Category News of China

3-year local rules suspension in pilot zone

Local regulations on foreign investment in Shanghai’s free trade zone will be suspended for three years from next Tuesday, in line with the state’s temporary adjustments on related laws to ease legal barriers for foreign participants.

The pilot free trade zone is due to open on Sunday.

The Shanghai People’s Congress, the city legislative body, said local regulations in the zone would be further adjusted if they were inconsistent with national laws and regulations and the overall plan for the zone. The suspension aims to maintain the unity of the national legal system and to push forward with the construction of the free trade zone, according to the SPC Standing Committee.

China’s top legislature last month authorized the State Council to suspend administrative approvals for foreign-funded enterprises, Chinese-foreign equity joint ventures and Chinese-foreign contractual joint ventures in the free trade zone, in a move to decentralize government power as part of the reform and opening up policy.

“The management system, operating mechanism and supervision system in the free trade zone will be quite different and will inevitably have conflicts with the current regulations,” said Ding Wei, director of the Legislative Affairs Commission of the SPC.

“The decision to adjust local regulations will lay a legal foundation for the introduction of ground-breaking reforms,” Ding said.

Covering a total of 28 square kilometers in the Pudong New Area, the free trade zone is expected to be a testing ground for major policy reforms involving government function transformation, trade facilitation and financial innovations such as free yuan convertibility and liberal interest rates and foreign exchange.

Wang Xinkui, director of the city’s Counselor’s Office and the city’s WTO Affairs Consultation Center, said at a forum yesterday that the pilot free trade zone is not about preferential policies but is a place for the exploration of institutional innovation.

Wang said the transformation of regulatory methods from administrative approval to management through a registration system will be a major part of reforms within the zone.

Chinese Premier Li Keqiang said earlier that a negative list approach will be explored in the free trade zone and priority will be given to easier investment and greater openness.

The establishment of the pilot free trade zone in Shanghai has raised hopes that China will deepen its economic reforms as part of a broad strategy to shift the world’s second-largest economy toward a mode driven by domestic consumption, replacing investments and exports.

On Sunday, the Shanghai government will publicize some detailed rules for the zone.

Shanghai’s long-awaited Free Trade Zone opens Sunday

China’s Big Bang or just the first of a bunch of loud pops? asks Asia Sentinel’s Steve Wang

On Sunday, China’s State Council is due to set in motion a long awaited pilot plan for the 28.78 sq km Shanghai Free Trade Zone, marking a major milestone for the country’s cautious, step-by-step economic liberalization that began 30 years ago.

It is a Big Bang that has Hong Kong officials looking nervously over their shoulders. Shanghai has been talked about as China’s financial capital since at least 1995, prior to the takeover of the former British crown colony by the Chinese government, when Fortune Magazine carried a cover story titled “The Death of Hong Kong.” The tycoon Li Ka-shing, Asia’s richest man, for instance, warned publicly recently that the impact of the Shanghai FTZ will be much bigger and come much more quickly than the territory anticipates.

Critics have said Hong Kong, still saddled with the colonial mentality that characterized the territory prior to 1997, will have trouble meeting a competition characterized by the ability to act fast and without the hobbles of an often-fractious Legislative Council and a chief executive’s office that has been steadily losing public support for a variety of reasons.

The territory’s main attributes, however, remain the enforceability of contract and the rule of law, both of which are absent in the mainland, and a communications and transport infrastructure that rank among the best in the world although parts of China are catching up fast.

Some of the details of the FTZ plan were released Friday to allow experiments within the zone, in Shanghai’s Pudong district, including easing restrictions on yuan, investment, trade and business management.

According to Xinhua, the state-owned news service, the opening permits reforms in six different fields including financial services including banking, health insurances and leases. Logistics are to include shipping and port management. Commercial enterprises include telecommunication and gaming services, professional services refer to a closer working with HK law enterprises, credit surveyors, travelling agencies, recruitment companies, investment managers and construction. Cultural and entertainment imply performer agencies and entertainment resorts. Social services mean education, vocational training and medical care.

“Under the preconditions that risk can be controlled, China will create conditions to test yuan convertibility under the capital account, market-set interest rates and cross-border use of the Chinese currency in the zone,” according to the plan. Regulations in the zone will also be eased in 18 sectors from finance, shipping, commerce to culture.

The zone is to be modeled on existing free trade businesses in the country’s economic hub – Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone, allowing domestic banks to provide services to depositors who are residents in other countries, according to Xinhua. It will also allow eligible foreign-funded financial institutions to set up banks and team up with qualified private banks to establish joint-ventures.

Alibaba denies IPO venue rumors

E-commerce giant Alibaba Group Holding Ltd dismissed as untrue published reports that it has decided to hold an initial public offering that could raise up to $75 billion in New York instead of Hong Kong.

In an interview with China Daily, an Alibaba representative in Beijing repeated the company’s statement earlier this month that it has made no final decision on the timing, location or terms for the IPO, projected to be one of the world’s biggest this year.

“Reports claiming that Alibaba has chosen the US over Hong Kong are not true,” said the representative, who asked not to be identified.

Alibaba Chief Executive Jonathan Lu also attempted to diminish the reports. Through his account on Laiwang, a mobile chatting app recently launched by the company, Lu replied “not yet” to a China Daily reporter who asked whether Alibaba had chosen to list in the US rather than Hong Kong and whether the company had received a final response from the Hong Kong stock exchange on its request for a change in board-nomination procedures. He did not say whether his response was to one question or both.

Alibaba has been in talks with the Hong Kong exchange’s listing panel to establish a system whereby founder Jack Ma and other top executives could nominate most of the company’s board and submit the proposed directors’ slate to shareholders for a vote. The managers’ goal is to retain voting power over Alibaba’s strategic direction and culture.

Hong Kong doesn’t allow the dual-class structure favored by Facebook Inc, Google Inc and other US-listed technology companies. The Hong Kong exchange’s charter says shareholders should have equal rights.

Published reports said that if Hong Kong regulators failed to approve Alibaba’s board-nomination request, the company would switch the listing venue to New York, where such a corporate structure is allowed.

That change of venue would come as Hong Kong needs a heavyweight such as Alibaba to revitalize its faltering IPO market. The territory was the top global destination for IPOs from 2009 to 2011, but a slowing economy has caused many companies to postpone their IPOs.

There’s no guarantee holding its IPO in New York would translate into a big payoff for Alibaba, despite its prominence in China. Recent accounting scandals involving US-listed Chinese companies have created a chilly climate for IPOs from the country, resulting in few IPOs from China seeking listings on US exchanges and hurting the share prices of Chinese companies which already trade on the US stock market.

But Alibaba would be the most widely anticipated IPO since Facebook’s $16 billion offering in May 2012 – the third largest in history.

Hong Kong, in comparison, has had fewer legal battles and a long record of hosting Chinese mainland companies incorporated overseas and listed in Hong Kong. Alibaba is incorporated in the Cayman Islands.

Hong Kong media outlets reported that the listing committee of Hong Kong Exchanges & Clearing Ltd, at its weekly meeting Thursday, discussed the IPO and decided not to make rule changes to accommodate Alibaba’s corporate structure. A spokeswoman for the Hong Kong exchange declined to disclose the substance of the committee’s discussions, saying they are not public information.

Hong Kong exchange CEO Charles Li suggested that the exchange might not compromise its rules for Alibaba. Li wrote in a blog post on Wednesday that “as enshrined in our charter, in the event of a conflict, public interest is put ahead of shareholder interest at HKEx”.

Praxair China Opens Global Technology Centre In Shanghai

The new Praxair China Technology Centre is a state-of-the-art facility for applications engineers and Research and Development

Praxair China Investment Company, a subsidiary of Praxair, Inc. has announced the opening of its state-of-the-art Global Technology Centre in Shanghai, supporting the company’s development and implementation of innovative applications technologies.

Praxair supplies gases such as nitrogen, hydrogen, arsine, phosphine, silane and ammonia used in III-V and III-nitride MOCVD growth.

The Praxair China Technology Centre is located in the Jinqiao Development Zone of Pudong New Area.

The centre houses laboratories, including pilot and demonstration facilities, to support a growing team of Praxair engineers and scientists who work with customers in China in the steel, combustion, metal fabrication, metals and materials processing, pharmaceuticals, water treatment and electronics segments.

“The new Praxair China Technology Center is a state-of-the-art facility for our applications engineers and R&D organisation,” says Minda Ho, president of Praxair China.

“These laboratories enable us to work closely with our business partners and customers to develop innovative products that meet their unique needs. In addition, Chinese regulations for emissions reduction are becoming more stringent and are world-class in several areas. Praxair’s experience will allow us to quickly replicate our applications technologies to contribute to our customers’ needs for cleaner air and water. We look forward to delivering novel gas applications from this centre to our customers across China,” adds Ho.

“The inauguration of the Praxair China Technology Centre builds on our rich tradition of innovation,” comments Amitabh Gupta, executive director of Praxair Asia R&D and Applications. “Praxair technical teams are developing applications to help customers increase productivity, achieve energy savings and improve environmental performance through emissions reductions. The development and application of these innovative products and services enables sustainable development, while truly making our planet more productive.”

“China is our largest and fastest growing market in Asia and this center is developing technology that will not only be used in China but also in Praxair’s businesses around the world,” adds Ray Roberge, Praxair’s senior vice president and chief technology officer.

“In addition, we are collaborating with several respected universities across China on important areas of research, which is a strategic advantage for Praxair. The innovation stemming from these projects and our ability to attract and recruit top talent from these and other educational institutions are key reasons we chose to open our facility here,” he continues.

Sogou sues Qihoo 360 over dirty tricks

China’s Internet giant Sohu’s search engine arm Sogou on Wednesday filed a lawsuit against Qihoo 360, a New York-listed Internet security company, for unfair competition.

Qihoo 360 is accused of using its free Internet safety products to “induce and cheat users, prevent them from using the Sogou browser through destructive technical means, and damage Sogou’s service integrity to Internet users,” according to Xi’an City Intermediate People’s Court in northwest China’s Shaanxi Province.

Sogou is demanding an open apology from Qihoo 360, and compensation of 45.5 million yuan (7.4 million U.S. dollars).

The court accepted the case, but did not disclose when the trial would open.

Also on Wednesday, Qihoo 360 announced it would sue Sogou and its CEO Wang Xiaochuan for unfair competition and damaging its reputation at two separate courts in Beijing, requesting total compensation of 51 million yuan. The courts have not confirmed the lawsuits.

Established in 2005, Qihoo 360 was listed in New York in 2011, and has a current market value of over 10 billion U.S. dollars.

The company lost a lawsuit in April, when it was accused of malicious competition and fined 5 million yuan as compensation to China’s Internet giant Tencent, the highest that has ever been ordered in an Internet competition lawsuit in China.

Airlines recruit ‘kind’ older flight attendants

Chinese airlines are recruiting older cabin crew as they believe they are more patient and considerate than the younger flight attendants traditionally preferred.

The trend is seeing more married women over 35 being taken on as domestic airlines raise their upper age limits.

“Married women look kinder, are more considerate and can serve passengers better than their younger counterparts,” said Zhang Wu’an, spokesman for locally based budget carrier Spring Airlines.

Demographics also play a part in the trend, as flight attendants already employed by the airlines get older, he added.

Spring Airlines launched a recruitment campaign yesterday, mainly targeting married women up to 45. Some 3,000 women — including 2,000 mothers aged around 35 — have applied, said officials.

“We will mainly evaluate their kindness and patience, while their appearance won’t be so important,” said Xiao Fei, human resources department director with the airline.

With Spring Airlines, a flight attendant can be promoted to chief attendant within two years with annual salary of more than 100,000 yuan (US$ 16,338), Zhang said.

Among those seeking a job with the airline is 34-year-old Lang Xiaohua, who has worked as a travel agency manager.

“My 10-year-old daughter is growing up and it’s time to realize my own dream,” Lang said.

She said she felt confident her work and life experiences would stand her in good stead.

Among other Chinese carriers, China Eastern Airlines has upped the age limit for new flight attendants to 32.

Chinese airlines are short of cabin crew due to the rapid expansion of routes and fleets.

A downside of the airline industry boom is frequent flight delays, leading to conflict between staff and passengers.

Last month, two Beijing passengers were detained for 10 days for pushing flight attendants and damaging boarding gates during a five-hour delay.

And in Shanghai, a crew with locally based Juneyao Airlines claimed last month that a flight attendant was slapped by a passenger during a delay.

China to inaugurate Shanghai FTZ on Sept. 29

China will officially launch the pilot free trade zone (FTZ) in Shanghai on Sept. 29, taking a solid step forward to boost reforms in the world’s second-largest economy.

Preparation work is going smoothly, sources with the Shanghai municipal government said on Tuesday.

Covering almost 29 square kilometers, the zone will be created modeled on existing free trade businesses in the country’s economic hub — Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.

Chinese Premier Li Keqiang said earlier this month that for the pilot FTZ, a negative list approach will be explored and priority will be given to easier investment and greater openness.

China’s legislature has given the green light to the State Council, or the Cabinet, to modify laws related to foreign enterprises in the zone.

As authorized by the National People’s Congress Standing Committee, the State Council will suspend administrative approvals covering foreign-funded enterprises, Chinese-foreign equity joint ventures and contractual joint ventures.

The State Council approved the pilot Shanghai FTZ on July 3. In the pilot zone, goods can be imported, processed and re-exported without the intervention of customs authorities.

More Foxconn Woes: Huge Fight Breaks Out

Foxconn may not be in the news like it once was, but not for lack of woes, it seems. The company revealed that a major fight erupted Thursday at a Foxconn campus in eastern China, and the firm says 11 people were injured. The fighting reportedly started as workers drank to mark a public holiday, the Mid-Autumn Festival. Pictures on social media show dozens of shirtless men carrying pipes and sticks, the Wall Street Journal reports. Unconfirmed reports say three people died, and ZDNet puts the number of those injured badly enough to require hospitalization at 27.

The company characterized the feud as “of a personal nature,” but ZDNet reports a conflict between provinces. The tech site says more than 200 armed workers from Guizhou province targeted dormitories at the Yantai campus, in Shandong province; they reportedly chanted, “Beat all that are from Shandong.” Either way, labor activists are speaking out after a summer that, the Journal notes, saw 183 strikes and protests at Chinese factories in general; that’s double last year’s tally. “Large-scale fights simply do not break out at well-run factories with a contented and well-paid workforce,” says one activist. The fight comes nearly a year to the day after a massive riot at another Foxconn factory.

China improves transparency for graduates recruitment

China’s educational authorities have vowed to improve transparency for recruiting graduate students, especially those recommended for admission, in order to safeguard fairness.

The Ministry of Education said in a circular on Wednesday that schools should ensure an open recruitment process by publicly stating selection criteria and publishing the lists of admitted students on their website for no less than 10 days for public scrutiny.

“Applicants whose names have not been made available to the public must not be admitted by schools,” it said.

Any issues should be investigated and rectified and supervision should be stepped up on recruitment, said the circular.

Applicants for graduate programs in Chinese universities or academic institutes should attend national exams, or recommended by schools where they pursued bachelor’s degrees for admission to graduate schools.

Cheating in exams should be prevented by ensuring smooth operation of the anti-cheating system including monitors and metal detectors, the circular urged.

Schools’ autonomy should be further expanded in recruiting graduate students and professors’ role should be given full play in selecting outstanding applicants, it added.

China Raises the Heat on Glaxo

BEIJING—GlaxoSmithKline GSK.LN +0.03% PLC came under new pressure as Chinese state-run news outlets ran reports of employees purportedly detained in a government bribery investigation of the drug maker saying that company executives created a sales culture that led to corruption.

China’s national broadcaster on Tuesday aired reports featuring what it said were detained employees saying that managers pressured sales representatives to get drugs to Chinese customers faster. The identities of the people, whose faces were blurred, couldn’t be verified.

A person identified as sales manager Huang Hong, who China Central Television said was one of four Glaxo employees detained in July, said in the report that former Glaxo China chief Mark Reilly told workers to enter hospitals to develop relationships with administrators to speed drugs’ entries into pharmacies.

Mr. Reilly couldn’t be reached for comment. Glaxo Chief Executive Andrew Witty in July said authorities hadn’t alleged wrongdoing by Mr. Reilly.

“Upper management came from sales, so they should have realized what they were doing,” the person identified as Ms. Huang said in the report.

Glaxo said the issues mentioned in the reports “would be a clear breach of our corporate values and we have zero tolerance for any behaviour of this nature.”

Chinese officials have alleged that Glaxo transferred three billion Chinese yuan, or about $490 million, through travel agencies since 2007, creating fake invoices to help the company generate money that could be used to bribe doctors. Officials in July said that some of the travel agencies offered Glaxo employees bribes in the form of sexual favors to keep the company’s business. Authorities didn’t disclose further details.

Glaxo has said that some senior executives may have violated Chinese laws and that it is cooperating with the probe.

The person identified as Ms. Huang said in Tuesday’s report that management instructed sales representatives to approach clients from the biggest and most powerful hospitals at least once a week and provide them with travel opportunities and gifts. The Wall Street Journal reported similar information last month, outlining information on trips and kickbacks that Glaxo allegedly offered to doctors.

Chinese authorities in July said Mr. Reilly left the country as they began investigations. Glaxo said Mr. Reilly left China on a preplanned business trip.

Glaxo in late July replaced Mr. Reilly as head of China with Hervé Gisserot, who had been co-head of Glaxo’s pharmaceutical business in Europe. Glaxo said at that time that Mr. Reilly would remain with Glaxo in London, helping the company respond to the Chinese investigation.

A report from China’s state-run Xinhua News Agency on Tuesday quoted Ms. Huang as saying that Glaxo management set sales growth goals of 25%, much higher than the industry standard of 7% to 8%. “Mr. Reilly’s company objective was, ‘Sales are king,’ ” Ms. Huang said.

The official People’s Daily quoted Glaxo’s head of recruitment in China, Guo Jianhua, saying that company executives shrugged off responsibility when authorities made bribery allegations. “When the problems were exposed, the company pushed all responsibilities to individual employees,” Mr. Guo said.