| TO THE POINT: The feverish auto market is calming down, with February sales dropping 33.1 percent from a month ago. Chinese thermal power generators are facing some serious headwinds as coal prices increase. Ernst & Young's report shows China races ahead of other countries in renewable energy investments. The U.S. coupon website Groupon.com extends its reach into China, but its prospects remain uncertain. Digital advertiser Focus Media is faring well thanks to a booming advertising market in China.
By HU YUE
Trade Deficit
The fast growth of imports and the slower pace of export growth resulted in a trade deficit in February this year, the first monthly deficit since March 2010. China recorded a trade deficit of $7.3 billion in February, said the General Administration of Customs (GAC) on March 10.
In the first two months this year, China posted a trade deficit of $890 million, as January's trade surplus halved year on year to $6.45 billion.
The GAC attributed the deficit to the week-long Spring Festival break (February 2-8), saying the holiday had led to a decrease in exports.
China's foreign trade rose by 10.6 percent year on year to $200.78 billion in February, with exports growing by 2.4 percent year on year to $96.74 billion while imports surged by 19.4 percent to $104.04 billion.
The EU remained China's largest trade partner during this period, followed by the United States and Japan.
China is expected to register trade deficits in several months this year as the growth of imports would likely outpace that of exports.
Cooling Auto Market
For China's auto market, the euphoria of high sales seems to be fading.
Auto sales across the nation totaled 1.267 million units in February, up 4.57 percent year on year, said the China Association of Automobile Manufacturers (CAAM). But the figure represented a 33.1-percent drop from January. The February output also fell 29.9 percent month on month to 1.26 million units.
CAAM attributed the downturn to the impact of the Lunar New Year holiday (February 2-8), end of policy incentives and new limits on car purchases in Beijing.
The government this year rolled back some supportive policies, including a favorable purchase tax for smaller cars, subsidies to rural buyers and an old car replacement program.
"I'm not surprised at the February data. But there's no need to be overly pessimistic about prospect of the market," said Xiong Chuanlin, Deputy Secretary General of CAAM.
After two years of vibrant growth, the market is more likely to plateau, said Xiong.
In addition, auto exports reached 43,400 units in February, down 16.51 percent from January, said the CAAM. But it still represented a 63.56 percent growth year on year.
Power in the Red
China's thermal power generators are swimming in red ink as coal prices soar.
The "big five" generators—Huaneng, Datang, Huadian, Guodian and China Power—incurred combined loss of 13.7 billion yuan ($2.1 billion) in 2010, said Zhai Ruoyu, former general manager of Datang.
This was their third loss-making year in a row, and the root cause has been pinned on skyrocketing coal prices, which account for 70 percent of their costs, he said.
The steam coal price at Qinhuangdao Port, an industry benchmark in the country, climbed around 7 percent last October, as a nationwide winter freeze pushed up demand.
Since 2003, the coal price at Qinhuangdao Port has surged 150 percent while the on-grid electricity tariffs climbed only 32 percent, according to data from the China Electricity Council.
China has deregulated the price of thermal coal to float in line with market demand. But the on-grid power tariffs have been mostly static, said Mao Rifeng, General Manager of Central China Grid Co. Ltd.
A hike in the electricity prices is less likely in the near future given simmering inflationary pressures, said Lu Qizhou, General Manager of China Power.
"Our company is expected to break even this year as profitable hydropower businesses cushioned much of the blow," he said.
Green Investments
China is leading the globe in renewable energy investments as the economy seeks a more sustainable source of growth, according to a recent report by the international accounting firm Ernst & Young.
China reached 42 gigawatts of wind power capacity in 2010, surging 64 percent from the previous year. However, Chinese companies are dealing with falling stocks, inflationary pressures, weak research and development capabilities, and limited grid capacity that may not be able to continue supporting the country's rapid growth in both wind and solar power, said the report.
Globally, however, the toxic legacy of the financial crisis continues to cast a shadow over the world renewable energy market, although new investment in clean energy climbed 30 percent year on year to $243 billion in 2010. Many countries sought to tackle budget deficits by trimming renewable energy incentives. For example, feed-in tariff incentives for solar energy were cut in Spain, Germany and Italy, while France imposed a three-month ban on new projects.
"The global transformation to a resource-efficient and low-carbon economy is a long journey. It is expected to have challenges along the way on local or regional levels," said Gil Forer, Ernst & Young's Global Cleantech Leader. "But the global drivers of this transformation, including imbalance of supply and demand of natural resources, energy security and energy prices, are solid."
Groupon in China
The world's largest coupon website Groupon.com is making China forays, hoping to capitalize on the world's most populous Internet market.
The U.S. behemoth has joined hands with Tencent Holdings Ltd. and the private equity fund Yunfeng Capital to build the Gaopeng.com. The new site is now accepting e-mail registrations from Chinese consumers who will be notified on daily deals from local merchants, such as restaurants, gyms and home electronics retailers. The service will initially cover Shanghai and Beijing before expanding to other major Chinese cities.
"The collaboration combines Groupon's global group-buying experience with Tencent's in-depth knowledge of Chinese online communities," said the Chicago-based company.
As it breaks new ground in China, Groupon sets its sights on the thriving Internet market. China had 457 million Internet users by the end of 2010, more than any other country. The Tuan800.com, a group-buying navigation website, estimated value of the group-buying market at 16 billion yuan ($2.46 billion) this year, nearly 10 times that of 2010.
However, analysts cast doubts over how successful Groupon can be in China given intensifying competition. Its aggressive expansion into China also angered local rivals. Groupon has been accused of poaching staff, and competitors have in response formed an alliance and vowed that employees who leave for Groupon will not be welcomed back.
"The inexperience with local consumer markets will be a stumbling block for Groupon," said Chen Shou, an analyst at the research company Analysys International.
Zhangyi, President of the Iimedia Research Co. Ltd., believed its tie-up with Tencent will provide a solid customer bass. "But it remains to be seen how the venture works given cultural differences between the two giants," he said.
Focus on Boom
China's digital advertiser Focus Media Holding Ltd. reaped juicy returns in 2010, drawing strength from an improving advertising market in China.
The Shanghai-based company raked in net profit of $177.8 million last year, compared with $88.8 million in 2009. The NASDAQ-listed Focus Media is China's largest publicly traded advertising company, running a handful of advertising networks in more than 90 cities across the country.
The performance was due to stronger advertising revenues from LCD (liquid crystal display) monitors and in-store and poster frame businesses. The company received a serious blow from the economic slowdown two years ago, which prompted its core corporate customers to cut expenses on advertising. It suffered five consecutive quarters of losses before returning to the black in the quarter ending in June 2010.
"The strength and effectiveness of our core business is becoming increasingly recognized by advertisers," said Jason Jiang, Chairman and CEO of Focus Media, "Meanwhile, the aggressive ad price hikes of traditional TV broadcasters have presented exciting growth opportunities to us.
"In 2011, we will continue enabling interactivity of our core media resources and expand our presence in the third and fourth-tier cities." | 
