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China Stock Watch 29/1/14

Another day of mostly moderate rises on the back of relief after the non-default – or, more precisely, that default that was paid up for by various institutions, governmental and otherwise. Only two stocks fell on the day: PetroChina fell 0.13% to RMB7.55, while Noble Group lost 0.52% to SG$0.965. China Telecom did best on the day, rising 1.97% to HK$3.63. Close behind was ICBC, up 1.47% to RMB3.44 (as investors breathed a sigh of relief).

The aversion of a default, of course, does not solve any of the problems surrounding the shadow banking industry and the subsequent likely defaults ahead. It speaks of a particular, and deserved, nervousness around the quality of the financial infrastructure in China. The unwillingness to allow, or come to terms with, zombie loans and zombie institutions, to embrace “creative destruction”, is all too reminiscent of the Japanese bubble experience. The relief of the markets may be genuine, but it is also artificially-induced, delaying the reckoning at risk of further infection.

The Shanghai Composite rose to 2,049.91, gaining 11.40 points (+0.56%)

Name Price Change Mkt cap 52wk high 52wk low EPS P/E
Sinopec 4.5 +0.01 (0.22%) 524,543.91M 7.03 4.05 CN¥0.62 7.32
PetroChina 7.55 -0.01 (-0.13%) 1.38B 9.5 7.08 CN¥0.68 11.17
ICBC 3.44 +0.05 (1.47%) 1.21B 4.53 3.33 CN¥0.74 4.68
China Construction Bank 3.96 +0.03 (0.76%) 990,043.48M 5.19 3.8 CN¥0.85 4.68
Agricultural Bank 2.4 +0.03 (1.27%) 779,505.91M 3.28 2.35 CN¥0.50 4.78
Bank of China 2.52 +0.03 (1.20%) 703,998.67M 3.26 2.45 CN¥0.53 4.75
China Mobile 74.35* 0.00 (0.00%) 1.49B 89.2 74.25 HK$8.21 9.05
Noble Group 0.965 -0.005 (-0.52%) 6,395.13M 1.27 0.785 SGD0.04 26.39
China State Construction 3.04 +0.01 (0.33%) 91,200.00M 4.18 2.9 CN¥0.62 4.94
CNOOC 12.24* +0.08 (0.66%) 546,484.85M 16.52 12.04 HK$1.90 6.45
China Railway Construction 4.16 +0.02 (0.48%) 51,324.17M 6.25 3.95 CN¥0.84 4.94
China Railway Group 2.45 +0.01 (0.41%) 52,184.76M 3.36 2.3 CN¥0.44 5.59
SAIC Motor 13.09 0.00 (0.00%) 144,324.67M 19 11.83 CN¥2.05 6.38
China Life Insurance 13.89 +0.07 (0.51%) 392,596.76M 22 12.88 CN¥0.97 14.37
Dongfeng Motor 11.76* +0.06 (0.51%) 101,325.57M 13.28 9.48 HK$1.38 8.53
China Shenhua 14.06 +0.03 (0.21%) 279,648.07M 25.28 13.97 CN¥2.25 6.25
Ping An Insurance 39.27 +0.11 (0.28%) 310,866.90M 53.27 31.69 CN¥3.45 11.39
China Telecom 3.63* +0.07 (1.97%) 293,784.51M 4.32 3.48 HK$0.26 14.02
China Communications Construction 3.85 +0.02 (0.52%) 62,272.73M 5.79 3.74 CN¥0.81 4.76
Bank of Communications 3.8 0.00 (0.00%) 282,198.36M 5.68 3.65 CN¥0.84 4.51
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China Business Briefs 24/1/14

ECONOMY

China races to prevent trust loan default – FT.com Chinese authorities are racing to prevent the default of a soured $500m high-yield investment trust, in a closely watched test case for the country’s shadow banking sector.

Local media reported on Thursday that the Shanxi provincial government is considering helping fund a bailout of the trust loan after ICBC, which distributed the product through its branches, said last week it would not provide a backstop. However, Time-Weekly, a state-owned newspaper, reported that the bank – the world’s biggest by assets – and the product issuer China Credit Trust will also be asked to chip in.

China’s First Default Is Coming: Here’s What To Expect | Zero Hedge So with under 10 days to go, for anyone who is still confused about the role of trusts in China’s financial system, a default’s significance, the underlying causes, the implications for the broad economy, and what the possible outcomes of the CCT product default are, here is Goldman’s Q&A on a potential Chinese trust default.

The People’s Money: The Benefits of Default – WSJ.com So far, Chinese investors who bought fixed-income wealth-management products have enjoyed higher returns than bank deposits offer, without suffering any losses. But that looks to be changing now, as a slowing economy starts to expose the weakness in the system, and the Chinese government may not want to absorb all the losses.

China’s Big Four banks raise their lending: report – MarketWatch China’s top four state-owned banks extended 440 billion yuan ($72.7 billion) of new loans in the first 20 days of January, according to a report by the 21st Century Business Herald on Thursday.

In January 2013, Chinese banks extended a total of 1.07 trillion yuan in new loans. The total amount this January is expected to exceed 1 trillion yuan, according to the report.

The top four banks–Industrial & Commercial Bank of China Ltd. (1398.HK), China Construction Bank Corp. (0939.HK), Agricultural Bank of China Ltd. (1288.HK) and Bank of China Ltd. (3988.HK) — typically account for about 30% of total lending in China.

China PBOC Injects Another CNY120 Bln For New Year Holiday | MNI The People’s Bank of China injected another CNY120 billion into the interbank system on Thursday, bringing the total addition of funds via its open market operations this week to CNY375 billion.

Today’s injection, transacted via 21-day reverse repos, follows the CNY255 billion added on Tuesday and the bank’s notice that it is expanding its Standing Lending Facility to make funds available to smaller lenders when market rates rise above preset thresholds.

China households elude taxman – and official GDP bean-counters | Reuters Data released this week showing China’s economy grew 7.7 percent last year suggested the imbalance is worsening, with consumption unchanged at just under 50 percent of GDP, but investment growing to slightly more than half.

A growing number of economists, however, say official statistics have got it wrong. To avoid taxes, consumers routinely get employers to buy things for them, resulting in a gross underestimation of how much consumers spend and exaggerating just how lopsided China’s $9.4 trillion economy is.

Rhodium Group » China’s Interbank Squeeze: Understanding the 2013 Drama and Anticipating 2014 The year 2014 has started off with additional drama over credit markets in China, and concerns that rising costs could lead to defaults for some risky financial products and end up spilling over to a broader financial crisis in China.  In this note we explore the current situation and the recent changes in money market structure. We also consider the common view that the central bank is not in control, and whether its intervention can steer reform for the coming year. As we held throughout 2013, we believe the Bank knows what it’s doing, is being as rational as it can be in the context of China’s unique political crosswinds, and will play a decisive role in shaping 2014 outcomes.

Salty fish, MNCs and the SEC ban | China Accounting Blog | Paul Gillis As much as the firms are feeling sorry for themselves, it is their clients and their investors who will be hurt if they are banned from practice. A ban could lead to the companies being kicked off of U.S. stock exchanges for failing to produce audited financial statements. IPOs would have to be postponed until the bans were over. Financings would be delayed. Fortunately appeals are likely to delay this for a long time.

McKinsey Greater China – Why should Chinese companies list overseas? 2014 is expected to be a busy year for Chinese companies seeking to list overseas. But the delisting of several Chinese firms from foreign exchanges in recent years has some wondering: why should Chinese companies list overseas? In this podcast, Nick Leung tackles this question with Gordon Orr and David Cogman. Gordon is Asia Chairman of McKinsey. David is a Partner in the Corporate Finance Practice. Nick is Managing Partner of McKinsey’s Greater China Practice.

Beijing considers industry fund to transfer excess capacity abroadWantChinaTimes.com China’s Ministry of Industry and Information Technology is considering setting up an industry investment fund to encourage businesses with a production capacity surplus to transfer capacity to other countries, with its size estimated to reach 100 billion yuan (US$16.53 billion), reports the Shanghai-based National Business Daily.

This time, however, China’s State Council is determined to target five sectors that have shown a production capacity surplus, namely steel, cement, aluminum, plate glass and shipping.

China’s fiscal revenue rises 10.1% in 2013 |China Data |chinadaily.com.cn China’s fiscal revenue climbed 10.1 percent year on year in 2013 to reach 12.91 trillion yuan ($2.11 trillion), the Ministry of Finance said Thursday.

The growth pace, however, slowed from the 12.8 percent reported in 2012 and 24.8 percent registered in 2011.

China’s 2013 M&A Value Hits Record High: PwC-Caijing The total value of mergers and acquisitions (M&A) in China reached a  record high of $260 billion last year, a PricewaterhouseCoopers (PwC) report  showed on Wednesday.

It noted that M&As among China’s state-owned enterprises were mostly  concentrated in energy, resources and industrial areas, while investments by  privately owned enterprises were more diversified.

China’s carbon market may remain a solo one as companies get rights to offset pollution with non-CO2 credits China will allow big emitters to use offset credits from nitrous dioxide (N2O) destruction to meet domestic climate targets, giving its nod to a type of project that has been banned in other carbon markets.

The National Development and Reform Commission (NDRC) published on Wednesday a list of more than 120 new types of projects eligible to earn carbon credits that can be sold to power generators and manufacturers facing emission caps under China’s fledgling carbon markets.

Crowdfunded in China: water cup, smartphone button, sex toy With Kickstarter-like Chinese site Demohour’s recent funding, we’ve taken notice of China’s growing crowdfunding scene. In light of this trend, we’re trying something new starting this week: a regular list of our favorite projects assembled from the top crowdfunding sites in the country. Depending on feedback and how many cool projects we can find, this could be a weekly or bi-weekly post. So to get things started off, here are our inaugural top five picks.

China becomes top gold consumer in 2013 – FT.com China has overtaken India as the world’s largest gold consumer thanks to soaring purchases of jewellery, minted Panda coins and small gold bars.

According to the Thomson Reuters GFMS gold survey, the most widely followed report on the industry, Chinese demand reached 1,189.8 tonnes last year, a 32 per cent year-on-year jump and a fivefold increase since 2003.

China’s rebalancing requires more investment of the right kind – FT.com To work out what the Chinese economy needs to invest in more one only has to spend a few days in Beijing or any other major city and listen to the things that ordinary people complain about.

There is enormous demand for better public transport, cleaner energy, environmental protection, industrial upgrading and other investments that can clean up the air and alleviate terrible gridlock on the roads.

Slowing China Economy Raises Questions About Policy – China Real Time Report – WSJ A sharp downturn in manufacturing activity in China is a warning sign to the government not to move too quickly to tighten monetary conditions, says HSBC’s chief China economist, Qu Hongbin.

Mr. Qu said China needs to get a handle on its huge shadow banking sector to avoid messy defaults. But he pointed out that policy makers need to do this without tightening credit for companies in the manufacturing sector, given that inflation remains low across the economy.

China Money Network − China Added A Record 12 Gigawatts Of Solar Panels In 2013 China installed a record 12 gigawatts of solar panels in 2013, the most solar power added in a single year by any country in history, according to Bloomberg New Energy Finance.

The research and data firm says that the number may be as high as 14 gigawatts if including year-end activities.

Investors Offer Hospitals a Market Injection – Which is one reason why local governments and the nation’s health care industry players have been carefully reviewing guidelines issued in October by the State Council, China’s cabinet, designed to encourage fresh investment in the nation’s more than 10,000 public hospitals.

The guidelines complement previous policy directives introduced by Beijing in recent years that encouraged a more market-oriented approach to managing the big, mainly urban hospital networks at the heart of the nation’s health care system.

Hong Kong Jewelry Sales Hit the Rocks, Says MasterCard Report – China Real Time Report – WSJ Hong Kong’s traditionally hot growth in jewelry sales is sagging, according to a new report analyzing MasterCard spending here, which the authors say is a warning signal for the city’s economy.

Nearly one year ago, year-over-year growth in jewelry sales was as high as 19%, said Sarah Quinlan, senior vice president for MasterCard Advisors, a division of the U.S.-based credit-card company. But according to a MasterCard report analyzing Hong Kong spending, that growth rate dipped below 6.4%, the average overall retail growth rate in the city last month.

COMPANIES

ICBC’s Jiang Won’t Compensate for Trust Product, CNBC Reports – Bloomberg Industrial & Commercial Bank of China Ltd. Chairman Jiang Jianqing said the lender won’t compensate investors for losses tied to a troubled trust product distributed by the bank, CNBC reported on its website.

Investors in the 3-billion-yuan ($496 million) Credit Equals Gold No. 1 high-yield product met with ICBC officials at a Shanghai branch yesterday to demand their money amid concern that the trust wouldn’t repay the funds. A default on the trust product, which raised money for a failed coal mining company, would shake investors’ faith in the implicit guarantees offered by trust companies to draw funds from wealthy investors.

Investors Meet ICBC Officials on Concern of Trust Default – Bloomberg Investors in a troubled trust product distributed by Industrial & Commercial Bank of China Ltd. met with the lender’s officials at a private-banking branch in Shanghai, demanding their money amid concern of a default.

Individuals were asked to sink at least 3 million yuan ($496,000) in the 3 billion-yuan Credit Equals Gold No. 1 product amid guarantees that it was “100 percent safe,” said Fang Ping, one of 20 investors who went into the branch. The product, which comes due on Jan. 31, raised funds for a coal mining company that collapsed after its owner was arrested.

Closer Look: New 4G Offerings Have Put China Unicom on Its Heels – Three years ago a long-time China Mobile customer told me he was lured away by China Unicom’s offer of an iPhone and 3G service.  Now, however, he is returning to China Mobile, which is preparing to offer faster 4G service and the popular Apple Inc. gadget.

Since China Mobile’s iPhone sales started on January 17, many people have told me they are abandoning China Unicom. It remains to be seen exactly how successful China Mobile will be with its new offerings, but alarm bells are ringing for China Unicom and China Telecom.

23rd January downstream news PetroChina has delayed the startup of two new refineries and the expansion of a third in order to counter the threat of overcapacity as oil demand growth slows.

The company will now start up its 200 000 bpd Kunming refinery in the Yunman province in 2016, two years behind the original schedule.

Operation of a 400 000 bpd joint venture refinery in Jieyang of Guangdong will be delayed to 2017, rather than 2013.

Alibaba Stake in Citic 21CN Sends Shares to Highest Since 2000 – Bloomberg Citic 21CN Co. (241)’s shares rose the highest in intraday trading in almost 14 years after Alibaba Group Holding Ltd., the owner of China’s biggest e-commerce business, said it would invest in the company to enter the drug-data industry.

Former Foxconn manager detained in kickbacks probe – Business – Chinadaily.com.cn A former senior manager at Taiwan’s technology giant Foxconn has been detained in an ongoing probe into kickbacks from suppliers, prosecutors said on Thursday after reports he pocketed NT$100 million ($3.33 million) in bribes.

Liao Wan-cheng was taken into custody late on Wednesday, while three other ex-employees were questioned and released on bail, an official at the Taipei District Prosecutor’s Office said.

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.

China’s Harbin Bank Said to Apply for $1 Billion Hong Kong IPO – Bloomberg Harbin Bank Co., a Chinese lender based near the Russian border, applied to the Hong Kong stock exchange for a $1 billion initial public offering, said two people with knowledge of the matter.

All three sponsors of the IPO are Chinese investment banks, said the people, who asked not to be identified because the information is private. The lender, based in the capital of northeastern China’s Heilongjiang province, aims to start trading in the first half, they said.

Apple Inc. (AAPL): Why Apple’s China Mobile Launch Was A Flop – Seeking Alpha The answer is partly in Apple’s “Premium” strategy and partly in the unique nature of the complex China smartphone market. In North America customers are pretty well divided between Apple and Samsung with a smattering of Motorola, LG, HTC and BlackBerry users and a group of also ran suppliers including Windows OS phones like the Nokia Lumia. Apple is the number one brand in the United States increasing its market share to 42% in the Christmas quarter.

irasia.com – China Telecom Corporation Limited China Telecom Corporation Limited (“China Telecom” or “the Company”; HKEx: 00728; NYSE: CHA) was voted by leading equity analysts “No.1 Best Managed Company in Asia”, across all industries at the “Best Managed and Governed Companies – Asia Poll 2014” (“the Poll”) by Euromoney, a leading international financial magazine.

Backers say twin $1 billion methanol plants planned by China-backed joint venture would be safe and environmentally sound | OregonLive.com A joint venture backed in part by a Chinese government agency has plans to build two $1 billion plants, one in Clatskanie and the other in Kalama, Wash., which would export methanol to China for making plastics and rubber.

allAfrica.com: Kenya: I Did Not Disown Rail Deal – AG (Page 1 of 2) Nandi Hills MP Alfred Keter yesterday appeared before the committee where he said that the China Road and Bridge Corporation is blacklisted from engaging in projects funded by the World Bank. Keter tabled a press release from the bank indicating the CRBC was blacklisted five years ago.

Museveni assures Chinese Railway Company of Government support President Yoweri Museveni has assured the China Harbour Engineering Company Ltd of Uganda Government support while the company will be undertaking the up-grading of the Northern and Eastern railway-line.

President Museveni said that the China Harbour Engineering Company Ltd will be one of the 2 construction companies the Government of Uganda will work with in improving the railway transport system in Uganda, especially the route from Kampala to Tororo in Eastern Uganda.

How I Lost My Offshore Oil Empire | The Global Mail Sun claims in a lawsuit in US District Court in Los Angeles that the Chinese oil giant Sinopec colluded with Chinese police to illegally detain him for five years and, while he was in prison, connived with his employees to wrest away an offshore firm that controlled much of his oil empire.

Sinopec – the fourth-largest company in the world behind Royal Dutch Shell, Wal-Mart and Exxon Mobil— has filed a motion to dismiss the suit, scheduled to be heard in March. It argues that the proper jurisdiction for the case is China rather than the US and that, even if events had happened as Sun alleged, they would not amount to the extortion, kidnapping and torture that he claims.

The “Self-developed” China Operating System by Chinese Academy of Sciences is A Windows Phone 7 Firmware? One week ago, the Institute of Software under Chinese Academy of Sciences unveiled China Operating System (COS) together with Shanghai Liantong Internet Technologies Ltd, as reported by CCTV, China’s state-owned TV station.

Posted from Diigo.

China Business Briefs 23/1/14

ECONOMY

Markit Economics – Press releases HSBC China Flash Manufacturing PMI (PDF)

China factory data show contraction; stocks fall – MarketWatch China’s manufacturing sector is showing an unexpected contraction in January, albeit a mild one, according to initial results from HSBC’s monthly survey released Thursday. The “flash” version of the HSBC/Markit China manufacturing Purchasing Managers’ Index fell to a six-month low of 49.6, down from a final December reading of 50.5, with the result sending Chinese stocks and the Australian dollar all lower. Economists had expected the flash PMI — which usually includes 85%-90% of total responses used for the final report — to print at 50.3, according to a Bloomberg News forecast. Results below the 50 level indicate contraction, while those above 50 suggest growth.

China PMI Signals First Contraction In 6 Months; Drops Most Since May | Zero Hedge With every component of HSBC’s China Manufacturing PMI either dropping or showong slower growth, it is hardly a surprise that the much-watched survey of economic strength dipped into contractionary territory. At 49.6 this is the lowest since July 2013 and dropped month-over-month by the most since May 2013. HSBC argues this is “domestic demand cooling” but new export orders tumbled at an accelerating pace as did employment. Of course, the silver lining is that because the prices components did not show acceleration then the PBOC has room to ‘stimulate’ to avoid repeating growth deceleration but that appears – despite today’s further CNY 120 billion reverse repo – to not be the plan for the PBOC for now (given the 20-plus percent YoY gains in house prices).

Judge Suspends Chinese Units of Big Four Auditors – WSJ.com The Chinese units of the Big Four accounting firms should be suspended from auditing U.S.-traded companies for six months, a judge ruled, a move that could complicate the audits of dozens of Chinese companies and some U.S.-based multinationals.

The audit firms, plus a fifth China-based accounting firm, broke U.S. law when they refused to turn over documents about some of their clients to the Securities and Exchange Commission to aid the commission in investigating those U.S.-traded Chinese companies for possible fraud, ruled Cameron Elliot, an SEC administrative law judge.

China’s Real-Estate Investment Boom Set to Continue in 2014 – China Real Time Report – WSJ Chinese outbound commercial real-estate investment is estimated to exceed $10 billion this year, after it doubled to $7.6 billion last year from 2012’s $3.3 billion, according to data from Jones Lang LaSalle. Rival brokerage Colliers International is more bullish, saying it expects Chinese investors to spend at least twice as much on overseas property assets this year as last year.

Among some of last year’s higher-profile investments were Shanghai’s Fosun International purchase of the Chase Manhattan Plaza in New York for $725 million in October and state-owned conglomerate Greenland Holding Group’s 70% stake in Brooklyn’s $5 billion Atlantic Yards project. Greeland also paid $1 billion for a piece of land in Los Angeles on which it plans to build a hotel, office units, serviced residences and high-end homes.

President Xi Jinping’s Crackdown on Official Gift-Giving Is Transforming How Business Is Done in China – WSJ.com An unexpected peak-season rut for China’s calendar business illustrates how broadly a corruption crackdown has challenged business as usual. Private clubs are shutting down following official criticism they are extravagant; officials attend meetings without watches and belts to avoid suspicion they have ill-gotten wealth; military officers, once able to ride high in imported SUVs, were recently told to drive only domestically made vehicles.

The campaign may be beginning to drag on China’s economy by reducing demand, economists said after a report this week showed last year’s gross domestic product growth held steady at 7.7%.

China Bailout Costs Jump Seen in Policy Bank Yield Surge – Bloomberg The average yield premium over the sovereign for five-year debt sold by China Development Bank, Export-Import Bank of China and Agricultural Development Bank of China widened 90 basis points from an August low to 142 basis points on Jan. 17, the highest in Chinabond data going back to 2007. The gap was 138 basis points yesterday. Yields have climbed on safer assets, including CDB’s, as delays in restructuring bad loans are stretching the central government’s ability to guarantee debt, Bank of America Merrill Lynch wrote in a report this week.

China creates teams to spearhead economic change, with top leaders in charge | Reuters China has created six teams to supervise its boldest economic and social changes in 30 years, with President Xi Jinping and Premier Li Keqiang personally taking charge, state media said on Wednesday.

Xi has been appointed the head of the central leading group for comprehensive reforms that will oversee the six teams, with Li as his deputy, state radio said after the group held its first-ever meeting.

Gazprom targets May for China gas deal, angles for pre-payments Gazprom on Wednesday proposed signing a major China gas export deal in May, as industry sources indicated that the Russian gas giant may offer a lower price in return for billions of dollars in upfront payments.

Industry sources say that Gazprom is hoping for $10-$11 per mmBtu from China. China is believed to pay $9 per mmBtu to Turkmenistan, the former Soviet state in Central Asia that beat Gazprom to the Chinese market.

China Auto Industry News | China to Account for 30% of Global Auto Sales by 2020 | China Car Times – China Auto News A recent study from KPMG indicates that the Chinese market will continue to expand considerably with it expected to account for 30% of global automotive sales by 2020 alone.

The study, carried out by KPMG as part of its fifteenth annual Global Automotive Executive Survey highlights many key points in the development of the Chinese auto industry which will coincide with the development of other BRIC markets which KMPG believes will benefit the top ten OEM manufacturers in China and to a lesser extent to the following ten.

Let the WMP house of cards fall apart next week | China Economic Review It’s time to let China’s wealth management house of cards fall apart. A potential US$500 million default at China Credit Trust (CCT) next week is the perfect place to start.

The 345 investors that bought CCT trust products through Industrial and Commercial Bank of China (ICBC) in 2011 aren’t sitting on buried treasure. Rather, the underlying assets for those products are a few dilapidated coal mines in Shanxi province. The price of coal has dropped 40% since a group of hungry investors poured their cash into the trusts, a form of wealth management product (WMP). The plant and equipment at the mine have also no doubt fallen in value.

China must spend $330 billion more to do fair share on climate – report | Reuters China must increase spending on emission cuts and clean technologies by 2 trillion yuan ($330 billion) to do its fair share to halt climate change, a report by Beijing’s Central University of Finance and Economics said.

China, the world’s biggest-emitting nation, has already pledged to spend 520 billion yuan to help prevent global temperatures from rising more than 2C, according to Chen Bo, co-author of the report.

Migrants find a home for capital in pursuit of foreign residence[1]- Chinadaily.com.cn Migration for investment in overseas real estate markets has become a top choice for Chinese applicants, according to a report on China’s migration status released on Wednesday.

The Annual Report on Chinese International Migration 2014 shows that a growing number of Chinese investors are rushing to go abroad in order to buy properties and establish permanent residence in places like Europe and North America.

Shadow Banking Again in the Limelight-Caijing The General Office of the State Council recently introduced a new set of  guidelines – known as Document No. 107 – to curb the country’s massive shadow  banking system. The guidelines are widely regarded as China’s highest level  document aimed at regulating risky off-balance-sheet lending.

Document No. 107 officially defines the shadow banking system in China for  the first time. It also clarifies responsibilities of the country’s central bank  and the separate regulatory agencies for the banking, securities and insurance  sectors when it comes to supervising shadow-banking activities, and pledges to  establish a regulatory framework featuring both central- and local-level  regulation.

China abandons its pursuit of growth at all costs – FT.com Implicit in this change of direction is a trade-off between growth and economic efficiency. The government is expecting growth of about 7.5 per cent in 2014. In previous years it has made its forecast deliberately low and then come in triumphantly above expectations. This year, if anything, it could go the other way. By the end of 2014 growth may be slowing towards 6 per cent, even if the result for the year as a whole is still likely to be 7 per cent or above.

China Reforms Hydro-Electricity Prices – WSJ.com China on Wednesday said it would reform the price that power-grid operators pay to hydropower plants for electricity to encourage investment in the industry.

Chinese officials admitted last month that the country is struggling to meet its 2015 targets for clean-energy production. China wants non-fossil fuels to make up 11.4% of its energy mix by 2015, but consumption reached only 9.4% in 2012.

For Liquor Makers, Cheer Dries Up in China – WSJ.com The crackdown on conspicuous consumption—part of an anticorruption drive led by President Xi Jinping—has hit spirits companies harder than most. Profit warnings, executive departures and restructuring drives have all been linked to the ban.

China is the world’s biggest alcohol market, making up 38% of global spirits consumption, according to the International Wine & Spirit Research industry body. The country is especially important for cognac makers: Rémy Cointreau derives about 40% of its total profit from cognac sales in China, while sales of the French liquor account for 15% of  Pernod Ricard S’s earnings.

China listings no lure to investors after closure of 3.6m trading accounts | South China Morning Post The number of mainland stock accounts containing funds shrank to a three-year low of 53.7 million on Friday, a drop of 3.6 million from the June 2011 peak.

The retreat, spurred by slowing economic growth and a shift towards higher-yielding wealth management products, is fuelling losses in the Shanghai Composite Index that erased US$571 billion of market value in the past four years and sent the gauge to a five-month low on Monday.

12 new free-trade zones to follow in Shanghai’s footsteps | South China Morning Post The 12 would include Guangdong, which has been lobbying the central government by highlighting its economic ties with Hong Kong, and Tianjin , Xinhua cited an official source as telling its subsidiary the Economic Information Daily. It did not name the remaining 10.

He said other candidates included Zhejiang’s Zhoushan , which consists of several islands with a focus on the shipping business; Qingdao , an important port city; Chengdu , a southwestern business hub; Wuhan , a central province; and Hangzhou , where e-commerce giant Alibaba is based.

Hi-tech industry helps Shenzhen beat GDP goal | South China Morning Post Mayor Xu Qin will tell delegates that the city’s economy grew by 10.5 per cent last year compared with 2012. Xu early last year set a target of a 9 per cent rise in gross domestic product. Per capita GDP in the city reached US$22,000.

Xu’s work report said Shenzhen’s six strategic industries – biotechnology, information technology, new energy, new materials, telecommunications and the cultural and creative industry – recorded growth of 19.8 per cent last year.

Wealthy Chinese want British education for their children – FT.com The Hurun Report, a closely watched annual survey of China’s entrepreneurs and investors, found that 29 per cent gave Britain as the ideal country for their children’s secondary education, followed by the US with 26 per cent.

The influx of Chinese in Britain’s education system would have spillover effects for the rest of the economy, he added. “These people will have two years in the UK at sixth form, followed by four years at university, followed very likely by a year or two of work experience. So they’re going to have a very personal relationship with Britain for the best part of 8 years.”

Chinese Hotels Drop Stars to Score Political Points – China Real Time Report – WSJ Amid China’s anti-extravagance sweep, hotels are downgrading themselves to score political points – and win back business from politicians. A year ago this week, President and Communist Party Chairman Xi Jinping declared war on “undesirable practices” by officials that he said risked creating an “invisible wall that separates the party from the people.”

COMPANIES

Chinese oil giants make use of offshore shell companies in Caribbean | World news | theguardian.com The country’s biggest oil companies – Sinopec, PetroChina and the China National Offshore Oil Company (CNOOC) – are among the world’s largest businesses, but executives in the industry are embroiled in multiple corruption probes, many tied to networks of shell companies around the world.

Research by the International Consortium of Investigative Journalists (ICIJ) based on leaked financial records from the British Virgin Islands, reveal dozens of companies tied to the three oil giants, many of which are not disclosed on any publicly available filings by the businesses.

China Insurer Ping An Promises to Look Into ‘VIP’ Investment Product Collapse – China Real Time Report – WSJ One of China’s largest insurers said it will look into allegations from investors that some of its salespeople sold them another firm’s product that they now say has collapsed.

In a statement to The Wall Street Journal on Wednesday, Ping An Insurance Group Co. said the company forbids its insurance agents from selling products on behalf of other financial institutions.

ICBC May Pay Part of Funds in Troubled Trust: Time-Weekly – Bloomberg ICBC and China Credit Trust may each take responsibility for 25 percent of payments for the 3 billion-yuan ($496 million) trust, the newspaper reported on its website today, citing a person it didn’t identify. The Credit Equals Gold No. 1 product raised money for a coal mining company that collapsed after its owner was arrested. The government of Shanxi province, where the company was based, may take responsibility for the remaining 50 percent, according to the report on the website of Guangzhou city-based Time-Weekly.

Special Report: How Caterpillar got bulldozed in China | Reuters The night of the awards on November 16 three Caterpillar lawyers were wrapping up an eight-hour grilling of Wang Fu, Siwei’s chairman. Major accounting problems had been unearthed at Siwei headquarters in the gritty Chinese city of Zhengzhou. Two months later, on January 18, 2013, Caterpillar said it had discovered “deliberate, multi-year, coordinated accounting misconduct” at Siwei.

Wang was sacked. Caterpillar took a non-cash goodwill impairment charge of $580 million – 86 percent of the value of the deal. The company says it was caught unaware by the problems at Siwei and only discovered them in November 2012, five months after the deal closed.

Are Lenovo and IBM Finally Close to Another Deal? It has taken a long time, but Lenovo (NASDAQOTH: LNVGY) and IBM (NYSE: IBM) may be about to finally strike a bargain for IBM’s x86 server business. Lenovo has openly acknowledged its interest in this business, but the companies have been at odds on deal terms. With ongoing share loss in the server business and a desire to reallocate capital to higher-returning businesses like software and services, IBM would do well to close this deal.

Yu E Bao Deals with the Pressure of Being No. 1 – As of January 15, Yu E Bao has more than 250 billion yuan in investment from over 49 million users, says Tian Hong Asset Management Co., the company that manages Yu E Bao. That makes it the 14th-largest money market fund in the world, data from Bloomberg shows. Combined with other investment funds, the amount managed by Tian Hong has exceeded 260 billion yuan.

An excerpt of the interview follows.

Text, Chat, Profit: Tencent Launches Investing on WeChat – China Real Time Report – WSJ The new service is no doubt aimed at competing with Alibaba’s service, which was introduced last year. It’s also likely a ploy by Tencent to entice users to link their bank and WeChat accounts. The fund, called Licaitong, offers an impressive 7.3940% seven-day annualized yield, besting Yu’e Bao’s rate by almost 1%.

Magnum Entertainment Soars on First Nightclub IPO in Hong Kong – Bloomberg Magnum Entertainment Group Holdings Ltd. (2080), the first nightclub operator to go public in Hong Kong, more than doubled on its first day of trading.

Magnum raised $16.3 million in an initial public offering, selling shares at the top end of a marketed range, according to data compiled by Bloomberg. The stock jumped as high as HK$3.21 from its offer price of HK$1.50, and traded at HK$3.05 at 9:57 a.m. local time.

China Mobile shakes up fixed-line broadband | South China Morning Post A welcome development looks set to shake up China’s fixed-line broadband sector this year, with word that leading wireless carrier China Mobile (0941.HK; NYSE: CHL) is offering aggressive pricing after receiving a license to offer fixed-line service late last year. Of course I’m speaking from the consumer’s perspective, since China’s 1.3 billion consumers and millions of businesses have had little or no choice for the last decade when choosing a fixed-line broadband supplier.

Qihoo 360 to distribute and facilitate Disney’s mobile gamesWantChinaTimes.co The two companies reached an agreement on Wednesday. Disney Mobile will sign over the intellectual property rights to its mobile games to Qihoo while the Chinese company’s 360 Mobile Assistant will use Qihoo’s resources to distribute and facilitate the games. The two companies will also provide various Disney-related products such as browser skins and computer desktop wallpapers of Disney images, said Jiang Zuwang, director of the Qihoo’s Mobile Gaming group.

Top Chinese App and Mobile Game Trends in 2013: Wandoujia Chinese Android app distributor Wandoujia (or SnapPea) and research institute iResearch jointly released a report on the hottest trends of Chinese mobile apps and games in last year.

Square-like Chinese startup QFPay swipes $16.5M in series B funding QFPay, maker of a Square-like gadget for taking e-payments via a smartphone, has secured series B funding worth $16.5 million, 36Kr reports today.

QFPay’s main product is QPOS, which looks like a mini calculator. It connects wirelessly to Android tablets or phones, or iPhone or iPad; or there’s a wired version that hooks up to a PC. It can be used by retailers of all sizes to take credit card or bank card transactions.

The Himalayan Times : Two banks asked to set aside Rs 1.5bn to pay MWSDB – Detail News : Nepal News Portal Himalayan Bank Ltd (HBL) and Bank of Kathmandu (BoK) will have to deposit Rs 1.51 billion at the central bank for possible payment to Melamchi Water Supply Development Board, according to a court order.

HBL will have to deposit Rs 660 million and BoK has to deposit Rs 850 million as a provision to pay MWSDB the counter guarantee amount. The two Nepali banks stand to lose about Rs 1.5 billion to the project after their client — China Railway 15 Bureau Group Corporation — failed to complete the construction of the tunnel.

LNG Stock Prices: Three Reasons 2014 Will Bring the Biggest Gains Yet China continues to turn more to natural gas as a solution to the country’s air pollution problem. It aims to triple the use of natural gas by 2020 to above 300 billion cubic meters from approximately 100 billion cubic meters now.

China only began importing LNG in 2006, but by the end of 2012 it had six LNG import terminals in operation. The total capacity of these terminals is 18.8 million tons of LNG.

Four of the terminals are run by CNOOC Ltd. (NYSE ADR: CEO) and two by the parent of PetroChina Co. Ltd. (NYSE ADR: PTR).

Addax signs 10-year Gabon petroleum deal – Business – Chinadaily.com.cn Addax Petroleum Corp, the biggest overseas subsidiary of Sinopec Group, has won a 10-year contract to extract oil at three fields in Gabon.

At peak production, the company will account for about 20,000 barrels a day, or nearly one-eighth of the African country’s oil output.

New batch of dairy brands recommended – BUSINESS – Globaltimes.cn The China Dairy Industry Association (CDIA) announced Wednesday the second batch of the association’s recommended baby formula brands. Twelve baby formula products from six domestic dairy companies were promoted in a press conference held in Beijing Wednesday.

The six companies are Zhejiang Beingmate Technology Industry and Trade Co, Beijing Sanyuan Foods Co, and four regional dairy brands.

LifeWatch announces strategic partnership with China Telecom for the sale of medical smartphones LifeWatch AG (SIX Swiss Exchange: LIFE), the leading wireless cardiac monitoring service provider in the U.S., makes a huge step forward in its strategy to complement its offering with products and ser- vices that are independent from third party payees. Today, Yacov Geva, CEO, signed a binding memorandum of understanding with China Telecom with a potential of more than USD 400 million sales of medical smartphones LiveWatch V and subsequent generation and related services in China over five years.

China Mobile Ltd. (ADR) (CHL): China Mobile: A Long-Term Buying Opportunity – Seeking Alpha Although CHL is currently facing some headwinds, the company has an enviable history of growth. From 2003 through 2012, CHL increased both revenue and EPS every year with a 9-year CAGR of 14.7% and 13.7%, respectively. Although rivals China Unicom and China Telecom grew revenues at a faster pace in recent years, their growth came at the expense of profitability as both companies spent heavily on marketing and subsidies to attract CHL customers. For example, although CHL has lagged badly from 2009 through 2012 in terms of revenue, the company has outpaced both CHU and CHA in terms of EPS growth at a 3-year CAGR of 3.9% vs. 0% for CHA and a negative 9.1% for CHU.

WeChat 5.2 Supports Nine Categories of Mobile Payments It now supports making payments for Didi (the taxi app venture backed by Tencent), Licaitong (the mutual fund, released several days ago, similar to Alipay’s Yuebao), purchases on Tencent’s online retailer Yixun, QQ Coins (the virtual currency used in Tencent ecosystem), movie tickets, lottery tickets, making donations, phone bills and splitting bills.

Volvo AB: Chinese Authority Approves Dongfeng Motor JV – WSJ.com Swedish truck maker Volvo AB (VOLV-B.SK) Wednesday said the National Development and Reform Commission in China on Jan. 7 approved the establishment of a previously announced joint venture between the company and China’s Dongfeng Motor Group Company Ltd. (0489.HK).

Volvo in January last year announced an agreement with Dongfeng to acquire 45% of the Chinese vehicle maker’s new subsidiary Dongfeng Commercial Vehicles, which will include a large part of its medium and heavy duty commercial vehicles business.

Posted from Diigo.

China Stock Watch 22/1/14

The big news today is of course the revelations (if something so unsurprising can be revelatory) of the offshore haven fortunes of China’s princelings and leaders. One of the main implications for business in China will be for facilitators such as PricewaterhouseCoopers, UBS and Credit Suisse etc. It will be difficult for any foreign company to work with them in China without the suspicion of corruption. Fallout for the tax-haven companies themselves won’t be such a problem; they are not there to conduct business after all, but to facilitate the smooth transfer of large amounts of capital from China to a safe place. It will be interesting to see if there are shareholder revolts for major companies caught up in the disclosures of offshore entities.

China-watcher Bill Bishop commented that the Chinese leadership will believe that “it is under attack from Western media“, after similar exposes of the fortunes of the family of Wen Jiabao and Xi Jinping. Perhaps so. They do provide an enormously satisfying target, in a country where they have a ruthless monopoly of power. Nonetheless, with power and prominence comes scrutiny, for which their behaviour suggests they are not prepared.

With the PBOC having provided fresh liquidity on Monday, stocks continued to rebound, with nineteen of the twenty blue chips finishing up on the day’s trading. SAIC Motor (up 3.23% to RMB13.09) and China Telecom (up 2.49% to HK$3.70) were the best performers, though a full fourteen out of twenty rose by over 1%. Only CNOOC fell, with yesterday’s disappointing news of missed targets still depressing investors; it closed down 1.99% to HK$12.82.

The Shanghai Composite finished at 2,051.75, up 43.44 (+2.16%). Increasing the (feeling of) wealth of ordinary Chinese is the only means of legitimacy the party has. This may mean that tough choices which reduce short-term growth in favour of restructuring will be delayed. More sabre-rattling in the South China Sea is another possibility for a pressurised leadership. Neither is encouraging for those who wish China well.

Name Price Change Mkt cap 52wk high 52wk low EPS P/E
Sinopec 4.64 +0.03 (0.65%) 540,863.04M 7.03 4.05 CN¥0.62 7.54
PetroChina 7.7 +0.07 (0.92%) 1.41B 9.5 7.08 CN¥0.68 11.4
ICBC 3.43 +0.03 (0.88%) 1.21B 4.53 3.38 CN¥0.74 4.66
China Construction Bank 3.96 +0.04 (1.02%) 990,043.48M 5.19 3.8 CN¥0.85 4.68
Agricultural Bank 2.38 +0.01 (0.42%) 773,010.04M 3.28 2.35 CN¥0.50 4.74
Bank of China 2.51 +0.04 (1.62%) 701,205.02M 3.26 2.45 CN¥0.53 4.73
China Mobile 77.85* +0.70 (0.91%) 1.56B 89.2 74.9 HK$8.20 9.49
Noble Group 1.01 +0.01 (1.00%) 6,726.49M 1.27 0.785 SGD0.04 27.82
China State Construction 3.07 +0.07 (2.33%) 92,100.00M 4.18 2.9 CN¥0.62 4.98
CNOOC 12.82* -0.26 (-1.99%) 572,380.37M 16.52 12.04 HK$1.89 6.77
China Railway Construction 4.3 +0.10 (2.38%) 53,051.43M 6.25 3.95 CN¥0.84 5.11
China Railway Group 2.48 +0.06 (2.48%) 52,823.75M 3.36 2.3 CN¥0.44 5.66
SAIC Motor 13.09 +0.41 (3.23%) 144,324.67M 19 11.83 CN¥2.05 6.38
China Life Insurance 14.65 +0.35 (2.45%) 414,077.92M 22 12.88 CN¥0.97 15.16
Dongfeng Motor 11.70* +0.18 (1.56%) 100,808.60M 13.28 9.48 HK$1.38 8.49
China Shenhua 14.39 +0.24 (1.70%) 286,211.65M 25.28 13.97 CN¥2.25 6.39
Ping An Insurance 41.85 +0.50 (1.21%) 331,290.53M 53.27 31.69 CN¥3.45 12.13
China Telecom 3.70* +0.09 (2.49%) 299,449.77M 4.41 3.48 HK$0.26 14.31
China Communications Construction 3.89 +0.08 (2.10%) 62,919.72M 5.79 3.74 CN¥0.81 4.81
Bank of Communications 3.77 +0.04 (1.07%) 279,970.48M 5.68 3.65 CN¥0.84 4.47

China Business Briefs 21/1/14

ECONOMY

PBOC Adds Cash to Banks as Money Rates Jump Most in Seven Months – Bloomberg China’s central bank pumped funds into the financial system and expanded a lending facility to include smaller banks as rising cash demand before the Lunar New Year drove money-market rates up by the most in seven months.

The People’s Bank of China supplied money to the largest commercial banks using its Standing Lending Facility and will auction reverse-repurchase agreements today, it said yesterday on an official microblog without giving details of the amounts involved.

China Money-Market Rates Fall – WSJ.com China’s short-term interest rates fell Tuesday after the central bank pumped in an usually large amount of funds into the money markets to pre-empt a potential liquidity crisis as demand for cash rises ahead of the Lunar New Year holiday.

The move also sent cheers to the country’s battered stock market, with the Shanghai Composite Index rising 0.9% and above a five-month low hit Monday.

Warning sounded on failures linked to cash crunches | South China Morning Post Yu E Bao, managed by Tianhong Asset Management and sold online by Alibaba Group, offers an annualised return of 6.7 per cent, compared with the 3 per cent official one-year savings rate. Some funds are offering higher rates, with news portal Eastmoney.com marketing a product that targets 10 per cent.

“Clearly, yields of 8-10 per cent are not sustainable,” Schneider said.

Despite talk of reform, no sign of rebalancing in China’s data | South China Morning Post Last year, investment was the biggest driver of growth, contributing 4.2 percentage points of the 7.7 per cent rise in gross domestic product.

In contrast, consumption – both by households and the government – made up a relatively meagre 3.9 percentage points (with net exports making a small negative contribution to growth).

That reverses the picture from 2011 and 2012, when the growth contribution of consumption edged ahead of investment for the first time in years.

China urged to increase domestic consumption to rebalance economy | South China Morning Post For years economists have been urging China to rebalance its economy and Chinese officials seemed to have heard the call.

While rebalancing could happen simply through a collapse in the current investment model, less devastating would be incremental reforms that realigned incentives. Cheaper imports from a stronger renminbi, private sector reforms, tax incentives and interest rate liberalisation are touted as possible remedies for the current growth model.

China’s clampdown on shadow banking begins to bite | South China Morning Post Interbank lending rates rose sharply again last week. On Friday, the seven-day repo rate climbed above 7 per cent from 4.35 per cent on Thursday.

Trust companies source their funds through the interbank market. The fact the interbank market is prone to regular credit squeezes suggests a key financing channel underpinning the shadow banking sector is becoming less viable.

But most alarmingly is the possibility of a default of a three billion yuan wealth management product at the end of the month. The firm backing the instrument, Zhenfu Energy, a coal miner, has gone bust.

Annual Forecast 2014 – The View from Stratfor / ISN Severe risks to social and economic stability will persist, mainly from recent credit accumulation, threats to employment from slower growth and rising public anxiety over corruption and environmental degradation. However, despite the risk of systemic financial crisis, the central government has the resources to manage these concerns throughout 2014.

China’s Economy Slows on Investment Spending – China Real Time Report – WSJ China’s economy grew 7.7% on-year in the fourth quarter, down from 7.8% in the third quarter. Annual growth in 2013 came in at 7.7%, unchanged from 2012. Here’s a breakdown of some of what the data tell us:

Slower Growth in China Will Put Pressure on Energy Stocks (^DJI, CVX, XOM) Slower growth in China will have a negative effect on demand for oil, and now that Libya’s exports are picking up, there will be increased pressure on margins for oil explorers. It’s a double-edged sword for ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) , which may make more money on refining, but will make less profit on exploration and production if the price of oil falls.

What China’s Electricity Usage Said About GDP Growth in 2013 – China Real Time Report – WSJ The country’s electricity consumption also corresponded with the increase in production. Electricity usage grew 7.5% last year to 5.3 trillion kilowatt hours, faster than a pace of 5.5% in 2012, according to data released last week by the country’s National Energy Administration, as energy-intensive industries such as steel production boosted power demand.

Pakistan in Talks to Acquire 3 Nuclear Plants From China – WSJ.com Pakistan is in talks with China to acquire three large nuclear power plants for some $13 billion, Pakistani officials said, in a further blow to international efforts to restrict the trade in nuclear technology.

The agreement, if reached, would help plug the crippling gap in Pakistan’s electricity supply and cement its strategic regional alliance with China, which is aimed against mutual rival India. Alarming Washington, the China-Pakistan nuclear trade bypasses international rules against nuclear exports to countries—like Pakistan—that have not signed the Non-Proliferation Treaty.

Ministry of Finance ‘Wants More SOEs to Hand over Profits’ – State-owned enterprises (SOEs) that are linked to what the government calls “the budget system” are required to hand over a certain proportion of their net profits depending on their line of business. The levels range from 5 to 20 percent for SOEs around the country. China National Tobacco Corp. is the only enterprise that is required to hand over 20 percent of its profits.

The comments by the ministry official are in line with the central government’s desire to reform SOEs. Backers of change say the public should get a greater share of profits from SOEs, which, they argue, have not honored their obligations to society. A major Communist Party meeting in November decided to make SOEs hand over at least 30 percent of their profits to the government for social security spending by the end of 2020.

US Steel Market Diverging, Baosteel Raising Prices Last week, Chinese iron ore port stockpiles rose 2.14 million tons week-on-week, while weekly shipments from Australia and Brazil dropped by a huge 9mt to 9.5mt. China imported a total of 820.3mt of iron ore in 2013, up 10% year-on-year, with Chinese steel output likely to have reached 775mt last year, up from 720mt in 2012.

China Workforce Slide Robs Xi of Growth Engine – Bloomberg Xi and Premier Li Keqiang, who in November unveiled the broadest policy shifts since the 1990s, are facing a labor force decline that the United Nations estimates will total almost 30 million in the decade through 2025. China’s working-age population, or people age 16 to 59, fell by 2.44 million in 2013, the National Bureau of Statistics said yesterday.

Major cities losing their allure for new graduates – Chinadaily.com.cn A study released last week by online recruitment company Zhaopin and Peking University’s Institute of Social Sciences found college students are showing less interest in working in China’s mega-cities – Beijing, Shanghai and Guangzhou – after graduation.

Only 38.7 percent of the 10,800 students from 200 universities interviewed said they would choose to work in the three cities after graduating, a downward trend for three consecutive years, from 53.8 percent in 2011 and 42.1 percent in 2012.

Proposal to force video uploaders in China to use real names China’s State Administration of Radio, Film, and Television (SARFT) yesterday issued a notice that proposes, among other things, anyone who uploads a video to the internet must be registered on the hosting website with their real name (hat-tip to Techweb for spotting).

Let’s take a look at China’s $13.5 billion online gaming industry (INFOGRAPHIC) This new infographic from the Go-Globe team shows lots of facts and figures on the Chinese online gaming industry right now. Some of the highlights include:

  • China’s online game operators made RMB 82.1 billion ($13.5 billion) in 2013.
  • That’s estimated to grow to $16.1 billion by the end of 2014.
  •  Tencent (HKG:0700), the same company that makes WeChat, is China’s gaming giant.
  •  Action RPGs are the most favored genre, led by PC-based gamers.

China’s economy: Doing stuff, not making stuff | The Economist Those looking for a “rebalanced” Chinese economy had to look elsewhere: not in China’s pattern of spending, but in its pattern of production and income. For the first time since 1961, China’s production of services (which include transport, wholesaling, retailing, hotels, finance, real estate and scientific research, among other things) exceeded its industrial output (see chart). The new figures meant that China’s economy is now primarily based on doing things for people not making things for them. For a country renowned for its industrial clout, this marked a long-awaited turning point.

Slew of IPOs to Test Whether New China Stocks Have Broken an Old Pattern – WSJ.com China’s securities regulator is about to find out whether changes it implemented to the application system for initial public offerings will cure offerings’ tendency to start strong and then lose steam.

When Neway Valve (Suzhou) Co. made its debut on Friday, marking the first new listing in mainland China in more than a year, it kept to the script of starting convincingly. Shares rose 43% to 25.34 yuan ($4.19), just below the opening-day upper limit of 25.43 yuan. But on the second day of trading, the valve manufacturer’s shares fell by the maximum 10% permitted, in line with a trend that, in part, prompted the China Securities Regulatory Commissionto stop approving IPO applications in November 2012.

Virtual telecom operators business nears reality|Industries|chinadaily.com.cn Sixteen companies are expected to get licenses for virtual telecom operators- business of resale mobile communication services- by the end of the year and open for business in 2014, Economic Information Daily reported.

Virtual operators business is reselling mobile communications services to introduce its own brand of telecommunication services through leased telecommunication operator’s network and facilities or other forms of cooperation.

China sets final duties on U.S. solar materials | Reuters China hit the United States with final anti-dumping and anti-subsidy duties on imports of solar-grade polysilicon on Monday, the latest move in what has been a contentious trade battle in the solar industry.

The anti-dumping duties, announced by China’s Commerce Ministry, were in line with initial levels levied last year of up to 57 percent on imports of the raw material used to make solar panels.

CSRC opens door for HK funds – BUSINESS – Globaltimes.cn Investors in the Chinese mainland will be able to buy Hong Kong fund products in the near future as the regulator has eased access to the mainland’s capital market for Hong Kong financial institutions, the China Securities Regulatory Commission (CSRC) said at a press conference Monday.

The securities regulators on both sides have reached a basic agreement on mutual recognition of funds, which means that Hong Kong incorporated fund companies can sell funds to mainland customers directly, and vice versa, said Tong Daochi, director general for the Department of International Affairs at the CSRC

Uralkali signs potash deal with China for $305/ton – MarketWatch The contract to sell 700,000 tons to the Chinese National Agricultural Means of Production Group Corp. until the end of June indicates a possible end to the uncertainty in the potash market. Prices have fallen more than 25% from $400 a ton last summer, prompted by Uralkali leaving a trading partnership with Belarus and breaking an informal global pricing cartel.

China abandons failed cotton stockpiling programme – FT.com Beijing’s effort to use the state reserves system to maintain cotton plantings and thus a secure supply of raw materials for textile mills has backfired spectacularly. Higher prices meant that cotton flowed to the state reserves – which now by some estimates account for half of world cotton stocks – while denying mills the supply they needed.

COMPANIES

Lenovo Said to Be in Advanced Discussions to Buy IBM Server Unit – Bloomberg Lenovo Group Ltd. (992) is in serious discussions to acquire International Business Machines Corp. (IBM)’s low-end server business, and a deal may be signed within weeks, according to a person with direct knowledge of the matter.

Lenovo, the world’s largest personal-computer maker, has completed due diligence, according to the person, who asked not to be identified because the talks are private. The companies failed to agree last year on a price for the assets, estimated to be worth $2.5 billion to $4.5 billion. The person didn’t have details on the current price or structure of the proposed deal.

CNOOC estimates oil output growth below target for third year | Financial Post Top Chinese offshore oil and gas producer CNOOC Ltd is aiming for an up to 4.3 percent output increase this year, excluding contributions from acquisition Nexen, well below its average annual growth target for 2011-2015 for a third year.

CNOOC has vowed it will still meet the annual growth target of 6-10% for the five years through 2015, increasing its capital spending budget by as much as a third from last year to almost $20 billion and aiming to get 20 projects into construction this year while launching up to 10 more.

(PR) CNOOC Limited Announces its 2014 Business Strategy and Development Plan – WSJ.com The Company’s net production target of 2014 is in the range of 422 to 435 million barrels of oil equivalent (BOE), including approximately 69 million BOE as a result of the acquisition of Nexen Inc. (Nexen). The Company’s net production for 2013 is estimated to be around 412 million BOE, including 61 million BOE of production as a result of the acquisition of Nexen.

Jardine to Buy 20% Stake in China Luxury Auto Dealership – Bloomberg Jardine Strategic, the owner of hotels to convenience stores around Asia, will invest about HK$5.6 billion ($722 million) in Beijing-based Zhongsheng, a distributor of luxury car brands including Mercedes-Benz, Audi and Porsche. The Chinese company will use the funds to expand the number of sales outlets in the country, according to a statement yesterday.

Glorious Property Plunges After Buyout Rejected: Hong Kong Mover – Bloomberg Glorious Property Holdings Ltd. (845) fell by a record in Hong Kong trading after shareholders rejected an offer by Chinese billionaire Zhang Zhirong to take the company private.

Glorious Property dropped as much as 30 percent and closed 27 percent lower at HK$1.25, the biggest decline since Oct. 2, 2009. The Hang Seng Index fell 0.9 percent.

4G push expected to hurt profits at China’s Big Three mobile network operators | South China Morning Post In a report released on Monday, Barclays cut its share price targets for China Mobile, China Unicom and China Telecom to reflect lower revenue forecasts for all three companies this year and next year.

“We see little incentive for China’s telco companies to focus on profit growth – 4G comes with all the excuses to [avoid doing] that,” said Anand Ramachandran, lead author of the Barclays report and the firm’s head of telecommunications, internet and media equity research for Asia, excluding Japan.

Xiaomi teams up with Xunlei to provide multimedia content|Companies|Business|WantChinaTimes.co China’s smartphone maker Xiaomi is likely to team up with Xunlei, a download manager developed by Thunder Networking Technologies, to provide phone users with multimedia content downloading services.

The deal will be inked in the week starting Jan. 20. Although the deal has not yet been confirmed, sources from the industry said that the two companies will work well together, Xiaomi providing the hardware, and Xunlei, the content.

Peugeot Plans $4.1 Billion Capital Increase to Boost Funding (1) – Businessweek Dongfeng Motor Corp. (489) may first contribute funding through a sale reserved for Peugeot’s Chinese partner, with a rights offering to follow that Dongfeng would also participate in, the Paris-based automaker said in a statement. The French state may also buy shares in both sales, the automaker said.

To keep up with China Mobile, China Unicom rolls out 42M 3G From what we can surmise, 42M is the standard of 3G used in some mobile hotspot wi-fi routers. Peak download speeds reach up to 42Mbps, reportedly fast enough to download a high-definition movie in one minute. Unicom says that’s comparable to 4G LTE, but perhaps it’s best to think of it as ’3.5G’.

China’s Qihoo aims at 35% search engine share by end of year Qihoo president Qi Xiangdong said last week, according to the Chengdu Evening News (via Marbridge Daily), that the company is aiming to reach 35 percent market share by the end of 2014.

Qi says that Qihoo now has 24 percent share, though the CNZZ data that we prefer to look at pegs the company’s So.com search engine at precisely 22.5 percent.

ZTE reports likely swing to net profit in 2013 – MarketWatch Chinese telecommunications equipment supplier ZTE Corp. said Monday it likely swung to a net profit in 2013, after suffering a hefty loss in the previous year, thanks to cost cuts and efforts to cut back on low-margin business contracts.

In its preliminary financial results filed with the Hong Kong stock exchange, ZTE said it expects a 2013 net profit in the range between 1.2 billion yuan ($198 million) and CNY1.5 billion, a reversal from a net loss of CNY2.84 billion in 2012.

China Mobile will have to make nice with internet firms | China Economic Review Over-the-top (OTT) applications such as Tencent Holdings’ messenger WeChat and Sina Corp’s micro-blogger Sina Weibo are largely dependent on mobile data networks to reach customers. China Mobile, and the country’s two other operators have spent the better part of a decade and tens of billions of dollars putting those networks in place, only see the internet giants scrape off the top of their profits. When users use apps such as WeChat they don’t send texts or make calls that they have to pay for.

China Auto Industry News | PSA and Dongfeng Close To Inking Deal | China Car Times – China Auto News Dongfeng are looking to take a significant stake of their joint venture partner PSA with a capital injection of 3 billion Euro with the French government expected to take a similar amount which will help PSA stay liquid as the European car market continues to slump. Peugeot posted a 5% sales decline in global sales in 2013, whilst Chinese sales jumped 26% to 550,00 units.

Alipay for Taxi Has Expanded to 40 Chinese Cities The taxi app Kuaidi, which is venture backed by Alibaba, now supports Alibaba’s payment solution Alipay in 40 Chinese cities, covering more than 400,000 taxi drivers, according to Alipay. Alipay was integrated into Kuaidi in May 2013.

Novus Energy Inc. announces completion of acquisition by Yanchang Petroleum International Limited – EIN News Novus Energy Inc. (“Novus” or the “Company“) (TSXV: NVS) is pleased to announce that the previously announced  acquisition of the Company by Yanchang Petroleum International Limited  (“Yanchang Petroleum International“) through its indirect wholly-owned subsidiary, Yanchang International  (Canada) Limited, pursuant to a plan of arrangement under the Business Corporations Act (Alberta) (the “Arrangement“) has been completed. Pursuant to the Arrangement, Novus shareholders  will receive C$1.18 in cash per common share of Novus.

Lenovo rewards top new designs[1]- Chinadaily.com.cn The 2014 Lenovo Innovators Competition kicked off in Beijing a few months ago and concluded on Jan 19, 2014. By following the release of the final results, 44 outstanding works from candidates were selected and will remain on display to the public at Beijing’s 798 Art Zone through the Chinese New Year holiday.

ICBC Macau’s Hengqin plan is still in pipeline | Macau Business Daily Industrial and Commercial Bank of China (Macau) Ltd (ICBC Macau) says the mainland authorities are still considering its plan to get a foothold on Hengqin Island.

Last week one of ICBC Macau’s competitors, Luso International Banking Ltd, got permission to open a representative office on Hengqin, which could be a step towards setting up a branch there.

GoXBTC’s closure raises trading concerns|Markets|Business|WantChinaTimes.com China-based bitcoin trading site GoXBTC announced on Jan. 4 that its services will be discontinued from Jan. 18, citing growing costs and the regulatory risks of operating in China as reasons. The announcement resulted in holders of the virtual currency selling their holdings at cut-throat prices, the newspaper explained. “It was really a clearance sale. One bitcoin can be sold for as low as over 3,000 yuan (US$495),” said a trader on an online forum.

Ethiopia: ERA Awarded 6.5B Birr worth Road Projects to Chinese Companies China Communications Construction Company (CCCC) is awarded three projects in Addis Abeba for 4.6 billion birr. The projects include the continuation of the Rapid Adama Expressway and two projects connecting the expressway with the capital.

China Railway No.3 Engineering Group Co Ltd. is awarded a project totaling 161.23kms, in Amhara region for 1.4 billion birr. The project include the 89.23kms long project which starts in Gashena, 620 km north of Addis Abeba in the North Gonder Zone.

Another Chinese company, China Railway Seventh Group Co Ltd., is awarded a 44km road in Zagora (Kechen Meda), which involves five large bridges, each 30m long. The contract has been awarded to  for 485 million birr.

Smart operator reaps rewards[1]- Chinadaily.com.cn Xu, chairman of the Yuemei Group, now does 40 percent of his business in Africa and the remaining 60 percent in China. He predicts that those numbers will be reversed in three to five years. The company’s current annual output in Africa is worth $30 million.

China Construction Bank (Asia) becomes Multifonds’ latest Asian client – bobsguide.com Multifonds, the leader in single-platform, multi-jurisdictional investment fund software, today announces that China Construction Bank (Asia) [CCB (Asia)] has become its latest Asian client.

Posted from Diigo.

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.

China Stock Watch 10/1/14

Sorry there’s no business briefs today. I am in London and time is tight. I will be in Beijing next week for the first time in some months, and am very much looking forward to it.

Today was mixed, but something of an improvement for major Chinese stocks, with eight rising and only seven falling (unusually, five were flat on the day). Gains were however tentative, with none breaching 1% – China Telecom was the best performer on the day, up 0.82%. It is perhaps no coincidence that China Telecom has won awards for its investor relations, reflecting a commitment to transparency. Elsewhere, rail stocks were worst performers, with China Railway Group and China Railway Construction down 2.46% and 2.83% respectively. China Railway Group has not been forthcoming since the death of chairman Bai Zhongren, and the suspicions of unmanageable debts and who-knows-what problems have dragged down China Railway Construction, too.

The Shanghai Composite Index slumped to 2,013.30, down 14.32 points or 0.71%. My predictions of a buy-back led rise have not come about. The big SOEs could be finding themselves between a rock and a hard place, ordered to deleverage, revenue streams not kicking in as forecast (projections of likely returns always being likely to be grossly optimistic) and now being “advised” to buy-back shares to increase prices. One almost feels sorry for them.

Name Price Change Mkt cap 52wk high 52wk low EPS P/E
Sinopec 4.42 +0.02 (0.45%) 515,218.70M 7.03 4.05 CN¥0.62 7.19
PetroChina 7.53 -0.06 (-0.79%) 1.38B 9.5 7.08 CN¥0.68 11.14
ICBC 3.53 0.00 (0.00%) 1.24B 4.53 3.4 CN¥0.74 4.8
China Construction Bank 3.96 +0.01 (0.25%) 990,043.48M 5.19 3.8 CN¥0.85 4.68
Agricultural Bank 2.41 0.00 (0.00%) 782,753.85M 3.28 2.38 CN¥0.50 4.8
Bank of China 2.51 +0.01 (0.40%) 701,205.02M 3.26 2.48 CN¥0.53 4.73
China Mobile 77.85* +0.50 (0.65%) 1.56B 91.1 74.9 HK$8.20 9.49
Noble Group 1.03 0.00 (0.00%) 6,859.03M 1.27 0.785 SGD0.04 28.47
China State Construction 2.97 -0.04 (-1.33%) 89,100.00M 4.18 2.9 CN¥0.62 4.82
CNOOC 13.74* -0.14 (-1.01%) 613,456.04M 16.76 12.04 HK$1.89 7.25
China Railway Construction 4.12 -0.12 (-2.83%) 50,830.67M 6.46 3.95 CN¥0.84 4.89
China Railway Group 2.38 -0.06 (-2.46%) 50,693.76M 3.41 2.3 CN¥0.44 5.43
SAIC Motor 13.07 +0.01 (0.08%) 144,104.15M 19 11.83 CN¥2.05 6.37
China Life Insurance 14.31 0.00 (0.00%) 404,467.94M 22 12.88 CN¥0.97 14.8
Dongfeng Motor 11.24* -0.20 (-1.75%) 96,845.19M 13.28 9.48 HK$1.38 8.16
China Shenhua 14.49 +0.05 (0.35%) 288,200.60M 25.33 14.4 CN¥2.25 6.44
Ping An Insurance 39.58 -0.39 (-0.98%) 313,320.92M 53.27 31.69 CN¥3.45 11.48
China Telecom 3.69* +0.03 (0.82%) 298,640.44M 4.42 3.48 HK$0.26 14.28
China Communications Construction 3.84 0.00 (0.00%) 62,110.98M 5.79 3.8 CN¥0.81 4.74
Bank of Communications 3.8 +0.01 (0.26%) 282,198.36M 5.68 3.65 CN¥0.84 4.51

Week’s Movers

Movement over the week shows how disappointing the major stocks have been so far this year.

Bank of Communications rose 1.06%, SAIC Motor rose 0.08%, and Noble Group was flat. The other seventeen stocks fell over the week, with China Railway Group not surprisingly leading the way, falling 5.18%, while China Railway Construction was not far off, going down 4.63%. It’s been a very poor start to the year. Perhaps 2014 will surprise us and see some solid share performance, but with reforms challenging the privileges of SEOs and lower growth practically assured, companies will have to show some real innovation and agility. It remains to be seen if they as institutions have it in them.

risersfallers