China Business Briefs 3/2/14

Still not much news out there. Will be interesting to see how the CNY holiday affects the monthly indicators. Such disruption may eventually help reform these awkward bi-annual calculations.

Economy   Finance   Energy   Property   Tech   Agriculture

Economy

China’s official services PMI falls in January – MarketWatch China official nonmanufacturing Purchasing Managers’ Index fell to 53.4 in January from 54.6 in December, the China Federation of Logistics and Purchasing said on Monday.

The services subindex declined to 51.5 in January from 52.5 in December and construction fell to 61.0 from 62.6, the federation said.

Will China’s Cash Squeeze Pinch the Real Economy? – China Real Time Report – WSJ China’s cash squeeze has pushed up interest rates on the domestic interbank market, raised funding costs for the nation’s banks and left many people wondering if this is putting the real economy into lower gear. So far the evidence is inconclusive.

There is proof of slower economic growth. Gross domestic product growth slipped in the final quarter of last year, dropping to 7.7% from 7.8% in the third quarter, and the trend could be continuing into this year. A gauge of factory-level activity–the HSBC Purchasing Managers’ Index—showed contraction in January from December, falling to its lowest level in six months.

Hong Kong bourse expected to ‘open red’ for Year of the Horse | South China Morning Post It is called “open red” if stocks rise on the first trading day of the Lunar New Year, representing good luck. If shares head the other way, it is known as “open black”. And they are tipping a winning start to build momentum for a positive year when the market ends up “in the black”.

Jeffrey Chan Lap-tak, chairman of the Hong Kong Securities Association, is also among those in the industry who believe the market will open red. “The markets fell quite a bit before the Lunar New Year. After the holiday, buying interest should return,” he said. He expects shares in technology and alternative-energy firms and mainland banks to do well.

Finance

China’s insurers look forward to easing of restrictions on investment of funds | South China Morning Post Despite Beijing’s gradual relaxation of investment caps on various assets for insurance funds, regulatory intervention remains a hindrance to the industry, analysts said.

Nonetheless, they expect regulation to become less heavy-handed and the authorities to grant more liberty for insurers on where to invest the funds they manage.

For instance, Chinese insurers were allowed to invest in real estate but barred from residential projects, because of the government’s concern about speculation in property prices, Man said.

Energy

China’s Got A Big Problem, But It Won’t Stop Demanding Energy Moving forward, even if growth continues to slow, energy demand should stay strong. Indeed, people don’t stop using energy when they get too old to work. And, productivity improvements will keep energy demand from industry high, regardless of the size of the workforce. So, even with a shrinking workforce, energy will remain a growth industry in China.

For example, the Energy Information Administration (EIA) projects oil and natural gas consumption to double by 2040 from 2010 levels. And China is expected to account for 70% of the coal demand growth that the EIA is projecting in Asia.

Chinese oil refiners will have to throttle back expansion as capacity races ahead of demand The decision by state-controlled giant PetroChina to put off two new refineries and delay expansion of another is the latest, most dramatic signal that China’s refined fuels capacity has expanded too fast.

While the country will no doubt continue to build refineries, the pace is likely to slow over the next few years, and new units will have to compete with other projects to secure funding.

Mining’s Dormant $8 Billion of Private Equity Seen Reviving M&A – Bloomberg Davis has so far raised $1 billion from Noble Group, Asia’s largest raw-materials trader, and private-equity fund TPG. X2 is targeting mines already in operation or close to producing, said the people, asking not to be identified because the plans aren’t public. A spokesman for X2 declined to comment.

China buys up Russia’s backyard – BUSINESS NEW EUROPE In what must have come as a shock to the Kremlin, during his last stop in Turkmenistan Xi signed off on a $60bn energy investment deal that includes $10bn to develop the massive Galkynysh gasfield which has gas reserves of some 1.3 trillion cubic metres – enough to meet China’s needs for several years. The Turkmen deal makes Gazprom’s deal largely superfluous.

China is clearly on an aggressive westward expansion and trying to spend their accumulated treasure of dollars before anything untoward happens to the currency. Chinese overseas investment rose to $80.2bn in the first 11 months of 2013, the latest data available – more than the $77.2bn that was invested in all of 2012. And outbound investment calculated on the basis of deals closed was up 28.3% in January-November.

Property

Chinese investor buys assets worth $1.9b from Dubai developer Property developer Dubai Pearl sold property assets valued at US$1.9 billion (S$2.4 billion) to a Hong Kong investor, in a sign of increasing Chinese investments to Dubai’s booming property market.

The transaction, which brings to an end a two-year delay in the development of the Pearl project, includes the sale of high-end residences and serviced apartments and two five-star hotels, the company said in an e-mailed statement.

Tech

Lenovo’s ambitious smartphone, server deals fraught with challenges | South China Morning Post Lenovo, the world’s largest supplier of personal computers, announced last Thursday it had agreed to acquire Motorola Mobility from Google for US$2.91 billion, which followed the company’s deal to buy IBM’s commodity server business for US$2.3 billion on January 23.

Despite the optimism expressed by Lenovo’s senior management about simultaneously absorbing two major operations, analysts see the road to integration being fraught with tough challenges.

WeChat got 10 million texts in 60 seconds on Chinese New Year Noting that activity in mainland China peaked from 10PM to to 12AM, WeChat states that it processed 10 million messages in one minute.

That figure dwarfs the one released by Sina Weibo, which stated that it processed 863,000 tweets within a single minute on the same day.

Why Robots Won’t Save China’s Factories – Silicon Hutong The future of Chinese manufacturing, then, lies not in producing consumer products for the world, but in producing consumer products for itself, and, I expect, building the machines that make local, personal production possible.

This will not happen right away: China’s mass-production manufacturers still have a long runway ahead as the world retools. It is also likely that the economies of mass production will continue to be essential for low-cost products for sale to developing nations.

Agriculture

Will China Continue to Drag Down Yum! Brands’ Earnings? (YUM) With KFC a big part of Yum!’s strategy in China, consumer distrust of poultry has the potential to hit Yum!’s China results hard. This couldn’t have come at a worse time for Yum!, with the Chinese New Year holiday, typically a busy period for KFC, beginning on Jan. 31.

2014 may end up being a repeat of 2013 for KFC China, where the chain saw same-store sales decline in the double digits for much of the year. This would destroy the big recovery that analysts are expecting in 2014, and it puts Yum!’s long-term earnings growth goal in jeopardy. Without a stable, safe poultry supply in China, it’s hard to imagine KFC China being successful in the long run.

 

Posted from Diigo.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s