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
