7/2/2010 Source: China Daily

A deal that would have given a Chinese investment company a  60 percent stake in Emcore’s fiber optics business has been called off because of regulatory concerns, the companies said Tuesday.

A filing with the Committee on Foreign Investment in the United States was officially withdrawn last week due to the concerns of Tangshan Caofeidian Investment Corp (TCIC).

Emcore Corp, of Albuquerque, announced in February it would sell a majority stake to TCIC, in the Hebei province of China, for $27.75 million.

The semiconductor and solar power supplier says it plans to continue working with TCIC despite the collapse of the deal.

06/30/2010 Source: China Daily

BEIJING – Google Inc will stop redirecting Chinese online users to its Hong Kong site in an attempt to renew its license for Google.cn, which is set to expire on Wednesday, the Internet search giant said on Tuesday.

The Chinese government has told US-based Google that re-routing users to Hong Kong is an “unacceptable” approach and said it would not renew its Internet Content Provider (ICP) license, said David Drummond, Google’s chief legal officer.

The ICP license is a permit issued by the Ministry of Industry and Information Technology (MIIT) to allow websites to operate in China. The authority has the right to shut down any website that fails to get an ICP license or have its license renewed, according to Chinese regulations.

Drummond said on his company blog on Tuesday that Google has instead started to provide a landing page on Google.cn that links to Google.com.hk and has “re-submitted” its ICP license renewal application.

“Without an ICP license, we can’t operate a commercial website like Google.cn – so Google would effectively go dark in China,” Drummond said.

“This approach ensures we stay true to our commitment not to censor our results on Google.cn and gives users access to all of our services from one page,” he said.

MIIT spokesman Wang Lijian told China Daily that he was not aware of Google’s announcement. Foreign Ministry spokesman Qin Gang also said he had not seen Google’s announcement, but noted that “the government encourages foreign enterprises to operate in China according to law”.

Since Google announced three months ago to move its search service to Hong Kong, its domestic traffic has been automatically redirected to its Hong Kong site. But the company still keeps some of its services such as Google Map via its domestic site Google.cn.

Google said on Tuesday at its landing page on Google.cn that the company has moved its services to Hong Kong and reminded users of the Hong Kong site’s address.

Marsha Wang, spokesperson for Google China, said the company is still waiting for response from the government. She refused to comment on whether Google will shut down its China offices if it failed to renew its license.

Google risks losing many users who do not want to follow the search engine to its other sites manually, industry analysts said.

“Not redirecting users automatically will have a huge impact on Google’s business because many Chinese users don’t want to bother following the search engine manually,” said Edward Yu, president of domestic research firm Analysys International.

The search giant’s market share in China fell to 30.9 percent in the first quarter from 35.6 percent three months earlier, figures from Analysys showed.

Yu said the impact of Google’s announcement in March to move to Hong Kong was limited because users could hardly feel the switch.

“But this time the impacts are for real,” he said.

06/08/2010 Source: Xinhua

The Chinese government Tuesday published a white paper on its Internet policy, stressing the guarantee of citizens’ freedom of speech on the Internet and more intensive application of it.

The white paper, released by the State Council Information Office, introduced facts of the development and use of the Internet in China, and elaborated on the country’s basic policies on the Internet.

The Chinese government actively advocates and supports the development and application of the Internet across the country, it said, stressing the government’s basic Internet policy: active use, scientific development, law-based administration and ensured security.

By the end of 2009 the number of netizens in China had reached 384 million, 618 times that of 1997 with an annual increase of 31.95 million users.

The Internet had reached 28.9 percent of the total population by the end of 2009, higher than the world average. Its accessibility will be raised to 45 percent of the population in the coming five years, it said.

There were 3.23 million websites running in China last year, which was 2,152 times that of 1997.

Of all the netizens, 346 million used broadband and 233 million used mobile phones to access the Internet. They had moved on from dialing the access numbers to broadband and mobile phones.

“These statistics make China among the top of the developing countries in developing and popularizing the Internet,” the paper said.

The Internet has become an engine promoting the economic development of China. Information technology (IT) including the Internet and its industry has made significant contributions to the rapid growth of the Chinese economy, it said.

In the past 16 years, the average growth rate of the added value of Chinese IT industry grew at over 26.6 percent annually, with its proportion in the national economy increasing from less than 1 percent to 10 percent, according to the paper.

Meanwhile, the Internet has become an indispensable tool in people’s every-day life, it said.

According to a sample survey, in 2009 alone, about 230 million people in China gathered information using search engines, and 240 million communicated through real-time telecommunications devices.

Also, 46 million Chinese people received education with the help of the Internet, 35 million conducted securities trading on the Internet, 15 million sought jobs through the Internet, and 14 million arranged trips via the Internet.

The Chinese government is determined to further promote Internet development and application so that more people can benefit from the Internet, the paper said.

“Chinese citizens fully enjoy freedom of speech on the Internet,” it said, adding that China’s websites attach great importance to providing netizens with opinion expression services.

Over 80 percent of China’s websites provided electronic bulletin service. And there are over 1 million BBSs and some 220 million bloggers in China.

According to a sample survey, over 66 percent of Chinese netizens frequently place postings to discuss various topics, and to fully express their opinions and represent their interests.

“The Internet’s role in supervision is given full play,” the paper said.

Over the past few years, a great number of the problems reported through the Internet have been resolved.

In order to facilitate the public’s reporting of corrupt and degenerate officials and suchlike, the central discipline inspection and supervision authorities, the Supreme People’s Court, the Supreme People’s Procuratorate and other relevant bodies have set up informant websites.

The informant website of the Communist Party of China (CPC) Central Commission for Discipline Inspection and the Ministry of Supervision, and the website of the National Bureau of Corruption Prevention are playing an important role in preventing and punishing corruption and degeneration among officials.

A sample survey found that over 60 percent of netizens had a positive opinion of the fact that the government gives wide scope to the Internet’s role in supervision, and considered it a manifestation of China’s socialist democracy and progress, the paper said.

“The Chinese government believes that the Internet is an important infrastructure facility for the nation. Within Chinese territory the Internet is under the jurisdiction of Chinese sovereignty,” it said, stressing that the Internet sovereignty of China should be respected and protected.

According to the paper, computer crimes in China have been on the increase in recent years.

Public security departments dealt with 142 computer crime cases in 1998, 29,000 in 2007, 35,000 in 2008 and 48,000 in 2009.

“China is one of the countries suffering most from hacking,” it said.

According to incomplete statistics, more than one million IP addresses in China were controlled from overseas in 2009, 42,000 websites were distorted by hackers.

Besides, 18 million Chinese computers are infected by the Conficker virus every month, about 30 percent of the computers infected globally.

National situations and cultural traditions differ among countries, and so concern about Internet security also differs, the paper said.

“Concerns about Internet security of different countries should be fully respected,” it said.

The Chinese government will constantly adjust relevant policies to better match the inherent law and the objective requirements of the development and administration of the Internet, according to the paper.

The 31-page document is divided into six sections: Endeavors to Spur the Development and Application of the Internet, Promoting the Extensive Use of the Internet, Guaranteeing Citizens’ Freedom of Speech on the Internet, Basic Principles and Practices of Internet Administration, Protecting Internet Security, and Active International Exchanges and Cooperation.

06/01/2010 Source: Global Times

The State Council said on its website Monday that it would gradually start to reform property tax policies, but experts said there is still a long way to go before collection of the tax begins.

The State Council said it has approved a proposal from the National and Development and Reform Commission to enhance the reform of China’s fiscal and tax systems. But it did not give a detailed explanation.

The announcement came after a report Monday in the China Securities Journal that Shanghai’s government had submitted a property tax plan to the central government, although there was no agreement on the standard of collection.

However, experts said the policy is more “a deterrent force” to rising housing prices.

“The government is using the policy to restrain the rising housing prices, instead of landing a blow against the market,” Li Xiaogang, director of the foreign investment research center of the Shanghai Academy of Social Sciences, told the Global Times Monday.

Li said designing a property tax would be complex, and the government would have to decide whether to levy taxes on a per-person or per-family basis, as well as how to deal with housing size and value when setting a tax rate.

He added that even if the government implements a property tax, measures to ensure the strong performance of mortgages would remain lacking.

According to figures provided by the Ministry of Land and Resources, new mortgage lending in 84 key cities last year was 774.9 billion yuan ($113.50 billion), up 59.7 percent from 2008. Bank loans for housing development reached 20 percent of total lending in 2009, according to figures from the China Banking Regulatory Commission.

“The later the property tax guides are launched, the less harsh the impact will be,” said Wang Xiao, a CCB International analyst.

05/20/2010 Source: China Daily

China’s currency policy is unlikely to be a major issue at next week’s high-level dialogue between Chinese and the US officials as pushing too hard over yuan appreciation would do little to break the stalemate, a central bank adviser said.

“Despite mounting pressure for a stronger yuan in the past few months, officials from both sides are expected to play down the currency issue during the meeting, leaving more leeway for China to decide the fate of its own currency,” Li Daokui, a member of the central bank’s monetary policy committee, told China Daily on Wednesday.

In the latest round of the Strategic and Economic Dialogue (SED) between China and the United States slated for next week in Beijing, top Chinese officials will meet their American counterparts, led by US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, to discuss issues such as trade and energy cooperation.

China came in for a lot of flak earlier this year over the value of its currency, but Li, who is also a professor at Tsinghua University, said the US now seemed less compelled to press China over yuan appreciation, as it is eyeing a broader cooperation framework with China.

US Commerce Secretary Gary Locke, who will attend next week’s bilateral meeting, is currently leading a US trade mission to China to boost clean energy technology sales, a major area in which the US wants to make a breakthrough in China.

“In this round of high-level talks, the US is expected to set aside its concerns on the yuan for a while, and will strive to seek bigger returns from the world’s largest market for clean energy,” said Sun Lijian, a finance professor at Fudan University.

Li said that as the pressure for yuan appreciation is abating, the Chinese government would reform the currency regime at its own pace without bowing to foreign pressure. But he refused to reveal how the yuan’s exchange rate would move in the near future.

Derek Scissors, a research fellow at the Heritage Foundation in Washington, said the recent sharp decline of the euro against both the dollar and the yuan will push China and the US into being less flexible on currency.

“China will argue that this is a bad time to change policy, which is quite reasonable,” he said.

The euro has dropped some 7 percent against the dollar in the past month on concerns over the European sovereign debt crisis, leading to further volatility on global financial markets.

China has pegged its currency against the dollar since mid-2008 in an effort to protect its exporters from the fallout of the global financial crisis.

Wang Tao, chief China research economist at the UBS Securities, said in a research note that the sovereign debt crisis in Europe has increased uncertainty across the board, which may mean China is more hesitant to let the yuan rise for the moment.

“Provided that financial markets stabilize in the next few weeks, we expect China to start the yuan move within the next couple of months,” she said.

Mark Weisbrot, co-director of the Center for Economic and Policy Research, said that China seemed to have some interest in yuan appreciation in order to “keep inflation from rising too fast”.

“But the declining prognosis for Europe’s economic growth in the near future, a major destination for China’s exports, makes it less likely that China will want to allow appreciation for these purposes,” he added.

Experts said the bilateral meeting would go beyond the currency issue, as China will use the opportunity to urge the US to relax its high-tech export controls and curb trade protectionism, while the US will demand a more favorable business environment for foreign companies, including those from the US.

“How to bolster bilateral trade will be a major topic during the dialogue, and the US will also urge China to create a more open trade and investment environment for US companies,” Cameron Kerry, general counsel of the US Department of Commerce, told China Daily.

05/17/2010 Source: Xinhua

The recent slump in Chinese equities has turned the stock market into an attractive investment option for investors. Pan Weiting says there is no better place to put her money than in stocks.

Pan shelved plans to buy an apartment after real estate prices jumped the most on record and the government banned loans for third homes to cool the economy. Interest on the 400,000 yuan she has in her bank account is being eaten away by rising inflation, and the country’s regulations limit her investment choices to property or domestic equities.

“The stock market is the best choice at the moment,” said Pan, a 27-year-old Shanghai accountant. “Even the bank staff advised me against depositing more money.”

Government leaders sought to deflate a speculative bubble that London-based property broker Knight Frank LLP said sent property prices up 25 percent in the fourth quarter by curbing mortgage loans. It left people in the nation with the world’s biggest savings with few places to put their money.

US investment bank JPMorgan Chase & Co expects China stocks to rally more than 40 percent in a year while Robeco Group, an asset management company in the Netherlands, forecast a second-half rebound.

“It becomes a question of who is the least ugly girl at the fair,” said Victoria Mio, a Hong Kong-based senior fund manager at Robeco, whose firm oversees $194 billion worldwide. “There is some migration occurring and the shift will accelerate with a few months of negative interest rates.”

As much as $59 billion, about a third of the housing transaction volumes in the 35 biggest cities in 2009, may be diverted from property to equities this year, according to Citic Securities, China’s biggest listed brokerage.

China’s $7.2 trillion of corporate and household savings is being eroded as inflation rises. The nation’s inflation rate is forecast to climb 3.4 percent this year, according to the median estimate of 18 economists surveyed by Bloomberg on May 11.

The Shanghai Composite Index has declined 17 percent this year, the world’s second-worst performer among the 93 gauges tracked by Bloomberg. It’s happened on concern the government will keep tightening monetary policy to contain inflation and avert asset bubbles. “Chinese stocks would be their first choice for investment because they may remain cautious about the property market in the short term,” said Shi Lei, a Beijing-based analyst at Bank of China Ltd, the biggest foreign currency trader. “The fixed deposit would be their last choice.”

But Zhang Qi, an analyst at Haitong Securities, said the capital diverted from the property market was unlikely to alter the near-term weak momentum of the stock market. “We do expect a certain amount of capital to flow into the stock market but the impact is not going to be strong enough to change the current weak trend in the market,” he said.

However, logistics company owner Hu Jielin says Chinese equities are still the best investment choice. He spent 9 million yuan buying apartments in Shanghai, where average home prices have risen threefold in the past five years, according to data from Shanghai Uwin Real Estate Information Services Co and eHomeday.com.

Hu, 33, said he would not buy more property given the government’s curbs. Instead, he plans to double his stock investments in the next six months to 3 million yuan.

“Property prices are probably going to take a breather with the current tightening,” said Hu. “Currently stocks look the best bet.”

For Pan Weiting, equities also trump home ownership for now. She doesn’t plan to resume her search for an apartment in Shanghai’s eastern Pudong district until prices decline by 20 percent.

“It’s always good to own the roof over your head but you’ve got to be able to afford it. For now, it’s out of my reach,” she said.

05/12/2010 Source: People’s Daily

Aluminum producer Alcoa Inc will enhance its position in China through strategic partnerships and possible mergers and acquisitions (M&A) with competitors and peers, a top company official said on Tuesday.

Vanessa Lau, group chief financial officer of Alcoa’s Global Flat Rolled Products Division, told China Daily that the move will help Alcoa to own a smelter in China.

At the same time, Alcoa would also look at acquiring or forming partnerships with Chinese aluminum producers who have access to hydroelectric dams or other sustainable green programs.

“We have always considered going upstream. It’s a continuous process for us to talk to potential parties (for possible tie-ups or acquisition). A potential partner has to live up to our sustainability image,” said the CFO.

At present, Alcoa – the world’s third-largest aluminum producer behind Rio Tinto Alcan and Rusal – has 26 smelters in different locations across the world.

No specific timeframe has, however, been set for the deals. Lau said Alcoa could also consider an organic growth path or a combination of organic and inorganic growth.

Owning a smelter in China will help Alcoa to move its operations upstream, a process that involves mining and refining of bauxite, the most commercially mined aluminum ore.

Bauxite ore is refined into a white powder called alumina, which in turn makes the aluminum used to produce the world’s cars, planes, houses and mobile phones.

Alcoa is currently involved in the downstream process, which involves smelting, casting and fabricating.

A smelter that has access to hydroelectric source translates to low energy costs. Historically, the most lucrative aluminum smelter plants have been located near hydroelectric dams or have access to large reserves of cheap natural gas.

Aluminum smelters need access to decades of low-cost energy to be profitable. In China, aluminum producers face difficulty in securing low-cost electricity from coal-fired power stations.

She said global aluminum consumption is forecast to grow by 10 percent this year, with growth largely driven by China.

Partnerships with Chinese producers are not uncommon for Alcoa.

On Feb 12, 2009, Alcoa and Aluminum Corporation of China announced that they would jointly explore opportunities to expand their commercial relationship.

In 2009, Alcoa recorded revenues of $18.4 billion.

Prices for aluminum have been moving upward since the first quarter of 2009, largely on strong Chinese government stockpiling, hedge fund demand and a weak US dollar.

China, the biggest consumer of the metal, cut purchases after record imports last year as local smelters resumed production.

Aluminum prices are likely to correct from current levels, but it’s not expected to return to the low prices of late 2008 and early 2009. Some of the gains since then will last, said a report by Moody’s Investors Service.