06/20/2007  Source: China View

Morgan Stanley upgraded its forecasts for China’s 2007 GDP growth from 9.3 percent to 10.5 percent and consumer price index (CPI) inflation from 2.5 percent to 2.9 percent.

A Morgan Stanley research paper that reached here Wednesday said the forecasts readjustment was made on China’s stronger-than-expected developments in the first five months of the year and a more favorable external environment going forward. The research also raised the 2008 GDP forecasts from 8.5 percent to 10 percent, stressing this is despite the upcoming round of macroeconomic tightening.The paper said the latest data through May indicate very buoyant activity in almost every aspect of the economy, including fixed-asset investment, retail sales, external trade, and industrial production. “The Chinese authorities appear poised to initiate a new round of macroeconomic tightening to guard against the risk of a generalized economic overheating,” the paper said.

China recorded a 10.7 percent GDP growth in 2006 and an 11.1 percent growth for the first quarter of this year.

Souce:Xinhua

China’s state foreign exchange investment company, which has yet to be fully established, has agreed to invest three billion U.S. dollars in the U.S. private equity firm the Blackstone Group, according to a joint news release.

Wang Jianxi, Chairman of the China Jianyin Investment Limited (China Jianyin), told Xinhua Monday that under an agreement signed on Sunday, the new state forex investment company will buy a non-voting stake worth less than 10 percent of Blackstone.

China Jianyin, a state-owned investment company, will be merged with the new state forex investment company.

According to the news release, the deal will be closed concurrently with Blackstone’s four billion U.S. dollars initial public offering (IPO) planned to be launched in mid June.

The Chinese investment company will buy the shares at 95.5 percent of the IPO price and hold them for at least four years.

“We are very pleased to make the state investment company’s very first investment in such a well-respected firm as Blackstone,” said Lou Jiwei, who is in charge of setting up the new investment company.

“We welcome the state investment company to be our stake holder and feel proud of being part of the very important transaction,” said Stephen A. Schwarzman, Chairman and CEO of Blackstone.

The deal is “purely commercial” and do not need the U.S. government approval as the stake is less than 10 percent, said Schwarzman.

The Chinese investment company will not affect the structure ofBlackstone as its stake is in non-voting shares, said Wang, adding the deal is a market-oriented decision made by the investment company with the goal of seeking higher earnings with acceptable risks.

As one of the core investors, the state forex investment company expects to gain profits from the private equity firm’s investment and rise in share prices, Wang said.

He noted the forex investment company, which is expected to go into operation this year, may also entrust its forex capital to other world leading asset management firms.

Chinese Premier Wen Jiabao said at a press conference following the closure of the annual session of China’s top legislature in March that the country will establish a foreign exchange investment company that will not be affiliated with any government department or institution.

The company, which will be subject to supervision, is charged with operating investments in line with state laws to preserve and increase the value of foreign exchange reserves, said Wen.

By the end of March, China’s foreign exchange reserves had jumped 37.36 percent from a year earlier to exceed 1.2 trillion U.S. dollars, which are mainly invested in low-yielding dollar bonds.

Source: China Daily

China’s foreign direct investment (FDI) increased over 10 percent year-on-year in the first four months of 2007 despite concerns that higher corporate income tax rates might affect the inflow. China drew $20.4 billion in FDI from January to April, up 10.2 percent from a year earlier, according to Ministry of Commerce spokesman Wang Xinpei. Foreign investment in the service sector is expected to maintain robust growth while investment in manufacturing is likely to decrease, said Shen Danyang, a researcher with the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce. “With five years (the grace period) elapsing since China entered the World Trade Organization, the service industry will be further opened up to foreign investors. New FDI will largely concentrate on sectors such as transportation, computer services, distribution, tourism, architecture and financial services,” he said. The FDI inflow grew rapidly till 2005, but has now entered a new phase of steady rises, Shen said. But the inflow, he maintained, will remain high this year. He said some drop in FDI is not bad news because the investment structure will be optimized in the process. Since late last year, there have been rumors of the average corporate income tax going up for foreign companies to 25 percent from 15 – a measure finally passed by the National People’s Congress this year. China is now encouraging high value-added manufacturing sectors and service industries while turning down foreign investments in high-pollution and low-efficiency ventures. The government is also encouraging foreign investments in western China. In April alone, actual FDI reached $4.47 billion, 5.5 percent more than in the previous year. The ministry approved 12,349 foreign-invested enterprises in the past four months, down 2.29 percent from the previous year. It did not disclose the amount of contracted investment of the FDI agreements, as opposed to the realized ones. For the whole of 2006, China drew a record $63 billion in non-financial FDI, up from $60.3 billion in 2005 and $60.6 billion in 2004. The FDI figure released by the ministry excludes investments in the financial sector.

Source: People Daily

China’s economic growth rate in 2006 was 10.7%. China has contributed more than any other country to global economic growth since 2000. It is expected that this year the growth rate will fall back to 9.9%, but it will still have a great impact on the Asia-Pacific Region, according to the UN Economic and Social Survey of Asia and the Pacific 2007.

George Pratt Shultz, an economist for the UN Economic and Social Commission in Asia and the Pacific said recently that China has a great influence on the world economy. If one calculates according to purchasing power, China’s economic growth accounts for one third of the world’s growth. However, China’s impact on the world economy is not only measurable in terms of trade and economic growth, but also the positive impact it has had on lowering global inflation.

Shultz said that since 1990, China’s foreign trade volume has increased 7 times over. Toy exports from China account for 90% of the world’s total, garments for 50%, and electronic products for 16%. Between 2001 and 2005, due to China’s inexpensive export products, inflation in the US decreased by 0.28 percentage points every year, inflation in the EU decreased by 0.37 percentage points, Singapore 0.70 and Japan 0.65. China has also bought a lot of US government bonds and this has contributed to low interest rates in the US. Between 2001 and 2005, the interest rate on 10-year-term US bonds decreased by 0.15 percentage points every year.

In Asia, trade with China has greatly promoted the prospects of exports for many Asian countries. China has a great deficit in trade with global energy producers and Asian neighbors. In 2007, trade between China and India is expected to reach US$20 billion, four times what it was in 2002.

The UN report finds that the development in the Asia Pacific region will continue to be strong in 2007. It is expected that the average growth rate in the Asia Pacific region will be 7.4%, lower than 2006. China, India and Japan will account for 60% of the total GDP in Asia and 45% of the total import, which will bring considerable opportunities to the region.

The report also estimates that China’s GDP growth rate will decrease to 9.9%, mainly due to the policies the Chinese government has taken. The report attributes the overheating of the economy to one of the risks of slow growth. It recommends that China take measures to cool the economy. The fast growth of credit loans is a key factor promoting investment growth. Fast investment growth likewise causes worry about the overheating of the economy. However, the report argued that overheating is only apparent in a few sectors such as the iron, steel and cement industries.

The slowdown of the US economy will have a direct impact on China’s export as China exports a lot to the US. The report suggests that China raise domestic consumption demand to compensate for export, take fiscal measures in education, medical care and pension to reduce people’s savings, or use consumer loans and insurance to encourage people to consume.

Oct. 16, 2006 – By Reuters

SHANGHAI (Reuters) – General Motors Corp., the world’s largest auto maker, said on Monday its vehicle sales in China rose 36.7 percent in the first nine months from a year earlier, and expected sales for all of 2006 to jump 30 percent.

GM sold 645,680 vehicles via its two local ventures in the January-September period, it said in a statement.

“For the year as a whole, GM and our joint ventures are on track to again outpace the market,” it said. “We anticipate annual sales growth of about 30 percent.”

GM’s January-September China sales growth outpaced the 28.7 percent reported by top European auto maker Volkswagen AG last week, its main competitor in China.

But it underperformed relatively later foreign comers in China. Japan’s Toyota Motor Corp. and Ford Motor Co. for instance, more than doubled their vehicle sales in China in the first nine months of this year, they said last week.

One of GM’s ventures, SAIC-GM-Wuling’s sales rose 39.3 percent year-on-year to 346,078 units. It sold nearly 215,000 units of its most popular vehicle, the Wuling Sunshine minivan.

This was a primary factor behind the Wuling brand’s growth of 38.7 percent and behind SAIC-GM-Wuling’s remaining China’s number one producer of mini-vehicles.

The other venture, Shanghai GM, saw sales increase 33.4 percent from a year earlier to 296,658 units in the first three quarters, it said. Sales of Buick and Chevrolet products — including the Spark mini-car — grew 27.8 percent and 51 percent year on year, respectively.

On top of these, Cadillac luxury brand sales also increased by 27 percent, it said, but gave no detailed figures.

Reuters 2006

Oct. 13, 2006 – By BLOOMBERG NEWS – The New York Times
I.B.M. Division Moves to China

I.B.M. has moved its global procurement headquarters to southern China from the suburbs of New York City to “capitalize on emerging market opportunities.”

I.B.M., based in Armonk, N.Y., spends 30 percent of its $40 billion annual procurement in Asia, the company said in a statement yesterday, confirming the move to Shenzhen that was first announced to suppliers in May. This is the first time that I.B.M., the world’s biggest computer services company, has moved the headquarters of one of its largest divisions to China.

Companies like I.B.M. and Microsoft are expanding in China to take advantage of lower costs and to gain market share in the world’s most populous nation.

The chief procurement officer for I.B.M., John Paterson, relocated from Somers, N.Y., and started work in Shenzhen yesterday, said Amanda Garland, an I.B.M. spokeswoman.

Demand for software and services across Asia is growing, and the company wants to develop new markets and suppliers to meet the demand, I.B.M. said.

Copyright 2006 The New York Times Company

Oct. 4, 2006 – Dan Harris – ChinaLawBlog.com

Alicia Beverly, Chief IP (intellectual property) strategist with IP Wealth, an Australian company, “based on the Gold Coast in Queensland, [that] specializes in identifying, protecting, managing and monitoring intellectual property assets for clients around Australia and overseas,” wrote a helpful article entitled “Protecting and Enforcing Your IP Rights In China.”

The article starts out with a couple of fairly typical China IP horror stories involving Australian companies. The first is of a manufacturer of pub dispensing equipment who went to China to investigate manufacturing a product there, only to discover it was already being produced “in the thousands, with the IP rights applied for by the rogue manufacturer.” The second is of another manufacturer who discovered his ex-manager had set up his own rival operation that sold the same product right down to the trademark.

Forgive me for yawning, but both of these stories more likely likely reflect carelessness on the part of the Australian company than any shortcomings in Chinese law. In the first story, the Australian company could have prevented the problem simply by filing its trademark in China. In the second story, the Australian company should have had its manager sign non-compete and trade secret agreements.

The article then goes through a strange history of improving Chinese IP protection and wrongfully predicts the 2008 Olympics in China “will have the most impact on routing out IP thieves and dramatically improving intellectual property enforcement.” Though I wish it were otherwise, I do not see the 2008 Olympics having anything more than the most marginal impact on improving Chinese IP enforcement.

But when it comes to explaining what to do to protect IP in China, Ms. Beverly’s recommendations are all right on. She prescribes the following:

* China is not a DYI [Do It Yourself] country – Get Professional Help.
* Contracts must also be translated into Chinese, cannot be common law centric [The United States, England, Canada, and Australia are all common law countries] and must cover everything because anything omitted is fair game.
* China is a “first to file” country with no recognition given to use or ownership by other parties. It is therefore essential that you file for your rights — trade marks, patents and designs — before you enter China. Failure to do so is an invitation to the manufacturer or distributor you are working with to do it themselves.
* Investigate whether your current trademark is useful for the Chinese market, conduct searches, and then protect several versions of your trade mark — the English version, the Chinese translation, and even a phonetic version of the English.
* Design products that are harder to imitate and commit to continuous innovation to keep one step ahead.
* Consider splitting up elements of your production in different locations.

Nothing new here, but all very solid advice. In discussing the need to have contracts in Chinese, because we are talking about protecting IP, I assume she is talking about contracts that aid in IP protection. On that score, it often makes sense to require those with whom you are dealing in China to sign a trade secret contract, requiring them not to divulge your trade secrets and/or non-compete agreement, whereby they agree not to compete with you within certain geographic and temporal limits.

If Ms. Beverly is advocating for companies always securing a China trademark in English, Chinese, and even “a phonetic version of the English,” I disagree. In many instances, just the English is enough and I am of the view that these determinations should be made on a case by case basis. Registering additional trademarks is not terribly expensive, yet it still makes economic sense to register only those that are necessary for the business.

For more on protecting your IP in China, check out “China’s Trademark Laws, Simple and Effective,” which talks about how Chinese trademarks are indeed good protection, and When Your IP Is In China …. and “Nike On China IP Protection: Just Do It With Green Tea,” both of which contain a number of additional good suggestions for protecting your intellectual property in China.