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19/09/2012

* CIC Invested About $2 Billion in Alibaba

WSJ: “China’s sovereign wealth fund invested about $2 billion in Alibaba Group Holding Ltd. as the Chinese Internet company bought back a large stake owned by Yahoo Inc., according to people with knowledge of the deal.

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Alibaba said late Tuesday that it had completed an initial buyback of half of Yahoo’s 40% stake in Alibaba in a deal valued at approximately $7.6 billion. China Investment Corp. led a consortium of Chinese investors including buyout funds Boyu Capital, Citic Capital, and China Development Bank Corp.’s private-equity arm.

Alibaba’s deal with Yahoo valued the Chinese e-commerce company, which includes Alibaba.com, payment service Alipay and other properties, at about $40 billion.

Under terms of the deal, Yahoo is receiving about $6.3 billion in cash, $800 million in preferred stock in Alibaba and $550 million as a result of amending the firms’ technology and intellectual-property licensing agreement.

Yahoo retains about a 23% stake in Alibaba, following the transaction announced Tuesday. Alibaba said it has the right to repurchase half of Yahoo’s remaining stake.

CIC, which has about $410 billion in assets under management, said in June interview that it had confidence in China’s economic growth and was actively scouting overseas investment opportunities leveraged to China’s growth prospects.”

via CIC Invested About $2 Billion in Alibaba – WSJ.com.

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19/09/2012

# Profile: Xi Jinping – China’s next leader?

BBC News: “Xi Jinping is expected to be the next Chinese leader.

A file photo taken on 17 August, 2012 of Chinese Vice President Xi Jinping at the Great Hall of the People in Beijing

Vice-President Xi Jinping is widely tipped to become China’s next president and Communist Party chief.

Current leader Hu Jintao must retire as head of the party in 2012 and from the presidency in 2013, and Mr Xi’s current positions all suggest he is in place to assume the top jobs.

The 59-year-old, seen as a “princeling” – a term applied to senior officials who are thought to owe at least some of their success to family connections, is already on the standing committee of the Chinese Communist Party.

He is also one of the vice-chairmen of the party’s Central Military Commission, which controls the army.

Analysts see this appointment – a position Mr Hu held before he secured the top post – as a key indicator that he is tipped for the top in the leadership change expected in coming weeks.

Path to the top

Born in Beijing in 1953, he is the son of revolutionary veteran Xi Zhongxun, one of the Communist Party’s founding fathers.

Xi Zhongxun was purged from the post of vice-premier in 1962 prior to the Cultural Revolution and eventually imprisoned. The young Xi Jinping was then sent to work in the countryside like most other “intellectual youth” of the time.

He went on to study chemical engineering at Tsinghua University in Beijing, which has produced many of China’s current top leaders, including Hu Jintao.

Xi Jinping’s military appointment intensified assumptions he will succeed Hu Jintao

Joining the Communist Party in 1974, he served as a local party secretary in Hebei province and then went on to ever more senior roles in Fujian and then Zhejiang provinces.

He was named party chief of Shanghai in 2007 when its former chief, Chen Liangyu, was sacked over corruption charges. Shortly after, he was promoted to the party’s Standing Committee and, in 2008, became vice-president.

Xi Jinping is seen as pro-business, after working hard to attract foreign investment to Fujian and Zhejiang.

In 2005, when he was the Communist Party secretary in Zhejiang, he told media that “government should be a limited government”.

Whenever there are issues that the government was incapable of handling, he said, the public should be given back the power to tackle them.

Seen as having a zero-tolerance attitude to corrupt officials, Mr Xi has twice been drafted in to trouble-shoot major problems.

In Fujian he helped to clear up a corruption scandal in the late 1990s which involved the jailed smuggling kingpin Lai Changxing.

In 2004, he reportedly told officials: “Rein in your spouses, children, relatives, friends and staff, and vow not to use power for personal gain.”

When, in June 2012, a Bloomberg investigative report examined the finances of his relatives, the company’s website was blocked in China – even though the report said there was no indication of wrongdoing by him or his family.”

via BBC News – Profile: Xi Jinping – China’s next leader?.

See also: https://chindia-alert.org/political-factors/

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19/09/2012

# How China is ruled: National People’s Congress

BBC News: ”

Under China’s 1982 constitution, the most powerful organ of state is meant to be the National People’s Congress (NPC), China’s parliament. In truth, it is little more than a rubber stamp for party decisions.

The congress is made up of nearly 3,000 delegates elected by China’s provinces, autonomous regions, municipalities and the armed forces. Delegates hold office for five years, and the full congress is convened for one session each year.

This sporadic and unwieldy nature means that real influence lies within a standing committee of about 150 members elected from congress delegates. It meets every couple of months.

In theory, the congress has the power to change the constitution and make laws. But it is not, and is not meant to be, an independent body in the Western sense of a parliament.

NPC meetings are more about spectacle than power

For a start, about 70% of its delegates – and almost all its senior figures – are also party members. Their loyalty is to the party first, the NPC second.

Independence

What actually tends to happen, therefore, is that the party drafts most new legislation and passes it to the NPC for “consideration”, better described as speedy approval.

The NPC has shown some signs of growing independence over the past decade. In a notable incident in 1999, it delayed passing a law bringing in an unpopular fuel tax. It has also been given greater leeway drafting laws in areas like human rights.

The congress also “elects” the country’s highest leaders, including the state president and vice-president, the chairman of the government’s own Military Affairs Commission and the president of the Supreme People’s Court.

But again, these elections are very different from the Western ideal.”

via BBC News – How China is ruled: National People’s Congress.

See also: https://chindia-alert.org/political-factors/

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18/09/2012

* In Africa’s warm heart, a cold welcome for Chinese

reuters: “Malawians bill their country as the “Warm Heart of Africa” and pride themselves on a reputation for friendliness. But Jaffa Shaibu, a burly 32-year-old merchant in a clothes market in Salima, a dusty town near the shores of Lake Malawi, feels less than welcoming to the Chinese traders who have moved in over the past four years.

Liberian children hold Chinese flags before the arrival of China's President Hu Jintao in Monrovia in this February 1, 2007 file photo. REUTERS-Christopher Herwig-Files

“The way it looks, one day there will be a big fight with them,” Shaibu said. “One day there will be blood.”

Echoing a grievance heard across Africa, Shaibu and his colleagues in this town of 40,000 complain of Chinese businessmen with better access to cheap imports of clothes, shoes and electronics, and deeper pockets that allow them to reduce their margins.

That sentiment is part of a grass-roots backlash against Beijing’s increasing diplomatic and commercial clout in Africa.

In many ways, the relationship between the two has never been stronger. Bilateral trade has almost doubled over the past three years, to $166 billion in 2011 from $91 billion in 2009. In July, Chinese President Hu Jintao offered Africa $20 billion in cheap loans over the next three years. China, he said, would forever be a “good friend, a good partner and a good brother” to Africa.

But a growing number of Africa’s billion people are less enthusiastic.”

via Insight: In Africa’s warm heart, a cold welcome for Chinese | Reuters.

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17/09/2012

* China past and present: review

UK Telegraph: “China past and present: review

By Rana Mitter7:00AM BST 10 Sep 2012Comment

Two books on China explain why the country’s rise to superpower status is still far from inevitable

A vision of the Chinese future in a 1982 propaganda posterA vision of the Chinese future in a 1982 propaganda poster Photo: Alamy

Some time this autumn, the Chinese Communist Party will announce the date of the 18th Party Congress. Among the Party’s priorities will be two major issues: the need to project Chinese power more widely in the world, and the consolidation of a system of welfare that will prevent the country’s social discontent from spilling over into outright rebellion. These themes are at the centre of these two important books which, taken together, illustrate why the rise of China is far from inexorable.

Odd Arne Westad’s Restless Empire has two main purposes. The first is to provide an overview of China’s engagement with the world over the past three centuries. Westad starts with an important piece of myth-busting, arguing strongly against the idea that China has been an inward-looking society closed to the rest of the world. Whether it was the trade in silks and porcelains that made China part of a global trading network during the Ming and Qing dynasties that lasted from the 14th century to the 20th, or the forced engagement with the West that came with imperialism, China has always been connected with the wider world. Westad is particularly acute on the Cold War period, using impressive documentation to argue that China’s relationship to the rest of East Asia was not just communist, but Confucian in the ties that Mao nurtured with his ideological “younger brothers” such as Kim Il-sung and Ho Chi Minh (even if the family quickly became dysfunctional).

The second aim emerges in the last two chapters, which concern the foreign policy crises facing China today. Westad firmly rejects the received wisdom that China is set to become a global superpower, dominating policy on everything from international intervention to energy resources. Despite its rhetoric, China has in practice been almost entirely passive or reactive in the past few decades. China shows pleasure in being treated as a global player, but shows little sign of knowing what to do with that power other than criticising the United States. “China has to learn,” he says drily, “that sticking it in the eye of the world’s hyperpower may bring short-term gratification, but it does not amount to a grand strategy in international politics.”

Some of the reasons that China’s leadership may be distracted from visions of world domination are made clear in Gerard Lemos’s The End of the Chinese Dream. Lemos spent four years working in Chongqing, the city that has become notorious for the Bo Xilai murder scandal, but his account is of a less lurid but equally troubling failing in Chinese government. He examines the model of welfarist authoritarianism with which the Chinese Communist Party is attempting to gain the “performance legitimacy” that might keep it in power, and finds it seriously wanting. When the Maoist “iron rice bowl” of guaranteed employment, pensions and health care broke down as China privatised its economy in the Nineties, millions of urban and rural Chinese found themselves left behind as others got rich. Figures tell part of the story: food inflation ran at over 18 per cent in 2008, and some analysts expect that health care costs will rise by 11 per cent annually into the middle of the next decade. But the participants in the surveys that Lemos organised add human voices to the statistics: one among the hundreds he records is the 39-year-old woman who declares “Losing my job [changed my life]. I have no money to see the doctor.” She tells Lemos that she fears she’ll be unable to find “the education fee for my children’s education”. The “Chinese dream” of a middle-class existence with a flat, car, and high-quality education for the next generation has only become a reality in the last decade or two. Now it looks as if it may be slipping out of the grasp of millions even before they have had a chance to aspire to it.

Both writers make poignantly clear the obstacles to China becoming a global leader. At bottom, China does not have a vision of what a Chinese-led world would look like. Nor does its domestic political model of party-led authoritarianism export well to the rest of the world. African and Latin American nations may welcome Chinese investment and on occasion find it expedient to use the threat of Beijing to squeeze concessions from Washington. But however shaky these countries’ engagement with democratisation, they do not seriously tout the “Chinese model” as an alternative, because it is clear that China has not solved its most pressing problems: a demographic crisis exacerbated by the one-child policy, a creaking welfare system, and slowing growth.”

via China past and present: review – Telegraph.

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17/09/2012

* China files WTO complaint against U.S. CVDs

Xinhua: “China on Monday requested to negotiate with the U.S. over countervailing duties (CVDs) levied by it against Chinese tyres within the trade dispute settlement mechanism of the World Trade Organization (WTO).

“Through consultations within the WTO trade dispute settlement mechanism, the Chinese side hopes the U.S. can correct its wrong-doing and properly deal with concerns from China,” said Shen Danyang, a spokesman for the Ministry of Commerce (MOC).

In a statement on MOC’s website, Shen said China has reiterated its stance on different occasions that it resolutely opposes the abuse of trade remedy rules or trade protectionism. He added that China will exercise its rights as a WTO member to protect the legitimate interests of domestic industries.

China’s request for consultation came after the U.S. Court of Appeals for the Federal Circuit passed a so-called GPX bill earlier this year to authorize the U.S. Department of Commerce (DOC) to apply CVDs to “non-market economy” countries.

The bill, a remedy for the Tariff Act of 1930, overturned a previous federal court ruling that the U.S. DOC did not have legal authority to impose CVDs on goods from non-market economy countries and gives an application retroactive period since Nov. 20, 2006.

Shen said the U.S. has for many years kept launching countervailing probes against Chinese products without legal support of U.S. laws.

The GPX bill will place Chinese enterprises under an uncertain legal environment and violates WTO rules on transparency and procedural justice, Shen said.

According to the MOC, the trade dispute on tyres involves 24 types of tyre products worth about 7.23 billion U.S. dollars.”

via China files WTO complaint against U.S. CVDs – Xinhua | English.news.cn.

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17/09/2012

* China, EU face dumping claim

China Daily: “Beijing said Brussels has agreed to begin dialogue and cooperation to resolve the multi-billion-dollar anti-dumping investigation towards China’s solar panel manufacturers.

But Brussels refused to go into details of such a stance, revealed by Chong Quan, China’s deputy representative for international trade talks, after three-hour intensive talks with senior officials of European Commission on Friday afternoon.

“They (Brussels) agreed (to hold dialogues) – and I found they are very candid and pragmatic,” Chong told China Daily. “I respect my negotiation partner.”

But when asked how strong Brussels’ intention is, Chong said: “I don’t know.”

Brussels was part of Chong’s three-stop mission to send a clear message from Beijing, which wants to solve this dispute through “consultation, dialogues and cooperation.” Before holding talking with Jean-Luc Demarty, the European Commission’s director general for trade, he was negotiating in Germany and has now moved on to talks in France.

EU trade spokesperson John Clancy refused to elaborate about the three-hour discussion in Brussels. Clancy said the European Commission has begun an “open” anti-dumping investigation on China’s solar panel exports, as it is required to do under the WTO framework and EU law.

He said input “from all stakeholders” is now welcome.

Clancy also confirmed that EU and Chinese trade officials discussed preparations for next week’s EU-China summit in Brussels.

Chong confirmed that China’s Minister of Commerce Chen Deming will be in Premier Wen Jiabao’s delegation that will attend the summit during a one-day visit to Belgium.

Wen and Chen are expected to urge Brussels to negotiate. Chong said both sides are eager to resolve this dispute through dialogue and both sides need to make every effort to avoid a trade war.

In the face of a severe economic slowdown and the magnitude of this dispute, Chong said: “Both of us will become losers if a trade war occurs and the situation is out of control.””

via China, EU face dumping claim |Economy |chinadaily.com.cn.

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17/09/2012

* ‘Iron rice bowl’ ban served up in another city

China Daily: “Civil servants in one city in central China may lose their “iron rice bowl” under a pilot program to be launched this year, the Zhengzhou Evening News reported Monday.

Members of the civil service will be hired under contract rather than with a lifetime job guarantee, according to Zhengzhou Administration of Civil Servants.

The contract normally lasts one to five years, and whether it will be renewed will depend on their performances in the post, according to the new system, which was first adopted in 2007 by South China’s Shenzhen city to increase competitiveness and efficiency in government agencies.

The program is also being mulled by other provinces such as Southwest China’s Sichuan, East China’s Jiangsu and Central China’s Hubei.

“Iron bowl” or “iron rice bowl” are terms to describe a stable occupation for life in China, such as a civil servant.”

via ‘Iron rice bowl’ ban served up in another city |Society |chinadaily.com.cn.

No more job guarantees for civil servants, just like in most Western countries.

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17/09/2012

* Boots in China pharmaceuticals deal

FT: “Just months after striking a £10bn deal to sell eventually the whole of Alliance Boots, chairman Stefano Pessina has taken a minority stake in a Chinese pharmaceutical wholesaler.

Alliance Boots

Alliance Boots (Photo credit: Wikipedia)

Alliance Boots said on Sunday that it had spent £56m to acquire a 12 per cent holding in Nanjing Pharmaceutical, the fifth largest pharmaceutical wholesaler in China by sales.

It comes hard on the heels of Mr Pessina’s deal in June to initially sell a 45 per cent stake in Alliance Boots to Walgreens, with the option for the US pharmacy chain to buy the whole of Alliance Boots.

Mr Pessina said the latest acquisition would give Alliance Boots “a further presence in China”.

Nanjing Pharmaceutical, which is listed on the Shanghai Stock Exchange, had sales of about £2bn in 2011. Alliance Boots said it had a strong market position in its home province of Jiangsu, operating distribution centres in 12 cities across eight provinces.

Alliance Boots already has a position in China through its joint venture with Guangzhou Pharmaceuticals, the sixth largest pharmaceutical wholesaler in China, which operates in complementary geographies.

“Together they represent more or less 5 per cent of the Chinese market, [which is] not negligible,” said Mr Pessina.

He said Alliance Boots was keen to develop its position in China, because it was a big market, which was likely to consolidate over the coming years. “We must be part of this consolidation process,” said Mr Pessina.

As well as seeking a presence in the US, Mr Pessina has long been keen to build Alliance Boots’s reach in China.”

via Boots in China pharmaceuticals deal – FT.com.

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17/09/2012

* For Beijing, expansion is not a big deal, it’s lots of them

The Times: “China’s slowing economy has failed to dent its global ambitions, with an increasingly hungry dragon scouring the globe for higher-value corporate deals, according to new research.

It made 177 outbound acquisitions worth a combined $63.1 billion last year, five times more than in 2005, the study by Mergermarket and Squire Sanders, the law firm, found. Deals are also growing in value, with the planned $15.1 billion takeover of Nexen, the Canadian oil sands explorer, by the state-owned CNOOC set to be China’s biggest-ever foreign acquisition, if it goes ahead.

Next month China will release its third-quarter GDP data, with some economists suggesting that growth could fall below the 7.6 per cent it brushed in the second quarter, despite assurances from Beijing that the economy would stabilise in the second half.

Natural resources and energy, the sectors most critical to China’s future growth, continue to dominate purchases, accounting for almost one in three M&A targets between 2011 and the year to date. Almost all these buyers are state-owned companies making investments at the behest of the Government.

Mao Tong, a Hong Kong-based partner at Squire Sanders, said: “We are seeing companies becoming more interested in making a strategic play, rather than just adding to their portfolio. These are big deals designed to position them in a global context.

“Even if the Chinese economy slows sharply, I think this will continue for a while. China is still the world’s most important manufacturing base, using huge amounts of iron ore, for example.”

China is eager to deploy its $3 trillion of foreign exchange reserves, mainly held in dollars, to counter the gradual depreciation of the currency and put its national wealth to good use. Yet the number of private sector deals is also expected to increase as the Government encourages state-owned banks to step up lending to the corporate sector.Britain is the favoured destination for Chinese dealmaking in Western Europe, accounting for a third of deals and two thirds of all outbound investment to the region, thanks to its reputation for transparency and a large number of Russian and Central Asian resources companies, Mr Mao suggested.

China has shown an increasing taste for European luxury brands, such as Shandong Heavy Industry’s buyout of the Italian yacht group Ferretti this year. Recent British brands going East include Weetabix, bought by the Shanghai dairy group Bright Food, and the $7.8 billion buyout of Northumbrian Water by Cheung Kong Infrastructure, a Hong Kong group chaired by Li Ka-shing.

The Dragon Index, a quarterly measure of China’s overseas direct investment by the private equity firm A Capital, which was released last week, hit an historic high in the second quarter, with ODI said to grow by 67 per cent between April and June on the previous quarter, to $24 billion.

André Loesekrug-Pietri, founder of A Capital, said: “State-owned enterprises remain the dominant force behind China’s ODI, with 90 per cent of the total deal value in the second quarter 2012.”

European companies accounted for 95 per cent of all non-resources deals in the quarter, the figures suggested. China’s share of US deals has slowed this year, owing to the sensitive political climate before the presidential election.”

via For Beijing, expansion is not a big deal, it’s lots of them | The Times.

See also: https://chindia-alert.org/2012/02/13/pattern-of-chinese-overseas-investments/

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