Alternative energy

• Shares in China Longyuan Power dropped after the company announced a plan to issue more shares to fund wind and solar projects, which analysts said would dilute existing shareholders’ interests. The announcement surprised analysts, since Longyuan purchased the wind and biomass power generation assets from its parent Guodian Group for CNY1.5 billion in 2011, and scaled down its capacity expansion to 1,600 MW this year from an earlier target of 2,000 MW due to sustained power grid bottlenecks that curtailed returns of new wind farms. The company said the share issuance plan was aimed at improving its capital structure.
• The Chinese government has earmarked CNY26.5 billion in subsidies for energy-saving home appliances, including air conditioners, flat-screen televisions, refrigerators, washing machines and heaters. They will be implemented for a year. It was also decided to spend CNY2.2 billion on promoting energy-saving lighting devices and LED light bulbs, and CNY1.6 billion on energy-efficient electric motors. A further CNY6 billion was earmarked for certain environmentally friendly vehicles with engine displacements of 1.6 liters or less.

Pollution

• About 7 tons of cinnamene leaked into the Hanjiang river after a traffic accident. The toxic chemical was found to have polluted a 5.5 km stretch of the waterway. A tanker carrying more than 30 tons of cinnamene was en route from Shaanxi province to neighboring Sichuan province when it overturned on a national highway in Ningqiang county of Shaanxi province on May 5. Cinnamene is a toxic chemical used to produce synthetic rubber and plastic.
• Environmental authorities in Beijing plan to shut down 66 polluting factories this year and 1,200 by the end of 2016 to reduce levels of PM2.5, very fine respirable particles that can cause lung damage.
• Groundwater in about 55% of the cities monitored across China is not safe to drink, according to report by the Ministry of Land and Resources. Monitoring conducted in 2011 found groundwater quality declined in parts of Gansu, Qinghai, Zhejiang, Fujian, Jiangxi, Hubei and Yunnan provinces. About 200 key cities across the country were monitored in the report, which covered more than 4,700 testing sites. More than 242 million rural residents have no sustainable access to safe drinking water, said Chen Lei, Minister of Water Resources. He promised that all will have access to safe drinking water by 2015.
• Heilongjiang provincial environmental authorities will spend CNY11 billion on nearly 200 projects to clean up the Songhua River by 2016. An environmental official said most of the money would be spent on reducing industrial pollution, residential waste and the use of pesticides and fertilizers in rural areas along the river.
• The U.S. Consulate began publishing hourly readings of PM2.5 in Shanghai on its official website and Twitter account. Monitoring data from the consulate was in accordance with that from the Shanghai Environmental Monitoring Center, but both gave different interpretations of the data. China’s acceptable daily limit for PM2.5 is 75 micrograms per cubic meter, compared with about 25 in the United States.
• Xinjiang’s lakes have shrunk by nearly 50% since the founding of the People’s Republic in 1949, dwindling from 1.2 million hectares to 700,000 hectares as a result of grassland degradation, desertification and a falling water table. Wetland areas have declined from 2.8 million hectares to 1.48 million hectares over the past six decades.
• The Guangdong provincial government will phase out or relocate by the end of this year 255 factories that have been discharging excessive levels of heavy metals, as part of efforts to rein in pollution. It has also ordered 12 city governments, including those of Guangzhou and Shenzhen, to submit plans for controlling heavy metal pollution by the end of this month.
• The Chengdu government has earmarked CNY17 million for low-interest loans to encourage the environmentally safe recycling of straw in the city, amid a round-the-clock crackdown by authorities on the burning of straw. Companies will be encouraged to adopt new recycling technology. Straw burning is a major contributor to China’s smog problem.
• The Hubei provincial government will allocate CNY11.15 billion to build 156 waste treatment facilities in the next four years. Eight of them will process restaurant waste, and 85% of household refuse will eventually be processed at the facilities.
• Shanghai is ready to release readings of fine particle pollution PM2.5 in June. Readings from all measuring stations will be averaged into a single citywide figure, said Zhang Quan, Director of the Shanghai Environmental Protection Bureau.
• Seven people who caused severe chromium pollution in Yunnan province were sentenced to prison in the Qilin District People’s Court. Three were sentenced to four years and fined CNY50,000 each for dumping more than 5,000 tons of carcinogenic industrial chemicals on hills near the Chachong Reservoir between April and June 2011. Production at the Luliang Chemical Industry plant – one of Asia’s largest producers of chromium sulfate – has been halted since last August.
• According to Ministry of Environmental Protection data, there were 935 landfills nationwide in 2008, with a combined capacity of 2.34 billion cubic meters, while 34% of these sites do not have any measures to prevent the pollution of the soil and groundwater.
• Five indoor air-quality inspection companies in Shanghai were told by the Shanghai Bureau of Quality and Technical Supervision to stop performing unqualified tests that give false readings. The companies given warnings were the Shanghai Huxing Professional Inspection and Management Co, the Shanghai Jienuo Quality Inspection Co, the Shanghai Disease Control Biological Engineering Inspection Co, the Shanghai Ousa Environmental Management and Consulting Co and the Shanghai Pudong House Quality Test Co. Officials from the Shanghai Environmental Protection Industry Association said some air quality testing companies cheat customers by producing fake reports and asking customers to pay a lot to hire them to remove the pollutants.
• China will launch its first large study on the relationship between environmental pollution and children’s health in the second half of next year. It will join a global collaborative research project under way in developed countries, with Japan, Denmark and Norway having already started their own studies of 100,000 women each, and the U.S. about to join them soon. British scientist Professor David Barker has suggested that many diseases, like heart disease, hypertension and diabetes, can be traced back to the first two years of a person’s life, and even to the womb.

Greenhouse gas emissions

• China wants energy-efficient buildings to account for 30% of all new construction projects by 2020 to bring the nation’s building energy consumption ratio closer to that of developed countries. The central government will step up incentives for green buildings, improve industry standards and promote technological improvements and the development of related industries, the Ministry of Finance and the Ministry of Housing and Urban-Rural Development said. It was the first time a goal for the development of energy-efficient buildings was set.
• Real-time data on the density of carbon monoxide and ozone in Beijing’s air was released on May 12 for the first time by the Beijing Municipal Environmental Monitoring Center. Beijing has now released data on all six major air pollutants addressed in new air quality standards passed by the Ministry of Environmental Protection in March.
• China has hit back at claims it is holding up global climate talks in Bonn, Germany.  Developed nations were trying to wriggle out of legal targets to curb global warming, China’s Chief Negotiator Su Wei said, adding that China had “shown a lot of flexibility”. European participants said China was blocking attempts to launch a negotiating “track” agreed to at talks under the UN banner in Durban, South Africa. French Climate Ambassador Serge Lepeltier said that China specifically “gives the impression of having hardened its positions since Durban”.

The Flanders-China Chamber of Commerce (FCCC) organized a fact-finding trip to Jinan, Qingdao, Yantai and Weihai in Shandong province from May 20 till 24, 2012 as part of  its strategy to give its members a better insight into business opportunities in second- and third-tier cities. Managers of a limited group of companies were offered the opportunity to become better acquainted with the area and meet potential partners and senior officials. H.E. Mr. Patrick Nijs, Ambassador of Belgium in China, accompanied the delegation, assuring that it was received at the highest possible level in all the cities visited.

The mission started on May 20 in Beijing with a networking lunch organized by the Benelux Chamber of Commerce in China (BenCham), chaired by Mr. Patrick Vandenbemd, General Manager of BenCham Beijing, where participants to the mission also met FCCC members based in Beijing. Mrs Naomi Sanders, Project Manager of the IPR Helpdesk, gave a presentation on the “Top 5 points you need to know about IP in China”. Mrs Ludmila Hyklova, Advisor at the EU-China SME Center, talked about “Due diligence on investing and exporting to China”, while FCCC member and General Manager of Orientas, Drik Laeremans, talked about different ways to get involved in the Chinese market. The lunch-meeting concluded with a brief introduction of the investment environment in Zhuhai, Guangdong province, by Corinna Wu, Event Manager at the Zhuhai Investment Promotion Bureau. In the evening, Ambassador Nijs welcomed the delegation with a dinner at his residence.

On May 21, the mission traveled by high-speed train to Jinan, capital of Shandong province, were a meeting and lunch were organized with the leaders of the Lingang Economic Development Zone, who briefed the delegation on the investment environment in Jinan. Mr. Winston Zhao, Partner at Jones Day Shanghai Office, shared some insights on investing in China. Mr Thierry Schmidt, Chairman of the Board of Esco Couplings (Jinan), offered a testimonial of Belgian investment in Jinan, followed by a visit to the company. The mission also met leaders of the Environmental Protection Bureau of Shandong province and Jinan city. Vice Governor of Shandong province Cai Limin met with the delegation and introduced the economic development of the province. Following a banquet offered by the provincial government, the mission continued the trip by high-speed train to Qingdao.

In Qingdao the mission was briefed on the investment environment in the city by Mr Feng Wenqing, Chairman of the Council for the Promotion of International Trade (CCPIT) Qingdao Sub-Council, followed by a meeting with the leaders of the Qingdao Environmental Protection Bureau, who introduced the opportunities for foreign companies active in the environment sector in the Five Year Plan. Qingdao Vice Mayor Liu Mingjun chaired a banquet for the members of the mission. In the afternoon a visit was organized to the Qingdao Economic and Technological Development Zone and to Huber Engineered Materials, a Member of the FCCC, where Plant Manager Zhang Weijia and HR Manager Helen Lu introduced the company and its experience of investing in Qingdao. The mission also visited the huge new Kempinski Hotel of Qingdao, which will cater to conferences and conventions, and is owned by the Qingdao Weiye Group, chaired by Mr.Li Zhongyu. A successful day was concluded with a dinner with the leaders of the Economic and Technological Development Zone.

Wednesday, May 23, started with a breakfast meeting with Andries Verschelden, Partner, and Scott Krivokopich, Manager at Moore Stephens Verschelden, about taxation issues and the results of a survey of Belgian companies investing in China. Mr. Zhan Haiqing introduced the Qingdao Association of Enterprises with Foreign Investment. Following the breakfast meeting, the mission traveled by bus to Yantai for a visit to the Yantai Haide Special Vehicle Co, where Chairman Louis Song and Executive Vice President Maxime de la Morandiere introduced the company. The very brief visit to Yantai was concluded by a meeting with Vice Mayor Song Weining and a dinner attended by leaders of the city.  In the evening the mission arrived in its final destination of Weihai.

The first activity in Weihai was a meeting with the Municipal Bureau of Commerce and the Weihai-Belgium Cooperation Exchange Meeting with presentations by Mr. Xu Dongming, Director of the Municipal Bureau of Commerce; H.E. Mr. Patrick Nijs, Ambassador of Belgium to the People’s Republic of China; Mrs. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce (FCCC); Mr. Juha Ven of the Huiyin Group and Mr. Geert Roelens, CEO of Beaulieu International Group. A welcoming lunch was chaired by Vice Mayor of Weihai Mr.Tian Zhiying. In the afternoon the mission visited Bekaert (Shandong) Tire Cord, where General Manager Julia Zhu led a visit to the plant; the Weiqiao Textile Co; the Weihai Airport Equipment Co and the Shandong New Northern Information Technology Co. The fact-finding mission to Shandong was concluded with a banquet offered by the leaders of Weihai’s Huancui district.

The visit to Shandong was organized with the financial support of Flanders Investment & Trade. An extensive report of the mission to Shandong will be made available to FCCC members this week.

Fund companies in China made CNY303.4 billion in profits for investors from 2001 to 2011, or about CNY27.6 billion on average every year, according to statistics from Wind Information Co. The companies received about CNY164.6 billion in management fees, meaning the funds provided investors with CNY138.8 billion in net profits. By the end of last year, 41 out of the 64 fund companies that took part in a recent survey said they had managed to make profits for investors since 2001. The fund family China Asset Management Co made about 12% of the industry’s total profits from 2001 to 2011. Among the 23 companies that reported losses, China Post Fund performed the worst. Since it began operating in 2006, it lost CNY22.4 billion. Wind’s statistics also suggested that 35 of the 41 companies that reported making profits in the past 11 years have seen their profits exceed their management fees. Johnson Chng, Partner at A.T. Kearney Management Consulting Co, said it is very hard to gauge the performance of fund managers in China, where the capital markets operate differently than in other countries. “Funds are charging high management fees in China,” Chng said. “Normally, investors should get profits from dividends,” he told the China Daily.

Hongkongers who spend most of their time working on the mainland will see their tax bills reduced thanks to new rules taking effect next month that are aimed at eliminating double taxation. Any resident who spends more than 60 days per year in Hong Kong must pay taxes, even if their work is outside the city, but they can reduce the sum on a pro rata basis if they pay taxes elsewhere. But employees who spend more than 183 days on the mainland are taxed on their entire salary – regardless of how much tax they pay in Hong Kong or any other territory. The changes, announced in a circular issued by the State Administration of Taxation, will see the mainland bring its calculation methods into line with those used in Hong Kong, meaning they will pay taxes based on the days they physically spend on the mainland – although the change will only apply to residents of Hong Kong or Macao working for a company from one of the special administrative regions. Business owners, some of whom paid part of their employees’ mainland tax bills, said the change would reduce their financial burden and increase their flexibility in sending Hong Kong employees to work over the border. A tax expert said a Hongkonger on CNY100,000 per month could save up to CNY172,000 in taxes for the year. Stanley Lau of the Federation of Hong Kong Industries said the change would give employers more flexibility in considering whether to send staff to work on the mainland. “It will no longer be necessary for us to count the days to ensure that employees don’t work more than 183 days on the mainland.” Government statistics show that the number of Hong Kong residents who worked on the mainland fell from 218,000 in the 12 months to September 2008 to 175,000 in the year to September 2010, the last year for which statistics are available.

HSBC said it has established itself as the largest yuan foreign exchange house in London, which is now seeking to transform itself into the western world’s leading yuan hub. But London’s ambition to become an offshore yuan center would complement, rather than compete with, Hong Kong’s yuan plans, said HSBC Hong Kong Chief Executive Anita Fung. Her comments came as representatives from the Hong Kong Monetary Authority (HKMA) and seven banks met the British Treasury and other agencies to discuss ways of advancing the internationalization of the yuan. Europe overtook Asia to become the largest yuan payment contributor earlier this year, accounting for about 47% of all yuan payments. London’s yuan deposits also reached CNY109 billion by April, according to data from the City of London. 64% of surveyed banks offer corporate accounts in yuan, plus RMB payment and cash management. Last year, London’s spot foreign exchange market’s daily volume contributed 26% of the global offshore yuan spot market volume, reaching USD680 million, compared to Hong Kong’s USD1.5 billion. RMB commercial loans in London reached CNY280 million in 2011, trade services topped CNY88 million, and import and export financing hit CNY16.3 billion. While yuan liquidity in London has been increasing, Hong Kong has experienced a consecutive four-month drop in yuan deposit volume, albeit still boasting the largest yuan liquidity pool outside the mainland. HSBC said it would continue to be an active player in yuan bond issuance both in Hong Kong and London, after becoming the first to issue a yuan bond in London in April.