China Business Briefs 14/1/14

ECONOMY

Red Flags in China – Can It Prevent a Major Financial Crisis? | Matthew Kerkhoff | FINANCIAL SENSE China’s policymakers have been working to shift their economic model towards consumption, and away from excess investment spending. An explosion in lending is beginning to saddle China with the same problems that have plagued other debt-ridden nations.

Take a look at the chart below, from The Wall Street Journal, which shows the rise in China’s debt levels compared with other countries before their respective financial crises. Looks strikingly similar if you ask me.

China pouring billions into London real estate – Headlines, features, photo and videos from ecns.cn|china|news|chinanews|ecns|cns Research released last December by Jones Lang LaSalle Inc, a Chicago-based real estate service and investment company, showed Chinese investment in London real estate has risen more than 1,500 percent since 2010, increasing from 54 million pounds to more than 1 billion pounds at the end of the third quarter of 2013.

This increase means that Chinese investment in London real estate now accounts for more than 50 percent of the total figure for Chinese investment in the rest of Europe, which stood at 1.9 billion pounds in 2013.

China Military to Stop Buying Foreign-Branded Cars, Xinhua Says – Bloomberg China’s military will stop buying foreign-branded vehicles as part of a campaign to promote frugality and reduce waste, the Xinhua News Agency reported.

The military will also limit official trips and lavish receptions and ban its members from receiving gifts and souvenirs, Xinhua said. The armed forces will strictly control new construction of official buildings or the renting out of office space, according to the report.

US challenges China over compliance with WTO ruling – FT.com The United States has for the first time challenged China’s compliance with a World Trade Organisation ruling, claiming the country had failed to make changes ordered by a WTO dispute resolution panel.

The dispute alleges China refused to comply with a 2012 ruling that barred the country from imposing duties on a type of heavy steel manufactured in the US. The complaint asserted that the inaction was costing US companies about $250m per year.

New areas underscore China’s westward shift of development|Markets|Business|WantChinaTimes.com China’s State Council, the country’s cabinet, recently approved two national-level new areas in western China, namely the Xixian New Area in Shaanxi province and Gui’an New Area in Guizhou province, increasing the number of new areas in the western region to four — on top of Liangjiang New Area in Chongqing and Lanzhou New Area in Gansu province, reports Shanghai’s China Business News.

Fuzhou’s US$16bn new town to emulate Shanghai FTZ|Policy|Business|WantChinaTimes.com A proposal for the development of a new district in Fuzhou and the city government’s plan to upgrade the Fuzhou development project to the national strategic level has been announced by the city mayor, reports China Business Journal.

HK should grow into a full-fledged financial market: HKEx – Xinhua | English.news.cn Hong Kong should grow into a full- fledged financial market and become the global financial center of Asia, Hong Kong Exchanges and Clearing Limited (HKEx) Chief Executive Charles Li said Tuesday.

Speaking at the Seventh Asian Financial Forum, Li said that in the last 30 years, China’s reform has been made mainly through three events — trade, which brought China the first bucket of gold, foreign direct investment, which has engaged China with the world market, and capital market formation. Hong Kong has becomes the offshore capital center of the Chinese mainland, and essentially has helped it grow into an important destination for world’s largest banks, insurance companies and other financial institutions.

Chief of China’s wealth fund bullish on US private sector | South China Morning Post China’s sovereign wealth investment fund is poised to launch a buying spree in global infrastructure projects and advanced technology companies after deleveraging in the US and European private sectors has run its course, its chief said.

However, Ding Xuedong, chairman and chief executive of the US$575 billion China Investment Corporation, cautioned that the outlook for US investments could be clouded by the tapering activity of the US Federal Reserve.

Guangdong outlines big FTZ plans[1]- Chinadaily.com.cn The Guangdong provincial government has vowed to realize liberalization of trade in services in the South China province and its neighboring Hong Kong and Macao special administrative regions by this year through CEPA (the Closer Economic Partnership Arrangement).

China Provinces Set Lower Growth Goals for 2014 – Bloomberg Some Chinese provinces are setting lower growth targets for this year than in 2013, adding to signs that expansion will slow as the government focuses on policies to sustain the economy in the long term.

Hebei, which borders Beijing in the north, set an 8 percent growth goal amid “unprecedented pressure” from air-pollution controls, according to an annual work report published today in the official Hebei Daily. Last year’s target was 9 percent. Fujian in the southeast and Gansu and Ningxia in the northwest are also targeting slower expansion, state-run websites show.

Hedge Funds’ Bets on China Pay Off – WSJ.com One reason for the strong performance is hedge funds stayed away from stock benchmarks loaded with shares of debt-laden state-owned enterprises, a sector that is struggling as the country enacts reforms aimed at increasing competition, said Richard Johnston, Asia head for alternative investment advisory firm Albourne Partners.

Chinese Search Market Saw 40% Increase in Revenue in 2013 The total revenues made by Chinese search services in 2013 is 39.32 billion yuan (about $6.5 billion), a 40.1% increase, according to the latest report by Chinese online data service iResearch. The increase rate is, however, lower than that for the previous year.

Foreign banks lured to Shanghai free-trade zone are left in limbo over regulation delay | South China Morning Post Foreign banks that were lobbied by the Chinese government to open branches in the mainland’s first free-trade zone in Shanghai have been left with little to do by ambiguous guidance and regulations that have yet to come into force.

However, after three months of preparation, many foreign banks are still left with very little to do in their new offices in the free-trade zone (FTZ), since most regulations are still at an un-actionable stage, said lawyers and accountants.

Detroit’s Plan: Export Cars, Import Chinese Investment – China Real Time Report – WSJ Even as Chinese auto makers shun the Detroit auto show, local officials and automotive industry players are hoping to transform Motor City into a hub for Chinese investment.

The Detroit Chinese Engineer Association has around 1,600 registered members, according to Zifeng Nie, chairman of its technical council. He estimates the total number of Chinese engineers working in the Detroit area to be around five times that figure. There are around 87,000 engineers in total in Michigan.

China’s Stocks Rebound After Reaching Cheapest Levels on Record – Bloomberg The Shanghai index’s 14-day relative strength measure, measuring how rapidly prices have advanced or dropped during a specified time period, was at 26.2 yesterday. Readings below 30 indicate it may be poised to rise. Trading volumes were 21 percent below the 30-day average today, according to data compiled by Bloomberg.

China branded products Succeeding at selling consumer products (really most products) in the United States virtually always requires more than just having the lowest price.  Unless and until Chinese companies truly understand this (rather than paying it mere lip service), the threat of Chinese companies taking over the US consumer market is minimal at best.

Liam Halligan: It pays to keep an eye on events in the East – Telegraph Among the most under-reported major trends in the world, this emerging Sino-Russian economic and diplomatic link-up will do a great deal to shape   the world economy in the years and decades to come.

As recently as 2003, cross-border trade between Russia and China amounted to just $12bn (£7.28bn). Over the last decade, that total has risen seven-fold, reaching $88bn last year.

China’s water shortage is so bad it could turn out the lights China has lost more than an entire Netherlands-worth of wetlands in the last decade—340,000 sq. km, or 9% of China’s total land—to agriculture, development, and climate change, according to new figures from its State Forestry Administration. It’s the latest in a long line of ominous warnings about the water supply in China, which has one-fifth of the world’s population but only 6% of its freshwater.

Chinese investors should avoid Britain’s rotten egg rail project | South China Morning Post **This is typical of British attitudes towards infrastructure or engineering works – investment in property is fine, but anything more ambitious gets sneered at** According to reports last week, Chinese state companies are eager to invest in Britain’s planned HS2 high-speed railway from London to Birmingham, and beyond to Manchester and Leeds.

They would be better advised to find another use for their capital. Although construction work has yet to start, HS2 shows all the signs of a classic British cock-up in the making.

5 Things Needed For an Education Startup in China Below are the 5 things entrepreneurs ‘should get’ for their education startup in China, according to Terry:

COMPANIES

Sinopec Plagued by Pipeline Crisis -Caijing **This is frightening** A schematic diagram of the national oil pipeline network shows that almost every province throughout the country has petrochemical pipelines, and many  cities incorporate multiple types of pipelines. And in each city, there are a  greater number of municipal grids that are even more complex. According to data from PetroChina Pipeline Company, there are more than 8,000 pipelines nationwide  that are in violation of current regulations.

China Railway Group Ltd : ANNOUNCEMENT-PASS AWAY OF PRESIDENT AND EXECUTIVE DIRECTOR | 4-Traders **Only took a week and a 10% share-price fall** The board of directors (the “Board”) of China Railway Group Limited (the “Company”) announces with deepest grief that Mr. Bai Zhongren, the President and an executive director of the Company, passed away on 4 January 2014 due to accident.

China Securities Regulator Investigating Sinovel Wind Group – WSJ.com **Who are the auditors, Deloitte?** Sinovel Wind Group Co., China’s onetime wind-power champion, signaled renewed scrutiny by Chinese regulators into its accounting problems in a filing to the Shanghai Stock Exchange late Sunday.

In the filing, Sinovel said it received a notice of an investigation from the China Securities Regulatory commission, adding to challenges that also include U.S. criminal charges and weak demand for wind turbines.

China Crackdown on IPO Pricing Gains Momentum With Bids Ignored – Bloomberg Chinese companies marketing initial  share sales are settling for lower valuations than most  investors were offering to pay, evidence that a government crackdown on overpriced deals is yielding results.

Beijing Utour International Travel Service Co. (002707), Hebei Huijin Electromechanical Co. (300368) and Yangzhou Yangjie Electronics Technology Co. (300373) priced IPO shares at below-average valuations for their respective industries after rejecting most investor bids for stock as too high, according to statements on the Shenzhen Stock Exchange’s website today.

Delay in SUV Launch Hits Great Wall Motor – WSJ.com Great Wall Motor Co.’s shares fell to a six-month low Tuesday after the Chinese auto maker said it deferred the launch of a sport-utility vehicle.

Analysts said the delay highlights the challenges China’s largest SUV maker by sales faces as it seeks a more upscale image to better complete with foreign car makers.

Huawei Pushes into Living Room With Game Console – China Real Time Report – WSJ Over the past few years, China’s Huawei Technologies has been branching further outside its mainstay telecommunications equipment business to sell more consumer products like smartphones, tablets and set-top boxes for TVs . Now, it’s making a push into the living room with a video game console.

Huawei has been trying to establish itself as a consumer brand as it seeks new engines for revenue growth beyond the market for telecom networking gear. Over the past few years, Huawei has become a major smartphone vendor in China, but it still has a long way to go in terms of consumer recognition, and the new game console could be a step toward building a more familiar brand.

RSI Alert: China Petroleum & Chemical (SNP) Now Oversold – Forbes In trading on Monday, shares of China Petroleum & Chemical Corp. Inc (NYSE: SNP) entered into oversold territory, hitting an RSI reading of 29.5, after changing hands as low as $75.24 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 47.0. A bullish investor could look at SNP’s 29.5 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. The chart below shows the one year performance of SNP shares:

China Petroleum and Chemical Rating Lowered to Underperform at Zacks (SNP) | Zolmax Zacks’ analyst wrote, “We are downgrading our recommendation on Sinopec to Underperform from Neutral, ahead of fourth quarter results. During the first nine months of 2013, the company witnessed a sharp fall in crude oil prices. This during the first nine months of 2013, dragged down Exploration and Production (E&P) segment’s operating profit by 15.5% year over year.

AB InBev to Buy Chinese Brewery Brand in CY3.8Bn Deal: Reports -Caijing Anheuser-Busch InBev, the Belgian-Brazilian multinational beverage and  brewing group, is planning to buy a Chinese brewery brand with 3.85billion yuan, Chinese media reported.

Ginsber, the north China-based brewer, was the eighth  largest beer brand by sales volume in Chinese market in 2011 when AB InBev surpassed Beijing-based Yanjing Brewery to become the market’s third largest brand.

Chat app WeChat launches four games in Southeast Asia It seems like the chat app competition has become a battle after all – according to WeChat, the China-based messenger will be rolling out four games for users residing in Thailand, Singapore, and Malaysia.

We reported earlier that WeChat had brought its game service into Indonesia, with four titles to begin with. But this news proves that it won’t stop there. WeChat will bring four games to the new markets in Southeast Asia, three of which already launched in Indonesia.

Shuanghui to apply next week for US$6 billion Hong Kong IPO, sources say | South China Morning Post Shuanghui International, China’s largest meat processor, plans to apply as early as next week for a listing on the Hong Kong stock exchange to raise up to US$6 billion, making it one of the biggest initial public offerings in Asia in years, people close to the situation say.

Yum Brands China same-store sales rose in December – MarketWatch Yum Brands Inc.’s China same-store sales rose an estimated 2% during December, increasing for a second straight month, but declined an estimated 4% for its fourth quarter.

The restaurant company has been trying to recover from food-safety concerns related to KFC chicken suppliers more than a year ago. Yum in November began an advertising and social-media campaign to assure people that its food is safe.

China Construction Bank VP to Lead China Everbright Bank | 4-Traders China Construction Bank vice president Zhao Huan will be appointed as president of China Everbright Bank amid a reshuffle of several bank executives, China Business News reported on Monday.

The report also said that Zhu Xiaohuang, president of China Citic Bank, would leave his post to become chairman of China Citic Group’s board of supervisors. The bank, China’s seventh-largest lender by assets, has so far declined to comment on the matter.

Chinese Smartphone Startup OnePlus Aims at Developed Markets OnePlus is a newly established Chinese smartphone brand officially announced today in Beijing.

It’s not just another phone brand by low-cost manufacturing China or aimed at less developed markets. OnePlus will be about high specs, comparatively low prices, selling directly online and shipping to the rest of the world, especially developed markets.

Bright Food gets 2nd Aussie firm – Business – Chinadaily.com.cn Bright Food Group Co Ltd, China’s second-largest food producer, acquired a midsized Australian dairy company following the purchase of Manassen Foods in the same country.

Manassen, in which Bright Food has a 75 percent stake, has signed a deal to buy Mundella Foods, a four-decade-old company in Western Australia, according to Bright Food spokesman Pan Jianjun.

China Merchants eyes deals in logistics | South China Morning Post China Merchants Group will take advantage of merger and acquisition opportunities in the mainland’s fragmented logistics and infrastructure sector as local governments deleverage, said the company’s chairman, Fu Yuning.

There are over 100,000 logistics players on the mainland but there are a lack of major players with advantages of scale.

China shoes: feeling the pinch – FT.com Three years ago Chinese shoe sellers were increasing their sales at a 20 per cent clip – and they were adding stores even faster. Stock valuations could be as dazzling as Dorothy’s ruby slippers. Now that sales are flat or falling, shares have followed suit and a rebound looks unlikely.

China’s Bold $10 Billion Investment in Nigerian Hydrocarbons Well, never mind the experiences of Shell, ExxonMobil, Chevron, Total, and Eni, Chinese companies are willing to brave the Nigerian new frontier and invest onshore there. On 10 January, the federal government in Abuja approved a $10 billion in Chinese oil exploration in the Bida Basin.

More Obstacles Ahead for Chalco Despite Year-end Profits – State-owned Aluminum Corp. of China Ltd. (Chalco), the nation’s biggest producer of aluminum, turned a profit before the year’s end by selling 12.9 billion yuan of assets to its parent company. The sale allowed it to stave off a risk warning on mainland exchanges.

The company said on January 10 that it expects to earn about 1 billion yuan in net profits in 2013, which means the company could avoid getting branded as an “ST share.” ST or Special Treatment, is a risk warning issued by the Shanghai and Shenzhen stock exchanges for listed companies that have two consecutive years of negative net profits.

China Telecom Offers South Pole Mobile Service | 4-Traders China Telecom Corporation Ltd. (NYSE: CHA and SEHK: 0728) has offered e-Surfing mobile communication service in South Pole, making first mobile phone call from there, ending the history for China to have no mobile communication service in South Pole. Thus, China Telecom becomes the first Chinese telecom carrier to open mobile communication service in South Pole.

Uganda inches towards oil sales With China National Offshore Oil Corporation (CNOOC), the only holder of an oil production license for the Kingfisher Discovery Area, expectations are that 2014 will likely be the year for the government to issue more production licenses to other firms.

China Seeks to Invest in Dutch Grain Trader – WSJ.com Chinese state-owned food company Cofco Corp. offered to buy a minority stake in Netherlands-based grain trader Nidera BV, the latest move by the world’s most-populous country to secure access to food resources.

Cofco submitted a binding bid for the stake last month, a person familiar with the transaction said. The stake is valued at around US$250 million, but it wasn’t clear how much Cofco offered to pay. The terms of the deal were being discussed, the person said.

ZURICH inks MoU with BANK OF CHINA to explore bancassurance opportunities in MALAYSIA | 4-Traders Zurich Insurance Malaysia Bhd declared that it has entered into a deal with the Bank of China Ltd for the expansion of bancassurance opportunities in Malaysia, by selling insurance products to the bank s clients.

It is stated, Zurich can provide the right guidance and surety which will be significant in Bank of China s business expansion here in Malaysia.

Fed Approves Chinese Bank for Expansion in California – Syndication Content Article – American Banker The Federal Reserve will allow Hong Kong-based Wing Lung Bank to expand in California as Chinese lenders boost their U.S. presence.

Wing Lung plans to establish a San Francisco branch and upgrade its existing office in Alhambra, California, to a full- service operation, the Fed said today in a statement.

Industrial and Commercial Bank of China : ICBC to Sell CNY100bn Certificates of Deposit in 2014 | 4-Traders Industrial and Commercial Bank of China announces that it plans to issue CNY 100 billion certificates of deposit in 2014 after ten Chinese banks completed the first round of such issuances at last year end.

ICBC points out that it will determine how many certificates will be sold and how long the certificates will mature in quotas filed this year and single issuance will be not less than CNY 50 million. Outstanding certificates will be not higher than quotas planned for the entire year at any time this year.

China data center roundup: Dawning, HongDa Telecom and CloudKC | Datacenter Dynamics Phase 1 of the 20m CNY Xinjiang Cloud Computing Data Center has come online.

Phase 1 of the project has seen 48 high-performance servers and storage systems deployed, and offers optical fiber connections by China Telecom, China Mobile and China Unicom.

Posted from Diigo.

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