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1 Industry

2 Finance

3 Automobile

4 Agriculture

5 Real Estate

6 Construction

7 Science & Technology

8 Information Technology

9 Society

02

Industry

China enhances exports of mechanical, electrical products

BEIJING -- China increased thevalue of its exports of mechanicaland electronic products to $1.18trillion in 2012, taking up a greatershare of the global market, ac-cording to new data.

Vice Commerce MinisterJiang Yaoping has said that the8.7-percent year-on-year growthbrought the global share achievedby products from China to 16.1percent in the first 11 months of last

year, up 0.9 percentage pointsfrom 2011. The combined importand export volume of the productsrose 6.7 percent year on year to$1.96 trillion, he said.

Exports of mechanical andelectronic products, accountingfor 57.6 percent of China's total ex-ports, reached more than 230countries and regions in the worldand grabbed 29.1 percent of mar-ket share in emerging economies,

Jiang added. He advised enterprises to

strengthen efforts in research anddevelopment and improve marketdiversification to fend off rising pro-tectionism amid a sluggish globaleconomic recovery.

2012 was the 18th consecu-tive year in which the mechanicaland electronic sector has beenChina's number-one exporter intrade volume.(XINHUA)

03

03

Shanghai urged to focuson traditional industry

CED Monitoring

SHANGHAI-Leading business fig-ures from Shanghai have warnedof the dangers of ignoring the city'straditional manufacturing indus-tries, in favor of more modern sec-tors, as the city strives to becomeone of the world's leading financecenters.

Shanghai's traditional indus-tries include foodstuffs, clothingand industrial manufacturing.

However, in recent years its devel-opment as a financial and servicescenter has become increasinglyimportant.

But its transformation into ahigh value economy should notcome at the expense of those tra-ditional sectors.

"The majority of multinationalcorporations that have establishedfootholds in China are in the tradi-tional food and beverage sectors,as well as the automobile sector,"

said Ge Junjie, the vice-presidentof Bright Food Group Co, thecountry's second-largest food ven-dor.

According to Ge, some do-mestic companies have lostground to foreign competitors inthese areas, at a time when do-mestic consumption has becomea priority for the government.Bright Food is a Shanghai manu-facturing giant, which has beenattracting global attention in re-cent years. It bought a controllingstake in British cereal maker Weet-abix last year.

But according to the latestdata from the Shanghai MunicipalBureau of Statistics, last year thecity's industrial sector dropped toless than 40 percent of its totaleconomic output for the first time.

Industrial input accounted forless than a quarter of fixed-asset in-vestment last year, further suggest-ing the dwindling role thattraditional manufacturing is play-ing in the economic powerhouse.

However, Ge argued that tra-ditional manufacturers still claim alion's share, or 77 percent, of thecity's overall industrial output, citingofficial figures.

His views on keeping a closereye on the city's traditional indus-tries are shared by Ma Xulun, thepresident of China Eastern AirlinesCo Ltd, a major State-backed air-line based in the city.

"I think a revival in the tradi-tional sector is essential because itshapes and strengthens the back-bone of the economy," said Ma.

He quoted President Xi Jinpingas saying in a recent speech tolawmakers from Shanghai thatChina should be mindful not to

Industry

04

abandon its traditional industries asit moves up the value chain, be-cause the sector matters to peo-ple's livelihood as well asemployment.

Ma warned that as global in-terdependence deepens, thecountry's economy will becomevulnerable to global uncertaintiesif traditional industries lose theircompetitive edge.

He cited the recent wave ofrelocations by US manufacturers oftheir outsourced facilities as an ex-ample.

"Western policymakers havestarted to reckon it is time that theircountries return to manufacturingto create jobs and prevent moremanufacturing skills from being ex-ported," he said. "Shanghai shouldtake note."

Zhang Yan, a professor atChina Europe International Busi-ness School in Shanghai, said tradi-tional industries still play a key role

in creating jobs. "People should be more

aware that job losses in the tradi-tional sectors cannot easily be off-set by adding headcounts in theservice sector," she said.

On the contrary, manufactur-ing posts help create additionalemployment opportunities in re-lated industries and in the servicesector, she added.

Ge said that some sections ofthe city's industrial sector are al-ready beginning to wane amidsoaring labor costs and outdatedbusiness models, and that workneeds to be done by many busi-nesses to raise their brand aware-ness as part of a manufacturingrenaissance.

Shi Chao, the president ofShanghai Tabacco Group Co Ltd,warned that some of the city's tra-ditional products were in dangerof becoming "obsolete".

"Brands need to stay vigorous,

and high-end technology compa-nies need innovation to maintaintheir brand reputation," he said.

"Made in Shanghai" used tobe considered a strong endorse-ment of top quality, said Shi, butthe glory days of some of its mostfamous brands - such as pens fromThe Shanghai Hero Pen Company,watches from Shanghai WatchFactory or bicycles from ShanghaiForever Co - have started to fade.

Ge noted that to increase thenumber of global Chinese equiva-lents of Coco Cola, McDonald's orWalmart requires not only financialresources, but executives experi-enced in international operations,and the latest high technologyand branding.

He Wenbo, chairman ofBaoshan Iron and Steel Co Ltd,China's biggest steelmaker, em-phasized that to compete withemerging industries, investment inadvanced technology is crucial.

05

CHINA'S ECONOMY SET TO STRONGREBOUND

Industry

06

07

Industry

CED Monitoring

BEIJING-China's economy "hit bot-tom" by late September, but a re-bound by the end of this year isn'tout of the question, economistStephen Roach said.

The former non-executivechairman of Morgan Stanley inAsia also said he expects China tomaintain an annual economicgrowth rate of about 8 percent -half a percentage point abovethe 2013 target set by former pre-mier Wen Jiabao last week.

"The economy seems to havehit bottom in the third quarter (of2012), and I expect progressivestrengthening over the course ofthe year - especially if the externalclimate starts to improve on the

heels of a gradual pickup in globalgrowth," Roach told media.

China's economy expanded7.4 percent between July 1 andSept 30, the seventh straight quar-ter in which the pace of growthwas slower than the precedingthree months, according to theNational Bureau of Statistics. In thefourth quarter, China's GDP growthaccelerated to 7.9 percent, slightlybeating expectations and begin-ning what some observers see as areturn to the high rates of pastyears.

Over the next five years, GDPgrowth in China should slow "to-ward 7 percent to 8 percent", asthe nation transitions to a moreservices- and consumer-orientedeconomy, said Roach, a trained

economist who left Morgan Stan-ley in February to take a position asa senior fellow at Yale University.

"A better-balanced Chineseeconomy," Roach said, "will beable to sustain slower underlyinggrowth in trend GDP - especially ifit draws support from labor-inten-sive services and thereby deliversmore jobs per unit of GDP."

Whether China would be bet-ter off engineering slower GDPgrowth was heavily debated dur-ing the just-concluded annual ses-sion of the National People'sCongress in Beijing.

A GDP-rate slowdown is a sen-sitive topic in the country, whichequates growth with success, asdefined by the ability to competewith mature economies of coun-

08

tries including the United States. For all of last year, China's

GDP growth was 7.8 percent - theslowest annual pace since 1999. In2011, the rate was 9.3 percent.

According to Roach, Chinahas experienced a "soft landing"despite his fears that the countrywas headed for a severe eco-nomic shock.

In an essay posted on the Proj-ect Syndicate website in January,the former Hong Kong-based ex-ecutive urged Chinese leaders tomove swiftly to accelerate theirnation's transition to a more con-sumer-driven economy, to avoid a"hard landing".

Economists generally define a"hard landing" as a severe slow-down in growth that could push a

country into economic recession,often as the undesired result of agovernment's efforts to curtail infla-tion by tightening the money sup-ply. A "soft landing" describes arate of GDP growth that's fastenough to avoid recession butslow enough to prevent damag-ingly high inflation.

"The debate is over: China hasnow set its strategy on the shift to aconsumer-led growth model,"Roach said in an e-mail.

The challenge "now goes fromstrategy to implementation", hesaid, calling consumer-led growth"the only antidote" to Wen's con-cerns. Wen lamented China's re-liance on an "unstable,unbalanced, uncoordinated andunsustainable economy".

"It will be up to the new lead-ership to implement the reforms re-quired to pull it off," Roach said.

To maintain "stable economic-growth performance" for severalyears, China's new leaders, hesaid, need to lay out plans for "de-velopment of the services sector,funding the social safety net, liber-alizing an antiquated residentialpermit system, reforming State-owned enterprises and lifting artifi-cially low interest rates on savings".

Roach also said he hoped thenew government would take aimat China's "endemic corruptionproblem". Implementing toughnew disclosure requirements forasset holdings of senior officials"would be an important step inthat direction", Roach said.

09

Finance

Tourism boost for Russia and China "Tourists from Russia has outnumbered any other

European or American countries in the last two

years." said Cheng Jie, deputy general man-

ager of European businesses in China Travel

Service.

10

Tourism boost for Russia and China

11

CED Monitoring Report

BEIJING: The Kremlin in Moscowhas witnessed the launch of"Tourism Year of China" 2013, whichwill look to help boost the travel in-dustry for both China and Russia.

Visiting Chinese President Xi Jin-ping and his Russian counterpart,Vladimir Putin, attended the open-ing ceremony. Analysts say the at-tendance of the two countries'presidents will hopefully provide aboost for the tourism business.

Xi said tourism is the best way toenhance the sense of neighbor-hood and Putin warmly introducedChina to all Russians.

This year's campaign will involve382 activities, 235 hosted by Chinaand the rest by Russia.

"Only travelers can tell how thebilateral relationship is going," saidXing Guangcheng, an expert onRussia research with the ChineseAcademy of Social Sciences.

According to Russian tourism of-ficial data, 343,000 trips weremade from China to Russia in 2012,up 47 percent year on year.

Diao Shuang, manager of Euro-pean businesses with China YouthTravel Service, said younger touristsare also heading to Russia. "In2011, 70 percent of tourists to Rus-

sia were elderly," Diao said, "butthis year 40 percent are youngerthan 45."

Meanwhile, the number of Russ-ian tourists to China is the thirdlargest in the world and has beensince 1997. Some 2.43 million tripswere made in 2012 and another172,700 trips from Russia to China inJanuary, up 27 percent year onyear.

"Tourists from Russia has outnum-bered any other European orAmerican countries in the last twoyears." said Cheng Jie, deputygeneral manager of Europeanbusinesses in China Travel Service.

In border cities in northeastChina, shops and stall holders carryout business making deals in Russ-ian and many Russian tourists visitlocal Chinese people, livingpeacefully and happily.

Renowned as "Twin Cities,"Heihe of China's northeast Hei-longjiang Province neighbors Rus-sia's Blagoveshchensk. More than7,000 Russians each day go shop-ping in Heihe during the busy sea-son.

Zhang Guangqiang, Far EastTravel Service executive generalmanager in Russia's neighboringJilin Province, said traditional Chi-nese medicine like acupuncture as

well as beautiful scenery attractsmany Russians.

"Many Russians have mistakenChinese people as wearing grey orblue suits," an experienced Russianguide Nikolay Amurov said, "butthey have found China to be suchan attractive country."

He said China's coastal cities likeBeidaihe of north Hebei Provinceand Sanya of south HainanProvince fascinate Russians be-sides cities such as Beijing andShanghai.

In 2011, Hainan Province ac-commodated 220,000 trips fromRussia, up 51.9 percent year onyear, according to the China Na-tional Tourism Administration.

Zhu Shanzhong, deputy directorof the administration, said thecountry aims to attract more Rus-sians to southwest Yunnan andSichuan provinces.

"Surging costs become thebiggest problem in developingtourism between the two coun-tries," Cheng Jie said, "airline, hoteland catering all face price in-creases which hinder tourists."

The lack of experienced andprofessional tour guides posed an-other challenge for Chinese enter-prises to explore the Russiantourism market, which long for op-portunities created by the "TourismYear" to tackle this plight. Meanwhile the China Tourism Asso-ciation has expressed concernsover the safety of Chinese touristsvisiting France.

An association official has urgedthe French authorities tostrengthen the protection of Chi-nese tourists.

More than one million Chinesepeople visit the European countryevery year, according to officialfigure.

The concerns come after a Chi-nese tour group with 23 memberswere robbed at 7:45 p.m. Wednes-day local time after having dinnerin Paris. Their passports, passengertickets and cash were looted andthe group leader was hurt.

The association called for the ar-rest of those responsible andproper handling of the case asquickly as possible.

12

13

Investment bankreport ridiculed asmarket bulls up

14

CED Monitoring Report

BEIJING: When Chinese investorscelebrated a bullish market, theydid not forget to mock a recentmarket report by JPMorgan Chase& Co.

Chinese bourses made a u-turnafter shedding 8 percent in amonth's time. The benchmarkShanghai Composite Index wentup 2.66 percent, or 59.94 points, toend at 2,317.37, while the Shen-zhen Component Index gained3.14 percent, or 283.93 points, to9,317.97.

On March 18, JPMorgan re-leased a report advising cuttingChinese stock holdings and bet-ting against the nation's biggestfour commercial banks. It down-graded China and recommendedbearish drivatives tied to the fourbanks.

The report became a hot topic

among Chinese netizens onWednesday, especially among in-vestors who use microblogs to dis-cuss investment tactics.

"It's a slap in the face of JPMor-gan," microblogger "huayra" wroteon Sina Weibo, a Chinese Twitter-like microblogging platform.

Microblogger "zhongguoshiIPO"wrote "It may not be a plot, but itproves that foreigners really do notknow China."

Many microbloggers said it wasnot the first time for a foreign insti-tution to misjudge the direction ofthe Chinese market.

In August 2012, when MinshengBank published its mid-year report,a number of international invest-ment banks, including JPMorgan,Credit Suisse, Citibank and Fitch,released reports advising shortingMinsheng Bank or downgrading itsrating.

Minsheng Bank subsequently led

Chinese shares in an overall mar-ket rise of more than 20 percent,with the bank doubling the price ofits shares.

Discrepancies between thestatements made by internationalinvestment banks and the actionsthey have taken have made Chi-nese investors distrustful of the insti-tutions.

Most investment banks are ac-tually buying in while publishingbearish reports, according to a re-port in Wednesday's China Busi-ness News.

In contrast, many Chinese in-vestors believe that big banks arestill undervalued, including Luo Yi,chief analyst at China MerchantsSecurities.

Luo said it is likely that the largerbanks' share prices will double inthe future, adding that bankingshares will have excess earnings ofover 20 percent this year.

15

Suntech bankruptcyhurts new energydrive

CED Monitoring Report

BEIJING: The bankruptcy of solarpanel giant Wuxi Suntech madefront page news, with many re-ports looking to the factors thatcaused the bankruptcy, as well asthe bankruptcy's future impact.

Suntech's problems are un-doubtedly a heavy blow to the in-dustry and the country's drive topromote new energy. Hopes thatwere pinned on the sector's risehave been dashed.

On Wednesday, the Wuxi CityIntermediate People's Court ap-

proved Wuxi Suntech's bankruptcyfollowing a joint application issuedby the company's nine creditorbanks on Monday.

Suntech is not the first solar en-ergy company to find itselftrapped in a debt crisis. ChaoriSolar, another leading player in thesolar energy industry, ran into debtlast December. On Thursday,Chaori reminded its investors thatits losses in 2012 may be as huge as1.3 billion yuan (209 million U.S. dol-lars). Generally speaking, none ofthe companies operating in thesolar industry have been in a com-

fortable position in recent years. It'snot a problem that is specific toany one company -- the whole in-dustry is in danger.

Some have criticized Suntechand some other companies formisjudging the market and ex-panding without measure. But thereal reasons behind the crisis lie inthe sector's lack of cost-efficiency.

For many years, solar energycompanies have had to rely ongovernment subsidies to makeprofits. However, these subsidieshave generally fallen short of theindustry's expectations.

16

Externally, the global economiccrisis had a fatal impact on thesolar energy industry, especiallyleading companies that sell mostof their products in the interna-tional market. Since 2008, majorsolar markets, including Europeand the U.S., have shrunk dramati-cally, while anti-dumping and anti-subsidy moves targeting solarenergy products have madethings even worse.

As a result, solar energy compa-nies have had to rely on the do-mestic market. In January, thegovernment said solar facilities ca-pable of generating a combined

10 gigawatts of power would beinstalled this year. However, ana-lysts believe that if subsidies, gridconnection policies and financingchannels are not improved, it willbe hard to reach the target.

China has been making greatefforts to encourage renewableenergy development to providepower for its fast economic growthwhile preventing the environmentfrom worsening. For many years,China's economy has been pow-ered mainly by coal, which ac-counts for over 60 percent of thenation's total energy consumption.

In its 12th Five-Year Plan (2011-

2015), the government paid spe-cial attention to new energy indus-tries, including solar energy, windpower, hydropower, nuclearpower and biomass energy. Thegovernment has shown determi-nation to solve China's pollutionproblems.

But achieving this goal will re-quire the government to adjust itspolicies in pace with the develop-ment of the solar industry.

Globally speaking, new energyis closely related to the welfare ofmankind. China has already be-come a leader in new energy de-velopment and will contribute

even more in the future. To thatend, it would be prudent for all the

world's countries to refrain from en-gaging in trade wars and protec-

tionism targeting new energyproducts.

17

Apple pursuit lures20,000 students into "usury"

18

CED Monitoring Report

WUHAN: Over 20,000 college stu-dents have taken high-interestloans to buy fancy electronicproducts, mostly Apple devices, incentral China's Wuhan City.

From the start of Jan. 2012 to theend of Feb. 2013, the studentshave applied for loans with a totalvalue of 160 million yuan (about25.76 million U.S. dollars) fromHome Credit China (HC China), asubsidiary of international invest-ment business PPF Group.

"We have lost touch with about100 of them, getting no responseto calls or letters reminding themabout delayed payments," said LiuMingwei, Wuhan regional man-ager with HC China, on Wednes-day.

With around 1 million students inWuhan, it means about one in 50of them are shouldering HCChina's heavy annual interest ratesof up to 47.12 percent on a 12-month-term loan.

About 90 percent of the creditwas used to buy Apple products,such as iPhones and iPads, andother high-end electronic prod-ucts, said Li.

Home Credit China providescredit loans in nine, 12 and 15-month terms for college and uni-versity students, providing they canpresent an ID card, bank card andstudent ID card.

Loan amounts range from 540to 10,000 yuan.

"Quite different from the loanapproval process in a bank, HCChina passes the credit loan appli-cation in as little as dozens of min-utes," according to Zhang Zheng,a HC China salesman in Wuhan.

Then, students can take awaygoods after paying a down pay-ment in HC China's partner stores.The down payments range from 10to 30 percent of the marked pricefor each item.

In Wuhan, HC China's list of part-ner stores cover major electronicproducts centers and chain storessuch as Gome and Sunning. And

the easy loans stimulate their salesvolume.

In spite of this, some stores haverefused such cooperation. "Icounted the loan rate and refusedsuch unscrupulous usury," said astore boss who did not wish to benamed.

The loans have encouragedyoung students to embrace thecraze for Apple devices.

"Apple products are a commontopic or a particular community incampus. I used to feel isolatedwhile they were discussing andplaying with iPhones or iPads," saida student of Wuhan University ofScience and Technology sur-named Yu.

About half of her classmatesand roommates have an iPhone. "Ifelt embarrassed even to take alook when they were in a heateddiscussion about a new applica-tion," Yu said.

She bought an iPhone withcredit loan "in the heat of the mo-ment during a marketing cam-paign by a salesman of HC China,but felt regret afterward."

The girl finally paid the credit withthe help of her parents.

Similar to Yu, Wang Yong, study-ing at the China University of Geo-sciences, failed to pay back theloan in March due to overspend-ing at the beginning of the spring

semester. At that point, he startedto work part-time in KFC.

"The HC China salesman contin-uously called to warn me aboutthe possible poor credit record,which would have a bad effect inthe future.

I was so afraid," Wang said, ex-plaining that he had to ask his par-ents for help.

HC China will report the badcredit of the "vanished" collegestudents who have failed to payback their loan, according to thefirm's Wuhan branch.

Though college students areadults, their consumption view isnot yet mature, said QiuBaochang, leader of the lawyerteam with the China Consumer As-sociation.

Consumer finance companieslike HC China offer loans to themwith quite loose examinations,which is an incentive to the youngpeople's irrational consumption,said Qiu.

The lawyer called for a rationalconsumption guide to educatecollege students, and suggestedthe government strengthen super-vision on consumer finance com-panies in lending.

In 2009, the People's Bank ofChina issued a regulation stoppingbanks from issuing lines of creditabove 1,000 yuan to students.

19

Automobile

China becomes biggestrecipient of Autoinvestment

20

21

Automobile

CED Monitoring

SHANGHAI-Nearly 60 percent ofglobal automobile-plant invest-ments in 2012 went to China, andthe trend should continue for theforeseeable future, a Canadian re-search report said.

China - the world's largest pro-ducer and buyer of automobiles -received C$9.62 billion last yearfrom new-capacity investments, or59.6 percent of the global total.

The figure over the past fouryears was C$40 billion ($38.9 bil-lion), or 57 percent of the worldtotal, according to the Office of

Automotive and Vehicle Re-search, Odette School of Business,University of Windsor.

The report, which studiesmajor automotive-assembler in-vestment announcements, saidChina has been the world leaderin attracting investments since2002, and received more than halfof all such spending in each of thepast three years.

The large amount of invest-ment to China is a result of the na-tion's growing consumer power,said Ma Chunxia, an industrial an-alyst with Zheshang Securities.

In the first two months of this

year, 3.4 million vehicles were soldin China, an increase of 14.72 per-cent year-on-year, the China Asso-ciation of AutomobileManufacturers said.

Although China has madegreat progress in developingurban public transportation, carownership continues to rise acrossthe country because it's often re-garded as a token of social status.

Zhang Hai, a 33-year-old IT en-gineer in Shanghai, said having acar would provide more shoppingoptions.

"If I want to buy some clothesin a discount outlet in suburban

22

Qingpu district, I have fewer choiceswith public transportation. If I have acar, the problem will be solved," shesaid.

China will be the world's biggestauto market for the foreseeable fu-ture as the country strengthens its po-sition, said Tony Faria, author of thereport.

"Saleswise, nobody is going totouch (China), period," Faria wasquoted as saying by AutomotiveNews, a Detroit-based weekly news-paper that reports on the automotiveindustry.

"Productionwise, the same is truegiven the current level of capacity tobuild in China - plus, new capacity isstill piling in."

Almost all of the world's majorautomotive assemblers made invest-ment announcements in China, ac-cording to the report.

Ford made two new-capacityannouncements in China in 2012,and the 500,000 additional units ofcapacity a year will cost $1.36 billion.

Honda is considering a newplant in Wuhan of Hubei provincewith its joint venture partner,Dongfeng Motor Group. And Nissan

made three new capacity an-nouncements in 2012 with a totalvalue of $1.46 billion.

South Korea's Kia Motors an-nounced a new joint venture assem-bly plant for Jiangsu province withDongfeng Motor Corp and JiangsuYueda Investment Co.

The plant is expected to open in2014 with a capacity of 300,000 vehi-cles.

Daimler AG made two new an-nouncements of two plants near Bei-jing.

Jaguar Land Rover, owned byTata Motors Ltd of India, announceda $1 billion joint venture plant withChery Automobile Co for a new plantin Changshu of Jiangsu province. Theplant will have an assembly capacityof 130,000 units and will assembleboth Jaguar and Land Rover vehi-cles.

However, some analysts ex-pressed concern about the huge in-flux of investment. China's vehicleinventory alert index reached 57.17percent in February, an increase of11.91 percent month-on-month, ac-cording to figures from China Auto-mobile Dealers Association.

23

Quality key to overseaspush, says JAC Chairman

Automobile

24

CED Monitoring

BEIJING-The chairman of JianghuaiAutomobile Co Ltd has vowed tocontinue to raise the quality of itsmodels as it targets more overseasbuyers.

An Jin, a deputy to the Na-tional People's Congress, said Chi-nese vehicle companies can nolonger compete on low prices and

labor costs, and his company ismaking efforts to ensure qualitystandards are raised, while pricesstill remain affordable.

Jianghuai's products are soldin more than 100 countries and re-gions in the world.

Three models of its light truckHFC range were all awarded "ex-port inspection-free" certification inDecember last year by the State

General Administration of QualitySupervision, Inspection and Quar-antine, the country's qualitywatchdog.

An said the company sellsabout 450,000 vehicles overseasannually, which account for 15percent of its entire revenue.

JAC aims to achieve a salestarget of 1.6 million units with rev-enue of 100 billion Yuan ($16 bil-lion) by the end of 2015, and Ansaid he hopes exports will accountfor one-quarter of the entire rev-enue.

JAC has the largest marketshare in Brazil and Chile. The com-pany exported 500 light trucks toBrazil in October, marking China'ssingle largest vehicle contract tothe South American nation.

The company is also the sec-ond-largest commercial vehiclebrand in Egypt, with more than3,000 vehicles on its roads.

JAC first entered Africa whenit delivered a batch of light-dutytrucks to Algeria in 2001.

Since then, it has sold vehiclesto more than 30 countries and re-gions, including Egypt, Morocco,South Africa and Ghana. Its prod-uct portfolio in Africa has alsobeen expanded to cover light,mid-sized and heavy-duty trucks aswell as passenger vehicles.

In addition to improving qual-ity, An said the company has beensetting up more service outletsoverseas.

"We will not rush to export toany country without a mainte-nance network in the country," Ansaid. According to company state-ments, the focus of its customerservice is solving problems rapidlyand effectively.

In Angola, for instance, someusers once complained about theloss of power in their heavy-dutytrucks.

JAC engineers discoveredthat the problem stemmed from alack of regular maintenance. Theythen offered maintenance serv-ices on site and trained drivers onhow to take care of the vehicles.

25

Automobile

Willing to

pay a premium

26

CED Monitoring

SHANGHAI-China is expected tobecome the world's largest pre-mium car market, overtaking theUnited States on its way to sellingmore than 2.3 million high-end carsby 2016, according to a McKinsey& Co report.

According to a recent report,the market for premium cars inChina grew 36 percent a year overthe past decade. During the sameperiod, the Chinese passenger ve-hicle market expanded 26 percentannually.

Sales of premium cars in Chinareached 1.25 million vehicles lastyear, making it the world's secondbiggest market after the US.

With Chinese consumers pur-chasing more high-end cars, manyautomakers from around theworld, especially from Europe, areexpanding their premium car mar-kets to China.

Europe has especially been hithard by the global economic re-cession. Only 12 millions cars were

sold in Europe last year, the lowestsince 1995. The rate of cars sold inEurope has been dropping annu-ally by 8.2 percent.

"Our main focus will be to ex-pand exports to booming marketssuch as China, which currently hasa high demand for high-end cars,"James Muir, CEO of Seat, a Span-ish automobile manufacturer saidat the 83th Geneva Auto Show.

Seat plans to introduce anddevelop its Leon series in China, aline of small family cars, with cul-ture-specific designs to impress theChinese market.

In its report, McKinsey high-lighted 23 brands as premium.Among them are Acura, AstonMartin, Audi, Bentley and BMW. Itsreport predicts China's premiumcar market will grow 12 percent ayear and sell 3 million premiumcars a year by 2020.

One-quarter of the 1,200 pre-mium car buyers in China whotook part in McKinsey's survey saysthey are willing to spend more ona car because they were confi-

dent in their careers and businessprospects.

"The number of premium carbuyers in China who are optimisticabout their future is increasing rap-idly," says Sha Sha, a partner atMcKinsey's division in Shanghaiand co-author of the report.

Eighty percent of China's pre-mium car owners are considered"affluent", according to the report.They are defined as those with an-nual disposable household incomeof more than 200,000 Yuan($32,100; 24,680 Euros).

By 2020, there will be 23 millionaffluent urban households. Thenumber of affluent urban familieswill grow at a rate of 16 percent inChina and make up 7 percent ofthe country's population-roughlyequal to the total number ofhouseholds in Britain today-by thattime.

Thirty percent of the respon-dents say how a car reflected theirsocial status was the main reasonto upgrade to a premium car,while 27 percent cited "self-indul-gence".

27

Most young buyers of branded carslike me are keen to get the best possi-ble performance, and the good looksand modern style of the vehicles arealso very important.

“ “

Automobile

28

There was also a new wrinkleto the trend of buying high-endcars. The report says a new entry-level group of potential premiumcar consumers, called the "newmainstream", has emerged.

The new demographic con-sists of households with annual dis-posable income of 100,000 Yuanto 200,000 Yuan.

"The new mainstream house-holds care more about style,brand and outward appearancethan more affluent consumers,who tend to value technology andvehicle performance," Sha says.

Zheng Shengtao, chairman ofthe printing and packaging com-pany Zhejiang Sunlead Group Ltdin Wenzhou, owns a stable of luxurycars, including a Rolls-Royce and aBentley.

"Owning a car like Rolls-Royceis a symbol of wealth and reputa-tion for most businessmen," saysZheng, who added that his cars

are as important as his clothes andaccessories.

Yu Kan, 27, who works in hisfamily business in Shanghai, sayshe bought his BMW two years agobecause of the engine's power.

"Most young buyers ofbranded cars like me are keen toget the best possible performance,and the good looks and modernstyle of the vehicles are also veryimportant," Yu says.

The report says 300 citieswould have consumers with suffi-cient household incomes to buypremium cars by 2020, up fromabout 100 cities today.

To meet the growing demandfor quality brands, European automanufacturers are introducingpersonalized products to the pre-mium car market in China.

"The market for Citroen out-side Europe is expected to be 50percent of the global market, witha larger growth of consumers in

developing countries, such asChina and Brazil, by 2015, " saidPhilippe Varin, PSA Peugeot Cit-roen CEO, at the Geneva AutoShow.

Citroen plans to sell carsmade to meet the demands ofChinese consumers. Varin addedthat new factories in China wouldbe opened to expand productionlines under a cooperation dealwith two Chinese partners,Chang'an Automobile Group andDongfeng Motor Group.

Paul Gao, another partner atMcKinsey's division in Shanghaiand co-author of the report, saysthat "as consumer preferencescontinue to diversify, premium au-tomakers may need to further lo-calize vehicle specifications, andeven nurture indigenous Chinesepremium brands with their jointventure partners to offer China-specific car models at appropriateprices".

29

Automobile

China's Auto sales post strong

14.7% rise

30

CED Monitoring

SHANGHAI-China's com-bined January and Febru-ary auto sales grew bydouble digits despite ablip caused by the LunarNew Year holiday lastmonth.

Deliveries of passen-ger cars and commercialvehicles rose 14.7 percentyear on year in the pasttwo months to 3.39 millionunits - a huge turnaroundfrom the sales decline ofthe same period of lastyear, the China Associa-tion of Automobile Manu-facturers said yesterday.

Passenger car sales,which include cars, multi-purpose vehicles andsport-utility vehicles,surged 19.5 percent to2.84 million units in Janu-ary and February, postingthe biggest increase since2010.

The market's strongperformance so far waslargely based on the salesspurt in January as Febru-ary posted a dramaticdecline during the week-long holiday when mostshowrooms nationwidewere shut.

China's total vehiclesales fell 13.6 percent inFebruary from a year ear-lier while those for passen-ger cars shed 8.34percent.

Meanwhile, sales ofJapanese brands fell 17.1percent year on year inthe past two months astensions between Chinaand Japan over theDiaoyu Islands intensifiedat the start of the year.

A government fore-cast in January said totalvehicle sales should rise to20.8 million this year, upfrom 19.3 million last year.

31

Construction

Sansha to have

satellite TV, dailynewspaper

32

CED Monitoring

SANSHA-The Hainan governmentsaid it will establish the South ChinaSea Satellite TV and Sansha Dailynewspaper this year.

According to reports Monday,the South China Sea Satellite TV willmeet the needs of residents andsoldiers in Sansha, covering eco-nomic development and marineenvironment protection issues in

the province.The Sansha Daily will be jointly

established by Sansha to report onthe city's construction, economicdevelopment and environmentalprotection progress,chinaxwcb.com, a website underthe China Press and PublishingMedia Group, reported on Mon-day.

Established in July, Sansha isChina’s youngest city and is seeing

rapid development with a series ofinfrastructure projects, such asroads and garbage treatment sta-tions.

A China Marine Surveillancedetachment was stationed in thecity on March 9 to carry out routinepatrols in the waters off Sansha.

The city administers Xisha,Zhongsha and Nansha islands andsurrounding waters in the SouthChina Sea.

33

Construction

Railway line leads new trading dawn

34

CED Monitoring

BEIJING-Pomegranate grower MaShan was pleased to see the trainarriving at Mengzi, the capital cityof the Honghe Hani and Yi au-tonomous prefecture in southernYunnan province.

On Feb 23, a train pulled outof Kunming, passed through thecity of Yuxi and proceeded to thesouthern Yunnan city for the firsttime. Its successful arrival markedthe launch of the new Yuxi-MengziRailway.

In the near future, the train isexpected to travel south fromMengzi, pass through nearby estu-ary ports and on to the PacificOcean, completing its historic jour-ney in the island nation of Singa-pore. As such it will form the maintransportation artery betweenChina and the Association ofSoutheast Asian Nations, a geo-political and economic organiza-tion of 10 countries located inSoutheast Asia, comprising Indone-sia, Malaysia, the Philippines, Sin-gapore, Thailand, Brunei,Myanmar, Cambodia, Laos andVietnam.

The operation of the Yuxi-Mengzi Railway "shortens the routeby more than two hours from mytown to the provincial capital ofKunming", Ma said.

"It will not only save me timebut also cost less in shipping, whichis more important for the fruit. Weexpect our income to increase thisyear," he said.

The Yuxi-Mengzi Railway,which opened at the end of lastmonth, was considered a signifi-cant move by the Yunnan provin-cial government to facilitate localindustries such as fruit-growing. Aspart of a bigger picture, the rail-way constitutes what will becomean indispensable part of the east-ern line of Pan-Asia Railways, a cru-cial connection betweenSouthwest China and theeconomies of Southeast Asia.

At the fifth ASEAN summit inDecember 1995, former Malaysianprime minister Mahathir Mohamadproposed building a Pan-Asia Rail-

way through the Malay Peninsula,visiting Singapore, Malaysia, Thai-land, Vietnam, Myanmar, Cambo-dia and eventually reachingKunming in China. The initiative im-mediately received recognitionfrom the summit attendees andthe Chinese government. In Sep-tember 2006, the ASEAN countriesreached a consensus to speed upthe construction of the Pan-AsiaRailway that will be completed in2015.

The plan was to have threelines - in the east, the middle andthe west. The east line would oper-ate between Kunming, KualaLumpur in Malaysia, Bangkok inThailand, Phnom Penh in Cambo-dia, Ho Chi Minh City and Hanoi inVietnam and Singapore.

When the last part in China iscompleted, between Mengzi andHekou County in Honghe, fastertrains will head south all the way toSingapore, through the biggestfree-trade zone in the world. Ex-perts say the Yuxi-Mengzi railwaywill help strengthen Yunnan's statusas a frontier region open to theASEAN economies.

As early as April 12, 1910, oneloud but lingering whistle piercedthe air over Kunming, declaringthe operation of the Vietnam Rail-way. Export cargos from Yunnanwere carried on the trains to as faras Hai Phong in Vietnam and thenshipped to France.

The prosperous export tradebrought Kunming the first customsand the first post office in Yunnan.The provincial capital then as-cended to become one of themost influential cities in China.However, people had to enduretrains that "were slower than cars".Things changed fundamentally inFebruary this year when a freshlong beep resounded throughHonghe declaring the official op-eration of the modern Yuxi-MengziRailway.

Now, as the railway starts op-erations and the Mengzi-Hekou linkis under construction, Yunnan willhave another historic opportunityto deepen exchanges with itsneighbors.

35

Construction

Liu Baisheng, general directorof the Kunming Railway Bureau,said locals would be the benefici-aries from this new railway.

Liu, who attended the Na-tional People's Congress session asa deputy in Beijing last week, toldChina Daily that the Yuxi-Mengzirailway starts from Yuxi, traversingHonghe Hani and Yi autonomousprefecture to cover an area of48,200 square kilometers with apopulation of more than 6 million.The area is the major habitation ofethnic groups such as the Hani, Yiand Dai.

"With Kunming-Yuxi, Yuxi-Mengzi railway lines in operation,we have another option for trans-porting huge cargos long dis-tances across Yunnan province.The new line will ensure fasterspeed and safer trips that sharplyreduce the cost of transportationand increase profits," an entrepre-neur in Honghe, who preferred toremain anonymous, said excitedly.

The tracks, mostly bridges andtunnels, were regarded as a soar-ing steel dragon by residents alongthe railway, who are optimisticabout selling more local agricul-tural and sideline products andconfident of developing thetourism industry.

The Yuxi-Mengzi Railway goesthrough the central YunnanPlateau, with its mountains andcanyons and some of the most in-tense areas of crustal tectonicmovement. Started in September2005, the new line took seven yearsto build, said Liu from the KunmingRailway Bureau "The same lengthof 141 km would only take two orthree years in less rugged areas,"he said.

Because of the special geo-graphical conditions, Yuxi-Mengziline builders were confronted withmany challenges. More than halfof the railway, 77 km, was built onbridges and tunnels. The Xiushantunnel, 10,302 meters in length, isthe longest railway tunnel in Yun-nan province and runs throughmultiple faults and caves. It is fa-mous for complex geological con-

ditions and frequent changes insurrounding rock types.

The tunnel experienced atleast 150,000 cubic meters ofwater leakage during constructionevery day. The volume increasedto 230,000 cubic meters in the rainyseason. "The tunnel builders had toendure suffocating humidity, hotdays in summer and dust from thedigging. Sometimes the collapseof sandstone and mudslides alsothreatened their lives," said Liu.

After seven years of hardwork, they finally completed thisSouthern Yunnan "mountain road",marking an historic achievement.

Guo Huiming, head of thesouthern Yunnan railway construc-tion project, was filled with emo-tion. "The completion of the railwaywas not easy," he remarked in avery understated fashion.

Guo said the engineering ge-ology of the entire line was ex-tremely complex, with manymountains and deep valleys. "Wehad poor construction conditionsand the work was difficult. Therewere 173 intersections. The amountof stone ballast totaled 447,626cubic meters. And there were thebridges and tunnels."

The Yuxi-Mengzi line, accord-ing to the former ministry of rail-ways, was a high-risk projectbecause it involved, among manygeological challenges, karst high-pressure, water-rich complex geol-ogy, tectonic movements,rock-crushing, lots of groundwaterin caves, flooding and suddenlandslides.

The former ministry will be in-corporated into the Ministry ofTransport according to the justconcluded session of the NationalPeople's Congress.

The former ministry and Yun-nan provincial government at-tached great importance to therailway. "They came to the con-struction site several times to con-duct research and to organizemeetings to study and deploytechnical solutions during con-struction," Guo said. "So we ulti-mately completed the Yuxi-Mengzi

line thanks to their support."On the map of Yunnan, the

Yuxi-Mengzi Railway directly con-nects Honghe with Kunming, alongwith the existing Kunming-Yuxi Rail-way. Those areas are rich in min-eral, biological, cultural andtourism resources. The most imme-diate effect of the railway's opera-tion is to further enhanceKunming-Yuxi rail transport capa-bilities. "More importantly, it runsthrough several cities in centraland southern Yunnan so eco-nomic factors can flow into eachother more smoothly," said DuanGang, president of the Yunnan In-stitute of Economic Research.

According to Liu from the Kun-ming Railway Bureau, Yunnan willbecome a big economic center,of which cores will be the centralYunnan Industrial District, the Kun-ming-Yuxi green industrial econ-omy and Kunming-Yuxi leisuretourism economy. There will be twowings — the four cities of Kunming,Qujing, Yuxi and Chuxiong, withKunming at the center.

The central Yunnan economiccircle will be the economic, politi-cal, cultural and transportationcenter. The area will function asthe core driving force to promotethe integration of the province'seconomic resources and factors ofproduction, Duan said.

Efforts have been made topromote the construction of cen-tral Yunnan Industrial District, focus-ing on high-end vehicle andequipment manufacturing, elec-tronic information, biology, newmaterials, textile appliances and amodern services industry clusterarea, according to the provincialgovernment.

The Yuxi-Mengzi Railway andthe Kunming-Bangkok Highway,along with the construction of thePan-Asia Railway, will link thesouthern Yunnan economic circlewith cities including Gejiu, Kaiyuan,Mengzi and Jianshui with Mohanand other important ports.

Rich natural and human re-sources in the area give it a hugeadvantage on top of the new

36

communication links. The southernYunnan economic circle is alsopart of the Kun-River EconomicCorridor and there are also thecentral Yunnan economic con-nections to the Indian and PacificOceans east line and midline arter-ies.

The manufacturing capacityformed by the central Yunnaneconomic circle will steadily go tothe southern Yunnan economiccircle, targeted at the ASEAN mar-ket and other major importersaround the world. The Yuxi-MengziRailway will also take on northwardtransport tasks from the southernYunnan economic circle and alsoASEAN regional resources in orderto meet the central Yunnan eco-nomic circle requirement for indus-trial development.

Gejiu city contributes more

than 90 percent of the country'soutput of refined tin. Xiaolongtancoal mine is Yunnan's largest open-cut brown coal mine, located inKaiyuan.

In addition, the southern Yun-nan region is also rich in iron, lead,gold and other mineral resources.These are indispensable for the de-velopment of the central Yunnaneconomic circle.

The Pan-Asia Railway will bethe third Asia-Europe continentalbridge linking China and ASEANeconomies. As an important partof the east line of the Pan-Asia Rail-way, the Yuxi-Mengzi Railway willcarry even more far-reaching sig-nificance.

In 2011, China's State Councilannounced its support to Yunnanprovince to accelerate the con-struction of an important frontier

for Southwest China to open up,creating a historic opportunity forYunnan.

The Yuxi-Mengzi Railway willact as a highly significant link be-tween China and Southeast Asianmarkets, further strengthening co-operation and exchanges be-tween the countries, especiallyVietnam, said Duan.

"For Yunnan, the railway hasthe positive significance of improv-ing the province's railway networklayout as well as the state of therailway business, promoting safeproduction and optimizing the rail-way industry structure. In the fu-ture, Yunnan will rely on thePan-Asia Railway East Line tospeed up the pace of opening-upand economic development andaccelerate its integration into theglobal market," Liu Baisheng said.

37

Construction

38

Infrastructureconstructionunder way in

Sansha

39

Construction

CED Monitoring

SANSHA-Located on Yongxing Is-land in the South China Sea, San-sha City of Hainan Provinceadministers the three island groupsof Xisha, Zhongsha and Nanshaand their surrounding waters.

Officially set up last July, thecity has been working on the infra-structure construction since then,especially in the field of transporta-tion.

Mayor Xiao Jie explains."We've increased the number

of trip of sealift vessels. For exam-ple, the Xiongsha No.3. Before itwas one or two trips per month be-tween the mainland and YongxingIsland and now we can guaranteeone trip per week. The improvedtransportation has raised the sup-ply capacity of the Xisha Islands.And now we are building a biggersealift vessel, Sansha No.1. It is ex-pected to be put into use in 2014."

Xiao Jie says other basic infra-structure to improve people's dailylives, such as desalination plants,solar power facilities and housesfor public use, have also been builton Yongxing Island.

Hainan Governor JiangDingzhi points out that Sansha canhelp the province develop its ma-rine industry.

"The establishment of Sanshacity is key to the development ofHainan Province. We'll use the op-portunity to further develop themarine industry. For example, tobuild more trawlers with larger ton-nages to continue our work in thefield of marine reserve. And prob-ably, we'll engage in oil and gasexploitation in the area."

Thanks to its geographical lo-cation, Sansha at the southern-most point of China is expected toplay a critical role in the explo-ration of the country's South ChinaSea.

NPC deputy and economistXiang Xiaomei is an expert in themarine industry. In her opinion, theeconomic value of oceanic terri-tory should be well utilized. AndSansha provides a support base for

40

the country to explore the deepsea.

"Take a deep-sea fishery as anexample. If you sail far in the deepsea and there is no such supportbase, then you need a larger shipto carry all the fishery equipmentand living supplies, which costs alot of money. Well, Sansha nowplays the role of the logistic supplybase between the mainland andthe deep sea in the exploitation. It

is the extension of the land."Xiang also says that with San-

sha as a base in the deep sea,China will learn more hydrologicalinformation about the South ChinaSea. It will also be another impetusfor the already flourishing tourismindustry in Hainan.

Mayor Xiao Jie says tourism willbe the signature industry of San-sha. The first travel program it ex-pects to launch this year is a cruise

tour of the Xisha area."Now the preparation work is

going smoothly. We've finished theconstruction work on the cruiseship. We've mapped out the shiproute and the tourist attractionsalong the tour. Safety controls arealso being discussed. It won't betoo long before it opens to thepublic."

Xiao says the cruise tour mightbe a two- or three-day route.

41

Construction

Investment in C

hina's Railw

ays rise

s

42

CED Monitoring

BEIJING-Fixed asset investment inChina's railways rose 25.7 percent year-on-year to 37.63 billion Yuan ($6 billion)in the first two months of the year, therailways authority has said Thursday.

The investment is a part of the min-istry's 650 billion Yuan fixed-asset invest-ment package this year, slightly higherthan last year's 631 billion Yuan.

But compared with the 70.9 per-cent rise in January, the 25.7 percentgrowth in the first two months sug-gested a substantial dip in February's in-vestment.

During the same period, infrastruc-ture investment, the largest part offixed-asset investment, rose 20.9 per-cent to 25.14 billion Yuan, slowing fromthe 62.3 percent growth in January.

Li Daxiao, director of Yingda Secu-rities Research, said fluctuation be-tween months is normal.

Zhao Jian, a professor at School ofEconomics and Management underBeijing Jiaotong University, said thoughthe first two months' investment only ac-counts for 5.79 percent of the annualtarget, investment could accelerate inthe coming months.

Whether the annual target is metwill be decided by the central govern-ment's attitude, which is shadowed withsome uncertainty after the announce-ment that the ministry will be disman-tled and the commercial part will runindependently, Zhao said.

In a bid to reduce bureaucracy,the latest administrative reform un-veiled at the ongoing National People'sCongress said the original Ministry ofRailways will split into two entities, withthe policymaking part taken over byMinistry of Transport, and the commer-cial operation taken over by the newlyestablished China Railway Corp.

In 2011, the railway constructionboom unexpectedly slowed after for-mer minister Liu Zhijun was investigatedfor corruption and a deadly high-speedtrain crash occurred in July. Since thethird quarter of 2012, railway investmenthas gained momentum again as thenation has tried to stimulate the decel-erated economic growth.

Records show the ministry in-creased its planned investment amountthree times in the middle of 2012. As aresult, fixed-asset investment last yearhit 631 billion Yuan, compared with

586.3 billion Yuan in 2011.In line with the investment expan-

sion, the rail ministry also increased itsbond issuing size.

Last year, the ministry sold a record164 billion Yuan in bonds, helping it set-tle unpaid bills.

China's rail network is set to reach120,000 kilometers under the five-yearplan ending in 2015.

By the end of 2012, China had98,000 km of rail network.

This means that a total of 22,000 kmof new rail will be built during the 2013-2015 period. And investment in railwaysinfrastructure could reach 1.33 trillionYuan during the period, Shanghai Secu-rities Daily reported.

The split of the ministry is unlikely toaffect investment in railways and willhelp the industry better meet marketdemand, Railway Minister ShengGuangzu told reporters at the NPC thisweek.

"We view the reform positively. Weexpect it will be easier for China Rail-way Corp to restructure its assets anddebt as an incorporated companyrather than the Ministry of Railways, pro-viding increased flexibility to the fund-ing of railway projects," Barclays Plcanalysts led by Patrick Xu said in a noteto clients.

The previous speculation that theauthority would be merged with thetransportation ministry also helped todent the interest rate of the railwaybonds, which hit a seven-month low atend of February.

Li Daxiao said bonds issued by therailway ministry are very popular in themarket, which potentially could beeven expanded, though the 2.66 trillionYuan liability has put the ministry's debt-to-asset ratio at 61.81 percent at theend of September.

"China's bond market is bigenough. Financing is not a problem.The problem is if the ministry and thecentral government have enough will-ingness to scale up the investment," Lisaid. China's railway transportation ca-pacity, both in freight and passengers,is still lagging far behind the economy'sdemand, Li said.

Expanding its capacity wouldgreatly ease the tension between sup-ply and demand and reduce the costof logistics, as the cost of train freight ismerely one-third of that of the roadfreight, Li added.

43

Real Estate

Commercial propertysales spike in capitalCED Monitoring

BEIJING-Beijing's commercialproperty and office buildingsales surged 320.5 percent inthe first 10 days of March, asmore investors shifted theirfocus in response to the gov-ernment's new measures tocool down the residentialsector.

Real estate brokeragecompany Century 21st hassaid that 759 units of com-mercial properties were soldand registered online fromMarch 1 to 10, accounting for6.3 percent of all transactionsrecorded during the period.

The surge in commercial-property transactions fol-lowed the latest moves bythe State Council to controlthe property market.

It said on March 1 thathomeowners who sell theirhomes will be levied an in-come tax of 20 percent onthe profit they make on atransaction. Before the newrules, the income tax was 1 to2 percent of the sale price.

"It is obvious that invest-ment-oriented purchases ofresidential housing will be fur-ther restrained, and the gov-ernment intends to weakenthe investment characteris-tics of home buying," saidKou Hailong, general man-ager of Century 21st Beijing.

"So it is natural that more

investors are turning theireyes to commercial proper-ties when other investmentchannels are limited," headded.

The commercial sectorof Jin Mao Palace, a projectclose to Beijing's CBD area, isscheduled to put up 154 unitsfor sale around the end ofMarch at an average priceof 49,800 Yuan ($8,008) persquare meters.

However, there are somany potential buyers thatthe registration for purchaseswas closed within one day.

"Even for those whohave registered their namesto buy the units, they have todraw lots to decide who canget the unit they want," amanager at the sales depart-ment said.

Commercial projectsdue to be launched on themarket in the followingmonths are expected to raisetheir prices.

In fact, following thegovernment's stricter controlson residential property in2010 and 2011, many Chi-nese investors have been ex-ploring commercial propertyto continue to benefit fromrising land values.

In Beijing, the marketwhere restrictions on residen-tial real estate purchaseswere most closely regulated,commercial real estate grew

23 percent in value in 2012,according to a report by realestate advisory companyKnight Frank.

Knight Frank expectsthese cities, especially Beijing,to continue to improve invalue in the near future.

Knight Frank's researchalso shows high potential forgrowth in lower-tier cities asmany developments arelaunched in these markets.

In the wake of infrastruc-ture and economic pushesundertaken by local govern-ments, many lower-tier citiesare developing potentially lu-crative commercial propertyprojects.

More mixed-use devel-opments are also expectedto come onto the market inthe near term.

"Beijing's growth in thissector has been phenome-nal, and we expect this topersist as long as restrictionson residential real estate con-tinue," said Nick Cao, KnightFrank China manager, headof investments and capitalmarkets.

"As for lower-tier cities, re-tail is a good option to con-sider as demand from localconsumers is quite strongwhile some cities will focus onmanufacturing and the in-dustrial sector, which will pushdown the value of office andhotel space."

44

45

Real Estate

Pre-owned house sales continue to soar

46

CED Monitoring

BEIJING-Pre-owned home sales al-most tripled in Beijing last week, fol-lowing the latest moves by theState Council to control the prop-erty market.

Figures released by the BeijingMunicipal Commission of Housingand Urban-Rural Developmentshowed a total of 9,400 apart-ments were sold and signed onlinelast week, a 279.5 percent rise onthe same period last year.

The central government is-sued rules to further tighten con-trols on the property market onMarch 1. It said that homeownerswho sell their homes will be leviedan income tax as high as 20 per-cent on the profit they make on atransaction. Prior to the new rules,the income tax levied was 1 to 2percent of the sale price.

Experts said the new ruleshave sparked frenzied activity inthe pre-owned market, as bothbuyers and sellers worry about thesoaring transaction costs as a re-sult.

"First-home purchasers, as wellas those buyers looking to improvetheir living conditions are the twomajor types affected by the newpolicies," said Hu Jinghui, vice-pres-ident of 5i5j, a major property bro-kerage firm based in the capitalcity.

A survey by SouFun HoldingsLtd, a leading real estate Internetportal, showed that about one-third of potential homebuyers hadchanged their home-purchaseplans as a result of the tougherpolicies.

Chen Li, a company execu-tive living in Beijing's Tiantongyuanarea, said: "I did not plan to sell myapartment before the launch ofthe 20 percent taxation policy.

"But considering I may have topay around 200,000 Yuan ($32,100)tax once the policy is in place, I'dbetter make a deal right now," hesaid.

According to the SouFun sur-vey, homebuyers in first-tier citiessuch as Beijing and Shanghai wereconcerned about the new poli-cies, with 28.81 percent of respon-dents saying they will quicken their

buying process as a result. In sec-ond-tier cities, the figure was 10.25percent.

In Beijing, 80 percent of poten-tial buyers said they planned tosnap up an apartment in 2013,with first-home buyers expected todominate the market.

More than 40 percent ofShanghai respondents said theywould like to complete their trans-action sometime between Apriland June, while 23 percent saidthey aimed to buy a property be-fore the end of this month.

More than half of all potentialhomebuyers said they believedthat prices will pick up further, ofwhich 11 percent expected themto soar.

Though most industry analystsexpect the new policies to benefitthe new-home market, somelarge-scale property developerssuggested they have no plans tochange their pricing strategies asa result.

"We still need time to see howthe cabinet's policies change themarket," said a manager at Green-town China Ltd, who declined tobe named.

"So far, we don't have anyplans to increase the prices of ourprojects, but we will not cut priceseither, given the market recovery."

China's real estate investment

sector has strengthened amid anoverall property recovery.

The the first two months of2013, property sales growth in-creased from 11 percent year-on-year in the fourth quarter of 2012 toabout 50 percent year-on-year,according to recent statistics bythe investment arm of Royal Bankof Scotland PLC.

China sales at Longfor, aHong Kong-listed property devel-oper, for instance, reached 6.03billion Yuan in the first two monthsof this year, up 82.2 percent year-on-year.

A marketing manager atSunac China Holdings, also a HongKong-listed property developer,said its pricing strategy had notchanged, and the pace of releas-ing units to the market would re-main as before.

Louis Kuijs, an economist withRBS, said: "We think the strength ofproperty sales may not last, espe-cially in light of the recent calls bythe State Council to reinforce tightproperty policies.

"Nonetheless, we expect thatwith enough underlying demandfor property, given robust incomegrowth and urbanization, thestrong financial expansion in thepast six months should help supportproperty construction in 2013."

47

Agriculture

Consequencesof long droughtdevastating

48

CED Monitoring

BEIJING-Every day, Zhu Chun-quan walks 16 kilometersthrough the mountains ofSouthwest China to fetchwater for his family.

His village, Ziniu, in Yun-nan province, has not seen adrop of rain since February.

"No one knows when thedrought will end," the 48-year-old farmer said, as helooked at the dry soil.

Apart from the sale ofdry apricots from his 1hectare orchard, he hasmade no money this year.Some of his neighbors havegone to Kunming, the provin-cial capital, to find tempo-rary work.

The drought that hascrippled southwestern re-gions since last year hasshown little sign of abating,affecting the water suppliesof millions of people.

According to the ChinaMeteorological Administra-tion, no rainfall is expected inparched areas, includingYunnan and Sichuanprovinces, for at least ninedays.

Li Xiaoquan, a meteorol-ogist for the administration,said the drought may easewhen the rainy season beginsin May.

This is the fourth year

Yunnan has suffered a severedrought, said Kong Chuizhu,vice-chairman of the stand-ing committee of the Yunnanpeople’s congress, and theproblem is expected to con-tinue.

Climate models showrainfall patterns arechanging, and the Na-tional Climate Center pre-dicts a possible decreasein precipitation in thesouth over the next 20years.

Although farmer Zhu saidhe does not believe "rainyYunnan" will one day be dry,he has still sold all his sheepand cows since the severedrought of 2010.

As of March 7, 2.3 millionhectares of land in Yunnanand Sichuan had been af-fected by the drought, withmore than 1.5 million peopleand 880,000 animals facingwater shortages.

About 417,800 people inGuizhou province have seentemporary shortfalls in drink-ing water, Xinhua NewsAgency reported on Mon-day. It added that authoritiesare taking measures to guar-antee supplies.

In drought-hit Neijiang inSichuan, the city weather bu-reau engaged in cloud seed-ing on Monday to inducerain.