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The Shanghai Stock Exchange (SSE), which marked its 20th anniversary of trading on Friday, is planning to boost the market of Exchange-Traded Funds (ETF), a relatively new breed in China's securities market, to cater for the growing appetite of Chinese investors.

Zhou Qinye, vice-president of the SSE, recently said that the bourse is planning to introduce more cross-market and cross-border ETF products. It recently signed agreements on index authorization with nine international index companies and five exchanges.

Industry players and analysts are positive about the outlook for ETFs in China, saying that their introduction will offer investors more asset allocation products, given the current shortage of investment tools in China.

"The potential of the Chinese ETF market is huge," said Zhang Qi, an analyst at Haitong Securities. "The trend is that ETF-related products will also expand to the commodities market, providing fund companies with more products to sell and giving investors wider investment choices."

The indexation investment market on the Shanghai bourse has seen remarkable growth over the past few years. Twelve ETFs are currently traded in Shanghai, boasting an asset size of up to 50 billion yuan ($7.5 billion).

The bourse is also vigorously promoting the innovation of indexation investment, and will launch a new index, the SSE 380 Index, on Nov 29.

It will target emerging and growing blue chips to mirror the overall performance of an array of medium-sized listed companies. The index, in conjunction with the SSE 180 and SSE 50, will constitute the major blue-chip indices of the Shanghai market.

The rapidly growing ETF industry in China has also helped fund managers rise as significant players.

China Asset Management Co, the largest domestic asset manager, and E Fund Management Co, the country's fourth-largest fund house, both saw their ETF assets reach more than $3.9 billion by the end of August, according to a report from the New York-based asset management company, BlackRock Inc.

The first domestic ETF was introduced in 2004 with the listing of the SSE 50 ETF by China Asset Management. Analysts said that ETFs have become an increasingly important way for many international institutional investors, and retail investors, to access the A-share market.

In the meantime, the Shanghai Stock Exchange is also actively promoting cross-border ETFs, which will allow Chinese investors to tap overseas capital markets.

The first cross-border exchange focusing on listed companies in Hong Kong will be traded in Shanghai next year.

The Chinese fund house Bosera Asset Management Co Ltd earlier this year also announced that it had obtained rights from Standard & Poor's to launch an S&P 500 ETF specifically designed for Chinese investors.

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"I can't afford an apartment, a car or a wife, but it never occurred to me until now that I can't even afford vegetables or fruit," said Gao Lei, a 30-year-old renter in Beijing.

China's consumer price index (CPI), the main gauge of inflation, rose to a 25-month high of 4.4 percent in October. The hike was mainly due to a 10.1-percent surge in food prices. Food prices have a one-third weighting in China's CPI calculation.

Though Gao is slightly exaggerating his hardship during the current inflation, price rises, particularly of life necessities such as grains and vegetables, do force Chinese low-income groups into a rough time.

Jiang Peng's family is hard-hit, as he and his wife both are laid-off workers and have two daughters in college. Jiang, however, has a new job, working as a janitor in Jinan-based Shandong Economic University.

Jiang's family makes some 24,000 yuan ($3,600) a year, half of which goes to paying tuition for their two college girls, with the majority of the rest covering their daughters' living expenses.

"We spend each penny carefully, because we try to save as much as possible for the kids. Now as price goes up, we find it increasingly difficult to make ends meet," said Jiang.

The only vegetable Jiang and his wife have these days is cabbage, since it is the cheapest of all vegetables.

Jiang said prices have dropped slightly due to government price control efforts, but it is not making a big difference yet, and prices of some daily necessities remain high, not showing signs of a decrease.

"We have fried dough sticks for breakfast, and even its price rose from 3.5 yuan per half a kilogram to 4 yuan, never falling again," said Jiang

For the poorest families, the government already made decisions to dole out temporary subsidies to help them cope with rising living costs.

Jin Hong, mother of a fifth-grader in the city of Nanjing, east China's Jiangsu Province, now has to pay 15 percent more for her son's lunch at school. Jin's household monthly income stands at less than 1,000 yuan.

"I hope there will be no more increases, otherwise I will not be able to afford the school meals for my son," said Jin. Jin's family is entitled to a 100 yuan subsidy given by the local government, which is due on December 10. "Now, we are counting on the subsidy," she said.

Students from poor families are also feeling the pinch, and they are paid great attention in the Chinese government's ongoing price control efforts. The National Development and Reform Commission (NDRC) issued a statement on November 23 detailing various measures to institute price controls, including keeping prices stable in student cafeterias.

Also, an earlier statement issued by the State Council, China's Cabinet, ordered local governments to offer subsidies to student canteens and increase allowances for poor students.

He Ming, a student from a low-income family at Nanjing-based Southeast University, now sneaks out of classes earlier to make it to the cafeteria before all low-priced dishes are sold out.

Low priced dishes are the vegetables, since meat is usually more expensive in China, and they are priced at one yuan per dish.

"In order not to only swallow rice for the meal, I have to quit part of the class. Though the cafeteria still serves low-price dishes, despite price hikes of vegetables lately, they serve less."

He has a monthly living allowance of 300 yuan, which is given by his parents.

Hu Xiaotian from Nanjing Xiaozhuang University finds that while prices in the cafeteria are not rising, with the highest at 3.2 yuan, the quality seems watered down. He said, "I used to get beef with 3.2 yuan, now beef dishes can't be seen anywhere in the school cafeteria."

In order to help low-income earners and other vulnerable groups to weather the rough time, Chinese decision makers have made price control a top priority.

The State Council recently urged local departments to stabilize winter vegetable planting and strengthen grain and edible-oil production to ward off supply shortages.

Also, local authorities were ordered to establish coordinated social-security mechanisms that promise a gradual rise in basic pensions, unemployment insurance and minimum wages.

As an example of local governments acting, the Beijing municipal government announced on November 24 that it would hand out 100 yuan to each of its 223,000 low income earners before the end of this month.

Further, northwest China's Shaanxi province has allocated about 60 million yuan to college dining halls to keep prices stable. Also, Changchun in northeast Jilin province handed out subsidies to wholesalers of vegetables on a daily basis, reaching 50 yuan for each tonne of vegetables.

On Friday, the State Council sent a supervisory team to conduct a nearly one month inspection tour to monitor progress made by local governments in developing price controls.

Jiang Peng said he hoped these measures work and prices would fall as soon as possible, or that an increase in his pay could make up for the price rise.

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Partly as a response to the global climate challenge, China's booming green industry has become the engine that boosts global economic cooperation and encourages investment into the country.

"We are vigorously seeking international cooperation in various fields of green technology," said Jiang Yaoping, vice-minister of commerce.

So far, China has signed Memoranda of Understanding with many countries, including the United Kingdom, Switzerland, Italy, Finland, Canada and Germany, to co-develop the country's green economy, Jiang said.

He said the ministry is working with relevant government agencies on the revision of the catalog for the encouragement of foreign investment industries, so that overseas investments will be encouraged to flow into emerging and energy-conserving industries, such as the advanced manufacturing sector, and participate in the transformation and upgrading of China's traditional industries.

"We can see China is taking very serious steps in developing clean technologies. The prospect for China's (green technology) market will be very bright and Finnish companies' know-how will be quite profitable," said Erkki Virtanen, permanent secretary of Finland's Ministry of Employment and Economy.

Finland is a country renowned for advanced green technologies in sectors such as processing, renewable energy and environmental measuring.

Over recent years, the country has earmarked 4 percent of its GDP to the research and development of clean technologies, said Virtanen.

Against this backdrop, Pac-Solution Ltd, a Finnish water treatment company, is seeing its business take off in the Chinese market. "We are now the only Finnish company operating in China in this specialized area and the market environment is quite favorable," said Jaakko Helenius, its chief executive officer.

The company set up an office in China two years ago. Currently, it is running pilot programs in Russia and Brazil, and its pilot program in Anhui province will begin in two months, he said.

In 2009, 35 percent of the company's revenue came from China, and within the next three to five years, revenue earned in the Chinese market is expected to reach between 15 million euros ($19 million) to 20 million euros, "which is very achievable", Helenius added.

Meanwhile, Det Norske Veritas (China) Co, a Norway-based classification society and risk management provider has similar expectations.

In 2009, revenue from China's market accounted for 10 percent of the Norwegian company's overall business revenue, and 30 percent of its revenue in China is from the green industry.

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Has the Shanghai laowai (老外) bug got into you? Have you been thinking of making Shanghai your new home? If so, then before you settle down you might want to check out these new regulations. According to China's Ministry of Housing and Urban Rural Development, purchases of apartments/houses by foreigners could be restricted or even capped in a move to combat speculative money from overseas.

If the rumors are true then these new rules, fresh out of Beijing, would mean that foreigners can only purchase one flat for their own personal use, and are required to provide proof of having worked in the country for at least one year prior to the purchase. Furthermore, overseas companies would only be permitted to buy non-residential properties in cities where they are registered.

The government is getting stricter and stricter with housing rules for expats. Back in the good old days of 2002 foreigners could buy property as free as locals. Revisions to the regulation came in 2006 which then required foreigners to demonstrate they had worked/studied for more than a year in China, but did not limit the number of home purchases allowed by overseas individuals. Yang Hongxu, an analyst with Shanghai-based E-house China Research and Development Institute, said that "The new policy, the most stringent on property purchases by foreigners so far in China, is in line with the country's latest tightening measures to rein in property speculation”.

Considering the extortionate prices of property in Shanghai, we are wondering how many foreigners are actually willing/able to purchase property here?!

 

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After a one year hiatus, Delta Airlines have announced that they will be resuming their direct flights between Shanghai and their hometown - Atlanta.

Delta first launched this route in 2008 offering daily flights between the two cities. After a year’s worth of hype, passengers on the inaugural flight in March 2008 were treated to a Blues band and a 10 course meal. Economic woes and a jaded demand (apparently following the H1N1 outbreak), however, resulted in the airline cutting back to fewer flights a week until they eventually discontinued the route all together in 2009. They previously offered daily flights, but learning from their mistakes, Delta is re-entering the market cautiously--offering only twice weekly flights beginning June 2011.

Delta will fly from Shanghai direct to Atlanta on Mondays and Wednesdays with returning flights on Tuesdays and Sundays. With the reintroduction of the Atlanta flight, Delta is the ‘dirty south’s’ airline of choice for Asian travel.

 

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When the Shanghai-based stand-up comedian Zhou Libo emphasized his "expensive taste" as a coffee drinker and mocked the Beijing crosstalk comedian Guo Degang as a garlic eater - thereby emphasizing the price disparity between the two products - he could never have foreseen that just months later the roles would be reversed.

The price of "soft" commodities such as garlic, mung beans, sugar, cotton, soybeans, bean oil and even apples has jumped month-on-month, making agricultural produce a major target for investors.

The price of sugar has increased 100 percent since the start of the year, while the price of garlic has surged nearly 10 times in some regions.

In Shandong province, a place famous for flavorings, the price of ginger has risen 4.5 yuan (67 US cents) per kilogram since July, making it 228.6 percent more expensive than the same period last year, according to a report in Beijing Youth Daily newspaper.

Data released by the National Development and Reform Commission (NDRC) on Tuesday shows that nearly 80 percent of food products in 36 major cities in China saw price increases in October from the month before.

The rising price of foodstuffs is creating inflationary pressure as previously undervalued agricultural products move toward normal levels, said Zhou Wangjun, deputy director of the NDRC's price division. Foodstuffs account for about one-third of the Consumer Price Index (CPI) weighting.

"During the process of industrialization and urbanization, the flow of labor and capital into cities accelerated, and led to a lack of production resources in rural areas, which now need price rises to compensate," he said.

 

"Hot money" seeking quick profits has also spurred the price of some agricultural products. Investors are flocking toward soft commodities to avoid the greater government controls in the real estate and stock markets, said analysts.

China faces strong inflationary pressure in the coming months after CPI hit a nearly two-year high in September, raising the possibility of more monetary tightening measures, economists said.

CPI, a main gauge of inflation, reached 3.6 percent in September year-on-year, and was up 0.6 percent from August.

Price rises contributed to 64 percent of the CPI increase, compared to 36 percent last year, said the National Bureau of Statistics. It will release figures for October on Nov 11.

Many analysts predict the figure will rise slightly before declining gradually by the end of the year mainly due to last year's higher comparison base.

CPI growth might reach 4.2 percent in October and start to decline in November, said Lu Zhengwei, chief economist at the Industrial Bank.

He said if the figure breaks 4 percent in October, the central bank would probably raise interest rates for a second time soon, and lift the reserve requirement for commercial banks in the fourth quarter.

The central bank raised the interest rate for the first time in nearly three years on Oct 20 to combat inflation and soak up excessive market liquidity.

"In coming months, unless vegetable prices slide by a large scale like in May and June, it is almost impossible for China to keep the inflation rate below the official target of 3 percent," said Lu Ting, an economist with the Bank of America Merrill Lynch.

Even if the CPI year-on-year growth of 2010 falls within 3 percent, the inflation rate of the country is already very high given that the official index undervalued the real situation somewhat, said Li Daokui, a member of the monetary policy committee of the People's Bank of China.

Coupled with structural deficiencies in domestic commodities, a rapid increase in international commodity prices would pose future inflation risks, said Cai Jin, deputy head of China Federation of Logistics and Purchasing. 

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Originally called Zhongdian, Shangri-La was renamed in 2001 in a effort to boost tourism. A gateway for travelers into Tibet, the cobblestone-lined old town offers a charming look into local life, which is as close as you can get to experiencing Tibet without actually being there.

A mere four-hour drive from Lijiang and six from Dali, Shangri-La is an excellent hub, conveniently located near attractions like the Songzanlin Monastery, Tiger Leaping Gorge, Pudacuo National Park, Napa Lake, Xiagei Hot Springs and Haba Village. 

Despite the rustic, mountain-town atmosphere, Shangri-La has a number of cafes, bars and hotels that cater to foreign visitors, offering mixtures of local and Western food and simple or extravagant amenities.

History

Archaeological evidence dates human existence in this area back to the Western Zhou Dynasty (1050 - 771 BC). For hundreds of years the area was home to several tribes. During the Han Dynasty (206BC - 220AD) Shangri-La finally made contact with Central China. Today, the town is more Tibetan than Han Chinese with Tibetan architecture, customs and most of the 130,000 population who celebrate New Year according to the Tibetan calendar. As tourism continues to increase, Shangri-La will continue to develop at a rapid rate.

Climate

Shangri-La is about 3,300 meters above the sea level. The weather has a tendency to be humid with temperatures varying both at night and during the four seasons. Winters are cold with lots of snow and summers are the rainy season. The best seasons to go are spring and autumn, specifically May to July and September to October. Although visits during Spring Festival are not recommend as temperatures are generally quite low and indoor heating is still somewhat hard to find in Shangri-La.

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Domestic airline companies are expected to implement new regulations on flight delay compensation, according to China Air Transport Association recently.

It was reported that new regulations included providing information, ticket refunds as well as endorsement and compensation for those irregular flights.

The compensation is divided into carrier and non-carrier reasons.

The non-carrier reasons refer to reasons including the weather, emergencies, air traffic control, passengers' safety inspection and public safety reasons, while carrier reasons refer to reasons including the flight plan, maintenance, flight deployment, transportation services and crew troubles.

According to the regulation, airline companies do not assume liability because of non-carrier reasons. Airports or airlines should assist passengers to contact food services and rest facilities, which will be paid by passengers themselves.

However, airline companies are required to provide free food and beverage services and accommodations for passengers for delay in intermediate stops.

According to the regulation, airline companies should bear the cost of ticket refunds and endorsement for flight delay because of carrier reasons.

Airline companies are required to provide food services for passengers for free in flights delays lasting one to four hours.

If the delay takes more than four hours, airline companies are required to provide rest areas for passengers.

If the delay lasts four to eight hours, airline companies are also required to provide ticket discounts, equivalent mileage accumulation or other compensation worth 300 yuan or 200 yuan in cash.

If the delay is longer than eight hours, airline companies are required to provide ticket discount, equivalent mileage accumulation or other compensation worth 450 yuan or 300 yuan in cash.

However, airline companies do not assume liability if passengers change flights or choose to accept the refund for flight cancellations 24 hours before the original flight.

According to the regulation, delays for carrier reason do not include those caused by passengers' refusal to get on board and get off the flight.

It was reported that new regulations are applied to all domestic airline companies except the Spring Airlines, China’s first and leading private capital sole proprietor of low-cost airlines.

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Especially here in Shanghai, one look out onto any main street and you'll see luxury car after luxury car roll by. Anyone with half a brain could deduce that the Chinese have money and love to show it off by their choice of ride; that's certainly not rocket science. That the top three luxury car brands are all German--Audi, BMW, followed by Mercedes-Benz -- is not news either. We could've guessed that one too. However, where the market research from J.D. Power & Associates becomes interesting is its demographic breakdowns on who's buying these cars.

According to their data, Audi buyers tend to be government officials who incidentally are the leading consumers of luxury cars in China. BMW, of which the most popular model is the 5 series, attracts young business people, usually entrepreneurs who have hit the pay dirt. Good ol' Mercedes-Benz is the preferred choice of senior (in age and rank) businessmen and government officials.

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