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Market Watch
Business> Market Watch
UPDATED: March 25, 2011 NO. 13 MARCH 31, 2011
MARKET WATCH NO. 13, 2011
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The government will also loosen the approval procedures and smooth the way for companies to establish overseas footholds, said Kong Linlong, Director of the Department of Foreign Capital and Overseas Investment of the National Development and Reform Commission.

"But offshore expansion is not without risks," said Yao. "The political turmoil in Libya, for example, has taken a painful toll on China's 50 contracted projects in the African country worth around $18.8 billion."

"That added urgency to building an effective insurance system for companies going global," he said.

Turbulent Skies

After a prosperous year of explosive growth, China's aviation sector is facing some serious headwinds.

The industry raked in a net profit of 1.74 billion yuan ($267.7 million) in February, diving 53 percent from a year ago, said the Civil Aviation Administration of China (CAAC). Of this total, airlines generated 1.21 billion yuan ($186.2 million) and airports earned 190 million yuan ($28.9 million), dropping 56.1 percent and 73.8 percent, respectively, compared with February 2010.

The result came as a disappointment given the significant euphoria last year. The civil aviation industry reaped profits of 43.7 billion yuan ($6.7 billion) last year, three times more than that of 2009.

"The downturn was attributable to the slowing broader economy that put a damper on cargo transport," said the CAAC. "In addition, February has always been an off-peak season for airlines as winter freeze weakens the demands for travel."

February cargo transport was down 11.8 percent from the previous year to reach 300,700 tons.

"Rebounding exports were the backbone of last year's pick-up in air freight,'' said Li Lei, a senior analyst at the China Securities Co. Ltd. "But uncertainties have been hanging over China's exporters this year due to the vulnerability of the world economy."

Li expected the industry to grow 15 percent in 2011 in part because of a higher comparison base.

From a long-term perspective, the air cargo market is bound for a bright prospect as manufacturers start producing more high-value products which would require faster shipments, said Cai Chengyu, CEO of Globelink China Logistics Co. Ltd.

Tencent Cashes In

China's Internet giant Tencent Holdings Ltd. reported 2.2 billion yuan ($338.5 million) in net profits for the fourth quarter of 2010, soaring 45.9 percent year on year, thanks to the strong performance of online and mobile games. The growth rate, however, was the slowest in more than three years.

Fourth-quarter revenue totaled 5.5 billion yuan ($846.2 million), up 49.8 percent from the previous year. Sales of Internet value-added services, including online games and QQ-related subscription fees, rose 54 percent to 4.38 billion yuan ($673.8 million). Online advertising revenues went up 39 percent to 388.1 million yuan ($59.7 million).

Tencent said its active user accounts of the QQ instant-messaging service totaled 647.6 million at the end of 2010.

In the wake of intensifying domestic competition, Tencent has been diversifying its businesses and weaning its reliance on online games. In February, it joined hands with the U.S. coupon company Groupon to launch a group-buying website in China.

Tencent also said it will step up investments to boost its social networking services, search engine and e-commerce sites Paipai and Tenpay.

"There are lots of opportunities to differentiate the markets in China's budding e-commerce industry, though competition is also pretty keen," said Tencent CEO and Chairman Pony Ma. "There will be a considerable amount of time whereby companies will be operating at losses and only several players will ultimately survive in the competition."

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