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Business Tianjin Magazine - Business English Magazine in China

Google ‘Confident’ About Further Growth in China, Executive John Liu Says

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NEWS - China IT/Telecom

Wednesday, 27 April 2011 11:42

Google Inc. (GOOG), which pulled its Internet search engine out of China last year, said it’s “confident” of growing in the country under new Chief Executive Officer Larry Page.

The company sees more “upside” in China, John Liu, Google’s head of sales in the world’s biggest market for Internet, said at a conference in Beijing yesterday. Google founders Page and Sergey Brin know China “very well,” he said.

Google is aiming to boost revenue from Chinese customers in display advertising and export marketing as the Mountain View, California-based company has failed to keep pace with Baidu Inc. in China’s search-engine market. Page, who took on the CEO role April 4 and succeeds Eric Schmidt, is ramping up spending on hiring and marketing as he faces rising competition from rivals Apple Inc. (AAPL) and Facebook Inc.

Liu, in charge of local operations since 2009, is negotiating with the Chinese government about online map services, and is seeking to increase adoption of Google’s Android software for phones in the country.

Google last month said the Chinese government is disrupting its Gmail e-mail service and disguising the blockage as technical issues on Google’s part. China’s Foreign Ministry spokeswoman Jiang Yu called that claim “unacceptable.”

That friction followed Google’s decision to shutter its search-engine service in China last year to avoid complying with the government’s rules on Web censorship. Since the March 2010 move, Chinese users of Google search have been redirected to an unfiltered site in Hong Kong.

Censorship Rules
Google in July was able to renew its Internet-service license in China through 2012, even after shuttering its Google.cn site in China and redirecting users to a Hong Kong site. The company had said it was no longer willing to comply with online censorship rules on topics such as Tiananmen Square crackdown in 1989 and Tibet independence.

Google accounted for 19.2 percent of China’s search market by revenue in the first quarter, declining from 19.6 percent three months earlier, according to research company Analysys International. Baidu’s market share rose to 75.8 percent from 75.5 percent, according to Analysys.

A March 4 opinion piece in the official People’s Daily, the mouthpiece of China’s Communist Party, compared Google with the British East India Company, whose sales of opium in the country was the root of two 19th-century conflicts.

China’s tax authorities have begun investigating three local Google affiliates for alleged offenses, the Economic Daily reported on March 31. Google said that day that it’s in “full compliance” with Chinese tax law.


China's Hainan hopes to avoid property crash

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NEWS - China Real Estate

Wednesday, 05 May 2010 16:42

(Reuters) - With new home prices rising by almost 20 percent a month, Haikou would seem to be the dictionary definition of a property market bubble.

After China unveiled plans in late December to turn tropical Hainan island into an international tourist destination, tens of thousands of real-estate speculators headed for Haikou, the capital. Property prices predictably rocketed.

Whether the authorities succeed in deflating the bubble -- or preventing one, depending on your views -- will be a litmus test of Beijing's campaign to defuse public anger over fast-rising prices nationwide without doing serious damage to a sector that is critical for the economy.

That policymakers are facing one of their stiffest challenges in Hainan brings a sense of deja vu. After a property collapse in the province in 1993, it took more than a decade to clear up the bad loans and vacant lots that were left behind.

Feng Ke, head of the property research institute at Peking University, is confident that history will not repeat itself.

"Prices are a bit too high now, but it's unlikely to crash," Feng said.

Back then, developers were speculating with borrowed money to buy land in a game of pass the parcel. When prices peaked, the developers saddled with property -- and their bankers -- were left high and dry. This time round, the buyers are investors and many of them are paying cash, Feng explained.

Still, fully aware that an overheated property market could ultimately lead to a hard landing for the entire economy, policymakers have rolled out a series of tightening steps.

"You know, things are really nasty in places like Hainan," said one senior government official, who declined to be identified given the sensitivity of the subject.

The State Council, China's cabinet, has mandated higher down payments and mortgage rates and made it harder for investor-speculators to buy multiple homes.

The measures will moderately cool market sentiment, but demand from owner-occupiers will remain strong, particularly in second- and third-tier cities, underpinned by rising incomes and China's urbanization drive, Fitch Ratings says.

"This is consistent with the government's goal to deflate bubbles when necessary to ensure a healthy long-term trend in the real estate sector," the ratings agency said in a recent report.


Walking along a deserted street in Haikou, Cao Ying can hardly believe what she has just heard: all the flats in the surrounding blocks are sold out, even though no one seems to live there. Perhaps two apartments in 10 are actually occupied, local property agents say.

New flats will come onto the market this month, but they will be priced about 15,000 yuan ($2,200) per square meter, triple the level a year ago.

"That's outrageous," she said, after getting similar information from three real estate agents, all indifferent to her protestations. "I bet they'll offer a discount when we come next time around in June," she said, not sounding sure of herself.

Pan Shiyi, chairman of top property developer SOHO China (0410.HK), told a forum on April 24 that more than 70 percent of China's listed property firms had over 10 billion yuan of cash in hand and would not rush to cut prices.

And Fu Wenyan, a real estate agent in Haikou, said there was no sign of a decline in the price of the villas on her books despite the new tightening rules.

"Both sides will wait and see for a while," Fu said.

Cao, in her mid-30s, flew more than 1,700 km (1,100 miles) with two friends from Sichuan province to buy a flat so her son could enroll at a prestigious middle school in Haikou.

Hainan's warm weather, lush landscape and clear sea only add to the island's attractions as a holiday or retirement retreat.

Would-be buyers like Cao expect their properties to going up as the island executes its ambitious development blueprint.

But with memories of the U.S. subprime crisis and Dubai property crash still fresh, the Hainan authorities have taken various measures to clamp down on speculation.

In mid-January they suspended the approval of property construction and the allocation of land for development until the end of March to give investors time to think twice.

The tightening campaign by the central and local governments drove transactions down as some investors took to the sidelines.

Ma Xin, a client manager with China Everbright Bank's Haikou branch, has seen the number of mortgage applications he examines a week fall from over 100 in January at the peak of the frenzy to just several in April.

"In the medium- to long-term, property prices in Hainan will move upward, despite short-term uncertainties," he said.


Property prices nationwide fell briefly in late 2008 as the impact of an earlier round of tightening bit at the same time as the global credit crunch caused China's economy to pull back from its rapid growth rate.

The trend started to reverse by March 2009 in response to massive monetary stimulus and steps to help the property market.

By the second half of last year, prices had soared past their pre-crisis levels, driven by a shortage of flats on the market and rising demand as a hedge against inflation risks.

The question for global markets is whether the latest tightening will topple the market, crushing China's demand for materials such as steel, cement and copper, and whether Chinese banks will be lumbered with a new bundle of bad loans.

Andy Rothman, China macro strategist with brokers CLSA in Shanghai, judges that Beijing wants to cool, not kill, the residential property market.

"The impact of the new rules will not be dramatic in most cities," he said in an April 20 report.

A survey by CLSA in 60 cities in late March and early April showed about half of families in second- and third-tier cities had paid for their first and second homes entirely in cash.

The proportion was even higher in Haikou. Guo Zhenxi, a local real estate agent, said all his clients paid the full amount in cash, making it easier when they want to sell out.

To get a mortgage in Hainan, banks insist that the family liabilities of a borrower do not exceed half their income. Otherwise, they require a higher initial down payment.

Cash buyers, or those not borrowing much, will return to the market if prices fall because the new rules do not raise the cost of holding property once it has been purchased, analysts say.

Ren Zhiqiang, chairman of Huayuan Property, said prices might even stage a "revenge" rally later this year as developers slow their investment, exacerbating the shortage of new properties.

He said Beijing would turn supportive if the market overreacted.

"If property prices drop to the desired level or farther than expected -- if there's a panic fall -- the authorities will change policies," Ren said in a blog.


Beijing acts to limit speculative investing

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NEWS - China Real Estate

Monday, 19 April 2010 16:38

SHANGHAI—China's State Council took steps to further restrict speculative property investments, including allowing banks to refuse additional mortgages for home buyers who already own two or more properties.

In an indication that Beijing is increasingly worried about runaway property prices, the State Council, the country's cabinet, said Saturday that local governments can take temporary measures to limit the number of property purchases each investor makes within a certain period.

The steps follow moves by the Chinese central government Thursday to raise minimum down-payment levels and mortgage rates for certain home buyers, after data showed property prices in 70 of China's large and medium-sized cities rose 11.7% in March from a year earlier, the fastest pace since China began releasing the data in July 2005.

The government's notice Saturday appears aimed at encouraging local governments and banks to even more strictly control credit for speculative property transactions.

"Overly high housing prices and overly fast price growth has increased the difficulty for people to seek residence through markets," the State Council said in the notice. "It also increased financial risks, which aren't beneficial to balanced social development."

"Each region's governmental departments should fully realize the threat of overly fast property-price growth and seriously implement the central government's real-estate-market policy adjustments," it said.

The State Council said banks should "greatly increase" minimum down payments and mortgage rates for those buying third homes or beyond, if a mortgage is to be issued at all, It didn't give concrete targets.

It also said banks should stop issuing mortgages to nonresidents who haven't paid local taxes or welfare-benefit fees for more than a year.

The State Council reiterated the rules unveiled Thursday that banks should raise the minimum down payment for second-home purchases to 50% from 40%, while requiring mortgage rates to be no less than 1.1 times benchmark rates. The State Council also set a 30% minimum down payment for purchases of first homes that are larger than 90 square meters.

The government also reiterated that local governments should increase land supply for residential housing development and expedite construction of government-subsidized housing.

The State Council also said the government will strictly monitor land purchases and fund raising of developers to prevent speculation on land prices.

Local governments need to file reports to the central government on audits of local developers by the end of June, the State Council said.


China to import more high-tech products over the next five years

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NEWS - China IT/Telecom

Friday, 18 March 2011 10:47

BEIJING - China's Ministry of Commerce (MOC) announced that the country would deepen high-tech trade exchanges with developed nations and called for the easing of restrictions in exporting high-tech products and advanced equipment to China over the next five years.

China would gradually raise the percentages of high-tech products, key components and equipment in the country's imports portfolio during the 12th Five-Year-Plan Period (2011-2015), according to a statement posted on the ministry's website Thursday.

During the period, China would meet the import demand from strategically important emerging industries at home, such as information technology, energy savings, environmental protection, new energies, and high-end equipment manufacturing.

The country would also set up mechanisms for bilateral high-tech trade cooperation with 20 countries including the United States, Japan, Finland and Israel. China also aims to jointly promote trade with other countries.

The importation of such high-tech products are expected to effectively bring down the pace of China's trade surplus growth with its trade partners, the statement said.

China's trade surplus shrank year on year by more than half to $6.45 billion in January this year. Meanwhile, in February the country recorded a trade deficit of $7.3 billion as the Lunar New Year holiday season hindered export growth.


China not to extend auto incentives next year

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NEWS - China Law

Monday, 06 December 2010 13:14

 Dec 6 (Reuters) - China will not extend tax incentives for small cars next year, a local newspaper reported on Monday, as the government moves to phase out stimulus measures that helped the country weather the global financial crisis.

Beijing will also stop handing out 3,000 yuan ($450) subsidies for fuel-efficient small cars from Jan. 1, 2010, the Chongqing Evening News reported, citing an unnamed official from the National Development and Reform Commission (NDRC), the country's top economic planner.

NDRC officials are not immediately available for comment.

Beijing cut the sales tax for cars with a 1.6-litre engine or smaller by half in 2009, a move that had significantly boosted automobile demand and helped China eclipse the United States as the world's biggest auto market that year.

The scale-back of the incentives since the beginning of this year is already seen by many industry insiders as a sign that they will be discontinued in 2011.

Many industry executives, including Kevin Wale, president and managing director of General Motors' (GM.N) China operations, expect China's vehicle market to return to a more rational growth pattern next year, gaining 10-15 percent, after robust expansion in 2009 and early 2010.

But December car sales could accelerate rapidly as people rush to take advantage of policy incentives before they are scrapped, analysts said.





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