterprises such as Zara, a Spanish retail giant, and Intertek, a laboratory testing group, have moved into Chengdu, creating an ideal environment for the city to develop its shoe-making industry.
Currently, Russia is the major buyer of Chengdu's women's shoes. The export base is expected to open channels for local shoe makers to do direct trade with international purchasers, insiders said.
By establishing the exporting base, the city hopes to improve the quality of its products and services in order to expand its presence in the European and US markets.

Must See Chinese Kite Festival

Society

Blowing in the wind

Updated: 2011-04-22 10:21

By Lin Jing (China Daily European Weekly)

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More than 100,000 people from 29 countries and regions attended the Weifang International Kite festival, one of the world's most famous kite flying events, from April 12 to 17. Wang Qian / China Daily

High-Flyers from around the world recently traveled to home of the kite for a very special event German kite enthusiast Andreas Fischbacher was in his element last weekend when he attended arguably the world's most famous kite festival. The 24-year-old journeyed to Shandong province, for the 28th Weifang International Kite Festival, joining thousands of kite fliers from China and all over the world to the homeland of the kite. "I was into kites when I was 10," he grins. "My mother is a dress maker, showed me how to make and fly kites." "I have been to many international competitions all over the world, including Vietnam and Malaysia, and Weifang was a great experience." Kites do not have long history in Germany, he says, but is growing in popularity. "There are around 80 kite associations and 10 festivals during a year. Some are international ones, which attract worldwide kite players," Fischbacher says. "In Germany, it is a sport for everyone, from children to senior citizens." According to ancient Chinese texts, the kite was developed by the famous philosopher Mozi about 2,500 years ago and improved by a renowned carpenter Lu Ban in the 5th century BC. At first, kites were used for military purposes and during the Southern Dynasty (AD 420-589), soldiers used kites to send rescue signals. During the Tang Dynasty (AD 618-907), flying kites became a recreation. People tied bamboo instruments on kites and different musical tones would ring out in the air. Because the kites sounded like a koto instrument, people began to call them fengzheng, or "wind koto". After the Tang Dynasty (AD 618-907), Chinese kites started to spread around the world and by the end of the 13th century, Italian traveler Marco Polo introduced stories of kites to Europe. In China, flying kites is still a way to express best wishes and hopes for the future. Spring is the time for kite flying, and people attach pictures and words to their kites symbolizing their dreams of longevity and good luck. In the West, kites were often used for other practical uses in science and meteorology. In 1750, Benjamin Franklin designed an experiment to prove that lightning is electricity by flying a kite into a lightning storm. In Britain, kites were used to test theories of aerodynamics and in the 1920s the British navy used kites to haul human lookouts into the sky for military observation. After centuries of development, kite flying has become a popular sport in Europe. "Kites are quite popular in France and all over the Europe," says Serge Allegre, a middle school teacher from Paris. Allegre has been flying kites for 25 years and is also the founder and president of a kite association in Paris. He says people in Marseilles and Mediterranean area love the hobby with a passion. "In France, there are four to five big kite festivals a year. In Dieppe, a city in Normandy, there is big festival held every two years, which would last for one week and receive around 1 million participants." He says kites players in Europe prefer to make kites by themselves. "Chinese kites are more traditional in forms, like swallows and fishes. In France, we make kites into stamps or the Eiffel Tower," he says. Helmut C. Georgi, 59, a kite shop owner from Austria, says every year there are major kite festivals and exhibitions in Austria, where players come and show off their creations. "At the annual Vienna Kite Festival, around 2,000 people will come and that is big number for Austria," he says. Georgi has been flying kites since he was four and today travels around the world to attend different kite competitions and festivals. He says flying kites certainly gives him a lift. "Flying kites makes me relax," he says. "Besides, in international festivals, we meet friends all over the world and share the same hobby." Meanwhile back in China, traditional kite makers fear their tradition will be lost. "It is difficult to find proper successors for traditional kite making and the number of kite craftsman is decreasing," says Han Fuling, 79, deputy director of Kite Arts Commission in Shandong Arts & Crafts Association and also an craftsman of traditional kites. Han has been making kites for 72 years and his creations have won various prizes at many international competitions. "To become a qualified kite craftsman, one has to master the skills of binding, pasting, drawing and flying and each element takes a long time to master," Han says. "Nowadays young people are not willing to learn." At the same time, some forward-looking export-oriented kite companies are developing new products, such as the "power kite" in an effort to boost the industry. Power kites originated in the US and Europe in 1992 and can harness large wind forces, and are used in kite surfing, kite boarding, and kite skiing. "We spent six years on research and development of a new power kite with 3D wind simulation technology," says Jie Bing, director of Albatross Stunt Kite Company in Shandong. The company is the only power kite maker in Weifang and all of its products are exported to Europe. In the past two years, its revenue has been growing by about 20 percent annually. Jie says compared to traditional kites, power kites have a better market potential in the Europe. "A power kite is priced at 860 euros to 1,076 euros, with a gross margin more than 50 percent," he says. "Besides, power kites are easy to transport and has no specific requirements for weather or geographical conditions. It could be used for different sports activities," he says. "Power kite sports are quite popular among middle class in the Europe. Many of them would pack up power kites and go for kite surfing in the weekend." Jie says the world kite industry is developing at a fast pace but Chinese kites have fallen behind the US and Europe in terms of design and technology." "From paper and bamboo to nylon and carbon fiber, from traditional kites with single line to power kites with two to four lines, the industry is experiencing a fast development," he says. "But lack of advanced technology and limited product types have hindered the development of Chinese kites." He says R&D is of great importance for domestic kites companies and they should keep pace with latest industry trend in the world and develop new models frequently.