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Wen Jiabao & George Papandreou Prime Ministers of China & Greece at the Parthenon on the sacred rock of Acropolis attaining the future with confidence!
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STAVROS NIKOLAKOPOULOS Executive Editor /
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Wen Jiabao & George Papandreou Prime Ministers of China & Greece at the Parthenon on the sacred rock of Acropolis attaining the future with confidence!
CHINA TO SAVE GREECE Wen Jiabao's visit to Greece opens new ways and opportunities for tourism,investment and finance (port facilities & modern railways)
Under the auspices of Euro Chinese Center of Research & Development With the support of: China Briefing EUPIC Our international licence: ISSN 1792 0027, listed in the International Catalogue of Publications in Paris FRANCE. Executive Editor: Stavros Nikolakopoulos Creative Editor: Alexios Nikolakopoulos Chief Photographer Thimios TSIKNIS Assistant to Editor:Rose Mao Chief Designer: Guo Yonghai Layout: Lei Jiaxing Special Advisor: Li Chenggui Legal Advisor: Jason Jiang Published by: Eurasian Link International Consultant (Beijing) Co., Ltd. Address: L24, Tower 3, China Central Place 77 Jianguo Road, Chaoyang District Beijing 100025, China Tel86 10 8587 2470 Fax86 10 8587 2471 e-mail:eurasianlink@126.com Website: www.eurochinabusiness.com www.eurochinabusiness.com.cn
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COVER STORY: Turning good intentions into joint actions INTERVIEW: China's engines of growth OPINION: Helping small firms is key to recovery
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Papandreou as President of Socialist International meets Hu Jintao
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Herman Van Rompuy new President of EU Baroness Ashton Foreign Affairs Chief
A new and more effective cultural & tourism policy, to promote the treasures and natural beauties of Greece
Greek Minister of Culture & Tourism
George PAPANDREOU
New Prime Minister of Greece With plan & vision for the future
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Pavlos Geroulanos
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COVER STORY Economic crisis: 'accelerates reform' OPINION Phantom of stagflation could be back INTERVIEW Lord Mayor of London
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GREEK PRIME MINISTER KARAMANLIS WELCOMES HE GUO QIANG AT THE OPENING OF NEW ACROPOLIS MUSEUM
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CONTENTS
7 Ties need calmness and courage 12 Ready for the next big one? 14 A constructive role with China 16 Market economy status yet to come 17 China moves up the global ladder 19 Domestic market for economic bliss 21 Chinese firms up the stakes in Europe 24 EU citizens would like to see their countries help developing world 26 Greece beckons Chinese tourists 28 Miyun 30 ASEM Summit
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33 ANIMATION FESTIVAL 36 COFACE: Survey on business payment performance 40 Mutual benefits, all-win results 42 CHINA to surpass JAPAN 45 Xuzhou 48 Shandong - Qingdao 50 LAOSHAN
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hina will continue to support European economies in need and will gradually allow more flexibility in its currency. C h i n e s e P r e m i e r We n J i a b a o delivered a speech at the Sixth China-European Union Business Summit. The following is the full text: Confidence was the keyword of my speech at the China-EU Business Summit two years ago when the financial crisis just broke out. Today, the keywords are calmness, wisdom and courage. With so many Chinese and European business leaders sitting in front of me, I would like to focus on several issues the EU business community is concerned with and use this opportunity to make a few clarifications so as to eliminate misunderstandings and boost our cooperation. It is a basic fact that the bilateral trade and investment between China and the EU have been growing rapidly. EU statistics show its overall exports declined in 2009 due to the impact of the financial crisis. However, its exports to China increased by 4 percent. In the first
half of this year, EU exports to China surged by as much as 42 percent. I paid a brief visit to Germany. I told Chancellor Angela Merkel that the monthly bilateral trade between China and Germany averaged about $10 billion, and that the 2010 total would probably surpass $120 billion. The trade between China and the EU was worth some $400 billion in 2009, and it would likely exceed $500 billion this year. These are the basic status quo and facts. O n t h e e xch a n g e r a t e o f t h e Chinese yuan, I said yesterday when meeting with the Euro Group troika that European political and business leaders should not join the "chorus" to pressure China to appreciate the yuan. Again, let's take a look at some basic facts. The yuan has appreciated by an accumulated 55 percent in terms of the real effective exchange rate since China initiated the reform of the yuan exchange rate mechanism in 1994. Some major currencies have all depreciated during this period. China further deepened the reform of the yuan exchange rate mechanism in July 2005. The yuan has appreciated by 22 percent against the US dollar since then. During this period of time, however, China's trade surplus against the United States has still increased by a large margin. We have registered surplus in trade in goods, but deficits in services trade. We have had surplus in
manufacturing trade, but deficits in general trade. We have had surplus in trade with the US and the EU, but deficits in trade with South Korea, Japan and the Association of Southeast Asian Nations (ASEAN). Doesn't all this show that it is an issue of trade structure instead of a mere exchange rate? The euro exchange rate experienced large fluctuations recently, but it was caused by the US dollar, instead of the yuan. How can you place the blame on China? The imbalance of trade is caused by structural problems against the backdrop of globalization. It should not be politicized. We pursue balanced and sustainable trade, and in no way seek surplus. In the cold winter in January 2009, I visited Europe and brought with me not only the confidence needed to overcome the financial crisis, but also a procurement delegation to place orders to the European countries. The EU is a strategic partner to China, and China did not look on unconcerned when some eurozone countries were in trouble. We continued to hold and buy eurodenominated bonds and helped Iceland, Greece, Spain, Portugal and Italy in their most difficult time. We will continue to render assistance and tide some countries over their difficulties. China is a friend indeed and I believe the entrepreneurs here all know it. You should not pressure China EURO CHINA BUSINESS
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on the yuan's appreciation if you consider the issue from another perspective. Many Chinese export enterprises have profit margins of only 2 to 3 percent, 5 percent at most. Should the yuan appreciate by 20 to 40 percent, as demanded by some people, a large number of Chinese export enterprises will go bankrupt, the workers will lose their jobs and the migrant workers will have to go back to the rural land, making it hard for society to remain stable. The world will by no means benefit from a crisis in the Chinese economy. China contributed about 50 percent of the global economic growth in 2009. It is a huge market with great potentials for many enterprises. Once again, I would like to tell our friends in the industrial and business community candidly: Don't pressure China on appreciation of the Chinese yuan. We will stick fast to the reform of the yuan exchange rate mechanism. The reform involves developing a managed floating exchange rate system based on the market supply and demand and adjusted to a basket of foreign currencies, to gradually allow more flexibility in the yuan exchange rate while maintaining its basic stability on a reasonable and balanced level. I f t h e y u a n e xch a n g e r a t e i s unstable, enterprises will also be unstable. So will be employment, and society in general. Should China have problems in economy and society, it will be disastrous for the world. The second question is whether the investment environment in China is good or not. I would like to tell you that China will steadfastly push forward its reform and opening-up process and will in no way deviate from the path. Only through reform and opening to the outside world will China develop further. The basic policies
that have been established in the reform and opening-up drive will not be changed. The only changes that have taken place are that foreign investment is now under better and more orderly regulation. Entrepreneurs' concern for the investment environment does not g o beyond three aspects intellectual property, innovation and government procurement. I can tell you in a responsible manner that all foreign businesses that are legally registered in China are entitled to enjoy national treatment, and that all products made by foreign-invested enterprises in China are made-inChina products. We will protect not only your intellectual property, but also all your legitimate rights and interests. The third question regards the export of raw materials, specifically the export of rare earth. As a longtime researcher on rare earth metals, I have a say on the issue. There are two kinds of rare earth metals, the heavy rare earth elements and the light rare earth elements. China has rare earth deposits in different regions, with the heavy ones located mainly in the south, such as Jiangxi province. The light ones are mainly in the north, such as Baotou city in Inner Mongolia. In the 1980s and 1990s, there was a lack of well-regulated m a n a g e m e n t o ve r r a r e e a r t h metals in China, and also a lack of extraction technologies in the country. Some countries bought a large amount of rare earth metals from China at low prices in a period of time when management over rare earth in China was the most chaotic, and even now they still have a considerable stockpile, which they know very well. China contributes a large propor tion of the global rare earth output, which far outdoes its share of the world's total rare earth deposits. We haven't imposed,
and will not, impose an embargo on the industry. We are pursuing a sustainable development of the rare earth industry, not only to meet the demand of our own country, but also to cater to the needs of the whole world. We not only need to accommodate the current demand, but also, more significantly, need to take a longterm perspective. It is necessary to exercise management and control over the rare earth industry, but t h e r e wo n ' t b e a n y e m b a r g o. China is not using rare earth as a bargaining chip. We aim for the world's sustainable development. China wishes to forge more e x t e n s i ve , d e e p e r a n d c l o s e r economic and trade ties with EU countries. The EU is now China's largest partner in terms of trade and investment, ahead of the United States and Japan. To be frank, the EU has done a better job in relaxing restrictions on high-tech exports to China. For instance, there is cooperation on the Galileo satellite project, with Airbus and there is nuclear power cooperation, to name a few. This morning, the Belgian King also mentioned to me about cooperation on the fourth generation micronuclear technology. It is in the fundamental interests of both China and the EU to develop bilateral trade and economic relations. Standing here today, I am feeling under a heavy responsibility. I will tr y my best to promote China-EU trade and economic cooperation and overcome the temporary difficulties and problems that have emerged in the process of cooperation. So, let's join hands to promote the development of China-EU trade and economic relations and jointly usher in broad prospects for future development of the China-EU comprehensive strategic partnership.
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Raymond Barre, former French prime minister and author of numerous economics textbooks, once told me: "One of the few things we know about economics is that it has cycles - the problem is that we do not know when they start, how long they last and why they end." The stigma of modern economics is that we still do not know how to avoid recessions and unemployment. This is my fifth recession. Some of the repercussions I have seen were expected, while others were totally new. Kill and overkill - a recession is a
costly experience. The European Central Bank estimates that the total amount spent on areas such as recapitalization, guarantees and toxic assets on both sides of the Atlantic was 27 percent of GDP, or a staggering $7.2 trillion! Budget deficits are in excess of 11 percent of GDP in the US and 6 percent in Europe. The total debt of the G20 nations will reach 106 percent of their GDP this year. Did we have a choice? Probably not! The market only understands "big money" and - just like in a poker game - only respects a player that is ready to place a huge and unlimited
amount of money on the table. Recessions occur at regular intervals. In the US, there have been 32 recessions since 1854. Globally, the four most recent recessions were experienced in July 1981, July 1990, March 2001 and December 2007. If the same pattern is repeated, the next recession will probably take place nine to 10 years from now. It is doubtful if many governments will have enough time to restore public finance to confront the next "big one". In addition, the "real" debt of nations is deeper than reported. The US national public debt exceeds $13 trillion. And if we include local debt plus Medicare and social security, it could be more than $105 trillion. For most advanced economies, the real level of debt is three to five times their GDP. United we enter, disunited we emerge. Growth produces a greater synchronization of economies: nations went into recession at more or less the same time. In contrast, recessions generate desynchronization: ever ybody escapes from the "big black hole" at different speeds. The recovery of Europe is relatively flat, with a growth of about 0.5 percent. The US is recovering faster, at more than 2 percent. Brazil and Russia can expect to achieve 6 percent growth, and a significant number of Asian economies will grow at more than 8 percent. Even within regions, the differences can be significant: In Europe, Germany could very well grow by 3 percent, outpacing the other large European economies. Countries that show a consistent surplus in their current account balance rise faster, benefited by a regular influx of fresh revenue from abroad. Finally, every recession is followed by a jobless recovery. Unemployment in the US remains high at 9.5 percent and in Europe it is close to 9 percent. Youth unemployment is particularly worrying: 18 percent in
the US, 20 percent in Europe and an alarming 42 percent in Spain. A jobless recovery for about a year is the norm. Companies start hiring again only after being convinced that the recovery is for real. Experience shows that even companies that fare relatively well during a recession tend to cut jobs or hire part-time employees to increase productivity. Then there have been the unexpected repercussions. First, the "boomerang" effect is broken. For years, the US and European governments have lived at the expense of others. Both regions ran current account and budget deficits without really suffering the consequences. T he money accumulated by emerging economies would always come back "home" re-invested in government bonds or real estate. That was because of a lack of political stability and stable investment oppor tunities in emerging economies. Without noticing it, industrial nations have expanded their public debt to dangerous levels. Today, a significant par t of this debt is owned by emerging economies. China holds $877 billion and 520 billion in US and European governments' bonds. But now the money is invested "elsewhere"! The money is also not where it used to be. Emerging economies are accumulating funds at an impressive rate - more than $9 trillion - with China boasting $2.5 trillion in foreign currency exchanges. The sovereign funds, which have become the new global investment bankers of emerging economies, manage more than $3.8 trillion. This huge amount of money attracts indebted governments, such as Greece, as well as private companies. For a while, emerging economies did show some interest in investing in industrialized nations or in buying Western companies. Now, however, new alternatives are available.
We have seen the emergence of a "South-South bloc", too. For the first time, an increasingly selfsufficient "South bloc" - lying south of a diagonal between Mexico and Moscow - is generating its own momentum. Despite disparities, these economies can rely on an emerging middle class, huge raw material resources, home-grown technologies and money. They breed an impressive number of global brands in banking and industry of the model. Haier from China - practically unknown a decade ago - recently became the larg est household appliance company in the world. Many companies enjoy the active support of their governments: 21 of the 22 largest Chinese companies are State-financed. These economies a l s o d e ve l o p a n e w b u s i n e s s model for the "emerging poor", a population emerging out of absolute poverty but which has not reached middle class status. Microfinance, mobile phone transactions, cheap cars or computers are just a few examples. In the end, the next recession will be the real moment of truth for advanced economies and businesses and governments better be prepared for it. An aging population used to a standard of living increasingly subsidized by state aid and public borrowing abroad may be in for a harsh reality with a reduced standard of living. What would happen, economically, politically and socially if emerging economies decide to close the money tap? Advanced economies have never been so vulnerable. They are now in dire need of a new solid economic model and they may have to rediscover frugality. The author is a professor and director of World Competitiveness Center at IMD, the global business school based in Lausanne, Switzerland.
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By Robert Zoellick
his year marks the 30th anniversar y of the historic C h i n a - Wo r l d B a n k G r o u p partnership - a partnership that has seen one of the most successful engagements of the World Bank Group and has contributed to shaping China's modernization and development. In April 1980, when Vice-Premier Deng Xiaoping first met the thenPresident of the World Bank, Robert McNamara, Deng described his vision of China at the turn of the millennium: an open and rapidly growing economy with a per capita income fourfold higher, well on its way to achieving middle-income levels by the mid-21st century. For his part, McNamara committed to providing the Bank's best talent to support China on this mission. In so doing, he hoped that the World Bank would become one of China's m o s t i m p o r t a n t d e ve l o p m e n t par tners. Both leaders had to overcome resistance and skeptics. Looking at China now and the important role it plays in the global
These are achievements of enor mous magnitude for any country, let alone one with the size and diversity of China. They have not only benefited China but the East Asia region more widely and indeed the world. China's efforts alone have ensured that the world's Millennium Development Goal on overcoming poverty will be met.
It is now the World Bank that can draw from China's experience whether in infrastructure, education, r ural development, forestr y or energy - and employ this knowledge with other countries to overcome poverty in the world. One way the World Bank is doing so is by facilitating and supporting an active program of knowledge exchange between China and other developing countries that wish to learn from China's development success and its record in overcoming poverty. I am pleased to observe that China has been generous in sharing its experiences and lessons from its development successes with its neighbors in East Asia and in less fortunate regions such as SubSaharan Africa. China's rapid growth and domestic transformation over the last three decades have reshaped the domestic as well as the global economy. W i t h t h e d o m e s t i c e c o n o m y, China is wisely addressing new challenges. These include creating a greater balance between savings and consumption, creating a Harmonious Society that will benefit all its people, seeking to avoid "The Middle Income Trap" that could curb prosperity, and moving to more value-added production that will warrant higher wages. In each of these areas, the World Bank may be able to assist in sharing knowledge and experience. We also believe that the lessons we learn together will be of interest to other developing countries. In the global economy, China is altering the division of labor, affecting capital flows, and creating n e w g r ow t h o p p o r t u n i t i e s i n other developing countries. This expanding influence in the world - including its recent elevation to being the third largest shareholder of the World Bank - will come with new responsibilities, opportunities and expectations. China will need to weigh how it can best contribute
as a responsible stakeholder in the international system that has benefitted China in the past and will offer cooperative opportunities in the future. China's influence will be felt in designing effective climate change policies, ensuring stable global growth, and providing development resources and investment to overcome poverty in other countries. Looking ahead, the World Bank will continue to work with China as it faces these challenges. China's quest now is to join the ranks of the high-income countries. I believe
that it can do so over the next generation while also protecting its environment and natural resources, enhancing social stability, and protecting the global commons. This is a demanding goal, but one that I am confident can be reached. China has already accomplished a great deal and earned the world's respect. The World Bank Group will be proud to play a constructive a n d s u p p o r t ive r o l e w i t h o u r extraordinary partner. The author is president of the World Bank.
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Apart from trade and investment, Dewit said China has taken steps to encourage investment outward. However, "Europe is not an easy market". Though the EU has rules, different countries have various regulations. "All these have added up to difficulties when the Chinese choose to invest in Europe." He suggested Chinese investors intending to expand businesses in Europe should enter into closer relationship with locals given Europe's diverse languages and cultures. However, he said many countries in Europe have already set up investment promotion agencies and investment incentives have been offered. "They welcome Chinese investment."
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scored well in several assessment factors such as market size and microeconomic environment, with rankings of second and fourth respectively. But in areas such as higher education and training, technological readiness and financial market development, the country still needs to make more advances. "Most of the BRIC nations have b e e n i m p r ov i n g. B u t C h i n a ' s improvement has been more faster," said Robert Greenhill, managing director and chief business officer of WEF. Speaking to China Daily, Greenhill s a i d t h e g l o b a l e c o n o my s t i l l faces uncertainties, as the present economic downturn is something that the world has never experienced before.
"We have avoided the fallout from a great depression. But we are still sailing in uncharted waters," he said. The need of the hour is to enhance and enlarge the scope of cooperation between nations, he said. China has made rapid advances in shifting its economic focus to innovation rather than efficiency, but it will take some time before the efforts bear fruit, said Greenhill. Policy instability, and corruption and access to financing are still the major issues confronting investors in China, the report said. Lingering concerns For the US, the WEF report was not exactly a rosy one. The nation slumped to the fourth position as macroeconomic imbalances
i n c r e a s e d , p u b l i c a n d p r iva t e institutions weakened, and concerns remained about the state of the financial market. Earlier this week, US President Barack Obama unveiled a new $350 billion stimulus package to alleviate the pressure on the American e c o n o my a n d b o o s t d o m e s t i c demand. But Greenhill said other countries may not follow Obama's move, as it is becoming increasingly clear that most of the nations don't have the wherewithal for more stimulus packag es. W hat is needed are smarter and more focused stimulus packages, rather than broad-based measures, he said.
The sun rises over the Shanghai World Financial Center (right) and Jin Mao Tower, landmarks in Shanghai's financial hub. China rose two notches to 27th in the global competitiveness ranking report released by the World Economic Forum. Jing Wei / For China Daily
hina could over take Japan as the world's second largest consumer market in the next decade. Its private consumption today is only about 16 percent and 56 percent of that in the United States and Japan. But China's strong GDP growth outlook bodes well for its domestic consumers, since it goes together with an increase in per capita income and the attainment of
consumption thresholds. Moreover, the Chinese government has an ar ray of active policies oriented toward increasing disposable income and rebalancing its growth model toward domestic demand. Many Western consumer and luxury brands have expanded into China after the global financial crisis struck, and have reported brisk sales, with some posting doubledigit growth even during the global recession last year. One of the most
concrete examples of this can be found in the automobile industry. China overtook the US as the world's largest automobile market last year, with vehicle sales reaching 13.6 million units, compared with 10.4 million cars and light trucks sold in the US. Many of these products have penetrated only the high-income group of urban households. The potential of other groups such as the high-income group in rural areas and middle-income group in urban areas is yet to be fully explored. Official data show the number of registered households in cities was 192.4 million in 2008, about 46 percent of the total registered households (403.8 million). This mirrors the ratio of urban to rural population. The rural population actually shrank from 796 million in 1980 to 713 million last year. In ter ms of annual household income, about 22 percent of China's urban households - or about 43 million urban households - had an annual income of about 65,000 yuan ($9,714.5) or above in 2008, rising from only 7.8 percent in 2005. Their number is likely to be close to 50 million currently. As such, this consumer segment is comparable to medium-sized, high-income Asian economies such as South Korea. Data on consumer goods ownership show solid growth across all key products in the past decade, with the only exception being fixed-line telephones. Ownership of washing machines and refrigerators appear to be nearing the saturation mark. Automobiles have a lot of headroom ahead because the ownership level is still relatively low at 10.5 cars per 100 urban households. Mobile EURO CHINA BUSINESS
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phones have seen an explosive growth from 3.3 phones per 100 urban households in 1998 to 180 phones in September 2009. Compared to the early 1990s, when data on consumption expenditure baskets became first available, consumption patterns have shown a shift away from basic necessities such as food, clothing and household appliances toward transport, residence and recreation. Rural households used to be a major contributor to nominal GDP in previous decades. But their contribution has declined in importance. At present, they contribute about 9 percent of nominal GDP, a steady decline from 24 percent in 1990. This contrasts with the contribution of urban household consumption, about 26 percent of nominal GDP at present, which is roughly unchanged from 25-30 percent in the 1990s. O n a ve r a g e , p e r c a p i t a r u r a l household income rose 12 percent from 1987 to 2009, slower than the 15 percent growth of urban households. This means that the gap in rural-urban per capita income increased over time, especially after 2001. The trend has intensified because of a more rapid rate of urbanization. All rural income groups, just like their urban counterparts, spend the largest percentage of their income on food. Data on rural consumption only goes back to 2002. Since then, the pattern of consumption by rural consumers has been more uniform than urban consumption, and has concentrated on food, residence and transport. Not surprisingly, rural consumers do not spend as much as their urban counterparts on discretionar y items such as recreation or clothing. As is to be expected, rural residents lag behind their urban counterparts when it comes to consumer goods ownership. This indicates that there
is still a lot of headroom for growth of consumer products' sales in rural areas. T he items that have seen the strongest growth in recent years are mobile phones, which rose from 4 per 100 households in 2000 to 115 in 2009, followed by color TV sets - from 49 per 100 households to 109. The ownership of household appliances such as washing machines, refrigerators and air conditioners, as well as motorcycles, is still low among rural households compared to their urban counterparts. Motorcycle ownership is about 57 per 100 households, even though it has more than doubled from 22 in 2000. How significant China's consumers will be to the global economy will de pend cr ucially on how successfully rural consumers catch up with their urban counterparts. Far ming will remain the most important source of income for rural families even in the foreseeable future, and there is plenty of scope to improve income from farming. Since most farming activities in China are small-scale and familybased, the central government has undertaken a major policy initiative to develop modern agricultural production, which should improve productivity and raise rural income. The recent focus on improving agricultural infrastructure, including water sources and irrigation facilities is encouraging. Putting aside the potential impact of structural policies to increase urban and rural household income, the continuation of current growth trends is likely to cr ea te two powerful groups of consumers in China in the next decade. Urban consumers will expand both in size and spending power and their spending behavior will increasingly resemble consumers in the highincome Asian economies such as Japan, Singapore and South Korea, and Hong Kong. This bodes well
for many industries, including travel, automobile, real estate, luxury goods and information/communication equipment. As incomes rise in rural China, its spending behavior will be similar to lower middle-income economies in Asia, which should boost the market for consumer staple goods and generate a second pole of private consumption on which China's economy can rely. The author is a senior economist at Deutsche Bank.
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(From left) Li Shufu, chairman of Zhejiang Geely Holding Group, Swedish Minister for Enterprise and Energy Maud Olofsson and Volvo CEO Stephen Odell at the Volvo headquarters in Torslanda, Sweden, on March 28, when Geely bought Volvo from Ford.
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BEIJING - Chinese companies are increasingly looking toward Europe to extend their business operations. In recent months there have been a number of high-profile deals. In August, Zhejiang Geely Holding Group Co completed its takeover of Swedish carmaker Volvo Car Corporation. And late last month Shanghaibased Bright Food (Group) Co Ltd emerged as the frontrunner to acquire United Biscuits, the UK biscuit maker currently owned by private equity firms. Other recent deals include Shanghai industrial conglomerate Fosun International Ltd acquiring a 7.1 percent stake in French holiday resort operator Club Mediterrane, commonly known as Club Med, in June. Eric Thun, lecturer in Chinese business studies at the Said Business School at Oxford University, said Europe was now often more attractive than the United States for Chinese companies looking for investments. "They are interested in capitalintensive manufacturing processes and countries like Germany are world leaders in this area," he said.
"It is not always about acquisition. You see a number of Chinese companies setting up research and development facilities in Germany because they want to be in industrial clusters where they have access to highly skilled labor, research institutes and training facilities." According to China's Ministry of Commerce, 5.8 percent of Chinese overseas direct investment in 2007 was directed at Europe, behind Asia on 62.6 percent, Latin America 18.5 percent and Africa 5.9 percent, but ahead of North America on 4.3 percent. There were 252 investments by Chinese companies in Europe in the 10 years up to 2007, according to research by international business adviser Ernst & Young. Of these, the largest number, 101, went to the United Kingdom with 40 going to Germany, 24 to France and 15 to Sweden. Andre Loesekr ug-Pietri, chief executive officer of private equity firm A Capital Asia, which has offices in Beijing and Shanghai, believes there are going to be more investments by Chinese companies in Europe.
He said recent moves by the Chinese government to simplify foreign exchange approval procedures could prove a catalyst for more mergers and acquisitions. "This should make it easier for Chinese companies to invest abroad and Europe is a key interest for many Chinese companies," he said. Loesekrug-Pietri, whose company advised Fosun on the recent Club Med deal and was also a co-investor, said a lot of European companies were looking for Chinese partners to access a market with more than 1 billion people. "Having a Chinese investor could give them some sort of assurance they have a strong ally in what is a highly competitive market, but one that is also perceived as more and more difficult." Zhang Tianbing, a partner in global management consulting firm A.T. Kearney, who is based in Shanghai, said bridging China's technology gap is one of the main aims for Chinese companies investing in Europe. "If you look at the car industry and the acquisitions of companies such as Rover and Volvo by Chinese companies, these allowed Chinese businesses to acquire technological
ability that had been built up over almost a century," he said. Zhang said that Chinese companies were not always looking to take over European companies so they could bring their manufacturing facilities back to China. "Keeping the manufacturing in Europe, and even most of the research and development, is part of the value of these acquisitions. Maybe some of that manufacturing will migrate to China over time," he added. Eric Schmidt, chairman of Beijingbased China Entrepreneurs, which organizes forums and conferences in China linking Chinese and European companies, said Chinese companies represent the perfect exit strategy for many European family-owned businesses. "There are many second and third g eneration businesses, in such sectors as fashion, for example, where the current generation don't want to be in the business their parents or grandparents started. Chinese companies have the cash and are hungry for their brands," he said. " T h e y m i g h t h a ve e ve n b e e n suppliers to them in the past and it is a way for them to move up the value chain." Mike Bastin, a brand expert and visiting professor at the China Agricultural University, warns there
are dangers for Chinese companies that overestimate the value of European brands.
"Brand values can be intangible and might not always compensate for the difficulties in integrating corporate cultures. Chinese companies need to pay more attention to modern methods of quantifying intangible brand values," he said. The appetite for major acquisitions in Europe by Chinese companies is unlikely to be sated any time soon, however. There is continued speculation that vulnerable European banks could be the next acquisition targets for Chinese companies. "I would not be surprised if there was an announcement of a Chinese takeover of a major European bank," added Zhang at A.T. Kearney.
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Nations hope ASEM Summit will help bind them closer together
By Zhang Haizhou
LONDON - The 8th Asia-Europe Meeting (ASEM) Summit, was held in Brussels, Belgium. It is the first of the biennial gatherings since the Lisbon Treaty came into force in December 2009.
The treaty aimed to create greater coherence among the member states, and thus enable the European Union (EU) to have more global influence. However, some analysts in the United Kingdom think it is still very hard for EU members to achieve consensus on dealings with China. "Member states have widely different interests, and the creation of consensus between them is very hard. Sometimes one thinks that the EU will never translate its immense commercial importance into political influence," Kerry Brown, a senior fellow on Asia at the London-based Royal Institute of International Affairs, told China Daily. The ASEM Summit brings together the 27 EU member states and the European Commission with 16 Asian countries and the ASEAN
Secretariat - representing 58 percent of the global population, 50 percent of global GDP and more than 60 percent of global trade - for an informal process of dialogue and cooperation. On the bilateral level, China and the UK have work to do if they are to improve their relationship and make it mutually beneficial. China remains a major focus for the UK's economic interests, bilateral trade, reaching $39.1 billion last year. Trade in the first four months of 2010 was up nearly 30 percent, according to Chinese statistics. " We s h o u l d b e s t r i v i n g f o r interde pendent and symbiotic relationships to create mutual benefit," said Alex Mackinnon, an international strategy consultant and co-author of China Calling: A Foot in the Global Door and China
Counting: How the West Was Lost. For example, Mackinnon said, China can benefit from the UK's experience in the development of contract law. "There is also in the UK a fair and reasonable arbitration environment and China could agree that some disputes may be allowed to be arbitrated in the UK under guidance from scholars of both nations," he said. The UK can also learn from China. Jeremy Browne, the minister of state at the British Foreign and Commonwealth Office, for instance, intended to use his visit to China in mid-September as the opportunity to see "how the UK can learn from the extraordinary success of Beijing Olympics".
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ANIMATION FESTIVAL
for default payments. Among major industries, enterprises selling to the electronics industry suffered the highest percentages of default payments. There was the second consecutive sharp increase in default payments, reported by 18.6% of respondents for in Q2 2010, up from 14.9% the previous quarter, and 11.8% in Q4 2009. Electronics products are not necessities. This means that during economic downturns, the electronics industry is more likely to suffer from poor business performance and cash flow problems. Moreover, the keen competition, coupled with continuously rising costs of raw materials and labour, especially in Mainland China, has further shrunk profit margins in the electronics industry. Local businesses trading in this industry should be cautious r e g a r d i n g c r e d i t c o n t r o l s, t o safeguard their payments, said Burton. Improvement in confidence of Hong Kong enterprises There were signs of improvements in the confidence and business
performance and of Hong Kong enterprises: 81.1% of respondents think that by the end of 2010, their business performance will return to levels typical of those before the financial turmoil, and 56.1 percent have increased revenue growth in the past six months. Additionally, 84.5 percent of respondents think there will not be an increase in delayed payments in their industry during the next six months 7.2 percent higher than in the previous quarter (78.8%). These figures tally with the growth of Hong Kongs GDP recorded in Q2 2010, which increased by 6.5% from same quarter last year and by 1.4% in real terms from the first quarter of 2010. In June, we upgraded Hong Kong to A2 positive watchlist, and a further upgrade is quite possible before the end of 2010, said Burton. Though Hong Kong enterprises are mainly optimistic regarding the economic situation and the continuous low-interest rate environment is favorable to the overall recover y , the slow
recover y of the global markets and increasing cost of raw materials may impact Hong Kong m a nu f a c t u r e r s a n d e x p o r t e r s. Therefore, local businesses are strongly recommended to continue closely monitoring buyers payment records and financial situations, to avoid unnecessary harm to their profitability and cash flow. Burton added. The survey of 1,425 Hong Kong companies was conducted from April to June 2010, by Coface Greater China Ser vices the business information and credit management services subsidiary of Coface. The survey considered trends in late payments and defaults, as well as credit terms for manufacturing, trading services and contracting companies. For further infor mation, please contact: Coface Shanghai Chloe Yao TEL: +86 21 6171 8100 E-mail: shanghai@coface.com
2010 2010 2010 21.1% 2010(23.7%) 200926.7%11% 21%2009 (40.2%) 4.9% 2010 4.3%2009 4.54%2009 8.6% 22.3% 31602010 24.8%48.5% 20101530 201040.3% 2009 6.67% 3.1% 81.1% 2010 56.1% 84.5% (78.8%) 7.2% 2010 6.5%2010 1.4% A2 8.0%2010 1.61% 7.6%% 1.4%2009 7.2%1.2% 2010 6.3% 6.1%20097% 20091.1% 20100.7% 0.8% 200911.8% 14.9%2010 18.6% 201016 2,514 + 1 11 100 shanghai@coface.com
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By Xie Xuren
Minister of Finance of China hina will strengthen practical cooperation with the World Bank while marking 30 years of togetherness This year marks the 30th anniversary of China resuming its legitimate seat in the World Bank. While constantly deepening its reform and openingup process, China has cooperated very successfully with the Bank in project loans, knowledge sharing and international development. This has contributed to China's socioeconomic development and enabled the Bank to play a greater role in fighting poverty and promoting development in the world. Promoting socioeconomic development through loan projects Channel for funding and technology: Over the last three decades, the Bank has accumulative committed over $47.8 billion to China and supported 326 projects.
through loan-project cooperation with the Bank. The international competitive bidding system, disbursement and reimbursement system, project supervision system and project owner's responsibility system introduced through the projects have become prevailing practices in China's major engineering projects. Training professionals to meet urgent needs: By organizing various kinds of training, study tours, seminars and workshops over the past 30 years China has cultivated a large talent pool with a sound understanding of market r ules, profound professional knowledge and enormous international exposure, providing strong intellectual support to the country's endeavor to enhance its international financial and economic cooperation. Deepening international development cooperation and sharing knowledge on harmonious development Strengthening South-South Cooperation: With the Bank as a
platform, China shows the world its development route marked with Chinese characteristics, reiterates the impor tance of respecting country ownership of development in developing countries, and calls for diversification in development roads and modalities. This has not only enriched the Bank's knowledge of development, but also actively contributed to the fulfillment of its mandate to fight poverty and promote global development. Improving the Bank's governance s t r u c t u r e : To h e l p f u l f i l l t h e consensus of the G20 Pittsburgh Summit and ensure the Bank's transfer of 3.13 percent voting power from its developed members to developing members, China actively participated in international consultations on the Bank's voting power refor m, strengthened communications and coordination with other developing members, and actively called on the Bank to raise the voice and representation of developing countries as a whole in its reform. China's efforts played an
important role in pushing forward the reform. While the past shines with remarkable achievements, the future is filled with long and arduous tasks: China is a developing country with a large number of people still living in poverty. The economy is still facing many long-term development challenges. The World Bank, as the biggest multilateral development institution in the world, rich in financial and intellectual resources, is expected to continue to play an active role in China's economic development pattern and economic restructuring and in scaling up South-South Cooperation. In the foreseeable period, China will continue to follow its scientific approach to development, stick to country ownership in development and strengthen practical cooperation with the World Bank for mutual benefits and all-win results.
The author is the Minister of Finance of China.
Xie Xuren, Minister of Finance of China and Robert B. Zoellick, President of World Bank
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CHINA to surpass JAPAN to become the second largest world economy in terms of GDP this year
China now third in terms of voting power at multilateral organization
he World Bank has agreed to increase the voting power of China and other major developing countries in a move that analysts said marks the start of a gradual but new change in global economic governance. China's stake at the bank, in terms of voting power, has gone up to 4.42 percent from 2.78 percent, lifting it to the third spot behind United States and Japan in the 186-nation lending organization. The ranking is above a host of Western countries, like Germany, France and the UK, all having their voting power cut to a varied level. The US' share, however, remained u n ch a n g e d a t 1 5 . 8 5 p e r c e n t , effectively still giving it the veto power. Japan is in the second place with a 6.84 percent stake, down from 7.62 percent. China's Minister of Finance Xie Xuren welcomed the move and said it increases the rationality of the World Bank governance structure and lays foundation for further reforms aimed at equalizing voting power between the developed and the developing nations. "It is the first time in the history of the World Bank that a reform of governance structure is mainly targeted at promoting representation and voices of developing countries," he told reporters on Sunday. "Today was a very good day for mu l t i l a t e r a l i s m , " Wo r l d B a n k President Robert Zoellick said after the conclusion of the bi-annual meeting of the bank's development c o m m i t t e e i n Wa s h i n g t o n o n Sunday. China's gross domestic product (GDP) expanded by an impressive 8.7 percent year-on-year in 2009, when it contributed to more than half of world economic growth while many developed economies registered negative growth thanks to the global financial crisis. I t i s a s i g n a l t h a t d e ve l o p e d countries' dominance of world economic order is star ting to weaken, said Yang Mian, researcher at Communication University of China. "China is rising." But analysts said given the de facto veto held by the US in the World Bank, there is a long way to go before the developing countries can have a voting power that matches their actual economic clout. T h e Wo r l d B a n k a n d t h e International Monetary Fund require 85 percent of overall votes to make a decision. But the US failed to give up any share of its voting power. "There's no substantial change so far. China should at least be above Japan in terms of voting power in the World Bank given their changing economic status.
Hilde Schwab (left), co-founder of the Schwab Foundation for Social Entrepreneurship, honors this year's award winners Sakena Yacoobi (second left), Andy Schroeter (second right) and Gemma Bulos.
Three outstanding social innovators that work at the grassroots level were g ranted Asia's "Social Entrepreneur of the Year" award by the Schwab Foundation for Social Entrepreneurship at the Summer Davos Forum. They are Gemma Bulos, who set up the A Single Drop for Safe Water in 2006 in the Philippines; Andy Schroeter, who r uns Sunlabob Renewable Energ y in Laos and several other countries; and Sakena Yacoobi, who led the Afghan Institute of Learning to provide health and education services to Afghan women and children. Bulos told China Daily that she feels incredible to meet people who share similar ideas and experiences at the forum. "It's not easy to be in the social sector and do it in a sustainable way," she said.
"It's really exciting to have this kind of forum to recognize these people." Established in 1998, the Schwab Foundation has so far awarded nearly 200 social entrepreneurs across the world. The winners should have innovative ideas and solutions to deal with social problems and their activities must directly benefit people's lives. Also, their enterprises should be self-sustaining instead of relying on government subsidies, she said. The most ideal situation is that their models and experiences could be replicated in other countries and regions that encounter the same problems. With years of experience working with social entrepreneurs, Schwab noticed that people from developed and developing countries face different social problems.
Developed countries' problems are more about taking care of elderly people and children, and providing employment for young people; while in developing countries, major social issues include clean water, basic education, and fighting against poverty. Last year, Hong Kong resident Timothy Ma was awarded by the foundation for his contribution to the local Senior Citizen Home Safety Association, becoming the only Chinese winner so far. Schwab said she would be happy to see more prizewinners from China in the future. "I am sure that there is big potential for social entrepreneurs to grow in China," she said. "I am also sure that there are social entrepreneurs around (in China), and it's our job to find them." EURO CHINA BUSINESS
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The 5th International Education Conference of Xuzhou The 13th China Xuzhou Investment Fair The 4th Tourism Festival of Han Dynasty Culture
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Laoshan
Building Senior Financial Business Area Laoshan Financial Business Area under planning and construction is located in the central area of Laoshan District, with the planning area of 10 square kilometers, will be a modern beautiful multi-functional Financial Business Area, combined function of business, commerce, clture, conference & exhibition, hotel, food and beverage, entertainment, and fitness, besides the financial function, which is the main usage. Among which, its central area is 1.45 square kilometers, will be the Financial Accumulation Area.
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Chairman: Stavros Nikolakopoulos Ambassador of Friendship of ChinaHonorary citizen of Shandong
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MAN OF THE YEAR 2008 STRIVING FOR PEACE & THE WELFARE OF HIS PEOPLE
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Welcomes Wen Jiabao in EU Brussels headquarters. EU-CHINA: A comprehensive strategic partnership.
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Vaclav Klaus
President of Czech Republic and President of EU (Jun.1 to June 31, 2009)
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G4 China - Brazil - Russia - India a platform but not a mechanism to combat the world's financial crisis
Fredrik Reinfeldt Sweden's Prime Minister President of European Union (1st July - 31st December 2009)
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COVER STORY: Turning good intentions into joint actions INTERVIEW: China's engines of growth OPINION: Helping small firms is key to recovery
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Papandreou as President of Socialist International meets Hu Jintao
Special Feature The Phenomenon of Dubai FINANCIAL CENTRE P28 TOURISM HUB P30 REAL ESTATE BOOM P32
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HARVESTING TOP FOREIGN STOCKS DOING BUSINESS WITH CZECH REPUBLIC WORLD TOURISM BAROMETER CHINA-EU A THRASHING PARTNERSHIP - UPHOLDING THESACRED INSTITUTIONS OF THE GAMES CHINA'S PRECIOUS GIFT TO EUROPE ON LINE TRADING BLOOMS IN EUROPE
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Herman Van Rompuy new President of EU Baroness Ashton Foreign Affairs Chief
A new and more effective cultural & tourism policy, to promote the treasures and natural beauties of Greece
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New Prime Minister of Greece With plan & vision for the future
EXCLUSIVE INTERVIEW
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GEORGE PAPANDREOU
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James Jao, the famous American-Chinese architect and city planner, is building a Greek village in China!
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Wen Jiabao & George Papandreou Prime Ministers of China & Greece at the Parthenon on the sacred rock of Acropolis attaining the future with confidence!
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CHINA TO SAVE GREECE Wen Jiabao's visit to Greece opens new ways and opportunities for tourism,investment and finance (port facilities & modern railways)
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