19 June 2009 | China Economic Scan

19-June-2009

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

In this edition: World bank raises China growth forecast to 7.2%, China sees 120% increase in rail investment, China set to grant final approval for first IPO since September, CIC goes on global hiring spree, Chinese stocks rise to 11 month high.

Top 5 headlines

World Bank Raises China 2009 Growth Forecast to 7.2%

• The World Bank raised its growth forecast for China this year and advised policy makers to delay until 2010 any additional stimulus plan to boost the world’s third-largest economy.
• China’s economy will expand 7.2% in 2009 from a year earlier, up from a 6.5 percent forecast in March, the Washington-based lender said in a quarterly report released today in Beijing. Stocks gained after the announcement.
• The World Bank joins Goldman Sachs Group Inc., Morgan Stanley and UBS AG. in raising growth forecasts this year after a 4 trillion yuan ($585 billion) stimulus package triggered record loans and surging investment.

China sees 120% rise in rail investment in first five months

• China saw a surge of investment in railway construction as the country pledged to increase spending as an effort to buoy the world's third largest economy.
• In the first five months, China pumped 168.9 billion yuan ($24.7 billion) in fixed-asset investment in railways, up 120% from a year earlier, the Ministry of Railways said in a statement Wednesday.
• The money included 149 billion yuan for railway infrastructure construction, up 161.8% from a year ago, 3.328 billion yuan for railway upgrading, and 16.55 billion yuan for purchasing trains, according to the ministry.

China Set to Grant Final Approval for First IPO Since September

• China’s securities regulator will grant final approval by tomorrow for the nation’s first initial public offering since September, two people familiar with the situation said.
• Guilin Sanjin Pharmaceutical, Zhejiang Wanma Cable and Shenzhen Salubris Pharmaceuticals are the three candidates for getting written permission to sell stock in Shenzhen, supposedly.
• “The securities regulator is still concerned about the benchmark’s performance,” said Sun Jian, a Shanghai-based analyst at Shenyin Wanguo Securities Co. “The market has been rising this week, which is an indication of sufficient liquidity and confidence.”

CIC goes on global hiring spree

• China Investment Corp (CIC), the country's $200 billion sovereign wealth fund, said it would start a new round of global hiring to support an expansion of its operations as it seeks new overseas investments.
• CIC, which currently employs about 200 people, will seek professional staff in 33 categories, including risk management, real estate, infrastructure, commodities and hedge fund investment, according to its website.
• "We are a new company, so it's natural for us to hire more people to grow," a CIC spokeswoman said. She declined to indicate the exact number of people CIC plans to hire.

China’s Stocks Rise to 11-Month High; ICBC, Shenhua Advance

• China’s stocks rose, driving the benchmark index to an 11-month high, after the World Bank raised its growth forecast for the country this year and Shenyin & Wanguo Securities Co. recommended buying machinery makers.
• Industrial & Commercial Bank of China Ltd., the nation’s biggest listed lender, rose +2.6% and China Shenhua Energy Co., the No. 1 coal producer, gained +5.5%.
• The country’s economy will expand 7.2% this year, up from a 6.5% forecast in March, the bank said. Sany Heavy Industry Co. climbed +4.9% after Shenyin & Wanguo said the company will benefit as property investment rebounds.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,777	-307.94	-1.70%
Shanghai Composite	2,854	43.78	1.56%
Shenzhen Component	11,152	111.14	1.01%
TAIEX	6,145	-51.38	-0.83%
CNY/USD	6.8355	-0.0027	-0.04%

Source: China Economic Scan

30 May 2009 | China Economic Scan

30-May-2009

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

In this edition: China economists raise growth forecasts, China may raise gasoline and diesel prices, Gold fever hits Chinese investors, Rocawear owner forms venture with Bosideng, Shanghai Gold Exchange marks 134% increase in trading.

Top 5 headlines

China Economists Raise Growth Forecasts Amid Signs of Weakness

• China’s growth prospects have improved from three months ago, even after accounting for drops in steel and electricity output and the risk of a manufacturing contraction this month, economists’ forecasts show.
• The world’s third-largest economy will expand 7.5% this year, according to the median estimate of 14 economists surveyed by Bloomberg News, up from a 7.1% forecast in February.
• Gross domestic product expanded 6.1% in the first quarter, the slowest pace in almost 10 years.

China May Raise Gasoline, Diesel Prices, Analyst Says

• China, the world’s second-biggest energy user, may raise gasoline and diesel prices by about 10 percent by next weekend as higher oil prices are leading to losses at the nation’s refiners, according to an analyst.
• Crude has surpassed $60 a barrel, putting pressure on Chinese refiners, Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong, said in an e-mail today.
• “We believe China is forced into a corner” and will raise prices “as soon as this weekend, and if not, very likely by next weekend following OPEC’s strong resolve to support higher oil prices,” Kwan said.

Gold fever grips Chinese investors

• Gold prices quoted on the Shanghai Gold Exchange SGE have increased by an average 6.74% in the past month to the current level of about 209 yuan a gram.
• "Gold demand in China in the first quarter rose to 114 tons, up 2% over the same period last year, solely boosted by an increase in jewelry demand," according to the latest Gold Demand Trends report for the first quarter of 2009 published by the World Gold Council.
• The report said global demand for gold rose 38 percent year-on-year to 1,016 tons, representing a 36% rise in value. China is the world's second largest gold consuming country after India.

Rocawear Owner Forms Venture With Bosideng to Open China Stores

• Rocawear, a brand co-founded by rapper Jay-Z, may sell clothes through 300 China stores after its owner entered into a venture with Bosideng International Holdings Ltd., the country’s biggest maker of down jackets.
• Bosideng said in a statement to Hong Kong’s stock exchange that it will partner with Iconix China Ltd. to sell the Rocawear range of men’s and women’s products in China by next year.
• Bosideng fell -1% to HK$1.04 in Hong Kong trading. Bosideng shares have gained +42% this year, compared with +26% for the benchmark Hang Seng Index.

Shanghai gears up for the big league

• With gold gaining a greater role in China's foreign exchange portfolio, experts feel that it is only a matter of time before Shanghai becomes a major gold trading market.
• Around 4,220.7 tons of gold was traded at the bourse in 2008, worth 822.9 billion yuan ($120.52), up 134.19% and 164.15% year-on-year, respectively, making it the world's top exchange for spot gold trading.
• "Although Shanghai still lags behind other gold trade centers like Hong Kong, New York and London in terms of global influence, China's robust economic growth and the city's plans to turn itself into a global financial center will give it an added advantage," said Albert Cheng, director of the World Gold Council's Far East Division.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,171	285.73	1.60%
Shanghai Composite	2,633
Shenzhen Component	10,128
TAIEX	6,890
CNY/USD	6.8325

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.

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