20 June 2009 | China Economic Scan

20-June-2009

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

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

18 June 2009 | China Economic Scan

18-June-2009

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

In this edition: Inflation said unlikely to occur in China in 2009, Hong Kong Q1 GNP/GDP down, CIC confirms financing deal with Australia's Goodman Group, UBS strategist speculates that US companies such as Coca Cola/GE/Walmart may seek Chinese listing, Chinese stocks get a boost on Wednesday.

Top 5 headlines

Economists: Inflation not likely to occur in China in 2009

• Concerns over possible inflation have shadowed the growth in bank credit, which continued to expand in May, with new loans reaching 664.5 billion yuan ($97.29 billion), according to the People's Bank of China (PBOC), the central bank, on June 12.
• About 49% of Chinese bankers thought the loans policy was a bit too "relaxed", an increase of 3.9 percentage points from the first quarter, while confidence in macro-economic growth prediction reached 39.1%, up 5 percentage points.
• "Deflation, instead of inflation, should be the major concern," said Yao Jingyuan, chief economist with the National Bureau of Statistics (NBS). "There is no need to be too worried about inflation, as commodities prices will remain low for the whole year," said Yao.

Hong Kong's first quarter GNP, GDP go down

• Hong Kong's gross national product (GNP) fell 9.2% in the first quarter over a year earlier, to 388.7 billion HK dollars (US$50.15 billion) at current market prices, Hong Kong Census and Statistics Department said.
• According to statistics from the department, Hong Kong's gross domestic product (GDP), estimated at 380.1 billion HK dollars (US$49.05 billion) at current market prices in the first quarter, fell 7.3% during the period.
• Compared with GDP, the value of the GNP was larger by 8.6 billion HK dollars (US$1.11 billion) in the first quarter, representing a net external factor income inflow of the same amount, and equivalent to 2.3% of GDP during the period.

CIC confirms financing deal with Goodman Group

• China Investment Corporation (CIC), the country's sovereign wealth fund, confirmed Wednesday that it will lend AU$200 million ($159 million) to Australia's leading property trust Goodman Group.
• CIC would commit to a financing facility alongside Macquarie Bank, Australia's biggest investment bank, said a source with CIC who declined to be named.
• Goodman Group is the third overseas company which CIC had chosen to invest in after buying stakes in Blackstone and Morgan Stanley since 2007.

Coca-Cola, GE, Wal-Mart May Seek China IPO, UBS Says

• Coca-Cola Co.,General Electric Co.Wal-Mart Stores Inc. are among U.S. companies that may seek to list on China’s stock exchanges, UBS AG said.
• John Tang, a Hong Kong-based UBS strategist, said he expects a dozen Western companies with a “strong presence” in China to offer shares in the yuan-denominated A-share market.
• “An A-share IPO allows foreign companies direct access to much needed renminbi funding,” Tang wrote in a note to clients. UBS declined a request for an interview.

China shares rise after Hu says stimulus working

• Chinese shares rebounded Wednesday after President Hu Jintao said Beijing's stimulus is showing results and China was determined to take the lead in emerging from the global economic crisis.
• Real estate stocks jumped, with China Vanke Ltd., the country's biggest developer, soaring 9.7% to 11.88 yuan, and rival Poly Real Estate Group up 8.2% to 25.52 yuan.
• Medical shares rose on speculation that the spread of the swine flu pandemic would drive sales. Da An Gene Co., a biotechnology company, surged 9% to 16.43 yuan, while Shenzhen Neptunus Bioengineering Co. rose by the daily 10% limit to 9.04 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,085	-80.9	-0.45%
Shanghai Composite	2,810	34.1	1.23%
Shenzhen Component	11,040	243.29	2.25%
TAIEX	6,196	-24.90	-0.40%
CNY/USD	6.8382	0.0041	0.06%

Source: China Economic Scan

17 June 2009 | China Economic Scan

17-June-2009

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

In this edition: China's fiscal revenue rises 4.8% in May, Microloans drive growth and change in rural China, Tencent CEO says still hopes to list yuan A shares, Everbright and Zunyi may be first to IPO following CSRC green light on new issues, Chinese stocks close down on Tuesday.

Top 5 headlines

China's fiscal revenue in May signals recovery

• An increase in China's fiscal revenue in May indicates a recovery in the economy and leave the government more room to employ fiscal measures to boost it, Tuesday's China Daily quoted experts.
• The country's fiscal revenue in May rose 4.8% year on year to 656.95 billion yuan ($96.05 billion), reversing the downward trend of the past few months, the Ministry of Finance (MOF) said yesterday.
• Aggregate central and local government revenues in the first five months stood at 2.71 trillion yuan, down 6.7% from a year earlier.

Wang Shulian’s Microloan Funds China Growth Impetus

• Microfinance provides small loans of a few thousand yuan to people in poverty who can’t get regular bank funding. Such programs have encouraged rural growth in countries including Bangladesh, where Nobel Peace Prize-winning economist Muhammad Yunus established Grameen Bank in the 1980s to extend loans to the poor.
• “Getting the money to trickle down” to the lowest level of the economy “is very, very important for the long-term development of China,” says Tammy Lam, who left her job as chief risk officer at Citibank last year to found Rural Impact Professionals, a nonprofit that fosters microcredit.
• “It’s really effective,” says Wang, 58, whose success encouraged her neighbors to get loans to raise sheep, expanding their village economy beyond subsistence farming. Many families now make at least several thousand yuan a year. Without the loans, “we’d still be poor,” she says.

Tencent CEO: Still Hope To List Yuan-Dominated A Shares

• Chinese Internet portal operator Tencent Holdings said the company still hopes to list yuan- denominated A shares in Shanghai. In March, the company said it had to drop its plans to list A shares because of poor market conditions.
• "Many domestic investors want to buy our shares and we want to allow our users to become our shareholders," Chairman and Chief Executive Ma Huateng told reporters Monday.
• Tencent said last month its net profit for the three months ended March 31 rose 94% to CNY1.05 billion from CNY542.0 million a year earlier.

Everbright, Zunyi May Lead China Share Sale Revival

• Everbright Securities Co., Zunyi Titanium Co. and Sichuan Expressway Co. may be among the first companies to sell shares publicly in China since September as the government prepares to reopen what was the world’s second- largest equity fundraising market in 2007.
• Everbright Securities, China’s 11th-biggest brokerage by assets, Zunyi Titanium and Sichuan Expressway are working on final documents required for regulatory approval to offer stock in Shanghai or Shenzhen, three people with knowledge of the matter said.
• “Current liquidity conditions can support share sales,” said Yi Yangfang, investment director at GF Fund Management Co. in Guangzhou, which manages about 78 billion yuan ($11.4 billion).

China Shares End Lower Led By Property Cos, Banks

• The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 0.5% at 2776.02. The Shenzhen Composite Index was flat at 916.55.
• Turnover for the Shanghai Composite Index slipped to CNY110.55 billion ($16.17 billion) from CNY111.43 billion Monday, which was down from CNY136.3 billion Friday. Analysts pointed to the shrinking turnover as a sign of investor cautiousness.
• Zhang Gang, an equity strategist at Central China Securities, said the Shanghai Composite Index will likely continue to consolidate around 2800 ahead of the resumption of initial public offerings, which may be later this month. "Until new IPOs are launched and people see how they're priced, uncertainty in the market will continue," he said.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,166	-333.46	-1.80%
Shanghai Composite	2,776	-13.53	-0.49%
Shenzhen Component	10,797	28.24	0.26%
TAIEX	6,221	-4.75	-0.08%
CNY/USD	6.8341	-0.0069	-0.10%

Source: China Economic Scan

16 June 2009 | China Economic Scan

16-June-2009

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

15 June 2009 | China Economic Scan

15-June-2009

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

In this edition: Soros says China is recovering fast from the crisis, foreign trade in Guangdong falls in May, Tengzhong communicating with regulator on Hummer deal, Ping An to acquire stake in Shenzhen bank for $3.2bln, Chinese stocks in the US fall the most in a week on share sale concerns.

Top 5 headlines

George Soros: China is recovering fast from crisis

• George Soros, chairman of Soros Fund Management, said Saturday he has confidence in China's economy and believes it is recovering fast from the economic downturn.
• "Its financial institutions are largely unaffected," Soros said, noting that with a good balance sheet, China was poised to balance its external accounts and in position to engage in stimulus investments. But Soros also pointed out that China's exports had been adversely affected. "China is dependent on exports, which have a high proportion in GDP."
• Soros made the remarks in an interview with Xinhua after meeting with Chen Feng, chairman of China's HNA Group. Soros has invested $50 million into Hainan Airlines, a subsidiary of the group.

Trade recovery fragile in Guangdong

• Guangdong province, which ranks first in foreign trade among provincial-level regions, recorded a decline rate in external trade lower than the national average in the first five months of this year.
• According to local customs data released Saturday, Guangdong's foreign trade volume stood at $208.52 billion between January and May, a decline of 21.8% from the same period of last year.
• The total included $125.39 billion in export value, down 18.5%, and $83.13 billion in import value, down 26.3%.

Tengzhong ‘Communicating’ With Regulator on Hummer

• Sichuan Tengzhong Heavy Industrial Machinery Co. is “communicating” with Chinese regulators about plans to buy General Motors Corp.’s Hummer sports utility vehicle brand after reports said the deal may be blocked.
• “It’s up to the government” whether the transaction will be approved, Chief Executive Officer Yang Yi said in an interview in Beijing today, without elaborating. “We respect the regulatory process.”
• Tengzhong said on June 2 that it had agreed to buy Hummer from bankrupt GM in a deal that would save more than 3,000 U.S. jobs. Still, regulators are unlikely to approve the plan as China wants companies to buy overseas parts makers instead of automakers.

Ping An to Acquire Stake in Shenzhen Bank for $3.2 Billion

• Ping An Insurance, shifting its focus to the Chinese market after losing $3.3 billion on an investment in Fortis, plans to buy a 22 billion yuan ($3.2 billion) stake in Shenzhen Development Bank.
• Ping An, China’s second-largest insurer, agreed to purchase as many as 585 million new shares from Shenzhen Development for 10.7 billion yuan, or 18.26 yuan apiece, it said. Ping An will also buy 520.4 million shares from Newbridge Capital LLC, the Asian unit of TPG, for about 11.45 billion yuan.
• “This is a good deal for both parties as they have a lot of resources to share, including customers, products and franchises,” said Xu Shoude of China Jianyin Investment Securities “While Ping An has a great ambition for its banking operation, it knows that the unit can’t grow fast enough without acquisitions.”

China Stocks in U.S. Fall Most in a Week on Share Sale Concerns

• Chinese stocks trading in the U.S. fell the most in a week as the prospect of new share sales in the mainland overshadowed better-than-expected economic reports.
• The Bank of New York Mellon China ADR Index, which tracks American depositary receipts, declined -2% to 361.23, paring a weekly advance to +0.6%. The gauge has rallied 28% this year.
• “You may be seeing some investors take some money off the table because of the prospect of some big IPOs,” said Jeff Papp, senior analyst at Lisle, Illinois-based Oberweis Asset Management Inc., which manages $700 million including China stocks.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,890
Shanghai Composite	2,744
Shenzhen Component	10,524
TAIEX	6,448
CNY/USD	6.8351

Source: China Economic Scan

China Economic Scan Weekly Economic Review - 13 June 2009

China Economic Scan Weekly Economic Review - 13 June 2009

13/06/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the past week there were a range of important data releases that have painted an interesting picture of the Chinese economy. New lending, M2, CPI, urban fixed asset investment, exports and imports, and car sales were among the data released.

New loans jumped to 664.5 billion yuan ($97 billion) from 318.5 billion yuan a year earlier, the central bank said. M2, the broadest measure of money supply, rose 25.7% in May from a year earlier, the central bank said, after a record 26% gain in April.

Urban fixed-asset investment climbed 32.9% in the 5 months to the end of May from a year earlier, the statistics bureau said. Urban fixed-asset investment in the first five months was 5.35 trillion yuan. The increase in spending was faster than the 30.5% gain in the first four months and analyst estimates of 31%.

May exports fell by a record 26.4% from the same month of 2008, and imports were down 25.2%. Despite the year-on-year import decline, demand for foreign raw materials is rising as Beijing's stimulus spending takes hold, analysts said. The value of imports fell even as volume rose because of a 30-50% drop in the price of oil and other commodities from last year's highs, which cut China's import bill.

CPI dropped 1.4% in May from a year earlier, after falling 1.5% in April, the National Bureau of Statistics (NBS) said. Analyst estimates were for a 1.3% decline. Producer prices fell 7.2%, the most on record.

Property 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. The China Se Shang Property Index is up about 116% this year.

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.

The Chinese government raised tax rebates for more than 600 export items, some up to the maximum level possible. 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. 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

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