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Business Tianjin Magazine - Business English Magazine in China
Google ‘Confident’ About Further Growth in China, Executive John Liu Says
Wednesday, 27 April 2011 11:42
Google Inc. (GOOG), which pulled its Internet search engine out of China last year, said it’s “confident” of growing in the country under new Chief Executive Officer Larry Page.
The company sees more “upside” in China, John Liu, Google’s head of sales in the world’s biggest market for Internet, said at a conference in Beijing yesterday. Google founders Page and Sergey Brin know China “very well,” he said.
Google is aiming to boost revenue from Chinese customers in display advertising and export marketing as the Mountain View, California-based company has failed to keep pace with Baidu Inc. in China’s search-engine market. Page, who took on the CEO role April 4 and succeeds Eric Schmidt, is ramping up spending on hiring and marketing as he faces rising competition from rivals Apple Inc. (AAPL) and Facebook Inc.
Liu, in charge of local operations since 2009, is negotiating with the Chinese government about online map services, and is seeking to increase adoption of Google’s Android software for phones in the country.
Google last month said the Chinese government is disrupting its Gmail e-mail service and disguising the blockage as technical issues on Google’s part. China’s Foreign Ministry spokeswoman Jiang Yu called that claim “unacceptable.”
That friction followed Google’s decision to shutter its search-engine service in China last year to avoid complying with the government’s rules on Web censorship. Since the March 2010 move, Chinese users of Google search have been redirected to an unfiltered site in Hong Kong.
Censorship Rules
Google in July was able to renew its Internet-service license in China through 2012, even after shuttering its Google.cn site in China and redirecting users to a Hong Kong site. The company had said it was no longer willing to comply with online censorship rules on topics such as Tiananmen Square crackdown in 1989 and Tibet independence.
Google accounted for 19.2 percent of China’s search market by revenue in the first quarter, declining from 19.6 percent three months earlier, according to research company Analysys International. Baidu’s market share rose to 75.8 percent from 75.5 percent, according to Analysys.
A March 4 opinion piece in the official People’s Daily, the mouthpiece of China’s Communist Party, compared Google with the British East India Company, whose sales of opium in the country was the root of two 19th-century conflicts.
China’s tax authorities have begun investigating three local Google affiliates for alleged offenses, the Economic Daily reported on March 31. Google said that day that it’s in “full compliance” with Chinese tax law.
China's Hainan hopes to avoid property crash
Wednesday, 05 May 2010 16:42
(Reuters) - With new home prices rising by almost 20 percent a month, Haikou would seem to be the dictionary definition of a property market bubble.
After China unveiled plans in late December to turn tropical Hainan island into an international tourist destination, tens of thousands of real-estate speculators headed for Haikou, the capital. Property prices predictably rocketed.
Whether the authorities succeed in deflating the bubble -- or preventing one, depending on your views -- will be a litmus test of Beijing's campaign to defuse public anger over fast-rising prices nationwide without doing serious damage to a sector that is critical for the economy.
That policymakers are facing one of their stiffest challenges in Hainan brings a sense of deja vu. After a property collapse in the province in 1993, it took more than a decade to clear up the bad loans and vacant lots that were left behind.
Feng Ke, head of the property research institute at Peking University, is confident that history will not repeat itself.
"Prices are a bit too high now, but it's unlikely to crash," Feng said.
Back then, developers were speculating with borrowed money to buy land in a game of pass the parcel. When prices peaked, the developers saddled with property -- and their bankers -- were left high and dry. This time round, the buyers are investors and many of them are paying cash, Feng explained.
Still, fully aware that an overheated property market could ultimately lead to a hard landing for the entire economy, policymakers have rolled out a series of tightening steps.
"You know, things are really nasty in places like Hainan," said one senior government official, who declined to be identified given the sensitivity of the subject.
The State Council, China's cabinet, has mandated higher down payments and mortgage rates and made it harder for investor-speculators to buy multiple homes.
The measures will moderately cool market sentiment, but demand from owner-occupiers will remain strong, particularly in second- and third-tier cities, underpinned by rising incomes and China's urbanization drive, Fitch Ratings says.
"This is consistent with the government's goal to deflate bubbles when necessary to ensure a healthy long-term trend in the real estate sector," the ratings agency said in a recent report.
SOARING PRICES
Walking along a deserted street in Haikou, Cao Ying can hardly believe what she has just heard: all the flats in the surrounding blocks are sold out, even though no one seems to live there. Perhaps two apartments in 10 are actually occupied, local property agents say.
New flats will come onto the market this month, but they will be priced about 15,000 yuan ($2,200) per square meter, triple the level a year ago.
"That's outrageous," she said, after getting similar information from three real estate agents, all indifferent to her protestations. "I bet they'll offer a discount when we come next time around in June," she said, not sounding sure of herself.
Pan Shiyi, chairman of top property developer SOHO China (0410.HK), told a forum on April 24 that more than 70 percent of China's listed property firms had over 10 billion yuan of cash in hand and would not rush to cut prices.
And Fu Wenyan, a real estate agent in Haikou, said there was no sign of a decline in the price of the villas on her books despite the new tightening rules.
"Both sides will wait and see for a while," Fu said.
Cao, in her mid-30s, flew more than 1,700 km (1,100 miles) with two friends from Sichuan province to buy a flat so her son could enroll at a prestigious middle school in Haikou.
Hainan's warm weather, lush landscape and clear sea only add to the island's attractions as a holiday or retirement retreat.
Would-be buyers like Cao expect their properties to going up as the island executes its ambitious development blueprint.
But with memories of the U.S. subprime crisis and Dubai property crash still fresh, the Hainan authorities have taken various measures to clamp down on speculation.
In mid-January they suspended the approval of property construction and the allocation of land for development until the end of March to give investors time to think twice.
The tightening campaign by the central and local governments drove transactions down as some investors took to the sidelines.
Ma Xin, a client manager with China Everbright Bank's Haikou branch, has seen the number of mortgage applications he examines a week fall from over 100 in January at the peak of the frenzy to just several in April.
"In the medium- to long-term, property prices in Hainan will move upward, despite short-term uncertainties," he said.
FULL PAYMENT
Property prices nationwide fell briefly in late 2008 as the impact of an earlier round of tightening bit at the same time as the global credit crunch caused China's economy to pull back from its rapid growth rate.
The trend started to reverse by March 2009 in response to massive monetary stimulus and steps to help the property market.
By the second half of last year, prices had soared past their pre-crisis levels, driven by a shortage of flats on the market and rising demand as a hedge against inflation risks.
The question for global markets is whether the latest tightening will topple the market, crushing China's demand for materials such as steel, cement and copper, and whether Chinese banks will be lumbered with a new bundle of bad loans.
Andy Rothman, China macro strategist with brokers CLSA in Shanghai, judges that Beijing wants to cool, not kill, the residential property market.
"The impact of the new rules will not be dramatic in most cities," he said in an April 20 report.
A survey by CLSA in 60 cities in late March and early April showed about half of families in second- and third-tier cities had paid for their first and second homes entirely in cash.
The proportion was even higher in Haikou. Guo Zhenxi, a local real estate agent, said all his clients paid the full amount in cash, making it easier when they want to sell out.
To get a mortgage in Hainan, banks insist that the family liabilities of a borrower do not exceed half their income. Otherwise, they require a higher initial down payment.
Cash buyers, or those not borrowing much, will return to the market if prices fall because the new rules do not raise the cost of holding property once it has been purchased, analysts say.
Ren Zhiqiang, chairman of Huayuan Property, said prices might even stage a "revenge" rally later this year as developers slow their investment, exacerbating the shortage of new properties.
He said Beijing would turn supportive if the market overreacted.
"If property prices drop to the desired level or farther than expected -- if there's a panic fall -- the authorities will change policies," Ren said in a blog.
China Starts Trial Property Tax to Cool Market
Friday, 28 January 2011 12:00
SHANGHAI—China announced details of a long-awaited property tax in two of its largest urban centers, but the move intended to crack down on speculation and curb rising prices that are fueling public anger was relatively mild and analysts said it would have only a limited impact on investment.
The trial tax, the closest thing yet to the style of tax levied annually on residential property in countries like the U.S., will be applied differently in Chongqing and Shanghai, apparently to see which one works best, before being rolled out across the country.
The tax comes after the country's cabinet on Wednesday raised the minimum down payment on second-home purchases to 60% from 50%, and imposed limits on home purchases as part of efforts to cool the overheated real-estate sector and rein in inflation.
"The tax, by itself, is not very harsh," said Remy Chan, managing director of CBD Commercial Investment Management, a 3 billion yuan ($456 billion) private-equity property fund in Shanghai. "But together with the new limits on home purchases and higher down payment for second homes, it shows the government is determined to rein in speculation."
The tax, which comes into effect Friday, "can guide residents toward more rational housing consumption" and "promote social equality," the Ministry of Finance said Thursday in a statement issued jointly with the Ministry of Housing and Urban-Rural Development and the State Administration of Taxation.
"Levying property tax on residential housing can help reasonably adjust income allocation and promote social equality," the statement added. It will be expanded to other cities "when the time is ripe" it said, without giving a timetable.
Late last month, Premier Wen Jiabao said the property-cooling measures announced so far hadn't been implemented well enough and prices had yet to meet his expectations. Property prices rose 0.3% in December from the previous month, and 6.4% from a year earlier. Property prices slowed for the eight months to December on an annualized basis.
Chongqing Mayor Huang Qifan said the city would levy a real-estate tax on villas owned by individuals—usually luxury, stand-alone homes—and on newly purchased high-end homes at three rates: 0.5%, 1%, and 1.2%, depending on market transaction prices.
Three to five years after a purchase, the tax may be based on the appraised value of the property, he said. In addition, the city will levy a tax on second homes newly bought by non-Chongqing residents who don't own companies or aren't employed by any company in the city, a move that apparently targets speculators.
Separately, the Shanghai government said it would levy a temporary 0.6% real-estate tax on homes and may cut the rate to 0.4% for properties whose transaction prices are below certain—unspecified—levels.
A statement by Shanghai's housing department said the tax would apply to second homes newly bought by Shanghai-resident families or to first homes newly bought by nonresident families.
"It's a mild plan overall, and the primary impact will be psychological rather than economic," said Michael Klibaner, head of research at Jones Lang LaSalle China,."We finally have some clarity. It's a surprise that the tax will be in effect tomorrow, but the tax rate came in line or slightly lower than the recent rumors," Mr. Klibaner said. He said it seemed the aim was to support end-user demand, but it likely will have a limited impact on investment demand, as the tax is lower than the investment yield of about 2% in Shanghai. The progressive tax in Chongqing and flat tax in Shanghaitaxes show that the government wants to experiment before rolling out a real-estate tax to other cities, he said.
One of the intentions of the tax is to provide a recurring source of income for local governments to reduce their reliance on income from land sales, which encourages high prices.
Both cities said the tax revenue would be used to support public-housing construction. However, Mr. Huang, the Chongqing mayor, said the trial tax "carries more symbolic significance" in reforming people's consumption habits and promoting better income allocation, and may not generate much fiscal revenue in the near term.
He estimated that the tax could bring in around 150 million yuan of fiscal revenue this year, only a fraction of the 100 billion yuan that the city needs to invest in public housing construction over the next three years.
He also played down public expectations about the short-term impact of the tax, saying it can only curb speculation and property prices "to some extent".
"Maintaining a good local property-market order isn't something that can be achieved overnight. Rather, it's a complicated project," he said. "Nobody believes that the real-estate tax can hit the Achilles' heel" immediately by pushing down property prices, he said.
Analysts have said that if the tax doesn't push down housing prices, it will lead to even more public resentment. Some also raise the possibility of more rampant speculation in cities that have yet to be included in the trial program.
The government currently charges a 1.2% annual tax on 70%-90% of the value of commercial properties. The commercial real-estate tax is largely based on the cost of developing properties, excluding the cost of the land, industry observers have said.
China introduced a series of measures last year to rein in property-price rises, including limiting home purchases, raising down-payment requirements and twice raising interest rates. Analysts say a real-estate tax could help stabilize the market.
Beijing acts to limit speculative investing
Monday, 19 April 2010 16:38
SHANGHAI—China's State Council took steps to further restrict speculative property investments, including allowing banks to refuse additional mortgages for home buyers who already own two or more properties.
In an indication that Beijing is increasingly worried about runaway property prices, the State Council, the country's cabinet, said Saturday that local governments can take temporary measures to limit the number of property purchases each investor makes within a certain period.
The steps follow moves by the Chinese central government Thursday to raise minimum down-payment levels and mortgage rates for certain home buyers, after data showed property prices in 70 of China's large and medium-sized cities rose 11.7% in March from a year earlier, the fastest pace since China began releasing the data in July 2005.
The government's notice Saturday appears aimed at encouraging local governments and banks to even more strictly control credit for speculative property transactions.
"Overly high housing prices and overly fast price growth has increased the difficulty for people to seek residence through markets," the State Council said in the notice. "It also increased financial risks, which aren't beneficial to balanced social development."
"Each region's governmental departments should fully realize the threat of overly fast property-price growth and seriously implement the central government's real-estate-market policy adjustments," it said.
The State Council said banks should "greatly increase" minimum down payments and mortgage rates for those buying third homes or beyond, if a mortgage is to be issued at all, It didn't give concrete targets.
It also said banks should stop issuing mortgages to nonresidents who haven't paid local taxes or welfare-benefit fees for more than a year.
The State Council reiterated the rules unveiled Thursday that banks should raise the minimum down payment for second-home purchases to 50% from 40%, while requiring mortgage rates to be no less than 1.1 times benchmark rates. The State Council also set a 30% minimum down payment for purchases of first homes that are larger than 90 square meters.
The government also reiterated that local governments should increase land supply for residential housing development and expedite construction of government-subsidized housing.
The State Council also said the government will strictly monitor land purchases and fund raising of developers to prevent speculation on land prices.
Local governments need to file reports to the central government on audits of local developers by the end of June, the State Council said.
China to import more high-tech products over the next five years
Friday, 18 March 2011 10:47
BEIJING - China's Ministry of Commerce (MOC) announced that the country would deepen high-tech trade exchanges with developed nations and called for the easing of restrictions in exporting high-tech products and advanced equipment to China over the next five years.
China would gradually raise the percentages of high-tech products, key components and equipment in the country's imports portfolio during the 12th Five-Year-Plan Period (2011-2015), according to a statement posted on the ministry's website Thursday.
During the period, China would meet the import demand from strategically important emerging industries at home, such as information technology, energy savings, environmental protection, new energies, and high-end equipment manufacturing.
The country would also set up mechanisms for bilateral high-tech trade cooperation with 20 countries including the United States, Japan, Finland and Israel. China also aims to jointly promote trade with other countries.
The importation of such high-tech products are expected to effectively bring down the pace of China's trade surplus growth with its trade partners, the statement said.
China's trade surplus shrank year on year by more than half to $6.45 billion in January this year. Meanwhile, in February the country recorded a trade deficit of $7.3 billion as the Lunar New Year holiday season hindered export growth.
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