China Economic Scan

Up, Up, and Away!

2009-08-13T07:33:00.000-07:00

China Economic Scan - Your daily update on the Chinese economy - 13-August-2009

In this edition: Rio Tinto Scandal, New Deal in Australia with Felix, Commodities and Finance Rally Up, 50 Day Moving Average Positive, New Flights to Taiwan

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26 June 2009 | China Economic Scan

2009-06-25T06:28:00.000-07:00

26-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China tells banks loans must help the real economy, China sees net capital inflows again, China Construction Bank and Santander plan rural venture, China Minsheng selects four banks to run its Hong Kong IPO, Chinese stocks creep up on Thursday.

Top 5 headlines

China tells banks loans must help real economy

China's banking regulator has urged lenders to ensure new loans are helping the economy after concerns that stimulus cash is being used to speculate on stocks and property, state media said.
The China Banking Regulatory Commission reiterated that loans must serve the needs of the real economy, the official Shanghai Securities News reported, citing a recent internal directive issued to commercial banks.
In May, new yuan-denominated loans reached 664.5 billion yuan, the central bank said earlier this month, bringing the total in the first five months to 5.84 trillion yuan.

China seeing net capital inflows again -SAFE

China is once again experiencing net capital inflows, but they are still lower than a year ago, a senior official said on Thursday.
Guan Tao, deputy director for the department of international payments at the State Administration of Foreign Exchange, said net inflows were recovering not because of a new surge of money coming into China but because outflows were receding.
Apparent net capital outflows reached $45 billion in the last quarter of 2008 and $109 billion in the first quarter of 2009, according to World Bank estimates.

China Construction Bank, Santander Said to Plan Rural Venture

China Construction Bank Corp., the world’s second-largest lender by market value, plans to set up a venture with Banco Santander SA to provide banking services in China’s rural areas, people with knowledge of the matter said.
Construction Bank, based in Beijing, aims to set up as many as 100 separate units together with Santander that specialize in financing farmers and rural businesses, the three people said, declining to be identified as the talks are private. It wasn’t clear how much each bank would own of the venture.
Santander, Spain’s largest lender, would join HSBC Holdings Plc and Citigroup Inc. in tapping China’s countryside, where the central bank estimates two-thirds of the 700 million inhabitants lack access to banking.

2nd UPDATE:China Minsheng Picks 4 Banks To Run HK IPO-Source

China Minsheng Banking Corp. (600016.SH), which owns nearly 10% of San Francisco-based UCBH Holdings Inc., has picked four investment banks to lead manage its planned CNY20 billion (US$2.93 billion) Hong Kong initial public offering, a person familiar with the situation said Thursday.
BOC International Holdings Ltd., China International Capital Corp., Macquarie Capital (Hong Kong) Ltd. and UBS AG (UBS) have been mandated as joint lead managers of the bank's Hong Kong IPO, the person said.
As part of efforts to boost its financial position ahead of the stock offering, China Minsheng raised CNY5.46 billion from the sale of its entire 4.6% stake in Haitong Securities Co. (600837.SH).

Most China Stocks Drop; Jiangxi Falls, Pacific Insurance Gains

Most China stocks fell on speculation this year’s rally has outstripped the prospects for earnings growth with the benchmark Shanghai Composite Index trading at the most expensive relative to earnings in 15 months.
Jiangxi Copper Co., the country’s biggest producer of the metal, slid 1.7 percent after more than doubling this year and Aluminum Corp of China Ltd. dropped 2.4 percent. China Pacific Insurance (Group) Co. rallied 6.4 percent after the Shanghai Securities News said the company may list shares publicly in Hong Kong next year.
“Shares have risen to an expensive level and everyone is expecting a correction to take place soon,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “That’s why buying has become more and more cautious.”

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,275	382.88	2.14%
Shanghai Composite	2,925	2.75	0.09%
Shenzhen Component	11,386	4.24	0.04%
TAIEX	6,458	77.53	1.22%
CNY/USD	6.8345	0.0015	0.02%

Source: China Economic Scan

25 June 2009 | China Economic Scan

2009-06-24T05:13:00.000-07:00

25-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: OECD raises China growth forecast to 7.7%, China defends export limits and counters with own complaints, more Chinese investment in Australia said to be inevitable, S&P signs MoU with Shenzhen stock exchange, Chinese stocks rally on Wednesday.

Top 5 headlines

OECD Raises China Growth Forecast to 7.7% on Stimulus Measures

The Organization for Economic Cooperation and Development raised its forecast for China’s economic growth and said stimulus measures may spark the biggest boom in urban investment since the early 1990s.
China’s economy will grow 7.7% from a year earlier, up from a 6.3% forecast in March, the Paris-based group said in a report today. Gross domestic product will climb 9.3% next year, up from an 8.5 percent estimate, it said.
“In the last two to three months China has turned its economy around,” said David Cohen, an economist with Action Economics in Singapore. “Government officials are increasingly confident that they’ll get closer to their 8 percent growth target than many feared a few months ago.”

China Defends Export Limits, Highlights Its Own Trade Complaint

China’s government said it will contest complaints to the World Trade Organization from the European Union and the U.S. that the nation unfairly limits exports of raw materials such as magnesium, coke and zinc.
The policy aims to protect the environment and natural resources and “is in accordance with WTO rules,” the Ministry of Commerce said in a faxed statement today.
The EU and U.S., which yesterday lodged their third joint complaint against China, allege that the nation’s export taxes keep material costs lower for domestic steel and manufacturing companies. Today, China called for a WTO probe of U.S. restrictions on poultry imports and the trade body’s former chief, Mike Moore, warned that the world is in “dangerous waters” as protectionism increases.

More Chinese investment in Australian resources "inevitable"：Australian expert

Australia and China both have the need to enhance cooperation in trade and capital flows and there is "inevitably" going to be more investment from China in Australia's resources industry, said Owen Hegarty, G-Resources Group Ltd., senior Australian expert in mining industry Monday in Hong Kong.
As a country with a relatively small GDP, Australia has the need to enhance cooperation in capital flows with China, said Hegarty in a gold investment forum held in Hong Kong.
Hegarty considered it inevitable to have further Chinese investment in Australia's resource industry, despite the cancelled tie-up deal between Chinalco and Rio Tinto recently.

S&P joins forces with Shenzhen Stock Exchange

Standard & Poor's is joining up with the Shenzhen Stock Exchange (SzSE) in China to cooperate on index development and product listings.
The index provider today signed a memorandum of understanding, which authorises S&P to use its securities information to create and launch a series of investable and benchmark indices in China to meet the growing needs of global investors.
It will also license the S&P 500 to allow the SzSE to develop a listed open-ended fund through its Qualified Domestic Institutional Investor program, which allows Chinese institutional investors to access overseas markets.

Chinese Shares Up On Ore Discovery

The Shanghai stock market climbed to one-year high on Wednesday. Commodities stocks led the rally after a huge iron ore deposit, which is said to be Asia's biggest, was found in China's northern province of Liaoning.
While Chinese steel markers are in tough price negotiations with major iorn ore miners, China said Wednesday that it had discovered Asia's biggest iron ore deposit in Liaoning province. Local officals estimated the mine has reserves of at least 3 billion tonnes and could start production next year.
The newly discovered mineral deposit boosted the stock of China's biggest Baoshan Iron & Steel up 3.0% to 7.20 yuan ($1.05). The country's No.2 Angang Steel Co rocketed 7.4% to 14.18 yuan ($2.08). The Shanghai Composite Index as a result surged 1.0% to 2,922.30, the highest since July last year.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,892	353.78	2.02%
Shanghai Composite	2,922	29.6	1.02%
Shenzhen Component	11,382	255.98	2.30%
TAIEX	6,380	182.61	2.95%
CNY/USD	6.8330	-0.0018	-0.03%

Source: China Economic Scan

24 June 2009 | China Economic Scan

2009-06-23T04:44:00.000-07:00

24-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China East Star Airlines gets offer from investors, Wuhan steel to invest $400m in Brazil ore assets, CapitaLand Retail says Chinese land too expensive, Gome shares jump on Bain investment, Chinese stocks fall on Tuesday.

Top 5 headlines

China East Star Airlines gets offer from investors

East Star Airlines, a debt-ridden privately held Chinese carrier, said it will sell at least an 85 percent stake in the firm to help it make a comeback.
East Star will get at least 500 million yuan ($73.2 million) from outside investors, led by little known Shanghai Yujie Industry Co, the company said in a statement late on Monday. No timetable or details of other investors were available.
The small carrier has filed for bankruptcy protection with a local court in Wuhan, its home base. It has total debt of more than 500 million yuan, Wu Yue, a lawyer hired by the company, told reporters at a news conference.

Wuhan Steel May Add to $400 Million Brazilian Ore Investment

Wuhan Iron & Steel Group, offering $400 million to buy Brazilian iron ore assets, will seek other investment opportunities in countries including Australia to meet its rising demand for the steelmaking material.
China’s third-largest steelmaker is seeking partners that are “honest and faithful,” spokesman Bai Fang said today. “It doesn’t matter whether our target is a big miner or not,” he said.
Wuhan Steel offered to buy a stake in MMX Mineracao e Metalicos SA and a unit for $400 million, Rio de Janeiro-based MMX said yesterday. China may spend more than $500 billion on foreign resource investments over the next eight years, according to Deloitte Touche Tohmatsu.

CapitaLand Retail Delays Land Acquisitions in China

CapitaLand Retail Ltd. said China land remains too expensive for it to make acquisitions and the unit of Southeast Asia’s biggest developer will instead focus on completing its shopping mall projects in the country.
“I don’t think it’s the right time” to buy more land for retail projects in China, Lim Beng Chee, chief executive officer of CapitaLand Ltd.’s retail unit, said in an interview.
Hong Kong’s Hang Lung Properties Ltd. and Shimao Property Holdings Ltd. resumed land purchases in China this year as home prices rise in the world’s third-biggest economy. CapitaLand Retail operates 29 malls in China, and plans to open 29 more in the next three years, Lim said yesterday in Singapore.

Gome shares jump 70 percent on Bain investment

Shares of Gome Electrical Appliances, China's leading home appliance chain, jumped nearly 70 percent Tuesday after announcing an investment from U.S. private equity firm Bain Capital.
The shares surged 69 percent to 1.9 Hong Kong dollars (24.5 cents) in their first day of trade since being suspended in November amid a corruption investigation centered on the company's tycoon founder.
Gome said Monday it plans to raise at least $417 million by issuing convertible bonds to Bain and selling new stock to existing shareholders.

China shares fall on worries about world economy

Chinese shares snapped a four-day rally and fell slightly Tuesday on worries about the world economy, but banking and steel stocks gained.
PetroChina Ltd., Asia's biggest oil and gas producer, shed 2.5 percent to 13.88 yuan, while China Petroleum & Chemical Corporation lost 2 percent to 10.31 yuan.
China Shenhua Energy Ltd., the country's biggest coal producer, declined by 3.1 percent to 26.57 yuan, while Pingdingshan Tianan Coal Mining Co. gave up 3.2 percent to 35.9 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,538	-521.18	-2.89%
Shanghai Composite	2,893	-3.6	-0.12%
Shenzhen Component	11,126	-65.05	-0.58%
TAIEX	6,197	-143.74	-2.27%
CNY/USD	6.8348	-0.0004	-0.01%

Source: China Economic Scan

23 June 2009 | China Economic Scan

2009-06-22T02:48:00.000-07:00

23-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: New loans in China to reach 6.5 trillion in H1, Citic says transfer of state held shares a positive move, China refines record level of crude oil May, China Minsheng wins investor approval for Hong Kong share sale, Chinese stocks gain for fourth day.

Top 5 headlines

New loans may reach 6.5t yuan in H1

China's new yuan loans in the first 20 days in June exceeded that of the same period in May, making it possible that new loans may reach 6.5 trillion yuan ($951 billion) in the first half of 2009.
According to the source, banks also tend to expand their credit line when the month is ending, which makes it almost certain that new loans in June will exceed that of May and that the 6.5-trillion expectation will come true, considering the current trend for the new loans increase.
The state council, or the cabinet, slashed the minimum capital requirements for fixed-asset investment projects at the end of last month, lowering the threshold of infrastructure construction projects and increasing the demand for loans.

China’s Transfer of Shares Is Positive, Citic Says

China’s decision to order companies listed since 2006 to transfer some of their state-held shares to the national pension fund may support the equity market, according to Citic Securities Co.
The move is “fairly positive,” and the pension fund will act as a stabilizing force for stocks, analysts at the country’s biggest listed brokerage, led by Yu Jun, wrote in a report published today.
The new rules, announced by the Ministry of Finance on June 19, require the transfer of 8.4 billion state-held shares in 131 listed companies, and the stocks will be barred from trading for another three years after existing lock-up periods expire.

China refines more crude oil in May, hits record high

China refined a record 31.19 million tonnes of crude oil in May, up 10.7% over the same month last year, according to the China Petroleum and Chemical Industry Association (CPCIA).
The CPCIA on Monday released figures that showed refined oil output, including gasoline, diesel and kerosene, totaled 19.34 million tonnes, an increase of 16.7% over the same period last year.
Sales of refined oil topped 18.32 million tonnes in May, up 2.3% from April, with gasoline sales up 2.9% year on year, or 3.6% from April, to hit 5.61 million tonnes.

China Minsheng Wins Investor Approval for Hong Kong Share Sale

China Minsheng Banking Corp., the nation’s first privately owned lender, won investor approval to revive an initial share sale in Hong Kong after shelving the plan for four years.
Minsheng Chairman Dong Wenbiao got the go-ahead for the sale at a shareholder meeting today in Beijing, where the bank is based. Minsheng plans to offer stock equivalent to as much as 15% of its enlarged share capital, and may boost the sale by 15% if there’s enough demand.
UBS AG, Switzerland’s biggest bank by assets, will help manage the stock sale, people familiar with the matter said last week. Minsheng aims to complete the offering by the end of the year barring any “unusual circumstances,” Liu Minwen, director of the capital financing office, told shareholders today.

China’s Stock Index Gains for Fourth Day; ICBC, Ping An Climb

China’s benchmark stock index rose, led by financial companies, after the Shanghai Securities News said new lending rose and the government required some state- owned companies to transfer stock to the national pension fund.
Industrial & Commercial Bank of China, the country’s biggest lender, added +3.1%. Ping An Insurance, the nation’s second-largest insurer, gained +3.4% on speculation the requirement will boost its equity investments. Suning Appliance rose +1.4% after saying it plans to sell new shares in a private placement.
“The confidence and market momentum are still there,” said Yan Ji, who helps oversee about $850 million of investments at HSBC Jintrust Fund Management Co. in Shanghai. “For the national pension fund, it will play a role of stabilizing the market because the fund isn’t unlikely to sell the shares.”

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,060	138.62	0.77%
Shanghai Composite	2,896	15.81	0.55%
Shenzhen Component	11,191	-51.58	-0.46%
TAIEX	6,341	110.06	1.77%
CNY/USD	6.8352	-0.0024	-0.04%

Source: China Economic Scan

22 June 2009 | China Economic Scan

2009-06-21T03:07:00.000-07:00

22-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Wen says China should have 'moderately loose' monetary policy, China state firms profits fall 30.3%, China increases cigarette tax, Suning Appliance to raise 3 bln yuan in private placement, Franklin Templeton renews Chinese investment license.

Top 5 headlines

China Should Have ‘Moderately Loose’ Monetary Policy

China should have a “moderately loose” monetary policy and implement “proactive financial policies,” Premier Wen Jiabao said during a visit to Hebei.
“We need to fully realize the stimulus measures,” Wen said, according to the statement. “We should focus on structural adjustment while maintaining economic stability and relatively fast growth.”
Wen “is trying to maintain optimism while acknowledging risks,” David Cohen, head of Asian forecasting at Action Economics in Singapore, said over the phone today. “Global demand will start to pick up and that should provide some boost to Chinese manufacturing.”

China Jan-May state firm profits down 30.3 pct y/y

Profits at Chinese state-owned enterprises (SOEs) continued to fall in the first five months from year-earlier levels, but the pace of decline slowed from the first four months, an official newspaper said on Saturday.
Overall profits of SOEs in the first five months reached 425.4 billion yuan ($62.3 billion), down 30.3% from a year earlier, compared with a drop of 32.3% in the first four months, the Securities Times quoted the Ministry of Finance as saying.
Among them, enterprises controlled by the central government registered profits of 331.55 billion yuan from January to May, down 23.3% year on year, while those backed by local governments had profits of 93.85 billion yuan, down 47.4%.

China increases cigarette tax to add to state coffers

China has increased tax on cigarettes by between 6-11% to tap additional revenue for for future government spending.
The tax rise took effect from the beginning of May 1, and a new tax of 5% was also imposed on cigarette wholesalers, China State Administration of Taxation said in a statement posted on its Web site (www.chinatax.gov.cn) on late Friday.
"This is to appropriately increase the government's fiscal revenue and also to perfect the cigarette taxing system," it said. The tax has not yet been passed on to smokers.

China's Suning to raise 3 bln yuan in placement

Chinese retailer Suning Appliance said on Saturday that it intended to raise around 3 billion yuan ($439 million) in a private placement for purposes including building new chain shops around China.
Suning planned to issue up to 200 million new yuan-denominated A shares to private investors, including its chairman Zhang Jindong, it said in a statement published in the China Securities Journal.
Proceeds would also be used to build six logistics centres in Chinese cities including Beijing and Tianjin and to supplement working capital, it said.

Franklin Templeton Gets Chinese Investment License

Franklin Resources Inc., manager of the Franklin and Templeton mutual funds, said it received a new license to invest in Chinese stocks and bonds after an earlier permit held by a unit expired.
Franklin Templeton will also invest in China through private-equity and its joint venture in the world’s third- largest economy, the statement said. It will also buy shares of Chinese companies traded in Hong Kong, it added.
Citigroup Inc., Goldman Sachs Group Inc. and HSBC Holdings Plc are among more than 80 overseas institutions cleared to invest in Chinese stocks and bonds under the so-called QFII program.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,921
Shanghai Composite	2,880
Shenzhen Component	11,242
TAIEX	6,231
CNY/USD	6.8376

Source: China Economic Scan

20 June 2009 | China Economic Scan

2009-06-19T05:00:00.000-07:00

20-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Report says no change to tax threshold, CDB posts 20.8bln yuan in net profit for 2008, CIC to invest $500m in hedge funds, China securities regulator approves Sanjin IPO, Chinese stocks rise again to close the week up.

Top 5 headlines

Experts push for raising tax threshold

The first ministerial review of the country's income tax system has recommended that the current tax threshold be maintained, despite repeated calls to raise the level to ease the burden on a growing number of middle-income families and stimulate domestic consumption amid the economic downturn.
China's personal monthly income tax threshold was increased from 800 yuan ($117) a month in 1980 to the current 2,000 yuan, meaning that workers with a monthly salary of 2,500 yuan or less do not pay any taxes after social insurance deductions.
Presently, those earning 10,000 yuan a month will pay 825 yuan of tax.

CDB posts 20.8b yuan in net profit last year

China Development Bank (CDB) posted a net profit of 20.8 billion yuan ($3.04 billion) in 2008, faring far better than the other two major policy banks in China despite a drop of 28% from a year earlier.
The decline was due to the influence of the Sichuan earthquake, the economic downturn, and the exchange loss over a weak US dollar, the bank said in its 2008 annual report.
CDB received $20 billion worth of capital funds at the end of 2007, which sharply increased its dollar position in 2008, leading to a greater exchange loss amid the depreciation of the US dollar.

CIC Said to Invest $500 Million in Hedge Funds, Blackstone

China Investment Corp., the nation’s $200 billion sovereign wealth fund, may invest as much as $500 million in hedge funds including those run by Blackstone Group LP, said two people familiar with the matter.
CIC aims to allocate $6 billion to hedge funds by the end of 2009, company adviser Felix Chee said two days ago at the GAIM International hedge fund conference at Monaco’s Grimaldi Forum.
Chee, who is a special adviser to the chief investment officer of CIC, said he will initially run CIC’s hedge fund and proprietary trading effort.

China Permits First IPO Since September; Brokers Gain

China approved its first initial public offering since September, triggering gains in brokerage shares on speculation the ending of the 10-month moratorium will spur fee income and trading.
Sanjin, China’s biggest producer of herbal lozenges, aims to raise about 634 million yuan ($93 million). The company will start a roadshow and seek a price for the sale on June 22, it said in a statement late yesterday.
Zhejiang Wanma Cable Co. and Shenzhen Salubris Pharmaceuticals Co. are also likely to get final IPO approval soon, the people said. The companies each plan to raise less than 650 million yuan, according to documents they’ve filed with the regulator.

China's stocks rise to 10-month high

China's stocks rose for the third straight day Friday, driving the benchmark index to a 10-month high as financial shares gained after the securities regulator approved the nation's first initial public offering (IPO) since September.
Sinolink Securities rose by the daily limit of +10% to close at 21.46 yuan. Northeast Securities rose +5.65% to 31.96 yuan.
Beijing Tiantan Biological Products Co., Ltd. advanced +6.91% to 25.52 yuan, and Dalian Merro Pharmaceutical Limited Company rose by the daily limit of +10% to close at 6.90 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,921	144.27	0.81%
Shanghai Composite	2,880	26.59	0.93%
Shenzhen Component	11,242	90.66	0.81%
TAIEX	6,231	86.62	1.41%
CNY/USD	6.8376	0.0021	0.03%

Source: China Economic Scan

19 June 2009 | China Economic Scan

2009-06-18T04:49:00.000-07:00

19-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: World bank raises China growth forecast to 7.2%, China sees 120% increase in rail investment, China set to grant final approval for first IPO since September, CIC goes on global hiring spree, Chinese stocks rise to 11 month high.

Top 5 headlines

World Bank Raises China 2009 Growth Forecast to 7.2%

The World Bank raised its growth forecast for China this year and advised policy makers to delay until 2010 any additional stimulus plan to boost the world’s third-largest economy.
China’s economy will expand 7.2% in 2009 from a year earlier, up from a 6.5 percent forecast in March, the Washington-based lender said in a quarterly report released today in Beijing. Stocks gained after the announcement.
The World Bank joins Goldman Sachs Group Inc., Morgan Stanley and UBS AG. in raising growth forecasts this year after a 4 trillion yuan ($585 billion) stimulus package triggered record loans and surging investment.

China sees 120% rise in rail investment in first five months

China saw a surge of investment in railway construction as the country pledged to increase spending as an effort to buoy the world's third largest economy.
In the first five months, China pumped 168.9 billion yuan ($24.7 billion) in fixed-asset investment in railways, up 120% from a year earlier, the Ministry of Railways said in a statement Wednesday.
The money included 149 billion yuan for railway infrastructure construction, up 161.8% from a year ago, 3.328 billion yuan for railway upgrading, and 16.55 billion yuan for purchasing trains, according to the ministry.

China Set to Grant Final Approval for First IPO Since September

China’s securities regulator will grant final approval by tomorrow for the nation’s first initial public offering since September, two people familiar with the situation said.
Guilin Sanjin Pharmaceutical, Zhejiang Wanma Cable and Shenzhen Salubris Pharmaceuticals are the three candidates for getting written permission to sell stock in Shenzhen, supposedly.
“The securities regulator is still concerned about the benchmark’s performance,” said Sun Jian, a Shanghai-based analyst at Shenyin Wanguo Securities Co. “The market has been rising this week, which is an indication of sufficient liquidity and confidence.”

CIC goes on global hiring spree

China Investment Corp (CIC), the country's $200 billion sovereign wealth fund, said it would start a new round of global hiring to support an expansion of its operations as it seeks new overseas investments.
CIC, which currently employs about 200 people, will seek professional staff in 33 categories, including risk management, real estate, infrastructure, commodities and hedge fund investment, according to its website.
"We are a new company, so it's natural for us to hire more people to grow," a CIC spokeswoman said. She declined to indicate the exact number of people CIC plans to hire.

China’s Stocks Rise to 11-Month High; ICBC, Shenhua Advance

China’s stocks rose, driving the benchmark index to an 11-month high, after the World Bank raised its growth forecast for the country this year and Shenyin & Wanguo Securities Co. recommended buying machinery makers.
Industrial & Commercial Bank of China Ltd., the nation’s biggest listed lender, rose +2.6% and China Shenhua Energy Co., the No. 1 coal producer, gained +5.5%.
The country’s economy will expand 7.2% this year, up from a 6.5% forecast in March, the bank said. Sany Heavy Industry Co. climbed +4.9% after Shenyin & Wanguo said the company will benefit as property investment rebounds.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,777	-307.94	-1.70%
Shanghai Composite	2,854	43.78	1.56%
Shenzhen Component	11,152	111.14	1.01%
TAIEX	6,145	-51.38	-0.83%
CNY/USD	6.8355	-0.0027	-0.04%

Source: China Economic Scan

18 June 2009 | China Economic Scan

2009-06-17T04:20:00.000-07:00

18-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Inflation said unlikely to occur in China in 2009, Hong Kong Q1 GNP/GDP down, CIC confirms financing deal with Australia's Goodman Group, UBS strategist speculates that US companies such as Coca Cola/GE/Walmart may seek Chinese listing, Chinese stocks get a boost on Wednesday.

Top 5 headlines

Economists: Inflation not likely to occur in China in 2009

Concerns over possible inflation have shadowed the growth in bank credit, which continued to expand in May, with new loans reaching 664.5 billion yuan ($97.29 billion), according to the People's Bank of China (PBOC), the central bank, on June 12.
About 49% of Chinese bankers thought the loans policy was a bit too "relaxed", an increase of 3.9 percentage points from the first quarter, while confidence in macro-economic growth prediction reached 39.1%, up 5 percentage points.
"Deflation, instead of inflation, should be the major concern," said Yao Jingyuan, chief economist with the National Bureau of Statistics (NBS). "There is no need to be too worried about inflation, as commodities prices will remain low for the whole year," said Yao.

Hong Kong's first quarter GNP, GDP go down

Hong Kong's gross national product (GNP) fell 9.2% in the first quarter over a year earlier, to 388.7 billion HK dollars (US$50.15 billion) at current market prices, Hong Kong Census and Statistics Department said.
According to statistics from the department, Hong Kong's gross domestic product (GDP), estimated at 380.1 billion HK dollars (US$49.05 billion) at current market prices in the first quarter, fell 7.3% during the period.
Compared with GDP, the value of the GNP was larger by 8.6 billion HK dollars (US$1.11 billion) in the first quarter, representing a net external factor income inflow of the same amount, and equivalent to 2.3% of GDP during the period.

CIC confirms financing deal with Goodman Group

China Investment Corporation (CIC), the country's sovereign wealth fund, confirmed Wednesday that it will lend AU$200 million ($159 million) to Australia's leading property trust Goodman Group.
CIC would commit to a financing facility alongside Macquarie Bank, Australia's biggest investment bank, said a source with CIC who declined to be named.
Goodman Group is the third overseas company which CIC had chosen to invest in after buying stakes in Blackstone and Morgan Stanley since 2007.

Coca-Cola, GE, Wal-Mart May Seek China IPO, UBS Says

Coca-Cola Co.,General Electric Co.Wal-Mart Stores Inc. are among U.S. companies that may seek to list on China’s stock exchanges, UBS AG said.
John Tang, a Hong Kong-based UBS strategist, said he expects a dozen Western companies with a “strong presence” in China to offer shares in the yuan-denominated A-share market.
“An A-share IPO allows foreign companies direct access to much needed renminbi funding,” Tang wrote in a note to clients. UBS declined a request for an interview.

China shares rise after Hu says stimulus working

Chinese shares rebounded Wednesday after President Hu Jintao said Beijing's stimulus is showing results and China was determined to take the lead in emerging from the global economic crisis.
Real estate stocks jumped, with China Vanke Ltd., the country's biggest developer, soaring 9.7% to 11.88 yuan, and rival Poly Real Estate Group up 8.2% to 25.52 yuan.
Medical shares rose on speculation that the spread of the swine flu pandemic would drive sales. Da An Gene Co., a biotechnology company, surged 9% to 16.43 yuan, while Shenzhen Neptunus Bioengineering Co. rose by the daily 10% limit to 9.04 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,085	-80.9	-0.45%
Shanghai Composite	2,810	34.1	1.23%
Shenzhen Component	11,040	243.29	2.25%
TAIEX	6,196	-24.90	-0.40%
CNY/USD	6.8382	0.0041	0.06%

Source: China Economic Scan

17 June 2009 | China Economic Scan

2009-06-16T04:54:00.000-07:00

17-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China's fiscal revenue rises 4.8% in May, Microloans drive growth and change in rural China, Tencent CEO says still hopes to list yuan A shares, Everbright and Zunyi may be first to IPO following CSRC green light on new issues, Chinese stocks close down on Tuesday.

Top 5 headlines

China's fiscal revenue in May signals recovery

An increase in China's fiscal revenue in May indicates a recovery in the economy and leave the government more room to employ fiscal measures to boost it, Tuesday's China Daily quoted experts.
The country's fiscal revenue in May rose 4.8% year on year to 656.95 billion yuan ($96.05 billion), reversing the downward trend of the past few months, the Ministry of Finance (MOF) said yesterday.
Aggregate central and local government revenues in the first five months stood at 2.71 trillion yuan, down 6.7% from a year earlier.

Wang Shulian’s Microloan Funds China Growth Impetus

Microfinance provides small loans of a few thousand yuan to people in poverty who can’t get regular bank funding. Such programs have encouraged rural growth in countries including Bangladesh, where Nobel Peace Prize-winning economist Muhammad Yunus established Grameen Bank in the 1980s to extend loans to the poor.
“Getting the money to trickle down” to the lowest level of the economy “is very, very important for the long-term development of China,” says Tammy Lam, who left her job as chief risk officer at Citibank last year to found Rural Impact Professionals, a nonprofit that fosters microcredit.
“It’s really effective,” says Wang, 58, whose success encouraged her neighbors to get loans to raise sheep, expanding their village economy beyond subsistence farming. Many families now make at least several thousand yuan a year. Without the loans, “we’d still be poor,” she says.

Tencent CEO: Still Hope To List Yuan-Dominated A Shares

Chinese Internet portal operator Tencent Holdings said the company still hopes to list yuan- denominated A shares in Shanghai. In March, the company said it had to drop its plans to list A shares because of poor market conditions.
"Many domestic investors want to buy our shares and we want to allow our users to become our shareholders," Chairman and Chief Executive Ma Huateng told reporters Monday.
Tencent said last month its net profit for the three months ended March 31 rose 94% to CNY1.05 billion from CNY542.0 million a year earlier.

Everbright, Zunyi May Lead China Share Sale Revival

Everbright Securities Co., Zunyi Titanium Co. and Sichuan Expressway Co. may be among the first companies to sell shares publicly in China since September as the government prepares to reopen what was the world’s second- largest equity fundraising market in 2007.
Everbright Securities, China’s 11th-biggest brokerage by assets, Zunyi Titanium and Sichuan Expressway are working on final documents required for regulatory approval to offer stock in Shanghai or Shenzhen, three people with knowledge of the matter said.
“Current liquidity conditions can support share sales,” said Yi Yangfang, investment director at GF Fund Management Co. in Guangzhou, which manages about 78 billion yuan ($11.4 billion).

China Shares End Lower Led By Property Cos, Banks

The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 0.5% at 2776.02. The Shenzhen Composite Index was flat at 916.55.
Turnover for the Shanghai Composite Index slipped to CNY110.55 billion ($16.17 billion) from CNY111.43 billion Monday, which was down from CNY136.3 billion Friday. Analysts pointed to the shrinking turnover as a sign of investor cautiousness.
Zhang Gang, an equity strategist at Central China Securities, said the Shanghai Composite Index will likely continue to consolidate around 2800 ahead of the resumption of initial public offerings, which may be later this month. "Until new IPOs are launched and people see how they're priced, uncertainty in the market will continue," he said.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,166	-333.46	-1.80%
Shanghai Composite	2,776	-13.53	-0.49%
Shenzhen Component	10,797	28.24	0.26%
TAIEX	6,221	-4.75	-0.08%
CNY/USD	6.8341	-0.0069	-0.10%

Source: China Economic Scan

16 June 2009 | China Economic Scan

2009-06-15T06:14:00.000-07:00

16-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Foreign direct investment fell 17.8% in May, Home sales on the rise in China, KKR said to pay $150m for China Modern Dairy stake, VC deals showing signs of life in China, Chinese stocks gain for first time in three days.

Top 5 headlines

Foreign Direct Investment in China Tumbles on Crisis

Foreign direct investment in China fell for an eighth month from a year earlier as companies cut spending to weather the worst economic slump since the Great Depression.
Investment slid 17.8% in May to $6.38 billion, the commerce ministry said at a briefing in Beijing today, after falling 22.5% in April.
“Companies have just been trying to survive the crisis, I don’t think they’re in the mood for aggressive overseas expansion,” said Wang Qing, chief Asia economist for Morgan Stanley in Hong Kong. “It’s too soon to see a pick-up.”

Home sales rise, but pricing remains crucial

According to DTZ, an international real estate consulting company, total floor space of new homes sold nationwide increased 18.6% year-on-year to 162 million sq m in the first four months this year, which was also 21.2% above the year-on-year average of 2006 to 2008.
Analysts say the strong rebound was triggered by the government's favorable policies on interest rates and taxation, and pent-up demand from 2008.
Statistics from the National Development and Reform Commission show that property prices in China's 70 largest cities climbed 0.4% in April, 0.2% higher than the previous month.

KKR Said to Pay $150 Million for Stake in China’s Modern Dairy

KKR, the private equity company of Henry Kravis and George Roberts, invested $150 million in Chinese milk supplier Ma Anshan Modern Farming, two people familiar with the matter said.
KKR completed a series of investments in the company, known as Modern Dairy, the New York-based firm said today, without providing financial details.
The milk supplier, based in Anhui province, has about 40,000 dairy cows and produces more than 150,000 tons of raw milk a year, KKR said.

VC deals showing renewed signs of life

Twenty-six venture capital (VC) and private equity (PE) companies invested $4.81 billion in 15 deals in May after a cautious April that registered only $156 million in total investment, the report said.
The financial services industry attracted by far the most investment in May, some $4.64 billion, or fully 97%, of the total.
It was one big deal in the finance sector that dramatically changed the investment mix toward financials. On May 12, PE funds led by Hopu Investment Management invested about $4.62 billion to buy 8.53 billion H shares of China Construction Bank.

China’s Stocks Gain for First Time in Three Days; Banks Rally

The Shanghai Composite Index gained 1.7% to 2,789.55 at the close, erasing a loss of as much as 0.6%. The CSI 300 Index, which tracks shares on both the Shanghai and Shenzhen exchanges, added 2.1%, with financial stocks posting the biggest gain among the 10 industry groups.
Industrial & Commercial Bank, the world’s largest bank by market value, advanced 5.3% to 4.94 yuan, the most since March 26. Bank of China Ltd. climbed 4.8% to 4.12 yuan.
The restarting of public offerings after a nine-month suspension may allow as many as 32 companies to raise up to 70 billion yuan ($10.2 billion), according to estimates from Liang Jing at Guotai Junan Securities Co. Some companies may receive final approval for initial public offerings this week, China Business News reported today.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,499	-390.72	-2.07%
Shanghai Composite	2,790	45.79	1.67%
Shenzhen Component	10,769	244.83	2.33%
TAIEX	6,226	-222.67	-3.45%
CNY/USD	6.8410	0.0059	0.09%

Source: China Economic Scan

15 June 2009 | China Economic Scan

2009-06-14T10:52:00.000-07:00

15-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Soros says China is recovering fast from the crisis, foreign trade in Guangdong falls in May, Tengzhong communicating with regulator on Hummer deal, Ping An to acquire stake in Shenzhen bank for $3.2bln, Chinese stocks in the US fall the most in a week on share sale concerns.

Top 5 headlines

George Soros: China is recovering fast from crisis

George Soros, chairman of Soros Fund Management, said Saturday he has confidence in China's economy and believes it is recovering fast from the economic downturn.
"Its financial institutions are largely unaffected," Soros said, noting that with a good balance sheet, China was poised to balance its external accounts and in position to engage in stimulus investments. But Soros also pointed out that China's exports had been adversely affected. "China is dependent on exports, which have a high proportion in GDP."
Soros made the remarks in an interview with Xinhua after meeting with Chen Feng, chairman of China's HNA Group. Soros has invested $50 million into Hainan Airlines, a subsidiary of the group.

Trade recovery fragile in Guangdong

Guangdong province, which ranks first in foreign trade among provincial-level regions, recorded a decline rate in external trade lower than the national average in the first five months of this year.
According to local customs data released Saturday, Guangdong's foreign trade volume stood at $208.52 billion between January and May, a decline of 21.8% from the same period of last year.
The total included $125.39 billion in export value, down 18.5%, and $83.13 billion in import value, down 26.3%.

Tengzhong ‘Communicating’ With Regulator on Hummer

Sichuan Tengzhong Heavy Industrial Machinery Co. is “communicating” with Chinese regulators about plans to buy General Motors Corp.’s Hummer sports utility vehicle brand after reports said the deal may be blocked.
“It’s up to the government” whether the transaction will be approved, Chief Executive Officer Yang Yi said in an interview in Beijing today, without elaborating. “We respect the regulatory process.”
Tengzhong said on June 2 that it had agreed to buy Hummer from bankrupt GM in a deal that would save more than 3,000 U.S. jobs. Still, regulators are unlikely to approve the plan as China wants companies to buy overseas parts makers instead of automakers.

Ping An to Acquire Stake in Shenzhen Bank for $3.2 Billion

Ping An Insurance, shifting its focus to the Chinese market after losing $3.3 billion on an investment in Fortis, plans to buy a 22 billion yuan ($3.2 billion) stake in Shenzhen Development Bank.
Ping An, China’s second-largest insurer, agreed to purchase as many as 585 million new shares from Shenzhen Development for 10.7 billion yuan, or 18.26 yuan apiece, it said. Ping An will also buy 520.4 million shares from Newbridge Capital LLC, the Asian unit of TPG, for about 11.45 billion yuan.
“This is a good deal for both parties as they have a lot of resources to share, including customers, products and franchises,” said Xu Shoude of China Jianyin Investment Securities “While Ping An has a great ambition for its banking operation, it knows that the unit can’t grow fast enough without acquisitions.”

China Stocks in U.S. Fall Most in a Week on Share Sale Concerns

Chinese stocks trading in the U.S. fell the most in a week as the prospect of new share sales in the mainland overshadowed better-than-expected economic reports.
The Bank of New York Mellon China ADR Index, which tracks American depositary receipts, declined -2% to 361.23, paring a weekly advance to +0.6%. The gauge has rallied 28% this year.
“You may be seeing some investors take some money off the table because of the prospect of some big IPOs,” said Jeff Papp, senior analyst at Lisle, Illinois-based Oberweis Asset Management Inc., which manages $700 million including China stocks.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,890
Shanghai Composite	2,744
Shenzhen Component	10,524
TAIEX	6,448
CNY/USD	6.8351

Source: China Economic Scan

China Economic Scan Weekly Economic Review - 13 June 2009

2009-06-14T10:50:00.000-07:00

China Economic Scan Weekly Economic Review - 13 June 2009

13/06/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the past week there were a range of important data releases that have painted an interesting picture of the Chinese economy. New lending, M2, CPI, urban fixed asset investment, exports and imports, and car sales were among the data released.

New loans jumped to 664.5 billion yuan ($97 billion) from 318.5 billion yuan a year earlier, the central bank said. M2, the broadest measure of money supply, rose 25.7% in May from a year earlier, the central bank said, after a record 26% gain in April.

Urban fixed-asset investment climbed 32.9% in the 5 months to the end of May from a year earlier, the statistics bureau said. Urban fixed-asset investment in the first five months was 5.35 trillion yuan. The increase in spending was faster than the 30.5% gain in the first four months and analyst estimates of 31%.

May exports fell by a record 26.4% from the same month of 2008, and imports were down 25.2%. Despite the year-on-year import decline, demand for foreign raw materials is rising as Beijing's stimulus spending takes hold, analysts said. The value of imports fell even as volume rose because of a 30-50% drop in the price of oil and other commodities from last year's highs, which cut China's import bill.

CPI dropped 1.4% in May from a year earlier, after falling 1.5% in April, the National Bureau of Statistics (NBS) said. Analyst estimates were for a 1.3% decline. Producer prices fell 7.2%, the most on record.

Property sales rose 45.3% to 1 trillion yuan ($146 billion) in the first five months of 2009 from a year earlier and real-estate investment growth quickened to 6.8%, the National Bureau of Statistics said. The China Se Shang Property Index is up about 116% this year.

China vehicle sales surged 34% in May on tax cuts and government subsidies, extending the country’s lead over the U.S. as the world’s largest auto market this year. Chinese drivers bought 1.12 million vehicles last month, the China Association of Automobile Manufacturers said in a statement today. Passenger-vehicle sales jumped 47% to 829,100.

The Chinese government raised tax rebates for more than 600 export items, some up to the maximum level possible. The Ministry of Finance said yesterday that it had increased tax rebates ranging from 5% to 17% on export products, including ethanol, toys and sewing machines, effective June 1. The export tax rebate scheme allows enterprises to get back part or all of the money they have paid in value-added tax, which stands at up to 17%, for items that have gone into the production of export goods. China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3^rd largest economy. For more info visit www.chinaeconomicscan.com

http://www.chinaeconomicscan.com/weekreview13june09econ.html

13 June 2009 | China Economic Scan

2009-06-12T02:51:00.000-07:00

13-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China doubles new lending and increases industrial output, China investors expect a correction, Sanyuan sales surge after absorption of Sanlu, Minmetals snaps up Aussie miner, Chinese mainland stocks fall on Friday.

Top 5 headlines

China New Lending Doubles, Industrial Output Quickens

New loans jumped to 664.5 billion yuan ($97 billion) from 318.5 billion yuan a year earlier, the central bank said today.
Industrial-output growth accelerated to 8.9 percent and sales rose 15.2%, the statistics bureau said.
M2, the broadest measure of money supply, rose 25.7% in May from a year earlier, the central bank said today, after a record 26% gain in April.

China Investors Expect ‘Correction,’ CLSA’s Wood Says

China’s investors expect a “correction” in the stock market, which will “tread water” in coming months as companies resume initial share sales, CLSA Ltd.’s Christopher Wood said.
The brokerage reduced the portion of Chinese shares in its model portfolio because it expects “considerable resistance” to further gains in the Shanghai Composite Index, Wood said in his “Greed & Fear” research note dated yesterday, recommending that investors move money into Malaysia.
“Local investors expect considerable resistance and a correction sooner or later” as the gauge reaches the 2,800 to 3,000 range, said Wood, the top-ranked Asian strategist in the 2008 Institutional Investor survey.

Sanyuan reports sales surge after takeover of Sanlu

Hebei Sanyuan, the dairy firm that bought most of the assets of the Sanlu Group, China's largest milk powder producer before its bankruptcy in the melamine contamination scandal, on Friday reported sales in May equal to total of the first four months.
Gao Qingshan, general manager of Hebei Sanyuan, said the firm's revenue in May hit 70 million yuan ($10.26 million).
"Our daily milk powder output reached 24 tons, or 80% of the total production ability of Sanlu's former factories, and the daily output of liquid milk amounted to 300 tons, 65% of production ability. Production will be further expanded based on market response," he said.

Nimble-footed Minmetals snaps up Aussie miner

A leading Chinese non-ferrous metal company yesterday won approval for its acquisition of a top Australian miner - only days after China's dominant aluminum company was thwarted in its bid for a bigger stake in another Australian miner.
China Minmetals Non-ferrous Metals Co Ltd (Minmetals) was dexterous in its dealing with OZ Minerals Ltd, setting an example for Chinese enterprises investing in overseas resources, experts said.
Minmetals acted quickly to raise its offer for OZ's assets from $1.21 billion to $1.39 billion, responding to increasing domestic and international metal prices in recent months, showing more flexibility than seen in the aborted deal between Aluminum Corp of China (Chinalco) and Rio Tinto.

Hong Kong Stocks Climb as China Data Outweighs IPO Concerns

Mainland stocks continued their fall on Friday with Shanghai down -1.91% to 2,744, Shenzhen down -1.64% 10,524, and Taiwan down -1.81% to 6,448; Hong Kong gained up +0.52% at 18,890.
Aluminum Corp. of China Ltd., the publicly traded unit of the nation’s biggest producer of the metal, surged +3.5%, while China Construction Bank Co. rose +2.9% after industrial production, bank lending and retail sales all climbed.
China Mobile dropped -1.9%, leading declines among some of the largest listed companies after 21st Century Business Herald, a newspaper, said the securities regulator will approve restarting initial public offerings as early as this weekend.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,890	98.65	0.52%
Shanghai Composite	2,744	-53.56	-1.91%
Shenzhen Component	10,524	-175.78	-1.64%
TAIEX	6,448	-119.14	-1.81%
CNY/USD	6.8351	-0.001	-0.01%

Source: China Economic Scan

12 June 2009 | China Economic Scan

2009-06-11T05:06:00.000-07:00

12-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese urban fixed-asset investment climbs further in May, China's May exports plunge 26.4%, Chinese car sales surge resulting in 2-month waiting lists, CICC beats Goldman Sachs in Asian bonds, Chinese stocks close down on Thursday.

Top 5 headlines

Chinese Investment Surges, Countering Record Export Slump

China’s spending on factories, property and roads surged by the most in five years as the government’s 4 trillion yuan ($585 billion) stimulus package countered a record slump in exports.
Urban fixed-asset investment climbed 32.9% in the 5 months to the end of May from a year earlier, the statistics bureau said today in Beijing.
Urban fixed-asset investment in the first five months was 5.35 trillion yuan. The increase in spending was faster than the 30.5% gain in the first four months and the 31% median estimate of 16 economists surveyed by Bloomberg News.

China's May exports plunge 26.4%

May exports fell by a record 26.4% from the same month of 2008, while imports were down 25.2%, the customs agency reported Thursday.
Despite the year-on-year import decline, demand for foreign raw materials is rising as Beijing's stimulus spending takes hold, analysts said.
They said the value of imports fell even as volume rose because of a 30 to 50% drop in the price of oil and other commodities from last year's highs, which cut China's import bill.

China Car Sales Jump ‘Beyond Imagination,’ Bring Two-Month Wait

Beijing drivers, used to leaving showrooms with new cars the same day, now have to wait about three weeks for a Hyundai Motor Co. Yuedong Elantra, China’s bestselling car, or as long as eight weeks for a Honda Motor Co. CR-V sport-utility vehicle.
Carmakers failed to predict a 14% sales jump caused by an economic rebound, tax cuts and subsidies and are now trying to raise Chinese output even as they cut U.S. and European production on plunging sales.
“We are having headaches and shortages because the automaker can’t make enough Yuedongs,” said Li Minghui, a salesman at dealership Beijing Hyundai Boshishan. “We expected sales to pick up at the beginning of this year, but it’s beyond our imagination that it would be this good.”

CICC Beats Goldman as China Banks Join Top Ranks in Asia Bonds

China’s banks, the world’s largest by stock market value, are starting to beat Western financial companies in underwriting Asian bonds as the government turns to capital markets to stimulate the economy.
China International Capital, Morgan Stanley’s partner, Industrial & Commercial Bank of China and Bank of China penetrated the ranks of the top 10 bond firms in the region. They led underwriters with $39 billion of debt sales this year, or 12% of the total in the Asia-Pacific region, according to data compiled by Bloomberg.
Beijing-based China International was the main securities firm in Chinese sales of $92 billion this year, almost five times the total of a year earlier.

Chinese shares down 0.67% on trade data, IPO shift

Chinese stocks fell on Thursday with the Shenzhen Component down -1.12% to 10,700, the Shanghai Composite down -0.67% to 2,797, the Hang Seng edged sideways +0.03% to 18,791.
"The new foreign trade data undermined investors' confidence," said Qin Xiaobin, a senior equity strategy analyst, Galaxy Securities. Further, news that China's securities regulator was ready to end de facto suspension of IPOs on Shanghai and Shenzhen stock exchanges also hurt stocks, Qin said.
China Vanke, the largest property developer by market value, lost -2.94% to 10.89 yuan. China Merchants Real Estate shed -2.32% to close at 27.4 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,791	5.37	0.03%
Shanghai Composite	2,797	-18.93	-0.67%
Shenzhen Component	10,700	-120.83	-1.12%
TAIEX	6,567	105.10	1.63%
CNY/USD	6.8361	0.0031	0.05%

Source: China Economic Scan

11 June 2009 | China Economic Scan

2009-06-10T04:58:00.000-07:00

11-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China CPI falls 1.4% in May, Fidelity's Ma says China's economic growth may beat predictions, China's property sales surge, Baosteel hikes July steel prices, Chinese stocks closed up on Wednesday.

Top 5 headlines

China’s Consumer Prices Decline 1.4%, Aiding Recovery

Prices dropped 1.4% in May from a year earlier, after falling 1.5% in April, the National Bureau of Statistics (NBS) said.
The median estimate in a Bloomberg News survey of 16 economists was for a 1.3% decline. Producer prices fell 7.2%, the most on record.
“China’s economy is already rebounding and as soon as it regains momentum, prices will return to positive territory,” said Sherman Chan, an economist with Moody’s Economy.com in Sydney.

Fidelity’s Ma Says China’s Economic Growth May Beat Predictions

China’s economic outlook is the “brightest” in Asia and growth may exceed investor expectations, Fidelity International fund manager Stephen Ma said.
The nation’s economy will expand 7.5% this year, according to economists surveyed by Bloomberg News last month, up from a 7.1% forecast in February.
“China has done all the right things to support the domestic economy,” Ma said. “I believe China’s GDP growth will continue to surprise people on the upside.” Fidelity International is the London-based affiliate of Fidelity Investments, the world’s largest mutual- fund company.

China’s Property Sales Surge, Add to Recovery Signs

Sales rose 45.3% to 1 trillion yuan ($146 billion) in the first five months of 2009 from a year earlier and real- estate investment growth quickened to 6.8%, the National Bureau of Statistics said.
“As developers run down inventory rapidly, they will soon start to buy land and increase spending again,” said Frank Gong, chief China economist and strategist at JPMorgan Chase & Co. in Hong Kong. “Property investment, which accounts for 10% of China’s GDP and is a trigger for growth in related sectors, will become a strong driving force in China’s recovery.”
The China Se Shang Property Index fell -1.6%, paring this year’s gain to +116%.

Baosteel hikes July steel prices as pressure mounts

China's top steelmaker, Baosteel, has raised July prices for major steel product prices by more than 10%, industry sources said, as it faces the threat of higher-than-expected iron ore costs.
Baosteel, or Baoshan Iron and Steel, is deep in talks with Australian miners Rio Tinto and BHP Billiton over iron ore prices, which it wants reset to 2007 levels, meaning a price cut of at least 40%.
Rio Tinto has already agreed a 33% cut with other Asian mills, forcing Baosteel to choose between a fixed price, albeit more than it wanted to pay, or the uncertain spot market.

Chinese shares up 1% as pace of price declines slows

Hong Kong lead Chinese stocks, up +4.03% at 18,786, followed by Shanghai up +1.02% to 2,816, and Shenzhen and Taiwan both up +0.75% to 10,281 and 6,462 respectively.
China State Shipbuilding rose +1.22% to 65.52 yuan, while Guangzhou Shipyard International gained +1.04% to 22.41 yuan.
Lianyungang Port shares rose by the daily limit of +10% to 7.87 yuan and Shenzhen Expressway Company gained +9.97% to 6.40 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,786	727.17	4.03%
Shanghai Composite	2,816	28.36	1.02%
Shenzhen Component	10,821	80.65	0.75%
TAIEX	6,462	47.88	0.75%
CNY/USD	6.8330	-0.0024	-0.04%

Source: China Economic Scan

10 June 2009 | China Economic Scan

2009-06-09T03:18:00.000-07:00

10-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese vehicle sales surge 34% in May, Chinese government increases export subsidies, NBS to add 10 000 CPI survey locations, Tsingtao to buy Shandong's Jinan Beer for 250m yuan, Chinese stocks close up on Tuesday.

Top 5 headlines

China’s May Vehicle Sales Surge 34% on Subsidies, Tax

China vehicle sales surged 34% in May on tax cuts and government subsidies, extending the country’s lead over the U.S. as the world’s largest auto market this year.
Chinese drivers bought 1.12 million vehicles last month, the China Association of Automobile Manufacturers said in a statement today. Passenger-vehicle sales jumped 47% to 829,100.
“Sales of small cars have been driving growth,” said Ricon Xia, an analyst with Daiwa Institute of Research (H.K.) Ltd. in Shanghai. “Whether automakers could reverse profit declines this year will depend on demand for big cars and heavy duty trucks that carry bigger profit margins.”

Exporters get sops to fight crisis

The government has raised tax rebates for more than 600 export items, some up to the maximum level possible, as it stepped up efforts to provide succor to businesses battling the global economic slowdown.
The Ministry of Finance said yesterday that it had increased tax rebates ranging from 5% to 17% on export products, including ethanol, toys and sewing machines, effective June 1.
The export tax rebate scheme allows enterprises to get back part or all of the money they have paid in value-added tax, which stands at up to 17%, for items that have gone into the production of export goods.

NBS to add 10,000 CPI survey locations

China will add 10,000 new consumer price index (CPI) survey locations in an effort to make the statistics more reliable.
Liu Jianwei, vice dean with the department of urban social and economic survey of the National Bureau of Statistics (NBS) said Tuesday that it is planning to have a total of 60,000 survey spots.
Currently, the NBS has 3,000 people who gather prices from almost 600 items of commodities and services from roughly 50,000 survey spots at more than 550 counties and cities across the country, said Liu.

Tsingtao to buy Shandong's Jinan Beer for 250m yuan

Tsingtao Beer, China's second largest brewer, said yesterday it would buy Jinan Beer, a beer producer from Shandong province, for 250 million yuan ($36.66 million).
Tsingtao said it had signed a contract with Shandong Commercial Group to buy its subsidiary, which has an annual beer output of 300,000 kiloliters and 1.08 billion yuan in total assets.
Jinan Beer has 30-40% market share in Jinan, the provincial capital of Shandong, and the deal, when finalized, would help push up the share that Tsingtao Beer has in Shandong to 80%, analysts said.

Hong Kong Stocks Fall on Valuation Concerns; Foxconn Tumbles

Mainland stocks closed up on Tuesday with the Shenzhen Component up +1.21% to 10,740, and the Shanghai Composite up +0.71% to 2,788, but the Hang Seng closed down -1.07% at 18,058, and the TAIEX continued it's 6 day losing streak down -3.22% and about 7% week on week at 6,414.
Foxconn International Holdings Ltd., the world’s largest contract maker of mobile phones, lost -4%. Citic Pacific Ltd., a specialty-steel maker, lost -6.2%.
China Huiyuan Juice Group Ltd. plummeted -8.3% after Warburg Pincus LLC pulled out of an investment in the company. Pacific Basin, Hong Kong’s largest bulk shipper, slumped -3.9%. The company was also hurt by a 4.3% slide in commodity cargo rates.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,058	-194.9	-1.07%
Shanghai Composite	2,788	19.55	0.71%
Shenzhen Component	10,740	128.34	1.21%
TAIEX	6,414	-213.63	-3.22%
CNY/USD	6.8354	-0.0019	-0.03%

Source: China Economic Scan

9 June 2009 | China Economic Scan

2009-06-08T04:49:00.000-07:00

9-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: PSBC lends 70 bln yuan to SMEs, Top Chinese banker calls for US sales of yuan bonds, China Eastern and Shanghai Air to merge, Vestas to boost global sales and China workforce, Chinese stocks finish mixed on Monday.

Top 5 headlines

Postal Savings Bank of China extends 70 bln yuan in small loans

The Postal Savings Bank of China (PSBC) has extended 70 billion yuan (10.2 billion U.S. dollars) in loans to small and medium-sized enterprises since it started giving small loans last June, PSBC governor Tao Liming said Sunday.
PSBC lent 3-400 million yuan on average every day to small and medium-sized enterprises, and total credit was expected to exceed 100 billion yuan at the end of this year, said Tao.
The PSBC's small loan program was first launched in Henan Province last June. It targets small and medium-sized companies and requires no collateral. The maximum loan for small business owners is 100,000 yuan, and for medium-sized firms 3 million yuan.

Top China banker calls for U.S. sales of yuan bonds

A top Chinese banker on Sunday called on the U.S. government and the World Bank to sell yuan-denominated bonds in Hong Kong and Shanghai to encourage the development of debt markets in those centers and to promote the yuan as a major international currency.
"I think the U.S. government and the World Bank can consider the possibility of issuing renminbi bonds in the Hong Kong market and the Shanghai market," said Guo Shuqing, the chairman of state-controlled China Construction Bank.
Last Wednesday, banking groups HSBC Holdings Plc and Standard Chartered Bank both said they were preparing for yuan-denominated bond issuance in China to help the country develop its local-currency financial markets.

China Eastern, Shanghai Air to Combine After Losses

China Eastern Airlines will combine with Shanghai Airlines after joint losses of 16.5 billion yuan ($2.4 billion) last year prompted the government to bail out the two state-controlled carriers.
The combined group would have 306 planes and more than 600 routes, giving it a 50 percent share of air travel in China’s financial capital.
“It shows that the government wants to improve the performance of state-owned companies through consolidation,” said Kelvin Lau, an analyst at Daiwa Institute of Research Ltd. in Hong Kong. And, “since they have accepted money from the government there is no other choice for them” except to follow the government’s plans.

Vestas to Boost Global Sales, Add China Workforce

Vestas Wind Systems A/S, the world’s biggest maker of wind turbines, plans to increase global sales by 20% this year as it adds production centers and boosts workforce by a third in China.
Vestas’s workforce in China will rise to 3,000 by 2009 from about 2,000 at the end of last year, Lars Andre Andersen, the head of the company’s China unit, said.
4 new production centers will also open this year, taking its number in China to 10, said Andersen. Vestas had sales of about 6 billion euros ($8.3 billion) in 2008.

China’s Stocks Rise for First Time in Three Days; Vanke Climbs

Chinese closed mixed on Monday, the Hang Seng lost -2.28% at 18,253, the Shenzhen Component also fell -0.52% to 10,612, but the Shanghai Composite managed a gain up +0.52% to 2,768.
Vanke jumped +4.7% after Shenzhen trading after the company reported the first monthly gain in the average price of its apartments this year. Minsheng Banking rallied +5.8% on the move to replenish capital. Jiangxi Copper, China’s biggest producer of the metal, dropped -4.2% on lower commodity prices.
“Expectations of an economic recovery are still driving this rally,” said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co., which oversees about $2.1 billion. “In the short term, the market needs a break to allow some profit-taking pressure to be relieved.”

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,253	-426.14	-2.28%
Shanghai Composite	2,768	14.45	0.52%
Shenzhen Component	10,612	-55.36	-0.52%
TAIEX	6,628	-139.08	-2.06%
CNY/USD	6.8373	0.0013	0.02%

Source: China Economic Scan

China Economic Scan Weekly Economic Review - 7 June 2009

2009-06-07T15:01:00.000-07:00

China Economic Scan Weekly Economic Review - 7 June 2009

7/06/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Last week in the Chinese economy, aside from the visit by US Treasury Secretary Timothy Geithner, there were a few interesting economic developments. Among data releases were the official PMI, and industrial profits, there were also inflation forecasts and statements from government bodies.

The official Purchasing Manager’s Index (PMI) was at a seasonally adjusted 53.1 in May after registering 53.5 in April, the Federation of Logistics and Purchasing said. A reading of the PMI above 50 indicates an expansion.

Chinese industrial profits in the first 4 months in 22 provinces fell 27.9% from a year earlier, narrowing a drop seen in Q1, the National Bureau of Statistics (NBS) said. In April, 23 out of 39 sectors saw their profit growth rebound or their losses narrow, the NBS said in a statement on its website (www.stats.gov.cn).

China's banking regulator and the Finance Ministry warned banks against issuing risky loans, saying they must step up their risk management. Banks extended 5.17 trillion yuan ($757.2 billion) in loans in the first 4 months of 2008, exceeding the government's minimum target of 5 trillion yuan for all of 2009 and fanning fears that banks are taking undue credit risks.

A Bank of Communications report said China’s CPI is likely to set a fourth consecutive drop in May and to remain negative in the first half of 2009. BoCom expects food prices to drop slightly in May. The report indicated a range of –1.8% to –1.2%, based on data from the Ministry of Agriculture and Ministry of Commerce.

The Chinese Ministry of Commerce said it would seek to actively encourage foreign investment in China, China's actual foreign direct investment fell 22.5% on year in April to $5.89 billion, bringing actual FDI in the first 4 months of this year to $27.67 billion, down 21% from a year earlier.

There were roughly 666,000 foreign-invested companies in China as of end April. These foreign-invested firms contributed to 29.7% of China's overall industrial output in 2008.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3^rd largest economy. For more info visit www.chinaeconomicscan.com

8 June 2009 | China Economic Scan

2009-06-07T04:53:00.000-07:00

8-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China and Japan pledge to boost global economic recovery, Russia says yuan could be reserve currency in a decade, China may improve fuel pricing, China Green Agriculture to boost sales on demand, Bain Capital agrees to buy into China's GOME.

Top 5 headlines

China, Japan pledge to boost global economic recovery

China and Japan on Sunday vowed to jointly promote world economic recovery during a meeting of top ministers and senior officials in Tokyo, Japanese Foreign Minister Hirofumi Nakasone said.
Nakasone also said both countries would "cooperate in domestic economic measures, in actively supporting developing countries in Asia through international financial institutions, and in preventing protectionism."
Nakasone was speaking after a day of talks with a Chinese delegation led by Vice Premier Wang Qishan that aimed to boost trade and cooperation between Japan and China, the world's second and third biggest economies respectively.

Russia says yuan could be reserve currency in decade

China's yuan could become a world reserve currency in the next decade, Russia's finance minister said on Saturday, as Moscow seeks to whittle away at the U.S. dollar's dominance.
"I think the shortest route would be if China liberalised its economy and allowed the convertibility of the yuan," said Finance Minister Alexei Kudrin, a close ally of Prime Minister Vladimir Putin.
"This could take 10 years but after that the yuan would be in demand and it is the shortest route to the creation of a new world reserve currency and I think China needs to think about this," Kudrin said at a panel discussion at the St Petersburg International Economic Forum.

China May Improve Fuel Price-Setting Mechanism, Observer Says

China’s planning agency is considering improving the mechanism under which fuel prices are adjusted, the Economic Observer reported, citing an unidentified government official.
The move is aimed at curbing hoarding and speculating on gasoline, the report said, without providing more details.
Under a mechanism introduced in December, China may adjust fuel prices when crude-oil costs change more than 4% over 22 straight working days, the NDRC said in May.

China Green Agriculture to Boost Sales on Demand

China Green Agriculture Inc., a producer of organic fertilizer, plans to boost sales by up to 40% in each of the next 4 years through acquisitions and increased domestic demand, its chief financial officer said.
“Chinese consumers, because of safety issues, are willing to pay a higher premium for organic food,” Ying Yang said in a phone interview from Denver. “We’ve been actively looking for opportunities domestically to acquire.”
China Green Agriculture, which is based in Xian, China, fell -2.5% to $7.80. The shares have more than doubled since March 9, when they started trading on the American Stock Exchange.

Bain Capital agrees to buy into China's GOME: source

U.S. private equity giant Bain Capital has agreed to buy a major stake in China's top home appliance retailer GOME, a source with direct knowledge of the deal said on Sunday.
The 2 parties were still finalizing financial details at the weekend and an official announcement is expected as early as next week.
On Wednesday, Bain entered into exclusive talks to buy a major stake in GOME, dubbed as China's Best Buy, after months of competition with other potential investors including Kohlberg Kravis Roberts and Warburg Pincus.

Source: China Economic Scan

6 June 2009 | China Economic Scan

2009-06-05T10:31:00.000-07:00

6-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinalco "Very Disappointed" with Rio Tinto deal collapse, inflation expectations could benefit stocks, ICBC buys Bank of East Asia's Canadian unit, China considers penalty tax on polluting businesses, Chinese stocks fall slightly but close the week up.

Top 5 headlines

Chinalco Is ‘Very Disappointed’ With Rio Rejection

Aluminum Corp. of China, the nation’s largest producer of the material, said it is “very disappointed” with the rejection of its proposed $19.5 billion investment in Rio Tinto Group.
“Our proposal presented an outstanding value creating opportunity for all Rio Tinto shareholders and would have provided a strong platform for a long-term strategic partnership between the two companies,” said Xiong Weiping, president of Chinalco, as it’s also known.
The failed deal would have been the largest single foreign investment by a Chinese company. Rio, the world’s third-largest mining company, said today it will raise as much as $15.2 billion in a share sale, helping reduce $38.9 billion in debt.

Analyst: Inflation expectations benefit stocks

Although surging prices are not good for the economy, inflation expectations can drive up asset prices and boost stocks in the Chinese market, a senior investment banker told the official China Securities Journal on Thursday.
According to Frank Gong, JP Morgan's China chief economist, financial authorities worldwide are now taking various measures against economic recession and deflation.
But these moves, if not well managed, could incur inflation risks in the future.

ICBC’s Canadian Foray May Prompt North American Push

Industrial & Commercial Bank of China agreed to buy control of Bank of East Asia’s Canadian unit, gaining a foothold for expansion in North America with its first acquisition on the continent.
ICBC is making the Canadian foray to “learn the lay of the land and decide whether or not to make a bigger push,” John Aiken, an analyst with Dundee Securities Corp., said in an interview. “ICBC has the potential to deploy a ton of capital within the domestic marketplace if they so choose.”
ICBC, which has more customers than Russia has people and $247 billion of cash and equivalents, has spent more than $6 billion on acquisitions in Indonesia, Macau and South Africa during the past 2 years. Chairman Jiang Jianqing aims to triple the share of profit coming from abroad to 10%.

China mulls penalty tax on polluting businesses

Zhang Lijun, vice minister of environmental protection, said collecting environmental taxes from polluting enterprises was one of the directions of the country's tax system reform.
"It has been put on the agenda of the ministries of finance, environment protection and the state administration of taxation," Zhang told a press conference. "We are jointly studying the issue, and when conditions are ripe, we'll launch the taxation system on polluting enterprises."
Zhang admitted that air in a few cities remained "very polluted" and the problem of acid rain remained serious.

China’s Stocks Decline, Paring Weekly Gain; Developers Retreat

Chinese stocks slipped slightly on the Mainland with the Shenzhen Component down -0.62% to 10,667, the Shanghai Composite down -0.48% to 2,754, however The Hang Seng registered a gain of +0.96% to 18,680.
Gemdale, the country’s fourth-largest developer by market value, retreated -1.6% after almost tripling this year. Haitong Securities dropped -2.3% as the stock traded near its priciest level in a year. Liquor maker Sichuan Swellfun gained +6.8% after Diageo boosted its stake in the parent.
“Stocks are expensive so the rally needs a pause,” said Larry Wan, Shanghai-based deputy chief investment officer at KBC-Goldstate Fund Management Co., which oversees about $583 million in assets.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,680	176.76	0.96%
Shanghai Composite	2,754	-13.35	-0.48%
Shenzhen Component	10,667	-66.61	-0.62%
TAIEX	6,767	-18.96	-0.28%
CNY/USD	6.8360	0.0032	0.05%

Source: China Economic Scan

5 June 2009 | China Economic Scan

2009-06-04T02:31:00.001-07:00

5-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: BoCom said it expects Chinese CPI to fall again in May, Merrill Lynch says Chinese banks' debt funding costs to rise, Chery Automobile raised 2.9bln yuan in growth capital from private equity investors, BNP Paribas lowers Chinese stocks to neutral - says buy India instead, Chinese stocks fall slightly.

Top 5 headlines

BoCom expects negative CPI growth in H1

China's Consumer Price Index (CPI) is set to record the fourth consecutive month of decrease in May and to remain negative in the first half of this year, according to a Bank of Communications (BoCom) report released Monday.
Food prices are expected to drop slightly in May with 1.5 percentage points of the decline due to the tail-raising factor, which was the main reason for the CPI decline in May, according to the report.
Based on data from the Ministry of Agriculture and the Ministry of Commerce, the report said CPI growth would be between minus 1.8% and minus 1.2% with the median minus 1.5% in May, making it the fourth consecutive month of negative growth since February this year.

Chinese Banks’ Debt Financing Costs Will Rise, Merrill Says

Chinese banks face higher costs for selling subordinated bonds as tighter capital regulations stifle demand for the securities following a surge in sales, according to Bank of America's Merrill Lynch.
Chinese banks sold 103 billion yuan ($15 billion) of bonds in the first 5 months this year, more than the combined tally for 2007 and 2008, Merrill analysts Winnie Wu, Alistair Scarff and Michael Li said in a report dated yesterday. Lenders plan another 700 billion yuan of sales before 2012, they said.
“The window for banks’ cheap debt financing is closing in the next three years,” the analysts wrote. “The supply-demand dynamics will drive up the cost of future sub-debt financing.”

Chery nets 2.9b yuan for growth

Chery Automobile Co, China's biggest automaker, said yesterday that it has raised 2.9 billion yuan from local private-equity investors to boost its development and expansion plans.
"The capital will be used in our clean energy program, heavy-duty program and a new sedan plant we are planning to build," said Jin Yibo, Chery's spokesman.
The investors, all local funds, include Bohai Industrial Investment Fund Management, which is majority owned by Bank of China; Tianjin-based CDH Investments; China Huarong Asset Management Corp; and Shenzhen-based China Science & Merchants Venture Capital Management Co Ltd, according to Chery's statement.

China Stocks Lowered at BNP Paribas; Switch to India

China stocks were downgraded at BNP Paribas, which said investors should instead buy more Indian equities because valuations, fund flows and liquidity in the South Asian nation have become more favorable.
Chinese shares were cut to “neutral” from “overweight,” analysts led by Clive McDonnell said in a report today, keeping India “overweight.”
The Bombay Stock Exchange Sensitive Index may extend its rally by another 11%, BNP said, advising customers to buy State Bank of India and sell Chinese peers including Industrial & Commercial Bank of China Ltd.

Hong Kong’s Stocks Decline as Shippers Tumble on China Warning

Chinese stocks fell slightly on Thursday with the Hang Seng down -0.40% to 18,503, the Shanghai Composite down -0.41% to 2,767, but Shenzhen Component closed up 0.20% to 10,734, but the TAIEX shaved off -1.55% to 6,786.
Hopson, a Hong Kong-based developer of real estate in China, plunged -7.9%. Esprit Holdings, a Hong Kong-based global clothing retailer, declined -4.6% on concern product demand will decline after a worse-than-expected report on the U.S. services sector.
Sinotrans Shipping, the dry- bulk arm of China’s third-largest shipping group, tumbled -7.4%. Shipping stocks accounted for six of the 10 biggest falls on the 201-member Hang Seng Composite Index. Trade faces “unprecedented difficulties,” Vice Commerce Minister Zhong Shan said yesterday.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,503	-73.7	-0.40%
Shanghai Composite	2,767	-11.35	-0.41%
Shenzhen Component	10,734	21.41	0.20%
TAIEX	6,786	-107.08	-1.55%
CNY/USD	6.8328	0.0022	0.03%

Source: China Economic Scan

4 June 2009 | China Economic Scan

2009-06-03T04:22:00.001-07:00

4-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China says quick rebound in trade is unlikely, JP Morgan economist predicts housing price rally in China, Morgan Stanley raises Chinese stocks to 'neutral', Shanxi province plans coal futures exchange, Chinese stocks surge to 10-month high on Wednesday.

Top 5 headlines

China Says Quick Rebound in Trade Is Less Likely

China said a quick rebound in trade is becoming less likely, with the nation’s exports and imports set to decline in the first half of this year.
“China’s exports may start to grow as early as January after the major economies such as the U.S. and Japan gradually recover later this year,” said Xing Ziqiang, a Beijing-based economist at China International Capital Corp.
Trade faces “unprecedented difficulties” and the outlook for the second half is not optimistic, Vice Commerce Minister Zhong Shan said in a statement about export credit insurance posted on the ministry’s Web site today. He didn’t elaborate on why a speedy recovery has become less likely.

Economist predicts housing price rally

China's housing prices are predicted to rise by 5 to 10% this year and will keep a growth of 10% next year, Frank Gong, chief economist at JP Morgan, said.
Hui Jianqiang, analyst of E-house China R&D Institute in Shanghai, echoed Gong's prediction as he said housing investment and sales are not in balance. "It is necessary for the government to adopt policies to lower the proportion of capital fund, in order to spur investment in real estate," Hui said.
Urban residents have relatively high saving rates that will be sufficient to support consumption, Gong said. He added that the fast growing urban population indicates a huge domestic housing demand.

China Stocks Raised to ‘Neutral’ at Morgan Stanley

China stocks were upgraded to “neutral” at Morgan Stanley, which said the growth in liquidity globally is boosting asset prices.
The brokerage also increased its “base case” target for the MSCI China Index to 50.9 from 36.3, Morgan Stanley’s Hong Kong-based strategist Jerry Lou wrote in a note today. He had cut the rating on Chinese stocks to “cautious” in April.
“A mini asset-economy upcycle, courtesy of aggressive policy-driven liquidity globally, could be developing,” Lou wrote. “Liquidity’s transference into borrowed prosperity could develop and carry the current market rally beyond 2009.”

Shanxi plans coal futures bourse

Shanxi province, China's largest coal producer, said it has plans to establish the country's first coal and coke futures exchange to help stabilize the domestic market and secure a bigger voice in international pricing.
"We have submitted a feasibility study to the authorities with the aim of establishing the market in 2012," said Wang Hua, director at the Shanxi provincial capital market development office.
Shang Fulin, chairman of China Securities Regulatory Commission (CSRC), yesterday said at the sixth Shanghai Derivatives Market Forum that the CSRC would continue to encourage more futures products in China to help domestic enterprises hedge against financial risks.

China shares hit 10-month high, led by financials

Chinese stocks surged again on Wednesday, the Shenzhen Component lead up +2.17% to 10,712, the Shanghai Composite rose +1.99% to 2,779, and the Hang Seng rose +1.02% to 18,576.
Midsize lender Pudong Development Bank soared by the daily maximum of +10% to 28.73 yuan. Industrial & Commercial Bank of China, China's biggest commercial lender, soared +4.2% to 4.69 yuan. Bank of China gained +3.03% to 3.74 yuan.
Property developers rose for a third day on hopes of a revival in China's real estate market. China Vanke, the country's biggest developer, advanced +6.1% to 10.84 yuan, while rival Poly Real Estate Group, surged +9% to 25.34 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,576	187.39	1.02%
Shanghai Composite	2,779	54.29	1.99%
Shenzhen Component	10,712	227.98	2.17%
TAIEX	6,893	-55.94	-0.80%
CNY/USD	6.8306	-0.0049	-0.07%

Source: China Economic Scan

3 June 2009 | China Economic Scan

2009-06-02T05:44:00.000-07:00

3-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Geithner says China has confidence in US economy, China to speed up nuclear power development, China alocates $878m for low-rent housing, Goldman Sachs sells shares in ICBC for $1.91bln, Chinese stocks edge up on Tuesday.

Top 5 headlines

Geithner Says China Has Confidence in U.S. Economy

Treasury Secretary Geithner said China, the biggest holder of U.S. Treasuries, has expressed confidence in the U.S. economy and the Obama administration’s actions to fight the recession.
“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”
“You have established good working relationships with your Chinese colleagues and you are committed to increasing China-U.S. cooperation in tackling the international financial crisis,” President Hu Jintao said at a meeting at the Great Hall of the People. “I appreciate that.”

Official: China to speed up nuclear power development

China's nuclear power capacity is expected to reach about 5% of the country's total power capacity by 2020, according to National Energy Administration (NEA).
The target is higher than the original one set in 2007, which aimed for a nuclear power capacity of 40 million kw by 2020, taking up 4% of the total power capacity.
At present, China's nuclear power takes up 2% of the total power generation, while coal-fired power covers more than 80% of the total. 15% of world power generation comes from nuclear energy.

China allocates $878 mln for low-rent house building fund

China's Ministry of Finance (MOF) announced Monday that the central government had earmarked the second batch of 6 billion yuan (878 million U.S. dollars) as special fund for low-rent house building projects across the country this year.
The central government allocated the first batch of 7 billion yuan fund for this purpose in April, thus completing the goal of providing 13 billion yuan of subsidy for this year.
Figures released on May 21 by the National Development and Reform Commission, China's top economic planner, showed that 214,000 low-rent housing units had been built by April since the government launched the 4-trillion-yuan stimulus package last November, with construction on another 650,000 units underway nationwide.

Goldman Sachs Raises $1.91 Billion Selling Shares in ICBC

Goldman Sachs Group, which wants to return $10 billion this month to the U.S. government, raised HK$14.8 billion ($1.91 billion) by selling shares of Industrial & Commercial Bank of China after the stock jumped 29% in two months.
The New York-based firm sold 3.03 billion Hong Kong-traded shares, or a 0.9% stake in the Chinese bank, at HK$4.88 apiece.
“It’s very opportunistic, and obviously they’re not the first to come to the market to do that,” said Douglas Ciocca, a managing director at Renaissance Financial Corp. “It’s a prudent reallocation of capital because they still have a big remaining stake in there.”

China’s Stocks Rise to 10-Month High; Developers Lead Advance

Chinese stocks were mixed on Tuesday with the Hang Seng falling -2.64% to 18,389, but Shanghai Composite registered a small gain of +0.11% to 2,724, and Shenzhen Component rose +0.60% to 10,484.
Huaxia Bank, partly owned by Deutsche Bank, dropped -1.1% to 10.08 yuan. The bank said 1.58 billion shares, or 32% of its share capital, will become tradable on June 8. The stock is owned by 25 of its biggest shareholders, it said.
Anhui Jianghuai Automobile, China’s second- biggest light-truck maker, jumped +4.3% to 6.10 yuan after yesterday’s trading suspension. The company said it has no “immediate” plan for any restructuring that involves Chery Automobile Co. Ningbo Yunsheng Group lost -3.9% to 11.14 yuan. The company said its biggest shareholder sold 3.75 million shares, or 0.95% of the company’s total.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,389	-499.51	-2.64%
Shanghai Composite	2,724	3.02	0.11%
Shenzhen Component	10,484	62.98	0.60%
TAIEX	6,949	-5.02	-0.07%
CNY/USD	6.8355	0.0084	0.12%

Source: China Economic Scan

2 June 2009 | China Economic Scan

2009-06-01T02:26:00.000-07:00

2-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese PMI comes in at 53.1 for May, NDRC says gasoline and diesel benchmark retail prices to rise, Melco opens $2bln casino in Macau's Cotai strip, academics and industry practitioners say derivatives not a bad thing, Chinese stocks jump 3% on Monday.

Top 5 headlines

Chinese Manufacturing Grows, Adding to Evidence of Recovery

The official Purchasing Manager’s Index (PMI) was at a seasonally adjusted 53.1 in May after registering 53.5 in April, the Federation of Logistics and Purchasing said.
A reading of the PMI above 50 indicates an expansion.
Industrial production growth may accelerate to 8% this quarter as stimulus spending gathers momentum, up from 7.3% last month and 5.1% in the first three months, the Ministry of Industry and Information Technology said May 22. Output may increase 10% in the second half, it added.

China to raise gasoline, diesel benchmark retail prices

China will raise gasoline and diesel benchmark retail prices by 400 yuan (58.6 U.S. dollars) per tonne as of Monday, the National Development and Reform Commission (NDRC) said.
The benchmark retail price for gasoline would increase by 7% and the price of diesel by 8%, according to the NDRC
According to the new mechanism, China's domestic fuel prices are to be "indirectly linked" to global crude prices "in a controlled manner." China would adjust domestic fuel prices when global crude prices reported a daily fluctuation band of more than 4 percent for 22 working days in a row.

Melco Opens $2 Billion Casino in Macau’s Cotai Strip

Melco Crown Entertainment Ltd. opens its City of Dreams casino today in a $2 billion bet that Macau will rebound from a slump that prompted rival Las Vegas Sands Corp. to halt construction on a neighboring project.
The complex on Macau’s Cotai Strip has 516 gambling tables in a 420,000-square-foot casino, Hard Rock and Grand Hyatt hotels as well as a multimedia theater and shops run by DFS.
“The gaming sector had a very bad year in 2008 because of a weakening Macau economy,” Winson Fong, who helps manage $2 billion at SG Asset Management H.K. Ltd., said. “Now, people are buying into the sector because as a speculative one, it tends to perform better during a recovery,”

'Let more firms trade in futures'

Allowing more Chinese companies to trade in the international futures market is a better solution to protect State-owned enterprises (SOEs) from potential losses in overseas derivatives trading than simply blaming the investment banks that offer these products, experts said.
Despite the fact that some SOEs have suffered enormous losses, derivatives continue to be a very important financial instrument for large corporations around the world, including Chinese companies, to hedge business risks, Hu Yuyue, a futures professor at Beijing Technology and Business University.
According to the professor, a report from the International Swaps and Derivatives Association (ISDA) indicated that over 94% of Fortune 500 companies use derivatives as a tool to manage risks.

China Stocks Rise Most in Three Months as Manufacturing Expands

Chinese stocks recorded strong gains with the Hang Seng up 3.95% at 18,889, the Shanghai Composite up 3.36% to 2,721, and the Shenzhen Component up 2.90% to 10,421.
“The pick-up in the economy is better than expected and that’s giving investors a strong reason to buy,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million.
Jiangxi Copper, the country’s biggest producer of the metal, surged +9.1% and Industrial & Commercial Bank of China gained +3.7%. PetroChina climbed +4.9% after China increased fuel prices and crude oil rose to a 7-month high. China Vanke added +4.3% after the government eased requirements for real-estate projects.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,889	717.59	3.95%
Shanghai Composite	2,721	88.35	3.36%
Shenzhen Component	10,421	293.43	2.90%
TAIEX	6,954	63.66	0.92%
CNY/USD	6.8271	-0.0054	-0.08%

Source: China Economic Scan

1 June 2009 | China Economic Scan

2009-05-31T05:21:00.000-07:00

1-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese economists see risk in holding US bonds, Chinese MOFCOM to encourage foreign investment after a 22.5% fall in FDI, China's banking regulator and Finance Ministry warned banks on making risky loans, Chinese industrial profits drop 28%, China's Agricultural Bank may still be some time away from IPO.

Top 5 headlines

Chinese economists deem huge holding of US bonds "risky," split on way out

On the first day of U.S. treasury secretary Timothy Geithner's visit to China, the Beijing-based Global Times published a survey of 23 famous Chinese economists on Sunday, saying that the majority of them deemed the vast holding of U.S. bonds "risky."
Among the 23 experts polled, 17 said they believed that holding U.S. equities pose great risks to China's economy.
However 15 of the interviewed economists said they were against the idea to quickly offload China's possession of U.S. debt as a means to strengthen the country's financial stability and decrease Beijing's vulnerability to the already ailing world economy.

China's Ministry Of Commerce To Encourage Foreign Invest

The Chinese Ministry of Commerce said it would seek to actively encourage foreign investment in China, ahead of U.S. Treasury Secretary Timothy Geithner's official meeting with Chinese authorities next week.
China's actual foreign direct investment fell 22.5% on year in April to $5.89 billion, bringing actual FDI in the first 4 months of this year to $27.67 billion, down 21% from a year earlier.
There were roughly 666,000 foreign-invested companies in China as of end April, about 3% of the country's overall number of companies. These foreign-invested firms contributed to 29.7% of China's overall industrial output and 21% of the country's tax revenue in 2008.

China regulator warns banks on risky loans

China's banking regulator and the Finance Ministry on Sunday warned banks against issuing risky loans, saying they must step up their risk management.
Banks extended 5.17 trillion yuan ($757.2 billion) in loans in the first 4 months, exceeding the government's minimum target of 5 trillion yuan for all of 2009 and fanning fears among analysts that banks were taking undue credit risks.
In offering loans, banks must make a careful assessment of the borrowers' needs, to ensure the company in question is not using the money for 'blind expansion', the statement said.

China Jan-Apr industrial profits drop 28 pct yr/yr

Chinese industrial profits in the first 4 months in 22 provinces fell 27.9% from a year earlier, narrowing a drop seen in Q1, the National Bureau of Statistics (NBS) said.
In April, 23 out of 39 sectors saw their profit growth rebound or their losses narrow, the NBS said in a statement on its website (www.stats.gov.cn).
Petroleum refining and coking industry profits reached 26.66 billion yuan ($3.9 billion) in the first 4 months, surging 181.3% year on year. The electricity sector made a profit of 2.19 billion yuan as of the end of April, in sharp contrast with a 1.37 billion loss made in Q1.

China’s Agricultural Bank May Not List This Year, Finet Reports

Agricultural Bank of China probably won’t list its shares this year, Finet news service reported, citing 2 bank executives it didn’t name.
The bank plans to open branches in New York and London this year to prepare for a global commodity-trading system before seeking a public listing.
Agricultural Bank expects to acquire licenses to start operations in the U.S. and U.K. next year.

Source: China Economic Scan

China Economic Scan Weekly Economic Review - 31 May 2009

2009-05-30T23:15:00.001-07:00

China Economic Scan Weekly Economic Review - 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the week that was, the Chinese government revealed more statistics about spending of the stimulus package, and encouraged its local governments to match spending. Elsewhere growth forecasts were raised, energy prices were touted to increase and signs of gold fever stirred.

China's central government has allocated 270 billion yuan (US$39.7 billion) for infrastructure investment so far this year, according to the National Development and Reform Commission (NDRC). The spending is part of a planned total of 367.6 billion yuan in the 2009 central budget and brings the total already allocated since Q4 2008 to 300 billion yuan.

China has urged its local governments to cough up funds so that projects in its 4-trillion-yuan ($586 billion) stimulus plan can be completed on time. Estimates are that local governments will need to raise 170 billion yuan to match the central government's first two batches of investment of 230 billion yuan. Previously a National Audit Office report found that "only 48% of the funds local governments had to contribute for 335 projects are in place".

That said, China’s growth prospects have apparently improved from three months ago, this is in spite of drops in steel and electricity output and the risk of a manufacturing contraction this month. The world’s third-largest economy will expand 7.5% this year, according to a median estimate of 14 economists surveyed by Bloomberg News, up from an earlier forecast of 7.1% in February this year.

Internationally, China is looking to increase investment from multinational corporations, Vice Premier Li Keqiang said. "We continue our opening-up policy and oppose trade protectionism in any form," Li told visiting GE Chairman and Chief Executive Officer Jeff Immelt, saying that China offered opportunities for multinationals to expand their business and investment. Li said the government is trying to foster the development of high-tech and strategic emerging industries.

China, the world’s second-biggest energy user, may raise gasoline and diesel prices by about 10% by next weekend. “We believe China is forced into a corner” and will raise prices “as soon as this weekend, and if not, very likely by next weekend following OPEC’s strong resolve to support higher oil prices,” said Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong.

In signs of gold fever hitting China, gold prices quoted on the Shanghai Gold Exchange (SGE) increased by an average 6.74% in the past month to the current level of about 209 yuan a gram. "Gold demand in China in the first quarter rose to 114 tons, up 2% over the same period last year, solely boosted by an increase in jewelry demand," according to the World Gold Council. The report also noted that global demand for gold rose 38% year-on-year to 1,016 tons. China is the world's second largest gold consuming country after India.

China Economic Scan Weekly Stockmarket Review - 31 May 2009

2009-05-30T23:14:00.001-07:00

China Economic Scan Weekly Stockmarket Review - 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Chinese stocks closed the week up; the Hang Seng lead by a whopping 6.5% at 18,171, the TAIEX followed with 2.27%, Shanghai closed up 1.36% to 2633 and Shenzhen was up 0.55% to 10,128.

The gains put the Shanghai index up 45% so far this year, with gains for each of the first 5 months of this year. "Ample liquidity and optimism about economic recovery have contributed to the monthly rally," said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co. "The gains may not last if we fail to see more good economic and corporate data."

In a very interesting development, the China Securities Regulatory Commission (CSRC) said it would end a de facto suspension of initial public offerings (IPOs) on the Shanghai and Shenzhen stock exchanges as of June 5. The CSRC effectively suspended all new stock issues last September, as it halted approvals. New guidelines issued by the CSRC aim to improve the price discovery function of the stock market, and help retail investors subscribe to newly issued stocks.

Enjoyor Technology Group is preparing for listing on the to-be-established Growth Enterprise Board (GEB) of the Shenzhen Stock Exchange (SSE), said an executive of the Chinese intelligentization solution provider. Intel Capital, the investment arm of Intel Corporation invested in the company earlier this year. The company was built in Hangzhou Hi-tech Industry Development Zone, and is engaged in building of intelligent traffic, medical, educational, security, financial and office systems.

Tingyi (Cayman Islands) Holding Corp., China’s biggest maker of packaged food, said profit climbed 43% to a quarterly record on higher instant-noodle and beverage consumption in the world’s third-largest economy. Q1 net income rose to $93 million, from $65 million a year earlier. Sales increased 21% to $1.18 billion. Instant noodle sales gained 12% to $587.7 million in and beverage sales rose 37% to $525 million, Tingyi said.

Xinao Gas Holdings, a distributor of piped natural gas in Mainland China, Executive Director Wilson Cheng said sales would rise by at least 25% each year until 2014. Xinao aims to sell 2.8 billion cubic meters of gas this year, compared with 2.2 billion in 2008. Xinao, based in Hebei province in northern China, forecasts it will connect 750,000 more households to the gas network this year, up to a total of 4.5 million.

Bain Capital may buy as much as 20% of Gome Electrical Appliances Holdings, China’s second-largest electronics retailer, for about $500 million. Bain is apparently competing for Beijing-based Gome with KKR & Co. and Warburg Pincus. Gome’s more than 800 stores in at least 160 Chinese cities make it an attractive target for investors faced with stagnant economies in the U.S., Europe and Japan.

China Economic Scan Weekly Debt Market Review – 31 May 2009

2009-05-30T23:13:00.000-07:00

China Economic Scan Weekly Debt Market Review – 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started on Monday at 118 even, and dipped down to lows of 117.60, before closing the trading week up at 118.10 on Wednesday. The Shenzhen Corporate Bond Index started the week at 130.77, dropped to a low of 130.47, and rallied to close the short week up at 130.85.

China's Ministry of Finance (MOF) said it would issue 16.9 billion yuan (US$2.48 billion) of 3-year local government bonds on behalf of 4 provinces and municipalities at a fixed annual coupon rate of 1.67%. The amounts were 3.5 billion yuan for Guangxi Zhuang Autonomous Region, 5.6 billion yuan for Beijing city, 4 billion yuan for Shanghai city and 3.8 billion yuan for Henan Province.

Chinese credit rating agency, Dagong Global Credit Rating, one of the first domestic rating agencies in China, announced the launch of its sovereign credit rating standards. It said credit risks will asses a country's political environment, economic power, fiscal status, foreign debt and liquidity, adding that it judges the credit of a sovereign entity on the basis of a comprehensive evaluation of its fiscal strength and foreign reserves.

SOHO China, the biggest property developer in Beijing's Central Business District, said the proceeds from a $359 million 5-year convertible bond issue, with a coupon rate of 3.75% a year, would be earmarked for general corporate purposes and strategic acquisitions. The bonds will be convertible into 476.2 million ordinary shares, accounting for 8.4% of SOHO's enlarged share capital.

China Construction Bank, the world’s 3rd-largest lender by market value, rose in Hong Kong trading after the company’s largest government shareholder raised its stake and promised to buy more shares. The Beijing-based company has acquired about 57.8 million Shanghai-traded shares of Construction Bank over the past 6 months at a price range between 3.71 yuan and 4.18 yuan a share, according to yesterday’s statement.

30 May 2009 | China Economic Scan

2009-05-29T13:09:00.000-07:00

30-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China economists raise growth forecasts, China may raise gasoline and diesel prices, Gold fever hits Chinese investors, Rocawear owner forms venture with Bosideng, Shanghai Gold Exchange marks 134% increase in trading.

Top 5 headlines

China Economists Raise Growth Forecasts Amid Signs of Weakness

China’s growth prospects have improved from three months ago, even after accounting for drops in steel and electricity output and the risk of a manufacturing contraction this month, economists’ forecasts show.
The world’s third-largest economy will expand 7.5% this year, according to the median estimate of 14 economists surveyed by Bloomberg News, up from a 7.1% forecast in February.
Gross domestic product expanded 6.1% in the first quarter, the slowest pace in almost 10 years.

China May Raise Gasoline, Diesel Prices, Analyst Says

China, the world’s second-biggest energy user, may raise gasoline and diesel prices by about 10 percent by next weekend as higher oil prices are leading to losses at the nation’s refiners, according to an analyst.
Crude has surpassed $60 a barrel, putting pressure on Chinese refiners, Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong, said in an e-mail today.
“We believe China is forced into a corner” and will raise prices “as soon as this weekend, and if not, very likely by next weekend following OPEC’s strong resolve to support higher oil prices,” Kwan said.

Gold fever grips Chinese investors

Gold prices quoted on the Shanghai Gold Exchange SGE have increased by an average 6.74% in the past month to the current level of about 209 yuan a gram.
"Gold demand in China in the first quarter rose to 114 tons, up 2% over the same period last year, solely boosted by an increase in jewelry demand," according to the latest Gold Demand Trends report for the first quarter of 2009 published by the World Gold Council.
The report said global demand for gold rose 38 percent year-on-year to 1,016 tons, representing a 36% rise in value. China is the world's second largest gold consuming country after India.

Rocawear Owner Forms Venture With Bosideng to Open China Stores

Rocawear, a brand co-founded by rapper Jay-Z, may sell clothes through 300 China stores after its owner entered into a venture with Bosideng International Holdings Ltd., the country’s biggest maker of down jackets.
Bosideng said in a statement to Hong Kong’s stock exchange that it will partner with Iconix China Ltd. to sell the Rocawear range of men’s and women’s products in China by next year.
Bosideng fell -1% to HK$1.04 in Hong Kong trading. Bosideng shares have gained +42% this year, compared with +26% for the benchmark Hang Seng Index.

Shanghai gears up for the big league

With gold gaining a greater role in China's foreign exchange portfolio, experts feel that it is only a matter of time before Shanghai becomes a major gold trading market.
Around 4,220.7 tons of gold was traded at the bourse in 2008, worth 822.9 billion yuan ($120.52), up 134.19% and 164.15% year-on-year, respectively, making it the world's top exchange for spot gold trading.
"Although Shanghai still lags behind other gold trade centers like Hong Kong, New York and London in terms of global influence, China's robust economic growth and the city's plans to turn itself into a global financial center will give it an added advantage," said Albert Cheng, director of the World Gold Council's Far East Division.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,171	285.73	1.60%
Shanghai Composite	2,633
Shenzhen Component	10,128
TAIEX	6,890
CNY/USD	6.8325

Source: China Economic Scan

29 May 2009 | China Economic Scan

2009-05-28T06:46:00.000-07:00

29-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese investment rises in Lat-Am, Northeast Electric goes into trading halt following Buffett rumours, Shenzhen Stock Exchange to promote construction of multi-level capital market, SOHO plans $359m bond float, Shanghai stocks are up 45% YTD.

Top 5 headlines

Chinese investment rises in Latin America: ECLAC

Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) Alicia Barcena said Chinese investment in Latin America is showing substantial increases.
In the report, ECLAC also cited the deals that the Aluminium Corporation of China reached with Anglo-Australian mining giant Rio Tinto to invest US$19.5 billion in its Peruvian mines, and China Metals agreed with Australia's Oz Minerals to invest US$17 billion in its mines in Latin America.
Regional foreign direct investment was around US$128.3 billion in 2008, a record figure despite the world's financial crisis. However, the figure is estimated to drop as much as 45% this year, due to the prolonged financial crisis, said the report.

Northeast Electric Halts Trading On Talk Of Buffett Invest

Shenzhen listed Northeast Electric Development suspended the trading of its shares in both Shenzhen and Hong Kong Wednesday, saying it plans to clarify a local media report on speculation that Warren Buffett may invest in the company.
Without citing a source, the Shanghai newspaper reported Wednesday that there is talk the U.S. billionaire is negotiating with Northeast Electric's major shareholders over a stake transfer. The paper didn't give other details.
Its H shares were up 59% at HK$2.26 before trading was halted in Hong Kong at 0250 GMT.

Shenzhen Stock Exchange: To Promote the Construction of the Multi-level Capital Market

Song Liping said the Shenzhen Stock Exchange shall continue promoting the reform of the systems of IPO and refinancing, enhancing financing efficiency and improving supervision system and means.
Chen Dongzheng, general-director of Shenzhen Stock Exchange said SME board has made great contribution to the forthcoming launching of the new market and the construction of multi-level capital market.
Chen stressed that the risks of new market shall be considered and undertaken due to the significance of the new market.

SOHO plans $359m bond float

SOHO China, the biggest property developer in Beijing's Central Business District, is filling up its war chest for future acquisitions with a $359 million bond issue.
The Hong Kong-listed developer said the proceeds from the five-year convertible bonds, with a coupon rate of 3.75% a year, would be earmarked for general corporate purposes and strategic acquisitions.
The bonds will be convertible into 476.2 million ordinary shares, accounting for 8.4% of SOHO's enlarged share capital. The bond will be issued at HK$5.88 each, representing a 20% premium over the stock closing price of HK$4.90 on Tuesday.

Index shows 5th straight monthly gain

Chinese markets were closed on Thursday (and will be on Fri) for Dragon boat festival after completing a fifth monthly gain, as raw-material producers and shipping companies climbed on higher commodity prices and increased transportation rates.
"Ample liquidity and optimism about economic recovery have contributed to the monthly rally," said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co. "The gains may not last if we fail to see more good economic and corporate data."
The Shanghai index has posted gains every month this year for a 45% rally on optimism a 4-trillion-yuan stimulus package and record lending would revive growth.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,885
Shanghai Composite	2,633
Shenzhen Component	10,128
TAIEX	6,890
CNY/USD	6.8310

Source: China Economic Scan

28 May 2009 | China Economic Scan

2009-05-27T04:46:00.000-07:00

28-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China urges local governments to spend stimulus money, China organises industry purchasing tours of Taiwan, Bain said to lead KKR in bid for 20% of Gome, China Construction Bank rises after Huijin increases holding, Hong Kong stocks rise over 5% on Wednesday.

Top 5 headlines

Local govts urged to provide stimulus money on time

China has urged its local governments to cough up funds to ensure major projects in its 4-trillion-yuan ($586 billion) stimulus plan could be completed on time.
It is estimated that local governments need to raise 170 billion yuan to match the central government's first two batches of investment of 230 billion yuan, Zhang Shaochun, vice-minister of finance, told four specialized committees of the National People's Congress yesterday.
Zhang's statement comes close on the heels of a National Audit Office report, which found that "only 48% of the funds local governments had to contribute for 335 projects are in place".

Chinese mainland organizes industry purchasing tours of Taiwan

The Chinese mainland has organized schedules for industry purchasing groups to Taiwan from May to September, to help develop the island economy during global financial crisis.
"The preparations are underway and we plan to convene seven to nine purchasing groups in next five months," said Yang Yi, spokesman of the State Council Taiwan Affairs Office at a press conference Wednesday.
He said the China Video Industry Association would organize a visit of leading mainland TV producers on June 1 with planned procurement of about US$2.2 billion.

Bain Said to Lead KKR in Bid for 20% of China’s Gome

Bain Capital may buy as much as 20% of Gome Electrical Appliances Holdings, China’s second-largest electronics retailer, four people familiar with the discussions said.
Bain may pay about $500 million for the stake, two of the people said, asking not to be identified because the talks are confidential. Bain is competing for Beijing-based Gome with KKR & Co. and Warburg Pincus, the people said.
Gome’s more than 800 stores in at least 160 Chinese cities make it an attractive target for investors faced with stagnant economies in the U.S., Europe and Japan. KKR and TPG Inc. are among private-equity firms that have sought stakes in companies tied to domestic consumption growth in the past year.

China Construction Bank Rises After Huijin Boosts Stake

China Construction Bank, the world’s third-largest lender by market value, rose in Hong Kong trading after the company’s largest government shareholder raised its stake and promised to buy more shares.
The Beijing-based company has acquired about 57.8 million Shanghai-traded shares of Construction Bank over the past six months at a price range between 3.71 yuan and 4.18 yuan a share, according to yesterday’s statement.
Construction Bank rose +1.9% to HK$4.88 as of 10:22 a.m. in Hong Kong and was up +0.7% to 4.49 yuan in Shanghai.

Hong Kong’s Stocks Surge to Seven-Month High; Li & Fung Rises

Chinese stocks surged on Wednesday, the Shenzhen Component rose +1.05% to 10,128, the Shanghai Composite jumped +1.71% to 2,633, and the Hang Seng surged +5.26% to 17,885.
Henderson Land Development Co., a Hong Kong-based developer controlled by billionaire Lee Shau-kee, gained +7.7%.
Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., jumped +11% after U.S. consumer confidence climbed the most in six years. PetroChina, the nation’s largest oil producer, added +5.8% after oil prices rose.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,885	893.71	5.26%
Shanghai Composite	2,633	44.35	1.71%
Shenzhen Component	10,128	105.62	1.05%
TAIEX	6,890	207.33	3.10%
CNY/USD	6.8310	-0.0025	-0.04%

Source: China Economic Scan

27 May 2009 | China Economic Scan

2009-05-26T09:50:00.000-07:00

27-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China allocates 270 bln yuan for infrastructure investment YTD, China hopes for more investment from multinationals, Shandong plans auto behemoth, Xinao gas says sales may more than double in 5 years, Chinese stocks close down on Tuesday.

Top 5 headlines

China allocates 270 bln yuan for infrastructure investment so far in 2009

China's central government has allocated 270 billion yuan (about US$39.7 billion) for infrastructure investment so far this year, a National Development and Reform Commission (NDRC) official told legislators Tuesday.
That amount is part of a planned total of 367.6 billion yuan in the 2009 central budget.
Adding another 30 billion yuan from last year's budget meant that the country had already allocated 300 billion yuan to infrastructure investment since the fourth quarter of last year, NDRC vice director Mu Hong told legislators.

China hopes for more investment from multinationals

China hopes US-based General Electric (GE) and other multinationals would increase investment, Vice Premier Li Keqiang said Monday.
"We continue our opening-up policy and oppose trade protectionism in any form," Li told visiting GE Chairman and Chief Executive Officer Jeff Immelt, saying that China offered opportunities for multinationals to expand their business and investment.
Li said the government was striving to support the development of high-tech and strategic emerging industries.

Shandong plans auto behemoth

Three auto parts makers, including a leading engine maker and an earthmover manufacturer, will merge to create an industrial conglomerate in Shandong province with sales projected to exceed 100 billion yuan by 2012, the latest industry consolidation move in China's fragmented auto sector.
Weichai Holdings, Shandong Construction Machinery Group, and Shandong Auto Industrial Group, will form a venture called Shandong Heavy Industry Group Co, according to separate exchange filings by their listed units.
The combined sales of the three listed companies amounted to more than 40 billion yuan in 2008, according to their annual reports.

Xinao Gas Says Sales May More Than Double in 5 Years

Xinao Gas Holdings, a distributor of piped natural gas in mainland China, said sales may more than double over the next five years as demand for the cleaner-burning fuel increases.
Sales will rise by at least 25% each year until 2014, Executive Director Wilson Cheng said in an interview today. Xinao aims to sell 2.8 billion cubic meters of gas this year, compared with 2.2 billion in 2008, the company said on April 8.
Xinao, based in Hebei province in northern China, forecasts it will connect 750,000 more households to the gas network this year, taking its total number of customers to about 4.5 million.

China shares fall on property tax, liquidity fears

Chinese stocks fell on Tuesday, the Shenzhen Component fell -1.57% to 10,022, the Shanghai Composite fell -0.82% to 2,610, and the Hang Seng fell -0.76% to 16,992.
China Vanke, the country's biggest developer, fell -3% to 9.66 yuan, rival Poly Real Estate Group dropped -2.5% to 21.14 yuan and Financial Street Holding lost -3.3% to 10.15 yuan.
Industrial and Commercial Bank of China, China's biggest commercial lender, edged +0.7% lower to 4.23 yuan while major refiner Sinopec, or China Petroleum & Chemical, fell -1.6% to 10.14 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	16,992	-130.26	-0.76%
Shanghai Composite	2,589	-21.43	-0.82%
Shenzhen Component	10,022	-159.86	-1.57%
TAIEX	6,683	-51.35	-0.76%
CNY/USD	6.8335	0.0096	0.14%

Source: China Economic Scan

26 May 2009 | China Economic Scan

2009-05-25T04:44:00.000-07:00

26-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese rating agency launches sovereign ratings, Dalian futures exchange lists PVC futures contract, Tingyi sees 43% profit rise on noodle and drink sales, Citic Pacific to invest $2.2bln in Steel, Chinese stocks begin the week with a small increase.

Top 5 headlines

China unveils 1st sovereign credit rating standards

Chinese credit rating agency, Dagong Global Credit Rating, one of the first domestic rating agencies in China, announced the launch of its sovereign credit rating standards.
Elements of credit risks will include the country's political environment, economic power, fiscal status, foreign debt and liquidity, said the company, adding that it judges the credit of a sovereign entity on the basis of a comprehensive evaluation of its fiscal strength and foreign reserves.
Compared with other rating agencies, Dagong pays more attention to the different economic stage of each country, and examines the features of its credit risks in a holistic and systematic view, according to Dagong.

China launches PVC futures trading

China started the trading of polyvinyl chloride (PVC) futures contracts at 9 a.m. at DALIAN Commodity Exchange Monday, the 3rd new futures contract this year after steel and rice.
The September contract V909 opened 275 yuan higher at 6575 yuan per ton.
PVC is a kind of synthetic resin widely used in construction, plumbing, electric wires and packaging. China is the world's largest PVC manufacturer, with an annual output of 8.82 million tonnes last year.

Tingyi Posts Record Profit on Noodle, Drinks Sales in China

Tingyi (Cayman Islands) Holding Corp., China’s biggest maker of packaged food, said profit climbed 43% to a quarterly record on higher instant-noodle and beverage consumption in the world’s third-largest economy.
Q1 net income rose to $93 million, from $65 million a year earlier. Sales increased 21% to $1.18 billion.
Instant noodle sales gained 12% to $587.7 million in and beverage sales rose 37% to $525 million, Tingyi said. Finance costs fell to $6.63 million from $9.25 million and the prices of palm oil, sugar and plastics declined, it said.

Citic Pacific to Invest $2.2 Billion in Steel, May Sell Assets

Citic Pacific, rescued by China after posting the biggest currency derivative loss by a Chinese company, plans to invest 15 billion yuan ($2.2 billion) in its iron ore and steel businesses, and may sell other assets.
The company in March posted its first annual loss of HK$12.7 billion ($1.6 billion) in almost 2 decades. It bought currency contracts to fund the iron ore mine in Australia, and bets that the Australian dollar would gain incurred losses after the currency tumbled.
Citic Pacific dropped -0.4% to close at HK$16 in Hong Kong trading. The shares have climbed 69% since the appointment of new Chairman, Chang Zhenming on April 8.

China’s Stocks Rise on Economic Recovery Hope; Haitong Gains

Chinese stocks rose slightly on Monday, the Hang Seng up +0.35% to 17,122, the Shanghai Composite up +0.48% to 2,610, and the Shenzhen Component up +1.09% to 10,182.
Haitong Securities, the second-largest listed brokerage by market value, rose +6.3% to 14.33 yuan. Pacific Securities added +8.4% to 16.90 yuan and Sinolink Securities gained +4% to 37.53 yuan.
China may resume these share sales on the nation’s stock exchanges next month, the Shanghai Securities News reported today. 32 companies are waiting to sell a combined 14.3 billion shares in initial offerings, it said.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,122	59.3	0.35%
Shanghai Composite	2,610	12.41	0.48%
Shenzhen Component	10,182	109.53	1.09%
TAIEX	6,734	-2.83	-0.04%
CNY/USD	6.8239	-0.0038	-0.06%

Source: China Economic Scan

25 May 2009 | China Economic Scan

2009-05-24T03:02:00.000-07:00

25-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: ARC Investment says China's export model is broken, HK regulator says PCCW ruling to stop vote manipulation, Intel Chinese investee eyes Shenzhen GEB listing, China to issue 16.9 bln yuan local bonds and 30 bln yuan t-bonds, CSRC says IPOs to resume after June 5.

Top 5 headlines

China Export Model Is ‘Completely Broken,’ ARC Investment Says

China’s export model is “completely broken” and investors should shift out of companies that rely on overseas sales and into those that sell goods domestically, according to private equity firm ARC Investment Partners.
“The export economy model is completely broken,” Adam Roseman, the Shanghai-based chief executive officer at ARC Investment, and “They are working as fast as they can to develop their domestic economy.”
ARC Investment has invested in 12 Chinese companies focused on the consumer and renewable energy, replacing management in return for taking “large positions” in these companies.

PCCW Ruling to Stop Vote Manipulation, Regulator Says

The Court of Appeal last month ruled that a PCCW shareholder ballot that approved the HK$15.93 billion ($2.1 billion) buyout was manipulated, upholding a legal challenge from the commission.
The decision that blocked PCCW Ltd. Chairman Richard Li’s buyout offer for the phone company will stop vote manipulation in privatizations, the city’s markets regulator said.
The verdict won’t deter “legitimate privatizations,” said Martin Wheatley, chief executive officer of the Securities and Futures Commission.

Intel Chinese Member Eyes Shenzhen Growth Enterprise Board

Enjoyor Technology Group is preparing for listing on the to-be-established Growth Enterprise Board (GEB) of the Shenzhen Stock Exchange (SSE), said an executive of the Chinese intelligentization solution provider.
In February 2009, Intel Capital, the investment arm of Intel Corporation (NASDAQ: INTC), announced that it injected a certain amount of money into the Chinese company.
The company was built in Hangzhou Hi-tech Industry Development Zone (HHTZ), Zhejiang Province in 1992, mainly engaged in building of intelligent traffic, medical, educational, security, financial and office systems.

China to issue 16.9 bln yuan local bonds, 30 bln yuan T-bonds next week

China's Ministry of Finance (MOF) said Friday it would issue 16.9 billion yuan (US$2.48 billion) of 3-year local government bonds next week on behalf of 4 provinces and municipalities at a fixed annual coupon rate of 1.67%.
The amounts were 3.5 billion yuan for Guangxi Zhuang Autonomous Region, 5.6 billion yuan for Beijing city, 4 billion yuan for Shanghai city and 3.8 billion yuan for Henan Province.
The MOF also said it would issue 2 batches of book-entry treasury bonds with a face value of 15 billion yuan (US$2.2 billion) each starting next week.

Regulator: China to resume IPOs after June 5

The China Securities Regulatory Commission (CSRC) said it would end a de facto suspension of initial public offerings (IPOs) on the Shanghai and Shenzhen stock exchanges as of June 5.
The CSRC effectively suspended all new stock issues last September, as it halted approvals.
Under the new rules, stock subscribers need to use either the online or off-line subscription system, but not both, to purchase new stocks. Institutional investors used to enjoy the privilege of subscribing through both systems, while retail investors could use only the off-line system. The new guidelines aim to improve the price discovery function of the stock market, and help retail investors subscribe to newly issued stocks, said the CSRC.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,063
Shanghai Composite	2,598
Shenzhen Component	10,073
TAIEX	6,737
CNY/USD	6.8277

Source: China Economic Scan

China Economic Scan Weekly Stockmarket Review – 23 May 2009

2009-05-23T03:03:00.000-07:00

China Economic Scan Weekly Stockmarket Review – 23 May 2009

23/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Mainland stocks closed the week down with the Shenzhen Component down -1.95% week on week to 10,073, and Shanghai Composite down -1.78% to 2,598. Hong Kong stocks however closed up +1.62% with the Hang Seng at 17,063 and in Taiwan the TAIEX jumped +3.82% to 6,737.

During the week Citic Securities Chairman Wang Dongming said China has 300 to 400 companies waiting to do initial public offerings (IPO). China’s securities regulator plans to set up a new system for pricing IPOs and may “soon” end a moratorium on IPOs. Wang also said “The decision on who to list, how to price the listing should be given to the investment bank, company and investors,”

American Dairy reported Q1 sales of $113.8 million vs $39.1 million last year, on increased sales of infant formula. Milk powder sales rose more than threefold in the quarter. “Our first quarter 2009 sales reflect consumers’ flight to quality at the height of the melamine crisis in China,” said Leng You-Bin, chief executive officer of American Dairy.

Esprit, which makes 85% of sales in Europe, said that sales in the 9 months through March fell 2% to HK$27.2 billion ($3.5 billion) as the local currency gained against the euro. Esprit’s wholesale revenue, including earnings from department-store counters, fell 8% to HK$14.8 billion, even as retail sales rose 5.9% to HK$12.2 billion.

PetroChina said it will buy 8 gas suppliers from its parent company and issue 26 billion yuan in medium-term notes. Goldman Sachs Group raised its stock rating to “neutral.”

A Chinese Fund manager, Zhang Ling, at ICBC Credit Suisse Asset Management which oversees the equivalent of $7.21 billion, said “Stocks are expensive now and have reached a level investors deem too high to be pushed up further,” and that “Corporate earnings have yet to catch up.”

Finally, in an exciting development, the China Financial Futures Exchange (CFFEX) is said to be likely to receive approval to launch trading in a Shanghai Shenzhen 300 Index future soon, having conducted mock trading for a little under 3 years.
Trading in the Chinese stock index futures will be limited to investors who have a balance in their margin account of at least 500,000 yuan ($73,313.78); pass a CFFEX test; and have practical experience in the mock trading of stock index futures.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3rd largest economy. For more info visit www.chinaeconomicscan.com

China Economic Scan Weekly Debt Market Review – 23 May 2009

2009-05-23T02:58:00.000-07:00

China Economic Scan Weekly Debt Market Review – 23 May 2009

23/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started the week at 117.81 and climbed steadily to a high of 118.08, before closing the week at 118.04. The Shenzhen Corporate Bond Index started the week at 130.59, climbed to a high of 130.78, and closed the week at 130.77

Agricultural Bank of China (ABC) raised 50 billion yuan ($7.3 billion) in the nation’s biggest corporate bond sale to boost capital as part of preparing for an initial public offering (IPO). ABC sold 25 billion yuan of 10-year callable bonds at a coupon rate of 3.3% for the first 5 years and 25 billion yuan of 15-year bonds at 4% for the first 10 years on interbank market.

Shenzhen Development Bank is planning to issue up to RMB 1.5 billion in 15-year bonds on May 26, sources reported. Dagong Global Credit Rating Co has rated the bonds AA-, and Haitong Securities and UBS Securities have been assigned as major underwriters for the issuance.

China's Ministry of Finance (MOF) said it would issue 27.3 billion yuan ($4 billion) of three-year book-entry treasury bonds, the ninth batch of its type this year. The bonds have a fixed annual interest rate of 1.55% and will be sold from May 21 to 25.

The MOF issued a total of 28.5 billion yuan of local government bonds in the first half of May on behalf of 6 local governments, which would include Dalian city, Sichuan province and Hubei province.

Finally, Chinese oil giant, PetroChina said it will buy 8 gas suppliers from its parent company, CNPC, and issue 26 billion yuan in medium-term notes.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3rd largest economy. For more info visit www.chinaeconomicscan.com

23 May 2009 China Economic Scan

2009-05-22T03:15:00.000-07:00

23-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China provides further details on stimulus spending, China considers setting iron ore price index, Zhongjin to boost gold production assets, Lenovo shares fall on record loss, Chinese stocks fall again - closing the week down.

Top 5 headlines

China updates spending details of stimulus fund

China's economic planning body released a breakdown Thursday of how the government's 4 trillion yuan (US$586 billion) of stimulus funding was being spent.
According to the commission, 214,000 units of low-income housing were completed, with construction started on another 650,000 units.
Since the stimulus package was unveiled in November, 230 billion yuan had been used as of the end of April, the National Development and Reform Commission (NDRC) said.

China considers setting iron ore price index

China will unveil its first iron ore trade platform Rizhao International Iron Ore Trade Center on May 25 in Shandong Province, which signals that the establishment of the country's iron ore price index is under way.
Jointly invested in by 5 local private companies pursuing bulk commodity transaction in Shandong, the center mainly provides electronic commerce services for iron ore suppliers and steel makers.
Data from China Customs showed the country imported 443.7 million tonnes of iron ore in 2008, and imports in January-April period in 2009 hit 188 million tonnes.

Zhongjin to get gold assets from parent

Zhongjin Gold Co is making a bid to become the leading producer of the yellow metal in China.
The Shanghai-listed company, controlled by the State-owned China National Gold Group Corp (CNGGC), plans to acquire seven gold mines in Henan, Hebei, Jilin provinces and Xinjiang Uygur autonomous region from its parent company in a transaction described by Zhongjin as an "asset injection".
The acquisition, if it goes through, will boost Zhongjin's total gold reserves to 405.98 tons and annual production to 12.5 tons.

Lenovo Shares Fall on Record Loss, PC Market Outlook

Lenovo's sales in Q1 2009 fell 26% to $2.77 billion, the company reported yesterday after the Hong Kong market closed.
“There won’t be much of a rebound in business in the U.S. and Europe,” said Kevin Tam, who rates Lenovo shares “hold” at Everbright Securities in Hong Kong. “Profitability should improve as costs come down after the job cuts, and the company should gain sales in China and emerging markets.”
The computer maker dropped -5.4% to HK$2.83 as of 10:55 a.m. on Hong Kong’s stock exchange.

China’s Stocks Decline, Complete First Weekly Drop in a Month

Chinese stocks fell again on Friday with the Hang Seng down -0.80% to 17,063, the Shanghai Composite down -0.50% to 2,598, and the Shenzhen Component down -0.36%.
“The economic recovery will take longer than earlier expected due to weak external demand,” said Yan Ji, who helps oversee $850 million of investments at HSBC Jintrust Fund Management Co. in Shanghai. “Investors shouldn’t expect stocks to rise as quickly as they have done this year.”
Shenhua dropped -2.1% to 26.09 yuan. China Coal Energy, the No. 2, fell -3.2% to 11.68 yuan, paring its 2009 gain to 81%. Crude oil for July delivery yesterday dropped -1.6% to settle at $61.05 a barrel. An index of energy stocks has rallied 74% this year, the best performer out of 10 industry indexes on the CSI 300 Index. The gauge of materials shares ranks third, having climbed 62%.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,063	-136.97	-0.80%
Shanghai Composite	2,598	-13.02	-0.50%
Shenzhen Component	10,073	-36.23	-0.36%
TAIEX	6,737	18.48	0.28%
CNY/USD	6.8277	-0.0018	-0.03%

Source: China Economic Scan

China Economic Scan Weekly Economic Review - 22 May 2009

2009-05-22T02:19:00.000-07:00

China Economic Scan Weekly Economic Review - 22 May 2009

22/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

During the past week a number of commentators highlighted issues in the Chinese economy, including interest rate movements and foreign trade. There were also some data releases such as SOE revenue, foreign financial asset holdings, and Hong Kong GDP figures.

Former Chinese ambassador to Brazil, Chen Duqing, said that the two countries have huge potential to expand trade. Bilateral trade rose 63.2% year on year to $48.98 billion in 2008, according to data released by the General Administration of Customs.

Brazil imported $268 million worth of farm produce from China, up 125.2% year on year. China imported vegetable oil, cotton and fruit worth $8.79 billion from Brazil last year, an increase of 82.4% from a year ago.

China's foreign financial assets rose 23% in 2008 to reach a total of $2.92 trillion, the State Administration of Foreign Exchange (SAFE) said. Of that amount, nearly $2 trillion, or 67%, were foreign exchange and gold reserves. Outbound direct investment, however, was just $169.4 billion, accounting for 6% of the total foreign financial assets.

London based economist Mark Williams said the deflation in China means that “real rates have risen sharply,” and that “If the recovery disappoints, further interest-rate cuts could resume from the middle of the year.” The key one-year lending rate is 5.31% after 5 cuts in the final 4 months of last year. Williams predicts 81 basis points of cuts in lending and deposit rates by the end of 2009 on the back of falling CPI.

Operating revenues of China's state-owned enterprises (SOEs) fell 7.3% year on year to 5.97 trillion yuan (854 billion U.S. dollars) in the first 4 months of 2009, the Ministry of Finance said. Profits of the 115,000 SOEs totaled 323.64 billion yuan in the first 4 months, down 32.3% from a year earlier. The fall was 4.5 percentage points lower than that of the 1st quarter.

China's Ministry of Land and Resources announced a 30% cut in the minimum purchase price of industrial land to boost investment. The national average industrial land price was 721 yuan per square meter in Q1 2009, down 1.08% from Q4 2008, and down 1.1% year on year. Land prices in China ranged from 60 yuan ($8.77) per square meter in northwestern Xinjiang Uygur, to 840 yuan per square meter in Shanghai.

Hong Kong's GDP for Q1 2009 fell 7.8% after a 2.6% drop Q4 2008. GDP for 2009 as a whole is now forecast to contract by 5.5 to 6.5% in real terms, down from the forecast decline of 2 to 3% earlier put out in the government budget. However there are positive signs e.g. a pick-up in the mainland economy and global stock markets. While on the downside is a sharp plunge in global demand and a fall-off in intra-regional exports.

22 May 2009 | China Economic Scan

2009-05-21T05:13:00.000-07:00

22-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Capital Economics says China may cut interest rates, Chinese domestic demand shows signs of picking up, Revenues of Chinese SOEs 7.3% YTD, China to issue $4bln treasury bonds, Chinese stocks close down 1.5% on Thursday.

Top 5 headlines

China May Cut Rates as Recovery Falters, Capital Economics Says

Deflation means “real rates have risen sharply,” London based economist Mark Williams said. “If the recovery disappoints, further interest-rate cuts could resume from the middle of the year.”
The key one-year lending rate is 5.31% after five cuts in the final 4 months of last year.
Williams predicts 81 basis points of cuts in both lending and deposit rates by year’s end after consumer prices fell for 3 straight months and producer prices declined by a record in April.

China sees initial results in boosting domestic demand

China's retail sales rose 14.8% in April year on year, 0.1 percentage points higher than March.
Rural spending, driven by a government rebate policy on home-appliance purchases and other commodities, grew by 16.7% in April, which was 2.8 percentage points higher than urban growth, according to NBS.
China became the world's largest vehicle market again with more than 1.15 million cars sold in April, up 25% from a year earlier. Property sales rose by 17.5% in acreage from a year earlier in the first 4 months of 2009.

Operating revenues of China's state-owned enterprise down

Operating revenues of China's state-owned enterprises (SOEs) fell 7.3% year on year to 5.97 trillion yuan (854 billion U.S. dollars) in the first 4 months, the Ministry of Finance said.
Profits of the 115,000 SOEs totaled 323.64 billion yuan in the first 4 months, down 32.3% from a year earlier. The fall was 4.5 percentage points lower than that of the 1st quarter.
The combined profits of China's SOEs, excluding financial institutions, totaled 217.7 billion yuan in the first quarter, accounting for 3.31% of the country's gross domestic product.

China to issue $4b treasury bonds

China's Ministry of Finance (MOF) said Wednesday it would issue 27.3 billion yuan ($4 billion) of three-year book-entry treasury bonds, the ninth batch of its type this year.
The bonds have a fixed annual interest rate of 1.55% and will be sold from May 21 to 25.
The MOF would issue a total of 28.5 billion yuan of local government bonds in the first half of May on behalf of 6 local governments, which would include Dalian city, Sichuan province and Hubei province.

China Stocks Fall for Second Day on Economy Concern; SAIC Drops

Chinese stocks dropped off again on Thursday with the Shenzhen Component recording a fall of -3.30% to 10,109, Hang Seng -1.58% to 17,199, and Shanghai Composite down -1.54% to 2,611.
“Stocks are expensive now and have reached a level investors deem too high to be pushed up further,” said Zhang Ling, a fund manager at ICBC Credit Suisse Asset Management Co. in Beijing, which oversees the equivalent of $7.21 billion. “Corporate earnings have yet to catch up.”
SAIC Motor fell -3.3% to 14.20 yuan. Beiqi Foton Motor, China’s biggest commercial-vehicle maker, lost -4.1% to 12.32 yuan. Fengfan, a manufacturer of automobile batteries, declined -6.3% to 14.54 yuan, after more than tripling this year through May 18.

Financial Indicators:

Metric	Value	Point change	% change
Hang Seng Index	17,199	-276.35	-1.58%
Shanghai Composite	2,611	-40.79	-1.54%
Shenzhen Component	10,109	-344.54	-3.30%
TAIEX	6,719	15.19	0.23%
CNY/USD	6.8295	-0.0004	-0.01%

Source: China Economic Scan

21 May 2009 | China Economic Scan

2009-05-20T05:05:00.000-07:00

21-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: World Bank says China recovery hopes may be premature, BoC says China-Brazil yuan trade settlement not yet practical, Chinese overseas assets rose 23% to $2.92 trln in 2008, Shenzhen Development Bank to issue RMB 1.5 bln bonds, Chinese stocks close down slightly on Wednesday.

Top 5 headlines

World Bank Says China Recovery Hopes May Be Premature

“Until we see a recovery in private investment, it’s hard to get too excited about the future,” David Dollar, country director for China, said at a forum in Beijing.
Private investment, the main driver of growth, was “way down” in Q1, Dollar said, without citing a figure. Manufacturers have excess capacity and “a lot of the real-estate sector is over-built,” he said.
Private investment is “the main source of job creation,” Dollar said. “It’s very important for private investment to come back if China’s going to be able to continue to grow at a high rate that is sustainable.”

China, Brazil Yuan Trade Will Take Years, Bank of China Says

China and Brazil’s plans to conduct bilateral trade in yuan and reais will be limited because the Chinese currency is still not fully convertible, Bank of China Ltd. said.
China is seeking to promote the yuan as an international currency after signing 650 billion yuan ($95 billion) in swap agreements with Argentina, Indonesia, South Korea, Hong Kong, Malaysia and Belarus in recent months.
“It may take a couple of years for China and Brazil to really start using yuan in trade because the currency is of limited use outside China,” said Shi Lei, an analyst in Beijing at the nation’s largest foreign-currency trader.

Overseas assets in 2008 soar to $2.92t

China's foreign financial assets rose 23% last year to reach a total of $2.92 trillion, the State Administration of Foreign Exchange (SAFE) said yesterday.
Of that amount, nearly $2 trillion, or 67%, were foreign exchange and gold reserves, the foreign exchange regulator said.
The outbound direct investment, however, was just $169.4 billion, accounting for 6% of the total foreign financial assets.

Shenzhen Development Bank to issue up to RMB 1.5 bln in bonds

Shenzhen Development Bank is planning to issue up to RMB 1.5 billion in 15-year bonds on May 26, sources reported.
Dagong Global Credit Rating Co has rated the bonds AA-. Haitong Securities and UBS Securities Co have been assigned as major underwriters for the issuance.
In the first quarter of this year, the bank's net profit jumped 12% year on year to RMB 1.12 billion, with basic earnings per share at RMB 0.36, up 6% from a year earlier.

Chinese stocks down 0.94% on Wed

Chinese stocks slipped on Wednesday - the Hang Seng fell -0.39% to 17476, and the Shanghai Composite fell -0.94% to 2651; however the Shenzhen Component rose slightly +0.28% to 10453, and the TAIEX was up +0.72% at 6704.
Coal stocks ended higher; Shanxi Coking, the biggest publicly traded coke producer in China, swelled +5.68% to RMB 7.82. Guizhou Panjiang Refined Coal jumped +8.15% to close at RMB 26.82. China Coal Energy, the country's second-largest coal miner by revenue, grew +2.10% to RMB 12.64.
Gold firms were also gainers; Zhongjin Gold jumped +7.89% to close at RMB 66.88. Shandong Gold Mining, China's second-largest listed gold miner, grew +2.44% to RMB 40.67. Zijin Mining Group increased +1.02% to RMB 8.88.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,476	-68.19	-0.39%
Shanghai Composite	2,651	-25.27	-0.94%
Shenzhen Component	10,453	29.04	0.28%
TAIEX	6,704	48.03	0.72%
CNY/USD	6.8299	0.0007	0.01%

Source: China Economic Scan

20 May 2009 Edition | China Economic Scan

2009-05-19T03:22:00.000-07:00

20-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China and Brazil said to have huge trade potential, Macao's property transactions fall 16% in Q1, Chinalco-Rio Tinto deal gets approval from US regulator, Agricultural Bank raises $7.3bln in bond sale, Chinese stocks rise to 9 month high.

Top 5 headlines

China, Brazil have huge trade potential: former ambassador

Former Chinese ambassador to Brazil, Chen Duqing, said that the two sides have huge potential to expand trade.
Bilateral trade rose 63.2% year on year to $48.98 billion in 2008, according to data released by the General Administration of Customs.
Brazil imported $268 million worth of farm produce from China, up 125.2% year on year. Imported goods were mainly soybeans, aquatic and livestock products. China imported vegetable oil, cotton and fruit worth $8.79 billion from Brazil last year, an increase of 82.4% from a year ago.

Macao's property transactions down 16.9% in Q1

Based on Stamp Duty records, a total of 1,664 building units were sold and purchased in the first quarter of 2009, decreasing by 16.9% over the fourth quarter of last year.
The total value of property transactions in the period dropped 20.5% quarter-to-quarter to just 2.13 billion patacas (US$270 million).
801 units, were residential units, valued at a total of 1.27 billion patacas (US$161 million), decreasing by 37.7% and 41% respectively quarter-to-quarter, the DSEC figure showed.

Chinalco-Rio Tinto deal gets approval from U.S. regulator

The Committee of Foreign Investment in the United States granted clearance to Rio Tinto regarding the proposed issue of convertible bonds to Aluminum Corp. of China.
In February, Chinalco signed to invest 19.5 billion U.S. dollars in the iron ore giant Rio Tinto of Australia, the world's third-largest mining company, to secure resource supplies for China and help cut Rio's heavy debt.
Under terms of the planned deal, Chinalco will invest US$7.2 billion in convertible bonds and US$12.3 billion in Rio Tinto iron ore, copper and aluminum stakes.

Agricultural Bank Raises $7.3 Billion in Bond Sale

Agricultural Bank of China, raised 50 billion yuan ($7.3 billion) in the nation’s biggest corporate bond sale to boost capital and help pave the way for an initial public offering (IPO).
The IPO, planned for as early as the second half of this year, would be the biggest by a Chinese lender since 2006 and cap a decade-long reorganization of the banking industry that cost $650 billion.
Agricultural Bank sold 20 billion yuan of 10-year callable bonds at a coupon rate of 3.3% for the first 5 years and 25 billion yuan of 15-year bonds at 4% for the first 10 years on the nation’s interbank market.

China’s Stocks Rise to Nine-Month High on Stimulus Expectations

Chinese stocks closed up, arriving at 9 month highs on Tuesday. The Hang Seng rose +3.06% to 17,544, Shanghai Composite +0.90% to 2,677, Shenzhen Component up +1.07% to 10,424.
“The government is quite determined to get a recovery,” said Philippe Zhang, chief investment officer at AXA SPDB Investment Managers in Shanghai, which oversees about $220 million. “The market is still quite strong.”
Pudong Bank gained +3.2% to 25.99 yuan, the most since April 29. Shenzhen Bank rose +2.2% to 17.89 yuan. PetroChina gained +1.4% to 13.15 yuan. The company said it will buy 8 gas suppliers from its parent company and issue 26 billion yuan in medium-term notes. Goldman Sachs Group raised its stock rating to “neutral.” China Oilfield Services, an oil driller, rose +1.5% to 16.63 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,544	521.12	3.06%
Shanghai Composite	2,677	23.9	0.90%
Shenzhen Component	10,424	110.32	1.07%
TAIEX	6,656	77.78	1.18%
CNY/USD	6.8292	-0.0023	-0.03%

Source: China Economic Scan

19 May 2009 | China Economic Scan

2009-05-18T05:15:00.000-07:00

19-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Auditor reports on spending of stimulus plan funds, China gold reserves to back Yuan internationalization, Ping An expects steady year in 09, Esprit falls in Hong Kong on EU data, Chinese stocks close up on Monday.

Top 5 headlines

Auditor: China's stimulus plan goes well, with minor exceptions

China's National Audit Office (NAO) said Monday that no major problems, but some notable minor ones, had been found as of the end of the first quarter by its oversight of the country's stimulus package.
Of the 100 billion yuan (14.64 billion U.S. dollars) allocated by the central government last year, all had been disbursed. Another 130 billion yuan appropriated in February had been mostly distributed, NAO said.
The 230 billion yuan investment was included in the 4-trillion-yuan package announced late last year to combat the global economic downturn.

China Gold Reserves May Back Yuan Internationalization

China's gold reserves may serve as backing for the yuan as Beijing promotes its use overseas, said Zheng Lianghao, managing director of the World Gold Council's Far East division.
Zheng said increasing gold holdings would provide China with a useful hedge as the dollar faced the possibility of depreciation.
In April China's gold reserves had risen 454 metric tons since 2003 to 1,054 tons.

Ping An Expects ‘Steady Year’ of Profit in 2009, President Says

Ping An Insurance, China’s second-largest insurer, will have a “steady year” of profit as an equity-market rally boosts returns and premium growth will be “very strong,” President Louis Cheung said.
Ping An’s first-quarter profit fell 72% as lower bond yields, following five interest rates cuts since September, and higher expenses tempered investment returns.
“This year will be a steady year for us,” Cheung said. “We expect to maintain very strong growth in premiums and in other business lines.”

Esprit Falls on Concern European Slump May Harm Sales

Esprit, which makes 85% of sales in Europe, fell as much as 6.8% to HK45.60, the biggest intraday drop since May 8.
The retailer said May 13 that sales in the nine months through March fell 2% to HK$27.2 billion ($3.5 billion) as the local currency gained against the euro.
Esprit’s wholesale revenue, including earnings from department-store counters, fell 8% to HK$14.8 billion, even as retail sales rose 5.9% to HK$12.2 billion.

China shares up on hope of reviving economy

Chinese stocks edged up on Monday with the Hang Seng up 1.38% to 17023, the Shanghai Composite up 0.28% to 2,653, and the Shenzhen Component up 0.40% at 10314.
"It's still a strong market. Investors are closely watching government policies and betting on when the economy would revive," said Chen Jinren, an analyst for Huatai Securities.
China Shenhua Energy, the country's biggest coal producer, jumped 3.2% to 28.05 yuan; Kailuan Clean Coal soared by the daily upside limit of +10% to 35.44 yuan, while Datong Coal Industry Co. gained +9.84% to 37.73 yuan. Tangshan Iron & Steel surged +5.1% to 7.28 yuan and Handan Iron & Steel added +3.5% to 4.97 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,023	232.21	1.38%
Shanghai Composite	2,653	7.52	0.28%
Shenzhen Component	10,314	40.81	0.40%
TAIEX	6,578	88.72	1.37%
CNY/USD	6.8315	0.004	0.06%

Source: China Economic Scan

18 May 2009 | China Economic Scan

2009-05-17T06:07:00.000-07:00

18-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Hong Kong GDP falls 7.8% in Q1, China said to have IPO backlog of up to 400 companies, China reduces industrial land prices, American Dairy gains market share in China, trading of Chinese stock index futures may come soon.

Top 5 headlines

HK's first quarter GDP down 7.8%

Hong Kong's GDP for the first quarter of this year fell 7.8% after a 2.6% drop in last year's fourth quarter.
GDP for 2009 as a whole is now forecast to contract by 5.5 to 6.5% in real terms, down from the forecast decline of 2 to 3% earlier put out in the government budget.
Positive signs are an expected pick-up in the mainland economy and global stock markets, on the downside is a sharp plunge in global demand and a fall-off in intra-regional exports.

China Has IPO Backlog Up to 400 Companies, Citic Says

China has 300 to 400 companies waiting to hold initial public offerings (IPO), said Citic Securities Co. Chairman Wang Dongming.
The nation’s securities regulator plans to set up a new system for pricing IPOs and may “soon” end a moratorium on IPOs, said Fan Fuchun, vice chairman of the China Securities Regulatory Commission.
“The decision on who to list, how to price the listing should be given to the investment bank, company and investors,” said Wang.

China to lower industrial land prices to boost investment

China's Ministry of Land and Resources has announced a 30% cut in the minimum purchase price of land for industrial use in order to boost investment.
The national average industrial land price was 721 yuan per square meter in the first quarter, down 1.08% from the fourth quarter of last year, and down 1.1% year on year, according to the ministry.
Land prices ranged from 60 yuan ($8.77) per square meter in some counties in northwestern Xinjiang Uygur autonomous region to 840 yuan per square meter in the suburbs of Shanghai.

American Dairy Soars as Sales Triple on Milk Scare

American Dairy reported Q1 sales of $113.8 million vs $39.1 million last year, gross margins jumped to 64% from 37% in the year-earlier period, on increased sales of infant formula. Milk powder sales rose more than threefold in the quarter.
Chinese based American Dairy jumped 55% in New York trading on Friday.
“Our first quarter 2009 sales reflect consumers’ flight to quality at the height of the melamine crisis in China,” said Leng You-Bin, chief executive officer of American Dairy.

Index Futures Come Nearer

The China Financial Futures Exchange (CFFEX) is likely to receive approval to launch trading in a Shanghai Shenzhen 300 Index future soon, having conducted mock trading for a little under 3 years.
Trading in the Chinese stock index futures will be limited to investors who have a balance in their margin account of at least 500,000 yuan ($73,313.78); pass a CFFEX test; and have practical experience in the mock trading of stock index futures.
The Shanghai Shenzhen 300 Index is made up of 179 shares in Shanghai and 121 in Shenzhen. The stocks in the index cover about 60% of the market value in Shanghai and Shenzhen.

Source: China Economic Scan

China Economic Scan Weekly Debt Market Review – 16 May 2009

2009-05-15T23:05:00.000-07:00

China Economic Scan Weekly Debt Market Review – 16 May 2009

16/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started the week at 117.39, and dropped sharply for a brief moment late Monday to 116.75 before climbing to the week’s close of 117.74. The Shenzhen Corporate Bond Index started the week at 130.45, and reached a high of 130.64 before closing the week at 130.62.

Jiang Jiemin, Chairman of PetroChina Company Limited, said Tuesday that PetroChina plans to raise 100 billion yuan ($14.71 billion) through debt financing in 2009 to support major strategic projects including oil exploration and development, oil refining and overseas business.

Beijing-based CNPC sold $1 billion of three-year floating- rate notes on May 12. The notes, part of a $3 billion borrowing plan to fund overseas projects, were priced to pay 62 basis points more than the London interbank offered rate.

China's Ministry of Finance (MOF) said last Friday it would issue 91-day treasury bonds with a face value of 15 billion yuan ($2.2 billion) from May 11 to 13. The issue price, set by competitive bidding, was 99.793 yuan. The annual yield was 0.85%, and interest would be calculated from May 11 and paid in a lump sum at maturity.

Lending in China was up 26% year on year 591.8 billion yuan ($86.7 billion), the central bank said on its Web site, about a third of the record 1.89 trillion yuan in March. M2, the broadest measure of money supply, rose 26% from a year earlier.

Bank of China (BOC) recently approved syndicated loans worth nearly 20 billion yuan ($2.93 billion), which will be provided to COSCO Container Lines Co Ltd (COSCON) in the next 3 years. BOC will grant a credit line of $1.75 billion in the coming 2 years for the construction and operation of 28 COSCON container vessels. It will offer $1 billion in liquidity loans in the next 3 years to help cover COSCON's operating costs.

China Economic Scan Weekly Stockmarket Review – 16 May 2009

2009-05-15T21:53:00.000-07:00

China Economic Scan Weekly Stockmarket Review – 16 May 2009

16/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Chinese stocks finished the week mixed versus last Friday’s close. Mainland stocks rose slightly with the Shanghai Composite up 0.75% at 2,645.26 and the Shenzhen Component up 0.89% at 10,273.23, while the Hang Seng closed down –3.45% week on week to 16,790.70, and the TAIEX down -1.44% to 6,489.09.

During the week there were a range of interesting developments, Hong Kong Exchanges & Clearing said net income dropped 49% to HK$834.2 million ($108 million) in the 3 months ended March 31, after the global recession caused trading to decline. The average daily value of securities traded on the exchange slumped 55% to HK$44.7 billion from a year earlier.

Keeping with the Hong Kong exchange, China Resources Power Holdings, a Chinese electricity producer, was named to replace Yue Yuen Industrial Holdings in the Hang Seng Index. Hang Seng Indexes Co also said in its quarterly review that HSBC would be capped at a weighting of 15% from the current 20%. The changes to the 42 constituent index will be enacted from 8 June 2009.

In resources, China National Offshore Oil Corp (CNOOC) signed an agreement with UK-based BG Group involving a liquefied natural gas (LNG) development project in Queensland, Australia. Under the agreement, CNOOC would buy 3.6 million tons per annum (mtpa) of LNG for 20 years. The project would come on line in 2014 with two liquefaction trains providing 7.4 mtpa capacity.

China CITIC Bank said it would buy a 70.32% stake in investment holding company CITIC International Financial Holdings for HK$13.6 billion (US$1.75 billion). The acquisition will let CITIC Bank expand its branch network to other international finance centers and establish a stronger presence in Hong Kong. CITIC Bank said the unaudited net asset value of CITIC International Financial Holdings was about HK$9.5 billion at the end of 2008.

Also CITIC-Prudential Life Insurance, a joint venture (JV) equally owned by China's state-owed CITIC Group and Prudential Plc of Britain, said it intends to launch an A-share listing in 2012. CITIC-Prudential has been posting losses since its establishment in October 2000. As of the end of 2008, it registered a net loss of about RMB 200 million.

On the international front, China and Britain agreed on Monday to prioritize opening China's stock markets to foreign companies and to arrange for more Chinese firms to list on London exchanges, in negotiations said to be largely driven by HSBC. As yet no timetable has been set, however there was talk of aiming to get Chinese companies listed in London as early as in the next few months.

Jien Nickel, one of China's leading nickel producers, said in a filing to the Shanghai Stock Exchange that it is now the largest shareholder of Australia's Metallica Minerals, after buying 19.95% of the company with A$5.16 million ($3.93 million). The company bought 22.85 million shares of the Metallica Minerals at a price of A$0.2259 per share.

Anshan Iron and Steel Group (Ansteel) received approval to increase its stake in Australian iron miner Gindalbie Metals up to a new cap of 36.28%. Ansteel is also a 50% JV partner with Gindalbie to develop the A$1.8 billion Karara Iron Ore Project.

16 May 2009 Edition | China Economic Scan

2009-05-15T05:18:00.000-07:00

16-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China's fiscal revenues fell sharply in April, China looks to fine tune monetary and fiscal policy to stimulate growth, PBOC gov says high saving rate to build shanghai financial hub, FDI in China drops 22.5%, Chinese stocks close up on Friday.

Top 5 headlines

China's fiscal revenues fall sharply in April

Combined central and local government revenues fell 13.6% from a year earlier, a far sharper decline than the 0.3% drop in March and the 1.2% drop in February.
Government spending in April surged 24.5 percent from a year earlier as Beijing implemented its 4 trillion yuan ($585 billion) stimulus package to prop up domestic demand as the economy slows.
Government outlays in the first four months totalled 2.05 trillion yuan, while spending was 1.79 trillion yuan. That left China with a fiscal surplus of 265 billion yuan through April, but the bulk of spending tends to come in the later months of the year, putting the country on track for an overall deficit.

China May ‘Fine-Tune’ Monetary, Fiscal Policies to Spur Growth

China may “fine-tune” monetary and fiscal policies as it seeks to spark a revival in the world’s third-biggest economy, central bank Governor Zhou Xiaochuan said.
“Economic conditions are still shaky, especially trade, so we don’t expect a marked change in policy,” said Ken Peng, an economist with Citigroup “Concerns over the quality of lending have definitely increased; some new controls could be imposed as early as the third quarter.”
New lending grew more slowly in April after a record 1.89 trillion yuan ($277 billion) of loans in March.

PBOC Gov: China High Saving Rate To Help Build Shanghai As Hub

"China is a country with a high saving ratio, offering abundant financing sources," Zhou said. "Although the central government encourages domestic consumption, China's saving ratio will remain high because the country is populous and has a cultural preference for saving."
China's saving rate rose to 49.9% in 2007 from 37.5% in 1998, according to the latest figures from the PBOC. The U.S.'s savings rate in March was 4.2%, according to U.S. Commerce Department data.
However, Chinese investors tend to have low risk tolerance compared with their counterparts in developed financial markets, which is an obstacle to financial innovation, he said.

Foreign Direct Investment in China Tumbles on Crisis

Investment dropped 22.5 percent to $5.89 billion in April, the commerce ministry said at a briefing in Beijing today.
That compares with a 9.5 percent decline in March. For the first four months of this year, spending fell 21 percent to $27.67 billion.
Businesses that are partly or entirely foreign owned account for 30% of industrial output, 55% of trade and 11% of urban jobs, according to the commerce ministry.

Chinese shares down 0.9% on fall of surrounding markets

Chinese stocks closed up on Friday, the TAIEX rose the most, up +1.96% to 6,489, the Hang Seng rose +1.51% to 16,791, the Shanghai Composite up +0.20% to 2,645, and the Shenzhen Component +0.21% at 10,273.
Anhui Conch Cement, China’s biggest cement maker, gained +5.5% to 45.03 yuan, the biggest advance in two weeks. Its Hong Kong-traded stock was raised to “overweight” from “underweight” at JPMorgan Chase & Co., which said Chinese demand will grow by 10% this year.
Huaneng Power lost -1.4% to 7.71 yuan. Huadian Power International, a unit of China’s fourth-largest electricity producer, declined -1.6% to 5 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	16,791	249.01	1.51%
Shanghai Composite	2,645	5.37	0.20%
Shenzhen Component	10,273	21.08	0.21%
TAIEX	6,489	124.92	1.96%
CNY/USD	6.8275	-0.002	-0.03%

Source: China Economic Scan