ChinaWatch: Sales, Surges, Sayings

Welcome to ChinaWatch, WMB’s digest of news from the country with the world’s second largest economy and our chief rival to global dominance. Our aim is to keep you informed.


What Confucius Says

The newly-appointed 199 Chinese presidents of Confucious Institutes around the world took office this month, according to China's Hanban, the Confucious Institute Headquarters.

The Chinese presidents will work with their foreign counterparts to co-chair the institutes and operate on relevant principles.

Hanban provides them with an employment period of two to four years and requires they have the ability to teach Chinese to foreigners.

The latest statistics from Hanban show there are about 330 Confucius Institutes and 400 Confucius Classrooms in nearly 100 countries worldwide, bridging an important cultural exchange gap between China and other countries.

In 2004, China began establishing Confucious Institutes, nonprofit, public institutions aimed at promoting Chinese language and culture in foreign countries.

Drill, Baby, Drill

High oil prices and a slow-moving global economic recovery are doing little to curb China's appetite for crude oil, a survey finds.

China's oil demand for March was estimated by the Platts news service at 9.2 million barrels per day, a 10.5 percent increase from same time last year.

Calvin Lee, a senior energy writer for Platts, says high energy prices weren't doing much to curb energy consumption in a surging Chinese economy.

“Oil demand in the first quarter was buoyed by diesel consumption due to rising industrial production and increased agricultural demand with the onset of the spring planting season,” he says.

The International Energy Agency notes in a July 2010 report that growth in China has redefined the global energy sector as that nation passed the United States as the world's largest energy consumer.

The IEA says China outpaced U.S. energy consumption by 4 percent in 2009. Exports of Saudi crude to China make up about 50 percent of the kingdom's total exports.

Green With Envy

While Apple's iPhone is selling well across the globe, China has emerged as its fastest growing market for the device.

Apple Chief Operating Officer Tim Cook says that for the first three months of 2011, iPhone sales in “Greater China” grew by almost 250 percent from the same period last year.

This brought Apple's revenues in the first fiscal half to just under $5 billion (U.S.) for the Greater China market, an increase of almost four times from 2010.

The $5 billion generated represents about 10 percent of Apple's revenues, Cook adds. “So we're extremely happy with how we're doing in China,” he says. In the United States, iPhone sales grew by 155 percent.

It's unclear, however, where in China the device is selling the most. Cook's reference to Greater China includes the mainland, Hong Kong and the island of Taiwan, says Apple spokeswoman Carolyn Wu.

But analysts say that in mainland China, Apple is seeing a major shift with how consumers are viewing the iconic smartphone.

When Apple's iPhone 4 launched there in late September, it was a hit with Chinese consumers, quickly selling out and leading to shortages.

Earlier versions of the iPhone had not met with the same reception, says Mark Natkin, managing director for Beijing-based research firm Marbridge Consulting.

Apple didn't officially begin selling the iPhone in mainland China until late 2009, more than two years after it was launched in America.

Even then, the iPhone sold in the country was designed without Wi-Fi capability, in order to comply with Chinese technology regulations at the time.

“Eventually Apple was allowed to offer the iPhone with Wi-Fi functionality,’’ Natkin says. “But by the time they were allowed to do so, the global launch of the iPhone 4 was just some months away. So again many users just waited for the right time.”

ChinaWatch

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Bioplastics Poised to Grow

Bioplastics derived from plant oils will grab a bigger share of the plastics market because of concerns about the environment and dependence on foreign oil. Analysts project about 50 billion pounds of demand in about two to five years.

Bioplastics already are found in products including plastic gift cards, food containers, cell phones, and computer casings. The basic ingredient of corn-based products is polylactide, referred to as PLA.

Most PLA has to go a commercial composting operation to be composted, according to Betty McLaughlin, executive director of the nonprofit Container Recycling Institute.

Other bioplastics come from plant sources such as hemp and soy bean oil. They became popular about 15 years ago as a solution to solid waste problems.

Amid growing concern about global warming and higher oil prices, bioplastics offer alternatives because they produce much lower amounts of carbon dioxide when they decompose compared to oil-based polymers.

Benefits Abound

Brand new versions of plastics are hybrids of oil- and plant-based feedstocks to preserve the property benefits of existing polymers like nylon. In some cases, there are improvements in some of the specifications, like surface gloss and impact resistance.

Some bioplastics are made directly from starch and are used for applications such as drug capsules. Another, polylactic acid, comes from polymerized lactic acid produced by fermenting starch contained in sweet corn and other plants.

PLA is already used in packaging and medical implants. A third bioplastic called poly 3-hydroxybutyrate (PHB) has properties comparable to polypropylene. A booming demand is triggering expanded capacity of both feedstocks and polymer.

For instance, sugar producers in South America, primary suppliers of ethanol, announced large capacity increases.

WMB agrees with analysts who forecast PHB could drop below 60 cents per pound, opening up new opportunities for bioplastics.

Greening of Japan

One of the most exciting developments is in Japan, where three new laws are fueling development. These include the Law on Promoting Green Purchasing, the Law for the Promotion of Effective Utilization of Resources, and the Pollutant Release and Transfer Register Law.

One of the leading players is Fujitsu which uses a PLA hybrid developed by Toray Industries to make the housing for its notebook PC series. The Toray material is called Ecodear and is aimed at fibers, textiles, molded parts, and films.
Toray recently invested in a $9 million plant in South Korea, with a packaging converter Saehan, a 10 percent investor. Their goal is to increase recycling and to avoid landfills.

Fujitsu also is working with a French chemical producer, Arkema, to produce a bioplastic based on castor oil with increased flexibility compared with corn-based plastic.

Arkema’s new Rislan PA 11 is now approved in fuel lines that carry biofuels in Europe and Brazil. This material cuts carbon dioxide emissions by 42 percent, according to Thomas Grimaud, Arkema’s business manager.

NEC Corp. is using PLA-based plastic reinforced with kenaf fibers to mold the entire case of a mobile phone for DoCoMo, Japan’s largest mobile phone company. The kenaf fiber provides significant strength to the bioplastic material. Sony also is involved in bioplastics.

Hiroyuki Mori, a senior eco-material engineer, says Sony is using several small components based on PLA. Sony’s research indicates PLA-based polymers can reduce carbon dioxide emissions by 20 percent and nonrenewable resource by 55 percent.

Closer To Home

DuPont is currently taking the lead in developing biopolymers in the United States. Target markets are automobiles, appliances, and connectors.

In another development, Proctor & Gamble and Kaneka are working on a joint-venture to commercialize a polymer called Nodax H.

Metabolix of Cambridge, MA, is partnering with Archer Daniels Midland to build a plant in Clinton, Iowa, to produce 110 million pounds of plastic based on PHA. The Metabolix plastics are produced from genetically engineered microbes. Most of the technology is owned by MIT.

Novomer of Ithaca, N.Y., is working with Kodak to develop commercial plastics based on technology from Cornell. Target markets are medical implants, and construction of flexible screens for electronic applications.

As bioplastics evolve and applications increase, it should be interesting to see what breakthroughs take shape. Global research and development is the key for this industry, which offers unlimited potential.

TechMan

Editor's Note: Because of a software glitch, an early unedited version of this post may have appeared briefly over last weekend. We apologize for the inconvenience.

We Need To Get Aboard

China, the second largest economy after ours, has invested $360 billion in high-speed trains which carry passengers between large cities at 200 mph.

Spain, despite its economic challenges, has invested $170 billion in high-speed rail systems. A similar rail expansion is taking place in Europe; this runs from the boot of Italy to the Baltic Sea.

Worldwide, however, most nations are not associated with such rail infrastructure, but India, Brazil, Argentina, Morocco and others are planning high-speed rail networks.

WMB believes these countries understand that modern rail systems are critical pieces in developing competitive 21st-century economies. They see the problems caused by dwindling oil supplies, congested highways and airports, and soaring carbon emissions.

Unfortunately, the United States has been sidetracked by controversy involving high-speed rail.

Deficit Versus Jobs

Officials in some states think a rail system will only add to the already high and unprecedented government budget deficits. But advocates argue it will make our infrastructure more efficient and create badly needed employment.


The Obama administration and various states will ensure the foundation of a national high-speed rail network will be laid in the next several years, according to the U.S. High Speed Rail Association.

This financial foundation includes $8 billion in federal stimulus funds slated to extend the network 17,000 miles by 2030, between all major cities in America, and at a cool 220 mph.

California will get $2.34 billion, the largest award,to help set up a high-speed line between San Diego and Sacramento by 2026.

States receiving more than $150 million in federal funds include Florida, North Carolina, Illinois, Washington, Oregon, Wisconsin, Ohio, Michigan, Virginia, and New York. But the governors of Florida, Wisconsin and Ohio, calling the rail project a boondoggle, have rejected funding.

Eventually, private funding would be included in the projected $600 billion project.

The Rail Alternative

The reasons so many interest groups support creation of a national high-speed rail system are straight-forward.


The United States has become far too dependent on foreign oil. Americans use six times more oil per capita than Europeans.

Currently, we spend up to $700 billion a year to import foreign oil, with 70 percent of this consumed by cars, trucks, and airplanes.

With oil prices hovering at $100 per barrel, the American economy is in jeopardy.

And most experts believe that we have hit the point of peak oil. This means that as demand soars and supplies decrease, the price per barrel could reach $300 within this decade.

Andy Kunz, president and CEO of the U.S. High Speed Rail Association, says enhancing America’s energy security is one of the best reasons we need a state-of-the-art high-speed rail system.

WMB agrees, and we think a national high-speed rail system will create millions of jobs, help revive the manufacturing sector by incorporating our steel and related components, and alleviate pressure on a crumbling infrastructure.

A side benefit would be removal of many vehicles daily from our clogged highways. Traffic delays cost the U.S. economy an estimated $156 billion annually.

Green And Viable

Then there’s the environment.

A national rail system also would dramatically reduce our collective carbon footprint. Advocates note the cost of building will decline each year and, eventually, exceed the estimated $600 billion budget.

Although much of the funding will be public, many believe the private sector can best run such an infrastructure.

WMB believes the United States must build a high-speed rail network to stay competitive in a world economy.

Why not put the money we spend on imported oil into a new rail infrastructure? The stakes are high, and we can’t afford to do otherwise.

America needs to embrace change, or we won’t control our destiny in the near-term.

Improvements on high-speed rail could one day reach over 300 mph and help maintain our global position and competitiveness.

We shouldn't be left behind at the station!

TechMan

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