China Economy - News & Updates

[Neo]

China wants more housing for poor

BEIJING: China has pledged to make more housing available for poor families, even as it struggles to control soaring property prices, state media said on Monday.

“It’s the government’s responsibility to solve the basic housing problem of the low-income group,” the China Daily reported, citing unnamed participants at a recent Cabinet meeting on the property market.

Vice Premier Zeng Peiyan said steps should be taken to build more housing that low-income families can afford, the paper reported. This is official policy all across China, but so far more than one fifth of the nation’s 657 largest cities have failed to start construction of cheap housing, according to the paper.

Zeng warned that property prices were rising too fast, regardless of the government efforts, which also include strengthened land appreciation tax collection on developers. “Property prices in some cities are still rising too rapidly due to insufficient supply of medium and low-cost housing,” Zeng said, according to the official Xinhua news agency.

Last month, housing prices in 70 large and medium cities rose 5.6 per cent year on year, with those in Beijing jumping 9.9 per cent, the China Daily said, citing the National Development and Reform Commission.

http://www.thenews.com.pk/daily_detail.asp?id=44616

 

[Janbaz]

Wal-Mart expands Chinese business

Wal-Mart, the world's largest retailer, is expanding its presence in China after agreeing to buy a 35% stake in discount store chain Trust-Mart.
The terms of the deal, giving Wal-Mart an interest in 100 stores in 34 Chinese cities, were not revealed but analysts have said the business is worth $1bn.

Should Wal-Mart ultimately buy out the group, it would make it China's largest foreign retailer in terms of stores.

Foreign sales currently account for about 20% of the firm's turnover.

Based in Taiwan, Trust-Mart was set up in the mid-1990s and has more than 30,000 staff.

Important step'

Along with other leading global retailers like Carrefour and Tesco, Wal-Mart is looking to build its interests in China's fast-growing retail sector.

The firm already operates 68 stores there and said last year that it was prepared to hire an extra 150,000 staff in the next five years.

Wal-Mart said the latest deal was an "important step" for the business.

"Through this investment in Trust-Mart we have the opportunity to expand our presence in China, one of the world's fastest growing markets," said Michael Duke, Wal-Mart's vice-chairman.

Wal-Mart said the two companies would, for the time being, operate independently but that if "certain conditions" were met, it could buy out the remainder of the business by 2010.

Mixed record

Wal-Mart's efforts to expand outside the US have not proved an unqualified success, raising questions about whether its retail formula can be replicated elsewhere.

The firm pulled out of Germany and South Korea after struggling in those markets, while its Japanese subsidiary Seiyu has made heavy losses.

The US firm is currently looking to develop a joint venture business in India, a plan which has sparked protests by small shopkeepers.

Carrefour is currently the leading foreign retailer in China, with 90 hypermarkets.

Tesco opened its first own-brand store in China last month, and has interests in another 45 outlets through a joint venture with a domestic retailer.

China's retail sector was worth nearly $850bn in 2005 and is forecast to grow to more than $2 trillion by 2020.

BBC News.
http://news.bbc.co.uk/2/hi/business/6399531.stm

 

[Janbaz]

Chinese yuan rise may quicken if surplus grows

BEIJING: China may allow the yuan to rise more quickly in 2007 if its trade surplus keeps growing rapidly, central bank governor Zhou Xiaochuan said in remarks published on Tuesday.

Zhou said in an interview with the Hong Kong Commercial Daily, a mainland-controlled paper that China would let market forces play a big role in deciding the yuan’s value but its approach would remain gradual.

The interview was conducted two weeks ago in Hong Kong when Zhou was returning from a meeting of Group of Seven finance ministers and central bank chiefs in Essen, Germany.

“If the trade surplus grows, the pace of the yuan’s appreciation may quicken,” said Zhou, governor of the People’s Bank of China.

China scrapped a decade-old yuan-dollar peg in July 2005, revalued the currency by 2.1 percent and set it free to float within managed bands. It has since gained a further 4.6 percent. However, the yuan is under pressure to rise further as China’s trade partners, particularly the United States, argue the currency is undervalued in light of China’s big current and capital account surpluses. Its trade surplus grew 74 percent last year to a record $177.47 billion. Some Chinese researchers, by contrast, believe the US is increasingly using the exchange rate as a lever to force other policy changes. Zhang Yi, from a research outfit under the National Development and Reform Commission, the top planning agency, said Washington was keeping up pressure on the yuan with an eye to making progress on issues such as greater access to the Chinese market.

“For the US, whether the yuan rises or not may not matter,” Zhang said in an opinion piece published in the official China Securities Journal. reuters

Daily Times.
http://www.dailytimes.com.pk/default.asp?page=2007\02\28\story_28-2-2007_pg5_25

 

[Janbaz]

Wen Jiabao calls for financial stability

SHANGHAI: Chinese Premier Wen Jiabao called on Wednesday for stability in the country’s financial sector, a day after the stock market recorded its biggest fall in a decade.

“From this period on, the main task for the financial markets is to improve and promote the financial industries healthy development,” Wen said in comments published by the official Xinhua news agency.

He said the government wanted “to promote the safe and steady” reform of the country’s financial sector, and that it planned to move its reforms to a “new stage” as it developed the country’s capital markets. Wen, whose comments were from an article in the Communist-backed “Qiu Shi” magazine to hit the streets on Thursday, said China planned to deepen reforms of state-owned banks and to further open up the financial industry.

The remarks came one day after China stock markets fell by nearly nine per cent, in the biggest one day decline in 10 years.

However, shares prices subsequently recovered, with the key Shanghai Composite Index gaining nearly 4.0 per cent on Wednesday.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=44897

 

[Janbaz]

China gets foreign oil incentives

China says nine countries have offered it financial incentives to invest in oil and gas projects as it continues its global hunt for energy resources.
Government officials said Kuwait, Qatar, Oman, Morocco, Libya, Niger, Norway, Ecuador and Bolivia would offer China tax breaks and other sweeteners.

China already has a similar arrangement with 20 other countries.

China is increasingly dependent on imported oil and gas as it tries to sustain its rapid economic growth.

Looking abroad

Beijing has agreed a host of energy deals with other countries in the past year, including Venezuela and Malaysia, and is currently negotiating with Iran over gas imports.

China has been particular active in Africa, prompting criticism that it is exploiting the continent's resources for its own benefit and setting aside concerns about poverty reduction and human rights abuses.

Chinese oil companies already have interests in Niger, while Libya is looking for external partners as it opens up its energy sector to foreign investment.

China imported 47% of its oil supplies last year as its domestic supplies dwindled. New supplies are regarded as vital if the country is to continue its swift economic expansion.

Separately, a government official said China would continue to rely on domestic coal production for most of its energy needs but was also looking to step up investment in renewable industries.

Zhao Xiaoping, head of the National Development and Reform Commission's energy bureau, told Money China magazine its goal was to source 10% of energy from renewable sources by 2010.

Beijing is under pressure to embrace more environmentally-friendly energy supplies to reduce pollution levels across the country and set a lead in the global fight against climate change.

BBC News.
http://news.bbc.co.uk/2/hi/business/6407337.stm

 

[Janbaz]

China’s grain production up in 2006

SHANGHAI: China increased its grain production 2.8 per cent to 497.46 million tonnes in 2006, but the world’s most populous nation still faces the prospect of shortages, state press reported on Thursday.

Production last year was 13.46 million tonnes more than in 2005, as annual grain output in China increased for the third year running, but still short of the country’s demand, the China Daily said.

No break down was given on the differing grains. China also includes legumes, such as beans, and oil bearing seeds, as part of its grain statistics.

China faces the possibility of a 48 million tonne grain shortage in 2010, equal to nearly nine per cent of the country’s grain consumption, according to a recent study published by the ruling Communist Party’s central school.

The nation of 1.3 billion people needs to feed its growing population but its arable land is increasingly being lost to expanding cities and environmental degradation.

China had 105.38 million hectares of land for grain crops last year, an increase of 1.1 million hectares over the previous year, according to the latest statistics cited by the state news agency Xinhua.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45088

 

[Janbaz]

Westinghouse to supply China four reactors

BEIJING (March 02 2007): China's leading nuclear power company signed a contract on Thursday with US-based Westinghouse to supply four nuclear reactors to the power-hungry nation, state press said.

The contract with the China State Nuclear Power Technology Company calls for two third-generation pressurised water reactors for Shandong province and another two for Zhejiang province, Xinhua news agency said.

No other details were made available. But the pact appeared to alter a December agreement that called for Westinghouse to deliver two reactors to Guangdong province-and to confirm news reports that France's Aveva was in the running for the Guangdong project.

The deal with Westinghouse, which is owned by Japan's Toshiba, was reportedly worth several billion dollars. China is aiming to construct more than 30 nuclear reactors over the next 15 years, officials have said.

Business Recorer.
http://www.brecorder.com/index.php?id=533995&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

China to curb foreign borrowing, boost home markets

BEIJING: China on Friday ordered banks to slash their short-term overseas borrowings in a move designed to reduce capital inflows that have helped push up the yuan, and to promote the country’s financial markets.

In a statement on its website, the State Administration of Foreign Exchange (SAFE) expressed concern that foreign debt, especially short-term debt, was growing fairly rapidly.

SAFE, the currency regulator, ordered domestic banks to reduce short-term foreign debt in stages to 30 per cent of their 2006 quota by the end of March 2008.

Foreign-owned banks and all non-bank financial institutions in China must cut their short-term foreign debt to 60 per cent of their 2006 quota by the same deadline, the regulator said.

Officials said they were also considering reductions in companies’ offshore borrowing.

SAFE said the cuts were not as drastic as they seemed because it was also relaxing the definition of short-term debt.

The regulator, which said the restrictions would help reduce China’s bulging balance of payments surplus, has not disclosed how much banks were permitted to borrow last year.

But state media reports have said quotas were similar to those for 2005 — $34.8 billion for foreign banks and $24.4 billion for Chinese banks and some non-banking firms. To compensate for the restrictions on foreign borrowing, SAFE said it would expand China’s underdeveloped currency swap market.

The regulator also promised to make it easier for foreign banks to operate in the interbank market and said more institutions would be allowed to issue yuan bonds.

“The policy changes may hit two birds with one stone: reduce capital inflows and help develop the domestic money market,” said Mingchun Sun, an economist at Lehman Brothers in Hong Kong.

Sun said the policy package had two possible implications.

Upward pressure on the yuan might ease at least slightly in the short-term, while reduced short-term capital inflows should help reduce excess liquidity in the banking system. This, together with increased demand for funds in the money market, could push market interest rates higher and pave the way for an increase in official interest rates, Sun told clients.

Oliver Stoenner, a portfolio strategist at Cominvest in Frankfurt, also saw the new policies as a form of backdoor tightening aimed at slowing the tempo of growth. “With this kind of regulation the authorities aim to reduce inflationary pressure on the mainland because, if the banks borrow abroad to finance activity in mainland China, that tends to give a positive impact on monetary growth and the real economy,” he said.

http://www.thenews.com.pk/daily_detail.asp?id=45244

 

[Janbaz]

China may open bond market to foreign firms

BEIJING: China will allow foreign firms to issue yuan-denominated bonds probably this year as part of efforts to ease upward pressure on the currency by stemming capital inflows, a senior central banker said on Saturday.

Wu Xiaoling, deputy governor of the People’s Bank of China, also said Beijing would continue to follow its own path on reforming the yuan’s exchange rate regime, despite US pressure to make the currency flexible more quickly.

“Allowing foreign investors to raise funds by issuing yuan bonds here is better for the balanced development of China’s economy than if they exchange foreign funds into yuan,” she told reporters on the sidelines of a meeting of the Chinese parliament’s consultative body.

Asked whether the change would come this year, Wu said: “I think it will.” So far only two international organisations, the Asian Development Bank and the International Finance Corp — the private lending arm of the World Bank — have been allowed to sell yuan debt.

Wu said she thought the corporate bond market in China had great potential to take off, given that it takes up only a small part of the country’s capital markets. However, the National Development and Reform Commission, the powerful economic planning agency, currently tightly controls the new bond issuance by setting annual quotas.

“A real corporate bond market doesn’t need a quota system — what matters is the companies’ demand and the ability of the market to meet it,” she said. Wu also said that even if China invested more of its newly-added foreign exchange reserves in non-dollar assets, this would not have a big impact on the US bond market because it did not mean China was withdrawing its existing investments.

Beijing was keen to develop the market in currency swaps, she said, adding that the central bank was considering allowing foreign banks to become primary dealers in the swaps market. She reiterated Beijing’s long-standing position that the yuan’s level would be determined by market forces.

“The direction of our reform will not change, and the pace of the reform will be controlled by us,” she said, when asked what she would tell US Treasury Secretary Henry Paulson if he pressured Beijing on the yuan next week.

Paulson is scheduled to make a brief stop in Beijing on March 7 as part of an Asian tour. US officials, who say the yuan is artificially undervalued, have repeatedly called for Beijing to let the currency rise further.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45369

 

[Janbaz]

Chinese inflation not intensifying’

BEIJING: Inflationary pressure in China does not appear to be intensifying, a senior central bank official said on Saturday. Tang Xu, head of the research bureau of the People’s Bank of China (PBOC), said a recent rise in food costs, which account for about a third of China’s consumer price index (CPI), was unlikely to be sustained. “I don’t think inflationary pressure in February was getting stronger,” Tang told reporters on the sidelines of a financial forum.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45378

 

[Janbaz]

China’s economy to race ahead despite lower growth target

BEIJING: China’s economy will continue to race ahead at a near double-digit rate, analysts said on Monday, despite a call by Premier Wen Jiabao’s for a more controlled pace of development.

Wen set an expansion target of around eight per cent in 2007 — following growth of 10.7 per cent in 2006 — as part of his government’s commitment to pursuing more balanced and sustainable development.

“(We must) avoid seeking only faster growth and competing for the fastest growth,” Wen told nearly 3,000 delegates assembled in Beijing’s Great Hall of the People for the opening of parliament’s annual full session on Monday.

But after Wen finished his two-hour speech, economists said the lower target would not be met, highlighting the continued difficulty Beijing faces in reining in the world’s fourth-largest economy.

“There’s no way it will be just eight per cent, but he has to say that,” said Wang Qian, a Hong Kong-based economist for JPMorgan Chase Bank. “It’s a way of expressing his point of view that the economy shouldn’t grow too hastily,” she said.

Wen has in previous years announced similar economic growth projections, only to see the actual number far exceed the initial target, and he acknowledged that the government’s projection may again not prove accurate. “Because of changes in the domestic and international economic environments, including the markets, the real growth rate will vary a certain amount from the projected target,” he said.

Targets tend to be missed in China because local governments want growth as a means of creating jobs, threatening also the central government’s ambition for growth that is less wasteful and gentler on the environment, analysts said.

“One of the crucial problems with China is that the local governments are more focused on the growth at the cost of pollution,” said Dong Tao, a Hong Kong-based economist for Credit Suisse First Boston.

“The most difficult part of the policy is how to align the local governments’ incentives along with China’s growth targets, environment protection targets and many other policy targets,” he said.

In his call for a more balanced economy, Wen targeted liquidity-fueled investment in plant, equipments and other productive capacity, a major factor in last year’s 10.7-per cent growth. “The focus of this work is to keep the scale of fixed-asset investment and credit under control and to promote overall balance between total supply and total demand,” Wen said.

Analysts said limiting growth to eight per cent would also prove hard because consumer spending was expected to gradually heat up as social safety improved and Chinese felt less of a need to save for emergencies and old age.

“The government is going to expand its spending on issues such as social security and environment protection,” said Sun Mingchun, a Hong Kong-based economist with Lehman Brothers.

The regularity with which growth objectives are missed in China has led some observers to call for an end to number targets — seen by some as a relic of the planned economy — and a shift to more comprehensive policy goals.

To some extent, the government may already be doing this, at least in private, according to Chen Xingdong, a Beijing-based economist with BNP Paribas. “I believe the government doesn’t really pay that much attention to the growth target as such,” he said. “It’s much more interested in issues such as keeping the deficit low and maintaining a stable monetary policy.”

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45648

 

[Neo]

China’s top reinsurer eyes $2.6bn IPO

SHANGHAI: China Reinsurance, the country’s biggest reinsurer, plans to raise as much as $2.6 billion in a dual Shanghai and Hong Kong IPO in September to bankroll a rapid expansion, two sources close to the deal told Reuters on Wednesday.

The plan follows a decision by the Chinese government late last year to inject $4 billion into the state-owned firm — which controls over 90 per cent of a burgeoning domestic reinsurance market — to boost its capital.

The firm now aims to raise 10 billion yuan to 20 billion yuan ($1.3-$2.6 billion) through the initial public offering, the sources said.

“The company definitely wants capital, as much as they can raise the markets,” said an insurance source in Shanghai familiar with the deal. “But it’s not China Life or Ping An,” the source said. “Reinsurance is definitely more difficult, and more complicated, to convince and explain to investors.”

If successful, the firm — which insures other insurers — would become the country’s first reinsurer to go public. Core sector players such as China Life and Ping An Insurance have already floated shares at home and abroad.

After its IPO, the Beijing-based insurer would hold assets of at least 70 billion yuan, the sources said. Its listing plan has won regulators’ support, though the company has not yet formally applied to Beijing for approval.

The sources added that it had not finalised its IPO size, which would depend on the state of markets.

China Reinsurance (Group) Co hired the country’s biggest brokerage, CITIC Securities, to manage its proposed local currency A-rhare issue in Shanghai. China International Capital Corp, 34.3 per cent-owned by Morgan Stanley, and other global investment banks will help the insurer with its Hong Kong IPO, the sources said.

The firm also has hired PricewaterhouseCoopers to be its external IPO auditor, the sources said, adding that an auditing report could be finished this month.

Officials at China Reinsurance declined comment.

Last week, China Insurance Regulatory Commission Vice Chairman Zhou Yanli said in Beijing the watchdog expected more insurers to list this year, a positive trend that will strengthen corporate governance and operations. He did not mention names.

China Reinsurance, whose clients include PICC Property & Casualty, the country’s biggest non-life insurer, is the country’s oldest reinsurance services provider, founded around the time the Communist Party seized control in 1949.

It is now owned by the Ministry of Finance but the company plans to secure a strategic partner by selling it new shares through the IPO, though the ministry will remain in control, the sources said, declining to elaborate.

China Reinsurance’s major rivals include Munich Re and Swiss Re, the world’s two biggest players. The sources declined to comment whether the Chinese reinsurer might get a foreign partner to boost its global business.

But they noted that part of the reason for listing was that the government wanted to strengthen the firm’s competitiveness globally.

“China is now a major economic power in the world and Beijing has lots of big projects to implement in the next few years, like space exploration,” said another financial source. “So, the government absolutely needs a strong reinsurance service provider.”

http://www.thenews.com.pk/daily_detail.asp?id=45924

 

[Neo]

Thursday, March 08, 2007

China to maintain rapid, stable growth in 2007

BEIJING: China will keep to a path of rapid but stable economic growth in 2007, the head of the National Development and Reform Commission, China’s top planning agency, said on Wednesday.

Ma Kai told a news conference during the annual session of the National People’s Congress, China’s parliament, that the 10.7 percent growth in gross domestic product that China achieved last year was within a normal range.

“There were no big ups or downs, meaning the stability of the economy improved,” Ma said.

Ma said that while fixed-asset investment had been brought under initial control, there was still pressure for a rebound in the pace of capital spending. To that end, Beijing would keep a tight grip on credit and land use as well as tightening environmental protection and energy-use standards for industry.

“The main problem is that there’s still a lot of projects under construction,” Ma said.

“There are also many newly started construction projects. And loopholes in the system that could trigger a new wave of excessive investment have yet to be plugged,” he said.

Ma added that the 8 percent growth target outlined by Premier Wen Jiabao on Monday at the start of the parliament session was not cast in stone, and could be adjusted.

He said the property market was basically healthy, and that overall property price inflation was trending down.

However, prices in some large and medium-sized cities were still too high and there was not enough affordable housing.

The NDRC would take appropriate steps this year to address those issues, Ma said without providing details.

Ma said the government was determined to cut pollution and save energy, but it had not set numerical targets for this year because the results would be seen only over the course of China’s 2006-2010 five-year plan, as policies bear fruit.

The government missed its 2006 targets for cutting the amount of energy needed to produce each unit of national income by 4 percent and for trimming key pollutants by 2 percent.

Ma said China would adopt a gradual, cautious approach to reforming the way prices for natural resources such as oil, gas and water are set.

The reforms were important because current prices did not reflect the true scarcity of the resources, he said.

But Beijing had to proceed with caution because of the impact that higher prices would have on poorer Chinese.

Ma also said that China’s growing demand for energy to feed its rapid industrialisation and urbanisation posed no threat to global energy security, because it met about 90 percent of its needs on its own.

China, the world’s second-largest energy consumer, relies on its own reserves of coal to provide about 70 percent of its energy.

http://www.dailytimes.com.pk/default.asp?page=2007\03\08\story_8-3-2007_pg5_27

 

[Neo]

China to set up 3rd bourse within year

BEIJING: China plans to set up the country’s third stock exchange in the booming northern city of Tianjin within the year but the project still needs cabinet approval, the China Daily reported on Saturday.

The over-the-counter bourse would handle mainly equity transactions of unlisted public companies, the report quoted Pi Qiansheng, director of the Administrative Committee of the Binhai New Area, as saying.

China has been trying to transform Binhai, centred on the port city of Tianjin, into a new economic backbone to fuel growth in the north of the country, and the area has become a designated zone for experimenting with reforms.

“It is a very important attempt to diversity property rights and capital,” Pi said of the exchange.

The exchange was meant to be supplementary to China’s current capital market and give more attention to companies that focus on scientific innovation, the report said.

Beijing approved bourses in China’s financial centre of Shanghai and Shenzhen, a special economic zone in the south, to build the country’s first two stock exchanges in 1990 and there are now more than 1,400 listed companies on the two bourses.

A Tianjin official said last year he hoped an exchange in the city could be like the Nasdaq, focused on technology-related companies.

http://www.thenews.com.pk/daily_detail.asp?id=46379

 

[Janbaz]

China's trade surplus jumps ahead

China's trade surplus neared record levels in February - fuelling criticism that its currency is undervalued.
The surplus hit $23.8bn (£12bn) for the month, more than nine times higher than a year earlier and the second largest on record, official data shows.

China has resisted calls from the US to remove currency controls that limit the amount the yuan can rise or fall.

The US argues that China keeps the yuan artificially cheap in order to boost its exports.

According to Goldman Sachs analysts "the significant increase in the trade surplus, both in terms of its levels and the year-on-year growth rate, continues to put the yuan exchange rate under the spotlight".

'Double-win'

China's exchange rate policy has been a source of contention in the US, with many politicians and company executives calling for trade sanctions unless China allows its currency to appreciate in value.

Some critics want a 27.5% import tariff put on Chinese goods entering the US.

US Treasury Secretary Henry Paulson has held long talks with China over its currency policy, as did his predecessor John Snow.

On Monday, Commerce Minister Bo Xilai said that sanctions would hurt companies on both sides.

"If the proposal goes ahead, it will be destructive to the current bilateral trade which is developing healthily, as well as disastrous news to both countries' enterprises that have achieved double-win in the relationship," said Mr Xilai.

The central bank said that it would take steps to change currency controls, which at present allow the yuan to climb or fall a maximum of 0.3% from a daily fixed rate.

"The managed floating exchange rate regime will be further improved and the flexibility of the exchange rate will be enhanced," the central bank said.

The bank would "keep the exchange rate basically stable at an adaptive and equilibrium level", it explained, adding that it would also look at ways of opening up its markets -, allowing more capital abroad - and deepening financial reforms.

Strong demand

The problem for the US is that it wants quick action and the Chinese are unwilling to rush through changes. Central bank governor Zhou Xiachuan said "the current trend of imbalanced trade will take some time to be adjusted and addressed".

Chinese exports rose by 52% in February from a year earlier, the fastest rate in more than a decade. Imports climbed by 13%.

Steel exports almost tripled in January and February, while foreign sales of furniture increased by almost 50%, electronics and machinery grew by 38% and clothing rose by 44%.

"This broad-based acceleration implies global demand for Chinese products is strong," said Qu Hongbin of HSBC.

BBC News.
http://news.bbc.co.uk/2/hi/business/6441059.stm