China Business Briefs 27/11/13

Reuters) – China’s aggressive quest for foreign oil has reached a new milestone, according to records reviewed by Reuters: near monopoly control of crude exports from an OPEC nation, Ecuador.

Last November, Marco Calvopiña, the general manager of Ecuador’s state oil company PetroEcuador, was dispatched to China to help secure $2 billion in financing for his government. Negotiations, which included committing to sell millions of barrels of Ecuador’s oil to Chinese state-run firms through 2020, dragged on for days. Calvopiña grew anxious and threatened to leave.

The regulations drawn up by the China Banking Regulatory Commission impose restrictions on lenders’ interbank business by banning borrowers from using resale or repurchase agreements to move assets off their balance sheets, said the people, who asked not to be identified because they aren’t authorized to discuss the rules publicly. Banks would also be required to take provisions on such assets while the transactions are in effect.
The long-anticipated third plenum of the 18th Central Committee closed with two ambitious goals to achieve. According to the plenum communiqué, Chinese leaders once again desire to deepen reforms toward market-oriented economy, yet under the predominant status of SOEs in the market. A “Leading Small Group for Deepening Reform” (shenhua gaige lingdao xiaozu) will be created as a key mechanism to design and coordinate the range of reform agendas and oversee their implementation. The state-run Xinhua released the statement that “leadership also vowed to let markets play a decisive role in allocating resources, aiming to achieve decisive results by 2020, with economic changes a central focus of comprehensive reforms.” While a comprehensive reform with decisive roles for the market is pledged, the first priority of the new leadership ultimately lies in strengthening the legitimacy of the Communist Party.

In an interview on November 20th, China’s Minister of Finance Lou Jiwei introduced the details of the fiscal and tax reforms that will be implemented after the Third Plenum. Lou explained that reforms will be achieved by fulfilling three objectives:

  • Improving the budget control system;
  • Consummating the tax system; and
  • Building an administration system with an appropriate allocation of fiscal and governmental responsibility.

If there’s one thing worse than inflation, it’s deflation. Falling prices hammer profits for businesses, kill any chance of pay rises for workers and raise the real burden of debt – the mirror image of “inflating away” your liabilities.

This is something China’s manufacturers have been dealing with for a while. The producer price index, which represents the prices paid at the factory gate, has been in deflationary territory for almost two years, underlining the weakness in demand for Chinese goods at home and abroad.

Property mogul Ren Zhiqiang’s rebuttal of a China Central Television (CCTV) report revealing a huge amount of unpaid land appreciation tax (LAT) by major real estate firms was rejected Monday by the lawyer who calculated the unpaid taxes.”Ren’s arguments are nothing but bad excuses used by property developers to blindfold the public,” Li Jinsong, a Beijing-based lawyer and certified tax agent, told the Global Times on Monday.

Li, who previously worked for tax authorities in East China’s Jiangxi Province for over 10 years, found that 45 major listed property companies in the country had failed to pay 3.8 trillion yuan ($623.58 billion) in LAT between 2005 and 2012. Li said his calculations were based on official data.

Goldman Sachs Group Inc. recommended buying Chinese (SHCOMP) and Russian stocks as a pick up in growth in developed countries and government reforms boost prospects for the “least-expensive” emerging markets.

Goldman upgraded equities in the two countries to overweight, the equivalent of buy, from market weight, saying Chinese banks and Russian energy companies could experience “modest valuation expansion,” according to a report today. The New York-based bank kept Korea and Mexico at overweight.

The extra yield investors demand to hold three-year AAA corporate bonds instead of government notes surged 35 basis points last week to 182 basis points, the biggest increase since data became available in September 2007, Chinabond indexes show. That exceeds the similar spread in India of 120 basis points. The benchmark seven-day repurchase rate has averaged 4.47 percent in November, the highest since a record cash crunch in June and up from 3.21 percent a year earlier.
(Reuters) – China’s anti-trust investigation into Qualcomm, the world’s biggest smartphone chip maker, is likely tied to the impending $16 billion rollout of commercial fourth-generation services by China’s big telecoms carriers.
CNCA data showed that China’s coal output increased to 3.65 billion tons last year from 2.35 billion tons in 2005, representing an annual increase of 190 million tons. Consumption in 2012 stood at 3.52 billion tons.

China’s telecom, media and technology industry’s share of total private equity and venture capital investments has risen significantly, a report from accounting firm PwC showed on Monday.

Macroeconomic volatility led to a significant decline in both the volume and size of overall private equity and venture capital deals in China in the first six months of 2013.

However, while investment decreased as a whole, the telecommunications, media and technology industry’s share of total PEVC investments showed a significant rise. The average ratio for the first half of 2013 was 59 percent, compared to 46 percent for the same period of 2012, according to PwC’s new China MoneyTreeTM Report 2013.

“All official building projects that have not had inspections carried out   according to regulations and where construction has started without   permission must halt construction and be handed over for confiscation,”   according to Xinhua, the state news agency.

 “All official building projects that exceed (the regulated) size, violate   standards, or are over budget should have the area that exceeds standards   vacated and handed over within a limited time or be entirely confiscated and   auctioned off,” the agency said, citing new regulations to control   spending and combat waste in the Communist Party.

Taiwan’s financial regulator Wednesday gave Chinese companies the green light to issue yuan-denominated bonds, with Bank of Communications Co. and Agriculture Bank of China set to sell the first such bonds by mainland issuers on the island.

Taiwan is one of several offshore yuan centers around the world and this comes as the island seeks to expand its domestic yuan services.

The much-discussed deal between tech giants Apple (NASDAQ: AAPL  ) and China Mobile (NYSE: CHL  ) could be the single largest near-term-growth driver for Apple.

The deal has been reportedly in the works for some time now, but to no avail. But a widely expected move from China Mobile next month has Apple observers once again thinking a deal could be coming soon.

PetroChina, which with its parent China National Petroleum Corp has been embroiled in a major corruption probe by Chinese authorities, is unaware of amounts related to the complaint, it said in a filing to the Hong Kong and Shanghai stock exchanges on Tuesday.

An overseas shareholder filed the complaint with the U.S. District Court for the Southern District of New York against PetroChina’s ex-Chairman Jiang Jiemin, current Chairman Zhou Jiping, former Chief Financial Officer Zhou Mingchun and current CFO Yu Yibo for violating U.S. securities regulations.

Chow Tai Fook Jewellery Group Ltd. (1929), the world’s largest listed jewelry chain, forecast “steady” growth for the rest of the fiscal year after first-half profit almost doubled on a surge in Chinese demand for gold.

Net income rose to HK$3.5 billion ($451.5 million) from HK$1.82 billion a year earlier for the six months ended Sept. 30, the company said in a stock-exchange statement yesterday. That was above the average estimate of HK$2.98 billion from five analysts compiled by Bloomberg.

People who long Qihoo must be confident in its search business. Qihoo management disclosed at today’s earnings conference call that currently Qihoo Search’s market share has increased to 22%. They found the new Sogou, added with Tencent’s search service Soso, actually has lost some market share to less than 13%. Zhou Hongyi, CEO of Qihoo, said on the call that the market can only accommodate two search players and there will be little room for the third largest. Baidu said they still had 70% a market share, Mr. Zhou denounced it saying that’s by Baidu’s own measurement. He said Qihoo’s goal is 30% by the end of next year. Earlier this year the company adjusted the annual goal for 2013 to 25%.

Chinese messaging app WeChat is the fastest growing social app used by youths worldwide, according to a study by Global Web Index. The latest study was conducted based on the feedback from teenagers aged 16 to 19 globally, excluding China. WeChat saw a 1,021 percent increase in usage among youths between Q1 and Q3 2013. The second-fastest growing is Vine at a rate of 639 percent, followed by Flickr (254 percent).

China Central Television reported on Sunday that property developers neglected to pay more than 3.8 trillion yuan ($623 billion) in land appreciation taxes from 2005 to 2012 (in Chinese). The report said 45 listed developers – including major well-known developers such as Soho China and China Vanke Co., owe land appreciation taxes. The one with the highest bill was Guangzhou-based Agile Property Holdings, with  8.3 billion yuan at stake, the report said.
The report quoted experts as saying the companies wouldn’t be able to support their cash flow if they paid what they owe in land appreciation taxes. “This would lower their ability to drive up land and housing prices,” the report cited Kang Xiaoming, a researcher from government think tank China Academy of Social Sciences, as saying.

(Beijing) – Five railroad workers were hit by a high-speed train in the northeastern city of Shenyang, a source close to China Railway Corp. (CRC) said on November 25.

Four people died in the November 22 incident. The fifth was injured.

Varin, the former CEO of Anglo-Dutch steelmaker Corus, joined Peugeot in 2009 and has steered the company through the worst of a six-year European car market slump.

But his support for a deeper tie-up with 7 percent shareholder General Motors or Dongfeng has led to bouts of tension with members of the founding Peugeot family, which would lose control of the company in the planned capital hike.

We consider China Mobiles Games and Entertainment Group (CMGE) to be one of the most undiscovered and undervalued publicly traded Chinese mobile game and technology companies. We believe that the stock can realize over 100% gain within a 12 month period. The mobile gaming market in China is expected to grow 92% in 2014, year-over year, but we expect CMGE to grow faster, at an estimated rate of 124%. Our target price ranges between $30 and $75, versus the current share price of $18

Qualcomm Inc. (QCOM), the largest maker of chips for smartphones, said China’s National Development and Reform Commission began an investigation related to an anti-monopoly law.

The NDRC has advised that specific details of the probe are confidential, San Diego-based Qualcomm said today in a statement. The company isn’t aware of any charge by the agency that it violated the anti-monopoly law.

BEIJING (Reuters) – Asia’s top oil refiner Sinopec has cut production for at least two of its refineries in China’s eastern Shandong province after the pipeline blast which killed 55 people on Friday, industry sources said.

The adjustments are part of a juggling of oil refining operations across its plants after the disaster, which has sparked a public backlash and an apology from Sinopec, saying it will conduct safety checks on all its more than 30,000 km of pipelines.

Hong Kong, November 25, 2013 — Moody’s Investors Service says that a pipeline accident which has  tragically claimed 55 lives is credit negative for China Petroleum &  Chemical Corporation (Sinopec Corp), but has no immediate impact  for its Aa3 rating and stable outlook.

The accident — which occurred just outside the city of Qingdao on  22 November — also has no impact on parent China Petrochemical Corporation’s  (Sinopec) Aa3 rating and stable outlook.

Posted from Diigo.

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