Alternative energy

• China Eastern Airlines has completed its first test flight using a new aviation biofuel developed by Sinopec. An Airbus 320 took 85 minutes to complete the test flight at Shanghai Hongqiao International Airport. As the test flight was successful, the airline said it would start using the biofuel on commercial flights. The biofuel, made with palm oil, can cut the carbon emissions of the aircraft, Sinopec said. China is now the fourth country in the world to have developed aviation biofuel, after the United States, France and Finland. Another kind of biofuel is made from recycled gutter oil.
• Renewable energy companies from the mainland and Hong Kong need to repay USD3.5 billion of debt this year, prompting global investors to fret that another issuer will follow Suntech Power into default. Bryan Collins, Fixed-income Portfolio Manager at Fidelity Worldwide Investment, said: “For the solar companies, it’s a function of too much debt and poor market dynamics leading to an inability to refinance.”
• U.S.-based world leading solar module manufacturer and PV solution provider First Solar said it is “on track for final approval” in the second quarter for its 2 GW project in Erdos in the Inner Mongolia autonomous region, and plans to start construction in the third quarter. First Solar has a large manufacturing unit in Malaysia, but it is possible that it may commence manufacturing in China if there is sufficient demand. California-based low-cost solar module manufacturer Solaria Corp is also planning to open a high-volume manufacturing facility in China. It is working on several megawatt-size projects in Qinghai province and Inner Mongolia.

Pollution

• Shanghai’s People’s Congress plans to produce a new, detailed environmental protection law this year aimed primarily at curbing PM2.5 pollution. The law will include exhaust discharge standards for vehicles and local factories as well as measures to control flying dust at construction sites. Under the more-stringent Air Quality Index that took effect in November, air quality is “excellent” or “good” when the index is below 100, “lightly” or “moderately” polluted between 101 and 200, and “heavily” or “severely” polluted from 201 to 500. On January 16, the index surged to 254, a record high for the new index.
• Villagers in Lanxi city, Zhejiang province, are demanding nearby Zhejiang Huadong Aluminum Co cease polluting the environment after they said 127 people had suffered fluoride poisoning and 84 had caught cancers over the past 27 years. Local environment authorities, however, say waste discharges from the factory meet national environmental standards. Villagers said the prevalence of skeletal fluorosis was evidence of the factory’s culpability as workers in the factory had to use fluoride to produce aluminum ingots. The Zhejiang Huadong Aluminum Co was established in 1958 and has 1,800 employees.
• There are no official data on the numbers of expatriates leaving China because of pollution, but executive recruitment consultants say they are noticing that it is becoming harder to attract top talent to China – both expats and Chinese nationals educated abroad. The European Chamber of Commerce in China says foreign managers leave for many different reasons but pollution is almost always cited as one of the factors and is becoming a larger concern. If the polluted skies continue, companies may have to increase salaries or settle for less qualified candidates.
• Shanghai will launch a pilot program for the disposal of hazardous waste such as used light tubes and batteries by asking disposal firms to set up collection spots at big supermarkets. The program will begin soon in Changning and Baoshan districts. Companies involved in hazardous waste collection and treatment will receive subsidies. Shanghai had about 1,500 tons of used light tubes last year and only 10 tons were disposed of properly. Less than 10% of the city’s hazardous waste is recycled properly.
• Pudong New Area’s environment watchdog is investigating an industrial zone in Hangtou town after a 300-meter stretch of a river there turned blue. Though residents no longer drink from the river that was quite clear several years ago, some still use river water for cooking. Local residents believe that some factories at the nearby Dabai Bay Industrial Zone could be the culprits and complained to the township government.
• The Ministry of Environmental Protection (MEP) will not issue data related to soil pollution for the time being but will discuss the situation after an in-depth investigation, the Ministry said. In January, Beijing lawyer Dong Zhengwei sent an application to the Ministry asking it to issue soil pollution data, but the Ministry said in February that the data is a state secret and refused to issue it. China is now facing a grave soil pollution situation. Heavy metals have severely polluted some areas, mines and factories have degraded soil in industrial areas, and the amount of arable land is decreasing due to the use of pesticides and chemical fertilizers.
• The Ministry of Environmental Protection (MEP) has revealed how the government has handled 13 cases of pollution in the first three months of 2013. Such information will be released on a quarterly basis in the future. The most recent major pollution scandal to provoke a public outcry was in March, when Deng Lianjun, then head of the local Environmental Protection Department in Cangxian county, Hebei province, said that just because a river had turned red didn’t mean the water was unsafe to drink, because “after boiling red beans the water has that color, too”. The river was later found to contain levels of aniline 73 times higher than the national standard. “The Ministry’s statement is a leap forward in official environmental information disclosure,” said Ma Jun, Director of the Institute of Public and Environmental Affairs.
• Hundreds of protesters gathered in Shanghai on May 10 to oppose plans for a lithium battery factory, marching peacefully along a busy street in the Songjiang district. Residents are concerned about potential waste water and gas emissions from the plant, which would be built by Hefei Guoxuan High-Tech Power Energy. It was the third mass protest in recent weeks against the planned factory.
• The Ministry of Environmental Protection (MEP) announced it had punished local governments and state-owned companies that failed to reach their 2012 emission reduction requirements, but environmental activists said fines were not high enough to deter further violations. The Ministry said that a special inspection of groundwater pollution in six provinces of North China resulted in fines for 88 companies out of the nearly 26,000 that were examined during the 40-day campaign. But the average fine was less than CNY70,000. The upper limit for fines under current regulations was CNY500,000.

Greenhouse gas emissions

• For the first time an entire chapter was devoted to environmental protection in the central government’s white paper on human rights progress. The government has worked hard to ensure that people can enjoy a good ecological environment, according to “Progress in China’s Human Rights in 2012”. Zhang Yonghe, Professor of human rights research at Southwest University of Political Science and Law in Chongqing, said that highlighting environmental protection guarantees the human rights of not only the current generation but also future generations.

Finance

• Bank of China (BOC) has closed the account of North Korea’s Foreign Trade Bank, the country’s main foreign exchange bank. The closure is the first significant, publicly announced step taken by a Chinese entity to curb its dealings with North Korea in the wake of sanctions imposed by the U.S. and its allies. It is unclear how much of the USD6 billion in annual trade between China and North Korea goes through the Foreign Trade Bank.
• China’s Aa3 sovereign bond ratings are supported by its economic and financial strength, which has not been jeopardized by the country’s slower growth, Moody’s said. The rating agency’s outlook for the country’s credit rating is stable. “We see China’s growth moderating further, but it will remain well above the global average over a five-year horizon, if not longer,” Moody’s said in its annual report. Moody’s predicted China’s gross domestic product (GDP) will grow 8% this year and 7.5% in 2014.
• Tian Huiyu, Director of Retail Banking and head of the Beijing branch of the China Construction Bank, will replace Ma Weihua, President of China Merchants Bank (CMB). Ma, 65, will step down from the post after being President of Shenzhen-based CMB for 14 years.
• Citibank (China) Co has launched multi-currency notional pooling with RMB capability, the first bank in China to do so. It will significantly enhance the efficiency of clients’ liquidity management.
• The National Social Security Fund (NSSF) is budgeting for a 9.9% increase in its income to CNY3.28 trillion this year, including insurance fee income and government financial subsidies. Expenditure is expected to grow 16.8% to CNY2.79 trillion.
• The number of financial crimes rose substantially in Shanghai last year. Shanghai’s Procuratorate has made 849 arrests involving financial frauds while dealing with 2,490 cases, up 78.5% over 2011 and accounting for 7.5% of total criminal activity, compared to just 4.5% in 2011, according to a white book on financial fraud by Shanghai People’s Procuratorate. Most of the financial frauds involved credit card scams, which accounted for 79.1% of the total number of frauds.
• The cost of funding so-called dim sum bonds has risen as the swap rates between the yuan and the U.S. dollar are at record lows, tempering the pace of investment-grade corporate bond issues by foreign issuers. New issues of dim sum bonds grew about 20% to USD5.2 billion in the first four months of this year from the same period last year, according to data from Dealogic.
• Last week the renminbi yuan reached an exchange rate of 6.1396 to the U.S. dollar, the strongest level since the end of 1993. The daily fixing rate of the yuan rose 1.41% since the beginning of the year. Analysts have forecast continuous appreciation pressure on the yuan as major economies announced a new round of monetary easing.
• Banks in China extended CNY792.9 billion in yuan-backed loans in April, while M2, the broad measure of money supply, grew 16.1%, faster than the official 13% annual target. New local currency loans fell last month from CNY1.06 trillion in March, but stayed higher than CNY620 billion in February, according to the People’s Bank of China (PBOC).

Foreign investment

• Finnish elevator company Kone has opened its largest manufacturing plant to date in Kunshan, Jiangsu province. China is by far the single biggest market for new elevators and escalators. With such an extended domestic demand, the world’s top eight elevator and escalator manufacturers are following Kone in penetrating the Chinese market, with the elevator industry projected to supply 4 million units to meet market demand in 2015.
• Chinese companies’ investments in the United States rose to USD6 billion last year from just USD700 million in 2005, with the momentum seen picking up, according to the “Chinese Investing in the U.S. Summit Forum” held in Shanghai. Tianjin Pipe Corp spent more than USD1 billion in building a facility in Texas in 2011, the largest investment in manufacturing by a Chinese firm in the U.S.

Foreign trade

• The State Administration of Foreign Exchange (SAFE) will boost scrutiny of cross-border capital flows by importers and exporters to stop speculative funds from entering the country disguised as trade payments. China is investigating possible fraud behind first quarter export growth figures questioned by economists from Goldman Sachs Group to Nomura Holdings. The practice of false trade declarations “does exist, but is definitely not mainstream,” Customs Administration Spokesman Zheng Yuesheng said. Recipients of SAFE’s warnings have 10 days to explain the need for their transactions and those who fail will be placed on the Administration’s B list, which means their activities will be closely monitored for at least three months. SAFE said it would “severely punish those who use fake documents.”
• A growing number of Chinese exporters attending the 113th Canton Fair reported they are successfully shifting their traditional export-focused businesses to chasing sales at home. Fair organizers reported transactions with traditional buyers from the European Union, the United States and Japan were down 4.9%, 0.5% and 12.6% year-on-year, respectively.
• A trial of China’s first free trade zone will be launched in Shanghai’s Pudong New Area as early as the end of this year. “Customs formalities within the free trade zone will be so simple and convenient that the entry of goods will only require registration of the variety and value of the goods without any inspection and intervention,” said Huang Shengqiang, Director General of Shanghai Customs. “Also, there will be no declaration process for goods coming in and out of the zone.” Pudong authorities have accelerated preparations to consolidate the three bonded zones in Waigaoqiao port, Yangshan Deep-Water Port and Pudong International Airport into the free trade zone.

Health

• The number people who have been infected by the H7N9 virus in China has risen to 130, according to Chinese health authorities. 32 of them have died. No human H7N9 bird flu infections have been reported in Shanghai for more than 20 days, prompting the city to end its emergency response scheme for epidemic diseases. However, hospitals and health authorities will continue to monitor and prevent the spread of the virus, the city government said.
• Scientists said that flu infections were rising among pigs raised for slaughter on farms in south and southeastern China, and the risk of spillover to humans was “constant or growing”, according to one of the authors of a study published in Proceedings of the Royal Society. Pigs can act as a “mixing vessel” in a process known as re-assortment, brewing new flu strains from swine, poultry and human viruses in areas where they live in close proximity. But the H7N9 virus has not been traced to pigs and has not been shown to jump from person to person.
• Hutchison China MediTech is in talks to license a cancer treatment based on traditional Chinese medicines, said Christian Hogg, the company’s CEO. The Hong Kong-based company, known as Chi-Med, completed due diligence with potential partners and will probably reach an agreement by year-end. The medicine may be used to treat colorectal, lung, breast and gastric cancers.

IPR protection

• Protecting intellectual property and developing strategic emerging industries go hand in hand, said Tian Lipu, Commissioner of the State Intellectual Property Office (SIPO) in a speech to the annual open house at SIPO on April 26, the World Intellectual Property Day. Because of fierce international competition. Emerging industries require a higher level of IP management and protection, he said.
• A new online portal designed to fight counterfeits was launched in late April. Created by the newspaper China Intellectual Property News, the website helps to expose cases of IP infringement with the goal of distinguishing the authentic from the fake, and it offers online consultation. Organizers said they wish to improve IP information services, protect consumers from being cheated and promote the watchdog role of the press.
• For eight consecutive years Chengdu has lead other central and western Chinese cities in the number of patents applied for and granted. Residents of the city applied for 48,901 patents last year, including 10,886 for invention patents, increasing 46% year-on-year. More than 32,000 patents were granted in that same year.
• The organizing committee of the 113th China Export and Import Fair in Guangzhou, which ended on May 5, received 542 intellectual property disputes during the event. More than 660 companies were involved, a decrease of 0.9% compared to the previous session. CEIF Spokesman Liu Jianjun said that most of the companies have strengthened awareness of IP protection, and their capacity to handle IP complaints and protect themselves has also been improved.

Macro-economy

• China’s private and export-oriented firms saw service activity grow at the slowest pace in 20 months in April. The HSBC Business Activity Index stood at 51.1 in April, down from March’s 54.3 and at the lowest level since August 2011. The latest reading signaled only a marginal increase in service sector activity. New orders grew at the smallest pace in 20 months, while staffing levels in the service sector fell for the first time since January 2009.
• The Chinese government  announced detailed plans on deepening economic reform, fulfilling its pledge to cut government intervention. The government will cancel or delegate power to lower levels on 62 items that were previously subject to central government administrative approval, after similar approaches were taken on 71 items last month. It will improve measures to check local government debts and make the budget system more transparent.
• The Xinjiang Production and Construction Corps (XPCC) is seeking USD8.5 billion of investment in five projects to use natural gas and coal in chemicals manufacturing. XPCC accounted for more than a sixth of Xinjiang’s economic output last year. Thanks to its vast land mass and small population, Xinjiang can better handle pollution from chemical industries than the more developed coastal regions.
• Hebei province is planning to build at least one zone in every city in the province to attract companies looking or forced to move from Beijing and Tianjin. Hebei attracted more than CNY219 billion in investment from Beijing, which accounted for 43% of its total external investment last year. The province wants to take advantage of its location surrounding Beijing and Tianjin to adsorb their spillover and attract companies that are moving out.
• Shenzhen unveiled the three-year “Shenzhen Overall Reform Plan for 2013 to 2015” to deepen reform, with development of the Qianhai-Shenzhen-Hong Kong cooperation zone at the top of the agenda. The plan aims to accelerate institutional reform in Qianhai, help promote the service industry and industry upgrades, and enhance cooperation between Shenzhen and Hong Kong.
• Irregularities involving billions of yuan were found in a review of 2011 revenue and expenditure at 10 state-owned companies and three banks by the National Audit Office (NAO). Violations included China Mobile spending CNY24 million to buy gym cards for staff, which was a breach of salary management rules; China Guodian Corp investing in projects worth CNY30 billion without approval; and China Huaneng Group owing business tax of CNY392 million and investing CNY32.4 billion in unapproved projects.
• Hong Kong’s economy grew a meager 0.2% in the first three months of the year compared with the previous quarter. It was the slowest growth in three quarters. On a year-on-year basis, gross domestic product (GDP) grew 2.8%, unchanged from the previous quarter’s growth rate. Government Economist Helen Chan said the government is maintaining its full-year growth forecast of 1.5% to 3.5%.

Mergers & acquisitions

• Bright Food Group is considering selling U.S. dollar-denominated bonds before an October deadline to repay financing for its acquisition of Weetabix. Bright Food, based in Shanghai with operations from sugar to dairy and wine, plans to meet investors in Asia and Europe. The company is due to repay a USD300 million loan in October, part of USD850 million borrowed last year to buy 60% of British cereal maker Weetabix.
• China Mengniu Dairy Co will pay HKD3.18 billion to raise its stake in raw milk provider Modern Dairy to 28% to gain greater control of milk supplies amid rising worries of food safety among Chinese consumers. Before the deal, Mengniu owned a 1% stake in Modern Dairy, which is now the company’s largest raw milk supplier with 22 dairy farms across China and aims to have 30 farms by 2015. Mengniu’s 2012 profit fell 21% to CNY1.26 billion.

Real estate

• China has overtaken Japan to become the Asia-Pacific’s largest market for investment-grade commercial real estate, DTZ, which is now part of UGL Services, a division of UGL, said in its latest “Money into Property” report. The value of such real estate in China totaled USD1.5 trillion in 2012, a 15% annual rise in local currency terms. Globally, the Asia-Pacific, which saw an 8% increase last year, was the only region where such investment grew.
• Three land parcels on the former World Expo site in the Pudong New Area fetched nearly CNY2.6 billion at an auction, with two of them being sold at starting prices. The three plots, designated for office and retail purposes, were all priced at around CNY27,000 a square meter. One was the most expensive plot sold in Shanghai in over a year. A subsidiary of Far Eastern New Century Corp, a Taiwan-based conglomerate, paid CNY978 million for the 6,100-square-meter parcel.
• China’s property market will continue to grow, but at a slower pace, while developers which focus on the mass market will experience strongest growth, Moody’s Investors Service said. It expected a 10% year-on-year growth in the value of residential property sales over the next 12 months, in line with last year. “Urbanization and favorable mortgage financing for first-time homebuyers will continue to support demand and sales volume,” said Kaven Tsang, Moody’s Vice President.
• A report from the investment bank Jefferies estimated that pre-sales by major developers last month fell 17% month-on-month, although they grew 24% year-on-year on average. Despite the drop from March, stronger developers were on track to reach full-year targets, it said. Daiwa Capital Markets said in a report the average property price would continue rising, at least over the next two to three years.
• Shanghai-based property developer Greenland Group has bought an additional stake in Hong Kong-listed SPG Land Holdings to become its controlling shareholder.  After the deal, Greenland will hold a 60% stake in the Hong Kong-listed company, and the latter will change its name to Greenland Hong Kong Holdings.

Retail

• Yum Brands said its roughly 450 Little Sheep hot pot restaurants in China are not involved in a fake mutton scandal after Shanghai authorities said they were testing mislabeled mutton from a wholesaler. Yum Brands said the wholesaler at issue is not one of its two suppliers. Media reported that police had busted a crime ring that had passed off more than USD1 million in rat and small mammal meat as mutton. Yum Brands bought a controlling interest in Little Sheep in February last year and now owns 93% of the chain.
• Annual sales growth of the catering sector slowed sharply to 8.5% in the first quarter from 13.6% in the whole of last year. The sales of large caterers dipped 2.6% in the first quarter, compared to a 12.9% rise last year. That put a drag on China’s consumption, with annual retail sales growth slowing to 12.4% in the first quarter from 14.3% over all of last year.
• British retailer Tesco will close a shop in Shanghai’s Jing’an district at the end of this month when its lease ends amid speculation that rising rent may be a factor. The outlet opened in July 2003. Tesco has 113 outlets in China, with 23 stores in Shanghai. Last year, it added 13 new stores and closed five in the country, a drop from the 16 new openings in 2011. Wal-Mart’s growth also slowed in 2012 when it added 30 new stores in China, down from 50 new outlets in 2010 and 41 in 2011.

Science & technology

• International scientific journals no longer consider China a low-income country. U.S. online publication PLoS One charges Chinese researchers as much as USD1,350 per article, a standard fee for contributors from the United States and Europe, but it charges nothing for papers submitted from low-income countries such as Afghanistan, Cambodia and Ethiopia, while charging USD500 for lower-middle-income countries such as India, Cuba and Egypt. China produced 168,000 sci-tech papers in 2012 – the  second highest number in the world. The vast majority of these papers were published in foreign journals, because domestic sci-tech publications were far less influential.

Stock markets

• The number of commercial urban banks awaiting IPO approval reached 16 by May 2, according to the China Securities Regulatory Commission (CSRC). The Bank of Dongguan reported a 45% rise year-on-year in net profit in 2012, the highest among the 12 pre-IPO lenders which had released their 2012 annual figures by May 5.
• Businesswoman Sun Min has been handed a record fine and costs totaling just under HKD24 million by Hong Kong’s Market Misconduct Tribunal for insider trading in connection with Coca-Cola’s failed bid to acquire Hong Kong-listed China Huiyuan Juice Group in 2008. It is the highest fine ever imposed by the Tribunal.
• The China Securities Regulatory Commission (CSRC) has announced its heftiest fine in a decade on an IPO sponsor, underlining its determination to get tough on financial investigations. Ping An Securities, the sponsor of Wanfu Biotechnology (Hunan) Agricultural Development Co’s IPO in 2011, has been fined CNY76.65 million, the equivalent of three times its fee for acting as sponsor. Wanfu Biotechnology had started falsifying its books as early as 2008 in preparation for its listing. Ping An has also been banned for three months from submitting any new IPO application.

Travel

• A combined Metro and maglev ticket will become available at CNY55 to travel from Pudong International Airport to Shanghai’s city center.
• Shanghai will upgrade capacity and facilities at Pudong International Airport to handle more Airbus A380 flights after two European airlines said they will fly the world’s biggest jumbo jet to the city from September. Boarding gates will be renovated and more bridges built at its two terminals. Hongqiao airport will also be renovated because it serves as the backup airport for the A380, which can seat 853 passengers in an all-economy class setting. Air France and Lufthansa unveiled plans to fly the A380 to Shanghai from September.
• Garuda Indonesia launched an immigration-on-board service for Shanghai travelers to Jakarta, as part of its effort to improve tourism between China and Indonesia. Immigration officers will provide visas on arrival to passengers on board Garuda Indonesia flights from Shanghai to Jakarta.
• Tollway operators who have been financially affected by the government’s toll-free policy during holidays may be allowed to extend their collection periods, according to a draft amendment to China’s tollway management regulation, which took effect in November 2004. According to the regulation, the time for non-government-invested highways to collect tolls should not exceed 25 years. Those in central and western regions are allowed to extend the period to 30 years. The revenue, expenditures and maintenance information of tollways must be made public for scrutiny, the draft said. The country’s 19 listed highway companies reported a total net profit of CNY2.7 billion for the first quarter of this year, a CNY330 million drop compared to the same period last year.
• Air China announced a large-scale aircraft purchasing plan. The Chinese flag carrier said it plans to buy 100 Airbus aircraft, without giving any details on models or a timetable for the purchases. Six A340 aircraft, the oldest in its Airbus fleet at an average 14.6 years, will be retired. At the end of last year, Air China had a fleet of 461 aircraft, including 209 Airbus airplanes. Such a large order showed that Air China is optimistic of continued growth in China’s civil aviation industry. Air China completed its first Beijing-Geneva flight on May 7, the carrier’s 12th destination in Europe.
• Thailand remained the most popular overseas destination among Shanghai travelers last year, while more local people traveled further and longer. Thailand was followed by Japan and South Korea, and the U.S. finished fourth and France fifth, the first time those two countries ranked in the top five. In 2012, some 102,825 Shanghai tourists in organized groups visited the U.S., up 101% from the previous year, according to a report released during the 2013 Outbound Tourism Forum at the Shanghai World Travel Fair. The number of organized travelers from Shanghai to Thailand surged 74% last year to 331,828, accounting for almost one fourth of outbound trips.

VIP visits

• China hopes to host and chair the G20 summit in 2016 to gain a bigger say in international economic affairs, French Foreign Minister Laurent Fabius said in Hong Kong. He briefed the media on the talks in Beijing last month between President Xi Jinping and French President Hollande. He dismissed concerns that if China chaired the summit, it would give Beijing undue influence. “It makes sense that a very large country like China wants to lift its international influence,” he said. Fabius also called on China to buy more French goods. France’s trade deficit with China fell by €1.5 billion last year to about €26 billion.
• Indian Foreign Minister Salman Khurshid paid a two-day visit to China, as a border dispute has been toned down in the past days. Two-way trade totaled USD69 billion in 2012, dominated by USD54 billion of Chinese exports to India. Khurshid met with China’s Foreign Minister Wang Yi and other Chinese leaders. He has said it was important to avoid “destroying” years of progress made between the two countries, while Indian Prime Minister Manmohan Singh also stressed his desire to avoid escalating the situation. The informal frontier dividing the two countries, called the Line of Actual Control, has never been formally demarcated.

One-line news

• Macao casino operator SJM Holdings, controlled by the family of Stanley Ho, posted a 12% year-on-year increase in first-quarter net profit to HKD1.9 billion, buoyed by strong interest from cash-rich Chinese gamblers. This compared with HKD1.7 billion a year earlier. SJM has the largest market share among the six licensed operators, with 27%. Analysts said a 10% growth in gaming revenues for the first quarter was decent considering the operator was not present on the Cotai strip, which is dominated by casinos from rivals Sands China, Melco Crown Entertainment and Galaxy Entertainment Group.

Hardware

• Alibaba has launched six new mobile phone models that run on the Aliyun system. Alibaba’s cloud computing unit will allocate CNY1 billion in subsidies this year for handset makers and software developers to boost its market position and deepen collaboration. The six new mobile phone models will be made by five domestic handset makers, including Amoi Technology and Konka. Last July, Alibaba joined hands with K-touch and launched its first smartphone model.
• Chinese electronics components makers AAC Technologies and GoerTek are now in the top tier of suppliers of so-called micro-electromechanical systems (MEMS) microphones as they are now also supplying Apple. The market for such devices reached USD583 million last year, with AAC and GoerTek generating combined sales of USD144 million, according to research firm IHS iSuppli. Hong Kong-listed AAC, which has its headquarters in Shenzhen, is now the world’s second-biggest supplier of the microphones behind United States-based market leader Knowles Electronics. AAC sold USD98 million worth of MEMS microphones last year, compared with USD48 million in 2011.

Operators

• The Hong Kong government has failed to appraise fully the negative impact of its plan to reassign 3G spectrum in use and the significant increase in license fees on mobile services, according to PCCW’s HKT, the city’s largest telecommunications network operator, and SmarTone Telecommunications. HKT, SmarTone, CSL and Hutchison Telecommunications Hong Kong earlier closed ranks to try to convince the government to follow international practice and automatically renew all 3G spectrum allocations in the 1.9 to 2.2 GHz band, which are due to expire in October 2016. HKT said the government has not conducted the requisite impact assessment for its plan.
• Customers would be required to present their ID cards when they apply for fixed-line telephone services or buy wireless internet cards if a draft proposal by the Ministry of Industry and Information Technology (MIIT) is implemented. The Ministry is seeking public opinions on the draft until May 15. “It’s quite hard for Chinese telecom carriers to effectively achieve the registration goal,” said Yang Haifeng, a Beijing-based telecom industry insider, adding that they are not able to effectively supervise the millions of mobile phone stores across the country. Among China’s 1.13 billion mobile phone owners, four out of 10 did not register their ID information, according to Chen Jinqiao, Deputy Chief Engineer at the China Academy of Telecommunication Research.
• China Mobile and Far EasTone Telecommunications, Taiwan’s No 3 operator, will share services and sales channels as part of a broad cooperation deal after a strategic stock investment accord collapsed. Taiwan saw its telecommunications sector as too sensitive for investment from the mainland. The new agreement covers retail channels, cloud connectivity and digital services. China Mobile Chief Executive Li Yue said the company’s income from Taiwan rose nearly 40% in the first 11 months of last year while the number of roaming customers in Taiwan grew 15%.

Radio, film & TV

• To tap into the growing demand for movies, Hong Kong film company Emperor Motion Pictures and UA Cinemas have announced a tie-up to invest in and operate cinemas in China aimed at mid-market to high-end filmgoers. China is the No 2 film market worldwide, with box-office spending of CNY17 billion last year, according to the State Administration of Radio, Film and Television (SARFT). The greatest potential for cinema operators was in second and third-tier cities.
• China’s culture and entertainment industry is predicted to grow at 20%, and could be worth CNY5.5 trillion within the next seven years, a study by Deloitte has predicted. The film industry in particular is set to experience unprecedented growth, with expected box office earnings of CNY23 billion this year. Last year, another 3,800 new cinema screens were built, bringing the total number to 13,118, according to the report by Deloitte. The other fastest growing sector was online games, according to data from iResearch, which showed that total sales were CNY58.3 billion, up 22% on 2011.
• A number of Chinese websites offering movie downloads went offline after Beijing police closed the country’s biggest high-definition movie site siluhd.com and detained eight of its top officials in an anti-piracy campaign. Websites including yyets.com, btscg.com and cnhd.com were temporarily offline in late April for maintenance and updates. Siluhd.com claimed to be China’s top HD movie downloading site with tens of thousands of blu-ray movies, music and games, and over 1.4 million members. Police found more than 190 hard disks with over 10,000 pirated movies at the home of the company’s CEO.

Software

• China’s biggest digital map provider AutoNavi and Nuance Communications will cooperate in voice-enabled navigation services, the firms said in Beijing. AutoNavi provides default map services for Apple’s iPhone and iPad in China. AutoNavi’s upgraded map services will now feature voice-enabled navigation functions based on Nuance’s technology and Chinese language support. Nuance said its collaboration with AutoNavi will help Chinese drivers keep their “eyes on the road and hands on the wheel.”
• The Southwestern University of Finance and Economics’ Tian Fu College has designed an app for students to sign in at campus before the 11 p.m. curfew. After “signing in”, AutoNavi’s positioning system relays the student’s location back to the university’s servers. Students dubbed the new program “the sleep checker” and criticized the software for being a blatant invasion of privacy. Legal experts, however, say the rather limited range of the tracking system means it is not privacy invading in a legal sense.
• Microsoft and Hon Hai Precision Industry signed a global patent licensing agreement designed to protect Hon Hai clients from patent claims arising from the use of Google’s Android and Chrome operating systems. “Foxconn’s clients don’t need to worry about infringing Microsoft’s patents anymore, because Foxconn has signed the agreement for them,” said Vincent Shih, Chief Legal Officer of Microsoft Taiwan. Hon Hai is the flagship listed entity of Foxconn Technology Group.
• Yonyou Software will establish a cloud-computing platform this year in a bid to improve profit margin after its net earnings tumbled 29% last year to CNY380 million, China’s biggest enterprise software maker said in Shanghai. Yonyou has diversified from just selling software to providing enterprise clients software, on-site operation, and consulting services based on its platform.
• Amazon has launched its mobile application store in China for Android phone and tablet users in anticipation of the domestic unveiling of its Kindle device, the world’s most popular e-book reader. Amazon became the first Western firm to offer a platform for paid Android apps in China. In December, Amazon launched an online e-book store and related apps in the mainland, which allow users to read downloaded digital books on mobile devices. Amazon’s Kindle and Kindle Fire may debut in China soon.

Telecom Mfg. Co.

• Huawei Technologies plans to increase hiring by 73%, or more than 5,500 employees, in Europe from the current size in the next four or five years. Huawei Europe will employ a total of 13,000 people in during the period, up from 7,500 now, Bloomberg News reported, citing Huawei’s acting Chief Executive Officer Ken Hu in Paris. While Chinese companies like Huawei and ZTE accelerate overseas expansion, their counterparts reduce their workforces in Europe. Paris-based Alcatel-Lucent said it would cut 5,500 jobs while Stockholm-based Ericsson announced it would eliminate 1,550 positions in Sweden.
• A report on network security by the U.S. Government Accountability Office (GAO) could have positive implications for Huawei Technologies and ZTE’s business in the country. It found no evidence of cyber-security incidents affecting the country’s telecommunications networks from January 2010 to October 2012. The GAO report said: “Specifically, of the over 35,000 outages reported to the FCC over this time period, none were related to traditional cyber threats.”

Web

• Alibaba Group Holding has chosen banks for a loan of USD8 billion, three people familiar with the matter have said. Founder Jack Ma said in January that he would step down as CEO on May 10, stoking speculation the company may be preparing for an initial public offering (IPO). About USD4 billion of the loan proceeds will refinance a facility of that size signed last year for the privatization of Alibaba’s Hong Kong-listed entity Alibaba.com and a buyback of a stake in itself owned by Yahoo. The rest would be used for general corporate purposes.
• Only 943 Chinese group-purchase websites, or less than 20% of the number at the industry’s peak, have survived. The number fell because large-scale websites in the sector have been very competitive and attracted the most customers, the report said.
• China and the U.S. have agreed to work together on cyber-security although the U.S. continues to accuse Chinese government entities of conducting cyber-espionage and attacks against the U.S. government and businesses, and stealing government and commercial data. The Chinese government has stated repeatedly that it opposes any form of hacking.
• Yahoo China has come in for criticism after announcing that its e-mail service will be deactivated and all user content deleted from August 19, a move that is likely to affect about 5 million Chinese accounts. User content and addresses can be transferred to an Aliyun account. Yahoo user IDs will remain operational until the end of 2014. Hitwise, an internet data service company, said the scrapping of Yahoo’s mail service in China would affect about 2% of China’s overall e-mail users, or about 5 million accounts. Alibaba Group took over Yahoo China’s business operation in 2005. Yahoo Mail ranked No 6 in March in market share in China. QQ Mail is market leader.
• Publishing industry professionals have expressed concern over a number of online promotions in which copyrighted e-books are being offered for free. China’s largest online bookseller Dangdang.com is offering almost all of its e-books for free during some days of the week, while rival Jingdong Mall also announced that it will offer 50,000 e-books for free. Analysts warned that a price war between the industry’s main players could be hugely destructive to the sector. Chinese writers are complaining about lost royalties.
• Online shoppers should be granted a seven-day cool-off period, within which they would be able to get a refund, according to a draft amendment to the consumer rights law. Businesses would have to refund consumers within a seven-day period after the goods are returned. The  proposal would also apply to TV and phone sales. China’s consumer rights law, which was enacted in 1993, does not have stipulations on the protection of online consumer rights. The requirement would not cover consumer-to-consumer (C2C) transactions, which account for almost 70% of online sales.
• The Ministry of Industry and Information Technology (MIIT) will not be involved in telecom operators’ deliberations over charging for Tencent Holdings’ WeChat mobile messaging application. Zhang Feng, Director of the Ministry’s Communications Development Department, said the decision to charge for internet and mobile internet businesses is a market-driven practice, one in which the government does not take sides. Tencent said that users will not be charged for its WeChat service.
• Qihoo 360 Technology Co was ordered to pay CNY5 million to Tencent for illicit competition, and also has to publish apologies in major media for 15 straight days, the Guangdong Province Higher People’s Court ruled. Chief judge Zhang Xuejun said, however, there wasn’t enough evidence to support Tencent’s demand for CNY125 million in damages. Qihoo said it would appeal to a higher court. Tencent filed the lawsuit in early 2012 after Qihoo launched software to block users from installing other value-added services related to Tencent’s online chatting tool.
• NetEase has entered the digital music market by releasing a service that enables users to listen to and share music on mobile devices. William Ding, NetEase’s CEO and Director, said earlier that the full portfolio of the company’s mobile internet services will be released in the first half of 2013.
• Alibaba Group is to pay USD586 million for an 18% stake in Sina’s Weibo microblog service. The two companies are to work on user account connectivity, data exchange, online payments and online marketing, Sina said. Weibo has more than 500 million users for its microblog services while more than 800 million people use Alibaba’s Alipay service. “Cooperation between the top social media platform and the top e-commerce platform will create huge business opportunities,” said Sina’s Chief Executive. Alibaba has the option of increasing its stake to 30% within a stipulated time.
• Youku Tudou, China’s largest online video company, says original programming and a push into mobile content will help the company as it seeks to post its first profit since a 2010 initial public offering (IPO). The company faces growing competition in the online video market. Baidu has expanded its video service with an acquisition as it seeks a greater share of advertising revenue that is projected to rise to CNY16.2 billion next year from CNY1.36 billion in 2009, according to Shanghai-based iResearch. Youku Tudou’s net loss more than doubled to CNY424 million last year from CNY172 million a year earlier. Youku Tudou held about 76% of the online video market last year.
• Haitao or “sea shopping” – buying from overseas online shopping platforms – has become an increasingly popular option for many consumers attracted by low prices and guaranteed quality. MasterCard estimates the cross-border online shopping market in China reached about CNY18 billion last year and could hit CNY50 billion by 2015. So far, mum-and-baby products, medicines, and cosmetics are the best sellers on the sites.
• Alibaba Group Holding’s net profit jumped to USD642 million in the quarter through December from USD237 million a year earlier, as revenue rose 80% to USD1.8 billion. The value of goods sold on Alibaba this year could reach about USD330 billion as more Chinese consumers shop online, according to iResearch.

One-line news

• The number of internet cafés in China fell in 2012, due to a boom in household broadband and mobile internet. The country had 136,000 cyber cafés nationwide at the end of 2012, a decrease of 6.9% year-on-year, according to an annual report released by the Ministry of Culture. It is the first decrease in eight years. The revenue of internet bars plummeted by 13.2% to CNY53.7 billion. The total number of computers installed in internet cafés increased by 3.7% to 11.95 million. Internet cafés employed more than 1.03 million people. The report predicted a further downward trend for the industry.
• The Pentagon’s decision to use a commercial satellite operated by a Hong Kong-based and listed company was questioned by U.S. Republican Representative Mike Rogers, who said the use of China’s Apstar-7 satellite “exposes our military to the risk that China may seek to turn off our eyes and ears”. However, a satellite expert has played down the fears, pointing out that the satellite was made by a French company. The Pentagon uses the satellite to provide communications for its Africa Command.
• Liquidnet, one of the largest dark pool operators in Asia, believes trading in Hong Kong on electronic platforms will continue to grow despite the regulator tightening regulations. Dark pools are electronic platforms that have emerged in recent years in advanced markets such as the United States and Britain. They allow traders to buy or sell large blocks of shares without having to disclose their identities, the volume or prices, as opposed to requirements at traditional exchanges. The 14 dark pool operators in Hong Kong represent just 3% of the total market turnover, but they represent 50% of all trades.
• China will invest CNY5 billion in an industrial park in Tianjin to make products for Beidou, the Chinese navigation satellite system. Output at the 27-hectare Beidou Strategic Emerging Industrial Park is expected to be worth CNY10 billion by 2017, said Miao Qianjun, Secretary General of the Global Navigation Satellite System and Location-Based Service Association of China. He added that 30 to 50 companies will  be operating in the park by 2017. The industrial park, built by the Association and Tianjin’s Wuqing district government, is expected to welcome its first 20 companies in June.

Expat corner

• Foreign English teachers face tighter supervision in the wake of two child sex scandals in Beijing and Nanjing. The State Administration of Foreign Experts has issued an urgent notice on regulating teachers’ daily activities after two foreigners, one with a criminal record for child pornography and the other on the run from child-sex charges, were able to get jobs as English teachers. More than 180,000 cultural and educational foreign professionals worked in China in 2011.
• The number of foreign citizens living in Shanghai exceeded 173,000 by the end of 2012, a 6.7% increase compared with 2011. They make up a quarter of such citizens on China’s mainland. Most of them live in nearly 80 neighborhoods across the city, the Shanghai Exit & Entry Administration Bureau said.
• Draft regulations on foreigners’ entry and residence stipulate that foreigners must obtain work permits and residence certificates for employment before being employed. Foreigners who violate China’s laws and regulations and are deemed “unsuitable” to stay will be given an exit deadline of no more than 30 days, according to the draft. The number of foreigners employed in China rose from 74,000 in 2000 to 220,000 by 2011.

Finance

• The yuan will eventually be a feasible currency for Hong Kong to peg its dollar against, in place of the U.S. dollar, said John Greenwood, known as the “father of the Hong Kong-dollar peg” and currently Chief Economist at Invesco Asset Management. But he added that the yuan must be fully convertible and widely used before that day comes, which could take “many years”. He defended the existing peg in a speech on “Optimizing Hong Kong’s Currency Strategy” to the Hong Kong General Chamber of Commerce. The existing peg is being debated because quantitative easing by the United States brings inflation to Hong Kong.
• The biggest creditors of the U.S. are American, including the Federal Reserve, social security and pension funds, banks, and individual domestic investors. China was responsible for USD1.22 trillion or 7% of total U.S. debt in February, the most recent month available. It remains the single largest foreign lender – just ahead of Japan – but has been slowly trimming its U.S. dollar holdings, down from nearly 10% a few years ago. Overall, all foreign investors, including national central banks, account for roughly one third of the total outstanding federal government debt.
• Some 300 people involved in a pyramid scheme in Anhui blocked a road in Hefei, the provincial capital, for three hours last week to protest against a police crackdown on the scheme’s operators, fearing the loss of their investment. The crackdown, which began last June, has busted 619 pyramid scheme hideouts and led to the arrest of nearly 2,000 people. In one case it was promised that an investment of CNY69,800 would turn into at least CNY10.4 million within two years.
• The interest rate on retail yuan deposits in Hong Kong is likely to drop after the Hong Kong Monetary Authority (HKMA) announced that it would relax two requirements to allow banks to use less capital for yuan business and encourage them to offer more yuan loans and other products. The interest rate drop signals that yuan supply in the market is growing after the measures. Yuan deposits in Hong Kong grew 2.5% on the month to CNY668.1 billion in March. Total deposits dropped 1% in March and total loans and advances rose 1.2%.
• China is still largely a cash economy, with some people paying for luxury cars and apartments in cash. Paper money issued in China accounts for about 40% of all global paper currency output, according to a report published by the China Banknote Printing and Minting Corp. Adjusted for the size of its economy, China has about five times as much cash in circulation as the United States. The CNY100 bill is the highest denomination. No major economy has limited itself to such a low denominated bill as China.
• Chinese insurers are poised for profit growth in the second quarter, with insurance claims after the recent Ya’an earthquake in Sichuan province not expected to be more than CNY100 million, while investment returns and premium income are likely to improve.
• Mainland Chinese customers accounted for 12.8% of total new life insurance policy sales in Hong Kong last year, up from 9% in 2011 and only 4% before that. Mainland customers are now the major driving force behind the growth in Hong Kong life insurance sales. Mainland regulations ban Hong Kong insurance agents from selling or approaching clients on the mainland, but mainlanders are allowed to buy insurance policies in the city. Insurance companies in Hong Kong offer various types of policies with a lot more investment choices and flexible terms and conditions.
• Bankcard expenditure during the three-day May Day holiday surged 39% in China from a year earlier, and overseas spending rose 33% as more Chinese traveled abroad. Online payment of train tickets during the holiday also grew 49%. Bankcard transactions through UnionPay’s channels rose above 60% in Italy, Germany and France.
• The yuan rose to its highest level against the U.S. dollar in 19 years on May 2. The Chinese currency closed at 6.1560 per dollar in Shanghai as markets reopened after the May Day holiday. It is the 10th record the yuan has set against the dollar since April 1. The People’s Bank of China (PBOC) raised the yuan’s central parity rate by 0.2% to 6.2082 per dollar, the largest daily jump since October.
• While giving his birthday wishes to Hang Seng Bank for its 80th anniversary, Hong Kong’s Financial Secretary John Tsang urged the lender to further develop the yuan business. Hang Seng was the lead arranger of the first yuan-denominated syndicated loan in the city. Hang Seng Bank, which started business on March 3, 1933, in an 800 sq ft office in Sheung Wan with 11 employees, is one of the top 50 listed banks in the world and the 18th largest in Asia by market capitalization. It has about 10,000 staff serving more than three million customers. It has 220 branches in Hong Kong and 46 on the mainland.
• The U.S. Chamber of Commerce has urged Washington and Beijing to resolve a dispute over the auditing of U.S.-listed Chinese firms, warning failure to do so will seriously hurt both countries. The Chamber, the world’s biggest business federation representing more than three million U.S. businesses, said it met leaders in both countries as well as senior officials at the SEC, the U.S. Public Company Accounting Oversight Board (PCAOB), the U.S. Treasury Department, the China Securities Regulatory Commission (CSRC) and the People’s Bank of China (PBOC), to push for a solution.

Foreign trade

• The Office of the U.S. Trade Representative has criticized Beijing for failing to stop the growing theft of trade secrets. “Not only are repeated thefts occurring inside China, but also outside of China for the benefit of Chinese entities,” the Office said in an annual report. A White House report lists 17 cases of trade-secret theft by Chinese entities. The Chinese Foreign Ministry again denied it was engaged in trade-secret theft and cyber-attacks.

Health

• China still follows regulations adopted from the Soviet Union to test bottled drinking water, according to the Beijing News. “When the World Health Organization updated its detection methods, [we] updated the standard for tap water, but not for bottled water,” an unnamed expert with the Institute for Environmental Health and Related Product Safety in Beijing told the paper. More than five times more indicators are used to test running water than bottled drinking water, the paper said. “The bottled drinking water regulation is lagging behind,” Wang Xiuyan, Adviser on mineral water for the Beijing Mining Industry Association, told the paper.
• The Bottled Water Sales Association of Beijing published a notice saying that Nongfu Spring water violated national standards and was guilty of false advertising and misleading customers. Nongfu Spring, which produces 21.8% of all bottled water in the Chinese market, has been under fire for allegedly having looser standards regarding a number of chemical elements than those for tap water. A new unified national standard for bottled water will be revealed  by the end of 2015.
• The latest statistics show that 128 people have been found infected with the H7N9 virus, of whom 27 have died, approximately 20% have recovered and the remainder are still sick. The infection can lead to severe pneumonia, blood poisoning and organ failure. Cases have been detected in 10 provinces. The Ministry of Agriculture said a chicken sample from a wholesale market in Dongguan, Guangdong province, had tested positive for the virus – a first in Guangdong, although there have been no human cases in the province. The finding highlights the growing risk of the disease spreading to Hong Kong.
• Two people hired by a county government in Fujian province to destroy pigs killed by the infectious disease pseudorabies – also known as blue-ear pig disease – have been detained for allegedly processing the carcasses and selling the meat in neighboring provinces. 40 tons of pork were allegedly sold in three months. All the meat sold had probably already been consumed by customers in restaurants. The news sparked a public outcry on the internet.

Macro-economy

• Power consumption in the first half of the year will see an annual increase of 5.5% to 6.5%, the China Electricity Council said. For the whole year, consumption will rise by 6.5% to 8.5%. Wang Zhixuan, Secretary of the Council, said economic growth will increase after the first quarter, resulting in greater power consumption.
• The European Commission has forecast that China’s economy will grow 8% this year and 8.1% in 2014, according to its spring forecast. EC officials said China remains exposed to a possible worsening of the international environment, but its principal risk factors remain domestic. The report said that consumption is likely to remain the principal driver of growth in 2013.

Real estate

• Shanghai’s pre-owned housing index rose at a slower pace in April amid a significant drop in transactions. The index, which tracks price variations of pre-owned homes, gained 40 points, or 1.5%, from March to 2,701, extending its rally for the 11th consecutive month, the Shanghai Existing House Index Office said. Prices rose in 120 of the 130 areas covered in the city by an average of 1.71% in April from March.
• A report released by international consultancy DTZ said China overtook Japan to become the Asia-Pacific’s largest property market, with the value of commercial properties held by investors, described as “invested stock” in the report, growing to USD1.5 trillion last year. The amount represented 15% growth in local currency terms compared with 2011. Invested stock is defined by the property consultancy as investment-grade commercial real estate held by investors.

Retail

• Chinese-made milk powder is better in quality and half the price of imported products, a study by the China Dairy Industry Association, found. Random tests were conducted on 25 milk powder brands sold in Beijing and the capital cities of nearby provinces. The results indicated that all 16 of the domestic products were in line with national nutrition standards, but three of the nine imported products failed to meet national standards regarding the lactose-carbohydrate ratio and calcium-phosphorus ratio. None of the tested brands, homegrown or foreign, was found to have safety issues.
• Chinese wealthy consumers are increasingly going abroad to make luxury purchases instead of buying at home, where they pay higher taxes. China overtook the United States and Germany to become the world’s largest source of tourists last year, spending USD102 billion in 83.2 million trips, according to the China Tourism Academy. The growth of luxury watch sales in China is slowing, partly due to a government crackdown on extravagant spending.
• Starbucks Corp promoted John Culver to Group President of its China and the Asia-Pacific region, with Jeff Hansberry taking on Culver’s former position of President of Starbucks’ China and the Asia-Pacific region. Wang Jinlong will become Chairman of Starbucks China and Senior Vice President of Business Development.
• Pork prices in China, the world’s largest producer and consumer of the meat, have been falling since mid-February by more than 18% and reached their lowest point since January 2011. Hebei, Shanxi, Liaoning and Shandong provinces led the declines with falls of up to 30%.

Stock markets

• China’s stock market will see CNY18.31 billion in locked-up shares become eligible for trading this week, sharply down from the CNY40.9 billion in shares that became tradable last week, data from the Shanghai and Shenzhen stock exchanges showed. A total of 1.83 billion non-tradable shares of 19 listed companies will be released after their lock-up periods expire this week.

Travel

• China Railway Corp, the new national railway operator that has taken over the business operations of the defunct Ministry of Railways (MOR), posted losses in the first quarter with its debt-to-asset ratio up slightly to 62.31%. At the end of March, the company’s total liabilities stood at CNY2.84 trillion, up from CNY2.79 trillion at the end of 2012. During the first three months of this year, the state-owned company posted losses after tax of CNY6.88 billion while taking out local and foreign loans valued at CNY100.9 billion.
• Beijing’s tourism revenue for the May 1 holiday surged 10.6% to CNY1.98 billion, with 4.97 million visitors, the city’s Tourism Commission said. A survey by the China Tourism Academy and travel agency Ctrip.com found that Shanghai was the most popular city destination.

VIP visits

• Japan has never in the past 1,500 years had a smooth relationship with China, Japanese Deputy Prime Minister Taro Aso said during a visit to India. Aso, a former Prime Minister, made the comment in response to a suggestion that Japan and India should strengthen defense and maritime cooperation since both have territorial disputes with China.

One-line news

• Macao’s gaming industry revenue rose 13.2% year-on-year last month, as strong demand from wealthy visitors from the mainland continued. Revenue in the world’s largest gaming hub reached MOP28.3 billion (Macao pataca), the second-highest monthly figure this year, after the record MOP31.3 billion in March.
• The Red Cross Society of China has admitted that CNY84.7 million donated by more than 100 Chinese artists to build an art school and fund other reconstruction work after the 2008 Sichuan earthquake was spent on other projects. The organization denied it had “misappropriated funds”, insisting the donations “were not used as intended but largely in line with donors’ wishes”.
• Ni Zhifu, a former Member of the Political Bureau of the Communist Party of China and former President of the All-China Federation of Trade Unions, has died at the age of 79 on April 24. He was praised in 1953 for inventing a multi-bit drill, which is still widely used today. In 1959, Ni was awarded the title of “model worker”. He later also became a Vice Chairman of the National People’s Congress (NPC).
• Former Shandong Vice Governor Huang Sheng was sentenced to life in prison for taking more than CNY12.23 million in bribes from 1998 to 2011.

Finance

• E Fund Management Co, China’s second-largest mutual fund management firm, has fired Ma Xide, a fixed-income portfolio manager, for illicit bond trading. E Fund, which managed 40 mutual funds with assets under management worth nearly CNY200 billion as of December 2012, said it had no knowledge of the allegations against Ma until media reported he was put on trial in March at a court in Ningxiang county in Hunan province. Ma and his accomplices allegedly embezzled CNY3.5 billion from their companies from March to December 2008 and made an illicit profit of CNY49 million by trading bonds.
• China Development Bank (CDB), the country’s policy lender, said its bad loan rate stood at 0.31% at the end of the first quarter, the eighth straight year under 1%. Its total assets topped CNY7.55 trillion at the end of March 2013. In the first quarter, the bank said it lent CNY132.1 billion to support a series of key government-supported projects in the coal, electricity, oil, transport, agriculture, forestry, fishery, communication and infrastructure sectors. The bank granted CNY41.1 billion in loans for environmental protection, energy saving and emission reduction in the first quarter.
• The Ministry of Finance has set up 12 offices to monitor the pilot reforms of replacing business tax with a value-added tax (VAT). From early April to the end of 2013, they will monitor at least 10 enterprises in each of the pilot industries. On April 10, the Chinese government decided to expand its VAT reform nationwide from August 1. It hopes to complete the reform by the end of 2015. By February 1, the program had saved over one million taxpayers more than CNY40 billion in taxes.
• Net purchases of foreign currency by Chinese banks in March amounted to almost CNY236.3 billion, down from CNY295.4 billion in February and a record CNY683.7 billion in January. Banks made total net purchases of less than CNY500 billion throughout 2012. Apart from international “hot money” inflows, the rising willingness of Chinese enterprises, especially property developers, to sell dollar-denominated bonds in overseas markets also contributed to increasing cross-border money inflows.
• The China Insurance Regulatory Commission (CIRC) plans to allow life insurers to pay higher returns on some policies, according to an insider. That may make the products more attractive to investors frustrated with government limits on bank deposit rates. The CIRC might scrap the 2.5% maximum rate on fixed-return policies in a trial starting as early as next month. The new rules might prompt insurers to increase their reserves for payouts by about CNY20 billion. Insurers’ premium growth has slowed as savers, seeking higher returns, turn to riskier investments such as wealth management products.
• Australia’s central bank plans to invest about 5% of its foreign currency assets, or AUD1.9 billion, in Chinese government bonds due to the growing economic and financial ties between both nations. The People’s Bank of China (PBOC) has approved an initial quota for the investment, the first time that the Reserve Bank of Australia (RBA) would have invested directly in the sovereign bond market of an Asian country other than Japan.
• Hong Kong Exchanges and Clearing (HKEx) is looking at a link-up with the mainland’s commodities exchanges to develop commodities trading in the city, Chief Executive Charles Li said. Speaking after the annual general meeting of HKEx, Li said the bourse would explore different aspects of commodities trading this year, including studying how to establish a link with commodities exchanges on the mainland.
• China’s financial and capital account surplus surged in the first quarter as looser monetary policies in developed economies and expectations of yuan gains spurred inflows of funds. The USD101.8 billion figure is the biggest since the three months through December 2010 and up from USD56.1 billion in the same period of last year. The currency climbed to a 19-year high on April 25 as the central bank set a record reference rate. The central bank “spent the first quarter fighting the inflows, accumulating USD157 billion of foreign exchange along the way,” said Wang Qinwei, London-based Economist at Capital Economics.
• China and Canada will sign an agreement to share assets that Chinese fugitives illegally transfer to Canada, Canadian Ambassador Guy Saint-Jacques said in Beijing. Negotiations are in advanced stages and an agreement should be reached in the next few months. Canada is considered a paradise for Chinese fugitives, including many corrupt officials, who flee to the country because it has no extradition treaty with China. According to the Ministry of Public Security, thousands of Chinese economic fugitives have transferred “billions of yuan” overseas. Canadian judicial departments have sent 590 Chinese nationals back to China since July 2011.
• China Life said net profit grew nearly 80% to CNY10 billion in the first quarter compared with the same period last year, thanks to an increase in investment yield and improvement on impairment losses. Net profit for the period nearly tripled when compared with the fourth quarter of last year. Premiums earned in the first quarter totaled CNY110 billion. Gross investment yield more than doubled to 5.82% in the first quarter.
• France now holds the leading position in euro countries for exchanging RMB yuan payments, after recording a 249% growth in the value of payments since March 2012, according to SWIFT. Last month 21.4% of the payments made between China and France were denominated in yuan, against only 6.5% a year ago. SWIFT said 95% of RMB payments made were institutional transfers, with 5% being customer payments. France is ranked fourth in the world in terms of the value of off-shore RMB payments,  excluding Hong Kong and the Chinese mainland, trailing behind the United Kingdom, Singapore and Taiwan.

Foreign investment

• Foreign direct investment (FDI) in Shanghai rose 10.4% from a year earlier to USD1.45 billion in March, a three-month high by value due to more investment in the city’s service sector. Last month, 343 foreign-invested projects were signed, a surge of 69% from a year earlier. The service sector garnered 322 projects, accounting for nearly 90% of the overall foreign investment in March. China’s FDI rose for the second month in March by 5.6%, due to more funds from Europe and the U.S.
• Shanghai’s Pudong New Area launched several new measures to simplify customs procedures and reduce clearance costs for company headquarters. The measures include setting up a coordinated customs system for headquarters, providing 24/7 solutions for emergency clearance issues, offering statistical information and further simplifying administrative procedures related to the processing trade business. The approval process of duty exemption or reduction for headquarters importing facilities for their research and development (R&D) centers will be cut to three days. By the first quarter of this year, Pudong hosted 196 regional headquarters of multinational companies and 126 headquarters or regional headquarters of major domestic firms.
• Vice Minister of Commerce Wang Chao said at the China Investment Policy Seminar in Hong Kong that China still retained its competitive advantage for FDI. He said the investment environment is improving, and China  remains a top investment destination for transnational companies. FDI in the first quarter gained 1.4% year-on-year to USD29.9 billion.
• The 17th China International Fair for Investment and Trade, to be held in Xiamen, Fujian province, from September 8 to 11, will focus more on China’s outbound investments, according to Fang Wei, Deputy Director of the Department of Outward Investment and Economic Cooperation at the Ministry of Commerce (MOFCOM). Speaking during the event’s Beijing promotional symposium, Fang said the fair has become a bridge for Chinese enterprises to tap global markets.

Foreign trade

• China remained the United States’ third-biggest export destination, behind Canada and Mexico, in 2012, having purchased nearly USD109 billion worth of U.S. goods, according to a report by the U.S.-China Business Council. Each of 30 U.S. states exported more than USD1 billion in goods to China while 10 others shipped more than USD500 million. China’s imports from the U.S. increased by 6.5% last year. The Chinese middle class accounts for nearly one quarter – USD6.2 trillion – of the USD26 trillion in additional global consumption projected for the 15 years leading up to 2025, according to consulting firm McKinsey & Co.

IPR protection

• The brand managers for United States lingerie maker Victoria’s Secret were to be compensated CNY80,000 by a local company that claimed to be the lingerie’s sole distributor in China, the Shanghai No 2 Intermediate People’s Court ruled. Victoria’s Secret accused Shanghai Jintian Clothing Co of trademark infringement and unfair competition and demanded CNY5 million after it discovered Jintian was selling its products in China in 2011. The U.S. firm said Victoria’s Secret products are sold to Chinese customers exclusively online or via mail order. Jintian argued it didn’t infringe on the trademark because all the products were genuine.
• A gang of 28 has been detained for selling counterfeit watches overseas on the internet. The gang, led by a man surnamed Shi, bought fake Rolex, Hublot, Breitling and TagHauer watches on taobao.com for prices ranging from CNY50 to CNY200 and then sold them on internet shopping platforms to the United States, United Kingdom and Brazil for USD30 to USD200. More than 3,100 counterfeit watches as well as 500 Monster headphones and 300 scarves were found at the gang’s hideouts.
• Local IP authorities marked the 13th World Intellectual Property Day with the establishment of the Beijing International Copyright Trading and Financing Service Center on April 18. By building up a library of copyright information and a credit system, the center is meant to improve the copyright industry chain while helping small and medium-sized cultural companies tackle challenges in terms of financing and copyright mortgaging.
• Hong Kong’s first online intellectual property trading platform, known as the HKIPEx, was launched on April 18. Built by local companies, it serves IP creators, companies, professional service providers and other IP stakeholders, providing them a secure and reliable online trading system and lower trading cost. Walter Yeung, Chairman and CEO, expects the city to become a regional IP trading hub in the near future.

Macro-economy

• Shanghai’s gross regional product grew 7.8% from a year earlier to CNY493.7 billion in the first quarter, the Shanghai Statistics Bureau said. The rate picked up from last year’s 7.5% rise and was higher than the national average of 7.7%, although Shanghai was again China’s slowest-growing city among the 22 provinces and municipalities which have released figures for the first three months. Foreign direct investment (FDI) in Shanghai rose 10.4% to USD1.45 billion in March, a three-month high, but exports slumped 4.6% in March while imports lost 7.6%.
• The Chinese Communist Party’s Politburo Standing Committee met to discuss economic policy. It pledged to bolster domestic consumption and to make it easier for companies to gain approval for investment projects. At the same time, it vowed to standardize the financing mechanism for local governments, addressing concerns about the debts they have accumulated through backdoor channels.

Mergers & acquisitions

• Venture capital and private equity funds totaling CNY3 billion will be difficult to cash out, with 88 Chinese firms supported by VC and PE companies canceling their IPO applications, ChinaVenture Group said. The 88 companies, out of 166 Chinese firms that have stopped their IPO examination and approval processes, are backed by companies such as Fortune Venture Capital, CSM Group, Jiuding Capital and Shenzhen Capital Group. Another 714 companies are awaiting examination and approval by the China Securities Regulatory Commission (CSRC), with about 300 involved with VC and PE funds.
• Australia’s GrainCorp and Archer Daniels Midland are hunkering down for a long wait for Chinese regulatory approval after agreeing a AUD3.0 billion takeover deal. China took several months to approve Glencore International’s CAD6 billion purchase of Canadian grain handler Viterra, and last week imposed stiff conditions on Japanese trading house Marubeni’s USD5.6 billion purchase of U.S. grain merchant Gavilon in a deal that was held up for months. Graincorp has an edible oils facility in China. ADM supplies 12% to 17% of China’s total soybean imports and has a stake in a soybean processing business owned by Wilmar International. It also supplies corn and other food products.

Petrochemicals

• The National Development and Reform Commission (NDRC) cut fuel prices in the first adjustment under new controls, after the cost of crude oil fell. Retail petrol fell by CNY395 a ton and diesel by CNY400, effective April 25. The pump price of 90-RON, China III petrol in Beijing fell 4% to CNY7.10 a liter. The government changed the pricing mechanism for oil products to better reflect movements in international crude costs and reduce speculation. Under the new rules, fuel tariffs are reviewed every 10 working days.
• Total, along with partners Tullow Oil and China National Offshore Oil Corp (CNOOC), have yet to reach an agreement with Uganda on a billion-dollar oilfield development in the Lake Albert Basin. The sticking point remains the potential size of a refinery that would be developed to process crude from Uganda.
• The Xin Hua Merchandise Exchange, which is offering fuel oil and methanol as its first batch of commodities, was launched in Daqing, Heilongjiang province, with the aim of developing into an influential spot trading platform and help China gain a bigger say in the international oil market. The exchange is controlled by Xinhua News Agency and co-sponsored by the Daqing municipal government and Guangdong Zhenrong Energy Co (GDZR). The Exchange would provide more channels for domestic refineries to purchase oil and related products. China has 300 spot trading exchanges and the annual trading volume reached more than CNY2 trillion in 2012.

Real estate

• Guangzhou developers and property agents must submit proposed new home prices for all new projects for scrutiny to Guangzhou’s Municipal Land Resources and Housing Administrative Bureau after prices in the city gained the most year-on-year last month. Price rises should not exceed the growth rate of disposal income per capita, for which market forecasts are about 8% this year. Guangzhou is the second Chinese city, after Beijing, to restrict prices for new homes. New home prices in Guangzhou jumped almost 35% year-on-year to an average cost per sq m of CNY16,817 last month, while the number of transactions surged 50% to 7,131.
• Soho China’s purchase of a major stake in a prime plot on the Bund from Shanghai Zendai Property and Greentown China Holdings was ruled invalid by Shanghai No 1 Intermediate People’s Court. All three parties announced shortly after the ruling that they will appeal against the decision at the Shanghai Higher People’s Court. The court said the agreement between SOHO and the sellers breached the rights of Fosun Group, the other major stakeholder of the plot, causing “direct harm” to Fosun’s interest. The stake purchase was judged by the court as an “illegal purpose covered by a legal format.” In May 2012 Fosun filed a lawsuit against Soho, Zendai and Greentown. The dispute was about whether the affiliates of Zendai and Greentown could sell their stake to another party without Fosun’s consent.
• China’s outbound investment in commercial real estate jumped one third last year from 2011 and the trend will continue this year, Jones Lang LaSalle has predicted. Money flowing out of China into direct real estate investment overseas totaled USD4 billion in 2012, an annual increase of 33%. This year, the company expects a 20% increase to USD5 billion following a strong first quarter which has already seen Chinese investors allocate USD1 billion to overseas real estate. In 2003, only 2% of all Chinese capital invested in real estate went overseas and by 2012 this figure jumped to 26%, the firm’s data showed.
• Soho China won a commercial site in Shanghai for CNY3.19 billion. The accommodation value of the site, in the Gubei area of Hongqiao district, is CNY31,000 per square meter, more than double the previous record in the district. The developer outbid Shanghai Takashimaya, Zhongying Enterprise and Kuo Yang Group, in the government land auction. It is Soho China’s 12th project in Shanghai since August 2009. It estimates the projects will be worth nearly CNY50 billion when completed.

Retail

• Chinese shoppers can look forward to greater buyer protection, including being granted “the right to regret” – to return goods within seven days of purchase and get a refund – under an amendment to the 1994 consumer rights law currently under review. Changes proposed in the draft will close loopholes, raise the cap on penalties for non-compliant firms and expand the reach of the law. The amendment, if approved, would help spur domestic consumption, a key policy objective of the central government over the next five years, analysts said. The consumer rights law came into force in January 1994.

Stock markets

• The Shanghai stock market slumped to its worst close in a month on April 23, after the preliminary reading of HSBC’s Purchasing Managers’ Index (PMI) showed the country’s manufacturing growth fell in April. The benchmark Shanghai Composite Index plunged 2.57% to 2,184.54. Securities brokerage, construction material and real estate stocks led the index lower. A survey released by HSBC showed that 57% of Chinese fund managers were bullish about emerging economy stock markets in the second quarter.

Travel

• Shanghai will be linked by Metro to Kunshan city in neighboring Jiangsu province when the Anting-Huaqiao section of Metro Line 11 is to become operational later this year. Buses will also run between Line 11 stations in Jiangsu to Metro Line 1 in Suzhou, making it more convenient for Shanghai residents to go to Kunshan and Suzhou.
• Each taxi driver in Beijing should complete at least two jobs booked over the phone each day, according to a new regulation that will be implemented from June. The Beijing Municipal Commission of Transport said earlier this month that passengers in the city will be guaranteed a 99% chance of booking a taxi four hours in advance, and a joint telephone booking number will be announced. Booking a taxi over the phone will incur an extra charge of CNY3. In Shanghai, the largest taxi fleet operator Qiangsheng is to charge for telephone booking from April 29 as a “scarcity premium” is becoming part of the fare paid by passengers during rush hours with the increasing popularity of third-party smartphone applications. The company’s 13,000 taxis have had their meters updated to add a fee of CNY4 for each phone booking, which will be divided between the taxi driver and the dispatch center.
• Indian discount airline SpiceJet will add flights to China as trade expands between India and its neighbor. The carrier, which flies four times a week to Guangzhou, plans to fly to three more destinations on the mainland this year. State-owned Air India is the only other local carrier that offers direct services to China, operating four flights a week between Delhi and Shanghai. In 2011, 142,000 Chinese people visited India, or 2.25% of the total arrivals.

VIP visits

• Chinese President Xi Jinping met in Beijing with Henry Kissinger, former U.S. National Security Advisor and Secretary of State, and former U.S. Treasury Secretary Henry Paulson. Xi said China and the U.S. should further expand their high-level exchanges and dialogue, identify shared interests and properly handle disputes. Kissinger, who has visited China more than 80 times, said “U.S.-China cooperation is vital not only to the two countries, but also to the world”. Xi said Kissinger has exerted a positive influence over China-U.S. ties during the administrations of eight U.S. Presidents.
• U.S. Deputy Secretary of State William Burns met with Chinese Vice President Li Yuanchao. His visit came days after that of General Martin Dempsey, Chairman of the U.S. Joint Chiefs of Staff.
• U.S. Ambassador to China Gary Locke has called for stronger cooperation with China in the energy sector. Locke made the call in Urumqi, capital of Xinjiang, at a roundtable conference seeking potential collaboration between U.S. companies and Xinjiang in energy and rail development. He is the first U.S. Ambassador to make an official visit to the region in more than 20 years and also the first to lead a trade delegation to the region, which is rich in energy resources, including coal and oil. Locke said he hoped the 27 U.S. energy and railway companies in the delegation can help Xinjiang achieve sustainable energy development.
• Beijing has cancelled an annual financial meeting with Japanese and South Korean officials planned for this week, amid strained relations over the Diaoyu islands sovereignty dispute and the visit by almost 170 Japanese lawmakers to Tokyo’s Yasukuni shrine. The cancellation highlights China’s unwillingness to hold high- or ministerial-level dialogue with Japan, even as both sides attempt to maintain contact at lower levels.
• British Prime Minister David Cameron canceled a trip to China planned for this month as Chinese leaders refused to meet him. He is now expected to visit in the autumn, two years after his first and only visit as Prime Minister. Shi Yinhong, Professor at Renmin University, said the central government was disappointed that Cameron had met the Dalai Lama “in disregard of Beijing’s core interests”.
• European Union High Representative for Foreign Affairs and Security Policy Catherine Ashton held talks with officials in China in the first visit by a top-ranking EU official to the country under its new leadership. Ashton said she had wanted to visit as early as possible to “discuss deepening our collaboration”.

One-line news

• Christie’s will hold its first auction in September in Shanghai and plans to make it an annual event. The autumn auction will see artworks from the mainland, including contemporary art, clocks and watches as well as jewelry auctioned, said Chao Kejian, Deputy Director of Jing’an District where Christie’s Shanghai office is based. Christie’s will be the first international auction house to operate independently from a Chinese joint venture partner in China.
• Neil Robinson, 46, a British man wanted for questioning by UK police in connection with child sex offenses, is reported to have been employed by the Beijing World Youth Academy, prompting calls for tighter background checks on foreign teachers. He was arrested in Beijing for illegally overstaying his visa. He resigned in May last year. The case has generated heated online discussion about the large number of foreign English teachers in China.
• Former Commerce Minister Chen Deming was elected President of the Association for Relations Across the Taiwan Straits (ARATS), a non-governmental organization entrusted by Chinese mainland authorities to engage in talks with Taiwan. Yu Xintian, Director of the Shanghai-based Taiwan Research Institute, said it is unusual for a trade official to head the Association, which was previously led by Chen Yunlin, who worked at the State Council’s Taiwan Affairs Office for about 15 years before he moved to ARATS in 2008.