NE WS LE TT E R|4 M A Y 2 0 1 5

FCCC activities EXPO Milano 2015 – EU-CHINA Days: Joint cooperation to enhance investments and business opportunities 9 – 10 June2015

Activities supported by FCCC Asia-Europe Meeting Industry Dialogue on Connectivity – 27-28 May 2015 – Chongqing

Past events 8 th China Green Companies Summit (CGCS) – 20-22 April 2015 – Shenyang

Lunch-meeting: Building a Successful Plant in Weihai, Shandong Province – 16 April 2015 – Gent

Notice FCCC takes on new challenges within the EU-China Business Association

New addresses, telephone and fax numbers of the Flanders-China Chamber of Commerce (FCCC)

Publications FCCC publishes “10 Years: Flanders-China Chamber of Commerce 2005 – 2015”

Advertisement opportunities Advertisement opportunities FCCC 10 th Anniversary publication, Newsletters and Website

Advertisement An Executive MBA by IMD & CKGSB

Hainan Airlines, your direct link from Belgium to China

Members' news Hainan Airlines links Chongqing to Rome with bi-weekly flights

Automotive BYD wins California electric bus order

Finance More foreign institutions enter interbank bond market

Foreign investment Household products JV set up

Foreign trade China to cut tariffs on popular imports

China serves up hope at Milan Expo

Health Less air pollution means heavier babies

Advertisement CrossTainer: air & sea forwarding services

IPR protection Survey cites enforcement as greatest concern in IP

Internet-based patent translation platform launched

Macro-economy Number of central SOEs to drop from 112 to 40

Virtually all provincial-level regions report first-quarter slowdown

Manufacturing activity close to contraction

FCCC Newsletter No 407, 4 May, 2015 Page 1

Mergers & acquisitions Outbound M&A deals reach historic high

Real estate Los Angeles favored for real estate purchases

High-end property in Beijing to exceed CNY100,000 per sq m

Advertisement ChinAccess: Professional Interpreting & Translation Services(EN/NL/CN)

Retail Walmart to open 115 new stores in China

Stock markets Residents of Shanghai FTZ to be allowed to invest abroad

Travel Huge crowds visit tourist sites during holiday

One-line news

FCCC ACTIVITIES

EXPO Milano 2015 – EU-CHINA Days: Joint cooperation to enhance investments and business opportunities 9 – 10 June 2015

The EU-China Business Association (EUCBA) and the Flanders-China Chamber of Commercehave the pleasure to invite you to the EU-China Days organized by the European Commission at the World Expo in Milan. The Flanders-China Chamber of Commerce is a member of the EUCBA and is in charge of the Secretariat-General at the EUCBA, which has recently set up an office in Brussels. The EUCBA is an Association of Associations in the European Union countries promoting business relations between European enterprises, institutions and their Chinese counterparts. Today it counts 20 members from 20 different countries. The European Commission – the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs – is organizing an event focusing on the EU and China, that will see the participation of European and Chinese companies, clusters and institutions.

The event will allow you to get information on the European Commission tools, which can assist and support the internationalization of businesses (in particular SMEs), as well as business relations between Europe and China. You will also have the chance to meet Chineseand European counterparts during the B2B sessions in order to discuss concrete cooperation projects in business, technology transfer and research. By attending this event, you will gain easy access to enterprises, clusters and stakeholders and will get new opportunities and competitive advantages!

You can find detailed information and registration forms for the conference and B2B meetings at the following links:

• EU – China Days (9-10 June, 2015): http://www.euexpo2015-china.talkb2b.net • Detailed draft programme of the EU-China conference

Participants• SMEs and big companies • Clusters • Research Centres • BSOs and Institutions

Sectors of the B2B Meetings • Agro-food manufacturing • Creativity, cultural heritage and local traditional food • Space application to agriculture and environmental management • Health biotechnologies • Food and wine, tourism • Other topics relevant to the thematic focus of the brokerage event.

To register for the Conference and/or the B2B, click here.

Programme6 Apr-29 May6 Apr-22 May

25-29 May

Registration for the Conference.Registration for the B2B meetings. Support will be provided for the drafting of cooperation profiles. Once your profile is duly filled, it will be validated by the organizers and will be published online and promoted.Selection and booking of the B2B meetings. Support will be provided for the

FCCC Newsletter No 407, 4 May, 2015 Page 2

1-8 June9-10 June10 Jun-14 Oct

matchmaking based on cooperation profiles. Confirmation of the participation at the B2B.Delivery of the confirmed B2B meetings schedule.EU-China Event.Follow-up.

We remain at your disposal for any further information you require and look forward to meetingyou at the EU-China Days at the World Expo in Milan!

For more information: www.flanders-china.be

ACTIVITIES SUPPORTED BY FCCC

Asia-Europe Meeting Industry Dialogue on Connectivity – 27-28 May 2015 – Chongqing

The Asia-Europe Meeting Industry Dialogue on Connectivity will be organized in Chongqing, China from 27 to 28 May, 2015. The cooperation on connectivity is the most important area discussed by leaders of Asian and European countries in recent years. This meeting will be a good opportunity to know and participate better in the connectivity cooperation between Europe and Asia.

Background: At the 10th ASEM Summit in 2014 in Italy, leaders “underscored the significance of connectivity between the two regions to economic prosperity and sustainable development and to promoting free and seamless movement of people, trade, investment, energy, information, knowledge and ideas and greater institutional linkages.”

Objectives: The dialogue is intended to provide a platform for ASEM government officials, entrepreneurs, scholars and other stake-holders to share and exchange valuable findings and thoughts on various aspects of connectivity, such as opportunities and challenges, ways of promotion, investment and financing.

Topics: • New opportunities and industrial cooperation outlook• Key areas of cooperation in connectivity• Innovation of cooperation in trade, investment and finance• Role of major stakeholders• The way forward

Date: 27-28 May, 2015Venue: Chongqing Yuelai International Convention Center, ChongqingFor more information and registration: contact Ms Wang Bingdan (wbd_2015@126.com) or MrMeng Dan (dforest@sina.com)

PAST EVENTS

8th China Green Companies Summit (CGCS) – 20-22 April, 2015 – Shenyang

The 8th China Green Companies Summit (CGCS) was held on 20-22 April, 2015 in Shenyang, Liaoning province. Mrs Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce (FCCC) and Secretary General of the EU-China Business Association (EUCBA) attended the Summit. The EUCBA was a supporting partner of the summit, which was organized by the China Entrepreneur Club (CEC). The Summit promotes smart and sustainable growth, and builds partnerships through matchmaking events with enterprises and organizations. The three-day event had a theme of “Game changers: Creating new business value”. The summit was first held in 2008 in Beijing with the focus on sustainability in the economy and is one of China's most influential meetings of its kind. Participants discussed the “One belt, one road” initiative, the new Silk Road, the Industry 4.0 concept, the environment, innovation and start-ups. Investment roundtables were held on health, agriculture, and consumption. Green companies roundtables discussed corporate development; the trend from“made in China” to “created in China”; and environmental industries. It was the first time the summit was held in North-east China.

FCCC Newsletter No 407, 4 May, 2015 Page 3

Lunch-meeting: Building a Successful Plant in Weihai, Shandong Province – 16 April 2015 – Gent

The Flanders-China Chamber of Commerce and the Weihai EU Office in Ghent organized an information meeting on ‘Building a Successful Plant in Weihai, Shandong Province’. This meeting took place on April 16th at the Voka Box in Gent.

Representatives from the Weihai Economic and Technological Development Zone (Weihai ETDZ) offered an insight into the economic environment and main sectors for investing in the Zone and the EU-China (Weihai) Industrial Park. In addition, Bekaert also shared their experiences of building a successful plant in this zone.

Weihai City is a coastal city in Shandong. Located south of downtown Weihai, the Weihai Economic and Technological Development Zone was set up by the State Council in 1992. Thepillar industries of Weihai ETDZ are electronics, pharmaceuticals, automobile parts, textiles, machinery, food processing, ICT and Environmental Protection Technology. It consists of several industrial zones, including Export Processing Zone (Weihai EPZ), Harbor Industrial Park and EU-China (Weihai) Industrial Park. The EU-China (Weihai) Industrial Park was set up in 2012 and covers an area of 14.4 sq km.

The City of Weihai and the City of Ghent have a sister city agreement, while the Flanders-China Chamber of Commerce and the City of Weihai have a longstanding cooperation agreement.

NOTICE

FCCC takes on new challenges within the EU-China Business Association

We have the pleasure to inform you that with 10 years of success behind us, the FCCC is still growing and ready to take on new challenges. We were asked earlier this year to take a leading role in the EU-China Business Association (EUCBA), the organisation that unites all the Chinese business associations in Europe. The EUCBA promotes economic and trade relations between the EU and China.

This will lead to some exciting changes. With the support of the Government of Flanders, we are increasing our activities at the EU level. Our next big challenge will be the co-organisation of the EU-China Business Summit. This Summit and future similar events will give you and other members better exposure to companies and institutions at an EU level.As from April 1st 2015, EUCBA will operate from their new office at the premises of Flanders Investment & Trade in Brussels. The FCCC will be responsible for the secretariat-general of the EU-China Business Association and we will be partly working in Brussels and in Ghent.

The FCCC will continue to:• Offer Advice and Expertise: the FCCC provides information about the latest economic

and trade developments via publications, weekly newsletters and interviews with member companies offering valuable information on how to enter the Chinese market.

• Meet Chinese Delegations: thanks to its extensive network the FCCC plays an important role in welcoming Chinese delegations to our country. We introduce Flemishentrepreneurs to non-traditional investment areas and help facilitate entry in the Chinese market.

• Exchange Experiences and Share Knowledge: the FCCC regularly organises conferences and round tables on China so participants can exchange experiences, facilitate, collaboration and create networking opportunities.

Our new contact details are provided below.

Members are always welcome to suggest topics for activities (e.g. seminars, lunch meetings, etc.) they would like FCCC to organise.

We look forward to meeting you at one of our next activities and thank you for your support.

FCCC Newsletter No 407, 4 May, 2015 Page 4

New addresses, telephone and fax numbers of the Flanders-China Chamber of Commerce (FCCC)

Please note the new addresses, telephone and fax numbers of the Flanders-China Chamber of Commerce (FCCC).

Offices: Ajuinlei 1, B-9000 Gent – Belgium New telephone and fax numbers: Tel.: +32/9/269.52.46Fax: ++32/9/269.52.99

Registered office: Zenith Building, Koning Albert-II laan 37, 1030 Brussels

PUBLICATIONS

FCCC publishes “10 Years: Flanders-China Chamber of Commerce 2005 – 2015”

On the occasion of its 10th anniversary, the Flanders-China Chamber of Commerce has issuedthe publication “10 Years: Flanders-China Chamber of Commerce 2005 – 2015”. The publication bundles interviews with H.E. Qu Xing, Ambassador of the People's Republic of China to Belgium; H.E. Michel Malherbe, Ambassador of Belgium to the People's Republic of China; Mrs. Claire Tillekaerts, CEO of Flanders Investment & Trade; Mr. Stefaan Vanhooren, President Agfa Graphics; Mr. Matthew Taylor, CEO, Bekaert; Mr. Stephan Csoma, Executive Vice President and two other Executives, Umicore; Christian Dumoulin, CEO, Vitalo; Filip Goris, General Manager Asia, Recticel; Mr. Hudson Liu, CEO, Huawei; Mr. Li Shufu, Chairman, Zhejiang Geely Group; Mrs. Chai Hui, General Manager Brussels Branch, ICBC; Mr. Robert Zhao, Chief Representative of the Weihai EU Office in Ghent; Mr. David Liu, Deputy Managing Director, APM Terminals; and Mr. Ma Jian, Chairman, Tianjin Liho Group.

Mr. Geert Bourgeois, Minister-President of the Government of Flanders, wrote the foreword to the publication. Chairman of the FCCC, Mr. Bert De Graeve, provided the introduction and Mrs. Gwenn Sonck, Executive Director of the FCCC, provided some more details about the FCCC.

The publication is available to Members of the FCCC free of charge.

Here is the link to the brochure online.

FCCC Newsletter No 407, 4 May, 2015 Page 5

ADVERTISEMENT OPPORTUNITIES

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This year, the Flanders-China Chamber of Commerce celebrated its 10th anniversary! We would like to give your company the opportunity to give more exposure about your companies' activities to Belgian companies active on the Chinese market and Chinese companies present in Belgium.

There are still opportunities to advertise in the second printing of the 10th anniversary publication.

In the link below you can find further information and a proposal for sponsorship as well as advertisement opportunities on our website and newsletters.

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MEMBERS' NEWS

Hainan Airlines links Chongqing to Rome with bi-weekly flights

Hainan Airlines launched a new route connecting two cities along the “One Belt, One Road” with direct flights from Chongqing to Rome. The carrier plans to operate bi-weekly flights between the two cities using an Airbus A330 aircraft with 260 seats, said company officials. It is the second route from Chongqing to Europe and the first route to Western Europe from Southwest China. “It is important for Hainan Airlines to connect the two cities located along theSilk Road,” said Xie Haoming, President of Hainan Airlines. The “Belt and Road Initiative”, namely, the Silk Road Economic Belt and the 21st Century Maritime Silk Road, were put forward by President Xi Jinping in 2013. So far, more than 60 countries along the one belt and one road and international organizations have shown interest in taking part in the two initiatives. With the new Chongqing to Rome route, Hainan Airlines now has 14 connections onthe “One Belt, One Road” routes Xie said. International business will account for 16% of Hainan Airlines' annual income this year, up from 13% in 2014. Chongqing airport, which is theeighth largest in China in terms of turnover, will record more than 30 million trips this year, saidZhao Jiangping, Chairman of Chongqing Airport Group.

AUTOMOTIVE

BYD wins California electric bus order

California’s Long Beach Transit will buy up to 60 electric buses this year from China’s BYD, the company’s biggest order to date from an overseas market. BYD, partly owned by Warren Buffett's Berkshire Hathaway, won the bid at a public hearing in Los Angeles. “The first batch of 10 buses will be delivered later this year, and following orders for about 50 more would be announced after that,” said Sherry Li, Marketing Director of BYD’s overseas group. The contract win marks a major step for BYD in its push to sell overseas and comes a year after the Federal Transit Administration ruled that the Chinese firm was ineligible to bid for a Long Beach transit contract because it did not submit goals for working with businesses owned by minorities or other disadvantaged groups, as required by the federal agency. “The order means a lot to BYD as the U.S. is the market with the toughest quality and safety standards,” Li added. She said BYD also won a contract to sell five electric buses to the Japanese city of Kyoto in February. BYD electric vehicles are in use or being tested in 140 cities across 33 countries and regions, Li said, though she declined to say how many buses were running on streets overseas. BYD is also negotiating with driver service firm Uber over the sale of a few hundred electric taxis for Chicago and New York. BYD announced it plans to sell 15,000 electric taxis and 6,000 electric buses this year. But Li said 95% of the orders would be from the domestic market, the South China Morning Post reports.

• Two Lykan HyperSport cars were sold at the Shanghai Auto show. A version of the car that comes with diamonds embedded in the headlights was previously said to cost as much as CNY90 million. The Lykan HyperSport is powered by a twin-turbo flat-six 3.7 liter engine and can accelerate from 0 to 100 km/h in 2.8 seconds.

• BAIC Motor Corp posted a net profit of CNY1.63 billion and revenue of CNY19 billion in the first quarter. BAIC raised HKD9.9 billion from its listing in the Hong Kong Stock Exchange in December 2014.

• China is to reduce subsidies for new energy cars by 20% in 2017-2018 and 40% in 2019-2020 compared to figures for 2016, the Ministry of Finance said, despite the nation being far from its green car deployment goals. Last year, subsidies were reduced by 5% from 2013’s figure while they were cut by another 10% this year. Next year’s maximum subsidy will be CNY55,000. The subsidy program is due to end in 2020. The number of new energy vehicles had surpassed 120,000 units by the end of 2014, much lower than the 500,000 target for 2015 and 5 million by 2020.

FINANCE

More foreign institutions enter interbank bond market

China has allowed another 32 foreign institutions to trade in its onshore interbank bond market. Eleven Qualified Foreign Institutional Investors, 11 Renminbi Qualified Foreign Institutional Investors and 10 financial institutions including commercial banks and insurers

FCCC Newsletter No 407, 4 May, 2015 Page 8

have been given access to China’s interbank bond market, according to the Shanghai ClearingHouse. The number of new approvals compared with a total of 73 granted last year and brought the total number of foreign institutional investors in the market to 243. China’s bond market is the third-largest globally at CNY36.7 trillion by the end of March, with the interbank market taking up 95% of the total trading volume. China first opened the interbank bond market to RQFIIs in 2012 and QFIIs in 2013. Foreign central banks with currency swap deals with the People's Bank of China (PBOC) and offshore yuan clearing banks can also invest in the market. China is also considering further easing curbs on foreign participation in the interbank market by replacing the current approval system with a registration system. As of theend of last year, foreign institutions held CNY572 billion in China’s interbank bonds, or 17.7% of the total, according to the PBOC.

• The Chinese authorities will push for the yuan to be included in a basket of currencies used to denominate and settle loans from the Chinese-led Asian Infrastructure Investment Bank (AIIB). They will also encourage the AIIB and the Silk Road Fund to set up special currency funds and issue yuan-denominated loans through both institutions, sources said. A basket of currencies called the “AIIB currency” would mostlikely be adopted as the bank's currency of settlement.

• The China Banking Regulatory Commission (CBRC) is probing Chairman Kwok Ying-shing of Shenzhen-based developer Kaisa Group for possible violations in the sale of National Trust to Sino Life Insurance despite a CBRC rule requiring trust company shareholders to hold their shares for at least three years. The CBRC might block the sale, sources said. Kwok bought National Trust for about CNY3 billion in mid-2014.

• Illegal fundraising hit a record high in China last year, especially in terms of the number of cases, the amount of capital and the number of people involved. In 2014, the police filed more than 8,700 illegal fund raising cases involving over CNY100 billion. Both numbers increased sharply from a year earlier. During the first two months of the year, such cases filed by the police reached more than 2,200 and the amount of money involved exceeded CNY34.6 billion. The risks grew particularly fast in fields such as wealth management, peer-to-peer lending and private equity investment.

• Bloomberg reported in April that the Central Commission for Discipline Inspection (CCDI) was investigating whether Dai Xianglong, Governor of the People’s Bank of China (PBOC) from 1995 to 2002, had used his influence to financially benefit his relatives. However, an interview with Dai appeared in the Financial News recently, suggesting he was not in trouble.

• China's central bank may have to ease credit further, after several provincial governments met cold responses to bond sales and amid rising pressure to spur infrastructure investment. But analysts said the People's Bank of China (PBOC) did not need to pursue quantitative easing (QE) as had the United States during the globalfinancial crisis.

• The yuan reclaimed its position as the world’s fifth-largest payment currency in March from seventh in February as foreign companies increasingly use the Chinese currencyfor trade and investment with China, SWIFT said. The yuan accounted for 2.03% of payments worldwide in March, up from February’s 1.81%. This made the yuan the fifth-largest payment currency after the U.S. dollar, euro, pound and yen.

FOREIGN INVESTMENT

Household products JV set up

Five companies from three countries are cooperating to sell imported popular household products like diapers and milk powder in China to tap a growing market for premium foreign products. They are Itochu, Japan’s third-largest trading house; Charoen Pokphand Group, Thailand’s biggest conglomerate; and Chinese companies CITIC, China Mobile and Shanghai Information Investment. A deal on the joint venture, Face to Face Co, was signed last week. The partners are investing USD500 million. The venture will operate through a cross-border e-commerce website out of the Shanghai free trade zone (FTZ) to benefit from preferential policies offered by the FTZ. “We predict the scale of cross-border e-commerce in China will jump from nearly CNY76.7 billion in 2013 to about CNY1 trillion by 2018,” Itochu said in a statement. The new venture plans sales of USD666.7 billion by 2019 and plans to list in China

FCCC Newsletter No 407, 4 May, 2015 Page 9

in 2020. Itochu said the venture will begin operation later this year, offering nearly 100,000 Japanese-made items, including household appliances, food, diapers, milk powder and possibly clothing. The joint venture will take over online shopping mall Kuajingtong, which was formerly run by state-owned Shanghai Orient Electronic Payment Co, to run its operations, theShanghai Daily reports.

FOREIGN TRADE

China to cut tariffs on popular imports

China will reduce tariffs on popular imported consumer goods to boost spending amid the economic slowdown. Observers said the move could have an impact on Hong Kong's retail sector. After a meeting chaired by Premier Li Keqiang, the State Council said boosting domestic consumption was an important step to stabilizing economic growth, and urged departments to come up with detailed plans to carry out the policy soon. There will be a trial run by June for imported products in high demand. More duty-free shops will be set up at portsof entry, while overseas tourists are likely to enjoy an easier process claiming back sales tax. The State Council's decision came after retail sales grew 10.2% in March from a year earlier, slowing from 10.7% in the January-February period. Economic growth slowed to 7% in the firstquarter of this year. Zhao Ping, Senior Researcher at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said the tariff reduction could drive retail sales growth 0.5 to 1 percentage point higher. Some imported products, suchas cosmetics, carry up to 30% consumption tax. In addition, some companies must pay between 5% and more than 20% in import duties, she said.

China serves up hope at Milan Expo

China launched its largest-ever pavilion outside the country at the Milan Expo, which opened on May 1, showcasing the nation's rich agricultural history, food culture and artwork. Covering about 4,500 square meters, second only to the 4,900-sq-m Germany Pavilion, the China Pavilion is themed “The Land of Hope”, echoing the theme of the 2015 Expo－ ”Feeding the Planet, Energy for Life”. Taking place from May 1 to Oct 31, the Milan Expo has participants from about 140 countries, of which 53 have built their own pavilion. Jiang Zengwei, Chairman of the China Council for the Promotion of International Trade (CCPIT), said that China will tell the world the stories of agriculture and food that are deeply embedded in its culture. Carlo Calenda, Italian Deputy Minister for Economic Development, congratulated China's efforts to bring the large-scale China Pavilion to the Milan Expo, and for being one of the first countries to complete the construction of its pavilion. Inside the China Pavilion, clay figures stood inside a large exhibit showing Chinese people eating and making food, or chatting around the food table, conveying the message of how food has brought together different people in the Chinese community, the China Daily reports.

• China’s Ministry of Commerce (MOFCOM) said that the European Commission had issued a “notice of initiation of an anti-dumping proceeding concerning imports of high fatigue performance steel concrete reinforcement bars” originating in China. This is the first anti-dumping probe by the European Union into Chinese products this year. The investigation will last 15 months.

HEALTH

Less air pollution means heavier babies

Beijing's tough air pollution reduction measures for the 2008 Olympics had an unintended benefit: heavier baby birth weights. Babies born to mothers whose eighth month of pregnancy fell between August 8 and September 24, 2008, were an average 23 grams heavier than thoseborn in the same period in the years before and after, according to a study led by David Rich, Epidemiologist with New York's University of Rochester Medical Center. The study, published in the journal Environmental Health Perspectives, looked at birth data from 83,672 babies.

FCCC Newsletter No 407, 4 May, 2015 Page 10

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IPR PROTECTION

Survey cites enforcement as greatest concern in IP

Enforcement remains the most troublesome intellectual property issue in China, according to the Social Satisfaction Towards IP Protection report. Respondents cited a lack of enforcement resources, delays and inconvenience in accessing help, and litigation costs and inefficiency asitems they were dissatisfied with. Satisfaction with IP protection enforcement was rated 65.81 of a maximum of 100 in 2014, the lowest among the four areas but the first time it surpassed abenchmark score of 60 since the survey was launched in 2012, Xiao Luqing, Secretary General of the Patent Protection Association of China, said at a news conference. The opening of three IP-dedicated courts in Beijing, Shanghai and Guangzhou in 2014 and planning for an IP appeal court also boosted confidence in enforcement, according to the report. Overall social satisfaction of IP protection in China was rated in the survey as 69.43 in 2014, up from the 64.96 result in 2013. It is the third time the annual survey has been released. For the latest edition, questionnaires were sent to IP professionals, rights owners and ordinary people across the country, of whom more than 12,700 responded, the China Daily reports.

Internet-based patent translation platform launched

The first internet-based patent translation platform in China went online on April 24. Developedby the Intellectual Property Publishing House, wiptrans.com helps translators and companies that need patent translations link with each other. “The quality of patent translation is closely

FCCC Newsletter No 407, 4 May, 2015 Page 11

related to the quality of a patent. One wrong word in the translation can lead to changes in the protection range of a patent,” said Li Cheng, Deputy Director of the publishing house. The platform boasts a database of 14 million English-Chinese technical terms in 12 different industries, as well as 30 million fixed phrases and expressions. A translator can work by simply editing the result of the machine translation, or choose to translate documents manually, with hints of possible terminology and fixed phrases popping up as he or she types, making it unnecessary to look up every term in the dictionary. An expert panel supervises the quality of all the translated works. Translators will receive a warning or lose credits if the panel rules their work to be of poor quality.

MACRO-ECONOMY

Number of central SOEs to drop from 112 to 40

The Chinese government plans to slash the number of central state-owned enterprises (SOEs)to 40 from 112 at present through large-scale mergers as part of a broad plan to reform the state sector. “The reorganization will initially focus on the commercial sector, especially companies in highly competitive industries,” a source told the Economic Information Daily. “Resources will be further allocated to large companies to prevent vicious competition, similar to what happened in the high-speed rail sector when CSR Corp and CNR Corp competed on bids for international projects.” SOE profits fell in the first quarter, sliding 8% year-on-year to CNY499.73 billion, the Ministry of Finance said in a statement. Four key sectors－ steel, non-ferrous metals, coal and petrochemicals－ depressed the overall profits of the state sector. If those four sectors were excluded, profits would have been basically flat, the statement said.

Virtually all provincial-level regions report first-quarter slowdown

All 31 regional governments in China have released first-quarter GDP growth data. Expansion slowed in 30 regions from last year, a compilation by China Daily showed. Zhejiang was the only provincial-level region in China to achieve higher growth in the first quarter, up 8.2% from 7.6% in 2014. The sharpest drop occurred in Liaoning province, where growth slumped by 3.9 percentage points to 1.9%. The second-largest fall was in Hainan province (down 3.8 percentage points) and Xinjiang (down 3.1 percentage points). On a national basis, GDP growth further slowed to a six-year low of 7%, down from 7.3% growth in the fourth quarter of 2014. Resource producers and heavy industrial bases were hit hard by sliding producer prices,which have been declining for more than three years. The national Producer Price Index (PPI) fell 4.6% year-on-year in March alone, the 37th straight month of decline. In Liaoning, steel, cement and iron ore output fell in the first quarter for the first time in years. As a result, industrial output contracted 5.9%. With a glut of unsold housing, property developers slashed investment. As a result, total investment tumbled 18.5%, whereas a year earlier it expanded 17.2%. Shanxi province's problems showed no sign of easing, with GDP growth slowing further to 2.5% from 4.9% a year earlier. The province was crippled by falling coal prices and the exposure of widespread corruption that the Chinese media have termed a “corruption landslide”. General fiscal revenue at the local level grew by only 4.9% in the first quarter, the slowest rate since 1994. Revenue from land sales, a pillar of local governments' income, slumped 36.1%.

Manufacturing activity close to contraction

China's manufacturing activity was on the verge of contraction in April. The manufacturing Purchasing Managers' Index (PMI) remained unchanged from March, at 50.1, close to the 50-point level that separates expansion from contraction, compared with 49.9 in February and 49.8 in January. The PMI readings for medium and small enterprises in April remained below 50, while that for large companies stood at 50.6, according to the National Bureau of Statistics (NBS). The subindex for employment was 48 in April indicating fewer job opportunities in the sector. The National Bureau of Statistics (NBS) also said the PMI for the service sector was 53.4 in April, the lowest level since January 2014, indicating a slower expansion compared with 53.7 in March and 53.9 in February. Employment in the service sector has contracted for three consecutive months, and decreased the quickest in April, a PMI subindex reading of 48.9 showed. Zhao Qinghe, Senior Economist at the NBS, said that the downward pressure for the manufacturing industry remained heavy, as both domestic and overseas market demand remained sluggish.

FCCC Newsletter No 407, 4 May, 2015 Page 12

• China’s employment situation is good and progress has been made in structural adjustments, so there is no need for strong stimulus for the economy despite downward pressure, Ma Jun, Chief Economist of the People’s Bank of China (PBOC) said. “The central bank’s recent lowering of rates and reserve requirements was mainly to prevent passive tightening of monetary policy and to maintain a neutral or steady monetary policy.” China’s economy grew at its slowest pace in six years in the first quarter of 2015.

• Profits of China’s industrial companies dipped 0.4% from a year earlier in March. Cheaper raw materials, improved investment returns and a recovery in the energy sector helped to narrow the profit decline. Industrial companies made total profits of CNY508.6 billion in March, bringing net earnings in the first three months to CNY1.25 trillion, down 2.7% from a year earlier. State-owned enterprises (SOEs) were the worstearnings performer as their net profits fell 29.3% year-on-year in the first quarter, whilethose of private companies rose 6.8% and overseas-invested firms added 6.2%.

• The number of Chinese consumers with investable assets of between USD100,000 and USD1 million may jump 10.1% from a year ago to 15.3 million by the end of this year. The total private investable capital of this group grew 12.8% to CNY106.2 trillion last year and may reach CNY114.5 trillion by the end of 2015, according to the 2015 Chinese Mass Affluent Report compiled by Forbes China and CreditEase.

• China’s crude steel output dropped 1.7% in the first quarter from a year ago to 200.1 million tons, accounting for slightly more than a half of the world’s total, according to the China Iron and Steel Association (CISA). Steel companies’ inventory rose by 40,000 tons in the first quarter from the same period in 2014. The revenue of big steel companies dropped 14.48% year-on-year to CNY762.92 billion due to weak market demand and falling prices.

• China's migrant workers are getting older, better educated and more expensive. Their average age rose to 38.3 years in 2014 from 35.5 five years earlier, with 17% older than 50 compared to 13% in 2010, a quarterly survey by the National Bureau of Statistics (NBS) has found. While their numbers continue to grow – now 274 million – the pace of growth has slowed. A migrant worker's average monthly income rose 9.8%from a year earlier to CNY2,864 in 2014.

• China will increase public spending and cut taxes to boost economic growth, the Politburo of the Communist Party has decided. It also approved a blueprint to develop a new megalopolis, integrating Beijing, Tianjin, and the neighboring province of Hebei.It said there should be no changes to reforms of state-owned enterprises (SOEs), protection of private enterprises' assets, or policies to attract foreign investment. It alsosaid the government must ensure more funds went into the real economy.

• In a speech to students of Tsinghua University's School of Economics and Management on April 24, Finance Minister Lou Jiwei said China had a 50% chance of sliding into the middle-income trap within the next five to 10 years when its annual gross domestic product (GDP) growth slows to 5%. Comprehensive reforms were desperately needed to raise the urban labor supply in order to avoid falling into the trap and to ensure an annual 6.5% to 7% GDP growth in the next few years, Lou said.

MERGERS & ACQUISITIONS

Outbound M&A deals reach historic high

The volume and value of Chinese outbound M&A deals reached a historic high in the first quarter of the year, according to a report from PricewaterhouseCoopers (PwC), while the “Belt and Road Initiative” is likely to bring new merger and acquisition opportunities for enterprises in years to come. The study said 77 Chinese mainland outbound deals were signed in the first three months, worth USD20.2 billion. “Easy monetary policies, low interest rates and a significant surge in the Chinese stock market also helped drive deals,” said Guo Wei, PwC's China Transaction Service Partner. “The 'Belt and Road Initiative', Silk Road Fund and Asian Infrastructure Investment Bank will significantly boost Chinese investments and acquisitions in countries along the trade routes, especially in Southeast Asia,” said Kevin Wang, PwC China'sTax Partner. According to the study, the investment preference has been shifted toward developing countries in Central Asia, Eastern Europe, Southeast Asia and North Africa away from developed countries. Specific target industries have also changed to infrastructure from traditional sectors such as mining and manufacturing. Strong investment is also likely to be made in high-speed rail, electricity, telecom, engineering machinery, auto and aircraft

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manufacturing. The report said private enterprises have continued to be the main driving force behind China's overseas M&A transactions, accounting for 52 deals in the first quarter of 2015,against 16 by state-owned enterprises (SOEs), the China Daily reports.

REAL ESTATE

Los Angeles favored for real estate purchases

More than 40% of investment overseas by rich Chinese is spent on property, with North America their favorite place to spend, a survey published by the magazine Hurun Report suggests. The wealthy each spend an average of CNY6 million on property abroad. Seven of the top ten favorite cities for wealthy Chinese buyers are in North America, with Los Angeles, San Francisco and Vancouver topping the list, followed by Sydney, Melbourne and Singapore.The survey was based on 141 people who have assets averaging CNY42 million. They have either moved abroad, or are considering doing so, the report said. One fifth invested overseas to spread risk, while 20% said their purchases abroad were for the sake of their children’s education. Wealthy students from China spent an average of two years studying abroad a decade ago, but many now lived overseas for eight years, said Rupert Hoogewerf of Hurun Report. Nearly half chose homes near prestigious schools, and some 23% favored real estate in areas with a high population of ethnic Chinese, the South China Morning Post reports.

High-end property in Beijing to exceed CNY100,000 per sq m

High-end properties in central Beijing – tipped to attract prices of more CNY100,000 per square meter – are being targeted at young elite customers. Young people in their 30s, working in finance, investment and internet companies, have replaced entrepreneurs in their 40s and 50s from the manufacturing sector as the leading buyers of the luxury homes built within the capital's third ring road. During the first three weeks of April, 420 luxury flats priced at more than CNY60,000 per sq m had been sold – an increase of 83% on the number sold during April last year. Year-on-year, the aggregated area of the flats had almost doubled to 123,000 sq m, while their average price per sq m was CNY93,000 – an increase of 30%. In order to attract younger buyers, real estate developers were modifying interior decorations to make them more modern, and added more high-tech intelligent appliances.

• China is home to about 40% of the world’s 79 skyscrapers of at least 1,000 feet (304.8meters) high, according to the Skyscraper 2015 Report by Knight Frank. Hong Kong still tops the Skyscraper Index with the world’s highest office rent at USD250.50 per square foot per annum for the fourth quarter of 2014. Shanghai ranked 10th in the index, with skyscraper office rent of USD68.75 per square foot per annum.

• Chinese corruption fugitive Cheng Muyang – who has been identified as Vancouver property developer Michael Ching – is seeking refugee status in Canada to evade Chinese authorities. He is President and Founder of Mo Yeung International Enterprise, a major Vancouver real estate firm. Ching Mo Yeung is a criminal and fraudster, Citizenship and Immigration Canada said in a statement, as Chinese police in 2004 already asked Canada to deny citizenship to the suspect.

• Guangdong-based developer Country Garden has entered the Shanghai residential market with the purchase of a plot of land for CNY607 million in a public tender. The purchase is seen by analysts as a strategic move as profit margins in third- and fourth-tier cities are declining. The developer paid CNY8,534 per sq m to acquire the 62,443.4 sq m site in Shanghai's Jiading district.

• Sunac China Holdings has sought permission from Hong Kong's stock exchange to proceed with its acquisition of a 49% stake in troubled developer Kaisa Group Holdings even though Kaisa has not published audited results for last year. Kaisa became the first Chinese developer to default on dollar debt.

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RETAIL

Walmart to open 115 new stores in China

U.S. retailer Walmart aims to open 115 new stores by 2017 and renovate more than 50 outletsthis year after Chinese sales fell in the fourth quarter of last year. The new openings come on top of its 412 current stores, including seven member-only Sam’s Club stores, in the next two to three years. Walmart will also spend about CNY370 million this year to upgrade more than 50 current stores. China is a top priority for us, said Chief Executive Doug McMillon at a news conference in Beijing. The expansion of Walmart, almost one-third by presence in China, will create more than 30,000 jobs. China’s retail environment is tough for foreign retailers. Last year, Carrefour closed eight stores, while Germany’s Metro said it was closing its consumer electronics business in China. Though online grocery businesses have changed the way consumers shop for goods, McMillon said he believes that physical stores would continue to prosper. Raymond Bracy, Walmart China's Senior Vice President of corporate affairs, said thatan expanding middle class is encouraging Walmart to move into the emerging third-and fourth-tier cities, adding that the company would also push for the further development of e-commerce. Since its entry into China in 1996, Walmart has opened 412 stores in 165 cities and partnered with nearly 20,000 local suppliers. Walmart was the third-largest hypermarket retailer in China last year with a 10.6% market share, behind French retailer Auchan and China Resources Enterprise (CRE), according to data from Euromonitor International.

• Tariffs on imported consumer goods will be cut in parts of China by the end of June to fuel domestic consumption and stabilize economic growth. The Chinese government decided to increase imports of overseas products favored by Chinese consumers. More duty-free stores will open at Chinese borders, with a higher purchasing cap for each individual tourist and more categories of products available for purchase. Easier tax refund procedures will also be promoted.

• Apple's iPhone sales in China surpassed those of the United States for the first time inthe first quarter of this year. The larger-screen iPhone 6 and iPhone 6 Plus became popular as Chinese New Year’s gifts in February. Apple’s total revenue in China surged 71% to USD16.8 billion in the quarter.

• Chinese brands are preferred by consumers as they are quicker to tap latest media trends and bolder with new marketing campaigns, outperforming their multinational rivals, according to Tian Tao, Deputy General Manager of market research firm CTR China. More than 30 of the top 50 most frequently purchased consumer products by Chinese urban households are made by home-grown manufacturers, according to

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Kantar Worldpanel.

STOCK MARKETS

Residents of Shanghai FTZ to be allowed to invest abroad

China may launch a trial scheme soon that would allow Chinese individuals in the Shanghai Free Trade Zone (FTZ) to invest in overseas markets directly for the first time, two sources with direct knowledge of the matter said. The program, known as the Qualified Domestic Individual Investor program (QDII2) is among measures jointly proposed by the Shanghai government, the central bank and regulators to promote capital account convertibility and greater international use of the yuan.

• Investors in China are among the most optimistic in the world. 94% of Chinese polled in a survey by the U.S. investment company Franklin Templeton in 23 countries said they were confident of meeting their investment goals this year and 71% expressed confidence that the prospects for the country’s main A-share market were rosy.

TRAVEL

Huge crowds visit tourist sites during holiday

Huge crowds took the May Day holiday as an opportunity for a spring day out, resulting in a heavy rush on tourist attractions in Beijing. According to the Beijing Commission of Tourism Development, 5.4 million visits were made to 150 major scenic spots in the capital during the three-day holiday, a decline of 1.3% year-on-year. Total revenue generated during the holiday reached CNY185 million. Tourists who once swarmed to traditional scenic sites sought out neighboring tourist destinations, reducing the pressure. Aside from the Palace Museum and the Summer Palace, where visitor numbers increased, major tourist spots in Beijing－ such as the Temple of Heaven, Badaling section of the Great Wall and Beihai Park－ all saw small decreases. But tourism in rural areas of Beijing gained in popularity. Activities included fruit picking, fishing, eating freshly harvested vegetables and living in farmhouses. More than 2 million visits were made to rural areas, a nearly 10% year-on-year increase. The China National Tourism Administration said on Sunday evening that the number of Chinese tourists visiting South Korea and Japan during the holiday rose 50% year-on-year, while Hong Kong cooled down as a previously popular destination. 30% of Chinese traveling abroad during the holiday went to Europe, the China Daily reports.

• More than 338,000 tourists from the mainland visited Japan in March, a rise of 83% compared with the same month last year, according to the Japan National Tourism Organization. Visitors from the mainland have been drawn by the cheaper yen and lower taxes on Japanese goods.

• China Railway Construction Corporation (CRCC) has won USD5.44 billion worth of contracts in Africa. CRCC’s subsidiary CCECC Nigeria won a USD3.51 billion contractto build the Nigeria Ogun State Intercity Mass transit Project in Nigeria. The intercity railway is 334 kilometers long with a designed speed of 120 km per hour. China Civil Engineering Construction Corporation (CCECC), a subsidiary of CRCC, gained a USD1.93 billion contract to build the Magamba 2015 Housing Project from the Zimbabwean Ministry of Local Government, Public Works and National Housing.

• The state parent of China Southern Airlines, one of the targets of Beijing’s anti-graft campaign, has closed overseas bank accounts, taken action against 25 corrupt executives and stopped free rounds of golf for premier clients. It also cut down the number of its agents and increased the ratio of direct sales.

• The Guangzhou office of taxi-hailing app Uber was raided by police and a number of mobile phones were seized. The company is suspected of allowing private car ownersto offer taxi services, an official with the city’s traffic authority said. The raid was part ofa comprehensive crackdown on illegal taxi services by private drivers. In January, the Ministry of Transport banned taxi-hailing apps being used by car drivers that did not have taxi licenses.

• Between October and March, the U.S. Embassy and its consulates in China processed more than 940,000 visa applications for business and tourist travel – up

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55% compared with the same period one year before. Nearly all of the people that hadtheir business and tourist travel applications approved received 10-year visas.

• A China Tourism Academy study found that the number of Chinese tourists traveling abroad during this year’s Lunar New Year holiday outnumbered those traveling within the country for the first time ever.

• A new record has been set for the number of journeys made on China's railway system on a single day as about 11.9 million people traveled by train on May 1 – an increase of 11.6% compared with the same day last year. This total was about 2 million more passengers than the previous record set during this year's Lunar New Year travel season.

ONE-LINE NEWS

• Chinese prosecutors have brought back 61 suspects accused of corruption from 20 countries and regions. The countries include the United States, Canada and Italy, withprosecutors confiscating CNY629 million in illegal funds, according to the Supreme People's Procuratorate.

• Wang Tianpu, President of the state-owned Sinopec Group, is under investigation for suspected “serious disciplinary violations”, the Central Commission for Discipline Inspection (CCDI) said. Sinopec’s Board said in a statement that the company supports the decision of the central government and will continue to fight against corruption. More than 7,500 corruption cases were filed by prosecutors across the country during the first three months of this year, most of them involving bribes of overCNY50,000.

• China now has the second-largest wine-growing area in the world after Spain, pushingFrance into third place, according to the International Organization of Vine and Wine. In 2014 China had 799,000 hectares of land devoted to wine growing. But because wine-making is less efficient, China's output is only the seventh-biggest.

• Since the 18th Communist Party Congress in November 2012 until early April, the Central Commission for Discipline Inspection (CCDI) has detained 124 top-level officials working for SOEs. Out of this total, 25% work in energy, with 13% in infrastructure, 12% in telecoms, 9% in finance, 8% in transportation, 7% in metallurgy, 5% in media, 5% in the automotive industry, and 16% in other sectors.

• Courts in China were given powers from to rule on whether regulations issued by government departments are unlawful if they are sued by members of the public. The reforms came into force on May 1. The new rules make it easier for the public to sue government officials for alleged injustices such as abuse of power and alleged illegal land seizures.

• The average undergraduate in Beijing expected a salary of CNY6,668 per month post graduation, yet the average salary for graduates in 2013 was only CNY4,746. Scienceand technology students earn the highest salary, of CNY4,674 a month, according to the Ministry of Education. Beijing offers the highest average monthly pay for new graduates, followed by Shanghai and Guangdong.

• Japan and China agreed to step up their cooperation in combating air pollution when their environment ministers held their first talks in three years in the latest sign of thawing relations.

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The FCCC Newsletters are edited by Michel Lens, who is based in Beijing and can be contacted by e-mail michel.jc.lens@gmail.com . Disclaimer: the views expressed in this newsletter are not necessarily those of the FCCCor its Board of Directors.

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