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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.

Google to Go ‘In-Depth,’ Kill Cookies, Solve Death

Making the cover of Time magazine used to be one of the great hallmarks of success for an individual or a company, and it’s still no mean feat. Though, most companies would not be thrilled at being described, like Google (NASDAQ:GOOG) is this week in its Time cover story, as “one of the most successful, ubiquitous and increasingly strange companies on the planet.”

Then again, Google corporate types may not mind the description, and co-founder and CEO Larry Page may be quite pleased.

It’s not just the wearable computer called Google Glass that Time finds strange, or the “smart balloons” that beam Internet signals to remote locations, or the driverless cars steering themselves down the highways of California, Florida, and Nevada.

Now, Time declares, Google is trying to solve death itself.

Well, yes, apparently it is. But it’s not trying to solve death by, say, the end of the current fiscal quarter, or even in the next few quarters.

In a rare interview with Time, Google’s Page suggested that its investment in a company called Calico, announced this week, may not result in any progress for 10 or 20 years. He calls this and Google projects like it, the “moon shots” — that is, big ideas that can change the world, but not tomorrow.

And that is what is so very strange about Google. Public companies just don’t think 10 or 20 years in the future these days. Or, if they do, they don’t talk about it out loud, because it makes shareholders nervous.

So, before getting into how Google is going to help us all live forever, or at least for much longer, take a look at a couple of projects the company is working on that could pay off a lot sooner:
* Google is working to replace the “tracking cookie,” that familiar but odious component of the Web experience, with something less objectionable on privacy grounds, without breaking the economic system that supports the Internet.
* It has enhanced its search results by adding “in-depth articles” to its results, in order to flesh out timely matches with greater context.
Killing Cookies

Google is considering ways to replace the third-party or tracking cookie as the basic piece of information that marketers use to target individuals based on their Web-browsing activity.

Google’s attempt to lead on this issue, first reported by USAToday.com, will be controversial in itself.

It isn’t going to be easy to replace a system that underpins the now-$120 billion digital advertising business, but it could be argued that it has got to be done, and soon.

For one thing, marketers are getting better at interpreting and responding to the information they have gathered on users’ interests and habits. But the more effective they get, the creepier they are. Advertisers do not aim to creep out their most-likely potential customers, so the industry itself is at least considering alternatives to the cookie.

Other industry players have responded to consumers’ concerns. The latest version of Microsoft’s (NASDAQ:MSFT) Internet Explorer browser has a default setting of “Do Not Track,” and Apple (NASDAQ:AAPL) does not permit third-party cookies in its Safari browser.

Worst of all, mobile apps do not support third-party cookies. So, their days are numbered.

Among the alternatives Google reportedly is considering is an anonymous identifier, or AdID, a system already in use by Apple.

According to USAToday.com, Google will start “reaching out” to industry, consumer, and government groups to get their reaction in the coming weeks and months.

Early indications are that the advertising industry will be wary of a change that could make Google the keeper of knowledge that is now in their own hands. In the words of AdAge, this system could take Google “from being the biggest card player at the table to owning the casino.”

Exploring “In-Depth”

Google is, after all, supposed to be a search engine company, so it’s a relief to learn that it’s still working on that.

It’s also good to get an explanation for those “in-depth articles” links that have begun popping up in some search results.

It seems that Google conducted a study late last year that concluded that about 10% of the queries conducted on its search engine were not satisfactory. That is, the user required more information, different information, or at least more context, than its algorithm had turned up.

The result is “in-depth articles,” a selection of related long-form articles that might be months or even years old, but that includes the context that is otherwise missing.

In an article co-authored by data scientist Peter J. Meyers, Forbes.com’s Denis Pinsky explains the new section, well, in-depth.

Curing Death

But about that cure for death…

The new company, called Calico and funded in part by Google, is dedicated to tackling the issues of aging-related disease, with the goal of extending the human life span.

In a blog post announcing the company, Page says he believes the company can improve millions of lives by bringing what he calls “moon shot thinking” to health care and biotechnology.

The company will be led by Arthur D. Levinson, a biochemist by training who is the chairman and former CEO of Genentech as well as the chairman of Apple. He also was on Google’s board until 2009, when he resigned to resolve a regulatory probe into the overlapping directors at Google and Apple.

Even Wired.com thinks Calico is, for Google, “an odd move.” What happened, it asks, to the promise Page made just two years ago to put more focus in core ventures?

The Time cover story might have an interesting answer to that question. Medicine is becoming an information science, it notes, as vast amounts of data are increasingly used to customize treatment. And Google, the article notes, “is very, very good with large data sets.”

But if that’s not persuasive, consider this: Google has about $54 billion in cash. If it can use a chunk of that to extend all of our lives, or just to cure Larry Page’s midlife crisis (he’s 40), what could it hurt?

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.

Shanghai elderly open to house-for-pension plan

More than 70 percent of elderly people in Shanghai are open to a house-for-pension program, a survey showed, despite a recent public outcry against the idea raised in a central government document.

According to the Shanghai investigation team under the National Bureau of Statistics, the program was supported by 73 percent of respondents as a possible means to ease the burden on elderly people in an aging society where people are choosing to have fewer or no children.

Under the program, an elderly person who owns a property could deed the house to an insurance company or bank, which would determine the value of the property and the applicant’s life expectancy, and pay out a fixed amount of money every month.

The survey of 2,248 residents aged from 60 to 79 who have lived in Shanghai for more than one year found only 27 percent of respondents were firmly against the idea, the bureau’s investigation team said in a report.

Those against the program cited various reasons including the possibility of family disputes, and that they don’t need the program because their children will care for them in their old age.

Respondents in rural areas said the program is impossible because the land used for building rural houses cannot be traded.

Earlier this month, the State Council, China’s cabinet, issued a document promising a complete social care network for people over the age of 60 by 2020.

The house-for-pension program, together with other policies such as encouraging private investment in elder care services, is dedicated to serving the world’s largest population of elderly.

But the proposal drew wide criticism, with many suggesting that it shows the government is preparing to pay less attention to elder care services.

Experts said those respondents who said yes to the idea would not necessarily utilize the program.

“Intuitively, it is impossible to have such a high rate of people accepting the idea,” said Feng Jin, a professor at Fudan University’s Economics School.

“If you casually ask them, they may say yes to the program. But when they are requested to make the decision to mortgage their houses for a pension, it will be a different thing,” she added.

In the United States, where a similar program has been in place for more than 20 years, only 2 percent of people aged 65 or above have mortgaged their houses for a pension, according to Feng.

In Hong Kong, only 11 percent of property owners accepted the idea, based on a survey in 2000 of 1,867 Hong Kong residents aged between 49 and 59.

A pilot program to test the idea by China Citic Bank in Shanghai proved unsuccessful because it did not comply with market demand, Feng added.

Yang Lei, founder of Huoban Jujia Homecare Service, said some elderly people showed interest in the program when she raised it.

All were childless or had children who had settled overseas, she said. “They accept the idea because they don’t have a person to inherit their property,” she added.

It is reasonable therefore that some oppose the idea in order to leave their house to their children, she said.
Wang Xiuzhen, 64, a retired worker, said a clear no to the proposal. “We are not Westerners. Asian culture promotes that you need to leave some heritage for your children.”

The Shanghai survey also found 87.5 percent of respondents agreed with the concept of “raising sons to help in old age”, and 67.3 percent supported the traditional concept of the family supporting its elderly members.

The respondents expected the authorities to provide more beds at care centers, improve community-based caring services and enhance the service level of those engaged in the sector, the survey found.

By the end of 2012, Shanghai had 3.67 million people aged 60 or older, accounting for 25.7 percent of its total registered population, according to Shanghai Civil Affairs Bureau. Shanghai also has millions of migrants who are not registered in the city.

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.

Bribery claims infect drug companies’ dealings in China

It began as a rumour on a Chinese social media site in July, but the impact has swiftly spread around the world: allegations that GlaxoSmithKline was the “godfather” of a system of bribery in the country totalling up to $500m.

The corruption claims, which have since expanded to other multinational pharmaceutical companies including Sanofi, Novartis and Eli Lilly, have created a growing sense of concern among executives, investors and doctors alike.

They raise the prospect of a squeeze in future sales growth, and a repetition of the escalating fines imposed on the industry in the US for illegal marketing and overpricing which have exceeded $30bn over the past two decades, according to Public Citizen, a health watchdog.

Last year, GSK paid a record $3bn to settle claims the US Department of Justice described as including “cash payments disguised as consulting fees, expensive meals, weekend boondoggles and lavish entertainment”. Abbott paid $1.6bn for illegal marketing of its bipolar disorder drug Depakote, and Johnson & Johnson paid $181m to settle some claims over marketing of its antipsychotic Risperdal, while the final bill could reach $2.2bn.

Now western companies face accusations in China covering everything from offering doctors luxurious trips to foreign medical conferences and visits to massage parlours, to payments disguised as research fees. All remain unproven and only scantily described. The sources are often anonymous – and potentially disgruntled – whistleblowers.

They also come in a country where commissions to doctors are viewed as a necessary way of supplementing low salaries. “If a doctor is paid no commission at all to use a particular drug, no one will ever prescribe it unless it has no competitors,” says a former drug representative for a mid-level Chinese pharmaceutical company.

But the Chinese probes have caused a drop in marketing activities as companies and the physicians they target seek to understand the new rules of behaviour, against a broader backdrop of concern over price cuts.

Marc de Garidel, chief executive of Ipsen, says some companies have stopped promotion in China, while hospital doctors did not want to meet sales staff. “In certain cities, in certain areas, there is a toughening of the marketing conditions,” he says. “We are monitoring this very closely. We don’t know how long it will last.”

Many investors have shrugged off the US fines, given the relatively modest financial impact compared with the revenues the companies’ drugs generate. They express more concern over costlier product liability litigation sparked by the side effects of drugs such as the painkiller Vioxx, which alone cost Merck more than $5bn.

Even so, the US clampdown has sparked fresh interest by regulators in other countries, who have been considering imposing their own fines.

This threatens to compound the drug companies’ problems. US and UK anti-corruption legislation – the Foreign Corrupt Practices Act and the Bribery Act respectively – raise the prospect of fines in those two countries being imposed on top of local penalties in the markets where bribery occurred.

Johnson & Johnson in 2011 paid nearly $80m to the UK and US for its activities in southern and eastern Europe and Iraq, for instance.

More fundamentally, investors have grown concerned in recent weeks about the impact of the Chinese probes on future sales practices and prices. Jo Walton, pharmaceutical analyst at Credit Suisse, says: “It seems clear that the breadth of the investigation into marketing practices is likely to slow growth for all of the majors.”

Few predict any withdrawal from China, given its strong growth. But they see pressure for price cuts after a period of adjustment to new rules. Deutsche Bank last month predicted the anti-corruption investigations in China would be “longer and larger” than expected, depressing sales growth into the first half of next year.

That also applies to many regional and local companies, perceived to be more aggressive in marketing than their western counterparts. One senior drug company sales representative in China says: “Everyone is afraid of getting caught, everyone. Before GSK, commissions were half public and half hidden, but now everything has been forced to go totally underground.”

“Doctors are trying to avoid drug sales reps, and many companies have put reps on half-time, or sent them for training,” she says. “Before, drug reps were given a quota of doctors they had to see every day; now you still need to go to the hospital, but if someone looks at you suspiciously, you should leave.”

Another multinational company rep said she still pays regular visits to doctors. “We try to avoid unnecessary trouble by hiding our company logo when we enter hospitals, but I am not too worried because what we are doing is legal. Doctors have to find out about our drugs somehow, and it is our job to inform them.”

Others are more critical of the industry’s role. One middleman in Shanghai said he recently began a business for multinationals conducting “phase IV” clinical trials, conducted after a drug is approved – and which critics claim are often for marketing purposes.

He described how over 15 years working for four foreign drug companies, he regularly filled out fake “clinical research forms” on trials that never took place, allowing kickbacks to be paid to the doctors who were on record for conducting the trials.

A medical student in a leading Shanghai hospital says: “The supervising doctor in my department sees as many as 80 patients in a morning, and prescribes as much as Rmb100,000 worth of drugs. She definitely takes commissions from drug companies, but that only affects what she prescribes when there are two similar drugs. It doesn’t affect the quality of care.”

Industry executives argue the multinationals are again reviewing compliance. “There is a real fear right now about doing business in China,” says Gregory Lovas, in charge of life science clients in Asia with CTPartners, an executive recruitment agency.

He says companies which previously saw China postings as a way of exposing their future leaders to an expanding market are now seeking greater existing “language, cultural understanding and market knowledge”. For middle level marketing staff, they want background checks and references stretching back as far as 10 years.

The industry is braced for a squeeze on pricing and tougher marketing rules in future. But given the sluggish growth in their traditional markets, China’s expanding healthcare demand will probably still be worth the price for most.