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The report found here as a PDF highlights the opportunities and trends associated with growth in the Chinese outbound travelers markets.

China Salt is a state owned company that has a monopoly over the management and production of edible salt in China. It is one example of an SOE that the public is beginning to question the need for- is salt a matter of national security in 2014?

Employees: 60,000

Subsidiaries: 46 over 22 provinces

Total assets: 34.5 billion in value

Output: 12 million tons salt annually,

7.7 million tons salt chemical products annually

China has a long history of many dynasties using salt as a major source of government revenue, with it still representing over 5% of the total national tax by the founding of the PRC. Nowadays, salt brings in only a very small percentage of national tax, but the monopoly still costs consumers an average of an extra 10 yuan per year in excessive profits.

One reason for the state affiliation decades ago was for health reasons as iodine deficiency is a common problem among under-nourished populations. As salt can be iodized or non-iodized, the government wanted to ensure that all citizens were consuming salt with iodine to resolve this problem. However, this is no longer the case for the Chinese population and in fact China is joining the developed world now in having the opposite problem, with people consuming too much iodine, also leading to health complications. Now, Chinese consumers have no option to purchase salt with iodine as there is no private market.

CNSIC has a monopoly in China on table salt, with sub-enterprises encompassing production, packaging, and distribution. The company was founded in 1950 and falls under the administration of the State Council. Regulations in China prohibit salt from being sold across regional lines or from private citizens selling their own manufactured salt. This particular law led to the removal of all salt listings from Taobao’s marketplace in March 2013.

One negative outcome of the monopoly is in the food industry, in which there have been reports of food product manufacturers, such as soy sauce and other seasonings, illegally using industrial salt rather than table salt in their products to cut down on costs.

In 2013, US exports to China reached $120 billion, making it the third-largest export market for US goods behind Canada and Mexico, our neighbors and NAFTA partners.

US exports to China have grown faster than exports to any other major US trading partner. From 2004 to 2013, US exports to China increased 255 percent. That rate is greater than growth to any of the other top ten US export markets, including its two largest trading partners, Canada (59 percent growth) and Mexico (108 percent growth). With its large population, rapidly growing middle class, and long list of infrastructure goals, China will continue to be a major export market for US goods and services.

Please click here to download the full PDF report.

For years, investment opportunities in China seemed restricted to bustling coastal cities like Shanghai, Shenzhen, and Guangzhou. The Chinese hinterland—where the bulk of the world’s largest population resides—received comparatively little attention.

Over a decade into the 21st century, the situation in China has changed. Previously emerging markets on the east coast have become  increasingly  saturated,  leading  savvy  investors  to  look  elsewhere.  Meanwhile,  infrastructure  investment  and favourable economic incentives have transformed China’s vast hinterland, opening up opportunities in cities most investors previously never knew existed.

Wuhan City                                                                                    Wujiashan Taiwan Development zone

Most  investors know that inland China has tremendous economic potential. What  most people don’t understand are the practical mechanics of accessing these increasingly vibrant engines of growth.

Wuhan —central China’s largest metropolis and a city at the nexus of China’s transport network. Once billed as the “Detroit” of China due to its massive auto manufacturing industry, Wuhan has reinvented itself for the 21st century as an environmentally-friendly venue for high-tech investment.

A Snapshot

Compared with similar size cities around the globe, Wuhan could seem awkward. Larger than London or New York, having over 1 million university and college students alone, yet with only three metro lines. Wuhan, as a city, started to exist only in 1926, when three ancient towns, Wuchang, Hangkou and Hanyang, were conjoined. Wuchang, by using its favorable position on the Yangtze River has always been a busy port. Nowadays, Wuhan’s position as a transportation hub is even stronger, as it lies on the two most important railway corridors in China, Shanghai-Chengdu and Beijing-Guangzhou and is the biggest inland port in the country. This has allowed the city to become a hub for major delivery and shipping companies.

Today the city offers a lot more, besides good transportation links. Wuhan is the largest city in central China, with the population of 10.5 million, 5^th largest in the country. The city has seen its GDP grow by 10-12% each year reaching 900 billion CNY ($144.3 billion) in 2013, the 9^th highest in the country. According to reports, it is one of the fastest growing cities globally in terms of GDP. Wuhan is also a burgeoning high-tech city, with 3 Special Development Zones and a Pudong-style skyline in the planning stage. According to British government estimates, ¥3.9 trillion ($625 billion) will be invested in Wuhan’s infrastructure by 2030.

State-level special industrial zones could be considered as Wuhan’s economic backbone. Both foreign and domestic companies have been taking advantage of them for the last two decades.

Wuhan East Lake Hi-Tech Development Zone (EDZ) includes many opto-electronics, telecommunications, biotechnology, laser and engineering companies from China and abroad. Enterprises receive tax breaks, subsidies for exports, and priority in government procurement. All Wuhan registered companies can receive subsidies for hired experts and office space. From these industries its optical telecommunications that are the pride of the EDZ, as the largest fiber-optic cable manufacturer and the largest research institute in China are located in the zone.

The original Dongfeng Motors’ production site and headquarters are located in Wuhan Economic & Technological Development Zone (WEDZ) making it one of the most automotive industry-concentrated areas in China. Honda and Peugeot-Citroen cars are manufactured here, as well as various domestic brands. Another pillar of industry in the WEDZ is electronics manufacturing, as it is one of the main production sites for LCD monitors and air conditioners in China. The zone also has a packaging, biopharmaceuticals, food and resources & materials industrial cluster, as well as industry parks designated for French and Japanese enterprises.

                                                The Citroen production line in Wuhan

The latest, Wuhan Wujianshan Economics and Technological Development Zone is mostly dedicated to Taiwanese-funded enterprises and is aimed to become the largest Taiwanese businesses’ cluster in Central China.

Wuhan loves all things French. According to Hubei government’s statistics, a third of the ¥144 billion ($23.2 billion) French FDI in China is invested in Wuhan. More than 80 French companies have a presence in the city; a rate higher than anywhere else in China. According to France’s Consul General in Wuhan, the partnerships started with the Peugeot-Dongfeng joint venture in the early 90s and intensified after Sarkozy’s visit to China in 2007. French companies are mostly focused on construction, waste processing, energy, transportation and retail industries. Prominent enterprises in Wuhan are Peugeot-Citroen, AXA, and TOTAL. GE as well as General Motors also have production facilities in the city.

However Wuhan`s greatest draw is Education, the city has over 1 million students, more than any other in China, enrolled in more than 80 higher education institutions. Furthermore, Wuhan University, Wuhan University of Technology and Huazhong University of Science and Technology (HUST) constantly appear in Chinese and Asian universities’ leagues tables’ top positions. Finally, there are plenty of national research centers and laboratories, most of which closely work with private enterprises in the city.

Wuhan is planning to seriously change its skyline and become the Shanghai of Central China. The development projects are just stunning. When it comes to super-tall skyscrapers (over 300 meters), there are 4 being built at the moment, and more than 10 proposed to be built, not to mention countless skyscrapers under 300 meters. The most noticeable one is Greenland Centre, a 636-meters tall multifunctional building, which eventually should become China’s third tallest building. It is estimated to cost around ¥30 billion ($4.8 billion) and to cover the area of 300 thousand square meters. Another project is Riverview Plaza (Wuhan Tiandi A1), a 460 meters skyscraper in Yongqing area. The whole Tiandi project is also estimated to cost about ¥30 billion, but cover a larger area of 1.5 million square meters. Shanghai’s Xintiandi reconstruction was done by the same developer – Shui On Land, with some of the same architects working on the project. Wuhan Center will be part of Wuhan’s CBD district, the 438-meter super-tall will be the first to be built among Wuhan’s skyscrapers and be the first building in the city to break 400 meter mark. To service these buildings the Metro will see a further extensions of the current lines, 4 new ones currently being under construction (to be completed in 2017 and another 6 in the planning phase.

                                    The proposed CDB area development

Wuhan’s expansion plans are very ambitious and the city wants to compete with the likes of Shenzhen or even Shanghai and Wuhan might just become one of those global cities due to its strategic geographic location: a 2-hour or shorter flight time from all other major Chinese cities to Tianhe International Airport and its shear audacity in its ambition.

Due to its large volume of University graduates both the municipality and provincial governments are determined to provide as many jobs as there are graduates to further fuel growth.. This can only contribute to the growing investment of foreign enterprises looking for a relatively cheap and skilled workforce.

However although the ambitions to build skyscrapers are high, the majority of them are still at the proposal stage, which makes any development plans susceptible to a slowdown in the economy. Moreover, there is no clear, public data on occupancy rates of recently built and under construction buildings.

As with many developing cities a major problem is pollution: a few weeks ago “water panic” erupted in the city, as the public water supply was cut due to an excess of chemicals in the supply as well as the ever prevalent API figure.

Government Policy and Investment Incentives

The Wuhan municipal government offers certain incentives to both wholly-owned foreign enterprises and Sino-foreign joint ventures invested in the city. These incentives, once limited to export-heavy industries,  have  expanded  to  include  a  wider  variety  of  industries  in  the  years  following  China’s accession to the World Trade Organisation.

Wuhan has tied incentives into industries that establish themselves inside one of the city’s economic development zones. These development zones, of which the two largest are the Wuhan East Lake High- Tech  Development  Zone  and  the  Wuhan  Economic  and  Technological  Development  Zone,  offer additional advantages to firms that include proximity to transport modes and access to a large pool of qualified university graduates.

In general, most investment-incentives accorded to firms operating in Wuhan come in the form of tax relief. According to the Wuhan municipal government, the following incentives are available to foreign invested enterprises:

1      Full exemption from 30 percent corporate income taxes, 20 percent withholding tax, and 3 percent local corporate income taxes

1.1      A permanent corporate income tax holiday is available to foreign financial institutions for interests on loans to the Chinese government and to China’s National Bank- these are available for profits derived from royalties on technologies deemed to be advanced

1.2      A five-year corporate income tax holiday is available for the first five profitable years of Sino-foreign joint ventures in energy, transport, and infrastructure with an operating term of at least 15 years. The holiday is also available for the first five profitable years of approved integrated circuit manufacturers with an operating term of at least 15 years.

1.3      A two-year corporate income tax holiday is available for the first two profitable years of investment for high-tech industries located in Wuhan’s development zone. It’s available for the first two profitable years of approved integrated circuit and software enterprises.

1.4      Exemptions  from  a 20  percent  standard  withholding  tax  are available  for:  foreign investors’  gains secured by the right to share profits by proportion of investment, stock rights, or other non-creditor rights business; for interest on loans by international financial institutions to the Chinese government and China’s National Bank; for interest at preferential rates on loans to China’s National Bank by foreign banks;  and  for  gains  from  chartered  rights  and  use  fees  acquired  by  providing  special  approved technology for scientific research, energy exploitation, and transportation development.

1.5      Exemptions from a 3 percent local corporate income tax are available for all investments which qualify for federal corporate income tax exemptions or reductions.

2      Concessionary Tax Rates

2.1      A six year 7.5 percent tax rate is available for profitable years six through eleven of high-tech industries located in Wuhan’s development zones.

2.2      A five-year 7.5 percent tax rate is available for profitable years six through ten of approved integrated circuit manufacturers with an operating term of at least 15 years and is available for years six through then of infrastructure construction projects.

2.3      A one-year renewable 10 percent tax rate is available in Wuhan’s  development zones for profitable years after the tax holiday and reduced rates have expired for companies exporting more than 40 percent of total production in any given year. The rate is also available in the development zones for profitable years after the tax holiday and reduced rate have expired, and for companies exporting more than 70 percent of total production in any given year.

2.4      A continuous 10 percent tax rate is available for profits derived from royalties on technical knowledge from scientific research, exploitation of energy resources, development of the communications industry, agricultural, forestry, and animal husbandry production. The rate is also available to software companies deemed to be key enterprises by the state, regardless of their location, when other preferential tax rates no longer apply.

2.5      A continuous 15 percent tax rate is available for investments in manufacturing located outside of the special zones for companies engaged in high-tech projects, energy, communications, and port construction, or having a value of more than USD 30m with a long investment payback period. The rate is also  available  for  high-tech investments in the  development zones after  the  initial tax  holiday  and reduction periods expire, and for approved integrated circuit manufacturers, regardless of location, that do not qualify for other preferential tax rates.

2.6      A continuous 24 percent tax rate is available for foreign investments in manufacturing not listed above that have an operating term of over 10 years.

3      Income Tax Deductions, Allowances, and Credits

3.1      Income tax losses can offset the following year’s gains. A ‘carry forward’ of any unused portion is permitted for up to five additional consecutive years.

3.2     Accelerated depreciation is available for software and for machinery and equipment of approved manufacturers of integrated circuits.

3.3      Software and approved integrated circuit enterprises may be eligible for a tax deduction of 50 percent of research and development expenses incurred during a single year, provided that those expenses exceed the previous year’s research and development (R&D) expenses by not less than 10 percent

3.4      Foreign investors reinvesting their share of profits in the same investments or in new businesses that employ advanced technologies, with an operating term of at least five years, may receive a refund of 100 percent of the income tax already levied on the reinvested amount

3.5      Foreign investors reinvesting their share of profits in the same investments or in new businesses not employing advanced technologies, with an operating term of at least five years, may receive a refund of 40 percent of the income tax already levied on the reinvested amount.

4      Non-income Taxes

4.1      Exemptions from the Value-Added Tax (VAT) are available for imported goods used in the processing of export products and to approved integrated circuit manufacturers and software enterprises for the import of raw materials for production and consumption goods for their own use, and for the import of technology and special equipment necessary to production.

4.2      Rebate of a portion of the 17 percent VAT paid by software manufacturers: the amount of VAT in excess of 6 percent charged to integrated circuit manufacturers for the sale of IC products may be rebated until the end of 2010, provided the differential is used for research and development or expanded production of software products. The rebated amount may be treated as tax-exempt income for income tax products

4.3      Rebate of a portion of the 17 percent VAT paid by software manufacturers: the amount of VAT in excess of 3 percent charged to software manufacturers for the sale of software products may be rebated until the end of 2010, provided the differential is used for R&D or expanded production of software products.The rebated amount may be treated as tax-exempt income for income tax purposes

5      Visas and Work Permits

5.1      Employees engaged in major high-tech projects, and employees and senior managers of large-scale investments may receive multiple-entrance visas.

5.2      Employees engaged in major high-tech projects, and employees and senior managers of large-scale investments may receive residency permits of a duration lasting from 3 to 5 years.

Wuhan Municipal Government website (Chinese): http://www.wuhan.gov.cn

And its English version: http://english.wh.gov.cn 

It’s no secret that a significant share of the goods we use in our lives are produced in China. On average 15 to 20 percent of imports come from the Middle Kingdom. Most people assume that, while these goods are manufactured or assembled in China, the designing and branding is actually done elsewhere. Now, however, a growing amount of “China’s” companies are offering their own products to foreign customers. Not many Chinese brands could be called truly global, but the trend is changing. Whether it is Haier’s mini-fridge aimed at American college students or a new Xiaomi smartphone, these Chinese branded consumer goods are appearing in our daily lives more and more often. What kind of Chinese companies operate outside their country? What are the differences among them? And most importantly, how will this trend continue to develop and what Chinese companies are successfully competing with their international peers in the global market?

Adopted in 1999, then revised in 2006 China’s Go Out Policy (走出去战略),, is boosting Chinese companies ambitions abroad. Despite being vaguely worded, the document still represents a State-level desire to use business ties to increase China’s global soft power. It mostly mentions investing, but another very important point of the document encourages businesses to familiarize European and American (sic) consumers with Chinese brands.

There have been 3 stages of Chinese companies’ expansion into foreign markets: in late 90’s and early 2000, after 2007 and since 2012. In the first case, companies such as Lenovo, Haier, ZTE and Huawei were looking for opportunities to expand their businesses abroad. In the second stage, money-loaded Chinese corporations rescued or swooped on tumbling foreign business during the Great Financial Crisis (GFC). Geely and Sany, for example, spent relatively little money on gaining valuable knowledge and IP.

Most recently businesses, such as Dalian Wanda group feel the danger of a slowdown in Chinese economy, especially in the property market, and are looking at ways to diversify or expand their portfolio of investments beyond China’s borders.

Here China Brain provides a selection of brief case studies of Chinese brands that are pursuing various paths to global success and offer a good starting point for those who are exploring this topic in detail.

White Goods

Haier

Haier is the largest white goods manufacturer in the world in terms of volume, and in 2008 it became world’s largest refrigerator manufacturer. Shandong-based SOE’s CEO Zhang RuiMin has been named as one of the most innovative entrepreneurs globally. The multinational’s success, and even its name, can be traced back to its joint venture with German refrigerator manufacturer Liebherr in 1980’s. The company has presence in all continents, and has acquired competitors in Italy, New Zealand and the US. Haier’s revenue in 2013 was over ¥62 billion ($9.98 billion), while its profits surpassed ¥2 billion ($321 million) mark. Its produces a wide range of goods including air conditioners, wine coolers, washing machines, computers and even mobile phones. Haier is and will remain a successful company due to  its strong presence in both developing and developed markets, multiple R&D centres in countries, such as in Germany, and ability to identify consumer needs, as it did in the US with compact refrigerators and electric wine coolers.

Midea Group

The Guangdong-based group is a private, white goods manufacturer, producing washing machines, air conditioners, kitchen appliances, and water heaters, as well as heat pump components. The group went public last year, though its subsidiary Midea Holdings, whose revenue in 2012 reached ¥68 billion ($10.95 billion), while its Net Profit was ¥4.3 billion ($692 million).  Although the group is the third largest home appliances manufacturer in the world, it still remains mostly focused on developing economies. It sends a quarter of its goods to the Philippines, India, and Brazil. Midea has international production bases in Vietnam and Belarus, and has made acquisitions in South America. It used to position itself as cheap goods producer, but recently has started heavily investing in R&D in preparation to expand into new markets.

Telecommunications

Huawei

Huawei became the largest telecommunications equipment maker in the world in 2012; it is also the third largest smartphone manufacturer globally. The company has R&D centres in more than 20 countries, and more than 40% of Huawei’s employees are engaged in R&D operations. In 2013, Huawei, despite slowing building telecommunication networks market growth, has managed to increase its revenue up to a record level of ¥239 billion ($38.47 billion), while the Net Profit was ¥21 billion ($3.31 billion).

Huawei has partnerships with most of the serious players in the telecommunication business. Just to name a few: BT, TeliaSonera, Vodafone, T-Mobile, Bell Canada and Motorola. In order to promote brand recognition, Huawei has been sponsoring cultural events (Jonas Brothers’ US tour), sports teams (Arsenal, Paris PSG, Dortmund Borrusia). The company has stated a revenue target of $70 billion for 2018. It is also expected to profit from growing 4G networks in China, and should see growing smartphone sales.

In the past Huawei has been accused of copyright infringement (though always denied it), but the most serious and ongoing issue for the company’s expansion in foreign markets is fear of its links with the CCP and PLA. U.S. Congress has even labelled Huawei as a “national security threat”, while Australia and Canada denied it the chance to build their communication networks due to espionage fears.

ZTE

ZTE is a Shenzhen-based telecommunications corporation and the 7th largest smartphone producer in the world. It is planning to ship 60 million smartphones in 2014, 40% of which will be supporting 4G technologies.

For 2013, ZTE posted profit of ¥1.36 billion ($219 million), but its revenues had fallen down to ¥75.2 billion ($12.11 billion). More than half of the sales came from outside China.

ZTE applies for lots of invention-related patents. In 2011 and 2012, it was the company, which applied for the biggest amount of patents in the world. The company is also expected to profit from growing 4G networks. In 2012, ZTE has posted heavy losses, and has therefore started focusing on projects with a higher profit margin.

ZTE’s expansion abroad was also met with some controversies, though the allegations were not as severe as in Huawei’s cases and were mostly related to bribery and corruption.

Construction/Urban Machinery.

Two Goliaths of this industry are Sany and Zoomlion, supplying everything from excavators and cranes to road sweepers and garbage trucks. The years of construction growth in China have been good to these companies in their domestic market.

In the case of Sany, only about 7% of its current sales are international, but this is expected to increase as the company targets international expansion. The company already has manufacturing plants in over 5 countries, including the US, Brazil and Germany, and has also set up a R&D centre in the US. It also recently acquired Putzmeister, a noted German pump manufacturer. It was the first time in history, when a Chinese corporation bought a German Mittelstand company.

Zoomlion has acquired Powermole, a construction equipment manufacturer in Britain; CIFA, an Italian concrete machinery manufacturer and M-Tec, a German dry mortar equipment producer. Zoomlion sells its production all over the world, but its crucial market remains China, which accounted for 87% of its total revenue (¥38.54 billion, $6.2 billion), while their recorded overseas sales only reached ¥2.79 billion ($449 million). However, both Sany’s and Zoomlion’s near future seems not as bright as before, since the latter’s financial results indicate a serious slowdown in the Chinese construction market. It is highly likely that both these companies will look for more growth in other emerging markets close to China.

Engineering

Some of the world’s largest engineering companies are Chinese and have already completed numerous overseas projects. One company aggressively expanding overseas is Beijing Capital Group, which focuses on water and wastewater projects. The company already has international projects in Malaysia, the Philippines, Iran, and also the UK.

CREC and COVEC

CREC was the largest construction company in the world in 2012and it has built numerous high-speed rail lines in China. Now it is looking to extend the network beyond China`s borders through its subsidiary, China Overseas Engineering Group (COVEC), notably to Thailand and Myanmar, such as the African Union building in Addis Ababa. COVEC has also built roads and had other projects in Africa and South East Asia. It tried to enter the European market but failed to finish a project in Poland.

Transportation

Geely

Geely has been aggressively expanding overseas in recent years. The company became a saviour of troubled Western automotive manufacturers by buying Volvo from Ford in 2010, and in 2012 acquiring The London Taxi Company, which was in administration. Both companies can expect a significant investment from Geely, especially Volvo, which will receive more than $11 billion. Although there were reported tensions between Swedish and Chinese executives, he Gothenburg-based company will introduce its first car model developed under the Chinese ownership this year , and in 2017 will start rolling out further models.

Geely’s plans with Black Cab are less ambitious, as it is a much more niche product. A factory in Britain is producing cars for the local market, while the plant near Shanghai is selling cars globally.

There are factories in CIS and ASEAN countries, assembling knockdown kits,but Geely does not own these factories and does not operate them.

Political turmoil in Egypt and Ukraine, both important export markets will cause serious losses for the Chinese group.

Besides these older establishments, Geely’s marque Emgrand has been officially launched in the UK, Italy and Brazil recently.

Chery

Chery’s cars are also assembled in more than 10 countries from knockdown kits, while selling its production in over 80 countries in the world. In Iran and Argentina, Chery owns production bases.

Chery has been living off the Chinese government’s subsidies in recent years. However, it has started a restructuring plan and will cancel unsuccessful marques.

It presented its first Qoros marque model, one of the few Chinese cars to receive a top, five-star safety rating in NCAP tests, which was born out of partnership with Israeli corporation. On top of that Chery has a joint venture with Jaguar-Land Rover. The company has recently announced its plant is undergoing test runs and production should be started at the end of the year.

Consumer Electronics

Lenovo

Even some insiders now hardly consider Lenovo as “Chinese” due to its multinational culture, embedded by the CEO’s global push. Lenovo is the second largest supplier of personal computers and the fifth largest producer of smartphones in the world. The corporation made the global headlines in 2005, after it acquired IBM’s personal computer branch. The company thinks its biggest, untapped potential lies in smartphones and tablets sales. Therefore it recently has announced a series of new tablets in order to challenge the industry’s hegemons – Samsung and Apple. The Chinese corporation has also strengthened itself, by buying Motorola Mobility from Google.

Property Management

Wanda Group

Wanda is the biggest property developer and operator in China. It owns shopping malls, cinemas, hotels and entertainment establishments. Recently, the company has started making large-scale acquisitions abroad. First, by buying American cinema theatres operator - AMC Theatres, the Dalian-based conglomerate became the largest cinema operator in the world. Later the Chinese company bought Sunseeker, a luxury yachts builder in Britain. The company reported ¥186.6 billion ($30.04 billion) revenue in 2013. It was the eighth year in a row with the corporation’s revenue growing by more than 30%. Wanda Group aims at growing the number of Chinese tourists abroad and is riding the trend of wealthy Chinese making investments into properties abroad. The company has already announced its plans to develop a five-star hotel and apartments in central London. A similar project in New York will be made public later this year, with 5-star hotels in in more than 10 cities around the globe. Hotels will be under Wanda’s own brand, a new field for the corporation, since it operates hotels under franchises.

Finance

UnionPay

UnionPay is the equivalent of Visa in China. Due to the fact, that it is almost the only bank card used in China, UnionPay recently overtook Visa as the world’s most used debit card by volume. Following an increasing amount of travelling Chinese shoppers, UnionPay is expanding its operations abroad. For example, in Taiwan it is treated as any other bankcard and can be used almost everywhere. In the UK or US, UnionPay can be used in a lot of ATMs and department stores. Since China has such a burgeoning middle class, who increasingly travel overseas and who spend big sums on consumer products while on the road, UnionPay can be expected to see its income from foreign countries grow.

Although Chinese banks and financial institutions are among the biggest in the world, their expansion abroad is quite slow and unambitious. Only recently ICBC received permission to acquire the US operations of Bank of East Asia Canada. However, there have been repeated announcements from Chinese bankers that they intend to expand abroad.

As it is clear, Chinese companies can and are successfully competing in foreign markets. Cheap acquisitions of troubled Western enterprises awarded Chinese companies with long-desired technical knowledge and access to markets. On top of that, highly skilled Chinese engineers, managers and designers are returning home from abroad, serving to increase Chinese companies’ understanding and competitiveness overseas. The government in Beijing will provide assistance. Chinese companies are moving up the value chain and developing more expensive consumer goods. With the help of all the above-mentioned reasons, SOEs and private companies will be able to increase their market share abroad.

Challenges, like increasing brand awareness abroad, improving quality of the production, finding ways to enter the market are serious. Not all are guaranteed success but every company needs to be aware and alert to the ambitions of Chinese companies in their sectors. China Brain will continue to explore this topic in detail. 

Looking to the Future.

China’s burgeoning nuclear industry’s relationship with the state places it in a unique position as it expands domestically and moves into the international market, and it will play a vital role in the country’s future development. The industry is led by two state-affiliated giants -China National Nuclear Corporation (CNNC) in the northeast and China General Nuclear (CGN, China Guangdong Nuclear until 2013) in the southeast. These two have been working together and independently to construct nuclear reactors across China, making it the country with the most reactors in development worldwide. In the past couple of years, they have begun moving abroad with major projects in development in the Middle East, Europe and beyond.

China is now taking significant steps to expand its nuclear industry domestically and internationally. While China still overwhelmingly runs on coal as its main source of energy, it is also the world’s leader in renewable energy production. Currently, nuclear energy only accounts for about 2% of total energy used in the country, with plans to double this figure by 2020. There are 21 nuclear reactors in China as of April 2014 and 28 under construction, the highest number around the world. This past fall, Beijing allowed CNNC to open on the Shanghai stock market in the hopes of raising further capital for expansion. CGN will list its IPO on the Hong Kong market, with a possibility of expanding to China’s mainland stock market in the future.

Both CNNC and CGN operate under the supervision of the State-owned Assets Supervision and Administration Commission of the State Council (SACAS). The government has in recent months obliged them to work together increasingly in order to streamline China’s nuclear exports including adopting common third-generation nuclear technology. Below is a brief review of their recent international bids and projects:

Currently, China is competing with a Japanese-French joint venture in a bid for the building of Turkey’s second nuclear plant. South Korea and Canada have both been dropped from the short list for the 5,000-megawatt nuclear power plant, which is planned for the Black Sea province of Sinop. The French company GDF Suez is officially placing a joint bid with Japanese companies in what is expected to be a $22-25 billion dollar investment.

In March 2014 it was reported that China’s main nuclear power companies were lining up to bid for a $93 billion dollar contract in South Africa to build six reactors by 2030. The Energy Minister said that this could promote nuclear power development across the region. In February the Nuclear Energy Corp of South Africa signed a skills development and training agreement with CGN and SNPTC, funded up to 95% by China.

China is currently in talks with Pakistan concerning a potential deal for Beijing to sell Pakistan three large nuclear plants for around $13 billion. These talks follow China-Pakistan nuclear cooperation on a $9 billion dollar project of two nuclear plants in Karachi.

In October, CNG and CNNC announced they will hold 30-40% of a new nuclear development project, Britain’s Hinkley Point nuclear project - the first nuclear project that China will be involved in with a developed country. The Chinese companies are teaming up with France's EDF in a 16-billion pound ($25.69 billion) deal to construct two third-generation European Pressurised Reactors (EPRs) in southwest England. Thus far, China is only slated to play a financial role in the project.

There are several problems facing Chinese nuclear companies at the moment, prohibiting them from expanding to their full potential. One detriment to Chinese nuclear companies in their bids for international projects is the limit placed on their technology. The companies cannot export the most modern reactors being built domestically because foreign companies such as Westinghouse and Areva own the copyrights for those designs. However, analysts say China’s own local designs are catching up with third generation models ready for export this year.

Another issue the government faces is lack of public trust, which has led to protests in areas of planned projects domestically, resulting in delays or relocation of future nuclear reactors. Negative news seen globally about Chinese industries and lack of adequate government oversight could discourage foreign nations from pursuing projects with China’s nuclear developers. Britain’s Hinkley point project will have China as a minor stakeholder only, stating the public’s need to adjust to the idea of Chinese involvement. In fact ,China has never had a nuclear event exceed Level 2 on the International Nuclear Event Scale (INES)—a globally accepted scale used by the International Atomic Energy Agency for prompt and effective public communications. The US, by comparison, had a Level 5 accident in 1979. However, negative impressions left by food and environment scandals will take some time to overcome.

Finally, the nuclear industry in China also faces problems with its structure and policy. China does not have an atomic energy law, despite it being in discussion since the 1980s. It also follows fewer international structures than most nuclear industries globally. For example, both the US and India have expressed concern about China’s planned projects in Pakistan because reactors are being built without the approval of the 48-nation Nuclear Suppliers Group, a multinational body concerned with reducing nuclear proliferation by controlling the export and re-transfer of materials. Some within the State Council Research Office have stated that nuclear safety governance in China is too fragmented and that its regulatory body, the National Nuclear Safety Administration, does not have a sufficient level of independence.

On the other hand, the affiliation of Chinese nuclear companies with the state allows them to work together and bid on projects with the vast financial backing of Beijing. By working together and reducing competition, CNNC and CGN are likely to win more international project bids. They seem to be on their way with their first foray in to the European market, with their future share in projects likely to grow. Their affiliation with the state has benefitted the Chinese nuclear duo in the recent bid in Turkey, mentioned earlier. Because of the enormous financing that can be guaranteed by Beijing, they were able to beat out South Korea by not requiring state guarantees for the project from Turkey. The recent bid in Pakistan has seen a similar situation in which CNNC was able to offer Pakistan a loan of at least $6.5 billion to finance the project if China wins the bid. This certainly gives Chinese companies a huge advantage over those entirely private companies trying to compete for international projects. 

China is often at pains to show what it believes is the hypocrisy of the “Land of the Free” dictating to other cultures and countries American values and rights. China’s white paper lays out the reality of America in 2013: a rise in violent crimes, pervasive state surveillance on its Citizens, prison chain gangs, the widening wealth gap in the population, rising racial tensions and of course the every prevalent rise of gun ownership.  Whilst the paper is a reaction to recent criticism, it pinpoints glaring contradictions in American attitudes towards China.

Feb. 28^th 2014 (Xinhua) -- The State Council Information Office of the People's Republic of China: "Human Rights Record of the United States in 2013".

The full text of the report is available here as a PDF or the original web page from Xinhua: http://news.xinhuanet.com/english/china/2014-02/28/c_133150579.htm

Foreword to the report.

The State Department of the United States, which posed as "the world judge of human rights," made arbitrary attacks and irresponsible remarks on the human rights situation in almost 200 countries and regions again in its just-released Country Reports on Human Rights Practices for 2013. However, the U.S. carefully concealed and avoided mentioning its own human rights problems. In fact, there were still serious human rights problems in the U.S in 2013, with the situation in many fields even deteriorating.

-- In 2013, 137 people died in 30 mass killings, which caused four or more deaths each, in the U.S.. A shooting rampage in the headquarters of the Naval Sea Systems Command in Washington, D.C. left 12 people dead.

-- The U.S. engaged in a tapping program, code-named PRISM, exercising long-term and vast surveillance both at home and abroad. The program is a blatant violation of international law and seriously infringes on human rights.

-- The use of solitary confinement is prevalent in the U.S.. About 80,000 U.S. prisoners are in solitary confinement in the country. Some have even been held in solitary confinement for over 40 years.

-- The U.S. still faces grave employment situation with its unemployment rate remained high. Rates of unemployment for the lowest-income families have topped 21 percent. The homeless population in the U.S. kept swelling and it had climbed 16 percent from 2011 to 2013.

-- There are a large amount of child laborers in the agricultural sector in the U.S. and their physical and mental health was seriously harmed.

-- Frequent drone strikes by the U.S. in countries including Pakistan and Yemen have caused heavy civilian casualties. The U.S. has carried out 376 drone strikes in Pakistan since 2004, causing deaths of up to 926 civilians.

-- The U.S. remains a country which has not ratified or participated in a series of core UN conventions on human rights, such as the International Covenant on Economic, Social and Cultural Rights, the Convention on the Elimination of All Forms of Discrimination against Women, the Convention on the Rights of the Child, and the Convention on the Rights of Persons with Disabilities.

During the year of China`s Economic & Social rebalancing, this report examines brand building in China. Whils the list is still dominated by SOE`s in the first 50, the next half show an interesting prominence of private companies where Chinese entrepreneurs have been developing market-driven companies and valuable brands accross many product and service categories which will only increase in value as reblancing unleashes competition.

Comparing the brand equity of Chinese brands and foreign brands in China. Chinese brands have caught up. They lag in only one crucial aspect: meaningful differentiation. That’s the missing piece for Chinese brands; it’s a critical element for the brands ranked 51 to 100 to move into the upper tier of the BrandZ™ Top 100 Chinese ranking. For the full PDF report, please click here.

China has over 100,000 State Owned Enterprises (SOE`s), mostly controlled at a local government level. The list below comprises the largest 117 supervised by SASAC. These are some of China`s largest and most influential companies, powering and supplying the headline growth rates not to mention the vtal role they play in povding Social Security for ther employees. The success or failures of this group will define the current re-balancing of the Chinese economy.   

The year ahead could see companies focus on driving productivity, CIOs becoming a hot commodity, shopping malls going bankrupt, and European soccer clubs finally investing in Chinese ones. McKinsey director Gordon Orr makes his annual predictions. Please click here to open the report. 

Updated and comprehensive information on trade shows, trade fairs and exhibitions held in China. For the full list for 2014 please click here