22 June 2009 | China Economic Scan

22-June-2009

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

In this edition: Wen says China should have 'moderately loose' monetary policy, China state firms profits fall 30.3%, China increases cigarette tax, Suning Appliance to raise 3 bln yuan in private placement, Franklin Templeton renews Chinese investment license.

Top 5 headlines

China Should Have ‘Moderately Loose’ Monetary Policy

• China should have a “moderately loose” monetary policy and implement “proactive financial policies,” Premier Wen Jiabao said during a visit to Hebei.
• “We need to fully realize the stimulus measures,” Wen said, according to the statement. “We should focus on structural adjustment while maintaining economic stability and relatively fast growth.”
• Wen “is trying to maintain optimism while acknowledging risks,” David Cohen, head of Asian forecasting at Action Economics in Singapore, said over the phone today. “Global demand will start to pick up and that should provide some boost to Chinese manufacturing.”

China Jan-May state firm profits down 30.3 pct y/y

• Profits at Chinese state-owned enterprises (SOEs) continued to fall in the first five months from year-earlier levels, but the pace of decline slowed from the first four months, an official newspaper said on Saturday.
• Overall profits of SOEs in the first five months reached 425.4 billion yuan ($62.3 billion), down 30.3% from a year earlier, compared with a drop of 32.3% in the first four months, the Securities Times quoted the Ministry of Finance as saying.
• Among them, enterprises controlled by the central government registered profits of 331.55 billion yuan from January to May, down 23.3% year on year, while those backed by local governments had profits of 93.85 billion yuan, down 47.4%.

China increases cigarette tax to add to state coffers

• China has increased tax on cigarettes by between 6-11% to tap additional revenue for for future government spending.
• The tax rise took effect from the beginning of May 1, and a new tax of 5% was also imposed on cigarette wholesalers, China State Administration of Taxation said in a statement posted on its Web site (www.chinatax.gov.cn) on late Friday.
• "This is to appropriately increase the government's fiscal revenue and also to perfect the cigarette taxing system," it said. The tax has not yet been passed on to smokers.

China's Suning to raise 3 bln yuan in placement

• Chinese retailer Suning Appliance said on Saturday that it intended to raise around 3 billion yuan ($439 million) in a private placement for purposes including building new chain shops around China.
• Suning planned to issue up to 200 million new yuan-denominated A shares to private investors, including its chairman Zhang Jindong, it said in a statement published in the China Securities Journal.
• Proceeds would also be used to build six logistics centres in Chinese cities including Beijing and Tianjin and to supplement working capital, it said.

Franklin Templeton Gets Chinese Investment License

• Franklin Resources Inc., manager of the Franklin and Templeton mutual funds, said it received a new license to invest in Chinese stocks and bonds after an earlier permit held by a unit expired.
• Franklin Templeton will also invest in China through private-equity and its joint venture in the world’s third- largest economy, the statement said. It will also buy shares of Chinese companies traded in Hong Kong, it added.
• Citigroup Inc., Goldman Sachs Group Inc. and HSBC Holdings Plc are among more than 80 overseas institutions cleared to invest in Chinese stocks and bonds under the so-called QFII program.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,921
Shanghai Composite	2,880
Shenzhen Component	11,242
TAIEX	6,231
CNY/USD	6.8376

Source: China Economic Scan

16 May 2009 Edition | China Economic Scan

16-May-2009

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

In this edition: China's fiscal revenues fell sharply in April, China looks to fine tune monetary and fiscal policy to stimulate growth, PBOC gov says high saving rate to build shanghai financial hub, FDI in China drops 22.5%, Chinese stocks close up on Friday.

Top 5 headlines

China's fiscal revenues fall sharply in April

• Combined central and local government revenues fell 13.6% from a year earlier, a far sharper decline than the 0.3% drop in March and the 1.2% drop in February.
• Government spending in April surged 24.5 percent from a year earlier as Beijing implemented its 4 trillion yuan ($585 billion) stimulus package to prop up domestic demand as the economy slows.
• Government outlays in the first four months totalled 2.05 trillion yuan, while spending was 1.79 trillion yuan. That left China with a fiscal surplus of 265 billion yuan through April, but the bulk of spending tends to come in the later months of the year, putting the country on track for an overall deficit.

China May ‘Fine-Tune’ Monetary, Fiscal Policies to Spur Growth

• China may “fine-tune” monetary and fiscal policies as it seeks to spark a revival in the world’s third-biggest economy, central bank Governor Zhou Xiaochuan said.
• “Economic conditions are still shaky, especially trade, so we don’t expect a marked change in policy,” said Ken Peng, an economist with Citigroup “Concerns over the quality of lending have definitely increased; some new controls could be imposed as early as the third quarter.”
• New lending grew more slowly in April after a record 1.89 trillion yuan ($277 billion) of loans in March.

PBOC Gov: China High Saving Rate To Help Build Shanghai As Hub

• "China is a country with a high saving ratio, offering abundant financing sources," Zhou said. "Although the central government encourages domestic consumption, China's saving ratio will remain high because the country is populous and has a cultural preference for saving."
• China's saving rate rose to 49.9% in 2007 from 37.5% in 1998, according to the latest figures from the PBOC. The U.S.'s savings rate in March was 4.2%, according to U.S. Commerce Department data.
• However, Chinese investors tend to have low risk tolerance compared with their counterparts in developed financial markets, which is an obstacle to financial innovation, he said.

Foreign Direct Investment in China Tumbles on Crisis

• Investment dropped 22.5 percent to $5.89 billion in April, the commerce ministry said at a briefing in Beijing today.
• That compares with a 9.5 percent decline in March. For the first four months of this year, spending fell 21 percent to $27.67 billion.
• Businesses that are partly or entirely foreign owned account for 30% of industrial output, 55% of trade and 11% of urban jobs, according to the commerce ministry.

Chinese shares down 0.9% on fall of surrounding markets

• Chinese stocks closed up on Friday, the TAIEX rose the most, up +1.96% to 6,489, the Hang Seng rose +1.51% to 16,791, the Shanghai Composite up +0.20% to 2,645, and the Shenzhen Component +0.21% at 10,273.
• Anhui Conch Cement, China’s biggest cement maker, gained +5.5% to 45.03 yuan, the biggest advance in two weeks. Its Hong Kong-traded stock was raised to “overweight” from “underweight” at JPMorgan Chase & Co., which said Chinese demand will grow by 10% this year.
• Huaneng Power lost -1.4% to 7.71 yuan. Huadian Power International, a unit of China’s fourth-largest electricity producer, declined -1.6% to 5 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	16,791	249.01	1.51%
Shanghai Composite	2,645	5.37	0.20%
Shenzhen Component	10,273	21.08	0.21%
TAIEX	6,489	124.92	1.96%
CNY/USD	6.8275	-0.002	-0.03%

Source: China Economic Scan