TO THE POINT: Air China's strong stance trampled Singapore Airlines' attempt to buy China Eastern Airlines. The country's liquor prices have risen substantially just before the Spring Festival (February 6-13). Home appliance giant Siemens also decided to increase its prices to cope with higher raw material and human resources costs. In a bid to protect the environment, China invited the U.S.-based General Biodiesel to produce diesel from organic products. Meanwhile, China has vowed to strike hard against software piracy on news that domestic software development has grown robustly, though piracy has eaten into its profits. By LIU YUNYUN

Shareholders Say No

China National Aviation Corp. (CNAC), one of the major shareholders of China Eastern Airlines (CEA) and also the parent company of Air China, vetoed Singapore Airlines' offer to buy China Eastern Airlines' shares, prompting the failure of the acquisition effort.

At a three-hour extraordinary general meeting on January 8, 77.6 percent of CEA shareholders rejected the management's attempt to sell a 24-percent stake to Singapore Airlines and the Singaporean Government's investment company Temasek.

On September 2, 2007, CEA agreed to sell a combined 24-percent stake to Singapore Airlines and Temasek at HK$3.80 per share.

To dampen the foreign acquisition attempt, CNAC, which already owns 12.07 percent of CEA, announced that it was willing to make a higher offer of HK$5 a share. The company also contended that the cooperation between Air China and CEA would boost the performance of both and it rejected any attempt by a foreign counterpart.

Earlier, CEA Chairman Li Fenghua was very confident about the deal with Singapore Airlines, and believed the cooperation would boost CEA's performance in the international aviation market. But he admitted after the result came out that Air China's more generous offer changed the minds of the previous supporters.

Analysts said Air China was skillful in handling the case. On the one hand, it showed strong opposition; on the other, it offered a more lucrative price.

However, Chairman Li said at a press conference earlier that CEA had no reason to invite Air China to be its strategic partner "no matter how high a price it can offer." Li argued that the two companies were "at the same level in terms of operation, management and market performance."

Pricey Liquor & Expensive Home Appliances

It is a year of consumption and everything is getting more expensive, leaving people wondering if life can get easier, as wage growth lags far behind the growth of consumer prices.

Maotai Liquor, the most recognized high-end liquor brand, raised its prices again in early January-the seventh increase since the beginning of 2007.

This round of price hikes ranged from 50 to 200 yuan ($6.85-$27.4) per bottle. The best-seller "Feitian Maotai" went up 100 yuan ($13.7), from 588 to 688 yuan ($80.5-$94.2). Beijing Times quoted a Maotai seller saying that, "even though the prices are higher, the supply is far short of demand."

Other liquor brands have followed suit. Wuliangye Liquor, the second most well-known domestic liquor brand, also raised its prices by about 50 yuan ($6.85). Luzhoulaojiao Liquor did nearly the same.

The price hikes come just in time to tap into growing consumer wealth. This year, China's Lunar New Year holiday falls on February 6-13. Liquor is the most inseparable part for a gathering of friends and relatives. It is the liquor companies that serve the nation's huge demand for spirits when the holiday season comes, and their timing seems to be perfect.

Just after New Year's Day, the German company Siemens lifted the prices on all its home appliances by 3 percent-5 percent, starting from January 4. Its European counterpart Bosch also raised home appliance prices by a greater range.

Siemens salespeople said that the rise was due to higher costs for raw materials such as steel. Meanwhile, the adoption of the new Labor Contract Law has added costs to human resources. Siemens said it "was forced to raise prices."

Rumors have circulated that joint-venture home appliance companies like Toshiba and Sanyo will follow suit in the near future. But domestic brands like Haier and Midea stated officially that they would not raise prices before the Spring Festival.

The Spring Festival is one of the best times for home appliance sales, when families in second-tier and third-tier cities and towns are more generous and richer than they are in the middle of the year. They represent the most vibrant market for home appliances during the Spring Festival. Song Hongyan, Sales Manager for the domestic brand HiSense, said that although prices would not be raised during Spring Festival, the possibility exists that they would eventually rise in 2008.

Developing Biodiesel

Seattle-based new energy firm General Biodiesel plans to build four projects in China located in Beijing, Shanghai, Guangzhou in Guangdong Province and Wenzhou in Zhejiang Province, according to the company CEO Yale Wong.

Wong said on January 8 that the initial investment for the four projects would be about $500,000, and after a year the company would increase its total investment to $100 million.

The introduction of this U.S. company is part of China's bid to save energy and protect the environment. Biodiesel is the natural equivalent to diesel. Diesel comes from petroleum, a nonrenewable resource, while biodiesel comes from organic renewable sources such as soybean or rapeseed oil, animal fat, or waste vegetable oil. General Biodiesel specializes in producing high-quality biodiesel by processing vegetable oil from palm, canola, soy, linseed, coconut, mustard and cotton, as well as by cleaning and recycling cooking oil.

The Chinese Government has set the target for increasing biodiesel output at 200,000 tons by 2010 and 2 million tons by 2020. The huge potential caught the interest of General Biodiesel, which is now seeking a joint-venture partnership in China.

Buoying Aircraft Construction

China will launch its own large aircraft manufacturing firm in March, according to Huang Qiang, Secretary General and Spokesman for the Commission of Science, Technology and Industry for National Defense. The company will design and manufacture large commercial planes and ARJ21 regional planes. It will independently manufacture China's homegrown aircraft and will pose a challenge to the dominant position held by the U.S. manufacturer Boeing and the France's Air Bus.

Huang said the new company would be funded by the State Council, local governments and aviation industrial groups. "It will be a major structural adjustment in the development of the Chinese aviation industry," said Huang. "It will also provide experience for the reform of the national defense technology industry."

The project is part of the nation's 11th Five-Year Plan (2006-10), though many citizens are deeply concerned about the safety of taking a domestically built jet.

Alibaba Takes the Lead

A survey conducted by the Data Center of the China Internet showed that business-to-business (B2B) transactions hit 1.25 billion yuan ($171 million) in China last year, rising 25.5 percent from that of 2006. Hong Kong-listed Alibaba.com took a lion's share of 70 percent, also making it number one in the e-commerce marketplace.

Alibaba.com is one of China's fastest-growing Internet companies. Its registered members soared to 24.6 million in 2007 from 6 million in 2004. Paying members had increased to 255,000 by June 2007 from 77,000 in 2004.

The survey polled over 300 websites and 200 companies across the country. Other major players in the B2B sectors include netsun.com, globalsources.com, cn.made-in-china.com and hc360.com.

The survey result also forecasts that China's B2B trade volume will exceed 1.6 trillion yuan ($222 billion) in 2008 and 2.1 trillion yuan ($292 billion) in 2009.

Fighting Piracy

The Chinese Government pledged on January 8 that it would strengthen efforts to combat software piracy in a bid to safeguard the development of the industry.

Wang Ziqiang, Director General of Copyright Bureau under the National Copyright Administration, said that "infringement has been the main culprit in slowing down the healthy development of the software industry."

People once joked that only when China's own software was pirated would the nation take seriously the importance of combating piracy.

Wang cited an American study which said sales of domestically developed software would increase by $3.79 billion if the rate of software infringement in China was cut by a mere 10 percent.

The large amount of domestically developed software has made the companies realize the need to apply for copyright protection. Last year a record 25,666 applications were submitted, up 16 percent over the previous year.

Wang said the government had strengthened its policies on infringement not only for the benefit of domestic software companies, but also to send a positive signal for further international cooperation on copyright disputes.

Numbers of the Week 30% Leading U.S. auto company Ford Motors boosted its vehicle sales in China by 30 percent in 2007, helped by demand for its Focus compact cars. The Focus was the fastest-growing mid-size car in China and one of the top 10 best-selling vehicles, Ford said in a statement. $104.33 billion China’s customs revenue reached a record high of $104.33 billion in 2007, rising 24.3 percent year on year, according to the General Administration of Customs. Customs revenue from telecommunications equipment, integrated circuits, television receivers and printing machines rose considerably due to the increase in imports.