TODAY'S BRIEFS

TODAY'S BRIEFS

China cuts interest rates as Wall Street wobbles
China has cut interest rates for the first time in more than six years in what is being seen as a move to shore up economic growth in the face of deteriorating global financial conditions, the Wall Street Journal reported. The benchmark one-year lending rate has fallen 0.27 percentage point to 7.20%. Deposit rates have not changed. This is perhaps in recognition that the rates are already low compared to the inflation rate. The People's Bank of China (PBOC) also said the proportion of total funds that small banks must keep on reserve - and therefore not lend - will be reduced by one percentage point from September 25. The PBOC said the measures were intended to "solve the current prominent problems in the economy." However, it is likely no coincidence that the announcement came just hours after Wall Street was rocked by the news that Lehman Brothers is filing for bankruptcy protection and that Bank of America is to buy troubled Merrill Lynch

New Zealand accuses China of tainted milk cover-up

New Zealand Prime Minister Helen Clark has accused Chinese officials of turning a blind eye to the sale of chemically-tainted milk powder that has killed two children and left nearly 500 more ill, the Financial Times reported. Chinese company Sanlu was ordered to halt production and issue a general recall last Thursday after investigators found the chemical melamine in the milk powder. The chemical - which was also found last year in pet food shipped from China to the US - is said to be responsible for causing kidney stones in children. However, the CEO of New Zealand dairy firm Fonterra, which has a 43% stake in Sanlu and seats on the company's board, said directors were first informed of the contamination as early as August 2. "I think the first inclination was to try and put a towel over it and deal with it without an official recall," Clark said. Chinese police have arrested two people on suspicion of contaminating the products.

Sinosteel poised to complete Midwest takeover
Sinosteel, the Chinese steel trading company, has increased its stake in Midwest Corp to more than 90%, enabling it to force the sale of all outstanding shares in the Australian mining firm, the Wall Street Journal reported. According to a person close to the deal, Sinosteel crossed the 90% threshold after New York investment group Harbinger Capital Partners agreed to sell its holding of around 15%. Earlier on Monday, Sinosteel said it had an 82.7% stake in Midwest. The Chinese company's bid was challenged by merger proposal from Midwest rival Murchison Metals. However, the merger floundered and last week Sinosteel agreed to buy Murchison's 9.2% stake in Midwest. It is the first successful aggressive takeover by a Chinese firm. Previously, companies were content to become no more than passive investors in Australian mining projects.

China appeals WTO auto parts ruling
Beijing has launched an appeal against a WTO ruling that the tariffs China imposes on imports of auto parts are a violation of global commerce rules, Bloomberg reported. Registering its appeal on Monday, China said it "cannot fully agree with the legal explanations and verdict of the expert panel." China charges a 25% tariff on imported vehicles and a 10% tariff on imported auto parts. However, if a vehicle manufactured in China comprises more than 60% imported parts it is taxed at the same rate as an imported finished vehicle. The US, EU and Canada filed a complaint with the WTO, arguing that the differences in duty represented an unfair discrimination against foreign auto parts. The complaint was upheld by a WTO panel on July 18 - the first time the global trade body has ruled against China. If the appeal fails, China could face retaliatory tariffs on its exports.

CDB looks to domestic acquisitions
China Development Bank (CDB) may acquire smaller domestic banks as it attempts to become a more commercially oriented lender, the South China Morning Post reported. A source said that CDB, which has traditionally lent money to state-backed infrastructure programs, is looking at possible targets among China's city commercial and joint-stock banks. The bank has a limited branch network and acquiring an existing network is quicker and easier than trying to grow organically. Shanghai-listed Industrial Bank and Shenzhen Development Bank, in which private equity firm TPG has both a stake and management control, are said to be among the potential targets. CDB's domestic investments have so far been limited to minority stakes in retail banks. It has a 20% holding in Xinjiang-based Urumqi City Commercial Bank and spent US$117 million on an undisclosed stake in Lanzhou City Commercial Bank.

US presidential candidates explain their China policies
Security, economics and the environment were the key topics for US presidential candidates John McCain and Barack Obama as they offered insights into how US-China relations would be managed under their respective administrations, Reuters reported. The candidates laid out their views in position papers published on Monday by the American Chamber of Commerce in China. Obama said a "change in currency practices" is central to redressing Washington's trade deficit with Beijing. He accused China of maintaining its currency at an artificially low rate and pledged to back legislation that defined currency manipulation as an illegal subsidy, which would enable the US to impose duties on more Chinese goods. McCain accused Obama of "preying on the fears stoked by Asia's dynamism," although he did say China must fulfill its obligations on currency issues, as well as enforcing international trade rules, protecting intellectual property and lowering manufacturing tariffs.

Survey: Chinese care more for price, less for brands
Chinese shoppers are becoming more price conscious and less brand-loyal, according to a survey conducted by consultancy McKinsey. Although recent retail sales figures have been encouraging, the survey concluded that consumer goods companies will have their work cut out for them satisfying an "increasingly discerning and sophisticated" target market, the Financial Times reported. However, there appears to be a greater willingness to pay a premium for high-end products. The top 15% of consumers will pay up to 60% more for top-of-the-range household electronics and 300% more for certain personal care products. This may lead to the kind of polarized consumption patterns seen in the West, McKinsey noted. Companies are advised to compete at one or both ends of the market. The survey also found that 80% of respondents thought environmental protection should be a priority, while food safety is also increasingly important.