China Business Briefs 1/2/14

I am experimenting with dividing the day’s links by business area. Any feedback on this will be gratefully received.

Economy   Finance   Auto   Infrastructure   Energy   Telecoms   Travel   Property   Tech   Food

Economy

China factory output slows in January – FT.com The gauge dropped from 50.5 in December to 49.5 in January, a slight downward revision from the 49.6 reported in the “flash” PMI last week. A figure above 50 indicates expansion. The January figure marks the first contraction in the sector for six months.

China Manufacturing Gauge Falls to Six-Month Low – Bloomberg The Purchasing ManagersIndex (EC11CHPM) was at 50.5, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That matched the 50.5 median estimate of analysts surveyed by Bloomberg News and compared with December’s 51 reading. Numbers above 50 signal expansion.

Many Local Gov’ts Aim for Lower GDP Growth This Year – Most of the local governments that have announced their GDP targets for this year aimed lower than they did in 2013, citing the need to rebalance the economy and improve the quality of growth. Many missed their growth targets last year.

The announcements were made after the governments of 28 provinces, municipalities and autonomous regions held their annual lianghui, or meetings of the provincial legislature and political advisory body, in January. The provinces of Anhui, Hunan and Hainan have not yet held the meetings.

China’s loan sharks circle in murky shadow bank waters – Yahoo Singapore Finance China’s crackdown on risky lending has driven borrowers into an even darker place in their search for capital – underground banking.

The domain of loan sharks, underground lending is the least regulated area of China’s shadow banking, or non-banking, sector and for some it is seen as the biggest risk to China’s financial stability.

Why China’s Factories Will Automate – Silicon Hutong In the coming decades, China will go from being “THE factory floor” to “A factory floor.” Many things will force that change – a shrinking pool of workers, growing local opportunities in services, tightening environmental regulations, and more expensive energy. The economics, in short, will change, and so must industrial China.

Chinese prefer buying German, British companies: study – Xinhua | English.news.cn Germany and Britain are by far the most popular investment destinations of Chinese investors, a study showed on Friday.

According to the study of the economic consultancy Ernst & Young published Friday in Dusseldorf, Chinese investors have made 25 acquisitions in 2013 in Germany and Britain respectively.

Finance

Economic danger lurks in China’s shadow banks – FT.com Hence China’s uncomfortable predicament. Because the government was unwilling to see Credit Equals Gold No. 1 collapse, fears of an imminent economic meltdown are overblown. But for precisely the same reason China’s debt powder keg is only getting more tightly packed.

Distrust of China’s Trusts – WSJ.com It would be a mistake for Beijing to overreact now by simply clamping down on trusts, which perform some useful functions. The best prudential regulation is not about blanket bans on particular products, but rather looking for signs of dysfunction and getting ahead of the problem. The explosion of trust products suggests that the Chinese financial system needs new conduits for capital outside the banks. The challenge is to make sure that they are transparent, well regulated and free of any expectation of government bailouts.

Rating agencies criticise China’s bailout of failed $500m trust – FT.com Global rating agencies – often among the more sanguine voices on China – have warned that this week’s bailout of a soured $500m trust loan was a wasted chance to address rising moral hazard in the country’s shadow banking sector.

“By bailing out investors in this particular instance, the authorities are perpetuating moral hazard within the Chinese financial system – and this risk may in fact have become a whole lot bigger,” wrote Jonathan Cornish, an analyst at Fitch, in a research report. “We think the authorities have missed a chance of putting a clear marker in the sand that non-bank products would certainly not be supported.”

China’s top lender ICBC to add Peru to expanding Latin America operations China’s ICBC, the country’s top lender, will start operating in Peru next week as part of a bid to finance local exporters while expanding its operations in South America, the Lima stock exchange said on Wednesday.

Industrial and Commercial Bank of China, one of the largest banks in the world in terms of assets, secured a license to operate in Peru last year and will start lending to Peruvian companies – particularly exporters – as of Feb. 6, the exchange said in a statement.

Audit in their hands: what China can tell us about rotation – 30 Jan 2014 – Accountancy Age TRADE with China makes headlines. But along with trade has come mounting pressure on audit in the country everyone wants to do business with. Last year saw the results from the first wave of companies forced to rotate their auditors in what is an important step for Chinese corporate integrity.

The move has been closely watched and the first tentative conclusions are already being drawn from what many see an experiment in the management of audit provision. What will it do to the concentration of high-profile audits in the hands of the Big Four? How will it affect the price of audit? And what can the rest of the world learn from the experience?

Standard sells stake in London business to ICBC | Financial Services | BDlive STANDARD Bank has sold its controlling stake in its London-based global markets business to the Industrial and Commercial Bank of China (ICBC) as part of its strategy to focus on its African operations.

Africa’s largest banker announced on Wednesday it had sold 60% of the ordinary share capital of its London-based Standard Bank plc.

China’s banks: fighting back against online upstarts | beyondbrics Whether such yields from the money market funds are sustainable is open to question – and security is still a concern for some. Nonetheless, the traditional national banks have been forced to address the challenge, adding pressure to their share prices despite their still-strong earnings.

Shares of 12 banks out of 16 A-share listed Chinese banks have fallen below their net asset value per share. Jiang Jian Qing, chairman of ICBC argued at Davos that it was caused by China-bashing stories about non-performing loans and shadow banking rather than healthy fundamentals.

ICBC and Standard Bank: Limited partnership | The Economist Yet the match—the biggest foreign investment by a Chinese firm at the time—has not quite lived up to expectations. Revenues that could clearly be credited to it seemed slow in coming; then Standard Bank gave up looking for them. In spite of the growing Chinese presence in Africa, Standard Bank never secured the fees and bragging rights that arranging a Chinese takeover of an African firm or a big infrastructure investment would have brought.

China Money Network − Banyan Capital Completes First China Venture Fund Of $206M China-focused venture firm Banyan Capital has completed final closing of its first venture capital fund, Banyan Partners Fund I, on January 8 raising a total of $206 million, according to a company announcement.

The fund had two months of marketing period, and attracted over 40 investors from the world including entrepreneurs, family offices, fund-of-funds, foundations and other institutional investors from greater China and the U.S.

China Money Network − JD.com Files For $1.5B US IPO Beijing-headquartered Chinese e-commerce operator JD.com, Inc. has filed for a U.S. initial public offering, according to a filing with the U.S. securities regulator.

JD.com plans to raise up to $1.5 billion, and has not decided which stock exchange it will list.

Auto

Ford Recalls Edge SUVs in China – January 31, 2014 – Zacks.com Ford Motor Co. has decided to recall 13,493 Edge SUVs in China to repair faulty fuel systems, according to Reuters. Inferior quality of the fuel pulsation damper used in the vehicles might crack and lead to fuel leakage. This may eventually lead to fire.

Discounts yield rebound for foreign car sales – Business – Chinadaily.com.cn Vehicle imports grew 7.3 percent to 1.17 million last year, with a strong rebound in the fourth quarter helping make up for a decline in the first half, China Automobile Trading Co Ltd said.

That was the first contraction since 2006, when China implemented its World Trade Organization commitment to lower the import tariff for vehicles to 25 percent.

SGMW honor Autoliv China with supplier of the year Award – MarketWatch At SGMW’s 2013 supplier conference and award ceremony held on in Guilin China, Mr. Shen Yang President of SGMW presented Autoliv China with the “Excellent supplier award”. This is Autoliv China’s third consecutive year to be named by SGMW following “the best quality award” in 2011 and “the best platform award” in 2012.

Infrastructure

allAfrica.com: Africa: Tanzania Becoming the New Chinese Province in Africa “Compared to the West, on my opinion, the Chinese are the best investors, we are quite sure the projects will succeed as there will be no politicizing,” he adds.

Energy

BP shelves China refinery plan as fuel demand slows BP is dropping plans to invest in a refinery in China, three sources with direct knowledge said, the fourth refining project in recent months to fall foul of a slowdown in growth in the world’s second-largest economy.

China’s fuel consumption rose at the slowest clip in more than 20 years in 2013, ending a decade of rapid demand growth that drove global oil prices to over $100 a barrel and made gaining access to China’s restricted retail market a mouth-watering prospect for international oil firms.

Sinopec to co-operate in Hong Kong graft probe | South China Morning Post China Petroleum and Chemical Corporation, also known as Sinopec, has said it is co-operating with Hong Kong authorities in an anti-graft probe, media reports said.

The state-owned company would not tolerate any illegal or corrupt conduct, it said in a statement made through a public relations agency to Bloomberg News. It added that operations were not affected and it considered the inquiries to relate to the “individual conduct” of unspecified staff, according to the statement.

China sets new world record for solar installations | Jennifer Duggan | Environment | theguardian.com China installed a record 12GW of solar power in 2013, doubling its rate of solar installations, according to preliminary figures. This is more than has ever been installed by any country in a single year and means that China installed three times more solar energy in 2013 than the total UK solar capacity.

China’s first direct coal liquefaction line produces 866,000 tonnes – Xinhua | English.news.cn China’s first direct coal-to-oil project, operated by the country’s leading coal producer, Shenhua Group, produced 866,000 tonnes of oil products last year.

The direct coal liquefaction line is located in Ejin Horo Banner, Ordos City in northern Inner Mongolia Autonomous Region. It produces 3,000 tonnes of oil products with consumption of nearly 10,000 tonnes of coal per day, said Shenhua Coal Liquefaction and Chemical Co., Ltd.

Chinese firms introducing new forms of energy into Ethiopia – Headlines, features, photo and videos from ecns.cn|china|news|chinanews|ecns|cns HydroChina is representative of the Chinese infrastructure enterprises that are building roads, bridges and housing in Ethiopia, catering to the country’s construction boom.

They didn’t stride into the promising but remote market alone; instead, they tapped into Ethiopia through Chinese government foreign aid projects.

China Resources Seeks Lenders for HK$6.4 Billion Syndicated Loan – Bloomberg China Resources Power Holdings Co. (836) is seeking bank commitments for a HK$6.4 billion ($824 million) syndicated loan after hiring banks to arrange the deal, according to two people familiar with the matter.

The state-owned power generator will use the five-year facility to refinance debt and for general purposes, the people said, asking not to be identified because the details are private. It’s asking lenders to commit by Feb. 21, they said.

Telecoms

There really has been a mass exodus of Sina Weibo users With over 60 million daily active users as of November (though some of those could be ghost accounts), Sina Weibo doesn’t appear to be dead just yet. And when the company reports staggering numbers of tweets during Spring Festival or New Year’s Eve, one is reminded that it’s still a powerful player in Chinese social media. But at the very least, Sina Weibo’s heydey of scandals uncovered and corruption exposed appears to be grinding to a halt.

Travel

Outlook bright for low-cost carriers in China|WantChinaTimes.com Chinese budget carrier Spring Airlines saw stellar annual results in 2013, with regulators approving an application for the company to set up a low cost carrier (LCC), signaling a different stage in China’s aviation sector, the Beijing-based Securities Daily reports.

The future of China’s LCC market seems to be bright after the Civil Aviation Administration of China (CAAC) recently approved two applications to set up new carriers, including an LCC to be based in Guangzhou.

Property

Keeping the lid on housing prices – Business – Chinadaily.com.cn Nobel laureate and Yale University professor Robert Shiller was one of the first global economists to talk about the runaway risks in China’s spiraling property prices, a matter that has been of considerable interest in China recently.Shiller, well known for his insights on global asset prices and extended research work on behavioral finance, macroeconomics and real estate, had during a visit to China mentioned that property prices were moving at a “dangerously high” pace. That comment, highly controversial back then, seems even more controversial now, given that real estate prices across most of China have increased by more than 50 percent, and by more than 100 percent in a few high-profile markets.Travel

Tech

Lenovo CEO Reshapes Chinese PC Maker With Deal Spree – Bloomberg In the span of a week, the chief executive officer of China’s Lenovo Group Ltd. (992) cut the two biggest deals in his company’s history. He’s spending a combined $5 billion to buy Google Inc. (GOOG)’s Motorola mobile-phone business and International Business Machines Corp. (IBM)’s low-end server business.

How Lenovo Built a Chinese Tech Giant – WSJ.com China’s Lenovo Group Ltd., once known as Legend, grew from a tiny government-funded venture in the 1980s to a global powerhouse that last year became the No. 1 personal-computer maker in the world.

With its proposed $2.91 billion purchase of Google Inc.’s unprofitable Motorola Mobility handset business, Lenovo is making a risky bet it can replicate that success in smartphones.

3 Reasons Lenovo’s Purchase of Motorola Will Succeed Where Google Failed (LNVGY) There are doubts regarding Lenovo’s ability to revive the Motorola brand, which at its peak (2006) accounted for 22% of the mobile phone market, but I truly believe that Lenovo will do a much better job than Google at rebuilding the fallen brand’s reputation in the mobile marketplace.

Let’s take a look at the three top reasons:

Lenovo’s Purchase of Motorola an Exercise in Buying Brands | China Briefing News Amongst all the recent hype of Chinese outbound investment going to the United States comes the news that Lenovo have purchased Motorola from Google for US$2.9 billion. I’m not a great believer in the stories of Chinese manufacturers heading in droves to buy up struggling American or European businesses – China has emerging Asia right on its doorstep and is investing heavily in these countries both for sound business and political incentives. I wouldn’t be expecting Motorola’s plants in the States to be undergoing mass transformation and expansion anytime soon.

In fact, what we are really seeing is a well planned out, but longer term strategy, consistent with emerging Asian entrepreneurs as a whole: the buying of brands that the West no longer knows what to do with, and the re-positioning of them for the Asian – not Western – markets.

Food

New Zealand’s exports to China soar 45 per cent on demand for dairy | South China Morning Post Figures released on Friday by Statistics New Zealand show that China surpassed Australia for the first time on an annual basis as New Zealand’s top export market.

In 2013, China imported US$8.1 billion worth of New Zealand goods, up from US$5.6 billion the previous year. About 40 per cent of those imports were of milk powder.

France’s truffle farmers aim to stop inferior Chinese fungi getting a sniff | World news | theguardian.com When is a black truffle not a €1,000-a-kilo rare French fungus? When it fails the smell test.

In their battle to see off competition from pale and cheap Chinese imitations, French trufficulteurs (truffle cultivators, as they like to be known), have enlisted the help of scientists.

China Overtakes France, Italy as World’s Biggest Red Wine Consumer – China Real Time Report – WSJ The country, including the wine hub of Hong Kong, consumed 155 million nine-liter cases (1.87 billion bottles) of red wine in 2013, according to new research released this week. The report was commissioned by Vinexpo, a Bordeaux-based wine industry conference, and conducted by the International Wine & Spirit Research, an independent research firm for the liquor trade.

The total marks a 136% increase from five years ago and surpasses France’s 150 million cases and Italy’s 141 million cases of red wine consumed in the same year. What’s more, red wine consumption in China almost tripled between 2007 and 2013, while it decreased 18% in France and 5.8% in Italy.<

Posted from Diigo.

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