BRIEFS

GENERAL

Open futures?

Chinese officials said stock prices probably would not have fallen so abruptly in early March if investors had been able to use stock-index futures to bet against the market. Without futures contracts, the only way for investors to make money is in a rising market, a risky prospect over the long term. Currently contracts in copper, aluminium, natural rubber and fuel oil are already traded at the Shanghai Futures Exchange, but the government has expressed a desire to expand futures trading to stock indices and currencies.

Paulson asks for reforms

US Treasury Secretary Henry Paulson asked China to push through reforms of its financial markets. In a speech he delivered during a visit to Shanghai, Paulson said China's current economic strength puts it in a unique position to stage the reforms that he argued were required to keep growth on track. His policy prescriptions for China include strong property rights, robust supervision by regulators, sound accounting and governance standards, stronger financial institutions and independent credit rating agencies.

Premier stresses green growth

More will be done to save energy and cut pollution in 2007, Premier Wen Jiabao said in his annual report to the National People's Congress (NPC). "We need to greatly improve the quality and efficiency of economic growth. We must attach greater importance to saving energy and resources, protecting the environment and using land intensively." However, Wen noted that environmental awareness must not come at the expense of "sound and fast economic development".

Bird flu at home in Guangdong

The southern Chinese province of Guangdong is the source of the H5N1 avian flu virus, according to a genetic analysis of the virus published by the University of California at Irvine. The researchers concluded that Guangdong is the origin of renewed waves of the H5N1 strain, which has killed 167 people worldwide as well as causing the death or forced destruction of millions of birds. The research showed that Qinghai province in far western China is another key source of bird flu's spread.

One million face water shortage

A drought in south-western China threatened the water supplies of 1 million people along the Yangtze River. Authorities in Chongqing have sent water trucks to provide for residents and livestock in regions that have not seen rain for weeks. Recently, water levels on the Yangtze have decreased rapidly and one of Chongqing's largest drinking-water suppliers said the water level has fallen below most of the pipes the company uses to draw water from the river.

Chalco to expand production through M&A

Aluminum Corp of China (Chalco) pledged to continue to expand its operations after posting a 67 percent jump in net profit for 2006 on the back of increased output. Net profit came to US$1.52 billion, up from US$906.63 million in 2005, as the company produced 8.83 million metric tons of alumina and 1.93 million tons of primary aluminium, a year-on-year rise of 23 percent and 84 percent respectively. CEO Xiao Yaqing said Chalco will seek to acquire aluminium enterprises in 2007 using funds raised through an A-share listing and other sources.

Investment to be curbed

Macroeconomic control measures have to be expanded this year to curb excessive investment in fixed assets and the energy sector, according to Ma Kai, director of the National Development and Reform Commission. China's 24 percent increase in fixed-asset investment in 2006 has spurred government authorities to look for ways to control the size of investment and enhance returns. Ma said the key to reining in excessive investment is to control the supply of land and currency, and limit the number of infrastructure projects.

Illegal share task force launched

China set up a task force to crack down on illicit activities in the securities market and help related agencies pursue suspected crimes. The committee will include the vice-chairman of the China Securities Regulatory Commission, the deputy governor of the central bank and the deputy head of the Supreme Court. China's securities market has been plagued by fraud in the past due to lax supervision, which has prompted prompting Beijing to launch repeated crackdowns.

Scientists plan stem-cell research

Scientists are preparing for a 2008 clinical trial which will use stem cells to help 400 patients with spinal cord injuries in Hong Kong, mainland China and Taiwan grow new cells and nerve fibres. Stem cells from umbilical cord blood will be injected into the spinal cords of the participants, who will also be given lithium to help stimulate cell regeneration, according to a researcher with the project in Hong Kong. The trial is aimed at studying a broad range of patients.

New drug laws on the way

The central government is planning a basic medicine system to control rising drug prices and improve access to health care. The system, which includes a list of necessary drugs that would be produced and distributed under government control and supervision, will improve the accessibility of a range of basic medicines and prevent manufacturers from dodging existing price controls, according to Gao Qiang, China's health minister. China steadily reduced its health care funding during the beginning of its economic reforms, resulting in deficits for public health institutions and leading hospitals to create their own revenue by selling drugs.

New trading changes for Shanghai exchange

The Shanghai Stock Exchange (SSE) has proposed to double the limit of daily share price movements, allow day trading and expand short-selling activities, in order to boost market turnover and increase volatility, according to a report based on a survey of investors with the New York Stock Exchange, Euronext and the Hong Kong Stock Exchange. The SSE has suggested allowing stock prices to move by up to 20 percent from 10 percent in an effort to improve its trading system.

New management for Nasdaq

The Nasdaq Stock Market has appointed new management in Asia, seeking to boost listings by companies in China and elsewhere in the region. Eric D. Landheer, previously the managing director for new listings at Nasdaq in London, has been made head of Asia Pacific. Also, Guang Xun Xu, a consultant in China and Nasdaq's managing director for Asia between 1994 and 2004, was appointed as the company's co-chief representative in China. Nasdaq currently lists 38 companies from China with a market capitalization of about US$30 billion.

Rise in assets predicted

China's asset-management market is set to grow strongly over the next decade as billions of dollars in savings are invested and regulators allow access to a wider range of products, according to McKinsey. The consultancy group predicted that the mainland market would grow 25 percent annually from the current US$156 billion (?117 billion) to US$1.4 trillion by 2016. Assets under management make up only 8 percent of gross domestic product in the mainland, against 24 percent in Taiwan, 28 percent in South Korea and up to 214 percent in the US.

Inflation picks up on higher food prices

Inflation picked up in China in February and economists warned it could pick up steam alongside the economy. The consumer-price index (CPI) rose 2.7 percent in February from 2006, according to figures from the National Bureau of Statistics. In January, the CPI rose 2.2 percent. Economists and officials said the rise has been caused by tight supplies of grain and not widespread price increases. Food prices rose 6 percent, much higher than the average 1 percent hike among non-food items.

Booming trade surplus

China announced a near-record US$23.8 billion (?17.9 billion) trade surplus in February. Authorities said the surplus was almost 10 times the figure a year earlier and nearly matched the record of US$23.8 billion set in October. In response to the surplus, some US senators suggested levying a 27.5 percent tariff on Chinese goods and even cancelling China's most-favoured nation status, which gives it preferential policies as a developing country. Chinese officials opposed the idea, suggesting it violated the rules of the World Trade Organisation. China denies gouging Africa China has said it is not scheming to milk Africa of its oil and other natural resources through unequal trade, stating that it has been trying to normalise trade with the continent rather than gouge resources. China's commerce minister Bo Xilai responded to criticism that China only wants to get the resources it needs from Africa while allegedly burdening the continent's nations with unnecessary debt. He pointed to statistics showing China accounted for 8.7 percent of total oil exports from Africa last year, but oil exports to Europe and the US made up 36 percent and 33 percent of the total.

BANKING

UBS gains brokerage ownership rights

UBS has become the first overseas securities firm to win the right to own a Chinese brokerage as soon as the law permits, according to state media. The bank, which will initially own 20 percent of the UBS Securities venture, has a written agreement that its five Chinese partners are willing to sell their stakes. Gaining a bigger stake would help Zurich-based UBS control its expansion in China, where total market capitalisation tripled in value in the past 12 months and more than US$20 billion of share sales are planned in 2007.

Domestic banks eye overseas expansion

China Merchants Bank (CMB), China Construction Bank (CCB) and China Minsheng Bank are all eyeing overseas acquisitions, according to statements from their chairmen. CMB is interested in buying banks in Asia, particularly Southeast Asia, while CCB is targeting lenders which already have close relations with its retail and corporate customers. CCB Chairman Guo Shuqing said the bank had established customer networks in the US, Europe, Southeast Asia and Africa. Minsheng, China's first privately held lender, is looking at potential acquisitions in Hong Kong.

Central bank increases reserve ratio

The People's Bank of China (PBOC) has raised its reserve ratio for financial institutions engaged in deposit business by 0.5 percent to 10 percent to absorb liquidity, according to state media. Analysts project ratio hikes to rise as high as 11.5 percent in 2007. The PBOC has increased the reserve ratio five times since July 2006, with the latest move expected to take US$23.22 billion out of the banking pool.

International banking agreement

Key mainland banks will implement Basel II, an international agreement governing the capital adequacy standards of banks. The China Banking Regulatory Commission will implement the agreement in stages beginning in 2010, starting with large commercial banks that have overseas business at that time. Hong Kong banks were among the first in the world to comply with Basel II, which takes into account a bank's operational risk as well as credit risk, setting a standard that better reflects the potential for loss.

INSURANCE

Ping An debut fails to stop further market decline

Shares in Ping An Insurance rose 38 percent as the company made its domestic debut on March 1. Opening at the initial public offering price of RMB33.80, Ping An shares reached as high as RMB50.97 - a 51 percent gain - before slipping back to RMB46.79 at close. The insurance giant is one of a number of Chinese listed in Hong Kong that are looking to sell shares in their domestic market as well. Ping An, in which HSBC has a 16.7 percent stake, raised US$5 billion (?3.78 billion) in its IPO, the second-largest amount ever.

New China Life delays IPO

New China Life Insurance will delay its initial public offering - worth up to US$1 billion (?758 million) - until at least 2009 due to a prolonged investigation of the firm, according to one of its shareholders. China's fourth-largest coverage insurer will first complete the reorganisation of its board before deciding on its listing plan and other strategies, according to Zhang Hongwei, chairman of Orient Group. Orient Group is one of the mainland's largest privately-owned firms, which also owns 13 percent of New China Life Insurance.

ENERGY

Local growth targets to ruin energy-saving plans

China is likely to miss its 2004-2020 energy-saving target because local governments set higher energy consumption ceilings in a bid to boost growth. The claim was made in the Development Report of China's Regional Economy, produced by local experts with the Chinese Academy of Social Sciences. It said local governments have made it "impossible" to reach the National Development and Reform Commission's target of quadrupling 2000-level GDP by 2020 while using only twice as much energy.

Massive energy plant to be built

China plans to invest US$12.8 billion (?9.7 billion) to develop Asia's largest coal-to-chemical production base in the north-western region of Ningxia in a move to diversify fuel sources. The plan is part of the more than US$21.79 billion of investment in chemical projects that also involves Asia's biggest oil producer, PetroChina. Shenhua, China's largest coal producer, has already begun building its US$1.7 billion plant in Ningxia. The company will use technology from German engineering group Lurgi, and is expected to complete the project by the first half of 2010.

China becomes net importer of coal

China, the world's largest consumer of coal, became a net importer of coal in January for the first time. China imported 4.7 million tonnes of coal in January, a rise of 81.1 percent from 2006. Coal exports last month fell 20.4 percent to 3.29 million tonnes, the fourth consecutive month of year-on-year declines. Increased demand from China's energy-hungry economy could push international coal prices higher, as the coal shortage has been brought on by transport bottlenecks and the cancellation of tax rebates.

Angola calls off Sinopec oil investment

Sinopec's plans to invest US$3.7 billion (?2.8 billion) in an oil factory in Angola were cancelled by state oil company Sonango. This is the first big setback in Africa for the Chinese state oil companies, all of which have been busy sealing exploration and production deals on the continent. Anabela Fonseca, vice president of Sonangol, said at an oil refiners' conference that the company wanted to carry out the project on its own. In 2004, Angola agreed to a US$2 billion credit line with Beijing, backed by oil revenues, and this was increased by a further US$1 billion last year.

Shell-Sinopec gas venture starts production

Royal Dutch Shell started natural gas production from the Changbei gas field in the northern territories of Inner Mongolia and Shanxi as part of a sharing contract with PetroChina. The 1,693-square-kilometre field in which Shell will spend US$600-700 million (?455-531 million) drilling some 50 wells over the next seven years, is one of the biggest joint ventures in China's oil and gas industry. Much of the gas will be used to meet Beijing's growing energy needs. The Changbei field is expected to produce 3 billion cubic metres of gas per year.

CNPC on CSR

China National Petroleum Corp (CNPC) released its first corporate social responsibility report, which gives details of CNPC's achievements in workplace safety, environmental protection, greenhouse gas reduction, clean energy development and social welfare. CNPC - the parent of internationally listed PetroChina - is said to be the fourth state firm to issue a CSR report (published separately from annual financial reports) as Chinese companies look to meet international corporate practices. The other companies that have produced reports are Baosteel Group, State Grid Corp and China National Offshore Oil Corp.

Carbon trading system planned

The United Nations and China will collaborate on a multibillion-dollar global exchange in carbon credits to be located in Beijing. The exchange would be the first in the developing world, opening up the Chinese market in carbon and competing against private carbon exchanges in Europe and the US. About US$3 billion (?2.3 billion) in carbon credits were traded in the first nine months of 2006 in developing countries. China is expected to account for 41 percent of all UN-issued carbon credits by 2012.

TELECOMS

600 million mobile users by 2010

China is expected to have more than 600 million mobile phone users by 2010. The Ministry of Information Industry said the number of users this year should reach 520 million, up from 460 million in 2006. It also said the number of Chinese people using the internet will top 200 million, accounting for 15 percent of the country's population. China currently has the world's second-largest population of internet users after the US, with 137 million people online.

Truce reached over fixed lines

China Telecom and China Netcom have sealed a deal intended to limit competition and leave each in control of its core markets. The dispute between the parent companies revealed conflicts of interest in the country's state-controlled, but foreign-invested telecommunications sector. China's four fixed-line and wireless operators were carved out of the former telecoms monopoly to create a competitive industry. China Telecom currently operates the fixed-line telephone network in central and southern provinces, while China Netcom focuses on the northern regions.

TECHNOLOGY

New internet caf¨¦ licences suspended

Chinese authorities will not approve any more internet caf¨¦ licenses in 2007, according to the Culture Ministry. The announcement, made on the ministry's website, also promised to crack down on gambling through online games as well as the use of virtual currencies. According to state media, the curbs are part of efforts to control rising internet addiction, with 13 percent of all internet users under the age of 18 said to be addicted to going online.

Spacewalks planned for 2008

China plans to carry out its third manned space mission next year, during which two of the three astronauts will perform spacewalks. Huang Chunping, chief consultant for China's manned launching vehicle system, was quoted as saying that the Shenzhou VII spacecraft would be ready in 2007 but further work was required on the suits the astronauts will wear on the spacewalk. He said no decision had been made on how long the walks would be and that the mission would not be timed with the Beijing Olympics in mind.

New blogging laws

China will intensify controls of the growing numbers of bloggers using the internet. The director of China's General Administration of Press and Publication, Long Xinmin, said the government is forming rules to further regulate internet publishing, including the millions of bloggers in China. By last September, the number of weblogs sites in China had reached 34 million, a 30-fold increase from four years before.

PHARMACEUTICAL

New ban on pharma investments

China banned its drug regulators from owning stock in pharmaceutical companies in order to clean up the scandal-plagued industry. Drug companies are accused of bribing regulators and paying off doctors and hospitals to use substandard products. Beijing is investigating a former State Food and Drug Administration director accused of taking bribes to approve drugs that were subsequently blamed in a string of deaths. Authorities have ordered a review of thousands of drug licenses to see whether any were improperly granted.

AVIATION

New airports planned for western China

China will spend US$6.7 billion (?5.1 billion) over a four-year period on 37 new airports and the expansion of 31 others in the west of the country, according to state media. The civil aviation authorities said that China's western regions account for just 38 percent of the country's airports, with the remote northwest particularly deprived. An airport planned for Tibet will be the highest in the world at over 4,000 metres above sea level.

Used car market to skyrocket

China's used car market is expected to boom over the next two years as 36 percent of current car owners plan to buy a new or used vehicle, according to the China Association of Automobile Manufacturers. Statistics show that more than 1.9 million used cars were traded in China in 2006, up 31.5 percent over 2005, a growth rate that was 6.37 percent higher than that of new car sales. It is the third consecutive year that used car sales growth beat the growth of new car sales.

HUMAN RESOURCES

Tougher job market predicted

Competition in the mainland job market is expected to intensify, with projections that another 10 million people will be jobless by 2010. Labour and Social Security Minister Tian Chengping said that excess labour and structural unemployment are serious problems and that the labour market requires more regulation. The labour supply is expected to top 830 million by 2010, with an additional 50 million residents joining the labour force in urban areas. Only 40 million jobs will have been created, leaving an extra 10 million people without work.

Guangdong faces increased labour shortage

Guangdong's labour shortage is expected to increase in 2007 as more migrant workers leave the province due to poor working conditions and low wages. Local labour officials estimate that Guangdong's demand for skilled workers will increase by 20 percent this year and the number of ordinary workers needed will rise by 10 percent. The Guangdong Labour and Social Security Bureau has asked local governments to organise more job fairs in an attempt to attract more migrant workers.

Migrant workers face abuse

China's migrant workers are becoming an "urban underclass," due to economic exploitation and residency rules that deny them access to medical, housing and education benefits, according to a report released by Amnesty International. Workers from China's rural areas are forced to work overtime and are fined for being late or not meeting production quotas. Pay is also routinely withheld to keep migrants from changing jobs. Chinese officials and legislators have said they are debating how to overhaul the residency system but no timetable has been set to replace the current model.

CONSUMER

Record spending over Chinese New Year

A record US$5.6 billion was generated in tourism revenues during the week-long Chinese New Year holiday, a year-on-year rise of 19 percent, according to state media. The National Tourism Administration said that 92.2 million tourists travelled across the country during the break, a jump of 17.7 percent from 2006. Retail sales of consumer goods rose 15 percent year-on-year to US$28.2 billion during the holiday, according to China's Ministry of Commerce.

Retail sales soar

China's retail sales in January and February grew at the fastest pace in more than two years as rising incomes boosted spending on food, cars, electronics and clothing. Reported sales for the two months combined rose 14.7 percent to US$187 billion (?141 billion) after gaining 14.6 percent in December, according to the National Bureau of Statistics. The government has raised minimum wages and increased welfare spending to boost consumption and reduce the economy's dependence on exports and investment. General Motors China contributed to the jump with a 48 percent increase in vehicle sales.

Foreign tax breaks to end

Chinese lawmakers have formally introduced groundbreaking laws to end nearly three decades of blanket tax breaks for foreign investors that have been a hallmark of China's economy and attracted nearly US$700 billion in foreign direct investment since reform and opening up. The proposed tax law will unify the tax rate for foreign-financed companies with those of Chinese enterprises at 25 percent, in a step that will raise the tax burden considerably for many companies. Vice Chairman Wang Zhaoguo, a member of the Communist Party's powerful Politburo, said the country's economic and social changes have made the laws necessary. Chinese companies were also complaining of the unfair advantages given to foreign investors. The feeling is that China no longer needs to offer special incentives to attract foreign investment and the change is part of efforts to meet World Trade Organisation commitments to treat companies equally. Despite the effort, however, tax collection ultimately relies on local authorities, and so it remains to be seen how effective implementation of the law will be.

China manages its huge forex reserves

China began preparations for the creation of an entity to manage the country's massive foreign exchange reserves. The new group will be related to Central Huijin Investment, a state agency that has invested foreign exchange reserves to recapitalise domestic financial companies. China had US$1.07 trillion (?811 billion) in foreign exchange reserves at the end of 2006 and has been actively exploring ways to diversify its holdings.

Central bank Vice Governor Wu Xiaoling said the establishment of the agency does not mean China will stop buying US treasuries. About three-quarters of China's foreign exchange reserves are believed to be held in US-dollar-denominated assets, partly due to Beijing's efforts to retain tight control of the yuan. Speaking at a meeting of central bank governors from the Group of 10 nations, Wu added that no timeframe had been set for creating the agency. Finance Minister Jin Renqing announced at the National People's Congress that the agency will be modelled in part on Temasek, the investment arm of the Singaporean government. It is thought that Lou Jiwei, a former vice minister of finance, will run the agency with an initial quota of US$300 million.