THE

CHINA ANALYST
A knowledge tool by THE BEIJING AXIS for executives with a China agenda April 2008

Taking a fresh
look at the
China-Africa link
p.6

Features:
China’s Urban Population Boom 4
Africa-China Relations Revisited 6

Regulars:
China Business News Highlights 10
China Perspectives 12
China Sourcing Blog Highlights 13
Upcoming Events 14
 3

Table of Contents
April 2008

4 Putting China’s Urban Billion into Perspective

To the business community, China’s population of 1.3 billion is most often portrayed as an unprecedented
opportunity. To a government, however, this is a significant challenge, as a new report by McKinsey
illustrates.

6 Africa and China: How Long will the Honeymoon Last?

With Chinese involvement in Africa growing by leaps and bounds, questions are being asked about the
sustainability of the relationship. The benefit to Africa is being called into doubt by the Western media, with
China being accused of displaying colonial attitudes. Is there reason to be concerned?

8 China in Statistics
Breakdown of China’s trade with other BRICS countries; China import & export figures; China’s largest trade
surplus destinations; actual use of foreign investment; Shanghai composite index performance; China’s foreign
exchange reserves..

9 Statistics in the News

Sovereign wealth funds; Shanghai’s air pollution index; and inflation.

10 China Business News Highlights

A selection of the biggest business stories coming out of China in December.

12 China Perspectives
A summary of high level debates and trends in the Chinese media, including coverage of the January
snowstorms, Taiwan’s election, the opening of the new Beijing Airport and more...

13 China Sourcing Blog Highlights

Highlights from pages of The China Sourcing Blog, an online information portal and discussion forum on
issues relevant to sourcing from China.

14 Upcoming Events
A list of upcoming fairs, exhibitions and conferences in China, with particular focus on sourcing from China.

15 THE BEIJING AXIS News

Company news for December, including the Macquarie China Day in South Africa and sourcing summits
held in Shanghai, Moscow and Ukraine...

THE CHINA ANALYST is published and distributed by THE BEIJING AXIS Ltd. For more information on
services, please contact any of the following persons:

Beijing Shanghai
Dirk Kotze Julian Hewitt
Tel: +86 10 6440 2347 Tel: +86 21 5882 0048
dirk@thebeijingaxis.com julianhewitt@thebeijingaxis.com

Johannesburg Russia and Eastern Europe

Jackie Li Lilian Luca
Tel: +27 11 201 2318 Tel: +86 10 6440 2106
jackieli@thebeijingaxis.com luca@thebeijingaxis.com
4

Putting China’s Urban Billion into Perspective

To the business community, China’s population of 1.3 billion is most often portrayed as an
unprecedented opportunity. To a government, however, this is a significant challenge, as a new
report by McKinsey illustrates. Julian Hewitt puts it into perspective.

McKinsey Global Institute’s latest All this is necessary to contain a reminder that the largest
report titled ‘Preparing for China’s sharp rise in urbanization from 44% industrialization in history is being
Urban Millions’ is a fascinating in 2005 to a projected 66% two accompanied by a similarly great
insight into the China of the future. decades into the future. human migration.
In some ways, it reads like a
science fiction novel. Within 17 Furthermore, if McKinsey’s Creating Context
years, China will have 221 cities recommendations are taken to heart, To really appreciate the
with million strong populations the Chinese Government needs to implications of China’s urban billion
(Europe has 35 today) and the look at a path of concentrated from a business context, let us take
urban population will have reached urbanization that will result in the a step back and understand things
a billion by 2030, with a population development of 15 mega cities each as they are before we look at what
the size of USA descending on with a population in excess of a the future holds.
China’s urban areas between today massive 25 million people.
and the year 2025. To date, China has made the most
Economically, by 2025 China’s cities sense for two kinds of business
To deal with this, China will need to will generate 95% of Chinese GDP interests. The easiest equation is
consider building 170 mass transit and consume a quarter of the that China is the world’s industrial
systems – twice the current world’s energy, while it is estimated hub and second largest exporter.
European number. The country will that urban consumption of GDP will Walk through any African market or
have to build 20 000 – 50 000 rise to 33% of GDP. USA strip mall and more often than
skyscrapers, amounting to around not the manufactured goods will
10 New York cities being added to McKinsey’s projections are carry a ‘Made in China’ label. It is
China’s already crowded skylines. phenomenal, and serve as a stark this ubiquitous trade that pushed
China’s exports to USD1.22 trillion
in 2007 and, according to the
China is Moving towards an Urban Billion by 2030 WTO, will result in China
surpassing Germany as the world’s
largest exporter by 2009.
China Urban Populations
2025: 926 Million The higher one goes up the value
chain, the more cost savings China
can offer your company. As China
Total Populations in millions (2005) focuses more heavily on research
and development and high tech
2005: 572 Million
products, the attractiveness of
European Union seeing China as a sourcing
Megacity (10M+) destination for high value industrial
United States
493
Large City (5-10M) machinery and equipment will only
Brazil
increase.
Russia
Midsized City (1.5-5M)
298
Nigeria The next step is to view China as a
South Africa 186
long-term manufacturing base, not
Small City (0.5-1.5M)
132 143 only in order to save costs, but to
Australia
have access to a huge market.
47 Large Town (<0.5M)
20 From a labour cost perspective
China is by no means the cheapest
Source: McKinsey Global Institute China All City Model; McKinsey Global Institute analysis destination anymore, but it still

offers a good deal when looking at
a suite of factors, ranging from
political stability to investment
incentives to access to suppliers.
This situation is not bound to
change any time soon, and even
though India and Vietnam may
displace China in terms of
competitiveness in some
manufacturing areas, these
countries will struggle to match the
consumer wealth that China is
bound to generate.
The final step in this equation is to
see China not as a source of
imports or manufacturing base, but
as a market in its own right. While
this is an ideal for many companies
with a Chinese agenda, the further
along the line of importing, sourcing
and manufacturing from China you
go, the more the complexity of
doing business increases. The
bigger your China ambitions, the
greater your need for foresight,
time, large investment, strong
networks and good local
knowledge.
Ultimately, having a strong
presence in the Chinese market will
be essential in leveraging
opportunities as China’s urban
population moves steadily towards
1 billion.
The Biggest Winners
Based on McKinsey’s findings,
urbanization trends will give rise to
two major growth areas –
infrastructural demand to support
city development and a general
increase in urban household
spending.
The obvious business opportunities
are areas that will be tightly
contested not from foreign
companies, but most probably with
Chinese companies that have
already entrenched themselves in
dominant market positions.
On the move: On one day in December 2007, 58 new stations were opened on
the Shanghai Metro system.
The smarter people will look at
spending patterns in places like
Japan and South Korea whose
growth spurts have preceded
China’s and whose cultural and
consumer tendencies more closely
resemble potential Chinese patterns.
Areas such as consumer electronics,
high quality foodstuffs, insurance,
healthcare, financial services,
entertainment, international travel,
luxury goods, private education and
vehicles are just a few sectors that
stand to benefit from increased
household spending.
The other approach is to look at
what the pressure points will be
amidst all this growth. Assuming
massive congestion, would it pay to
invest in small cars, parking garages
or mass transit companies?
Will health risks from pollution
warrant looking at healthcare
solutions or is investment in cleaner
emission technology a more worthy
option? Coal-to-electricity or solar
power? The answer is all of the
above!
All of these factors are pushing
China into a position of long term -
though tightly contested -
opportunities. If your company
pursues a global agenda, can if
5
feasibly afford not to have a
concrete Chinese strategy? If not,
you are signing your company up
for fringe side seats on one of the
greatest economic booms of our
time.
The following are the highlights of
the McKinsey’s study:
● 350 million will be added to
China’s urban population by
2025 - more than the present
population of the US
● 1 billion people will live in
China’s cities by 2030
● 221 Chinese cities will have
one million or more people
living in them compared to
Europe’s 35 today
● 5 Billion square meters of
road will be paved and 170
mass-transit systems could
be built
● GDP will have multiplied by 5
times from now until 2025
● 50 000 of these buildings
could be skyscrapers – the
equivalent to constructing up
to 10 New York cities
Julian Hewitt
Manager, Shanghai Office
julianhewitt@thebeijingaxis.com
6

Africa and China: How Long will the Honeymoon Last?

With Chinese involvement in Africa growing by leaps and bounds, questions are being asked about
the sustainability of the relationship. The benefit to Africa is called into doubt by the Western media,
with China being accused of displaying colonial attitudes. Is there reason to be concerned?

For a country with well over a When looking at imports of

trillion dollars in foreign reserves,
China is showing an inordinately
large amount of interest in a
continent that is hardly seen as the
hottest investment destination
around. As China is bailing out Wall
Street investment banks and
pursuing such prize assets as Rio
Tinto, one could be forgiven for
thinking that the much-vaunted
China-Africa friendship of the
socialist era is something from
which China can now comfortably
move on.
And when deeper analysis is made
of the present reality behind
China’s pursuit of resources in
Africa, one might wonder whether
China’s renewed interest in Africa
should be categorized along with
some other investments made by
China’s recently created sovereign
fund - a dud investment made by a
sovereign rather than a commercial
entity. While western reporting on
the China-Africa relationship
centers on China’s “hunger for
African resources”, China is at
present, with the exception of oil,
getting precious little resources
from Africa. Even then, imported oil
in 2007 satisfied only about 12% of
Chinese energy needs, and of that
about a third came from Africa. And
for all China’s diplomatic
maneuvering on the continent,
around two thirds of African oil was
imported from just two countries,
Angola and Sudan, with Congo and
Equatorial Guinea making up most
of the rest.
minerals and metals, China’s focus
on Africa seems even more
puzzling. Chinese companies have
made fewer successful
investments in Africa than any
other region in the world. A copper
investment at Chambishi in the
Zambian copperbelt is the flagship
Chinese mining investment in
Africa, with around thirty other
investments dotting the continent.
Of these, however, only about a
third are operational, and only
about five major projects represent
ventures that were brought onto its
feet with Chinese capital.
Yet, China’s engagement of Africa
is inviting increasingly alarmist
parallels, especially in the western
media. Talk of a new Scramble for
Africa often mentions China as the
protagonist in a new era of
colonialism, even as China imports
only about a quarter as much oil
from Africa as the United States. In
a way investors in Africa are all
tarred with this brush - everyone
from oil companies to NGO’s to the
World Bank have been accused of

African Oil Exports to China (million tons, 1992-2005)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Angola 370 1,000 1,660 3,840 1,110 2,880 8,640 3,800 5,710 10,100 16,210 17,460
Sudan … … … 0 270 3,310 4,970 6,430 6,260 5,770 6,620
Congo-Brazzaville … … … 980 380 380 1,450 640 1,050 3,390 4,780 5,530
E. Guinea … … … 200 240 810 920 2,150 1,780 1,460 3,480 3,840
Libya 210 140 70 140 130 130 250 … 130 1,340 2,260
Nigeria … 390 … … 120 1,370 1,190 770 490 120 1,490 1,310
Algeria 10 130 … … … … … … … 130 680 820
Chad … … … … … … … … … … 830 550
Others 120 120 130 1,030 440 1,510 2,200 1,930 700 600 730 80
Total 500 1,840 1,930 5,910 2,190 7,250 16,950 13,550 15,800 22,180 35,300 38,470
% of imports 4% 11% 9% 17% 8% 20% 24% 22% 23% 24% 29% 30%

neo-colonialism - but in the case of
China this allegation has been
brought about by the unique nature
of China’s embrace of Africa. For
the first time since the end of the
cold war Africa is being engaged by
a country, instead of a collection of
companies or other organizations.
While Chinese mining companies
are scouring the continent for
opportunities, Chinese state-owned
companies are building related
infrastructure on the back of
massive credit lines supplied by
Chinese banks. In late March
Chinese insurer Sinosure offered
export credit guarantees of USD 40
to 50 billion for Chinese
investments in Nigeria, while the
DRC has been promised up to
USD 9 billion worth of Chinese
assistance in rebuilding the
shattered economy through
resource investments. There is a
sense of urgency in China’s
engagement of Africa - in 2002 a
mere 16 Chinese government
delegations visited Africa, while
that number had risen to 64 by
2005. Certainly a scramble by most
definitions.
But to typify China as a colonizer is
to look at the situation through a
very narrow historical prism.
Chinese involvement in Africa goes
back to the earlier years of the
post-colonial era when Chinese
railway engineers completed the
spectacular feat of linking the
Zambian copperbelt to the Indian
Ocean port of Dar-es Salaam.
Besides, China’s engagement of
Africa is to bring it little material
benefit for a substantial time into
the future, and most investments
are made in countries that carry
considerable risk. From the African
perspective, Chinese investment
arguably carries even more risk.
Chinese parties are known for
driving a hard bargain, and the
habit of importing Chinese
labourers and service providers
Making the connection: Zambian and Chinese railway engineers working on the
Tanzam Railway, ca. 1970 (courtesy ChinaRail)
labourers and service providers
carry local political risk - just ask
the Zambian government who had
to fend off a challenge from a
politician that built an entire political
campaign on exploiting anti-
Chinese sentiment.
The central theme here is the major
strategic synergies that exist
between these two regions. China
regards Africa as geo-political
beachhead that has been
abandoned, politically at least, by
western governments. Africa’s
industrial revolution holds the
promise of great markets, while its
resource wealth acts as a political
hedge in a world where China’s
economic expansion will move
commodity scarcity ever higher up
the global political agenda. If China
can actually, ten or twenty years
from now, obtain significant
resources from Africa, that would
be a handy bonus. For African
governments, China’s interest
hands it unprecedented power on
the international stage: China offers
commercial ties with little or no
political strings attached, while
7
political strings attached, while
China’s interest allows African
governments to drive a better
bargain with western parties.
Mining projects, oil concessions,
construction credit or votes at the
UN currently serve to develop this
overarching synergy, not to bluntly
pursue short or medium term
profits.
Chinese resource investments in
Africa don’t yield immediate
resources, but rather immediate
political clout with the add-on
benefit of future material yields. A
promise of a USD 9 billion loan
doesn’t mean money in the bank
for an African government, but
rather immediate political clout with
the add-on benefit of future flows
of investment. Governments in
Africa may change, but their geo-
political weaknesses won’t; the
commodity boom may end, but
China will still have very few
resources. The courting has only
Dirk Kotze
China General Manager
dirk@thebeijingaxis.com
8

China in Statistics
The China in Statistics page contains recently released data that best illustrate the main trends in
the growth and transformation of Chinese commerce and industry, with an emphasis on trade and
foreign investment.

Share of BRI(C)S Total Trade with China (Jan-Dec 07) China Total Trade (12 month historical data, USD bn)

Brazil South 120 Imports Exports

23% Africa
11% 100
80
60
40
India Russia
20
30% 36%
0

v
c
ct
ay

g
r
ar
b

p
Ju
Ap

No
Ju

De
Ja

Au
Fe

Se

O
M

M
Source: PRC Ministry of Commerce Source: PRC Ministry of Commerce

10 Largest Trade Deficits with China (Jan-Nov 07) Actual Use of Foreign Investment (2007, USD bn)

Hong Kong USD 172 bn

USD 6.6 bn
United States USD 163 bn
8
Holland

Britain
5
United Arab Emirates

Singapore

Spain 3
Italy

India

Turkey 0
b

ov
pr

ug
l

ct
n

p
ay
n

ar

ec
Ju
Fe

Ju
Ja

Se

0 50 100 150 200

O
A

N
M

D
M

Source: PRC Ministry of Commerce Source: PRC Ministry of Commerce

Shanghai Composite Index (12 month historical avg.) China’s Foreign Exchange Reserves (2007-08, USD bn)

7,500 16 Oct 07 USD1647 bn

21 Mar 08 2,000
6,092 3,796
1,500
5,000
1,000

2,500 500

0
0
ov

b
pr

ug
l

ct
n

p
ay

n
ar

ec
Ju

Fe
Ju

Ja
Se

O
A

N
M

D
M

Jan 07 Mar Jul Oct Jan 08

Source: Shanghai Stock Exchange Source: China State Administration of Foreign Exchange
 9

Statistics in the News

China’s rise is best described in numbers, whether population, economic growth or the fact that in
2007 its crude steel output was the same as the total for the entire three decades after the 1949
revolution. Statistics in the News is a selection of the most interesting statistics released this month.

Sovereign wealth funds are making their force felt in the global investment arena
The China Investment Corporation (CIC) is the newest UAE
member of the “Super Seven” USD100+ billion state-
owned sovereign wealth funds. Morgan Stanley recently Norw ay
published a report saying that up to USD2.9 trillion is Singapore
7 Largest Sovereign
under sovereign wealth control and this could grow to Kuw ait Wealth Funds (USD bn)
USD12 trillion by the year 2015 making it the world’s
China
largest global investment pool. The largest, UAE’s Abu
Dhabi Investment Authority, was established in 1976 Singapore (TH*)
and has an asset base of USD875 billion. While China Russia
Investment Corporation is only valued at USD200
billion, it could soon become the largest on the back of 0 200 400 600 800 1000
China’s USD1.6 trillion foreign reserves. * Singapore’s Temasek Holdings does not consider itself a SWF

Shanghai’s air pollution statistics offer some cause for concern

The Chinese Ministry of Environmental Protection ranks 500 Shanghai's Air Pollution Index (2007)
84 Chinese cities on a daily Air Pollution Indices (API)
basis according to three major air pollutants - sulphur 400
dioxide, nitrogen dioxide and inhaleable pollutants. The
API scale goes from 1 to 300 with anything in excess of 300
300 being heavily polluted. According to these
statistics, Shanghai had an Air Pollution Index (API) 200
average of 68 (qualified as ‘Not affecting daily activities’)
for 2007 compared with Beijing’s average of over 90. 100
However, Shanghai did have two days for serious
0
concern in 2007. On 19th January, the API was 412
while a staggering 500 was recorded on 2nd April. Jan Apr Jul Oct Dec

Heavy snowfalls add to China’s inflation woes

China’s inflation rate soared to an 11 year high of 8.7%

8 China's Inflation (CPI core YoY)
in February 2008, adding calls for the central bank to
increase interest rates to ease inflationary pressures.
Food prices comprise of a third of China’s CPI basket 5
and have seen significant price increases in recent
times. The pork price was up 63% year on year while
cooking oil jumped 41% over the same period. The 3
latest inflation figures come on the back of a disastrous
cold weather spell that swept through China over
Chinese New Year. Heavy snow falls disrupted supply 0
lines and caused severe damage to agricultural
06

07

08
20

20

20

produce.
10
China Business News Highlights
First quarter business developments in China saw Chinalco take a stake in Rio Tinto, while the
Shanghai stock market continued its slide. Snowstorms further pushed up an already high inflation
rate, just as the release of 2007 statistics showed no slowdown in GDP growth.
In late January central China was
lashed by severe snowstorms that
were described as the worst in
memory. According to government
estimates some USD15 billion of
damage was done, with 350,000
homes destroyed, along with 24
million hectares of farm production.
The storms hit at the worst time -
just as 200 million migrant workers
were making their way home for the
Lunar New Year festival - and at the
worst place - in parts of China that
straddle most of the important
transport routes.
The National People’s Congress
(NPC) and Chinese People’s
Political Consultative Conference
(CPPCC) had its annual sitting 5 to
18 March. China’s main legislative
and political bodies respectively,
this year’s sessions placed special
emphasis on inflation, given the
almost doubling in 2007 of the price
for pork, a popular part of the
Chinese diet. The government
further promised to strive to reduce
energy consumption while
promoting sustainable development.
Events also saw the creation of five
new super-ministries, including one
for environmental protection.
Taiwan’s presidential elections
yielded a result palatable to China
or the first time since the
introduction of democracy to the
island in the early 90’s. The election
of Ma Ying-jeou, the charismatic
former mayor of Taipei, returned the
Kuomintang to the presidency for
the first time since 2000, thus
raising hopes for better cross-strait
relations. Although the Kuomintang
is the Communists’ traditional
adversary, the two parties made
The fresh new face of China Going
Abroad: Chinalco President Xiao
Yaqing.
peace in 2005, and the Kuomintang
is generally regarded favourably,
especially after the erratic 8-year
presidency of Chen Shui-bian
Chinalco, holding company of
Chinese aluminium giant Chalco,
on 1 February announced that it
had partnered with US based Alcoa
to buy a 12% stake in Rio Tinto,
thereby wishing to block BHP
Billiton’s attempt to acquire the
Anglo-Australian iron ore miner.
China’s GDP grew by 11.9% in
2007, according to National Bureau
of Statistics released at the end of
January and adjusted in March.
This is the highest annual rate in 13
years. Over the last 6 years the
Chinese economy grew by 65.5%.
In early January Chinese
authorities slapped export tariffs
on grains, ranging from 5 to 25%.
The move came a mere two weeks
after exports rebates on grains
were scrapped, and echoes similar
measures by governments in India
and Vietnam to deal with food
inflation.
China had issued 1.5 billion bank
cards by the end of 2007, a growth
of 32.6 percent on the same period
of the previous year, according to
the People's Bank of China, the
central bank. The total included
1.41 billion debit cards, up 30.4
percent, and 90.26 million credit
cards, up 82 percent. Last year
witnessed bank card-based
consumption account for 21.9
percent of China's total annual
retail sales, up 4.9 percentage
points year-on-year.
In March the Shanghai Composite
Index fell by more than 20%, and
recorded its lowest level since April
2007. The index had lost more than
40% in the 5 months since
November. PetroChina, who in
October 2007 was responsible for
China’s largest ever IPO, saw its
stock sink back to close to its listing
price of around 16 yuan. That after
the stock surged by 163% on its
opening day.
In late March the Industrial and
Commercial Bank of China (ICBC)
and Standard Bank of South Africa
announced the creation of a USD1
billion global resources fund.
The fund would focus on China and
Africa, especially in the fields of
preliminary mining, and resources.

CITIC Securities announced in
mid-March that it was pulling out of
a seemingly ill-advised USD1
billion investment in Bear Stearns,
after JP Morgan announced that it
was taking over the company.
China’s consumer prices rose
8.7% year-on-year in February
after gaining 7.1 percent in
January. This was the highest
figure since May 1996, when it
stood at 8.9 percent. Food prices
surged 23.3 percent in February,
with pork prices up 63.4 percent
and vegetable prices up 46
percent, contributing more than 80
percent of the increase.
Ping An Insurance Group,
China's second largest insurer,
announced during March that it had
agreed to buy half of Belgian
financial service provider Fortis's
asset-management unit for 2.15
billion euro (3.4 billion U.S. dollars).
The deal is expected to help Ping
An establish a global business
platform for its asset-management
and QDII (Qualified Domestic
Institutional Investor).
A court in China’s Southern
Guangdong Province has ruled in
favour of Louis Vuitton in a case
brought against a local hotel that
leased floorspace to a seller of
knock-off Louis Vuitton (LV)
products. However, the
Intermediate People's Court in
Dongguan City awarded only
100,000 yuan (around USD13,500)
to the French luxury producer.
Significantly, most of China’s large
knock-off markets have up to now
escaped lawsuits on the grounds
that they only lease space to small
vendors, and thus are not
themselves responsible for any IP
infringement. Whether the ruling is
applied nationwide remains to be
seen.
The prices they are ‘a changing: A sign outside at a rural food vendor
announces a rise in price for mutton skewers.
The first two months of the year
saw a spectacular 75% rise in
China’s inwards FDI figure,
reaching some USD18 billion. This
is on the back of several large
projects and a strong yuan, and
despite a unification in the tax
codes for foreign and local
companies by which foreign
companies will pay tax at a higher
rate. In 2007 China received foreign
direct investment to the tune of
USD74.8 billion.
In the first two months of the year
Chinese retail sales grew by
20.2% year-on-year, an 11-year
high. When accounting for inflation,
sales were still up 12.6%, a figure
stimulated by high income growth
and the growing financial security of
Chinese consumers. China has
relatively weak domestic
consumption, a situation that the
government is eager to remedy as
the country tries to shift the source
of its spectacular growth from
investment and foreign demand for
goods to domestic consumption.
11
Housing prices in China
continue to rise. In February year-
on-year growth of 10.9% was
recorded, with second tier cities
leading the charge. Whereas the
property boom in the large coastal
cities have tapered off, Urumqi in
Xinjiang, Ningbo in Zhejiang and
Haikou in Hainan saw growth of
24.2%, 18.3% and 18.9%
respectively.
In early March the president of
Minmetals, a Chinese diversified
metals giant, implored the Chinese
government to establish a fund
through which Chinese
companies could acquire foreign
metals assets. He said that capital
could be raised from the China
Investment Corporation (CIC), the
Chinese sovereign fund. In late
2007 BHP Billiton sent a shudder
through China when it attempted a
takeover of Rio Tinto, thereby
raising the possibility of three
quarters of the world’s iron ore
production coming into the hands
of only two companies.
12
China Perspective
Taking a look at the issues discussed in the Chinese media, China Perspectives aims to track the
opinions and criticisms of the very people that are driving and living China’s breakneck
transformation.
In January the Chinese media was
dominated by the chaos that
ensued when the annual Lunar New
Year migration of 200 million
workers coincided with the worst
snowstorms in memory in central
China. Disrupted train schedules
saw crowds of up to 150,000
stranded at railway stations, while
key staff were recalled from their
vacations to repair infrastructure.
Premier Wen Jiabao made a much-
publicized visit to a railway station
to apologise over a megaphone,
while a group of electricity utility
workers who died while repairing
pylons in freezing temperatures
were lionized by state media.
The annual sitting of China’s
legislative body, the National
People’s Congress and the
political advisory body, the Chinese
People’s Political Consultative
Conference, took place from 5 to
18 March. As is usual, official news
coverage focused on the positive
and agenda aspects of the
meetings, but this was by no means
where the story ended. The
Chinese internet was alive with
independent commentary, and the
favourite punching bags seemed to
be the Ministers for Railways and
for Education. The former gave his
ministry a 90% score for their
performance during January’s Lunar
New Year transportation chaos. The
Education minister drew ridicule for
making Beijing Opera and some
revolutionary opera part of the
elementary curriculum, a move that
seemed entirely out of tune with the
times. Significantly, such
unflattering comments were
generally not deleted by chatroom
moderators or other censors.
Chinese media reacted indignantly to
perceived western bias in the coverage
of the “Lhasa Riots”. A picture that
appeared on CNN was shown by state
media to have been cropped in order to
exclude rioting Tibetans, while a widely
distributed photo of monks being beaten
up by soldiers was actually taken in
Nepal - Chinese riot police do not wear
blue camouflage. However, state media
was selective in its own coverage too:
when the Olympic torch-lighting
ceremony in Greece was disrupted by
Tibet activists, state television carefully
avoided showing any of the protesters.
The election of the Kuomintang’s propaganda bonanza of the year:
Ma Ying-jeou in Taiwan was In late March Beijing’s new airport
heralded by the mainland media as and Heathrow’s Terminal 5 opened
the best chance for cross-strait on consecutive days, and the
peace, after eight years of often contrast couldn’t have been
provocative politicking from greater. As Terminal 5 sank to its
Taiwan’s pro-independence DPP. knees, Beijing opened the world’s
The biggest influence will, however, biggest airport, 17% bigger than all
be felt by Taiwanese residents - Mr of Heathrow, without a glitch. Yet,
Ma has promised to allow direct the opportunity to ridicule western
flights to the mainland for the first ineptitude was largely passed over,
time in almost 60 years, while with only state television comparing
allowing more mainland tourists to the two events in a small report.
visit the island. Was this simply self restraint on an
Olympic scale?
At a time when the China is being
lambasted in the Western media, Compiled by Haiwei Huang and
Chinese media was gifted with the Edward Wang
 13

China Sourcing Blog Highlights

In the past few months the China Sourcing Blog has continued to digest and analyze all parts of the
sourcing debate. Investigating familiar issues like sustainable sourcing and quality fade, CSB also
gained some new insights from interesting developments involving ‘suspicious liquids’ and ‘hot air.’

Tracking a multi-faceted, dynamic

subject, this blog has a big name to
live up to. So we carefully scan
everything from the mainstream
financial media to the more distant
corners of the Internet, all to find
you the best bits and pieces on
China sourcing. Sponsored by the
THE BEIJING AXIS, CSB aims to
provide an informative channel on
China sourcing and give a more
holistic perspective on the issues
debated. Following are some of the
most popular postings over the last
three months:

Posted: 18 March 2008

In the rush for natural resources,
China’s mining industry has
undergone rapid expansion, with a
headlong new gold rush and a
booming building industry that have
even led to copper gangs in
Australia trying to get in on the
lucrative China metals trade.
However, for some of China’s
migrant workers, as factory-line
poet Zheng Xiaoqiong tells us, life
as a cog in the machine can have
all the qualities of a piece of iron.
Posted: 15 March 2008
From terrorist attacks attempted
with flammable liquids in an aircraft
toilet to quality fade in the form of
water-tinged gasoline, China’s had
a fair share of problems with
suspicious liquids recently. Yet
China is having more luck in
making the machines that use
these liquids as demand for
Chinese trucks and motorcycles is
steadily increasing…
Posted: 1 March 2008
Labour shortages in Guangdong
formed the basis for a posting
Vietnam or bust: At the end of 2007 some 10,000 factories in Guangdong
Province closed their doors due to rising production costs.
about how China’s economy is
dealing with rapid growth and
inflation. As some light
manufacturers in Guangdong faced
closure, increasing labour
organization have formed the
backdrop for pressures of
regulation and rising costs of
energy, materials and labour, which
have led some to speculate China
is about to lose its claim on
cheapness.
Posted: 28 February 2008
Quality Fade was one of the main
issues of 2007, and in a posting
analyzing current debates on the
subject, CSB investigated the
adverse effects of cost-cutting by
Chinese factories experiencing
pressure. Yet quality fade is also
the supplier’s responsibility, and
illustrates why trust is such an
essential component of sourcing.
Posted: 21 February 2008
Could China be at the forefront of
the so-called Third Industrial
Revolution? In a posting
investigating the outlook for
sustainable sourcing in China,
CSB presented some ideas for
ensuring more ethical supply
chains by integrating environmental
and labour concerns more fully into
companies’ procurement efforts.
And finally...
In one of the most popular posts,
Dealing with hot air - China’s
snow storms and reflection, we
outline the problems with China’s
energy security by means of a
novel interpretation for the ‘hot air’
which caused China’s Spring
Festival snow storms.
CSB@chinasourcingblog.org
14

Upcoming Events
THE BEIJING AXIS can assist delegates that wish to attend events such as fairs, exhibitions and
conferences in China. Services include research, interpretation, negotiation and travel logistics.
For more information: info@thebeijingaxis.com, or contact one of our offices.

Date Event Location

15 - 17 April Automotive Logistics Asia Conference Shanghai

15 - 24 April Canton Fair - China Export and Import Fair Guangzhou

17 - 20 April Chinaplas International Exhibition on Plastics and Rubber Industries Shanghai

19 - 22 April China Plywood Trade and Investment Conference Qingyuan

22 - 24 April China Power Exhibition Shanghai

22 - 28 April Auto China - Beijing International Automotive Industry Exhibition Beijing

13 - 15 May CECIA - International China Exhibition & Conference on Instrumental Analysis Guangzhou

13 - 15 May Expo Bio - International Biotechnology Exhibition Guangzhou

14 - 17 May Beijing Essen International Welding & Cutting Fair Beijing

19 - 21 May AES China - International Automotive Electronics Products and Technologies Show Shanghai

19 - 21 May ATS China - International Automotive Testing Instruments Expo Shanghai

23 - 25 May China International SME Fair & Forum Suzhou

23 - 25 May Logistics World Suzhou China - Logistics Technology and Service Exhibition Suzhou

26 - 29 May IBCTF - International Building & Construction Trade Fair Shanghai

28 - 30 May Aluminium China - Aluminium Industry Event Guangzhou

28 - 30 May Biotech China - International Trade Fair & Congress for Biotechnology Shanghai

4 - 6 June Optinet China Conference - Optical Networking Conference Beijing

10 - 13 June Power Transmission and Automatic Control Expo Beijing

16 - 19 June China International Exhibition of Mould Equipment and Technology Guangzhou

16 - 19 June China International Hardware Tool Exhibition Guangzhou

16 - 19 June International Machine Tools Exhibition Guangzhou

9 - 12 July Eastpo Shanghai - International Machine Tool Fair Shanghai

28 - 31 July China Industrial Equipment Fair Qingdao

28 - 31 July China Machine Tools & Moulds Expo Qingdao

28 - 31 July China Industrial Automation & Instruments Expo Qingdao

28 - 31 July China Power Transmission & Control Technology Exhibition Qingdao

28 - 31 July China Plastics & Rubber Industry Exhibition Qingdao

 15

THE BEIJING AXIS News

Danielle Olivier joined The Beijing
Axis Johannesburg Office as an
Analyst on 1 January. She
graduated from the Institute of
Marketing Management in
Johannesburg in 2007, and has
been employed part-time since
November 2007.
Vladimir Tsiba joined The Beijing
Axis Moscow Office as an Analyst
on 1 March. Vladimir speaks
Russian, English and Mandarin
Chinese, and graduated in
Mathematics from the Far Eastern
National University in Vladivostok.
He has worked as a management
consultant in Russia for the past
two years.
Dirk Kotze, The Beijing Axis
General Manager for China,
delivered a presentation on
‘Chinese Investment in African
Mining’ at the Macquarie First
South China Day in South Africa,
held in Cape Town on 1 February
2008.
In early March Lilian Luca, The
Beijing Axis Director for Russia and
Eastern Europe, delivered a
presentation titled ‘Advantage
through Sourcing from China’ at
sourcing summits in Moscow and in
Donetsk, Ukraine.
Kobus van der Wath, Managing
Director of The Beijing Axis
addressed two events on issues
related to sourcing from China. On
3 March a presentation titled ‘China
in your Low Cost Country Sourcing
World: Strategy, Implementation
and Selected Cases’ was delivered
to the Council of Supply Chain
Management Professionals
(CSCMP) in Johannesburg, while a
presentation titled ‘Gaining
Advantage through China
Sourcing: From Strategy to
Implementation’ was delivered to a
gathering of the International
Purchasing & Supply Education &
Research Association (IPSERA) in
Perth from 9 to 12 March.
Cheryl Tang and Dirk Kotze from
the Beijing office and Julain Hewitt
from the Shanghai office attended
the China Sourcing Summit 2008
in Shanghai on 13 March. Dirk
Kotze, General Manager for China,
delivered a presentation titled
‘China Sourcing in the Sphere of
High-Value Industrial Products’ .

About THE BEIJING AXIS

THE BEIJING AXIS serves as a dedicated business

bridge to China. Our focus is on two-way China strategy,
sourcing and investment.

By leveraging sound analytical processes, hands-on

experience and strong networks, the firm is positioned to
support clients’ divergent needs. Our solutions go
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enables us to bridge information gaps as well as cultural Why THE BEIJING AXIS?
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mitigates associated risk. transaction support. We offer insight, impact, trust and
confidence on the basis of a strong team and:
We have assisted several international blue chip
companies in setting their China ventures on the right
strategic course and implementing related initiatives. ● Operational (on-the-ground) presence in China
Similarly, we serve many of China’s most ambitious and
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For more information, please visit our English, Chinese ● Proven track record
or Russian websites at www.thebeijingaxis.com.