China developing quietly as worlds largest commodities trading center

Mar. 25 - Amidst the on-going rhetoric about China’s trade imbalances, a little understood, but significant revolution is underway – the massive emergence of China as the worlds largest commodities trading center.

Global commodities markets have seen prices of goods such as basic fuels, grains and metals increase dramatically over the past two years, however the emergence of China’s internal markets as a force to be reckoned with is going to have a significant impact on industries from foreign banking to commodities trading to global suppliers and processors.

Futures Exchanges booming as China seeks pricing stability
Chinese domestic trading is on the increase as long positioning internal trade barriers are being brought down – the days of provincial governments levying taxes on goods transiting their borders from other provinces are finally drawing to a close. Oil, steel and aluminum from the power belts and heavy industrialized northeast are driving production of grains, coffee, tea, tobacco and sugar from the south, which in turn sell these products on, in the form of cigarettes and other processed foods to the wealthy stretch of China’s east coast and elsewhere within across the nation. (more…)

China’s meteorological bureau guarantees good weather for Olympics

BEIJING, Feb. 1 - Beijing’s Meteorological Bureau announced yesterday at a Beijing Olympics Organizing Committee meeting that they are fully prepared to take control of the most unpredictable element in sports – the weather. China is a world leader along with the Russians in what is known as “weather modification science;” however this has usually been deployed to create rain, rather than eliminate it.

Cloud seeding for example has long been used by the Chinese since the 1950s to bring on downpours, particularly in the North, where desertification has eaten away at precious arable land resources, and trying to induce rain to fall in the drier provinces. There has been success – deserts are slowly waning in China and more land is being reclaimed. The Russians, too, have long been experts in this field – sophisticated rain seeding carried out over Chernobyl prevented much contaminated rain from reaching further than it did in the aftermath of the nuclear catastrophe. However, the reverse procedure – ensuring no rain falls – is little used. (more…)

Dec. 26 - Tianjin airport has completed its large expansion project, including a new terminal and runway expansion, ahead of the 2008 Summer Olympic Games in Beijing.

The new terminal building is five times larger than its predecessor with a handling capacity of 10 million passengers annually airport sources told Xinhua.

The project, with a total investment of nearly RMB3 billion, started in August 2005 and included a new 116,000-square-meter terminal building, a 270,000-square-meter apron and a 62,000-square-meter parking lot. The runway was also widened to 75 meters from the current 50 meters and lengthened 400 meters to 3,600 meters. (more…)

SHANGHAI, Oct. 10 - The central government has given the Beijing-Shanghai high-speed railway the green light according to a notice posted on the National Development and Reform Commission’s website Tuesday.

With a speed of up to 350 kilometers per hour, the high-speed train would shorten rail travel times between Beijing and Shanghai from the current 10 hours to less than five.

The project, which has been on the drawing board for more than a decade with work expected to begin last year, was to be operational by 2010 before construction was postponed. The cost of the project, with initial estimates ranging from RMB130 billion to RMB170 billion, could exceed RMB200 billion due to rising real estate prices and the cost of resettling people who live along the proposed path.

The 1,318 kilometer rail project has attracted the attention of France’s Alstom, Canada’s Bombardier, Japan’s Kawasaki Heavy Industries and Germany’s Siemens, all vying to provide technology. It’s expected that high-speed wheel technology, like that used in Europe, Korea and Japan, will be employed over more the costly magnetic levitation that currently is only used on a tester extension in Shanghai. (more…)

By Adam Livermore 

DALIAN, Oct. 8 - Standing on a windswept hill overlooking the coastline of southern Dalian and looking towards the distant port town of Lushun, it is hard to visualize how the rolling rural landscape will look after it is swamped by the planned “silicon peninsula,” at least until you turn around and look northwards instead. An area of 27.54 square kilometers that was rural land until the turn of the century is now an extension of Dalian city. Over the coming decade this area, the High-Tech Industrial Zone of Dalian, will spread down the peninsula and become increasingly more important to the city from which it gets its name.

Over the past decade the High-Tech Industrial Zone in Dalian has developed into a community of BPOs, IT outsourcing companies and call centers, primarily for the Japanese and Korean markets. However in the past few years more and more western companies have arrived in the zone and they are involved in a wider variety of operations. Phase I of the project is currently being extended, and Phase II of the project was officially launched in September. This article introduces the current state of the high-tech zone, the plans for its expansion and the rationale behind the ambitions project.

The zone has a few special characteristics that make life here rather different from other areas of Dalian. First of all, the average age of the population living and working in the zone is much younger – the residents are software engineers, IT professionals, web designers or and technicians, many of them bilingual or trilingual. (more…)

By Adam Livermore

DALIAN, Oct. 1 - Located further up the peninsula from the city center of Dalian, the development zone has turned into a major metropolis in its own right with a population of around 350,000. Normally it takes about 45 minutes to make the drive from the development zone to the Dalian city center, so although the road is lined with factories and shipbuilding docks, the development zone can be considered to be a separate metropolis. Indeed the main weakness of the zone is its poor transportation links with the city center. A light railway exists but trains only run every 10 -15 minutes and the service finishes quite early at night. There are only a couple of major road links between the two metropolises, and bottlenecks tend to form at the entrance to tunnels on the route. A major crash on one of the roads can paralyze traffic for hours during rush-hour. A ferry service has been suggested as one means of alleviating this problem, and longer-term plans are to include a 20km tunnel under the bay, but the transformation of the development zone into a fully-fledged city would seem to offer the best hope of improving the quality of life for expats working in the area – the commute into central Dalian is only going to get worse over the coming years.

The Dalian Development Zone has thrived due to the tax benefits and other incentives offered to the companies that have established there. As of 2008 these benefits will no longer be offered, and the companies that presently enjoy preferential treatment will see the benefits gradually phased out. However the development zone will still be an attractive place to invest for several reasons: (more…)

By Adam Livermore

DALIAN, Sept. 26 - Dalian is a city attracting a great deal of attention right now. Particularly newsworthy is the US$2.5 billion investment by Intel in a new semiconductor plant, and the expansion of the High-Tech Zone – Dalian is set to become the Bangalore of China. Major multinationals are spearheading the charge to take advantage of a large pool of skilled labor and excellent IT infrastructure. Growth in the service sector is happening with less fanfare, but at a similar high pace. This is evidenced by the arrival in Dalian of multinational real estate brokers (for example CBRE, Savills and DTZ), relocation specialists for expats (Santa Fe) and a proliferation of new five star hotels.

Yet in the minds of many western businesspeople Dalian remains a rather obscure Chinese provincial backwater. In fact, Dalian is nothing of the sort – it is an exceptional city for several reasons. In this series of articles I aim to introduce Dalian to the wider business community and explain why, if you are a provider of high-value added products or services, it should factor in your strategic visions for the future.

Part 1 – An overview of Dalian

The first thing that should be understood about Dalian is its location. Perched on the top lip of the Bohai Gulf (which provides sea access to northern China), its location has historically been important for both military and commercial reasons. In terms of international trade, the majority of products manufactured or processed in Liaoning, Jilin or Heilongjiang provinces (the traditional industrial heartland of the north with a combined population of over 100 million) are exported through Dalian. Domestically, a large amount of energy resources such as coal and oil are sourced from the northern provinces, flowing through Dalian on their way south by ship to power the energy-sapping factories in Zhejiang and Guangdong. Its proximity to Korea and Japan has ensured that a large amount of the trade with these countries involves Dalian in some way or another. It is not difficult to find fluent Japanese and Korean speakers in Dalian, especially among the huge ethnic-Korean population. (more…)

By Andy Scott

SHANGHAI, Sept. 11 - China’s new policy restricting processing trade, which took effect nationwide August 23, will most heavily impact Guangdong province. The booming Chinese economy, which has grown at over 10 percent for the last 15 years, has been largely driven by processing trade factories located in South China and the Yangtze River Delta region, importing tax-deductible raw materials to manufacture finished products for export. Of the over 90,000 processing trade firms operating on the mainland, nearly 70,000 are located in Guangdong province according to the National Bureau of Statistics.

However, in its continued efforts to develop the central and western regions which have not profited from China’s economic surge, Beijing has stipulated that the new regulations will not affect enterprises operating in those regions.

With that in mind, we decided to take a look at central China, an area that includes the six provinces of Anhui, Henan, Hubei, Hunan, Jiangxi and Shanxi. It includes 30 airports, 12 inland ports, 460,000 kilometers of highway and approximately 15,000 kilometers of railway. Would it be better for processing trade manufacturers to move their operations inland, or look for other possibilities to dealing with Notice 44? (more…)

Sept. 1 - Yingkou is a third-tier Chinese city located on the northeastern edge of the Bohai gulf, just a few hours drive from the regional powerhouses of Shenyang and Dalian. An otherwise fairly ordinary provincial Chinese city, Yingkou is set to capitalize on the increasing exporting power wielded by enterprises in Liaoning, Jilin and Heilongjiang provinces.

Most people associate Liaoning province with the port city of Dalian. Indeed Dalian is a thriving, cosmopolitan city that possesses one of the largest ports in China. The city of Yingkou has been left in the shadow of its big brother further down the peninsula and has not attracted the levels of foreign investment seen around many other ports in China. In particular, export processing has not flourished in the area, leaving Yingkou lagging behind many other ports in China in terms of its degree of internationalization. Recently however, the volume of traffic through the ports – Yingkou Old Port and Bayuquan New Port – has risen dramatically, with over 100 million tons of cargo expected to be handled in 2007. This expansion is attracting the attention of foreign investors due to the proximity of the inland manufacturing giant that is Shenyang, China’s fourth largest city by population.

Yingkou is, and will remain, primarily a port responsible for the processing and transportation of products manufactured in the heartland of Liaoning (the cities of Shenyang, Fushun, Benxi, Haicheng, Liaoyang etc.). However, it is also strategically important for the distribution of oil, grain and fertilizer around China. Two pipelines connect Yingkou with the Daqing oilfields of Heilongjiang province, and Bayuquan port is expanding its capacity for oil storage in anticipation of further future growth. (more…)

By Adam Livermore 

DALIAN, Aug. 24 - Dalian is hosting a prestigious three-day meeting for fast-developing multinational companies beginning September 6. Entitled the “Inaugural Annual Meeting of the New Champions” and informally dubbed the “Summer Davos” because of its perceived similarity to the Swiss summit held every winter. The event is attracting CEOs from companies all over the world.

Some of the participants are already well-established global powerhouses. Intel will be represented by their chairman, Craig R. Barrett, PWC by Global CEO Samuel DiPiazza Jr., Citibank by President William R. Rhodes, WPP by Group CEO Sir Martin Sorrell and British Telecom by CEO Ben Verwaayen. However many of the participants will come from the major corporate powers in emerging countries, principal among them representatives from India and the Gulf states – nations that are rapidly increasing their levels of investment in China.

From India offshore software development giants Infosys and HCL Technologies are represented. Dubai Holding and Shamil Bank of Bahrain are a few of the major Gulf state players looking to develop further links through this conference. Of course there will also be a star-studded list of Chinese CEOs and the obligatory rafts of government ministers in attendance, headed by commerce minister Bo Xilai (coincidentally also previously Mayor of Dalian). In short, it may be the largest collection of powerbrokers ever to descend on a city in China. (more…)