China Business Briefs 22/1/14

ECONOMY

China’s princelings storing riches in Caribbean offshore haven | World news | The Guardian The ICIJ records show both PricewaterhouseCoopers and UBS had extensive contacts with incorporation agents in the BVI and other territories in the region. In total, UBS helped incorporate more than 1,000 offshore institutions for clients from China, Hong Kong or Taiwan, while PwC had a role in establishing at least 400.

Both PricewaterhouseCoopers and UBS declined to comment on any specifics regarding their activities in the BVI, or with China’s rich. However, spokesmen for both companies said their activities complied with appropriate law and ethical codes.

Leaked Records Reveal Offshore Holdings of China’s Elite | International Consortium of Investigative Journalists Close relatives of China’s top leaders have held secretive offshore companies in tax havens that helped shroud the Communist elite’s wealth, a leaked cache of documents reveals.

Nearly 22,000 offshore clients with addresses in mainland China and Hong Kong appear in the files obtained by the International Consortium of Investigative Journalists.  Among them are some of China’s most powerful men and women — including at least 15 of China’s richest, members of the National People’s Congress and executives from state-owned companies entangled in corruption scandals.

It’s farewell to the golden chopsticks – FT.com But they are not the only ones hit by the new scourge of Scrooge: lots of ordinary pen-pushers are suffering too. They were not worth bribing before because they were either too junior or in the wrong department. Now they are not getting the other perks of office either: everything from mooncake coupons at the mid-autumn festival, to grocery gift cards at Chinese New Year, perks that they counted on to boost their meagre civil servant salaries by 10, 20 or even 30 per cent a year.

Heard on the Street: Dukes of Chinese Moral Hazard – WSJ.com Some observers hope that the failure of such a risky investment product—something that has never happened in China—will flush moral hazard out of the system. The scare has become a litmus test for Beijing’s reform drive. Let a small trust product fail, and the rest of the market will snap into shape. But the contagion risks means such an outcome is far from certain.

ICBC’s stance is that it’s only a sales agent and doesn’t have a legal obligation to stand by the products. This response shouldn’t surprise investors. If ICBC said it would backstop the products, it would risk an official reappraisal of how it treats all the other investments it keeps off its balance sheets.

China eases credit squeeze with lots of cash and surprising transparency | Reuters Faced with an abrupt rise in benchmark interest rates on Monday, which saw the benchmark seven-day repo rate quoted as high as 10 percent at one point, the People’s Bank of China (PBOC) announced it had provided an unspecified amount of emergency cash directly to some banks through its short-term lending facility (SLF).

It also committed to injecting money into the financial system during regularly scheduled open market operations on Tuesday – an unusual behavioral change for the central bank, which usually remains cagey about such plans.

Chinese investors try police to recoup funds | Business Spectator The product in question involves about one billion yuan in funds raised in 2012 by a little-known investment firm, Beijing Roll-In Investment Co. Beijing Roll-In planned to invest the money in several public housing projects backed by the government in the city of Chengdu, in western China, according to a dozen of its investors interviewed by The Wall Street Journal.

On Tuesday, about a dozen investors gathered at a branch of the Beijing Municipal Public Security Bureau, the city’s police, and asked the agency to start investigating the alleged default, which has led to the loss of what the investors call their “xue han qian,” or blood and sweat money.

Offshore Yuan-Bond Sales Off to a Galloping Start – MoneyBeat – WSJ According to data provider Dealogic, 10 borrowers have raised $2.9 billion worth of funds via dim-sum bonds so far this year, or yuan bonds issued outside mainland China.

That is more than four times the $697 million raised in the same period a year earlier, and the largest amount on record, Dealogic data showed. With 10 days before the month comes to an end, dim-sum bond issuance in January could exceed the record $3.2 billion issued in November.

Is China’s Slower Growth Good or Bad News? – China Real Time Report – WSJ So is less growth good or bad? Is economic data pointing to political success or merely a flagging economy? And should China’s leaders take a bow – or should they take a hint? The answer is — it depends.

Chinese Outbound Tourist Numbers To Double By 2020 | China Briefing News CLSA, the CITIC-owned Asian investment and brokerage advisory firm, issued a report on Monday which estimated that the number of mainland Chinese outbound tourists will double from 100 million in 2013 to 200 million by 2020. As a result, tourist spending is expected to triple, from about RMB500 billion to some RMB1.4 trillion during the next six years

New CIC President Credited with Shrewd Overseas Investments – The country’s sovereign wealth fund, China Investment Corp. (CIC), has replaced its retiring president and vice chairman, Gao Xiqing, with vice president Li Keping, who has a reputation for wise overseas investments.

Li, 57, joined the CIC in July 2011 as a vice president. He also held the posts of executive director and chief investment officer. Before that he worked with the National Council for Social Security Fund in charge of overseas investment. Li started working there in 2001.

J.P. Morgan Avoids Some Deals In China, Fearing U.S. Investigations – WSJ.com  J.P. Morgan Chase & Co. has pulled out of a $1 billion initial public offering of a Chinese chemical company and won’t seek a role in the IPO of a Chinese state-owned train maker, as the bank walks away from deals that could come under scrutiny from U.S. investigators probing its hiring practices in China.

Now the U.S. bank has stepped back from two more deals. J.P. Morgan ceded work on the IPO of Tianhe Chemicals, a privately owned maker of specialty chemicals. It was one of two banks with Morgan Stanley handling Tianhe Chemical’s planned 2011 IPO in London, which didn’t get off the ground.

Two Luxury Developments Inch Closer to Hitting Market in Capital – Homes in the luxury Taihe and Yueyuan projects will sell for more than 65,000 yuan per square meter. The total value of the two projects will pass 5.2 billion yuan, Centaline Property Agency says.

Two luxury housing projects in the capital have received special permits from the housing regulator, a sign the city is easing limits on the high-end property market.

Struggling hotels in China cut ratings to woo customers|Markets|Business|WantChinaTimes.com A total of 56 Chinese hotels have lowered or done away with their ratings to survive following Beijing’s crack down on government excess, reports the state-run China News Service, citing Chen Miaolin, vice president of the China Tourism Association and chairman of the Zhejiang-based New Century Tourism Group

Chen said that Chinese hotels had been graded on a five-star scale according to their facilities and quality of service. The greater number of stars, the more luxurious the hotels were considered, and could charge higher prices.

Shanghai free trade zone to be policed for copyright infringements – CHINA – BUSINESS – Globaltimes.cn China will keep a close eye on the Shanghai Pilot Free Trade Zone (FTZ) to combat cross-border crimes on intellectual property right (IPR) infringements and production of counterfeit goods.

The FTZ, inaugurated on September 29, 2013, has a high level of openness. This means it could be subject to the risk of fueling criminal infringement of IPR, said Chai Haitao, deputy director of the Office of the National Leading Group on the Fight against IPR Infringement and Counterfeiting, at a briefing Tuesday.

New China IPOs suspended from trading after excessive price surge | South China Morning Post Trading in the shares of seven of the eight mainland companies that made their market debut in Shenzhen yesterday was halted twice after gains exceeded limits set by the city’s exchange.

Shares of Zhejiang Wolwo Bio-Pharmaceutical, Chengdu Tianbao Heavy Industry, Guangdong Qtone Education and four other companies were suspended from 10.30am until 2.57pm, three minutes before the close, after they jumped at least 44 per cent from their initial public offering prices.

China Banks Get Greater Freedom on Small Loans – WSJ.com Under new regulations that took effect this month, Chinese banks have greater freedom to write off small loans that have turned sour. Banks still need to follow strict rules, but the mild relaxation may make them more willing to lend to the small businesses that are a vital part of the world’s second-largest economy, which is grappling with a slowdown.

Meanwhile, the central bank is trialing a program this week aimed at giving local banks around the country better access to funds when short-term borrowing costs rise above high levels. They are among the financial institutions most reliant on money markets for cash, leaving them vulnerable when short-term borrowing costs rise.

China, EU talking investment[1]- Chinadaily.com.cn China and the European Union on Tuesday started the first round of negotiations to forge an investment pact as both sides expect to open a new decade of ties between the two economies, officials said.

Remy Martin in low spirits as crackdown drains brandy sales – Chinadaily.com.cn France’s second-biggest distiller Remy Martin can no longer count on the Chinese NewYear, usually the best time of the year for a sales boost, for a bonanza this Spring Festival because of the government’s crackdown on extravagant spending.

Sales of the Paris-based company were down in the first three quarters by more than 12 percent to 845.7 million euros ($1.15 billion) from 964.5 million euros over the same period in the previous year because of the “unfavorable situation” for spirits in China, the company said on Tuesday in a statement.

Li’s Power Assets Raises $3.1 Billion in Electricity Trust IPO – Bloomberg Power Assets Holdings Ltd. (6), controlled by Asia’s richest man Li Ka-shing, raised HK$24.1 billion ($3.1 billion) in the initial public offering of HK Electric Investments at the low end of a marketed price range.

The company sold HK Electric units at HK$5.45 each, Power Assets said in a statement to the Hong Kong stock exchange today. About 4.43 billion units were offered at HK$5.45 to HK$6.30 apiece, according to HK Electric’s IPO prospectus.

China’s Sina, Baidu and Other Big Websites Are Hit With Disruptions – China Real Time Report – WSJ Chinese Internet users first noticed a problem at around 3:15 p.m. local time, when many complained that they couldn’t access a range of popular local websites ranging from news and social media portal Sina.com to services run by search company Baidu.

Though the exact nature of the problem is unclear, Qihoo and another security company, Kingsoft.com, said the problem likely had to do with servers that link a website’s domain name — such as baidu.com — with the numerical IP address that allows a computer to connect to a website.

Time for China’s economy to grow like it’s 1999 | China Economic Review What’s coming into focus now is the balance between appeasement – that is, powering the economy with cheap credit, maintaining employment and social stability and keeping state businesses afloat – and rebalancing. The concept of rebalancing China has come to mean scaling back government investment, killing inefficient state firms and tightening their access to credit, all the while opening channels of credit to the real economy, namely small and medium enterprises.

This is a delicate balancing act because without strong economic growth, leaders will be wary of implementing reforms, many of which are thought to be impediments to strong headline GDP.

What’s China’s Game In Central Asia? Some have raised eyebrows when noticing that the China National Petroleum Corp is the only foreign company to have a much-coveted onshore contract to develop a Turkmen field — the Bagtyyarlyk (Happiness) field, with estimated gas reserves of some 1.3 trillion cubic meters (that’s enough to fill all the European Union’s gas needs for about two years).

Most-Profitable ICBC Led by Jiang at Davos Peak From a Coal Mine – Businessweek The head of Industrial & Commercial Bank of China Ltd. is the first Chinese banker to serve as a co-chairman of the annual meeting of the World Economic Forum in Davos. The recognition highlights the increasing prominence on the global stage of the country’s state-controlled banks, which have added as many assets over the past five years as are held by all U.S. lenders combined. As China’s financial champions expand, Western banks are grappling with stagnant revenue and mounting legal costs tied to fines and settlements.

China’s Iraq Oil Imports Surge as Beijing Diversifies Crude Sources – WSJ.com Imports over the past year from Saudi Arabia, Angola and Russia—China’s largest suppliers in 2012—shrank as an overall share of total shipments. Last year their crude made up 42% of China’s imports, compared with 44% in 2012.

At the same time, growing imports from smaller and emerging oil-producing countries have helped make up for the shortfall. Imports from Iraq rose roughly 50% in 2013, ranking it behind Russia as China’s fifth-largest source of foreign crude.

Migration of Chinese Startups to Second-tier Cities Continues in 2013: Itjuzi Report Beijing, Shanghai and Guangzhou are still No. 1 destinations for startups, accounting for 76% of the total on aggregate. Zhejiang, Suzhou, Sichuan, Fujian, which account for a combined 18% of the total, is catching up thanks to government supports in policies, funds and other resources.

However, the combined percentage of startups based in regions that nabbed 4-10 spots in Top 10 list (where second-tier and third-tier cities located) reached 21% on aggregate, up from 13% in 2011 and 20% in 2012.

Vale CEO: China iron ore price drop temporary – MarketWatch A recent decline in iron ore prices in China is temporary and prices should rebound after companies operating there begin rebuilding inventories, the chief executive of Brazilian mining company Vale (VALE, VALE5.BR), Murilo Ferreira, said Tuesday.

COMPANIES

Battle to become top personal finance portal begins in ChinaWantChinaTimes.com Tencent quietly introduced the service — which allows users to invest in currency funds through its WeChat mobile phone app — on the evening of Jan. 15, following rumors that it would do so over the preceding six months, the newspaper said.

Alipay announced on the same day as WeChat’s quiet launch that Yu’ebao had a total user base of 49 million, who had jointly invested 250 billion yuan (US$41 billion).

Sinope (SHI) Increases Stake in China Petroleum (SNP) On 17 January 2014, the Company received a notice from Sinopec Group that Sinopec Group had increased its shareholding in the Company by way of acquiring 173,248,859 A shares on the secondary market through the trading system at the Shanghai Stock Exchange as of 17 January 2014, representing approximately 0.149% of the total issued share capital of the Company.

China Petroleum & Chemical (SNP) Shares Cross Above 200 DMA – Forbes In trading on Tuesday, shares of China Petroleum & Chemical Corp. Inc (NYSE: SNP) crossed above their 200 day moving average of $79.00, changing hands as high as $82.25 per share. China Petroleum & Chemical Corp. Inc shares are currently trading up about 5.8% on the day. The chart below shows the one year performance of SNP shares, versus its 200 day moving average:

China CNR Plans to Raise Around $1.5 Billion in HK IPO in 2nd Quarter – WSJ.com China CNR Corp is planning to raise around US$1.5 billion in a Hong Kong initial public offering in the second quarter, people with direct knowledge of the deal said Tuesday.

CNR, which is already listed in Shanghai, is China’s second-biggest train maker by sales after CSR Corp Ltd, which is listed in Hong Kong and Shanghai. It is planning to submit an application to list to the Hong Kong Stock Exchange in coming weeks, the people said. A listing application is the first step toward an IPO in Hong Kong.

As Cnooc sinks on no-growth guidance, Sinopec seen as better bet – Seeking Alpha J.P. Morgan is surprised Cnooc has guided almost no organic growth in 2014, and thinks the company has set itself up for a difficult 2015, where 14%-18% Y/Y organic production growth would be needed to reach the low end of the 2011-15 6%-10% target; the firm recommends SNP or PetroChina (PTR +0.2%) instead for China oil exposure.

SNP’s prospects are considered rosier than Cnooc’s: Its dividend yield is healthy at 5.21% vs. the 4.67% industry average, and its 9.17 P/E ratio indicates general investor expectations of higher returns in the short and medium term, if not beyond.

Mobile Game Developer LineKong Rakes in $80 Million of Series C Funding Wang Feng, CEO of mobile game developer LineKong, confirmed today the company had secured $80 million of Series C funding from consortium consisted of Orchid Asia, SAIF Partners, Starwish Global Limited, Profitable Century International Limited.

Failed Chinese Startups 2013 Like always and anywhere, a number startups in China failed in 2013. ITjuzi, a China-based starup data base, shared with us this list of worth-mentioning Chinese startups that died in the year.

Gome shares rise on strong sales growth – FT.com Shares of Gome, China’s second-largest home appliance retailer, rose 6 per cent on Tuesday after the company reported strong sales growth last year.

Same-store sales are expected to have grown by more than 12 per cent last year from the year before and gross profit margins are expected to have exceeded 18 per cent, the company said in a filing to the Hong Kong stock exchange late on Monday. The news took the company’s stock to a close of HK$1.34, up nearly 40 per cent from its close a year ago.

Green Dragon Gas confident on growing output sixfold this year – Yahoo Finance UK Green Dragon Gas (LSE: GDG.Lnews) , a China-based gas firm, forecast on Tuesday that production would grow sixfold by the end of this year and said it was confident of funding the drilling needed to reach its long-standing output target.

Green Dragon said on Tuesday its own operations were on track to produce 18 billion cubic feet (bcf) of gas by the end of 2014, a six-fold jump from the 2.9 bcf it produced last year.

5 Stocks Under $10 Worth Buying China Ming Yang Wind Power Group  (NYSE: MY) — $2.72

Shares of this Chinese wind-turbine maker more than doubled last year as orders spiked nicely higher and it powered its way closer to profitability.

Ventures Africa | East Africa Injects Billions Into Rail Infrastructure In Kenya, civil engineering firm, China Road and Bridge Corporation, has started the construction of the $3.8 billion SGR Railway line.

Posted from Diigo.

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