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.

05/04/2010 Source: Xinhua

The first regulation on rules of conduct for Chinese police and punishments for violating them will take effect on June 1.

The regulation specifies 76 disciplines for violations, said a statement published on the website of Ministry of Public Security Tuesday.

Jointly issued by Ministry of Public Security, Ministry of Supervision and Ministry of Human Resources and Social Security, the regulation requires related local monitoring bureaus to seriously investigate any violation of the rules by police.

The new regulation, together with former ones, would become an effective measure in the promotion of strict and fair law enforcement by Chinese police, said the statement.

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.

Source: China Daily 04/27/2010

The country’s leading police chief suggested on Wednesday that the top legislature add a new charge to the Criminal Law to stem drunk driving and illegal car racing, which have killed dozens of people in recent years.

“Studies on stipulating a new charge of ‘driving motor vehicles in a dangerous way’ are underway,” Minister of Public Security Meng Jianzhu said while making a report on road safety to the National People’s Congress Standing Committee.

The new charge targets illegal traffic practices, including drunk driving, the use of fake licenses, illegal car racing and overloading transport, which are believed to jeopardize road safety, Meng said.

Previously, it was only when severe consequences, such as deaths or injuries, have occurred as a result of these illegal practices that an offender has been accused of a “traffic offense” or of “endangering public safety”.

However, the suggested charge to the law does not require severe consequences as a precondition for the charge, according to Zhou Guangquan, deputy dean of the law school at the Beijing-based Tsinghua University.

Meng also suggested raising the limit of punishment for traffic offenses from the current maximum jail term of seven years.
The suggestions have already received strong support from the public.

“Drunk drivers are no different than murderers. Only severe punishment could work to stop them,” said Beijinger Zhang Jian.

The new charge, if added to the Criminal Law, will more effectively warn people not to drink and drive, said Hangzhou-based lawyer Wang Zhiguo.

Several recent tragedies have placed the dangers of drunk driving at center stage.

Sun Weiming, a 30-year-old sales executive, killed four people in Chengdu, capital of Sichuan province, in 2008 and became the first drunk driver to receive a death sentence on charges of “endangering public safety”. He later received a life sentence after he appealed to a higher court.

In response to the proposed change, both lawyer Wang Zhiguo and Zhou Guangquan, of Tsinghua University, said the two existing charges could cover drunk driving that resulted in deaths or injuries, making the new charge “unnecessary”.

Zhou even warned that the new charge could ruin a drunk driver’s livelihood, if no casualties were incurred by the incident.

“In China, people tend to view crimes more seriously than some other countries, where stealing things worth less than 100 yuan ($14.60) can be a crime that leads to a light punishment like a fine,” he said.

“Legislators should be cautious about setting up a new crime.”

In China, nearly 200 million people hold driver’s licenses and the number of privately-owned vehicles soared to 187 million by the end of 2009, according to figures from the Ministry of Public Security.

Despite the rising number of drivers and vehicles, traffic accidents have actually declined, from 667,000 in 2003 to 238,000 in 2009. From 2003 to 2009, the death toll from traffic accidents also dropped from 104,000 to 68,000.

Nevertheless, illegal traffic practices of both drivers and pedestrians still pose a severe problem.

Deaths caused by drivers who proceed before pedestrians have safely crossed the road increased 5 percent in recent years, the ministry said.

03/28/2010 Source: People’s Daily

Four employees of British-Australian mining giant Rio Tinto were sentenced on Monday to jail terms ranging from seven to 14 years for taking bribes and stealing commercial secrets – a verdict the Australian government described as “very tough”.

The Shanghai No 1 Intermediate People’s Court sentenced Stern Hu, an Australian national who headed Rio’s iron ore operations in China, to seven years in prison for taking bribes, and five years for stealing commercial secrets. However, he will serve 10 years in jail, the court said. Hu was also fined 1 million yuan ($146,000).

“On any measure this is a very tough sentence,” said Australia’s Foreign Minister Stephen Smith. “It is a tough sentence by Australian standards. As far as Chinese sentencing practice is concerned, it is within the ambit or within the range,” he said.

But he added the Australian government respected China’s legal and judicial processes and that the sentencing would not affect Australia’s ties with China.

The other three defendants, all Chinese nationals – Liu Caikui, Ge Minqiang and Wang Yong – were sentenced to seven, eight and 14 years behind bars respectively. It is believed Wang got the longest jail term for receiving the highest amount of kickbacks from a steel tycoon in Shandong province.

The four were convicted of receiving over 92 million yuan in bribes.

The court said in the verdict that the defendants had also obtained confidential information from Chinese steel mills that had been used

as a bargaining chip to drive up the price that China pays for its iron ore imports from the world’s three top suppliers: Rio, BHP Billiton and Vale.

It said the four had “damaged the competitiveness” of, and “caused severe losses” to, the Chinese steel industry and hurt China’s national interests.

The court on the same day also ruled on a second case – that of Tan Yixin and Wang Hongjiu, executives at two major Chinese steel mills, Shougang Corp and Laigang – for allegedly leaking commercial secrets to Rio’s employees. But details of the verdict were not immediately announced.
The two were detained around the same time as Rio’s employees last year.

Lawyers representing Rio’s four employees said they were yet to meet with their clients to decide whether to lodge an appeal.

While acknowledging evidence that bribery acts did occur among Rio’s employees, Smith said there were “serious unanswered questions” regarding the commercial secrets charges. That part of the trial was held in closed court and no details have been made public.

He said the issue was not only of concern to Stern Hu and the other accused, but also more generally and widely to the Australian and international business community. China had “missed a substantial opportunity” to bring clarity to the notion of commercial secrets, he said.

Shortly after the announcement of the verdicts, Rio Tinto posted a statement on its website, quoting Sam Walsh, chief executive of Rio Tinto Iron Ore, as saying that receiving bribes is “a clear violation of Chinese law and Rio Tinto’s code of conduct” and that the company will “terminate employment” of the four men.

Tom Albanese, Rio’s chief executive, said: “I am determined that the unacceptable conduct of these four employees will not prevent Rio Tinto from continuing to build its important relationship with China. This is a high priority for me personally.”

The Rio case, together with search engine Google’s recent announcement to pull out of the Chinese mainland, has been widely seen by foreign media as a sign that foreign business sentiment is souring against China, where legal boundaries are blamed as vague.

Chen Fengying, a researcher at the China Institutes of Contemporary International Relations, said China had dealt with the case in accordance with Chinese law. She refuted the foreign media’s association of the case with the business environment in the country. Instead, the case reflects the fact that “China is getting increasingly international”.

“It is unavoidable that bribery cases involving multinational firms in China will increase as the country integrates more closely with international business community, which is true across the world. More bribery cases will be exposed as China learns how to cope with them,” she 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.