PLUS • China’s booming car industry • Interview with Robert Hirth of COSO • Musical CPAs hit high notes ISSUE 3 VOLUME 10 MARCH 2014 POSITIVE FEEDBACK Members back Council over audit regulatory reform HK$70.00 President’s message Working towards optimal solutions to audit reform Dear members, he audit regulation reform member istry’s external circular about the offence relating to T consultation ended in January with contents of the auditor’s report. We understand that strong support for the Coun cil’s posi- the government has committed itself to setting a high tion. We are pleased with the results barrier for prosecution under “recklessness” and of the consultation that attracted more than 4,500 as long as members follow auditing standards they responses through our online survey. should meet statutory requirements. As reinforced by the opinions expressed in the Other guidance on which we have been working member consultation, we main tain our position that: hard, under the Professional Accountants in Business a) there should be segregation between the investi- Leadership Panel, was issued last month. A Guide gation and inspection function and the sanctioning on Better Corporate Governance Disclosure aims to function; b) there should be sanctioning guidelines encourage meaningful reporting by Hong Kong-listed to ensure that any sanction should be proportionate companies, under the revised Corporate Gover- and reasonable in relation to the audit failure; c) all nance Code of the Hong Kong stock exchange’s List- “ We will continue decisions for the granting or restricting of licences ing Rules. It provides a useful and practical tool for to advocate for should only be taken after proper procedures and Institute members who have responsibilities for cor- the reform that we hearings; and d) the new regime should not have the porate governance within their companies, and also believe is best for unintended effect of reducing competition and hence for boards and management of companies that seek Hong Kong’s long- limiting choices of auditors. to maintain high standards of corporate governance term wellbeing but The Institute’s task now is to synthesize these disclosures or to make necessary improvements for much depends on viewpoints into a detailed coherent plan with which the benefit of their stakeholders. the details. ” to engage other stakeholders as we move forward to In corporate governance and reporting, sustain- the public consultation stage. ability has certainly become another hot topic in re- We will continue to advocate for the reform that cent years. A leading global financial centre like Hong we believe is best for Hong Kong’s long-term wellbe- Kong needs to embrace international best practices ing but much depends on the details. in this area and the Institute has been prominent in Another topic that has captured our attention is facilitating this. the liability issues that will arise from the new Com- The Council, under its commitment to the Sixth panies Ordinance, effective from 3 March. In light of Long Range Plan, recognizes that sustainability in the potential implications of section 408 (formerly business strategy, governance and reporting will be clause 399) of the new ordinance regarding crimi- a matter of central importance to members and the nal liability of auditors, the Institute has published a wider business community. The momentum behind practice guide for members. The cumulative effort of the development of integrated reporting is one ex- a working group formed in 2012 following the enact- ample and, closer to home, the HKEx is expected to ment of the law, the guide sets out relevant sections further develop its environmental, social and gover- in the ordinance to which the penalty sanctions ap- nance reporting requirements. ply; considers the implications of those sections; and We will continue to devote sufficient resources to provides guidance on auditor’s statutory reporting take a leading role in promoting and developing this obligations. area of corporate governance and reporting in Hong You are advised to also read the Companies Reg- Kong. Clement Chan President March 2014 1 CONTENTS ISSUE 3 VOLUME 10 MARCH 2014 REGULARS 01 President’s message 04 Institute news 06 International news 10 G reater China news FEATURES 14 Vroom at the top China’s booming car market is outpacing most other countries, with 250 million passenger vehicles on the road. George W. Russell reports on what it means for Hong Kong 20 C OSO spreads the word R obert Hirth wants to see the U.S.-originated internal control framework become a global standard. George W. Russell finds out about the challenges 26 Members, Council agree on reforms W hile Institute members have shown support for the Council's position on the proposed audit regulatory framework, A Plus finds out the concerns raised from member feedback 32 Success ingredient B ryan Chan, CFO of Travel Expert, tells George W. Russell that despite the rise of the Internet, the agency model is far from dead among outbound Hong Kong tourists 38 Key players Making music can be the ideal respite from work pressures. Jemelyn Yadao meets some passionate and talented Institute members and their instruments SOURCE 44 Capital markets Andy C.F. Wong examines the Hong Kong stock exchange’s various requirements for suitability of listing 46 H ong Kong law Ada Chung and Karen Ho explain how the new Companies Ordinance will streamline procedures 48 Technical update An in-depth look into two annual improvements to HKFRSs, issued by the Institute 50 TechWatch 136 The latest standards and technical developments 55 Events A guide to forthcoming courses, workshops and member activities LIFESTYLE R A A 56 Business travel SEL T H onnus Cheung visits Shanghai’s wonders, ancient and modern ME S E 58 After hours KE G eorge W. Russell on wine; Sam Cheeseman on watches OTO: H 60 Let’s get fiscal P N ury Vittachi is not what he seems About our name: A PLUS stands for excellence, a reference to our top-notch accountant members who are success ingredients in business and in society. It is also the quality that we strive for in this magazine — going an extra mile to reach beyond grade A. President: Clement Chan Vice Presidents: Ronald Kung, Dennis Ho Chief Executive and Registrar: Raphael Ding Email: [email protected] Deputy Director of Communications: Stella To Editorial Advisory Group: Daniel Lin (Convenor), Eric Tong (Deputy Convenor), L.S. Chan, Louis Chow, Felix Shui, K.M. Wong, Raphael Ding, Chris Joy Editorial Manager: John So Editorial Coordinator: Maggie Tam OFFICE ADDRESS: 37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2287-7228 Fax: (852) 2865-6603 MEMBER AND STUDENT SERVICES COUNTER: 27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong WEBSITE: www.hkicpa.org.hk EMAIL: [email protected] M&L Editor: George W. Russell Managing Editor: Gerry Ho Email: [email protected] Copy Editors: Jemelyn Yadao, Sam Cheeseman Production Manager: Jasmine Hu Editorial Assistant: Ginnie Pang Design Manager: Jennifer Chung Designers: Charlene Tsang, Matt Burchell EDITORIAL OFFICE: 2/F, Wang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong ADVERTISING ENQUIRIES: Advertising Director: Derek Tsang Email: [email protected] Tel: (852) 2656-2676 A PLUS is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in 20 all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine. © Hong Kong Institute of Certified Public Accountants March 2014. Print run: 6,520 copies The digital version is distributed to all 36,795 members, 17,160 students of the Institute and 640 business stakeholders every month. Subscription: HK$760 for 12 issues per year. See www.hkicpa.org.hk/aplus for details. NEWS THE INSTITUTE New initiatives on corporate governance disclosure issued Budget policies “fall short The Institute is launching new initiatives to help on competitiveness focus” companies enhance corporate governance disclosure and practices. A Guide on Better Corporate Governance Disclosure comprises Hong Kong needs tax policy unit, says Institute panel four topics: the board’s roles, internal control, The second budget laid out by the administration of Chief Executive Leung the audit committee and communication with Chun-ying needs to add more vision and substance to its stated theme of shareholders. competitiveness, according to the Institute. Disciplinary findings “The most disappointing point for us is that there was no attention paid to the idea of establishing a tax policy unit,” said Curtis Ng, Convenor of the Institute Lau Yuk Chu Peter, CPA (practising) Budget Proposal Subcommittee. A tax policy unit, he added, would help to look at Complaints: Failure or neglect to observe, international developments and Hong Kong’s overall tax competitiveness. maintain or otherwise apply Hong Kong Stan- “The financial secretary raised the spectre of a future structural deficit in his dard on Auditing 250 Consideration of Laws and speech, based on the findings of the working group on long-term fiscal planning. Regulations in an Audit of Financial Statements If that is the case, then it lends further support to the proposal for a tax policy unit and Hong Kong Standard on Auditing 500 Audit to be set up.” Evidence. Tax measures come across as too piecemeal and ad hoc, Ng added. “Hong Kong Lau is the sole proprietor of Peter Y.C. Lau needs a sound, secure and world-class tax system to serve the city’s long-term & Co. The Institute received information that, interests and to uphold its status as a global hub of finance and commerce,” he said. in auditing the financial statements of a private The Institute supports the budget measures related to interest expense company, Lau did not obtain sufficient audit reductions for treasury operations, the stamp duty waiver on exchange-traded evidence that dividends and rental expense funds and additional allowances for dependent parent and grandparents. recorded as paid were actually paid. The Institute Such policies are in line with Institute proposals and target specific needs, also found that Lau had not obtained sufficient according to Florence Chan, Chair of the Institute’s Taxation Faculty Executive audit evidence that the company met the criteria Committee. for adopting section 141D of the Companies Some policies, such as proposed measures aimed at low-income households, Ordinance and the Small- and Medium- are “welcome but nothing new or innovative,” said Chan. sized Entity Financial Reporting Standard for preparing the financial statements. After considering information available, the Institute Institute issues guidance related lodged a complaint against Lau under section to new Companies Ordinance 34(1)(a)(vi) of the Professional Accountants Ordinance. Lau admitted the complaints. The Institute has issued guidance related to the new Companies Ordinance, which came into effect on 3 March. Decision and reasons: Lau was reprimanded AATB 4 Guidance on Section 408 of the Companies Ordinance relates to one of the and ordered to pay the costs of the disciplinary measures introduced: a new offence imposed by section 408 (formerly clause 399 proceedings of HK$25,887. When making of the Companies Bill) in relation to certain omissions in an auditor’s report. its decision, the Disciplinary Committee took The offence would be committed if an auditor knowingly or recklessly caused into consideration the gravity of the breaches certain statements required by section 407(2)(b) and (3) to be omitted from the including the fact that no one had suffered auditor’s report. economic loss, Lau’s admission and his previous The objectives of the guidance contained in AATB 4 are to: clear disciplinary records. • S et out the relevant sections in the Companies Ordinance to which penalty sanctions apply; Details of disciplinary findings are available at the • C onsider the implications of those sections; and Institute’s website: www.hkicpa.org.hk. • P rovide guidance on the auditor’s reporting for statutory purposes. Obiturary The new ordinance also expanded the eligibility criteria for simplified The Institute notes with regret the passing of Ho reporting. As such , the Institute has issued the Small- and Medium-sized Entity Kam-wa, Tommy Tam Hok-lam, Tang Shung-hei Financial Reporting Framework and Financial Reporting Standard (Revised). and Tsang Shu-nan. Please refer to paragraphs 22-43 of the revised standard for details. 4 March 2014 NEWS INTERNATIONAL U.S. to maintain taper policy, new L’Oréal buys Fed chairwoman tells Congress back shares from Nestlé Volatile markets unlikely to affect economic outlook Janet Yellen, the new Chair economy is not back, the L’Oréal, the French cosmetics of the United States Fed- labour market is not back, group, last month bought 8 per- eral Reserve Board, told to normal,” Yellen told the cent of its shares back from Nestlé, legislators last month that committee. “There’s a great the world’s largest food company, the central bank would deal of slack in the labour for €6.5 billion. continue to reduce its eco- market still.” The deal will cut Nestlé’s nomic stimulus measures, She admitted that she stake in L’Oréal to 23.29 percent following policies adopted AFP was “surprised” by the weak from 29.4 percent, the company under her predecessor, Ben Janet Yellen AFP estimates of jobs growth for said in a statement. Bernanke. earlier last month. December 2013 and January, but Under the terms of the deal, Yellen said that the Fed Yellen said the recent volatility said: “We have to be very careful L’Oréal sold Nestlé its 50 percent planned to keep cutting back on in emerging markets posed no sub- not to jump to conclusions about stake in skin pharmaceuticals its bond-buying, a crucial part of stantial risk to the U.S. economic what those reports mean.” company Galderma, jointly- its economic stimulus campaign, outlook, adding that the Fed Under Bernanke, the Fed owned by both companies, for an unless there was a significant expected “economic activity and bought trillions of dollars in bonds enterprise value of €3.1 billion. deterioration in the U.S. economy. unemployment will expand at a to drive borrowing costs lower L’Oréal also paid the Swiss com- “I served on the committee as moderate pace this year and next.” and encourage investment. pany €3.4 billion in cash. we formulated our current policy Despite economic recovery The central bank has cut its Peter Brabeck-Letmathe, the strategy, and I strongly support gaining greater traction in the bond-buying programme by Chairman of Nestlé, insisted the that strategy,” she told the House second half of last year, Yellen US$10 billion at each of its last move did not signify a full retreat of Representatives Financial also described the recovery of the two meetings, reducing the from L’Oréal. “It’s not a sign of dis- Services Committee in her first country’s labour market as “far monthly purchases to US$65 engagement and we’re integral to public comments since becom- from complete.” billion, reported The New York L’Oréal’s future,” he told a press ing the head of the central bank “By a number of measures our Times. conference. Myanma Airways seals US$960 million deal to upgrade fleet Myanma Airways, the state- Electric. It is said to be the larg- the development of Myanmar’s international routes to Japan owned airline of Myanmar, last est commercial sale in decades aviation industry.” and South Korea. month signed a lease agreement by a U.S. company to Myanmar. The deal was signed during The deal comes as Myan- for 10 new Boeing 737 jets in The aircraft should be deliv- the Singapore Airshow, Asia’s mar opens up to business and a bid to upgrade its fleet and ered by 2020. “We are pleased biggest aerospace and defence tourism after years of isolation. expand routes. at GE to work with Myanma show, on 11 February. Foreign carriers, as a result, The airline signed the deal, Airways to provide new, state- Myanma Airways currently have set up routes there. Last worth US$960 million, with GE of-the-art Boeing aircraft,” flies only domestic routes, ex- year, Japan’s biggest airline, Capital Aviation Services, the GECAS President and Chief cept for a weekly flight to Gaya, All Nippon Airways, bought a world’s largest leasing company Executive Norman Liu said in a a Buddhist pilgrimage centre in 49 percent stake in Myanmar’s and a unit of United States- statement. “This is an important India. According to BBC News, Asian Wings Airways for around based conglomerate General milestone for the airline and for the carrier plans to expand its ¥3 billion. 6 March 2014 Facebook buys messaging service Central banker suspended for US$19 billion in cash, share deal over oil claims WhatsApp gives social network access to 450 million users Facebook agreed last According to The Nigeria’s President Goodluck month to acquire instant AFP Telegraph, a London news- Jonathan last month suspended messaging service paper, the deal will also the head of the country’s central WhatsApp for US$19 help Facebook reinforce bank for “various acts of financial billion in cash and shares, its standing with younger recklessness.” in the social networking social network users, who The move came after giant’s biggest acquisition have been drawn more to Governor Lamido Sanusi’s to date. AFP WhatsApp and other in- repeated accusations over the The deal will potentially stant messaging services past year that US$50 billion in Mark Zuckerberg help Facebook bolster its rather than Facebook. revenue from oil sales by the already strong position in the said on the conference call that he The transaction ranks as the state-owned Nigeria National messaging world as it would gain planned to operate his company largest purchase of a company Petroleum Corporation was access to WhatsApp’s 450 million “independently and autono- backed by venture capital, missing. NNPC has repeatedly monthly users. mously.” Koum will reportedly according to The Wall Street denied Sanusi’s allegations. “WhatsApp is on a path to become a member of the social Journal. Facebook’s biggest Deputy Governor Sarah Alade connect one billion people,” network’s board of directors as previous acquisition was was appointed to replace Sanusi, Mark Zuckerberg, Founder and part of the deal. Instagram, the photo-sharing who was named the world’s Chief Executive of Facebook, said Facebook will pay WhatsApp application, which was bought central bank governor of the year on a conference call. “The ser- US$4 billion in cash, US$12 for US$1 billion in 2012. in 2010 by Banker magazine. vices that reach that milestone billion in Facebook shares and While WhatsApp is avail- On 25 February, Jonathan are all incredibly valuable.” US$3 billion in restricted stock able for free, a premium model told the Lagos newspaper This- Jan Koum, Chief Executive awards for WhatsApp’s founders charges users a subscription fee Day that his removal of Sanusi and Cofounder of WhatsApp, and employees. of US$1 per year. was unrelated to the allegations. Swiss petroleum trader acquires Australian assets from Shell Vitol, the world’s largest inde- and chemicals unit and part of Times reported. Van Beurden had outlined plans pendent oil trader, spent A$2.9 its lubricants business. Shell’s “Australia remains import- for sharp cuts in the company’s billion to buy an oil refinery and aviation business is excluded ant to Shell, but we are making investment spending this year a large petrol station business from the deal, which is subject to tough portfolio choices to and further disposals of down- in Australia from Royal Dutch regulatory approvals and is ex- improve the company’s overall stream businesses in a bid to Shell, according to media re- pected to close within this year. competitiveness,” Ben van increase cash flow. ports last month. It is said to The move comes amid a Beurden, the newly appointed When outlining Shell’s new be the Swiss-based trading com- growing appetite from oil trad- Chief Executive Officer of Shell, business strategy in January, he pany’s largest-ever acquisition. ers to buy refiners in an attempt said in a statement. highlighted “enhancing capital The purchase covers Shell’s to focus on more profitable The Australian deal puts efficiency, with hard choices on refinery in Geelong, 65 km west investments, particularly in Shell on track to reaching its new projects, reduced growth of Melbourne, as well as 870 exploration and production of target of US$15 billion in asset investment, and more asset service stations, a bulk fuels crude oil and gas, the Financial sales over the next two years. sales,” as a priority. March 2014 7 NEWS INTERNATIONAL Material restatements affect companies’ credibility – paper SEC questions write-downs Material restatements of earnings that involve on Exxon Mobil’s books correcting accounting irregularities, lead to a loss in company credibility with a decline in a Competitors revalue shale gas properties measure of investors’ response to earnings re- ports lasting an average of nearly three years, After several energy companies reduced the values of their natural-gas properties which is substantially longer than previously in the United States over the past three years, the Securities and Exchange Com- documented, according to a research paper re- mission has asked Exxon Mobil Corporation why it has taken no write-downs on leased last month. The study, by Xia Chen and its holdings despite a decline in prices. Qiang Cheng of Singapore Management Uni- The shale boom has caused an oversupply of gas in the U.S., pushing prices versity and Alvis K. Lo of Boston College, was down to about US$2 per million British thermal units, compared with US$5 in published in The Accounting Review. June 2010 when Exxon Mobil bought XTO Energy for US$25 billion. IASB makes costs pledge The SEC, in its request for information, noted that Chief Executive Rex Til- on lease accounting rules lerson said in 2012 that Exxon Mobil was making “no money” on shale gas. The regulator asked whether the company had tested the value of its shale reserves International Accounting Standards Board Chair- and why it had taken no write-downs. man Hans Hoogervorst said the costs of the con- Exxon Mobil responded that it expected commodity prices to recover this verged lease accounting standards, developed year, telling the SEC it did not test the value of its shale holdings in 2012 because with the Financial Accounting Standards Board low prices made such an exercise unwarranted. in the United States, would be kept to a mini- Under U.S. Generally Accepted Accounting Principles, Exxon Mobil does not mum. Bloomberg reported that Hoogervorst have to discount future cash flows when estimating its gas assets’ current value, told the Accounting Standards Board of Japan The Wall Street Journal noted. As long as the assets’ gross expected cash returns last month that decisions had already been exceed their current value, no write-down is required. made to reduce costs by excluding short-term Oppenheimer & Co. Analyst Fadel Gheit speculated that Tillerson is reluctant leases and most variable lease payments. to acknowledge that a write-down might be necessary, even though it could FAF contributes funds reduce income taxes and make the company look more profitable. “[Tillerson] to convergence projects doesn’t want to take the write-off on his watch,” Gheit told the Journal, adding that Exxon Mobil has long resisted writing down the value of its assets. The Financial Accounting Foundation, which BHP Billiton took a US$2.84 billion write-down on some of its U.S. shale-gas oversees the Financial Accounting Standards properties in 2012. Board in the United States, announced last month that it would contribute up to US$3 mil- lion to the International Financial Reporting HP says it found “major errors” Standards Foundation to help complete some in Autonomy financial statements of their joint accounting standards convergence projects, Accounting Today reported. The joint Hewlett-Packard Co. announced last month that it had found major accounting er- projects involve accounting for revenue recogni- rors in an audit of the 2010 financial statements of Autonomy, the British software tion, leasing, financial instruments and insurance. maker the company bought for US$11 billion in October 2011. The HP audit of the two largest Autonomy entities in the United Kingdom, con- Accountant glut prompts ducted by EY, found that Autonomy significantly inflated revenue for Autonomy skilled-migrant list rethink Systems in 2010 by booking deals that were unlikely to be paid for, booking deals Australia has too many unemployable ac- prematurely before they were closed, and claiming transactions where there were counting graduates and the profession should no end customers. be struck off Australia’s priority list for skilled As part of filing the British company’s 2011 statements, HP said it had to refile migrants, the Department of Employment an- the statements for 2010 with significant reductions in revenue and profit. The nounced last month. “Vacancy levels are now restatement lowered the 2010 revenue of Autonomy Systems, by 54 percent, or at their lowest since the [job index] began in £95 million, according to a filing with Companies House. 2006 and there is no sign of an upturn,” the A spokesman for Autonomy’s former management told the media that the re- department wrote in a submission to the gov- statements were trivial, “given the size of HP’s write-down,” and noted that many of ernment, The Australian reported. the adjustments were related to transfer pricing in a bid to lower company’s tax bill. 8 March 2014 NEWS GREATER CHINA Internet giant Weibo expects IPO to Steady trade growth likely, raise US$500 million in 2nd quarter says ministry Alibaba expected to increase its stake in microblogging site The owners of the Weibo AFP line.” However, The New China’s export performance in microblogging service York Times noted that its 2014 is expected to show similar hope to raise about popularity has been under- trends to the previous year, US$500 million through mined by censorship and according to the Ministry of an initial public offering the rise of Weixin (WeChat), Commerce. in the United States, inter- rival Tencent’s instant mes- A ministry spokesman, Shen national media reported saging application. Danyang, said last month that XXXXXXX last month. Besides Sina Weibo, a there was cautious optimism Weibo Sina Corporation is number of other media or- about 2014 trade growth. “We planning the IPO for the second is likely to increase its stake ganizations offer microblogging have confidence in securing a quarter of this year, according to 30 percent if the IPO takes services, including Tencent, trade growth pace equal to last to the Financial Times. place, the Journal reported. Sohu and the People’s Daily year, while further improving The Wall Street Journal re- Analysts have noted that newspaper. the trade growth pattern and ported that Sina, which is already Sina has been slow to monetize In January, a government structure,” China Daily reported listed in the U.S., has hired Credit Weibo. The company reported research group said the total Shen as saying. Suisse and Goldman Sachs US$43.7 million in advertising number of microblog users in The country’s total trade rose Group to handle the listing. revenue from Weibo in the third China fell 9 percent to 280.8 7.6 percent in value year-on-year Given that Weibo is estimated quarter of 2013, less than a million last year, from 308.6 in 2013, missing the govern- to be worth between US$3 quarter of Sina’s total net reve- million in 2012. ment’s target of 8 percent. billion and US$6 billion, only nue of US$184.6 million. Chao told the media that Wei- In January, total foreign trade a relatively small stake will be Sina Chief Executive Charles bo’s user numbers rose to 61.4 unexpectedly surged 10.3 per- offered in the IPO. Chao said during a November million at the end of December cent year-on-year, with exports Alibaba Group Holding, 2013 earnings call that Weibo 2013, from about 60 million at up 10.6 percent and imports up which owns 18 percent of Weibo, was nearing “the break-even the end of September 2013. 10 percent. January housing price rises ease in wake of market tightening Chinese property price rises of Statistics last month. New home prices in Shanghai “Because of the effects of a slowed for the first time in 14 It was the first slowdown in the rose 20.9 percent in January from series of government measures… months in January, indicating rate of price rises since November a year earlier, slowing slightly the market environment and pric- that measures implemented by 2012, according to the bureau. from a 21.9 percent increase in ing expectations were relatively local governments to rein in soar- The government has gradually December 2013. stable,” the Financial Times quot- ing prices might be working. tightened monetary conditions In Beijing, prices rose 18.8 ed Liu Jianwei, a Senior Statisti- New housing prices in China’s since mid-2013, raising the cost of percent in January from a year cian at the bureau, as saying. 70 major cities rose 9.6 percent funding for banks and increasing earlier, down from a 20.6 percent “Tightening credit conditions year-on-year in January, down mortgage costs for homebuyers. increase in the previous month. and easing pressures from hous- from 9.9 percent in December Local governments took further Of the 70 cities monitored, six ing inventories also helped home 2013, according to calcula- tightening measures at the end of posted price declines from the sales to drop, which in turn eased tions by Reuters based on data last year following concerns about previous month, up from just two the home price rises further in released by the National Bureau the risk of an asset bubble. in December 2013. some cities,” Liu added. 10 March 2014 Manufacturing activities shrink to Danone plans to raise stake seven-month low, index indicates in milk maker Analysts divided over government’s next steps China’s manufacturing AFP as it seeks to focus on longer-term Danone, the world’s largest activities dropped in February, structural changes that will yoghurt maker, will spend €486 according to a preliminary reduce the reliance on export-led million to raise its shareholding survey released last month, manufacturing for growth, the in China’s largest milk producer, signalling a continued slow- Journal reported. China Mengniu Dairy Co., which down of the economy. It was also suggested that the will boost the group’s holding The Flash Markit/HSBC disappointing PMI reading was a to 9.9 percent from 4 percent, Purchasing Managers’ Index Manufacturing in China result of the timing of the Lunar media reported last month. fell to a seven-month low of have been edging lower in recent New Year holiday, which saw The move will help the French 48.3 in February, compared to months and this may continue,” many businesses shut down. group expand its presence in January’s final reading of 49.5. Greg Gibbs, a strategist at Royal The PMI’s employment the Mainland, noted a Danone A reading below 50 indicates a Bank of Scotland in Singapore, sub-index fell for a fourth spokeswoman. contraction. told Bloomberg. straight month to 46.9, its lowest “This transaction is consistent “There is continued down- Some analysts called for more point since February 2009. with Danone’s strategy to increase ward pressure on the economy,” support from policymakers to Beijing has expressed a desire our interest in and join hands Ding Shuang, Economist at ensure sufficient momentum in to keep unemployment low to with Mengniu to capture the huge Citigroup told The Wall Street the economy. “We believe Beijing maintain social stability. growth potential of the chilled Journal. “Economic growth will policy makers should and can Earlier last month, Mao Wei- dairy products market in China,” continue to decline to 7 percent fine-tune policy to keep growth at ming, Vice Minister of Industry Chief Executive of Danone, Franck over the next two quarters.” a steady pace in the coming year,” and Information Technology, Riboud, said in a statement. China’s full-year growth for 2013 HSBC Economist Qu Hongbin was said that the government was The purchase will be made was 7.7 percent, steady from 2012. quoted as saying by the Journal. aiming for around 9.5 percent through a joint venture with Analysts expect further Other analysts speculate that annual growth in industrial Mengniu’s state-owned parent disappointment from indexes in the government may be comfort- output in 2014, down from last company COFCO Dairy Invest- the near future. “China’s PMIs able with slightly slower growth, year’s 9.7 percent. ment and Denmark’s Arla Foods. U.S. technology companies face probe over patent licence costs The National Development and nies in November 2013 following Qualcomm, which manu- tigation in exchange for making Reform Commission, which acts complaints from unspecified factures and designs micro- changes to its business practices. as China’s price regulator, said Chinese industry associations and chips, said last year that it was The government, Xu said, is last month that it was conducting companies, a commission official, unaware of any activity that considering this proposal. The an investigation into whether Xu Kunlin, told a news conference violates China’s 2008 antimo- investigation of Qualcomm con- technology companies Qual- in what was the regulator’s first nopoly law and will cooperate tinues, he added. comm and InterDigital, both based public remarks about the probe. with the NDRC. The Qualcomm probe comes in the United States, violated He added that both companies According to Xu, authorities amid efforts by the Chinese China’s antimonopoly law by were suspected of “abusing their are considering a proposal by government to build a domestic overcharging for patent licences. dominant market position” and InterDigital, a wireless-research microchip industry, with officials The NDRC began separate charging “discriminatorily high and development company based vowing to invest billions of U.S. investigations of the two compa- fees” but gave no further details. in Delaware, to resolve the inves- dollars in design and production. March 2014 11