BRIEFS

GENERAL

CSRC to ease domestic listing rules

The China Securities Regulatory Commission (CSRC) issued draft rules in mid-February to en-courage overseas-traded Chinese companies to list domestically and to make it easier for big state companies to go public, Bloomberg re-ported. In a draft document sent to brokerages, the regulator proposed scrapping limits on the amount that can be raised in IPOs, currently set at twice net assets, and on transactions with affil-iates, which are capped at 30 percent of annual sales. It also suggested separate rules to permit the sale of China Depositary Receipts by Hong Kong-incorporated companies that have their headquarters and operations on the mainland. The moves are aimed at reviving stock bench-marks that fell to eight-year lows last year. The Shanghai and Shenzhen stock exchanges were the world's fourth-worst and third-worst perform-ers in 2005, respectively.

UPS plans 22 distribution centres in China

UPS announced plans to open 22 distribution centres in China this spring as part of its expan-sion plan in the fast-growing market, Reuters re-ported. The US-based package delivery compa-ny currently operates18 weekly flights between China and the United States and the number will increase to 21 in March. The company will also expand the number of cities it serves in China this year.

NDRC issues jobs warning for 2006

Some 25 million young people will be looking for 11 million available jobs this year, the Na-tional Development and Reform Commission (NDRC) said, according to state media. The situ-ation was described as the "country's worst em-ployment crisis ever" as children of baby boom-ers, born around 1980, sought their first jobs in 2006. China can generate 11 million new jobs this year, the NDRC said, adding that at no time in this decade did job creation exceed 10 million a year. Guo Yue, a researcher with the Institute for La-bour Studies under the Ministry of Labour and Social Security said: "The government is racking its brains to create jobs as it braces for a real tough year."

EU plans anti-dumping duty on shoes

The European Union is set to impose an anti-dumping duty of nearly 20 percent on shoes from China and Vietnam, Financial Times reported. EU Trade Commissioner Peter Mandelson said he has "compelling evidence" that shoe exporters have been selling below domestic prices by relying on "clear state subsidies". The issue has split the EU between liberal northern European countries, many of which have long outsourced shoe production, and Medi-terranean nations, home to many European shoemakers. China is the world's largest exporter of shoes and Asia already accounts for three-quarters of world footwear. Meanwhile, European footwear production fell 19 percent between 1995 and 2003.

2,000 bankrupt enterprises to shut

The State Council plans to close down 2,116 state-owned en-terprises over the next three years. A policy report issued by China's cabinet says the bankrupt firms must take greater re-sponsibility for their own finances. The state companies have combined debts of US$28 billion and employ more than 3.5 million workers.

China signs coal emissions accord with EU

China and the European Union signed an agreement in late Feb-ruary on developing technology to reduce emissions from burn-ing coal, as a top EU official called on the mainland to play a greater role in fighting climate change, the South China Morning Post reported. The memorandum of understanding would encour-age the mainland to develop technology to capture and store car-bon dioxide emitted from coal-fired power plants. EU officials said the agreement marked the first stage of the development of the technology on the mainland. China has no targets for controlling emissions under the protocol because developing nations receive exemptions.

Genpact to triple China staff

Genpact, the former in-house business process outsourcing (BPO) unit of US firm General Electric, will nearly triple its staff in China as part of plans to open two BPO centres in the country over the next two years, Financial Times reported. India's largest BPO group already employs 1,800 mostly Chinese staff at a center in Dalian, northeast China. It says it will recruit up to 3,500 more people for the new units in anticipation of stronger demand for offshore services from Japan and greater outsourcing by companies within China. The company expects global sales to grow more than 25 percent this year to US$625 million.

China adopts world accounting standard

China has agreed to adopt a form of the International Financial Reporting Standards (IFRS) used in almost 100 countries including the EU member states, Financial Times reported. The decision was applauded by international accountants in Beijing at a ceremony at the Great Hall of the People. China will not adopt the IFRS in every respect, but rather absorb its principles and translate them into its own Chinese Accounting Standards System. The move will increase confidence in the quality of financial information, but presents difficulties for local accounting firms already facing competition from foreign accounting houses.

New cigarette factories stubbed out

A ban on new cigarette factories, including joint ventures, has been pledged as part of a crackdown on tobacco consumption, state media reported. Sha Zukang, Chinese ambassador to the United Nations Office in Geneva, told a tobacco control conference of the World Health Organization the government will also put existing tobacco production under strict control through taxes and industry reorganization, continue to impose strict restrictions on tobacco advertising, forbid selling cigarettes to minors and ban the use of automated cigarette machines. China also aims to host a tobacco-free Olympic Games in Beijing in 2008, he added. ECONOMY

Retail sales to rise 12.5 percent

Retail sales are expected to grow about 12.5 percent in the first half of 2006 from a year earlier, the South China Morning Post reported, citing a Ministry of Commerce report. Retail sales reached US$830 billion in 2005, up 12 percent from 2004 in real terms. Meanwhile, an earlier ministry survey showed that the supply of 72 percent of retail consumer goods would exceed demand, while the remaining 28 percent would face balanced supply and demand, underscoring downward pressure on retail prices. Annual consumer inflation has been below 2 percent since April 2005.

FDI up 11 percent

Foreign direct investment (FDI) to China totalled US$4.55 billion in January, up nearly 11 percent year-on-year, China Daily reported, citing a Ministry of Commerce report. Hong Kong, the British Virgin Islands and Germany were the largest sources of FDI during the period, according to the ministry. Investment from 15 EU countries rose 70.8 percent from a year earlier and investment from the US grew 19.7 percent year-on-year, the ministry said. A total of 3,044 foreign companies were established in the first month, down 15 percent.

FDI off to stronger start

Foreign direct investment in China increased by almost 8 percent in the first two months of this year compared to 2005, according to the Ministry of Commerce. FDI totalled US$8.6 billion in January and February, up 7.8 per-cent year-on-year. Leading sources of invest-ment include Hong Kong, the British Virgin Islands and South Korea. Last year the main-land attracted US$60.3 billion, down slightly from the US$60.6 billion record high of 2004. The ministry approved 5,136 new foreign-in-vested enterprises in the first two months of the year, a fall of 5 percent compared to a year ago.

GDP growth to stay strong

Economic growth will stay robust in 2006, hit-ting 9.2 percent or 9.3 percent, the director of the State Council's State Information Center economic forecasting department said. While a decline on last year's 9.9 percent growth rate is expected and some prices could fall, Fan ar-gued that this was "different from deflation", the Wall Street Journal reported. However, produc-er price index (PPI) rose 3.1 percent in January, the National Bureau of Statistics announced, prompting fears of increased deflationary pres-sure due to oversupply and a fall in food price growth. The PPI, which measures wholesale prices of goods, is down on the 2005 average of 4.9 percent.

HSBC plans further China expansion

HSBC is planning further expansion in China after mainland profits surged more than tenfold to US$334 million last year as pre-tax earnings from its Hong Kong operations contracted 6.48 percent, South China Morning Post reported. HSBC has mainland investments in Bank of Communications, Industrial Bank, Ping An In-surance and Bank of Shanghai. Group chief ex-ecutive Stephen Green said HSBC would continue to expand in the mainland with partners and on its own. With a full spectrum of invest-ments in banks, insurance and fund investment, the market is speculating that HSBC and Bo-com, in which HSBC has a 19.9 percent stake, intend to buy a distressed securities house.

FDI off to stronger start

Foreign direct investment in China increased by almost 8 percent in the first two months of this year compared to 2005, according to the Ministry of Commerce. FDI totalled US$8.6 billion in January and February, up 7.8 per-cent year-on-year. Leading sources of invest-ment include Hong Kong, the British Virgin Islands and South Korea. Last year the main-land attracted US$60.3 billion, down slightly from the US$60.6 billion record high of 2004. The ministry approved 5,136 new foreign-in-vested enterprises in the first two months of the year, a fall of 5 percent compared to a year ago.

GDP growth to stay strong

Economic growth will stay robust in 2006, hit-ting 9.2 percent or 9.3 percent, the director of the State Council's State Information Center economic forecasting department said. While a decline on last year's 9.9 percent growth rate is expected and some prices could fall, Fan ar-gued that this was "different from deflation", the Wall Street Journal reported. However, produc-er price index (PPI) rose 3.1 percent in January, the National Bureau of Statistics announced, prompting fears of increased deflationary pres-sure due to oversupply and a fall in food price growth. The PPI, which measures wholesale prices of goods, is down on the 2005 average of 4.9 percent.

HSBC plans further China expansion

HSBC is planning further expansion in China after mainland profits surged more than tenfold to US$334 million last year as pre-tax earnings from its Hong Kong operations contracted 6.48 percent, South China Morning Post reported. HSBC has mainland investments in Bank of Communications, Industrial Bank, Ping An In-surance and Bank of Shanghai. Group chief ex-ecutive Stephen Green said HSBC would continue to expand in the mainland with partners and on its own. With a full spectrum of invest-ments in banks, insurance and fund investment, the market is speculating that HSBC and Bo-com, in which HSBC has a 19.9 percent stake, intend to buy a distressed securities house.

Bohai Bank makes debut in Tianjin

Bohai Bank, China's first joint-stock com-mercial bank since 1996, began operation in Tianjin in mid-February, China Daily reported. The bank has a registered capital of US$621.1 million. Tianjin Taida Investment Holdings is the largest shareholder of the lender with a 25 percent stake, followed by UK-based Standard Chartered with 19.9 percent of the stake. Bohai Bank plans to open 10 branches in Tianjin this year and another three in 2007, one of which will be in Beijing and the other two in Shang-hai, Guangzhou or Shenzhen, said Yang Zilin, chairman of the bank.

BOC clears IPO obstacles

The Bank of China (BOC) said it had sealed agreements with all its foreign strategic inves-tors, clearing a major obstacle to its proposed Hong Kong IPO, Financial Times reported. The announcement that no more investors would be included before the listing ends speculation that BOC might also sell a stake to Japan's Bank of Tokyo-Mitsubishi UFJ. The bank will sell a total of 16.85 percent of its existing shares ahead of the IPO, substantially less than originally envisaged. BOC had been planning a Hong Kong listing for the first quarter of this year but pressure from reg-ulators to stage part of its IPO in local markets, as well as debate over the valuation of state banks, are likely to delay it by some months. The listing is expected to raise up to US$10 billion.

Morgan Stanley eyes Chinese brokerage

Investment bank Morgan Stanley is negotiating the purchase of up to half of Shanghai-based brokerage AJ Securities, Reuters reported, cit-ing two sources close to the situation. The bank is eyeing a minimum 20 percent stake, but wants to take this up to 50 percent should overseas firms be successful in their calls for an end to foreign ownership caps in the finan-cial sector. A controlling stake in the broker-age would allow it to underwrite activities such as share listings. AJ Securities, which has 16 branches nationwide and US$80.8 million in registered capital, is widely seen as one of the most troubled and debt-ridden of China's brokerages.

Foreign banks could be hit by rule change

Regulators are to ask foreign banks to incorpo-rate their China operations locally in a move that could see them face higher capitalisation requirements and higher taxes, the Wall Street Journal reported. They may also have to make accounting and management changes under the new rules, which the China Banking Regulatory Commission (CBRC) has said are necessary to improve regulation and control risk. China's banking sector is due to open up considerably in December according to WTO accession agreements, with all foreign banks permitted to accept deposits and give loans in local curren-cy. The CBRC's planned changes are intended to level the playing field between foreign and domestic players by making them structurally more similar.

Rate swap experiment to start

The People's Bank of China said it would soon trial trading of yuan-denominated interest rate swaps in an effort to expose interest rates to greater market influence, the Wall Street Journal reported. Designed to help banks better price capital and investors hedge interest rate risk, the plan will also expand a growing domestic fixed-income market and pave the way for more inter-est rate derivatives. The central bank said it will gradually expand the trial and will allow the full launch of a yuan interest-rate-swap market as soon as possible.

Rover plant leased by Nanjing Auto

Nanjing Automobile of China signed a 33-year lease for the factory site of former British car-maker MG Rover with a view to producing sports cars from next year, Reuters reported. The company plans to employ 1,000 workers in the production of MGTF sports cars. Nanjing bought the carmaker for US$92 million last year, beat-ing off a bid from Shanghai Automotive in a sign of the keenness of Chinese auto makers to chal-lenge their Korean and Japanese counterparts by becoming global brands. Geely Automobile Holdings and Chery Automotive are among the other domestic players with big export plans.

Nanjing Auto deal to go ahead

Nanjing Automobile's takeover of British car-maker MG Rover has been given the final gov-ernment stamp of approval. State media report-ed that the National Development and Reform Commission has given the go ahead that will allow production to restart. Annual capacity is said to be 200,000 motor vehicles, 250,000 engines and 100,000 gearboxes. The produc-tion lines and research and development cen-tres will be located in Nanjing. The first MG-75 sedans should be rolling off the line in the first half of 2007. It has been claimed that the first MG would be released on March 27 next year to coincide with Nanjing Auto's 60th birthday.

Hyundai Motor to open auto finance unit in China

South Korea-based carmaker Hyundai Motor plans to establish a wholly owned auto finance unit in China, Shanghai Securities News reported, citing a company official at Hyundai Motor (Chi-na) Investment. The company will invest a total of US$24.6 million in the new subsidiary, which is scheduled to start operations in August this year.

Chery in Russian tie-up for EU sales

Chery Automobile signed with Russia's Avtotor to assemble cars for sale in Europe and is con-sidering a US$200 million investment in a new plant, the South China Morning Post reported, citing industry sources. Avtotor, on the border of Lithuania and Poland, is expected to assemble Chery models in its existing factories. It has the capacity to make 70,000 vehicles a year, having made 16,500 cars, including Kias, BMWs, Chev-rolets and Hummers last year. The region enjoys tax benefits like those in China's special eco-nomic zones. Founded in 1997 in Wuhu, Anhui province, Chery is the eighth-largest domestic car manufacturer in China.

Boeing's China deal nearing completion

China is to confirm its oral agreement to buy 80 Boeing 737 aircraft in addition to a 70-plane order sealed in November, the Wall Street Journal report-ed, citing Larry Dickenson, senior vice president for Boeing's Asia Pacific division. Contracts have been signed and deposits paid for the first 70 aircraft, and the deal for the remaining 80 may well be sealed during President Hu Jintao's trip to Washington in April, Dickenson said. The full 150-plane deal is valued at US$8.6 billion, but Beijing is likely to have secured a discount on such a large order.

Starbucks bullish on China

Starbucks Chairman Howard Schultz confirmed China as the Seattle coffee giant's key expansion target, the Wall Street Journal reported. "The No.1 priority for our company in terms of new growth is China," Mr. Schultz said. "We are as excited and enthused about our course in China as about any country we have entered." Since entering China in 1999, Starbucks has invested heavily to try and establish a first mover advantage. Last year, it in-creased its total number of stores to 209, up from 152 at the end of 2004. It also opened new stores in second-tier cities Qingdao, Dalian and Chengdu.

Kingway beer to further investment in new brewery

Shenzhen-based Kingway Brewery plans to inject an additional US$48 million in a new production facility in southwest China this year, following an initial US$99 million investment, China Daily reported. The company expects the move to help maintain an annual sales growth rate of 35 per-cent and a double-digit profit increase. Another brewery with an annual production capacity of 200,000 tons will be built in Tianjin this April, and the company will be capable of producing a total of one million tons of beer annually.

Hot pot catering chain eyes Hong Kong IPO

China's leading hot pot catering chain, Inner Mongolia Little Sheep Catering, plans a US$128 million Hong Kong IPO in 2008, China Daily re-ported, citing Vicky Yeung, the company's Hong Kong regional manager. Proceeds gained from the IPO will be used to fuel the company's ex-pansion. The Baotou-based company currently runs four restaurants in Hong Kong.

SABMiller JV buys stake in Qingyuan Brewery

China Resources Snow Breweries, a joint ven-ture between South African brewer SABMiller dustry sources. Top domestic insurer China Life has also expressed interest in the mid-sized Chinese property insurer, offering last year to buy 51 percent of Dazhong for between US$24.82 million and US$37.21 million. It was not yet known how large a stake the foreign firms may seek to buy, but a source said the new interest casts uncertainty over China Life's original plan, with Dazhong now thinking the stake should be worth more money.

IAG to buy 24.9 percent of CPPI

Australia's largest general insurer Insurance Australia Group (IAG) announced plans to acquire an initial 24.9 percent stake in China Pacific Property Insurance (CPPI), the country's second-largest general insurance group. The move is part of the Australian insurer's plan to build a portfolio of insurance assets in Asia to supplement its businesses in its home markets of Australia and New Zealand. IAG is also in the plan to increase its ownership in CPPI to 40 percent, subject to certain regulatory approvals. METALS

Hanwa mulls China expansion

Japanese steel trading company Hanwa is expanding its steel processing sites in China to meet the growing demand in the country, Nihon Keizai Shimbun reported. Hanwa plans to rebuild Chang Fu Stainless Steel Center (Suzhou) located in Jiangsu province to double its annual production capacity to 270,000 tons by year-end. The company will also invest US$17 million to establish a joint venture with an automobile maker in Beijing. The new venture will start operation in 2007 with an annual production capacity of 200,000 tons.

China Mobile boosts expenditure

China Mobile has increased capital expenditure by 60 percent for this year to upgrade its 2G network while it continues to wait for state approval on 3G. The telecoms giant will increase spending to US$10.4 billion for this year, while in 2007 the rise will be 76 percent from the original allocation to US$9.7 billion. The company recorded better-than-expected net profits of US$6.66 billion last year - a rise of 28.3 percent - after taking market share from China Unicom. The extra funds will pay for expanding capacity for voice services, as well as preparing software for the introduction of 3G. China Mobile expects strong growth from its customer base of more than 250 million subscribers. Licenses for 3G operations are expected to be granted in the second half of this year.

Steel mills up prices to counter losses

China's steelmakers are increasing prices nearly 10 percent to counter fourth-quarter losses in 2005, the South China Morning Post reported. Wuhan Iron & Steel and Angang New Steel introduced a new price schedule from March 1 with others expected to follow. An Angang spokesman said the price increase reflected changed market conditions and could be sustained in the longer term. Output was expected to grow 11.3 percent to 385 million tonnes this year, down from 27 percent growth in 2005. "This year, the industry's profit outlook is not going to be very good, given cost increase pressure and major capacity expansion," said Tiger Huang Weihua of industry consultancy Hatch. "But it should be no worse than last year."

Chalco to spend US$1.2 billion

Aluminium Corp of China (Chalco) is to spend up to US$1.2 billion on acquisitions and extra capacity in 2006. The world's second largest maker of alumina is to set aside capital for expanding its production capability for the raw material needed for making aluminium. Chalco, which produces about 90 percent of Chinese alumina, is to increase expenditure by almost a fifth, compared to last year when it was cut. Possible domestic mergers and acquisitions include smelters that could push annual production of aluminium up to 3 million tonnes, which would be more than double capacity at the end of last year. The average spot price for Chalco's alumina was US$475 a tonne last year, up 1.2 percent on 2004. Annual alumina capacity is set to increase from 8.33 million tonnes in 2005 to more than 12 million tonnes in three years. TELECOMS

Curbs placed on trial 3G networks

The Ministry of Information Industry ordered a stop to new trial WCDMA networks before the issue of the country's first 3G cell phone licenses, Shanghai Securities News reported, citing an unidentified China Mobile official. Beijing endorsed the domestic TD-SCDMA 3G platform as a national standard in January, providing a lead against international rivals WCDMA and CDMA2000. The first TD-SCDMA license is expected to be issued soon to a dominant domestic player like China Telecom, but analysts believe the two rival standards will also be licensed to Chinese operators as early as May.