China scrambles to teach masses financial ABCs

By Reuters

BEIJING (Reuters) - Xi Zhong learned the hard way about the risks of investing in China's stock market.

The 40-year-old day trader and tech-sector dropout says his training over the past 12 years has consisted of losing bets time and again, then learning from his mistakes.

"I've already gained so much experience through losing money that if I gave it up now I'd be throwing it away -- look at how much tuition I've paid," Xi said in the VIP room of a Beijing brokerage after the market close, three screens in front of him.

Still, Xi laments that even today, so many new investors have to go through the school of hard knocks like he did.

"There are so many people who have just entered the stock market who have no idea about the risks involved," he said.

"Many of them invest the savings they've earned from working hard for decades. Some of them are retired and invest their pension money. Sometimes I don't even have the heart to watch."

Xi is not alone in worrying about the lack of understanding of financial basics among many of China's new investors, millions of whom have poured into the market as the country's main share index has risen five-fold since the start of last year.

Though figures are hard to come by, local media and fund managers say Chinese retail investors accounted for the bulk of

the turnover before a sharp but brief dip in the market in May.

Concerned about potential financial and social turmoil should the market suffer a big correction, China's securities watchdog has sharply stepped up its warnings about market risks, saying that educating investors is one of its immediate priorities.

"Investor education is a very vital task over the long term and an indispensable part of the development of market infrastructure," Tu Guangshao, vice chairman of the China Securities Regulatory Commission, said on the sidelines of the Communist Party Congress last week.

BIG BULL, SMALL BEAR

In 2001, at the end of the last big bull run, prominent economist Wu Jinglian said China's stock markets were like a casino, causing a stir in the securities industry.

Back at Xi's brokerage, all signs indicate that regulators still face an uphill battle.

While the application materials for opening an account start off with a risk disclaimer, the pamphlet's design speaks volumes about investors' mood: a red silhouette of a bull's head takes up about three-fourths of the cover, while a tiny black bear makes its exit off the lower right-hand corner of the page.

Zhu Qiuxia, for one, is not worried about a bubble. The power grid worker has put all her savings into shares, and is planning to keep them there until the Olympic Games next year, when she plans to put her original principal back in the bank and continue to speculate with the profit she's made.

"I'm pretty confident in myself," she said, flipping through a well-worn notebook filled with newspaper clippings and notes.

"Before the Olympics are over next year, just like before the return of Hong Kong (to China), as long as it hasn't happened yet, the market won't collapse. That's the main policy."

Zhu's attitude is common among retail investors -- that because of Beijing's desire to present a good face to the world when it hosts the Summer Olympics next August, it will come to the rescue should the market suffer any major volatility.

IRRATIONAL EXUBERANCE

William Hess, Greater China manager for Global Insight in Beijing, said that retail investors were essentially replicating the type of "blind investment" that many Chinese companies have been known for in the past.

"But the downside risks for the retail investors are certainly much larger, when they're buying into funds and buying shares when their only knowledge of the stock market is that it seems to continue to go up," Hess said.

"That kind of perspective towards risk and the expectation either that risk is low or that someone will bail them out leads to, call it 'irrational exuberance', on the part of Chinese investors in the same way we've seen in other bubbles."

The central bank recently published a 300-page "Citizen's Finance Handbook" explaining in plain language everything from how interest rates are calculated to share valuations.

In addition to distributing the book to every local library in the country, the central bank has held a series of exhibitions on finance across the country.

The China Insurance Regulatory Commission (CIRC) recently launched a pilot program for teaching high school students the basics of insurance, hoping to instill in them a sense of long-term financial planning.

"We need to raise awareness from a young age that people have to use market-orientated ways of insuring themselves, and can't just rely on the government," said Fan Xinhong, deputy head of the CIRC's policy and research department.

But the banking regulator's "public education centre" speaks most vividly of the need to boost people's financial know-how.

To enter it, visitors must pass through a sophisticated security door that rejects those toting suspiciously large bags.

"You never know, some people coming here with a complaint might use violence," one worker explained.

PetroChina market value reaches US$420bil

By The Star

HONG KONG: Shares in Asia's top oil and gas company, PetroChina Co Ltd, jumped 10% yesterday on optimism about its fourth-quarter performance, putting the Chinese company on par with General Electric as the world's second most valuable firm.

The surge in the shares to an all-time high of HK$18.34 gave the state-backed energy producer a market value of as much as US$420bil, rivalling GE, the world's most highly valued listed company after Exxon Mobil.

PetroChina has soared some 60% since the start of September as Chinese media reports of big new discoveries fuelled voracious demand for the stock.

“We believe after the company's A-share listing (in Shanghai) is launched next month, PetroChina is likely to announce a number of substantial oil and gas discoveries,” said Citigroup energy analyst Graham Cunningham in a research report. “We thus expect strong short-term (23 months) share price performance.”

PetroChina added to the optimism yesterday with third-quarter production data showing it had pumped more oil and gas while managing to pass price increases on to customers.

Starting Business in China - A Huge Market

To start business in China, there are few issues need to be consider also, please look at the legal and management issues involved in establishing a business entity in China.

Starting a Business in China
by SME & Entrepreneurship Malaysia

Wolly Owned Foreign Enterprise (WOFE)
In certain industries, the Chinese goverment allows business to be wholly foreign owned. These are usually capital intensive or technology-driven companies and enjoy additional benefits offered by either the central, provincial or municipal goverment. Due diligence should be conducted to ensure that incentives offered to attract your investment are state level approved. Regrettably there has been an increasing number of problems with foreign investment due to local goverment over exaggerations resulting in post-registration non-compliance issues that can have serious consequences. WOFE however, when properly structured, are particularly useful when considering a to open a manufacturing facility in China. WOFE are typically used as China manufacturing investment vehicles, either to manufacture and sell in China, manufacture and sell overseas, or increasingly, a combination of both.


Foreign Invested Commercial Enterprises (FICE)
FICE are commonly used as investment vehicles for international businesses wishing to establish wholly foreign owned operations in international trading, domestic trade, retail and wholesales, and distribution and franchising. FICE however need attention to detail in their structuring, as being considered as services companies in China, they may not obtain China tax holidays. This means tax planning at the pre-incorporation stage must be part of the investment structuring process.

Representative Office
Representative Offices based in China are relatively inexpensive to establish, and do not require capitalization. Typically, they are used for China market research activities, to access the scope and depth of the domestic market when considering a future investment, or for liaison activities between China-based buyers of the services or products sold by your international business. China representative offices cannot invoice directly however, meaning the payment terms must be arranged directly between the international businesses parent company overseas, and the China-based purchaser. There can be tax considerations here so be careful to examine this aspect.

Joint Ventures
Joint ventures with a Chinese partner can be considered as an investment strategy into China if the specific industry you are engaged in is restricted with only partial foreign investment permitted, or if the China partner can provide some tangibles, such as supply chain, a complimentary existing customer base, or other distribution channels of use to your product.

China Market

by SME & Entrepreneurship Malaysia

China is the world's most populated country with over 1.3 billion people. Administratively China is divided into 23 provinces, 5 autonomous regions and 4 municipalities. For centuries, China stood as a leading civilization, outpacing the rest of the world in arts and sciences. However, in the 19th and early 20th centuries, the country was beset by civil unrest, major famines, military defeats and foreign occupations. After World War II, under the leadership of Mao Ze Dong, China once again established and ensured its sovereignty. After 1978, Deng Xiao Ping and other leaders focused on market oriented economic development and by year 2000, output had quadrupled. For most of the population, living standards have improved dramatically and room for personal choice has expanded.

Since 1978, China 's economy has been performing exceptionally well, averaging 9% in GDP growth. Fueled by exports expansion, China's economy saw a GDP growth of 9.5% to US$ 1.65 trillion for the year 2004. In the same year, China's foreign trade increased by 35.7% and reached US$ 1.15 trillion, while foreign direct investment (FDI) increased 13.3% to US$60.6 billion. This makes China the leader in attracting FDI. From the year 2000, China underwent its second phase of economic development as new opportunities arise in the domestic market from its large population, growing affluence of the middle class, and its strong purchasing power/desire. This has replaced the 1980 -1990s development phase, where China focused on export driven investment and hence concentrated in coastal cities.

In the early stages of China economy development, the focus was on coastal provinces and cities namely Beijing, Tianjin, Shandong, Shanghai, Jiangsu, Zhejiang, Guangdong and Fujian. These locations are able to attract major foreign investments as they have more transparent system, higher familiarity in dealing with foreign investors and excellent geographical location. After many years of development, the coastal region has seen less infrastructure development projects, higher business cost, labour shortage and more competition. Despite this, the high development level of the region also creates new opportunities such as high-tech business, service sector, regional HQ, etc.

In recent years, China's focus of development is on two areas: Western and Northeast China. China's western region is made up of 11 provinces, autonomous regions and municipalities. They have a total land area of 5.4 million square km which is 57% of China's land area. Despite the substantial land area of western China, it only has 23% of China's total population of 285 million. Inaccessibility of Western China greatly hindered its growth, causing imbalanced development between the eastern and western coast. In 1999, to achieve a more balanced growth and reduce income disparity throughout China, the Chinese goverment launched the "Go West" campaign. Despite attractive points of the "Go West" campaign including special incentives, low cost, abundant rescources and less competition, this national policy has yet to yield significant results.

The Northeast provinces of China, known as the "Industrial Cradle of China", played a vital role in the country's industrial development from the 1950s to the early 1970s. However, from 1970s onwards, there has been a gradual decline in the industry output of this region, from 16.5% of the nation's industrial output in 1978 to only 9.3% of nation's industrial output in 2002. Today, the past heavy investment by the state has become the region's vulnerability. Northeastern provinced have the highest concentration of state-owned enterprises (SOEs) among all of China's regions. With China's WTO accession, SOEs' outdated plants and inefficient managements represent a huge challenge. To tackle this issue, the Chinese goverment has started the "Revival of the old industrial belts of Northeast China" campaign. This will provide opportunities for infrastructure development, logistics and education/ training.

In the 21st century, China is widely regarded as the main growth engine of the global economy. Not only does its massive population provides huge growth potential, its substantial workforce also produces much of the world's products. Furthermore, China's attractiveness as an investment destination is enhanced by the growing affluence of its population. However, prospective foreign investors should be recognize of China's Business environment. Considerations include China's culture, values system, labour relations, and political stability, amongs others, before embarking on a Business venture.

Administrative Regions of China

Article by China Economic Review - CHINA BUSINESS GUIDE 2007

China - the People's Republic of China
China's official name is the People's Republic of China (PRC). Central leadership is concentrated in the capital, Beijing, beneath which the country is divided into Thirty Four (34) administrative areas, provinces, regions and municipalities.

Provinces
There are twenty two (22) provinces in the People's Republic of China (PRC) (and not including Taiwan which has been under separate rule since the Communist victory in 1949), as follows:
Anhui, Fujian, Gansu, Guangdong,Guizhou, Hainan, Hebei, Heilongjiang, Henan, Hubei, Hunan, Jiangsu, Jiangxi, Jilin, Liaoning, Qinghai, Shaanxi, Shandong, Shanxi, Sichuan, Yunnan and Zhejiang.

Regions
There are five (5) " autonomous regions", each named after the minority group that dominates the particular region. They are: Guangxi Zhuang Autonomous Region, Inner Mongolia Autonomous Region, Ningxia Hui Autonomous Region, Tibet Autonomous Region and Xinjiang Uighur Autonomous Region. These regions are governed in effectively the same way as the provinces.

Municipalities
There are four cities designated as centrally administered municipalities as follows: Beijing, Chongqing, Shanghai and Tianjin. Rumors occasionally surface that other bustling metropolises such as Nanjing, Dalian, Shenzhen and Wuhan could be promoted to municipality status. Beijing, Shanghai and Tianjin have operated as separate municipalities since the 1950s while Chongqing became a municipality in 1997, partly to provide more focussed administrative support to the Three Gorges dam project and the huge population and economic changes taking place upstream from the dam along the Yangtze River valley, and also to promote faster growth in the poor and largely neglected western provinces.

Special Administrative Regions
China originally created the concept of the special administrative regions (SARs) to allow for the integration of the former foreign-run colonies of Hong Kong and Macau back into China's administrative structure. The special administrative regions (SARs) of Hong Kong and Macau are allowed a high degree of administrative independence, although there is a lively debate in Hong Kong over the extent to which the 1997 handover agreement, allowing for " One Country; Two Systems" and fifty years of autonomy, has or has not been observed since. The fact that there is such a debate at all clearly differentiates Hong Kong from the mainland. A long-term goal of the SAR concept is to encourage Taiwan to return to the embrace of the mainland. This issue remains one of the most sensitive on the Chinese political scene.

Money Exchange Rate

Chinese currency is " RenMinBi" 人民币 and the basic unit of the RMB is the "Yuan" , it is issued by the People's Bank of China. It comes in notes of RMB 100, RMB 50, RMB 20, RMB10, RMB 5 & RMB 1. The coin in denominations comes with one & two & five "jiao"
(Notes: the RMB unit "Yuan" is the similar with the unit called "dollar" )
(Notes: the RMB unit "Jiao" is the similiar with the unit called " sen" )

Most bills features a prominent portrait of Mao Ze Dong (was a Chinese military & political leader who led the Communist Party of China to victory in the Chinese Civil War, and he was the leader of the People's Republic of China.

Discover Shenzhen Districts

The city of Shenzhen (Chinese written as: 深圳) today are spearheading China's remarkable economic growth. Shenzhen is a sub-provincial city of GuangDong province in southern China. Most people been travel to HongKong before, they mostly know that it was fast & easy to move into Shenzhen because it was just next to Hong Kong border. The location was chosen to attract industrial investments from Hong Kong since these two places are nearby to each other.

Bordering with Hong Kong, Shenzhen has become China's First Special Economic Zone (SEZ) in year 1980 & also one of the largest cities in the Pearl River Delta region, which has become one of the economic powerhouses in China.

Shenzhen, formerly known as 'Bao'an County ' (宝安县), was promoted to prefecture level, directly governed by Guangdong province, in November 1979. In May 1980, Shenzhen was formally nominated as a "special economic zone", the first one of its kind in China. It was given the right of provincial-level economic administration in November 1988.
The population in Shenzhen approximately 8.3 million people.




From the picture above, Shenzhen was actually municipality comprises into six (6) districts area which is called Luo Hu (罗湖), Fu Tian (福田), Nan Shan (南山), Yan Tian (盐田), Bao'an (宝安) & Long Gang (龙岗).

For your information, most tourists are easily travel & accessible to various parts of the town & most shopping area & major landmarks location of the above districts by Shenzhen Metro Rail way. see more related website: http://www.szmc.net/10station/index.jsp
But unfortunately, this website did not convert in english version.

Let us Look into Luo Hu District (罗湖)
It was located at the centre of Shenzhen, Luohu serves as an important immigration control between mainland China & HongKong. Luohu districts was established in year 1979, the size of LuoHu is about 76 km² , population around three hundred thousand of people staying here. Today, Luohu has become more commercial, trading and internet services centre compare with other districts.

The second is FuTian District (福田区)
FuTian was located next to the West side of LuoHu, as you can refer to the small map above, it comprising an area of 78.8 km², estimated population around 1 million of people staying here.