Manufacturing continues to expand

Index hits five-month peak, easing concerns over economic slowdown
BEIJING / SHANGHAI - Manufacturing bounced back to a five-month peak in February, supported by stronger exports, easing concerns about a possible contraction.
The purchasing managers' index, an indicator of manufacturing activity, hit 51 last month, 0.5 points higher than January, the National Bureau of Statistics and the China Federation of Logistics and Purchasing revealed on Thursday.
It has stayed above the 50-point level for three consecutive months after it dropped to a 32-month low of 49 in November. A reading higher than 50 means expansion, while below 50 shows contraction.
"The continually increasing PMI proves the nation is undergoing an economic rebound, propped up by industrial production," Zhang Liqun, a research fellow with the Development Research Center of the State Council, said.
In view of the current economic situation the forthcoming two sessions of the National People's Congress and the Chinese People's Political Consultative Conference are expected to further clarify the government's stance.
"The government may highlight the modest easing to support growth, while fiscal spending is likely to be tilted more to livelihood areas," said Wang Tao, chief economist with UBS China.
Liu Ligang, director of the economic research department of ANZ Greater China, attributed the rebound to China's easing monetary policies and improving external climate.
China announced last month that it would cut the reserve requirements for banks which Liu said would help direct more capital to the economy.
Economic growth declined to 8.9 percent in the final quarter last year after Beijing hiked interest rates and tightened other controls to tame inflation.
The government reversed course in December and promised more bank lending to help companies cope with the slump in global demand but changes have been gradual.
In February the sub-index of industrial output climbed to 53.8 from 53.6 in January, its highest in six months.
Unlike the January growth, which was mainly driven up by consumer spending during the Lunar New Year holidays, the rise in February was fueled by expansion of electrical and mechanical equipment manufacturing, a report from the logistics federation said.
There was also good news on the export front. Orders increased to 51.1, 4.2 points higher than the January reading, the first time it was above 50 since August 2011.
It may be a sign of a trend initiated by rising US manufacturing and the improved situation in the indebted eurozone, the federation said.
Zhou Dewen, chairman of the Wenzhou Small and Medium-Sized Enterprises Development Association, said manufacturers in Wenzhou are busier, so far, in 2012 than they expected to be.
Many export-oriented businesses in Wenzhou are developing new markets outside Europe, North America and Japan and are seeking new distribution channels in South America, Africa and the Pacific Rim, Zhou said.
The purchasing prices index, which shows the raw material costs of industrial production, jumped to 54 in February, the highest since October last year.
Zhang warned that the surging prices, especially for oil-related commodities and chemicals, might indicate inflationary pressure and threaten future economic growth.
The consumer price index, a main gauge of inflation, increased to 4.5 percent in January from 4.1 percent in December, forcing authorities to remain vigilant over inflation while maintaining growth.
According to the official statement, small companies were able to expand at a faster pace according to a sub-index reading of 55.2, up by 3.2 points from a month earlier.
Small and medium-sized businesses have benefited from government support. In addition, the central bank's move to reduce bank reserves on Feb 24 increased market liquidity.
However, an HSBC index portrayed a different view of manufacturing.
The HSBC PMI reading of 49.6 indicated a contraction although recording a better performance from the 48.8 in January.
"Deteriorating external demand is adding more downside risks to growth in the absence of a strong comeback in domestic demand," said Qu Hongbin, HSBC chief economist in China.
Zhang Zhiwei, chief economist in China with Nomura Holdings, also had a dim view. He expected that PMI in March will drop, because of cooling export and property sectors.
Zhang said that the People's Bank of China, the central bank, may cut interest rates by 25 basic points in March and again cut bank reserve requirements by 50 basic points in April, to prevent a further slowdown.

Hearing ends without ruling over iPad name

Graham Michael Robinson, witness for tech company Apple, is surrounded by reporters outside the Guangdong High People's Court in Guangzhou, Guangdong province, on Wednesday, as the court held a public hearing on the iPad trademark dispute.

GUANGZHOU - A court in Guangdong province did not make a final ruling on a lengthy iPad trademark dispute between a Chinese company and tech giant Apple after a public hearing on Wednesday.
The latest hearing, held in Guangdong Provincial High People's Court, followed an initial ruling by the Shenzhen Intermediate People's Court, which rejected a lawsuit in December by Apple and IP Application Development accusing Proview Technology of infringing on the iPad trademark.

The hearing on Wednesday focused on whether Proview Electronics, a Taiwan-based company, had the right to represent Shenzhen-based Proview Technology to sell the iPad trademark.
Xiao Caiyuan, the attorney for Shenzhen Proview, said Shenzhen Proview and Taiwan Proview are two independent companies and the contract signed between Taiwan Proview and Apple for the iPad trademark transfer on the mainland was invalid.
But attorneys for Apple said Taiwan Proview was linked with Shenzhen Proview and that Apple has the right to use the iPad trademark on the mainland.
Meanwhile, senior executives from Shenzhen Proview, including Yang Rongshan, Mai Shihong and Yuan Hui, have participated in the negotiations for the trademark transfer, representing Taiwan Proview, attorneys for Apple said during the hearing.
Yang was chairman of Shenzhen Proview before he resigned in early 2010, while Mai was director of the legal affairs department with the company.
Taiwan Proview registered the iPad trademark in a number of countries and regions as early as 2000, with Shenzhen Proview registering the trademark on the mainland a year later.
At the hearing on Wednesday, representative lawyers of Apple and IP showed new evidence including e-mails between both sides during the early negotiations for the trademark deal.
However, Xiao argued Shenzhen Proview never asked its executives to negotiate with Apple and IP to sell the iPad trademark on the mainland, and Yang himself did not have the right to sell the company's properties.
Shenzhen Proview has registered and used the iPad trademark for more than a decade on the Chinese mainland, he said.
"The contract for the mainland's iPad trademark transfer was signed between Taiwan Proview and Apple and IP Application Development Limited in December of 2009, not Shenzhen Proview," Xiao said.
Apple and IP paid $56,000 to Taiwan Proview for the iPad trademark transfer.

Customers test out Apple iPads in an Apple Store in downtown Shanghai Feb 29, 2012. 

Ma Dongxiao, a lawyer representing Shenzhen Proview, said he was confident of winning the lawsuit.
"E-mails presented by Apple at court actually have no legal validity," Ma told China Daily.
The e-mails showed that Yuan Hui, a staff member of Shenzhen Proview, was once involved in the trademark transfer negotiation.
"Yuan was actually asked by Taiwan Proview to help translate some documents during the transfer negotiation. He had no right to represent the Shenzhen side to sign the contract," Ma said.
Also, a lawyer surnamed Wang who attended the public hearing, said Shenzhen Proview has a good chance of winning, according to the evidence produced by both parties so far.
"Shenzhen Proview and Taiwan Proview are after all two different companies, and Shenzhen Proview has never signed the iPad trademark transfer contract with the foreign companies," Wang with the Guangdong Kede Law Firm told China Daily.
If the court finds that Apple has infringed on the trademark rights of Shenzhen Proview, its wildly popular iPad tablet computers will be banned from sale on the Chinese mainland.
Wang said the provincial court may uphold the verdict passed by the Shenzhen court in its first trial.
But in a related case heard late last month in Shanghai - where Shenzhen Proview sued Apple's chief distributor in China - the court rejected a request to stop iPad sales.

Business lawsuits in sharp increase

More investment from overseas, slowing economy cited as reasons
BEIJING - Lawsuits involving non-mainland companies rose last year as domestic opportunities lured an increasing number of firms battling the global economic slowdown, according to a top court.
The last 12 months saw a 10 percent rise in lawsuits, Liu Guixiang, presiding judge of the No 4 civil tribunal under the Supreme People's Court, said. The tribunal is in charge of non-mainland commercial and maritime trials.

Liu did not disclose the exact number of cases, but said they accounted for a "considerable portion" of the 31,953 civil and commercial lawsuits involving non-mainland firms last year.
Jiangsu province, in East China, provides a clear example.
The 114 cases in the province last year represented an increase of 20 percent over the previous year, according to court figures.
Apart from normal disputes regarding contracts, there were also more lawsuits involving bankruptcy and profit distribution, Liu said.
Courts are also dealing with cases involving international finance and derivatives, he said.
There has also been a shift in the type of businesses involved.
Legal disputes now concern the new industries, such as energy and the environment, as well as the more traditional ones, such as real estate and manufacturing.
Most of the cases involve companies from Asian countries and regions, such as Japan, the Republic of Korea, Singapore and Malaysia, as well as Hong Kong and Macao special administrative regions.
Disputes involving companies from Hong Kong and Macao accounted for 60 percent of the total, according to court figures.
Liu said the rise in disputes was partly due to an increasing number of overseas companies entering the mainland.
By the end of November, the mainland had about 453,600 of these companies, up from 426,000 in September 2008, according to figures from the State Administration for Industry and Commerce.
Yang Anjin, a lawyer and partner with Wis & Weals, a Beijing-based law firm that focuses on providing intellectual property services, said the main driving force behind the increase was globalization and the more opportunities that the mainland had to offer amid Europe's crisis.
"Apart from established US companies, we've noticed more and more small and medium-sized enterprises in Europe and Japan, that once ignored the mainland market, are now seeking opportunities on the mainland," he said.
Yang said localization is the most difficult aspect for newcomers.
"Compared with the early arrivals that have engaged more Chinese in decision-making and management, the late entrants are more conservative and unfamiliar with Chinese culture and laws."
Eduardo Leite, chairman of the executive committee of Baker & McKenzie, one of the world's largest law firms, also said it is "common" for international investors to have trouble obtaining local licenses and handling labor and intellectual property issues because of the complicated regulatory framework and unfamiliar culture.
Disputes usually pop up during difficult times and that is what is happening on the mainland, Liu said.
Businesses are facing rising labor costs and higher prices, for energy and raw materials.
The real estate market has also slowed down amid tightening measures, and the sluggish global economy has hit export demand. All these factors, and others, have contributed to more disputes.
Legislation concerning overseas-invested enterprises was drafted about two decades ago and may need to be updated, Liu said.
"For example, such laws fail to specify the detailed rights and obligations of the mainland and overseas parties," Liu said.
Moreover, due to different legal proceedings and concepts, some overseas investors questioned the efficiency of mainland courts, he said.
"We'll focus on unified judgment standards, improve the quality of judicial services and optimize the legal environment for overseas investment," Liu said.
"And most importantly, we'll protect the legitimate rights and interests of both mainland and overseas parties involved in disputes."

Chinese new year's real estate policies to stabilize

中国新一年的房地产政策趋于稳定.Potential homebuyers at a real estate exhibition in Suzhou, Jiangsu province, on Sunday. Analysts said that the nation's policies are unlikely to change in the short term and the government still aims to bring home prices down to a reasonable level.

中国新一年的房地产政策趋于稳定.BEIJING - China is not likely to loosen its rigorous real estate policies in the short term but may give the market a bigger role in setting prices in the long run, industry analysts said ahead of the opening of the two major political sessions.
"The central government will probably maintain its existing real estate policies in the short run," said Qin Xiaomei, chief researcher at Jones Lang LaSalle (JLL Beijing).

Potential homebuyers at a real estate exhibition in Suzhou, Jiangsu province, on Sunday. Analysts said that the nation's policies are unlikely to change in the short term and the government still aims to bring home prices down to a reasonable level. [Wang Jiankang / for China Daily]
However, in the long term, the government will let financial factors play a bigger role in setting prices, such as by collecting property taxes instead of restricting home purchases, Qin added.
Since the start of 2011, the government has moved to cool property prices, such as requiring higher minimum downpayments and setting limits on the number of homes a family could buy in some cities.
Government control of the property market will be among the hottest topics among deputies of the upcoming annual sessions of National People's Congress and Chinese People's Political Consultative Conference in Beijing.
"Some measures, such as restricting the amount of homes a family could purchase, will be gradually phased out once property prices fall back to a reasonable level," said Carlby Xie, head of research at real estate consultancy Colliers International (Beijing).
People who have held Shanghai resident cards for more than three years are eligible to buy a second home despite their non-permanent residence status, a municipal housing official confirmed to local media on Wednesday for the first time, triggering market rumors that housing regulations would be eased in the city.
Before that, Wuhu, a third-tier city in eastern Anhui province, abruptly halted a plan to give home buyers subsidies for residences smaller than 90 square meters.
The policy shift reflected both the central government's determination to continue its policies as well as the local government's fiscal plight, said Xie.
China Index Academy, a Beijing-based real estate consultancy institute, reported that revenue from land sales in the 300 large cities that it monitors fell 67 percent year-on-year in January.
Beijing's revenue from land sales is expected to drop by 30 percent this year to 90 billion yuan ($13.6 billion), making it the worst year on record, the local bureau of finance said.
Shanghai likewise lowered its forecast for land sales revenue this year to 125 billion yuan, which would be down 16.2 percent year-on-year, according to the local bureau of finance.
"The government needs to achieve a balance between maintaining sound economic growth while deflating the real estate bubble, and the local governments also need other alternatives to back up revenues when land sales plummet," said Qin. "It is all about a balance."
Though the central government has reiterated that its policies wouldn't change, there's been some sign of fine-tuning in the market as prices fall.
Some banks in Beijing and Shanghai, for instance, began to offer first-home buyers' mortgages at the benchmark level, compared with higher rates before.
With the property market continuing to cool, some economists are concerned that a larger-than-expected correction would mean a hard landing for the world's second-largest economy.
Some foreign institutional investors forecast a gradual loosening in real estate policies in the second half.
Wee Liat Lee, regional head of property at Samsung Securities (Asia), said the government should become cautious about an over-correction in property prices, which would inevitably affect the economy.
Property prices in more than two-thirds of China's major cities dropped further in January from the previous month.
Of 70 major cities monitored by the government, prices fell month-on-month in 48, according to the National Bureau of Statistics.

Geithner praised China to play a responsible role in the stability

盖特纳赞扬中国发挥负责任的稳定作用.MEXICO CITY - China has played a responsible stabilizing role in its international policy, US Treasury Secretary Timothy Geithner said here Saturday.
"China has played a really very responsible stabilizing role, despite its relative newcomer status,"  he said at a press conference.
"And if you listen to China talk about their challenges, dramatic changes in reorientation of structure of economy towards domestic demand, is every meaningful about the basic reform of the Chinese economy," said Geithner who is here for the G20 finance ministers and central bank governors meeting.
The G20 financial meeting discusses how to strengthen the support mechanism of the International Monetary Fund (IMF) against the eurozone debt crisis.
But analysts say it is hard to reach an agreement at the meeting as divergences among the G20 countries on the issue can't be resolved in the near future.
The European Union (EU) has urged the international community to pump more money into the IMF, but some members of the G20 oppose to the proposal as they think the resources of the IMF can not substitute a healthy and strong European rescue fund.

China's central bank may cut interest rates before July

中国央行可能在7月之前下调利率.BEIJING - China's central bank may cut the interest rate in the second and third quarters this year, as the economies in the EU and US slow down further while domestic inflation pressure gradually eases, economists said on Saturday.
According to research co-sponsored by Xiamen University and the National University of Singapore, China's monetary policy is very likely to see an adjustment in the first half of 2012.
"We expect the People's Bank of China to cut the interest rate twice in the second and third quarters, by 25 basis points each time," said Chen Kang, professor of economics at the Lee Kuan Yew School of Public Policy at the National University of Singapore.
After those two cuts, China's benchmark interest rate will drop from the current 6.56 percent to 6.06 percent.
The central bank said on Feb 18 that it will cut the reserve requirement ratio, or the proportion of money that lenders must set aside as reserve, by 50 basis points effective Feb 24. It followed a cut in the reserve requirement in December by 50 basis points, which was the first since December 2008.
"As the external demand weakens, the renminbi further appreciates and the domestic economy slows down, we believe the inflation pressure will gradually ease this year," said Li Wenfu, a professor with Xiamen University.
According to the National Bureau of Statistics, the Consumer Price Index, a main gauge of inflation, stood at 4.5 percent year-on-year in January. It rose 5.4 percent in 2011 from a year earlier, the bureau said.
"Based on our research, China's CPI will fall to 3.33 percent in 2012, down 2.18 percentage points from 2011, which provides leeway for the central bank to loosen its monetary policy as the economy further slows down," Li added.
Zhang Ping, deputy head of the economic research institution of the Chinese Academy of Social Sciences, said the CPI will fall further in February, probably below 3.5 percent.
"With a meaningful rebound for domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth," said Qu Hongbin, chief economist for China and the co-head of Asian economic research at HSBC, urging the central bank to further loosen its policies after it cut the RRR for banks for the first time this year.
Due to last year's surging inflation, China's real interest rates have been negative for the past 23 months. China's CPI reached a 37-month high of 6.5 percent in July 2011.
"Given China's negative real interest rate, there should be a cut in the loan interest rate but no more in the deposit interest rate," said Zhang Shuguang, an economist with the Unirule Institute of Economics.

China's economy is expected to expand 8.5% in 2012

中国的经济预期到2012年再扩大8.5％.GUIYANG - China's economy is expected to expand by 8.5 percent in 2012, slightly down from 9.2 percent in 2011, the head of a Chinese government think tank said Thursday.
The world's second-largest economy faces relatively significant downward pressure this year due to increasingly complicated domestic and overseas situations, said Li Wei, director of the Development Research Center of the State Council, or China's Cabinet.
China's annual export growth is likely to slow to 10 percent from 20.3 percent in 2011, as the global economic outlook has been darkened by slow economic recovery in the US and Europe's sovereign debt crisis, Li said at a conference held in Guiyang, capital of Southwest China's Guizhou province.
Li projected the country's fixed-asset investment to grow by some 20 percent, down by four percentage points from a year earlier, as the manufacturing and real estate sectors have been hit by slowing exports and curbing policies, respectively.
A moderate economic slowdown will help to curb inflation triggered by excess demand and also encourage more mergers and acquisitions, which will speed up the adjustment of China's economic structure, he said.
Once the potential economic growth rate begins a downward trend, expansionary measures cannot increase the growth rate, but only lead to a "bubble" economy, Li said.

Beijing - Multi-State proposed to abandon green taxes for airlines in Europe

北京--多国建议欧洲放弃针对航空公司的环保税.Moscow meeting sees common approach develop against scheme
BEIJING / LONDON - A 32-nation conference agreed that Europe should drop its unilateral decision to impose a green tax on airlines flying into the European Union, and a majority of countries signed a declaration opposing it, a senior official said on Thursday.
All airlines using EU airports, from this year, are required to buy permits under the Emissions Trading Scheme. The scheme was introduced unilaterally, without any negotiation.
"(Charging emission fees on international aviation) is a multilateral issue, but the EU breached this principle of handling international matters," said Ji Yuan, a deputy director at the planning and development department of the Civil Aviation Administration of China.
Thirty-two countries, including China, the United States, Brazil, India, Japan, Singapore, South Africa and Argentina, participated in the international conference on cutting greenhouse gas emissions in Moscow on Tuesday and Wednesday.
"All participating countries agreed that the EU should drop its unilateral methods and return to a multilateral discussion to solve the emission issue," said Ji, who was a member of the Chinese delegation to the conference.
So far, 29 countries have signed a joint declaration opposing the European scheme.
The declaration envisages a basket of retaliatory measures to the EU emissions trading scheme, allowing any country to introduce any measure in line with national legislation to either completely scrap the ETS or to postpone it.
The measures include barring national airlines from participating in the EU's carbon scheme, lodging a formal complaint with the United Nations' International Civil Aviation Organization, ceasing talks with European carriers on new routes and imposing retaliatory levies on EU airlines.
"The conference has achieved its purpose. It will send a strong signal to the EU," Ji said.
Foreign Ministry spokesman Hong Lei on Thursday urged Europe to base its future decisions on the bigger picture of international cooperation on climate change, the sustainable development of international aviation as well as China-EU ties.
Beijing hopes the EU will beef up communication and coordination with related parties, including China, with "a constructive and practical attitude" to find an appropriate solution, Hong said.
Previously, non-EU countries expressed opposition against the scheme in various ways.
China's air regulator banned Chinese airlines from complying with the EU scheme this month. In the US, legislation is under way to ban US airlines from participating in the ETS.
Russia's Deputy Minister of Transport Valery Okulov said on Wednesday that Russia might impose restrictions on European airlines' trans-Siberia flights. A draft law to ban airlines from complying with the ETS has already been submitted to Russia's State Duma, or the lower house of parliament.
Richard Wellings of the Institute of Economic Affairs, a London-based think tank, said that the EU's policy could inflict economic damage by raising the flight cost.
"It is also deeply unfair, firstly because it unilaterally imposes the new costs on non-EU firms, and secondly because aviation is already more heavily taxed than other modes of transport," he said.
Simon Retallack, from Carbon Trust, a London-based nonprofit company, believed that the European proposal to include aviation in the ETS is "sensible" but "not ideal".
"The aviation industry, like every other sector of the economy, needs to play a part in order to help avoid the risks associated with dangerous climate change," he said.
"But if you are to ask is it the ideal solution on the global level, no. The ideal solution will be to have an international agreement on aviation emissions," he said.
At a briefing in Brussels, Isaac Valero-Ladron, EU spokesman for climate action, reiterated that the EU "will review its legislation if there is an ambitious global agreement in force because we would be covered by this agreement".
Professor Kenny Tang, CEO of Oxbridge Weather Capital, a London-based investment company focusing on environmental technology, said that the coalition of non-EU countries will give them more bargaining power.

Dec inflation dips to 4.1%, 2011 CPI at 5.4%

BEIJING - China's consumer price index (CPI), a main gauge of inflation, rose 4.1 percent year-on-year in December, down 0.1 percentage point from November on falling non-food prices, the National Bureau of Statistics (NBS) said Thursday.
The CPI was up 5.4 percent in 2011 from the previous year, well above the government's full-year inflation control target of 4 percent, the NBS said in a statement on its website.
The inflation rate in December marked a five-straight-month decline after hitting a 37-month high of 6.5 percent in July amid government tightening measures, according to the NBS data.
On a monthly basis, the cost of living dipped 0.2 percent in December, while prices of entertainment, educational and cultural articles and services dropped 0.3 percent, the NBS said.
Food prices, which account for nearly one third of the basket of goods in the nation's CPI calculation, went up 9.1 percent year-on-year in December and 1.2 percent month-on-month, the NBS said.
The December inflation figure was in line with the market expectation, as many economists forecast that the CPI would grow around 4 percent year-on-year in December.
China's Producer Price Index (PPI), a major measure of inflation at the wholesale level, rose 1.7 percent in December year-on-year, further weakening from 2.7 a month earlier.

 The reading eased further from November's 2.7-percent growth, the NBS said in a statement on its website.
On a month-on-month basis, China's December PPI fell 0.3 percent from November, the NBS said.
Producer purchase prices grew 3.5 percent year-on-year in December and were down 0.4 percent from a month ago, said the NBS.
The full-year PPI climbed 6 percent year-on-year in 2011, while producer purchase prices rose 9.1 percent from a year earlier.
Analysts expect the pullback to ease temporarily, as upcoming holiday demand will drive prices higher in the short term, although the downward trend is likely to last amid the global economic downturn.
"As long as there is not a significant easing of China's monetary policy, the downward trend will not change," read an analysis by Bocom International.
Analysts warned that any change in market sentiment will influence the trend.
"Though investors' confidence remains low, possible government measures to spur the economy could boost prices at all levels," said Chen Kexin, an analyst with the distribution productivity promotion center of China Commerce.
China has made controlling prices a top priority last year and implemented a series of measures to address the issue, including tightening monetary policy, cracking down on speculation, increasing food supplies and reducing circulation costs.

Trade surplus continues declining trend

Falls for third consecutive year as global demand shrinks for exports
BEIJING / SHANGHAI - China's trade surplus narrowed further for the third consecutive year in 2011 to below $160 billion, while exports declined due to the European debt crisis and the sluggish US economy.
Global demand for made-in-China goods will continue to be weak in the coming year, especially with eurozone uncertainty creating "downside" risks for the economy, economists warned.

Statistics released by the General Administration of Customs on Tuesday showed the trade surplus for 2011 decreased by 14.5 percent from a year earlier to $155.14 billion. Exports grew by 20.3 percent and imports by 24.9 percent year-on-year during the same period. The previous year saw exports grow by 31.3 percent and imports by 38.7 percent.

China is still the largest global exporter and the second-largest importer next to the US, according to the customs administration.

"Although growth in exports and imports slowed, especially in the second half of last year, China's foreign trade is getting more balanced and the surplus is gradually narrowing," a statement on the customs administration website said.

The trade surplus has been narrowing since the global financial crisis erupted in 2008. It decreased by 34.2 percent to $196 billion in 2009, dropping further by 6.4 percent year-on-year to $183 billion in 2010.

China's year-on-year export growth has been on the decline since August. That month saw shipments surge by 24.4 percent, but by December it was down to 13.4 percent to $174.72 billion.

"We are not optimistic about the outlook for exports this year," Li Wei, economist at Shanghai-based Standard Chartered, said.

With the eurozone teetering on recession and the US still to anchor its recovery, exports will slow further and "we expect single-digit growth for the first quarter," Li said.

"And the contribution of exports to GDP will also shrink."

Minister of Commerce Chen Deming said at the annual national work conference last week that the ratio of China's surplus to its GDP is expected to fall to "2 percent" in 2011 from 3.1 percent in 2010.

Economists expressed concern that export decline will hamper the economy.

The biggest "downside" risk for China's economy is external weakness, a report by Barclays said.

"The nation's export growth may slow to 10 percent this year, while import growth may decelerate to 13 percent," it said.

Lu Zhengwei, chief economist at Industrial Bank, agreed: "The export trend will have a direct impact on the nation's economy."

Import growth has also been declining. Imports for December rose by 11.8 percent year-on-year, the lowest for two years, bolstering the prospect for monetary easing, economists said.

Grimmer situation

Both Chen and Vice-Commerce Minister Zhong Shan warned recently that the external trade environment will be bleak this year.

Liang Yaowen, director-general of the Department of Foreign Trade and Economic Cooperation of Guangdong province, told China Daily recently that companies in the nation's largest export region are under growing pressure as labor costs and the price of raw materials rise and the currency appreciates.

"Foreign trade will probably grow by single digits this year," Liang predicted.

The yuan surged to a high against the dollar in December, breaking the 6.3 barrier for the first time in 18 years.

US officials, including Treasury Secretary Timothy Geithner, have repeatedly called for the yuan to appreciate further.

"The government has to maintain a stable yuan" or the economy will be damaged, Lu said.

"Demand from overseas has been dropping since 2008 due to the severe economic environment in the US and Europe and the situation got worse last year," said Liu Mengjue, manager of Wenzhou Jingyi Clothes, a garment exporter in Zhejiang province.

To lower operational costs, the company cut the number of employees last year by half to 500.

China, Japan, South Korea, trade agreements meeting

中国、日本、韩国，贸易协定会议。BEIJING - Talks on a China-Japan-Republic of Korea free trade agreement (FTA) are expected to start in the first half of this year, with May seen as the earliest date, following the conclusion in December of studies and research into its potential consequences, a source close to the matter told China Daily.

"If there is no strong opposition from inside the Republic of Korea (ROK), talks on the China-Japan-ROK FTA will be officially launched during the first half of this year, in May at the earliest," said the source from the Ministry of Commerce who asked not to be named.

And he also said that China-ROK FTA negotiations will probably start in the first half of this year.

Reports have said that the timetable and roadmap of the China-Japan-ROK FTA talks will be clarified during summits among the leaders of the three nations. The previous two summits were held around May.

ROK President Lee Myung-bak starts an official three-day visit to China on Monday, during which economic and trade relations will be on the agenda.

During the visit China and the ROK are reportedly set to announce bilateral FTA talks this year.

"There are still uncertainties with the process of trilateral FTA talks, although China is actively advancing them. However, the ROK seems to be more interested in initiating China-ROK FTA talks," the source said.

Feasibility studies about a China-Japan-ROK FTA started among research institutions from the three countries in early 2002.

In 2009 the studies were completed and concluded that the FTA will be beneficial for the three nations.

Research by governments, industries and academies from the three nations started in May 2010. The last round of studies was held in Pyeongchang in the ROK last month when a timetable for the talks was considered.

Premier Wen Jiabao proposed in November to initiate trilateral FTA talks in 2012 during the East Asia Summit on the Indonesian island of Bali.

"China is willing to promote the program, and Japan is OK about it but the problem is there is opposition from inside the ROK," the source from the ministry said.

Zhang Xiaoji, senior researcher at the State Council's Development Research Center and also an expert on China-Japan-ROK FTA issues, said that representatives from various sectors in the ROK, including agriculture, were against a trilateral FTA.

Although research has shown the benefits that the three nations would reap from the FTA, "when to start the talks is more of a political, rather than economic, issue," he said.

The US-ROK FTA, which was signed in 2007, was also challenged from within the ROK on key issues, including opening the agriculture market wider.

Wang Yuzhu, researcher on Asia-Pacific issues at the Chinese Academy of Social Sciences, said agriculture would also be a major concern for Japan when the talks began.

Despite the challenges, "there is little doubt that the talks could start in 2012, if the three nations can reach a consensus on some key issues, including investment," Wang said.

"China's efforts on pushing forward the trilateral FTA could have positive consequences."

Experts said the proposal by the United States on joining the Trans-Pacific Partnership (TPP) will help the process of the China-Japan-ROK FTA.

Leaders of the nine Trans-Pacific Partnership countries, including Australia, Chile, New Zealand, Peru, Singapore, Vietnam, and the US, announced the broad outlines of the TPP agreement in November. US President Barack Obama, along with the other eight TPP leaders, also agreed to seek to finalize an agreement in the coming year.

"Through the TPP, the US expects to take a dominant position in the integration of economies of the Asia-Pacific region and expand its exports to the region," said Yu Miaojie, professor from the National School of Development with Peking University.

But China cannot just wait and see, and it "should actively promote the progress of the FTA talks".

China-ROK FTA

Kim Sung-hwan, ROK foreign minister, said at a briefing in Seoul last week that "both sides basically share the view that a free trade agreement between the ROK and China is needed."

Responding to Lee's visit this week, Foreign Ministry spokesman Hong Lei said at a briefing in Beijing that China hopes it will elevate their strategic partnership "to a new level."

The joint study by China and the ROK, which ended in May 2010 after four years, showed that both countries could witness benefits to their economy if a bilateral FTA was signed.

"Time is right for the two sides to set up the free trade area, and it is highly possible that talks will be initiated soon," Yao Weiqun, assistant to the president of Shanghai WTO Affairs Consultation Center, said.

Zhang agreed. "It would be easier and more motivational for the ROK to advance the China-ROK FTA talks, compared with the China-Japan-ROK FTA."

ROK exports to China from January to November in 2011, the nation's largest market, increased by 17.9 percent from a year earlier to $148.4 billion, according to the General

China in 2012 will remain "prudent" monetary policy

中国2012年将保持“审慎”的货币政策。BEIJING - China will maintain a prudent monetary policy this year with "timely and appropriate adjustment", the People's Bank of China (PBOC), or the central bank, said here Sunday on the closing of a work conference of the central bank.

The PBOC will adjust credit supply and keep social financing at a reasonable growth under a macro-prudential policy frame with a set of policy tools, such as interest rates, exchange rates, open market operations and banks' reserve requirement ratio, said the central bank in a statement on its website.

The PBOC said that it will strive to optimize credit structure and better serve the development of real economy, with more emphasis on the agricultural sector, the affordable housing projects and the small and micro-enterprises.

China's central bank on Sunday said in a separate statement that the country's new yuan-denominated lending in 2011 reached 7.47 trillion yuan ($1.18 trillion), down from 7.95 trillion yuan in 2010.

Wen Jiabao: To prevent bubble

温家宝：要防止经济泡沫。 BEIJING - Premier Wen Jiabao has urged the financial sector to strengthen its capability in supporting the production of goods and services and to prevent artificial factors from inflating the economy.

China should set up a long-term mechanism that will make sure the "real economy" gets sufficient investment for growth, to strengthen the foundation for economic growth in the post-crisis era, the premier said. He was speaking at the end of the two-day National Financial Work Conference on Saturday in Beijing.

"In future, China will stick to the principle of having the financial industry serve the real economy to prevent virtual bubbles from inflating the economy," Wen said.

The real economy is defined as production activity in sectors such as agriculture, manufacturing and service, which is the basis of a country's GDP.

China's financial system is running on a stable course despite the global financial crisis, he said. However, apparent problems and potential risks still linger and the crisis is not over, Wen said.

"China's economy has maintained stable and relatively fast growth with stabilized consumer prices and improvement in people's lives. The financial system is running steadily. The positive momentum of economic and social development remains unchanged.

"We have the confidence, capability and conditions to move economic development to a new stage," he said.

The conference mapped out the blueprint for financial reform in the next five-year period. Similar conferences were held in 1997, 2002 and 2007 which led to significant policy changes, including the reform of large commercial banks that increased their capabilities of guarding against risks.

China has resolutely pushed forward a series of financial reforms which have set significant milestones. Large commercial banks improved their risk management capabilities remarkably, Wen said.

"We should note especially that the global financial crisis has not ended. We should strengthen our awareness of risks and responsibilities in order to push financial capabilities to new levels."

Wen voiced his support for the development of financial innovation, but stressed that this should not escape supervision.

"Risk-aversion should be the lifeline of our financial work," he said.

He pledged to allow market forces a greater say in deciding fund allocation and to more clearly define the government's role.

Financial supervision will be tightened and improved, and banks should establish a more complete and prudent system.

According to the conference plan, the government is expected, within the next five years, to diversify the shareholding structure of listed companies and to broaden capital sources by allowing in more private capital.

"We should protect the investors' rights and interests and break the monopoly in the financial industry," Wen said.

The premier also said the financial market should open up to overseas market faster, while strengthening its capacity to guard against external risks.

"China will steadily promote the convertibility of the RMB capital account, and further improve the management of the foreign exchange reserve," he said.

A statement from the financial conference said the banking capital adequacy ratio increased to 12.3 percent by the end of September 2011 from 7.3 percent at the end of 2006.

The bad-loan ratio was 0.9 percent, having dropped by 6.2 percentage points from 2006.

The statement also showed that by the end of November 2011, China's total assets in the financial industry had reached 119 trillion yuan ($18.8 trillion), rising 149 percent from figures at the end of 2006.

The most important task for China in the coming year is to restructure economic development and support the growth of the real economy, said Li Daokui, of the monetary policy committee of the People's Bank of China.

"We should be aware of the potential financial risks and improve the efficiency of bank lending to promote industrial upgrading," Li said.

Cheng Siwei, former vice-chairman of the Standing Committee of the National People's Congress, said on Saturday at an economic forum in Beijing that more measures should be taken to facilitate market-oriented financial reforms and enhance regulations.

"To highlight the transparency of information is necessary for financial institutions, which will encourage the whole society to supervise their activities and reduce financial crime," Cheng said.

The number of unionized account for 20% of China's total population

加入工会的人数占中国总人口的20%。BEIJING - Nearly one out of every five Chinese are now members of trade unions, with more than 17 million workers joining labor unions last year, according to data from the All-China Federation of Trade Unions (ACFTU) on Saturday.

The country's total trade union members now stand at 258 million, or about 20 percent of China's population, according to the ACFTU.

The unionized Chinese equal the combined population of Germany, France, United Kingdom and Italy.

Of the country's trade union members, more than 94 million are migrant workers who come from rural areas and seek jobs in cities.

Currently, trade union organizations have been established in about 5.2 million businesses.

The ACFTU will work to add at least 630,000 trade union organizations and more than 10 million union members, this year.

According to the ACFTU, 23 out of 31 provinces, autonomous regions and municipalities in the Chinese mainland have enacted on collective wage negotiation, a right that enable employees to choose representatives on their behalf to negotiate with employers on wage scales, working hours, training, health and other issues.

To date, the collective wage negotiation system has covered more than 100 million employees and 1.74 million businesses.

Ministry of Foreign Affairs in 2012 the main task, stable exports and imports, trade balance

外交部2012年主要任务，稳定出口，增加进口，平衡外贸。Figure reduced by 15% to $160b as export outlook cited as severe

BEIJING - China's trade surplus narrowed to $160 billion in 2011, from a year earlier, as export demand weakened in the United States and Europe, the Ministry of Commerce said on Thursday.

And the outlook for exports in 2012 is "severe" but foreign trade will be "more balanced" with measures to boost imports, officials from the ministry said during the annual National Commerce Work Conference in Beijing.

The trade surplus last year declined by 15 percent from a year earlier to $160 billion, Chen Deming, minister of commerce, said during his keynote speech at the two-day conference which started on Thursday.

Chen highlighted the major tasks that the ministry will undertake in the coming year, including stabilizing exports, increasing imports and balancing foreign trade.
The ratio of China's surplus to its GDP is expected to fall to "2 percent" in 2011 from 3.1 percent in 2010, he said, while foreign trade in 2011 grew by "20 percent" year-on-year to "$3.6 trillion".

The General Administration of Customs is expected to release export and import figures for December and the whole of 2011 on Jan 10.

As the European debt crisis spreads, China's year-on-year export growth has been declining during the past few months. The European Union is the largest destination for China's exports.

Exports increased by just 13.8 percent in November from a year earlier to $174.46 billion, the lowest since December 2009.

The trade surplus has been shrinking since the global financial crisis erupted in 2008. In 2009 the surplus decreased by 30 percent to $196 billion, and dropped again by 6.4 percent year-on-year to $183 billion in 2010.

Severe situation

"The business environment home and abroad for Chinese exporters is severe and there are many uncertainties and unstable factors ahead, especially with the spreading European debt crisis," Chen said.

Economists predicted that exports during the first quarter of this year will probably decrease from a year earlier.

"We cannot deny that export prospects are not positive but there is little possibility that a year-on-year decline will appear in the first quarter unless the global economy collapses," Wang Shouwen, director-general of the Department of Foreign Trade affiliated with the ministry, said at the conference.

Premier Wen Jiabao said this week that business conditions may be "relatively difficult" during the first quarter and China faces "problems of weakening external demand and rising costs for companies".

Exporters are facing a number of issues, Jin Yonghui, director-general of the Zhejiang Department of Commerce, said.

"Growing trade remedy cases, downward global economic pressures and rising labor costs are the biggest concerns of exporters (in Zhejiang province)." Zhejiang is a leading export province.

Liang Yaowen, director-general of the Department of Foreign Trade and Economic Cooperation of Guangdong province, said that companies in the nation's largest export region are under pressure.

"Foreign trade will probably grow by single digits this year," compared with 16 percent in 2011, Liang said.

To stabilize exports emerging markets will be prioritized.

China will organize a trade fair in Tanzania, East Africa, in June, the first of its type, in a bid to promote domestic products, Wang said.

China has organized trade fairs in the US and Europe.

Exports to developing nations in 2011 grew by 30 percent, and by 17 percent to developed nations, Wang said.

Measures will be introduced to transfer orders from coastal areas to central and western regions, he said.

Chen said in his speech that exporters would be encouraged to add value and conduct research.

China recently approved and announced the establishment of 59 export bases nationwide in a bid to help promote overseas shipments of traditional goods, including garments, shoes, and suitcases.

Balanced trade

Although the surplus shrank and export growth slowed in 2011, China's foreign trade has turned more balanced, Wang said.

The Ministry of Finance announced late last year that China would reduce import tariffs on more than 700 categories of goods ranging from high-tech equipment to consumer goods.

"China plans to import more goods, including energy, raw materials, key components, high-tech equipment and consumer goods this year," Chen said.

Chinese local governments in 2010 to identify misuse of funds 53.09 billion yuan (about 8.43 billion U.S. dollars)

中国2010年查出地方政府滥用资金530.9亿元人民币（约合84.3亿美元）。BEIJING - Nearly half of the misused funds uncovered in the auditing of China's local government debts in 2010 has been recouped, authorities said on Wednesday.

Of the 530.9 billion yuan (about $84.3 billion) of misused funds uncovered for the year 2010, around 259.2 billion yuan had been recouped by October 2011, the National Audit Office (NAO) said in a report on the year's auditing progress.

The majority of China's local government funds are raised through local government financing vehicles (LGFVs), which are mainly set up to fund construction projects and have come under fierce criticism from people alleging they are poorly supervised and managed.

Violations of the management of local debts involved illegal guarantees for local debts, misdirected funds to capital, property and energy-consuming markets, and the operation of fake investment companies, the report said, adding that the governments have been moving actively to correct the irregularities.

The NAO said earlier that local government debt totaled about 10.7 trillion yuan at the end of 2010.

To ease local governments' financial strains and curb fast-spreading debt risks, China's State Council has allowed four local governments, including Shanghai and Shenzhen, to issue their own bonds.

Meanwhile, the NAO said 375 million yuan had been recouped after auditors found that a total of 82 government units had illegally kept 414 million yuan for unauthorized use.

The report said authorities had made improvements on 1,581 regulations at the NAO's suggestion and 699 people had been punished concerning the illegal cases in 2010.

China is expected to ODI (outward investment) will increase

预计中国ODI（对外投资）将增长。Expansion will match foreign direct investment, experts say

BEIJING / HONG KONG - Outbound direct investment (ODI) for 2011-15 is expected to register double-digit annual growth to reach $560 billion, matching the nation's foreign direct investment (FDI), a statement from the Ministry of Commerce said.

The government will accelerate promoting "overseas investment" during the 12th Five-Year Plan (2011-15) period, the statement, posted on the website of the ministry on Wednesday, said.

The scale of accumulative ODI from 2011 to 2015 will reach the level of the nation's FDI, according to the statement.

"The annual growth rate (from 2011 to 2015) for the nation's ODI on average will remain around 17 percent, and the accumulative volume in the five years is expected to reach $560 billion, equivalent to that of China's FDI during the same period," it said.
ODI growth has remained robust despite the global financial crisis.

ODI in the non-financial sector, in 2010, surged as high as 36.3 percent year-on-year to $59 billion, after it gained 14.2 percent in 2009. China overtook Japan and the United Kingdom that year to become the world's fifth-largest overseas investing nation.

From January to November of 2011, ODI in the non-financial sector grew by 5.2 percent year-on-year to $50 billion, according to the ministry. By the end of November accumulative investment reached $312 billion.

"The target (of 17 percent) is really positive. There is no doubt that ODI in the next few years will grow rapidly thanks to China holding large volumes of foreign exchange reserves and its huge demand for agriculture and mining products," said Jin Baisong, researcher at the Chinese Academy of International Trade and Economic Cooperation affiliated to the ministry.

In the statement the ministry said the government will guide and encourage local companies to enhance cooperation and invest abroad in manufacturing, energy, culture and engineering.

And China will also promote investment in the service sector, including finance, architecture, tourism, education and telecoms.

ODI will play a more dominant role in the future, said Professor Chong Tai-leung of the Chinese University of Hong Kong's Institute of Global Economics and Finance.

"I predict that ODI, rather than FDI, will be dominant in the future as more mainland firms are taking excess cash outside the country to invest in various economic projects overseas," he said.

"More ODI means that capital is invested outside the country, so that the ODI will not help boost domestic economic growth very much.

"But ODI can help mainland corporations to expand their business footprint through technology and management skills."

Standard Chartered global research head Nicholas Kwan said that both ODI and FDI can help the domestic economy.

"The announcement by the ministry shows that the government is committed to attracting foreign capital into the country as well as promoting mainland companies to invest overseas. The simultaneous growth of FDI and ODI can help the economic transformation of the country."

While the European debt crisis is still unresolved and the US is troubled by high unemployment, Chinese enterprises will find it easier to enter developed markets, experts said.

China Three Gorges Corp recently agreed to pay 2.69 billion euros ($3.5 billion) for a 21 percent stake in EDP-Energias de Portugal, Portugal's biggest utility, to gain access to wind and hydropower assets in Europe and the Americas. It is also the Chinese company's biggest cross-border acquisition.

Corporate Chairman Cao Guangjing said on Wednesday, at a news briefing in Lisbon, that Three Gorges is looking for acquisitions abroad if the price is right.

It's not only about State-owned companies. Executives from the Qingdao Kingking Group, the world's second-largest candle maker, told China Daily on Tuesday that it plans to invest $100 million globally to develop gold and copper mines in the next three years.

"More companies from the steel, manufacturing, textile and household appliance sectors will seek to go abroad," said Wang Haifeng, director of the International Cooperation Center affiliated to the National Development and Reform Commission. "Southeast Asia, Africa and Latin America will be the favored destinations."

FDI growth

The FDI outlook is less promising. From 2011 to 2015, China's annual FDI is expected to reach, on average, $120 billion, with improved quality and diversification, the statement said.

During 11 months of 2011, China's FDI surged by 13 percent year-on-year to $103.8 billion, close to the level of 2010. The figure for the whole year is expected to range from $110 to $120 billion, experts predicted.

"Foreign investment will be important for China, but quality, rather than the scale of investment, will be the priority for the government," said Wang Zhile, director of the ministry's research center for transnational cooperation.

China will encourage foreign enterprises to invest in agriculture, high-end manufacturing, high-tech, new energy and services, the statement said.

In foreign investment guidelines released last Friday, China said it will open more sectors to foreign investors.

According to the ministry's statement, China's commodity trade will enjoy an annual growth of 10 percent from 2011 to 2015, reaching $4.8 trillion in 2015.

China 2012 new measures to stimulate consumption

中国2012采取新的措施，以刺激消费。Vehicles and electrical appliances targeted and may be subsidized

BEIJING - New measures will be introduced to boost consumption, especially for vehicles and electrical appliances, as export demand weakens.

With tax rebate policies on vehicles and appliances having expired or due to expire, "new measures are in the pipeline," to boost consumption, said Huang Hai, former assistant minister of commerce and member of the economic and trade policy consulting committee affiliated to the Ministry of Commerce.

"The Ministry of Commerce has drafted a proposal to continue the stimulus programs in the coming few years, but in different ways, and they are expected to cover vehicles and those related to real estate, say household appliances," Huang told China Daily in an exclusive interview.

The measures may include subsidies for consumers in affordable housing to buy appliances and for those planning to change their cars.

Ministry of Commerce spokesman Shen Danyang also said the ministry is mulling over launching new programs, expected to be announced next week, on expanding domestic consumption.

The ministry is expected to hold the National Commerce Work Conference on Thursday and Friday, during which Commerce Minister Chen Deming will make a keynote speech.

Huang also disclosed that under the instructions of Premier Wen Jiabao a national circulation conference, the first of its kind, will be held around April.

Government officials will discuss how to introduce concrete measures to boost consumption at the conference, he added.

More than 10 central government departments including the Ministry of Commerce, the National Development and Reform Commission and the Ministry of Finance, are expected to make proposals after conducting research before the conference, Huang said.

China has sought to sustain fast economic growth through boosting domestic consumption, given the fact that export growth has been declining during the past few months with demand weakening from the European Union, China's largest trade partner.

In November 2011, the nation's exports increased by 13.8 percent from a year earlier, the smallest gain since 2009, according to the General Administration of Customs.

The Ministry of Commerce has predicted that a slowdown in the country's export growth could continue at least into the first quarter of 2012 with a "more severe" outlook.

"This year in China will be all about trying to ensure a soft landing," said Jim O'Neil, chairman of Goldman Sachs Asset Management.

"Growth, under downward pressure from weakening exports and a fall in government-sponsored investment, will have to be led by stronger personal consumption if the economy is to grow by more than 8 percent."

It was agreed at the annual Central Economic Work Conference in December that China will be committed to expanding domestic consumption and improving people's livelihood while trying to stabilize exports.

Since the global financial crisis in 2008, the government has launched a series of preferential polices encouraging local consumers, through subsidies, to renew or purchase household appliances and cars.

"No matter whether the nation's economy slows down or not, China will have to change its economic growth model to consumption-oriented, rather than export- or investment-driven," said Lu Zhengwei, chief economist with Industrial Bank Co Ltd.

"We have to sustain relevant preferential policies."

In December 2007, China launched the pilot tax rebate program for household appliances which was later introduced nationally.

According to the Commerce Ministry, by the end of October 2011, the accumulative sales of household electrical appliances under the programs reached 200 million units, worth 457.6 billion yuan ($69 billion).

"The trade-in subsidy programs should be reinitiated as the new year comes, as it is not only a way to stimulate consumption, but also a guarantee of production tools for the large population in rural areas," said Jia Xinguang, an independent auto analyst based in Beijing.

Fan Jianping, director of economic forecasting at the State Information Center, said China's retail sales may grow by 13.2 percent this year.

China will launch a "policy of welcoming foreign investment guide"

中国将推出“欢迎外国投资指南方针“。Government officials and experts said the new guidelines are in keeping with proposals contained in China's 12th Five-Year Plan (2011-2015), which seeks to lay the foundations for a more innovative and greener economy. 

中国将推出“欢迎外国投资指南方针“。Ministry opens more industries to investment from overseas

BEIJING - China will encourage foreign companies to invest more in domestic industries to further make good on the country's commitment to open its economy, according to guidelines released on Thursday.

In a new version of the Foreign Direct Investment Industry Guidelines (2011), the Chinese government is encouraging foreign investors to put money into advanced manufacturing, the service industry and certain business concerned with energy conservation, advanced technology, renewable sources of energy, new materials and advanced-equipment manufacturing.
Government officials and experts said the new guidelines are in keeping with proposals contained in China's 12th Five-Year Plan (2011-2015), which seeks to lay the foundation for a more innovative and greener economy.

On Thursday, the Ministry of Commerce and the National Development and Reform Commission (NDRC) issued the guidelines, which will replace a previous version of the rules that was published in 2007. They are expected to come into force on January 30.

Compared with the 2007 version, the new guidelines encourage foreign companies to invest in a greater number of industries and reduce the number of industries that are off limits to such investment.

"The new version indicates China's strong commitment to opening its market wider," said Wang Zhile, director of the ministry's research center for transnational cooperation. "It's absolutely a positive signal."
In the new guidelines, the Chinese government will encourage foreign enterprises to invest in new technology and equipment for the textile, chemicals and machinery-manufacturing industries.

The guidelines also call for the encouragement of investment into nine service industries. Among them are those concerned with charging electric vehicles and swapping their batteries, protecting intellectual property rights, cleaning up offshore oil pollution and vocational training.

China will also allow foreign companies to invest in medical institutes and various other industries that were previously off limits to them.

Dirk Moens, secretary general of the European Union Chamber of Commerce in China, said foreign investors are likely to take heed of the government's investment guidelines.

This "will indeed facilitate decision-making for foreign investors thinking of coming to China", Moens said.

Kong Linglong, director-general of the National Development and Reform Commission's department of foreign capital and overseas investment, had similar thoughts.

"Looking at the changes in the new version, we can tell the way in which the Chinese government would like to transform its industrial structure," Kong said.
"And another message is that China is now placing more value on the quality of foreign investments rather than their scale."

The government will also prevent foreign companies from building or operating refineries that have the capacity to distill fewer than 200,000 barrels of crude oil a day. That is up from the previous limit of 160,000 barrels a day.

China, meanwhile, has removed industries from the list of those it encourages foreign companies to invest in. No longer part of that group are automakers, large coal-to-chemical operations and manufacturers of polycrystalline silicon.

"The restrictions generally apply to industries that have excessively large capacities and that pollute the environment," said Zhang Xiaoji, senior researcher at State Council's development research center.

"But they will probably be a source of their (foreign companies') complaints about transparency in China's market for foreign investment. To alleviate their concerns, China should try to provide detailed information about what will be restricted."

China issued the first version of its guidelines governing foreign direct investment in 1995. They are now amended every four years.

China released a draft version of the new guidelines in early April, seeking the public's suggestions and comments.

"We have made reasonable changes in response to foreign companies' opinions," Kong said. For instance, the draft version said foreign investors could take no more than a 50-percent stake in joint ventures that produce all of the chief components needed in new-energy vehicles, a proposal that led to heated discussions in the auto industry.

The final version changed the stipulation about "all chief components" to one that only concerns "fuel cell batteries".

Giving a keynote speech in December at a celebration ceremony for the 10th anniversary of China's entry into the World Trade Organization, President Hu Jintao said China will continuously open its economy to the world. He said that is especially true for industries concerned with advanced manufacturing, strategic emerging industries, services, agriculture and modern culture.

In April, China issued a directive that encouraged more investment in the high-tech, renewable energy and service industries, and for more attention to be paid to the country's western and central regions. The directive marked a turning point in China's policies concerning foreign direct investment.

China is now the second-largest destination for such investment in the world and the largest among developing economies. In 2010, the value of foreign direct investment into China hit a record high, increasing to $105.74 billion, a rise of 17.4 percent from the year before. In 2009, it decreased by 2.6 percent.

From January to November, the value of China's foreign direct investment increased by 13.15 percent from the same period the year before, reaching $103.77 billion.

Next year China will increase spending to stimulate economic growth

中国将在明年提高财政支出，刺激经济增长。Vice-Premier Li Keqiang (L) addresses a budget meeting in Beijing on Tuesday. He said China will see its fiscal spending grow faster to boost economic growth and improve people's livelihood next year. 

中国将在明年提高财政支出，刺激经济增长。BEIJING - China will see a faster-growing fiscal expenditure next year, together with moderate scales of fiscal deficit and public debt, to prompt a steady development, Vice-Premier Li Keqiang said on Tuesday.
Li said more priorities should be given to the areas related to improving people's livelihood, so as to boost the domestic demand and consumption.

And the country will also strive to maintain a proper pace of investment and foreign trade growth.

"The positive fiscal policies in the past year allowed a wide margin in the country's policy adjustment but with more global uncertainties ahead next year, the policies need to be more targeted, flexible and forward looking," Li said at a national financial meeting in Beijing.

Li was speaking at the conclusion of the Ministry of Finance's annual working conference, which formulated the details of the fiscal tools that will play a major role in China's economic agenda for next year.

Finance Minister Xie Xuren reiterated at the conference a series of tax cuts the ministry will adopt next year, including lower tariffs on certain imports, value-added tax replacing sales tax, and tax preference toward smaller businesses.

A main part of the plan is the hope of easing the tax burden to boost the development of service sectors and release purchasing power, Li said.

Li, meanwhile, stressed more expenditures should be made in areas such as social security, education and healthcare.

The ministry was allowed enough flexibility to do so as China's fiscal revenue grew more than 26 percent annually to 9.73 trillion yuan ($1.54 trillion) by the end of November.

Fiscal spending is expected to increase 11 percent to 11.1 trillion yuan ($1.75 trillion) in 2012, against a revenue increase of 9 percent, Shanghai Securities Journal reported, citing an unnamed finance ministry source.

Finance Minister Xie vowed to keep the spending on education at no less than 4 percent of the GDP, and to increase the pension level for retirees and medical insurance.

The ministry announced last month that the country will scrap the collection of up to 22 administrative fees from small companies from 2012 to 2014, including charges for companies' registries and tax invoice purchases.

Gao Peiyong, a researcher at the Chinese Academy of Social Sciences, said proactive fiscal policies in 2012 are expected to play a leading role as the country needs to sustain economic growth. And tax cuts are expected to play a more important part than fiscal expenditures next year, Gao said.

To guarantee a smooth implementation of these policies, the central and local administrations need to bring fiscal risks under control, and increase financial openness and transparency, the vice-premier said.