Nov 30

China Watch Blog has learnt that the Christmas season is quickly approaching, and China’s exporters are like elves busy making holiday gifts to be transported and sold worldwide. But while large volumes of orders usually bring happiness in profits, this year, it’s bringing on headaches instead.

Most years, Chinese manufactures have looked forward to the holiday season with cheer. But this year may be different.

In the eastern Chinese city of Ningbo, a hub for export goods, factories are feeling more towards incoming orders from overseas. Their production prices are rising thanks to the soaring costs of raw materials, People’s Daily reported.

Xiang Bobo, Manager of Chinese Exporter said “Material prices are rising so fast, they differ each day. That makes it impossible for us to price our product appropriately, and we have had to turn down many orders.”

Production prices are normally fixed several months in advance. So overseas buyers are unhappy when they have to pay for the slack. It has left many exporters unwilling to take large orders.

Zhang Yongda, Manager of Chinese Exporter said “Since prices cannot be changed, and uncertainties still abound in the raw material market, exporters are afraid of bigger orders, as they also mean bigger risks.”

For the manufacturers who have taken such orders, they are struggling for profits. And for many, this is shaping up to be a busy season, but not necessarily a profitable one.

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Nov 30

China Watch Blog has picked up this article which says traders and consumers reel as food prices continue to go up.

The People’s Daily reported that street-side fruit and vegetable stall sellers Wang Qilu said: “Business is getting worse. Prices keep going up and fewer people are buying.”

After 15 years of menial jobs, including work as a street cleaner and coal miner, the stall had provided the 41-year-old with a safe and steady income. Until he began to feel the force of inflation, that is.

According to the National Bureau of Statistics, food prices in October rose 10.1 percent year-on-year, the highest rate in two years. Vegetable prices alone climbed 18 percent.

The result has led to a massive 4.4-percent growth for China’s consumer price index, a key indicator of inflation.

“Take the retail price of long beans,” said Wang in Taiyuan, capital of Shanxi province. “To buy 1 jin (a Chinese measurement equal to 500 grams) has almost doubled from 2 yuan to 3.5 yuan in the last month.”

The father of two is used to taking home roughly 3,000 yuan ($450) a month but explained things are getting so tight he could be forced to delay buying his younger daughter a new winter coat.

Under the pressure of high inflation, the State Council last week announced a package of measures to prevent further price hikes, including increasing supplies of vegetables and daily necessities, as well as offering subsidies to low-income families.

On Nov 19, China’s central bank also raised the reserve requirement ratio (the amount commercial banks must hold in customer deposits) by 50 basis points for the second time in nine days.

“The recent moves by the Chinese government indicate the nation has realized the importance and necessity of normalizing monetary policy and suppressing high inflation,” said Wang Tao, head of China economic research at UBS Securities, a global financial services firm.

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Nov 30

China Watch Blog has learnt that in October the values of Hong Kong’s total goods exports and imports of goods rose 13.9% and 14%.

According to figures released by the Census & Statistics Department today, the value of total goods exports in October rose 13.9% over a year earlier to $274.2 billion, following September’s corresponding 24.1% increase.

The value of re-exports rose 13.9% to $268.2 billion in October, while the value of domestic exports rose 11.2% to $6 billion.

The value of goods imports went up 14% over a year earlier to $296.4 billion in October. A visible trade deficit of $22.3 billion,, equivalent to 7.5% of the value of goods imports, was recorded.

For the year’s first 10 months, the value of total goods exports rose 24.6% over the same period last year. The value of re-exports increased 24.7%, while the value of domestic exports increased 20.6%.

Meanwhile, the value of goods imports fell 27.2%. A visible trade deficit of $267.1 billion, equivalent to 9.6% of the value of goods imports, was recorded in this year’s first 10 months.

Comparing the three-month period ending in October with the preceding three months on a seasonally adjusted basis, the value of total goods exports rose 1%. Within this total, the value of re-exports increased 1.2%, whereas the value of domestic exports went down 6.4% and the value of goods imports fell 1.2%.

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Nov 30

China Watch Blog was reading this article that China has reported more than 68,000 AIDS-related deaths as at the end of October, up nearly 20,000 year on year, according to official figures released yesterday.

Shanghai Daily reported that since the 1980s, when the disease first emerged in the country, the total number of registered AIDS patients and HIV carriers had surpassed 370,000, with more than 130,000 being AIDS patients, the Ministry of Health said in a statement.

However, joint research by the ministry, the United Nations Program on HIV/AIDS and the World Health Organization estimated the total at 740,000 as of the end of last year, including some 105,000 AIDS patients.

“In recent years, AIDS infections in the country have continued rising, though at a lower rate. With intensified education, consulting and tests, more carriers and patients have been detected and the death rate dropped considerably,” the ministry said in its statement.

However, the ministry noted that the AIDS control situation in some regions was especially grave, citing the regions of Yunnan, Henan, Sichuan, Guangdong, Xinjiang and Guangxi which account for a disproportionate 77.1 percent of the country’s total HIV/AIDS sufferers.

According to the statement, sex is the most prevalent method of AIDS transmission in the country, with male-to-male sex accounting for 8.6 percent of all HIV/AIDS cases in 2009, up from 5.9 percent in 2008.

Also yesterday, the State Council, China’s Cabinet, pledged to step up screening for HIV/AIDS while improving public knowledge of the disease and working harder to protect those at risk.

The government will expand its monitoring network to detect as many HIV-positive people as possible, said a statement issued after a State Council executive meeting, presided over by Premier Wen Jiabao.

While promoting speedy HIV detection methods at grassroots level, the government will add more HIV/AIDS medications to basic medical insurance to ease the sufferers’ financial burden, it said.

The health ministry noted that the number of HIV/AIDS sufferers in China will keep rising for a “certain amount of time.” China had 49,845 AIDS deaths as of October last year, the ministry said.

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Nov 30

China Watch Blog would like to share an experience of taking a flight with a Chinese budget airline called Spring Airlines. This airline offers the cheapest return flight between Hong Kong and Shanghai – costing just over HK$1,000 – and it turned out to be OKAY. Nothing fantastic, but not bad at all for the low price they charged.

One of the conditions attached to the low price is that a passenger is allowed only to bring 5kg hand carry items and 10kg for baggage storage compartment.

Upon checking in at the ticketing counter before boarding the plane, many travellers from the Mainland who came to Hong Kong for shopping found that they had excess baggage and had exceeded the 10kg quota.

This is a small matter! This is because Spring Airlines is very customer friendly and has a cashier’s counter next to the ticketing counter where passengers can pay for their excess baggage.

Noticed one passenger who was having some hand carry items that were clearly over 5kg, but she refused to pay the excess baggage charge. She claimed she would not take them to Shanghai and would leave it with a friend.

The ticketing agent did not want to argue with the customer over this, but we met the passenger again while boarding the plane with the extra baggage which of course was not left behind with a friend as she claimed she would.

As for punctuality, the flight was delayed for slightly over an hour, and this is quite acceptable by China’s standards as other airlines are usually facing delays too. And sometimes they can be delayed for as long as two to four hours.

One of the airline’s conditions was that passengers should not bring their own food and drinks on board the aircraft. Immediately upon boarding, several passengers were drinking from their own bottles of water, including some holding thermos flasks with hot tea. Others were digging into their handbags to pull out huge plastic bags of tit-bits and goodies for munching on the way to Shanghai for the slightly more than two hours trip.

When an air steward and stewardess came to sell drinks and tit-bits, of course there were some other passengers who bought them.

Then we tried to get some sleep upon boarding, but unfortunately there were three passengers seated behind who were yakking away for the whole duration of the trip loudly without taking a break.

One of them was trying to impress the other two gentlemen, while expounding his views in Mandarin, of his knowledge in English by interjecting one or two English words in every one or two sentences in Mandarin. He was talking to his friends about his travel experience, and he was showing off his knowledge of the names of drinks like Cognac, XO Brandy, Martini, etc. he had taken during the trip.

Tough luck if you ended up in such a hot seat the next time you fly on a budget airline, and want to have a short nap.

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Nov 30

China Watch Blog has learnt that the State Council, China’s cabinet, will revise penalties to further crack down on price violations in order to tackle inflation.

The revised code will mainly target price manipulation, collusion, malicious hoarding and the spreading of false information, China Daily reported, citing a statement issued after a State Council executive meeting presided over by Premier Wen Jiabao.

Revision to the Provisions on Administrative Penalties for Price Violations is necessary to crack down on price violations and to maintain normal order and market pricing, the statement said.

The statement, which did not elaborate on the revisions, said the new code will be made public after further revision.

China’s CPI, the main gauge of inflation, rose to a 25-month high of 4.4 percent year on year in the 12 months through October. The hike was mainly due to a 10.1 percent surge in food prices. Food prices have a one-third weighting in the calculation of China’s CPI.

China has implemented a slew of measures to rein in rising commodity prices to ease economic pressures on the public, especially low-income groups.

The measures include increasing grain supply, giving subsidies to low-income families and clamping down on speculation.

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Nov 30

China Watch Blog points out that the Mainland economy’s twin engines, the Yangtze and Pearl river deltas, are spluttering due to a shortfall of migrant workers, especially in the service and manufacturing industries, amid soaring living costs and stagnant salaries.

“The labor shortage has hit customer services and the home service sectors since spring, and it is becoming more serious recently,” Chen Qian, the manager of a downtown employment agency in Shanghai was quoted by the China Daily as saying.

“On average, up to 40 percent of job vacancies in these sectors have not been filled.”

According to the latest statistics from the Shanghai Restaurants Association, the shortfall in waitresses currently stands at 20 percent and will double during the Spring Festival period, which falls in early February next year.

“Up to 80 percent of the 40,000 restaurants in the city have been regularly running recruitment notices this year as demand for labor has been much higher than supply,” said a male staff member, surnamed Xia, from the association’s marketing department.

In order to fill the huge shortage in the customer services sector, many restaurants have to employ part-time workers from universities or previously unpopular middle-aged workers from rural areas in other provinces.

“As more and more migrant workers were born in the 1990s, they are more picky on salaries and work conditions, and it is extremely difficult to find enough hands ahead of the Spring Festival,” said Shen Xiaoyan, restaurant supervisor of South Beauty, on Ziyun Road in Shanghai.

Migrant workers make up 95 percent of the workforce of the company, which owns more than 10 restaurants in Shanghai. It has dozens of unfilled vacancies, she said.

Shen added that the restaurant had removed the age-limit requirement for job applicants so that it could employ middle-aged workers and college students.

The main reason for the severe labour shortage is the soaring cost of living coupled with stagnant income growth, experts said.

The average monthly salary for an employee in the service sector in Shanghai is about 1,300 yuan ($197), barely enough to cover food costs.

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Nov 24

China Watch Blog has obtained details of an ACFE study on Asia-Pacific Fraud Trends in the Workplace which reveals that on Average Occupational Fraud Case Costs US$300,000.

The report released from Austin, Texas in the United States, says that the median fraud loss for organisations in Asia is about US$300,000 – significantly higher than the global median loss of US$160,000, according to a survey of Certified Fraud Examiners (CFEs) who investigated cases between January 2008 and December 2009.

Corruption was the most commonly reported scheme, appearing in more than half of the Asia-Pacific fraud cases in the study. Survey respondents also estimate that the typical organization loses 5 percent of its annual revenue to fraud, which is consistent with the study’s worldwide estimate.

The Association of Certified Fraud Examiners (ACFE) – the world’s largest anti-fraud organization and premier provider of anti-fraud training and education – recently published Asia-Pacific findings from its global survey in the 2010 Report to the Nations on Occupational Fraud & Abuse, Asia-Pacific Edition. The new Report breaks down data gathered from 338 fraud cases in Asia-Pacific countries, providing benchmarking statistics on occupational fraud losses, detection methods and perpetrators.

Key findings from the 84-page Report include:

* Asset misappropriation is the most common type of occupational fraud. Asset misappropriations occurred in 80 percent of all cases. Financial statement fraud was the most expensive category, causing a median loss of $4.3 million. This is consistent with the ACFE’s worldwide figures.

* Fraud committed from the top of an organisation is the most damaging. Occupational frauds committed by owners/executives caused a median loss of $1 million. Losses caused by managers and employees were $242,000 and $200,000, respectively.

* Most offenders have no criminal record. Approximately 85 percent of fraud perpetrators had never been charged with, or convicted of, a prior criminal offense.

* Surprise audits and tips are leading methods of reducing losses. The anti-fraud controls that had the greatest impact on occupational fraud losses were surprise audits and hotlines. Both controls were associated with a loss reduction of more than 40 percent.

The Report also details findings such as how organisations were affected based upon industry, how the implementation of anti-fraud controls affected exposure to fraud, additional breakdowns of fraud statistics by geographical region and the most common behavioural traits observed among fraud perpetrators.

The 2010 Asia-Pacific Edition report is available in PDF format for download online at the ACFE’s website:

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Nov 23

China Watch Blog has learnt that Mainland China will build a complete industrial chain of cloud computing technology and create the “China Cloud Valley” in Harbin, capital of northeastern China’s Heilongjing Province over the next three years.

In the coming three years, the new industry will have a scale of 3 billion yuan, People’s Daily reported on Monday. Cloud computing refers the shared use of resources from several computers facilitated by networks.

The world’s largest cloud computing data centers are mostly located between 40 degrees north latitude and 50 degrees and Harbin’s location is similar to that. In addition, Harbin has abundant electric power and water resources, which help to reduce the operating costs, thus Harbin has unique regional advantages in developing the cloud computing industry, said Sun Rao, vice governor of Heilongjiang Province, at the launching ceremony of the cloud computing base on Nov. 18.

The “China Cloud Valley” will include a cloud computing center base; an application, innovation and research and development base; and a business incubator base. It will mainly develop industries involved in could computing, such as the Internet of things; software and service outsourcing; film, TV and new media production; and animation production

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Nov 23

China Watch Blog has learnt that Mainland China has started allowing the yuan or renminbi to trade against the Russian rouble in the interbank market from Monday as policymakers promote the currency’s use in global trade and finance.

The China Daily reports that the move will help “facilitate bilateral trade between China and Russia and help develop yuan trade settlements,” according to a statement published on the website of the China Foreign Exchange Trade System (CFETS), a subsidiary of the People’s Bank of China.

The central bank calculates the daily reference rate by taking an average of quotes from commercial banks designated to act as market makers, the statement said.

“The pace of internationalizing the yuan is accelerating,” said Zhao Qingming, a senior analyst in Beijing at China Construction Bank Corp, the country’s second-largest lender.

“The direct trading between the yuan and the rouble will help expand trade settlements in the two currencies.”

hina is allowing greater use of its currency for cross-border transactions to reduce reliance on the US dollar, after Premier Wen Jiabao said in March he was “worried” about holdings of assets denominated in the greenback. Purchases of US currency to contain yuan gains contributed to a $194 billion increase in the nation’s foreign-exchange reserves in the third quarter, boosting the total to a record $2.65 trillion.

The rouble traded at 4.6711 per yuan as of 9:59 am in Shanghai, according to CFETS data. The reference rate, which is published at around 9:15 am every day, was set at 4.6711 per yuan. The yuan is allowed to trade 5 percent on either side from the fixing, according to the CFETS statement.

China started allowing the Malaysian ringgit to trade against the yuan on Aug 19. Traders can also buy and sell the yuan against the dollar, the euro, the yen, the Hong Kong dollar and the British pound.

The yuan was little changed at 6.6375 per dollar, from 6.6395 on Nov 19. The rouble was stable at 30.9912. The value of international trade transactions settled in the Chinese currency totaled 126.5 billion yuan ($19 billion) in the third quarter, 160 percent more than in the three months through June, the People’s Bank of China reported on Nov 2.

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