Green Economic Development, Cultural Industry, Tourism, Ray-Ban, Wal-Mart, Microsoft and more

THIS WEEK IN CHINA

China Becoming a Role Model for Green Economic Development

The 3rd Nobel Laureate Symposium on Global Sustainability was held recently in Stockholm, Sweden with the aim of preparing a document to be presented during the World Conference on the Environment which, exactly 20 years after its debut, will take place next year in the city that hosted it for the first time – Rio de Janeiro.

Among the event's distinguished participants was former Norwegian Prime Minister Gro Harlem Brundtland, who is famous for coining in 1987 the often-quoted definition of sustainable development as: "Development which meets the needs of the present without compromising the ability of future generations to meet their own needs."

The three-time Norwegian prime minister and former head of the World Commission on Environment and Development congratulated China on its efforts towards a greener economy, saying that the emerging Asian giant represents an example to follow in a world which has seen very few improvements on sustainability from the time when she directed the work of the Commission.

"I think the leadership in China knows that the pattern of development in China cannot be coal-based, oil-based, transport-based in private cars, so they talk about green economy, because they know they have different energy resources, they have to use solar and they are entering into changing all these technologies and implementing them," Brundtland said, adding that "the rich world has to change the pattern, the newly emerging economies cannot do what we did because the world will suffocate under the pressure."

The reliance on coal as the primary source of energy in China is expected to change. The demand of coal by its power plants from more than 80 percent of total electricity generation today could be cut down to around 30 percent in the next two decades, through significantly ramping up investment in clean energy technologies such as hydropower, wind, and solar energy.

China is now the world's largest producer of photovoltaic panels and has recently experienced the construction of record size plants, such as new plant in Xuzhou, Jiangsu Province which is capable of producing 26 million kW per hour – equivalent to 20,000 tons in carbon emission reductions per year.

Except for nuclear, which is also growing, Director of SGS China Dr. William Lau underlines the rapid growth of Chinese wind power, now constituting 23 percent of the energy output of its kind worldwide. Lau suggests the possibility of the country reaching full coverage of its energy needs through this single source by 2030.

According to McKinsey & Company, a consultancy firm, China has the potential to build a "green economy" over the next decades. China has reduced the amount of carbon dioxide and other greenhouse gases that it produces for every unit of GDP by 4.9 percent each year on average over the past decade or so, compared with just 1.7 percent in the US and 2.7 percent in Germany.

China is estimated to be able to cut its projected demand for imported oil by up to 30-40 percent in 2030 by comprehensively rolling out electric vehicles over the next two decades.

China has also been implementing energy efficiency improvement technologies in the building and industrial sectors. Recovering and utilizing waste and by-products in the industrial sector has been one of the government's focuses as well.

Through a combination of government policies and industry-wide initiatives, by 2030, China is expected to reduce its coal demand by 40 percent and greenhouse gas emission by 50 percent, said McKinsey.

This is achievable through a combination of government policies and industry-wide initiatives.

To fulfill the task of transforming China into a "green economy", McKinsey estimated that up to RMB 1.5 to 2.0 trillion on average would be needed in additional investment each year from now until 2030, in order to effectively roll out the green technologies required to achieve the substantial improvements.

On an annual basis, the estimated investment is equivalent to 1.5 to 2.5 percent of China's GDP. The energy sector, especially the sustainable energy sector in China, is expected to fundamentally benefit from the investment.

China is taking an aggressive stance to reduce its environmental impact and has all the credentials to serve in the future as a model for other countries wishing to follow a sustainable path of development.

Adam Roseman Founder & Managing Partner ARC China


China To Lead World Economy

China is about to overtake the United States as the world's biggest economy, creating profound changes in the balance of global power.

The International Monetary Fund has projected that, by 2016, China will overtake the US in real economic output - the first time in the modern era that any country has done so.

Economic historian Angus Maddison estimated that the Soviet Union at its peak produced only a third as many goods and services as the US; Japan's economy at its peak was still less than half the size of the US economy.

China's ascension has been startlingly different, in speed and size. If it grows at anything like the 10 per cent rate it has averaged since 1980, its economy will be far bigger than that of the US within a generation.

Australian National University professor of strategic studies Hugh White said the looming end of US economic dominance marked a turning point for the world, and had serious implications for Australia.

''For us, it is the end of a very long cycle in which both our great allies, first Britain, then the United States, have been the strongest economy in the world and the greatest military power,'' Professor White said.

''For the first time, the greatest economic power in the world will not be our close ally.

''One issue is whether we will have to accommodate an ambitious, growing China that behaves reasonably well, or face an aggressive China that operates without such constraints. Another is how the US responds to China's growing military strength.''

Professor White said that while the US had confronted more-hostile enemies before - Nazi Germany and the Soviet Union - it had never had to contend with a rival that matched it in economic strength.

He said this would pose a ''very tough strategic choice'' for Australia as to whether or not to back the US in a conflict.

China's growth has been unprecedented. In 1980, when its economic reforms were just starting, the IMF estimates the US produced more than 10 times as many goods and services. Even 10 years ago, when China overtook Japan to become the world's second-biggest economy, the US still produced three times as much.

But since then China's share of global output has doubled, while that of the US has shrunk rapidly. From 25 per cent of global output in 1986, the US share has shrunk to less than 20 per cent and a projected 17.8 per cent by 2016.

China produced just 2.2 per cent of the world's output in 1980, but this rose to 7 per cent by 2000, 14 per cent now, and is projected to top 18 per cent by 2016.

By 2016, the IMF estimates, China will be producing more in a fortnight than it did in a year when the reforms began. Over that period, its output would have risen to 30 times its starting level; US output would have risen to 2.7 times its 1980 level.

The US would still be the world's biggest market. If China keeps its currency heavily undervalued, as it is now, the IMF projects that, in nominal terms, by 2016 the US economy will still be two-thirds larger than China's.

But this gap would simply reflect currency values. Factor in relative prices, and China's real output of goods and services would be the world's biggest.

The IMF assumes that China will grow at 9.5 per cent a year over the coming decade, a tad slower than previously, while US growth would accelerate from an average of 2.1 per cent over the noughties to 2.75 per cent in the new decade.

Australia is assumed to average growth of 3.25 per cent, and more or less maintain its place in the world economy, which has changed remarkably little over the past century.

On Professor Maddison's estimates, Australia in 1913 produced 1.02 per cent of the world's output. On the IMF's figures, this edged up to 1.34 per cent in 1981, is 1.19 per cent now, and will shrink further to 1.11 per cent by 2016.

This reflects the rapid growth not only of China, but developing countries as a whole. In 1990 they produced just 31 per cent of the world's output, but by 2010 this had risen to almost 48 per cent, and by 2013 most of the globe's output would come from low- and middle-income countries.

India's growth is projected to continue at more than 8 per cent a year. It is on track to overtake Japan next year to become the world's third-biggest economy in real output.

The relative weight of Japan and the European Union is declining rapidly. On IMF projections, by 2016 Japan would account for just 5 per cent of global output, down from 10 per cent a generation earlier, while China and the US would have overtaken the EU's output.


Emerging Markets Leading Global M&A Table

An increasing number of companies from emerging markets, led by China and India, have taken control of businesses in developed economies since 2002.

The number of cross-border merger and acquisitions (M&A) by businesses from emerging countries grew 26 percent in 2010, almost three times higher than the overall market for major M&A transactions.

Acquisitions by Chinese companies have been growing at by far the fastest pace, with an annual growth rate of 42 percent from 2006 to 2010.

Securing supplies of raw materials, especially in the mining sector, is becoming an increasingly important motive for buyers from developing countries, along with acquisition of innovative technology and market access.

"Chinese buyers are paying several times more than what will be required in the market because of a lack of experience," said Bernhard Hartmann, managing director of A.T. Kearney Greater China.

Unlike Japan, which is constrained by a lack of resources and secures supplies by long-term contracts, Chinese companies are keen on gaining ownership of the resources, which can lead to an adverse political reaction in the target's home country.

"Raw materials acquisition is by nature very political," said Hartmann. "As long as the political issues are resolved, the big deals will go well."

To acquire know-how and innovative technologies may be more challenging as it is often very difficult to maintain innovation in a Chinese environment, according to Hartmann, adding that he has not seen much success so far.


Foreign Investment In China Climbs 15% On Consumer Demand

Foreign direct investment in China climbed 15 percent in April as companies including Starbucks Corp. and Walt Disney Co. expand to tap rising incomes in the world's fastest-growing major economy.

Investment rose to $8.5 billion, the Ministry of Commerce said in a statement in Beijing. The increase compared with a 33 percent gain in March. For the first four months, the total was $38.8 billion, a gain of 26 percent.

Foreign companies are targeting consumers in the most populous nation as earnings rise and families move to cities from rural areas. Inflows of capital add to the nation's record $3 trillion foreign-exchange reserves, complicating central bank efforts to limit gains in the currency and curb inflation.

"Global investors are still attracted by China's growth story," Yao Wei, a Hong Kong-based economist with Societe Generale SA, said. "The question is what the Chinese government is going to do about the capital inflows which are putting pressure on the yuan."

China is aiming to increase urban and rural per capita net income by more than 7 percent a year in real terms over the next five years, the National Development and Reform Commission said. Premier Wen aims to shift economic growth to a model that is more driven by consumption and less reliant on exports and investment.

Builders broke ground for a $4.4 billion Shanghai Disney Resort, its first theme park on mainland China. Starbucks, the world's largest coffee-shop operator, is planning to expand its presence to 70 Chinese cities from 35, Chief Executive Officer Howard Schultz said in an interview.

China's foreign-exchange reserves rose by the second- highest amount on record in the first quarter. People's Bank of China Governor Zhou Xiaochuan said last month the holdings may have led to excessive liquidity and are putting pressure on central bank operations that withdraw money from the financial system.

The PBOC raised banks' reserve requirements for the fifth time this year on May 12, taking the level for the nation's biggest commercial lenders to a record 21 percent.

The central bank has raised interest rates four times since mid-October. The PBOC has also allowed the yuan to appreciate at a faster pace against the dollar to help contain inflation that's exceeded the government's 4 percent target each month this year. The currency climbed 0.9 percent in April, the most this year.


China's Cultural Industry To Develop Speedily

China, with a history and ancient wisdom that stretches back across millennia, is a nation that abounds in cultural resources. Yet, when it comes to the commercialization of these resources, the Asian Giant is only at its infant stage. Over the next five years, China's cultural industry is geared to grow from a new engine into a pillar of the national economy.

With its economy expanding at an astounding rate and the central government's heavy support, China's cultural industry is to hail a new dawn.

For years, China has been one of the world's fastest growing economies. According to statistics, from 1989 until 2010, China's quarterly Gross Domestic Product (GDP) growth rate averaged 9.31 percent. In the fourth quarter of 2010, its GDP expanded 9.80 percent and overtook Japan as the world's second largest economy.

International common sense suggests that when a country's per-capita GDP exceeds $3,000, its citizens' demand for cultural consumption will rise sharply. China's per-capita GDP surpassed $4,000 in 2010, and in such metropolises as Beijing, Shanghai and Guangzhou, the number even exceeded $10,000.

In the meantime, the newly-released 12th Five-Year Plan of the Communist Party of China (CPC) made it clear that the cultural industry should be developed into a pillar industry in the next five years, meaning the cultural sector, as a pillar industry, should take up at least 5 percent of the total GDP by 2015, whereas it currently accounts for less than 2.5 percent.

China's cultural industry is ready to get on the fast track in its development and enjoy a favorable environment in both economic and political terms.

In recent years, China's cultural industry has been growing at an average annual rate of more than 17 percent, surpassing that of the national economy by over 7 percent. It has emerged as a new engine in driving economy. Even the international financial crisis failed to dampen the growth of the sunrise industry, in which it has played a special role in boosting domestic demand and adjusting the economic structure.

For that matter, the cultural industry was highly regarded by the Chinese Central Government.

In 2009, the State Council, the highest executive organ of State administration, for the first time, issued a document designed to promote cultural industry in China. The release of the document, namely the Plan to Adjust and Reinvigorate the Cultural Industry, indicates that cultural industry in China was elevated to an unprecedented height of strategic position at national level, manifesting the Chinese Central Government's resolution to transform the budding industry.

To ease the financing difficulty faced by the cultural industry, in 2010, nine government ministries jointly issued a guiding opinion on financial support for the rejuvenation and prosperity of the cultural industry.

Experts predict that China's cultural industry is poised to maintain high growth during the next five years. While the industry's past growth was more government-driven, its growth will be more market-driven in the next few years, industry experts say.

Previously, China's economy relied on investment and exports, and domestic consumption was not strong. In the next five to 10 years, as the economic structure is adjusted, the government will encourage consumption.

First, the cultural industry will gradually become a pillar industry in the regional and national economy, given the favorable policy and economic environment the industry enjoys. It will also become a key investment area for the capital market. A batch of flagship public-listed cultural enterprises will appear. The industry will become more and more concentrated.

Second, the cultural industry will be further commercialized. Strong demand for cultural products will bring unprecedented prosperity to the industry. Investment in the industry will gradually diversify as the share of private and foreign capital increases.

Third, China's cultural brands and products will compete in the international cultural market. Although China's export of cultural content products will gradually expand, it is still difficult to eliminate China's deficit in cultural trade.

Fourth, the cultural industry will further integrate with other industries. Convergence between the cultural, manufacturing and service industries will spur the development of these industries.

Fifth, while significant progress has been made in the integration of telecommunications networks, cable TV networks and the Internet, digitalization that marked the cultural industry will be the core of the sector.


Many Chinese Children Studying English at a Young Age

English is the most popular course among the nation's youngsters with hundreds of millions of pre-school children across China already embarking on primers.

In China, children under 14 years of age account for more than 20 percent of the 1.3 billion population. More and more parents, either driven by vicarious ambition or peer-pressure, are sending their children to private training organizations to take English lessons before they ever step over the threshold of elementary school.

"Children are taking English lessons at a younger age every year. Now the average starting age is 5," said Jia Tao, general manager of Global Children's English, a division of Global Education & Technology Co Ltd, a major English training institution in China.

The sector is proving to be profitable. Xie Qin, director of POP Kids Education, a division of the New Oriental Education and Technology Group, the largest provider of English training services in China, said its revenue is expected to increase by 50 to 60 percent this year.

Currently, English lessons for teenagers take up only a limited proportion of the burgeoning industry. The total market for China's English-teaching industry was estimated at RMB 15 billion ($2.31 billion) in 2009, about a medium-sized city's annual gross domestic product. It is expected to balloon to RMB 30 billion ($4.62 billion) this year, according to an industry report.

But, robust expansion tends to breed chaos. As numerous players scramble for a bigger market share, fierce competition puts a drag on tuition fees, while labor costs and rent keep rising. Companies may easily fold if they fail to attract enough students. In December 2009, a raft of English teaching institutions in Beijing, Shanghai and Guangzhou closed, igniting widespread concerns and prompting calls for tighter government regulations.

Nevertheless, parents will choose whatever they think is best for their children. Diana, a 32-year-old English professor at a college in Beijing, who declined to reveal her Chinese name, said the biggest problem with the current English teaching industry is the quality of teachers.

Moreover, with a market as big as China, strategic decision-making is further complicated by income gaps and geographical location. "Parents in first-tier cities such as Beijing and Shanghai prefer small classes. The fewer students in a class, the better the learning. They also set high standards for the teaching environment," said Zhang, president of Global Education & Technology Co Ltd.

"In comparison, parents in second- and third-tier cities tend to care more about tuition fees. They generally prefer cheaper lessons," he said.

Still, companies and parents are optimistic about the future. Zhang expects revenue from teaching English to teenagers to at least double in the next three years. Diana thinks better linguistic proficiency will provide her daughter with a better understanding of the world.


Tourism Industry Urged To Further Tap Domestic Market

China's tourism businesses should extend their services to serve more people as domestic travel remains a major contributor to the country's tourism industry over the next five years, officials from the China Tourism Academy said.

Further, Chinese businesses should serve travel and tourism demands of a wider range of people, especially their core needs, in order to achieve further development, Dai Bin, deputy head of the academy said.

"To satisfy the needs of average people is the key to success for any business, in addition to excellent teamwork, technology and its business model," Dai said.

He said that services of most Chinese tourism enterprises are currently designed for a small group of consumers, mostly rich, leaving the country's tourism market largely unexplored.

"The country's tourism industry has developed rapidly over recent years, but still remain at its early stage of development," he said, adding that the age for the tourism industry to serve a broader array of people has arrived.

He also noted, however, that Chinese enterprises face grave technological challenges and intense competition in the context of globalization.

"Very few of the 21,000 Chinese tourism enterprises could properly use modern technology, especially information technology, to offer travel services," he said.

Citing the rapid development of China's leading online travel agent, Ctrip.com International, Dai called on the country's tourism enterprises to adjust their development strategies to a global point of view.

According to a five-year development outline for the country's tourism industry, China hopes to attract 3.3 billion tourists by 2015, up from 2 billion recorded in 2010.


Organic Food Sales Growing in China

A tiny sector in China - organic and natural food - is benefiting from the middle- to upper-income, health-conscious consumer and overseas returnees but misinformation, lax regulations and questionable business practices are proving to be major stumbling blocks.

At LohaoCity Organic Store, sales have been growing at an average rate of 35 percent year-on-year. There are eight outlets in Beijing, six in Shenzhen, four in Chengdu and one each in Guangzhou and Tianjin.

Plans are afoot to set up more outlets in different parts of China but it's a daily challenge to ensure all produce from its suppliers is free from chemical and other life-threatening ingredients.

Despite the rise in sales, China's organic food market is still facing an uphill challenge in a country where farmers are used to pesticides and chemical fertilizers to beef up production and to keep weeds at bay, which usually means less hard work.

While there is demand for organic, natural food, it is still uncommon to find it in the marketplace and the difficulty in locating reliable organic farmers or suppliers affects supply and demand.

Community-supported agriculture (CSA), in which a farmer offers a certain number of "shares" to the public, is seen as a workable idea. Membership involves receiving a box of seasonal vegetables every week for a year.

Based on the CSA model, Little Donkey Farm, which is Renmin University's demonstration project, has successfully cultivated quality foods with the support of the public.

In 2010, Little Donkey Farm had 500 "shares". This amounted to 5 kilograms of vegetables a week for each shareholder. It costs 1,500 yuan ($273) for a year's subscription. Shareholders also pay for seeds, tools and irrigation.


Chinese Are Top Spenders In France

Chinese tourists have, again, topped a list of big spenders in France. A record 57.4 million Chinese took out-bound trips in 2010 - the fourth-largest number worldwide according to the United Nations World Tourism Organization - an increase of 20.4 percent from the previous year.

The number is expected to rise to 65 million this year.

A report by Global Blue has found that Chinese tourists spent an average of 1,300 euros ($1,900) every time they hit the shops in France.

It was the second year running that China topped the list and the latest figure represented a 60 percent increase on 2009, the report by the tourist tax refund services provider said.

Overall, tourist spending in France rose 35 percent in 2010 to 3 billion euros ($4.29 billion), with the Chinese spending 650 million. The report's figures are based on requests for value added tax refunds, which can be made for any purchase above 175 euros ($251).

Russian tourists remained in second place with 220 million euros ($315 million) in purchases in France last year, a jump of 30 percent from 2009. Brazilians followed with expenditure in French shops rising 56 percent to 100 million euros ($143 million).

Chinese accounted for 16 percent of sales to tourists from outside the European Union, followed by 10 percent to Russians, 9 percent to both Middle Eastern and Japanese shoppers and 6 percent to those from the United States.

Luxury brands such as Louis Vuitton, Givenchy and Dior were among the biggest beneficiaries, with their products especially popular with tourists from China.

The report echoed a similar conclusion in the UK's annual GlobeShopper Calendar survey last month.

Boston Consulting Group Inc forecast that spending by Chinese tourists will jump five times to 1.5 trillion yuan ($231 billion) in 2020, triple that of Japanese visitors.


China Luxury Consumers Become More Brand Conscious

Chinese consumers are increasingly brand conscious as the country is set to become the world's largest luxury market, according to KPMG International.

Buyers in China rank French brands as the most favorable labels, followed by those from Italy and Hong Kong, KPMG said.

"China is continuing its march toward becoming the largest luxury market in the world, buoyed by extremely favorable attitudes towards brands, increasing levels of wealth in tier-two as well as tier-one cities, and a continued confidence in future economic prospects," according to the report.

China has a large number of young millionaires, which translates into opportunities for brand owners to use technology such as digital marketing and online sales, according to the KPMG report, which was based on a survey of 1,200 consumers in 24 Chinese cities by TNS, a market research company.

Customers from the Greater China region, which includes Hong Kong, Macau and Taiwan, will account for 44 percent of global luxury-goods sales by 2020, compared with 15 percent now, CLSA Asia-Pacific Markets forecast in January.


Rich More Willing To Set Up Family Foundations

Mainland billionaires are showing an ever greater eagerness to establish family foundations for charitable purposes and to fall in line with what experts think is the most decent way for the rich to spend their money.

Earlier this month, Cao Dewang, chairman of the glass giant Fuyao Group in Fuzhou, Fujian province, used stocks with a market value of RMB 3.55 billion ($546 million) to establish a family foundation.

The Heren Foundation, named after Cao's father, is the mainland's first family foundation. Its mission is to provide support for education, healthcare and various projects aimed at eradicating poverty.

Successful entrepreneurs in China are now wont to give money to charities but seldom go so far as to establish a family foundation.

Zong Qinghou, the founder of the Hangzhou Wahaha Group, a leading beverage company in China, is an exception.

Speaking at a Beijing conference, Zong said he is willing to set up a family foundation.

"Our chairman, Zong Qinghou, has considered setting up his family foundation for a long time," Shan Qining, a spokesman for Wahaha, told China Daily. "But this was the first time he announced that to the public."

Explaining his goals, Zong said he would like to establish an internationally recognized prize, similar to the Nobel Prize, to encourage more successful Chinese scientists to work toward making innovations in technology.

Zong also said he will take part of the annual bonuses he receives from the 150 companies he holds shares in and use the money to "provide continuing capital" to defray the costs of running the foundation, Beijing News reported.

Zong, who owns about $5.9 billion in assets, ranked third on the 2011 "Global Chinese Billionaire List" released by Forbes China.

Rupert Hoogewerf, chairman of Hurun Report, said those who do charity work in China will benefit from the fact that so influential a person as Zong has decided to start a family foundation.

His opinion was echoed by Wang Zhenyao, director of the One Foundation Philanthropy Research Institute at Beijing Normal University.

Wang praised Cao and Zong for choosing to give stocks and bonuses to their foundations instead of making single donations. Those funding methods should help to prevent the capital shortages that most public foundations face in the long run.

Meanwhile, not all who want to do good must give to charity, said Deng Guosheng, deputy director of the Non-Governmental Organization Research Center at Tsinghua University.

He said the rich can also benefit society by using their money to improve the equipment used by their companies and to hire more workers.

"A good entrepreneur will not necessarily become a good philanthropist," Deng said.

He said the rich should learn more about policies regulating charitable giving and hire professionals to manage their foundations.

SUSTAINABILITY

China's Waste Management Market Expands

Experts say China's waste management industry is heading toward prosperity, as relevant annual output value growth rate in the coming two to three years might hit 30 percent.

"In the coming two to three years, the waste management sector will encounter a booming period as the government continues to make efforts to strengthen waste management," said Hou Yuxuan, a researcher with an affiliated Web site of the China Investment Corporation.

The State Council, China's Cabinet, recently approved proposals by 16 ministries on strengthening the work of urban domestic garbage management companies.

A report from China Solid Waste Net shows that by 2015, China's annual urban refuse output will reach 184 million tons, of which 82 percent will go through treatment to make it less environmentally harmful.

Xiao Qiong, a researcher with the China Solid Waste Net, said, "China's investment in refuse treatment facilities will reach 170 billion yuan ($25.28 billion) by the end of 2015, at least double the amount invested from 2005 to 2010."

The expanding construction of refuse treatment facilities will help promote the marketization of the industry and attract more investment from companies both at home and abroad, said Hou.

China's waste management approach will gradually switch from putting refuse in landfills to incinerating it, in order to reduce environmental impact. By the end of 2015, incinerated waste will account for 35 percent of China's total managed waste, said Xiao.

Currently, waste in China is processed via landfills, incinerators and composting facilities. Landfill currently accounts for 85 percent of refuse, while incineration accounts for 17 percent.

Many cities in China, including Dalian and Xiamen, are constructing large incinerators. Beijing plans to build nine large-scale incinerators by the end of 2015.

The country's first refuse incinerating plant which is able to handle 2,000 tons of refuse each day went into service in February this year in the city of Wuxi in east China's Jiangsu province.

Waste recovery is also a focus of the proposals brought by the 16 ministries. Recycling rates in urban areas are required to hit 30 percent, and some municipalities and provincial capitals are being asked to bring that number to 50 percent.

China's recycling industry has been expanding rapidly. Statistics show that in 2009, China recycled 140 million tons of refuse. This recycling resulted in RMB 500 billion ($77 billion) in value.

Experts say that new policies, technologies and information are the three factors that affect the development of China's recycling industry.

It is estimated that China loses as much as RMB 30 billion ($4.62 billion) as the result of poor waste management each year. However, if new waste management procedures and techniques are put into place, it is believed that the country can reap economic benefits of at least RMB 250 billion ($38.5 billion) annually.


China Set To Increase Use Of Biofuels

China can become a leader in the production of second-generation (2G) biofuels, made from agricultural waste instead of foodstuffs, such as sugar, starch and vegetable oils said a senior executive from one of the industries' leading companies.

That's as the nation attempts to improve energy efficiency and reduce reliance on fossil fuels.

"The United States is the biggest producer of first-generation (1G) biofuels. Regarding 2G production, no other country has shown leadership, so maybe China will move faster on this because it has been put on the political agenda," said Michael Christiansen, president of Novozymes (China) Investment Co Ltd, referring to the nation's 12th Five-Year Plan (2011-2015).

Global biofuel consumption will increase from the current level of 55 million tons of oil equivalent - the amount of energy obtained by burning one standard barrel of oil - to 750 million tons in 2050. Meanwhile, over the same period, the proportion of biofuel used in the transportation-fuel market will rise from 2 percent to 26 percent, with 2G biofuels accounting for roughly 90 percent of all biofuels used, according to a report by the International Energy Agency.

By developing 2G technology, China can reduce the import volume of crude oil, and reduce CO2 emissions by 90 percent from current levels, he said. "It fits perfectly with China's next Five-Year Plan to reduce inefficiency."

The nation has announced plans to reduce CO2 emissions by 40 to 45 percent by 2020. It's expected that energy consumption of non-fossil fuels could account for more than 11 percent of the country's total energy consumption by 2015.

According to the WEF report, the conversion of biomass into fuel, energy and chemicals has the potential to generate upwards of $230 billion for the global economy by 2020.

China's use of biofuel ethanol will reach 12.7 billion liters by 2020, while automotive ethanol gasoline usage will be 100 percent, and annual consumption of biodiesel will reach 2.3 billion liters, according to the targets set by the National Development and Reform Commission.


Shanghai To Start Alternative-Energy Car Subsidies

Shanghai will start subsidizing purchases of alternative energy-powered vehicles by the end of June, Netease reported on its website.

The city plans to give 20,000 yuan ($3,074) in subsidies for buyers of plug-in hybrid cars and 40,000 yuan ($6,160.24) for pure electric cars, the report said, citing Lu Xiaochun, vice chairman of Shanghai's science and technology commission. China is already offering buyers nationwide subsidies of as much as 60,000 yuan ($9,240.37).

China, the world's largest vehicle market and second- biggest crude-oil importer, is promoting alternative energy- powered vehicles to cut oil imports and rein in pollution. The nation aims to have 13 million all-electric and plug-in hybrid electric vehicles by 2020, making it the biggest market for such cars, according to the World Electric Vehicle Association.

The city will boost buying of alternative energy-powered vehicles to 1,000 by the end of the year through bulk purchases, leasing and private consumer use, according to the municipal government's website. Shanghai will set up 770 charging posts and four stations to facilitate the adoption of electric and hybrid cars, according to the government website.

CONSUMER

Ray-Ban Opens Online Store On Taobao Mall

Ray-Ban, the global leader in eyewear has opened the first premium eyewear online store (rayban.tmall.com) on Taobao Mall, the business-to-consumer (B2C) platform within Taobao, China's largest online retailer. Ray-Ban's E-store will serve as a key avenue for the brand to launch exclusive premium collections and offer Chinese consumers a wide selection of original and iconic styles.

"Ray-Ban speaks to a broad audience of consumers, from young trendsetters to specialists interested in premium products and in search of innovation and technology, and we are excited to collaborate with Taobao to launch our online store and offer Chinese consumers an additional channel to shop the Ray-Ban brand," said Sara Beneventi, global brand director of Ray-Ban. "Our e-commerce strategy in China is grounded in the continued and growing strength of online retailing in China, and Taobao Mall offers unparalleled reach and market penetration across the country. In the future we will continue to build upon our brand awareness in China by leveraging Taobao's 370 million-plus consumer community."

"We are pleased to be able to help bring Ray-Ban's high quality products to the largest possible group of buyers across China," said Peng Ye, vice president of Taobao and general manager of Taobao Mall. "With the combination of the rise of online shopping in the major cities across China and the fact that Chinese consumers are growing increasingly fashion-savvy, we believe this new Taobao Mall store will provide Ray-Ban with the opportunity to satisfy its consumers with enhanced access to the company's authentic, high-quality products."

The Ray-Ban online store will serve as a platform for Chinese consumers to preview and purchase new product offerings such as the Ray-Ban Tech: Light Ray collection, which will be made available in China exclusively through the Ray-Ban Taobao Mall Store until July of this year. The online store will also offer Ray-Ban's Asian Fit and Asian Design styles, which are tailored to better suit Asian facial characteristics and tastes.

Ray-Ban joins the ranks of major brands such as Gap, UNIQLO, adidas, Levi's, Bestseller Fashion Group and Li Ning, who have all launched official online retail storefronts on Taobao Mall.


SM Prime To Build Its Largest Mall In China

The Philippines' largest mall operator plans to build its fifth mall in China, which the company said will be SM Prime Holdings Inc's biggest shopping mall to date.

SM Prime told the Philippine Stock Exchange that the new mall will be built in the industrial city of Tianjin in China.

The mall, expected to be the biggest that the company will build so far, will have a gross floor area of 530,000 square meters.

It is bigger than SM Prime's SM Mall of Asia's gross leasable area of 406,962 square meters. SM Mall of Asia is currently the third largest mall in Asia and the largest in the Philippines.

"In the last 25 years, SM Prime redefined and enhanced its vision, mission, and core values, enabling it to create strategies that foster sustainable growth and expansion. A bigger and bolder SM Prime has since emerged, ready to take on the vast opportunities that will come from a robust and still growing Asian economy," Hans T. Sy, SM Prime president said.

SM Tianjin, which is only about 30 minutes by high-speed train and roughly one and a half hours by car from Beijing, is expected to open in 2013 and will feature three oval-shaped arch buildings.

"(SM Tianjin) will be a grand showcase of how SM Prime has transformed into a first rate mall owner and developer not just in the Philippines but also in select cities of China," the company said.

At present, SM Prime already operates four malls in China, namely SM City Xiamen, SM City Jianjing, SM Lifestyle Center, also in Xiamen, and SM City Chengdu.

SM Prime is owned by Philippines' richest man Henry Sy, Sr.


Marks & Spencer Unveils Plan For New Shanghai Stores

The British-based apparel and luxury food retailer Marks & Spencer Group Plc (M&S) intends to open more stores in Shanghai to increase its market presence.

Its latest outlet will cover an area of 3,700 square meters in the City Centre shopping mall in the city's Changning district.

According to a company statement, M&S plans to build a strong presence in the Shanghai region as one of its priority international markets. M&S opened its first store in Shanghai in 2008, and it currently operates four outlets in China - three in Shanghai and one in Ningbo, Zhejiang province.

"The Chinese market has played an important role in our international expansion strategy, so we may have more stores to open before 2013," said an M&S' marketing department insider in Shanghai who declined to be identified. "The speed of the expansion depends on our overall performance in China."

The company will devote more attention to developing its presence in the country's coastal area over the next year or two, the insider said.

HEALTHCARE

Beijing To Bring In Additive Regulations

China's health ministry has announced that new national safety and technical definition standards for food additives will be released by the end of 2011.

The announcement came amid police investigations into claims that an illegal additive was being added to pork.

The ministry has warned of frequent cases of the illicit use of clenbuterol – a feed additive reducing fat content.

According to China's People's Daily, police have detained 96 people for producing, selling or using meat additives.

In March, meat processor Shuanghui Group was forced to apologise after an illegal additive was found in its products.

That month, China's state council promised to raise operating licence standards in the dairy, edible oils, health-promoting food, meat, and food additives sectors.

China launched its first ever food safety law in June 2009 in the wake of the melamine scandal but there are concerns that increasing regulation may not be the answer.

Dr Weng Shihong, of Shanghai-based Fudan University's international relations and public affairs department, said he fears there are already too many regulators overseeing China's food supply controls.

"For example, compliance issues could be caused by departmental interests or incongruous relationships between a regulator and local government," he warned.


Guideline To Improve Distribution Of Drugs

China issued a guideline that says the country will improve supply and marketing of its medical drugs over the next five years.

According to the guideline, the first of its kind issued by the government, the country aims to create one to three nationwide drug distributors with annual sales topping 100 billion yuan (US$15.38 billion) each by 2015, and another 20 regional distribution companies with sales exceeding 10 billion yuan ($1.54 billion) per year.

The guideline also says the country's top 100 drug wholesalers should aim to raise their sales to account for more than 85 percent of the market share, while the top 100 retail drug-chains should boost their sales to at least 60 percent of the market share.

According to the Ministry of Commerce, China had more than 13,000 drug wholesalers and 388,000 drug retailers by the end of 2009, mostly small- and medium-sized firms. During the same period, the market share for the country's top 100 drug wholesalers and retailing drug-chains stood at 70 percent and 39 percent.

The data also showed the top three Chinese drug wholesalers make up only about 20 percent of the market share by sales at present, while sales by the top three drug wholesaling enterprises in the United States account for more than 90 percent.

Analysts say the guideline will help change the low industrial concentration and inefficiency of drug logistics that has long plagued the drug distribution sector.

"It has become very necessary for us to strengthen industrial management and industrial concentration whether in terms of international competition, more efficient drug distribution, or lowering the price of drugs by reducing the procedures in the middle," said Wen Zaixing, vice director of the Market Order Department at the ministry.

The guideline says the government will encourage mergers and restructuring in the sector while controlling the number of companies.

Fu Mingzhong, chairman of the China Association of Pharmaceutical Commerce, an industrial regulator and adviser to the government, said improving industrial concentration is needed, but mergers and restructuring should be driven by the market.


TCM Seeking Greater Global Recognition

As a brand-name herbal capsule for cardiovascular disease in China, Di'ao Xinxuekang only needs to wait for another 15 years before reaching the EU market.

"The Dutch medical supervisors have recognized it as a qualified drug, but we still lack the evidence of 15-year presence in the EU market," said Ji Jianxin, a research manager with the drug's developer Di'ao Group based in Southwest China's Sichuan province.

Di'ao, one of the largest Traditional Chinese Medicine (TCM) manufacturers, has been quite depressed, as many other TCM enterprises in China, by a European Union directive on traditional herbal medicinal products fully implemented from the beginning of this month.

The directive requires that all herbal medicinal products, must obtain a medical license from any EU member state before it can be allowed in the EU market.

It introduced a so-called simplified registration procedure with a seven-year transition period for traditional herbal medicinal products to be licensed, including Chinese and Indian ones.

However, not a single Chinese herbal medicinal product has been granted the license so far, mainly due to the prohibitive registration cost and lack of required evidence to prove the product had a 30-year history of safe use, including 15 years in the EU.

With a history of more than 2,000 years, TCM did not enter into the EU market until mid-1990s, and it has been imported into the EU and sold to European customers as food supplements instead of drugs.

Most Chinese producers and importers did not reserve the customs papers a decade ago, thus unable to prove the 15-year use of their products in European markets.

While TCM's globalization won't be doomed by one single EU directive as TCM export value to EU only takes up 14 percent of the total in 2010, experts and industry insiders still have had serious concerns about its future.

"Most TCM even don't have standardized labels that can help consumers to find out its origin," said Xian Sheng, from the China Association of TCM Export Companies.

Many experts interviewed by Xinhua said the cultural and philosophical difference could be the greatest barrier to TCM' s entering into western market.

"TCM prescriptions seem confusing to the west with no specified amount of ingredients, while western medicine always pursues accuracy in medical quantity and composition," said Lai Xiaoping, director of pharmaceutical science with Guangzhou University of Chinese Medicine.

Therefore, TCM needs a lot more strategies for its overseas promotion, industry insiders say.

China has signed 91 government contracts with 70 countries to cooperate in the general medical sector, plus 48 contracts exclusively concerned with TCM, according to Peng Yuhang, an official with Sichuan's science and technology department.

"Our government can have a big role to play in promoting TCM in the global market, said Wang Deqin, a manager from a Guangzhou-based TCM company.

The revenue of global herbal products has been increasing by 10-20 percent every year, but China's TCM only takes up about 3 percent of the global market, and 70 percent of its exports are raw herbs with much less added value.

"We still have a long way to go global, and most importantly, we need to pull our efforts together," Xian said.

RECENT CHINA TRANSACTIONS

Yum Offers To Buy Chinese Restaurant Chain

Fast-food restaurant owner Yum Brands Inc. said that it is formally offering to buy most of the remaining shares of Chinese hot pot chain Little Sheep.

Restaurant growth overseas, particularly in China, has been a key driver for Yum's profit growth.

The operator of the Pizza Hut, Taco Bell and KFC chains is offering 6.50 Hong Kong dollars (83 cents) per share to boost its stake in Little Sheep Group Ltd.

The move comes after Louisville, Ky.-based Yum said in late April it was considering making the bid.

The offer values all of Little Sheep at about 6.7 billion Hong Kong dollars ($863.5 million).

The deal would increase Yum's ownership of Little Sheep to 93.2 percent from 27.2 percent with company founders owning the remaining 6.8 percent stake.

Baird analyst David Tarantino estimates Yum will pay about $580 million to $590 million during the deal, including expected option buyouts and excluding the stake it already owns.

"The move appears consistent with Yum's strategy to build on its market-leading position in China through multiple growth platforms," he said

He added the deal will "amplify" Yum's long term growth potential in China, which accounted for about 37 percent of Yum's 2010 revenue.

Yum said the Chinese restaurant industry has become increasingly competitive and taking Little Sheep private would help the company expand in that environment.

Sum Su, chairman and CEO of Yum's China division, said the deal could allow the company to expand Little Sheep's hot pot concept internationally.


Wal-Mart To Buy Stake In China Web Shop Yihaodian

Wal-Mart Stores Inc plans to buy a minority stake in Chinese e-commerce company Yihaodian, giving the world's largest retailer a stronger foothold online and in the fast-growing China retail market.

Financial terms were not disclosed. The deal is expected to close within 60 days, Wal-Mart.

The Yihaodian investment fits into two goals for Wal-Mart -- expanding online and internationally. Wal-Mart Chief Executive Mike Duke has stressed the company's focus on those areas as its U.S. sales at stores open at least a year have fallen for seven consecutive quarters.

Yihaodian offers more than 75,000 items, including groceries, consumer electronics and apparel. The company has operations in Shanghai, Beijing and Guangzhou.

The company, launched in July 2008 by Chairman Gang Yu and CEO Junling Liu, offers next-day delivery at competitive prices, Wal-Mart said.

China's online sales are projected to match U.S. online sales in the next few years, Eduardo Castro-Wright, vice chairman, Wal-Mart Stores and CEO of Walmart Global eCommerce and Global Sourcing, said in a statement.

U.S. online retail spending jumped 10 percent to $142.5 billion in 2010, according to comScore Inc.

Tapping into China's online market is a key step as Wal-Mart tries to capture more sales wherever people want to buy, whether online, via mobile phones or in stores.

In the United States, Walmart now offers shoppers the option of selecting items online and picking them up at its stores. It is also testing home delivery of groceries ordered online in San Jose, California, and has agreed to buy social media company Kosmix to help grow its online and smart phone capabilities.

Wal-Mart and others invested in China's top online seller of consumer electronics and communications products, 360buy, in late 2010.

Wal-Mart entered China in August 1996. It now has 333 stores there, including 104 stores operated by Trust-Mart. Wal-Mart bought a 35 percent stake in Trust-Mart in 2007.

Wal-Mart's biggest growth retail opportunity remains the United States, where it is opening more stores, followed by the potential to expand in China, Duke said last month.


BYD Gets OK For Shenzhen Share Sale

BYD Co Ltd, the Chinese carmaker backed by Warren Buffett, has won regulatory approval for a share sale on the Shenzhen Stock Exchange to fund its expansion in the world's biggest vehicle market.

The China Securities Regulatory Commission approved the planned issue of A shares, according to a statement posted on its website.

Hong Kong-listed BYD is awaiting written approval and will announce details of its Shenzhen offering later, according to a Hong Kong Stock Exchange filing.

BYD plans to offer as many as 79 million shares in Shenzhen, where the company is based, according to a May 5 statement to the Hong Kong bourse.

The automaker said it will use the proceeds to develop its auto and rechargeable- batteries businesses, and to expand into car products and accessories.

"BYD has urgent demand for capital to fuel its expansion," said Zhang Xin, a Beijing-based analyst with Guotai Junan Securities Co. "With sales plunging, IPO pricing will be a key to make BYD attractive to investors."

BYD's vehicle sales fell for nine straight months through April amid rising competition from rivals General Motors Co, Volkswagen AG and Nissan Motor Co.

MidAmerican Energy Holdings Co, a unit of Buffett's Berkshire Hathaway Inc, bought 9.9 percent of BYD in September 2008.

The carmaker raised HK$1.4 billion ($180 million) in an initial public offering in Hong Kong in July 2002 by selling shares at HK$10.95 each. The stock has declined 60 percent in the past year.

OVERSEAS TRANSACTIONS

Lactalis Offers To Buy Parmalat In $4.9 Billion Deal

French dairy company Lactalis announced a EUR.38 billion ($4.92 billion) offer to buy full control of Italy's Parmalat, a move the Italian government had sought to avoid to protect one of the country's corporate titans.

The unsolicited offer, at EUR.6 ($3.7) per share, sent shares of the Italian company soaring 11 percent -- to EUR.58 ($3.68) -- in midmorning trading on the Milan Stock Exchange.

In a statement, Lactalis sought to assuage concerns in Italy about the takeover, saying the merged company would be built around Parmalat and its brand name.

"We have an ambitious project for growth at Parmalat, to make a standard-bearing Italian group in consumption milk around the world, with headquarters, organization and management in Italy," said Lactalis president Emmanuel Besnier in a statement.

Lactalis will examine transferring its activities in the milk sector in France and Spain into Parmalat, the statement said, adding that the size of the merged company could provide enhanced growth prospects in emerging markets like Brazil, China, and India.

After Lactalis moved to increase its stake in Parmalat to 29 percent in recent weeks, the Italian government passed new rules to protect companies in strategic sectors from foreign takeovers. It claimed Parmalat was in the strategic sector of food production.

European Union officials said they were watching the case to see whether EU merger rules applied.

On the day the bid was announced, French President Nicolas Sarkozy was planning to meet with Italian Prime Minister Silvio Berlusconi for a bilateral summit.

Lactalis said its offer is targeting 1.30 billion shares — including the 1.23 billion shares that make up 71 percent of Parmalat's float — plus a possible further 63.7 million shares. At euro2.6 ($3.7) per share, that would put Parmalat's total value at more than euro4.7 billion ($6.7 billion).

Lactalis said the combined company would have revenues of euro14 billion ($19.98 billion), making it the world leader in dairy products.


Qatar Airways To Buy Cargolux Stake; Eyes More Deals

Qatar Airways, one of the Arab world's largest carriers, expects to sign a deal for a 33-percent stake in European all-cargo airline Cargolux in a few weeks, its chief executive said.

Cargolux, Europe's largest all-cargo airline, has previously said it was in talks to sell stake to a strategic investor.

"We are soon going to sign an agreement with them (Cargolux) ... in a few weeks. We see there are synergies and Qatar Airways would like to expand," Chief Executive Akbar Al Baker told reporters in Dubai. He did not give a value for the deal.

Abu Dhabi-based rival Etihad Airways tried to buy a 33.7 percent stake in Cargolux in 2005. At that time reports put the price of the deal at $130 million (77.9 million pounds).

Qatar Airways, half-owned by the Gulf Arab state's sovereign wealth Qatar Investment Authority, will continue to scout for other deals in the future, the chief executive said.

"We will only be interested in other airlines if they are healthy, well established and will add value to Qatar Airways," he said.

Al Baker was quoted last month as saying the airline was on the lookout for acquisitions this year.

The airline said in December it is planning to launch an initial public offering (IPO) in early 2012 after three consecutive years of profit.

Qatar Airways will list the planned IPO in Qatar and abroad, and a London listing was one of the options, Al Baker said.

The airline expects to post a net profit of over $250 million for its financial year ending 2010-2011, compared with $205 million for the year-ago period, the CEO said.


Microsoft Agrees To Buy Skype For $8.5B

Microsoft Corp. said that it has agreed to buy the popular Internet telephone service Skype SA for $8.5 billion in the biggest deal in the software maker's 36-year history.

Buying Skype gives Microsoft access to a user base of about 170 million people who log in to Skype every month, using the Internet and Skype usernames as a complement to the traditional phone network and its phone numbers.

Microsoft said it will marry Skype's functions to its Xbox game console, Outlook email program and Windows smartphones. All of these platforms already have other options for Internet calling, but the addition of Skype users would expand their reach, making them more useful.

Microsoft said it will continue to support Skype on other software platforms.

Skype users made 207 billion minutes of voice and video calls last year. Most of that usage is free calling from computer to computer, which has made it difficult for the service to make money since entrepreneurs Niklas Zennstrom and Janus Friis started the company in 2003. An average of about 8.8 million customers per month, or just over 5 percent of the user base, pay to use Skype to call out to the regular phone network.

The vast majority of paying Skype users is in Europe, where high country-to-country rates for traditional phone calls make Skype more popular than in the U.S., where state-to-state calling is cheap.

Skype is the largest provider of international calling services in the world, surpassing any single phone company, according to research firm TeleGeography.

Skype lost $7 million on revenue of $860 million last year, according to papers that the company has filed since announcing its intentions last summer to launch an initial public offering of stock. The IPO was later put on hold. Skype's long-term debt, net of cash, was $544 million at the end of 2010.

The Skype takeover tops Microsoft's biggest previous acquisition — a $6 billion purchase of the online ad service aQuantive in 2007.

Microsoft said Skype will become a new business division headed by Skype CEO Tony Bates, who will report directly to Microsoft CEO Steve Ballmer.