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Brief

Railway Speed Boost Tested

China's railway authorities on April 2, 2007, began tests to prepare for an increase in train speeds scheduled for April 18, according to the Ministry of Railways.

Trains plying the Beijing–Harbin, Beijing–Shanghai and Beijing–Guangzhou railway lines will travel at 200 kilometres per hour (km/h). In some sections the speed may be increased to as much as 250 km/h, an upper limit for conventional international railway speeds on normal routes.

Allowing higher train speeds is expected to increase the railway system's passenger handling capacity by 18 percent and its cargo capacity by 12 percent.

Insiders say a speed of 200 km/h demands much higher safety standards, requiring upgrades of rolling stock and tracks.

China has been raising train speed limits since 1997, when most ran at 60 km/h.

Brokers Set to Trade Financial Futures Soon

China may allow securities houses to trade financial futures contracts as early as April but will likely restrict the business to brokers that have strong capital, industry sources said on April 3, 2007.

Selected securities firms will also be able to introduce brokers to futures companies for a commission, according to the sources.

Authorities are also looking into letting mutual funds, insurance funds and qualified foreign investors join futures brokers in tapping the potentially lucrative business.

Financial regulators are on track to launch the country's first stock-index futures contracts on its new financial derivative bourse by the end of the first half of 2007.

Securities houses should have at least 1.2 billion yuan (US$155.23 million) in net capital before they can apply for licenses that allow them to introduce brokers, the sources said, citing a document which regulators are seeking industry opinions.

Candidates must also control a futures subsidiary and have capital that accounts for not less than 70 percent of net assets, according to the sources.

China's Service Trade Value: US$400 Billion by 2010

China's service sector expects to generate US$400 billion worth of business per year by 2010, according to proposals put forward by the State Council on March 27, 2007.

The proposals say reforms should be deepened in the telecom, railway and civil aviation sectors; easier market access should be provided for investors in these areas; competition should be increased and non-State service enterprises should be encouraged.

According to the proposals, by 2010 the service sector will furnish 43 percent of China's gross domestic product (GDP). The service sector will become dominant in some major cities and will outperform the national GDP growth rate.

The proposals underline the need for further investment, including private investment and preferential policies in the service sector.

Banks will be encouraged to lend to service enterprises that conform to State industrial policies and to extend aid to eligible service enterprises so that they can raise money on the domestic and overseas capital markets.

By 2020, services will account for more than 50 percent of China's GDP, the proposals say.

Bank of China Opens Private Banking Service for Millionaires Only

The Bank of China (BOC), the nation's second-largest State-owned commercial lender, launched a private banking service for millionaires only in Beijing and Shanghai on March 28, 2007.

Only clients with financial assets exceeding US$1 million are eligible for the service that is being offered in conjunction with the Royal Bank of Scotland, which owns a 4.4 percent stake in the bank.

Yuan Kuntao, general manager of the UK-based bank's Asia-Pacific division, said the private banking service would be able to meet the customized needs of Chinese customers, adding that it was almost on a par with its overseas peers. 

Wang Lei, general manager of BOC's private banking division, said the service had huge room to grow as an increasing amount of rich customers are starting to think about financial assets management.

Paper Giant APP Accused of

Illegal Logging

Greenpeace China has alleged that the Singapore-based Asia Pulp and Paper (APP), part of the Sinar Mas Group, Indonesia°Øs second-largest conglomerate, is illegally clearing indigenous forests to build roads and plant a "large area eucalyptus pulp and paper forest" in a protected nature reserve in Yinggeling, a remote mountainous region in Hainan Province.

"APP crudely opened roads in the protected area by destroying natural forest," Liu Bing, Greenpeace forestry project director, told a news conference on March 28, 2007.

"This not only harmed a large area of the natural forest, but also caused significant water loss and soil erosion, and could lead to reduced biodiversity and the destruction of an ecosystem," Liu said.

APP's China office in Shanghai on March 31, 2007, asserted that the forest referred to by Greenpeace is not in the Yinggeling Reserve and that APP has not destroyed any forest as alleged.

In March 2005, China's State Forestry Administration (SFA) charged the APP, one of the world's leading paper-makers, with illegal tree felling in Yunnan Province in Southwest China. The SFA vowed to punish anyone responsible, according to a Xinhua News Agency report.

Environmentalists have previously accused APP of illegal logging in Indonesia and Cambodia and at its pulp and paper operations in Hainan and in Yunnan provinces.

The firm has denied wrongdoing.

NASDAQ Opening Bell Rings

in Beijing

A ceremonial ringing of NASDAQ°Øs opening bell was held on April 3, 2007, in Beijing. Representatives of 40 Chinese companies listed on the US NASDAQ exchange and NASDAQ CEO Robert Greifeld participated in the symbolic ceremony.

°∞In organizing this ceremony, NASDAQ is clearly hunting for more Chinese companies,°± said Zhang Zhimin, a senior analyst with Securities Research.

Xu Guangxun, chief representative of NASDAQ in China, said, °∞China is our fastest-growing market outside the United States. We are optimistic about the number of Chinese companies that can list on NASDAQ.°±

Capital raised from initial public offerings (IPO) in China topped US$62 billion in value in 2006, exceeding the US$48 billion raised in the United States, for the first time, according to an earlier forecast by Pricewaterhouse Coopers (PwC).

Since Qiao Xing Universal Telephone Incorporated's debut in 1999, 40 Chinese companies valued at US$28 billion, including the major Chinese Web portals Sina, Sohu and Baidu, have listed on NASDAQ.

First-Quarter A-Share Market Welcomes 4.79 Million New Accounts

Investors opened 4.79 million new accounts at China's A-share stock exchanges in the first three months of 2007, in a race to cash in on bullish equity markets, according to the China Securities Depository and Clearing Corporation Limited.

The record number of A-share account openings is 56 percent more than that reported for all of 2006: 3.08 million accounts.

The company also said that 3.74 million new fund accounts were opened between January and March, increasing China's total A-share, B-share, and fund accounts to 87.25 million at the end of March 2007.

As a result, turnover on China's Shanghai and Shenzhen stock exchanges has expanded rapidly over the past three months to a record 224.41 billion yuan (US$29 billion) on March 28.

Analysts said excessive liquidity had provided strong growth momentum for the country's equity markets. The benchmark Shanghai Composite Index closed at a record high of 3,291.30 points on March 27, surging 20.6 percent in the year 2007.

Four Locally Incorporated Foreign Banks Open

in China

Four foreign-funded banks°™HSBC, Citibank, Standard Chartered Bank and Bank of East Asia°™officially began business on April 2, 2007, as the first group of locally incorporated overseas financial companies approved by China's banking regulator.

The four banking companies will launch a full range of forex services and renminbi (RMB) business, including RMB retail banking for ordinary Chinese citizens, once they have passed assessments by the country's banking regulators.

This means that the four banks can compete with their Chinese counterparts on an equal footing, analysts said.

°∞Our local outlets and resources are limited so we will focus on providing wealth management services,°± said Vincent Cheng, chairman of the HSBC Bank (China) Company Limited.

HSBC Bank (China) plans to open 30 new outlets in 2007 on the Chinese mainland and recruit 2,000 more employees over the next two years.

The Bank of East Asia expects its post-tax profit from the Chinese mainland business to account for 35 percent of its total in 2010; it was 15.6 percent in 2006.

Eight other banks°™JPMorgan Chase, ABN Amro, Hang Seng Bank, Mizuho Corporate Bank, DBS Bank, Bank of Tokyo-Mitsubishi UFJ, Wing Hang Bank and Overseas-Chinese Banking Corporation°™are also preparing to establish locally registered subsidiary banks with corporate status on the Chinese mainland.

Air China Flies Daily Between Beijing and San Francisco

Air China now flies daily between Beijing and San Francisco, an increase from five times a week. The new flight schedule took effect on April 1, 2007.

The country°Øs flagship air carrier said adding of two more flights, on Mondays and Wednesdays, would meet increasing passenger demand for the popular Beijing-San Francisco route.

Flight CA 985 will depart Beijing at 3:30 p.m. (Beijing time) and arrive in San Francisco at 12:10 p.m. (local time) the same day. Flight CA986 will depart San Francisco at 2:20 p.m. and arrive in Beijing at 5:05 p.m. the next day.

Zhang Lan, vice-president of Air China, said, °∞The daily flights will also help us seize more market share in America's Midwest."

She said the company was the only Chinese carrier offering non-stop flights from China to San Francisco and Los Angeles, the two most important destinations in the western United States. It also offers direct flights from Beijing to both New York and Vancouver.

The Beijing-based carrier serves 74 domestic and 38 overseas cities.

Trade Unions Say Global Fast-Food Chains Underpay Part-Time Staff

The All China Federation of Trade Unions has accused global fast-food giants YUM! China Division (KFC and Pizza Hut) and McDonald°Øs China of illegally exploiting their part-time workers by paying them less than the minimum wages required by local governments.

Unions in Shanghai, Hubei and Fujian have been instructed to work with local governments in May and June to investigate alleged fraud in the Chinese mainland°Øs fast-food chains with regard to wages and employment contracting.

The operators of the fast-food giants have moved to defend their employment practices, saying the labour laws are unclear.

McDonald's has more than 790 restaurants and 50,000 employees on the Chinese mainland and aims to open 100 new restaurants a year.

Yum Brands, whose 2,000 KFC, Pizza Hut and Chinese-style East Dawning restaurants in China generate nearly a third of its global operating profit, has more than 100,000 employees.