February 2012

Prof Li Tao, Institute of South Asian Studies, Sichuan University (2nd

from right), Mr Richard Deng, MD, Sany Heavy Industry Pvt. Ltd. (1st

from left) and other speakers at the session on India –China: New Dynamics at The Partnership Summit, 2012

India & China

India-China bilateral trade (January 2012)Trade Value ChangeImports from China $3.735 billion -4.6%Exports to China $1.713 billion -37.4%Total trade $5.448 billion -18.1%India’s deficit $2.022 billion

http://www.customs.gov.cn/publish/portal0/tab1/info354756.htm

China, India sign pact on border affairsChina and India signed an agreement in New Delhi on January 17 on establishing a working mechanism for consultation and coordination over border issues. The agreement is believed to help strengthen bilateral cooperation on border affairs, and benefit the joint effort to maintain peace and tranquility in border areas (More).

India, China may tie up for fuel huntThe government-run companies of India and China — ONGC Videsh Ltd (OVL) and Sinopec — met in Beijing in the second week of February to discuss possibilities of joining hands for pursuing global oil and gas opportunities. Officials of ONGC Videsh were in Beijing to attend the 5th annual shareholders meet of Mansarovar Energy Colombia — the first JV between India and China that jointly acquired the oil producing block in Colombia for $850 million in 2006; and also to discuss further possibilities of joint acquisition of global oil and gas assets with Sinopec (More).

M&M plans to assemble SsangYong vehicles in China, Brazil, RussiaMahindra & Mahindra Ltd. (M&M) plans to start assembling SsangYong vehicles in China, Brazil and Russia in the next two years. Mahindra may also set up a new assembly plant in China with a joint venture partner to assemble SsangYong vehicles. It also plans to export its latest SUV-the XUV500-to Chile and Australia in the next fiscal year (More).

IL&FS Transportation arm buys stake in Chinese state firm ITNL International Pvt Ltd (IITL), a subsidiary of IL&FS Transportation Networks Ltd (ITNL) signed an agreement with the Chongqing Expressway Group Co Ltd (CEG) and SASAC- Chongqing to acquire 49% of the equity interest in Chongqing Yuhe Expressway Co Ltd with an investment of over $150 million (More).

CII & China

Session on “India-china: New Dynamics” at Partnership Summit-2012In view of the increasing significance of the economic growth of China and India in past few decades, a session themed “India and China: New Dynamics” was held at The Partnership Summit organized by CII, from 11-13 January 2012 in Hyderabad. The speakers at the session also included Li Tao, Professor and Executive Dean, Institute of South Asian Studies, Sichuan University and Richard Deng, Managing Director, Sany Heavy Industry Pvt. Ltd. from China.

1

The Monthly China Journal of Confederation of Indian Industry February 2012- Volume 9 No 2

China Pulse

February 2012

(L-R): Mr. Rangarajan Vellamore, Chairman, CII IBF China and CEO, Infosys Technologies (China) Co., Ltd, Dr. Junfang Xi, Associate Professor of International Economics, Jiao Tong University, Mr. E B Rajesh, Chief Representative, CII Shanghai Rep. Office, at Session on TPP agreement, Shanghai, 11 Jan. 2012

Session on TPP AgreementCII India Business Forum China organized an interaction with Dr. Junfang Xi, Associate Professor of International Economics, Jiao Tong University of Shanghai on the Trans-Pacific Partnership (TPP) Agreement and its implication on global business for IBF members on 11th January 2012 at Infosys Technologies Campus in Shanghai. TPP is a multilateral free trade agreement that aims to further liberalize the economies of the Asia-Pacific region. The views of the US and some key Asian nations on different areas of TPP negotiations and its implications for business environment were also discussed during the interaction. More than 20 IBF members participated in the interaction.

Chinese Economy

China's non-financial ODI totals $60.07 billion in 2011China's non-financial outbound direct investment (ODI) rose 1.8% year-on-year to $60.07 billion in 2011. This brings China's total non-financial ODI to $322 billion as at the end of 2011. China has made investments in 132 countries and regions in 2011. The ODI in Europe and Africa went up 57.3% and 58.9% respectively, to $4.61 billion and $1.7 billion. Investment through mergers and acquisitions, mainly in the mining, manufacturing, electricity, communications and retail sectors, hit $22.2 billion in 2011, accounting for 37% of the total ODI (More).

China’s Economic indicators (January 2012) Exports $149.938 billion, down 0.5% CPI Up 4.5%Imports $122.661 billion, down 5.3% PPI Up 0.7%Total trade $272.599 billion, down 7.8% PMI Up 50.5%Deficit $27.274 billion PMI (Non-manufacturing) 52.9%

Government & Politics

Chinese Premier visits Nepal, Arab countries Chinese Premier Wen Jiabao paid a 6-day visit to Nepal, Saudi Arabia, the United Arab Emirates (UAE) and Qatar from 14-19 January 2012. During his four-nation tour, Premier attended more than 40 bilateral and multilateral activities and delivered important speeches at the opening of the Fifth World Future Energy Summit in Abu Dhabi and the Fourth China-Arab Business Conference (More).

China completes cross-border power transmission project with Russia State Grid Corporation of China (SGCC) said on January 1 that it had put to trial operation a cross-border electricity transmission project in Heilongjiang province to supply Russia's electric power exported to China. With a transmission capacity of 750 mega-watts, this electricity transmission project is China's biggest cross-border power line and is a part of the Sino-Russian energy and trade cooperation (More).

China's urban population outnumbers rural The number of people living in cities in China for the first time exceeded those living in the country's rural areas as of the end of 2011 as the urban population increased by 21 million to 690.79 million, accounting for 51.27% of the country's total population. The rural population fell by 14.56 million to 656.56 million. Population of China increased by 6.44 million over the past year to 1.34 billion. The number of people between the ages of 15 and 64 stood at about 1 billion, or 74.4% of the nation's total (More).

China set to develop 10 major metalsChina has planned to develop the production of 10 major metals (copper, aluminium, lead, zinc, nickel, magnesium, titanium, tin, antimony and mercury) to 46 million tons by 2015 from 31.21 million tons in 2010. The consumption of these metals will reach 49 million tons in 2015 from existing 34.3 million tons (More).

Construction of Tibet railway extensionThe construction on the extension of Qinghai-Tibet railway line from Lhasa to second-largest city of Tibet, Xigaze, is in full swing and will be completed by 2015. As of the end of 2011, $538 million had been poured into the Lhasa - Xigaze railway line, about a quarter of the total budget for the project. This is one of the key construction projects of Tibet for the period from 2011-2015. The task of laying 14.08 million cubic meters of roadbed, about 77% of the total, has been finished and 40% of the tunnels along the road have been built. This 253-km railway line will pass through five counties in Tibet and the 90-km-long Yarlung Zangbo Grand Canyon. Construction on this line began in September 2010 (More).

2

February 2012China rolls out 1st industrial restructuring plan China on January 19 published its first mid- and long-term industrial restructuring and upgrading plan (2011-2015), in which the country set 9% growth target in value-added output for all industries over the next four years and a 2-basis-point increase in value-added ratio from the end of 2010. The value-added output of emerging industries is expected to account for 15% of the country's total value-added output by 2015 (More).

China cuts US debt holdings by $1.5 billionChina trimmed its holdings of the US government bonds by $1.5 billion to $1.1 trillion in November 2011, but it was still the largest creditor to the United States. China has been keeping the scale above the amount of $1 trillion for 18 months since June 2010 (More).

China invests heavily in water conservation China has invested 345.2 billion yuan in water conservation projects. The central government invested 114.1 billion yuan, up 71.2% from a year earlier, while local governments provided 231.1 billion yuan. China has also pledged to invest 400 billion yuan in water conservation projects annually over the next 10 years (More).

China announces support for SMEs in government purchasing China has issued guidelines to relevant authorities to step up making plans to buy from SMEs in 2012. 60% of the allocated quota will be reserved for small and micro-sized businesses. The guidelines forbid any institution or any individual from impeding or restricting SMEs' access to the government purchasing market. In regards to projects that are not especially oriented to SMEs, the government purchaser or purchasing agency should first implement a 6-10% cut in product prices as reported by SMEs, and use the reduced pricing for bidding in order to give them advantages. The Ministry of Finance also announced last month that the country will scrap the collection of up to 22 items of administrative fees from small and micro-sized companies during the Jan. 1, 2012 - Dec. 31, 2014 period (More).

London set for a role in yuan transactionsLondon is set to become a major offshore trading center for the yuan, as Britain teams up with Hong Kong to develop such business. The Hong Kong Monetary Authority (HKMA) and the UK Treasury on January 16 agreed to launch a private-sector forum to strengthen links between Hong Kong and London in such areas as clearing and settlement, market liquidity and the development of new yuan-denominated products. The forum will have representatives from financial institutions in Hong Kong and London, including HSBC Holdings PLC, Standard Chartered PLC, Bank of China Ltd, Deutsche Bank AG and Barclays PLC (More).

China's satellite navigation sector to reach US$35 billion by 2015 The annual output value of China's satellite navigation industry is estimated to reach about $35 billion in 2015, according to a latest research report on the country's geographic information sector compiled by a think-tank under the National Administration of Surveying, Mapping and Geoinformation. The report has predicted that the industry would become country's third new IT economic growth point, after mobile communication and Internet. China aims to increase the total number of satellite navigation terminals used by the public across the country to 340 million by 2015 (More).

Business & Industry

Auto industry’s growth in 2011 slowest in 13 yrs Auto production and sales in China dropped by 31.6% and 29.9% in 2011, making the growth rate of the year hit the lowest point in the past 13 years. China’s auto production and sales volume stood at 18.4 million units and over 18.5 million units in 2011, up 0.84% and 2.45% year on year respectively (More).

China's Internet population reaches 513 millionThe number of Internet users in China reached 513 million by the end of December 2011. The Internet penetration rate rose to 38.3%, up four percentage points from the same period in 2010, increasing by 55.8 million Internet users. The number of mobile phone Internet users also increased, reaching 356 million by the end of December 2011, up 17.5% from the previous year. There were nearly 2.3 million websites in China by the end of 2011, up 20% from 2010 (More).

Sinopec builds oil refinery with Saudi AramcoChina Petrochemical Corporation (Sinopec Group) and Saudi Aramco have agreed to set up a joint venture oil refining company in Yanbu, Suadi Arabia. Sinopec will contribute 37.5% of the investment and Suadi Aramco 62.6%. This is Sinopec’s first overseas downstream investment. The oil refinery will produce 90,000 barrels of gasoline and 263,000 barrels of ultra-low-sulfur diesel each day. Sinopec is Saudi Aramco’s largest crude oil purchaser (More).

China's crude steel output up 8.9% in 2011 China's crude steel output increased 8.9% year-on-year to 683.27 million tons in 2011, 0.4 percentage points slower than the growth rate of 2010. China's imports of iron ore rose 10.9% year-on-year to 686.06 million tons last year, while exports of steel products amounted to 48.88 million tons, up 14.9% year-on-year. Steel industry posted a combined profit of $46.75 billion in the first 11 months of 2011, up 29.9% year-on-year (More).

3

February 2012China overtakes Japan as world's top coal importer While China has long been the world's top producer and overall consumer of coal, the country also became the largest importer of the resource last year, overtaking the position held by Japan since at least 1975. The strong domestic demand boosted China's coal imports by 10.8% in 2011 to 182.4 million tons. Import of the fossil fuel by Japan dropped by 5.1% to 175.2 million tons during the same period.

CII India OfficeU. D. Bhatkoti, Advisor

Confederation of Indian Industry

CII China OfficeE B Rajesh, Chief RepresentativeConfederation of Indian Industry

The Mantosh Sondhi Centre 23 Institutional Area, Lodi Road, New Delhi-110003 Tel: 91-11-2462 9994-7; Fax: 91-11-24601298 Tel: Email: u.d.bhatkoti@cii.in; Website: www.cii.in

Room No 11A47/49, Shanghai Mart,2299 Yan'an Road (West), Shanghai 200336, China

Tel: +86 (21) 62360969; Fax: +86 (21) 32283510 Email: e.b.rajesh@cii.in; Website: www.cii.in

4