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
