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    China's manufacturing activity contracted for the second straight month in February.

    The news comes a day after China's central bank announced an interest rate cut to help stem a slump in the world's second-largest economy.

    The official Purchasing Managers' Index (PMI) released by the National Bureau of Statistics (NBS) came in at 49.9 last month, up a fraction from 49.8 in January, but remaining in contraction.

    The index, which tracks activity in factories and workshops, is considered a key indicator of the health of China's economy, a major driver of global growth.

    A figure above 50 signals expansion, while anything below indicates shrinkage.

    January's figure had been the first contraction for 27 months and highlighted weakness in the key sector as China's economic growth slows.

    China's overall economy expanded 7.4 per cent in 2014, a 24-year low, with the slowdown prompting authorities to loosen monetary policy in a bid to put a floor under growth.

    Underscoring concern, the People's Bank of China (PBoC) announced on Saturday it was lowering benchmark interest rates for the second time in three months.

    The central bank lowered its one-year rate for deposits by 25 basis points, or 0.25 percentage point, to 2.5 per cent and its one-year lending rate by a similar margin to 5.35 per cent.

    The move takes effect on Sunday.

    In a statement posted on its website, the bank pointed to "historically low inflation" as among the factors behind the move.

    China's inflation plunged to a more than five-year low of 0.8 per cent in January, fuelling fears the economy could be on the brink of deflation.

    The PBoC surprised markets in late November by cutting interest rates for the first time in more than 30 months.

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    China's manufacturing activity shrinks for second straight month in February.

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    Growth in China’s embattled steel industry has declined for the tenth month in a row despite its recent rebound in activity. The Purchasing Manager Index, which measures activity in the sector, stood at 45.1 for February.

    Any figure above 50 indicates expansion, while below 50 suggests contraction.

    An unnamed insider from a medium-sized and privately owned steel mill in Jiangsu accuses the government of ignoring the plight of privately-owned steel firms.  “The government is protecting state-owned enterprises and offering them subsidies whenever they are making a loss,” he says.

    The introduction of a new environmental law this year will significantly increase the cost production by 13 per cent or 200 yuan per tonne.

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    February PMI at 45.1, the 10th consecutive decline.

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    At least 36 members of China’s national legislature are billionaires with a combined worth in excess of the GDP of Vietnam reports Hexun.

    Citing figures from the 2014 Hurun rich list report, the news outlet shows that the combined worth of NPC members exceeds 1.2 trillion yuan. 

    The combined worth of the richest 36 members of the national legislature exceeds the GDP of Vietnam or over 3 times the total 2014 GDP of Hainan Province.

    Of the top 100 in the Hurun list, 15 are in the National People’s Congress, and 21 are in the Chinese People's Political Consultative Conference.

    14 of the millionaire members of parliament are involved in the real-estate industry.

    Chairman and CEO of  Hangzhou Wahaha Group, Zong Qinghou is proposing a plan to extend the retirement age, increase car pollution controls and reduce pollution in cities.

    Lei Jun,  CEO of smartphone maker Xiaomi, is pushing for the simplification of the process for businesses to register with thte government and reduce other forms of red tape.

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    Combined worth of National People's Congress members exceeds 1.2 trillion yuan.

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    Wage growth for China’s migrant workers has dipped below 10 per cent a year for the first time in the past five years. Their wages increased 9.8 per cent last year.

    The number of migrant workers peaked in 2010, reaching 12.45 million, and has been in decline ever since. Last year, the number of migrant workers increased 1.9 per cent, one third of the growth rate back in 2010.

    Wages growth has been moderating since 2012. The expansion in salary reached its peak in 2011 when it grew 21.2 per cent.

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    Wage growth dips below 10 per cent a year for the first time in five years.

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    The trading lull that usually accompanies China's Spring Festival holidays helped drag average property prices down in February, according to data released by China Real Estate Index System yesterday.

    The average price of newly-constructed housing in 100 Chinese cities fell to 10,539 yuan per square meter in February, down 0.24 per cent on January and 3.84 per cent on a year earlier.

    Of the 100 cities monitored, 39 experienced month-on-month price increases in February, five less that over the previous month.

    In terms of annual growth, average house prices fell for the fifth consecutive month. Prices increased in only 13 cities in February, five less than the 18 that recorded year-on-year growth in January.

    Analysts note however that due to the rate cut announced over the weekend, there are expectations that the market will begin to trend upwards in March. 

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    Average price of newly-constructed housing in 100 Chinese cities fell to 10,539 yuan per square meter in February.

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    There is a growing expectation that mergers involving huge state-owned conglomerates could be part of China's soon-to-be-announced reforms of state-owned enterprises, according to a report in today's Securities Daily.

    Li Jin, deputy head of the China Enterprise Reform and Development Society, said that state-dominated industries with problems of overcapacity, namely construction, electricity and rail would "face large scale mergers and restructuring".

    The article also notes that rumours of mergers in the construction, energy and telecommunications industry have been circling for a while now.

    The mergers could help reduce excessive competition between large SOEs, cut waste, encourage the formation of huge conglomerates that could better compete against large foreign firms and also assist in the internationalisation of the Chinese yuan.

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    State-owned enterprises could face large scale mergers and restructuring.

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    East Asia Forum

    A key pillar of President Xi Jinping’s program of political reform is entrenching the rule of law through developing the idea of ‘Chinese constitutionalism’, or the authority of the Chinese constitution. If he succeeds, one would imagine, the consequences for governance, and ultimately even the Chinese political system, will be profound. It is a change that would appear to some to require a fundamental cultural shift in the organisation of the state and the relationship between the Chinese people and the state — a shift from rule by those who wield power (‘the rule of men’), traditionally the hopefully virtuous emperor and his mandarins, but now, post-Mao, the officials of the Party-state, to rule bounded by laws and an overriding state constitution (‘the rule of law’) that serve the public interest at the same time as they protect the rights of citizens.

    In October last year, the Chinese Communist Party (CCP) set the ‘rule of law’ (yifa zhiguo) as the principal theme of a plenary session for the first time. There was a good deal of scepticism about this move. Certainly it could not have been a move contemplated lightly because elevating the rule of law and establishing its independence and integrity potentially challenges the supremacy of the Party. The rule of law, properly conceived, would constrain the Party’s power. Yet unchecked power exercised without the constraint of codified laws and principles might well come to corrode the power and damage the legitimacy of the Party itself.

    Indeed, one could observe, this had been the cancer gnawing away at the vitals of the Chinese Party-state — a cancer that increasingly threatened the legitimacy of the Party itself — in the lead up to the assumption of power by the current Chinese leadership. Untreated it might tear the state asunder. Without confidence in the legal system, many other things were likely to fall apart. Confidence at home and abroad in the operation of private markets increasingly depended on the rule of law. But there was a deeper issue. If the people had no faith in the rule of law and the abuse of official power in all its forms, and enjoyed no sense of fairness in their dealings with the state and with each other, the bonds of social cohesion will be threatened.

    The distinguished academic, Yang Guangbin, in our lead essay this week, observes the ebb in the confidence of the Chinese people in the years after 2008 that led the ‘Party finally (to decide) to adopt the strategy of rule by the constitution or “Chinese constitutionalism”’.

    When Xi ascended to the Chinese presidency, he faced a very complex political scene domestically. The Bo Xilai affair hung over the leadership transition ominously, underlining the need to deal with disquiet among the Chinese public over corruption and the relationship between the state and economic power. There was increasing unease within the elite about the direction that the Party was heading.

    Political disorder blocked economic reform. The monopolistic position of state-owned enterprises was being entrenched, rather than weakened. Collusion between government officials and businesses was increasingly endemic, reinforcing special interest groups and exacerbating corruption. If Xi wanted to secure popular support, he needed to deal with state monopolies and money power; but he ran the risk of undermining his power base if he wasn’t prepared to see off threats from some very powerful interest groups that were becoming a more and more important feature of the economic and political landscape.

    This is the context which has seen a remarkable consolidation of Xi’s political power and, with his new authority, the initiation of comprehensive reforms across the panoply of government institutions. The Party’s Central Committee has moved to deepen reforms to promote the ‘modernisation of the state governance system and governance capacity’. As Yang explains, Xi ‘established new institutions and authorities to expand his power and maintain control. These new institutions include: the Leading Group for Deepening Reform Comprehensively; the National Security Commission, which the former General Secretary of the CCP, Jiang Zemin, was unable to establish; and a leading group for cyber-security and information. Xi is in charge of all these new institutions. This means that all the institutions of the Party, State Council and military are now responsible to Xi and only Xi. As a result, Xi acts as the de facto Party Chairman — like Mao Zedong once did’.

    ‘In the past year, Zhou Yongkang, formerly a member of the Politburo Standing Committee, Xu Caihou, former Vice-President of the Central Military Commission, and Ling Jihua, the supervisor of party management for Hu Jintao, were all rounded up and indicted. Over 200,000 government officials have been investigated for corruption. The unexpected and unprecedented scale and strength of the campaign shows Xi’s determination to defend the Party’s rule’. The assault on Zhou broke what many considered an unspoken rule to not go after Party heavyweights or their families after they have retired from office. But if Party heavyweights are exempt, there would be no sustained confidence in the rule of law.

    Meanwhile, Yang argues, the economic reform agenda which had stagnated has been revived. Xi’s anti-corruption drive has broken down vested interest groups, while Premier Li Keqiang has focused on the economy. ‘Likonomics‘ stresses the decisive role of the market over the state in resource allocation and Li is reshaping government regulation to give effect to this precept.

    Among the noteworthy results that Yang reports are that the number of newly-established private enterprises which increased by more than 30 per cent in 2014. And while growth dropped to 7.4 per cent, the lowest in 24 years, employment expanded.

    So far, Xi seems to have won widespread support in this campaign, and his leadership has attracted strong public backing. The consolidation of political power around his leadership has huge advantages in coordination of the affairs of the state in dealing with big issues that were threatening to get out of hand. The question is whether the personalisation of policy heft and the centrality of the Party are consistent with long term transformation of governance around the rule of law and constitutionalism which is his stated goal. In the short term, moves like lifting the control of local courts up a level to remove them from local interference is likely to deliver better outcomes to Chinese business confidence, and even some citizens. Taking the privileged down a peg or two is likely to reassure citizens, but the climate of fear that constrains worthy activists as well as venal officials creates an political environment antipathetic to the long term goal of effecting a major advance in Chinese political accountability.

    The new emphasis in China on the rule of law is an important shift from the old reference points of clan and emperor — and relying on virtuous leadership to deliver fairness and justice for the people — to the idea of embodying the public interest in a constitution and to raising the position of the rule of law with its attendant rights and duties and civic responsibilities that must impinge upon the behaviour of leaders, however virtuous, as well as upon the behaviour of other and ordinary citizens.

    Yang sees Xi’s grand design as evidence of his being ‘a far-sighted reformer rather than a politician satisfied with the temporary ease and support of his position’. Certainly, Xi is a most powerful reformer and has in many ways taken on the mantle of the Party. It will be difficult for Xi, and for the Party, to retreat: China’s economy is unlikely to flourish without the large-scale reforms on which it is apparently embarked, and these reforms will ultimately stand or fall on comprehensive entrenchment of the rule of law.

    Peter Drysdale is Editor of the East Asia Forum.

    This article first appeared on East Asia Forum. Republished with permission.

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    Australia’s interest in the learning of Chinese in high school has waxed and waned over the past decades, but is steadily picking up momentum. The Australia in the Asian Century White Paper signalled a significant shift towards a renewed interest in Chinese language education. However, the same issues surrounding student engagement and retention still exist: 94 per cent of second language learners drop Chinese by year 12.

    Two questions arise from this: (1) can we significantly increase the number of students completing year 12; and (2) what should be the focus of our teaching if so many students are leaving Chinese far from fluent?

    While point one has been addressed and a number of significant long term and structural changes have been proposed -- namely by the Asia Education Foundation -- the answer to both these questions may be much simpler.

    The answer lies in a widespread and significant shift to deeply analysing the Chinese culture through the language and through this comparison reflecting on the ‘English’ language and culture.

    Analysis of Chinese high school textbooks and observations of various Chinese programs in Australia illustrates that high school teachers do explore elements of Chinese culture, but typically at a superficial level. For example, students may explore activities such as the giving of ‘lucky money’ during Chinese New Year, but there is no deeper analysis of the event.

    What I propose is a meta-cognitive analysis of elements of the English and Chinese languages, whereby the learning processes are simple but the conclusions are deep. The depth of analysis and insight into the culture directly correlates with greater language retention and engagement as evidenced by my students’ results at Kooweerup Secondary College.  

    Kooweerup Secondary College is a wonderful litmus test for this type of learning because it is a rural school in Victoria, Australia, where students often struggle to connect Chinese to their world-view and there is low community support for learning Chinese.

    Three simple key examples will illustrate that deeply exploring the Chinese culture through the language leads to greater language engagement and retention.

    Within three hours of starting Chinese students in year 7 (ages 11-13) compared a number of English and Chinese expressions and reflected on how language shapes culture. In one example students broke down the Chinese word ‘teacher’ (lǎoshī 老师) into ‘old’ (lǎo 老) and ‘master’ (shī 师) and concluded that the Chinese culture often encodes a sense of respect based on age. They also compared lǎoshī to English forms of addressing teachers (Mr, Miss, Ms, Mrs, Sir, Madam) and reflected on what these titles mean. They also suggested that English titles reflect a sense of ‘sexism’ because Mr does not denote whether one is married whereas the female equivalents do. Based on one word students extrapolated a wealth of meaning about the Chinese and English languages, and retained the expression lǎoshī throughout the school semester.

    Students in year 8 (12-14 years old) completed a numeracy project whereby they analysed the structure and expression of Arabic numerals (1, 2, 3, etc) and Chinese numbers. Over a period of 9 hours of class time students learnt Chinese numbers 1-100,000,000, yet it was the cultural or meta-cognitive analysis of such numbers that was important.

    For example students discovered that Chinese numbers are structured along ‘base-10’ (multiples of 10); that only one new character is needed to be learnt each time the number is multiplied by 10 (10, 100, 1000, etc); that only 10 characters are needed to form numbers 1-99 whereas 27 English words are needed to form the same numbers; that Chinese numbers encode place values (for example 25 is written as 2-10-5; that commas or spaces in Arabic number denote how to say the numbers; that English numbers are structured by 12 (there is no eleventeen or twelveteen) and 1,000 whereas Chinese numbers are structured by 10,000 and are multiples (for example 100,000 is literally 10-10 000).

    The deep meta-cognitive analysis of Arabic and Chinese numbers led to at least 15 per cent greater retention of numbers vocabulary than when taught in previous semesters, and the broader learning helped students appreciate how languages borrow elements from one another (for example the English language uses Arabic numbers), that Chinese may typically be good at mathematics because their numbers are ordered by multiples of 10 and helped their understanding of numeracy. The vocabulary learning was no slower than using any other method, but students engaged and retained such information over the course of the semester. Students were engaging their problem-solving skills, learning interest aspects about the Chinese and English languages, and as such students’ neural connections that correlate with language retention were strengthened.

    My year 8 students will reflect on Chinese positions (up, down, in front, behind, etc) this year. This unit has enormous potential for understanding the Chinese conception of time, which is fundamentally different from the typical way Western culture conceives time.

    For example the word for above (shàng 上) is also the word for past, and the word for down (xià 下) is also the word for next. This is the opposite in English, where people are striding forwards into the future (consider the Johnny Walker icon). Imagine in Chinese time that one is walking backwards down a staircase and above the person is the past.

    As the person moves further down the staircase into the future he is gaining a greater perspective up the staircase into the past. Again, this image of looking into the past reflects why age is correlated with respect in China, because elder people have greater perspective and can see further into the past.

    While these positions can be taught irrespective of the culture, the depth of analysis and insight into the Chinese culture leads to greater student engagement and retention.

    There are several significant considerations when we remember that the vast majority of second language learner students do not complete year 12 Chinese. Firstly, what do we want our students to take away from their Chinese studies? If they are nowhere closer to conversational then a focus on deep cultural and meta-cognitive analysis is far more valuable and enduring.

    Secondly, deep analysis of the Chinese language and culture allows for greater student engagement and language retention. The deeper the learning, the more connections the brain makes. When I made this shift in my teaching content and practice, student engagement and assessment scores went up by at least 15 per cent.  Cultural learning is no longer superficial, but interesting, engaging and worthwhile. 

    At some stage most students will lose part or much of the vocabulary and grammar they have learnt unless they continue to study and use it in a professional environment. It is the cultural learning that will endure with students long after their Chinese studies finish, and this avenue may be the best hope of keeping them engaged in Chinese language learning.  

    Patrick Chin-Dahler is the Head of Languages at Kooweerup Secondary College, a rural high school in Victoria. His Chinese studies website is www.chin-dahler.weebly.com

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    Why thinking about the English language may hold the key to making Chinese language learning stick.

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  • 03/01/15--19:50: China business news digest
  • Click here to subscribe to the China Spectator daily newsletter.

    Your daily digest of the biggest business news in China, translated and summarized every day. China Spectator has not verified these stories.

    Steel industry PMI contracts for the 10th month

    Growth in China’s embattled steel industry has declined for the tenth month in a row despite its recent rebound in activity. The Purchasing Manager Index, which measures activity in the sector, stood at 45.1.

    Any figure above 50 indicates expansion, while below 50 suggests contraction.

    An unnamed insider from a medium-sized and privately owned steel mill in Jiangsu accuses the government of ignoring the plight of privately-owned steel firms.  “The government is protecting state-owned enterprises and offering them subsidies whenever they are making a loss,” he says.

    The introduction of a new environmental law this year will significantly increase the cost production by 13 per cent or 200 yuan per tonne.

    (The Paper)

    Migrant farmers’ wages declining for the first time

    Wage growth for China’s migrant farmers has dipped below 10 per cent a year for the first time in the past five years. Their wages increased 9.8 per cent last year.

    The number of migrant farmers peaked in 2010, reaching 12.45 million, and has been in decline ever since. Last year, the number of migrant farmers increased 1.9 per cent, one third of the growth rate back in 2010.

    Wages growth has been moderating since 2012. The expansion in salary reached its peak in 2011 when it grew 21.2 per cent.

    (Caixin)

    China's billionaire congress members

    At least 36 members of China’s national legislature are billionaires with a combined worth in excess of the GDP of Vietnam reports Hexun.

    Citing figures from the 2014 Hurun rich list report, the news outlet shows that the combined worth of NPC members exceeds 1.2 trillion yuan. 

    The combined worth of the richest 36 members of the national legislature exceeds the GDP of Vietnam or over 3 times the total 2014 GDP of Hainan Province.

    Of the top 100 in the Hurun list, 15 are in the National People’s Congress, and 21 are in the Chinese People's Political Consultative Conference.

    14 of the millionaire members of parliament are involved in the real-estate industry. Chairman and CEO of  Hangzhou Wahaha Group, Zong Qinghou is proposing a plan to extend the retirement age, increase car pollution controls and reduce pollution in cities.

    Lei Jun,  CEO of smartphone maker Xiaomi, is pushing for the simplification of the process for businesses to register with thte government and reduce other forms of red tape.

    (Hexun)

    SOE reform could see more merger activity among state firms

    There is a growing expectation that mergers involving huge state-owned conglomerates could be part of China's soon-to-be-announced reforms of state-owned enterprises, according to a report in today's Securities Daily.

    Li Jin, deputy head of the China Enterprise Reform and Development Society said that state-dominated industries with problems of overcapacity, namely construction, electricity and rail would "face large scale mergers and restructuring".

    The article also notes that rumours of mergers in the construction, energy and telecommunications industry have been circling for a while now.

    The mergers could help reduce excessive competition between large SOEs, cut waste, encourage the formation of huge conglomerates that could better compete against large foreign firms and also assist in the internationalisation of the Chinese yuan.

    (Securities Daily)

    Housing prices fall in February

    The trading lull that usually accompanies China's Spring Festival holidays helped drag average property prices down in February, according to data released by China Real Estate Index System yesterday.

    The average price of newly-constructed housing in 100 Chinese cities fell to 10,539 yuan per square meter in February, down 0.24 per cent on January and 3.84 per cent on a year earlier.

    Of the 100 cities monitored, 39 experienced month-on-month price increases in February, five less that over the previous month.

    In terms of annual growth, average house prices fell for the fifth consecutive month. Prices increased in only 13 cities in February, five less than the 18 that recorded year-on-year growth in January.

    Analysts note however that due to the rate cut announced over the weekend, there are expectations that the market will begin to trend upwards in March. 

    (The Paper)

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    Steel industry PMI contracts for the 10th month and SOE reform could see more merger activity among state firms.

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    Five of China's 10 wealthiest people are due to take part in the Communist party's two major political meetings starting this week, government websites show, highlighting the influence of the country's mega-rich.

    The wealthy delegates to the two sessions are often the focus of public attention, with some criticised for showing off their influence and lobbying for favourable policies for their own industries.

    The five rank in the top 10 of Hurun magazine's China 2014 rich list.

    Third-place drinks tycoon Zong Qinghou, fifth-placed Pony Ma of internet giant Tencent, and Lei Jun, the head of mobile phone upstart Xiaomi, who took tenth spot, are all delegates to the National People's Congress parliament, according to its website.

    Solar energy tycoon Li Hejun - listed in joint third place last year but now described by Hurun as China's richest man - and sixth-ranked Robin Li of Chinese search engine giant Baidu, are both in the Chinese People's Political Consultative Conference (CPPCC), a parallel debating body, the latest membership list showed.

    Both chambers are part of China's Communist-controlled machinery of government.

    The New Culture newspaper reported that among China's top 100 richest people, 15 were NPC delegates and 21 CPPCC members.

    The total fortune of the 36 was more than 1.2 trillion yuan ($A244.21 billion), it added - more than the gross domestic product of Vietnam.

    China's unprecedented economic boom has raised hundreds of millions out of poverty but also brought huge income disparities and rampant corruption, with just a few accruing vast wealth.

    At previous NPC and CPPCC sessions the government has repeatedly vowed to help the poor and close the wealth gap.

    This year's CPPCC session starts on Tuesday and the NPC opens on Thursday.

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    Five of China's 10 wealthiest to participate, highlighting influence of the tycoons.

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    China's shares ended higher Monday, boosted by Beijing's decision over the weekend to cut interest rates for the second time in less than four months. 

    The benchmark Shanghai Composite Index rose 0.8 per cent to 3336.28, while the less-tracked Shenzhen Composite Index was up 2.1 per cent at 1663.65. 

    "Investors had been anticipating a rate cut. It actually came earlier than expected," said Zhang Gang, a senior analyst at Central China Securities. 

    The People's Bank of China said Saturday it would reduce the benchmark one-year loan rate and one-year deposit rate by a quarter percentage point each, to 5.35 per cent and 2.5 per cent, respectively, effective Sunday. 

    The decision underscores the increasingly aggressive measures taken by China's leadership to boost activity in the world's second-largest economy. 

    Leading the gains were debt-laden industries, ranging from steel to utilities operators, that typically suffer from overcapacity, as lower interest rates would help reduce their funding costs. 

    Shares of Baoshan Iron & Steel gained 3.7 per cent to 6.93 yuan ($A1.44), while those of Jiangxi Copper were up 3.6 per cent at CNY18.72. 

    Shares of Aluminum Corporation of China were 3.9 per cent higher at CNY5.62, while those of Huadian Power International rose 2.9 per cent to CNY6.01. 

    Analysts said the market's immediate reaction to the latest monetary easing is considered less-than-robust, suggesting lingering concerns over the weak state of China's economy. 

    "We will likely see some consolidation and fluctuation in the near term. The market needs more bullish news," said Mr Zhang.

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    Market responds to increasingly aggressive approach from Beijing to boost activity.

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    LONDON— Marks & Spencer Group PLC is changing its growth strategy in China, culling stores around Shanghai while planning to set up shop in Beijing and Guangzhou later this year.

    Bruce Findlay, M&S’s regional director for Asia, is leaving the company to pursue a new role, according to a spokeswoman for M&S. Roughly 60 people are expected to be laid off as part of the store closures and changes at the U.K. food and clothing retailer’s China head office in Shanghai, according to a person familiar with the company’s plans.

    The 131-year-old, London-based group currently has 15 shops in Shanghai but doesn’t have a presence elsewhere in China. Following the closure of five stores by August in what M&S characterized as second-tier cities around Shanghai, will have six stores in Shanghai itself and four in surrounding cities.

    The moves by M&S come as China’s slowing economy has posed challenges for many multinational companies in what has been a key growth market. Electronics retailer Best Buy Co. , based in Richfield, Minn., in December said it was selling its China division to a Chinese real estate group and would move to focus more on the U.S. New York-based Revlon Inc. at the end of 2013 also moved to exit China, reporting weak demand in the country.

    M&S, by contrast, last year flagged the country as one of its “priority international markets,” saying it was “fully committed to its business in China.” The company has been in China since 2008. In November, Chief Executive Marc Bolland said M&S sales were growing in China, though he declined to say whether the stores were profitable.

    In addition to the expansion into Beijing and Guangzhou, M&S said it would open more stand-alone food stores in Hong Kong over this year and next. Growth at the company’s food business has increasingly outstripped that at its clothing business.

    The retailer also said it would modernize stores in Hong Kong, as well as one of its two flagship stores in Shanghai, installing new layouts, among other changes. M&S currently has 18 stores in Hong Kong and one in Macau.

    The company on Monday said it is evaluating potential local partners in the region. M&S has aimed to build its brand across China through a Web presence. In January, it launched a children’s clothing store on Alibaba Group Holding Ltd. ’s foreign-brand-focused shopping platform TMall.com, on which it has been selling men’s and women’s wear since 2012. It has also launched a clothing store on Chinese online retailer JD.com Inc.

    M&S currently has 480 international stores across Europe, the Middle East and Asia. In January, M&S reported that its international sales fell 5.8 per cent in the third quarter, amid what it described as “worsening currency and macroeconomic issues” across the Middle East and Russia.

    Corrections & Amplifications

    Roughly 60 people are expected to be laid off as part of the store closures and changes at the U.K. food and clothing retailer’s China head office in Shanghai, according to a person familiar with the company’s plans. Following the closure of five stores by August in what M&S characterized as second-tier cities around Shanghai, the retailer will have six stores in Shanghai itself and four in surrounding cities. An earlier version of this article misstated the attribution for the news. It also mistakenly said that all 10 remaining stores were in Shanghai.

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    Jobs to go in Shanghai as British retailer eyes expansion in Beijing, Guangzhou.

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    SHANGHAI—Companies dealing in real estate are combining in China as the property downturn lingers and the emergence of Internet services upends the business.

    58.com Inc. —the Chinese equivalent of Craigslist Inc., backed by Internet giant Tencent Holdings Ltd. —said Monday it had acquired Shanghai-based property-listing platform Anjuke Inc. for about $267 million in cash and shares. It marked the latest deal in China’s fast-growing market for services that connect online users with traditional offline businesses.

    In another deal, announced on Sunday, Homelink Real Estate Agency Co., Beijing’s largest real-estate firm by market share, will combine with Shanghai Deovolente Realty Co. Homelink, which is much larger than Deovolente in terms of employees and outlets, characterized the deal as a merger but didn’t disclose terms.

    Since 2011, real-estate companies have weathered a volatile market and the rise of China’s e-commerce companies. Conditions have worsened since 2013 because of a huge supply of homes, especially in smaller cities. Housing sales in China fell 7.8 per cent nationwide in 2014, and home prices in many smaller cities declined significantly, squeezing profits.

    In February, average home prices in 100 Chinese cities fell 3.8 per cent from a year earlier, the fifth straight month of year-over-year declines, according to private sector data provider China Real Estate Index System, an arm of SouFun Holdings Ltd.

    Last year, more than a dozen property companies, including Deovolente and Homelink, announced a boycott of China’s largest real estate Internet portal, SouFun, arguing that it charged unfair prices for listings on its website. SouFun disputes the accusations.

    In January, Chinese real-estate firm Century 21 China Real Estate was delisted by the New York Stock Exchange after it failed to maintain required market capitalization. The company has said the delisting won’t deter it from increasing its business.

    58.com said revenue growth from the housing sector slowed in the third quarter as a result of the housing slump. Some real-estate firms have cut back on the number of branches and on online marketing expenses, said Zhou Hao, 58.com’s chief financial officer, according a transcript of a company conference call.

    Anjuke, which was founded in 2007, sees 66 million unique visitors to its site each month, according to its website. Anjuke covers 67 cities in China and said it would continue to operate its website and mobile application under the Anjuke brand.

    Deovolente, the Shanghai brokerage, said that after its combination with Homelink, the combined company would be called “New Homelink.” The combined firm will focus on developing its online-to-offline marketing strategies, the Deovolente statement said.

    Homelink will combine its 1,800 storefront outlets, and 35,000 staff with Deovolente’s more than 200 storefronts and 5,000 staff, it said.

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    China is investigating 14 of its senior military officials for graft as the country’s anti-corruption campaign continues to widen.

    According to a report on China Military Online posted on Monday the 14 Generals include the son of a former deputy head of the Central Military Commission that oversees the armed forces.

    Major General Guo Zhenggang, the son of the Guo Boxiong, is suspected of "serious legal violations and criminal offences".

    According to a report in the Beijing Morning Post, Guo had only been promoted to the rank of Major General less than 50 days ago.

    Guo had been the deputy political commissioner of Zhenjiang Military District.

    According to a report in Caixin magazine, Guo and his wife were allegedly involved in a soured property deal with investors involving military-owned land.

    Shortly before the announcement was made, a senior Chinese official told a Beijing press conference that there would be no “upper limit” to the anti-corruption campaign, and that no officials were untouchable.

    Chinese People's Political Consultative Conference plenum spokesman Lu Xinhua said the party and the government were in agreement on the need to stamp out corruption.

    The investigations come just months after Xu Caihou, formerly China's second-highest ranking officer as vice chairman of the Central Military Commission, confessed to staking bribes.

    Xu, who was until 2012 a member of the Communist Party's elite 25-strong Politburo, is the first of its former members to fall in Xi's crackdown.

    Communist Party authorities have been waging a much-publicised anti-graft campaign since Xi ascended to the leadership two years ago.

    But critics say no systemic reforms have been introduced to increase transparency to help battle endemic corruption.

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    Son of a former deputy head of the Central Military Commission that oversees the armed forces included in list.

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    East Asia Forum

    On 14 December 2014, the Chinese Premier Li Keqiang visited Astana for the 13th meeting of the Council of Heads of Government of the Shanghai Cooperation Organisation. The premier’s visit signified a new stage in Kazakh–Chinese economic relations. Li announced a new package of economic deals, totalling US$14 billion. Kazakhstan and China also agreed to establish joint enterprises in the manufacturing and other key industrial sectors.

    Kazakhstan is the biggest recipient of Chinese FDI in the former Soviet Union. It received a total of US$22 billion in investment from 1991–2013. At the meeting, the Kazakh President, Nursultan Nazarbayev, stressed that Kazakhstan fully supported the construction of China’s Silk Road Economic Belt  and the 21st Century Maritime Silk Road.

    At the January 2015 Kazakh–China investment forum, officials announced that Kazakhstan would launch more than 20 joint projects with Chinese companies in the near future. These joint enterprises will focus on priority sectors in the Kazakh manufacturing industry, such as mining, oil and gas, construction, chemical and light industry, and transport.

    These new deals come at a crucial time for the Kazakhstan economy, which recently began to slow down. With crisis in Russia and plunging oil prices, the forecast for growth in Kazakhstan was downgraded from 5.1 per cent to 1.5 per cent. China’s own economic slowdown has also caused the price and demand for metals and other resources from Kazakhstan to fall. During the first half of 2014, exports of iron ore to China fell by 41 per cent. This led the Kazakh government to announce a new infrastructure investment program that aims to attract Chinese investment in the manufacturing sector.

    China wants to counterbalance Russian influence in Central Asia by expanding its economic activities, trade and transport projects in the region. As Russia suffers recession and the political isolation due to the conflict in Ukraine, its influence in Kazakhstan and Central Asia may decrease. Falling commodity prices have already negatively affected key countries in the region.

    By increasing investments and establishing joint enterprises in Kazakhstan, China can also get privileged access to the huge Eurasian Economic Union market, which was launched on 1 January 2015. Chinese President Xi Jinping announced China would contribute US$40 billion to set up a Silk Road Fund to strengthen connectivity and improve cooperation in the country’s neighbourhood. Previously, Chinese officialsoffered to establish infrastructure funds within the SCO framework.

    Critics of China–Kazakhstan economic integration point out there are serious risks for Kazakhstan. Limited transparency and openness in both countries may result in unfavourable conditions for Kazakhstan. For example, on 2 February 2015 the Chinese government announced that it had closed down all of its outdated factories and highest polluting plants. Experts fear that China could transfer some of these outdated factories to Kazakhstan, which would exacerbate environmental problems there.

    Closer integration with China might also inflame anti-Chinese sentiments. Many ordinary Kazakhs are afraid of Chinese economic expansion, immigration and of conflicts over trans-border rivers. In July 2013 the Committee of Tourism of Kazakhstan hinted that it might establish a visa-free regime for Chinese citizens, sparking anti-Chinese demonstrations.

    The waning of Russian influence in Central Asia presents a unique opportunity for China to both increase its influence in the region and to reap economic benefits by deepening its market access. But if this is done quickly and clumsy, China’s economic expansion into Kazakhstan may provoke resistance and renewed fear of a Chinese threat.

    Anuar Almaganbetov is a senior expert at the Economic Research Institute based in Astana, Kazakhstan.

    Bakhytzhan Kurmanov is a head of system analysis department at the Economic Research Institute based in Astana, Kazakhstan.

    This article originally appeared on the East Asia Forum. Republished with permission.

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    China aims to reduce coal use by over 80 million tonnes by 2017, according to an internal "clean plan" jointly authored by the Ministry of Industry and Information Technology and the Ministry of Finance.

    According to a Beijing News report, the plan aims to encourage the more efficient use of coal over the period from 2015 to 2020.

    The report sets a goal of reducing coal use by more than 80 million tonnes by 2017 and also includes various other emissions targets.

    The plan also seeks the involvement of local-level authorities and is said to include financial resources to help companies to reduce air pollution, improve technology and deal with out-dated equipment and overcapacity.

    The paper quotes an unnamed MIIT official as saying "we're currently fighting for specialised funds to support the implementation of this plan."

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    Govt ministries are seeking funds to implement the plan.

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    China’s Ministry of Environment Protection Ministry managed to collect only a paltry sum of 7.23 million from polluters during the first two months of the year, signaling the weakness in the country’s environmental protection and enforcement regime.

    According to a China National Radio report, Vice Minister Pan Yue says enforcement mechanism receives a much needed boost this year since the introduction of new Environment law this year. Polluters will be fined on daily basis this year.

    Mr Pan says a Jiangsu court has issued a judgment that demands six polluters to pay 610 million yuan in environmental recovery fee.

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    Paltry sum signals weakness in the country’s environmental protection and enforcement regime.

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    One of China’s most influential private sector entrepreneurs Zong Qinghou says Chinese companies need to handover 40 to 50 per cent of their profits to tax collectors.

    Apart from the heavy tax burden, he also voiced grievances about the high cost of social security costs for employees. According to his company’s estimate, it needs to 400 to 500 types of various fees.

    Zong, who founded the country’s largest beverage company, also complains about China’s high cost of borrowing and especially for private sector businesses. He says the average cost of a loan is more than 10 per cent and the median profit for businesses is only around 6.04 per cent.

    He has urged the government to set aside 20 per cent of total bank lending to small and medium sized businesses and reduce rental costs for industrial estates.

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    Zong Qinghou also concerned by the high cost of social security costs for employees.

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  • 03/02/15--19:34: China business news digest
  • Click here to subscribe to the China Spectator daily newsletter.

    Your daily digest of the biggest business news in China, translated and summarized every day. China Spectator has not verified these stories.

    China releases details of charges against Qualcomm

    China’s top economic planning agency released its official antitrust ruling on chipmaker Qualcomm on Monday.

    In a ruling posted to the website of the National Development and Reform Commission (NDRC), the company was found to have had a dominant position in the licensing of patents in wireless communication.

    The ruling also found that the chipmaker had misused its market position by charging unfairly high patent fees.

    Qualcomm was hit with a US$975 million fine for violating China’s antimonopoly law in February.

    NDRC officials met with executives from Qualcomm 28 times during the prolonged negotiation process.

    (The Beijing News

    Policy breakthrough on market reforms in next five-year plan

    China will push ahead with plans to give the market a decisive role in the allocation of resources reports the Economic Daily.

    The paper cites ‘exclusive knowledge’ of plans to push ahead with thre reforms as part of China's next five-year plan.

    Song Xiaowu, the former head of the NDRC's Academy of Macroeconomic Research and an adviser to the China Society of Economic Reform, said that even though commodities are already allocated through market mechanisms, the use of the market in the allocating key resources such as labour, land and capital is still relatively limited.

    According to the article, the upcoming five-year plan will no longer focus on nominal economic growth numbers.

    The 13th five-year plan will cover the period from 2016 to 2020 and will likely be published later this year.

    (Economic Information Daily)

    Survey: Income expectations wane

    Expectations of salary increases over the coming year have begun to wane in China, according to a survey of 100,000 households across 104 cities jointly released by China Central Television, the National Bureau of Statistics and China Post yesterday.

    Expectations about future incomes sank to 67.6 per cent from last year's 75.4 per cent, a four-year low.

    Reports on the result of the survey also said that people are changing the areas in which they invest, with funds less popular this year and wealth management products topping the list.

    Summaries of the survey have also highlighted the result that younger people are more willing to invest than older respondents. 

    Only 40 per cent of households surveyed responding that they felt 'happy'.

    Over a third of respondents listed air quality as their top environmental concern.

    (The Beijing News)

    China aims to reduce coal use 80mn tonnes by 2017

    China aims to reduce coal use by over 80 million tonnes by 2017, according to an internal "clean plan" jointly authored by the Ministry of Industry and Information Technology and the Ministry of Finance.

    According to a Beijing News report, the plan aims to encourage the more efficient use of coal over the period from 2015 to 2020.

    The report sets a goal of reducing coal use by more than 80 million tonnes by 2017 and also includes various other emissions targets.

    The plan also seeks the involvement of local-level authorities and is said to include financial resources to help companies to reduce air pollution, improve technology and deal with out-dated equipment and overcapacity.

    The paper quotes an unnamed MIIT official as saying "we're currently fighting for specialised funds to support the implementation of this plan."

    (Beijing News)

    China’s environment ministry collects 7.2 million yuan fines this year

    China’s Ministry of Environment Protection Ministry managed to collect only a paltry sum of 7.23 million from polluters during the first two months of the year, signaling the weakness in the country’s environmental protection and enforcement regime.

    According to a China National Radio report, Vice Minister Pan Yue says enforcement mechanism receives a much-needed boost this year since the introduction of new Environment law this year. Polluters will be fined on daily basis this year.

    Mr Pan says a Jiangsu court has issued a judgment that demands six polluters to pay 610 million yuan in environmental recovery fee.

    (China National Radio)

    Chinese companies pay 40 to 50% taxes, says leading business leader

    One of China’s most influential private sector entrepreneurs Zong Qinghou says Chinese companies need to handover 40 to 50 per cent of their profits to tax collectors.

    Apart from the heavy tax burden, he also voiced grievances about the high cost of social security costs for employees. According to his company’s estimate, it needs to 400 to 500 types of various fees.

    Zong, who founded the country’s largest beverage company, also complains about China’s high cost of borrowing and especially for private sector businesses. He says the average cost of a loan is more than 10 per cent and the median profit for businesses is only around 6.04 per cent.

    He has urged the government to set aside 20 per cent of total bank lending to small and medium sized businesses and reduce rental costs for industrial estates.

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    Huawei CEO Richard Yu presents the Huawei Watch in Barcelona.

    Huawei CEO Richard Yu presents the Huawei Watch in Barcelona. Source: AFP

    Competition ahead of the Apple Watch has intensified with Huawei releasing a stylish round-faced smart watch that’s getting plenty of attention at the Mobile World Congress.

    At a packed media event in Barcelona, Huawei said it had “dared to dream” since entering the consumer electronic market. “We are a company of dreamers . of young energetic people who keep trying until our vision is real,” said Huawei’s global brand director Any Lou.

    Richard Yu, head of Huawei consumer business group. introduced the products.

    Huawei’s Watch is cast in the vein of LG’s successful circular G Watch R, which was released last year. The Huawei Watch includes a traditional crown, as well as a choice of more than 40 customisable watch faces.

    The display on the Huawei Watch is sapphire glass; Huawei said it was the first sapphire crystal watch using Google’s Android Wear operating system. The watch has a 1.4-inch AMOLED 400x400 pixel display with 286 pixels per inch resolution, and a 10,000:1 contrast ratio.

    The diameter of the watch is 42mm and there’s a range of interchangeable leather and metal straps for it. Huawei says it has made sure that people with smaller wrists find the watch comfortable.

    Like other Android Wear watches, the Huawei Watch displays call notifications and users can answer calls on the watch. It has a 6-axis motion sensor, a barometer sensor, and measures steps, calories, and hours of sleep including deep sleep.

    The Watch can create single activity records for walking, running and cycling, and has a heart rate monitor. It connects to Huawei’s health platform and to other well-known fitness systems such as Google Fit and Jawbone.

    The key will be battery life and price. Huawei is yet to reveal pricing. The Watch will be available by mid year.

    The Chinese manufacturer also announced the Talkband B2, a fitness band and Bluetooth headset that can store and play music.

    The Talkband B2 has a 0.73-inch plastic AMOLED touch screen, an anti-allergy strap and is 20 per cent thinner than its predecessor, Talkband B1.

    It has a “self learning” motion sensor that observes how its wearer moves.

    There’s a high quality speaker for listening to calls. Calls can be routed to the headset or a speaker and a smartphone pager can help a user locate their phone. Battery life is 5 days.

    The B2 fitness band is selling in Europe from €169 to €199 and will be available in Australia by the end of April. The headset is compatible with Apple’s iOS8 operating system.

    The remaining device, Talkband N1, is a Bluetooth headset with high-resolution speakers. It has 4GB of storage and can be used as a stand-alone music player.

    The Talkband N1 checks steps, calories burned and provides voice notifications of activity performance. The unit weighs less than 18 grams.

    Chris Griffith travelled to Barcelona courtesy of HTC.

    This story was first published in The Australian Business Review.

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