Need2LearnChinese Blog

American pension and mutual fund money is being invested in the Chinese coal industry.

The biggest Chinese coal company is China Shenhua Energy Co. of Beijing, which produces about 170 million tons of coal a year from 21 mines and builds power plants. While about 80 percent of the company's stock is owned by Shenhua Group in Beijing, the rest of its shareholders reads like a who's who of US investors: Fidelity Investments, OppenheimerFunds, Merrill Lynch, even the Teachers Retirement System of Texas.

The performance of Shenhua's Hong Kong-listed shares explains why US investors love Chinese coal. Shenhua gained almost 65 percent from July through September, while Peabody -- a favorite of analysts who follow US coal companies -- lost more than 3 percent over the same period. Shenhua's initial public offering in Shanghai in September raised $8.9 billion, a record for Chinese mainland.

Along with investors, US coal companies are salivating over China because of the promise of things they haven't seen much of lately: Rising prices and the opportunity to increase exports.

Massey Energy Co. of Richmond, Va., and International Coal Group of Scott Depot, W.Va., recently told investors they plan to increase metallurgical coal production to take advantage of rising world demand caused by China's transition from a coal exporter to an importer this year. And St. Louis-based Peabody spent US$1.51 billion last year to buy its way back into Australia, a country it left several years ago, to export to China.

"In general, they're doing a very smart thing," said Mike Tian, an analyst with independent investment research company Morningstar. "That's where the money is."

The most recent US government data illustrates the lure of China clearly. Exports from the US -- the third-largest exporter of metallurgical coal in the world -- were up 25 percent from 2002 through 2006, and an estimated 19 percent just through July.

"There will be opportunities for US metallurgical coal companies to export more," said Jim Truman, who follows the coal industry for consulting firm Hill & Associates.

Iron ore pellet maker Cleveland-Cliffs Inc. recently jumped into the coal business, buying West Virginia and Alabama mine operator PinnOak Resources. Cleveland-Cliffs said the US$610 million purchase is squarely aimed at exporting metallurgical-grade coal. Peabody has gone a step further and opened a business development office in China.

The National Mining Association's Leslie Coleman said both companies are positioning themselves to be bigger players in the metallurgical coal businesses because of the demand coming from China and the rest of Asia. Metallurgical coal is used to make coke, a fuel.

Faced with increasing opposition from environmental groups, US coal companies have begun pushing technology designed to reduce pollutants, including the greenhouse gas carbon dioxide. They've also been working with electricity producer China Huaneng Group on FutureGen. The planned US$1.5 billion experimental coal-fired power plant would serve to test carbon capture and underground storage, among other things.

Cal Kent, who follows the industry at Marshall University's Center for Business and Economic Research, sees the beginning stages of US coal companies trying to turn into global companies.

"Where markets are growing, you want to be near them," Kent said. "It's generally good in a global market to be a global company."

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The dragon at Beijing Capital International Airport came to life on Friday. Everyone who walks into the dragon-shaped Terminal 3 (T3) will see the flattery heaped upon it before it opened was no deception.

The new terminal wasn't even half as crowded as the two older ones around noon, when this reporter walked in. No lines in front of check-in desks, no passenger running down the passages, no arguments in hushed or loud tones, No strains, at all. That's should be good news for those traveling to and from Beijing for the Olympic Games.

Camera-clicking passengers are rare in the old terminals. But they were everywhere in T3, taken in by the size and dcor of the new edifice. Shoppers can take heart, too, for T3 has a lot more shops. The new terminal is all about space and the use of it - especially because it has been built to maximize the use of natural light, with walls of glass.

There were places that looked full, however - a caf in the departure hall, for instance. People sat there chatting or working on their laptops, a cup of coffee or other beverage on their table. Leisure was in the air.

But then, didn't T3 handle only 42 flights throughout the day? Yes, but that's not why it wasn't crowded. T3 is huge, and it would take a hell lot of passengers to make it crowded.

That its gigantic size and unconventional shape have caught everyone by surprise was evident from what Peter Nataraj said. "It was visible in the distance when our plane passed the Great Wall." First officer Nataraj co-piloted a British Airways (BA) plane, the first international flight served by T3.

The "unconventional shape" of T3 makes it look almost as long as the runway, he said. Usually airport terminals are rectangular or square in shape.

BA Captain Rik Heron, on his first flight to Beijing, looked as excited.

"This is the largest terminal building I have flown to. It is beautiful. The facilities are wonderful, and people here are helpful," he said. BA's was one of the three international flights served by the new terminal.

T3 provides a "comfortable feeling", said Irish national Rory McGowan, who took the BA38 flight to London at noon.

The Automatic People Mover runs up to the international boarding area, and immigration and Customs checkpoints are bigger than those in Terminal 2, he said.

The attitude of the staff in T3 is different too, said Liu Zhenquan, a businessman from Shandong province. "They are very kind. The woman at the check-in desk stood up to greet me when I walked up to her."

But Liu was lost in the huge building, unable to find the right way from the check-in island to the domestic boarding gates. He looked around for signs, but could not find any. So he decided to walk toward the spot where he saw a crowd. The signs were not on the walls or hanging from the ceilings but on the ground, he was told.

Liu Zhaolong, advisor to China Civil Aviation Airport, said the real test for T3 would be on March 26, when Air China and 18 other carriers move in and the passenger flow will reach 100,000 a day.

Air China's own and code-sharing flights account for 60 percent of the total at the airport now.

Also, the restriction on the number of daily flights to and from the airport would be lifted on March 26, said Li Jiaxiang, acting director of the General Administration of Civil Aviation of China (CAAC). "With T3's opening, Beijing airport can handle up to 1,800 flights a day," he said.

Safety concerns prompted the CAAC to order the airport to cut the number of daily flights by 48 to 1,050 in October.

Designed by British architect Norman Foster, also the man behind Hong Kong's Chep Lap Kok Airport, T3 has special bridges to handle Airbus's giant double-decked A380.

It has almost double the number of boarding gates of the old terminals and nearly 300 check-in desks.

A train link, to open before the Olympics, will zip people downtown in about 15 minutes on the 28-km line, and the high-tech baggage system will handle 19,800 bags an hour.

Six carriers, Sichuan Airlines, Shandong Airlines, Qatar Airways, Qantas Airways, British Airways and El Al Israel Airlines, will use Terminal 3 initially. More will move in from March 26.

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Wu Shaogang, a manager from manufacturer Lemote Technology has said the first batch of 80 computers powered by home-grown Chinese CPUs are undergoing user tests. This means the home-made chip, Godson II E, is out of the lab and moving into at least a small commercial operation followed by the big time.

Lemote, which is based in Changshu in China’s Jiangsu Province, hopes to get a thousand PCs out on to the market in China before the Chinese New Year. Which means that we will see them in the rest of the world before the end of the year.

The PCs will use Linux, have a 40-gigabyte hard drive and 256 megs of memory.  Price in China will be RMB1,599 ($200) to which you have to add a monitor and a keyboard. Probably come in at around $250 in the first instance.

So it is not that much less expensive than a standard PC. But it is made in China, uses Linux, is more that adequately specced and will undoubtedly find a market.

The chip which powers it, Godson II E was developed by the Institute of Computing Technology (ICT) under the Chinese Academy of Sciences. China started CPU research and development in 2001, and the first chip, Godson I, came out in September 2002. Since when there have been three more generations of the Godson — Godson II B, Godson II C and Godson II E. The latter models tripled the computing speed of the previous ones.

This is all part of China’s 863 Program and Knowledge Innovation Project which started back in 1986 and is aimed to  boost the development of science and technology in China.

Does this mean we will see a rash of computers from China coming on sale? In fact, this has been the case for a long time. It is just they had different labels: IBM (now Lenovo), Dell, Hewlett-Packard and the rest. The only differences were that these were badged machines that ran an Intel chip and Microsoft Windows.

Now the Chinese computers can run a chip made in China and operate with Linux. And that is a wondrous revolution.

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Be worried. If you have given even a moment's thought to climate warming and its potential impact on our planet, be very worried. China, a nation of 1.3 billion people, has abandoned the bicycle as a principal mode of transportation and is now moving at a frightening pace to a car-based economy.

Perhaps it's the years of Western chest-beating about the grandeur of capitalism and consumerism. Or perhaps it's the simple human desire to have and consume more, to be more comfortable. Whatever it is, the Chinese are going the American way.

Recently I was in Korla, a fast-growing city in Xinjiang province in western China where I was at the tail end of my mission, to scout the Chinese portion of the famed Silk Route for a bicycle tour that my company is planning for the summer of 2007. The route will take about 45 cyclists from Istanbul to Beijing in 108 days, covering 10,000 km. Part of our mandate is to promote bicycles as sustainable transportation in a world that seems to be hurtling toward major ecological disaster.

Korla is one of 661 cities in China. What distinguishes it from all others is that it is the home base for several oil companies, including the U.S. conglomerate Exxon. The companies are tapping into the oil reserves of the vast Taklaman desert.

Korla is an impressive city. Striking new highrises line wide boulevards filled with Western style boutiques. The city is clean and, unlike most of the other cities I have seen on this trip, one can still breathe here without tasting the pollution. Here the sun still reaches the street.

Of course, Korla is still relatively small (population: 350,000) and new, and is the beneficiary of cleansing desert winds. Other Chinese cities were once like this, too. Now, the smog is so thick in most of them that the sun is only a rumour.

But while I can breathe here comfortably, I have reached the dispiriting conclusion that promoting sustainable transportation in China, as in the West, is a quixotic activity.

A friend who works for the World Health Organization recently pointed out that, when Chinese officials are drawn into discussions about bicycles as a means of transportation, they respond by asking how many people use bicycles in Los Angeles, New York or Toronto. Automobiles are rapidly replacing the bikes that are disappearing from the streets of Chinese cities at a phenomenal rates..

According to the China Association of Automobile Manufacturers, car sales in China in the first half of 2006 climbed almost 50 per cent, year-on-year, to 1.8 million.

The gains come on the heels of 21.4 per cent growth in car sales for 2005, with sales of luxury cars doing particularly well. Before the 1980s China did not allow private citizens to purchase vehicles for private use and there were few automobiles on the roads. By 2005, there were 20 million cars in use. By 2020, it is estimated, there will be 140 million.

It is not only new roads that these automobiles require.

With China's new wealth come bigger houses, each requiring more energy, not only to build, but to heat in the winter and cool in the summer, producing additional climate warming gases. Last Nov. 22,the China Daily reported that in the first half of 2006, emissions of sulphur dioxide increased by 4.2 per cent, chemical oxygen demand, a major index of water pollution, grew by 3.7 per cent, compared to the same period in 2005.

So although a 10,000-km bicycle trip may be a worthwhile activity for promoting health, fitness or adventure, it is hardly going to make a dent in changing people's minds about using bicycles instead of cars.

Perhaps the only hope would be for Western trendsetters – young actors, business leaders, politicians – to adopt a non-car lifestyle, since Western trends seem to influence the behaviour of much of the world.

Of course, that is not going to happen. Even if by some miracle it does, there is no guarantee that a world that has watched the West stuff its collective face with energy-consuming habits will join in its new-found environmental sensitivity.

So be worried. It's really the only option. And if 1.3 billion car users do not scare you, remember that Indians, who number a mere 1.2 billion, are close behind. Our Western ethos and lifestyle has triumphed, all right.

Oh, here is one more piece of good news: At the recent annual Detroit auto salon, China's Changfeng auto group announced that within two years it will be selling sports utility vehicles and pick-up trucks at least 20 per cent below any competitor. Isn't that wonderful?

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For real-estate developers in the city, the sky is not the limit.

Shanghai, already crowded with skyscrapers built on the back of robust economic growth and financial might, will be home to the country's tallest building in Lujiazui financial zone of Pudong New Area.

Construction on the proposed 580-m building, among the world's tallest, will start this year, Xinhua News Agency reported.

The Shanghai Center, reportedly scheduled for completion by 2010, has been approved by the city's development and reform commission.

The project will be jointly developed by Shanghai Chengtou Corporation, Lujiazui Finance and Trade Zone Development Co Ltd and Shanghai Construction Group. The cost has not been revealed.

According to a design by Skidmore, Owings & Merrill (SOM), a Chicago-based architectural and engineering firm, the 118-story center will dwarf the nearby 491.3-m Shanghai World Financial Center (SWFC), which is expected to be completed this spring, and the 420.5-m Jinmao Tower.

Taking up 20,300 sq m, the Shanghai Center is expected to house offices, hotels and shopping malls as well as recreational facilities, complementing the two neighboring buildings with more office space for financial institutions and companies as the district sees an increasing inflow of foreign capital.

According to a recent survey on office requirements of foreign firms in Shanghai conducted by Mori Building Co, office quality is becoming increasingly important when financial companies seek expansion. The survey also found that Lujiazui remains the most popular office location in Shanghai.

"Competition over the world's tallest building seems inevitable as the city moves steadfastly to become a world-class financial center," Michiho Kishi, deputy general manager of public relations at Mori Building Co, the real estate developer behind SWFC, told China Daily.

"High-quality and prestigious office space can attract a highly educated workforce, which in turn will contribute to the city's status as an international financial hub."

In the past two decades, Pudong New Area has developed from a rural backwater into a financial district which is home to scores of financial institutions and internationally renowned companies.

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So if you can't get a dinner reservation at Jean George, Sense or M, give Deli Roma a call. Grab a bottle of the best 1998 Great Wall Cabernet Sauvignon, a pirated DVD (Shanghaiist recommends "The Painted Veil") and enjoy a memorable evening with that special someone… even if that special someone is you. Alone. (By the way, in above said movie, he dies of cholera and she is left all alone at the end, single mother to bastard brat.)

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Need2LearnChinese wishes everyone a happy, healthy and harmonious Chinese new year!

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Olav Kristoffer Bauer makes an unusual business mogul. At just 24, Bauer co-owns six restaurants in Beijing and it looking to expand.

The Buckhead native, who also lived for a time near Stone Mountain, has a tattoo of a Chinese flag on his back (he decided against a hammer and sickle design) and wears his hair in a shaggy Mohawk. He figures he lost $100,000 last year by ignoring his accounting books and dreams of opening a charity school.

Bauer's eateries include one modeled on a combination of a Fellini's pizzeria franchise and Fox & Hounds, the English-style pub in Buckhead. He's not sure how much money he's earned since 2006, when he opened his first pizzeria, but he estimates that the number might "push like six zeros."

Bauer's story is both about a young Atlantan who has found success far from home and, in a bigger sense, about the opportunities and challenges facing entrepreneurs who invest in China.

As China's economy has surged — growing 11 fold since 1980, according to Chinese government data — investors have poured into the market.

Foreign investment in China's "wholesale and retail trade" sector rose to $1.79 billion in 2006, the latest available figure, from $740 million in 2004. In 2006, foreigners invested another $300 million in China's food and beverage industries.

"Ten years ago there was a tiny handful of foreigners involved in small-scale enterprise in China," said Arthur Kroeber, managing director of Dragonomics, a consulting firm in Beijing. "Now there are people all over the place doing all kinds of business."

New restaurants sprouting in Beijing and other cities are catering to a growing number of Chinese interested in foreign cuisines and rich enough to spend $10 or $20 on dinner. Restaurants also have benefited from a surge in foreigners living in China.

Kroeber estimates that the number of foreigners living in Beijing has quadrupled over the past decade to 200,000, most in the "upper-middle class."

Bauer's business is a long way from his roots in Stone Mountain and Buckhead, where his parents, Edward and Vigdis Bauer, still live on Margaret Mitchell Drive.

He first became interested in China when he spent his junior year at The Westminster Schools studying in Beijing, a program he chose over Germany and Norway.

The experience left him with a love for languages. When he later enrolled at the University of Hawaii, he studied Chinese, Japanese and German among others.

Atlanta, on the other hand, gave him a love for food. During summers in college he worked at a Fellini's pizzeria franchise in Buckhead and frequented the Fox & Hounds pub, which he liked for its dart boards, pool tables and "the old arcade game in the back."

After graduating in 2005, he combined his two loves: "I wanted to be in China and I saw there was no good pizza," he said.

The start-up costs were appealing. Opening a restaurant in Atlanta would have cost $250,000 "with a bunch of the capital up front," he said.

But in Beijing he could open a comparable restaurant for a quarter of that price, low enough that he convinced relatives to lend him money.

From there, Bauer's path has been straight, if not always smooth.

First, he had to locate ingredients in local markets. He found good Chinese-grown tomatoes but had to help a local distributor buy American pepperoni from Hormel and Australian cheese.

Maintaining quality was also a problem. The contractor he hired for the first restaurant installed shoddy wiring that had to be replaced and all of the chairs broke in the first month.

Protecting his intellectual property was also difficult. Shortly after he trained his first chefs, several left and sold his recipes to a competitor.

"My biggest threat is that another dumb foreigner will come in and open a place just a little bit better," he said.

Many foreign business owners face similar problems. More than a quarter of companies responding to an American Chamber of Commerce survey last year said intellectual property rights infringement — including counterfeiting and violations of copyright and patents — was either their biggest challenge or a major challenge.

Other business owners complain that China's tangled system of permits and regulations are difficult to understand and are sometimes used to target foreign firms.

"You have to be prepared for the hassle factor, which is much greater than in the United States," said James Zimmerman, chairman of the American Chamber of Commerce in China.

Bauer has avoided some of the challenges by working with a Chinese partner. But he is still finishing paperwork on several of his restaurants and admits that his legal rights are murky.

His contract with his partner, a friend of several years, "is on an old piece of paper," he said.

"If my partner were to die, I'd be done," he said.

Bauer's first pizzeria returned the $62,000 he and a Chinese partner invested within eight months.

The other restaurants they have opened — a second pizzeria and four sandwich shops on Beijing college campuses — have been steadily profitable and they are considering franchising.

Bauer also plans to open a "Georgia-style barbecue" modeled on Fat Matt's Rib Shack, the barbecue restaurant on Piedmont Avenue, and a "1950s-style American diner."

"Because China is developing so fast, there are so many holes (in the economy) waiting to be filled," he said. "Even if it's just for a short period of time, you can make your money and get out."

During a mid-afternoon lull between the lunch and dinner crowds last week, Bauer relaxed on a wooden bench at one of his pizzerias.

"Sometimes I don't even believe myself that I can be a 24-year-old living like this," he said. "It's like a pipe dream. It seems like it could disappear at any time."

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