China News - Winter 2010

China - structural reform

Last week the ruling Communist Party met and moved to drop the growth guarantee and strengthen structural reform. It approved the outline of a new five-year plan that will continue the trend away from an emphasis on economic growth and towards a focus on structural goals such as energy efficiency and income redistribution. Immediately after the meeting closed, the central bank announced a much-needed interest-rate hike - a small but telling signal that Beijing is starting to get serious about reining in the excesses caused by easy money. The Party document barely mentioned the word 'economic growth' but repeatedly used the term 'economic development' - which is a broader term implying a focus on economic composition and structure.

It also called for 'a new growth pattern that is jointly driven by consumption, investment and exports' and a new target for increasing the household income share of GDP was introduced. Also, the State Council issued a new industrial policy strategy that dropped real estate from the list of 'pillar' industries, suggesting that the government is no longer willing to provide unlimited suppt to the property market. The new pillar industries focus on new technologies and efficiency improvements, rather than the basic heavy industries like steel and automotives that dominated previous plans.

Press reports suggest that policy makers expect exports to grow at 9-10% in coming years - far below the annual 29% during the pre-crisis boom years and trade surplus reduction will be a target. China will push ahead with ambitious efforts to increase energy efficiency with a 17% gain expected by 2015 on top of the nearly 20% improvement made in the last five years. Sceptics will respond by saying that we have heard such plans before and why is it different this time? The answer is that effective policy starts at the top and the signal is now clear. (From 'Opinion' by Arthur Kroeber in The Wall Street Journal 26/10/10)

China's lost treasures (Yuanmingyuan)

In 1860 the commanders of the British and French forces in Beijing held a tense conference outside the gates of the Yuanmingyuan -the Garden of Perfect Brightness. Each side feared the other would obtain more booty from looting the huge palace which comprised mansions, temples, theatres, libraries, pavilions, chapels, gazebos and galleries all filled with priceless works of art, antiquities and personal possessions. To ensure equitable distribution, the commanders agreed to appoint 'agents' to divide up the property. There then followed an orgy of indiscriminate plunder in which anything that could not be carted off was destroyed. Then on 18 October, British forces were ordered by Lord Elgin (son of the Lord Elgin who removed the marble friezes from the Parthenon) to burn the buildings and what was left as revenge for the deaths of British and Indian prisoners in Chinese captivity. Because the Yuanmingyuan was so vast (about five times the size of the Forbidden City) it took nearly 4,500 men to set it aflame. Gilded beams crashed, porcelain roofs buckled, ash filled the lakes and embers snowed down on Beijing.

Robert McGhee, chaplain to the British forces, a participant in and a defender of the destruction wrote, 'It was a sacrifice of all that was most beautiful. It is gone, but I do not know how to tear myself from it'. A hundred and fifty years later, China cannot forget neither its vanished glory, nor vindicate its vindictive desecration. Professor Que Weimin of the World Heritage Research Centre in Beijing said, 'Yuanmingyuan is the shame in the heart of the Chinese people and a reminder to the whole world that such destruction of human cultural heritage should not happen again'.

It has been estimated that 1.5 million relics of the Yuanmingyuan are in the hands of museums and private collectors outside of China. Posters show images of Yuanmingyuan relics in foreign collections. Examples are the gold, pearl and ruby cap ornament of an imperial prince in the Philadelphia Museum; the Qianlong emperor's armour in the French Military Affairs Museum and jade carvings in the Fontainebleau Palace. (From The Straits Times 26/10/10, via the International Herald Tribune)

Dogs in China

There estimated to be about 900,000 dogs in Beijing today plus many more unregistered ones and their numbers are growing at about 10% a year. After dogs began to appear in Beijing households, the government banned them from the city in 1983. The economic renaissance, however, has changed this and people's lives have changed. People used to be focused on improving their own lives, but their outlook has changed and dog ownership helps relieve stress. Some believe the one-child policy has increased enthusiasm for dog ownership as a way to provide companionship to only children and also to fill empty nests in homes when the child has grown up. The Beijing city government relaxed the no dog policy in 1994 to 'severely restrict' dogs, but in 2003, the law was changed again to allow anyone to own a dog. However, city dogs are limited to dogs no more than 35 centimetres (14 inches) in height. Now there is a dog park in Beijing and a formal proposal has been submitted to the National People's Congress to ban the eating of dogs. This has still has to come into law, but it has passed two rounds of public comment, which bodes well for the future. (From International Herald Tribune 26/10/10).

Luxury products tailor made for China

Although the luxury goods business in the West may be out of fashion, it is booming in China and the rich are becoming even more discriminating than ever. They are demanding luxury goods specially made for them. For example, the French luxury giant, Hermes, has recently opened a boutique in Shanghai for its new Chinese brand, Shang Xai. There are Ming-style chairs, eggshell porcelain bowls and jewellery inspired by unusual Chinese collectable baubles, such as teapots.

For top brands the progress in China has been surprisingly slow, partly because China is still a relatively poor country with a high savings rate, but also because many big brands have simply dumped their existing products on the Chinese market, with little thought to tailoring their wares to the local population apart from changing the language on the packaging. However, consumer spending in China has risen by 15% a year over the last two years and most analysts predict that growth will continue as a new generation of indulged only children - used to spending rather than saving - reaches maturity. There is believed to be big money to be made in health and wellness products but with a Chinese essence, specifically for the Chinese market. (From Newsweek 18/10/10)

From the British press

Expo-UK pavilion wins top award

The UK pavilion captured the imagination of the Chinese public and about 8 million visitors passed through its doors. The pavilion is a shimmering cube of 60,000 Perspex rods and was judged to be the best of the Expo's large exhibits, despite costing a fraction of its competitors' budgets. The UK Pavilion cost £15 million to build and £10 million to operate and was one of the smallest outlays on site. By comparison, the Saudi Arabian pavilion cost a reported £100 million. In a ceremony which was broadcast live on Chinese state TV, the Prime Minister, Wen Jiabao, praised the UK effort as 'very creative' and gave it the gold award. The Expo closed a few hours later with a gala ceremony with hundreds of dancers performing in a flying saucer-shaped theatre on the banks of the Huangpu River. More than 73 million people visited the six-month Expo - a new world record.

The UK pavilion specifically targeted Chinese business leaders and hosted 100,000 VIP guests. The UK consul-general in Shanghai, Carma Elliot, believed that four years' achievement had been accomplished in the six months of Expo in getting access to Chinese leaders and businesses. Yesterday, UK officials estimated that between 3,000 and 5,000 UK jobs would be created in the UK as a result of the pavilion and said that the pipeline of Chinese investment projects had swelled from 50 to 170. So far the pavilion has generated about £5 million of new orders for British engineering and information technology companies and there is believed to be a 'significant' contract in the making between a UK aerospace firm and a Chinese buyer. (From The Daily Telegraph and its website 1/11/10)

Cameron leads large trade delegation

The British Prime Minister hopes to double business with China to $100 billion (£62 million) by 2015, which includes a rise of exports to China of $30 billion per year. He is accompanied by 43 businessmen and women and hopes to seal up to 40 deals involving business (low-carbon technologies, urban design and communications technology.), education and culture. He said he wants to make his first trip to China to take the relationship between the two countries to 'a new level'. He believes that the UK is the most open economy in Europe and is uniquely placed as the gateway to the EU, which is China's largest export market and the world's largest single market.

Britain is home to more than 400 mainland Chinese companies and as China rebalances its economy and as its growing middle-class demand new and ever more high-value goods, brands and services, UK companies have much to offer.

Even before Mr Cameron landed, a series of small deals were signed by Vince Cable, the UK business secretary, who is one of four other cabinet ministers as part of an advance party. Pearson, the media and education company, is to open 50 new English language centres doubling the number of people it is teaching to 100,000 adults and children. Mothercare, which sources its products from within China, plans to become the largest parenting brand in China and Tesco, which already has 88 stores, believes China offers 'extremely attractive investment opportunities'. (From The Times 9/11/10)

China - the new science superpower

Dr Shi Yigong, a prize-winning professor at Princeton University in the US shocked the scientific community when he chose to return to China, just after he had been awarded a $10 million grant for his work at Princeton. The West remains an attractive place for many of China's brightest minds, but the return of Dr Shi, a world-class talent, to Tsinghua University in Beijing is emblematic of the phenomenal rise of scientific endeavour in China. Figures complied by Thomson Reuters show that Chinese scientists published around 120,000 articles in peer-reviewed scientific journals in 2009, up from just 20,000 in 1990. If this trend continues, China will overtake the US as the most prolific nation by 2020 and within a decade we could be looking east for the innovations that solve the world's problems.

Chinese President Hu Jintao said at the launch of the 'Medium and Long-term Plan for Science and Technology in 2006', that 'by the end of 2020, China will achieve more science and technological breakthroughs of world influence, qualifying it to join the ranks of the world's most innovative countries'. Innovation drives economic growth and to speed the transition, China spends 1.5 % of GDP on research and development, behind only the US and Japan. There are calls for it to be increased to 2.5% by 2020. At present there are 25 million students in China - up from 5 million nine years ago and the Chinese Government is developing over 100 elite institutions to compete with the best in the West.

China is very deliberately seeking to lead the world in the 21st century in priority areas such as space exploration, biomedical science and nanotechnology. The objectives are to increase quality as well as quantity. In 2004, 351,000 engineering graduates were produced by Chinese universities, compared to 137,000 in the US. About 20% of the global output in materials sciences comes from Chinese researchers. (From BBC Focus Magazine November 2010)

Chinese girls outperform all others at GCSE

The Equalities and Human Rights Commission set up in 2007 has published its first report, a 680 page survey. In education, white boys from poor backgrounds have one of the poorest records at GCSE. Chinese girls emerge as the best performing group at 16 regardless of economic background. The only group which outpaced Chinese girls on free school meals, the standard measure of poverty, was Chinese girls who do not claim free school meals.

Laura Tan, a marketing executive, told the Times that she was not surprised, because it is in the Chinese work ethic. She said that Chinese culture is all about hard work, standing on your own two feet and taking responsibility for yourself. She said this was instilled in her from a very young age and the Chinese believe in discipline. A lot of Chinese children play musical instruments at an early age because their parents like the fact that it requires discipline and hard work. (From the Times, 11/10/10)

Shanghai: a 21st century dragon

When the gates close on the Expo 2010, more than 60 million visitors will have been welcomed. Only the Chinese pavilion and a few other structures will be kept. The rest will be demolished and on the ruins, a new financial district will arise. A recent report by UK Trade & Investment has identified four nearby cities which have a combined population of 23 million as prime beneficiaries of Shanghai's boom and as targets for British business. They are Ningbo, 5.5 million (centre for BP, shipbuilding and high-end manufacturing), Shaoxing, 4.3 million (turning from for textiles to recycling and environmental businesses), Wenzhou, 7.5 million (turning from cheap products to luxury goods, insurance and financial advice) and Suzhou, 6 million, (industrial estates and technology firms).

In Shanghai, flats, office blocks and government buildings are rising in all directions and the new harbours being built will give Shanghai the biggest container terminal in Asia, toppling Hong Kong. Criticism of the spending on Expo ran rife on line, but it is now clear that the planners did have a vision for what comes next. This includes possibly more trade in futures and other derivatives on the Shanghai stock exchange and the development of a bond market for corporate issuers and to tap the enormous pool of domestic savings. All this will need buildings, a larger trained workforce and a network of supporting service industries. Dong Tao of Credit Suisse says he can see Shanghai emerging as a global financial capital in 10 to 15 years time. He says currency appreciation will continue and reserves be so big, they will need a financial centre. (From The Sunday Times 10/10/10)

The next president of China

The next president of China could be Xi Jinping, aged 57, the son of one of China's most revered revolutionaries. His wife, Peng Liyuan, 47, is amongst the country's most famed folk singers. Mr Xi, China's Vice-President, was named a Vice-Chairman of the Central Military Commission and is only the second civilian on the commission. President Hu Jintao is its chairman. Mr Xi and his wife have never been seen next to each other in public and it is not known what role the future president's wife will play, but comparisons are already being made to Carla (Sarkozy) and Michelle (Obama).

Mr Xi rose through the ranks without any fanfare, whilst his wife has appeared often on the Spring Festival television spectacular at Chinese New Year, which is the most watched show on earth. It is not clear whether Mr Xi will break with tradition to appear in public with his wife at his side. Deng Xiaoping rarely showed up with his wife, whilst his successor Jiang Zemin took his wife on some state visits. President Hu is equally circumspect. In China, giving excessive publicity to a spouse could be seen as indiscreet, if not an abuse of position.

Compared to his wife, less is known about Mr Xi, a tall, well-built man imposing man. A family friend told the Times that he is a neutral person who has always avoided showing strong political opinions, neither supporting nor opposing people and their policies openly. Some Chinese ananlysts believe he may have inherited some of his father's more liberal views compared to the current President.

He is seen as friendly to business and was the first Chinese leader that the former US Treasury Secretary Hank Paulson asked to visit after he was appointed. Mr Paulson described him as a 'guy who really knows how to get over the goal line.' (From The Times 19/10/10)

Patriotic purchases

An 18th century Chinese porcelain vase previously taken to Going for a Song (forerunner of the Antiques Road Show) in the 1960s and declared a very clever fake, has recently been sold for £51 million to an anonymous buyer. It is highly likely that the buyer is Chinese. In June another Chinese buyer paid £44 million for an 11th-century calligraphy scroll. In the past few years, Chinese buyers, driven by patriotism as much as by profit are buying back their past and driving up prices at international auction houses.

The £51 million vase is an highly coloured and intricately worked article from the Qianlong Emperor period in the 18th century. It was possibly looted and shipped out of China during the Opium Wars of the 19th century. (From The Times 13/11/10)

NB. In some museums in China, you do see exhibits donated by overseas Chinese. Possibly these too had been spotted, bought and sent back to China.

China's census

Some six million people are being mobilised to conduct a ten-day survey of China's population. This is the sixth nationwide census since 1949. The last one, in the year 2000, presented problems because of the loosening controls on internal migration. It is believed that since then the number of people who have moved out of the countryside and taken up urban residence for more than six months has grown by 85% to 145 million. Some people may not tell the authorities they have moved, to avoid the bureaucracy and possible costs involved in registering a new residence. Migrants are particularly afraid of revealing any children born in violation of the strict family planning regulations.

Now officials are trying to convince people that personal data gathered by the census will be kept secret - even from other government departments. Still state media reports that many are evading the enumerators. Preliminary data are due to be released in April. The problem will be how to handle the inevitable undercounting. In 2000 the census takers reported an undercount of 1.81% and officials deemed this to be within acceptable limits and to compensate they added a further 22 million to provide a figure of 1.27 billion. From sample surveys, officials estimate the population at the end of 2009 to be 1.33 billion. (From The Economist 6/11/10)

China's diving dragon China's deep-sea craft, Jiaolong, named after a mythical dragon, is preparing to plunge to 7,000 metres (23,000 feet) below the surface of the sea to survey, map and drill and to take samples of minerals. It is searching for gold, silver, copper, zinc, cobalt and rare elements used in computers and electronics. Liu Feng of the China Ocean Mineral Resources Research and Development Association says that Jiaolong is capable of surveying 99% of the world's oceans. China is believed to have plans to mine 29,000 square miles of the Pacific Ocean. The prize includes 112 million tons of manganese, 4.06 million tons of copper, 5.14 million tons of nickel and 980,000 tons of cobalt.

Chinese shipbuilders are already at work on the country's second oceanographic vessel, Ocean 2, a 6,000-ton ship with a crew of 75 that will be able to transport mini-submarines more than 10,000 miles. They are also developing a manned submersible and a robot craft that will be used in the next phase of China's quest. (From The Sunday Times 10/10/10)

From the Chinese press

Boeing, Tsinghua research centre

US plane maker Boeing and Tsinghua University have opened a joint research centre in Beijing to develop aviation application technologies. There is a five-year agreement and $5 million funding for collaborative research involving airplane cabin environments and designs, advanced materials, computer science and industry deign. The intellectual property rights will be jointly owned and Boeing hold the license for company purposes. Fan Weicheng, the director of Tsinghua's centre for public safety research will head the laboratory. (From China Daily 21/10/10)

Chinese to UK tourism to increase

The number of Chinese tourists to the UK is set to increase by 27% from 100,000 in the year to August 2009 to 127,000 in the next year period. From 1993 when 16,000 Chinese visited the UK, the figure has grown six times to the 2009 figure and is expected to continue to grow. Some analysts believe it could eventually exceed the number of Indian (the largest number from the Asia-Pacific region) visitors (390,000) who came last year to the UK. The number of Americans who came remains static at 2.8 million but the number of Japanese actually fell from 492,000 to 235,000 (a decrease of 47%) over the same period. The regional director of VisitBritain, Garry White believes, there was the need to shift the perception of the UK in China from a solely business destination to being a tourist destination. The relatively low value of the pound is an advantage at the moment and the London Olympics should prove a catalyst in encouraging more Chinese tourists. (From China Daily 25/10/10)

China considers new car tax

Legislation is being drafted to encourage the use of smaller engines in cars to reduce pollution and the dependence on oil. The first review of the law was passed at an executive meeting of the State Council on 12 October. It is expected to be finalised by spring and will impose increasing taxes based on engine capacity. Taxes on engine size 1.6 litres or smaller will be unchanged or reduced slightly, while engine size between 1.6 and 2.5 will be increase moderately but a relatively large increase will be applied to engine size of 2.5 litres and above. (From China Daily26/10/10)

New social security law

The Standing Committee of the National People's Congress (NPC) voted to adopt a social insurance law on 28 October after four readings and consideration of feedback from the general public on the drafts. The new Social Security Law prevents the improper use of social security funds. This law, the first of its kind in China, specifies a common right for all citizens to access and enjoy five forms of insurance: basic endowment insurance, basic medical insurance, employment injury insurance, unemployment insurance and maternity insurance.

The law would help improve the social security system in both urban and rural areas, ensuring that all citizens enjoy the achievements of the reform policy. Obstacles prevalent in the old system would be overcome. These obstacles restricted movement of the country's increasing migrant population. The law states that a new medical payment system should be should be established to allow medical insurance in one place to be transferred to another. Citizens should also be allowed to pay premiums in one place and withdraw it in another. The Social Insurance Law shows that China's social security system has entered a phase of steady development after a two-decade trial stage.

The law is to come into force on 1 July 2011. It was first submitted to the legislature in December 2007 following a scandal in Shanghai involving a gaping 3.7 billion yuan ($552 million) debt to the city's social security fund. In order to prevent the misappropriation of social insurance funds, this law says that the fund's income and expenses, management process and investment should be made public. Social security funds cannot be used for any other purpose such as covering budget deficits or to build or renovate offices. In addition, the provisions relating to social insurance also apply to foreigners working in China.

The Vice Minister for Human Resource and Social Security, Hu Xiaoyi, said at a press conference that China's economy and society are becoming more and more open and that such a regulation follows international practice and gives equal national treatment to foreigners working in the country. (From Beijing Review 11/11/10)

Chinese government to build rural chain store network

It was announced on Monday that the government will open more rural chain stores in the next few years to cover all of the nation's counties and the majority of its villages. This move is expected to help boost domestic consumption in accordance with the next five-year plan. A Ministry of Commerce spokesman said that more funds would be injected into the project in the next five years to realise the goal.

The project started in 2005 to encourage consumption in rural areas and by the end of this year, about 4.4 billion yuan ($646 million) will have been spent to build a network of 520,000 rural chain stores in 80% of counties and 65% of villages. Such a network could generate sales of more than 200 billion yuan this year. (From China Daily 26/10/10)

China amending death sentence rules

The eighth amendment to Criminal Law, demanding more prudent use of capital punishment, has triggered hot debates after it was presented to the Standing Committee of the National People's Congress (NPC) for the first reading at the end of August. The draft was publicised on the website of the NPC to solicit public opinion until the end of September.

There might be several readings before the amendment is ratified. The amendment is to progress the policy of implementing justice with mercy. Currently 68 crimes are punishable by the death penalty in China. The draft eliminates 13 economic-related non-violent offences. If the amendment becomes law, it will be the first time the number of crimes has been reduced since the law was enacted in 1979. This will also be the first major development since the Supreme People's Court resumed the review and approval of all death penalty decisions in 2007. (From Beijing Review 16/9/10)

China in need of nursing homes

The nation is suffering from a great shortage of old-age homes, said Yan Qingchun, deputy director of the China National Committee on ageing (CNCA). Beijing had about 90,000 people waiting for a place in a nursing home at the end of 2009, but there were only 30,000 beds available. Meanwhile, the number of people nationwide aged 60 or older amounted to 167 million by the end of 2009 or 12.5% of the population. Of the 167 million elderly people, 50% were living alone, whilst their children sought employment elsewhere. To make matters worse, 30 million of these old people are disabled or will soon be and are in need of care.

Professional nursing homes might be the best choice for these people, but the cost has caused many who are in need to give up looking. In Beijing, Evergreen is an example, but the price is 2,500 yuan per person per month ($375) and even at this price, the home struggles to make ends meet. Beijing's response is to look for policies that favour old age care facilities in taxes and other ways and to encourage privately-owned care homes to supplement the government owned ones. China has 30,000 people certified to work in old age care homes, but at least 10 million are needed according to media reports. At present China has about 40,000 nursing homes with around 2.4 million beds. (From China Daily 25/10/10)

Filial tradition withering in urban areas?

In Guangdong, a recent study of the elderly has shown that the tradition of children supporting their aged parents is slowly fading away. The survey of 1,300 people aged 60 or above living in urban areas found that 62% live apart from their grown-up children while only 48% can expect a weekly visit and a further 28% expect a visit once a month. For 24%, a visit is only made once a year.

The study found that 40% of those studied, comply with tradition and take care of grandchildren, while around 20% help with the housework. Perhaps surprisingly, most of even those who live with their children are confronted with loneliness and 75% longed for greater spiritual support from their children. One man said that he felt a lack of communication with his son, even though he lived in the same community. He never has supper with his son's family because it is the only part of the day when the family have time to spend together and he does not want to disturb them. He said he was sick in bed for two moths and his son did not even notice.

The 'empty-nesters' problem increases annually and Li Dandan of the Guangdong Volunteers' Union has suggested that it would be better if the elderly just spoke directly about their feelings to their children. An alternative is to communicate more with other elderly people in the community. Guangdong had 10.47 million people aged 60 or above at the end of 2009. (From China Daily 25/10/10)

China leading in UN Millennium Development Goals

At the 65th Session of the UN General Assembly Chinese Prime Minister Wen Jiabao reaffirmed China's commitment to the UN Millennium Development Goals (MDGs). In the year 2000, world leaders agreed to establish under the UN framework eight goals in areas such as economics, social development and environmental issues to be realised by 2015. According to the UN, China has made remarkable progress towards its contribution to the MDGs and is expected to achieve all its goals on time.

Justin Yifu Lin, World Bank Chief Economist and Senior Vice President, believes that overall, only one of the MDGs is likely to be achieved - the reduction of poverty by half from 1990-2015 and the reason it is likely to be achieved is because of the huge poverty reduction in China. He was speaking at a lecture in Columbia University and went on to say that the achievement was beyond anyone's expectation. Jim Canrong, a professor at Beijing's Renmin University of China, said that the chances of the UN fully realising the MDGs are not good and that one reason was that Western nations did not fulfil their promise to provide 0.7% of their gross national income as development assistance. However, these nations have domestic problems and the UN lacks the ability to enforce agreements.

Prime Minister Wen noted that although China's total GDP is large, the per-capita figure is only one tenth that of developed nations. In 2009, China's GDP was $4.6 trillion, third largest in the world, but per-capita GDP was only $3,700, below the 100th in the world. He went on to say that this is the real China with still 150 million people living below the UN poverty line.

China is ahead of schedule on a number of its individual MDG targets: Halving between 1990 and 2015 the proportion of people whose income is less than $1 per day: measured against the international poverty line, the share of China's rural population living in poverty was reduced from 46% in 1990 to 10.4% in 2005; ensuring that by 2015, children everywhere, boys and girls alike, would be able to complete a full course of primary school; by the end of 2009, primary school enrolment in China has reached 99.4%; reducing by two thirds, between 1990 and 2015, the under-five mortality rate; the infant mortality rate in China came down from 50.2 per 1,000 live births in 1991 to 13.8% per 1,000 live births in 2009. The under-five mortality rate was reduced from 61 per 1,000 births in 1991 to 17.2 per 1,000 live births in 2009. (From Beijing Review 7/10/10)

Sino File is compiled by Walter Fung.

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