Capital account opened’ for firms in free trade zone

The long-anticipated detailed rules for capital-account transactions, which will allowcompanies operating in the China (Shanghai) Pilot Free Trade Zone to borrow abroad undera simpler regulatory regime, have been released.

The new process may help FTZ-registered companies cut their financing costs in half.

The announcement of the rules on Thursday means that the capital-account has effectivelybeen opened for companies in the FTZ, said Zhang Xin, deputy head of the Shanghai HeadOffice of the People’s Bank of China.

The rules will allow FTZ-registered enterprises that borrow abroad to choose the length andcurrency of the loan.

FTZ-registered enterprises that seek financing overseas will be monitored by the PBOCduring and after the financing process, but they will no longer need to seek prior approval.

“The detailed rules actually return many rights and initiatives to enterprises, enabling them tomake their own financing decisions, while regulators just help to monitor the risks,” saidZhang.

“The new rules will benefit enterprises when doing foreign trade and overseas mergers. Thenew rules significantly reduce the time needed for completing the procedures, which could beas short as half an hour.”

“For a one-year yuan-denominated loan, the financing cost could be half of what it used tobe,” said Wang Jianxin, head of the FTZ branch of Shanghai Pudong Development Bank CoLtd.

The banking regulators promised a freer environment for financing to support foreign tradeafter the FTZ opened in September 2013.

Financial and nonfinancial enterprises registered in the FTZ will be able to borrow up to twicetheir capital base, which will be double the previous cap.

“For trading firms like us, the new rules have given us more freedom and space to obtain thefinancing that suits us best,” said Zhang Lei, finance director of an FTZ-registered wine trader.

The more liberal financial policies in the FTZ have already helped companies registered therereduce their financing costs.

PBOC data showed that so far, 120 overseas yuan-denominated financing deals with acombined value of 19.7 billion yuan ($3.2 billion) have been arranged.

The World Needs New Rules for Armed Drones

New data shows how armed drones are proliferating around the world and why international standards to govern them are overdue.

Before 9/11, the United States had only a tiny number of experimental drones that were never used in combat. The 9/11 attacks and the wars they engendered changed this. Today there are more than 7,000 American drones, some 200 of which are armed and which have killed thousands of people.

But the virtual monopoly on drones that the U.S. once enjoyed is long gone.According to data collected by New America, there are 85 countries that have some sort of drone capability, both armed and unarmed.

So far only three countries have used armed drones in conflict, the United States, Israel, and the United Kingdom. But other countries are arming drones and it’s only a matter of time before one of these countries will deploy them in combat.

Now, the United States is even going to start allowing the sale of American armed drones to foreign countries. On Feb. 17, the State Department announced the new policy that would allow certain, friendly governments to make purchases of armed drones from the United States if they agreed to a series of commitments, such as only using the drones when there’s a lawful basis to do so.

The State Department said that the United States has a “responsibility to ensure that sales, transfers and subsequent use of all U.S.-origin UAS [unmanned aerial systems or drones] are responsible and consistent with U.S. national security and foreign policy interests…as well as with U.S. values and international standards.”

An example of other countries contemplating the use of drones in ways that could be inconsistent with U.S. values and international standards already exists, it came in 2013 when a state-run newspaper reported that the Chinese government had mulled the possibility of using armed drones to kill Naw Kham, a drug lord based in neighboring Myanmar who had murdered a group of Chinese sailors.

In the end, China decided to capture the drug lord instead of killing him in a drone strike, but it showed that the Chinese have this capacity and may be willing to use it, including in countries outside of China.

Other countries are also arming drones — and have been for a couple of years now. In 2013, a Russian government website showed photographs of armed drones that were supposedly scheduled to begin test flights in 2014 (although, later the manufacturer moved the prototype release date back to 2018).

A year earlier the Iranians plausibly claimed they were building a new long-range drone that can fly 2,000 kilometers (about 1,250 miles), which puts Israel in range.

India has also started an armed drone program.

Why are these countries all getting into the armed drone business? Drones are far cheaper than buying or manufacturing fighter jets and training fighter pilots. U.S.Reaper drones cost $12 million each, while the F-22 fighter costs around ten times that amount.

This helps account for why a Virginia-based defense consulting firm, the Teal Group, estimated in 2013 that the global market for drones will almost double in the next decade, from $6.6 billion annually to $11.4 billion a year. And a 2011 study found that there were around 680 active drone development programs run by governments, companies and research institutes around the world, compared with only 195 six years earlier.

According to New America’s research, 78 countries have drones with only surveillance capabilities.

Israel is the world’s largest exporter of drones and drone technology. New America found that Israel has sold drones and drone technology to 38 countries, ranging from Angola to Chile, Serbia, Thailand and the United States.

Armed drones aren’t limited to use by nation states only. Hezbollah, the militant Shiite group based in Lebanon, reportedly used drones to bomb a building used by al-Qaeda in Syria in September.

A month earlier, the Islamic State, or ISIS, uploaded a video to YouTube that showed surveillance footage of a Syrian Army military base that was shot by a drone.

Of the 85 countries with drones, 62 of them produce the drones domestically, meaning only 23 nations are wholly dependent on importing drone technology. That number will most likely change drastically in the coming years as the technology becomes more cost efficient and easier to make.

With all these changes and the proliferation of drones continuing at a steady pace, the idea of the United States asking countries to abide by “U.S. national security and foreign policy interests” in their “subsequent use of all U.S.-origin” drones is not a long-term solution to shape a rapidly changing environment.

Instead, international standards need to be put in place for drone use that governs both state and non-state actors and would govern the use, sale and transfer of these valuable weapons. While the Missile Technology Control Regime, orMTCR, seeks to place limits on weapons such as drones — including ballistic missiles, cruise missiles — by placing export controls on its member states, it’s only been joined by 34 countries and it’s limitations are optional, not binding under international law. Countries like Iran, North Korea and Pakistan, who are not member states, continue to deploy and sell weapons that the MTCR is trying to limit.

The United States has sold or given weapons to countries in the past, only to have those arms fall into enemy combatants’ hands. The Islamic State is the most timely example of this; they’ve managed to not only intercept U.S. arms drops meant for Kurdish fighters, but also taking Iraqi military bases and equipment that was provided for them by the United States, including U.S.-donated M113s, an armored personnel carrier, and an M1 Abrams tank.


Introduction to ITDS in AES

The purpose of this email message is to alert filers in the Automated Export System (AES) to be on the lookout for new AES functionality that will be communicated to you in the next year. This communication will allow AES filers to prepare for new reporting requirements in AES as a result of AES being a critical component of the International Trade Data System (ITDS) “single window” concept for exports.


On February 19, 2014, the President of the United States signed the executive order on STREAMLINING THE EXPORT/IMPORT PROCESS FOR AMERICA’S BUSINESSES. The order established policy principles and an implementation plan for the development of the ITDS by December 2016, and to improve supply chain processes and identification of illicit shipments.


The ITDS will allow businesses to continue to transmit in the AES the transactional data required by dozens of U.S. executive departments and agencies for the exportation of cargo. In doing so, the platform on which AES resides will be the system for the export data exchange (or “single-window”). Although AES is currently mandatory to meet the export reporting requirements of the Commerce Department’s U.S. Census Bureau, the Bureau of Industry and Security, and the State Department’s Directorate of Defense Trade Controls, businesses will soon be able to submit data in AES to satisfy requirements of other agencies that currently require reporting on paper.  The ITDS single window concept will improve the costly and time-consuming process by allowing businesses to submit electronic data one time in AES.


The modernized information communication infrastructure provided by the ITDS will also enable improvements to current logistics and border management processes which would, in turn, simplify the export process and facilitate enforcement of U.S. trade, security, safety, and environmental laws. Agencies will have authorized access to accurate and timely electronic export data to better orchestrate reviews and develop common risk-management policies and systems. In addition, businesses will also have authorized access to their own data through the “single window” for recordkeeping and to ensure compliance.


As the new functionality is introduced, we will strive to provide timely email messages that will provide a narrative of the new functionality, links to appropriate websites for programming instructions, and dates when testing or pilots will be available. In the coming months ahead, be on the lookout for messages describing the following:


    • The new electronic reporting capability for Environmental Protection Agency-regulated Hazardous Waste Exports
    • U.S. Customs and Border Protection’s new electronic reporting capability for Automated Outbound Manifests
    • Other Government Agencies’ electronic reporting capabilities for regulated export items


For more information about the International Trade Data System and copies of these fact sheets, visit If you have questions, please contact the U.S. Customs and Border Protection Automated Commercial Environment Communication Team via email at

US, Canada Reach Key Funding Deal for Detroit-Windsor Bridge

The Obama administration and Canada have agreed on financing a key piece of a planned $2.1 billion bridge connecting Detroit and Windsor, Ontario, the two governments announced Wednesday.

The agreement involves a funding mechanism for a toll plaza on the U.S. side of the international crossing, the U.S. Department of Homeland Security said in a statement. It says a “public-private partnership” will pay for the plaza’s construction, with reimbursement from bridge tolls.

Both governments have said the new bridge will create thousands of jobs and further stimulate the $658 billion annual trade between the nations.

“This agreement clears one of the final hurdles to building this hugely important bridge. Both Michigan and the entire nation will benefit,” U.S. Rep. Sandy Levin, D-Mich., said in a statement.

Authorities have said the limited capacity of the 85-year-old Ambassador Bridge and the 85-year-old Detroit-Windsor Tunnel, which is too tight for tractor-trailers, is an increasing impediment to trade.

Michigan Sen. Debbie Stabenow called Wednesday’s deal “a critical step forward” for the project, long stymied by opposition from owners of the nearby Ambassador Bridge who seek to add a new span of their own across the Detroit River. That opposition has blocked the needed U.S. funding for the plaza. The bridge itself already was to be built without U.S. funds.

Canadian Transport Minister Lisa Raitt said the agreement ensures “that the new publicly owned bridge between Windsor, Ontario, and Detroit, Michigan, can proceed without further delay” and that the project “will ultimately be delivered through a public-private partnership.”

U.S. lawmakers said it remains crucial for the Obama administration and Congress to appropriate the funds that will be needed to operate the U.S. Customs plaza.

Officials have said they hope to open the bridge in 2020.

Michigan Gov. Rick Snyder, a supporter of the new bridge, said he “will continue to encourage the U.S. government to provide the necessary resources to fund U.S. customs facilities” at the bridge and at the Blue Water Bridge that links Port Huron, Michigan, and Sarnia, Ontario, about 55 miles north-northeast of Detroit.

Ambassador Bridge owner Matty Moroun had paid for a campaign to get a proposal on the November 2012 Michigan ballot seeking to block any new cross-border bridges or tunnels without holding a referendum first. Voters defeated the proposal.

The Associated Press left a message Wednesday seeking comment from the Moroun family-owned Detroit International Bridge Co. The company’s website includes statements and videos criticizing the new crossing.

“The best outcome is to continue with the success that we as a region have had with southeastern Michigan border crossings for the last 80 years, especially with the Ambassador Bridge, where no taxpayer resources or government resources have been used whatsoever,” Vice Chairman Matthew Moroun, vice chairman of the family-owned Detroit International Bridge Co., says on the site.

US challenges China at WTO, alleges that it unfairly subsidizes exporters

The United States is challenging China at the World Trade Organization, alleging that the Chinese government unfairly subsidizes exports in seven industries.

The Office of the U.S. Trade Representative says that China designates certain export companies as “demonstration bases” that receive free or discounted services from suppliers. The U.S. says China paid the suppliers almost $1 billion over three years to provide those services.

Getting help are textile and clothing makers, advanced materials and metals companies, light industrial firms, specialty chemical manufacturers, medical product makers and agricultural firms.

The U.S. says the subsidies violate WTO rules.

“This unfair Chinese program is harmful to American workers and American businesses,” USTR says.

The challenge arose from an earlier investigation into Chinese subsidies of auto and auto parts exporters.

Listed firms caught in anti-corruption net

As many as 70 listed companies were involved in China’s anti-corruption investigations last year, with the energy, real estate and finance sectors attracting most scrutiny, the Beijing News reported on Monday.

Around a quarter were in the oil, nonferrous metals and coal industries and both state-owned enterprises and non-state companies were included.

The newspaper said companies were often involved in illegal activities in capital markets, IPOs and reform of SOEs. Sectors most hit by the campaign were characterized by high profits.

Some senior executives were taken away by anti-corruption watchdogs to assist with investigations while others were accused of directly accepting bribes and other illegal activities.

One of the biggest cases was the state-owned China National Petroleum Corporation, in which 45 of its executives and employees were investigated, the report said.

In the financial sector, the most recent case is China Minsheng Banking Corp, the country’s biggest private lender. The bank’s president, Mao Xiaofeng, resigned for personal reasons after reportedly being implicated in the corruption case of Ling Jihua, a former senior political adviser.

Mao was said to have offered Ling’s wife a job for three years at Minsheng Financial Leasing.

Chen Zhuolin, chairman and CEO of Hong Kong-listed real estate developer Agile Property, was put under investigation by Kunming People’s Procuratorate and was allegedly involved in an anti-corruption investigation against officials in Yunnan province, according to Chinese financial media Caixin.

UP taps Fritz as CEO

Union Pacific Railroad’s has promoted its president and chief operating officer to CEO.

Lance Fritz, who will continue to service as president, was elected on Thursday by the U.S. western railroad’s board of directors to succeed John Koraleski. Before joining UP, Fritz worked for Fiskars, a tool retailer; an electrical product manufacturer and distributor; and General Electric. Koraleski will stay on with the company as executive chairman.

“The board regularly reviews and updates its robust management succession plan, and we are confident Union Pacific will continue to deliver industry-leading customer service and strong shareholder returns under Lance’s guidance, Steven Rogel, UP’s lead independent director, said in a statement.

UP saw fourth-quarter profit rose 22 percent year-over-year to $1.4 billion, as revenue expanded 9 percent to $5.8 billion in the same period. A 6 percent intermodal volume jump, fueling a 11 percent increase in intermodal revenue, helped the railroad hit record profit in the quarter.

Chinese New Year fails to stimulate factory output, official data shows

HONG KONG — An expected spike in China’s factory production in January in the buildup to a late Chinese New Year failed to materialize, with the official purchasing manager’s index (PMI) falling to a level not seen since 2012.

China’s National Bureau of Statistics released the factory output data that showed manufacturing activity in the country had fallen to 49.8 in January, edging below the 50-point level that separates growth from contraction.

The PMI fell from 50.1 in December, but was expected to improve as shippers get their orders in early to beat factory shutdowns during Chinese New Year, the country’s biggest holiday, that falls on Feb. 19 this year. Although the holiday is only three days, many factories are closed for three weeks as migrant laborers head back to their home provinces.

HSBC released its own flash PMI that also delivered a reading of 49.8, compared with 49.6 in December.

China’s manufacturing slowdown can be seen in its exports that grew only 6.1 percent in 2014, the slowest growth rate since it joined the WTO in 2001, with the exception of 2009 (the global financial crisis), according to a note to customers by Barclays.

The bank said China’s slowing growth compared with manufactured goods export growth of more 11-18 percent year-over-year for Vietnam, Myanmar, the Philippines, and Sri Lanka in 2014.

“The dispersion of low-end manufacturing out of China is re-shaping trade routes in Asia and is driven by Chinese manufacturing wage rates that are nearly double that of other emerging Asia countries, given the renminbi’s average 10 percent appreciation against competing Asian exporters in the past two years,” the Barclays note said.

Shipping line executives told recently that China’s slowdown was not expected to hurt their container volumes, a position supported by analyst predictions of throughput growth on important routes, such as Asia-U.S and Asia-Europe.

JOC Economist Mario Moreno expects total U.S. import volume in 2015 to increase 6.8 percent to 20.2 million TEUs compared to 2014. Drewry Maritime Research is predicting container shipping volumes will grow 5.5 percent across major trade lanes in 2015, except Asia-Europe that will see growth of 3.5 percent, while Clarkson Research Services expects global container trade to increase 6.7 percent this year, with a 7 percent year-over-year growth in Asia-Europe.

The consensus is that exports from China will continue to post increases, but its future will increasingly be tied to other emerging Asian economies, Barclays noted.

“In our view, export-led economic development in emerging Asian economies is a necessary step for China to maintain even modest 5-10 percent export growth for the rest of the decade. Furthermore, the collapses in oil and other commodity prices are likely to impair demand for Chinese exports to commodity-centric economies, which accounted for 21 percent of total Chinese exports in 2014,” the bank report stated.

“If we exclude the more developed North Asian economies, China’s exports to the rest of Asia grew from 14 percent of total exports in 2007 to 26 percent in 2014, on our estimates, and will be critical demand drivers in 2015.”

Barclays said the changing regional trade patterns posed a key risk to Chinese port operators, while ASEAN ports were well placed to capture the structural shift as Chinese manufacturers relocated factories to Southeast Asia.

Contact Greg Knowler at and follow him on Twitter: @greg_knowler.

Top 10 Chinese companies to look out for in global market in 2015

No 1 Lenovo

Lenovo Group got known worldwide for its acquisition of IBM’s ThinkPad division in 2005. The year 2014 also saw the company’s two major acquisitions in the US: Motorola Mobility and IBM’s x86 enterprise server division.Lenovo chairman Yang Yuanqing said the company can become a global information technology giant if it uses its global resources in an optimal manner.

No 2 Dalian Wanda

China’s real estate developer Wanda acquired US cinema chain AMC Entertainment at $2.6 billion in 2012, drawing worldwide attention.

The company announced an investment of 45 million euros ($52 million) for a 20 percent of stake in the Spanish football Club Atletico Madrid, marking the first time that a Chinese company has invested in a top flight European football club, reported on Jan 21.

No 3 Fosun

Chinese conglomerate Fosun International Ltd is moving into the US property and casualty insurance market by acquiring Meadowbrook Insurance Group for about $433 million, China Daily reported on Jan 1, citing chairman Guo Guangchang.

No 4 Huawei

The company exhibited over 100 products at the 2015 International Consumer Electronics Show (CES) held early this month in Las Vegas.

The showcased products include Huawei’s latest flagship smartphones, wearable devices, tablets, mobile access devices, home access devices, smart home devices, OTT and vehicle-mounted modules.

No 5 Wanxiang

The Chinese auto parts producer has acquired more than two dozen companies in North America since opening its overseas headquarters there in 1994, according to Joel Backaler.

Wanxiang acquired the assets of stylish electric car pioneer Fisker Automotive for $149.2 million in a US bankruptcy auction in February, 2014.

No 6 Alibaba No 7 Xiaomi No 8 Baidu No 9 Tencent No 10 Bright Food

China’s port project in Greece not affected by privatization reversal

ATHENS — Chinese shipping conglomerate COSCO Group will continue to run two container terminals of Piraeus port in Greece under a 35-year concession agreement, after Greece’s newly elected government has decided to halt its privatization, an official with the COSCO subsidiary in Greece said on Wednesday.

On Monday, left-wing SYRIZA party leader Alexis Tsipras was sworn in as Greece’s newprime minister after winning Sunday’s national elections.

One of the first decisions announced by the new government was to stop the planned sale ofa 67-percent stake in the Piraeus Port Authority (PPA). COSCO is among one of the suitorsfor the privatization of PPA.

“The public character of Piraeus port will be maintained. The privatization stops right here,right now,” Greek Alternate Shipping Minister Theodoros Dritsas told media on Tuesday.

A senior official of the Piraeus Container Terminal (PCT), a subsidiary of the COSCO, whospoke on condition of anonymity, said Dritsas was referring to Pier I and other facilities ownedby the PPA, not including Pier II and Pier III operated by PCT.

Regarding further information about the suspension, the PCT official said the company hadnot been notified on this matter and refused to comment.

Dritsas said on Wednesday the government will not proceed with PPA’s privatization,because the “entire local community opposes this plan.”

Dritsas also said that “Greek people are connected with relations of friendship and solidaritywith the Chinese people.”

China is seeking confirmation of Greece’s new government about the privatization of Piraeusport, Greece’s biggest port.

“We have noticed the reports, and are checking with Greece about the issue,” ForeignMinistry spokesperson Hua Chunying told a daily press briefing on Wednesday.

Piraeus port has been run by the PCT after the financial crisis in 2008.

Commercial traffic through the port has increased eight-fold since COSCO’s takeover,attracting international giants such as ZTE and Hewlett-Packard to use the cargo terminals aslogistics centers for their products.

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