BRIEFS

GENERAL

TNT seals COSCO deal

Dutch mail group TNT has agreed to form a joint venture in logistics with COSCO, China's largest shipping group, the companies said in a statement. The 50:50 venture is to have about 1,000 employees and be operational by 2006. The partnership will enable state-owned COSCO to penetrate further into the Asia-Pacific market and enable TNT to expand its presence in China, the companies said. TNT Chief Executive Peter Bakker told Reuters that the company is also looking to buy a freight management firm in China.

New venture capital restrictions

China imposed new rules to restrict venture capital activities in mid-November, Bloomberg reported. Beginning March 1, venture capital funds will be banned from stocks, futures and warrants as well as real estate and insurance. They may be deposited in banks, invested in government bonds and other fixed-income securities. Venture capital funds will be banned from investing more than 20 percent of their assets in one company under new rules. Additionally, venture funds should have registered capital of at least US$3.7 million, with no more than 200 investors contributing below RMB1 million each.Overseas

investors to get breaks

In an effort to breathe life into stock markets that have been Asia's worst performers, China plans to exempt profits of licensed overseas investors from capital gains tax, among other measures, Qi Bin, a deputy director at the China Securities and Regulatory Commission, told Bloomberg. Investors may also be able to sell holdings after three months, instead of one year, the report said. Meanwhile, AIG Global Investment and Temasek Holdings, Singapore's investment unit, were granted licenses to buy A-shares, bringing the number of approved non-Chinese investors to 32.

Rolling Stone comes to China

Hong Kong-based One Media Group said it has entered a licensing agreement with Rolling Stone magazine to publish a Chinese-language edition of the American popular culture magazine in the mainland beginning early 2006, The AP reported. One Media Chief Strategy Officer Robby Yung said the Chinese version of the magazine will combine local content and articles translated from the US edition. Yung declined to say how much money was being invested in the venture and declined to disclose the terms of the licensing agreement, noting only that Rolling Stone would receive part of the net revenue.

Clothing, textile exports to EU up 40 percent

China's clothing and textile exports to the European Union rose by 40 percent in the Imaginechina first eight months of the year, undercutting imports from other Asian and African exporters, reported Financial Times. Burma and the Philippines were the worst-hit Asian countries, down 54.4 percent and 41.4 percent, respectively. Also falling were South Korea, whose shipments were down by 28.6 percent, Thailand by 15.1 percent, Pakistan by 16.3 percent and Bangladesh by 9.3 percent. Nations in Africa, the Caribbean and the Pacific saw their textile exports to the EU drop 24 percent in value and 28.1 percent by volume.

Official HIV cases up 50 percent

China's top AIDS official said the country's confirmed number of HIV cases rose by more than 50 percent in the past year, but the magnitude of the epidemic remains unclear due to the government's poor monitoring, Reuters reported. By the end of September, the number of reported HIV cases was 135,630, compared with 89,067 over the same period last year, according to Wang Longde, director of the State Council AIDS Prevention and Treatment Work Committee. Health experts say China's vast size and poor healthcare infrastructure mean that only about 15 percent of HIV-positive people are officially diagnosed with the virus, and even fewer AIDS patients receive medical attention. Wang told a medical conference that local officials were continuing to cover up the cases, out of fear that acknowledging the epidemic would hamper economic growth.

Silver Grant to buy China's bad loans

Silver Grant International Industries, the Chinese bad loan specialist, has agreed to buy China's US$67.4 million worth of non-performing loans to expand its loan base, Reuters reported. Silver Grant, which is controlled by China Cinda, one of China's four asset management agencies set up to help dispose of bad loans from the country's four big banks, has proposed to sell 50 percent of the NPLs to its strategic investor Citigroup for US$33.7 million.

ECONOMY

US-China surplus to top US$200 billion

China's trade surplus with the US is likely to exceed US$200 billion this year, roughly US$40 billion more than in 2004, said US Trade Representative Rob Portman. Speaking at a China-US relations forum in Beijing, Portman warned that bilateral trade tensions had not evaporated because of the textile deal brokered last week, and pointed to intellectual property rights as another sticking point. "Americans today are greatly concerned about China's role in the world economy and whether China is playing by the rules," he said.

Contracted FDI hits US$145.08 billion

Foreign direct investment (FDI) to China reached US$48.4 billion in the first 10 months of last year, down 2.1 percent from a year earlier, but contracted foreign direct investment - a money pledged but not yet used - was up 22.5 percent in the same period, reaching US$145.08 billion, the Ministry of Commerce announced. Meanwhile, the National Bureau of Statistics reported that retail sales rose 12.8 percent in October year on year, hitting a record US$72 billion. Clothing sales were up 17 percent, home appliances up 24 percent and cosmetics, 15 percent. Telecommunications equipment and vehicles sales both surged 27 percent.

Industrial output up 16.3 percent

China's industrial output increased 16.3 percent in the first 10 months of this year, despite economists' warnings about an oversupply. Ma Liqiang, director of the Economic Operating Bureau under the National Development and Reform Commission, told China Securities Journal. He also said factory production increased to US$704 billion year on year, slightly lower than last year's 16.9 percent growth over the same period.

Urban fixed asset inflow up 27 percent

China's urban fixed-asset investment grew 27.2 percent in October from a year earlier, slower than the expected 29.3 percent rise and down from September's 29.4 percent gain, The Wall Street Journal reported. The pace of investment growth remains below the level of nearly 50 percent in late 2003 and into 2004, but analysts said Beijing would likely remain on guard against a rebound that could overheat the economy.

AUTOMOTIVE

Acute auto over-supply looms

China will produce twice the vehicles it needs by 2010 if the current investment frenzy in the automotive sector goes unchecked, Chen Bin, head of the National Development and Reform Commission's industry department, told China Securities Journal. Vehicle production in China is expected to hit 20 million units in 2010, far outpacing expected sales of 9 million units, he said. Annual capacity, now at 8 million units, has already exceeded anticipated sales of 5.5 million units this year.

Dongfeng raises US$512m in IPO

Wuhan-based Dongfeng Motors, China's third-largest automaker, raised US$512 million in its Hong Kong IPO in late November, reported the Wall Street Journal. Dongfeng will be the biggest overseas-listed Chinese auto maker when shares start trading December 7. Dongfeng aims to boost sales to make up for declining margins, and to maintain its 13 percent share of China's auto market. The proceeds of the IPO will be used mainly to service debt.

AVIATION

China buys Boeing planes

China has signed a letter of intent to purchase 70 Boeing 737 jetliners and pledged verbally to buy an additional 80 in a US$4 billion contract, The Wall Street Journal reported. The deal was announced jointly by Chinese and US officials during US President George W Bush's visit to China. If the deal is consummated, it will be a record aircraft deal for Boeing in China.

Private airline in Airbus, GE deals

Wuhan-based East Star Airlines, China's fourth registered private airline, has signed a US$1.5 billion agreement with Airbus and GE Commercial Aviation Service, in what is shaping up to be the largest single order with these companies from a mainland private airline, state media reported. Under the agreement, East Star would buy and lease 20 Airbus A319s and 320s to be delivered in the next five years. The airline is slated to begin service next May.

BANKING

ICBC eyes HK-mainland listing

In what would be a market first, Industrial and Commercial Bank of China, the country's biggest lender, is considering listing shares in both Hong Kong and the Mainland in an expected US$10 billion IPO in the second half of 2006, reported The Standard of Hong Kong. ICBC has reorganized itself as a joint stock company and has been helped by a contribution of US$15 billion in state funds as well as the removal of US$55.6 billion in non-performing loans.

National welfare fund eyes bank stakes

China's national welfare fund said in late November it was in talks to invest in the country's two largest lenders, Industrial and Commercial Bank of China and Bank of China, Reuters reported. Xiang Huaicheng, the chairman of the fund, confirmed a report by the official China Securities Journal that the fund was considering a stake of US$700-$800 million in ICBC. Xiang did not say how much it wanted to invest in the Bank of China. Both banks have plans to list overseas in 2006.

ENERGY

Sinopec plans to drill in Sudan

China Petrochemical, or Sinopec, will join its competitor China National Petroleum (CNPC) in a US$600 million acquisition of drilling rights in Sudan, reported The Wall Street Journal. The Sudanese government will seek a stake in the venture, from which 20,000 barrels of crude a day is expected. Sinopec quit Sudan in 2000 before its IPO in October of that year, selling the whole of its 80 percent stake in a small venture to CNPC.

Venezuela signs China oil deal

Venezuela's state oil company, Petroleos de Venezuela, signed a one-year contract with China National Petroleum to supply 100,000 barrels of crude and 60,000 barrels of fuel oil a day, AP reported. In 2005, Venezuela sold 70,000 barrels a day of mostly fuel oil to China, five times what it sold in 2004. Venezuela, the world's fifth-largest oil exporter, will expand its fleet of tankers to sell more to Asia.

Turkmenistan, China reach gas deal

Turkmenistan's President Saparmurat Niyazov said his country will sign a key agreement next year to sell natural gas to China, with which it would also jointly develop Turkmen gas fields, The AP reported. Under the deal, a gas pipeline, which could carry up to 30 billion cubic meters of natural gas annually, would be built to China from east-ern Turkmenistan, where the fields planned for joint extraction are located.

FOOD AND BEVERAGE

Fonterra to take stake in China's Sanlu Group

New Zealand dairy exporter Fonterra plans to acquire a 43 percent stake in milk pro-ducer Sanlu Group based in Shijiazhuang, Hebei province, for US$106 million, The Wall Street Journal reported. The New Zea-land dairy company's investment will go toward creating a joint venture focusing on liquid milk and milk powder production.

Dairy Queen has big plans for China

International Dairy Queen (IDQ) an-nounced the opening of its first eight stores in Shanghai in mid-November, Shanghai Daily reported. The US-based ice cream treat firm plans to expand in China by opening at least 30 new stores by the end of 2006. It also signed a franchise deal with RCS Group and Guangdong Foison to open 14 Dairy Queen locations in China. IDQ is still seeking new partners in central China and expects to open at least 50 stores annually after next year.

Kirin to quadruple output in Zhuhai JV

Kirin Brewery plans to raise annual capac-ity to 400,000 tons from 100,000 tons at its China JV, Zhuhai Kirin President Brewery, Xinhua Finance reported. The JV will invest around US$56 million to build a new brew-ing facility in Zhuhai, Guangdong province, with initial annual capacity of 200,000 tons of beer. The new plant will be completed by June 2006.

Aviva to expand into six Chinese cities

Aviva plans to launch operations in six ma-jor cities in China in the next two years in conjunction with its joint venture partner, China National Cereals, Oils & Foodstuffs Corp, Financial Times reported. The UK-based insurer now has full branch licenses for four Chinese cities - Beijing, Guangzhou, Chengdu and Fuzhou. The insurance group said its long-term strategy is to have 10 percent of the market share for new business in 10 major Chinese cities by the end of the decade, according to the newspaper.

TELECOMS

Americans sign Internet deal

UTStarcom, a US networking firm, said it has a deal with China Telecom to deliver Internet television (IPTV) starting with 5,000 sub-scribers in Shanghai in January 2006. "IPTV technology will empower users to choose programs they want when they want," said Ying Wu, CEO of UTStarcom China. Sub-scriber growth is expected to top 110 million by 2010, with Asia Pacific accounting for more than 50 percent worldwide, according to a recent ABI Research report