China vows to release climate change plan

China will release a long-awaited "action plan" on climate change ahead of next week's G8 meeting in Germany as it seeks to mount a more aggressive international defence of its environmental policies.

China's rapidly growing economy and a surge in heavy industry in the past five years has catapulted it uncomfortably into the centre of the global climate change debate and Beijing wants to pre-empt criticism at the meeting.

The Paris-based International Energy Agency estimates that China will overtake the US this year as the world's largest annual emitter of greenhouse gases, even though its economy is less than one-fifth the size of America's. China disputes the IEA calculation, and prefers to use the measure of per capita emissions, where its large population ensures its emissions are one-fifth those of the US.

The new plan is to contain promises to increase use of renewable energy and biofuels, as well as measures to capture methane gas emissions via methods such as carbon sequestration.

China will also re-emphasise its commitment to meet a target to cut the energy use per unit of GDP by 20 per cent between 2006 and 2010.

Last year it cut energy use per unit of GDP by 1.23 per cent, below the target for that year of 4 per cent.

China's plan is also expected to expound on its existing defence of its position, as a signatory to the Kyoto accord with developing country status, which does not require it to agree to binding cuts in emissions.

Beijing argues that developed countries are responsible for most of the accumulated greenhouse gases in the atmosphere and should take the lead in reducing emissions. "Climate change caused by developed countries has already made China one of its main victims," an official from the National Development and Reform commission, the economic planning agency, said yesterday.

CHINA AIMS TO BUY UP MORE OVERSEAS COMPANIES - FT.com

Record numbers of Chinese companies are looking for overseas acquisitions, according to results of a survey published yesterday which foreshadows a global buying spree with potential political repercussions.

China Inc has to date been a reluctant player on the world stage, apart from in the state-controlled energy sector, with most companies either unprepared or fearful of managing assets overseas.

By contrast, Indian companies have recently embarked on a global acquisitions binge, highlighted by Tata Steel's $11bn takeover this year of Corus, the Anglo-Dutch steelmaker.

However, more than 90 per cent of Chinese respondents to the new survey conducted by the Economist Intelligence Unit and Norton Rose, the law firm, said they were looking to conduct a merger or acquisition over the next 12 months.

The executives of Chinese companies said they were looking in Asia, Europe and North America.

Richard Crosby, a Hong Kong-based partner of Norton Rose, said: "The findings show an increasing willingness among Chinese companies to consider deals outside Asia."

The findings suggest Chinese executives are seeking to build global scale, two years after US lawmakers famously prevented CNOOC, the state oil company, from acquiring Unocal for "strategic" reasons.

Bankers who advise mainland companies predict that China's leading telecommunications and financial services companies will lead the acquisitions charge. Rodney Ward, UBS Asia chairman, said: "Corporate China will continue to seek overseas acquisitions to exploit economies of scale."

The findings form part of a survey on cross-border corporate deals based on responses from 258 executives across Asia, excluding Japan and Australia.

The EIU found that intra-Asian M&A climbed over the past five years from 1,102 cross-border acquisitions valued at $30bn to 2,073 deals valued at $52bn. Buy-outs by Asian companies in Europe and North America rose from $2.6bn in 2002 to $15bn in 2006.

The survey found that while China is expected to lead the region's M&A boom this year, respondents believe that the mainland remained the most challenging terrain in Asia to conduct business from a regulatory perspective.

Asian executives voted the US and France as the most difficult western countries in which to operate because of the higher likelihood of M&A deals being blocked on political grounds.

Western investors are seeking acquisitions in Asia to take advantage of fast growth rates. But respondents said western companies' focus on compliance-related issues "makes it difficult to negotiate deals with them".

JUST RELAX ABOUT CHINA'S STOCK MARKETS - FT.com

Two mornings every week, a friend of mine goes to a park in central Shanghai to practise T'ai-chi, the Chinese exercise regime sometimes known as meditation in motion. The group of mostly retired Chinese is led by an elderly gentleman who mixes strict punctuality with a certain eastern mysticism.

My friend was there on a cold February morning the day after the local stock exchange had fallen 9 per cent, spooking the rest of the world's markets. The group was halfway through their hour-long sequence of movements when the leader cut them abruptly short. "I have to leave early to get to my stockbrokers before the market opens," he announced. "Because today is a buying opportunity."

Everyone who lives in a Chinese city at the moment has a story to tell about the stock market craze and most have a similar theme: fascination with the sheer dynamism of the boom and fear at the occasional recklessness.

Having watched share prices quadruple in two years, more than 100,000 Chinese have been opening trading accounts every day in recent weeks as a new generation of middle-class Chinese has gained a taste for playing the market.

But in a nation where the urge to gamble is never far below the surface, the stock market has sometimes come to resemble a casino. People have taken out loans to speculate, while a few individuals have even pawned their houses to buy shares. The education ministry last week warned university students not to be distracted by investing. Eccentric investment theories abound: some are looking for shares with a price less than the cost of a kilo of pork, on the grounds that such a company must be a very good bargain indeed.

The 6.5 per cent drop in the market yesterday is a grim reminder of how this story could end: a collapse in the Shanghai market with the people who came in at the end of the party picking up the tab. So irrational is the exuberance in China that even Alan Greenspan, former chairman of the US Federal Reserve, is worried.

But will the damage stop there? In the early stages of the market boom, gung-ho Chinese speculators were considered a mild curiosity. Yet as the rally has gathered pace over the past month or so, some international investors have begun to fear the potential global fallout from Shanghai's excesses. They have started to ask what would be the impact from a crash not just on the Chinese economy but also on global iron ore consumption, Latin American trade surpluses and Treasury bill purchases.

The answer is, well, pretty much nothing at all. If the mainland market were to drop by a further 20-30 per cent, the Chinese economy would barely miss a beat.

For a start, there would be no domino effect of forced selling in one market pulling down others. Given the wall of capital controls that Beijing maintains for its currency, the mainland stock market is a parallel universe, detached in any real sense from other markets, with little money coming in to the country to invest in shares and little going out. Foreign investors have only a very modest exposure to mainland equities. Indeed, capital controls explain why share prices in Shanghai are so high: people have few other places to put their money.

Despite the recent boom, the stock market is still a relatively small part of the economy, even by the standards of emerging Asia. The massive investment surge in China has been financed largely from corporate profits, not from the capital markets, and would carry on at a relentless pace.

It is possible that consumption growth might be modestly held back, but retail spending was already surging before the market rally began. Most of the new funds have come from savings, not credit, and the Chinese still have $2,000bn in bank accounts to fall back on. Consumers can withstand a large correction.

The Shanghai market still has the power to scare the world – we saw that in February. In markets, if enough people think something is important then it is important, whatever the underlying logic. If global equities are overvalued and due a correction, investors do not need a good reason to start selling, just a popular one.

But for investors comfortable that strong global growth underpins the rise in share prices around the world, a collapse in Shanghai is an occasion to hold one's nerve and remain calm. Maybe even try some T'ai-chi.

The writer is the FT's Shanghai correspondent

China Rejects US Health Warning on Toothpaste

China is rejecting a U.S. government warning about Chinese-made toothpaste that contains a potentially poisonous chemical commonly used in antifreeze.

China's General Administration of Quality Supervision, Inspection and Quarantine says the advisory from the U.S. Food and Drug Administration is unscientific and irresponsible.

China says low-levels of the chemical, diethylene glycol, have been approved for consumption. It also says the U.S. food regulator has approved all Chinese-made toothpaste exported to the United States.

On Friday, the U.S. government warned consumers to avoid using toothpaste made in China after the FDA found diethylene glycol, or DEG, in a shipment seized at the border and in two U.S. retail stores.

The FDA said it is not aware of any reports of poisoning from the toothpaste, but that it is concerned about sick people and children being exposed to the chemical.

The FDA has been scrutinizing toothpaste imported from China after similar products containing the chemical killed or sickened users in Latin America.