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China's 2010 crude steel consumption to hit 596 million tonnes: steel association - People's Daily OnlineNovember 28, 2010

China's apparent consumption of crude steel is likely to reach 596 million tonnes this year, a year-on-year increase of 5.6 percent, according to a steel association official.

Apparent consumption represents the sum of net imports and output, and can be used to estimate real consumption excluding inventory.

Luo Bingsheng, deputy head of the China Iron and Steel Association, expected the country's crude steel output to climb 8.2 percent this year from one year earlier, to reach 624 million tonnes.

Luo further noted that a rising investment in 2011 would result in an increase in China's steel demand.

If the year-on-year growth of the country's social fixed assets investment maintained itself at around 20 percent next year, China's crude steel apparent consumption would see an annual increase of 40 million to 50 million tonnes next year, said Luo.

Source:Xinhua
 
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China's Hainan Airlines launches 1st direct line between Beijing, Toronto - People's Daily OnlineNovember 28, 2010

Hainan Airlines' A340-600 passenger plane prepares to land at Pearson International Airport in Toronto, Canada, Nov. 27, 2010. China's Hainan Airlines launched its first direct flight between Beijing, capital of China, and Toronto on Saturday. (Xinhua/Zou Zheng)

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Central China starts building supercomputing center - People's Daily OnlineNovember 29, 2010

Central China's Hunan Province began building the country's third National Supercomputing Center (NSCC) on Sunday, where the world's fastest supercomputer, the Tianhe-1A, will be installed.

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Photo taken on Nov. 28, 2010 shows the effect displaying design of National Supercomputing Center located in Changsha, central China's Hunan Province. Hunan began building China's third National Supercomputing Center on Sunday, where the world's fastest supercomputer, the Tianhe-1A, will be installed. Designed to handle one quadrillion computing operations per second, the NSCC in Changsha will add to the world's eight quadrillion-level supercomputing centers and national labs. The new NSCC will be housed in Hunan University in Changsha, and the construction is expected to be completed by the end of 2011. (Xinhua/Ming Xing)

Designed to handle one quadrillion computing operations per second, the NSCC in Changsha will add to the world's eight quadrillion-level supercomputing centers and national labs, said Du Zhanyuan, vice minister of the Ministry of Science and Technology.

The new NSCC will be housed in Hunan University in Changsha, capital of Hunan, and the construction is expected to be completed by the end of 2011, said Du.

Earlier this month, the Tianhe-1A at the NSCC in Tianjin, which is capable of 2.57 quadrillion computing operations per second, was certified as the world's fastest supercomputer.

Once completed, the Tianhe-1A at the NSCC in Changsha will be able to provide supercomputing services to the weather forecast, scientific research, biological pharmaceuticals, animation design and other complex work in central China, said Xu Shousheng, provincial governor of Hunan.

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Photo taken on Nov. 28, 2010 shows the foundation stone laying ceremony of National Supercomputing Center (NSCC) in Changsha, central China's Hunan Province

"The setting up of the NSCC in Changsha will raise the innovative level of Hunan Province and of central China," said Xu.

Apart from the ongoing-construction, China has built two supercomputing centers which are located in Tianjin and Shenzhen, respectively.

Source: Xinhua
 
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China establishes 4,300 postdoc research centers - People's Daily OnlineNovember 29, 2010

This year marks the 25th anniversary of the founding of postdoctoral system in China and 2,146 mobile postdoctoral research centers as well as 2,158 postdoctoral stations in China have been established as of 2010, according to the Ministry of Human Resources and Social Security.

The postdoctoral research centers and stations have cultivated over 80,000 postdoctoral researchers. Plenty of high-quality postdoctoral talents have been cultivated following the establishment of the postdoctoral system.

Many postdoctoral researchers have become the backbone of scientific research and academic leaders in various areas. Twenty-four postdoctoral researchers have been elected as academicians of the Chinese Academy of Sciences or the Chinese Academy of Engineering. About 20 percent of participants in major talent and scientific research programs such as Cheung Kong Scholars Program and 100 Talents Program are postdoctoral researchers.

Over the past 25 years, postdoctoral researchers have led or participated in a batch of national-level major research projects and accomplished many first-class scientific research achievements in economics, science, technology, military and other areas.

The system has advanced the utilization of scientific research achievements and the proper flow of talents, as well as helped firms become key players of technological innovation, with about 12 percent of postdoctoral talents working in firms. Furthermore, the postdoctoral system has promoted the formation of a flexible talent selection mechanism and explored new ways for personnel system reforms.
         
Tsung-Dao Lee, a Chinese-born world-renowned physicist, wrote two letters to the Chinese leadership in 1983 and 1984, suggesting China should establish centers for postdoctoral studies and develop a sound postdoctoral system.

China's first batch of centers for postdoctoral studies were established at Peking University, Tsinghua University, Fudan University and the Chinese Academy of Sciences at the end of 1985, and the National Postdoctoral Management Committee was created at the same time.

Hong Zhiliang, China's first postdoctoral researcher, started his career at the center for postdoctoral electronics and communications studies at Fudan University in 1986 after completing his doctorate in Switzerland.

China began developing the postdoctoral system in companies in 1994, with Shanghai Baosteel Group Corporation being the first company to establish a postdoctoral research station. China began establishing postdoctoral research stations in the military in 2000 in order to meet the needs of defense-related science and technology.

By People's Daily Online
 
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Internet of Things Cloud computing center starts operation in Jiangsu - People's Daily OnlineNovember 29, 2010

The first stage of the Cloud Computing Center of the Internet of Things of China started operation in Wuxi city, Jiangsu Province through joint efforts by the Dawning Information Industry Co., Ltd. and Wuxi New District.

Cloud computing is Internet-based computing whereby shared resources, software and information are provided to computers and other devices on demand. It is regarded as another revolution within the IT industry and also a major supporter for the country's information security in the future.

Its peak performance reaches nearly 50 trillion calculations per second, and it is a high-performance computer system.

The Dawning Information Industry Co., Ltd. and Wuxi New District signed a strategic cooperation agreement on July 21, 2010, which jointly set up the Cloud Computing Center of the Internet of Things of China.

The first stage of the center consists of building an apparatus room of about 5,000 square meters and installing the high-performance computer system. The second stage of the center will be to invest 60 million yuan, purchase scientific research land at the ipark of the Wuxi New District and expand the peak performance to 100 trillion calculations per second.

In the coming three years, the new industry will have a scale of 3 billion yuan, according to the People's Daily. The cloud computing center provides a strong platform for the construction of a national sensor network demonstration area at the Wuxi New District, said a relevant official.

The Ministry of Industry and Information Technology of the People's Republic of China and National Development and Reform Commission has launched its first five innovative experimental units of cloud computing services in Wuxi, Beijing, Shanghai, Shenzhen and Hangzhou.

By Zhang Qian, People' Daily Online
 
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China introduces first light-rail train with new-energy fuel cells - People's Daily OnlineNovember 29, 2010

Recently, China's first new energy fuel cell light-rail train, jointly developed by the China North Vehicle Yongji Electric Motor Corporation and the Southwest Jiaotong University, was successfully launched.

China's first new-energy fuel cell light-rail locomotive adopts hydrogen as the energy for the fuel cells as well as the world advanced permanent-magnet synchronous motor and frequency converter independently developed by the China North Vehicle Yongji Electric Motor Corporation as its main source of power.

Meanwhile, China North Vehicle Yongji Electric Motor also independently took on the tasks of vehicle design as well as research and development. As the comprehensive performance test results meet the requirements of various indicators, this new-energy fuel cell light-rail train has many potential applications as well as huge economic and environmental benefits in fields such as railways, subways, urban-suburban light-rail railways and mining.

The permanent-magnet synchronous motor adopted by the China's first new-energy fuel cell light-rail train has advantages, which include high power, high efficiency, remarkable energy conservation, low vibration and minimal noise.

It can achieve a level of performance that traditional motors cannot achieve and also can be developed into a special motor and highly-efficient energy-conservation motor to meet specific operational requirements. It can conserve 10 percent to 20 percent of integrated energy on average and has been successfully applied in many fields. It will also aid China's motor industry to adjust its industrial structure toward a new developmental direction.

Experts believe the successful application of the permanent-magnet synchronous motor in China's first new energy fuel cell light-rail train has provided a solution for the electrification of China's urban public transportation and the traffic congestion panic. It is also conducive to the promotion of China's new-energy industry in a larger scope.

By People's Daily Online
 
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Hyundai Motor begins to build third China plant - People's Daily OnlineNovember 29, 2010

South Korean auto maker Hyundai Motor on Sunday started building its third China plant in Beijing, intended to meet rising demand after the firm's two existing Beijing plants exceeded their production capacity this year.

The plant, with an investment of 6.5 billion yuan (975 million U.S. dollars), is designed to have an annual capacity of 400,000 passenger cars, according to a statement from Beijing Hyundai Motor Co., a joint venture between Beijing Automotive Holdings and Hyundai Motor.

The factory in Shunyi, eastern Beijing, would increase Hyundai's production capacity in China to 1 million units, said the statement.

The other two plants, also in Shunyi, had a total annual capacity of 600,000 vehicles, but sales this year were expected to exceed 700,000, it said.

Its first phase is scheduled to begin operating in the second half of 2012 with an annual capacity of 300,000 units and will rise to 400,000 units with the second-phase, it said, without giving a timetable.

Li Feng, executive vice general manager of Beijing Hyundai, said the plant would be the largest and most sophisticated of all the 27 overseas production bases of Hyundai Motor.

Xu Heyi, chairman of Beijing Hyundai, said the plant would help meet rising demand in China, the world's largest auto market.

Source: Xinhua
 
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China sacrifices economic growth to reduce emissions - People's Daily OnlineNovember 29, 2010

The U.N. Climate Change Conference was held in Cancun, Mexico on Nov. 29. As an active participant in the meeting, China has made great efforts to promote energy conservation this year even at the cost of slowing economy growth.

In October, some of the energy intensive and high-emission enterprises in Guangxi, Hebei and other places received notice from local governments to stop operation. This is one of the important measures taken by government to reach the 11th Five-Year Plan (2006-2010) emission reduction targets. This is part of the early warning program of energy conservation.

Premier Wen Jiabao said on Sept. 13 in Tianjin while attending the fourth annual Summer Davos that in order to achieve emission reduction targets, "we have developed indicators to reduce high energy-consumption enterprises in the second half, including the elimination of small thermal power plants, small iron and steel plants, cement plants and other high energy-consuming enterprises. We are willing to achieve this goal at the cost of reducing GDP growth rate. "

According to the National Bureau of Statistics, in the first quarter of this year, China's economic growth increased by 11.9 percent, 10.3 percent in the second quarter and 9.6 percent in the third quarter. This gradual decline is partly due to the government's efforts to rein in the development of energy-intensive, polluting industries, which will contribute to economic and social sustainable development.

Because 2010 is the last year to achieve the 11th Five-Year Plan (2006-2010) emission reduction targets, governments at all levels are intensifying their efforts. In many areas local governments even stopped the supply of power to energy intensive and high-emission enterprises, or other emergency measures such as shut-down maintenance for those enterprises.

China attaches great importance to energy conservation. This is a strategic decision made for China's sustainable development and long-term interests of mankind. This decision is critical at a time when economic and social development is limited by resources, energy and environmental factors and human survival is facing the threat of global climate change

During the 30 years of reform and opening up, China's economy has maintained an average annual growth rate of more than 9 percent, and overall national strength and people's living standards have greatly improved. However, due to excessive dependence on energy resources, energy resource use efficiency is low. This not only has caused great waste, but also brought serious environmental pollution, seriously hampered the sustainable development of China's economy and society, affecting quality-of-life improvements.

To this end, since 2006, the State Council officially launched a comprehensive energy reduction program to speed up the elimination of backward production capacity, reduce backward production facilities in the industries of power, steel, building materials, electrolytic aluminum, ferroalloy, calcium carbide, coke, coal, glass, etc. By 2010, China's energy consumption per 10,000 yuan of GDP will be reduced from 1.22 tons of standard coal in 2005 to below 1 ton of standard coal, about 20 percent lower.

To ensure the realization of these goals, China adopted a series of unprecedented economic, legal and necessary administrative means, including the leadership accountability system for local government leaders who failed to fulfill the reduction targets.

During the past five years, the central government invested about 200 billion yuan in energy-saving projects, driving a total investment of about 2 trillion yuan in the whole country for energy saving.

From 2006 to 2009, China reduced small thermal power plants of 60 million kilowatts, eliminated backward production capacity of 87.12 million tons of iron production, 60.38 million tons of backward steelmaking capacity; 214 million tons of backward cement production capacity, equivalent to saving 110 million tons of standard coal. This year, China is expected to shut down small thermal power plants of 10 million kilowatts, eliminate backward iron production capacity of 25 million tons, steel making of 6 million tons, cement production capacity of 50 million tons and will save 16 million tons of standard coal.

Xie Zhenhua, deputy director of National Development and Reform Commission said since the start of the 11th Five-Year Plan period, China has made important progress in energy conservation. The effectiveness of China's energy reduction efforts is in the forefront in the world. When the 11th Five-Year Plan emission reduction task is completed, the total energy saving in China will reach more than 600 million tons of standard coal, equivalent to reduce more than 1.5 billion tons of carbon dioxide emissions.

In this regard, deputy director Li Zuojun at the Institute of Resources and Environmental Policy of the Development Research Center of the State Council said, that China's efforts will make an important contribution to dealing with global climate change and will accumulate experience as well as lay the foundation for the future energy saving.

Li said the new policies effectively promote China's economic development mode and structural adjustment, and slows the shortage of resources and ease environmental damage pressure.

In addition, for the development of a low-carbon, circular and green economy, China issued 10 industrial restructuring and revitalization plans, and recently released strategic decisions to accelerate the development of new industries. China plans to use the next 20 years to improve the overall innovation capability and level of industrial development of seven new strategic emerging industries, such as energy-saving environmental protection, information technology and others, in order to reach the world advanced level.

Xie said that in the next five years, China will drastically reduce energy consumption intensity, carbon dioxide emissions intensity and emissions of major pollutants as important binding targets and continue to strengthen energy conservation work and accelerate the construction of resource-saving environment-friendly society.

By Huang Beibei, People's Daily Online
 
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Foreign currency inflows jump 79% in October - People's Daily OnlineNovember 29, 2010

Speculative "hot money" is flowing to China at a pace unprecedented in October, lured by the country's solid economic growth, China's central bank said.

In October, $77.6 billion worth of foreign currency inflows were detected, rising 79 percent over September, said figures released by the People's Bank of China.

It said that the influx of speculative "hot money", attracted by higher yields in China than in developed countries, accounted for $42.8 billion in October.

The inflows of foreign money have accelerated China's inflationary pressure, and might compromise the authorities' efforts to control price rises and management China's macro economy, experts say.

The central bank last month raised interest rates for the first time in almost three years, with many analysts expecting more rises in the near future. Rate rises have attracted inflows of foreign currencies to China.

By People's Daily Online
 
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British universities pursue stronger ties with China
2010-11-29 09:29:05

BEIJING, Nov. 29 (Xinhua) -- British universities are endeavoring to build stronger partnerships with their Chinese counterparts and to enhance the exchange of students and scholars, in order to satisfy rising student interest in each other's country, a senior UK education official said.

"It is an opportunity to learn from each other and try to build a strong relationship between our two countries," Steve Smith, president of Universities UK, was quoted by Monday's China Daily as saying.

The latest figures from the Higher Education Statistics Agency (HESA), a central source for the collection and publication of higher education data in the UK, show that 47,035 students from China studied in the UK during the 2008-2009 academic year, a rise of 3.7 percent on the previous year.

Chinese students account for 18.72 percent of all non-EU international students in the UK's higher education institutions.

HESA's statistics also show that there has been a steady increase in the number of students from the mainland who have enrolled at universities in the UK over the past few years and that China is the top country outside the EU for sending students to study in the UK.

Zhang Yang, marketing manager with the Aoji Education Group, a Beijing-based student recruitment agency, said her company sent more than 3,000 Chinese students to study in the UK during the 2009-2010 academic year, 50 percent more than the previous year.

Zhang attributed the increase to a growing appreciation of the yuan as a currency and the improved student visa application system introduced in 2009.

"Under the new points-based system, the credentials of different educational institutions have been rated and are available to the public, which helps students make more informed decisions," Zhang said.

7Lower financial requirements have also made overseas study more feasible for some applicants.

To secure a visa for a three-year undergraduate program, a Chinese student now only needs 20,000 yuan (3,010 U.S. dollars), instead of 60,000 yuan, Zhang said.

According to Smith, there were 3,500 British students on courses of study last year in China, which has become increasingly attractive as a location for studying abroad as a result of its rapidly growing economy and increased influence in the world.
 
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New index tracks Shanghai's emerging industry blue chip stocks
2010-11-29 14:08:35

BEIJING, Nov. 29 (Xinhua) -- The Shanghai Stock Exchange (SSE) and the China Securities Index Co., Ltd. (CSI) on Monday jointly launched the new SSE-380 Index that aims to reflect the performances of high-growth blue-chip stocks on the Shanghai stock market.

The new index would track the performances of 380 of the 890 companies listed in Shanghai, a statement on the SSE website said Monday.

The SSE-380 index focuses on emerging industries in the fields of energy efficiency, environment protection, new energy, new materials, and high-end equipment manufacturing, the statement said.

It said the new index would not track the performances of companies in telecommunications, banking, insurance and finance.

The new SSE-380 index, along with the SSE-180 and SSE-50 indexes, would together reflect the performances of blue-chip stocks, the statement said.

The selection of the 380 stocks were based on the companies' total market value, growth rate of revenues, return on net assets, and transaction value.

The SSE-380 Index on Monday opened at 4,500.103 points.
 
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China Huaneng buys power generation assets from Indian GMR
2010-11-29 15:27:01

MUMBAI, Nov. 29 (Xinhua) -- China's top power generation company China Huaneng Group will spend 1.232 billion U.S. dollars buying 50 percent stakes of U.S.-based power generation firm InterGen N.V. from Indian infrastructure developer GMR Group.

GMR said the purchase of assets will help China Huaneng tap power generating assets in the UK, the Netherlands, Mexico, the Philippines and Australia with overall gross operational capacity of 8,148 MW.

GMR said the transaction requires customary regulatory approvals from above-mentioned countries as well as China and is expected to wind up the deal in the first half of 2011.

G. M. Rao, chairman of GMR Group, said the decision to divest shares in InterGen falls in line with company strategy to focus on Indian market and GMR Group could hence deploy more capital and management resources on domestic investments.

Rao said: "InterGen has emerged as a more efficient and strong power producer and we believe that China Huaneng will be an ideal partner in the next phase of InterGen's growth."

GMR Group purchased 50 percent stakes of InterGen in October 2008 at the price of 1.135 billion U.S. dollars.

Headquartered in Bangalore, GMR Group deals with airports, energy, highways and urban infrastructure businesses and has 14 power projects operational or under construction.

InterGen has 12 power plants scattered in several countries and Ontario Teachers' Pension Plan holds the other 50 percent of InterGen shares.
 
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Seventh China Products Fair gets underway in Jordan
2010-11-30 02:57:56

AMMAN, Nov. 29 (Xinhua) -- The seventh China Products Fair started Monday in the Jordanian capital of Amman with the participation of more than 500 Chinese companies representing different sectors.

Around 5,000 products are on display during the four-day fair, ranked as one of the biggest exhibitions in the Middle East.

Inaugurated by Jordan's Ministry of Industry and Trade Amer Hadidi, the fair is expected to witness the signing of major deals worth of tens of millions of U.S. dollars, according to organizers.

Over 10,000 persons are expected to visit the fair from Jordan, Palestinian territory, Lebanon, Iraq, Syria and Egypt, according to a statement by the organizers.

Products showcased represent different economic sectors such as construction, machinery, automotive, energy and water, printing, packaging, food, household items, consumer electronics, toys and gifts, furniture, textile and leather among other commodities.

In the sixth edition of the expo in 2009, deals signed reached about 83.6 million U.S. dollars.

Organizers said the fair provides an opportunity for traders from Jordan and the region to build partnerships and sign deals with their Chinese counterparts and to exchange expertise.

The fair is an annual event that started in 2004.
 
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China surges ahead on clean energy investment

By Fiona Harvey, Environment Correspondent
Published: November 29 2010 19:19 | Last updated: November 29 2010 19:19
China has surged ahead of the rest of the world in renewable energy, creating a “new world order” in the low-carbon sector, according to research published today.

The rapid growth of Chinese investment has prompted venture capital and private equity companies in Europe to call for more regulation and greater government assistance, warning that without such help, the European economy will fall behind.

China spent a record amount on its wind power industry in the last quarter, according to a report from Ernst & Young, the consultancy. The country’s spending on wind energy in the second quarter of 2010 amounted to about $10bn, or about half of the global total of $20.5bn.

“China has opened up a healthy gap from other markets. Cleantech, including renewable energy, represents a significant part of the country’s future economic growth plans,” said Ben Warren, energy and environmental infrastructure advisory leader at Ernst & Young.

“The level of wind energy being deployed in China shows what can be achieved with a carefully planned energy and industrial policy that elevates cleantech to a national strategic level. The Chinese solar industry is also fast becoming of great importance in the global marketplace.”

China came top of the consultancy’s league table, the “renewable energy country attractiveness indices”.

By contrast, the US is falling behind, owing to the “continued repercussions of the financial crisis, low gas prices, and the uncertain medium-to-long-term policy environment”, according to the report.

Ernst & Young also pointed to burgeoning investment in clean technology in countries such as South Korea and Mexico, which is hosting the United Nations climate change talks in Cancún. Romania and Egypt also boast fast-growing wind sectors, the consultancy noted.

Japan’s solar market could also grow at a healthy clip, thanks to the government’s climate policies, including a feed-in tariff subsidy for households. This could lead to four-fold growth in Japan’s solar panel market by 2020, from its 2009 level of Y487bn ($5.8bn).

Fears that the European Union risks losing out to other regions prompted the EVCA, Europe’s biggest private equity and venture capital industry association, to urge governments to take stronger action. For most of the past decade, the EU enjoyed a strong leadership position in the clean technology market.

The EVCA called for the EU to set a binding target to increase its energy efficiency by 20 per cent over the next decade; to adopt programmes mandating public procurement money to be spent on clean technology and supporting research and development; and to reduce policy uncertainty by setting out long-term measures, such as subsidy programmes.

The EVCA, representing nearly 1,300 European investment companies, said that early-stage investors had been instrumental in giving the EU its early lead in clean technology and were still keen to build up the industry – if they received the right kind of government response.

China’s investment across the whole clean technology sector reached $13.5bn in the third quarter of this year, compared with $8.4bn for Europe, the EVCA said.

“For an investment theme that did not exist 10 years ago, cleantech is already delivering highly successful returns,” said Patrick Sheehan, chairman of the EVCA’s environmental task force. “But without the right regulatory framework to significantly scale up investment, Europe risks not only missing crucial low-carbon targets but an immense opportunity to become a global powerhouse in a vast new energy economy.”
China: Rapid growth but influence stunted by restrictions

By Leslie Hook
Published: November 29 2010 16:12 | Last updated: November 29 2010 16:12
When China began to flirt with futures markets in the late 1980s, advisers from the Chicago Board of Trade likened the markets to 19th-century exchanges in the US. Zhengzhou, the city where China’s first forward contract for wheat was launched in 1990, was still short of telephone lines.

Today, China’s commodities futures exchanges are among the largest in the world in terms of volume and are still growing at a phenomenal clip. In October, total futures trading in China was 286m contracts worth about Rmb30,000bn ($4,500bn), according to the China Futures Association.

However, the exchanges have yet to gain global influence commensurate with the country’s role as the largest consumer of commodities from copper to cotton. A look at China’s early exchanges illustrates some of the reasons why.

The development of commodities markets in the early 1990s was empowered by the economic reforms of Deng Xiaoping, who lifted the price controls that had ruled China’s economy for decades. Traders and producers were quick to grasp the benefits of the forward contract. By 1994, China had 40 futures exchanges, although market abuse and non-enforcement of contracts was a problem.

The rapid embrace of futures took everyone by surprise – especially planners in Beijing. In response, the state began a “rectification” programme in 1994 that cut the number of exchanges from 40 to 15 and increased regulations, with a second wave in 1998 that shut down more exchanges.

Today, China has just three futures exchanges for commodities: the original Zhengzhou exchange for wheat, rice, cotton and other agricultural commodities; the Shanghai Futures Exchange for copper, “rebar”, aluminium and other metals; and the Dalian Commodities Exchange that offers contracts for soya beans and maize, among others.

The exchanges have come a long way since that first wheat contract in Zheng zhou, but they are still grappling with some of the same thorny issues.

The first is political. In the late 1980s and early 1990s, China’s exchanges were closely tied to the ideological battles of the day, as China moved from being a state-directed economy to a market economy.

Today, China’s commodities futures exchanges are likewise closely linked to the speed at which the government will liberalise the financial system and introduce full convertibility for the renminbi.

Chen Baizhu, professor of finance at USC Marshall School of Business, says: “If Shanghai wants to build itself as a financial centre, it definitely needs to make the market more open to foreign investors.” China is gradually introducing channels to allow renminbi convertibility and the speed at which this will happen is a contentious political debate.

China’s commodity exchanges bar foreign investment, and traders say that this and the nonconvertibility are primary reasons why the exchanges in Dalian and Shanghai have yet to become global price-setters or enjoy the liquidity of London or Chicago.

The second is the role of speculation, a favourite scapegoat for rising prices. In the early 1990s, speculative bubbles and market abuse prompted the government to intervene – and likewise this year speculators have often made headlines in China.

Guided by orders from the State Council and the China Securities Regulatory Commission, some ex changes have even taken measures to cool activity this autumn by introducing double commission on trades. In the past month, Dalian, Shanghai and Zhengzhou have all issued notices about punishing speculative activity.

“If you look at the Chinese market, the majority of investors are individual ... they tend to be swayed by the mood, they tend to be very speculative,” says Mr Chen. “Given this, Chinese policymakers tend to be reluctant to open up the markets and they have to be very cautious.”

Price fluctuations have also tested the mettle of China’s commodities ex changes recently, as swings in the market often caused contracts to hit their daily price-change limits, ending trading for the day.

Several commodities ex changes have increased their limits as a result, hoping to avoid the chaos of halting trading. Dalian, for example, raised limits for soya bean meal and soya bean oil contracts from 5 to 7 per cent on November 23.

One key change for China’s commodities ex changes today compared with 20 years ago is that they are now more closely aligned with government objectives than they were during the heady days of Deng’s economic liberalisation programme. The exchanges’ efforts to cool markets this autumn have underscored how closely linked they are to government policy.

As one employee at the Dalian Commodity Ex change puts it: “Exchanges in China, as state-owned institutions, are also responsible for fostering a sense of social harmony. The market is not just supposed to exist for speculators to run rampant. It’s supposed to be a market where farmers and consumers can come together to get a sense of stability.”
Caterpillar looks to shift parts sourcing from Japan to China

By Hal Weitzman in Chicago
Published: November 29 2010 22:27 | Last updated: November 29 2010 22:27
Caterpillar, the world’s biggest maker of earth-moving equipment, plans to switch “as much as possible” of its sourcing of complex parts for its Chinese factories from Japan to China.

“How quickly we can move from Japan to China depends on the ability of the Chinese supply base to do more,” Rich Lavin, Caterpillar’s head of emerging markets, told the Financial Times.

“As they show their ability to manufacture more complex components we’ll move capacity out of Japan and into China,” he said, adding that the aim was to move “as much as possible”.

Caterpillar’s plans are not only a blow to Japan’s industrial base but also a sign of China’s maturing manufacturing sector.



The company imports about 40 per cent of components for its Chinese excavator factories from Japan, but is planning to reduce that by at least a quarter within five years as a first step towards a bigger shift.

Mr Lavin’s comments will cause concern in Japan as they come shortly after Carlos Ghosn, Nissan chief executive, said the carmaker would shift the balance of its production and support functions towards dollar-linked economies to protect against currency volatility.

Caterpillar entered China in the 1970s and its fastest-growing market is home to 11 of its 175 manufacturing facilities worldwide and a workforce of 7,400.

China is expected to account for just under a tenth of the company’s annual revenues this year, which could reach $42bn. Caterpillar has a market share in the Chinese heavy machinery sector of about 7 per cent.

Mr Lavin said Caterpillar was running pilot programmes with its Chinese suppliers to determine their ability to manufacture complex parts currently imported from Japan.

The proposed shift in its regional supply base comes as Caterpillar is expanding its manufacturing operations in China. A new hydraulic excavator factory is due to start production in Wujiang in 2012, with a new large engine factory opening in Tianjin in 2013. It also has plans to expand its Xuzhou excavator plant by 2014.

Caterpillar last week became the first industrial multinational to issue renminbi-denominated debt in Hong Kong, placing Rmb1bn ($150m) of two-year notes with institutional investors. It will use the proceeds for customer financing.
 
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