05/07/2010 Source: Xinhua

China will work to make the Boao Forum for Asia (BFA) a key voice of Asia and more globally represented, the BFA’s newly-elected secretary-general Zhou Wenzhong said Sunday.

Zhou, a veteran Chinese diplomat, said that for the first time, the BFA’s new board of directors has several members from other continents, including former U.S. Treasury Secretary Henry Paulson and former French Prime Minister Jean-Pierre Raffarin.

This created conditions for the forum to be more globally represented, Zhou told Xinhua before the BFA wrapped up its annual conference on Sunday in Boao in south China’s island province of Hainan.

The forum represents Asia’s consensus and it belongs to the whole Asia, said Zhou, who will take the post from Long Yongtu, former deputy trade minister of China.

The three-day conference, with the theme of “Green Recovery: Asia’s Realistic Choice for Sustainable Growth,” concluded Sunday. It attracted about 2,000 political and business heavyweights and experts from Asia and around the world.

Established in 2001, the BFA is committed to promoting regional economic integration and bringing Asian countries even closer to their development goals.

05/04/2010 source: People’s Daily

In light of sustained high housing prices and rumors that property taxes may soon appear in major cities such as Beijing, Shanghai, Shenzhen and Chongqing, the topic of property taxes has once again attracted unprecedented attention. Jia Kang, director of the Research Institute for Fiscal Science under the Ministry of Finance said that it is very necessary to levy property taxes during an interview with People’s Daily.

Jia said collecting property taxes can bring local governments a major, stable and growing source of tax revenues, which will sustain the long-term transformation of local governments’ functions and behaviors and help to complete the comprehensive fiscal, tax and administrative reforms.

If property taxes are levied on real estate owners, it can lead to rational behaviors from both housing supply and demand by posing a tax constraint, Jia said.

“It is worth placing particular attention to the positive effects of collecting property taxes in China where urbanization has just begun. Land resources are exceptionally scarce and fluctuations in the housing market will pose a significant impact on the economy,” Jia added.

He believes that collecting property taxes can have three positive effects. First, it can increase the proportion of demand for small and medium-sized houses, benefiting the intensive use of land, the sound development of urbanization and the transformation of economic development. Second, it can help reduce the vacancy rate of existing housing and enhance the allocation efficiency of social property resources. Third, it can help restrain property investments and speculations and benefit the long-term, sound development of the real estate industry.

The property tax will objectively increase the costs to high-income people who have bought several houses or even luxury houses, and the tax levied can be used to improve the living standards of low-income people. This reallocation of resources is of great urgency and practical significance to rationalize China’s income distribution system.

Some people may wonder whether the property tax is necessary since the government has already levied a land-transfer tax. Jia explained that developers pay land-transfer taxes for the rights to use the land, while property tax is levied on the homeowners during their tenure of the houses. Therefore, the two taxes do not interfere with each other and there are no insurmountable “legal barriers” or “repeated charges.”

Jia concluded that market economy countries have many years of experience in levying real estate taxes, and China should draw on their rich experience based on current national conditions to achieve better development.

Source: Xinhua 04/27/2010

The recent government measures to cool the red-hot property market will not slow economic growth or lead to a significant rise in the bad debts of lenders, a central bank adviser said on Tuesday.

Li Daokui, a member of the central bank’s monetary policy committee, said the tightening measures would in no way dampen real estate investment, a key component of China’s economic growth.

“The current wave of tightening measures are aimed to cool soaring property prices, rather than curb realty investment,” Li, also a professor at Tsinghua University, told China Daily.

“In fact, we will see that the government will increase land and housing supply in the lower-end segment this year, something that would spur property investment,” he said.

In the current round of stimulus-driven economic growth, the booming property sector is largely “a free rider”, Li said. “Indeed, there are multiple growth engines for the Chinese economy, for example, the accelerating urbanization drive, infrastructure investment and rising consumer demand.”

The Chinese government rolled out a series of measures to cool the sizzling property market, including a ban on loans for third-home buyers and tighter mortgage standards for second-home buyers, after real estate prices in 70 major cities went up by a record 11.7 percent in March.

The government measures triggered fears that it would derail investments by developers and dampen property sector sentiment, a pillar industry that could have a ripple effect on over 60 other sectors. The real estate sector accounts for about one fourth of China’s fixed-asset investment, which in turn contributed to about 90 percent of the nation’s GDP growth last year.

Zhang Xiaojing, senior economist at the Chinese Academy of Social Sciences, said policymakers still need some more time to see how the market would respond to the tightening measures.

“It is still premature to conclude that the tightening measures will drag down growth, even though it has brought some downside pressure to the economy,” Zhang said.

He said policymakers would wait and see the real impact of these measures on the overall economy. “The government may relax some of the policies once they get worried about a sharp slowdown in construction activity.”

Experts also said that the risk of bad loans increasing for lenders as a result of the measures was limited. “Mortgage loans and lending to real estate developers accounted for only 18 percent of the total outstanding loans at the end of last year,” said Tang Jianwei, an economist with Bank of Communications, the nation’s fifth largest lender by assets. “It is a low level compared with other countries.”

Most of last year’s record lending went to projects backed by local governments. There are now concerns that the new measures could reduce the fiscal revenues of local governments, as a big chunk of it comes from land sales to developers.

“There are multiple ways to expand local government’s sources of income, like allowing them to issue bonds,” Li said.

03/28/2010 Source: People’s Daily

China’s Geely Holding Group signed a binding deal Sunday to buy Ford Motor s Volvo Cars unit for $1.8 billion, representing a coup for the independent Chinese automaker which is aiming to expand in Europe.

It is another manifestation that a rapidly growing China has set its eyes on valuable assets around the globe.

The purchase gives Geely, in East China’s Zhejiang Province, a European luxury car brand with a reputation for safety and quality at a time when China, which last year surpassed the U.S. as the world’s largest car market, is eager to improve its competitiveness.

The price, which includes a $200 million note with the remainder to be paid out in cash, is far less than the $6.45 billion Ford paid for the Swedish automaker in 1999. The U.S. automaker has been trying to sell Volvo since late 2008 to focus its resources on managing its core Ford, Lincoln and Mercury brands.

“We think it’s a fair price for a good business, and yes, we’re happy with the deal we’ve achieved with Geely,” said Ford Chief Financial Officer Lewis Booth Sunday at a news conference at Volvo Cars headquarters in Goteborg, on Sweden’s west coast. Booth added that his company believes that, under Geely, “Volvo can continue to build its business and return to profitability.”

The agreement was signed by Booth and Geely’s chairman, Li Shufu, and witnessed by Li Yizhong, the Chinese minister of industry and information technology, as well as Swedish Minister for Enterprise and Energy Maud Olofsson.

In a statement, Geely said it has secured all the financing necessary to complete the deal, as well as “significant working capital facilities to fund Volvo Cars’ ongoing business.” The sale is expected to be completed in the third quarter, subject to regulatory approvals.

The deal also covers further agreements on intellectual property rights, supply, and research and development arrangements between Volvo Cars, Geely and Ford. The U.S. automaker has committed to provide engineering support, information technology, access to tooling for common parts and certain other services for a transition period to smooth the separation.

Li, whose comments were translated by an interpreter, described the deal as “a milestone”for both Geely and Volvo, adding that his group will make a Volvo CEO public “in due course.”

Geely said it aims to keep Volvo’s existing manufacturing facilities in Sweden and Belgium, but that it also will explore manufacturing opportunities in China.
Volvo Cars will remain separate from Geely’s other operations, with its own Sweden-based management team and a new board of directors, the company said.

“China, the largest car market in the world, will become Volvo’s second home market. Volvo will be uniquely positioned as a world-leading premium brand, tapping into the opportunities in the fast-growing China market,” Li said.

As Western automakers unload unprofitable assets, they are finding keen buyers in Asia.

In 2008, Ford sold its Jaguar and Land Rover brands to India’s Tata Motors Ltd. for $1.7 billion, a third of what it paid for them. In addition, General Motors Co. attempted to sell its rugged Hummer brand to a Chinese heavy equipment maker, but is now winding that brand down as the deal collapsed.

Analyst Zhang Xin, with Guotai Junan Securities in Beijing, said Geely’s pledge to keep Volvo’s factory and business teams in Sweden after the takeover limits its leeway to cut costs.

“Reality is always much crueler than what people would wish. Geely wants to build itself as a new ‘international Geely,’ so they sought a strong foreign brand like Volvo,” Zhang said. “Geely should foresee many difficulties. How will it manage to run Volvo well? How will it deal with the factory and employees? How much more will Geely have to spend to operate Volvo?”

Volvo, whose first car left its Swedish factory in 1927, employs nearly 20,000 workers, most of them based in Sweden. The group, initially a subsidiary of ball-bearing maker SKF, was listed on the stock exchange in 1935. In 2009, it sold 334,808 cars. It currently has 10 models on the global market, with its crossover XC60 being the best-seller. The United States, Sweden and Britain account for its three biggest markets.

In a statement Sunday, Volvo Cars CEO Stephen Odell said Volvo managers fully endorse the sale to Geely.

“We believe this is the right outcome for the business, and will provide Volvo Cars with the necessary resources, including the capital investment, to strengthen the business and to continue to move it forward in the future,” he said.

Volvo dealers in the U.S. said Sunday that Geely’s assurance that the cars will still be made in Sweden has allayed customers’ concerns about quality control. Chinese automakers seeking to expand into U.S. markets have faced quality questions from consumers concerned about defects and problems with a number of Chinese exports ranging from drugs and foods to furniture and appliances.

03/24/2010 Source: Global Times

The Chinese government Tuesday criticized Google for being “totally wrong” by stopping censoring its Chinese-language search results, while reaffirming that the foreign investment environment will not be affected in China, a readymade reaction after two months of tension sparked by the search engine’s pullout threat.

Surveys showed that the majority of China’s Web users is not much affected by Google’s decision to reroute searches to its Hong Kong-based site.

Analysts said Google’s withdrawal shows that the Chinese government has successfully defended itseflf in an ideological battle, adding that the company’s business is sure to suffer a blow.

Google’s chief legal officer, David Drummond, made an announcement in a blog post at about 3 am Tuesday (Beijing time), saying that the company had stopped censoring its search services – Google Search, Google News and Google Images – on Google.cn, and the company was redirecting Chinese mainland users to its uncensored site in Hong Kong.

The announcement came two months after Google’s revelation of coordinated cyberattacks on the Gmail accounts of Chinese dissidents. The company said the attacks originated in China, without giving specific evidence.

Speculation of its threatened pullout lasted the past two months, with information ping-ponging back and forth.

Beijing reacted two hours after Google moved to cease censoring search results, accusing it of violating a written promise it made when it opened its Chinese search engine in 2006.

“This is totally wrong. We’re uncompromisingly opposed to the politicization of commercial issues, and express our discontent and indignation to Google for its unreasonable accusations and conduct,” an official in charge of the Internet Bureau of the State Council Information Office (SCIO) said in a statement carried by the official Xinhua News Agency.

The White House, which had backed Google in its dispute, expressed “disappointment” Tuesday that an American company felt compelled to take this step, noting that the White House was informed of it before the company made its announcement to the public.

Chinese foreign ministry spokesman Qin Gang said at a regular press conference Tuesday that the Google case would not affect China-US relations “unless someone politicizes the issue.”

Jin Canrong, vice director of the School of International Studies at Renmin University of China, said the withdrawal was a profit-driven show, in which Google went after bigger business profits by closing its services on the Chinese mainland, which was not profitable, in exchange for boosting its reputation.

While Google is the world’s top search engine, it held only an estimated 36 percent share of China’s search market in 2009, compared with home-grown rival Baidu’s 60 percent.

“The spat was also a display of an ideological clash between China and the West. China would not allow complete Internet openness, which is in line with the country’s national policy. Google has little knowledge of and respect for China on that,” Jin said.

Losers and winners

An online poll on huanqiu.com showed that 74 percent of nearly 19,000 Web users believed Google’s exit from the mainland search market will have no effect on their use of the Internet, 14 percent felt they would be partly affected, and 12 percent conceded they will be much affected.

CNN reported Tuesday that academics, researchers and business people, however, are more concerned because local Chinese search engines are less successful at international searches in English.

Lü Benfu, an expert on the Internet economy and deputy director of the Management Institute at the Chinese Academy of Social Sciences, said that, considering the interests of those users, Google’s exit means a loss for all sides.

An opinion piece in PC World magazine said Tuesday that Google’s decision ignored conventional wisdom, which holds that no company can afford to ignore, let alone walk away from, China, a market with more than 1 billion people.

In fact, Google stopped short of pulling out of China altogether, saying that it intended to continue research and development work in China and maintain a sales presence there. The company has 700 software engineers and sales staff at three locations in China.

The company hopes that many of its Web services can survive, including mobile phone and browser businesses. It also has a popular music search business and a version of Google Answers.

Wang Jinhong, a Google spokeswoman, told the Global Times that operations at the Beijing headquarters had been “normal” and the company had “no plans to shift its staff to Hong Kong at this stage.”

Shen Dingli, director of the Center for American Studies at Fudan University, said Google’s decision is only a stall tactic.

“The company might believe the ideological issue remains negotiable,” Shen said. “That’s why it doesn’t completely pull out for now.”

The Times said Tuesday that the compromise reflects the importance to the company of retaining a presence in the world’s largest market of nearly 400 million Web users.

Analysts and investors, however, are not optimistic about Google’s future performance in China, which represents an important growth opportunity for the company, while its growth slows in mature markets such as the US and Western Europe, and even though China generates only a small portion of Google’s nearly $24 billion annual revenue.

“You sort of make China look like the bad guy and you think you’re going to be selling Google phones? Good luck, we’ll see how that goes,” Colin Gillis, an analyst at BGC Financial, told Reuters.

Shares of Google, which have fallen more than 6 percent since it announced plans to stop censoring searches in China in January, closed Monday down $2.50 at $557.60. Shares of Baidu, which have soared more than 40 percent during the same timeframe, finished up $10.07 at $579.72.

Google’s departure could “also give a chance to Microsoft, a perennial underdog in Internet search, to make inroads in the Chinese market. Microsoft’s search engine, Bing, has a very small share of the market,” The New York Times reported.

China will unwaveringly adhere to the opening-up principle and welcomes foreign companies’ participation in the development of the Internet in the country, the SCIO official said, noting that foreign companies must abide by Chinese laws and regulations when they operate in China.

03/18/2010 Source: Xinhua

China respected the universality of human rights and believed all human rights were “universal, indivisible, interdependent and interrelated,” He Yafei, China’s new ambassador to the UN Office in Geneva, said on Wednesday.

“The principle of universality has been included in the UN Charter, the Universal Declaration of Human Rights and other international human rights instruments,” He told Xinhua in an interview.

“China has ratified more than 20 international human rights instruments, including seven of the eight core human rights instruments. This demonstrates clearly China’s affirmation of the universality of human rights,” said the ambassador, who was China’s vice foreign minister before taking his new position in Geneva earlier this month.

While acknowledging the universality of human rights, He also stressed that countries might have different understandings about human rights and different ways and means of promoting and protecting human rights because of the “diversity of culture, history, religion and the difference of social systems and development levels.”

“The Vienna Declaration and Program of Action (VDPA) adopted by the World Conference on Human Rights in 1993 has confirmed that the significance of national and regional particularities and various historical, cultural and religious backgrounds must be borne in mind when promoting and protecting human rights and fundamental freedoms by states,” he said.

According to the Chinese ambassador, the UN Human Rights Council, which is based in Geneva and comprises 47 member states, is an agency aimed at promoting and protecting human rights through dialogue and cooperation.

Nearly four years after its creation, the Council “has basically accomplished its work and is on the right track,” he said.

He noted the Council had been able to review all the items on the agenda and provided timely responses to the substantive human rights issues.

In addition, the Council had reviewed human rights situations in 112 UN member states, including China, through its Universal Periodic Review (UPR) mechanism, which was a “worth mentioning” result.

He admitted the Council was not a “perfect” agency and still suffered from problems such as double standards and politicization.

The functioning of the Council needed to be reviewed so that its work could be improved and better aligned to the letters and spirit of the UN resolutions, he said.

However, the ambassador expressed opposition to any attempts to “rebuild” the agency or to “renegotiate what has been agreed upon.”

“It is not the time to reform it or rebuild it when it is only four years old… What we should do at the present stage is to find the gaps and fill them in a pragmatic and forward-looking way,” he said.

The Human Rights Council replaced the former widely discredited and highly politicized UN Human Rights Commission, created in 1946.

One of the Council’s major duties is to conduct a Universal Periodic Review of all 192 UN member states to scrutinize their human rights records at home, regardless of their size, wealth, military or political importance.

Besides its three regular meetings each year, the Council can also hold special sessions to discuss crisis situations.

While the Council’s Universal Periodic Review mechanism has been widely praised, some nongovernmental organizations still criticize the agency for not working effectively to tackle human rights problems around the world.

A review of the Council’s working methods is expected to take place in 2011, in accordance with a UN General Assembly resolution.

In the interview, He also highlighted China’s increasing contribution to the United Nations and its deeper integration into the international system.

“From the start of this year, China becomes the 8th largest contributor to the UN regular budget, just following the seven industrialized countries,” He said.

He added China was by far the largest troop-contributing country among the five permanent members of the UN Security Council. Currently more than 2,100 Chinese soldiers are participating in some 10 UN peacekeeping missions.

The ambassador stressed China would never shirk from international roles, and that it would continue to meet its global obligations.

03/15/2010 Source: Global Times

The State Administration of Foreign Exchange (SAFE) has invested billions of dollars in several hedge funds and investment management companies in the US, the 21st Century Business Herald reported Saturday.

The report said fund companies the SAFE invested in include Pacific Investment Manage-ment, BlackRock Inc., BLK and Bridgewater Associates.