Category News of China

Economic recovery buoys building and service sectors

China’s nonmanufacturing industries gained stronger growth momentum in March, supported by an accelerating economic recovery.

The nonmanufacturing purchasing managers’ index, an indicator that reflects the business activities in the construction and service sectors, bounced back to 55.6 in March, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing on Wednesday. It was 54.5 in February and 56.2 in January.

A PMI above 50 means expansion, as opposed to contraction. The survey covers 1,200 enterprises.

Overall new orders increased 0.2 points to 52 percent month-on-month, and new export orders improved to 51.7 from 51.6, indicating stronger demand from both domestic and overseas markets, said Cai Jin, vice-chairman of the CFLP.

Input prices dropped to 55.3, 0.9 points less than in February, suggesting an easing of inflation pressure, the analyst said.

It is a signal of a strengthened growth impetus for the whole economy, along with the raised manufacturing PMI released on Monday, he said.

The March manufacturing PMI, which reflects factory production, rebounded to 50.9 from 50.1 in February.

The construction industry PMI rose to 62.5, up by 4.5 points from a month earlier and a 12-month high, as most migrant workers returned to cities to resume construction projects after the Spring Festival holiday in February.

“It suggests that construction enterprises have more positive expectations for the market situation this year,” Cai said.
The service industry PMI slightly declined to 53.6 from February’s 54.9. Business volumes for catering, retail, air transport and road transport industries shrank in March, said an NBS statement.

HSBC Holdings PLC reported a service industry PMI on Wednesday based on a separate survey. It registered a six-month high of 54.3 in March, up from 52.1 in February, because of the rebound of new business orders and employment.

Report names most open cities In China

Shenzhen, Guangzhou and Xiamen on the southeast coast are the three places in China with the greatest economic, technological and social openness, according to a report released Saturday at the Boao Forum for Asia.

According to the report, the first of its kind, Shenzhen, one of the earliest economic zones in Guangdong Province, is the most open. It has an edge on trade contacts, innovation and technology exchanges. Guangzhou, the capital city of Guangdong, is ranked second. Xiamen, in Fujian Province, was third, the Nanfang Daily reported.

All three places were among the first wave of regions in China to modernize their economies and open themselves to foreign investment, a process that started in the 1980s.

The International Cooperation Center of National Development and Reform Commission released the report, which rates Chinese cities’ openness to doing business internationally. The ranking list includes 32 cities, including 27 capital cities and five other cities with provincial-level economic management authority. The evaluation is based on 48 indicators rating the economy, technology and societal openness, trade contacts, foreign currency deposits and direct investments from foreign merchants.

Hangzhou and Ningbo in Zhejiang Province, Nanjing in Jiangsu Province, Dalian in Liaoning Province and Qingdao in Shandong Province came next.

These eight cities are all from coastal or eastern provinces, suggesting that a city’s openness level is closely connected to regional openness and development. It also highlights the problem of China’s imbalanced development regionally, said the report.

Cities taking the last five spots of the list are all from western inland China, namely Hohhot in Inner Mongolia Autonomous Region, Lhasa in Tibet Autonomous Region, Lanzhou in Gansu Province, Yinchuan in Ningxia Hui Autonomous Region and Xining in Qinghai Province, according to China News Service.

The western part of China is not likely to become a hot spot of foreign investments due to its geographical location, Ding Yifan, researcher at the Institute of World Development under the Development Research Center of the State Council, told the Global Times.

Most foreign investment in eastern coastal areas are focused on raw material processing, which doesn’t suit western China, Ding said, adding that the west, which has remarkable sunshine, should seek openness based on its own unique qualities, such as agricultural product processing.

Citing the eastern coastal areas’ great achievements in terms of openness, Ding pointed out that excess capacity is a common problem in China and the east should not continue seeking foreign investment targeting raw material processing,
“Openness in the service industry is the trend,” said Ding. “Currently the service industry in China isn’t open enough in the sense that the market in the field is so large and the potential is also significant.”

Microsoft to launch first Chinese mainland innovation center

Microsoft is expected to establish an innovation center in south China’s Hainan Province, the first of its kind on the Chinese mainland, according to an agreement signed between Microsoft and the Hainan provincial government on Sunday.

Based on Microsoft’s leading technology platform, the Microsoft Innovation Center will attract software enterprises in the fields of tourism and agriculture to Hainan, said Li Guoliang, deputy governor of Hainan.

Li said the government hopes to nurture an ecology-related industrial software chain worth 5 billion yuan (798 million U.S. dollars).

Microsoft will also build a “Microsoft IT Academy” in Hainan to boost the training of IT experts.

Microsoft will carry out strategic cooperation with Hainan regarding technological development, software training and intellectual property rights protection, according to a memorandum of understanding inked by the Hainan provincial government and Microsoft (China) Co., Ltd. on the sidelines of the ongoing Boao Forum for Asia.

Microsoft Group Vice President Orlando Ayala said global tourism hot spots are moving to the Asia-Pacific region, adding that the company’s cooperation with Hainan will prop up the province’s efforts to become a major international tourist destination.

Microsoft Innovation Centers are state-of-the-art facilities designed to foster collaboration on innovative research, technology and software solutions, involving a combination of government, academic and industry participants.

Minimum wage hike helps workers as costs go up

Old Yang, a 55-year-old security guard in a residential complex, has been counting the days until his next paycheck. Effective this month, the minimum wage in Shanghai rises to 1,620 yuan (US$261) a month from 1,450 yuan.

Like most low-wage workers in the city, Old Yang is finding it hard to cope with rising prices for groceries, medicine, transport and the other basic necessities of life.

Sitting in the gate room of a residential compound on Anguo Road in Hongkou District, a cigarette glowing in his left hand, Old Yang said “food, transportation, tuition, water, gas and power bills. You have to pay for everything with the minimum wage.”

Old Yang lost his job during the global financial crisis in 2008 and found work as a security guard through a government-sponsored re-employment program aimed at helping jobless people in their 40s and 50s.

“Many jobless people chose to stay at home after the crisis,” Old Yang said. “I chose not to because my family needs money and I want to get a pension after retirement.”

His wife works part-time to help defray the cost of a son in college.

On March 29, the Shanghai government increased the minimum monthly wage by 11.7 percent, or 170 yuan. The minimum payment for part-time employment was lifted to 14 yuan from 12.5 yuan an hour, according to the government notice that took effect on April 1.

Nationally, Shanghai has the highest minimum wage of all 13 provinces and major cities in China. Its most recent rate of increase, however, isn’t as high as in some provinces, such as Jiangxi Province, which showed the biggest increase this year at 41.4 percent, according to People’s Daily.

The minimum wage in Shanghai has more than quadrupled, from 352 yuan, in the last 15 years. By 2020, China aims to double the per-capita income of both urban and rural residents from 2010 levels and narrow the gap between the rich and poor, according to a report from the 18th National Congress of the Communist Party of China that ended last November.

“The minimum wage will also be doubled by that time,” said Jennifer Feng, a senior human resource analyst with 51job.com, a Nasdaq-listed headhunting firm. “But you have to remember we are talking about net income. Actual take-home pay may be less, when social insurance fees and other mandatory costs are included.”

In its Five-Year Plan for the period ending 2015, the State Council, China’s Cabinet, stipulates annual increases of at least 13 percent.

“I think the latest increase is a balanced result, which takes into account the rising cost of living and the payroll tolerance capacity of employers,” Feng said. The risk, she said, is that employers, especially in manufacturing, may lay off staff or recruit lower-paid workers to replace experienced ones in order to lower their operating costs.

There were a dozen security guards in Old Yang’s residential compound last December. Now, there are only six.

“Maybe our boss knew he couldn’t afford so many of us, anticipating that the minimum wage would rise, so he fired them earlier,” Old Yang said.

He said his employer tends to hire local people like him because their social insurance fees are paid for by the government and the neighborhood committee under the re-employment plan.

Still, migrant workers are also commonly hired as security guards and cleaners in Shanghai. One such colleague of Old Yang’s, surnamed Zheng, lives in the basement of a high-rise in the housing complex, along with his wife, who works as a cleaner. Zheng, a native from central China’s Henan Province, declined to give his full name.

Zheng said the accommodation is free and he doesn’t have to pay utilities.

“Rent can gobble up nearly half of the minimum wage in Shanghai,” Zheng said. “The city is really too expensive to live in.”

For employers, the picture is mixed. A rise in minimum wages tends to make higher-paid workers think they should get raises, too. Feng said as wages rise, many employers are caught in a bind. Amid slower economic growth, they are under pressure to make more money, and wages account for a big chunk of operating cost. She suggests the government help share the burden by reducing business taxes or by defraying part of the cost of hiring people.

Beijing is booming, but talent is leaving due to bad air

Some days it is so thick that you can scarcely see across the street. Other days its acrid smell catches at the back of your throat. More than one day in two in recent months, it has been officially unsafe to go outside without a face mask.

Three months of shockingly bad air pollution, known to foreigners here as the “airpocalypse,” is now prompting growing numbers of expatriates and their families to leave China, and some companies to offer hazard pay to keep them here, according to executive recruiters, doctors, and business leaders.

And for the first time, they add, ambitious young Chinese executives, too, are seeking to build their careers in more hospitable cities, driven to fresher pastures by the capital’s foul air.

Though foreigners leave Beijing for many motives, says Jim Leininger, principal consultant at the Beijing office of Towers Watson, a global human resources firm, “the litany of reasons usually starts with air quality. It’s a very important factor.”

“Just yesterday I got two e-mails from people who said they had been in Beijing for several years, the air quality was nuts, and they wanted to go back to the States,” adds Kitty Vorisek, executive vice president of DHR, a head hunting company with five offices in China. Such requests, she says, have snowballed in recent months.

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The past three months have seen the worst air pollution on record in Beijing. For a couple of days in January, the levels of PM 2.5 particulate matter (2.5 micrometers or less in diameter, which reaches deepest into the lungs) were 40 times higher than those categorized as safe by the World Health Organization.

On 35 days during February and March, more than every other day, the US embassy’s air pollution monitor detected levels deemed “very unhealthy,” “hazardous,” or “beyond index.”

“Air quality is one of the most negative things about living in Beijing, especially for families with children,” says Mr. Leininger. “It’s all you hear about every day.”

“I’ve talked to a lot of parents who won’t be renewing their employment contracts when they are up,” says Richard Saint Cyr, a doctor at Beijing United Family Hospital who specializes in air quality issues. “For many of them it is a very reasonable decision.”

FOREIGN BUSINESS COMMUNITY TAKING A HIT

The trend is anecdotal for the time being; nobody appears to have compiled any statistics yet, but human resources experts say the movement is clear and a handful of departures have attracted attention in the foreign business community.

A senior lawyer for BMW and a top Volkswagen executive both insisted on being repatriated in January, and when anyone leaves “we inevitably hear, nearly every time, that one of the contributing reasons is the air pollution,” says Adam Dunnett, head of the European Union Chamber of Commerce in China.

The traditional outflow of expatriates in the summer, at the end of the school year, is “almost guaranteed” to be up on last year, predicts Max Price, China partner at Antal, an executive consultancy. But pollution is not the only reason, he points out; many international firms are increasingly replacing foreign executives with locally hired Chinese recruits.

That might become more difficult in the future, observers suggest. Some young Chinese executives, who have long seen Beijing as a high-paying mecca where the rewards are worth the hardships, are beginning to think differently.

REASON TO GO SOUTH

Appealing to them are companies such as Meizu, a manufacturer of mobile phone handsets based in the southern seaside town of Zhuhai.

Two months ago, the firm launched a “Blue Sky Recruitment” campaign in Beijing, placing ads in business tower block elevators around the city to tempt young IT engineers into moving south.

“Do you dare to pursue a life with blue sky and white clouds?” read a Meizu poster at a Beijing jobs fair last week. “Welcome to air you can breathe with a PM 2.5 reading of 27.”

“Young Chinese professionals are looking not just at pay but at quality of life issues too,” says Mr. Price, whose own girlfriend has just moved from Beijing to the coastal city of Qingdao to escape the pollution here. “They are very curious about this stuff, more eyes are open, and I can see this increasing.”

Meanwhile, human resources departments are scrambling to deal with the air quality issue for their companies’ employees, buying air purifiers, restoring hardship allowances, and asking for expert advice.

“Our hospital has been flooded with requests from companies and embassies for health talks,” says Dr. Saint Cyr. “A lot of businessmen are very, very worried about this.”

That has made it harder to attract new talent from abroad, says Ms. Vorisek. In the past six months, she says, health questions have become “much more prevalent” among candidates for jobs in Beijing. Some companies, according to Price, are even paying American recruits “danger money” to attract them.

LONG TERM DAMAGE TO BEIJING?

This could do long term damage to Beijing’s future, worries Huang Xiaoping, head of Risfond, a head-hunting company that specializes in recruiting foreigners to Chinese companies. “It will be a big challenge for Beijing to attract foreign talent if the air quality does not improve,” he warns. “Environmental problems could become a big obstacle to future economic growth.”

The Chinese government says it is aware of the threat. Most of the PM 2.5 pollution comes from power generating plants and cars. The head of Beijing’s Environmental Bureau, Chen Tian, promised in an interview this week with the Beijing News that new automobile emissions standards to be introduced in July will help reduce pollution, and that the construction of new power stations outside Beijing will be sped up so that coal-burning generators can be shut down.

In February, the State Council, China’s cabinet, pledged new fuel standards to make gasoline and diesel less polluting.

Similar promises in the past, however, have not always been kept.

Beijing is losing its pre-eminence in China’s economy, and thus its attractiveness to high-flying foreign executives, as second-tier cities develop specialized industries, says Price. “How fast that happens depends on how quickly they get hold of the pollution issue,” he predicts.

“Beijing will always be the capital of the fastest growing big economy in the world,” he says. “But it is losing its attraction.”

China has 48 million sci-tech personnel

China’s has 48 million people working in the fields of science and technology, but the pool of personnel still lacks high-level scientists for strategic needs, a former human resources official has revealed.

Though the numbers of both sci-tech current workers and graduates outnumber those of the United States, China is not a great power of talents, Xu Songtao, former deputy head of the Ministry of Human Resources and Social Security, said at a seminar on Monday.

According to statistics from the Ministry of Science and Technology, China has just over 10,000 people classed as high-level innovative talents, said Xu, also an adviser to the China Talent Research body.

Despite China being a marine leader, the number of Chinese scientists registered in a database of oceanic talents is less than 100, one-twentieth of that of the United States, he added.

“The innovative capabilities and competitiveness of Chinese talents are also weak,” Xu said, urging officials at all levels to pay great attention to the nurturing of talented people and to initiate a number of recruitment projects.

He also suggested creating a competitive environment to eliminate the incapable as well as to form a reserve of strategic talents.

Report: Lenovo to design own chips

China’s second largest smartphone seller Lenovo will reportedly foray into the chip design segment. The company is expected to design own chips for smartphones and tablets.
“Lenovo is looking to expand its IC design team from 10 to 100 by the mid of this year,” EE Times quoted an industry source with direct knowledge of Lenovo’s recruitment of chip designers. The PC maker will be hiring 40 engineers in Shenzhen and 60 in Beijing.

This initiative appears to be driven by the company’s desire to control its own destiny in smartphones and tablets–a la HiSilicon at Huawei. (HiSilicon is a chip division of Huawei.)

Unlike Samsung or Apple, Lenovo has a checkered history of adopting different apps processors from a variety of suppliers for its smartphones. The company adopted MediaTek’s MT6573 in the Lenovo A60 smartphone in 2011, while it became the first company–outside Samsung –in 2012 to design in Samsung Electronics’ quad-core apps processor Exynos 4 in its LePhone K860.

Lenovo, however, announced earlier this year a 5.5-inch smartphone, dubbed K900, by integrating Intel’s first dual-core Atom chip for phones. The Atom Z2580 is said to have roughly doubled the CPU performance of Intel’s single-core Medfield processor used in Lenovo’s K800 phone, which was introduced a year ago.

While Lenovo might have been enjoying its freedom in choosing the best apps processor available on the market, reality bit hard, sources said, when Samsung Electronics refused to supply its newest version of the Exynos apps processor to the Chinese company.

Indeed, on the growing Chinese smartphone market last year, Lenovo became Samsung’s biggest rival–with Samsung holding a 17.7 per cent share, with Lenovo at 13.2 per cent and Apple at 11 per cent.

Meanwhile, Lenovo has been beefing up its senior management team to prepare itself to become a leading consumer electronics vendor.

The world’s second-largest supplier of personal computers last month (February) named Jerry Yang, the co-founder and former CEO of Yahoo, as a “board observer.” Further, Lenovo added Tudor Brown, one of the founders of ARM, as a non-executive director to Lenovo’s roster of seasoned veterans.

It’s far from clear if an internal group of mere 100 IC engineers can make a dent in the already crowded apps processor market. And yet, as Shao Yang, CMO of Huawei Device, recently said in an interview with EE Times, having a chip division of its own could help [the handset company] “negotiate better with other semiconductor companies.”

China launches its own ‘best job in the world’

A Chinese city is searching for a foreign traveller to become a “modern Marco Polo”, with a 40,000 euro ($A50,893) salary on offer to the winner.

Hangzhou in eastern China, renowned for its canals and bridges, was described as the “most beautiful and elegant city in the world” by the Venetian traveller, whose 13th-century journal was one of the first detailed accounts of China written by a European.

Now the city is “calling people around the world to follow Marco Polo’s steps”, said Chen Li, of Hangzhou’s tourism commission.

The promotion is akin to Australia’s “best jobs in the world” campaigns, the first of which required the winner to live on a tropical island for six months.

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The new Marco Polo will be recruited via Facebook – which is banned in China – and will undergo intensive training before being flown to the city for a 15-day trip, the tourism commission said in a media release.

Duties include making a short video about Hangzhou and promoting the city online. Both men and women are eligible, it said.

“To be a modern Marco Polo is a very interesting job, it will maybe change their life,” Chen said. “They may find inner peace, like Kung Fu Panda.”

The Travels of Marco Polo, composed in 1298, described a journey across Asia through realms of pygmies, exotic plants and cannibals.

The book had an enormous impact on European perceptions of the continent, but modern historians have questioned the veracity of Polo’s account, and some query whether he reached China at all.

China was the world’s third most visited country in 2011, behind the United States and France, according to the United Nations World Tourism Organisation, with 57.6 million international tourism arrivals.

Meanwhile, more than a quarter of a million entries have been submitted for Australia’s ”Best Jobs in the World” promotion in just a week.

Tourism Australia is offering their pick of the best working holiday jobs to showcase the country.

Roles include being a ”funster” in NSW and an outback adventurer in Northern Territory.

Winners will be paid $100,000 each for a six-month contract starting in June.

In the seven days since the launch, Tourism Australia has received 275,000 applications from 150,000 people in 196 countries.

Applicants can apply for more than one job.

About 38,000 entries came from the US, 33,000 from France, 32,000 from the UK and 30,000 from Italy.

The most popular jobs are South Australia’s wildlife caretaker, NSW’s chief funster and Queensland’s park ranger.

The aim of the competition is to boost the number of working holiday tourists visiting Australia.

About 1.6 million people under the age of 30 travel to Australia each year, making up just over a quarter of all tourists and contributing about $12 billion a year to the economy.

Entries close 9am (AEDT) on April 10 and winners will be announced on June 21.

Visit www.australia.com/bestjobs to enter.

AUSTRALIA’S ‘BEST JOBS IN THE WORLD’

Wildlife caretaker, SA – wake up the kangaroos, swim with dolphins and sea lions, assist with conservation projects
Park ranger, Qld – check water temps, protect and promote native plants and animals, walk in the rainforest, visit waterfalls

Chief funster, NSW – promote food, lifestyle and sports events across the state, work behind the scenes of some of Sydney’s biggest festivals

Lifestyle photographer, Melbourne – create city and country photo shoots, meet local identities, designers and artists, explore the city’s hidden secrets, share trends

Outback adventurer, NT – meet the locals, journey through the outback, sleep under the stars in a bush camp, taste traditional bush foods

Taste master, WA – eat your way around the state, forage for the finest produce, uncover the best bars and restaurants.

Pacific Online Limited Announces Full Year 2012 Earnings Results

HONG KONG, March 26, 2013 /PRNewswire/ — Pacific Online Ltd. (HKSE: 543) (“Pacific Online,” the “Company,” or the “Group”), a leading internet content provider in China, today announced its financial results for the full year ended December 31, 2012. The Group will host a conference call to discuss these results at 9:00AM Hong Kong time on Wednesday, March 27, 2013. Dial-in details are provided at the bottom of this release.

Year Ended December 31, 2012 Financial Highlights
* Total revenues increased 11.8% year-over-year to RMB715.6 million
* Net profit increased 3.3% year-over-year to RMB 236.5 million
* Proposed final cash dividend of RMB15.26 cents per ordinary share

“For the full year 2012, we are pleased to report an 11.8% increase in revenues and a rise of 3.3% in net profit,” stated Mr. Waiyan Lam , Chairman and Chief Executive Officer of Pacific Online Limited. “These results demonstrate the cautious, yet profitable approach we have taken to grow our business, despite the uncertain macroeconomic conditions in China, pressure from competition, and increases in operating costs.”

“PCauto, our largest vertical portal in terms of revenue, delivered revenue growth of 17.3% in 2012. The portal benefitted from the across the board increases seen in the advertising budgets of automobile manufacturers due to intensified competition in the retail market. However, we also saw increased competition from both vertical and diversified portals. Our auto business was temporarily affected during the second half of the year as a result of the dispute between the Chinese and Japanese governments. This caused a brief decrease in marketing spending by some manufacturers, though the impact was temporary as advertiser spending quickly returned to pre-dispute levels. To successfully navigate through these challenges, we worked to strengthen the quality of our content, which helped us increase user stickiness and brand equity, and remain relevant for our users.”

“PConline, our IT portal, continued its stable development in 2012 thanks in part to relatively steady advertising spending in the IT sector amid intensified competition. The political dispute between China and Japan last year also had a minor temporary impact on our IT business. We were able to marginally expand by shifting our advertising product mix to adapt to the market. With more spending coming from mobile device manufacturers and other similar areas, we will continue to devote resources to this important segment as demand for consumer electronic devices in China continues to expand in line with the rising middle class.”

“Revenue from our female-focused PClady portal increased 13.9% in 2012. As more and more women move online to research and purchase luxury and brand name products, we are devoting resources to this area in order to attract traffic from users who start their shopping experience with our portal. In addition, we have re-aligned our editorial team in order to strengthen our content, developed a variety of brand-building opportunities, and strengthened cooperation with e-commerce companies both online and offline.”

“Our other vertical portals, including PCgames, PCbaby, and PChouse, continued to improve content and attract users during 2012 as they gradually build scale. While these brands remain relatively small, their user bases remain robust and continue to grow as new features and content are added. We expect that the revenue contribution from these portals will increase in the coming years.”

“Last year, we continued to invest in the development of mobile applications for each of our vertical portals. We also launched our third free online magazine for PClady on Apple’s iPad which mirrors and expands on the content that is already available on the portal. Our online magazines generated a significant buzz in the market last year and garnered positive feedback. In particular, our PChouse magazine was named one of the Products of the Year by Apple’s Mac App store in China. With the increased viewership that we attracted in 2012 along with continued development of our brand, we believe we are bettered positioned to capture the rapidly growing mobile internet market in 2013.”

“In anticipation of the changing competitive environment, we believe that we have taken the right measures to address current and potential challenges. We are committed to our long-term strategy and will continue to invest more on marketing to increase our brand value, strengthen our management team, and improve the quality of our content to increase user stickiness. This will help to ensure the success of Pacific Online Limited over the long-term.”

Proposed Final Dividend

The Board has recommended the payment of a final cash dividend of RMB15.26 cents per ordinary share for the year ended December 31, 2012 (2011: RMB14.78 cents), subject to the shareholders’ approval at the Company’s forthcoming annual general meeting to be held on Monday, May 20, 2013. The Proposed Final Dividend will be paid in cash on June 6, 2013 to shareholders whose names appear on the register of members of the Company at the close of business on May 29, 2013.

Full year 2012 Financial Results

Revenue

Revenue increased 11.8% from RMB640.1 million for the year ended December 31, 2011 to RMB715.6 million for the year ended December 31, 2012.

In 2012, the Ministry of Finance in China launched a pilot program to gradually transition the taxation system from a business tax (“BT”) to a value- added tax (“VAT”). Pursuant to this program, the Group’s advertising revenue in Shanghai, Beijing and Guangzhou is now fully subject to VAT. For purposes of comparison, our reported revenue growth for 2012 would have been 15.8% had the BT remained applicable to our business during the year.

Revenue for PCauto, the Group’s automobile portal, increased 17.3% from RMB293.9 million in 2011 to RMB344.6 million in 2012. According to statistics from the China Passenger Car Association, passenger car sales in China grew 6.8 percent to 14.68 million vehicles in 2012. PCauto was able to outperform car industry growth because automobile advertisers continued to allocate more of their marketing budgets to digital media.

Revenue for PConline, the Group’s IT and consumer electronics portal, increased 3.3% from RMB257.5 million in 2011 to RMB266.1 million in 2012. The increase in revenue from PConline was mainly due to the overall increase in advertising spending from IT sector customers, including smartphone and tablet manufacturers.

Revenue for PClady, the Group’s lady and fashion portal, increased 13.9% from RMB51.8 million in 2011 to RMB59.0 million in 2012. The rise in revenue mainly reflected increased demand in the women’s segment, especially for luxury and fashion goods.

Revenue for other operations, including the PCgames, PCbaby and PChouse portals, increased by 24.3% from RMB37.0 million in 2011 to RMB45.9 million in 2012. Revenue from these segments increased significantly due to advertisers increasingly look to the internet as an effective platform to promote and market their products and brands.

As a percentage of total revenue, PCauto accounted for 45.9% in 2011 and 48.2% in 2012, whereas PConline accounted for 40.2% in 2011 and 37.2% in 2012, PClady accounted for 8.1% in 2011 and 8.2% in 2012 and other operations accounted for 5.8% in 2011 and 6.4% in 2012. The Group continued to diversify its revenue base across the different industry segments.

Cost of Revenue

Cost of revenue increased 5.0% from RMB197.9 million in 2011 to RMB207.7 million in 2012. The gross profit margin was 69.1% in 2011 and 71.0% in 2012.

The slight increase in cost of revenue was due to increases in personnel related expenses, higher sales commissions and increases in branch operating expenses during the year. This was partially offset by lower business tax charges through the implementation of the business tax/value-added tax reform policy, fully applied to us in late 2012.

Selling and Marketing Costs

Selling and marketing costs increased 32.5% from RMB86.3 million in 2011 to RMB114.4 million in 2012. The increase was mainly due to increases in staff costs and marketing expenses.

Administrative Expenses

Administrative expenses increased by 37.6% from RMB48.7 million in 2011 to RMB67.1 million in 2012. The increase in administrative expenses was primarily due to increases in hiring and salary, traveling expenses and higher provisions for the impairment of trade receivables during the full year 2012.

Product Development Expenses

Product development expenses increased by 38.3% from RMB28.7 million in 2011 to RMB39.7 million in 2012. The increase was primarily due to greater staff recruitment in research and development.

Operating Profit before Share-based Compensation Expenses (non-GAAP)

Operating profit before share-based compensation expenses (non-GAAP) was RMB297.9 million in 2012, representing 3.0% increase from RMB289.2 million in 2011.

Finance Income and Cost

Net finance income was RMB5.3 million in 2011 and RMB4.7 million in 2012. The decrease in net finance income was mainly due to lower interest income on bank deposits.

Income Tax Expense

Income tax expenses increased 2.6% from RMB58.5 million in 2011 to RMB60.0 million in 2012. The increase in income tax expense was primarily due to a modest increase in operating profit during the year.

Net Profit

Net profit increased 3.3% from RMB228.9 million in 2011 to RMB236.5 million in 2012.

Liquidity and Financial Resources

As of December 31, 2012, the Group had short-term deposits and cash totaling RMB439.9 million, compared with RMB432.2 million as of December 31, 2011.

In 2012, net cash flow from operating activities was RMB199.4 million, net cash used in investing activities was RMB23.3 million, net cash used in financing activities was RMB168.0 million. The Group had a net increase in cash and cash equivalents of RMB8.1 million for the year 2012.

In 2011, net cash flow from operating activities was RMB218.2 million, net cash used in investing activities was RMB84.7 million, net cash used in financing activities was RMB134.5 million. The Group had a net increase in cash and cash equivalents of RMB168.4 million for the year 2011.

The Company had no external debt as of December 31, 2012 and 2011.

Business Outlook

Looking ahead, the Group will continue to adapt to current trends and technologies in order to ensure that it is keeping up with the changing needs of its operating environment. In view of the government’s policy on expanding domestic consumption through urbanization in the coming years, and the continual growth of the online advertising market, the Group is confident that the potential for future business opportunities remains strong. The Group is devoted to enhancing and developing the content on its existing vertical portals, and to improving its brand recognition in order to strengthen competitiveness and provide business growth potential. The Group will also continue to invest in mobile applications, with the aim of enhancing long-term shareholder value.

Conference Call

Management will host a conference call to discuss the results at 9:00 AM Hong Kong time on March 27, 2013 (9:00 PM Eastern Daylight Time on Tuesday, March 26, 2013). Mr. Lam Wai Yan , Chairman and CEO, and Mr. Wang Ta-Hsing , Chief Financial Officer, will discuss the results and take questions following the prepared remarks.

The dial-in details for the live conference call are as follows:

– Hong Kong Toll Free Number:
+852 3027 5500

– Mainland China Toll Free Number:
8008 0361 03

– U.S. Toll Free Number:
+1 866 978 9970

– International dial-in number:
+852 3027 5500
Passcode: 928856 #

A live and archived webcast of the conference call will be available on the investor relations section of the Group’s website at: http://corp.pconline.com.cn.

A telephone replay of the call will be available for thirty days after the conclusion of the conference call. The dial-in details for the replay are as follows:

– Hong Kong Number
+852 3027 5520

– U.S. Toll Free Number:
+1 866 753 0743

– International dial-in number:
+852 3005 5520
Passcode: 149653 #

About Pacific Online Ltd. (corp.pconline.com.cn)

Pacific Online is one of the leading Internet content providers in the PRC in terms of total advertising revenue. The Company operates six vertically-integrated portals, which, according to industry practice, are portals that focus on specific content. Among the Company’s portals are PConline, one of the largest portals in the PRC specializing in IT product-related content, and PCauto, one of the largest portals in the PRC specializing in automobile-related content.

Safe Harbor Statement

This press release contains forward-looking statements which are subject to risks and uncertainties. Actual results may differ from those discussed in the press release. In addition, any projections about the Company’s future performance represent management’s estimates as of today March 26, 2013. The Company assumes no obligation to update these projections in the future as business and market conditions change.

For further information, please contact:

Pacific Online Ltd.

Hudson Wong
Company Secretary
Tel: +852 2121 0634
Email: hudson.wong@pconline.com.cn

Christensen Investor Relations

Tip Fleming
Tel: +852-9212-0684
Email: tfleming@christensenir.com

For the full financial statements, please visit the Group’s website at corp.pconline.com.cn

SOURCE Pacific Online Ltd.

160 SOEs disclose executive pay

More than 160 State-run companies in Jing’an district have started to disclose the salaries of high-level executives to their employees, the Laodong Daily reported.

The government-sponsored disclosure is part of an effort to narrow the salary gap between executives and rank-and-file employees, and increase transparency at State-run enterprises.

The measure applies to anyone at the companies who receives an annual salary, including board members and top-level managers, said Lu Yanghong, a senior director from the Jing’an District Labor Union. The companies will tell employees about the salaries through their employee congresses.

Several government agencies, including the discipline inspection and State-run assets authorities ordered the companies to make the disclosure, Lu said.

Lu called Jing’an district a pioneer in executive pay disclosure. “No other district in Shanghai has made such a large step,” he told the Global Times.

Asking the State-run enterprises to expose executive pay could push them to increase the salaries of ordinary employees in an effort to head off complaints about a salary gap, Lu said. “There will be complaints if a senior manager is making 500,000 yuan ($80,492) while an ordinary employee is getting 20,000 yuan a year,” Lu said.

When asked whether companies will disclose other executive benefits, such as payment cards, Lu said that few companies provide executives with payment cards these days. He did not address any of the other perks executives have received in the past.

About 99 percent of the State-run companies in Jing’an district have already started to make the disclosures, Lu said.