TODAY'S BRIEFS Daily News Update - 6 November, 2008

TODAY'S BRIEFS

CCB poised for first commercial mortgage bond sale
China Construction Bank (CCB) will raise US$292 million in the first domestic commercial mortgage bond sale, Bloomberg reported, citing sources familiar with the situation. The planned sale requires government approval, which is expected next year as Beijing encourages the development of bond and asset-backed securities markets to reduce reliance on bank loans. CCB, China's second-largest lender, was chosen by the government for a pilot program in 2005 that led to the country's first sale of securities backed by residential home loans. Beijing is expected to make changes to regulations for asset-backed securitization after two further rounds of pilot programs.

Ex-CSRC head expresses long-term optimism
China's household savings could stabilize China's stock market and lead to an eventual rebound, according to a former chairman of the China Securities Regulatory Commission (CSRC). Zhou Daojiong, who now serves as deputy director of the finance and economics committee of the National People's Congress, also said a bullish market was needed to support the growth of domestic firms, the South China Morning Post reported. Zhou's comments, made at a seminar in Shaanxi province, are seen as a sign of further government efforts to improve confidence and prevent market declines. "We must be fully aware that the government's strategy to unswervingly develop the capital market hasn't changed. The motivation to stabilise the market hasn't changed," said Zhou. The Shanghai Composite Index has fallen more than 66% this year.

Transport Ministry to increase infrastructure spending
China's Transport Ministry will boost spending on infrastructure by a further US$292.9 billion over the next three to five years, the South China Morning Post reported. The ministry now plans to spend about US$732.25 billion on roads, waterways and ports as part of efforts to boost growth during an economic downturn. An additional US$292.9 billion has been budgeted for railway construction. Analysts say the additional spending is meant to compensate for slower investment in infrastructure by the private sector and local governments. However, there is some doubt as to whether additional state-led fixed-asset investment will be sufficient to avert a slowdown.

Feed factory closed over melamine suspicions
Authorities in Shenyang, Liaoning have closed an animal feed processing factory and detained its owner over suspicions that chicken feed was laced with the industrial chemical melamine, AP reported, citing state media. The Mingxing Feed Processing Factory had sold chicken feed to Dalian Hanwei Enterprise Group, China's largest egg producer. A brand of Hanwei's eggs sold in Hong Kong was found to contain excessive levels of melamine earlier this month. It is unknown if Mingxing's feed is sold in other countries. To date, no illnesses have been linked to eating eggs tainted with melamine, but officials say the practice of adding melamine to animal feed is widespread in China's agriculture industry.

Avic, Shanghai government plan jet engine venture
Aviation Industry Corp of China (Avic) said it plans to set up a joint venture with the Shanghai government to produce engines for China's first large commercial aircraft, the South China Morning Post reported. The announcement, made at the Zhuhai Air Show, noted the venture would be launched with US$876 million in registered capital. To date, engine construction has been subcontracted to firms such as Rolls-Royce and General Electric. Avic Executive Vice President Tan Ruisong said the risk and cost of the engine project would be outweighed by the wider benefit of growth in supporting industries. As part of the agreement with the Shanghai government, the city will be the location for the aircraft and engine assembly lines. A feasibility study for the engine program is expected to be finished within six months.

Rizhao Steel to merge with state-owned rival
Privately owned Rizhao Iron and Steel has agreed to consolidate with state-owned rival Shandong Iron and Steel, Reuters reported. Rizhao, one of China's largest private steel mills, has seen rapid growth and high profit margins on its 8 million tons of annual steel production. No details were given on the agreement or the process of consolidation, but Beijing has been encouraging consolidation in the steel sector. Shandong Iron and Steel was formed by the merger of the state-owned parents of Laiwu Steel and Jinan Iron and Steel. Analysts at Standard & Poor's have forecast reduced demand for Chinese steel products in 2009.

China Railway 'unaffected' by Nigerian project suspension
China Railway Construction said that its full-year financial results for 2008 would be unaffected by the suspension of a Nigerian railway project, Reuters reported. The US$8.3 billion project had been suspended by Nigeria's transport ministry pending reevaluation of the contract. However, segments of the project already completed had been funded by advance payments. "The project is still in the preliminary construction stage, the revenue of which has not been recorded in the 2008 projected annual revenue," China Railway said in a statement. The company added that there was no risk of construction costs not being recoverable.