9 June 2009 | China Economic Scan

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

8 June 2009 | China Economic Scan

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

19 May 2009 | China Economic Scan

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