On October 24, 2008, attorney Robert J. Allan gave a speech on how investing in non-performing loan transactions in China compare to traditional asset investment vehicles at the UCLA School of Law.  Mr. Allan outlined how non-performing loan transactions are affected by changing property markets in China, and how to evaluate opportunities and manage the risks in structuring asset investments in China.

Joining Mr. Allan on the speaking panel was Donald C. Clarke, Professor of Law at George Washington University in Washington, D.C.  Professor Clark created the Chinese Law Prof Blog, and is a prolific author on Chinese law subjects, including most recently “The Role of Non-Legal Institutions in Chinese Corporate Governance,” in Transforming Corporate Governance in East Asia (Routledge, 2008).  Professor Clarke spoke on the new developments in China’s property law and foreign investment environment.

The keynote lunch address was given by L.A. Superior Court Judge Charles Lee, Chief Representative of the U.S. Delegation to the Beijing Olympics.  A Superior Court Judge since 1989, Judge Lee recently returned to Los Angeles from the Beijing Olympics, and candidly shared his personal experiences with U.S. Olympic athletes in Beijing and his insights into Olympic negotiations with the Chinese government.

Not a newcomer to the Olympic Movement, Judge Lee was appointed as Envoy to the People’s Republic of China for the 1984 Olympic Games in Los Angeles by the Los Angeles Olympic Organizing Committee.  After the Soviet Union announced its boycott of the 1984 Olympic Games, Judge Lee headed a LAOOC delegation to China which negotiated China’s agreement to participate in L.A.’s 1984 Olympic Games.

Source: China Daily
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Chinese enterprises, especially small and medium ones, are facing a harder time because of the combined effects of the global slowdown, tight domestic credit, rising costs and an appreciating yuan.
About 67,000 small and medium-sized enterprises (SMEs) went bankrupt throughout China in the first half of the year, according to National Development and Reform Commission (NDRC), the country’s top economic planner.
Many of those that managed to stay afloat are desperate to cut costs, mainly through worker layoffs.
“Business is poor this year, especially since May,” said Liu Yongcheng, a senior executive of the Zhejiang Adwin Furniture Co Ltd in east China’s coastal province of Zhejiang. His company’s exports to the United States have plunged, as American consumers tighten their belt amid the deepening housing and credit crisis there. Liu had to cut his workforce by one-fifth to 400, well below the factory’s full capacity.
Large firms fared better, but only by a little. In the first six months, firms listed in the domestic stock market reported a 16.3 percent growth in profits year-on-year, a sharp drop from the 80 percent for the same period last year.
A look at Gross Domestic Product (GDP), the most important gauge of a country’s economic performance, tells a similar story. In the April-June period, China’s GDP growth slowed to 10.1 percent from almost 12 percent growth achieved last year.
As China’s economic growth has declined for four consecutive quarters, many have predicted that growth may drop further in the second half of 2008, as the European Union, the largest destination for Chinese exports, draws closer to a recession.
Traditional wisdom has it that China has to maintain its growth rate above eight percent to keep its workforce employed.
Actually, SMEs employed 75 percent of the country’s workforce and created 85 percent of new jobs each year, contributing substantially to the country’s economic well-being.

That’s why decision makers are coming to the rescue with a host of measures, including encouraging commercial banks to make loans to SMEs by raising their credit quota.
The Beijing authorities have signaled on several occasions that they will give greater weight to keeping stable economic growth, while staying vigilant against inflation. That marked a departure from the official stance, at the begining of the year, of preventing the economy from overheating and preventing price increases developing into full-scale inflation.
As part of the efforts to ease pressures on exporters, the central bank slowed down the appreciation of the yuan, which even depreciated against the dollar since the beginning of August.
The deceleration came after the Chinese currency jumped 6.6 percent against the greenback since January and more than 20 percent since July 2005, when China ended the yuan’s peg to the US dollar.
A stimulus plan worth billions of dollars was also reported in the pipeline, including tax cuts. However, some economists are debating whether such a firing-up initiative is necessary.
“The economy is not really weak,” Huang Yiping, an economist with Citigroup wrote in a research paper recently. “China needed economic stimulus policies during the Asian financial crisis, but it doesn’t need them now.”
There are also suggestions of a looser monetary policy. The central bank may start to lower the reserve requirement for commercial banks at the year end, according to JP Morgan chief China economist Frank Gong. Calls for a lift of credit control are growing louder.
However, Ben Simpfendorfer, an economist at the Royal Bank of Scotland in Hong Kong, opposed such moves. “It is too early for a change in monetary policy,” he said.
Inflation concerns run counter to easing credit. The Consumer Price Index runs at a decade-high level although it declined a little in the past few months. And the Producer Price Index (PPI) jumped to a 12-year high of 10 percent in August. That may lead to a rebound in CPI, as it usually takes four to six months for the PPI to pass on to the CPI.
However, many officials and economists are optimistic about the status of the economy, and have dismissed any reason to panic.
“Our advice is: just calm down,” Arthur Kroeber, head of Dragonomics consultancy in Beijing, told the Financial Times recently. “China’s economy is basically in fine shape.”
Exports, a key driver of China’s economy, are actually performing better than previously thought, increasing by 21.9 percent in the first half.
Retail sales were solid with a real growth rate of 15.4 percent in July after adjusting for inflation, the strongest increase in the past 10 years, according to a HSBC report.
Investment, another major driver of economic growth, also fared well. In the first six months, fixed assets investment grew 26.3 percent from a year earlier, compared with 25.9 percent in the same period last year.
China has plenty of investment prospects as it prepares to host the World Expo in Shanghai as well as the Asian Games in Guangzhou in 2010, among many other international events.
In addition, the central government and local governments have much cash at their disposal, which can be spent on building railways, roads, or other infrastructure, thus providing a huge boost to the economy, economists have argued.
They believe the broader prospect for China’s economy is strong non-stop growth this year, though uncertainties remain about the outlook for 2009 and beyond.
Li Huiyong of Shenyin Wanguo Securities advocated a dose of medicine to ensure the health of the economy. “A combination of a tightening monetary policy and loose fiscal policy is the solution,” he said.
A tightening monetary policy is effective in controlling price rises, while a relaxed fiscal policy will boost government spending and create jobs, just what China needs at its present stage when it faces the risk of stagflation, Li explained.

Source China Daily
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Beijing Raycom Real Estate Development Co Ltd, which will be the third listed company in Legend Holdings Ltd, will complete asset restructuring by the end of this year.

The company expects to meet the IPO conditions in 2010, Raycom executive CEO Zheng Zhigang told 21st Century Business Herald.

Three Legend Holdings real estate projects in Shenzhen, Beijing and Tianjin, worth about 60 billion yuan ($8.78 billion), went on auction in Shanghai United Assets and Equity Exchange (SUAEE) recently.

The company is not selling the assets but to inject them to Raycom through the auction in SUAEE to realize its IPO as a whole, said Zheng Zhigang.

Legend Holdings Ltd will sell Shenzhen Raycom and Tianjin Lihe’s 90 percent stake for nearly 440 billion yuan and 126.6 billion yuan respectively, and Beijing Wangdu Real Estate’s 1.5 percent shares for 4.15 million yuan.

Raycom will finish its domestic asset restructuring once all three companies’ shares are sold to new firms. Companies affiliated with the Chinese Academy of Sciences have been given the preference in buying shares.

Raycom will be listed as a whole company, even though the company previously considered spinning off residential property through A-shares and self-sustaining property by the Real Estate Investment Trust, which encountered policy obstacles,

Raycom is introducing strategic investors and restructuring assets at the same time. The company is maintaining cooperative relations with the Dutch bank ING, US-based Warburg Pincus and other foreign investment companies.

“Raycom will maintain its principle of allocating land properly rather than making changes for being listed”, said Zheng Zhigang, “Now Raycom reserves 3 million square meters of land for development over the next 3-5 years.”

The downturn of domestic real estate will have an impact on Raycom’s performance, but it won’t put any financial pressure on, he added.

Zheng says sales of residential property have reached 2 billion yuan this year with another 300 million yuan to achieve the annual target, which has dropped by 30 percent due to the slowdown of overall economy.

In 2007, Raycom’s sales of residential property reached 2.875 billion yuan with more than 400 million yuan in profits.

Raycom’s total assets are now 10 billion yuan. Its proportion of residential and self-sustaining properties is 7:3, with the latter’s rental income 200 million yuan, 21st Century Business Herald reported.

On October 14, 2008, The USA-China Law Group sponsored the Business Leader Roundtable in Los Angeles, hosted by The Asia Society Southern California with special guest speaker Mr. Long Yongtu, Secretary General, Boao Forum for Asia (BFA). Mr. Long discussed the global economic climate, the current trade relationship between China and the United States, and his views to strengthen and promote Asia-Pacific integration.

Source: China Daiy
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Chinese shares ended week-long plummet and rebounded on Monday, as regional markets mostly rallied on a boost of market confidence after policy makers around the world took more bold moves to stem the financial crisis.

The benchmark Shanghai Composite Index gained 3.65 percent to end at 2,073.57 points following a powerful rebound of bank shares in the afternoon. The Shenzhen Component Index closed at 6,571.59 points, up 2.92 percent.

Aggregate turnover edged up to 57.6 billion yuan ($8.5 billion) from previous day’s 54.08 billion yuan.

Source: China Daily
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Three decades after the advent of its reforms and opening up, China has become another engine driving the world economy in addition to the United States, UN Under-Secretary-General Sha Zukang has said.

China has enjoyed 30 years of continuous and rapid development, expanding its economic aggregate by nearly 15 times and its foreign trade more than 100 times, a sustained fast growth rare in modern world history, Sha told Xinhua in a recent interview in his office at the UN headquarters in New York.

Measured by gross domestic product (GDP), China’s economic aggregate now ranks the third in the world. It stands likely to become the largest exporter and the biggest manufacturing powerhouse in 2009, said the under-secretary-general for economic and social affairs.

“China’s contributions to world economic growth in the past few years are comparable to that of the United States,” Sha said, “It has become yet another engine driving world economic growth.”

Its contributions to reducing global poverty have also been there for all to see, he said. Over the past 30 years, about 500 million Chinese people have emerged from abject poverty, meeting the target of halving such population as listed in the UN Millennium Development Goals (MDGs) well ahead of the 2015 deadline.

China, the world’s most populous country, has been transformed into a world economic giant, with ever greater influence on world economy, Sha said.

Despite all the progress, he noted that China’s per capita income remains well below the world average and far behind the income levels of many developed countries.

As a low-to-medium-income developing economy, China faces a myriad of challenges such as bridging the widening gap between the rich and poor and protecting the environment amid rapid economic growth, he said, stressing that all these are problems in the process of development and can be addressed through further deepening reforms and pushing forward wider opening-up.

The Chinese government has in recent years come up with such concepts as “human-oriented” governance and building a harmonious society, emphasizing the quality of development, rather than simply pursuing faster GDP growth, Sha noted.

These guiding principles, he said, have laid a policy foundation for handling new problems cropping up in the process of development and ensuring sustained growth of China’s economy.

Sha attributed China’s success to its emphasis on development, its efforts to choose development path in line with its specific conditions, and its stepwise reform and opening-up rather than the so-called “shock therapy” championed by some.

On the relationship between China’s reforms and opening up on the one hand and the development of the United Nations on the other, Sha said development is one of the three pillars of UN work, and it is also the foundation for the other two pillars — peace and security, and human rights.

“China’s achievements in its 30 years of reforms and opening up accord with the United Nations’ tenets of promoting common development in the world,” Sha said.

One of the key factors behind China’s success in its reforms and opening up has been its adherence to proceeding from the country’s actual conditions, he said.

“A country has to mainly count on its own efforts to develop,” Sha said, “You may draw on other countries’ experience in development, but cannot be copied or ‘transplanted’ it.”

“It is imperative to study and explore in line with a country’s actual conditions. There is neither ready ‘blueprints’, nor shortcuts,” he said. “Overseas investments and foreign trade can all be utilized, but a country bears primary responsibility for its own development.”

On China’s cooperation with other developing economies, Sha said China has all along attached great importance to such cooperation and actively promoted cooperation among developing nations through frameworks such as the Group of 77 and China mechanism in a bid to safeguard the rights and interests of developing countries.

Sha also praised the assistance offered by the United Nations to China in its reforms and opening up, mainly in the areas of policy advices, information, and technical assistance and cooperation.

As China’s economy grows stronger, the modalities and priorities of UN support are also changing, moving gradually from mainly assistance, as was the case in the past, to mainly exchanges and cooperation, he noted.

At a time of ever more profound economic globalization, Sha said, both China and the rest of the world have become increasingly indispensable to each other.

There is a solid foundation and broad vista for cooperation between China, the world’s largest developing country and fastest growing economy, and the United Nations, the most authoritative and broadest represented intergovernmental world body, in the field of development, Sha said.

Source: China Law & practice
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The Chinese government has provided more incentives for foreign-invested telecommunications enterprises (FITEs) to do business in the PRC, through the revision of the Provisions for the Administration of Foreign-invested Telecommunications Enterprises.

The revised regulations have reduced the minimum registered capital requirements for a FITE. For an enterprise that intends to provide basic telecommunications services nationwide or across provinces, the requirement is down from Rmb2 billion (US$292.2 million) to Rmb1 billion. For those that focus on a single province, the requirement is now reduced from Rmb200 million to Rmb100 million.

Damien Bailey, information communications and technology partner at Simmons & Simmons, said that the lowering of the barriers will make foreign investment in the Chinese telecommunications sector more attractive.

“It is likely that we will see major foreign telecommunications operators taking minority stakes in the three large Chinese telecommunications operators,” he said.

Despite the revisions, the maximum proportion of foreign investment is unchanged. If foreign operators are unable to exercise control of the FITE, Bailey said, this could hamper their investment interest in the sector, making them reluctant to take large stakes in domestic operators.

The new provisions were promulgated on September 10 2008 and took effect on that date.