China Business Briefs 1/1/14

The Shanghai Stock Exchange is closed today, so no Stock Watch. Happy New Year to all readers – best wishes for 2014.

ECONOMY

China trusts bring contrasting fortunes – FT.com **Lack of regulation makes it highly risky, whatever the current form of certain banks** The term “shadow banking” in China for many observers conjures up images of underground lenders handing out credit to sketchy borrowers at usurious rates. But that is a simplistic view of many of the financial institutions that have moved into gaps left behind by the country’s heavily regulated banks.

Some shadow banks have indeed courted trouble; others, though, are well-managed companies with strong track records.

China’s manufacturing growth slows as demand for exports weakens – FT.com Growth in China’s manufacturing sector slowed for the first time in six months in December, dragged down by weak demand for Chinese exports, according to an official purchasing manager’s index.

The state-sponsored PMI fell to 51 in December, down from 51.4 in November, marking a four-month low and highlighting the challenges facing the ruling Communist party as it tries to transform the growth model in the world’s second-largest economy.

China’s factory growth slower but resilient at year end | Reuters Many economists have said China’s economy was likely to show weaker momentum in the final three months of 2013 after a rebound between July and September, due to slowing credit growth and a fall-off in restocking demand.

China’s farm produce prices stay flat – Xinhua | English.news.cn **Some notable spikes** Farm produce prices in 36 major Chinese cities stayed mostly flat in the week ending Dec. 29 compared with the previous week, according to the latest statistics from the Ministry of Commerce.

Average wholesale prices of 18 kinds of vegetables rose 4.8 percent from a week earlier, while the prices of bitter gourds and tomatoes increased 11.3 percent and 9.9 percent, respectively.

Food accounts for about one-third of China’s consumer price index (CPI), a main gauge of inflation.

Closer Look: Rise in Total Gov’t Debt – to 30.3 Tln Yuan – Means Change Is Needed – This is the third time the National Audit Office has surveyed government liabilities. The survey was the work of some 544,000 auditors across the country. It was performed in August and September, and a report was given to the State Council, the country’s cabinet, in mid-October. Suspicion had mounted about how horrible the figures were considering it took so long for the government to publish them.

Experts, especially those from overseas institutions and academia, tended to be pessimistic in their estimates of total local government debt, guessing the figure would be 18 to 25 trillion yuan. Chinese government officials and affiliated institutions were generally more sanguine, estimating it to be between 15 and 20 trillion yuan.

China’s Tianjin to Begin Restricting Car Population, Xinhua Says – Bloomberg **Tianjin’s subway is still relatively quiet** Only 100,000 new license plates will be issued in Tianjin next year, of which 60,000 will be distributed by lottery and the rest auctioned off for a minimum bid of 10,000 yuan ($1,650) each, according to Xinhua. Government departments will be banned from buying new official cars and all proceeds from the auctions will go to support public transportation, Xinhua reported, citing a plan approved by the Tianjin government.

Property to take less of the GDP load | South China Morning Post **Dangerously high** Property investment accounted for 15.8 per cent of the mainland’s gross domestic product in the first three quarters of last year, a record high and a big jump from the 5 per cent contribution in 2000.

The ratio has stayed above 10 per cent since 2009 and the industry, which affects more than 40 other sectors including metals and home appliances, has stood out and provided a cushion to slowing growth in the world’s second-largest economy.

Xi Says in New Year’s Address China Will Make Progress on Reform – Bloomberg **One leads to the other. Can expect to see more aggressive moves towards of South China Sea neighbours** Xi Jinping, delivering his first New Year’s address as China’s president, said the country must press ahead with reforms in 2014 to improve livelihoods and make the country “rich and strong.”

Analysis: Transparency the crux in China’s struggle to deal with rising debt | Reuters **Money talks louder** By letting local governments sell bonds for cash, China wants to rely on nimble markets rather than inflexible regulations to keep spendthrift units in check.

But analysts say China’s dreams of a municipal bond market are so far just that, as building one has been impeded by a lack of disclosure from local governments on how much money and assets they have, and how much they owe.

China’s Banks Adopt ‘Living Wills’ to Plan for Less Predictable Future – China Real Time Report – WSJ The living will proposals come at an appropriate time for China, as the nation begins to address the prospect of bank failures. Its government-dominated banking sector is seen as having implicit state support. But Beijing wants to bring private capital to the sector and that could mean new risks. While China wants fresh competitors to shake up its banking system, it doesn’t want to be on the hook for management mistakes.

China-Russia trade sees downshift in 2013|Markets|Business|WantChinaTimes.com China-Russia trade value in January-November stood at US$81 billion, up 0.5%. The growth rate is more than 10% down on a year ago, according to China’s general customs administration.

During the period, exports to Russia reached US$44.56 billion, up 11.3% while Russian exports to China stood at US$36.5 billion, down 10.1%.

Chinese Banks Eye Global Bond Market – WSJ.com The country’s banks will need to raise up to two trillion yuan ($330 billion) from share and bond sales in the next five years, according to McKinsey & Co. With growing levels of bad debt in a slowing domestic economy, weakness in stock markets and rising capital requirements, Chinese banks can no longer rely on share sales and the country’s four-trillion-yuan bond market for cash.

China’s third economic census enters registration phase – BUSINESS – Globaltimes.cn China’s third national economic census entered its registration phase on New Year’s Day after months of preparation, according to the National Bureau of Statistics (NBS).

The census is designed to paint a wide economic picture of China’s fast-expanding secondary and tertiary industries and complete a database covering all economic sectors, said NBS head Ma Jiantang.

China suspends Pfizer imports – Chinadaily.com.cn China’s drug watchdog has decided to stop importing an injection from the Pfizer Inc., as the US pharmaceutical maker failed in a supplementary application for drug exports.

China will not import Pfizer’s Fluconazole injection, used to treat monilial infection, until the company makes correction, the State Food and Drug Administration announced Tuesday.

NDRC: Negative list to cut central govt role in investment – People’s Daily Online The National Development and Reform Commission, the country’s economic planner, vowed on Tuesday to stick strictly with the State Council’s directory of investment projects that require government approval.

The directory, known as the negative list, came into effect on Dec 2 and replaces the government’s approval procedures for 19 investment areas.

It devolves the responsibility to approve 30 categories of investment items from central to local authorities, and it transfers approval for 10 kinds of investment projects to industrial administrations.

Timeline: a history of Bitcoin in China in 2013 In the first three months of this year, China’s relationship with bitcoin was virtually nonexistent. A handful of scattered miners and exchanges like BTC China, which launched in 2011, had never really entered the public eye.  As far back as we can tell, Bitcoin’s recorded history in China dates back to April, when a Chinese charity started accepting bitcoins to help earthquake victims in Lushan, Sichuan province. That probably sparked the curiosity of a few speculative investors. The miners sooned caught the favorable eye of state media, which led to China’s explosion of interest.

Walter Lippmann on China – Silicon Hutong **Innovation and agility** “The small American businessman has long complained about how difficult it is for him to survive in the competition with the large American corporation,” [Walter] Lippmann warned. “What will he do when he has to face the competition of totalitarian monopoly organized on a continental scale?”

Lippmann was talking about the Soviet Union at the time, but his words do resonate today.

The year of bitcoin – The Tell – MarketWatch Elsewhere, banking authorities in China, India and Europe issued warnings about the risks associated with bitcoin. Developments in China took a bite out of the bitcoin rally, which was supported in part due to increased Chinese demand, and raised questions about what geographic region could attract the next round of bitcoin mania.

5 Things to Watch: China’s Energy and Environmental Policy – Five Things – WSJ An overhaul of China’s energy and environmental policies will be in focus next year as the country struggles to balance economic growth with protecting the environment. In November, China’s central government said in its landmark reform plan that it would allow markets to take a more “decisive role” in the economy, a signal that the era of cheap, tightly controlled energy prices might be over. Here are some major energy and environmental-policy reforms to look out for in 2014.

China Money Network − The Drivers And Headwinds For China’s Economy In 2014 Now onto the negatives. Drags on growth include tighter monetary policy, a slower real estate market (though location is everything), a cash crunch in the local government infrastructure space and a mild rise in inflationary pressures.

Regional jet service set to start in 2015 – Xinhua | English.news.cn China’s first domestic regional jetliner will go into commercial operation in 2015, with the first two ARJ21-700 aircraft intended for commercial service rolling off the assembly line on Monday.

The dual-turbofan planes will be delivered to Chengdu Airlines Co Ltd by the end of 2014, assuming the airworthiness certification process goes smoothly.

COMPANIES

Chinese state firms looking malnourished in 2013: report|WantChinaTimes.com **See yesterday’s analysis of the annual performance of the twenty largest stocks** Six state firms sit on the top 10 list with China National Petroleum Corp (CNPC) having seen the highest market value decline among all state firms. CNPC’s market value slipped from 1.46 trillion yuan (US$241 billion) at the beginning of 2013 to 1.24 trillion yuan (US$204 billion) by the end of the year.

In addition to CNPC, state companies that are on the top 10 lists are China Shenhua Energy Company, the Industrial and Commercial Bank of China (ICBC), the China Life Insurance Company, the China Petroleum & Chemical Corp (Sinopec) and the Bank of China (BOC), whose combined market value shrunk by nearly 600 billion yuan (US$99 billion) this year.

How Alibaba and Tencent went head-to-head in 2013 This past year saw some major competition emerge between Tencent, China’s massive gaming and social networking company, and Alibaba, which is best known for its e-commerce offerings. Below we’ve tracked the progression of both firms throughout 2013 and ask: what’s next?

Baidu.com, Inc. (ADR) (BIDU): Baidu Cranks Up Anti-Piracy Campaign – Seeking Alpha **Got to act mature if it wants to play with the big boys** Just days after announcing a new acquisition designed partly to rid its various sites of piracy, leading search engine Baidu (Nasdaq: BIDU) has removed all pirated material from one of its popular video sharing sites. The timing of this move looks quite interesting for a number of reasons, including the fact that Chinese media are saying Baidu has just been fined by Beijing for piracy violations. The move also comes just 6 weeks after Baidu was sued for piracy by China’s leading video sites, which took the action in an unusual alliance with Hollywood’s most powerful trade association. But perhaps most interesting is the fact that the U.S. could soon release its latest list of the world’s most “notorious” piracy sites, and Baidu has no desire to see its name appear on the list.

Morgan Stanley Stake Purchase Propels NQ Mobile Rally – Bloomberg Shares of the Beijing-based company soared 17 percent to $13.90 in New York, the biggest gain since Nov. 11. Morgan Stanley, which helped NQ Mobile raise $173 million in convertible bonds in October, said in a filing that it has a 5.2 percent stake. The Bloomberg China-US Index of Chinese companies trading in the U.S. slipped 0.6 percent yesterday, paring its 6 percent advance this year.

805 companies face punishment for pollution **But what punishments?** The names of 33 companies, including Ansteel Group’s chemical branch in Northeast China’s Liaoning province, were publicized by the ministry for serious air or environmental pollution.

Another 890 small workshops were shut down in the inspection, the ministry said.

Why China Ming Yang Wind Power Group Ltd. Soared 113% in 2013 (MY) Shares of wind-turbine maker China Ming Yang Wind Power Group  (NYSE: MY) clearly had the wind buoying them in 2013, having clocked a massive 113% gains. For a company that’s yet to turn in a profit, the rally may seem out of place. Yet, a growing order book, and great-looking prospects in the clean energy space, kept investors hopeful. But will that be enough to propel the stock higher in 2014, or is the rally close to over? Let’s find out.

Shenzhen incubated Wearable Device Startup Vigo Helps you Stay Alert and Fight DrowsinessThe Vigo team moved to Shenzhen, China as part of the hardware accelerator HAXLR8R. HAXLR8R offers seed funding ($25,000), office space as well as mentorship along with the other opportunities for startups to take an idea to a product. The programme is based in Shenzhen in order to leverage the supply chain and factory ecosystem. They use a process they call ‘Interactive Manufacturing Process’ to ensure rapid development of manufacturable products.

The Island Speaking at the occasion Minister Abeywardena said that Sri Lanka will sign US $2 billion worth Foreign Direct Investment (FDI) deals, including the $ 1.3 billion Investment from China Communications Construction Co. Ltd. to build a port city.

Riding the Digitization Trend into a New Industrial Age – PR Newswire – The Sacramento Bee Huawei Unveils its Viewpoints on 2014 Industry Trends

TAZARA, Chinese firm sign pact for four locomotives The Tanzania-Zambia Railway Authority (TAZARA) has sealed a contract with the Chinese Civil Engineering and Construction Company (CCECC), for the manufacture and supply of at least four new mainline locomotives.

According to a statement from the TAZARA head office in Dar es Salaam, the locomotives will be supplied together with consumables and spare parts worth Chinese RMB Yuan 85 million (about USD12.45 million).

Chery plans to build R&D center in Brazil – People’s Daily Online After building an engine factory in November, Chery automobile plans to build a R&D center in Brazil. The CEO of Chery Brazil, Luis Curi, said the investment of this center would be tens of millions, aiming to promote localization. Chery has planned an assembly plant, an engine factory and a R&D center.

Numerous Gurus Hold IDCC, DGX, PTR at 10-Year Low P/B – NASDAQ.com According to the GuruFocus Value Screen  that shows value strategies of stocks traded at historical low P/B ratios, InterDigital Inc. (IDCC), Quest Diagnostics Inc. (DGX) and PetroChina Co. Ltd. PTR) are held by numerous gurus and are traded at or near their 10-year low. Furthermore, insiders are selling IDCC and DGX.

Revlon to Exit Operations in China, Cut 1,100 Jobs – Bloomberg Revlon Inc. (REV), the maker of cosmetics under its namesake and Almay brands, will cease operations in China and eliminate about 1,100 positions, including 940 beauty advisers, as it restructures its struggling business.

The China business makes up about 2 percent of net sales, and the restructuring will result in about $22 million of pretax charges, the New York-based company said in a filing with the U.S. Securities and Exchange Commission. The changes are expected to reduce costs by about $11 million a year, Revlon said.

Posted from Diigo.

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