Direct China-Taiwan flights begin

In what is being seen as a major initiative to improve relations, by Chinese and Taiwanese Governments, first regular and direct flight services have started operation from China to Taiwan. Commenting on the same, China’s official on Taiwan affairs said that ‘this was a new start’ in trying to improve relations between Beijing and Taipei.The move comes in the wake of improved relations since Taiwan’s new president, Ma Ying-jeou, came to power in May. The arrangements for direct flights, is a big step towards improving relations between strained nations.

The flights that will operate from Friday to Monday will connect five major cities of China and Taiwan.

The first China Southern Airlines flight, a part of this arrangement had 250 passengers aboard and was met with traditional water sprinkling ceremony.

China Southern Airlines, company chairman Liu Shaoyong, described the moment as ‘a sacred’ one, even as lion dancers and aboriginal singers welcomed passengers at the airports.

The new flight agreement is being touted as a drive that will prove to be a good deal for both the new Taiwanese President Ma Ying-jeou, and the countries tourism. This brings in a ray of hope for a boost to Taiwan’s flagging economy.

Local businessmen are appreciative that this move is sure to bring in a good deal of business to the local market. In what is seen as a major achievement, the two sides have agreed to an increased number of Chinese tourists who can visit Taiwan. The number will rise to 3,000 per day from 18 of July.

Skeptical and more practical solutions were however offered by a group of those who believed that direct cargo flights, would have been a better idea to improve China-Taiwan relations.

These new chartered flights will take a round about route, through Hong Kong airspace; this is because Taiwan’s military is on constant alert for any kind of possible air attack from the mainland. This is also because civilian flights cannot be allowed to clutter cross-straits radars, says military sources.

Buy Call on the China market

Jim Rogers, investment guru, issued a “buy call” recently on the market in China. The mainland’s benchmark CSI index is decreased by more than 50% from its peak in October. Experts wonder if the market has finally hit bottom.Technically and fundamentally analyzing a market is a dual-effort that is considered to be the most effective form of analysis. Pressure builds from inflation, and the stronger currency and rising interest rates and hindering Shanghai and Hong Kong exchange. Fundamentally, however, China has an expansive economy.

Higher interest rates in China would damage the majority of the market, especially financial firms. The yuan’s value has risen 6.5% compared to the US dollar. This strengthening is however harming Chinese exports. On the other hand many Chinese companies are benefiting from the new strength because it makes manufacturing such things as oil, steel, and copper cheaper and therefore turning more of a profit.

The government in China hasn’t raised interest rates this year, mostly because it already raised them six times last year. Inflation was at around 8.1% for the first five months of the year. Gains made in the consumer price index slowed this to 7.7% in May, while in February it was 8.7%. According to a Bloomberg report May was the record month for the past three years for rises in producer prices.

On a more technical side, things are a little better. Markets in China are fading since the October high. This fade is similar to the fade shown by US technology, but worse. This is because individual investors in China are behaving with more anxiety, apparently from lack of experience. This seems to be even more of an issue than it was in 2000 regarding technology.

Between 2005 and 2007 China exhibited a huge market run-up. The Shanghai market rose nearly 500% during that time. Indicators during this time showed a short sell of the market.

Even with this result of a fundamental and technical analysis, it is not necessarily recommended that investors stay out of China. One should consider stocks in sectors that are unphased by the business cycle that exhibit a strong rising secular trend in cases like this. A sector that seems to next to immune to the business cycle in this case is health care. As China attempts to make its economy more private the system is becoming dismantled, and that is the problem. China spends only 6% of its GDP on healthcare. This is even lower than Japan and the US, and in the US the amount (14%) is commonly criticized for being far lower than Canada and European countries.

Ill Chinese citizens are forced to pay their healthcare upfront, and there is a serious shortage of doctors. Citizens without funds are not permitted to receive treatment even in emergency cases. The cost of medical insurance is too high for low and even many middle class citizens. Furthermore, hospitals and pharmacies have been raising prices of medicines up to 20x cost. Often drugs are ridiculously overprescribed, and thus the medical system is being turned into a profit center. Over half of what patients in China pay for healthcare goes to pharmacy. Many people are resorting to bribery to get proper care.

To keep this situation from getting worse, the Chinese government is going to have to significantly increase spending on healthcare.

Biofield signed a deal to provide new breast cancer technology to a Chinese healthcare network and has gained technical strength in doing this. More of these opportunities are going to reveal themselves in China, and it is predicted there will be a great number of them with time. 

Biotech in general is good in China, in addition to healthcare. Stock here is not driven by the business cycle but instead is reliant on media and pharmaceutical advancements.

The US Food and Drug Administration agreed with China to open three offices, in China, this year. A significant portion of US biotech is going Chinese, due to lower costs in development, testing, and drug research. The regulations are also less stringent, which speeds up the whole process.

This isn’t in support of swan diving into healthcare and biotech investment, but the propects are promising nonetheless. Some things need to give in the Chinese economy and healthcare system, the causes are there and the effects will be revealing themselves very soon.

Sino-Tibet ‘Fence-mending Talks’

BEIJING: In a move that brings hope to the hearts of many, after the prolonged protests of the Tibetans, China resumed talks with the Tibetan leader the Dalai Lama, in what is being termed as ‘fence-mending talks’. This is being widely seen as an image building exercise By China, in the wake of a large scale international protest against the treatment meted out to the Tibetans. The timing is a perfect match to subside some of the protests over the holding of Olympics in China; reportedly it will improve the image of China, desperately seeking international coverage with the soon to be held Olympics.

With China still refusing to confirm details, what is supposedly a much closed door meeting, an aide of the Dalai Lama however confirmed the news. Tenzin Taklha added that the talks started on Tuesday morning and that the envoys are expected to return on Thursday.

Chinese Foreign Ministry spokesman Liu Jianchao, reiterated that Tibet was an internal issue, when he was asked to comment on the French President Nicolas Sarkozy’s statement that his decision about attending the Beijing Olympics would be based on the progress of Chinese talks with Tibet.

In what seemed a clear indication of the issue, answering reporters, Liu said, “Tibet is our internal affair, and the Chinese government’s relevant department’s contacts with the Dalai Lama’s representatives are an internal affair, and we oppose any foreign leader meeting the Dalai Lama in any setting and oppose linking the Olympic Games to the Tibet issue” The current talks, was supposedly delayed by the deadly earthquake in China. Supposedly it was preceded by a goodwill motion mostly by the, Dalai Lama.

Commenting on the situation, UN Secretary General Ban Ki-moon, on a three-day visit to China, said he was looking forward to a fruitful round of talks between the envoys of the Dalai Lama and the Chinese delegation.

China Deals With Power Shortages In Quake Zone

China takes emergency measures to cope with “short supplies of coal, diesel and power in some areas,” and vows to ensure energy supply during reconstruction in quake zones.

Guizhou, Shaanxi provinces and Ningxia Hui Autonomous Region should continue to supply coal to quake-hit areas to ensure the power generation of thermal power stations there, said an emergency circular of the State Council made available to Xinhua on Saturday.

The overall supply and demand for coal, oil, electricity and agricultural goods and materials are now in balance, with short supplies in some areas, said the circular.

It urged local governments to guarantee the supplies of coal, oil, gas, electricity and agricultural goods, saying it would provide the basis for promoting disaster relief, garnering agricultural harvests for the whole year and maintaining the national economy on a healthy and fast track.

China’s coal-fired power industry has been under stress from coal shortages this year, but the 8.0-magnitude earthquake exacerbated the problem as it damaged a considerable number of the hydropower stations in southwest China, which could not restore power generation in the near future.

As the damaged power network gets repaired, reconstruction embarks on and the industries restore operation, the demand for power would gradually recover to the level before the earthquake.

Thermal power stations would have to make up for the lost hydropower during the reconstruction period, generating an even higher demand for coal.

By May 21, coal stocks fell to a level sufficient for less than seven days in some power plants in Sichuan Province with an aggregate amount of power capacity of 4 gigawatts.

Starting from then, the railway authorities used six trains to ship coal from Guizhou, Shaanxi and Henan provinces to Sichuan, and the government might draw on power supply from the Three Gorges Dam in real difficult situations to make ends meet.

The circular urged coal-manufacturing provinces to increase their output and speed up the approval process for resumption of production at small coal mines that had been suspended from operation to amend safety problems.

Coal-producing counties should wait for the approval of provincial government and report to the National Development and Reform Commission and State Administration of Work Safety if it plans to reduce one third of its coal output, according to the circular.

Coal production in quake zone should also be restored as soon as possible when work safety could be ensured, said the circular.

Thermal power plants should take measures to keep no less than 15 days of coal stock, said the circular.

The circular also ordered the China National Petroleum Corporation and Sinopec to guarantee oil supply to the quake zone.

Chinese, Japanese Power Dynamics

The roles of and interaction between the region’s major powers - China, Japan and the US -are likely to undergo significant change by 2020. The US’s military, entrepreneurial, economic, scientific and technological strengths should ensure it remains the predominant power in East Asia for some time, though its ability to translate its power into influence will depend on how skilfully it manages its wide array of regional relationships.

US security relationships in the region are likely to endure, though changes in the US forward presence, and in US and regional threat perceptions, may lead to a loosening of these ties.

China’s influence in East Asia will loom ever larger - whether it succeeds or fails. Between now and 2020, China is likely to develop even more into an economic and political centre of gravity, exercising a growing influence on the calculations of other states.

Growing Chinese influence will not require nor develop into a network of formal alliances. Its regional initiatives will increasingly be followed by others, and East Asian states will become more careful to avoid crossing its interests.

The US and China have strong incentives to avoid confrontation. Their relationship inevitably contains elements of competition. But China needs the US to remain strategically engaged in North Asia as a restraint on Japan’s military and nuclear development.

The US, in turn, looks to China to exert a restraining influence on North Korea. In the short term, shared economic interests are likely to outweigh economic frictions. But in the longer term, constructive economic relations will depend on the state of the wider political and security relationship.

Rising nationalism in China, and fears in the US of China as an emerging strategic competitor, could fuel an increasingly antagonistic relationship, with Taiwan the likeliest catalyst for crisis. Despite awareness of the risks in all three capitals, the potential for miscalculation will remain. A combination of factors, including China’s military capability developments and the 2008 Olympics, point to 2008-2010 as a particularly dangerous period.

China’s growing regional power and influence will pose a dilemma for Japan. Japan’s responses could include competition with China, drawing closer to Washington or attempting a more assertive regional role. A key determinant will be the nature of any final settlement on the Korean peninsula. Nevertheless, Japan’s will and capacity to play a larger role in the region will remain open to question.

All regional states want to avoid having to choose between the US and China. The US will remain important for economic and security reasons, and to forestall the possibility of Chinese hegemony. But accommodating China’s rising power will increasingly be their main pre-occupation.

Nanotechnology key to China’s future economic success

“China is betting that their growing investment in nanoscience will help them capture a large share of what shortly will become a $3 trillion global market in nanotech manufactured goods, and that breakthroughs in nanotechnology research and commercialization will confer economic superpower status on the country that attains first mover advantage in this cutting-edge technology,” stated Richard P. Appelbaum, professor at the University of California at Santa Barbara. “The Chinese government clearly understands that enhanced nanotechnology research capacity and marketable innovation go hand-in-hand. Both are key to their strategy for future commercial success, economic competitiveness, and continued economic growth.”

Dr. Appelbaum made his remarks at an event co-sponsored by the Project on Emerging Nanotechnologies, the Asia Program, the China Environment Forum, and the Program on Science, Technology, America and the Global Economy, at the Woodrow Wilson International Center for Scholars. The event, “Nanotechnology in China: Ambitions and Realities,” focused on China’s current and future capabilities to become one of the world’s leading nanotechnology nations. The panel included Denis Fred Simon, an expert on Chinese science and technology policy and vice president of Academic Affairs at the State University of New York. It was moderated by Evan Michelson, research associate at the Wilson Center’s Project on Emerging Nanotechnologies.

“Worldwide, nanotechnology has emerged as a critical area for science and technology competition-much like the race to be the first country to put a man on the moon. China and the U.S. are both big players in the nanotech race. Each faces a number of significant competitive challenges and collaborative opportunities, including the need for internationally coordinated risk research strategies and effective oversight mechanisms,” said Michelson. “It would be unfortunate if government agencies in both countries squandered this unique opportunity to help direct nanotechnology at a relatively early stage along a responsible path. Both nations need to work together to help engender public confidence in the private and public sectors ability to handle possible nanotechnology risks and to increase the capacity of public institutions to deal with the long-term implications posed by this cutting-edge innovation.”

Dr. Simon situated China’s nanotechnology research and investment capacity within the context of the country’s long-term science and technology strategy. “China recently released plans to radically increase its research and development capabilities over the next fifteen years. It will be a grand experiment to see if the country can become a global innovation center. Central to these prospects are a number of key frontier technologies-including nanotechnology-aimed at ensuring the country’s long-term competitiveness as it faces various funding, management, and organizational obstacles.”

A senior Department of Commerce official recently claimed that China is rapidly “gaining on” the United States in nanotechnology. This news comes on top of the latest Organization for Economic Co-operation and Development (OECD) forecast that China will have spent more on research and development (R&D) than Japan in the past two years, making it the world’s second highest investor in R&D after the United States.

Michelson concluded by noting that “China’s current nanotechnology research, education and manufacturing investments are only the tip of the iceberg. Over the coming years, there is the real potential for China to rapidly advance in making new nanotech scientific discoveries that lead to commercializing new, innovative nano-based products that are produced by its burgeoning, highly skilled and relatively cheap workforce. Now is the time for the United States and others around the world to cooperate with the Chinese on risk research and work toward getting a suitable oversight system in place from the start to ensure a safe and level commercial playing field.”

Dr. Appelbaum is professor of Sociology and Global and International Studies at the University of California at Santa Barbara. He currently serves as director of the M.A. Program in Global & International Studies, and serves on the Executive Committee of the Center for Nanotechnology in Society. He is also co-director of the Center for Global Studies in the Institute for Social, Behavioral, and Economic Research.

Dr. Simon is the provost and vice president for Academic Affairs of the Levin Graduate Institute of International Relations and Commerce under the State University of New York in New York City. He has written and lectured widely regarding innovation, high technology development, foreign investment and corporate strategy in the Pacific Rim and is frequently quoted in the Western and Asian business press regarding commercial and technology trends in China, Hong Kong and the Asia-Pacific region.

Mr. Michelson is a research associate for the Project on Emerging Nanotechnologies at the Woodrow Wilson International Center for Scholars in Washington, DC. Michelson received his masters degree in international science and technology policy from The George Washington University.

Ease In Lending to China’s farmers

China, concerned about rising food costs, a growing rural-urban wealth gap and the ability of the country to feed itself, is making it easier for lenders ranging from HSBC Holdings to mini-lenders such as UA Easy Lenders to operate.

That will help the country’s 700-million strong farming community secure more loans, boosting the opportunities for stronger growth in agricultural output and so adding even more muscle to the country’s fast-growing economy. Agriculture, along with other primary industries of forestry, animal husbandry and fisheries, accounted for almost 12% of the country’s gross domestic product in 2006.

Better access to loans may also help ease the drift of young people from farm areas to big-city factories, and brake the consequent disintegration of rural communities and infrastructures.

At one extreme, the government plans to ease curbs on how international banks such as London-based HSBC can operate in rural areas, Bloomberg reported this week, citing two people with knowledge of the matter.

Other regulatory changes will now allow small-loan operators such as UA Easy Lenders, an outfit based in Shenzhen, near Hong Kong, to raise money from banks, rather than just from shareholders and donations.

That will strengthen their ability to lend money to farmers whose limited needs and lack of assets for collateral often leave them shunned by bigger lenders. More loans should mean more investment in modern machinery, higher spending on better seeds and fertilizer, so improving output and farmers’ incomes.

Growth in rural per capita income, while apparently strong at 9.5% last year, lagged the near 12% expansion in the economy as a whole in 2007.

The government’s efforts to boost access to funds in the countryside come as inflation is hitting near 12-year highs of 8.5%, led by increases in food prices, which in April were 22% higher than a year earlier. Farmer’s are meanwhile having to rebuild after much of the countryside was hit earlier this year by the worst snowstorms in five decades.

HSBC, which set up a rural bank in Suizhou, central Hubei province in December, 2007, is so far the sole foreign-owned countryside lender in China. Citigroup said in October last year it would set up at least 10 rural banks and loan firms in China.

The country first allowed foreign firms along with local investors to establish rural banks and loan companies in selected areas in December 2006. Up until now, overseas banks have had to oversee these businesses through offshore entities with separate teams for each unit.The rule change would let them operate through a single unit or a China-incorporated subsidiary, according to Bloomberg. That would cut costs and the problems of finding numerous experienced branch-management teams.

Greater impact might be felt by the changes covering companies such as UA Easy Lenders that lend out small sums to businesses, operations sometimes referred to as micro-finance. Rates charged are high, but access to funds to support lending has until now been severely restricted.

Micro-finance, with small-volume lending to farmers or laid-off workers to help them start up their own businesses, has increased in importance as Beijing seeks to improve rural development and reduce the widening wealth gap between city and countryside. Such loans have historically been granted via specialized agencies such as rural credit co-operatives.

To expand the sector, the People’s Bank of China in early 2006 began a loosely regulated pilot scheme in some of the more agricultural provinces such as Shaanxi, Shanxi and Sichuan, involving establishment of seven small-loan companies. Their number has since grown to about 300.

Faster expansion has been hindered by the absence of official policy to define the nature of such lenders, their funding resources and such issues as bankruptcy processes.

“Also,given that the central bank has no rights to grant licenses, small-sum loan companies have been shut out of the [official] financial sector,” said Zeng Gang, an economist with the Research Institute of Finance under the Chinese Academy of Social Sciences.

The China Banking Regulatory Commission (CBRC) and PBoC recent issue of guidelines go some way to removing these hindrances.

Under the new guidelines, the small-loan companies can now raise funds from not more than two banks, in addition to existing channels such as shareholders and donations. Zeng believes this will encourage establishment of more small-loan companies.

Along with the new funding opportunities, limits have been set on rates lenders can charge their customers. To encourage better pricing of credit risk, small-loan lenders can set rates with an upper maximum of four times the rate offered to the small-loan company by its funding bank. As a lower limit, they must charge at least 0.9 times the one-year lending rate set by the PBoC, at present at nine-year high of 7.47%.

UA Easy Lenders, one of the pilot companies, offers loans at an interest rate of 27.6% per annum. The country’s benchmark one-year lending rate is at a nine-year high of 7.47%.

“The release of the new guideline is surely a good thing for the small loan lenders. Now we can officially operate on the mainland,” said Li Jie, director and general manager of Zhongan Xinye in Shenzhen, which offers financing for small business owners.

Wang Tao, a farmer-turned-businessman, said he is going to buy two more machines for making furniture after receiving 40,000 yuan loan from Zhongan Xinye. This is the second time he has borrowed money from the local lender. “With the immediate cash, I now can meet increased spending for the machines and pay for new hires,” he said on the phone.

At the beginning of the year Wang received his first loan of 20,000 yuan from Zhongan Xinye and paid it back six months later. He said he will continue to apply for loans from Zhongan Xinye if he needs money again.

“For small businesses like us, it is hard to apply for loans from the large banks such as Bank of China and China Construction Bank. However, at privately owned small-loan lenders, we get immediate money to smooth out our cash flow,” he said.

The transformation in recent years of big national banks into commercial banks, bringing an increased focus on cutting costs and making profits, has cut financial support for small businesses in rural areas. Farmers largely depend on rural co-operatives for financing. These control about 10% of the mainland’s 42.9 trillion yuan in deposits and tend to make small loans of 500 yuan to 20,000 yuan. By the end of July in 2007, there were 80,692 credit co-ops, with an overall a capital adequacy ratio of 8.38%. Loans granted were worth 2.16 billion yuan, of which 56% was for agricultural purposes. The bad loan ratio was below 2%, from 14.8% as of the end of 2005.

In July 2006, Agricultural Bank of China started to be restructured to promote rural finance and at the end of last year the CBRC approved the creation of a postal savings bank to develop retail and intermediary businesses.

About 60% of farmers and half of small business owners in rural areas have no access to banking services, according to recent research by Beijing’s Qinghua University, which also find high demand for loans from these sectors.

A researcher said inadequacy of rural financial services has hindered development of the Chinese government’s san nong policy of “agriculture, villages and farmers”, which aims to better balance rural and urban development and revenues.

About 60% of the country’s 1.3 billion population live in rural areas. Fast economic growth and social development over the past decade has been led by eastern coastal areas and industrial centers, with the vast countryside left far behind. That has also hindered the country’s efforts to build a harmonious society.

Yi Xianrong, a researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences, said the guideline on small-sum loan companies will still leave unresolved issues for small lenders.

“These companies are only given licenses to offer loans but they are not allowed to take deposits from local residents - different from many small-loan companies in the world, which grant small loans to poor people without taking collateral,” he said.

He said the restriction on taking deposits will affect the sustainability of these projects because they might lack the capital to grow. He called for the government to allow micro-credit institutions to take deposits and develop micro-finance projects such as those set up by the 2006 Nobel Peace Prize winner Muhammad Yunus, a Bangladeshi economist and founder of Grameen Bank.

Tibet unrest spreads beyond Lhasa

Protests in Tibet over Beijing’s rule have spread to neighbouring parts of China, after days of demonstrations and violence in Tibet’s main city, Lhasa. Clashes between Tibetan protesters and police in Aba, Sichuan province, saw a police station and cars attacked. Rights groups said several people had been killed in the clashes. Protests were also reported in Gansu province.

The unrest came after exiled Tibetan leaders said a Chinese crackdown had killed at least 80 people in Lhasa.

Indian-based officials said the figure was confirmed by several sources, even though China had put the death toll during Friday’s riots at 10.

The Dalai Lama has called for an international inquiry into China’s crackdown, accusing it of a “rule of terror” and “cultural genocide”.

The clashes in Aba, known as Ngawa in Tibetan, happened around 1200 local time on Sunday, according to Kate Saunders of the International Campaign for Tibet.

“According to reliable reports the police opened fire,” said Ms Saunders, who is in London but said she had indirect phone and web access to eyewitness accounts. “We know there have been deaths.”

She said that more than 1,000 monks had been on the streets of the town, which is home to a large monastery.

Accounts of how many people died differ, but she said the most reliable eyewitness source put the toll at seven.

Reuters news agency cited an unnamed police officer in Aba saying that Tibetans had thrown petrol bombs, burned a police station, and torched vehicles during the clashes.

In China’s north-western Gansu province, at Machu town, hundreds of protesters marched on government buildings and set fire to Chinese businesses, Reuters reported, quoting the Free Tibet Campaign. About 1,500 people - monks and lay people - shouting “Free Tibet” and “Long Live” the Dalai Lama were tear-gassed by security forces.

In the Gansu capital Lanzhou, more than 100 Tibetan students staged a sit-down protest on a university’s playing field, according to the activist group Free Tibet.

Elsewhere in Gansu, at Xiahe, security forces extended their clampdown on Sunday after confrontations there between hundreds of monks and police over the weekend.

In Lhasa, where demonstrators set fire to Chinese-owned shops and hurled rocks at local police on Friday after days of mainly peaceful protests, Chinese troops were out in force.

The authorities in Tibet have urged the protesters to hand themselves in by Monday morning.

Tibet’s spiritual leader the Dalai Lama has been quoted in interiews saying he feared there would be more deaths unless Beijing changed its policies towards Tibet.

“It has become really very, very tense. Now today and yesterday, the Tibetan side is determined. The Chinese side also equally determined. So that means, the result: killing, more suffering,” he said.

China says Tibet has always been part of its territory, though Tibet enjoyed long periods of autonomy before the 20th Century and many Tibetans remain loyal to the Dalai Lama, who fled in 1959.

The unrest erupted a fortnight before China’s Olympic celebrations kick off with the start of the torch relay, which is scheduled to pass through Tibet.

The Dalai Lama emphasised that he still supported Beijing’s staging of the Olympic Games this summer, saying it was an opportunity for the Chinese to show their support for the principle of freedom.