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.