China Business Briefs 29/11/13

In a policy proposal unveiled Thursday, the State Council, China’s cabinet, said it wants big corporate champions to manage the economic development and environmental consequences of the industry, which also has a slew of smaller operators.

The government said it would “encourage the consolidation of coal companies, with large-scale companies as the main body, building large-scale modern coal mines within large-scale coal bases.”

China keeps detailed statistics on the stuff it adds to the skyline. Last year it finished building 1.1 billion square metres of housing, equivalent to more than 10m homes, according to Rosealea Yao and Thomas Gatley of GK Dragonomics, a research firm. But China does not publish figures on what it subtracts from the skyline. The Ministry of Housing and Urban-Rural Development has not released a figure for housing demolitions for nearly ten years.

At a shareholder’s meeting in May, the chairman of China National Petroleum Co. (CNPC), Zhou Jiping, announced that “resources are extremely tight this year.”

The company supplies nearly 70 percent of China’s natural gas. Zhou said CNPC plans to supply 107 billion cubic meters of natural gas this year, 8 billion short of expected demand. Some research institutions predict the country’s shortfall will hit 10 billion cubic meters.

As China gradually opens its economy to the forces of supply and demand, there are now more opportunities for losses and gains than ever before. These days, fortunes can hinge on an individual’s ability to foresee trends in the market. But should a person ever have to pay for their business failures with their own life? The answer, obviously, is no.To prevent further tragedies, China should introduce a personal bankruptcy protection system along the lines of those already found in many developed nations. When a financially unsound company is driven into bankruptcy, its assets can be liquidated or restructured in order to make the best use out of its resources. Entrepreneurs should have similar opportunities to discharge their debts and restart their lives.

China will tighten approvals of new coal mines and ban imports of low-quality coal in order to curb the disorderly growth of coal production and promote sustainable development of the coal industry, according to a guideline released Thursday by the State Council.
New coal mines with annual output of below 300,000 tons will no longer gain approval. Existing coal mines with an output of less than 90,000 tons will be gradually eliminated from the industry, and coal mines that fail to meet safety standards will be shut down, the guideline said.

China will conduct nationwide underground oil pipeline safety checks, as PetroChina Co. (857) joined China Chemical & Petroleum Corp. in warning that the country’s rapid urbanization poses risks to their networks.

The inspections follow a Nov. 22 explosion at China Petroleum, or Sinopec’s, underground pipeline in the eastern city of Qingdao that killed 55 people. The section of pipeline at the center of the disaster was built in 1986 in a sparsely populated suburb that has since become a densely populated urban center. Sinopec is the nation’s second-biggest pipeline operator, while PetroChina is the largest.

Demand for luxury goods is set to slow this year, hurt by Beijing’s anticorruption drive, decelerating economic growth and increasingly discerning shoppers. Top brands can no longer figure that whatever they ship to China will be snapped up.

Bain & Co. expects luxury-goods sales in mainland China to edge up to $21 billion this year, an increase of just 2.5% from 2012. That is a dramatic slowdown from last year’s 20% pace, and slower than the growth in luxury-goods sales the consulting firm expects in the Americas—a reversal of the recent trend.

China’s 10 trillion yuan ($1.64 trillion) trust industry risks shrinking revenues as the government steps up financial reforms, research from Ping An Trust and McKinsey & Co showed on Nov 28.

About 88 percent of industry revenues are at risk in the long run, with 39 percent of earnings forecast to disappear completely in five years, the research said.

The assets under management of China’s trust sector grew sevenfold from 2007 to 2012, exceeding 10 trillion yuan by the end of the third quarter of 2013, making it the second-biggest financial sector in China after banks.

Li Ka-shing, Asia’s richest man, said his companies have slowed land purchases in Hong Kong and China as prices have escalated to a high level.

“Land prices in Hong Kong are high, and already showing signs of an unhealthy situation,” Li said, according to a statement from Cheung Kong Holdings Ltd., his flagship developer. “Land prices in China have surged, and we’re unable to win auctions for land.”

His business lost around 100,000 yuan (£10,044) in its first month and has  incurred total losses of 250,000 yuan since August.

I’ve had the chance to listen to a cross-section of Chinese government officials over the last week or so as they recast their priorities to be consistent with the direction of the Third Plenum. They seem to take conclusions from the document at three levels.

The simplest and most direct is where there is a sentence that says X will happen in Y industry. There the focus is pretty much on the when, not the what. The second level is to take the overarching themes, such as the role of the market, and infer how that applies in their area of responsibility. The third is to draw second order consequences from direction in the document that primarily applies to another sector or topic but which could be taken to apply partly to the speaker’s area.

In the market for a luxury home? Don’t look for one in Beijing. At the beginning of the month, the capital city’s construction committee made illegal the sale of any home priced at higher than US$6,560 per square meter. Anyone there willing to put down a pile of cash for a three-story villa with a garden and koi pond will have to wait until the municipal government once again changes its policy on how real estate is bought and sold.

Despite already-congested airspace in the skies above China’s southern Pearl River Delta region, airport operators in Hong Kong, Guangzhou, Shenzhen, Macau and Zhuhai—which currently manage a total of eight runways in five commercial airports—are investing in more infrastructure in an attempt to win over more of the growing number of travelers in the region.

In the first 10 months of 2013, passenger traffic in China rose 11% to 297.6 million, thanks to the robust demand for air traffic despite poor on-time performance.

A Chinese environmental group is suing PetroChina, the nation’s largest oil and gas producer, for what they claim is severe pollution in northeastern Jilin Province.The All-China Environment Federation said on Friday that it has filed suit in the Beijing Municipal No. 2 Intermediate People’s Court against the oil producer and its Jilin subsidiary for illegally discharging waste drilling water which poisoned local groundwater and farmland.

The nationwide organization are demanding that the company pay 60.75 million yuan (almost $10 million) for environmental restoration.

WeChat is being marketed heavily in the Philippines with TV advertisements this year. Now, the app’s maker, Tencent (HKG:0700), is set to open a WeChat office in the Philippines, according to Justin Sun, director of international WeChat operations, in conversation with ABS-CBN News.
Alibaba recently blocked WeChat’s access to two of its e-commerce apps. Users  who click on links to products and shops on Taobao and Tmall through WeChat,  Tencent’s popular messaging app, will be directed to the download page for the Alibaba apps. They are unable to browse or make purchases.

Hong Kong, November 29, 2013 — Moody’s Investors Service has assigned a provisional (P)A2 rating to the  credit enhanced bonds to be issued by China Merchants Land Limited (unrated).

The bonds will be supported by an irrevocable standby letter of credit  from the Industrial and Commercial Bank of China (Asia) Limited (ICBC  Asia, A2/P-1/C-, stable).

Exxon Mobil Corp.agreed to sell stakes in its West Qurna-1 oil project in Iraq to PetroChina Co. and PT Pertamina (Persero) of Indonesia.

Exxon said Thursday that PetroChina would take a 25% stake in the project and Pertamina would take a 10% stake. The West Qurna-1 field is located near Basra in southern Iraq. It is one of several big fields that Western oil companies agreed in 2010 to help Iraq develop.

Posted from Diigo.

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One comment

  1. CAA Resources (2112.HK), a major exporter of high-grade iron ore to China, said last week it more than doubled revenue and increased earnings 90 percent compared to 2012. This occurred primarily because of major increases in demand from Chinese steel manufacturers. An undervalued gem.

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