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
