Daily News Update - 5 May, 2009

TODAY'S BRIEFS

SCI rises to 9-month high on economic optimismThe benchmark Shanghai Composite Index rose by 3.3% on Monday to 2,559.91, its highest close since early August, Bloomberg reported. Investors were cheered by reports that manufacturing on the mainland expanded in April for the first time in nine months, suggesting that the country's stimulus package was taking effect and reviving the economy. The CLSA Purchasing Managers Index for April rose to 50.1 from 44.8 the previous month. A score above 50 indicates expansion. Earlier, the China Purchasing Managers Index put out by the China Federation of Logistics and Purchasing had also registered improvement in manufacturing activity. Baoshan Iron & Steel rose by 4.5% and refiner China Petroleum & Chemical Corp gained 3.6% after the government said it would attempt to address overcapacity in the steelmaking and oil refining industries. Hong Kong's Hang Seng Index rose by 5.54% on Monday to close at 16,381.05. It was the first time the index had broken through the 16,000-point ceiling in half a year, and was the largest one-day gain in a month.

Think tank predicts 7% 2Q GDP growthA government-affiliated think tank said that rising investment on the back of China's economic stimulus package will likely lift the country's second-quarter economic growth to 7%, AP reported, citing state media. This growth would represent a rebound from the 6.1% GDP growth recorded in the first quarter of the year, the slowest rate in more than a decade. The State Information Center said that fixed-asset investment is forecast to rise 27.6% year-on-year in the second quarter, a figure only slightly lower than the 28.8% growth seen in the same period one year ago. The think tank's report, published on Monday in the state-run newspaper the China Securities Journal, predicted that exports would continue to decline in the second quarter, falling by 20.2% year-on-year to US$287.7 billion. Meanwhile, imports are expected to drop by 25.5% to US$225.6 billion.

China Mobile begins third round of 3G tenderChina Mobile on Monday called for a third round of tenders for third generation (3G) telecom equipment worth US$1.3 billion, the South China Morning Post reported. The third round of bids calls for 39,000 base stations operating on homegrown 3G technology TD-SCDMA in about 290 prefecture-level cities. This construction could bring TD-SCDMA, widely seen as the least mature of the three licensed 3G standards, to 70% of the mainland population by December, the paper said. Domestic equipment vendors ZTE Corp, Huawei Technologies, Datang Mobile and China Putian are expected to receive the lion's share of the orders, though foreign providers Nokia Siemens Networks and Ericsson are also allowed to submit bids. Analysts said the latest round of bids came sooner than expected, suggesting that China Mobile is accelerating its network buildout.

China boosts wind power capacity targetChina has more than tripled its target for wind power capacity to 100 gigawatts by 2020 from 30 gigawatts, AFP reported, citing state media. An official with the National Energy Administration told a Beijing conference that the country is aiming for an annual growth rate for wind power capacity of 20% for the foreseeable future, making China the world's fastest growing market for wind energy technology. China is the world's fourth-largest wind power producer after the US, Germany and Spain. Separately, Reuters reported that Morgan Stanley is selling around US$110 million in shares of China's largest wind power transmission gear maker, China High Speed Transmission. Morgan Stanley was one of the underwriters of Nanjing-based China High Speed's 2007 Hong Kong listing.

HSBC eyes eventual Shanghai listingHSBC Holdings hopes to be among the first foreign firms to list on the Shanghai stock exchange within two to three years, the South China Morning Post reported, citing comments by the firm's executive director. Peter Wong Tung-shun said HSBC had been in talks with mainland authorities but that no definite timeline for a Shanghai listing had been set. China's government said last week it would permit foreign firms to list in Shanghai and to use the renminbi for trade settlements on a trial basis. Details of the government plan have yet to be revealed, making it difficult to know whether foreign firms could list in Shanghai this year, Wong said. He added that HSBC still had ambitions to tap the mainland securities market and had applied to issue renminbi-denominated bonds in Hong Kong.

China to repatriate Mexicans affected by swine fluChina will use special charter flights to airlift from China dozens of Mexican nationals said to be affected by swine flu, the Wall Street Journal reported. According to a statement released on the Ministry of Foreign Affairs' website on Monday, the two countries were working out the details of the charter flights to Mexico. More than 70 Mexican citizens have been quarantined in China over suspected exposure to the H1N1 virus. However, only one 25-year-old Mexican man, currently in Hong Kong, has become ill with the disease in China thus far. Mexican officials have claimed that Mexican citizens were being held in China under "unacceptable conditions." Chinese officials have said that the quarantine is "non-discriminative" and not targeted at Mexican citizens.

US admiral Mullen questions China military buildupThe chairman of the US Joint Chiefs of Staff said on Monday that China's buildup of sea and air power appears to be aimed at the US, Reuters reported. Speaking in Washington, Admiral Michael Mullen said that while China had the right to meet its security needs, the US would have to work with its Pacific allies to respond to China's increased military strength in the region. He said that China's maritime and air expansion was "very focused on the United States Navy and our bases that are in that part of the world." China in March revealed an official military budget of US$70.2 billion for 2008, a continuation of nearly two decades of double-digit increases in military spending.

china economic Daily News Update - 24 April, 2009

TODAY'S BRIEFS

Source: Coke, Huiyuan re-start talksCoca-Cola and China Huiyuan Juice Group have re-entered talks for a possible partnership, the South China Morning Post reported, citing an unnamed source. Coke had its earlier, high-profile US$19.65 billion takeover bid for the juice maker rejected by Chinese regulators. While regulators' reasoning for rejecting the deal was not explicitly stated, many observers believed Beijing was unwilling to let a successful domestic brand come under foreign control. Terms of a possible new deal, said to be at "a preliminary stage" have not been set, but Coke may be looking for a minority stake in Huiyuan. Spokesmen from Coke and Huiyuan declined to comment, but the source indicated that Coke's interest in the company had been strengthened by its current, lower asset price.

PBoC to continue moderate monetary policyThe People's Bank of China said it would "firmly stick" to a moderately loose monetary policy this year, the South China Morning Post reported. In a statement on the central bank's website, Deputy Governor Yi Gang said that the year's rapid growth in bank lending had "more benefits than drawbacks." Positive effects included eliminating deflation expectations, stabilizing asset markets, accelerating destocking and increasing confidence in the economy. However, the PBoC's position puts it at odds with the China Banking Regulatory Commission, which has registered increasing discomfort with rising lending due to fears of a rise in non-performing loans. New loans in the first quarter of the year reached US$670.9 billion, 91.6% of the country's goal for the entire year.

New postal law could restrict foreign firmsChina may soon pass new laws governing postal services, raising concerns among foreign express-delivery firms that they will face restrictions on their services, the Wall Street Journal reported. The law, a draft of which was published last year, is expected to be passed when the meeting of the standing committee of the National People's Congress ends on Friday. One article in the draft, which state media reports indicate has not been removed from the finalized version, forbids foreign companies from participating in the express delivery of letters. However, some Chinese legislators have indicated that the law would not impact the operations of foreign delivery companies. Under current laws, China Post, the national post office, has has monopoly on the delivery of letters.

CASS sees property recovery in second halfThe Chinese Academy of Social Sciences (CASS) said that it expects China's property market to recover in the second half of the year as Beijing's stimulus strengthens the wider economy, the South China Morning Post reported. In a yearly report on property, the think-tank also proposed loosening credit, cutting taxes and lowering land costs to contribute to a rebound in property sales. It also called for financial institutions to support "quality" property developments. Existing stimulus measures, such as lower interest rates and reserve requirement ratios, and generally easier access to credit would also contribute to the property sector's development, said Li Jingyuan, the report's author. However, he noted that if the policies were not sufficiently effective, Beijing could introduce further stimulus measures later in the year.

China Life profits jump 55%China Life Insurance posted a 55% increase in first-quarter net profit, Dow Jones reported. Net profit at China's largest life insurer rose to US$789 million from US$508.3 million in the same period a year ago. Premiums increased 1.8% to US$15.2 billion. The rise in income was helped by the Chinese stock market's rally - China Life reported a fair value gain of US$123.19 billion for its financial assets over the quarter as the Shanghai Composite Index rose 30%. The insurer also reported that a sale of a 51% stake in a joint venture with Commonwealth Bank of Australia was proceeding, after first announcing its intention to exit the venture in 2003.

Taiwan, mainland to hold financial talksNegotiators from Taiwan and the mainland will meet this weekend to reach agreements on financial issues, the Washington Post reported. The talks, to be held in Nanjing, are expected to focus on allowing Taiwan-based financial firms to enter the mainland market. Currently, Taiwan banks can operate offices in the mainland, but cannot offer banking services. Other areas to be covered by the expected financial cooperation agreement are securities and futures, insurance, and a currency exchange and clearance mechanism. However, the agreement is not likely to lead to direct changes; Taiwan's Mainland Affairs Council said it would be more likely to prepare the way for future, more detailed negotiations.

Fleet parade marks PLA Navy's 60th anniversaryChina yesterday held a fleet parade near the port of Qingdao to mark the 60th anniversary of the founding of the People's Liberation Army Navy, Reuters reported. Hu Jintao presided over the parade, which included two of China's nuclear-powered Long March ballistic missile submarines. Hu sought to allay concerns of Chinese military expansion; state media paraphrased him as saying, "China will stick unswervingly to the path of peaceful development, and will never seek hegemony now or in the future, no matter how much the country develops." The parade comes after a minor confrontation last month between Chinese ships and a US navy vessel in the South China Sea, in an area that China considers its exclusive economic zone, and following several missions by Chinese navy ships to guard against pirate attacks on merchant vessels off the coast of Somalia.