11 June 2009 | China Economic Scan

11-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China CPI falls 1.4% in May, Fidelity's Ma says China's economic growth may beat predictions, China's property sales surge, Baosteel hikes July steel prices, Chinese stocks closed up on Wednesday.

Top 5 headlines

China’s Consumer Prices Decline 1.4%, Aiding Recovery

• Prices dropped 1.4% in May from a year earlier, after falling 1.5% in April, the National Bureau of Statistics (NBS) said.
• The median estimate in a Bloomberg News survey of 16 economists was for a 1.3% decline. Producer prices fell 7.2%, the most on record.
• “China’s economy is already rebounding and as soon as it regains momentum, prices will return to positive territory,” said Sherman Chan, an economist with Moody’s Economy.com in Sydney.

Fidelity’s Ma Says China’s Economic Growth May Beat Predictions

• China’s economic outlook is the “brightest” in Asia and growth may exceed investor expectations, Fidelity International fund manager Stephen Ma said.
• The nation’s economy will expand 7.5% this year, according to economists surveyed by Bloomberg News last month, up from a 7.1% forecast in February.
• “China has done all the right things to support the domestic economy,” Ma said. “I believe China’s GDP growth will continue to surprise people on the upside.” Fidelity International is the London-based affiliate of Fidelity Investments, the world’s largest mutual- fund company.

China’s Property Sales Surge, Add to Recovery Signs

• 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.
• “As developers run down inventory rapidly, they will soon start to buy land and increase spending again,” said Frank Gong, chief China economist and strategist at JPMorgan Chase & Co. in Hong Kong. “Property investment, which accounts for 10% of China’s GDP and is a trigger for growth in related sectors, will become a strong driving force in China’s recovery.”
• The China Se Shang Property Index fell -1.6%, paring this year’s gain to +116%.

Baosteel hikes July steel prices as pressure mounts

• China's top steelmaker, Baosteel, has raised July prices for major steel product prices by more than 10%, industry sources said, as it faces the threat of higher-than-expected iron ore costs.
• Baosteel, or Baoshan Iron and Steel, is deep in talks with Australian miners Rio Tinto and BHP Billiton over iron ore prices, which it wants reset to 2007 levels, meaning a price cut of at least 40%.
• Rio Tinto has already agreed a 33% cut with other Asian mills, forcing Baosteel to choose between a fixed price, albeit more than it wanted to pay, or the uncertain spot market.

Chinese shares up 1% as pace of price declines slows

• Hong Kong lead Chinese stocks, up +4.03% at 18,786, followed by Shanghai up +1.02% to 2,816, and Shenzhen and Taiwan both up +0.75% to 10,281 and 6,462 respectively.
• China State Shipbuilding rose +1.22% to 65.52 yuan, while Guangzhou Shipyard International gained +1.04% to 22.41 yuan.
• Lianyungang Port shares rose by the daily limit of +10% to 7.87 yuan and Shenzhen Expressway Company gained +9.97% to 6.40 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,786	727.17	4.03%
Shanghai Composite	2,816	28.36	1.02%
Shenzhen Component	10,821	80.65	0.75%
TAIEX	6,462	47.88	0.75%
CNY/USD	6.8330	-0.0024	-0.04%

Source: China Economic Scan

10 June 2009 | China Economic Scan

10-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese vehicle sales surge 34% in May, Chinese government increases export subsidies, NBS to add 10 000 CPI survey locations, Tsingtao to buy Shandong's Jinan Beer for 250m yuan, Chinese stocks close up on Tuesday.

Top 5 headlines

China’s May Vehicle Sales Surge 34% on Subsidies, Tax

• 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.
• “Sales of small cars have been driving growth,” said Ricon Xia, an analyst with Daiwa Institute of Research (H.K.) Ltd. in Shanghai. “Whether automakers could reverse profit declines this year will depend on demand for big cars and heavy duty trucks that carry bigger profit margins.”

Exporters get sops to fight crisis

• The government has raised tax rebates for more than 600 export items, some up to the maximum level possible, as it stepped up efforts to provide succor to businesses battling the global economic slowdown.
• 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.

NBS to add 10,000 CPI survey locations

• China will add 10,000 new consumer price index (CPI) survey locations in an effort to make the statistics more reliable.
• Liu Jianwei, vice dean with the department of urban social and economic survey of the National Bureau of Statistics (NBS) said Tuesday that it is planning to have a total of 60,000 survey spots.
• Currently, the NBS has 3,000 people who gather prices from almost 600 items of commodities and services from roughly 50,000 survey spots at more than 550 counties and cities across the country, said Liu.

Tsingtao to buy Shandong's Jinan Beer for 250m yuan

• Tsingtao Beer, China's second largest brewer, said yesterday it would buy Jinan Beer, a beer producer from Shandong province, for 250 million yuan ($36.66 million).
• Tsingtao said it had signed a contract with Shandong Commercial Group to buy its subsidiary, which has an annual beer output of 300,000 kiloliters and 1.08 billion yuan in total assets.
• Jinan Beer has 30-40% market share in Jinan, the provincial capital of Shandong, and the deal, when finalized, would help push up the share that Tsingtao Beer has in Shandong to 80%, analysts said.

Hong Kong Stocks Fall on Valuation Concerns; Foxconn Tumbles

• Mainland stocks closed up on Tuesday with the Shenzhen Component up +1.21% to 10,740, and the Shanghai Composite up +0.71% to 2,788, but the Hang Seng closed down -1.07% at 18,058, and the TAIEX continued it's 6 day losing streak down -3.22% and about 7% week on week at 6,414.
• Foxconn International Holdings Ltd., the world’s largest contract maker of mobile phones, lost -4%. Citic Pacific Ltd., a specialty-steel maker, lost -6.2%.
• China Huiyuan Juice Group Ltd. plummeted -8.3% after Warburg Pincus LLC pulled out of an investment in the company. Pacific Basin, Hong Kong’s largest bulk shipper, slumped -3.9%. The company was also hurt by a 4.3% slide in commodity cargo rates.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,058	-194.9	-1.07%
Shanghai Composite	2,788	19.55	0.71%
Shenzhen Component	10,740	128.34	1.21%
TAIEX	6,414	-213.63	-3.22%
CNY/USD	6.8354	-0.0019	-0.03%

Source: China Economic Scan

5 June 2009 | China Economic Scan

5-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: BoCom said it expects Chinese CPI to fall again in May, Merrill Lynch says Chinese banks' debt funding costs to rise, Chery Automobile raised 2.9bln yuan in growth capital from private equity investors, BNP Paribas lowers Chinese stocks to neutral - says buy India instead, Chinese stocks fall slightly.

Top 5 headlines

BoCom expects negative CPI growth in H1

• China's Consumer Price Index (CPI) is set to record the fourth consecutive month of decrease in May and to remain negative in the first half of this year, according to a Bank of Communications (BoCom) report released Monday.
• Food prices are expected to drop slightly in May with 1.5 percentage points of the decline due to the tail-raising factor, which was the main reason for the CPI decline in May, according to the report.
• Based on data from the Ministry of Agriculture and the Ministry of Commerce, the report said CPI growth would be between minus 1.8% and minus 1.2% with the median minus 1.5% in May, making it the fourth consecutive month of negative growth since February this year.

Chinese Banks’ Debt Financing Costs Will Rise, Merrill Says

• Chinese banks face higher costs for selling subordinated bonds as tighter capital regulations stifle demand for the securities following a surge in sales, according to Bank of America's Merrill Lynch.
• Chinese banks sold 103 billion yuan ($15 billion) of bonds in the first 5 months this year, more than the combined tally for 2007 and 2008, Merrill analysts Winnie Wu, Alistair Scarff and Michael Li said in a report dated yesterday. Lenders plan another 700 billion yuan of sales before 2012, they said.
• “The window for banks’ cheap debt financing is closing in the next three years,” the analysts wrote. “The supply-demand dynamics will drive up the cost of future sub-debt financing.”

Chery nets 2.9b yuan for growth

• Chery Automobile Co, China's biggest automaker, said yesterday that it has raised 2.9 billion yuan from local private-equity investors to boost its development and expansion plans.
• "The capital will be used in our clean energy program, heavy-duty program and a new sedan plant we are planning to build," said Jin Yibo, Chery's spokesman.
• The investors, all local funds, include Bohai Industrial Investment Fund Management, which is majority owned by Bank of China; Tianjin-based CDH Investments; China Huarong Asset Management Corp; and Shenzhen-based China Science & Merchants Venture Capital Management Co Ltd, according to Chery's statement.

China Stocks Lowered at BNP Paribas; Switch to India

• China stocks were downgraded at BNP Paribas, which said investors should instead buy more Indian equities because valuations, fund flows and liquidity in the South Asian nation have become more favorable.
• Chinese shares were cut to “neutral” from “overweight,” analysts led by Clive McDonnell said in a report today, keeping India “overweight.”
• The Bombay Stock Exchange Sensitive Index may extend its rally by another 11%, BNP said, advising customers to buy State Bank of India and sell Chinese peers including Industrial & Commercial Bank of China Ltd.

Hong Kong’s Stocks Decline as Shippers Tumble on China Warning

• Chinese stocks fell slightly on Thursday with the Hang Seng down -0.40% to 18,503, the Shanghai Composite down -0.41% to 2,767, but Shenzhen Component closed up 0.20% to 10,734, but the TAIEX shaved off -1.55% to 6,786.
• Hopson, a Hong Kong-based developer of real estate in China, plunged -7.9%. Esprit Holdings, a Hong Kong-based global clothing retailer, declined -4.6% on concern product demand will decline after a worse-than-expected report on the U.S. services sector.
• Sinotrans Shipping, the dry- bulk arm of China’s third-largest shipping group, tumbled -7.4%. Shipping stocks accounted for six of the 10 biggest falls on the 201-member Hang Seng Composite Index. Trade faces “unprecedented difficulties,” Vice Commerce Minister Zhong Shan said yesterday.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,503	-73.7	-0.40%
Shanghai Composite	2,767	-11.35	-0.41%
Shenzhen Component	10,734	21.41	0.20%
TAIEX	6,786	-107.08	-1.55%
CNY/USD	6.8328	0.0022	0.03%

Source: China Economic Scan

China Economic Scan Weekly Economic Review - 15 May 2009

China Economic Scan Weekly Economic Review - 15 May 2009

15/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the past week a number of key indicators of economic activity came out, painting a positive picture for economic growth in China, but CPI and PPI stats showed prices continued to fall. Among those data released were output, retail sales, food exports, and urban fixed-asset investment.

China's consumer price index (CPI), fell 1.5% year on year in April 2009, according to the National Bureau of Statistics (NBS). Food prices (comprising a 3^rd of CPI) dropped 1.3%, dragged down by a 28.6% decline in pork prices as demand plummeted on pig flu fears. Non-food prices fell 1.5%. The index was down 0.2% since March, and the YTD fell 0.8% from the same period last year.

China's producer price index (PPI), a major measure of inflation at the wholesale level, also fell 6.6% in April year on year, according to the NBS. The decline compared with a 6.0% year on year drop in March and 4.6% in Q1 2009. Prices of production materials fell 8.1% in April year on year, the NBS said, and PPI for January-April fell 5.1% over the same period last year.

Meanwhile, China’s output rose 7.3% from a year earlier, according to the NBS, after gaining 8.3% in March, and less than analyst estimates of 8.6%. In another positive sign, retail sales grew 14.8%, above estimates of 14.5% (and 14.7% in March). The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries.

On a similar note, Morgan Stanley raised its forecast for China economic growth to 7-8% from 5% for 2009. Morgan Stanley Asia Chairman Stephen Roach said growth could fall back to 5.5 to 7% in 2010, as external demand will remain weak. "It's premature to say China is enjoying a V-shaped recovery. I think the outcome is going to be closer to the letter W." he said.

New orders placed with China’s shipyards fell 95% during the first four months of this year, the Ministry of Industry and Information Technology said. Orders from January to April dropped to 990,000 deadweight tons. While new orders last month reached 200,000 deadweight tons, taking total order books to 195 million deadweight tons at the end of April - 7% higher than a year earlier.

Another key indicator, China’s urban fixed-asset investment, climbed 30.5% in the first four months from a year earlier compared with a 28.6% increase in the first three months and analyst estimates of 29.1%. “Fixed-asset investment is the most important driver for economic growth this year,” said Sun Mingchun, chief China economist at Nomura Holdings.

China's food exports reached US$2.62 billion in March 2009, up 8.9% from a year earlier, presenting the first year-on-year growth in the last five months, said General Administration of Customs (GAC). Exports of fruit led growth, rising 23.5% in March, and Seafood was up 16.2% year on year. Food exports totaled US$7.17 billion Q1, down 5.5% year on year.

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

12 May 2009 Edition | China Economic Scan

12-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China's CPI falls again in April, China's PPI also falls, China's food exports returned to growth in March, CITIC Bank set to acquire affiliate for $1.8 bln, Chinese stocks start the week down.

Top 5 headlines

China's CPI falls 1.5% in April

• China's consumer price index (CPI), fell 1.5% year on year in April 2009, according to the National Bureau of Statistics (NBS).
• Food prices (comprising 1/3 of the CPI) dropped 1.3%, dragged down by a 28.6% decline in pork prices as demand plummeted on swine flu fears. Non-food prices fell 1.5%.
• The index was down 0.2% from a month earlier, and the figure for January-April fell 0.8% from the same period last year.

China's producer prices down 6.6 pct in April

• China's producer price index (PPI), a major measure of inflation at the wholesale level, fell 6.6% in April year on year, according to the National Bureau of Statistics (NBS).
• The decline compared with a 6.0% year on year drop in March and 4.6% in Q1 2009.
• Prices of production materials fell 8.1% in April year on year, the NBS said, and PPI for January-April fell 5.1% over the same period last year.

China's food export back to growth in March

• China's food exports reached US$2.62 billion in March 2009, up 8.9% from a year earlier, presenting the first year-on-year growth in the last five months, said General Administration of Customs (GAC).
• Exports of fruit led growth, rising 23.5% in March, and Seafood was up 16.2% year on year.
• Food exports totaled US$7.17 billion Q1, down 5.5% year on year.

CITIC Bank to acquire affiliate for $1.8b

• China CITIC Bank will buy a 70.32% stake in investment holding company CITIC International Financial Holdings for HK$13.6 billion (US$1.75 billion).
• The acquisition will allow CITIC Bank to expand its branch network to other international finance centers and establish a stronger presence in Hong Kong
• CITIC Bank said the unaudited net asset value of CITIC International Financial Holdings was about HK$9.5 billion at the end of 2008. The remaining 29.68% of the company belongs to Spain's second-largest bank BBVA.

China shares fall as investors cash in on gains

• Chinese stocks began the week down with the Hang Seng closing off -1.74% at 17,088, the Shanghai composite down -1.75% to 2,580, and the Shenzhen component falling -3.09% to 9,869.
• Banks led the decline, with Industrial & Commercial Bank of China, China's biggest commercial lender, -1.2% at 4.31 yuan. Bank of China -0.8% to 3.61 yuan while China Construction Bank -1.3% to 4.65 yuan.
• Coal miners also fell. China Shenhua Energy, the country's biggest coal producer, -2.8% to 26.11 yuan and Datong Coal Industry -6.3% to 32.46 yuan.

Financial Indicators:

Metric	Value	Point change	% change
Hang Seng Index	17,088	-301.92	-1.74%
Shanghai Composite	2,580	-45.9	-1.75%
Shenzhen Component	9,869	-314.27	-3.09%
TAIEX	6,648	63.63	0.97%
CNY/USD	6.8280	0.0015	0.02%

Source: China Economic Scan