CHINA, NATIONAL,NEWS: China Likely to Prevent Foreign Control Over Key Auto-components Manufacture

by Li Mu and Wayne Xing

Approval of several auto parts joint ventures that have majority control by foreign partners has been delayed, according to a recent report in zhongguo qiche bao (China Automotive News).

While China is opening up its domestic auto parts sector to foreign investment as part of its WTO commitments, decision makers are becoming aware that multinational suppliers are expanding their control in their China operations by either taking up controlling shares of their joint ventures or shifting to setting up wholly owned foreign enterprises (WOFE). Ministries that supervise the country's automotive sector are now more cautious in the approval of joint-venture projects that may result in foreign control or monopoly.

When joint-venture projects are usually approved within 30 days, ThyssenKrupp's $39.19 million acquisition of 51 percent shares of the Tianrun Crankshaft Co., Ltd. has been sitting on the desk of the Ministry of Commerce since January, according to a company spokesperson in a telephone interview. The acquisition, if approved, will put the German company in control of 60 percent of China's crankshaft market share currently enjoyed by Tianrun, China's biggest State-owned and independent crankshaft manufacturer located in Wendeng, Shandong Province.

Another proposed joint-venture project waiting for approval from the Ministry of Commerce is a transmission joint venture between Gertrag of Germany and Jiangling Motors Transmission Co., Ltd. Gertrag plans to take up 66.7 percent of equity shares of the new venture. A Chinese executive working at Gertrag Beijing Office confirmed the situation in a telephone interview.

Foreign investors are snatching more control of domestic supplier businesses and moving towards larger market share and even monopoly, analysts say. This has been the case especially since the State Development and Reform Commission released the new Automotive Industry Development Policy in 2004. According to the new policy, foreign investors are allowed to have majority shares in auto parts joint ventures, including engine joint ventures.

Industry analysts indicate that the growing foreign control in China's equipment manufacturing industry as a result of local government approval has alarmed the central government. Decision makers are therefore contemplating on setting up guidelines as to how to prevent foreign equipment manufacturers, including key parts and components manufacturers, from controlling the domestic industries.

"The swarming in of foreign investment has created adverse environment for domestic innovation," said Sui Yongbin, vice secretary general of China Machinery Industry Federation, in an interview with jingji guancha bao (Economic Observer), "Further regulations on foreign acquisition is a must, and such regulations are in compliance with acceptable international practice," he said.

Sui is involved in the drafting of a regulation on foreign investment in the equipment manufacturing industry, which is expected to be released by the State Council. He said the new policy would protect major domestic companies from foreign control and prevent local governments from giving indiscriminative approvals to projects that are detrimental to the strategic development of the national economy.

The State Council is also considering setting up inter-ministerial conferences headed by SDRC to inspect major foreign acquisitions, according to a Hong Kong newspaper. Insiders say that these joint-venture auto parts projects are not likely to be approved until the new regulation on foreign acquisition come out.

According to some analysts, the tightening up of government control on multinational acquisitions of key automotive parts and components manufacturers has been prompted by the aborted joint venture deal between Hangzhou Advance Gearbox Group and ZF of Germany last year.

ZF's intention of controlling 70 percent shares of a partnership with the Hangzhou Advance Gearbox Group has been curbed by decision-making government departments, according to a Xinghua News report. The joint venture is "cancelled at the behest of some senior officials and professors," according to the person in charge of HAGG's public relations. He denies that there has been government intervention, however, saying instead that it is because the management of the corporation could not accept the unfavorable conditions set by ZF.

As the largest gearbox producer dominating over 80 percent of domestic market share, Hangzhou Advance Gearbox Group has doubled its annual revenue over the past five years, but its deal with ZF would prevent it from developing and manufacturing products such as marine and transmission gearboxes under its own brand, and the contract would also cost it more than ¥39 billion worth of royalties for technology over the next seven years.

Executives of the company said in an interview with Xinghua News that if the deal is made, the Chinese partner will have little say in the management of the joint venture, and may, following several precedents of foreign acquisition, eventually give up the equity interests.

The article has been published in an August newsletter of China Business Update, a company owned by Gnix Transpacific Co., Ltd in United states, which specializes in automotive industry publication. Wayne Xing, co-writer and the CEO of China Business Update, has authorized the publication of this article in WOW.

NATIONAL NEWS: Hunting Restrictions Reorganized With Regulated Quotas and Opened to Foreign Hunters

By Shi Rui

The Chinese government auctioned quotas for wild animal hunting for the first time to four mainland agencies on August 13 in Chengdu city, the capital of Sichuan province.

There were hunting quotas for 289 wild animals of 14 species in the auction, all of them herbivores. Takin is the only species of the first category of national wildlife protection while all the other 13 kinds are of the second category.

The base price of the auction is the quarry price set by the government in 1996, such as: $10,500 for a blue sheep, $22,000 for an argali, and $28,000 for a takin, etc.

According to Wang Wei, vice director of the Wildlife and Plant Conservation Division of the State Forestry Administration, the professional hunting could not destroy wild animal populations with the strict limitations in number, time and place. He also mentions that the hunting is restricted to eight areas, including Ningxia, Qinghai, Shanxi, Gansu, Xinjiang, Hunan, Sichuan and Inner Mongolia.

The government started to allow foreigners to hunt wildlife with payment from 1985 in Qinghai province. The action was considered an effective way to collect funds for animal protection and stimulate local people's awareness that wildlife is precious.

"Most of the wild animals killed each year were cooked and eaten by local people. But when they knew a living blue sheep could be sold to international hunters for more than $10,000 in 1985, they stopped hunting it." Wang Wei says, "The profit went back to the local government to rebuild the pasture and to improve the residents' condition of medical treatment."

Every year before 2006, the government would investigate the population and habitat situation of certain species and calculate the hunting quotas. The quotas were then allocated to several domestic agencies, which are qualified to do the international hunting business, and the agencies could sell them to foreign hunters.

The old policy always put forestry officials into a corner when agencies competed for the limited quotas, or when higher officials pressed them to give preference or priority to any certain agency.

"This year's auction mitigates our pressure, because it is open, and therefore fair. It allows no wire-pulling." Wang Wei says, "The quotas go to those offering the highest prices, and personal relationships will be of no use."

The bidders were restricted to only four qualified domestic agencies, including China Wildlife Conservation Association and three other travel agencies, but foreign agencies and even individuals will have a chance to bid in the auction next year.

This article by Ms. Shi Rui was first published in the South China Morning Post -- the editors

NATIONAL NEWS: Foreign Student Enrollment In Chinese Universities Expected To Increase Significantly

By Wang Yan

By 2020 Chinese universities will enroll 300,000 students from abroad, up from 140,000 in 2005, a Chinese educational official announced at a conference in Xinjiang recently and reported by the Xinhua News Agency.

The report said the information was released by Mr. Cao Guoxing, director-general with the International Cooperation and Exchange Department of the Ministry of Education, at a conference in Shihezi, northwest China's Xinjiang Uyghur Autonomous Region. Mr. Cao also said that the current 20 percent annual growth rate in foreign student enrollments was expected to drop to eight percent after 2020.

He explained that a total of 568 universities in the mainland were qualified to enroll foreign students and that the majority of students from overseas major in Chinese language and traditional medicines. He referred to China's booming economy as a reason for the increase of students coming to the mainland over the next few years.

The report also said Mr. Guo announced that the Chinese government planned to increase the number of scholarships for foreign students to 10,000 per year from the current 6,700 in order to attract more foreigners to China.

When asked, an official with the Ministry of Education said he was not very clear about the conference but confirmed on Tuesday that Mr. Cao was in Xinjiang. "It must have been some kind of overseas education research conference," he said.

The official agreed with the number of 300,000 students in 2020.

"It could be much more," he said.

NATIONAL, LIFESTYLE: Finding Love On The Net

By Wang Yan

Over 50% of respondents expressed their confidence in finding life partners and friends through social networking sites, said Yeeyoo.com in its mainland net love and marriage research report on July 31th.

"77.5% of the respondents agreed that social networking sites would create more chances for them to meet the opposite sex," said the report. Involving over 100 thousand people in Beijing, Shanghai and Guangzhou, the survey was conducted in June and July by Yeeyoo.com, which called itself "the largest and fastest growing online dating platform in greater China" with over 5 million members up to June 2006.

In answering the research question "Why would you choose network as a channel to find your love?" most people chose the answers of "Communicating online is more convenient" and "It offers more chances than the traditional ways."

Twenty-eight-year-old Yeeyoo user Mr. Liu from Liaoning agreed: "I have met 5 or 6 ideal girls on line since the beginning of this year." Websites like Yeeyoo.com serve as platforms where members' profiles are collected and shared. Online chatting, group activities and other match-making services help people get acquainted with each other. Ordinary memberships at Yeeyoo.com are for free, and VIP memberships, which enable more privileges, cost around 13 yuan per month

Obviously this communication model without space limit overcomes the disadvantages of traditional friend-making procedures. Xiong Hongyue, a senior-to-be at Beijing Foreign Studies University, met her current boyfriend online in March, "I couldn't find a boyfriend in real life," she said, "there are too few boys in my university. I have no chance to meet more, let alone finding one I like."

Miss Xiong's problem was not unique. According to the report, narrow social intercourse range had become the biggest obstacle in people's way to find their love. Further explanation by Zheng Chen, director of China Marriage and Family Seminar, was offered by Yeeyoo in its "experts' comments" file: "Trust was hardly built among people in real life, and the degree of communication was relatively shallow." Director Zheng believed the net had created a fictitious space where interpersonal communications were beyond limitation and further intercourse became possible.

"Of course one might feel fictitious chatting online. But after I met him in person, everything settled down." Miss Xiong was perfectly confident in her love.

Xiong Hongyue, student, 熊红月
Zheng Chen, director, 郑晨

This article by Ms. Wang Yan appeared in a slightly different version in today's South China Morning Post -- the editors

NATIONAL, NEWS: Major Investment in Huaihe River Basin Flood Control Projects

By Shi Rui

Mainland China will invest 155.4 billion yuan to improve flood control in the Huaihe River Basin in the next 20 years. The money mainly comes from the government.

The 1991 flood and 2003 flood of Huaihe River caused a loss of 30 billion yuan each, and the Huaihe River Commission of Ministry of Water Resources of PRC shows its confidence in forming an effective flood control system in the Flood-Control Plan for Huaihe River Basin evaluated by experts on July 28.

According to the plan, 104.4 billion yuan will be used to build the upriver reservoirs, reinforce the riverway and levees in the middle reaches of the river, and enlarge the flood discharge ability downstream in the next 10 years. After the completion of the 10-year plan, another 51 billion yuan will be put into upriver environmental improvement and the further construction of the watercourse downstream that can lead floods to the sea. Till then, the Huaihe River Basin can enjoy a much safer flood control and calamity prevention system.

The propaganda section manager of the Huaihe River Commission says, the water-control of the area started about 50 years ago, and they've never relaxed their attention on the issue. After the 1991 flood, the Central Party Committee and State Council set up 19 major flood control projects to administer Huaihe River, half of which have been finished and all of them are expected to be completed by the end of 2007. The investment on the 19 projects is 25.3 billion yuan, which has been counted as a part of the total 155.4 billion for the 20-year plan. "We work on the specific construction projects, and at the same time we constitute and examine the Plan for the whole flood control system. The government has its process to examine a plan, which will take some time," the manager said.

This article by Ms. Shi Rui also appeared in today's edition of the South China Morning Post -- the editors