by Xinhua writer Jiang Xufeng

    BEIJING, Jan. 15 (Xinhua) — China’s large state-owned companies with high sales and substantial assets may no longer be deemed “successful” under new government performance measurements.

    Huang Shuhe, vice chairman of the State-owned Assets Supervision and Administration Commission (SASAC), has announced the SASAC this year will use the economic value added (EVA) measure to assess the performance of the 129 state-owned enterprises affiliated to the central government.

    Developed by the U.S.- based consultancy firm Stern Stewart & Co., the measurement tool has been applied widely among top-tier transnational firms, including Coca-Cola, Temasek, Pemex and others.

    EVA refers to the residual income of firms after subtracting costs on all capital employed in the business, debt and equity, from their net operating profit after tax (NOPAT), Erik Stern, Stern Stewart president international, told Xinhua in an exclusive interview.

    ”It considers not only the actual cost of capital, but also its opportunity cost, in other words the expected returns that could have been achieved with the capital if it had been invested in a similar investment,” said Stern.

    If a company’s NOPAT is 5 million yuan with 100 million yuan capital employed, the profitability is 5 percent. But if the average industry cost of capital ratio is 6 percent, that translates into a negative EVA of 1 million yuan, meaning the firm failed to deliver optimum value for shareholders.

    ENDING EMPIRES

    Experts hold that a firm’ s profitability measures only its profit-making capabilities, while EVA measures its profit-making capabilities compared with its peers, a more scientific and tougher standard.

    ”Previously, we viewed the large and high-profit-generating firms as good ones. The concept has changed now. Profitable enterprises don’t necessarily mean that they have created enough value for shareholders,” said Liu Nanchang, head of the Bureau of General Affairs of the SASAC.

    Analysts hold that some Chinese firms think that they are “too big to fall” and prefer to “build empires.” EVA would make corporate executives more responsible for the capital they are employing, as their investments must beat the cost of capital to deliver positive EVA.

    According to the new version of the central SOE performance assessment document to be rolled out soon, EVA will replace return on net assets. It will account for 40 percent of the criteria governing SOE executive performance. The remaining 60 percent will target profits and other industry-tailored metrics.

    MACAO, Jan. 15 (Xinhua) — The opening ceremony of the Zhejiang’s China Time-Honored Brands and Zhejiang Macao Branded Products Fair 2010 were held here on Friday, where various products from China’s Southeastern province were exhibited.

    More than 4,000 items of long-established and famous brands will be exhibited at the three-day fair by 110 enterprises from the Zhejiang province, and the products on display covered five diverse areas, including Chinese traditional medicine and health care, food and beverage, general merchandise, cultural arts and crafts, tea products and art.

    The fair will further enhance the trade, economic and cultural exchange between Macao Special Administrative Region (SAR) and Zhejiang province, said Jin Yonghui, director-general of department of commerce of Zhejiang.

    He also said that the objective of hosting this event in Macao is to learn from the SAR’s trade and economic experience, in a bid to deepen Macao and Zhejiang’s business and economic exchange and cooperation.

    Aside from the fair, a photo exhibition and a Zhejiang product center was also unveiled on the same day, which were all parts of the 2010 Macao-Zhejiang Week, a business promotional event organized by the provincial government of Zhejiang.    

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    LANZHOU, Jan. 15 (Xinhua) — A leading pharmaceutical firm that produces traditional Chinese medicine in the northwestern Gansu Province is hoping to make Sweden its gateway to the European Union market after a landmark EU directive on herbal drugs takes effect in 15 months.

    ”We have applied to export our medicine to Sweden and eventually other EU markets,” said Sun Yu, deputy general manager of Foci Pharmaceuticals based in Lanzhou, the provincial capital.

    Sun said Friday he saw a ray of hope in a two-hour visit by Dr. Magnus Breidne, science counselor of the Swedish Embassy in China and Christina Chuck, general manager of the Stockholm-based Wilkris & Co, to his workshops on Thursday.

    Foci Pharmaceuticals, founded in 1929, has been selling herb extracted pills to 27 countries and regions including the United States, Canada, Japan, Germany, the Netherlands and Australia.

    It is China’s largest exporter of herbal products in terms of volume and number of destinations. But like all other Chinese herbal exporters, its pills are categorized as “food” or “healthcare products” instead of “drug” in the international market.

    EU’s Traditional Herbal Medicinal Products Directive, issued in2004, however, requires all herbal medicine products to obtain an authorization to market within the EU starting in April 2011.

    The directive requires evidence proving 30 years’ use — of which 15 years must be in the EU community, to ensure safety.

    ”If we cannot obtain the authorization, our products will be taken off the shelves in EU next year,” said Sun Yu. “It’ll be a great loss for the Chinese industry as well as our European buyers who are relying on Chinese herbal medicine to keep fit.”

    As the only herbal pharmacy in China to have 15 years of presence in the EU, Sun said his company was still the most hopeful to cross the barrier. “There’s a technical, as well as a cultural, barrier to get over.”

    Foci failed to be accredited for sale in Britain in 2006. “We are hoping to enter the Swedish market, where the accreditation procedures are less strict,” said Sun.

    His company has applied for authorization of 10 product categories to be sold to Sweden. “We hope one or two will make it in the coming 15 months.”

    Dr. Breidne said the Swedes were not very familiar with herbal medicine. “But I suppose they will be quite interested.”

    Twenty years ago the Europeans had no idea about Chinese acupuncture. “Today, it’s popular among many women,” she said.

    While most Swedish thought herbal medicine might, to some extent, prevent illnesses, it still needed time and research to prove that the herbs were really effective and safe, she added.

    Chuck, from an industry insider’s perspective, suggested Chinese companies should study the international market from the westerners’ standpoint. “It’s also necessary to mark clearly the products’ ingredients and side effects, which are sometimes not listed properly in herbal medicine from China.”

    China exported 193 million U.S. dollars worth of herbal medicine to the EU in 2008, the most recent data available from the General Administration of Customs.

    The State Food and Drug Administration is working to enhance foreign exchanges and cooperation in the accreditation and authorization of traditional Chinese medicine in other countries, said Zhang Wei, an official in charge of drug accreditation.

    ”We’ll try to build a platform for traditional herbal medicine to enter the EU market,” he said.

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    BEIJING, Jan. 15 (Xinhua) — China’s new yuan-denominated lending last year hit a record 9.59 trillion yuan (1.4 trillion U.S. dollars), almost double that of the previous year, the People’s Bank of China (PBOC), the central bank, announced Friday.

    The figure compared with the 5-trillion-yuan annual target the government set at the beginning of 2009.

    New yuan-denominated lending in December rose to 379.8 billion yuan from November’s 294.8 billion yuan and 253 billion yuan in October, the central bank said.

    The December statistics suggested that China’s credit rise was returning to a reasonable growth, said Liu Yuhui, economist with the Chinese Academy of Social Sciences, a government think tank.

    At the end of December, outstanding loans by financial institutions stood at 39.97 trillion yuan, up 31.74 percent year on year, according to the PBOC.

    The broad measure of money supply, M2, which covers cash in circulation and all deposits, rose 27.68 percent from a year earlier as of the end of December, 9.86 percentage points higher than that at the end of 2008.

    The narrow measure of money supply, M1 (cash in circulation plus current corporate deposits), was up 32.35 percent to 22 trillion yuan.

    Renminbi deposits in 2009 were up by 13.13 trillion yuan, a rise of 5.44 trillion yuan year on year.

    The government shifted to the moderately easy monetary policy in 2009 from a tight monetary policy in 2008 to help the national economy counter adverse impacts of the global financial crisis.

    However, the lending boom and soaring housing prices have ignited concerns about a risk of an assets bubble and increasing inflation.

    The PBOC and the country’s policy-makers have repeatedly stated that the government would maintain the continuity and stability of macroeconomic policy and continue the proactive fiscal policy and moderately easy monetary policy in 2010. But it would enhance the focus and flexibility of macroeconomic policy according to conditions.

    On Tuesday, the central bank decided to raise the reserve requirement ratio of banks by 0.5 percentage points from Jan. 18, which analysts forecast would help freeze 250 billion yuan of liquidity.

    Although new loans this year would not rise as fast as last year, there would still be a significant increase, said Qiu Gaoqing, a senior financial analyst with the Bank of Communications.

    Growth of the country’s gross domestic product (GDP) accelerated from 6.1 percent in the first quarter of 2009, to 7.9 percent in the second quarter and 8.9 percent in the third. GDP growth for the fourth quarter, together with other major economic data, are due for release on Thursday.

    The country’s foreign exchange reserves hit almost 2.4 trillion U.S. dollars by the end of 2009, up 23.28 percent year on year, the PBOC said.

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    HONG KONG, Jan. 15 (Xinhua) — Hong Kong stocks shed 62.79 points, or 0.29 percent, to close at 21,654.16 on Friday.

    Turnover totaled 84.28 billion HK dollars (10.81 billion U.S. dollars), compared with Thursday’s 84.20 billion HK dollars (10.80billion U.S. dollars).

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    BEIJING, Jan. 15 (Xinhua) — China’s foreign exchange reserves almost hit 2.4 trillion U.S. dollars by the end of 2009, up 23.28 percent year on year, the People’s Bank of China, the central bank, announced on Friday.

China might become top world exporter, but weakness remains

    BEIJING, Jan. 10 (Xinhua) — China will probably overtake Germany to become the world’s largest exporter though its exports in 2009 had fallen 16 percent from a year earlier, according to figures released Sunday by the General Administration of Customs (GAC).

    But Chinese experts and officials said the country was far from being a real trade power if measured by exports structure, technological innovation and industry competitiveness.  Full story

China rolls out fresh measures for property market amid rising house prices

A customer checking out a model of a real estate project in Shenzhen, Guangdong province. Property prices in China’s 70 major cities rose at the fastest pace in 16 months in November. (China Daily/Qiu Daocen)

    BEIJING, Jan. 10 (Xinhua) — The General Office of the State Council, China’s cabinet, Sunday issued a notice that required central governmental departments and local governments to strengthen management, stabilize market expectations and facilitate stable and sound development of the real estate market.     

    ”With the recovery of the real estate market, such problems as excessively rising house prices have recently emerged in some cities, which call for great attention,” said the notice.  Full story

China’s 2009 foreign trade falls 13.9% to $2.21 trln with surplus at $196.1 bln

    BEIJING, Jan. 10 (Xinhua) — China’s foreign trade in 2009 dropped 13.9 percent from a year earlier to 2.21 trillion U.S. dollars and its trade surplus last year slid 34.2 percent year on year to 196.1 billion U.S. dollars, according to figures released Sunday by the General Administration of Customs (GAC).

    In breakdown, China’s exports in 2009 stood at 1.2 trillion U.S. dollars, down 16 percent from in 2008, and imports reached 1.01 trillion U.S. dollars, down 11.2 percent from a year earlier, said the GAC.  Full story

China’s 2009 fiscal revenue expected to surpass $1 trillion: Minister

    BEIJING, Jan. 10 (Xinhua) — China’s 2009 fiscal revenue was estimated at 6.85 trillion yuan (just over 1 trillion U.S. dollars), an increase of 11.7 percent over a year earlier, Finance Minister Xie Xuren said here Sunday.

    Xie also said the budget of public investment in 2010 from the central government was likely to stand at 992.7 billion yuan, up 572.2 billion yuan from the 2008 budget.  Full story

China gives nod to index futures, margin trading     

    BEIJING, Jan. 8 (Xinhua) — China’s securities regulator said Friday the State Council had approved “in principle” the launch of index futures and given it the green light to pilot the margin trading business.

    Its introduction was aimed to boost the stable and healthy development of the capital market, said an official with the China Securities Regulatory Commission (CSRC). The move came after the benchmark Shanghai Composite Index surged 80 percent in 2009 after tumbling 65 percent in 2008.  Full story

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