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Foreign companies get boost

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By Wang Bo (China Daily)
Latest directives 'alleviate worries' about Chinese business climate

 

BEIJING - The State Council, the country's Cabinet, has said it will support companies listed in the Chinese mainland to rope in foreign strategic investors and broaden foreign companies' funding channels, amid complaints by foreign firms about the investment climate in China.

Qualified companies can also issue shares, corporate bonds and mid-term bills in the Chinese market, the State Council said in its latest directives facilitating foreign investments issued on Thursday.

The move is seen as the latest gesture from the government to welcome foreign businesses, following a batch of new foreign direct investment development guidelines unveiled in April.

It is also expected to alleviate foreign worries that the business climate in China is becoming unfavorable to foreign enterprises, analysts said.

"China is in a critical period of transforming its economic landscape, which cannot be realized without foreign enterprises' participation, as they have been an important engine for the country's economic development in the past 30 years," said Li Xiaogang, head of the Foreign Investment Research Center at the Shanghai Academy of Social Sciences.

It is a win-win situation for foreign and domestic firms, as foreign companies whose finances are strained due to the financial crisis can get funded in the Chinese market where liquidity remains ample, Li said.

For domestic firms that are still struggling in the lower end of the industrial value chain, tie-ups with foreign companies are a good learning experience, he said.

Analysts said the latest directives will facilitate the flow of foreign investment into China and foreign investors will continue to play an important role in the country's economic restructuring in the coming decades.

During a meeting with German Chancellor Angela Merkel in July, Premier Wen Jiabao reiterated that China always welcomes foreign enterprises and will provide them with treatment equal to that of domestic companies.

Despite foreign accusations of China's challenging investment environment, the country's foreign direct investment continued to surge in July, up 29 percent from a year earlier. The increase showed that foreign investors are still keen about operating in China, one of the most vibrant economies in the world, analysts said.

Source - China Daily (http://www.chinadaily.com.cn/business/2010-08/21/content_11184256.htm)

 

Feeding urban masses: A key world challenge

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By P.K. Hangzo, For The Straits Times

THE world is bracing itself for a food crunch. Amid the growing food shortages, in part due to climate change, there is an urban green revolution emerging. As cities burgeon in size, they are growing food to feed themselves.

To understand this emerging phenomenon, a Food Security Expert Group Meeting was convened in Singapore on Aug 4 and Aug 5 by the Centre for Non-Traditional Security Studies of the S. Rajaratnam School of International Studies. It was attended by representatives from academia, policy and think-tank communities, private agribusiness companies, urban planners and humanitarian organisations. Aside from drawing attention to the issue of urban food security, the meeting also discussed Singapore's role in the global food system.

Food security and agriculture are largely considered a rural phenomenon, discussed primarily in the context of rural poverty. The Green Revolution, which occurred between the mid-1950s and the mid-1990s, was a rural phenomenon to change crop varieties and agricultural practices, and to enact broader social, economic and political change.

It led to a substantial increase in gross world food production, with rapid economic development in some developing countries. Remarkably, despite an increase in the global population from three billion in 1960 to 6.7 billion last year, per capita agricultural production outpaced population growth.

Ironically, these successes contributed to public complacency about food and agriculture, manifested in decades of faltering public commitment to investing in agriculture in developing countries.

The share of official development assistance to agriculture, for example, fell sharply from a peak of 17 per cent in 1979 to a low of 3.5 per cent in 2004. Public complacency, a low stockpile of staples, declining agricultural yield, declining investment, population growth, rising income levels, dietary change, climate change and the global financial crisis combined to spark a food crisis in 2008, when food prices climbed to their highest levels since the 1970s.

This crisis triggered riots across the globe - particularly in the teeming, impoverished cities of the developing world, where many people spend a major portion of their incomes on food.

Whereas issues of food security, livelihood and agriculture resulted in peasant revolts in rural areas, they are now capable of eliciting unrest among the urban poor, the urban working class and the urban underclass.

The importance of urban food security is intensified by a growing urban population. For the first time in history, urban population had equalled rural population in 2008. By 2050, about 70 per cent of the world's projected population of 9.1 billion are expected to live in urban areas.

How will these teeming urban masses be fed? The feeding of a larger, more urban and richer population requires food production to increase by over 70 per cent. This must be done in the face of changing consumption patterns, the impact of climate change and the growing scarcity of water and land.

Rural agriculture alone will be insufficient to meet the future need for food in urban areas. Only an urban green revolution will help countries secure food for their populations. To do this, urban agriculture must be stepped up to supplement food supplied from the hinterland and rural areas.

Urban agriculture is the growing of food crops and the raising of farm animals within and around cities. It plays an important role in enhancing urban food security, since the cost of supplying and distributing food to urban areas based on rural production and imports continues to increase, and does not satisfy demand, especially that of the urban poor. Urban agriculture also contributes to economic development, poverty alleviation and the social inclusion of the poor. It also contributes to the overall greening of the city and the productive reuse of urban waste.

Urban food security has been a major concern for small, highly urbanised city-states like Singapore.

Due to size limitations, Singapore relies primarily on imports. It bought more than 90 per cent of its food requirements from 31 countries in 2008. Singapore boosts food supply resilience by upgrading its local farm production capability. It is also aiming to invest in overseas food zones, overseas contract farming and sourcing from non-traditional sources or existing sources which are not major exporters to Singapore.

Singapore can be an important player in regional food security. Given its role as a stable regional financial centre, it can serve as a catalyst for venture investment funds. It can also facilitate and inspire technology transfers, best practices, processes, business models and standards. The Republic is also home to a number of research-oriented local and foreign agribusiness companies. By harnessing their knowledge and expertise, it can take the lead in developing high-yielding seed varieties, fertilisers, pesticides and related products. Singapore's efficient port and logistics can also help the country establish itself as a regional food processing and distribution hub.

Food processing has already been pursued vigorously in the country, with exports totalling US$3.4 billion (S$4.6 billion) last year - an increase of nearly US$1 billion since 2005. The Singapore Food Manufacturers' Association has predicted that food exports from Singapore companies will reach US$4 billion this year. The growth of its exports is due to the increasing number of manufacturers based locally: There are 781 today, compared with 677 in 2005. This is a result of higher overseas demand for food products made and processed in Singapore.

The Food Security Expert Group Meeting had discussed urban food security and developed a consensus that it has become one of this century's key global challenges, requiring urgent attention.

Although urban agriculture has been around for a long time, it has not been thought of seriously. It is time to pay serious consideration to it, in order to feed the stomachs of the ever-increasing urban population. In the end, it is not just about feeding people, but also about keeping countries stable.

The writer is an associate research fellow with the S. Rajaratnam School of International Studies, Nanyang Technological University, where he is attached to the Centre for Non-Traditional Security Studies.

Source - The Straits Times (http://www.straitstimes.com/Review/Others/STIStory_568918.html)

 

China going all out to develop green vehicles

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SHANGHAI: The Chinese government, determined to become a world leader in green technology, says it plans to invest billions of dollars over the next few years to develop electric and hybrid vehicles.

The government says a group of 16 big state-owned companies have already agreed to form an alliance to do research and development, and create standards for electric and hybrid vehicles.

The plan aims to put more than a million electric and hybrid vehicles on the roads over the next few years in what is already the world's biggest and fastest-growing car market.

The announcement, analysts say, is another example of how China seeks to marshal resources and tackle industries and new markets. The plan also underlines what China describes as its growing commitment to combating pollution and reducing carbon emissions.

According to some reports by state-run media, Beijing intends to invest nearly US$15 billion (S$20 billion) in the venture, which if true would make it one of the world's most ambitious attempts to develop more energy-efficient vehicles.

The bold plan was announced late on Wednesday by one of China's most powerful bodies: the State-owned Assets Supervision and Administration Commission (Sasac), which operates under China's Cabinet, or State Council.

State-owned companies 'have an overall advantage in developing the electric vehicle industry', Mr Li Rongrong, Sasac's chairman, said in a statement.

Analysts say the government plan bears watching.

'This is the kind of plan the government would like to happen, and they certainly have the resources to put behind it,' said Professor Oded Shenkar, a professor of management at Ohio State University and author of The Chinese Century.

'The government could easily underwrite or subsidise the development costs, and do it at a time when the global car industry is still reeling.'

Few details of the plan were released. But Beijing said that over the next three years, 500,000 energy-efficient vehicles would reach the market each year and that more efficient vehicles would soon account for 5 per cent of passenger car sales in China. This year, analysts expect vehicle sales in China to reach about 17million.

Sasac's announcement said the alliance had been formed with about US$200million. But other reports said the investment was tied to the government's plan to revamp the car industry and promote energy-efficient vehicles with an investment of nearly US$15 billion.

There is some opposition to the plan. The English edition of The Global Times, another state newspaper, said on Thursday that some groups had criticised the alliance, saying it favoured big state-owned companies and had not made it clear who would own the intellectual property.

'Such an association should include all firms strong in the area, rather than only SOEs,' Mr Zhong Shi, editor-in-chief of China Automotive Review, told The Global Times, referring to state-owned enterprises. 'Although lots of foreign firms launched technology agreements, there is no precedent of successful technology exchange in China's auto industry.'

The government said the country's top state-owned oil producers, power companies, several military and aviation companies, and two of the nation's biggest car companies, China FAW Group and Dongfeng Auto, would be involved in the effort.

Whether China can successfully develop electric and hybrid vehicles of world-class standards is still unclear. China has a lot of carmakers. But the country's engine and car technologies lag far behind those in Japan and the West.

But big companies like General Motors and Volkswagen have been in long-term joint ventures with Chinese carmakers. And experts say that some of the technology being developed here by Chinese engineers has advanced.

'What you have here is the confluence of two important things,' Prof Shenkar said. 'The car industry was long ago designated as a pillar industry for China. And the second thing is green technology or high-tech; this is where the action will be, and China wants to be there.'

NEW YORK TIMES

Source - The Straits Times (http://www.straitstimes.com/Asia/China/Story/STIStory_568956.html)

 

Seamless S'pore to China rail link one step closer

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Mekong countries to endorse plan to integrate their railway systems

 

Global automakers eye massive market

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Employees at the Beijing Benz Automotive Co plant in Beijing. [Nelson Ching / Bloomberg] 

China will no doubt remain the favorite investment destination for global automakers in the future, due to the local market size and potential, as well the continuous upgrading of the industry and investment environment, said analysts and company executives.

"We are firm believers in China's investment environment and the huge potential it brings, as for years China has been providing preferential policies and expanded domestic demand to attract foreign investment," said Ulrich Walker, chairman and CEO of Daimler Northeast Asia.

"Furthermore, during the global financial challenges, China continued to offer a beacon of light to others around the world. As such, we hold strong confidence that China will continue to present a dynamic investment environment and a fast-growing marketplace that is favorable for foreign direct investment," said Walker.

Last year, the world automobile industry shrank considerably as demand slumped due to the financial crisis.

However, helped by the Chinese government's series of successful incentive measures, China's domestic vehicle market last year overtook the United States for the first time to become the world's biggest auto market.

Automobile sales in China are expected to maintain a year-on-year growth rate of 20 percent for the next five years, according to a recent survey conducted by consulting firm AlixPartners.

"China is the world's most promising auto market and foreign carmakers' success in China is vital to their overall global performance, so who is willing to leave such a huge market?" asked Zhong Shi, an independent auto analyst based in Beijing.

According to Walker, Daimler has continued to invest heavily in China, as demonstrated by its local joint ventures and partnerships, including Beijing Benz Automotive Co Ltd in manufacturing passenger cars, with Fujian Daimler Automotive Ltd to produce vans, with Foton-Daimler for trucks, and BYD-Daimler on R&D for new-energy vehicles.

"With such extensive investments, Daimler has now expanded to all segments of the automotive industry in China. Looking forward, we are dedicated to further strengthening these investments in order to reinforce our competitive edge in this market, and again we feel proud to be able to sustainably develop together with a market that is as rich, dynamic, and rapidly growing as China," said Walker.

He also told China Daily that the German automaker and its partners have decided to invest 3 billion euros in China in the next years."

"There is no doubt that all of the automakers will continue to invest," said Thomas Schiller, managing director of consulting firm Arthur D. Little in China.

"The country is for many OEMs (original equipment manufacturers) already the most promising or most important market. And even the competition is fierce, the size and growth of the market requires investments to gain more competitiveness and not only to increase production."

Last year, the Chinese government made extensive efforts to encourage mergers and acquisitions in the domestic automobile industry, in a bid to integrate the industry and improve local automakers' competitiveness.

"We are very impressed to see a growing number of local companies becoming more globalized and much more competitive. And together with them, Daimler is extremely pleased to also take an active part in the fast development of the Chinese automotive industry," said Walker.

However, to maintain their leading position ahead of domestic rivals, Schiller suggested foreign OEMs invest in product development to enrich their portfolio, create lower-priced cars and compete directly with Chinese OEMs.

He also advised foreign automakers to move more of their investments to less-developed parts of the country.

"Many OEMs are only strong in one area, for example dominant production and location in the south, but weak in the north," said Schiller.

"All multinational and domestic players should allocate plants to underdeveloped regional markets," he added.

Global automakers are also facing challenges to keep investment balanced with market conditions and development, according to Schiller.

"There will be a consolidation phase sooner and nobody knows when and how much the next boom will start. All OEMs should to be prepared and invest heavily, but cannot allow low utilization of their capacity," said Schiller.

Source:China Daily 

http://en.ce.cn/subject/mncsinchina/mncsinchinatrade/201008/18/t20100818_21732044.shtml

 


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