Saturday, April 21, 2012

Book Review - A Gift to My Children: A Father's Lessons for Life and Investing

                      A Gift to My Children: A Father's Lessons for Life and Investing

Legendary investor Jim Rogers co-foundered the Quantum Fund with George Soros in 1970, then he retired at the age of 37, he spent a number of years traveling the world by motorcycle and later traveling the world with his wife by car.
I recently read Jim Rogers' book "A Gift to My Children: A Father's Lessons for Life and Investing", in which he shares a heartfelt guide to help his two daughters and others find success, happiness and prosperity.  
Jim Rogers writes about how to learn from our own achievements and our own mistakes in order to achieve a successful well-lived life. I am always amazed when he admits a mistake and then makes a great lesson from it. If you have read his other works you will see some of his basic principles again; think for yourself, see the world, be persistent, focus on what you have passion for, rely on your own intelligence, people laughing at your ideas? Take heart!

Jim Rogers, Baby Bee and Jing Nealis
I found this short book an enjoyable read, there are lessons in life for all of us in this book, people familiar with his work will quickly recognize his down to earth easy to read style of writing but this time he adds paternal love and protectiveness to it. This book is very touching, I hope that Jim Rogers' daughters will be proud that their father not only took the time to write a book for them but also put his heart into it.

Having met Jim Rogers and his daughter Baby Bee in their Singapore home, I can say this man lives as he preaches and if you have ever listen to him speak you would be able to hear his words ring true in this book, I believe you would find this book a valuable read if you are an investor or just a parent who would like to pass along wisdom to your children.


Thursday, February 16, 2012

2012 Asian Financial Forum

I attended the high-profile event 2012 Asian Financial Forum this January. Every year, the Asian Financial Forum (AFF) brings together some of the most influential members of the global financial and business community to discuss developments and trends in the dynamic markets of Asia. It is always an excellent opportunity to gather the latest market intelligence and explore business opportunities in Chinese mainland and the rest of Asia.
Deloitte has been the gold sponsor of AFF for third consecutive year. This year's AFF attracted more than 2,000 participants and 400 journalists from 32 countries and regions. Attendees came to hear the latest opportunities and challenges in Asia from more than 70 internationally respected leaders in government, financial and business sectors.
The panel discussion I enjoyed the most is the one on China Opportunities.  As we know, global headwinds are expected to slow China's economic growth in 2012, opening the door to some easing in monetary policy as inflation starts to subside. A leadership transition will also be taking place.  The panelists gave us their insights on the twists and turns ahead in the nation's remarkable economic transformation. The panelists are among the most influential business leaders in the private sectors as well as government official, including Ronnie Chan, Chairman of Hang Lung Properties, Tomson Li, CEO of TCL Corporation, Cho Tak Wong, Chairman of Fuyao Class Industry Group, John Zhao, Founder and CEO of Hony Capital, Liming Yu, VP and Chief Economist of China Merchants Group, and Guangshao Tu, Vice Mayor of Shanghai.  It was very insightful to hear these business leaders' view on China's future economic growth, and their experience in running successful businesses in China.  

Saturday, February 11, 2012

Bloomberg Shanghai Bureau Visit

While I was in Shanghai on business this week, I had the pleasure to visit the Bloomberg Shanghai bureau as a guest of Margaret Conley, who is an anchor and reporter for Bloomberg Television.  Margaret gave me a wonderful tour of the Bloomberg's news studio, editing center and the client training facility.

Bloomberg's management believes that open and fast communication is critical for the operation of the global news bureau. I have always heard that Bloomberg offices have fish tanks and transparent open floor designs. It is true! All meeting rooms in the Shanghai bureau have glass windows, so you could look inside.  All staffs' including management's desks are clustered in a big open room without walls to facilitate better and faster communication.  

 
Bloomberg's core money-generating product is the Bloomberg Terminal, which is a computer system that enables financial professionals to access the Bloomberg Professional service through which users can monitor and analyze real-time financial market data movements and place trades on the electronic trading platform. The system also provides news, price quotes, and messaging across its proprietary secure network.  It was exciting to see the amazing capability of the Terminal and how much information is being contained in this machine!


Saturday, January 28, 2012

Book Review - Warren Buffett and the Interpretation of Financial Statements

Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage



I am an accounting and finance professional with 10 years' experience in advising clients on cross-border merger & acquisition transactions, international tax structuring and business model optimizations. I read companies' financial statements regularly to gain understanding of a company's business operation, source of revenue, financing situation, cash flow, global effective tax rate, and etc.  I wanted to read a book about interpretation of financial statements from investors' perspective, so I picked up "Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage".

This book is written by Warren Buffett's former daughter-in-law Mary Buffett and a successful Buffettologist David Clark. The authors have written a simple guide for reading financial statements from Warren Buffett's successful perspective.  With 57 short chapters, the book illustrated what Buffett would look at when buying a business.  He looks at the company's pre-tax earnings and asks if the purchase is a good deal relative to the economic strength of the company's underlying economics and the price being asked for the business.

This book is an easy read to learn Buffet's time-tested dos and don'ts for interpreting an income statement and balance sheet, how much debt Buffett thinks a company can carry before it becomes too dangerous to touch, the financial ratios and calculations that Buffett uses to identify the company with a durable competitive advantage, and what kind of companies Buffet stays away from no matter how cheap the price is.  

Overall, I think this is a good book. I enjoyed this book because it introduced to me Warren Buffett's methodology for reading financial statements. If you aren't experienced with reading financial statements, I would highly recommend this book as a great place to start.

2012 - Year of the Dragon!

Chinese New Year is the most important traditional Chinese holiday, it is also known as the "Spring Festival" in China. It marks the beginning of the spring season and the end of the winter based on the Chinese lunar calendar.  The festival begins on the first day of the lunar calendar and ends with the Lantern Festival which is on the 15th day.  Chinese New Year's Eve is a day where Chinese families gather for a reunion dinner.

2012, the 4709th Chinese year, is the year of the Dragon. Dragon is the only mythological creature in the Chinese zodiac of the 12-year cycle of animals.


I went back to Beijing my home town for Chinese New Year with my family.  It was a wonderful five days in Beijing visiting relatives and childhood friends. My parent's home is decorated with red color paper-cuts and couplets with popular themes of happiness, good fortune and longevity.  On the Eve of Chinese New Year, I had the super feast with my family, the night ended with fireworks.

I wish everyone a prosperous and happy Year of the Dragon!

Sunday, January 15, 2012

Showcase Hong Kong

I would like to share an article I was quoted in written by Deroy Murdock on National Review Online. 


Showcase Hong Kong 


http://www.nationalreview.com/articles/287776/showcase-hong-kong-deroy-murdock?page=2


Hong Kong — Beyond the intricate Chinese pictograms rendered in iridescent neon and the incense spirals that smolder in the Man Mo Taoist temple on Hollywood Road, Hong Kong’s most exotic gift to a visiting American is a reminder of how economic dynamism looks.

Unemployment is just 3.2 percent here (versus 8.5 percent in the U.S.), and it shows. Around the clock, "Hong Kong people” (as they call themselves) buy, sell, produce, and deliver. Everyone seems to be running somewhere. Workers rush handtrucks in every direction, laden with raw materials, finished goods, and sometimes just Styrofoam boxes.

Stores overflow with consumers and merchandise. A riot of street signs, in both English and Chinese, scream the names of companies, stores, and sole proprietors. There often is neither rhyme nor reason to how these displays are presented beside buildings. But the disorder that would set a central planner’s hair on fire creates a commercial cacophony that is music compared to the dull static groan that defines today’s U.S. economy.


At 11:50 on a Wednesday night, rather than prepare for bed, 20 or so eager consumers huddle around a small table and pick through a packed, informal table of cellphone covers. They sell for 25 to 40 Hong Kong dollars, or about 3 to 5 bucks. (All subsequent sums are in U.S. dollars.)  "Super cheap!” one man grins through his Chinese-accented English.
Just a few feet away, an old man wearing a surgical face mask sweeps the pavement of the Mong Kok district’s Sai Yeung Choi Street, which is clean and spotless, like many streets here. The subway system’s immaculate floors are polished to a warm glow.

There seem to be no graffiti on subway cars, platforms, and stations, or anywhere else. Hong Kong people possess enough civic pride, self-respect, and decency to keep their spray paint to themselves. One suspects that they decry graffiti as criminal filth, not celebrate it as “art” — as do too many Americans. (Manhattan Institute scholar Heather Mac Donald colorfully chronicled this enraging fact in last spring’s City Journal.)
After walking and riding through Central, Diamond Hill, Mong Kok, Sheung Wan, and other Hong Kong neighborhoods for six days in late November, I counted a grand total of four street-level retail vacancies for rent or lease. In contrast, I found 16 such spaces within a five-minute radius of my apartment in Manhattan’s lively East Village.

Abandoned storefronts are rare enough in Hong Kong to grab attention. Other spaces are empty, but only while laborers craft them into new or improved enterprises eager to prosper. And Hong Kong’s indefatigable, largely non-union workers occupy themselves with construction, repairs, and decoration — even at 1:00 a.m.

Those four retail vacancies in Hong Kong were small spaces, not the huge, hollow storefronts that haunt too many American communities. Everywhere else here, commercial storefronts thrive. Products cascade from every shelf. Along narrow alleyways and steep, outdoor stairways that double as streets, small, one-man operations sell bespoke shirts, custom suits, electronic gear, fish, printing services, lumber, crabs, antiques — you name it. Many of these are tiny shops, each literally about the size of a spacious phone booth. This is pure entrepreneurship.

Hong Kong’s glistening skyscrapers are packed, too. According to CB Richard Ellis, a global real-estate firm, Hong Kong’s average office-vacancy rate is 3.6 percent. Such voids stand at 10 percent in Midtown Manhattan and average 17.1 percent for the U.S. in the third quarter of 2011, Cushman & Wakefield calculates.

Just as real estate is almost fully occupied, so is Hong Kong’s population. Almost no one sits still for long. In 2011, people here deserved the compliments that the late British development economist Lord Peter Bauer paid them a generation ago: “Enterprise, hard work, ability to spot and utilize economic opportunities, are widespread in a population 98 percent Chinese, engaged in single-minded pursuit of making money day and night,” Bauer wrote in the April 19, 1980, London Spectator (reprinted in Princeton University Press’s From Subsistence to Exchange and Other Essays). Bauer added: “Hong Kong bears out that population increase is not an obstacle to progress, that suitably motivated people are assets not liabilities, agents of progress as well as its beneficiaries.”

So, what are the secrets of Hong Kong’s success? And, most important, what can the 7.1 million residents of this Special Administrative Region of the People’s Republic of China prove to a vast superpower of 312 million?

First and foremost, Hong Kong is the Vatican of economic liberty. Since it began 17 years ago, Hong Kong always has been number one in the Heritage Foundation/Wall Street Journal Index of Economic Freedom.

Why is Hong Kong sprinting at 5 percent GDP growth for 2011, while America slouches at 1.8 percent? As the Index explains, Hong Kong’s “effective legal and regulatory frameworks and openness to global commerce strongly support entrepreneurial dynamism, while overall macroeconomic stability minimizes uncertainty.”


Meanwhile, the Index thus describes today’s U.S. economy:  The government’s recent spending spree has led to fragile business confidence and crushing public debt. Interventionist responses to the economic slowdown have eroded economic freedom and long-term competitiveness. Drastic legislative changes in health care and financial regulations have retarded job creation and injected substantial uncertainty into business investment planning.
Ongoing regulatory changes, coupled with fading confidence in the direction of government policies, discourage entrepreneurship and dynamic investment within the private sector.

American individuals and corporations pay top income-tax rates of 35 percent, in addition to taxes on capital gains, dividends, overseas profits, and even death. An unfathomable tax code spans 72,536 pages, according to CCH, a publishing company. Just determining the size of the U.S. Internal Revenue Code is an accounting exercise. As the National Taxpayer Advocate reported to Congress in 2010: “The tax code has grown so long that it has become challenging even to figure out how long it is.” Moreover, “to determine the length of the Code,” the NTA admits, “there is no clearly correct methodology to use.”

In Hong Kong, the top tax rate on salaries is either 17 percent (minus deductions) or 15 percent of gross income, whichever is lower. The tax rate on capital gains, dividends, overseas profits, and death is zero. There is no sales tax. Hong Kong’s Inland Revenue Ordinance stretches 183 pages.

"Hong Kong accountants probably spend less time on tax matters compared to the U.S.,” says Jing Nealis, U.S.-tax desk manager of Deloitte’s Asia Pacific International Core of Excellence. Having worked in the U.S. and now in Hong Kong, she adds: “U.S. and Hong Kong companies both treat commercial feasibility as an important factor for decision making. The difference is that U.S. companies spend more time and pay more attention to the tax implications, as sometimes tax factors could kill a deal.”

Hong Kong satisfies individual taxpayers as well. "Unlike the hefty volume that shows up from the IRS in the United States, the form I use to file my income taxes in Hong Kong is a very manageable four pages. I only spend about ten minutes completing it,” American-born Time magazine correspondent Michael Schuman wrote in October 2010. “The revenue department here in Hong Kong then calculates what you owe.  need even to do the math yourself. Compare that to the arduous nightmare of filing U.S. taxes. . . . That’s an extra expense of $1,000 each year. Completing my Hong Kong taxes costs me zero.”

Hong Kong’s leaders also are vigilant about spending. "The administration deliberately self-imposes on itself that we do not take up more than 20 percent of the GDP,” Hong Kong’s chief executive Donald Tsang told the Council on Foreign Relations in New York City last November 7. “In other words, you have to be a reasonably small and compact and efficient administration. And taxation is also maxed out at 20 percent, roughly, of the GDP. So we balance our books every year.”

The actual numbers behind Tsang’s remarks epitomize why Hong Kong thrives as America wheezes: According to Heritage’s index, total government spending as a share of GDP in 2010 was 18.6 percent in Hong Kong versus 38.9 percent in the U.S. Tax revenue that year was 13 percent of GDP in Hong Kong and 26.9 percent of GDP in America.

Hong Kong’s “national” debt is just $5.8 billion, totaling 2 percent of GDP. Local free-marketeers trivialize this as a frivolous public project designed to promote a local government-bond market. Regardless, Hong Kong’s few government bonds are overshadowed by its $76.4 billion in foreign-exchange reserves, equal to 32 percent of GDP and 19 months of government expenditures. Hong Kong’s $500 million surplus equals 1.05 percent of its budget — a small but solid confirmation of its fiscal discipline.

U.S. national debt, in contrast, is morbidly obese at $15 trillion. That equals a frightful 101 percent of GDP. There is no cash reserve, nor a “rainy-day fund” — just $116.9 trillion in long-term, unfunded liabilities, according to USDebtClock.org. In contrast to Hong Kong’s modest surplus, the 2012 U.S. federal budget deficit is forecast to be $1.3 trillion. This will be America’s fourth consecutive year of trillion-dollar red ink.


Sound money is another ingredient in Hong Kong’s magic potion.
Imagine U.S. dollar bills engraved with the names of Bank of America, JPMorgan Chase, and Wells Fargo. While not even Hong Kong enjoys free banking, it employs three different sets of paper currency. The Bank of China, Standard Chartered Bank, and HSBC (the Hong Kong and Shanghai Banking Corporation) all print cash. The Hong Kong Monetary Authority (HKMA), however, does not let these banks create as much money as they desire. Instead, they only may produce such currency as they back up with U.S. dollars.


Since Oct. 15, 1983 — beginning under the well-grounded Federal Reserve chairman Paul Volcker, rather than “Helicopter Ben” Bernanke — the Hong Kong dollar has been pegged to the U.S. dollar at a fixed 7.8-to-1 exchange rate. This link leaves the Hong Kong dollar at the mercy of the greenback’s fluctuating value. But Hong Kong people need not fret about their money being diluted by a “printer-in-chief” like Bernanke.

"Quantitative easing is impossible under the current framework,” says Peter Wong of the Lion Rock Institute, a local free-market think tank. “Because the big three, like the Bank of China, certainly cannot print U.S. dollars, and the issuance of Hong Kong dollars is 100 percent backed by U.S. dollars, that means the big three cannot issue money or control the money supply as they wish.” Wong adds: “More important, our money supply is entirely market-driven [by the means of capital flowing into and out of Hong Kong]. Thus, HKMA can do little to control the money supply.”



These rules, and the banks’ vested financial interests in not debasing their own vault-loads of custom-made money, prevent Hong Kong’s leaders from churning out sheets of currency like wallpaper, as the Fed does. While its peg to the buck ultimately may weaken Hong Kong’s currency relative to others, that would be due to its official link to the Fed’s foolish policies, not because of Hong Kong’s enviable monetary integrity.
Hong Kong also practices “open, free trade,” says Y. C. Richard Wong of the Hong Kong Center for Economic Research. “So, the only things that are taxed now are tobacco and first registrations on cars. The latter is largely a congestion-control measure.”


Hong Kong’s weighted-average tariff rate is 0 percent. Beyond sparing buyers the import duties that others pay around the world, Hong Kong people, Wong says, “purchase from the cheapest sources in the world and also enjoy the lower cost of not managing all kinds of regulations, quotas, tariffs, country-of-origin certificates, etc.”


Another slice of good fortune is that Beijing largely has kept its hands off of Hong Kong since it reverted from British to Chinese rule on July 1, 1997.


"The handover was a big anticlimax,” says Lion Rock Institute co-founder G. Andrew Work. “In terms of the Chinese presence in Hong Kong, the People’s Liberation Army arrived, went into their barracks, and they haven’t come out since.”


Richard Wong offers three rationales for China’s laissez-faire approach to Hong Kong. "One is the casual reason,” Wong explains. “A lot of the Chinese folks really like to come to Hong Kong to shop, relax, and breathe some fresh air. The other more significant reason is that this is a place where they could put their money in safely and have access to it. The third is that if Hong Kong goes down, then there is actually very little that the mainland could do to entice Taiwan to consider some form of an agreement on reunification.”
Snaking through all of this is the parade of mainland Chinese tourists who keep cash registers humming in Hong Kong’s hotels, shops, and dining spots. According to Jones Lang LaSalle, total arrivals have increased 16.2 percent in 2011, reaching 4 million visitors last August alone — a new one-month record.
Two of Hong Kong’s positive attributes are difficult to measure, or even notice, from afar.


One is the spectacular work ethic of Hong Kong people. The “I’m on break”–entitlement attitude that possesses too many Americans is hard to detect here. Also, Hong Kong people, so far, seem immune to the class-warfare/envy virus that has consumed the American Democrat party and infected a growing number of Americans.


Appreciation and respect for the wealthy and their assets also seem ingrained in this culture; Hong Kong people hope to grow rich. A tiny example of this is a promotion for Madame Tussaud’s at the base of the Victoria Peak tram. Rather than an actor, athlete, or “reality”-TV personality, the wax museum lures visitors by displaying a beaming likeness of Li Ka-shing, the 83-year-old chairman of Hutchison Whampoa Limited. Nicknamed “Superman” for his business acumen, the high-school dropout is now worth $26 billion, making him the richest of all Hong Kong people.


"So what?” critics snap. Hong Kong is a tiny territory of homogeneous people on the other side of the planet. Why on earth should America’s enormous and diverse population emulate anything that transpires here?


"Just try it in one city,” Richard Wong suggests. “See whether the rest of America will all move there.” Wong adds: Hong Kong people have “the freedom to do things that they prefer to do. Economic choice works miracles because it allows people to make the best use of their talents in activities that they prefer, which is incredibly valuable.”


"Of all the places I’ve been to,” Wong concludes, “people in Hong Kong seem to be busy all the time because there is no lack of things to do — whether it is work or fun. And they seem to have a fairly long life expectancy. So, it doesn’t seem to hurt their health, either.”


Hong Kong’s rulers do a few things well and cheaply, while Washington considers a $15 trillion national debt an invitation to spend more. They will not even let Americans screw in light bulbs in peace. Hong Kong’s limited government and expanding market have plenty to teach the U.S. Will America ever learn?

Thursday, January 12, 2012

International Issues Highlighted in U.S. Taxpayer Advocate's Annual Report

This is an article posted on today's Worldwide Tax Daily that I would like to share with my blog readers, especially those who are US taxpayers.
National Taxpayer Advocate Nina Olson identified six serious problem areas regarding international taxpayers in her annual report to the U.S. Congress released on January 11, 2012.
The recommendations follow several years of IRS efforts to prioritize international enforcement and represent a significant expansion of the international recommendations in Olson's report compared with prior years.  


1.    Foreign Taxpayers

The report from the Taxpayer Advocate Service (TAS) says the IRS is missing opportunities to educate foreign taxpayers. In particular, the report notes that many tax forms and publications are not available in languages other than English. The TAS encouraged the IRS to expand its language services branch, a group of bilingual IRS employees who have been working to improve products and services in Chinese, Korean, Vietnamese, and Russian since August 2010. The report also recommends making focused outreach efforts for specific groups of nonresident alien taxpayers, for example, foreign students and scholars; foreign professors and researchers; and foreign athletes, artists, and entertainers. Introducing electronic filing of Form 1040NR, "U.S. Nonresident Alien Income Tax Return," and accepting payments from foreign-issued credit cards or wire transfers from foreign banks were also among the TAS recommendations regarding foreign taxpayers.
In response to the TAS report, the IRS said it agrees with the notion that providing assistance to taxpayers enhances compliance. The IRS wrote that it would consider whether to work more directly with the State Department or the Department of Homeland Security to distribute tax information to people obtaining some types of visas.

2.    U.S. Taxpayers Abroad

U.S. taxpayers living abroad need more services to help them deal with the higher compliance costs that they face compared with their domestic counterparts. The TAS suggested that the IRS expand service to that group of taxpayers by partnering with the State Department to train embassy and consulate staff to provide taxpayer services, using webcasts to reach taxpayers abroad and implementing virtual service delivery for international taxpayers.
The U.S. tax code is so complicated and onerous that it has become near impossible to expect tax advisers who do not specialize in international matters to understand all the reporting and taxation rules that apply to U.S. taxpayers living abroad.

3. Small Businesses
 
The third problem area that the TAS identified was small businesses involved in international transactions. Those businesses need comprehensive industry- and country-specific outreach, said the TAS. The report recommends developing a Web page and materials that address the needs of small businesses engaging in international transactions, simplifying the information reporting required of small businesses, and giving small businesses improved access to pre-filing and advance pricing agreement programs.
The IRS response questioned the feasibility of a pre-filing program with reduced fees for small businesses, citing budgetary and staffing constraints. The IRS said it will continue to consider a reduced fee for the APA program.

4. International Taxpayer Service

The TAS said the IRS’s recent strategy has focused on stepped-up international enforcement “without adequate coordination or a corresponding increase in service to international taxpayers.” International taxpayers must cope with greater complexity, which creates a heightened need for IRS services, the report says. The TAS recommended reinstating the International Planning and Operations Council as an IRS-wide forum for international taxpayer service and enforcement.
The IRS explained in response that improving services to U.S. taxpayers abroad was a strategic goal and that it would be conducting in fiscal 2012 a review of specific problems faced by those taxpayers.

5. Penalties

U.S. taxpayers who are not in compliance with information reporting requirements face steep penalties, and Olson explained in the report that she is “concerned about an apparent shift in the IRS’s approach to the application of these civil penalties.” Drawing a connection between the IRS’s strict application of penalties to taxpayers coming into compliance and a potential decrease in voluntary compliance, the report says there are indications that the IRS may have used penalties as leverage against taxpayers who entered voluntary disclosure programs.
The IRS disputed the TAS’s assertions that there had been a shift in approach to the application of civil penalties and that penalties were used as leverage in voluntary disclosure programs.

6. Voluntary Disclosure Problems

The TAS report also addressed the problems encountered by taxpayers who entered the 2009 OVDP under the impression that they would be able to advance reasonable cause arguments for their noncompliance. In March 2011 the IRS issued a memorandum to examiners that directed them to stop agreeing to penalties below the 20 percent rate prescribed by the terms of the program.  
The IRS responded that it "strongly disagrees with the inaccurate 'bait and switch' characterizations" in the report. The agency explained that it never intended to allow mitigation of penalties in the OVDP because the program was a certification process, not an examination process.

Shanghai delays implementation of the unpopular expats social security scheme

As a follow-up on my posting two weeks ago regarding the new law that requires foreigners to pay social security tax in China, local authorities in Beijing has published detailed implementation guidelines and set out how the money should be paid into pension fund. However Shanghai’s labor authorities have yet to draw up a similar document. It means that Shanghai based companies and their foreign employees do not have to start contributing, just yet.

There are more than 600,000 expats working in mainland China, employed by everything from global industrial giants to small restaurants, forcing them to participate the social security system would pump about RMB 3 billion (about $48 million) into the pension fund accounts.  Most of these expats are in mainland China for just a few years and unlikely to collect Chinese pension.  

I am somewhat surprised that Shanghai is delaying the order from central government.  But I am happy to see that Shanghai is pro-business and is acting in the interest of foreign businesses and their expat employees and allaying their concerns about a worsening investment climate in the world’s fastest-growing economy.  The city’s municipal government is keen to avoid worsening the pressures faced by foreign businesses amid the global economic downturn.

We shall wait and see what would happen in other major cities, and how long Shanghai would be able to delay the implementation.

Friday, January 6, 2012

China's airlines refuse to pay any charges under the EU's ETS

EU’s emissions trading scheme (ETS), launched by the EU in 2005 to combat climate change, was the world's first cap-and-trade program for carbon. The scheme originally applied to power plants and factories based in the EU, but in 2008 EU justice ministers approved a compromise deal to include aviation within the ETS beginning January 1, 2012. As of January 1, carriers that fly to or from Europe must purchase permits that allow them to emit a set amount of carbon dioxide. If a carrier emits less than the preset cap, it can sell its remaining permits, but if it exceeds the cap, it must buy more credits. The cap is set at 97 percent of the average aviation emissions between 2004 and 2006, but between 2013 and 2020 it will shrink to 95 percent of average emissions. To soften the economic impact, EU officials announced in September 2011 that carriers would be allowed to emit 85 percent of their carbon dioxide limits free of charge for the first year. Airlines won't receive their first "carbon bills" until March 2013.
The cap-and-trade scheme, which has angered the US and Chinese governments and airlines worldwide, came into force on Sunday after the European Union's highest court rejected a challenge brought by US carriers last month.

China Air Transport Association estimates that the scheme would cost Chinese airlines about $127 million in the first year and more than triple that by 2020.  China's airlines will refuse to pay any charges under the ETS and are considering taking legal action against the EU.
What would happen to the airlines refuse to comply?  Would the Europeans deny those airlines' rights to land in the 27 nations of EU? That wouldn't not be a good idea, as it would hurt EU’s economy.