China Business Briefs 14/4/14

Apologies for the lengthy hiatus. I had started a new job, which also involved a change in career, so spare time was at a premium. Also, the time involved in putting together the business briefs and stock watch reports is considerable: when done on a daily basis, it must be around three hours a day. The pesky formatting is the biggest time sink – if anyone knows a faster and more efficient method of putting together a clippings blogpost together, do let me know. (I am currently using Diigo, which is great for clipping and storing, but not so good at attractive output).

Economy Finance Auto Infrastructure Energy Retail Property Industry Tech Agriculture

Economy

China’s March CPI up 2.4Pc, Below Expectations -Caijing China’s Consumer Price Index (CPI), a main gauge of inflation, rose  less-than-expected last month, official data showed on Friday.

The National Bureau of Statistics (NBS) said that Chinese CPI rose to an  annual rate of 2.4%, from 2.0% in the preceding month. Analysts had expected  Chinese CPI to rise to 2.5% last month.

The bureau said falling vegetable and fruit prices were the main reason for  the month-on-month drop in CPI as the weather improves, accounting for 0.55  percentage point of the 0.5% monthly decline.

Li urges to keep economy growing[1]- Chinadaily.com.cn Before going to Haikou, Li dismissed speculation that the central government will issue massive short-term stimulus policies, easing concerns that authorities may again opt for a massive stimulus package as it did in 2008. The move led to severe overcapacity and structural problems.

“A growth rate under this year’s 7.5 percent target is acceptable as long as sufficient employment is ensured, and the government has prepared enough options to respond to any risks and is capable of maintaining economic growth at a reasonable range,” the premier said in an earlier speech.

China’s local govt debt sparks fears of Lehman-style collapseFinanceBusinessWantChinaTimes.com Local governments have already said that they will not guarantee loan repayment by their state-owned enterprises. For example, the 1999 bankruptcy of state-owned Guangdong International Trust and Investment Corporation, one of the biggest in Chinese history, was not covered by the Guangdong provincial government.

The spiralling debt has investors and analysts concerned that China’s banking sector could be heading towards a collapse similar to that experienced by America’s Lehman brothers in 2008 which sparked a global financial crisis.

China rebuts ‘hard landing’ warning – Frontpage – BUSINESS – Globaltimes.cn Vice Finance Minister Zhu Guangyao hit back over the weekend at IMF warnings that the Chinese economy may face the threat of a hard landing.

“In general, we think they [the IMF] are a very professional financial institution, but [due to] some of the methodology used and some traditional thinking, they also need reform,” Reuters quoted Zhu as saying Saturday to a group of foreign journalists in Washington DC on the sidelines of the annual spring meetings of the IMF and World Ban

China engineers ‘Potemkin defaults’ to mask debt reality – FT.com Led by the People’s Bank of China, the central bank, which has responsibility for maintaining stability in the financial system, Beijing has launched a campaign of highly public, but controlled defaults as a way to tackle moral hazard and impose market discipline.

At the same time, for any bankruptcy or default that could threaten regional or systemic stability, the government continues to step in quietly and co-ordinate loan rollovers and bailouts.

SOEs in search of strategy for change amid reform drive – Headlines, features, photo and videos from ecns.cn|china|news|chinanews|ecns|cns Even as the central government called for further reform of China’s massive State-owned enterprises, a policy that could undermine their dominant market positions, investors were pulling funds from their shares.

A survey by Bloomberg News in late February found that oil producer PetroChina Co Ltd ranked only 14 on a list of the top 20 emerging-market stocks in terms of market capitalization, down from fourth place a year earlier. It was the only Chinese company to make the top 20.

Pensions and retirement: Paying for the grey | The Economist IN THE 1950s, when China’s civil war was only just over and life expectancy still below 45, setting a relatively young retirement age seemed sensible to China’s new Communist Party rulers. But 60 years on, a recent study showed the nationwide average age of retirement is still 53 even though the economy is transformed and the average life expectancy is now 75. With the number of pensioners set to soar, and the number of young workers able to support them unable to keep up, China has been making long-overdue changes at both ends of the demographic spectrum. Late last year it started to ease its restrictive one-child policy. Now it is planning an adjustment to the retirement age.

Focus on value in a time of investment trend reversals | South China Morning Post But cheapness is never the reason to buy. So the question is, what is different this time that makes cheap valuation count? I believe that the receding global liquidity tide is likely to be the culprit. For instance, the jobless claims in the US this week saw the largest drop since the 2009 recovery, while food inflation experienced one of the largest surges in twenty years – it was epic. Even though these shorter-term economic data tend to be volatile, a general improvement in the unemployment picture, one of the key yardsticks for the Fed’s rate decision, as well as accelerating inflation, are enough to arouse the market’s concerns. Dwindling liquidity will make excessive valuation an inflection point for many previously high-flying assets.

China Money Network − Asia Pacific CFOs Bullish On Revenues, Less So On Profits Asia Pacific’s leading chief financial officers (CFOs) are increasingly optimistic that revenues will rise in 2014 compared to last year, but are less optimistic on the outlook for profits, according to a survey commissioned by Bank of America Merrill Lynch.

About 76% of 639 surveyed CFOs and other senior financial executives in the region say they expect revenues in 2014 to rise, up from 72% in the same survey last year.

Finance

ICBC, Bank of China to Gain Relief With New Capital Ratio System – Businessweek ICBC, the nation’s largest lender, and Bank of China, the fourth biggest, will be among the first in China to comply with Basel III guidelines for global banks’ liquidity and risk buffers, they said in separate statements.

The new system may bolster banks’ capital ratios by reducing the risk-weighting of some assets, analysts at China International Capital Corp. wrote in a note today. The four biggest lenders, which have been grappling with stricter rules since China introduced its own version of the Basel III guidelines in January 2013, may face a capital shortfall of $87 billion by 2019, Mizuho Securities Asia estimated last month.

China Tightens Oversight of Trusts as Default Risk Increases – Bloomberg China’s banking regulator ordered owners of the nation’s 68 trust companies to be prepared to provide funding or sell their stakes as the risk of defaults rises in the $1.9 trillion industry for high-yield investment.

The China Banking Regulatory Commission told trust companies to either restrict their businesses and reduce net assets or have shareholders replenish capital when the firms suffer losses, according to an April 8 notice that was seen by Bloomberg News. The regulator will also impose a “strict” approval process on trust firms’ entry into new businesses and products starting this year, according to the document.

CSRC announces new cross-market transaction rules[1]- Chinadaily.com.cn Regulation of listed companies and securities firms will be based on the location they go public and gain business licenses under a pilot program of cross-market stock investment by Chinese mainland and Hong Kong investors, the China Securities Regulatory Commission said on Friday.

Ministry of Finance Seeks New Model for Local Gov’ts to Finance Projects – A model of financing infrastructure projects called a public-private partnership (PPP) has been a topic of conversation among officials around the country recently.

The PPP model sees the government cooperate with private investors to build infrastructure projects and develop public utilities. The projects include roads, airport and power plants.

Closer Look: Funding Method for Jack Ma’s Deal with Wasu Curious – An investment by Jack Ma and two others in Wasu Media Holding Co. is curious because of the unusual financing method used.

The investment vehicle being used in the deal is Zhejiang Yunxi Investment Partnership Enterprise, a company controlled by the trio. Technically, Alibaba did not make the investment, but 99 percent of the funding comes from the e-commerce giant.

This was done through a three-step process. An Alibaba subsidiary, Zhejiang Tmall Network Co. Ltd., which runs Tmall, the country’s largest business-to-customer shopping website, will lend up to 6.53 billion yuan to Xie. The interest rate on the loan will be 8 percent, Wasu Media said.

China’s Citic Buys Stake in U.S. Brokerage BTIG – Bloomberg The Chinese investment bank is making the investment through its Hong Kong-based CLSA unit, BTIG said yesterday in a statement. New York-based BTIG, which has more than 450 employees, will continue operating independently. The financial terms and stake size weren’t disclosed.

Chinese shares move closer to parity on HKEx and Shanghai – FT.com Investors rushed to exploit the opportunity afforded by far freer cross-border equity trading: trading volumes of dual-listed companies rose by 170 per cent and 100 per cent in Shanghai and Hong Kong respectively during trading on Thursday, according to HSBC.

China bitcoin exchanges say some banks will close their accounts – The Times of India SHANGHAI: Two of China’s largest bitcoin exchanges said their trading accounts at certain domestic banks would be closed down by the lenders next week, the latest blow to the virtual currency.

Unlike conventional money, bitcoin is generated by computers and is not backed by any central bank or government, or by physical assets.

Huobi.com said in a statement posted on its website that Industrial and Commercial Bank of China Ltd would close its accounts by April 18. However, it added accounts at other banks were currently unaffected.

Branching out | Macau Business Daily China Construction Bank becomes a branch in Macau. The Beijing-based lender will turn a firm incorporated here into a local branch for a heavier presence in the lending business, suggests a banking source

A dispatch published in Macau’s Official Gazette yesterday said that the Macau administration had authorised CCBC, one of the big four state-owned banks in mainland China, to set up a branch here, under the name of Macau Branch of China Construction Bank Corp.

Auto

BYD Slumps As Chinese Rides Slow – China Real Time Report – WSJ The Warren Buffett-backed BYD—which positions itself as an electric car maker but still depends heavily on sales of its low-cost conventional cars—said Monday it sold 39,300 vehicles globally in March, down 24% on the same period last year. Most of BYD’s sales come from its home market China.

Sales in the first three months were also discouraging. The company sold 103,500 vehicles between January and March, according to an email from the company Monday, down about 28% from the same period a year earlier.

BAIC Motor eyes Hong Kong IPO later this year – Headlines, features, photo and videos from ecns.cn BAIC Motor Corporation Ltd, a subsidiary of China’s leading automaker BAIC Group, is planning to get listed on the Hong Kong stock market in the second half of this year, media said late Tuesday, citing the group’s chairman Xu Heyi.

Xu said the company is planning to raise 10 billion yuan ($1.61 billion) to 20 billion yuan in the listing, news portal finance.qq.com reported.

Coscharis to Build Auto Assembly Plant, Articles | THISDAY LIVE “The idea of a CKD plan was conceived in Coscharis about three years ago but couldn’t be realised for reasons beyond our control. With the introduction of the New Automotive Policy, it has become imperative to revisit it,” said the Group Managing Director, Coscharis Motors, Mr. Josiah Samuel.

Samuel said, “For close to three years we have been in discussion with one of our partners JiangSu Joylong Automobile Co., Ltd, China, now we have concluded an agreement with them as the OEM organization for the project, they will provide the necessary technical back-up for the project. We have also concluded an agreement with DongFeng Design Institute Co.,Ltd, a company well-known in China for its world class  Auto factory design and management, they will design and mange this project including general oversight.”

Infrastructure

New railway under construction in Xinjiang – People’s Daily Online The 308 km railway from Karamay to Tacheng will cost over 5 billion yuan (840 million U.S. dollars) and be completed at the end of 2016.

When it opens in 2017, the railway is expected to carry over 10 million tonnes of freight annually and, in the long run, annual throughput will top 15 million tonnes, the local government of Tacheng Prefecture said in a press release Saturday.

China wants to build power plant in Kazakhstan. Science & Technologies. Tengrinews.kz China is interested in constructing a thermal power plant (TPP) in Kazakhstan, Tengrinews reports citing the press service of Samruk-Kazyna, Kazakhstan’s state-run National Wealth Fund.
“As part of the 2014 Boao Forum for Asia the Chairman of the Board of Samruk-Kazyna Umirzak Shukeyev met with top managers of Datang Corporation and China Engineering Machinery Corporation (CMEC). They discussed construction of Turgay TPP. The Chinese companies expressed interest in constructing the 2000 MW power plant in Kostanay region,” the message said.

Railway: Angola’s iron, snake forked tongue | Central Africa The train driver, his face streaked with exhaustion, squatted in the doorway of his ragged-looking locomotive and took a deep drag on his bottle of green tea as he squinted into the sun at the pair of China International Fund (CIF) guards who had accompanied the train from Luena the previous night.

“This company, it’s no good. Working all the time, Saturdays, Sundays, all the time,” he grouched in pidgin Portuguese before stalking off shouting directions for offloading of an open wagon filled with suitcases belonging to the group of camouflage-clad Chinese workers and their Angolan helpers.

Exactly what this company is – the mysterious, Hong Kong- based CIF – is key to understanding what is unfolding in Angola.

Projects and contracts – April 11th 2014 – heavyliftpfi.com Technip, in partnership with China HuanQiu Contracting & Engineering Corporation (HQC), has been awarded a front-end engineering design (FEED) contract for Ar Ratawi Natural Gas Liquids (NGL) train1 project at North Rumaila in Basra Province, Iraq by Basra Gas Company. Find more here.

Energy

Russia Loses Leverage with China on Gas Deal That has clearly accelerated the deal that Russia is trying to finalize with China on natural gas. It may seem odd that the two countries have let a gas deal go undone for so long – they are some of the largest energy producers and consumers in the world, respectively, and are close neighbors. But with very few interconnections and a dispute over pricing, Russia hasn’t been able to sell much natural gas to its neighbor. To get gas flowing into China, Russia will need to build a $22 billion pipeline – the Power of Siberia pipeline – that traverses Siberia and runs all the way to Vladivostok on the Pacific Coast. Along the way, the pipeline will have three interconnecting points on the Chinese border, allowing China to offload natural gas in a variety of places. Once completed in 2018, Gazprom could send 38 billion cubic meters per year to China, which is equivalent to about 24% of the total that Russia sells to Europe.

Contract let for Guangdong heavy oil refinery – Oil & Gas Journal Sino-Venezuela Guangdong Petrochemical Co., a subsidiary of China National Petroleum Corp.’s (CNPC) PetroChina Co. Ltd., has let a second major contract to Metso Corp. for advanced valve technology at its 20-million tonne/year heavy crude oil processing plant in the Jieyang Nandahai Petrochemical Industrial Zone of China’s Guangdong province.

Sinopec Invites Banks to Submit Proposals for Retail Sale – WSJ.com China Petroleum & Chemical Corp, China’s largest oil refiner, has invited banks to pitch for handling the sale of part of its retail assets of thousands of gas stations and convenience stores, people familiar with the matter said Friday.

Beijing-based Sinopec is looking to complete a private sale of part of its retail assets or list a stake in the division, people familiar with the matter said. Banks have been asked to submit proposals by next week, one of the people said.

Retail

China Private Equity, M&A & Capital Markets, from China First Capital Malls are starting to empty out in China, but Chinese are richer, and spending like never before. Overall, retail sales rose 13% in 2013. The paradox can be explained by a single word: Taobao.  It is China’s largest online shopping business, and the anchor asset of Alibaba Group, now preparing for one of the world’s richest-ever IPOs on the US stock market. Taobao, along with its sister site TMall, and a host of smaller online retailers including Jingdong, Amazon China and Wal-Mart-controlled Yihaodian, have landed like an asteroid, and are wiping out the ecosystem supporting traditional retail in China, especially brand-name clothing shops.

Wal-Mart Cries Foul on China Fines – WSJ.com Over the past three years, Chinese authorities have fined Wal-Mart Stores $9.8 million, sanctioning the retailer for using misleading pricing, selling poor-quality products and even peddling donkey meat that turned out to be fox.

But Wal-Mart is also doing something rare for a Western company: Telling Chinese authorities they need to clean up their own act.

Property

Property Trust Sales Drop 49% as Vicious Loop Seen: China Credit – Businessweek Issuance of property-related trusts, which target wealthy investors, slid to 50.7 billion yuan ($8.16 billion) from 99.7 billion yuan in the fourth quarter, data compiled by Use Trust show. The yield on AA rated five-year bonds has climbed 175 basis points in the past year to 7.23 percent, according to Chinabond. That compares with 2.74 percent on corporate securities globally, Bank of America Merrill Lynch indexes show.

Housing market in China fails to see usual spring upturnMarketsBusinessWantChinaTimes.com Following the off season in the first two months of this year, China’s realty market has failed to stage its usual upturn in the March-April period, as transaction volume, despite showing a certain degree of growth, has stayed at a comparatively low level compared with corresponding periods in previous years.

According to the realty portal of the website of the state-run China News Agency, transactions of residential properties in many cities tumbled in the first quarter year-on-year, with those in Beijing plunging by over 50%, the steepest decline. To stimulate demand, some developers have frozen or cut their prices, even waiving the down payment usually required.

Ghost towns still a risk if local officials fail to do their homework | South China Morning Post Baoding has led home price gains on the mainland in recent weeks after news that President Xi Jinping had revived a proposal to move some institutions and businesses from Beijing to surrounding areas, including Tianjin and Hebei.

“Baoding may probably become another ghost town,” although not as serious as Ordos, in Inner Mongolia, or Wenzhou, in Zhejiang province, said Li Enping, a researcher at the Chinese Academy of Social Sciences, a government think tank in Beijing.

Industry

CNPC Blamed for Contaminating China City’s Water, Xinhua Says – Bloomberg Chinese investigators traced the source of a chemical that contaminated the water supply of 2.4 million people to a leak from an oil pipeline run by a unit of China National Petroleum Corp., the Xinhua News Agency said.

Crude oil leaked from the pipeline into the water source of a water plant in Lanzhou, a city 1,700 kilometers (1,100 miles) northwest of Shanghai, Xinhua reported today, citing Yan Zijiang, Lanzhou’s environmental protection chief. The seepage sent benzene, a carcinogenic compound used to manufacture plastics, into the city’s water supply, Xinhua said.

Tech

200 million people use Tencent’s QQ… at the same time Last Friday, Tencent’s 15-year-old QQ messenger and social network might have hit it’s final major milestone – 200 million people used the service simultaneously. That’s more than the entire population of Brazil all concurrently using a single application.

China’s daily deals sector gets a boost as one site seeks to raise $400 million in US IPO China’s daily deals industry is worth about US10 billion per year – and that makes the risky and highly fragmented sector worth fighting for. Among thousands of Groupon-like sites in China, only about 10 have risen to prominence. The most specialized of these is Jumei, which sells discounted cosmetics and skincare products. Over the weekend, Jumei filed with the US SEC for an IPO in which it’ll raise up to US$400 million.

McKinsey Greater China – Coming To A Factory Near You: Chinese Robots World Robotics recently published their annual update on the industry. It captures very clearly the trend in China towards higher value added production and towards substituting capital for labor. They believe global sales of multipurpose industrial robots last year was around 162,000, of which 25,000 were sold in China, slightly fewer than were sold in North America or Japan. By only 2016, they forecast that China will be consuming 38,000 robots, 20% more than either Japan or North America is expected to buy.

China Design Patents. Because They Work. In 2012, the last year for which statistics are available, 657,582 design patent applications were filed in China – more than in any other nation in the world. In fact, more design patent applications were filed in China than in the rest of the top 20 jurisdictions combined. But only a paltry 2.3% of the design patent applications in China were filed by non-Chinese entities. These statistics, and the fact that vast numbers of foreign companies manufacture and/or sell products in China, lead to two fairly obvious conclusions:

Chinese companies are taking advantage of China’s legal IP protections for product design

Foreign companies are not.

Agriculture

UK to export horses for China courses[1]- Chinadaily.com.cn Under the agreement, Britain will be allowed to export thoroughbreds and sports horses to China. France and Ireland had earlier signed similar agreements with China.

Horse exports to China could soon be worth 10 million pounds ($17 million) a year to the British economy, the British government says.

Posted from Diigo.

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