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Publications FCCC publishes “10 Years: Flanders-China Chamber of Commerce 2005 – 2015”

FCCC activities Seminar: 'China Market Deregulation and Impact on Financing Solutions’ – Thursday, March 12, 2015 – 16h00 – FCCC – Gent

Notice Subscription to FCCC sectoral newsletters: Automotive; Metals & Minerals; Environment; Logistics

Advertisement opportunities Sponsorship opportunities FCCC 10 th Anniversary and Newsletters

Advertisement An Executive MBA by IMD & CKGSB

Hainan Airlines, your direct link from Belgium to China

Activities supported by FCCC “Afstudeerbeurs” – Asia Job Corner – 31 March 2015 – ICC, Ghent

EY panel: 'Doing Business in China' – 1 April 2015 – Ghent

Legal aspects of doing business with China – 2 April 2015 – Brussels

8 th China Green Companies Summit (CGCS) – 20-22 April 2015 – Shenyang

Past events FCCC 10 th Anniversary and Chinese New Year Reception – 23 February 2015 – Brussels

Pictures of the FCCC 10 th anniversary and Chinese New Year Reception

NPC & CPPCC sessions Premier Li Keqiang puts GDP growth target at “around 7%”

NDRC: range-based regulation ensures steady economic performance

Ministry of Finance warns deficit is rising

Commerce Minister confident of reaching 6% target this year

Automotive BYD to sell EVs in South Korea

Expat corner Shanghai most desirable city for expats

Finance Securitization market expected to double

Foreign investment EU-China investment pact to be concluded soon

U.S. companies plan to moderate their China investments

Foreign trade Central government now fully responsible for export tax rebates

FCCC Newsletter No 399, March 9, 2015 Page 1

Health Market approval for first TCM product in the UK

Advertisement CrossTainer: air & sea forwarding services

IPR protection IPR policy not biased against foreign companies

Macro-economy Dalian Wanda Chairman richest on Forbes list

Mergers & acquisitions Chinese companies lead M&A activity

Real estate Soho China reports 45% drop in profit

Advertisement Ziegler Group, Your major Global Transport & Logistics player

Retail Sun Art Retail develops e-commerce platform

Science & technology Research funding reform needed to boost innovation

Stock markets Orient Securities to launch IPO

Travel Lufthansa counts on Air China JV

One-line news

Quotes of the week Wang Yi

Announcements 5 th China (Sichuan) Imported Commodity Fair

6 th China (Guangrao) International Rubber Tire & Auto Accessory Exhibition

PUBLICATIONS

FCCC publishes “10 Years: Flanders-China Chamber of Commerce 2005 – 2015”

On the occasion of its 10th anniversary, the Flanders-China Chamber of Commerce has issuedthe publication “10 Years: Flanders-China Chamber of Commerce 2005 – 2015”. The publication bundles interviews with H.E. Qu Xing, Ambassador of the People's Republic of China to Belgium; H.E. Michel Malherbe, Ambassador of Belgium to the People's Republic of China; Mrs. Claire Tillekaerts, CEO of Flanders Investment & Trade; Mr. Stefaan Vanhooren, President Agfa Graphics; Mr. Matthew Taylor, CEO, Bekaert; Mr. Stephan Csoma, Executive Vice President and two other Executives, Umicore; Christian Dumoulin, CEO, Vitalo; Filip Goris, General Manager Asia, Recticel; Mr. Hudson Liu, CEO, Huawei; Mr. Li Shufu, Chairman, Zhejiang Geely Group; Mrs. Chai Hui, General Manager Brussels Branch, ICBC;

FCCC Newsletter No 399, March 9, 2015 Page 2

Mr. Robert Zhao, Chief Representative of the Weihai EU Office in Ghent; Mr. David Liu, Deputy Managing Director, APM Terminals; and Mr. Ma Jian, Chairman, Tianjin Liho Group.

Mr. Geert Bourgeois, Minister-President of the Government of Flanders, wrote the foreword to the publication. Chairman of the FCCC, Mr. Bert De Graeve, provided the introduction and Mrs. Gwenn Sonck, Executive Director of the FCCC, provided some more details about the FCCC.

The publication is available to Members of the FCCC free of charge.

Here is the link to the brochure online.

FCCC ACTIVITIES

Seminar: 'China Market Deregulation and Impact on Financing Solutions’ – Thursday, March 12,2015 – 16h00 – FCCC – Gent

The Flanders-China Chamber of Commerce (FCCC) is organizing a seminar focused on 'China Market Deregulation and Impact on Financing Solutions'. This event will take place at 16h00 on Thursday March 12, 2015, at the Flanders-China Chamber of Commerce/Voka, Lammerstraat 18, 9000 Gent.

China is currently going through a transitional phase, moving away from an investment driven to a consumption driven economy. This transition is proving to be disruptive, as it is expected to allow for a greater role for free market forces in the economy. As such, it is impacting China’s economic policies and regulatory framework, not in the least for financial services.

During the seminar, Mr Jason Lee, General Manager, KBC Bank NV Shanghai and Mr Yvan Jonckheere, Manager Trade Credit Finance, Picanol, will be providing further background on recent developments and how it will impact the financing of your operations in China. Mr Constant Pompen, Investment Officer, Belgian Corporation for International Investment, will present alternative financing solutions for foreign investments of Belgian companies in China.

Programme:

15h3016h00

16h30

17h00

17h30

17h30 - 18h00

RegistrationWelcome by Ms Gwenn Sonck, Executive Director – Flanders-ChinaChamber of CommerceChina Market Deregulation and Impact on Financing Solutions’ by Mr Jason Lee, General Manager – KBC Bank ShanghaiAlternative Financing Solutions for Foreign Investments of Belgian Companies in China’ by Mr Constant Pompen, Investment Officer – Belgian Corporation for International Investment SBI-BMIPanel discussion and Question & Answer session with Mr Yvan Jonckheere, Mr Jason Lee and Mr Constant PompenNetworking reception

If you are interested in attending this event, please register online before Monday March 9, 2015. Participation fee for FCCC members: €65, non-members: €95.

NOTICE

Subscription to FCCC sectoral newsletters: Automotive; Metals & Minerals; Environment; Logistics

In 2015, The Flanders-China Chamber of Commerce will continue to publish its China sectorialreports in order to keep you up to date on the developments in China in the sector that you areactive in.

However, we are going to change from free sectoral newsletters to paid newsletters. The pricewill be 125 € per sector. These fees will help cover our costs of research and development.

FCCC Newsletter No 399, March 9, 2015 Page 3

We currently produce newsletters in the following sectors:

• Automotive, metal & minerals• Environment• Logistics• Healthcare• ICT

Past newsletters can we viewed on the FCCC website: http://www.flanders-china.be/en/publications/fccc_newsletters.

If you are interested in continuing to receive one of these sectorial reports, we kindly invite youto subscribe via the following subscription formula before 28 February 2015:

Register now

If you are interested in a sector not listed above, please send an e-mail to info@flanders-china.be.

We hope you will enjoy reading these publications and thank you for subscribing.

ADVERTISEMENT OPPORTUNITIES

Sponsorship opportunities FCCC 10th Anniversary publication and Newsletters

This year, the Flanders-China Chamber of Commerce celebrated its 10th anniversary! We would like to give your company the opportunity to give more exposure about your companies' activities to Belgian companies active on the Chinese market and Chinese companies present in Belgium.

There are still opportunities to advertise in the second printing of the 10th anniversary publication.

In the link below you can find further information and a proposal for sponsorship as well as advertisement opportunities on our website and newsletters.

Link a dvertisement opportunities

FCCC Newsletter No 399, March 9, 2015 Page 4

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An Executive MBA by IMD & CKGSB

All over the world, people are beginning to do business with China. All over China, people have been doing it for centuries. So, who better to help prepare you for China’s increasing influence on the global marketplace? While the Chinese economy continues to grow, gaining expert knowledge from the other side of the business fence can give you an unquestionableadvantage in leading the way between China and he world.

CKGSB: Cheung Kong Graduate School of Business and IMD business school can help youdevelop your understanding of China with a fully global perspective. CKGSB is recognized as China’s world-class business school with an alumni base that accounts for 13.7% of China’s GDP. Our world-class faculty represents many of the best minds from the U.S. and Europe’stop business schools. IMD is a top-ranked business school.100% focused on executive education, IMD offers Swiss excellence with a global perspective. Together these twoleading business schools have devised the Executive MBA program.

The Executive MBA by IMD & CKGSB is designed in two stages – the foundation stage and the mastery stage. The program will allow you to master Eastern and Western business concepts and practices whilst gaining all-important international connections. The program will also strengthen leadership, strategy and general management skills.

Made up of equal numbers of participants from both Eastern and Western businesses, theprogram will include 11 weeks of face-to-face learning. The program is scheduled to take place from February 2015 until September 2016 with a unique split of 50/50 program delivery

FCCC Newsletter No 399, March 9, 2015 Page 5

across Eastern and Western locations. Delivered by two world-class business schools, the IMD-CKGSB Executive MBA is the ideal answer for fast-rising executives who want to create value for their organizations by spanning both East and West. You’ll go beyond the basics to atrue understanding of the forces that will be shaping the world of business in the future.

For admission details or further information visit imd.ckgsb.info

Hainan Airlines, your direct link from Belgium to China

Hainan Airlines, your direct link from Belgium to China.

Hainan Airlines is your 5 Star Airline awarded by Skytrax, operating direct flights from Brussels to Beijing.

Save time, fly in comfort and have the possibility to connectto 50 domestic destinations including Hong Kong and Taipei.

A seamless connection and a convenient transfer service will bring youvia Beijing to your destination in Hong Kong.

ACTIVITIES SUPPORTED BY FCCC

“Afstudeerbeurs” – Asia Job Corner – 31 March 2015 – ICC, Ghent

Registration is now open for the 2015 edition of the Afstudeerbeurs / Job Market for Young Researchers (31 March 2015). Click http://afstudeerbeurs.augent.be/ or go directly to the registration page.

After last year's roaring success of the China Job Corner, we are now organizing an Asia Job Corner on the 2nd floor of the ICC. Occupying a booth, you will have direct access to Asian (Chinese, Indian, ...) final-year Master students, doctoral students and postdoctoral fellows in all academic disciplines. The purpose of the Job Corner is to help Asian job seekers find a (first) job and make it easier for Belgian employers to network with these young professionals and introduce them to their businesses in Asia.

Interested in participating in the Asia Job Corner? Please indicate 'Asia Job Corner' in the comments section of the registration form.

Should you have any further questions about the Asia Job Corner, please contact Katrien

FCCC Newsletter No 399, March 9, 2015 Page 6

Daemen-de Gelder (katrien.degelder@UGent.be)

EY panel: 'Doing Business in China' – 1 April 2015 – Ghent

EU is the largest trading partner of China and China is the second largest trading partner of the EU. China is also a dominant trading partner of many other countries.Next to being the biggest factory in the world, China’s economy, when measured by purchasing power parity, surpassed that of the United States to become the world’s largest. China’s global economic power cannot be denied anymore. Many Belgian entrepreneurs have successfully set up businesses in China.

During our panel discussion “Doing Business in China”, Simon Barker, Geert Roelens and Patrick Keereman want to share with you recent China business trends and opportunities, but also some of the pitfalls and challenges they have faced while trying to achieve their endeavours. This forum, which is focusing on mid-sized companies with an ambition to do business in China, will allow you to raise any question you may have.

Date: 1 April 2015, Location: EY, Moutstraat 54 – 9000 Gent

Timing07h3008h0008h15

08h30

08h45

09h00

09h40

Welcome and walking breakfastIntroduction by Pieter De Crem – Secretary of State for Foreign Trade Simon Barker – Head of Why5 Research in China- Developments over the last decade, expectations going forward, and consequences- Brand building in China'Geert Roelens – CEO Beaulieu International Group - Foreign investment in China : lessons learned- Views on the Chinese labour marketPatrick Keereman – CEO Nuscience Group- Foreign investment in China : lessons learned- Intangible protectionPanel debate moderated by Jan Grauls – Senior Advisor EY and former permanent representative at the United NationsQ&A

Registration: To register click here before 23 March 2015.

Legal aspects of doing business with China – 2 April 2015 – Brussels

China’s economic impact is constantly increasing. In that respect, both Belgian and Chinese companies are looking for market opportunities to guaranty their growth.

As an attorney, legal practitioner or business person you are without doubt often confronted with the legal issues of these cross-border developments. In order to make you more confidentwith the different aspects of such cases, the following topics will be dealt with during the seminar organized during two afternoons.

The day 1 theoretical seminar took place on 26 February 2015.

Day 2: practical approach (2 April 2015):14.00 – 14.3014.30 – 14.4514.45 – 15.3015.30 – 16.15

16.15 – 17.00

17.00 – 18.00

RegistrationWelcome Speech, Joris Roesems, President Vlaams PleitgenootschapM&A in China, Peter Goes, LinklatersChinese Partners and Due Dilligence, Koen Vanheusden, Belgian Foreign Trade AgencyTechnology Transactions and Trade in and with China, Philippe Snel, De Wolf& PartnersReception

4 legal credits per afternoon were asked at the OVB (Association of Flemish Bars).

Venue: Voka – Vlaams Netwerk van Ondernemingen, Koningsstraat 154-158, 1000 Brussel

FCCC Newsletter No 399, March 9, 2015 Page 7

Price: Members Vlaams Pleitgenootschap, FCCC and Voka KvK Halle-Vilvoorde: half a day – package deal: €80 / €150 Non-members Vlaams Pleitgenootschap, FCCC and Voka KvK Halle-Vilvoorde: half a day – package deal: €95 / €165

Notice: enrolment in the package deal entitles you to receiving a study book, published by Larcier.

Subscription: Subscription can be made by sending an email at info@vlaamspleitgenootschap.be with reference of your name, first name, company references, telephone number, e-mail address and the date or dates for which you would like to subscribe. We’ll send you a debit note.

The Seminar is organized with the support of the Flemish Chinese Chamber of Commerce andVoka – Chamber of Commerce Halle-Vilvoorde; fits in the Brussels Academy of China and European Studies (BACES) and has been realized by the support of the Huawei Chair.

8th China Green Companies Summit (CGCS) – 20-22 April, 2015 – Shenyang

The China Entrepreneur Club (CEC) cordially invites you to attend the 8th China Green Companies Summit (CGCS) held on the 20th-22nd of April, 2015 in Shenyang, Liaoning Province of China. CEC’s annual China Green Companies Summit (CGCS) is committed to creating a platform for the most influential business, academic and government leaders in China and around the world to engage in thought-provoking dialogues, as well as bolstering long-term collaboration between Chinese and global enterprises. The Summit promotes smart and sustainable growth, and builds partnership through matchmaking events with enterprises and organizations. Our era is being changed by drivers of innovation, game changers that put creativity into action to create values and address social challenges. They change themselves,they change others, they change the world. These innovators continuously generate new business models and entire systems, producing new business values. Innovation and change have sparked a dynamic trend that every ambitious individual – old and young – hopes to be apart of, a trend that is viewed as the key to creating new social values. The 2015 Summit will once again gather visionary entrepreneurs, leading representatives of various sectors, and members of the next generation from China and across the world to talk about their new strategies and visions. They will present their thoughts on new technological and strategic hurdles, new business opportunities that address social challenges, and new growth models that will change the future.

Those interested to participate in the Summit, please send an e-mail to gwenn.sonck@flanders-china.be

PAST EVENTS

FCCC 10th Anniversary and Chinese New Year Reception – 23 February 2015 – Brussels

The Flanders-China Chamber of Commerce (FCCC) organized the FCCC 10th Anniversary and Chinese New Year Reception on 23 February 2015 at KBC Bank in Brussels.

Speeches were delivered by:Mr Bert De Graeve, Chairman Flanders-China Chamber of CommerceHis Excellency Mr Qu Xing, Ambassador of the People's Republic of China in BelgiumMr Stephen Phillips, Chairman EU-China Business AssociationMr Mark Andries, Chief of Cabinet of the Minister-President of the Government of Flanders

There were over 220 participants.

With special thanks to KBC Bank; the Golden sponsors Ageas, Volvo and Huawei; and the Silver sponsors Cosco, Recticel and Maasmechelen Village. This event was organized with the support of the Government of Flanders.

The Flanders-China Chamber of Commerce has about 250 members. Over the past ten years,it has organized 225 seminars with 23,720 participants. The Chamber has received 126 Chinese delegations in Flanders, and organized or supported 14 economic missions to China. FCCC has organized 50 meetings with Chinese and Belgian Ambassadors, Consuls-General

FCCC Newsletter No 399, March 9, 2015 Page 8

and Trade Commissioners. It has published 398 weekly newsletters, 328 sectoral newsletters and 10 other publications. It’s clear from these statistics that FCCC is one of the most active trade associations in Belgium.

This has been made possible by the support of the Flemish authorities. Minister-President Bourgeois has decided to actively support the FCCC also in 2015 – as China is an important component of the strategy of the Government of Flanders – to put Flanders on the map as an investment area and to support Flemish companies on the Chinese market.

Pictures of the FCCC 10th Anniversary and Chinese New Year Reception

Pictures of the FCCC 10th Anniversary and Chinese New Year Reception are available for viewing on the FCCC website.

This is the link to the pictures on the FCCC website.

NPC & CPPCC SESSIONS

Premier Li Keqiang puts GDP growth target at “around 7%”

Chinese Premier Li Keqiang set a slightly lower target for gross domestic product (GDP) growth for this year. Moreover he allowed for some leeway by putting the target “around 7%”. Last year's GDP growth of 7.4% fell short of the 7.5% target. The new target was announced by the Premier in his work report of the government to the opening session of the National People's Congress (NPC) in the Great Hall of the People in Beijing on March 5. “The road to global economic recovery has been rough”, he told the 2,907 Delegates. 57 other Delegates who were expected to attend, didn't make it to the opening session. “The economy operated within an appropriate range”, he added. The Chinese government is no longer pursuing the highest possible growth target, but is satisfied with a lower, but more sustainable, growth rate. Last year, despite a slower growth rate, 13.22 million urban jobs were created, which was higher than the figure for the previous year. Prices remained stable with the consumer price index (CPI) rising 2%. Illustrating that growth was more sustainable, Premier Li said that the contribution of consumption to economic growth rose by three percentage points to 51.2% andthe value-added of the service sector increased to 48.2% of GDP.

Per capita disposable income rose by 8% in real terms. The income of rural residents grew by 9.2%, outpacing that of urban residents, alleviating the income disparity between urban and rural areas. Premier Li also reviewed a number of key reforms. The management of local government debt was strengthened and new steps were taken to establish private banks. The Shanghai-Hong Kong Stock Connect was launched and price reforms were accelerated. The China (Shanghai) Pilot Free Trade Zone (FTZ) and similar zones in Guangdong, Tianjin and Fujian were established. Foreign direct investment (FDI) reached USD119.6 billion in 2014, while China's outward investment (ODI) reached USD102.9 billion. Free trade agreements with Iceland and Switzerland were concluded and talks were completed with South Korea and Australia. An additional 8,427 kilometers of railway lines were put into operation. The length of high-speed railways in China reached 16,000 km, accounting for more than 60% of the world'stotal. This year the government plans to invest over CNY800 billion in railway construction andput over 8,000 km of railway lines into service. Progress had been made in developing the SilkRoad Economic Belt and the 21st Century Maritime Silk Road. Premier Li said that negotiationswould continue to conclude investment agreements with the United States and the European Union.

While affirming the government's achievements, Li Keqiang also noted the difficulties and challenges ahead. Maintaining stable growth is becoming more difficult, businesses are findingit difficult and costly to obtain financing, China's capacity for innovation is insufficient, and “shocking cases of corruption still exist”. He emphasized that development was the key to solving every problem, while this development would be driven by reforms and innovation. Themain targets for this year are GDP growth of approximately 7%, which would be the objective for a relatively long period of time; a CPI increase of around 3%; the creation of 10 million urban jobs; an increase of foreign trade by around 6%; and a reduction of energy intensity per unit GDP of 3.1%. The government budget deficit for 2015 is projected to be CNY1.62 trillion, up CNY270 billion over last year. The deficit-to-GDP ratio would rise from 2.1% to 2.3%. Local governments would be allowed to issue an appropriate amount of special bonds. The M2 money supply is forecasted to grow by around 12% in 2015.

FCCC Newsletter No 399, March 9, 2015 Page 9

The year 2015 is the final year for completing the 12th Five Year Plan and the planning for the 13th plan which will start next year. Premier Li Keqiang said that market access for private investment would be greatly relaxed and a negative list for market access would be drawn up, replacing governmental approvals by simple registration. Local governments will delegate more powers to the market or society. Market competition would determine which businesses survived, said Li. The process of replacing business tax with VAT will be further completed. Qualified private investors will be encouraged to establish small and medium-sized banks and interest rates will be liberalized. Foreign investment will be further encouraged by halving the number of industries in which it is restricted. Foreign investment projects would only need to be placed on record, with government review required in only a limited number of cases. Urbanization would further narrow the gap between urban and rural areas and the governmentpromised to build an additional 7.4 million units of subsidized housing. Migrants would find it easier to transfer their household registration – which is linked to social benefits including medical care and pensions – to urban areas.

Premier Li Keqiang promised to fight environmental pollution “with all our might”. The intensity of carbon dioxide will be cut by at least 3.1%, while both chemical oxygen demand (COD) and ammonia nitrogen emissions would be reduced by around 2%, and emissions of sulfur dioxide and nitrogen oxides by around 3% and 5% respectively. Those who allow illegal emissions willbe held to account, warned the Premier. Concluding his report on the work of the government, Premier Li Keqiang said that tolerance for corruption is zero and the government would “resolutely eliminate any room for rent-seeking, thus eliminating the breeding grounds of corruption”.

NDRC: range-based regulation ensures steady economic performance

The report by the National Development and Reform Commission (NDRC) on the implementation of the 2014 plan and the 2015 draft plan for national economic and social development was distributed at the first session of this year's National People's Congress (NPC). Range-based regulation ensured that the economy performed within an appropriate range, the report said. Consumer spending was boosted with total retail sales rising 12%. Total fixed-asset investment (FAI) rose by 15.3%, of which 64.1% came from non-governmental sources.

Foreign trade increased by 3.4% – below the 7.5% target – and net exports only contributed 0.3% to economic growth. The system of mandatory government review for all overseas-funded projects was replaced with a reporting-based system, the NDRC said in its report, and only 2% of the total number of projects still needed government approval. The NDRC further carried out price reforms, lifting controls over the prices of more than 700 medicines and 50 other goods and services. Spending on R&D as a percentage of GDP reached 2.09% in 2014 with corporate R&D spending accounting for 76% of the total.

In 2014 the rural population living in poverty was reduced by 12.32 million and around 100 rural migrants were granted urban residency. The ratio of per capita urban to rural income dropped to less than 3 to 1 for the first time in 13 years.

The NDRC said it had accelerated the implementation of the “Three Major Strategies”:• “One Belt and One Road” (the Silk Road Economic Belt and the 21st Century Maritime

Silk Road)• coordinated development of the Beijing-Tianjin-Hebei region• development of the Yangtze river economic belt

Moreover, 33 key projects were launched in the western region with a total investment of CNY835.3 billion.

The share of non-fossil fuels in the primary energy consumption reached 11.2% in 2014, up 1.1% on the previous year. Energy consumption per unit of GDP dropped by 4.8%. According to the National Plan for Responding to Climate Change (2014-2020) carbon dioxide emissions would peak around 2030 and the share of non-fossil fuels would increase to around 20% by that time.

The NDRC said trials to replace business tax with VAT would be extended to the construction, real estate, financial, and consumer service industries. Total retail sales of consumer goods are expected to increase by 13% in 2015 and total fixed-asset investment (FAI) is projected to in crease by 15%. The government will reduce direct investment in projects and instead establish investment funds to attract non-governmental investment. Deepening reform of

FCCC Newsletter No 399, March 9, 2015 Page 10

SOEs will allow for non-state capital to hold share in SOEs. Approval for stock offerings will bereplaced by registration. Internet banking will be encouraged, said the NDRC.

Ministry of Finance warns deficit is rising

In its budget report, the Ministry of Finance said further progress was made in the reform of the budget management and tax systems. The system of transfer payments from the central tolocal governments was improved and trials to replace business tax with VAT were extended. Preferential tax policies were further standardized. Local governments issued a total of CNY400 billion worth of bonds in 2014. Spending on officials' overseas visits, vehicles and hospitality was strictly controlled, as well as funds for the construction of new government buildings. The central government had a budget deficit of CNY950 billion, while local governments were CNY400 billion in the red.

Selected budget categories:

Category 2014 Expenditure Increase over 2013

Agriculture CNY647 billion 8.4%

Social security CNY707 billion 8.5%

Health care CNY293 billion 11.0%

Education CNY410 billion 8.2%

Science & technology CNY254 billion 3.5%

Housing CNY253 billion 9.0%

Environment CNY203 billion 3.2%

Transport CNY427 billion 3.3%

Defense CNY808 billion 12.2%

Public security CNY212 billion 9.7%

The Ministry of Finance noted that “the rate of growth in government revenue has also been falling significantly” as “government expenditure continues to rise”, concluding that “without deeper reform, spending would be impossible to sustain, thus placing enormous pressure on public finance in the medium to long term”. A new budget law will come into effect in 2015. Thegovernment deficit for 2015 is projected to be CNY1.62 trillion, up CNY270 billion over last year. The deficit to GDP ratio will increase by 0.2 percentage points to 2.3%.

Commerce Minister confident of reaching 6% target this year

China is confident about meeting this year’s trade growth target of 6% despite lingering weakness in global demand, Commerce Minister Gao Hucheng told a press conference on thesidelines of the NPC session. Last year, the 3.4% growth in foreign trade fell far short of the 7.5% target. Though the global economic climate is unlikely to see significant improvements this year, external trade demand will likely post slight growth, the Minister said. Declining prices of imported goods were to blame for the slump in imports, and there were no signs that import prices would rebound. Minister Gao nevertheless predicted that foreign trade would likely be in the black in March. Year-on-year exports fell 3.3% and imports slumped 19.9% in January, but trade activity had “improved dramatically” in February. Minister Gao said China would hasten free-trade agreement talks with Japan and Korea, and complete talks by the endof this year for updated versions of free-trade deals with Asean countries. China and the United States had completed negotiations on the text of a bilateral investment treaty (BIT), andthe two sides were expected to exchange “negative lists” this year.

Commenting on Chinese tourists’ spending abroad, Gao said overseas consumption last year surpassed CNY1 trillion. He cited price differences between foreign and local goods as the main reason for making purchases abroad. Domestic prices could be further reduced by lowering logistics costs. A second reason was mainlanders' eagerness to follow international trends or “imitating others”. “But I believe the copycat shopping habit will change gradually,” Gao said.

China hopes to finish talks on creating an Asian free-trade bloc – the Regional Comprehensive

FCCC Newsletter No 399, March 9, 2015 Page 11

Economic Partnership (RCEP) – estimated to cover 28% of the world economy, by the end of this year. RCEP comprises the 10-nation ASEAN group plus China, India, Japan, South Korea, Australia and New Zealand. The United States has been leading negotiations on the U.S.-backed Trans-Pacific Partnership (TPP) that involves 12 countries, not including China. Minister Gao Hucheng said China was closely monitoring and assessing the impact of the TPPdeal on global trade, and that the Chinese government welcomed any trade framework that was open and transparent. China and the U.S. have basically completed text negotiation on a bilateral investment treaty and preparing to exchange negative lists. Regarding negotiations about a bilateral investment treaty with Europe, Gao said China recently received the negotiation text from the European Union leadership and is preparing its response.

• China will continue its massive nationwide anti-corruption campaign, with no limit or ceiling and shielding no one, Lü Xinhua, Spokesman for the third session of the 12th Chinese People's Political Consultative Conference (CPPCC) said. “Over the past year, the Communist Party of China has made an all-out effort, adopted a zero-tolerance attitude and left no stone unturned in fighting corruption,” he added. “Endeavors have been made to create a political climate in which officials dare not, cannot and wish not commit corruption, and good progress has been achieved.”

• The Chinese Communist Party’s Central Commission for Discipline Inspection (CCDI) said inspections will be expanded and sped up in 2015 to include up to 2,100 cities and counties, and 4,700 government offices and institutions. Officials already covered more than 1,200 cities and counties, and 700 offices and institutions in 2013 and 2014.

• China cannot relent its efforts to tackle pollution, though a rapid turnaround should not be expected, newly-appointed Environment Minister Chen Jining told a news conference. The country’s environmental laws were still not as strong as its economic laws, and innovation was also weak, he said. Even as Chen addressed reporters in Beijing, the city was cloaked in smog. Chen is a former President of Beijing’s prestigious Tsinghua University.

• China has announced a 10.1% rise in its defense budget to CNY886.9 billion for 2015,the lowest growth in five years. It rose 12.2% last year.

• China will speed up its strategy for free trade zones (FTZs), a key initiative in further opening up, President Xi Jinping said at a discussion with lawmakers from Shanghai. “Innovation is the most important driving force for development,” Xi said, adding that China needs to break through “system and mechanism barriers” to innovation.

• China and Canada will grant each other's citizens visas valid for up to 10 years, China’s Foreign Minister Wang Yi announced. The agreement went into force on March 9.

• China's top diplomatic priority was to push forward its “One Belt, One Road” initiative –a plan to boost infrastructure and trade links with countries from Asia to Europe – and marking the 70th anniversary of the end of the second world war, Foreign Minister Wang Yi said. It would also actively take part in UN environment and development conferences.

• Shandong Governor Guo Shuqing brushed off speculation he will be the next Governor of the People’s Bank of China (PBOC). He is a former Chairman of the China Securities Regulatory Commission (CSRC). The current PBOC Chairman, ZhouXiaochuan, is past retirement age at 67.

• Premier Li Keqiang has supported the idea to build a 83 km cross-Bohai Strait tunnel, equivalent to nearly two times the length of the Channel Tunnel between the UK and France, to promote regional logistics and encourage investment. The project would link Lushun in Liaoning province to Penglai in Shandong province. It would cut the current travel time between the two provinces from more than six hours to about 40 minutes.

• Beijing is determined to keep its population at less than 23 million by 2020 by moving out industries that are not suitable for the capital and adjusting economic structures, said Li Shixiang, Executive Vice Mayor. Water supply is the key and major reason of the population restriction. By the end of last year, the capital's population had reached 21.52 million, about 6,000 more than the goal the government set for last year.

• Shanghai will spearhead a national campaign to regulate the business activities of

FCCC Newsletter No 399, March 9, 2015 Page 12

senior officials' relatives, with the move expected later this year, Shanghai Communist Party Secretary Han Zheng said. President Xi Jinping urged Shanghai to create a model that could be expanded to other parts of the country.

AUTOMOTIVE

BYD to sell EVs in South Korea

Chinese new-energy vehicle maker BYD is planning to sell its electric vehicles (EVs) to the South Korean market before the end of 2015. BYD has brought its popular BYD e6 electric taxiand SUV to an international EV expo in Jeju. BYD is the only Chinese EV producer at the expo, which also attracted big automakers including BMW and General Motors. BYD plans to sell its electric bus in South Korea first. The company is also considering selling its electric taxie6, which has run in Shenzhen for five years. Earlier this year, BYD supplied a Japanese bus company with five K9 electric buses, which can travel about 250 kilometers after a single charging, the first time a totally made-in-China motor vehicle entered the Japanese market.

EXPAT CORNER

Shanghai most desirable city for expats

Shanghai has for the third time topped the list of the 10 most attractive Chinese cities for expats. It scored highest in the ranking's four important indexes for foreigners to evaluate cities, including the policies for foreign professionals, the working environment and the living environment. The other nine cities on the list are, in order from No 2, Beijing, Shenzhen, Tianjin, Qingdao, Hangzhou, Guangzhou, Suzhou, Xiamen and Kunming. This is the fifth time the ranking, organized by the International Talent magazine and China Society for Research on International Professional Personnel Exchange and Development, has been released. Between July and December, nearly 20,000 foreign professionals throughout China participated in the survey. Shanghai has more than 88,000 resident foreigner experts, one-sixth of the national total. More than half of the respondents to the survey hoped departments or organizations in Shanghai would improve medical insurance and service for foreigners, and simplify the procedures for them to enter the country.

FINANCE

Securitization market expected to double

China’s securitization market may double this year as the regulator simplifies issuance procedures and falling interest rates will support investment demand, Moody’s Investors Service said. China launched the practice in 2005 but stopped it on risk management concerns during the 2008 financial crisis. The practice was allowed again in 2012 and the interbank securitization market boomed in 2014 to CNY280 billion from about CNY16 billion in the previous year. Moody’s expects the interbank market involving large institutional players torise to CNY500 billion this year, and the smaller securities exchange market to grow from CNY30 billion to between CNY100 billion and CNY200 billion. Last year, a new registration system was unveiled for credit asset securitization so that qualified issuers do not need to apply for regulatory approval case by case.

• Yi Gang, Vice Governor of the People’s Bank of China (PBOC), said the yuan was thesecond-strongest currency in the world after the U.S. dollar and will remain “very stable” as the country continues to push the currency’s internationalization and capital account convertibility. He added that China’s economic growth had been slower underthe “new normal,” but was still relatively strong. The yuan has shed more than 2.5% ofits value against the U.S. dollar since November.

• Residential mortgage backed security products are set to debut on Chinese markets this year. China Merchants Bank has already wrapped 8,920 of its mortgages amounting to CNY3.15 billion into a security. It is the first RMBS product introduced in China after the regulator adopted a new registration system for credit asset securitization. In 2014, only one RMBS product was issued: a CNY6.81 billion securityissued by the Postal Savings Bank of China.

• The overdue payments problem in China is getting worse. More than 56% of

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companies surveyed reported an increase in payments overdue; a new record, according to Coface. SMEs paid upwards of 15% to 20% annualized interest for financing, which was already “not sustainable” for many businesses operating off low single-digit margins, the Coface report said. The percentage of debt in arrears between 90 and 120 days nearly doubled to 10.1% last year.

• He Guangbei, Chief Executive and Vice Chairman of BOC Hong Kong (Holdings) has stepped down as he reached the retirement age of 60. Non-executive Director Yue Yi was appointed Executive Director, Chief Executive and Vice Chairman.

FOREIGN INVESTMENT

EU-China investment pact to be concluded soon

Beijing and Brussels are soon expected to conclude an investment pact, European Parliament President Martin Schulz told China Daily. “The negotiations for a Comprehensive Agreement on Investment, launched at the end of 2013, figure at the top of the European Union's prioritiesin its economic relations with China," Schulz said before the opening of the annual session of the National People's Congress (NPC) in Beijing. “On the EU side, we are placing the emphasis on the facilitation of market access, transparency, non-discrimination and a level playing field for EU investors in China,” he said. Schulz is due to visit Beijing this month to starthigh-level exchanges between Beijing and Brussels. This year marks the 40th anniversary of the diplomatic relationship. Schulz said four rounds of talks have already been completed on the investment pact and that progress has been much faster than expected. “We expect to have an ambitious investment agreement, which aims to create a better environment for EU investors in China and vice versa,” Martin Schulz said. As to Beijing's proposal to launch feasibility studies on an EU-China free trade agreement (FTA), Schulz said trade and investment will continue to be an area where more can be achieved, the China Daily reports.

U.S. companies plan to moderate their China investments

U.S. companies in China will moderate their increase in investment in the country, a survey by the American Chamber of Commerce in Shanghai showed. Around 67% of the respondents planned to increase investment for this year, while 28% said they will maintain investment at 2014 levels, according to the 2015 China Business Report by Am-Cham Shanghai, based on an annual survey of 377 company executives. Last year, 96% of the respondents said they had kept or increased investments in their China operations. Some 41% of respondents indicated an investment increase of 1% to 15% this year, and 21% of them signaled a rise of 16% to 50%. The corresponding figures last year were that 36% indicated a 1% to 15% rise and 23% indicated a 16% to 50% gain – a clear sign that intention for larger investment has fallen. The survey also showed 85% of the companies have an optimistic five-year outlook on business hopes in China. However, 10% of them moved from the “optimistic” category to the “slightly optimistic” category, reflecting concerns, the Shanghai Daily reports.

• Jia Lining, Human Resources Executive at Alcatel-Lucent Shanghai Bell who was reported missing on January 16, was found dead in a tributary of the Huangpu river last month, Shanghai Television reported. Prior to his death, Jia had posted a letter to a WeChat group run by the State-owned Assets Supervision and Administration Commission (SASAC) in which he accused senior executives of Shanghai Bell, including Chairman Yuan Xin, of corruption and abuse of power.

FOREIGN TRADE

Central government now fully responsible for export tax rebates

The central government has assumed full responsibility for paying export tax rebates to companies. The change is retroactive to January 1. For any rebates still due for 2014, local governments remain responsible for their share, which was 7.5%. Previously, the central and local governments split the burden of export tax rebates. The local governments submitted their share of the rebates to the central government, which then added the other 92.5% and reimbursed companies. Zhao Zhongxiu, Trade Professor at the Beijing-based University of International Business and Economics (UIBE), said that some local governments had been reluctant to develop export-oriented companies due to the subsequent burden of rebates. “By assuming the full burden of rebates, the central government will sweep clean the obstacles

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that discourage local governments from developing exports,” said Zhao. “There is hope that this policy will reduce the burden of provinces with export advantages and boost overall exports.” Other smaller adjustments to the export tax rebate system have been made recently,including further delegation of approval authority, a simplified application process and faster rebates, the China Daily reports.

• Chinese police have frozen two bank accounts held by Trafigura, one of the world’s three largest private oil and metals traders, as the authorities investigate an alleged USD32 million gasoline trade fraud.

• Nearly three-quarters of American firms in Shanghai say the city's free trade zone (FTZ) offers no business benefits, almost 18 months after it was established, according to a survey by the American Chamber of Commerce. A total of 73% of the 377 member companies answering the survey said the FTZ offered “no tangible benefits” for their business, and almost half of them reported no noticeable changes for their operations so far.

• China's exports surged in February while imports continued to tumble. Exports climbed 48.9% from a year earlier to CNY1.04 trillion. The growth reversed a decline of 3.2% in January. Imports tumbled 20.1% to CNY666.1 billion the worst since 2009 and deteriorating further from the 19.7% dive of a month earlier. China posted a record-high monthly trade surplus of CNY370.5 billion in February. Seasonal factors were responsible for the sharp volatility of China’s trade in the past two months. The Spring Festival holiday, which fell in February this year, occurred in January 2014. In the first two months, China’s foreign trade contracted 2% year-on-year, with exports up 15.3% and imports down 19.9%.

HEALTH

Market approval for first TCM product in the UK

The first traditional Chinese medicine (TCM) to obtain market approval from the United Kingdom's Medicines and Healthcare Products Regulatory Agency (MHRA) can now be sold over the counter in the country. The medicine, Phynova Joint and Muscle Relief Tablets, was developed by Phynova Group, a life sciences company in Oxford, England. It is the first time that the European Union's Traditional Herbal Medicinal Product Directive, introduced in April 2004, has successfully been used to register a TCM product in the UK. The EU directive, which was designed to protect consumers and guarantee that the treatment is safe and meets high standards, has resulted in many Chinese medicines that are popular in European countries no longer being available over the counter without a prescription. Robert Miller, CEOof Phynova, said that the approval process took around three years, but he expects the period to be shorter for other medicines put forward for approval in the future, the China Daily reports.

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IPR PROTECTION

IPR policy not biased against foreign companies

China’s intellectual property policy is intended to ensure market fairness, and it is not biased against foreign companies, He Zhimin, Deputy Commissioner of the State Intellectual PropertyOffice (SIPO), said. He added that China opposes the abuse of IP rights and will clamp down on companies that use their IP advantages to gain “monopolistic and unjustified profit”.

• In 2014 China was No 1 in the world in invention patent filings for the fourth consecutive year, according to the latest data from the State Intellectual Property Office (SIPO). Some 928,000 applications for invention patents were filed with SIPO in2014, an increase of 12.5% from a year earlier.

• The Beijing High People's Court recently ruled that Shenzhen-headquartered Feipengda Manufacturing Co must stop making and selling models of the J-10 fighter jet, one of the country's most advanced home-developed military aircraft, and pay Beijing Zhonghang Zhicheng Technology Co CNY430,000 in compensation. The Beijing company, the only authorized maker of the models, told the court it found Feipengda was selling copies based on its design without authorization.

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MACRO-ECONOMY

Dalian Wanda Chairman richest on Forbes list

Wang Jianlin, Chairman of Dalian Wanda Group Co, overtook Alibaba’s Jack Ma to become the richest man on the Chinese mainland on the 2015 Forbes Billionaires List. Wang saw his personal wealth rise to USD24.2 billion from USD15.1 billion a year earlier. Wang also caught up with American financier George Soros to tie for the 29th position on the world's rich list. Wanda Commercial Properties Co went public in Hong Kong at the end of last year, the largest initial public offering (IPO) by a real estate development company. Li Hejun, Chairman of Hanergy Thin Film Power Group, overtook Robin Li of Baidu and Pony Ma of Tencent Holdings this year to become the third-richest man on the Chinese mainland.

• The average salary of Shanghai residents rose to CNY5,144 per month last year from CNY5,036 in 2013, according to the Shanghai Social Sciences Academy. College graduates earned CNY6,930.97 a month on average. Senior technical employees were the best paid with an average salary of CNY8,884 per month.

• China’s economic growth may slow to 7% in the first quarter due to rising deflation risks, weakening investment and continued correction in the property market, the State Information Center (SIC) said. The country’s gross domestic product (GDP) grew 7.3% from a year earlier in the fourth quarter of last year. Exports may grow 5% in the first quarter but imports could drop 10% by value due to weak demand and lower commodity prices on the global market.

• Debate is rising about whether China should scrap annual gross domestic product (GDP) goals following Shanghai Mayor Yang Xiong's announcement that the city had ditched its official target for this year, the first to do so. In this year’s “Report on the Work of the Government”, Premier Li Keying set the 2015 growth target at approximately 7%.

• Shenzhen could be the “Silicon Valley for hardware makers”, according to a ranking ofemerging start-up hubs around the world by U.S. magazine Inc., which also warned that “possibly the chief negative for companies doing business in Shenzhen is intellectual property theft.” Other world cities filling out the Top 5 were Istanbul, Turkey; Tallinn, Estonia; Santiago, Chile; and Dubai.

• The HSBC Services Business Activity Index, a gauge of operating conditions in privateservice companies, rose to 52 last month, up from 51.8 in January, according to HSBC Holdings and research firm Markit. The index signaled a “modest” rise in activity at the start of the year, the bank said. The official non-manufacturing Purchasing Managers’ Index (PMI) compiled by the National Bureau of Statistics (NBS) stood at 53.9 in February, also up from 53.7 in January.

• China is on track to overtake Germany and Britain as the country with the third-largest number of people with assets of more than USD30 million within 10 years. With 8,366 so-called ultra high-net-worth individuals, China ranked fifth last year but the number will jump 87.4% to 15,681 by 2024, according to the Wealth Report, released jointly byproperty consultant Knight Frank and BOCI. In terms of billionaires, Beijing, Shenzhenand Shanghai were the three mainland cities that made it into the world's top 20 cities for wealth. Over the next 10 years, Chinese cities would comprise two-thirds of the top30 cities, according to the report.

MERGERS & ACQUISITIONS

Chinese companies lead M&A activity

Chinese companies led merger and acquisition (M&A) activity in the Asia-Pacific region in the second half of 2014 despite a slowdown in economic growth. The companies sealed 781 M&Adeals worth USD167 billion in the second half of last year, helped by several industry consolidations, especially in energy, mining and utilities, according to financial analysis company Mergermarket. Chinese oil giant Sinopec’s sale of its marketing arm for USD17.4 billion ranked as the biggest M&A deal.

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REAL ESTATE

Soho China reports 45% drop in profit

Soho China’s net profit tumbled 45% year-on-year in 2014 to CNY4.1 billion following a 60% plunge in turnover to CNY6.1 billion, the Beijing-based developer said in a filing to the Hong Kong stock exchange. However, Soho China’s rental income surged 52% annually to CNY424million. “As the company switches to its ‘build and hold’ model from the ‘build and sell’ model, we saw outstanding performance in the property leasing sector,” said Chairman Pan Shiyi. “Aslettable space continues to grow with the completion and delivery of more investment properties, rental income is expected to rise rapidly.” As of December 31, the total gross floor area of Soho China’s completed investment properties reached 838,000 square meters. By 2018, the developer is set to hold 1.8 million sq m of commercial properties – mainly comprising office buildings in prime locations in Beijing and Shanghai.

• New home sales in Shanghai fell for the second month in February due to the traditionally slack momentum during the festive season. Purchases of new homes dropped 44.1% from a month earlier to 422,800 square meters, Shanghai Uwin Real Estate Information Services Co said. March sales will likely set the tone for the rest of the year. The average cost of new houses climbed 2.1% from January to CNY29,267 per sq m, a year-on-year rise of 14.5%.

• Australia has told China’s Evergrande Real Estate Group to sell a Sydney mansion worth AUD39 million, saying it was bought illegally under foreign investment rules. Thegovernment is enforcing rules under which foreigners are only allowed to buy new dwellings and are barred from purchasing existing residential property. The “Villa del Mare” in Sydney’s exclusive Point Piper district will have to be disposed of within 90 days. The luxury home was bought in November last year by Golden Fast Foods, but is ultimately owned by Evergrande Real Estate Group, which is listed on the Hong Kong Stock Exchange.

• Property management firm Colour Life has reported a 228.3% year-on-year surge in net profits to CNY145.7 million last year. Its revenue grew 67% to CNY389.3 million after the company expanded services to 109 cities, covering an aggregate contracted gross floor area of 200 million square metres by the end of last year.

• Troubled property developer Kaisa has announced a restructuring plan for its CNY48 billion of onshore debts. There would be a reduction of interest and an extension of tenor, Kaisa said in a notice to the Hong Kong stock exchange. All creditors’ principal debt claims would be paid in no less than three years and no more than six years, except where outstanding debt was already more than six years. Kaisa owed CNY12 billion to banks and CNY36 billion to non-bank financial institutions at the end of last year. As much as CNY35.5 billion of this debt could be due this year.

• Purchases of pre-occupied homes plunged 44.8% in Shanghai in February to 9,800 units as sentiment cooled sharply during the Spring Festival holiday, according to Shanghai Deovolente Realty Co. The average cost of the homes dipped 0.9% month-on-month to CNY23,000 per square meter. A notable pickup in transactions is expected as early as the second half of this month.

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RETAIL

Sun Art Retail develops e-commerce platform

China’s largest hypermart operator Sun Art Retail expects its e-commerce platform Feiniu.comto reach CNY10 billion in sales over the next two to three years, Executive Director Peter

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Huang said, as the retailer announced yearly profit increased by 4.8% to CNY2,908 million, falling short of market expectations. “By April, we should be able to cover the entire nation,” Huang said of its year-old online operations, adding that last January when the site first launched, it took in 500 orders but had since grown to 6,000 transactions this month. Feiniu.com currently operates in Shanghai, Zhejiang, Jiangsu and Anhui provinces.

• British retailer Marks & Spencer plans to close five stores in Shanghai by August, but reaffirmed its commitment to expand into other large Chinese cities. M&S entered China in 2008 with a store in Shanghai, and now has 15 on the Chinese mainland.

• Carrefour is expected to open 15 new hypermarkets in China this year and roll out more convenience stores aimed at customers in local communities, according to Thierry Garnier, Executive Director of Carrefour China. Last year, an expansion of outlets in China managed to generate organic growth of 2.5%, while sales fell by 5.3%. The retailer opened 11 hypermarkets in China last year and closed eight stores.

SCIENCE & TECHNOLOGY

Research funding reform needed to boost innovation

The national scientific research funding program urgently needs reform to boost the country's capacity for innovation, according to Yin Zhuo, Member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC). He added that spending on basic scientific research lags far behind that in Western countries. “Less than 10% of the massive research budget went to support basic scientific projects. In developed nations, the proportion is 20% to 25%,” he said, adding that low investment in the area will damage the country's scientific competitiveness in the long run. Total research and development (R&D) spending broke through the CNY1.3 trillion mark in 2014, according to the Ministry of Science and Technology (MST). Enterprises contributed more than 76% of the sum. “Some researchers are too engaged in making connections with the fund approval authority and spend half their working time on producing a better-looking financial report in order to obtain more investment the following year,” Sun Chaohun, Director of a mineral research lab in Sichuan province, said. “As the country is set to witness slower GDP growth in the foreseeablefuture, innovation will play an increasingly important role in boosting the economy,” Wan Gang,Minister of the Ministry of Science and Technology, said.

STOCK MARKETS

Orient Securities to launch IPO

Orient Securities, the investment banking partner of Citigroup in China, is looking to raise CNY10 billion in a Shanghai initial public offering (IPO) that could be the country's biggest IPO in more than three years. The Shanghai-based broker plans to offer 1 billion shares, representing about 18.9% of the enlarged share capital. Proceeds from the share sale would be used to expand businesses like wealth management margin financing and investment banking. Citigroup owns 33% of Citi Orient Securities Company, which has 200 employees in Shanghai, Beijing, Shenzhen and Xinjiang. Shenergy Group, the largest investor in Orient Securities, will hold a 30% stake, down from 38.38%. State-backed property developer Greenland, which owns a majority stake in New York's Atlantic Yards, holds a 2% stake.

• Short selling of A shares under the Shanghai-Hong Kong Stock Connect got off to a flat start. At market close on the first day that short selling was allowed, there was no short selling of Shanghai-listed shares, data from the Hong Kong exchange showed. The Hong Kong bourse allows international investors to short sell 414 Shanghai-listed shares, or 72.9% of the capitalization of the designated A shares under the link. The cold response was in line with market expectations as a number of curbs were put in place to prevent instability in the A-share market.

• Hong Kong Airlines' much anticipated dual-currency initial public offering (IPO) has lapsed after it failed to file the formal application and other documents within a six-month deadline, plunging its possible listing into uncertainty as it will have to start the process all over again. The delay means its listing could be shoved back to the second half of the year at the earliest.

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• A trading link between Shenzhen and Hong Kong stock markets is to be launched within this year as approval is likely to be given in the first half of the year. The new link will allow overseas investors to tap some of China’s most high-growth sectors such as information technology and health care. The Shenzhen-Hong Kong scheme would have the same quota as the Shanghai-Hong Kong program. Up to March 6, mainland investors had used only 10.5% of the southbound quota, or CNY26.3 billion, while Hong Kong investors had used CNY110 billion of their northbound quota.

• HKEx reported a net profit of HKD5.17 billion for last year, up 13% year-on-year, thanks to increased turnover from the Shanghai stock through-train scheme in recent months and higher volume of commodities trading at its wholly-owned unit, the London Metal Exchange. The daily average turnover for all of last year was HKD69.46billion, up 11% from 2013. The through-train scheme from November 17 boosted average daily turnover in the fourth quarter to HKD80.7 billion, compared with HKD70.9 billion in the third quarter.

• A potential landmark reform of China's stock market is under way as the China Securities Regulatory Commission (CSRC) said unprofitable companies could be allowed to go public. The profitability requirement was scrapped in the first draft of the revised securities law. The requirement had deterred a number of firms, especially internet companies without decent profits, to seek a stock listing. The revision also includes handing the CSRC's vetting power over listing applications to the stock exchanges, moving towards a registration-based offering system.

TRAVEL

Lufthansa counts on Air China JV

Lufthansa wants to see its joint venture with Air China up and running by the end of this year, which will be its 89th in China, says Chairman and Chief Executive Carsten Spohr. “Of the €30 billion turnover we make, €4 billion we make out of Asia. And out of the 240 flights we put into Asia-Pacific every week, 83 of them go to greater China, so it’s by far the most important destination in Asia-Pacific for us,” Spohr told the South China Morning Post on his first visit to Hong Kong since he took the top job in May. He admitted the profitability of the Asian market suffers from fierce competition, especially from new players in the Middle East. Lufthansa and Air China, codeshare partners and Star Alliance members, would coordinate and share revenue on all their routes connecting mainland China and Europe in the proposed venture. “I see joint ventures as a recipe for future success,” Spohr said. He added that Lufthansa hoped to gain access to China’s secondary cities served by Air China. The launch of a new route by Cathay Pacific to Dusseldorf on top of its Hong Kong-Zurich service threatens to take traffic away from the group.

• China’s passenger flights are “10 times safer than the average global level”, accordingto Li Jiaxiang, Director of the Civil Aviation Administration of China (CAAC). He added that test flights would be carried out to assess the performance of China’s first home-produced large passenger jet, the C919, before the end of the year.

• Fosun International has bought a 5% stake in Thomas Cook Group, paying GBP91.9 million. It later plans to double its stake to 10%, but would not view it as a step toward acquiring Thomas Cook in its entirety. Thomas Cook said the deal would help to accelerate its plans to develop more specialized hotels and aid expansion in China over the medium term.

ONE-LINE NEWS

• Cinema box office revenue in China surpassed that in the United States in February for the first time, making China the world's biggest box-office market, according to research firm Entgroup. The holiday brought in USD650 million in China, compared to the U.S. total of USD640 million. The Lunar New Year has become the peak movie-going period in China. In 2014, box office returns in China surged 36%.

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QUOTES OF THE WEEK

“The practical cooperation between China and Russia is based on mutual need, it seeks win-win results and has enormous internal impetus and room for expansion.”

Chinese Foreign Minister Wang Yi at a press conference in Beijing on March 8, 2015.

ANNOUNCEMENTS

5th China (Sichuan) Imported Commodity Fair

The 5th China (Sichuan) Imported Commodity Fair (SICF) will be held inChengdu on June 19 –22, 2015. The exhibition area will cover 20,000 square meters, and the scope of exhibits includes fashion & featured products, food & beverages, consumer electronics, outdoor products, international famous brands and service trade etc. China will import about USD10 trillion of goods and services in the next five years. This could provide unprecedented opportunities for foreign enterprises to expand on the Chinese market. The SICF is the professional exhibition platform built by Sichuan province for foreign enterprises to exploit the market in western China. The Sichuan CCPIT could offer a discount for booth fees, help to organize B2B workshop, provide one year’s free display opportunity for the exhibits’ samples in the Sichuan Provincial International Commodity Display Center, and provide the legal services of intellectual property protection and assistance on exhibits' custom clearance. Now, more than 10 countries have confirmed their participation in the fair, including France, Italy, Canada, South Korea, Thailand, Malaysia, Vietnam, Cambodia, and Nigeria. For more information, visit the official website: http://www.westimportfair.com/

6th China (Guangrao) International Rubber Tire & Auto Accessory Exhibition

As one of the most professional and most influential rubber tire expos, the 6th China (Guangrao) International Rubber Tire & Auto Accessory Exhibition will be held in the Guangrao International Expo Center in Shandong province on May 15-17, 2015. it will offer thebest platform to get in touch with the global tire industry. As a world famous rubber tire industrybase, Guangrao has more than 100 rubber tire enterprises with one-fourth of China's tire production capacity. The total expo area will reach 40,000 square meters and 150 tire companies have already applied as exhibitors. Nine of them are in the world's top 500 (American Emerson, Japanese Mitsubishi, Gemany's Lanxess, CNPC , FAW etc.) and 25 are in the global top 75 rubber tire companies. The exhibition will also organize a series of on-site activities like visiting tire & auto parts production bases.

E-mail: wp7677@chinagr.gov.cn wp7677@163.com website: www.chinagr.gov.cn

FCCC Newsletter No 399, March 9, 2015 Page 21

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