Faux Price War Initiator

(FILE)

Liu Qiangdong, founder and CEO of Jingdong Mall, one of the major online retailers in China, was strongly criticized for misleading consumers during a recent price war. In response to the criticism, Jingdong Mall apologized on a micro-blog on September 5 with a statement asserting that Jingdong did not fulfill its promise to keep the gross profit ratio of major appliances at zero and keeping the price of major appliances lower than that of its rivals' in the price war. However, the company's apology has been under attack by consumers who accused Liu, the initiator of the war, of trying to gloss over his faults by making the apology through a micro-blog account that has few followers, rather than his own micro-blog which has nearly 2 million followers.

Three Chinese online retailers engaged in a price war starting August 15, with each pledging to sell major appliances for less than their rivals. However, they were accused of increasing prices immediately before launching the price-cutting campaigns. An investigation into the price war launched by the National Development and Reform Commission found that the three rivals lied about the original prices of the goods they sold and failed to fulfill their low-price promises.

Liu, 38, started Jingdong Mall in 2004, which has become China's second-largest online retailer by sales.

Inflation Rebounds

The consumer price index (CPI), a key gauge of inflation, rose 2 percent year-on-year in August, accelerating from 1.8 percent in July, the National Bureau of Statistics said on September 9 (see page 34).

Food price hikes mainly drove the higher CPI growth, as heavy rains affected vegetable supplies and global grain prices went up.

Food prices, which account for nearly one third of the CPI basket, climbed 3.4 percent in August from a year earlier, while it grew 2.4 percent in July. Vegetable prices, in particular, jumped 23.8 percent year on year in August, while fruit prices surged 9.7 percent.

The base effect also contributed to the higher annual rate. CPI growth has gradually retreated since July last year when it hit a 37-month high of 6.5 percent.

The increasing inflationary pressure and weakening economic growth will place the central bank in a monetary policy quandary, said Guo Tianyong, a finance professor at the Central University of Finance and Economics.

Negotiation Over Friction

On September 11, the Chinese Government sent a delegation to Europe to discuss trade frictions with the EU over solar panel imports.

The delegation, led by Chong Quan, deputy representative for China's international trade talks, will meet with government officials from Germany and France and members of the European Commission.

The delegation will outline the Chinese position over the EU's decision to launch an anti-dumping investigation into imports of solar panels and key components from China, according the Ministry of Commerce (MOFCOM).

China has maintained its position to resolve the China-EU trade friction through consultation and cooperation, said the MOFCOM.

The EU announced on September 6 that it would launch a 15-month investigation into imports of solar panels and key components from China and may impose provisional antidumping duties within nine months.

Shortly after the EU announcement, MOFCOM spokesman Shen Danyang said China deeply regretted the EU decision and restricting China's solar panel products will hurt the interests of both sides and undermine the healthy development of the global solar and clean energy sector.

China exported around 21 billion euros ($27.14 billion) worth of solar panels and their key components to the EU in 2011, according to EU statistics.

New Lending Surges

New yuan-denominated lending in August rose to 703.9 billion yuan ($111.2 billion), marking an increase of 155.5 billion yuan ($24.6 billion) year on year, according to the People's Bank of China, the country's central bank.

Analysts said the August figure beat market expectations of 600-630 billion yuan ($94.8-99.54 billion), and they attributed the growth to an increasing housing turnover and the government's new investment spree.

To stimulate the economy, the National Development and Reform Commission (NDRC) approved 55 investment projects worth 1 trillion yuan ($158 billion) on September 5-6 to build highways, ports and railways across the country.

Green Subsidy

China will subsidize the use of energy-saving desktop computers and air-conditioners in its latest effort to save energy and boost domestic demand, said the Ministry of Finance (MOF) on September 9.

The MOF, the NDRC and the Ministry of Industry and Information Technology will release rules on the subsidy program soon.

The country will earmark 14 billion yuan ($2.22 billion) in subsidies to encourage the purchases of six types of energy-saving products, including desktop computers, airconditioners, fans, water pumps, compressors and transformers.

The subsidy program will last for one year and is expected to raise the market share of the energy-saving products to more than 40 percent, said the MOF, without disclosing when the program will start.

The move marks the government's effort to combine stabilizing economic growth and stoking domestic demand with promoting energy savings and emission reductions.

The subsidy program is expected to save 31.3 billion kwh of electricity every year and drive sales of the energy-saving products by 155.6 billion yuan ($24.46 billion), said the MOF.

Western Growth Engine

Lanzhou New Area (LNA), located in Qinwangchuan Basin to the north of Lanzhou, capital of Gansu Province, was approved to become the fifth national-level development zone in the country and the first national-level economic zone in northwest China.

"The establishment of LNA marks the country's latest effort to accelerate development of the western regions," said Qin Yucai, Director of the Department of Western Region Development of the NDRC.

Liu Weiping, Governor of Gansu, believes that LNA, covering an area of 806 square km and a population of 110,000, will offer opportunities to companies, including energy smelters and automakers from home and abroad.

Apart from LNA, China has four other national-level development zones including Pudong New Area in Shanghai, Binhai New Area in Tianjin, Liangjiang New Area in Chongqing and Zhoushan Islands New Area in Zhejiang Province.