TODAY'S BRIEFS Daily News Update - 21 October, 2008

TODAY'S BRIEFS

Beijing preparing stimulus package
China is preparing a raft of measures - likely to include interest rate cuts and an increase in infrastructure spending - in order to spur economic growth, the South China Morning Post reported. "Concrete fiscal, credit and trade measures will be issued soon," a spokesman from the National Bureau of Statistics (NBS) Li Xiaochao was quoted as saying. The NBS on Monday announced that China's economy had grown by 9% in the third quarter, its slowest rate in five years. The paper cited economists at major foreign banks who predicted that China's economic stimulus package would likely include a slower appreciation of the yuan against the dollar; price rises for electricity, natural gas and petrol; increasing infrastructure spending by US$43.9 billion; reducing the value-added tax on housing transactions; three or four rate cuts of more than 27 basis points each from the benchmark one-year lending and deposit rates by the end of 2009, as well as one or two reserve ratio cuts of 50 basis points each.

Industrial output hits 6-year low
China's industrial growth in September hit a six-year low at 11.4% from a year ago, with economists anticipating further declines, the South China Morning Post reported. The figure, which was below the 12.8% recorded in August, was caused by a manufacturing ban for factories near Beijing in the runup to the Olympic Games, as well as slackening global demand due to the US financial crisis. While industrial output may recover somewhat for the rest of the year, now that the Olympics have passed, the outlook for next year is bleak. "We will see a sharp slowdown next year because exports will be badly affected by a recessionary US and economic slowdown in Europe and Japan," Merrill Lynch economist Lu Ting was quoted as saying.

Citic Pacific faces potential $2bn forex losses on unauthorized trades
Citic Pacific, the Hong Kong-listed arm of conglomerate China International Trust and Investment Corp, is facing about US$2 billion in foreign exchange losses due to unauthorized one-way bets against the US dollar, the Financial Times reported. Citic Pacific engaged in hedging contracts that bet on the rise of the Australian dollar and Euro, in a botched attempt to hedge currency risks related to massive investments in an Australian iron ore mine. The contracts turned loss-making when both currencies fell against the US dollar. "These contracts were done without proper authorization and the potential maximum exposure under these contracts was not evaluated correctly," Citic Pacific chairman Larry Yung was quoted as saying, adding that there was "no reason to believe fraud or other illegal activities were involved." The group's financial director and financial controller have resigned over the losses. Citic Pacific will receive a US$1.5 billion standby loan from its parent.

China mobile 3Q profit up 26%, disappoints analysts
China Mobile's third quarter net profit rose by 26% year-on-year to US$4 billion, but failed to meet analyst expectations as the Olympic games slowed demand from business clients, Bloomberg reported. Revenues rose by 14% to US$15.4 billion. The network operator added 7.25 million users in September, for a third-quarter total of 66.8 million and a total subscriber base of 436.1 million. "The Olympics would have had some effects, as we can see in the decline in average usage data,'' said Victor Yip, an analyst at UOB Kay-Hian Ltd in Hong Kong. "We are a little disappointed by the earnings, which dropped from the previous quarter." Average use fell to 493 minutes per user per month in the first three quarters, compared with 496 minutes in the first six months.

Beijing to boost prices for grain reserve purchases
Beijing will raise substantially the price it pays for various grains for its national reserves in the latest move to narrow the income gap between its urban and rural residents, the South China Morning Post reported. The policies, announced Monday by the National Development and Reform Commission, will also see the government boost investment in food productivity, with the goal of raising grain production capacity by 50 million tons between 2009 and 2020. Investment would focus on irrigation, energy, transport and drinking water. China's northeast will be developed into a soybean production base, the Yangtze River area would concentrate on rapeseed production and Xinjiang would be China's cotton center. Farmers will also receive subsidies to cover fertilizer and equipment expenses. China earlier announced it intended to double rural incomes by 2020.

Three die from toddler virus
Three children in eastern China have died from hand, foot and mouth disease, Reuters reported, citing state media. This marks the second outbreak of the toddler virus this year. The three victims were all less than one year old and from Jian'ou City. A flare-up of the virus in southern China killed at least 42 people in April and May and 27,500 additional cases were reported. Hand, foot and mouth disease is a common illness among children, but outbreaks in China have been linked with enterovirus 71 (EV71), which can lead to a more severe form of the disease. Symptoms of EV71-linked hand, foot and mouth disease include high fever, paralysis and meningitis.

China faces health care funding crisis
China's health system faces a funding crisis, with the average cost of a single hospital admission almost equivalent to annual per capita income, the Financial Times reported, citing a report published in the medical journal The Lancet. The report found that the average cost of a single hospital admission was more than twice the average per capita annual income for 20% of China's population. Many Chinese who lack health insurance are reluctant to visit the hospital for even relatively treatable injuries or illnesses for fear of high bills. More than 35% of urban households and 43% of rural households "have difficulty affording healthcare, go without, or are impoverished by the costs," the report said.