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CIC buys 20% stake in HK clean energy firm
China Investment Corporation (CIC), the nation\’s sovereign wealth fund, would spend 5.5 billion HK dollars (US$709.69 million) to buy about 20 percent stake in a Hong Kong-based new energy company, said a report posted on CIC\’s website Thursday.
The company said it had entered into a binding framework agreement with GCL-Poly Energy Holdings Ltd (GCL-Poly), and would subscribe for 3.108 billion new shares at a price of HK$1.79 per share.
The two sides also agreed to set up a joint venture, or JV Company, to invest and develop photovoltaic or other solar energy projects with an initial capital of US$500 million.
CIC will hold 49 percent shares of the joint-venture, and GCL-Poly, 51 percent.
"This transaction marks an important step for GCL-Poly. With our industry expertise in the renewable and clean energy business and our newly gained financial flexibility, the deal will strengthen our financial position and enhance the company\’s leading role in the renewable energy industry," said Zhu Gongshan, the company\’s chairman.
GCL-Poly said in a statement that it intended to use the net proceeds raised from the subscription for general working capital, repayment of borrowings and exploration of new business opportunities, including investment in and development of the joint-venture company.
Founded in 2006, GCL-Poly, is the country\’s largest polysilicon producer and got listed on the Hong Kong Stock Exchange in 2007.
Shares of GCL-Poly surged 12.21 percent to close at 2.59 HK dollars at the midday while the Hang Seng index dipped 0.53 percent.

Mattel cuts sales target for Shanghai Barbie store

Mattle has revised the sales targets three times. [China Daily]
Mattel Inc, the world\’s biggest toymaker, lowered the sales target for its Barbie store in Shanghai by at least 30 percent after deciding the original marketing concept didn\’t work.
"The initial sales targets were astronomical," said Dann Murphy, who took over as general manager as his predecessor left eight months after the store opened. Targets for the six-story outlet\’s restaurant and "retail experience", which includes designing personalized Barbie dolls, have been revised down three times since its opening in March.
Mattel chose Shanghai for its first dedicated Barbie store as consumer demand slumped in the United States and Europe.
China\’s economic growth accelerated to 8.9 percent from a year earlier in the third quarter, while the US economy expanded 3.5 percent from the previous three months. Compared with the previous year, US GDP shrank 2.3 percent in the third quarter.
"Every retail store operates at a loss when it opens, but they\’ve been open long enough that it should be working by now," said Paul French, founder of Shanghai-based market research company Access Asia.
"They overestimated their brand recognition in China. I just think the concept is wrong."
Mattel has revised the overall sales target for the store to between 65 percent and 70 percent of original expectations, said Murphy. The store has started meeting its sales targets on product sales, including dolls and toys, after the targets were downgraded twice, he said.
"The restaurant hasn\’t carved out its own separate identity," said Murphy in a Nov 16 interview in Shanghai. "Sometimes customers don\’t even know the restaurant is there. So they get to the sixth floor and are like, \’Where am I?\’"
Mattel fell 12 cents to $20.55 on Wednesday in NASDAQ Stock Market trading. The shares have gained 28 percent this year.
The company modeled the store\’s concept on American Girl, Mattel\’s online doll catalog that also has retail stores and restaurants in the US.
Mattel intended for the store to generate revenue from its retail sales, spa, restaurant and what it calls its "retail experience", which includes having children pretend to model clothes on a fashion runway and to design customized Barbie dolls.
China\’s retail sales growth last month was the fastest since December, excluding seasonal distortions in January and February.
Mattel\’s third-quarter profit fell 3.5 percent to $229.8 million as consumers spent less on toys and Barbie faced challenges from new dolls.
More than 500,000 people visited the store between the March 6 opening and Oct 9, former general manager Laura Lai said last month.
Lai, 41, was replaced by Mattel "retail specialist" Murphy, the California-based toymaker said in an emailed statement on Nov 6. It didn\’t say why or when Lai resigned. Lai said she stopped working for the store on Oct 22.

Merck to set up R&D unit in Beijing
Merck Serono, a division of pharmaceutical and chemical giant Merck KgaA, plans to establish a global research and development (R&D) center in Beijing, to strengthen its global R&D capabilities and expand business in China, said company executives yesterday.
The Geneva-based company will invest more than 150 million euros and create more than 200 new jobs over the next four years to set up the new center and conduct R&D activities in China.
Research conducted in the center will mainly focus on biomarker research including pharmacogenomics and bioanalytics activities.
"The creation of the China R&D center marks a new milestone in Merck Serono\’s commitment to China, where there is a rising demand for more healthcare options," said Elmar Schnee, president of Merck Serono.
According to Schnee, the investment will go to areas that help China to address some of its public health needs that currently are not met.
By 2011, the capacity of China\’s pharmaceutical market may exceed 310 billion yuan, the third biggest after United States and Japan, according to data from IMS Health.
"The new center will help us to deliver products to consumers in China three to four years ahead of schedule and also boost our business here," said Sui Chenghao, managing director of Merck Serono China.
During the first nine months of this year, Merck\’s sales in China surged 40 percent year-on-year. Sui said he expects sales to grow by 30 percent next year.
The R&D center will become one of the key hubs for Merck Serono worldwide, said the company. It currently has hubs in Germany, Switzerland and the United States.
According to the executives, the center will lead drug development for China and other Asian countries. It would also help in local clinical trials and participation in global clinical trials, and manage collaboration with local research institutions and companies.
Merck Serono currently employs more than 1,000 people in China. With an annual R&D expenditure of around 1 billion euros, its main brands focus on cancer, multiple sclerosis, infertility, endocrine and metabolic disorders, and cardio metabolic diseases.

China State Construction nets $100m US subway deal

The company has signed more than $2 billion worth of contracts in the US this year. [China Daily]
China State Construction Engineering Corp, the largest contractor in China, has bagged a subway ventilation project worth about $100 million in New York\’s Manhattan area, marking the construction giant\’s third order in the United States\’ infrastructure space this year.
The contract was given to China Construction American Co, a subsidiary, the Wall Street Journal quoted a source as saying.
"The new project, along with the $410-million Hamilton Bridge project and a $1.7-billion entertainment project it won earlier this year, signals China State Construction\’s ambition to tap the American construction market," said Li Zhirui, an industry analyst at First Capital Securities.
Li, however, said the order came as no surprise as the US government is spending massively on infrastructure projects.
The three orders only account for about 4 percent of the value of its total orders this year, Li added.
In the first three quarters of this year, the Chinese construction giant signed more than $2 billion worth of contracts in the US market. China State Construction was also the contractor for a high school, a railway station and the Chinese embassy in the US.
Despite the progress made in the US market, the Middle East, Asia and Africa remain the State builder\’s key markets. The value of its contracts in Algeria this year increased 32 percent year-on-year, exceeding $800 million, and the value of its contracts in the Middle East surged 62 percent year on year, also exceeding $800 million.
The domestic market is still the largest contributor to China State Construction\’s revenue, mainly due to strong property sales and infrastructure sector projects.
China State Construction said it reaped 41 billion yuan in revenue from the property sector in the first 10 months of this year, up 83.2 percent over the same period last year. Orders from the infrastructure construction business were boosted by 90 percent largely due to the fiscal stimulus allocated to China\’s infrastructure sector.
Citing the company\’s recent performance, Shenyin &Wanguo Securities has given China State Construction a "buy" rating for the first time.
According to statistics provided by the Ministry of Commerce, China\’s overseas project contracts have increased 22.7 percent to $100.15 billion in the first 10 months of this year.

Surging Skoda: Spectacular 3 years
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Superb Haorui, Skoda\’s flagship model. [File photo]
Skoda, the Czech subsidiary of German automaker Volkswagen Group, more than doubled its sales to 123,000 units in China last year, a staggering achievement for such a newcomer.
Though a century-old brand, Skoda entered China\’s market just three years ago as a part of Shanghai Volkswagen\’s dual-brand strategy.
Skoda now makes three models at the Sino-German joint venture – the compact Octavia Mingrui, the subcompact Fabia Jingrui and the mid-sized Superb Haorui.
All three have performed well as segment leaders and contributed to Skoda\’s rapid growth.
In the middle of 2007, Skoda introduced its first locally built model, the Octavia Mingrui, and sold 27,112 units in just half a year.
By the end of 2008 that single model ranked in the top three in the A-class high-end market as sales surged 117 percent to nearly 60,000 units.
Skoda then launched the Fabia Jingrui the same year that has turned out to be one of the fastest-growing models in the A0-class segment. The subcompact now has stable monthly sales of more than 3,000 units.
In August last year, Skoda put its flagship model Superb Haorui into the B-class market. It also quickly gained in popularity with monthly sales surpassing 3,000 units in the highly competitive medium- and high-end segment.
With the three models, Skoda has built up a product line that covers China\’s mainstream markets, the company said.
Skoda\’s 2009 full-year sales jumped 108 percent, twice the growth rate of the country\’s overall passenger vehicle market. According to statistics from the China Association of Automobile Manufacturers, passenger vehicles sales increased by 53 percent to 10.33 million units last year.
Peter Miling, Skoda brand chief at Shanghai Volkswagen, said in an earlier interview that China is expected to surpass Germany to be Skoda\’s largest market in the world this year.
Sales have already exceeded 200,000 units since it entered the China market.
In order to better meet the demands of domestic customers, Skoda revamped and upgraded the existing models last year.
It has also built a sales network of 235 dealerships and showrooms across China. The company said it will greatly expand the network this year to further boost sales.
Skoda now accounts for one-sixth of total sales for Shanghai Volkswagen, which once again was the nation\’s champion last year with total sales of 729,000 units.

BYD wins backing to make e6   
New-energy vehicle and battery manufacturer BYD Automobile Co said?Monday that it has won approval to produce the e6, its first pure electric car, in the country.

A BYD official said the e6 accelerated the auto maker\’s new-energy vehicle strategy and will help domestic car makers compete against international rivals.

BYD Auto\’s e6 is presented during the 2010 North American International Auto Show (NAIAS) at Cobo center in Detroit, Michigan, U.S.A., Jan 11, 2010. (Xinhua/Zhang Jun)
China-based BYD, backed by billionaire Warren Buffet, will launch the plug-in e6 sedan in China in the first half of this year for about 300,000 yuan (43,988 U.S. dollars), mainly supplying government, public services and taxi fleets. BYD also plans to sell the e6 in the United States at the end of this year with a price tag of about 40,000 dollars.
With government support, hybrid and electric vehicles are becoming an industry trend as consumers seek ways to reduce emissions to protect the environment. Demand for such vehicles has prompted car makers to increase investment and speed up engineering in the field.
General Motors plans to launch its extended-range electric car Volt in the US this year before introducing it to China in 2011. Nissan plans to launch its Leaf plug-in electric car in 2012.
BYD said the e6 is a sedan powered by a lithium iron phosphate battery.
The car promises a battery-only range of 330 kilometers on a single charge. The battery can be quick-charged to 50 percent of capacity in 10 minutes, and fully charged in 60 minutes.
Aside from intensifying competition, car makers also face challenges convincing consumers about the benefits of new-energy vehicles as some people worry about inconvenience due to the lack of charging stations.
Auto makers also face issues over heavy batteries, which reduce the efficiency of electric cars, and recycling batteries.
Wang Chuanfu, chairman of BYD, said recently that the car maker is aiming to become the world\’s largest auto maker by 2025. Last year, BYD saw sales jump 130 percent to 400,000 vehicles. It set a sales target of 800,000 units this year.
At the ongoing Detroit auto show, BYD was the only Chinese car maker to attend. Its lineup also included the F3DM, the world\’s first dual-mode plug-in hybrid.
Besides BYD\’s e6, the new-energy vehicles the government approved included Dongfeng\’s Fengshen S30 and Changan\’s Zhixiang.

Economic stability boosts CIC
China Investment Corporation (CIC), the nation\’s 300 billion U.S. dollars sovereign wealth fund, may gain more than 10 percent from its investments last year on the back of the global financial market and economic stability, a source close to the fund said.
"Though the total financial return is not yet fixed, the fund expects to report an annual return better than last year," said the source, speaking on condition of anonymity.
It was reported in August last year that the fund\’s net profit grew 6.8 percent to reach $23.1 billion in 2008, thanks to hefty gains in its domestic investment arm made from major listed State banks. However, the value of its global investment portfolio fell 2.1 percent during the same year.
Shanghai Securities Journal reported yesterday that the fund might expand its investment scope and was considering investing in the high-speed railway sector in the United States.
However, the source contacted by China Daily denied that the fund had such a plan. Railway investments usually do not yield high returns and the process would be "quite complicated", the source said.
CIC, which was set up to manage the nation\’s swelling foreign exchange reserves, accelerated its investment drive after the second quarter of last year, when it was widely believed that the worst of the global downturn had passed. The fund diversified its investment strategy by shifting from investing in financial firms to energy and resource-related companies.
Lou Jiwei, chairman of the fund, said earlier that such a strategy was aimed at hedging risks brought by growing expectation of inflation and the purchasing of financial products.
More than $10 billion of the fund was poured into nine investments last year, mostly in energy and resource-related sectors. This compares with the $8.7 billion and $4.8 billion it invested in 2007 and 2008 respectively, according to investment statements released by CIC.
After the initial embarrassment of heavy losses on investments on Wall Street, the fund appeared to have turned around successfully through making a string of overseas investments in energy and resource-related sectors and streamlining its management team.
In late November last year, the fund invested HK$5.5 billion in China\’s leading green energy supplier GCL-Poly and spent $400 million to become the cornerstone investor of Longyuan Power Group, Asia\’s second largest power producer.
CIC\’s massive investments in US financial giant Morgan Stanley and Blackstone soured in 2008 when the global financial crisis was at its worst.

Google\’s loss could be Baidu\’s gain
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Domestic search firm Baidu Inc could be the biggest beneficiary of a possible pullout from China by Internet major Google, leading industry experts said yesterday.
The NASDAQ-listed Baidu already dominates the Chinese search landscape and it has signaled its intentions to spread wings, even before Google hinted at a pullout.
The California-based Google could see an exodus of advertisers from the Chinese mainland and see them switching to Baidu, something that could strain revenues in the long run for the US firm, experts said.
"Google may get applauses from many for its stance," said Li Zhi, an analyst with research firm Analysys International. "But its advertisers may not be convinced, even if it buries the hatchet with the government."
She said if Google exits China, Baidu would have a near monopoly of the market in the short term.
The world\’s largest search engine said on Wednesday that it may close its China business if the government does not allow it to provide uncensored results in its Chinese version website Google.cn.
The company said it is still in discussions with the government and may eventually close its Chinese offices.
"We are still waiting for the final decision from Google China," said a top official from an advertisement company. The official, who declined to be named, said many of his clients have expressed concern on the issue and are planning not to advertise on Google.

The US company started to provide Chinese language search services in 2000. It started making significant growth only after it established a China team in 2005 and launched domestic website Google.cn.
According to Analysys International, Google\’s market share in China rose from 22.8 percent in 2006 to 35.6 percent in the fourth quarter of last year, while Baidu\’s share fell from nearly 70 percent to 58 percent.
Google has been planning to rejig its strategy in China after its former head Lee Kaifu quit the company in September to start his own venture.
John Liu, who succeeded Lee, said last month that it was time for Google to resume its role as a multinational firm. "We are not Google China, but Google in China," he said, while speaking to CBN Weekly, a domestic business magazine.
Industry experts said the stringent Internet regulations could be prompting Google to think of pulling out from the country.
Lee could not be reached for comments yesterday. But he posted a message on a domestic Twitter like service saying, "a captain would never run away from his duty if he knew the ship was sinking."

Chinese firms more cautious on foreign buyouts
Chinese companies are planning to take a more cautious approach to foreign acquisitions, avoiding outright buyouts and seeking more partnerships and alliances, a report by the Economist Intelligence Unit said on Tuesday.
According to the report, among survey respondents who say they are definitely or likely to make an overseas investment, 47 percent would prefer to strike either joint ventures (29 percent) or alliances (18 percent) while only 27 percent say they will do so through acquisitions.
"Our analysis of transactions worth more than $50 million between 2004 and 2009 shows that half the deals involved the buyer taking at least 50 percent ownership of the target. But Chinese executives are beginning to sense that this may not be the best approach, not least because it can set off alarm bells among the public and regulators," said Xu Sitao, China chief representative of the Economist Group.
Chinese companies made 298 cross-border acquisitions in 2009, with much of those investments welcomed by cash-strapped Western companies that would be hard-pressed to survive without it. But China\’s buying spree has raised a number of concerns, particularly where it has involved State-owned enterprises (SOEs).
And Chinese companies are discovering just how difficult it can be to get mergers and acquisitions (M&A) right, especially when they are cross-border deals. These factors have encouraged companies to lower their ambitions.
"Multiple investments of minority stakes in different companies in different countries can give a Chinese company many valuable \’windows\’ to learn about management and technology in different markets without triggering foreign investment review or the political pressure associated with \’control\’ issues," said Stephen Harder, managing partner of law firm Clifford Chance LLP (China).
Meanwhile, the report showed that outbound M&As remains dominated by SOEs. According to analysis of deals worth more than $50 million between 2004 and 2009, an overwhelming majority of China\’s outbound M&A transactions – 81 percent – were made by State-owned entities.
"This will remain a cause for concern abroad, not only because many deals involve control of natural resources but also because State ownership seems to confer unfair advantages on the acquired companies," said Alison Kennedy, managing partner of strategy with consulting firm Accenture in China.
In the survey conducted for the report, 82 percent of respondents cited a lack of management expertise in handling M&As as the biggest challenge for Chinese companies making purchases abroad. Only 39 percent feel they know what is required to integrate a foreign acquisition. And only 39 percent of survey respondents say they had identified attractive targets within their chosen geographic markets – increasing the risk that Chinese buyers will succumb to the temptation to buy assets that have become available as a result of the global financial crisis, rather than focusing on carefully researched targets.
The report is based on in-depth interviews with large Chinese companies with extensive investment experience abroad, an online survey of 110 Chinese executives and interviews with several foreign participants and advisers to Chinese deals overseas.
In addition, the report analyses available data on Chinese companies\’ cross-border transactions over the past five years, focusing on deals worth more than $50 million.

Tesco opens landmark development
Tesco, the largest retailer in the UK by market share and also by sales, is aggressively tailoring its development strategies in China by adding freehold multiplexes with shopping centers, hypermarkets, entertainment venues, apartments and home offices.
With an investment of more than 500 million yuan, Tesco\’s first 76,000 sq m freehold multiplex in Qingdao, Shandong province, opened its shopping mall, hypermarket and restaurants to shoppers during the weekend.
The company said it is a landmark for Tesco\’s development in China, and added that it is the first foreign retailer to do freehold mall development on this scale.
Tesco entered the Chinese market in 2004, and the late-comer is facing fierce competition for market share from Carrefour and Wal-Mart.
"The freehold multiplexes will provide us more freedom in selecting better locations and also making better plans for supportive facilities — for example, parking lots — compared to the old model of renting properties," said Paul Mercer, CEO of Tesco Property China.
The freehold model also enables the retailer to equip the projects with more environmental friendly technologies and facilities, Mercer said.
Tesco\’s Qingdao hypermarket is expected to cut energy consumption by 25 percent compared to common markets of the same scale. It will save 1.18 million kilowatt-hours of electricity and reduce CO2 emissions by 1,176.5 tons a year, he said.
"Additionally, some of the freehold multiplexes will include apartments and home offices, so it will help us gather a stable group of shoppers," he added.
More than 20 such giant shopping complexes will be opening across the country, said Ken Towie, president and CEO of Tesco China.
Towie said Tesco is willing to import a leading management and operation model in the retail industry to China to better serve Chinese customers.
Another two multiplexes will be built soon in Qinhuangdao, Hebei province, and Fushun, Liaoning province, he said.
Mercer told China Daily that a new shopping multiplex is expected to be built at Yaojiayuan in Beijing\’s Chaoyang district.
Tesco is operating 71 hypermarkets and seven pilot Tesco Express stores in the country. By February, Tesco will have 82 hypermarkets in China, although sales there are still less than 2 percent of the group\’s total.
Wal-Mart\’s share of Chinese hypermarket sales in 2009 was 45 billion yuan and Carrefour\’s was 33 billion yuan, while Tesco accounted for just 11 billion yuan, according to data from Euromonitor.
US retail giant Wal-Mart, which entered the China market in 1996, owns more than 160 outlets in 89 Chinese cities. The chain opened about 30 new outlets in 2009.
Carrefour previously said it will add 20 to 25 new outlets each year. The French hypermarket chain that first came to China in 1995 now has about 145 outlets in the country.