Related stories

Rocky Route to Business Success The First Step for New Business Thinking About Business in New Years Alexandre Fauvet talks about Business Beijing Rene S. Schmitt talks about Business Beijing

Brief

ADBC Ensures Wheat Purchases

The Agricultural Development Bank of China (ADBC) will loan 53 billion yuan (US$6.89 billion) to six provinces to ensure the minimum purchasing price for wheat, the bank said on June 3.

The establishment of a minimum purchasing price for major crops by the Chinese Government in 2006 was designed to protect the country’s farmers' interests by establishing reasonable prices.

The loans will be made to Hebei, Jiangsu, Anhui, Shandong, Henan and Hubei provinces, China's major wheat-producing regions. When the market price is lower than the minimum price, entrusted enterprises will purchase wheat at the minimum price, the ADBC said.

Floor prices have been set at 72 yuan (US$9.36) per 50 kilograms for white wheat and at 69 yuan (US$8.97) for red wheat, the country's top economic planner, the National Development and Reform Commission, said earlier.

China's wheat production is expected to increase slightly in 2007 with more land under cultivation, according to the bank.

Local Governments Urged to Safeguard Pork Supply

The General Affairs Office of the State Council has urged local governments at all levels to ensure the continuity of pork supplies and to curb soaring pork prices.

The price of live pigs nationwide was 71.3 percent higher in May than a month earlier, and pork was 29.3 percent higher in April than in March, according to the Ministry of Agriculture.

"A proper price hike in pork could help increase farmers' incomes and encourage them to raise pigs, but excessive price rises will affect low-income residents," said a notice issued by the office.

In Beijing, the price of pork was about 30 percent higher than normal in early June, while wholesale prices in Shanghai rose to 16 yuan (US$2.10) per kilogram, the highest in a decade.

The notice requires local governments to monitor pig production and to focus on quality, price and quarantine inspections of pork to ensure market safety and stability.

Farmers who raise breeding sows should be offered subsidies and low-income families should be given relatively higher social insurance, said the notice.

“Pig raisers experienced losses over the past couple years and were reluctant to raise pigs. This led to a marginal decline in the pig population this year,” said Xu Lianzhong, a senior economist with the National Development and Reform Commission.

Coming Soon: A Food Recall System

China will release its first regulation on food recalls by the end of 2007 to improve food safety, said Wu Jianping, a senior official with the General Administration of Quality Supervision, Inspection and Quarantine.

The administration’s move comes in response to a recent spate of food safety scandals, and will target potentially dangerous and unapproved food products.

The regulation, to be drafted by the end of 2007 in line with international practices, stipulates that food production and sales companies should recover their products when the products are confirmed as dangerous to people's health, Wu said.

Now, only one section in a regulation on product inspection that was issued in 2002 focuses on food recalls and the need for a product recall system.

Energy Guzzlers to Lose Preferences

China's top economic planning agency has ordered local authorities to remove preferential policies for energy guzzlers in line with the nation's efforts to save energy and cut pollution, according to a statement on the Web site of the National Development and Reform Commission (NDRC).

The NDRC also warned local governments not to violate laws, regulations and policies by introducing preferential policies such as tax cuts to attract new high energy-consuming projects in the future.

The NDRC said local governments should set stricter market access standards to help eliminate outdated production facilities and to tighten land use and credit access for new projects.

Slowing the rapid growth of high energy-consuming projects is crucial to meeting China's energy saving and pollution reduction targets, the statement said.

The Chinese Government has set a goal of reducing energy consumption per unit of gross domestic product by 20 percent by 2010, while pollutant discharges should drop by at least 10 percent.

Energy consumption, however, fell only 1.23 percent in 2006, less than one-third of the annual goal of 4 percent.

Toy Quality Scrutinized

China will ban the sale of toys that fail to pass a national compulsory safety certification beginning on June 1.

At that time, toys that “could have a direct effect on the safety of babies and children” must bear the mark of “CCC” (China Compulsory Certification) before they can be sold in China, according to a statement issued by the General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ) and the Certification and Accreditation Administration (CAA) on May 24.

The targeted toys include baby carriers, toys that launch projectiles, dolls and electric, plastic and metal toys, according to the statement.

“Some baby carriers have sharp edges that could cut kids and the small parts of some toys can easily be swallowed by children,” said Zhu Guangpei, CAA's deputy director.

China exports 70 percent of the world's toys, yet safety remains a major problem for the giant toy manufacturing country.

China unified its compulsory inspection system by setting up the “CCC” product certification system in 2003 as part of its commitment for entry into the World Trade Organization.

Just over 80 percent of the toys on the market had been certificated by the end of April 2007, according to the quality watchdog’s data.

Life Insurers’ Investment Options Broadened

China plans to issue rules within two months that will allow insurers to diversify investments by investing as much as 15 percent of their assets abroad, the industry regulator said on June 1. This is an increase from the current 5-percent-of-assets limit.

This will allow China Life, with total assets exceeding 685 billion yuan (US$89 billion) at the end of 2006, to invest as much as 103 billion yuan (US$13.4 billion) overseas. Ping An, with assets of 494.3 billion yuan (US$64.2 billion) at the end of 2006, can invest up to 74 billion yuan (US$9.6 billion).

China's major life insurers responded actively to the news.

Ping An Insurance (Group) Company, the country's second-largest life insurer, plans to broaden its overseas investment portfolio by making investments in foreign financial sectors and infrastructural markets once it gets the go-ahead from regulators, Chief Operating Officer Louis Cheung said on June 1.

Ping An has a US$1.7 billion quota under the qualified domestic institutional investor scheme, which allows it to buy overseas-listed mainland stocks.

Total assets of China's insurance sector stood at 1.97 trillion yuan (US$256 billion) at the end of 2006, meaning that about 300 billion yuan (US$39 billion) can be invested overseas.

Chinese Banks' Overseas Investments Minimal

China's banks have used only 6 percent of their quotas for overseas investment, a banking regulatory official said on May 31.

The China Banking Regulatory Commission (CBRC) had approved 22 banks as qualified domestic institutional investors (QDIIs) with a total quota of US$14.8 billion, said Yin Long, deputy director-general of the CBRC's supervisory cooperation department for banking innovation.

The banks “regrettably” had invested only US$800 million to US$900 million overseas, he told a forum hosted by the French bank Societe Generale.

“It is not that we discourage overseas investment or that the banks are not interested in that business,” he said, explaining that overseas investments by QDIIs had been hindered by China's strong stock market and expectations of yuan appreciation.

Market enthusiasm for the QDII scheme, launched in July 2006, cooled as many investors feared a rising yuan would eat into their investment returns, which came only from fixed-income products and money-market products.

After four years in the doldrums, China's stock markets began to rebound at the beginning of 2006, with the benchmark Shanghai Composite Index nearly doubling in a year.

Focus Bids for IT Firm

Focus Media Holdings Limited, China's largest listed advertising company, is bidding for the local IT consultancy iResearch Group, the company's latest move to carve a niche in China's online advertising market.

Yang Weiqing, iResearch’s general manager, and officials from Focus declined to reveal further details of the proposal. It was reported earlier that the advertising company could pay as much as US$10 million for the IT researcher.

Established in 2002, iResearch has become one of China's major IT consultancies. Focusing on the Internet, the company releases more than 50 reports each year, covering topics such as the shopping habits of local Internet users, the company said.

“iResearch's knowledge of Internet users could give Focus Media a boost for its online advertising business,” said Sheng Wei, marketing director of Analysys International, a Beijing-based IT consulting firm.

Shanghai-based Focus paid as much as $300 million in cash and shares this March to acquire Allyes Information Technology Company Limited to enter the online advertising market. 

Presently,most of Focus Media's revenue still comes from sales of advertising on flat-panel televisions installed in office buildings, supermarkets and in other public venues.

Lenovo Looks to Countryside

Lenovo will expand its presence in rural China to maintain its competitive edge, according to one of the computer giant's top managers.

“China's rural towns will become our major growth engine,” said Chen Shaopeng, a Lenovo senior vice-president and its president of China operations.

In 2004, Lenovo released a low-end, 2,999 yuan (US$390) PC, marking the beginning of a battle to lure lower-income customers.

“As China's economy continues to boom, more people in China's poorer and rural areas will join the PC age,” Chen said.

In 2006, Lenovo's PC market share in the fourth quarter of 2006 reached 30.2 percent, beating Founder Electronics’ 9.6 percent, Hewlett-Packard’s 7.2 percent and Dell’s 6.8 percent.

More Electrical Power Available, Yet Local Shortages Persist

China's electricity output is expected to grow by 14 percent year-on-year in the first half of 2007, but demand continues to outrun supply in some areas, according to the nation's top economic planner.

Power output rose to 1.45 trillion kilowatt hours (kWh) between January and June in 2007, said a report released by the Economy Operation Department of the National Development and Research Commission (NDRC).

The increased output helped to meet surging power demand in the world's second-largest energy consumer, but power crunches continued in Guangdong, Zhejiang, Hainan, Shanxi and Liaoning provinces, said the NDRC.

China generated 701 billion kWh of electricity in the first quarter of 2007. The output represented an increase of 15.5 percent from a year ago, and electricity used by industry grew 17 percent in the first three months, according to the report.

China Mobile Offers New IM Tool

China Mobile formally launched an instant messaging (IM) commercial service under its own brand on June 5, entering a market dominated by Microsoft's MSN division and Hong Kong-listed Tencent Holding Limited.

Called Fetion, China Mobile's IM tool, enables handset users to chat with other Fetion customers over the mobile Internet offered by its GPRS network, either with a mobile phone or PC. The interface is similar to MSN messenger and Tencent's popular QQ.

China Mobile started a pre-commercial trial of the IM service, initially branded Femoo in 2006. By the end of the 11-month trial in April, it had signed up 20.68 million subscribers, said company Vice-President Sha Yuejia.

Market researchers estimated that Tencent has about seven million mobile QQ users. For mobile MSN messenger, the figure is estimated at 300,000.

The Fetion IM tool has already been embedded with Colourful Ring Back Tone (CRBT) downloads and refers to an online shop where subscribers can buy China Mobile's service offerings and check phone bills, Sha said.

“We are expecting to add a number of new offerings such as games and video-phone calling to Fetion,” he said.

China Mobile said it will not charge monthly fees initially and has yet to set a timetable for future charges.