China Business Briefs 24/12/13

ECONOMY

China’s Total Debt at 215 Percent of GDP in 2012: CASS-Caijing **Which puts it above Greece in % of GDP – see here** China’s total debt topped more than 100trillion yuan in 2012, which  was 215 percent of that year’s GDP, according to the China Balance Sheet  2013 released by the Chinese Academy of Social Sciences (CASS).

China Cash Crunch Pushes Up Short-Term Rates – WSJ.com Rates rose again despite cash injections last week by the People’s Bank of China, which has tried to rein in lending but is facing crosscurrents ranging from government budget tightening to quirks in bank accounting rules to distrust among banks to rising losses on loans that haven’t yet been disclosed.

Chinese Rate Crunch Exposes Cracks – WSJ.com In an echo of last June’s cash crunch, interest rates that Chinese banks charge each other for short-term funds have again shot up to worrying levels. Despite moves by the central bank to calm the interbank market, the benchmark seven-day repo rate averaged 8.94% on Monday and spiked as high as 9.8%. That’s up from an already elevated 8.2% on Friday.

China banks squeezed for cash – Dec. 23, 2013 Some banks in the world’s second largest economy have been struggling to secure funds as the end of the year approaches, a time when they usually need extra cash to meet minimum deposit requirements, and as companies seek more money for operations.

China cash crunch eases as PBoC reassures – FT.com The People’s Bank of China pumped Rmb29bn ($4.8bn) into the financial system via open-market operations on Tuesday morning. Although the injection was tiny relative to the country’s Rmb100tn banking market, it was an important gesture to coax wary lenders back into doing business with each other.

The relief was virtually immediate. The seven-day bond repurchase rate, a key gauge of short-term funding, fell 344 basis points to 5.4 per cent, the steepest decline in more than two years, as liquidity improved.

China cash squeeze persists even after central bank reassures market | Reuters China’s cash market squeeze showed little sign of easing on Monday, reinforcing the view the central bank has shifted to tighter monetary policy.

Closer Look: Repeated Liquidity Crunches Beg a Question: Where’d the Money Go? – Some analysts say capital has left the country in anticipation of the U.S. Federal Reserve ending its policy of so-called quantitative easing, while others say interest rates have risen as reform deepens. Still others say the money that has been released was looped in a cycle formed by the property sector and the financial market instead of flowing into the real economy.

China Banks Stock Falls Due to Portfolio Adjustment | 4-Traders A slump in shares of banks like China Construction Bank Corp. late Friday was a result of changes in the investment portfolios of one or two foreign institutional investors, the Shanghai Stock Exchange said.

Some foreign index service providers adjusted the components and the weight of components of their indexes for stocks trading in the Shanghai and Shenzhen stock exchanges, which led to one or two foreign investors under the so-called Qualified Foreign Institution Investor program to accordingly adjust their positions in those stocks, the bourse said Sunday through its official account on the Weibo, a U.S. Tweeter-like microblogging service in China.

Local Bonds Set for Approval-Caijing **About time. But lessens central government control** China may allow city governments to issue municipal bonds independently as early as March next year to support their financial need for urbanization and relieve the pressure on mounting government debt, experts close to the matter said.

Key to Debt Problem ‘Is Giving Local Gov’ts More Autonomy’ – The key to the solution is matching local governments’ rights to their obligations and establishing a self-restraint mechanism through which local officials are responsible for their own income and spending, Wei Jianing, a research fellow at the State Council’s Development Research Center, said at an academic forum on local government debt last week.

IMF Working Paper 10.2013–Local Government Financing Platforms in China: A Fortune or Misfortune? Yinqiu Lu and Tao Sun China’s rapid credit expansion in 2009–10 brought local government financing platforms (LGFPs) into the spotlight. This paper discusses their function, reasons behind their recent expansion, and risks they are posing to the financial sector, local governments, and sovereign balance sheet. This paper argues that LGFPs were a fortune for China in the past, but would turn out to be a misfortune if the causes of the rapid expansion of LGFPs are not addressed promptly.

Chinese Steel Firms Reported Debt Ratio of 70pct, Margins at 0.43Pct in Jan.-Oct. Period-Caijing **Major restructuring ahead** Total liabilities in the companies – 21 percent of which posted a net loss – hit 1 trillion yuan in the period, and their margins were among the lowest across all sectors in the economy, said Miao Changxing, a senior official at the Ministry of Industry and Information Technology.

Property Investors Still Can’t Get Enough of Shanghai – China Real Time Report – WSJ **Same as London – property is an asset** According to a report published jointly by PricewaterhouseCoopers and U.S. research organization the Urban Land Institute, Shanghai ranked second out of 23 Asian cities in terms of investment prospects. The city held the No. 2 spot for the fourth year running, finishing behind Tokyo, which catapulted to the top with a hand from the economic reforms of Prime Minister Shinzo Abe. Last year’s winner, Jakarta, slipped to third place this year.

Sotheby’s, Liu Yiqian Deny That $8.2 Million Calligraphy Scroll Is Fake – China Real Time Report – WSJ **How corrupt are the experts?** The public spat began Saturday when three art experts from the Shanghai Museum alleged that the calligraphy work, titled “Gong Fu Tie,” was a forgery. Purchased at a Sotheby’s auction in September by collector Liu Yiqian, the piece is attributed to the Song Dynasty poet Su Shi, who lived from 1037 to 1101 and is known by the literary name Su Dongpo.

Chinese Investments In US Commercial Property Soar By 500% | Zero Hedge **Buy low, sell high!** Investors from multi-billion dollar hedge funds to individuals buying as few as 10 properties have acquired more than 1 million homes across the U.S. in the past three years, transforming a mom-and-pop business into one of Wall Street’s hottest investments. As we noted here, Blackstone Group LP alone has acquired more than 40,000 properties in 14 cities to become the largest single-family landlord in the country. As Bloomberg notes, the new landlords are transforming the way Americans live and accumulate wealth. But while Wall Street is becoming America’s largest residential landlord, it appears China wants to get paid for commercial properties… and Detroit.

Learning the Wrong Lessons from the Three Gorges Dam – **Experts don’t face the pressure on infrastructure which Chinese leaders do** The “South-North” project will cost at least 350 billion yuan. Once again, scientists are warning of dire environmental effects. Critics say the money would be better spent on water conservation, better infrastructure and making industry use scarce supplies more efficiently. Chinese leaders prefer grand projects above complex policy adjustments requiring debate and consent. The 3,000 kilometer network of viaducts, pipelines and canals is proceeding.

Q. and A.: U.S. Commerce Secretary Penny Pritzker on China Trade Talks – NYTimes.com Since a key Communist Party conference issued a plan in November to advance market reforms, a series of foreign envoys have rolled through China seeking to capitalize on some of its more business-friendly initiatives. Top American trade officials took the same tack during talks in Beijing last week, but made clear afterward that it would take time for United States businesses to reap dividends from the conference, known as the Third Plenum.

MOFCOM seeks foreign investment – BUSINESS – Globaltimes.cn China will encourage investment by foreign capital in the tourism, elderly care and education sectors next year, a spokesman for the Ministry of Commerce (MOFCOM) said Monday.

New incentives weighed to curtail overcapacity |Economy |chinadaily.com.cn **Very necessary** China will use fiscal and financial incentives to encourage consolidation in a number of industries, Minister of Industry and Information Technology Miao Wei said on Monday.

In a sign of shifting policy focus, Miao said that instead of mandatory, administrative-oriented consolidation, the industry regulator will do more to create a sounder environment for mergers and acquisitions.

8 tech trends to watch in China for 2014 The new year is a time for reflection, but it’s also a time for looking forward. In this regard, we’ve taken a broad look at some of the budding trends we expect to continue in China in 2014. In an ecosystem growing as fast as China’s tech scene, anything is possible within a year, but here’s a few predictions we think will change the country’s landscape.

SOE Reform in China — Big Change is On the Way | China Private Equity, Published by China First Capital The reality, however, is substantially different and substantially more challenging. SOEs live in a different world than they did ten, or even three years ago. They are more and more often under intensifying pressure to achieve two incompatible goals: to continue to expand revenues by 15%-25% a year, but to do so without corresponding large increases in net bank borrowing. The result, over time, will be that SOEs will need to rely increasingly on private sector capital to finance their future growth.

How going global can go well for firms – Headlines, features, photo and videos from ecns.cn|china|news|chinanews|ecns|cns China’s overseas business is still at its beginning stages, and more effort has been urged to strengthen the enterprises’ “soft power” abroad amid the boom of going global.

COMPANIES

China Mobile Faces Hit From Lower Connection Fees – China Real Time Report – WSJ **Competition is a bitch, ain’t it?** China’s telecoms regulator said it will reduce the interconnection fees that smaller carriers pay to dominant player China Mobile Ltd. beginning next year, as part of the government’s effort to promote competition.

The new fee regime will hit China Mobile’s earnings, analysts say, even as the extent of the profit boost from its new 4G services remains unclear.

Alibaba International Platforms to Merge into One Marketplace Alibaba’s AliExpress, Tmall International and the international division of Taobao, reportedly will merge into one marketplace, targeting individual consumers overseas (via Sina Tech).

Chinese users welcome Apple, China Mobile deal – Yahoo Finance UK Chinese users welcomed a long-awaited tie-up between Apple and China Mobile, the world’s biggest wireless operator, but analysts warned Monday that the deal’s impact depends on the quality of the carrier’s 4G network.

How China’s Richest Man Plans to Take on Hollywood (CMCSK, DIS, IMAX) Small, coastal Qingdao, China, may seem like an odd place for the next entertainment production mecca, but that is just where China’s wealthiest man, Wang Jianlin, with his company Dalian Wanda Group, plan to build their entertainment metropolis. Wanda Group is currently the largest land development company in China, developing and running shopping malls, department stores, hotels, and over 500 cinemas.

Pricing will be key to success of China Mobile’s deal with Apple – FT.com **But profit comes from a small percentage of high-end phones** Operators such as China Mobile traditionally agree to subsidise part of the cost of popular handsets, but some are now trying to end that practice. T-Mobile USA recently began replacing smartphones subsidies with mobile device financing plans, while Randall Stephenson, chief executive of AT&T, said that as smartphones become ubiquitous in more mature markets such as the US, “the model has to change. You can’t afford to subsidise devices like that.”

Chinese Energy Giants Refocus on Traditional Assets – WSJ.com The world’s biggest firms, or majors, are putting plenty of oil assets on the sale block, and Chinese companies are snapping them up. So far this year, China’s top three oil companies—China National Petroleum Corp., China Petrochemical Corp., or Sinpoec Group, and Cnooc Ltd. have spent $32 billion on conventional oil and gas asset acquisitions overseas, according to data provider Dealogic.

China is Preparing for the Future by Buying Up Energy Resources of All Kinds Energy is a necessity for growth. That’s why countries like China and India are building so many new power plants—without reliable electricity their growth would eventually strain and falter. China has been particularly aggressive in partnering with and buying foreign oil companies. And it’s doing the same thing with coal.

Xiaomi reports monthly revenues of $4.9 million from MIUI First, in a post on Xiaomi’s excellent official blog (hat-tip Marbridge Daily), the company revealed that its Android-based MIUI software has over 30 million users. This includes Xiaomi phone buyers as well as those who have installed the software on their Android phones as a ROM. The company points out that this means that one in every 48 people in China have MIUI installed on their devices, if you assume that China has a population of 1.4 billion people – a subject that’s best suited for other blogs.

China’s Jingdong set to pull in over $16 billion in sales in 2013 Jingdong – formerly called 360Buy – is the second largest Amazon-like site in China. It’s behind Alibaba’s Tmall in terms of market share, according to data from iResearch. With China’s whole business-to-consumer e-shopping sector worth $71 billion in Q2 this year, Jingdong has 17.1 percent market share to Tmall’s dominant 50.7 percent. Jingdong differs from Tmall in that it buys and ships its own stock, whereas Tmall serves as an online mall for brands and merchants.

Jingdong Posts Small Profit in Q1-Q3 2013 | Marbridge Consulting – China Internet News **Very low margins on high turnover** Beijing-based B2C e-commerce platform Jingdong has released financial performance figures for the first three quarters of 2013, revealing that the company achieved a small profit during the period. Jingdong’s total gross merchandise volume (GMV) (including the Jingdong open platform) exceeded RMB 100 bln in Q1-Q3 2013.

Netease to Sell Wealth Management Product -Caijing **Leading the market. Shows the dynamism of capital – always seeking returns** Following Baidu’s Baifa, NetEase’s first wealth management product, Tianjin, will be sold starting Dec 25 on that platform.

Tianjin will be launched in collaboration with Xianjinbao, a money market fund managed by China Universal Asset Management. Currently, the seven-day annualized yield of Xianjinbao is 5.97 percent.

HSBC may Target Industrial Bank in Next China Sell: Report-Caijing HSBC is in line to sell its 10 percent stake in China’s Industrial Bank after it spun off all stakes in Ping’an Insurance last year and stakes in Shanghai Bank earlier this month, reported the Money Week.

The Apple-China Mobile Deal Doesn’t Solve Anything – Businessweek Coming just a few months after a similar breakthrough with the leading carrier in Japan, NTT Docomo (9437:JP), the China Mobile deal addresses Apple’s traditional weakness in Asia. What it won’t do, however, is propel Apple to the top of the Chinese market. Samsung Electronics (005930:KS) is No. 1 now, followed by Lenovo (992:HK) and other local makers that sell good smartphones for far less than the cost of an iPhone. “Chinese consumers like to buy low-end, so-called white box, low-priced mobile phones,” Barclays analyst Kirk Yang told Bloomberg Television.

Delivery Industry Faces Review after Leaked Chemical Kills Parcel Recipient – The order was issued after media reports about the death of a man in Weifang, in the eastern province of Shandong, in late November. The man died after taking delivery of a parcel – a box of shoes he bought online – from Shanghai YTO Express (Logistics) Co.

China Telecom (CHA) Updates on Interconnection Settlement Standards; Sees Lower Revenue The Board of Directors of China Telecom Corporation Limited (NYSE: CHA) announced that the Company was notified by the Ministry of Industry and Information Technology of the PRC (the “MIIT”) that amongst others, public telecommunications network interconnection settlement standards of basic telecommunications operators will be adjusted with effect from 1 January 2014.

iOS Jailbreaks Bundled with Chinese App Store Is Just A Matter of Time? No matter who is backing TaiG or who are the other Chinese companies that were in talks with SaurikIT, Chinese tech industry are not surprised that Chinese companies tried to reach partnership with jailbreaks.

Mobile Payment and Loyalty Startup Mobexo Expanding to Four Tier 1 Chinese Cities Mobexo offers a customizable system of pre-payment, payment, and post-payment services. The Mobexo mobile payment e-wallet is a free app on iOS, Android and Windows Phone, which allows two parties to transfer funds without the need of additional devices. The app enables users to pay online or at physical shops, restaurants and bars. At the time of payment, users can earn points on their preferred merchants’ loyalty card and redeem promotional deals. Unlike credit cards or cash, Mobexo allows merchants to accept funds from customers without requiring them to give out their personal banking information.

Tsinghua Unigroup Completes Acquisition of Spreadtrum for US$31.00 per ADS Tsinghua Unigroup Ltd. (“Tsinghua Unigroup”), an operating subsidiary of Tsinghua Holdings Co., Ltd., a solely state-owned limited liability corporation funded by Tsinghua University in China, and Spreadtrum Communications, Inc. (NASDAQ: SPRD; “Spreadtrum” or the “Company”), a leading fabless semiconductor provider in China with advanced technology in 2G, 3G and 4G wireless communications standards, today jointly announced the completion of the approximately US$1.7 billion merger of Spreadtrum with an affiliate of Tsinghua Unigroup (the “Merger”) as contemplated by the previously announced agreement and plan of merger, dated as of July 12, 2013 (the “Merger Agreement”), between Tsinghua Unigroup and Spreadtrum.

allAfrica.com: Ethiopia: Chinese Firms to Undertake Two Billion Birr Road Projects in Amhara, South The roads, totaling 121.5km, are found in the Amhara and Southern regional states. The road in Amhara will be undertaken by China First Highway Engineering (CFHE) for 1.55 billion Br. It involves 24kms of badly damaged asphalt road, constructed during the Italian occupation more than 60 years ago, and 43.5kms of gravel road. Called Dessie-Kutaber-Tenta Junction Road, it will be upgraded to asphalt.

CNOOC’s Huizhou refinery plans Q4 overhaul next year – source | Reuters **You wonder what problems they’ve found in their plants around China** China’s 240,000 barrels-per-day Huizhou refinery, owned by China National Offshore Oil Corp (CNOOC), has set a tentative plan to shut down its whole plant for major overhaul for about 45 days in the fourth quarter of 2014, a company source said on Tuesday.

Moody’s affirms CCB Asia’s ratings and assigns (P)A2/(P)P-1 ratings to the bank’s MTN program Moody’s Investors Service has today affirmed China Construction Bank (Asia)  Limited’s (CCB Asia) long-term and short-term deposit ratings  at A2/P-1. The agency has also affirmed the bank’s  bank financial strength rating (BFSR) at C, which translates into  a baseline credit assessment (BCA) of a3. At the same time,  Moody’s has assigned (P)A2/(P)P-1 long-term and short-term  senior unsecured ratings to the bank’s USD 3 billion Medium-Term  Note Program, and affirmed the bank’s long-term and  short-term certificate of deposit program ratings at (P)A2/(P)P-1.

Posted from Diigo.

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