Archives August 2013

5 Eye-Popping Numbers Behind China’s Rise

China’s a big place. The world’s most populous country and second-largest economy has become a global star, ranking as the hottest emerging market and an investor target for growth, while previous top economies such as the U.S. and Europe have slowly staggered back from the recession. In China, the present is only part of the story: Growth investors have their eyes trained firmly on this nation’s massive opportunity in the future.

But just how big is that opportunity? Let’s look at five numbers that sum up China’s present and future — and just how this king of the emerging markets shapes up for investors everywhere.

1. 1.4 billion
China boasts around 1.35 billion people under its flag today, but Thomson Reuters estimates that the country’s population will only increase to around 1.4 billion by 2050. This is a country looking at a low-growth environment over the next 35 years as it modernizes and urbanizes — and it signals a major shift on how investors should look at this emerging market.

For decades, China has translated its massive population’s burgeoning potential into double-digit annual economic growth. China’s slowdown today is coming as the country faces a pair of demographic challenges that will probably prevent China from achieving its old, eye-popping annualized growth rates again. Indeed, many economists project that India will surpass China as the world’s most populous country before then.

Beijing’s one-child policy has gutted China’s youth, leaving a swelling senior population too heavily reliant on a thin corps of young, productive workers. Thomson Reuters projects that more than 20% of China’s population will be above age 65 by 2040, with that percentage growing even higher by 2050. Beijing will be forced to allot more attention and funds away from its current resource-oriented strategy — one that has given rise to massive state-owned corporations, with many of the largest listed on American markets — and toward services that can care for its elderly and increase the efficiency of its smaller working class.

Combined with a national birth trend that sees more than 120 boys born for every 100 girls — one of the highest such ratios among top economies in the world — China will be hard-pressed to bolster its youth population in the next few decades. But while that will hit the country’s long-term growth rates, China does have other statistics firmly in its favor.

2. 651.3 million
China had an estimated rural population of 651.3 million people in 2012, according to figures from the World Bank. That’s as many people as the populations of the United States, Russia, Japan, and France combined all living in China’s rural fringes that, for the most part, haven’t caught up with the country’s advances in recent decades.

Urbanization has fueled China’s growth, as some of the country’s largest cities, from Shanghai to Wuhan, have grown into metropolises large and tall enough to rival America and Europe’s biggest cities. As more and more Chinese citizens have flocked to the cities, companies both domestic and foreign have tapped into this source of new, cheap labor as a means to reduce manufacturing costs and boost their balance sheets.

But the face of China’s urbanization is changing. The cheap “made-in-China” era is coming to an end as labor costs rise and companies look for cheaper means of production. Increasingly, China’s leading companies of the future will need to tap into the nation’s growing urban population not as a source of labor, but as a massive consumer market unrivaled on a global stage. This strategy’s already paid off in a big way for international leaders in the auto industry that have tapped into China’s burgeoning auto market as the revenue base of the future.

Yum! Brands (NYSE: YUM ) is one company that’s already hitched its wagon to China’s urban potential, for better or worse: Yum!’s KFC and Pizza Hut brands have thrived in China’s market, but a 13% year-over-year same-store sales decline in July hammered the stock recently. Consumer stock investors should expect more hits and misses as companies look to cater to this lucrative market in the years to come.

3. 624 million
Not every industry is still emerging in China, however: The materials industry has come to be dominated by China lately, as exemplified by the 624 million tonnes of steel the nation used in 2011 alone. That was more than six times the amount of steel that the U.S., the second-place nation, used — and China further beat a second-place America six times over in steel production for 2011.

It’s a symbol of how China’s investment in its growing nation has fueled its global ambitions — and also a sign of how those ambitions can be a poison for investors. A caustic mix of oversupply and weak demand in the steel industry has taken down America and Europe’s top steelmakers, which have ceded the lead in the industry to China’s state-run behemoths, such as Wuhan Iron and Steel.

Wuhan’s stock has suffered as a result, but the contagion has plagued former titans of the industry. China’s quest to lead materials industries, combined with the general economic slowdown in the wake of the recession, has led to lean times in the materials sector. U.S. Steel (NYSE: X ) in particular has seen its stock fall more than 40% over the past two years, and the company’s earnings have turned into the red for the past three fiscal years. Beijing has ramped down production across its state-run companies this year as a result of its slowdown, but China’s materials giants are still dominating this hard-hit sector.

Aluminum and other industries have fared just as poorly, as oversupply has forced factory closures and worse. It’s just one way that bigger isn’t always better for investors in China.

4. 44%
Forty-four percent isn’t even a majority, but it’s a huge number when dealing with a population like China’s. That’s the percentage of Chinese citizens on the Internet as of the end of June, according to the Chinese Internet Network Information Center. It’s an amount that adds up to 591 million people, more than the populations of the U.S. and Indonesia combined and a gain of 27 million Web-linked Chinese citizens since just the end of last year.

Out of all the industries standing to benefit from China’s growth, Internet companies may top the list. China’s increasing urbanization will only lead to more citizens on the Web, but Beijing’s restrictive Internet regulation has prevented many U.S. or other international companies from establishing a strong base in the country.

That’s led to a huge opportunity for Chinese search engine king Baidu (NASDAQ: BIDU ) and other Chinese companies that have quickly filled the Internet vacuum. Baidu’s not only captured a majority of the Chinese search-engine market in its young life, but it’s also established itself as a dominant force to come by pushing hard into the mobile market. Mobile revenue made up more than 10% of Baidu’s total revenue last quarter, a first for the company. China’s mobile market stood at 420 million users at the end of last year, according to the China Internet Network Information Center, and Baidu’s opportunity here is enormous.

5. 8.7 million
The auto market has exploded in China, and the 8.7 million passenger cars sold in the first six months of 2013 is a staggering amount. Even more eye-popping: That figure represented a 13.8% year-over-year gain, showing that the Chinese auto market’s only getting started in the country’s growing urban and middle-class segments.

Just how large is that number? America’s auto industry has bounced back well this year, and even that success has rewarded automakers with only 7.8 million American auto sales over the year’s first half. And that push came from the built-up demand caused by the advanced age of the average car on U.S. roads. China’s appetite for cars should only continue to increase its lead on all rivals.

The world’s leading automakers have taken notice. China has become Volkswagen’s (NASDAQOTH: VLKAY ) largest market, as the German auto king has soared to take the No. 1 spot there. Consequently, Europe’s slump hasn’t hit VW anywhere nearly as much as it’s affected fellow European companies, as VW’s stock has roared higher by more than 45% over the past year.

Even Detroit’s finest companies have turned to China for their bread and butter, as China recently became General Motors’ (NYSE: GM ) top market as well. GM’s behind only Volkswagen in China, and strong sales on the other side of the Pacific helped the company’s overall sales climb 4% over the first half of the year. For auto investors and China investors alike, the Chinese auto market is one industry you can’t afford to take your eyes off.

Making money on China’s rise
China’s a huge, growing, and valuable market; there’s no other way to say it. The country’s growth from a minor power in Asia to one of the world’s economic powerbrokers has been nothing short of astounding over the past few decades. While some areas in China still need much work to thrive — the materials sector, the country’s weak transportation infrastructure, and the economy’s housing struggles are notable examples — China’s in it for the long run.

Investors can’t just throw money around in a nation that’s still finding its feet, but by sticking to the basics, investing in great, solid companies, and buying for the long term, you might just make the most of China’s rise.

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51job print job ads fall by half in China as demand drops

Chinese recruitment services group 51job, one of the country’s fastest growing companies, is seeing demand for print advertising dropping substantially.

The firm’s results for the second quarter of 2013 show print revenues down 50% to RMB11m (£1.15m) compared with Q2 2012, with the estimated number of print advertising pages it generated in 2012 declining 47% to 355.

51job says it has taken a “strategic decision to discontinue certain newspaper editions”, thus reducing the number of cities where its supplement 51job Weekly is distributed to five – half the number of cities covered in the same period last year.

In Q2 2012, print had made up more than 6% of the group’s revenue. As revenue has grown, this figure is now less than 3%.

Group-wide revenues of RMB404.4m grew by 12%, with online recruitment, representing two-thirds of the business, growing slightly above that rate.

The firm’s president and chief executive officer Rick Yan says: “Recent feedback we have received from enterprises continues to be favourable regarding their hiring plans for white-collar workers.

“We remain optimistic about market outlook as we focus on strategy execution and capturing opportunities in the evolving HR services industry in China.”

See next week’s August edition of Recruiter for the Global Spotlight on China, and stay tuned for more online on recruiter.co.uk, including thoughts from Totaljobs director Mike Booker, also the managing director of global job site alliance The Network.

Foxconn on mass recruitment in China, puts ‘robot’ plan in question

Foxconn reportedly is looking to recruit more than 90,000 workers for its Shenzhen factory, putting more question marks on the company’s previous plan to deploy 1 million robots by 2014.

According to a Yi Cai report Friday, the Taiwanese electronics manufacturer is beefing up its pool of skilled workers. It cited a staff at Foxconn’s Shenzhen recruitment center who declined to be named: “We are keeping things very low-key during this recruitment drive.”

The latest development follows another massive recruitment exercise for its inland factory in Zhengzhou earlier this year, which seems to contradict Foxconn CEO Guo Taiming’s plan to replace manpower by installing 1 million robots across its factories.

“There are huge hurdles if Foxconn wants to push forward its 1 million robot plan,” a robotics technology provider for Foxconn noted in the Yi Cai report. He estimated Foxconn probably installed fewer than 100,000 robotic pieces since Guo shared his vision for factory automation in 2011, with plans to increase the company’s robot count by 100-fold from 10,000 to 1 million by 2014.

The source from Foxconn said the company needed more time to push forward the automation process and, for the time being, would choose the comparatively cheap labor in mainland China as its first choice.

Premier encourages students to find work in western China

Premier Li Keqiang told new graduates to be enterprising and innovative in hunting for jobs in what some say is the toughest time for them to find work in recent years.

At Lanzhou University in Gansu province on Sunday, Li assured students that the government will spare no effort in helping them succeed in the difficult job market.

“Young people should be resolute and brave to start their own businesses. By doing so, you create jobs not only for yourselves but also for many others,” Li said when he met a crowd of students. “Confidence and enterprising spirit are your biggest assets.”

Li said he’s been inspired to know that some graduates from the university have taken the initiative in shouldering social responsibility by setting up their own businesses.

Huang Zheng, a 25-year-old graduate, told the premier he has just given up a job offer in administrative management in Guangzhou to set up an Internet company in Lanzhou that will help local students find jobs.

Huang said by doing so he could follow his passion and hone his skills in the real business world.

“You’ve made a good choice,” Li told Huang. “Don’t be afraid of failure.”

However, Huang told China Daily that he now lacks capital and resources and he hopes the government can help.

Under the incentive policy for new graduates who are setting up enterprises, entrepreneurs can receive a two-year tax waiver.

“But we still need about 300,000 yuan ($49,000) start-up capital,” Huang said. “We’re applying to set up our company in the local venture industrial park so that we can have a free office site.”

Venture capital and social resources are harder to come by in a western city, he said, than in big cities like Beijing or Shanghai.

During his visit to the university, Li urged students to be confident in the job market.

This year might be the toughest time for college graduates to enter the workforce in recent years. A record 6.99 million students are leaving universities in summer, a 2.8 percent increase, to hunt for jobs at a time when employers are cutting back on recruitment due to a slowing economy, according to the Ministry of Education.

“Though the number of graduates is huge, the unemployment rate (in China) is still low compared with some developed economies,” Li said.

“Young talent is the future of the nation, and the government will try every way possible to help them.”

The premier also encouraged students to work in western and remote areas of China, as the western region has become a growth engine for the country, but it still lacks innovation and talent.

In 2012, the region’s GDP increased by 12.5 percent year-on-year, much faster than in the eastern and central parts of the country.

To help graduates find jobs, the State Council has called for the implementation of existing policies favorable to graduates’ employment.

The central government has also encouraged graduates to turn toward self-employment and start their own businesses, promising to provide training subsidies, small loans, tax breaks and other incentives.

However, setting up businesses might not be easy. “Starting up a company is challenging for fresh graduates as they have no social experience or capital,” said Chen Yu, deputy director of China Association of Employment Promotion.

Entrepreneurs on average are between 35 and 44 years old when they launch their companies, according to a report on entrepreneurship released by the management committee of Zhongguancun, China’s Silicon Valley. It said lack of access to capital and experience are strong barriers for young entrepreneurs.

“When jobs are unavailable, new graduates may have to create opportunities by themselves,” Chen said. “But this is difficult for many because it is not what they have been trained to do.”

He said traditional education teaches students how to perform a job that already exists, but fails to encourage broad and creative thinking.

Market open for bilingual job seekers

Zhang Daojian, vice-president of the Confucius Institute in Islamabad, said he has had numerous requests over the past year from Chinese businesses that want to hire local Mandarin-speaking students.

“Studying Chinese is a great help to Pakistani students because many Chinese companies here want to hire people who can speak English, Urdu and Mandarin,” Zhang said.

Urdu is the national language of Pakistan, and both Urdu and English are the official languages.

“Last year a Chinese company asked me to recruit such talent, and I apologized because we had no students available,” said Zhang, a former teacher at Beijing Language and Culture University. The university established the Confucius Institute in Islamabad in 2007.

Zhang said some of the students who are fluent in Mandarin went to China for further studies, and the rest were hired in Pakistan.

“Generally, their jobs are really good, and most of them are working in banking or for leading Chinese enterprises,” he said.

The Confucius Institute gave Mandarin lessons to 6,000 students in 2012 amid the nationwide drive to learn the language.
“Mandarin lessons are compulsory in the leading elementary schools here,” Zhang said.

The Confucius Institute also co-hosted a series of cultural events to boost public diplomacy. One such event last year impressed Zhang with the Pakistani public’s enthusiasm for Chinese culture.

Local enthusiasm

“We participated in a cuisine festival last year, and China’s booth attracted many people.

The traditional friendship between the two neighbors is one of the reasons Pakistanis want to learn Chinese, he said.

“Economic, political and cultural exchanges are frequent between the two countries, which naturally provides a major boost to the demand for learning Mandarin.”

Traditional Chinese culture also appeals a lot to the local people, Zhang added.

Although Pakistanis have a strong desire to learn Chinese, Zhang said maintaining that enthusiasm is difficult.

“Some students have been brought up in well-off families, and they went to Britain or the United States for further studies after abruptly ending their Mandarin lessons,” he said.

Others who get posts at branches of Chinese companies in Pakistan are not interested in furthering their studies, Zhang added.

Security concerns

The security situation in Pakistan also is a concern, Zhang said. The media seldom reports good news about Pakistan, and the country has been depicted as being overwhelmed by bombings and earthquakes, he added.

One recent explosion several kilometers from the institute killed more than 20 people.

One of the institute’s teachers was giving lessons near the site of the bombing, but no one with the institute was hurt.

The security issue is a concern for some teachers from Beijing before they leave for Islamabad, Zhang said.

But the situation in Islamabad is relatively safe compared with elsewhere in the country, and one will be all right if he or she takes precautions, he said.

No Chinese teacher may leave Islamabad without Zhang’s permission, and he suggests that they finish their shopping early in the morning.

“I told them to leave at 7:30 am to buy fruits and vegetables and ensure they return before 8:30 am. The fewer people there are on the streets, the safer it is.”

Apple’s China Unit Hiring Across Environmental Affairs, Security, Retail

Apple is reported to be hiring over 200 people in China and the hiring will be across environmental affairs, security and in its retail segment.

On its LinkedIn page for China the iDevice giant is ramping up its employee base, writes Wall Street Journal’s Digits Blog. In past few years the iPhone and iPad maker has been hit hard. Environmental activists have filed complaints frequently claiming its China-based manufacturing facility harms the environment. Foxconn is the largest manufacturing partner of Apple in the country and has suffered such complaints too.

Apple has lately come forward in improving the environmental-friendliness at its manufacturing partners including Foxconn and has regularly updated them of the efforts taken in those areas.

Digits blog writes further the environmental affairs program manager of Apple would be working out in Beijing to “ensure that Apple’s products and processes meet and surpass regional and national environmental regulatory requirements.”

The iDevice giant wants to recruit reliable and perfect employees in those positions to the earliest. About the other disciplines there are no words from either Apple or its manufacturing partners as of now.

China manufacturing weak in July – surveys

Chinese manufacturing remained weak last month with SME businesses suffering a bigger share of the pain, two surveys showed today.

The official China Federation of Logistics and Purchasing’s manufacturing index strengthened slightly to 50.3 from June’s 50.1.

Separately, the private HSBC purchasing managers’ index fell to an 11-month low of 47.7 from 48.2 in June.

Any reading over 50 signals expansion in a sector, while a figure under 50 signals contraction.

The unexpected rebound in the official survey offered a glimmer of hope that China’s slowdown is stabilising. But analysts warned that it was still too early to conclude a decisive growth rebound because the pickup “is still far too modest.

The results also reflect how China’s small and medium-sized private enterprises, which analysts say make up a bigger share of HSBC’s survey, are more vulnerable to efforts to tighten up lending as well as to slumping global export demand for toys, clothing, electronics and other manufactured goods.

China’s big state-owned companies have easier access to bank loans and hardly compete in export markets.

The HSBC report, covering 420 companies, said output at Chinese manufacturers fell as total new orders dropped at the sharpest rate in 11 months because of a decline in new business in both China and overseas. Export orders fell for the fourth month in a row, though at a slower pace.

Exporters said that new sales to Europe, Southeast Asia and the US fell from June. Chinese manufacturers also shed jobs at the fastest pace in four years.

The federation’s survey of 3,000 businesses, meanwhile, found production, new orders and most other sub-indicators moved higher. New export orders improved but remained below an index reading of 50 last month.

Fallout from China’s manufacturing slump may be felt globally, as declining orders result in less demand for commodities from countries such as Australia and Brazil and for industrial components from Southeast Asia, Taiwan and South Korea.

China has recorded five quarters of growth below 8% in a row – a substantial economic cooling for a country that previously grew at double-digit rates. Analysts said the survey results indicate smaller private companies may still be feeling the effects of a credit shortage that began in June as Chinese regulators try to rein in a lending boom over fears it could race out of control.

The credit crunch caused interest rates on loans between banks to spike to a record high. China’s central bank wants to tighten lending standards, which should reduce risk but is likely to reduce financing for private businesses that generate China’s new jobs and wealth.

Ministry of Human Resources and Social Security Seeks Comments on Regulating Labor Dispatch

China’s Ministry of Human Resources and Social Security issued provisions that align closely with recent changes to the PRC Labor Contract Law in order to help standardize labor dispatch in the country. The draft calls for a clearer definition of auxiliary positions, which will affect employers that historically employ a large amount of dispatched employees. However, a grace period is also provided so that employers can adjust their employment models in China.

On 7 August 2013, the Ministry of Human Resources and Social Security of the People’s Republic of China promulgated “Several Provisions on Labor Dispatch (Draft for Comments)” (the Draft) to solicit public opinion on how to regulate the labor dispatch in the country. This effort is intended to echo the Decision of Amendment of the Labor Contract Law (the Decision), effective from 1 July 2013, for the purpose of detailing the rules for labor dispatch and providing implementation guidance.

Highlights

Union Involvement

The Draft echoes the Decision’s recommendation that labor dispatch shall only apply to positions of temporary, auxiliary and substitutive nature (Three Characters). In addition to the established definitions that a temporary position applies only to a position lasting no longer than six months, and a substitutive position applies to a position vacated for off-work studies, time off, etc., the Draft specifies that an employer shall propose the list of auxiliary positions in line with industry features and business operation needs, and confirm the list upon consultation with a labor union or employee representative meeting before making it public.

The Draft further reinforces the supervisory function of the labor union in that if an employer violates the provisions—especially regarding Three Characters—or the maximum ratio of dispatched employees, the labor union is entitled to raise concerns and ask for corrective actions.

Maximum Ratio of Dispatched Employees

The Draft mandates 10 per cent as the maximum ratio for dispatched employees among the total employee pool of an employer. That said, an employer cannot unlimitedly set auxiliary positions and should be limited to the ratio ceiling at 10 per cent. Such limitation would have a great impact on companies that have a large amount of dispatched employees, and certain adjustments would be accommodated in order to comply with the law, as well as optimize the benefits for the business.

Expanded Coverage of Labor Dispatch Services

According to the Draft, if an employer subcontracts certain business operations to a third-party contractor but still takes direct control and management of the employees of the said contractor, such subcontracting behavior shall be regarded as labor dispatch, and therefore subject to the regulations on labor dispatch.

This expanded definition of labor dispatch is meant to prevent an employer from taking advantage of the subcontract to circumvent the restrictions and limitations for labor dispatch, including, but without limitation to, the maximum ratio of dispatched employees. Therefore, it requires special attention and due consideration when an employer intends to adopt the subcontracting model for certain parts of its business operations.

Liability

The penalty for violating the rules on labor dispatch is RMB 5,000 to RMB 10,000 per person. It is worth noting, however, that if an employer violates the relevant rules on labor dispatch, especially those of “Three Characters” and the ratio ceiling of auxiliary positions, and makes no rectification within one month of being given administrative penalty, the dispatched employees will be deemed to have established an employment relationship with the employer, and the employment contract will be deemed to take effect one day after the end of the one-month period after receiving the penalty.

Grace Period

The Draft provides a grace period for employers to be compliant. That said, any labor dispatch duly established prior to 1 July 2013, when the Decision took effect, shall continue to be in force until the expiration of the term period, which is up to two years. If the existing labor dispatch does not follow the “Equal Pay for Work of Equal Value” principle, it is further proposed that the amendment shall be made accordingly and immediately. Further, for any employer that has a large amount of dispatched employees exceeding the 10 per cent ratio ceiling, it shall not recruit any new dispatched employees, even for auxiliary positions.

Conclusion

To summarize, the Draft calls for clear identification of the auxiliary positions through participation in either a labor union or employee representative meeting followed by the strict 10 per cent ratio ceiling for all auxiliary positions in any event. This gives little room for an employer to maneuver if such employer historically has had a large amount of dispatched employees. However, the Draft also provides for a grace period so that an employer could take time to consider and adjust its employment model in China.

High-tech firms encouraged to recruit more graduates

Chinese high-tech enterprises have been encouraged to find more vacancies for graduates due to the country’s mounting employment pressure.

High-tech companies are working hard to recruit more than 950,000 of the record-high 6.99 million graduates this year, according to science and technology minister Wan Gang.

More than 3.62 million university graduates have been employed by the country’s 49,000 high-tech companies since a regulation dedicated to develop such firms was introduced in 2008, according to the Ministry of Science and Technology.

“High-tech enterprises should actively bear social responsibility and take the lead in terms of providing graduates with more suitable positions,” said Wan.

The number of Chinese graduates will rise 3 percent year on year during the 12th Five-Year Plan period (2011-2015), said Xin Changxing, vice minister of human resources and social security.

China’s high-tech enterprises are largely located in the country’s first-tier cities such as Beijing, Shanghai and Guangzhou.

Influencing China’s healthcare industry

Allegations that British drugs giant GlaxoSmithKline has paid millions of dollars in bribes to increase its market share in China have thrown the spotlight on the country’s murky pharmaceutical industry.

China’s health spending is projected to soar from $357bn (£232bn) in 2011 to $1tn in 2020, according to a report by McKinsey, the global management consultancy group.

And with sales slowing in the West, the global drugs giants want a share of the booming profits in China.

But now the Chinese authorities say they are investigating up to 60 pharmaceutical firms in an effort to curb drugs prices.

Chinese doctors who spoke on condition of anonymity to the BBC – fearing they would lose their jobs for speaking out – say the healthcare system is awash with corruption.

They say that the pharmaceutical firms, both foreign and Chinese, have enormous influence.

‘Bribery chain’
That is because Chinese hospitals traditionally rely on pharmaceutical sales as a major source of income.

Government funding is often barely enough to cover basic operational costs at most hospitals.

So doctors rely on drug prescriptions – and the kickbacks that come with them – to bulk up their pay.

But the doctors we spoke to stressed that they were at the “very end of the bribery chain”.

“State and food administrators need to decide if the drugs are safe,” said one doctor.

“And then, when the drugs reach the hospital, the directors get involved. Everyone takes their cut. And by the time it reaches the doctors there is very little money to be made.”

While Chinese companies will offer incentives in the form of cash to prescribe certain drugs, foreign companies will offer lecture fees or conferences at hotels, the doctors claim.

The medical staff we spoke to say they depended upon the income. Despite China’s booming economy, they receive meagre salaries.

“My basic monthly salary is about $600,” said one surgeon with 30 years of experience. “Without bribery I could not live a decent life.”

But increasingly, doctors in China are bearing the brunt of public anger over bribery. Patients often complain of being given tests they do not need and being prescribed expensive drugs.

According to Chinese state media, there were more than 17,000 violent incidents in Chinese hospitals in 2010. Several hospitals in Beijing have also reportedly beefed up their security.

Market survival
Fixing the system is one of the priorities of China’s new leaders. The Chinese government has promised to rein in soaring health costs as the authorities roll out a national health insurance plan.

They plan to introduce national reforms to lower drugs prices and pay doctors more.

Tackling the powerful pharmaceutical industry also fits with President Xi Jinping’s pledges to do more to root out widespread corruption, which is a source of enormous public anger.

James McGregor, a businessman and author who has spent more than 20 years in China, said foreign companies make a convenient first target for the authorities.

“It’s all about market survival for foreign firms because there are local businesses that want their market share,” he said.

“At the same time there are political reforms that look like they are going to happen in the state sector. And I think the authorities are going to be going after some very tough players. So if you go after the foreigners first it may soften the way a little bit. ”

But the doctors we spoke to said the healthcare system needed a total overhaul. They said the key problem was that the government was not spending enough money to guarantee decent healthcare.

But they all agreed there was no easy fix.

“I’m a Communist Party member,” said one doctor. “I probably shouldn’t say this but the system is rotten to the core. It’s hard to cure a deeply ingrained disease.”