GDP grows stunning 10.9%

And other news in Greater China

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China's GDP grows stunning 10.9%
BEIJING -- Despite efforts by the Chinese government to cool its economy, its gross domestic product (GDP) surged 10.9% in the first half of this year -- its biggest gain in a decade -- to $1.14 trillion, according to the National Bureau of Statistics (NBS). Growth stood at 11.3% for the second quarter alone.

The result of China’s strong manufacturing base and capital investment, a building boom and a 25.2% rise in the value of exports in the first half, the macro-economic performance is both stunning and alarming. Although inflation remained moderate and the consumer-price level rose just 1.3%, down one percentage point from the same period last year, even NBS spokesman Zheng Jingping warned this week in Beijing that an excessive growth rate could ignite inflation, raising expectations among economists of an interest rate hike.

The Chinese economy "is clearly growing much too fast, and has been for far too long," said David O'Rear, chief economist for the Hong Kong General Chamber of Commerce. "The faster the economy grows, the greater the risk that the authorities will have to resort to ever blunter policy instruments in an effort to get this rampaging dragon under control. As that happens, unexpected knock-on effects are going to produce some nasty surprises."

Real GDP is up 10% a year for three years in a row due to very fast growth in the money supply, trade volumes and capital investment. That combination should produce a lot of inflationary pressure, but consumer prices have been rising less than 2.5% since 2003.

Retail sales of consumer goods also grew in the first half, rising to $455 billion, a year-on-year increase of 13.3%, and in urban areas, total retail sales grew by 14%. Across key sectors, sales of petroleum and petroleum products grew 38.4%, followed by vehicles (27.7%), telecommunication equipment (25.5%), lodging and catering (15.3%) and wholesale and retail business (13.4%).

The per-capita disposable income of urban residents was $750 (5,997 RMB), a year-on-year growth of 10.2% in real terms, but for rural residents, that figure was just $224 (1,797 RMB), down by 0.6 percentage points in real terms.

The NBS also warned about “prominent problems existing in economic life,” namely the difficulties the government faces in increasing the income of farmers. Also, “the investment in fixed assets is excessive, the supply of credit is overscaled [and] the margin for profits of selected enterprises” is restricted by the price hike of raw materials, fuels and power.

Hong Kong consumers likely to get 5% sales tax
HONG KONG -- Hong Kong's government is considering introducing a 5% sales tax on goods and services to raise $3.86 billion in revenue. It will be the first time Hong Kong consumers have had to pay a sales tax. The Chinese territory already has one of the lowest tax rates in the region. The profits tax rate is 17.5%.

KFC to open 100 drive-thru restaurants in next 3 years
SHANGHAI -- Yum Brands’ KFC fast-food chain plans to open 100 drive-thru restaurants in China in the next three years.

The chain just opened two drive-through outlets in Nanjing in cooperation with German retailer Metro Group and Wuxi, a high-tech development zone, bringing its total in China to four. Another is scheduled to open in Shenzhen later this year. KFC’s first drive-thru there was opened in the Asian Olympics Village district of Beijing in September 2002, followed by one in Shanghai last October.

KFC leads its global rival McDonald’s Corp. in China, with more than 1,200 fast-food outlets in the mainland dating back to 1987. McDonald’s entered the Chinese market in 1990, and now has 760 restaurants and aims to have at least 1,000 outlets there by the start of the Olympic Games in Beijing in 2008.

Even so, McDonald’s is turning out to be the leader when it comes to drive-thru restaurants. In 2005, McDonald's opened its first one in China in Guangdong Province. Two additional drive-thrus have opened this year, in Shanghai and Shunde, Guangdong. Last month, the company partnered with the Dalian Wanda Group, one of China's largest real-estate enterprises, to develop restaurants and drive-thru outlets in the group's shopping malls and business centers around the mainland. And earlier this month, it brokered a deal with state-owned China Petroleum & Chemical Corp. (Sinopec) to develop drive-thrus at the oil giant's gas stations in China, where car ownership is growing quickly.

With almost 6 million car sales last year, China has surpassed Japan to become the second-largest market in the world, following the U.S. in annual car sales, according to the China Association of Automobile Manufacturers. The market is expecting to grow 10 to 15% in 2006.

Suntory and Gulf Air sponsor lifestyle program
HONG KONG -- The Japanese beverage giant Suntory Group and Gulf Air are sponsors of a 13-part lifestyle TV series airing across Asia on the Discovery Travel & Living channel called “Mixing With the Best.”

The half-hour show follows international barman Manuel Terron on a journey about the contemporary cocktail and bar culture, providing viewers with a look at the colorful personalities that run the hottest bars in the world in cities like New York, London, Paris and Sydney.

Brands product or distributed in Asia by Suntory, such as Jose Cuervo Tequila, Midori, Frangelico, Pravda Vodka, Martin Miller’s Gin and Grand Marnier were featured in the programming in cocktail-making segments and distillery tours and events organized by both sponsors were covered in some episodes.

“As the interruptive advertising model continues to lose effectiveness, marketers continually seek new ways to deepen and strengthen the relationship between their brands and consumers,” said Hong Kong-based Charles Edwards, executive producer of Media Village, developer of the series with Igloo Productions in Sydney.

“Discovery Asia has licensed the show for a four-year period across the region [and] we are currently negotiating to get the show distributed in North America and Europe” he added. The series has been released on DVD.

Jackie Chan stars in campaign to save the South China tiger
HONG KONG -- Hong Kong action star Jackie Chan is starring in the first execution in a “Support the Chinese Tiger” campaign. It was developed by nongovernmental organization Save China's Tigers to support the South China tiger, whose numbers have fallen below 100, making it the most endangered tiger species on the planet, according to the World Wide Fund for Nature.

The main visual shows Mr. Chan with striking tiger stripes painted on his face. The public-awareness effort, created by Eight Partnership in Hong Kong, will feature other high-profile personalities in future ads. The ads will run on bus shelters in Hong Kong.

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