Car Industry Booming in China

Automakers are ramping up their operations in China to take advantage of record-breaking growth in vehicle sales. China replaced Japan last year as the world's second-biggest auto market, and industry experts predict the growth will continue as the country's booming economy encourages greater consumption of luxury goods. VOA's Mil Arcega reports.

Buying a new car in China

For automakers, China is the new frontier:  the world's fastest growing market with millions of new consumers. Even more attractive to foreign retailers is the emerging class of young successful Chinese.

"This new group, which they define as 'Tweens' - it's a combination of the words teens and in-between," says Charlotte Rylme, general manager at the Swedish Trade Council. "They have a new job, they earn a lot of money, and they live and stay at home with their parents, some of them, and they are very attracted to buy foreign brands, so they are very attractive for foreign retail companies. And they buy more than 300 billion RMB ($40 billion) annually."

Charlotte Rylme

They are also buying a lot of cars.  More than 7 million new cars were sold in China last year.  This year the number is expected to surpass 8.5 million. 

Swedish carmaker Volvo expects to double its sales in China this year.  Company  Vice President Lex Kerssemakers says in China, having a good brand is the key to success. "You see people walking around here with all sorts of branded stuff, from sunglasses to jeans to trousers," he says. "So they are very brand focused.  Volvo has a good reputation here from the past, and what we need to do is, we need to continue to build on that reputation and strengthen our premium in a market which will be very premium oriented."

Lex Kerssemakers

Although the competition is fierce, car dealer Eddie Lai says Chinese consumers like to buy cars that show how worldly and how successful they are. "The economy is growing, the society is growing, and young people are getting more on an uptrend scale," he says, "and they are going to fit into the lifestyle as in the European countries and American country, and it's the status symbol in China.  It is a status symbol for the young generation to demonstrate that they are successful, that they are intelligent, that they are up on society's expectations."

Carmakers are capitalizing on those expectations by increasing production quotas.  While factories are closing in North America and Europe, new plants go up almost daily in China.  Industry executives project the Chinese market could grow to 20 million vehicles per year by 2020.

China Trying to Upgrade Its 'Made in China' Image

Those who control the image strings for government and business interests in China, the world's largest single market, are trying hard to bury the country's well-embedded "Made in China" image and embrace a new one: "Created in China."

The huge Far Eastern country, which ran up a staggering $232.5 billion trade surplus with the United States in 2006, is reinvesting some of that capital back into America through several large purchasing agreements with software companies, as well as by helping to establish new IT research facilities here in the states.

China is also attempting to change its image from a cost-effective, product-producing nation to one that is more inventive and research-oriented.

At a splashy media event May 9 at the Mark Hopkins Hotel in San Francisco, representatives of several corporations and trade associations from both China and the United States gathered to sign long-term purchasing and marketing agreements that will bring some $4.3 billion into the American economy.

The event was staged on the eve of the second strategic economic dialogue between the two superpowers. Chinese and U.S. trade representatives are to meet May 23-24 in Washington for talks on Beijing's surpluses, currency controls, product piracy and other issues that have been nagging U.S. businesses and the government for years.

The Chinese representatives signed 27 contracts and an investment deal with their American counterparts. Many of the signings were simply a formality; most of the business deals have been in process for various periods of time.

A dozen Chinese companies—including computer maker Lenovo, China Netcom and Semiconductor Manufacturing International—concluded deals with 23 U.S. companies in the software, semiconductor and telecommunications sectors. Microsoft, Oracle, Cisco Systems and Hewlett-Packard were among the U.S. companies involved in the agreements.

Microsoft lands biggest software deal

Microsoft, the world's largest software maker, landed the largest piece of the $4.3 billion pie when Lenovo committed to purchasing $1.3 billion this fiscal year in Windows XP, Windows Vista, Microsoft Office and other software to run its desktops and laptops.

Lenovo, which acquired IBM's personal computer line in 2005, is currently ranked fourth behind HP, Dell and Acer in worldwide market share. According to a recent Gartner market report, Lenovo holds 6.3 percent of the market.

"Microsoft ... believes that respect for intellectual property rights is critical to the sustained development of the software industry. Efforts like this to promote the use of genuine software help to support the protection of intellectual property in China," a company spokesperson told eWEEK.

"We further applaud the Chinese government for taking significant steps toward ensuring the use of genuine software in China, and for promoting a healthy intellectual property environment, which we believe is vital for China to realize its full potential as an innovation leader."

China says U.S. piracy case will harm trade ties. Click here to read more.

In April 2006, Lenovo and Microsoft sealed a similar deal for $1.2 billion in an effort to get legitimate copies of Windows back on Chinese PCs.

For years, China has been criticized for not doing enough policing and law enforcement in trying to slow down the rampant black- and gray-market counterfeit software and hardware trade in that country.

$95 million for research facility

Hong Yuan Machinery, from East China's Jiangxi Province, agreed to invest about $95 million to establish a research center in San Francisco. Details about the center were not available at press time.

"As China continues its path of economic development, one of the things that their government policy has advocated going forward is to move from 'Made in China' to 'Created in China,'" said Daryl Hatano, vice president of public policy for the Software Industry Association in San Jose, Calif., one of the organizers of the May 9 event.

"And that means many things. At its core, it means they don't want to stay 'low-value' manufacturing. So, 'Created in China' means really moving up the value chain. And I think, over time, it is to develop world class companies that have recognizable brands, and that are operating outside of China, as well as in China," Hatano said.

Over time, China would like to have manufacturing here in the U.S., Hatano added.

"This event underscores China's resolution to explore more U.S. investment and strengthen the understanding and mutual development between the two sides," said Ma Xiuhong, vice minister of China's Ministry of Commerce and head of the delegation, which is composed of 369 Chinese business leaders.

California Lt. Gov. John Garamendi told the gathering: "These agreements are an important step in furthering the deep relationship between this state, this country and China."

China Prepares for First Strike in Electronic War

China's military is preparing for electronic warfare by setting up information warfare units that are developing viruses to attack enemy computers and networks, according to the Department of Defense's annual report to Congress.

According to the DoD, the PLA (People's Liberation Army) has also established tactics to protect its own computer systems and networks and those of friendly states. Since 2005, the PLA has been including offensive network attacks into its exercises, "primarily in first strikes against enemy networks," according to the report.

China's military is looking to establish what it calls "electromagnetic dominance" early in a conflict, specifically by launching electronic warfare against an enemy's information systems on the battlefield, the DoD said.

Beyond computer viruses, the PLA is investing in other electronic countermeasures, including electronic and infrared decoys, angle reflectors and false target generators.

China's foreign ministry spokesperson Jiang Yu denounced the DoD's report, saying that it exaggerates China's military strength and expenses "out of ulterior motives."

"As a peace-loving country, China steadfastly follows a road of peaceful development, adopting a national defense policy that is defensive in nature," she said.

"Each sovereign state has the right and obligation to develop necessary national defense strength to safeguard its national security and territorial integrity. It is totally erroneous and invalid for the U.S. Report to play up the so-called 'China Threat.'"

The DoD views Taiwan and the Taiwan Strait as being the likeliest arena for military confrontation and credits China's focus on that country for its recent efforts to modernize its military planning.

"China's near-term focus on preparing for military contingencies in the Taiwan Strait, including the possibility of U.S. intervention, appears to be an important driver of its modernization plans," the report states.

In response to that particular view, Yu called Taiwan an "inalienable part of the Chinese territory."

"China resolutely opposes interference in China's internal affairs by any country with whatever manifestation," she said. "… We will never tolerate the 'Taiwan Independence' or any attempt by anyone to separate Taiwan from China by whatever means."

At any rate, China's cyber-espionage is nothing new. Ira Winkler—author of "Zen and the Art of Information Security," former NSA (National Security Agency) analyst, former director of technology with the National Computer Security Association and current president of the Internet Security Advisors Group—said in an interview with eWEEK that Russia has had cyber-security squads for decades and that China has been at it for at least a decade. North Korea has had this type of behavior attributed to it as well.

"As far as a potential military adversary goes, China is clearly ranked second behind Russia with regards to capability," he said. "We have lots of little adversaries all over the place, but nobody offers more of a strategic threat than [Russia]."

What China has, Winkler said, is sheer resources to lavish on the effort, both in terms of gathering intelligence against the United States as a whole, as well as in military preparation.

China slaps anti-dumping duty on antibiotic from India

China has imposed anti-dumping duty of up to 37.7 per cent on sulfamethoxazole, an antibiotic from India, following a final ruling made by China 's ministry of commerce which said sulfamethoxazole exports from India have inflicted losses to local manufacturers.

The anti-dumping duty rates were increased from 10.7 per cent to 37.7 per cent to offset damages caused by cheap imports to the local producers, and the tax would be in effect for five years.

Sulfamethoxazole is a sulfonamide bacteriostatic antibiotic is commonly used to treat urinary tract infections. It is also an important material for producing other sulfonamides.

China started its anti-dumping investigation on imported sulfamethoxazole from India last June, and imposed temporary anti-dumping measures in February this year on the basis of its preliminary investigations.