BRIEFS

General

Lenovo sold most PCs in Asia

Lenovo, China's largest computer maker, sold more personal computers in the Asia-Paci.c region during the first half of 2005 than any other manufacturer, The Standard of Hong Kong reported, citing IT research agency Garter. Lenovo, which did no selling outside of China before its purchase of IBM's PC divi-sion in May, captured 17.3 percent of the Asian market and was followed by US manufacturer Dell, at 10.8 percent and Hewlett-Packard, at 7.4 percent. China accounted for more than 80 percent of its sales in the region.

Novell to up China investment

Novell, a leading provider of infrastruc-ture software and services, will increase investment in China by year-end, setting up an R&D center in Beijing by 2006, opening new regional branches and teaming up with local partners to develop Linux applications, state media reported, citing Novell CEO Jack Messman.

Caterpillar to expand in China

US-based heavy machinery maker Cater-pillar said its Chinese subsidiaries have signed three MOUs with the Shanghai Lingang Economic Development, an industrial park developer af.liated with Shanghai's municipal government. Cat-erpillar and Lingang will work to create a "regulatory system" that facilitates trade and investment in the region, a remanufacturing site and a service cen-ter. In a related development, China's leading machinery maker, Xugong Machinery, said in July that Caterpillar was negotiating to buy a controlling stake in its construction machinery unit. Caterpillar's annual China sale is almost US$1 billion.

Kodak plans output reduction

In a bid to move away from the .lmbased industry to the fast-growing digital arena, Eastman Kodak said by the end of this year, it would reduce output and staff at its Xiamen plant, the firm's larg-est production base in Asia, state media reported, citing Ying Yeh, vice-president of Kodak Global and chairwoman of the Kodak Greater China Region. Yeh said China is important to Kodak's growth plans and remains a key link in Kodak's global supply chain. US$300 million investment pledged by 3M

3M, the producer of Post it notes and Scotch tape, plans to invest US$300 million in China over the next five years, including a US$40 million research and development center in Shanghai, state media reported. The center, to be completed in May 2006, will be one of the US company's top five global R&D centers. 3M expects revenue from the Chinese mainland, Hong Kong and Taiwan to grow by 25 percent to US$1.7 billion in 2005, representing 8 percent of the company's global revenue.

BPB to build plant in China

British plasterboard manufacturer BPB an-nounced plans to build a new plasterboard plant in Changzhou, Jiangsu province, at a cost of US$36 million. The plant, set to become operational in early 2007, is intended to capitalize on an expected sharp upturn in the region, BPB said in an of.cial statement.

Microsoft invests US$25m in Chinese IT company

US software giant Microsoft announced that it would invest US$25 million in the IT company Langchao Group to develop advanced management software for Chi-nese businesses. Microsoft's investment, announced in late August, will be mainly used to help Langchao make further inroads in its ERP, e-government software, and software outsourcing businesses, state media reported.

Skype, Tom joint venture

European telephony provider Skype has formed a joint venture with Chinese portal Tom online in order to expand its premium services, the Financial Times reported in early September. Tom online will own 51 percent of the venture. The two companies have offered co-branded services since last year, and in that time Skype has acquired 3.1 million registered users in China.

ECONOMY

Crude imports decline

China imported 8.76 million tons of crude in August, a drop of 6.1 percent from a year ago, as the country's SOEs were reluctant to make up the price difference between local and international products, the Wall Street Journal reported. Crude imports rose 3.9 percent over the first 8 months of 2005.

China's trade surplus soars ever upward

China's exports outpaced its imports for the tenth month in a row, reaching US$10 billion, the third-highest rate on record, as August exports rose by 32.1 percent to a new high of US$67.8 billion, while imports increased 23.4 percent. The Commerce Ministry said the surplus may reach US$80 billion this year, a 125 percent increase on 2004. It is likely the data will increase US and EU calls for a .oating of the yuan, or at least a further revaluation.

PPI index up 5.3 percent

China's producer price index rose 5.3 percent in August from a year earlier and 5.5 percent during the first eight months of the year, the Wall Street Jour-nal reported. The actual results could point to an imminent rise in inflation since the index shows price increases that could be passed on from producers to consumers. Raw materials and fuel rose 8.1 percent from August 2004 to August 2005.

Plans to ease tax burden on poor

An increase in the minimum taxable in-come from US$99 a month to US$185 is being considered by the National People's Congress in a bid to narrow the country's widening wealth gap, state media reported. Consideration of the draft amendment of the law on income tax comes in the wake of growing social unrest, with scores of protests triggered by disputes over land, abuse of power and corruption, much of which is blamed on the grow-ing gap between rich and poor. Some local governments have already raised the minimum taxable income, with Beijing setting a level of US$148 and Shenzhen US$193.

BANKING

Temasek to invest US$2.4b in CCB

Singapore's state-owned fund management company Temasek Holdings Pte is poised to double its investment in China Construction Bank (CCB) through a US$1.4 billion stock purchase ahead of the group's initial public offering in Oc-tober, Bloomberg reported. This comes in addition to the US$1 billion Temasek has already pledged to the IPO. The move is seen as part of the company's efforts to expand its financial investments across Asia and reduce reliance on the city state, which currently accounts for more than half its assets.

RBS to acquire 10 percent of BoC

The Royal Bank of Scotland Group PLC (RBS) said it is leading a US$3.1 billion investment in the Bank of China (BoC) that would give Europe's second largest lender a 10 percent stake, with 5 percent controlling interest, to a tune of US$1.6 billion. The deal, which is subject to regulatory approval, would give RBS access to China's second largest lender with 11,307 branches, a 12 percent share of the loans market in the mainland and 14 percent of the savings market. Hong Kong billionaire Li Ka Shing will buy a 2 percent stake in BoC worth US$750 million.

PBOC increases deposit rates

The People's Bank of China (PBOC) announced in mid-August that it was lifting domestic US and Hong Kong dollar deposit rates by 0.375 percent-age points, the second increase since the revaluation of the yuan on July 21. The benchmark one-year deposit rate for US dollars goes up to 2 percent, while the rate for Hong Kong dollars rises to 1.9 percent, the central bank said in a statement posted on its website. Market observers said the move was part of ongoing exchange regime reforms and aimed at deterring further speculation on the yuan.

Distribution begins for QFII quota expansion

After announcing in May it would raise the amount of money overseas institu-tions may invest in the nation's stocks and bonds to US$10 billion, Beijing has begun distributing US$6 billion worth of new quali.ed foreign institutional inves-tor (QFII) quotas to foreign banks and fund managers. Hang Seng Bank, the first to acknowledge the increase in its investment quota, said the total amount it could invest in Chinese stocks and bonds had been doubled to US$100 million, ac-cording to the South China Morning Post. The most recent data show that at the end of March, QFII quota holders had only invested about US$1 billion in equities, with the rest mostly in government bonds and yuan bank accounts.

BoC chooses bankers

Citing "close long-term association", Bank of China (BoC) announced in late August that its multi-billion-dollar IPO would be handled by Goldman Sachs, UBS and Bank of China International, BoC's investment banking arm. The decision comes as a blow to Merrill Lynch, which announced earlier plans to participate in a consortium that would buy a 10 percent stake in the Chinese lender for US$3.1 billion.

Further JVs permitted

Offshore futures brokerages registered in Hong Kong and Macau can now ap-ply to establish mainland futures joint ventures in which the overseas partners can hold a stake of up to 49 percent, much higher than the 33 percent cap for securities joint ventures, the China Securities Regulatory Commission an-nounced in late August. According to the guidelines, overseas applicants will have to spend at least US$6.2 million for shareholder equity and must have posted profits for the previous two years.

Launch of Tianjin's Bohai bank

Bohai bank has been launched in Tianjin, the first stockholding commercial bank created on the mainland in nine years, reported the Wall Street Journal. It is the first time a foreign investor has been a founding member in a Chinese bank. UK-based Standard Chartered has a 19.99 percent stake, making it the second largest of the bank's seven initial shareholders after Tianjin TEDA Investment Holding, which has a 25 percent stake. Bohai has a registered capital of US$618 million.

CCB the first to sell mortgage-backed securities

China Construction Bank (CCB), China's top property lender, will become the first Chinese bank to sell mortgage-backed securities when it under-writes the issue of more than US$371 million in October just as it launches its US$5 billion IPO, the South China Morning Post reported in early September.

ENERGY

Shenhua to build plant in Inner Mongolia

Taking advantage of China's huge demand for fuels and chemicals, Shenhua Group, China's biggest coal miner, and Hong Kong-based Kerry Group, will spend US$1.85 billion to build a plant in Inner Mongolia that turns coal into methanol, Bloomberg reported. The provincial government has approved the plan and is studying the possibility of building a pipeline to transport the chemicals from Inner Mongolia to Hebei province. Other investors, including a group from Taiwan, are considering building another coal-methanol plant in Inner Mongolia, Bloomberg reported, citing local officials.

CNPC to develop Venezuela oil fields

China National Petroleum Corp (CNPC) signed an agreement with the Venezuela state oil company, Petroleos de Venezuela SA (PDVSA), to develop and manage Venezuela's Zumano oilfields in the eastern part of the country, state media reported, citing PDVSA's website. The Zumano area has 400 million barrels of light and medium crude and 4 billion cubic feet of gas reserves, according to PDVSA. Ven-ezuela said last week it expects to supply about 15-20 percent of China's oil import by 2012, or 300,000 barrels of crude a day to China, from the current level of 68,800 barrels a day. The two companies are also studying a possible re.nery project in Chi-na, PDVSA said. Separately, PDVSA set up a branch office in Beijing in August.

Datang to invest in three power plants

Datang International Power Generation has been given clearance to build three new power plants in Fujian, Guangdong and Zhejiang provinces at a total cost of US$2.6 billion. The Beijing-based compa-ny said in a statement that the new plants, in which it will hold majority stakes, would add 4,800 megawatts to its current capacity of 11,250 megawatts. Already China's second-largest listed electricity supplier, Datang plans to almost double its capacity to 20,015 MW in 2006 to meet soaring demand.

CNOOC to build its first re.nery

China National Offshore Oil Corp (CNOOC) signed a US$2.47 billion agreement with US-based WorleyPar-sons Energy Services LLC to build its first refinery in Guangdong province, marking CNOOC's move to engage in both upstream oil and gas exploi-tation and the downstream refining business. Under the agreement signed in late August, the construction of the refinery, with a capacity to process 12 million tons of crude oil annually, is expected to be completed by mid-2008, a CNOOC executive told China Daily. When completed, it will be one of the country's largest, rivaling Sinopec's five refineries with an annual crude process-ing capacity estimated to be at least 10 million tons.

China to scrap gasoline export tax rebate

China will suspend its export tax rebate on gasoline between Sept 1 to Dec 31 in a bid to ward off domestic shortages by making it more expensive to ship petroleum products overseas, according to media reports. Petro-leum product exports have been growing this year because ceilings on state-set pump prices have led to deepening domestic losses for China's re.ners and have pushed them to seek overseas markets to take advantage of surging global oil prices.

METALS

Ansteel and Bensteel merge

In one of the steel industry's first moves toward planned consolidation, two of China's ten biggest steelmakers, Anshan Iron & Steel Group (Ansteel) and Benxi Steel (Bensteel), will be merged to form Anben Steel Group Company, a giant with an annual output of 20 million tons, state media reported. Less than a month ago, the National Development and Re-form Commission (NDRC) issued a new policy aimed at forming bigger domestic steelmakers with an annual output reach-ing 30 million tons by 2010. Currently, China's largest steelmaker, Baosteel, has an annual output expected to reach 25 million tons by the end of this year.

Steel maker to cut prices

Baoshan Iron & Steel Co will cut prices of its major steel products in the fourth quarter in a long-awaited move to catch up with similar reductions made by global and domestic rivals, the Wall Street Journal reported. Analysts saw the move as a sign that steel prices in China, which have fallen by a .fth on average since April, remain pressured by overcapacity.

China Minmetals seeks JV with Brazilian iron ore giant

After its failed US$5 billion bid for Cana-da's zinc behemoth Noranda, state-owned China Minmetals proposed a joint venture with the world's largest iron ore producer CVRD based in Brazil in a bid to secure easy access to metals from overseas, the Financial Times reported. CVRD already has plans to build a US$1 billion steel plant in Brazil with China's Baosteel.

TELECOMS

AT&T moves China HQ to Shanghai

US telecommunications giant AT&T will move its Greater China headquarters from Hong Kong to Shanghai to break into the growing telecommunications market on the mainland. The move will not lead to job losses at the Hong Kong office, an AT&T spokesman said. AT&T, a current partner in mainland telecom joint venture Shanghai Symphony, signed leasing contracts with China Telecom and China Netcom in June, expanding its cov-erage to 135 cities. AT&T follows Wal-Mart, McDonalds, UPS and other MNCs in moving China headquarters to the mainland.

Netcom buys 4 regional networks

China's second-largest fixed-line tele-phony operator, China Netcom, has agreed to purchase four provincial networks from its state-owned parent company for US$4.5 billion, the Financial Times reported. The four northern provinces of Jilin, Shanxi and Heilongjiang provinces and the Inner Mongolia Autonomous Region have 30.5 million .xed-line subscribers - a penetra-tion rate of 24.9 percent. Netcom's chief executive, Edward Tian, said the company would need to focus on broadband, cor-porate clients and value-added services. Although Netcom's .xed-line growth has been slow this year, the company cited Xiaolingtong, its limited wireless service, as its recent success story. Xiaolingtong's network of customers grew 45.4 percent to 18.1 million in the first half of 2005.

AUTOMOTIVE

Volkswagen plans China eco-car

Volkswagen will develop, assemble and sell a gasoline-electric hybrid minivan in China, the International Herald Tribune reported. The new vehicle, which will be a version of its existing Touran van, will begin marketing at the 2008 Olympics. It is the first time Volkswagen confirmed it is working on such a project.

AVIATION

China to build one of highest air-port in world

China plans to build one of the world's highest airports in Tibet at 14,300 feet above sea level, state media reported. The airport in Ngari prefecture near Tibet's border with Kashmir will be only the third in the Himalayan region once it is built, the report said, citing Yan Shijin, deputy director of Tibet's development and reform commission.

Korean Air to buy Okay stake

Okay Airways, China's first private airline, has signed a preliminary agreement to sell a 25 percent stake to Korean Air for around US$8.6 million, The Standard of Hong Kong reported. The group, which started fiights from Tianjin's Binhai International Airport earlier this year, first entered into talks with Korean Air in June on a possible joint venture. The Korean airline said the pricing, acquisition terms and the timing of the takeover would be .nalized after due diligence.

UAL hires Ameco for maintenance

In a bid to deepen its ties with China, which it views as a key growth market, United Airlines (UAL) said Chinese company Ameco, a joint venture between Air China and Germany's Lufthansa Technik, would perform heavy maintenance on some of its jumbo jets, the Financial Times reported. The deal would also help the second big-gest US carrier cut costs by using less expensive Chinese labor.

China Southern will buy 10 Boeings

China Southern Airlines has .nalized a deal to buy 10 Boeing 787 aircraft with a total list price of about US$1.2 billion, state media reported. The new aircraft, which use 20 percent less fuel than similar planes and reduce maintenance costs by 15 percent, are expected to lower operation costs of China Southern. The sale is part of a larger deal signed in January in which six Chinese airlines agreed to buy 60 Boeing jets worth US$7.2 billion

Mainland airspace opened for Taiwan planes

Taiwan's China Airlines and EVA Air-ways have received permission from the mainland's aviation authority to fly over Chinese airspace en route to destinations in Europe, southeastern and western Asia, reported Reuters. The carriers plan to each make more than 50 passenger and cargo flights a week over mainland China to such destinations as Hanoi, Paris and Vienna. Taiwan banned its carriers from using mainland airspace in 1949.

China Airlines buys mainland air-cargo company

Taiwan-based China Airlines announced that it would jointly buy a combined 37 percent stake in mainland Chinese air cargo carrier Yangtze River Express Airlines (YREA) with Taiwan's two major shipping companies, reported the Wall Street Journal. It will pay US$38.6 million for a 25 percent stake in YREA. China Airlines, the largest Taiwanese airline by revenue, has tried previously to enter China's cargo market but without success. The lack of transport links between Taiwan and the mainland mean only a mainland carrier can give the airline good access to the mainland market.

INSURANCE

Aegon plans China fund venture

Dutch insurer Aegon plans to set up a fund management venture in partnership with China National Offshore Oil Corp as part of an effort to break into China's corporate pensions market, Bloomberg reported. The Chinese government started giving out corporate pension li-censes in August to companies, including commercial insurers and fund managers, because existing contributions are insuf-.cient to meet retirement demand. With less than 25 percent of China's total working population covered by basic pensions, private pension schemes are expected to grow by RMB100 billion annually.

Insurers allowed to invest more in bonds

Yielding to the lobbying by Chinese insur-ers in search of higher investment returns, China is allowing insurers to increase their investments from 20 percent to up to 30 percent of total assets in domestic corporate bonds and short-term bills, the AFP reported, citing the China Insurance Regulatory Commission (CIRC). Accord-ing to the CIRC rules, insurers can only invest in bonds issued by firms with good credit ratings and must limit investment in a single firm to 10 percent of their total assets. Investment in treasury bonds and debt issued by policy banks have no restrictions.

Bocom applies to set up insur-ance venture

Bank of Communications (Bocom) has applied to set up an insurance joint venture on the mainland to diversify its business and expand its non-interest income, the South China Morning Post reported. The proposed venture would be led by China Communications Insurance, Bocom's Hong Kong insurance unit, thereby circumventing regulations that ban mainland banks from investing directly in domestic insurance companies.

Carlyle Group wins 25 percent stake in China Paci.c Life

Directors of China Pacific Life Insur-ance voted in favor of Carlyle Group buying a 25 percent holding in China Pacific Life, worth US$400 million, the Financial Times reported in early September. Carlyle Group has an op-tion to later increase its stake to 49 percent.

FOOD AND BEVERAGE

Tsingtao to open Shaanxi brewery

Tsingtao Brewery, the mainland's largest brewer, will spend US$20 million on a .fth plant in Shaanxi province in order to strength-en its position in China's northwest, The Stan-dard of Hong Kong reported. The new plant, 55 percent owned by Tsingtao's Xian branch, is to be located in Yulin city in the north of the province and will produce 100,000 kilolitres per year. Tsingtao, in which Anheuser-Busch holds a 27 percent stake, owns more than 50 breweries across the nation.

Heineken ends talks on stake increase

Dutch brewer Heineken NV has halted talks on increasing its stake in Chinese beer maker Kingway Brewer Holdings Ltd, the Chinese company said in a statement to the Hong Kong Stock Exchange. Heineken-APB, a joint ven-ture with Singapore's Asia-Paci.c Breweries, paid US$74.6 million for a 21.4 percent stake in Kingway last year and had been negotiating to take over part of Guangdong Holdings. 52.6 percent controlling stake. In April, Heineken-APB paid US$28.6 million for 40 percent of Jiangsu Dafuhao Beer Co Ltd.