BRIEFS

GENERAL

China still attractive: Survey

Despite fears that competitors may steal business secrets, executives still see China as an opportunity, according to a new survey. Management consultancy Hay Group, which interviewed top executives in Europe, North America and Asia-Pacific, found that 83 percent of business chiefs wanted to cash in on China's growing demand. Most of them were either already operating in China or planned to enter the market within the next five years. Although determined to take advantage of China's vast opportunities, executives expressed concern over poor intellectual property protection, corruption, bureaucracy and an opaque legal system. Unfair treatment of foreign firms was a big obstacle for almost a quarter of business leaders surveyed, the Financial Times reported.

Avon on shopping spree for new staff

In one of the largest recruiting drives by a foreign company in China, Avon Products has hired more than 114,000 sales representatives this year. The American cosmetics company's hiring offensive is a sign of its confidence that Beijing is ready to fully resume direct sales, helping the company shift from retail in China to its usual person-to-person sales strategy. Avon has processed more than 31,000 new applications for sales jobs. In February this year, the Ministry of Commerce gave Avon the green light to resume direct selling under a new set of rules issued late last year. Other foreign and domestic firms are also expected to apply to begin large-scale direct selling. Direct selling had previously been allowed in China during the 1990s, but was banned in 1998.

Government to slash export tax rebates

The Chinese government announced it will reduce tax rebates on exports of resource-intensive and environmentally harmful products. An unreleased policy is scheduled to take effect in September or October, despite strong protests from domestic companies and traders, reflecting its drive to shift the nation away from low-value-added exports. Tax rebates for exports were introduced in 1985 to make Chinese products more competitive in the international market. It is now expected that rebates will be cut by an average of 2 percent for products such as textiles, iron and steel, while high-tech industries will have their rebates increased.

Gome to acquire Paradise

Gome Electrical Appliances Holdings, the largest electronics retailer in China, will offer US$677 million for rival Paradise Electronics Retail in an effort to shore up falling margins and solidify its position in the face of tighter competition, the South China Morning Post reported. Gome has proposed that its chairman, Wong Kwong-you, China's richest man, remain chairman of the merged company while China Paradise's Chen Xiao would be chief executive. The entry of foreign retailers into the market, including US-based Best Buy, has been chipping away at profits across the industry.

Brokerages turn profit corner

Two of the country's largest brokerages, Guotai Junan and Shenyin Wanguo, each posted net profits of more than US$87 million in the first half of this year. The encouraging financial results are being seen as evidence that the resumption of mainland share listings is helping the long-struggling brokerage industry turn the corner. Beijing-based Guotai Junan's US$87.9 million profit came after losses of US$13.5 million in the first half of last year, while Shanghai broker Shenyin Wanguo rebounded from a 2005 deficit of US$32.6 million to record gains of US$95.8 million in the same period this year. The majority of revenues were generated by commissions on securities trading as the total volume of stock traded on the Shanghai and Shenzhen exchanges hit US$475 billion in the first six months of the year, up 170 percent on the same period last year.

World Bank arm looks at securities

The investment arm of the World Bank plans to turn its attention to Chinese securities, the South China Morning Post reported. The International Finance Corporation has already poured almost US$600 million into the country's banking sector, which helped make China the IFC's fifth-largest investment destination. But Beijing has not been welcoming of its efforts to penetrate the securities industry. An application to buy a 5 percent stake in Changjiang BNP Paribas Peregrine Securities last year is still pending and in 2002 regulators rejected IFC's US$12 million offer for 16 percent of a joint venture between Changjiang Securities and France's BNP Paribas Group. China's securities sector has, to date, depended almost exclusively on government-held investment firms for capital.

One in five managers will leave: survey

Some companies operating in China lose one in five top managers every year, according to a recent survey by the Economist Intelligence Unit and Heidrick & Struggles. The results estimate that top managers in China switch jobs every 15 months. Among executives, 48 percent said a lack of "suitable management candidates" is a major problem for their business, with 7 percent of companies surveyed losing 15-20 percent of their senior managers every year. Companies are now developing a range of strategies to retain management talent, with 66 percent willing to offer training abroad and opportunities for senior executive positions. By comparison, 53 percent of companies still rely on higher wages.

Top 500 traders move US$604 billion

China's top 500 traders did US$604.8 billion worth of business last year, according to statistics released by the Ministry of Commerce. They accounted for 42.6 percent of total imports and exports. Energy, machinery, electronics and high-tech companies ranked high on the top 500 list and made up all of the top 10. More than 95 percent of these traders are based in coastal cities with only 18 based in central or western China. Foreign-invested companies took a leading role, accounting for 60 percent of the top 500, while state-owned enterprises made up 28 percent. China is the third-largest trader in the world with volumes of US$1.42 trillion in 2005, up 23.2 percent over 2004.

China tightens textile controls

The Ministry of Commerce announced plans to revise rules on textile export quotas in a fresh push to prevent quota speculation and to streamline the market following last year's disputes with the US and Europe. A number of problems had been reported with the Provisional Management Method for Textile Exports approved by the ministry in July 2005. Some companies boosted profits by speculating with their quotas while others left theirs untouched. The ministry was looking in July for input from industrial associations and textile companies.

China world's top shipbuilder by 2015

China is set to become the world's leading shipbuilding nation by 2015 due in no small part to its growing energy demands, according to maritime classification group, Det Norske Veritas (DNV). For reasons relating to national security, Beijing requires that at least half of all seaborne crude oil imports be carried by domestic vessels and, as a result, DNV expects China to build 40-50 supertankers over the next five years. A further 20 have been ordered for delivery by 2009, each with a price tag of US$130 million and weighing in at more than 300,000 dead-weight tons, the South China Morning Post reported. Carried by this bumper investment, China will reel in Japan and South Korea to take top spot in the shipbuilding stakes.

Internet community grows to 123 million

The number of Internet users in China shot up once more, but penetration is still low. State media reported that 123 million people are now online in China, 19.4 percent more than in June 2005. However, despite representing the second-largest online community in the world behind the United States, the number is still only 9.4 percent of China's population, "so there is still plenty of room to develop," said Wang Enhai, information services director for the China Internet Network Information Centre. The number of broadband users at the end of June hit 77 million, 45 percent above that of June 2005. Analysts said the increase in the number of broadband users bodes well for online services such as games and broadcasting, which require faster connection speeds.

Top SOEs post profit hikes

The country's key state-owned enterprises (SOEs) posted solid growth in the first half of 2006, partly due to newfound energy efficiencies, state media reported. The country's 166 biggest SOEs, directly supervised by the central government, posted profits of US$43.96 billion, a 16 percent increase from the first half of 2005. Sales revenues climbed 20.6 percent. The State-owned Assets Supervision and Administration Commission (SASAC) said the higher profits were largely driven by growth in coal, oil and power production in the face of growing energy demands. The country's five major power companies, for example, produced 12.5 percent more electricity than a year ago. A closer focus on structural upgrades and better allocation of resources and cost controls also contributed to growth.

Tibet-Guangzhou rail link planned

A direct rail service between the southern city of Guangzhou and Tibet's principal hub Lhasa will begin on October 1, China's National Day, state media reported. The section of railway linking Lhasa to Qinghai province and the rest of China - which climbs to more than 5,000 metres above sea level and was described by Beijing as an engineering miracle - opened on July 1 and direct rail services to Beijing, Chengdu, Chongqing, Lanzhou and Xining have been introduced. The Lhasa-Guangzhou service will take three days and two nights to complete the trip. Critics of the Tibet railway say the transport link will simply speed up the cultural and environmental degradation of the region. It was reported Monday that insurance companies will offer a US$11 altitude sickness policy, which will cover up to US$1,250 in medical expenses for travellers who fall ill en route.

Daqin shares in demand

Demand for shares in Daqin Railway Co outstripped supply by nearly nine times as the company opened up subscriptions ahead of its US$1.9 billion IPO in Shanghai. Daqin, which operates China's biggest coal transport network, said it would price its shares at US$0.62 and was scheduled to begin trading on August 7, Bloomberg reported. It is set to be the second-largest local currency share sale after Bank of China's US$2.5 billion offering in June, and comes on the back of a 43 percent increase in the Shanghai Composite Index since the start of the year. Daqin intends to use the capital raised to expand capacity, hopefully putting an end to the transportation bottlenecks that are partly responsible for rising coal prices in China.

New semiconductor guidelines in the works

A new policy on semiconductors currently under development could include tax exemptions or reductions in an area considered vital for China's high-tech industry, according to state media. China already has a guideline, developed in 2000, to encourage the semiconductor and software industries, but value-added tax levels that gave advantage to domestic products sparked complaints from the US, Japan and the EU. Industry officials said the National Development and Reform Commission had organised a fresh round of consultations to figure out a policy to develop China's semiconductor business.

Chevalier unit invests in Anhui property venture

Chevalier International Holdings announced plans to take a majority stake in a US$93.8m mixed-use property development in Anhui province, according to Chinese media. The Hong Kong-based construction and engineering firm will invest US$14.11 million, while the mainland partners will contribute US$13.6 million, with the balance to be raised by external borrowings, or borne between Chevalier and the two Anhui companies on a 51 percent to 49 percent basis. The project, named Hua Qiao Plaza and located on Chang Jiang Road Central in Hefei, will comprise an office building, shopping mall, a hotel and service apartments.

Fixed-asset investment shoots past targets

Urban fixed-asset investment jumped in June, up 33.5 percent from a year ago, according to the National Bureau of Statistics. Fixed-asset investment shot past the 29.8 percent growth expectations of a Dow Jones Newswires poll and was higher than the 28.8 percent growth registered in June 2005. A spokesman for the statistics bureau told the Wall Street Journal he felt economic growth driven by fixed-asset investment was not sustainable. The bureau director said growth of 20 to 25 percent would be more in line with China's economic needs. Despite government measures to slow it down, with curbs on new construction projects and land restrictions, fixed-asset investment shows no sign of slowing down.

Schumer-Graham back on track

Two US senators behind a stalled bill to impose a 27.5 percent tariff on Chinese imports, in retaliation for alleged currency manipulation by Beijing, said the lack of action on currency reform meant they would call for a vote on the legislation by September 30. Charles Schumer and Lindsey Graham made the comments after meeting with new US Treasury Secretary Henry Paulson, where they told him they were disappointed with the yuan's failure to strengthen against the dollar. They agreed to put off a vote in March after they said a visit to China had persuaded them that Beijing was committed to eventually moving to a freely floating currency. "We have done the minuet for quite a while and it's time to see progress," Schumer said.

Guangdong raises minimum wage

Guangdong province raised the minimum wage in September, hoping to become a more appealing destination for migrant workers, state media reported. As of September 1, workers in Guangzhou earned a minimum US$97.5 (RMB780) per month, in Shenzhen US$101.25 (RMB810), and second-tier cities like Zhuhai, Foshan, Dongguan and Zhongshan saw the minimum monthly wage hiked to US$86.25 (RMB690). The increases were an average of 17.8 percent. The province said this is the seventh time it has raised the minimum wage in 12 years but this is the highest jump yet. Minimum wages in Shanghai and Jiangsu province are US$86.25 (RMB690) and Beijing's minimum is US$80 (RMB640).

Chile's Congress OKs free trade deal

Chile's lower house of Congress ratified a free trade deal with China in a 94-5 vote. The deal, seen as a key step to expand China's commercial ties in the Pacific Rim, still needs to be ratified by the Senate but passage appears to be all but assured, according to state media. Chile's foreign ministry called the deal - the first between China and a South American country - the "widest, most comprehensive negotiated by the Asian country with any nation". China and Chile agreed to the free trade arrangement last November during the Asia-Pacific Economic Cooperation summit in South Korea and it is expected to kick in later this year. Trade between the two countries hit US$6.9 billion last year.

High-tech firms lead VC market

The venture capital market more than doubled in the first half of this year, state media reported. Venture capital investment hit US$772 million in the first six months of 2006, up 128 percent from 2004. The number of deals rose 49 percent to 121. The focus of investment has been the country's information technology market, which took up 73 percent of the total. Internet investments alone accounted for US$276 million. The number of venture capital firms in China is growing but some mainland analysts said the market is not overheating. Total VC investment could top US$1.5 billion this year. China's private equity market accounts for 0.5 percent of its GDP compared to an average of 4-5 percent in developed economies, state media reported.

Top-level reshuffle at CCB

The resignation of China Construction Bank (CCB) president Chang Zhenming is part of a larger management reshuffle at the top of the country's financial sector, triggered by the impending retirement of the chairman of state investment conglomerate Citic. Chang is set to fill the vice-chairman and president role at Citic in place of Kong Dan who will become chairman of the group following the retirement of incumbent Wang Jun, the South China Morning Post reported. Chang's place at CCB will be taken by Zhang Jianguo, president of Bank of Communications (BOCOM). It is the second top-level personnel shake-up in a little over a year at the Hong Kong-listed state bank, after its previous chairman, Zhang Enzhao, resigned amid a corruption probe just four months before the bank raised US$9.2 billion in its initial public offering last October. The Chinese system, by which the Communist Party puts senior officials at the head of state-owned companies, is criticised in the West as it often sees bureaucrats become business managers, theoretically undermining the state's policy of reducing its influence over the corporate world.

Bank regulator urges risk localisation

The China Banking Regulatory Commission called on foreign banks to localise business units to monitor yuan trading risks as the country moves to liberalise the foreign exchange system. In a statement the banking regulator noted that foreign banks tended to monitor their foreign-exchange system risks from banking offices outside the country, which it said was becoming less feasible. The statement suggested no timetable for compliance and also offered no indication the regulator expected the yuan's actual exchange rate to become more flexible. The statement, which was published only in Chinese, called on foreign bankers to "fully understand China's financial market."

Fresh bids for GDB

New bids were expected in July for Guangdong Development Bank (GDB) from Citigroup and Soci¨¦t¨¦ G¨¦n¨¦rale (SocGen), Reuters reported, citing banking sources. In the latest round of this protracted bidding war, both sides are said to be targeting a 20 percent stake in the bank. As both bidding consortiums want a majority share in debt-ridden GDB, the deal is now widely seen as a gauge of how deep China will let foreign investment penetrate. Having thought it had made a breakthrough with a US$3 billion bid for 85 percent of GDB - including a regulation-busting 40 percent for itself - Citigroup is now targeting 80 percent. It has brought China Life into its consortium, with the insurer slated to lead the way by taking a 25 percent stake. SocGen's bid for 85 percent is backed by Baosteel and Sinopec, each of which is expected to match SocGen by taking 20 percent.

Barclays buys Citic stake

China Citic Bank announced plans to sell a 5 percent stake to Barclays, Britain's third-largest lender by market value. It was unclear how much Barclays would pay for the stake, which would be used to boost Citic's financials ahead of a US$2 billion public offering in Hong Kong. Citic Bank, China's seventh-largest lender by assets, is part of state-owned investment conglomerate Citic Group. The international arm of Citic Group will buy a 16 percent stake in its sister financial institution for US$652 million, 1.15 times book value. Barclays opened its first branch in Shanghai last year, offering market, foreign exchange, debt finance and risk management services.

CMB bosses to get stock options

Senior management at China Merchant's Bank (CMB) will receive stock options worth 90,000-300,000 H-shares ahead of its US$2 billion Hong Kong listing, the bank announced in July. Under the agreement, the 10-year options can be swapped into H-shares at the previous month's average daily price. Holders will be able to exercise 25 percent of their options before 2008, and further lots of 25 percent every two years thereafter. Senior management will also be insured against corporate failure, while independent directors and supervisors can expect significant pay rises. CMB, China's sixth-largest lender, has previously said it will sell a 15 percent stake, or 2.2 billion shares, in Hong Kong. It is distinct among China's banks as it hasn't sought any foreign investment.

ICBC targets US$19 billion dual IPO

Industrial and Commercial Bank of China, the mainland's biggest bank by assets, plans to raise as much as US$19 billion from simultaneous initial public offerings in Shanghai and Hong Kong, which could rank as the world's largest IPO. The bank, which applied for a listing on the Hong Kong Stock Exchange in July, will offer 12 percent of its enlarged share capital in Hong Kong and 6 percent in Shanghai, sources told the South China Morning Post. The simultaneous listing poses a pricing dilemma since mainland-listed A-shares trade at a premium to Hong Kong-listed H-shares. The IPO is expected to surpass the US$13.7 billion rival Bank of China raised earlier this year from both H- and A-share listings. The IPO record is held by Japan's NTT DoCoMo, which raised US$18.4 billion in 1998, followed by Italy's Enel with US$17.4 billion from its 1999 listing.

Nanjing Auto to build MGs in Oklahoma

Nanjing Automobile Group announced plans to begin building MG-brand cars in Oklahoma, as it leads the charge among Chinese automakers eyeing the US market. The company, which took control of MG Rover last year, will assemble cars in Nanjing, near Birmingham, England and at a new plant in Ardmore, Oklahoma. The now discontinued MG brand would be relaunched in 2007. In the US, cars would be available by mid-2008. Other Chinese automakers like Geely Automobile Holdings and Chery Automotive are hoping to increase worldwide sales. Nanjing Auto's capital investment would be more than US$2 billion and will be funded by state and local governments in Oklahoma, the state's development agency and private investors.

Shanghai Auto may sell holdings to listed arm

Shanghai Automotive Industry Corporation (SAIC) may sell its automaking holdings to publicly traded affiliate Shanghai Automotive in a deal worth US$2.5 billion, the Wall Street Journal reported. The move would be part of a major restructuring at the state-run car manufacturer that owns stakes in joint ventures with General Motors and Volkswagen AG. Shanghai Automotive will raise US$2.25 billion towards the acquisition by issuing 3.1 billion shares. The restructuring would concentrate SAIC's auto holdings into its main listed arm and give Chinese investors a chance to buy into the biggest domestic automaker in China. The move was announced in a filing with the Shanghai Stock Exchange on Tuesday.

Car sales up almost 50 percent in first half

Car sales in China jumped 46.9 percent year-on-year during the first half of 2006, China Association of Automobile Manufacturers figures showed. China's top 10 auto manufacturers in terms of sales moved 1.272 million units, 70.5 percent of the total 1.804 million sold across the country. Shanghai GM cemented its status as China's top automaker with sales of 453,832. Car sales grew 21.4 percent last year, but only 15 percent in 2004 after Beijing took steps to reign in credit. Shanghai Volkswagen remained in second spot, followed by Chery, Beijing Hyundai, FAW Toyota, Tianjin-FAW Xiali, Geely, Guangzhou Honda and Dongfeng Peugeot Citroen.

Manheim expands into China

Manheim reached an agreement with a Chinese partner to expand its auction business into Shanghai. The company has formed Shanghai Manheim Guo Pai, which is a joint venture between Manheim's Chinese subsidiary and Shanghai International Commodity Auction Company. The Chinese firm is one of the country's largest auction companies and deals in art, antiques and real estate as well as used cars.

CNPC sidelined in Rosneft IPO

China National Petroleum Corp (CNPC) received just a sixth of the shares it was seeking in Rosneft's US$10.4 billion IPO in July. It placed an order for US$3 billion worth of shares in the Russian oil giant's IPO in London and Moscow, but was allocated a stake worth only US$500 million. CNPC was one of three strategic investors in the float, with BP and Petronas, Malaysia's state oil company, both allocated stakes worth about US$1 billion. Along with a fourth unnamed investor, the companies took up nearly half of the Rosneft offering, Russia's biggest flotation and the world's fifth-largest. One person familiar with the details told the Financial Times that Chinese demands for better access to reserves in exchange for its investment had backfired.

Gas find revitalises CNOOC

A recent natural gas discovery deep under the South China Sea will usher in a second growth era for CNOOC, the listed arm of China National Offshore Oil Corp, CNOOC chairman Fu Chengyu told the Wall Street Journal. Multinational oil and gas companies abandoned the area decades ago after shallower wells turned up dry, but CNOOC's Canadian partner, Husky Energy, discovered a natural gas field in June approximately 240 kilometres south of Hong Kong beneath 1,500 metres of water, re-opening the area for exploration. CNOOC has the option to buy a 51 percent stake in the field, which Husky estimates contains 4 trillion to 6 trillion cubic feet of recoverable natural-gas reserves. CNOOC has 5.8 trillion cubic feet of booked natural-gas reserves.

PetroChina opens Xinjiang to foreigners

PetroChina will open nine exploration blocks covering 110,000 square kilometres within the Xinjiang region's Tarim Basin to foreign investors, unlocking potential resources in the under-explored area and bolstering supply for the 3,800km Xinjiang-Shanghai gas pipeline, China Oil News reported. The cooperation will be in a profit-sharing structure commonly used worldwide, in which foreign firms will foot the exploration bill and output and revenues will be shared after the exploration and development expenses are recovered. The 560,000 square kilometre Tarim Basin is estimated to have 6 billion tonnes of provable oil reserves and eight trillion cubic metres of provable gas reserves.

Solar companies make splash abroad

ReneSola, a Zhejiang-based company that recycles silicon wafers for solar panels, raised US$50 million in an initial public offering in London. The company plans to use the funds to expand capacity and expects to see sales triple in the next year, the Financial Times reported. ReneSola is the latest of a growing string of Chinese solar companies that have attracted investors. Solar panel maker Suntech raised US$455 million in the New York Stock Exchange last year. China Biodiesel, a renewable energy company from Fujian, raised almost US$15 million in London last month. China's solar industry is leaping forward, partly due to a government decree that 15 percent of energy should come from renewable resources by 2020.

Ping An to invest in expressways

Ping An put itself on course to become the first insurance company to branch out into infrastructure investment. The company signed letters of intent in July to buy into three expressways in the coal-mining province of Shanxi. The government awarded it a US$1.25 billion investment quota, Ping An said, which accounts for the bulk of the US$1.5 billion assigned to a trial program allowing insurers to invest in domestic infrastructure projects. The remainder of the quota will be shared by leading life insurer China Life, top-ranked non-life insurer PICC Property & Casualty and Taikang Life Insurance. In March, insurance firms were given the green light to invest up to 5 percent of their total assets in infrastructure projects so that they could improve returns and diversify investment risk. In the past, insurers were forced to place most of their assets in low-yield bank deposits and government bonds.

China's most expensive address still empty

The most expensive luxury complex on the mainland finally sold four units in under a week after going its first nine months without a single buyer. The developer, Tomson Group, has no intention of slashing prices, reported Hong Kong's The Standard. One of the 220 units in the Tomson Riviera complex on the banks of the Huangpu river is priced at US$20 million. To bring in some income, Tomson has decided to rent out flats in one of the development's four towers early next year. Still, Roger Feng, manager of the Riviera believes the market is there. "We only have to wait," he said.

Institutional investors up real estate bets

Institutional investors are expected to double their spending in Chinese real estate this year to US$7 billion, according to a Jones Lang LaSalle report quoted in the International Herald Tribune. Negative information may be dampening the market, making it a good time to buy. Sales to overseas institutions during the first half hit US$3.66 billion. Companies like Morgan Stanley, who bought two residential projects in Shanghai for US$187.5 million, and Goldman Sachs, who spent US$70 million in an apartment project in Shanghai, are driving the growth, Colliers said.

China is third-largest food donor

China was the world's third-largest food donor last year, thanks to its growing shipments of wheat, flour and grain to North Korea. According to the UN World Food Program, China accounted for 90 percent of the 576,582 tonnes of cross-border food aid received by Pyongyang in 2005. This was the driving force behind a 260 percent year-on-year increase in China's total food donations, which catapulted it into third place in the global standings behind the US and EU. It was only last year that China stopped receiving donations from the World Food Program. The government refused to comment on its food aid to North Korea; a Ministry of Commerce official said that such information was a state secret.

Profits soar on investment in steel

CITIC Pacific looks poised to rake in the cash from investments in steel in the first half of the year with profits at one of its subsidiaries expected to soar by 500 percent, The Standard of Hong Kong reported. Daye Special Steel, 56 percent owned by CITIC, said profits could jump to US$24.8 million, up from US$4.1 million in the same period in 2005. Daye said the boost in profits was the result of improvements in production technology and a new focus on value-added products. Daye and steelmaker Hubei Xin Yegang contributed 20 percent to the group's total profit last year. The company started investing in the sector at the end of 2004.

Copper smelters pushed to consolidate

Moves have been made to push China's copper industry towards consolidation in the wake of recent capacity expansion and growing inefficiency, the Wall Street Journal reported. The National Development and Reform Commission (NDRC) said that new investment in smelters with annual output capacities of less than 100,000 metric tons were prohibited from July 1. Smelters must also obtain at least 25 percent of raw materials from their own mines and pay for 35 percent of investment in new projects from internal sources. In addition, stricter rules were introduced regarding equipment standards, safety levels and environmental protection. Eight smelters, each with an annual capacity in excess of 100,000 tons, produce 70 to 80 percent of China's copper output. Under the new measures, the small-scale smelters that account for the remaining 20 to 30 percent will have to expand capacity or face being swamped by larger players. In the first half of 2006, copper production was up 23 percent on the previous year to 1.42 million tons and capacity is expected to reach 3.7 million tons by the end of 2007.

China demand drives global mining output

The world's largest mining company, BHP Billiton, boosted metal production to record levels this year on the back of Chinese demand, the Financial Times reported. The company's latest figures showed record production levels for iron ore, aluminium, copper, nickel and natural gas. The report comes as China, which is leading world demand for commodities, announced economic growth of 11.3 percent last quarter, the strongest rate of growth in a decade. One area of particularly strong growth was iron ore. Strong production levels are counterbalanced by increased market volatility and worries over whether miners can meet timetables in the face of strong demand from China and rest of the world.

Draft rules may slow giant retailers

Proposed new rules could put a roadblock in the expansion plans of large retailers like Wal-Mart and Carrefour. Drafts of the rules were under review in July, but the State Council could release them later this year. If approved, large-scale shopping outlets will be required to file detailed blueprints of new outlets and hold hearings on how communities would be affected, increasing expansion costs. Analysts said the move could put a hurdle in the major expansion plans of foreign operations, which expected a clear road ahead after the retail industry was liberalised in 2005, but the rules will apply to both foreign and domestic retailers.

PCCW ends buyout talks

PCCW, Hong Kong's dominant phone operator, said it had ended buyout talks with Australia's Macquarie Bank and United States firm TPG Newbridge. The two foreign companies had made offers worth as much as US$7 billion for PCCW's core telecom and media assets, but the mainland government and China Netcom - the group's second-largest shareholder with a 20 percent stake - strongly opposed the asset sale. "Despite persistent endeavours to develop an acceptable structure, all attempts to do so have failed", PCCW said in a statement. PCCW chairman Richard Li Tzar-kai announced earlier this month he would sell his 22.7 percent stake in the company to former investment banker Francis Leung Pak-to for US$1.15 billion.

China Mobile chases value-added market

Shares in value-added mobile service providers plunged after China Mobile issued new rules to protect subscribers. The telecoms provider is also expected to take a hit, The Standard of Hong Kong reported. China Mobile will now send subscribers two notices before charging subscription fees, following a directive by the Ministry of Information Industry. Customers will also get free trial periods of up to 41 days. The company also plans to cancel numbers that are inactive for four months. Early in its history, China Mobile offered generous terms to value-added providers but with revenues from those services growing to 20 percent of the company's total, the country's biggest mobile operator has started looking at offering its own.

Huawei supplier for Japan's eMobile

Huawei Technologies Co Ltd said that Japanese mobile operator eMobile has chosen the Chinese firm as a key 3G mobile technology equipment supplier for the roll out of eMobile's new Universal Mobile Telecommunications System (UMTS) and High-Speed Downlink Packet Access (HSDPA) network. Under the terms of the agreement, Huawei will deploy an Internet protocol-based HSDPA radio access network, initially in cities such as Sendai and Sapporo. Huawei said in a statement that it will also provide technical support for the rollout of the nationwide network in the "upcoming years".

Holding pattern for China's air industry

China and India will not become major players in long-haul air travel until at least 2030, according to a study by the Boston Consulting Group. The conclusion flew in the face of fears that airlines will be transformed by low-cost Asian economies in the same way that the manufacturing and information technology industries have been. The study, which looked at long-haul outbound trips versus GDP per capita since 2003, in a number of countries, found that the US, Japan and the UK have much stronger growth prospects for the next 25 years, based on the theory that long-haul air travel is only significantly altered when a country's GDP per capita exceeds US$15,000. China's GDP per capita currently stands at US$1,200 and is not expected to cross the US$15,000 threshold until 2030, while India will have to wait until 2040.

SIA may buy into China Eastern

Singapore Airlines (SIA), the company touted as the target of China Eastern Airlines' search for foreign investment, has suggested that it may have held talks with the Chinese group, the Financial Times reported. Stating that it intermittently took part in "general discussions" with other airlines about investment opportunities, SIA indicated that Chinese groups had been involved in such talks. A stake in China Eastern - analysts believe 20 percent of the company is worth about US$260 million - would allow SIA to expand its coverage in what is expected to become the world's biggest tourist market.

First Taiwan-Shanghai cargo flight lands

The first direct cargo flight from Taiwan landed in Shanghai in July. China Airlines flight CI 6901 left Taipei loaded with semiconductor manufacturing equipment and landed in Shanghai shortly after midnight. It is the first Taipei-Shanghai flight since the mainland's Cross-Straits Aviation Transport Exchange Council and the Taipei Airlines Association agreed to allow chartered cargo carriers to fly directly between Taiwan and the mainland. Cargo planes from Taiwan usually have to stop in Hong Kong, where Taiwan airlines drop off the cargo, and carriers like Dragonair or China Eastern Airlines take it the rest of the way to Shanghai.

Leaders fear overheating

Premier Wen Jiabao warned that the economy was in danger of overheating and urged local authorities to heed central government macroeconomic control measures. Wen identified rapid growth in fixed-asset investment and bank lending, growing imbalances in international payments, escalating energy consumption and environmental degradation as major risks. The economy grew by 11.3 percent in the second quarter, the fastest in 12 years, while fixed-asset investment grew 31.3 percent in urban areas in the first six months of the year. The central government twice raised commercial banks' reserve-requirement ratios in June and July to soak up excess liquidity, and increased lending rates slightly in April. However, it faces an uphill battle to cool the economy in the face of overzealous regional authorities chasing growth at any cost.

President Hu Jintao called for tighter controls on China's runaway economic growth as well as highlighting the need to deal with public concerns about the widening gap between rich and poor, state media reported. Without unveiling any new measures in addition to the real estate and bank lending clampdowns, Hu told a meeting of key figures within and outside the Communist Party that the government must "control the scale of investment" in the second half of the year. The fact that Hu rarely speaks out on economic issues emphasises Beijing's concerns at a growth rate which hit 11.3 percent in the second quarter, the highest level in a decade. State media followed up on his remarks about sharing the wealth by confirming that the Central Committee meeting in October will focus on building a "harmonious society".

Property crackdown finally comes

New rules intended to cool the real estate market by making it harder for foreigners to buy property were approved by the State Council in late July. According to the new regulations, foreign individuals and companies will only be able to purchase residential property for their "own use or own habitation" and individual buyers must use their real names when doing so. Foreign firms need to have registered capital of at least 50 percent the value of a property they are buying, provided the total investment comes to more than US$10 million. Analysts told the Financial Times that the measures would have minimal impact, with one source pointing out that foreign investors already provide more than half the capital for purchases by themselves as they are unable to borrow so much money from Chinese banks. However, they did suggest that the rules could foster a climate of uncertainty among real estate investors. State Council figures show a 28 percent increase in foreign investment in Chinese property during the first six months of the year, much of which has been driven by expectation of further appreciation in the yuan.