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Issue 570 21-05-2012
Summary:SOEs Pledge to Spend 350 Billion Yuan in Chongqing, Auto Workers Strike in Yunnan, Chinese Internet Firms Set to Produce Their Own Smart Phones

Highlights from the EO print edition, No. 570, May 21, 2012

State-Owned Firms Pledge to Spend 350 Billion Yuan in Chongqing
News, cover
~ The municipality of Chongqing has signed contracts worth more than 350 billion yuan with more than thirty centrally-administered state-owned enterprises, including national giants China National Petroleum Corp. (CNPC) and China Mobile.
~ The enterprises, which are controlled by the government in Beijing, will be given a key role in boosting the local economy in Chongqing, where some businesses suffered during the so-called anti-corruption campaign introduced by ousted party boss Bo Xilai.
~ The new investments are being seen as a gift from Beijing – Zhang Dejiang, who was appointed party secretary in Chongqing after Bo was removed from his position in March, also serves as a member of the party's politburo and one of the country's deputy premiers.
~ The total investments covered in the 72 contracts are equivalent to 10,000 yuan for each of the municipality's 30 million residents.
~ There are 35 energy projects, with six companies will be working on the construction of power stations.
~ In industry, 21 deals were signed, including agreements with Chang'an Automobile Group Motors, which is based in the city.
~ The municipality's high-tech sector will get 10 projects, one of which involves a research center for car engines and another will be for the manufacture of helicopters.
~ The state contracts represent the biggest investment in the region since the foundation of the People's Republic of China in 1949.
~ According to an unnamed source from the Chongqing government, officials at all levels in Chongqing are now avoiding mentions of the "Red Chongqing" campaign led by Bo Xilai, and the focus of local politics is shifting from "return to the past" to ensuring stability.
Original article: [Chinese]

Lawyers' Office to be Relocated for Aiding Petitioners
News, Cover
~ Wanxianglou (晚香楼) is a law office that has been operating in Fuzhou, the capital city in Fujian Province, for thirty years. It was once considered one of the best legal firms in the city, but now it's offices are now being demolished and many say it's because the firm accepted cases on behalf of petitioners.
~ Jiang Chengyuan (姜成元), the founder of Wanxianglou, was once the director of the local law bureau. The construction of the office was financed by the bureau, the central government and the lawyers. Starting from 2010, Jiang and his partners were required to pay rent to the local bureau of law for the use of the office space and now they have been told that they'll have to move out. No one remembers that many of the lawyers who are still working in the building invested in the construction of the firm's headquarters.
~ The local government says the firm has to be relocated because it is too close to the local law bureau and they need to be clear that there are no improper links between the firm and the local law bureau. However, Jiang and his colleagues believe that the real reason for them being forced to move is they have helped too many petitioners over the past thirty years.
Original article: [Chinese]


Coastal Cities Excited by Prospect of Free Trade Zone with Japan, South Korea
Nation, page 13
~ China, Japan and South Korea on May 13 agreed to begin negotiating a free trade agreement.
~ The following day, the city government in Qingdao announced a plan to strengthen its economic and trade ties with Japan and South Korea. Qingdao hopes to become a pilot city for the free trade zone.
~ Qingdao is competing with the other coastal cities in Shandong, including Weihai and Yantai. Leaders in Dalian, Lianyungang, Tianjin and Shanghai also want to their cities to be included in the scheme, which they think give their local industry an advantage in the form of lower tariffs and trade restrictions as well as making it easier to move goods across the borders.
Original article: [Chinese]

Government Policies Fail to Lift A-share Market
Market, page 22
~ The Shanghai Composite Index closed down last week at 2,344, as stock prices failed to benefit from new policies launched by the China Securities Regulatory Commission (CSRC), including lower transaction taxes and moves to allow larger holdings by overseas pension funds and other QFII (Qualified Foreign Institutional Investors).
~ Regulators said that the policies weren't designed to support stock prices market but to improve the investor structure of the publicly-traded companies.
~ The fall in equity prices reflected the market's disappointment at recent economic data, including falling exports and slower growth in the amount of funds being invested in real estate development.
Original article: [Chinese]

Chinese Internet Firms Set to Produce Their Own Smart Phones
Corporation, page 25
~ Major Chinese internet companies have begun to start investing in producing their own range of mobile phones. On May 17, NetEase confirmed to the EO that they are in the process of developing mobile phones. Dominant Chinese search engine Baidu.com, Inc. and leading anti-virus company Qihoo 360 Technology Co Ltd have also announced agreements with Changhong and Huawei respectively to produce smart phones.
~ Aside from attempting to promote their own systems and applications, the push towards producing mobile phones among China's big internet companies is also being encouraged by favorable government policies and the potential for future subsidies.
~ A high level Chinese official is said to have bemoaned the fact that China doesn't have their own mobile operation system of proprietary intellectual property rights, when visiting the overseas office of one Chinese telecommunication company.
~ Sources also say that the Ministry of Industry and Information Technology (MIIT) is likely to encourage Chinese internet companies to develop an indigenous operating system of their own by offering government subsidies.
~ As most Chinese phone manufacturers are now developing mobile phones which support Google's Android operating system, it seems most appropriate to assign the task of developing the new operating system to the large internet companies who are also interested in developing mobile internet technologies.
~ According to Wang Haibo (王海波), the intellectual property director at ZTE Corporation, the world's fourth-largest mobile phone manufacturer, intellectual property rights are vital for telecommunication companies, as it determines the barriers to industry access.
~ However, many doubt that the internet companies can succeed in the mobile phone industry and they say that this strategy is only being pursued because of the government's backing. Kai-Fu Lee (李开复) noted that most internet companies are not likely to succeed with mobile phone manufacturing, as they're unwilling to allow the instalation of applications developed by their competitors on their phones. Huang Meng (黄萌), a senior analyst from Analysys International (易观国际) thinks Chinese Internet companies are not capable of developing an alternate operating system.
~ Zhou Hongyi (周鸿祎), the CEO of Qihoo 360, thinks that mobile phones will be so cheap in the future that they will generate little in the way of profit. Zhou says that the profits will come from the built-in services and applications that come with the phone.
~ In the past, many Chinese internet companies cooperated with mobile phone manufacturers, getting them to pre-install applications they'd developed on phones. However as many dealers and individuals learned how to wipe phones and reinstall applications, many of the application developers no longer consider this an efficient way to promote the use of their applications.
Original article: [Chinese]

Automobile Workers at FAW-GM Hongta Strike
Automobile, page 33
~ If it wasn't for a 10-day strike by workers at a factory in Yunnan, many people might have forgotten about the joint venture set-up three years ago between General Motors (GM), the world's largest car manufacturer, and the state-owned First Automobile Works (FAW), China's largest car manufacturer. The strike has brought to light allegations of managment problems at the FAW-GM Hongta Yunnan Automobile Manufacturing Co. Ltd. (一汽通用红塔).
~ The strike began on the afternoon of May 4 in the staff dormitory, when a real estate company based in Qujing (曲靖) came and asked the workers to move out. Staff who were working in the workshops were irritated. "They built two buildings on factory land in 2009, claiming that is was to improve the livelihood of the staff, but ended up making profit by selling the as commercial housing. Now they want to sell the living area," a worker told the EO's journalist.
~ Most workers were not satisfied that the factory leaders decided to sell the area without holding a vote among representatives of the workers (职工代表大会). Employees decided to down their tools that night in an attempt to stop the land sale going through. With the organization of retired workers in the living area, employees gathered on May 7 and demanded that management answer questions about improving the housing situation among retired employees and also address allegations about whether high-level executives were corrupt and had transferred profits.
~ A public letter was posted to the "Qujing BBS" section of Baidu.com, it appealed to the local government departments to launch an investigation into the company.
~ According to the announcement of FAW-GM Hongta, however, the strike is led by retired and current employees who have demands about accommodation, salaries and the development of the company. A representative of the company surnamed Hu, said that allegations of corruption against company directors were simply "ungrounded speculation."
~ Although employees did agree to go back to work on May 14, the offering of higher salaries for all employees is unlikely to prove a long-term solution to the problem. "If the management and communication problems between the leaders and employees are not solved, there might be another strike in the future," one senior employee told the EO.
~ After the joint venture was established three years ago, FAW-GM Hongta' performance has underwhelmed analysts, which many interpret as being the real reason for the strike. FAW-GM said in an interview that they have endured annual losses of 300 to 400 million yuan for the last three years.
Original article: [Chinese]

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