BRIEFS

GENERAL

Dollar still important

The People's Bank of China, China's central bank, said in its first-quarter monetary policy report that the country would retain its US-dollar-denominated assets when diversifying its foreign exchange reserves. It also noted it would widen the foreign currency investment channel when dealing with newly added reserves, suggesting dollar-denominated assets would remain an important part of China's outbound investment. The report also said there was a risk of inflation and a rebound in investment, and further cooling measures should be taken to prevent the economy from overheating.

New agency to manage reserves

A newly created agency to manage China's reserves of foreign exchange more flexibly could be up and running soon. The plan was first announced in March and Beijing tapped former finance vice-minister Lou Jiwei to run it. The agency would help manage part of the country's US$1.2 trillion (?890 billion) in foreign reserves. It could start operations this year with some US$200 billion in funds. The government wants the agency to improve the yields and diversify the risks associated with investing the country's reserves.

More IPOs in US

Up to 35 Chinese companies are expected to list in the US this year, as many as in the last three years combined, according to Eric Landheer, NASDAQ's Asia Pacific chief. Mobile phone manufacturer Qiao Xing Mobile, television marketing firm Acorn International and solar panel maker LDK Solar are set for listings in New York in May. Together, they are likely to raise nearly US$1 billion (?740 million), almost equal to the entire amount raised by Chinese companies in US offerings last year. London's Alternative Investment Market attracted 28 Chinese companies in 2006 and expects a similar number this year.

Strong gains in steel

China's steelmakers posted strong first-quarter gains powered by higher prices, increased output and soaring demand. Baoshan Iron & Steel (Baosteel) said net profits jumped 156 percent to US$480 million (?356 million) in the first three months of the year. Competitor Ma'anshan Iron & Steel posted a jump in earnings of 80 percent to US$69 million while Shanxi Taigan Stainless Steel said net profits jumped a massive 759 percent to US$160 million. Steelmakers in China produced 22.3 percent more crude steel than the first quarter of 2006 for a total of 114.7 million tonnes and exported 120 percent more for a total of 14.13 million tonnes.

Tata taps China

India's biggest outsourcing company, Tata Consultancy Services (TCS), plans to increase its China staff fourfold to 5,000 in four years. "We can easily grow to 3,000 or 5,000 in Hungary, but not to 50,000 like we could in China," said N. Chandrasekaran, TCS global head of sales and operations. China is still relatively small in terms of IT outsourcing - TCS currently has around 90,000 employees in the country, far more than the 8,000 who work for the largest domestic player, Shenyang Neusoft.

BANKING

Banks to invest globally

Chinese banks were given the go-ahead to invest as much as 50 percent of their overseas investment quotas in equity funds endorsed by overseas regulators such as the Hong Kong Securities and Futures Commission. This latest liberalisation in the Qualified Domestic Institutional Investor (QDII) program is seen as a move to encourage capital outflows from the overheating Chinese economy. Deutsche Bank estimates about US$10 billion (?7.4 billion) will leave the country over the next 12 months, while Morgan Stanley predicts a US$23.4 billion medium-term outflow. Foreign fund managers can now target the Chinese wealth management market without setting up mandatory local operations.

Mutual funds boom

Mutual fund assets topped US$150 billion (?110 billion) for the first time during the first three months of this year. At the end of March, the country's 55 fund management companies were running 319 funds worth a total of US$153.3 billion. This is 38 percent more than the US$110.9 billion under management in 307 funds at the end of 2006. It is estimated that US$21 billion was removed from bank deposits in the first quarter with the stated use of going into funds.

BOA debuts credit cards

Bank of America and China Construction Bank announced plans to jointly develop a co-branded credit card business in China, following the model of competitors Citigroup and HSBC. The two banks have a two-stage business plan, beginning with CCB setting up anndependent credit card unit to which BOA will provide consulting services. Bank of America's $2.5 billion (?1.9 billion) purchase of a 9 percent stake in China's second-largest bank in 2005 has yielded tremendous financial rewards on the books for the US bank, as CCB shares have doubled since its IPO a year ago.

China Post's insurance plan

China Postal Group applied to start offering insurance services. According to the application document submitted to the China Insurance Regulatory Commission, China Postal Group will run the business independently, emerging as a potential rival to the postal authority's existing insurance joint venture with Paris-based CNP Assurances. In March, the post office's deposit-taking arm was separated from the standard mail services to create the China Postal Savings Bank. It is the country's fifth-largest lender by number of outlets. ENERGY

Sinopec tops Exxon in tanker hiring

Asia's largest oil refiner, China Petroleum & Chemical Corp (Sinopec), may hire more supertankers than ExxonMobil for the first time this year as it seeks to haul oil from Angola and Venezuela. Sinopec hired 103 tankers in the single-voyage market in 2006, up from 86 in 2005. ExxonMobil, the world's largest publicly traded company, hired 149 last year. China's crude oil imports rose 8.9 percent in March to a record 13.9 million metric tonnes, or 3.3 million barrels a day.

Acquisitions boost CITIC's oil

Hong Kong listed CITIC Resources will become the fourth-largest oil producer in China after a purchase of an oil asset in Kazakhstan and an oil field in Bohai Bay for US$1.15 billion (?850 million). The company will buy a 50 percent interest in JSC Karazhanbasmunai, Argymak Trans Service and Tulpar Munai Services. The purchase heralds an increased focus at CITIC Resources on oil and gas with oil revenue expected to become the largest profit contributor, according to chairman Peter Viem Kwok.

China's nuclear power roadmap

China is looking to fuel its nuclear power industry with largely self-developed technology by 2020. The country has been advocating greater use of nuclear energy as part of its efforts to reduce global warming gases emitted from burning fossil fuels. China's first self-developed pressurised water reactor is expected to be put to use by 2017. The State Nuclear Power Technology Company recently purchased four nuclear reactors and technological transfer from the Westinghouse Electric Company. TRADE

Sino-Japanese trade hits record

China overtook the US to become Japan's largest trading partner for the year through March, according to the Japanese government announcement. Japanese exports to China were up 21.2 percent from the previous fiscal year to US$95 billion (?70 billion), while imports from China rose 13 percent to US$119 billion. Semiconductors and electronic products were the major exports, and auto and metals were the key imports. The total value of Sino-Japanese trade - which does not include figures for Hong Kong - increased 9.6 percent. Japan's trade deficit with China for the fiscal year was US$23.61 billion.

RMB into Saudi project

Two Chinese companies plan to invest in a US$4 billion (?3 billion) aluminium plant in Saudi Arabia. The deal may underline how the trade relationship between Beijing and Riyadh is moving beyond China's need for oil. The investment could be one of the largest ever made by China in the Middle East. China National Machinery Industry, or Sinomach, and China Nonferrous Metal Industry's Foreign Engineering & Construction (NFC) plan to produce 1.6 million tonnes of alumina and 700,000 tonnes of aluminium annually.

TECH/TELECOM

Software piracy declining

Software piracy in China has been dropping for three years, according to a recent study by International Data Corp. The study found that 82 percent of software used in China last year was pirated, compared to 92 percent in 2003 and 86 percent in 2005. Software companies gained US$864 million (?641 million) from the decline in copied software. The study also found that the authentic software market grew by 88 percent to US$1.2 billion last year. China is the world's second-largest personal computer market.

China Mobile struggles for profitability

China Mobile expects to continue adding 4-5 million new subscribers every month, but average revenue per user (ARPU) will decline as most new customers are in rural areas, according to Wang Jianzhou, the company's chairman and chief executive. China Mobile currently draws an average of US$11 (?8.15) per month from each of its users. It had 316.12 million subscribers at the end of March and a market value of about US$185 billion, making it the world's biggest wireless company and second-largest telecom company.

Private equity funds eye SMIC

Bain Partners, General Atlantic and Kohlberg Kravis Roberts are among those interested in purchasing a stake in Semiconductor Manufacturing International Corp (SMIC), China's largest chipmaker. The private equity firms are willing to spend about US$600 million for 20-25 percent of the Shanghai-based company. However, SMIC is extending the completion deadline, originally set or the end of the month, in the hope of attracting interest from the likes of TPG-Newbridge and Blackstone Group.

Microsoft, Lenovo to team up

Microsoft announced that it would set up a multimillion-dollar R&D centre in Beijing in partnership with Lenovo, the domestic computer manufacturer. Each company will hold a 50 percent share in the centre, which will be located at Lenovo's corporate headquarters. The two companies will share intellectual property and collaborate on project in the consumer and mobile markets, such as smart handsets, ultra-portable personal computers, and digital-media and internet applications. The software giant, who struck a deal with Lenovo in 2005 for its operating systems to be pre-installed on the computers sold in China, hopes to further exploit the company's dominance in its home market.

Yahoo loses piracy case

A Beijing court ordered Yahoo China to delete links to free websites offering music downloads and to pay US$27,200 (?20,200) for facilitating distribution of unlicensed songs by other sites. But in its ruling, Beijing's No. 2 Intermediate Court said Yahoo China was not responsible for copyright infringement because all the music was downloaded from servers of third-party websites. In early January, music industry giants including Warner Music Group sued Yahoo China for alleged copyright infringement involving more than 200 unlicensed songs, seeking damages of US$710,000. Yahoo China said in a statement it would file an appeal.

CONSUMER

Wahaha resists Danone takeover

China's largest beverage maker, Hangzhou Wahaha Group said they are opposed to a series of takeovers by the French group Danone which would result in the loss of Chinese control of their brand. Wahaha, in which Danone has a 51 percent stake, will not agree to the French firm's plan to buy its remaining assets for US$519 million (?385 million), according to Zong Qinghou, chairman of the Chinese beverage maker. Danone, one of the world's largest yoghurt makers, set up five joint ventures with Wahaha in 1996 under an agreement that bars the Chinese company from making products that compete with it.

Best Buy buys into Five Star

US electronic goods retailer Best Buy bought a further 20 percent of domestic electronics retailer Jiangsu Five Star as it seeks to expand in second and third-tier cities. The company, which bought 50 percent of the 136-branch chain for US$180 million (?130 million) last year, refused to confirm the deal. Best Buy China Chairman Lu Weimin said that the company had a controlling stake in Five Star and would look to add 23 stores to its network this year. Lu refuted speculation that Best Buy is in talks to buy Beijing Dazhong Electronics.

TRANSPORTATION

Airspace to open up

China plans to categorise its airspace according to international standards within three years, opening up the skies for private airplanes. The Civil Aviation Administration of China (CAAC) said the move would cut down on complex legal requirements for private aircraft. The move may boost sales of private aircraft as China's skies, which are currently under military control, are becoming more open and low-altitude flights are allowed.

Faster trains for China

China began running trains that can reach speeds of 200 kilometres per hour, joining a small group of nations capable of operating high speed locomotives. The first of 140 new trains left Shanghai station in late April, travelling 80km to Suzhou. The total number of trains is expected to rise to 257 by the end of the year. Running at 200-250 kilometres per hour, they will expand national railway passenger capacity by 18 percent, or 340,000 seats a day. Much of the technology used in the trains has come through transfer agreements with Japan's Mitsubishi-Kawasaki, Canada's Bombardier, Germany's Siemens and France's Alstom.

Rail network set for break-up

China's railroad network is to be broken up into at least five companies based on geography. The rail network is currently split up into 16 bureaus run nationally under the Ministry of Railways. The move is intended to be towards increased efficiency, but will likely to be accompanied by higher prices. Tariffs for rail cargo are expected to rise 20-50 percent over the next two years. Basic fares on passenger trains are expected to stay, although efforts will be made to offer a value-added experience at a premium to cater to China's growing middle and upper classes.