TODAY'S BRIEFS Daily News Update - 26 November, 2008

TODAY'S BRIEFS

World Bank cuts 2009 growth projection to 7.5%
The World Bank expects China's economy to expand by 7.5% in 2009, its slowest rate in nearly two decades, the Financial Times reported. The revised projection, which came in the bank's quarterly report on the Chinese economy, released on Tuesday, represents a sharp drop on the 9.2% growth predicted just three months ago. Weakness in the property and export markets is seen as responsible for the worsening economic problems, and the bank stressed the importance of rebalancing the economy away from exports and investment toward domestic consumption. It stressed that higher public spending - which is expected to account for 4 percentage points of growth in 2009 compared to 1.5 percentage points last year - should focus on improving living standards rather than just improving infrastructure. More should be spent on health and education as well as on transfer payments to low-income groups, the bank said.

EU Chamber: Property market revival is crucial
Prospects for European companies in China hinge on the government's ability to revive the ailing property sector, according to the European Union Chamber of Commerce in China. The recently announced US$586 billion economic stimulus package includes provisions for low-cost housing, while measures have been announced to ease mortgage financing, in a bid to turnaround slowing sales volume and tumbling prices. "Kick-starting of the real estate sector has probably the biggest impact on the real economy when it comes to the bigger items that European companies are interested in," said Joerg Wuttke, the chamber's president. He noted that a revived property market would create a knock-on demand for many of the products that European firms sell in China. Wuttke also praised the stimulus package but expressed concern about the transparency of the spending and whether EU companies would have a fair chance of winning contracts, Rers reported.

Mobile operators race to sign up customers ahead of 3G
China's mobile operators have launched a wave of new offers in order to attract customers ahead of the issue of 3G licenses, which could take place as early as next month, the South China Morning Post reported. China Mobile, which controls over 80% of the mobile market, is focusing on customer retention. Free top-up vouchers worth between US$45 and US$130 available to customers who make prepayments, depending on the city in which they live. China Unicom, which runs a GSM network, is making similar offers in what analysts see as an effort to tap market share before China Telecom launches its CDMA mobile services nationwide next year. As part of industry restructuring efforts, China Telecom acquired Unicom's CDMA business. It is thought that the company will make a play for Unicom's low-end users, leveraging its broadband network to offer broadband and mobile bundled packages in 21 provinces in southern China.

MSCI China Index changes prompt sell-offs
Several Hong Kong-listed mainland companies saw sharp drops in their share prices on Tuesday ahead of alterations to the MSCI China Index that kicked in today, the South China Morning Post reported. China Southern Airlines, China Eastern Airlines, Guangzhou Investment, CITIC Resources Holdings and Hopson Development Holdings all fell by more than 10% in trading on Tuesday. They are among the nine stocks that MSCI, an equity index compiler, said would be removed from its mainland benchmark index. Six new stocks have been added to the index. Most of the selling was done by managers of tracker funds, which link their positions to the index. Any change in the composition of the index requires a change in holdings so as to track the performance of the index most accurately.

Brazil wants Chinese investment in supply chains
Brazil is seeking investment from China in its ports and roads as part of efforts to improve the supply chain for agricultural products, Bloomberg reported. About one-fifth of the South American nation's agricultural exports headed to China last year. The imports, dominated by soybeans, frozen meat and tobacco, were worth US$11 billion. Celio B. Porto, secretary of agri-business for international relations at Brazil's Ministry of Agriculture, noted that the country lacked the capital to allow a smoother flow of goods to port. "The investments China has been making in Asia and Africa represent future production. Brazil's competitiveness comes from having present production," Porto said. Brazil is seeking to benefit from recent food safety problems, such as the dairy scandal. Porto said there had already been a jump in demand for Brazilian dairy products and eggs.

China's steelmakers pessimistic about their prospects
Chinese steel executives have expressed doubts as to whether the boom times will ever return to the industry, as the market declines both at home and abroad, the Wall Street Journal reported. "We think that the era of high profits for steel companies has already come to an end," said Yang Siming, chairman of Nanjing Iron & Steel Group. With the domestic housing market struggling, steel output plunged 17% in October. China produces a third of the world's steel and so the impact is being felt worldwide, with demand for the minerals used in steel production, notably iron ore, badly hit. Mining giant BHP Billiton announced on Tuesday that it had abandoned its bid for rival Rio Tinto. The company is now focusing on preserving its finances. Chang Chia-Juch, chairman of Taiwan's China Steel, which sells as much as 75% of its production in the domestic market, said the collapse of the takeover is "very good for the steel industry," as it will ensure more competitive pricing for iron ore.

Hangzhou subway collapse death toll rises to 17
Seventeen people are now confirmed dead following the collapse of a half-built subway tunnel in Hangzhou, Zhejiang province, Reuters reported. Four people are still missing, with little chance of survival. Ten people remain in hospital and local insurance companies have paid out nearly US$1.5 million in compensation. The tunnel collapse swallowed several vehicles, including a public bus, and trapped dozens of people in a 75-meter-long chasm. Hangzhou Mayor Cai Qi said the accident had exposed "serious problems" in the city's subway construction. Hangzhou and other cities have since conducted safety checks on such projects. China's construction industry is plagued by corruption, poor standards and shoddy materials, although in this case no arrests or punishments have been reported