15 June 2009 | China Economic Scan

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

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

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