China Business Briefs 3/1/14

ECONOMY

How China crashed the Nafta party | Kevin P Gallagher and Enrique Dussel Peters | Global development | theguardian.com **Great piece** Looking back, our research shows that China has significantly penetrated many of the new markets opened by Nafta. In a paper published by the Economic Commission for Latin America and the Caribbean, we document the extent to which Chinese products have taken away market share in the US, and how China has begun to take Mexican markets from the US as well.

China official services PMI falls to 54.6 from 56 – MarketWatch **Still decent growth, higher than manufacturing as you’d expect** China’s official nonmanufacturing Purchasing Managers’ Index fell to 54.6 in December from 56.0 in November, according to a statement on Friday from the China Federation of Logistics and Purchasing.

Local-government debt: Counting ghosts | The Economist IN MANY countries, governments struggle to contain their debt. In China, the authorities struggle even to count it. Last August and September, 54,400 auditors fanned out across the country, quizzing local officials, scrutinising their books and inspecting their pet projects in an effort to tally the Chinese government’s liabilities. They went from top to bottom, examining 31 provincial-level governments (which are typically responsible for tens of millions of people), 391 cities (often home to a million or more), 2,778 counties (with populations of hundreds of thousands) and over 33,000 townships (which are typically home to about 10,000 people). Never has so much been audited by so many.

Beijing airport world’s 2nd-busiest |Industries |chinadaily.com.cn Beijing Capital International Airport was the world’s second-busiest airport in 2013, serving more than 83.69 million passengers as of Dec 31, an increase of 2.2 percent from 2012, Beijing Youth Daily reported.

The airport ranked No 2 in terms of passenger throughput for the third year in a row, and handled 567,000 flights in 2013, an increase of 1.9 percent compared with 2012.

China LGFV Sells First Dollar Bond as Yuan Borrowing Costs Rise – Bloomberg Shanghai Chengtou Corp. sold the first onshore dollar-denominated bond by a local-government financing vehicle in China as yuan borrowing costs surge.

The funding unit issued $200 million of AAA rated notes with a 3.3494 percent coupon on Dec. 27, according to a statement posted on the website of the Shanghai Clearing House on Dec. 31. The bond was priced to yield 300 basis points more than six-month Libor, the statement said.

Taiwanese-invested business sweating in China’s credit crunch|Markets|Business|WantChinaTimes.com Due to the credit crunch at Chinese banks at the turn of the year, many Taiwanese-invested enterprises in China have been forced to resort to underground financiers, driving up the latter’s interest to nearly 200% per annum.

The banking credit crunch has been reflected in soaring banking interest rates. The rate for seven day mortgaged repo loans has climbed to over 8.9% in a single leap. Shanghai’s A-share market has taken a 6.75% decline in 2013.

PwC forecasts sharp increase in IPOs in 2014 – BUSINESS – Globaltimes.cn A-share IPO activities will be robust in 2014 after having been suspended for more than a year, and the number of IPOs is expected to reach 300, a significant increase over 2012, PricewaterhouseCoopers (PwC) said in a report released Thursday.

Among the 300 new listings, 40 are expected to be on the main board of the Shanghai Stock Exchange, with 260 on the small and medium-sized board and the Growth Enterprise Board (also known as ChiNext) of the Shenzhen Stock Exchange, said Frank Lyn, managing partner at PwC China, at a press conference in Beijing.

Shanghai focuses on blue chips, investor confidence |Markets |chinadaily.com.cn **Information disclosure is often poor. See the information available here** The SSE said it will diversify products to meet investor demand, improve the structure and quality of listed companies, elevate blue-chip shares, and continue pushing for better information disclosure.

“We could not predict market trends in 2014, but we believe stronger protection of investors will help to improve the user experience and attract more investors,” a top official of the exchange was quoted as saying.

Chen Guangbiao on Buying New York Times: It’s not a Joke -Caijing **That won’t reassure anyone** In an article published on the official Global Times on Friday, Chen said the U.S. knows little about a civilized and open-minded China while New York Times articles about China are hardly fair and objective.

Vice-minister calls for new economic growth model |Economy |chinadaily.com.cn China’s current economic growth model is “unsustainable,” and an “updated” style based on innovation must be forged, said deputy finance minister Wang Bao’an.

He characterized the feature of China’s growth model as “high input, high resource consumption, high pollution, high growth” and “low output, low efficiency, low profit, low tech”.

Pimco Sees Dim Sum Refinancing Boom on Cash Crunch – Bloomberg **A nice way of putting it** Pacific Investment Management Co. sees a 2014 boom in issuance outside the mainland by Chinese companies, driven by a record amount of Dim Sum bonds set to expire and a cash crunch in domestic markets.

“A lot of local and Dim Sum bonds are coming up for maturity so there will be a lot of refunding needs,” said Raja Mukherji, the Hong Kong-based head of Asian credit research at Pimco, manager of the world’s biggest bond fund. “Given that onshore rates have been ticking up in China, corporates may choose to go to the offshore bond markets and extend their maturity.”

China Moving Ahead on Water Prices – WSJ.com The changes are part of a wider government reckoning that current state-controlled pricing structures for everything from water to electricity and natural gas are broken. Underpriced resources help Beijing protect its citizens and industries from inflation, but experts say they are contributing China’s environmental woes and long-term concerns about economic sustainability.

Under the plan, the heaviest consumers—or top 5% of households—will pay at least three times the base rate of water. The second tier will pay 1.5 times the base rate, while the lowest tier—roughly 80% of urban households—wouldn’t be affected by the changes, according to the NDRC.

Why Investors are Willing to Take Bold Bet on the Money Burning Taxi App Business? **What about the taxi companies – opening access etc?** Two crucial considerations for venture capitalists in determining whether to invest in a company are team (background, experience, execution power, and complementarity) and direction (market potential, policy and competitors). The investment rounds of domestic taxi apps can be explained from these aspects (source in Chinese).

Local Flavor Returns As China Box Office Sales Boom and Outperform Foreign Films – China Real Time Report – WSJ Local productions powered a 27% rise in China’s box-office sales last year, according to one estimate, as Chinese-made films outdrew foreign movies after losing their top position in 2012.

China’s box office raked in 21.6 billion yuan ($3.17 billion) last year, according to consulting firm Artisan Gateway. That’s compared with 17.07 billion yuan for 2012 and a mere 950 million yuan in 2002, when China first began shaking up its state-run movie houses and started allowing modern theater chains.

Chongqing, Dalian, and Shenyang Offer 72-Hour Visa-Free Stays to Foreign Travelers | China Briefing News **Some kind of progress** In order to take advantage of these new visa-free policies, foreign travelers must hold a valid passport from one of the 51 countries named, a third country visa and tickets to depart the city to a third country or territory within 72 hours. During their layover, foreign travelers are permitted to engage in various activities such as tourism, business, and cultural communication, but are not permitted to travel beyond the administrative regions of Chongqing, Dalian or Shenyang.

Closer Look: The Era of Deifying GDP Growth Is Over. Now What? – In the past, if you asked to what extent the Chinese worshiped GDP growth, this was the answer: it was nothing short of almighty.

But that era is gone. GDP is no longer deified not only because the condition of the environment now weighs heavily in the performance evaluation of government officials. More importantly, the pursuit of high growth rates has become the greatest enemy of real growth.

Building a Foundation – **Sounds like a “Constitutionalist” argument** China has achieved great success from a low base, but the growth will not be sustainable unless institutions supporting innovation are fostered, Daron Acemoglu, an MIT economist and the co-author of Why Nations Fail, said at 4th Caixin Summit on December 19 in Beijing.

Why Nations Fail is based on the assertion that institutions are the key difference between successful and failed nations. Countries that develop political and economic institutions that are “inclusive” to a broad base tend to thrive, the book argues. Countries where power and opportunity are concentrated in the hands of a few have “extractive institutions” and tend to fail.

Shanghai’s housing market extremely robust in 2013 – Xinhua | English.news.cn **”Overheated”, more like** Over the past year, 12.82 million square meters of new homes were sold across the city, up 36.6 percent year on year, Shanghai Uwin Real Estate Information Services Co said in a latest report. They were sold at an average price of 24,177 yuan (3,983 U.S. dollars) per square meter, an annual growth of 7.6 percent.

Sales of new homes by area and costing above 2 million yuan grew by double digits year on year in 2013, while those priced under 2 million yuan rose by single digit, DTZ said after compiling data released by the city’s real estate trading center.

Disclosure rules bring clarity – People’s Daily Online A clearer picture of companies about to go public is emerging with the regulator mandating more complete disclosure from the first group of Chinese enterprises to issue shares under new regulations.

Under IPO rules released by the China Securities Regulatory Commission in November, prospectuses must include updated financial data and supplemental information about developments that occur after companies submit financial reports to IPO reviewers.

Concern expressed over rising debt risk – BUSINESS – Globaltimes.cn Lian Ping, Shanghai-based chief economist at Bank of Communications, told the Global Times Thursday that it is highly risky for the central government to allow LGFVs to borrow money to ease liquidity shortages.

“This is an emergency measure [for] when a large-scale debt problem has occurred,” Lian said. “If the borrowing activities are not scrutinized closely, however, the burden of local government debt will definitely become heavier.”

Turning the Table on Museum Displays, Chinese Huanghuali Wood Furniture Gets a Chance to Shine – China Real Time Report – WSJ In 1996, Christie’s held a major sale of Chinese furniture in New York. More than 100 tables, chairs, screens, boxes and cabinets from the Ming and Qing dynasties were put up for auction, setting sales records and sending a clear signal of the strength of the market.

Auction successes mean more public attention—and that in turn translates into greater public interest.

COMPANIES

Ping An to launch mobile financial services platform – BUSINESS – Globaltimes.cn Ping An Insurance (Group) Company of China, the world’s second-largest insurer by market value, plans to officially launch its mobile financial services platform before the upcoming Spring Festival, which falls on January 31 this year, news portal finance.sina.com reported Thursday.

The platform, dubbed “Yiqianbao,” mainly features online payment and social networking services and users can manage their money, and even their daily life, said the report, citing a New Year’s address by the company’s chairman Ma Mingzhe to his employees.

China sets up group for rare-earth production – MarketWatch Rare-earth production quotas, mining permits and other policies will be coordinated in China by a new group, the state-run Economic Information Daily newspaper said in a report on Friday.

Rare-earth producers Inner Mongolia Baoutou Steel Rare-Earth Group Hi-Tech Co. Ltd. (600111.SH), China Minmetals Corp., Aluminum Corp. of China, Ganzhou Rare Earth Group Co. Ltd., Guangdong Rising Nonferrous Metal Co. Ltd. and Xiamen Tungsten Co. Ltd. (600549.SH) are included.

Chinese Firm Linked to CNPC Suspected of Fraud in Iraq – “We would like to inform you that you should suspend all the activities of your company with Hermic especially the contract of water pipeline 24,” Hussain wrote, without giving any reason.

MOC is a state-owned Iraqi oil company. In May 2010, CNOOC signed a technical service contract (TSC) with the Missan oil block in southeastern Iraq. About four months earlier, another Chinese oil giant, China National Petroleum Corp. (CNPC) also won a TSC with Halfaya oilfield owned by MOC.

China Mobile’s Costly iPhone Deal with Apple – Digits – WSJ Since Apple confirmed the deal with China Mobile, brokerages have been swiftly reducing their earnings forecast for the world’s largest carrier by subscribers  because of steep capital outlays for a new network and anticipated handset subsidies. The carrier will also have to contend with lower interconnection fees from rivals as of Jan. 1 as part of the Chinese government’s latest effort to promote competition.

China No. three smartphone maker aims to double sales target in 2014 – Yahoo!7 China Wireless Technologies Ltd, the country’s third biggest smartphone maker by sales, plans to double its sales target this year, the latest budget Chinese handset maker eyeing a windfall in the world’s largest mobile phone market.

The Chinese firm, the parent of Coolpad smartphone-maker Yulong, aims to ship 60 million units, including 40 million 4G phones, it said on its official microblog late on Thursday.

Why I’m Not Worried About iPhone Pre-Orders in China Telecom Corporation Limited (ADR) (CHA) | Next iPhone News In a market that buys more smartphones than the U.S. has people, 100,000 phones is just a small drop in the bucket. It’s also the number of pre-orders China Mobile Ltd. (ADR) (NYSE:CHL) took for Apple Inc. (NASDAQ:AAPL)‘s latest iPhones in its first two days of availability, according to Wedge Partners. The largest wireless carrier in the world took fewer early pre-orders than its smaller competitors, China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) and China Telecom Corporation Limited (ADR) (NYSE:CHA) – 120,000 and 150,000, respectively.

Perhaps the China Mobile Ltd. (ADR) (NYSE:CHL) deal isn’t as major as people thought. I’m not really worried about it, though.

New Bagamoyo port to restore town’s lost glory Further, Tanzania has already signed a framework agreement with China Merchants Holding International Co. Ltd. to carry out the construction of the port as well as the railway network leading to it and the special economic zone. The total amount of these three parts could total more than 10 bn US Dollars.

Chinese Car News | Auto Brands to Watch in the Chinese Market in 2014 | China Car Times – China Auto News But let’s not focus on the big brands in 2014, we should look at other brands beyond the headline grabbers that we have seen over 2013.

China’s Demohour rakes in millions in series A funding round Chinese crowdfunding site Demohour announced today it has received “millions” of US dollars in funding from Matrix Partners China and Intel Capital, according to Tech 163.

China’s Meituan on course to sell $500M in daily deals per month Extrapolating that $16.4 million daily number, Meituan is close to pulling in $500 million per month in sales revenue. That’s more than double its rate in May 2013, when the company revealed monthly transactions worth $155 million.

Engines spluttering on Dongfeng-Peugeot deal – BUSINESS – Globaltimes.cn The long-stalled Dongfeng-PSA deal finally saw some signs of movement recently. A National Business Daily report said on December 26 that the cooperation between Dongfeng and loss-making French carmaker PSA Peugeot Citroën is expected to start with Dongfeng buying into a PSA research center in Shanghai.

“The two companies are still negotiating the potential purchase,” the report said, citing a source at Dongfeng Peugeot Citroën Automobile Co, the China joint venture set up by the two companies back in 1992.

Yanzhou Discount Widens as Gaming Data Boosts Melco Crown – Bloomberg The Bloomberg China-US Equity Index of the most traded Chinese stocks in the U.S. retreated 1.4 percent to 104.60 yesterday, following a 6.9 percent gain in 2013. Yanzhou Coal Mining Co. (YZC), China’s fourth-largest coal producer, tumbled 9 percent, while China Petroleum and Chemical Corp. slid to a two-month low. Yingli Green Energy Holding Co. surged 24 percent after announcing a joint venture with a state-owned company, and Melco Crown Entertainment Ltd. (MPEL) rose to a record.

Crowdfunding Site DemoHour Secured Millions of Dollars Series A Funding from Matrix Partners and Intel Zhang You, founder of Kickstarter-like crowdfunding site DemoHour booked millions of dollars of Series A funding from Matrix Partners China and Intel (source in Chinese). The capital will be used to develop crowdfunding services for hardware and art, etc, said Zhang.

Launched in July 2011, the site received $500 thousand seed fund from a Taiwanese angel investor in the same year, according to Baidu Baike (a wikipedia-style service in Chinese).

Tencent hits the road to map China’s biggest ‘street view’ Started with just three areas in late 2011, Tencent’s (HKG:0700) street view imagery is now the most comprehensive in China. In a country where Google has not been permitted to roll out its iconic Street View cars, Tencent has filled the void, rolling out camera cars and sending guys with panoramic cameras to cover dozens of cities from all possible angles.

Chinese P2P lending site Dianrong gets funding Chinese peer-to-peer lending service Dianrong raised “tens of millions of dollars” in a series A funding round from Northern Light Venture Capital, according to Kuailiyu.

As of the end of November 2013, more than RMB 100 million ($16.5 million) was lent through Dianrong. Kuailiyu states China’s P2P lending market is worth RMB 20 to 40 billion ($3.3 billion to $6.6 billion) per year and is growing at a rate of 300 percent year-on-year. In 2012, China’s then 200 P2P lending firms handed out RMB 10 billion ($1.65 billion). Other major domestic players include Renrendai, Haodai, PPDai, and Rong360.

Peer-to-peer online platform tries to muscle in on banks’ loan business | South China Morning Post By combining discount loans with a new asset class, a group of former bankers has launched Hong Kong’s first peer-to-peer (P2P) online lending platform.

Dispensing with the cost-heavy model of office branches and sales staff, and by employing cutting-edge risk analysis modelling, P2P platforms match borrowers with individual investors looking for high single-digit percentage returns.

Cost overruns dispute puts Panama Canal project in jeopardy | South China Morning Post Work on the massive Panama Canal extension project may be suspended after a clash between the builders and the Panamanian authorities over US$1.6 billion in cost overruns, according to a statement from the building consortium on Wednesday.

Panama Ports Co, part of Li Ka-shing’s Hutchison Whampoa conglomerate, operates the ports at both ends of the cana

HK IPOs in 2014: What to Look out for This Year -Caijing With Hongkong Electric, AS Watson, Shuanghui, and Alibaba looking to tap HK’s  capital market, this year’s IPO fundraising is expected to grow to CNY200billion  (US$33billion), of which at most CNY120billion is likely to come from two  spin-offs inside Li Ka-shing’s empire.

Why Yingli Green Energy Hold. Co. Ltd.’s Shares Popped Today What: Shares of solar module maker Yingli Green Energy Hold. Co. Ltd. (ADR)  (NYSE: YGE  ) are up 22% today after announcing a new venture in China.

Now what: Most Chinese solar stocks are up big today so there’s a rising tide lifting Yingli along with this news. As for the Shuozhou Coal deal, I think it’s an incremental positive but not a game changer for Yingli. The company still has too much debt and needs to make strong operational improvements to make a profit and that’s what I’ll be looking for in 2014 before buying into this stock.

Analyst: Don’t ‘Over-Exaggerate’ Apple’s China Mobile Deal – Part 2 Based on the assumption that Apple will require a volume commitment of 5 million units in 2014 and that China Mobile will employ a similar subsidy policy as China Telecom and China Unicom, the analyst calculated a total subsidy bill of 10.3 billion renminbi for the full year. He also reminded investors that since China Mobile’s fiscal 2013 budget was only 27 billion renminbi, the additional subsidy burden represents a “meaningful” 36.1 percent year-over-year increase.

Bank of Communications Co Ltd : China’s CPI to expand 2.6% y/y in December | 4-Traders China’s consumer price index (CPI) is likely to accelerate 2.6% y/y in December this year, as compared to an expansion of 3% y/y recorded during the previous month. According to Bank of Communications (BOCOM), the country’s CPI is projected to expand 3% next year, higher than the estimated level in this year.

Yingli Green Energy Announces Joint Venture with Datong Coal Mine Group – PR Newswire – The Sacramento Bee Yingli Green Energy Holding Company Limited (NYSE: YGE) (“Yingli Green Energy” or the “Company”), the largest vertically integrated photovoltaic (“PV”) module manufacturer in the world, known as “Yingli Solar”, today announced that its wholly-owned subsidiary, Yingli Energy (China) Company Limited (“Yingli China”), has entered an agreement (“Agreement”) to establish a joint venture (“Joint Venture”) with Shuozhou Coal Power Co., Ltd.(“Shuozhou Coal Power”), a wholly-owned subsidiary of Datong Coal Mine Group Co., Ltd. (“Datong Coal Mine Group”), which is China’s third largest state-owned coal mining enterprise. The Joint Venture will develop and construct solar power plants in Shuozhou city, Shanxi province.

Posted from Diigo.

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