Regulatory super-agency proposed
The State Council was said to be considering a draft proposal for a financial "super-agency". The body would coordinate policy formation and oversight among the country's financial regulatory departments, the South China Morning Post reported. An inter-agency group comprising senior officials from the People's Bank of China, the Ministry of Finance, the National Development and Reform Commission and the banking, securities, and insurance regulators has been discussing the proposal for several months.
Morgan Stanley top underwriter
High profile efforts to woo China business paid off for US investment bank Morgan Stanley as it finished as top underwriter for Chinese public offerings in the 12 months ending on June 30. The company advised on half of the 10 largest offerings by Chinese companies in the period, including the US$9.2 billion IPO of China Construction Bank. It finished ahead of Goldman Sachs, Bank of China and UBS.
Share swap rules pave way for M&A
New regulations providing a framework for foreign investment in local companies via share swaps were announced by the Ministry of Commerce. Under the new rules, which take effect September 9, such transactions could theorectically be used for mergers and acquisitions. Foreign companies that want to undertake a share swap deal must be listed abroad and have had steady stock prices for a year.
Margin trading licenses out soon
Domestic brokerages looked set to be awarded margin trading licenses by the end of August. Citic Securities, Orient Securities and Guotai Junan Securities were tipped as the first companies to be allowed to lend money to clients to buy stocks and bonds. At least five other companies have applied to the regulator for permission to offer the service. These companies are among the dozen or so of China's 109 brokerages named "innovative companies" by the regulator, a title which allows them to apply to provide new financial products.
BANKING
Managerial merry-go-round
China Construction Bank's (CCB) vice-chairman and president, Chang Zhenming, announced his resignation from the bank in order to fulfill the same role at state investment conglomerate Citic. The move is part of a larger reshuffle triggered by the impending retirement of Citic chairman Wang Jun, whose post will be taken by current vice-chairman Kong Dan. Chang's place at CCB will go to Zhang Jianguo, president of Bank of Communications.
Fresh bids for GDB
New bids were expected at the end of July for Guangdong Development Bank (GDB) from Citigroup and Soci?t? G?n?rale (SocGen). In the latest round of this protracted bidding war, both sides are said to be targeting a 20% stake in the bank. Citigroup has brought China Life into its consortium, while rival SocGen has secured the backing of Baosteel and Sinopec.
Bank of Beijing poised to expand
Bank of Beijing said it would open a branch in nearby Tianjin by the end of the year as the first step in an nationwide expansion strategy. It is only the second of China's 113 city commercial banks permitted to offer services beyond its home market, after Bank of Shanghai. Bank of Beijing hopes to launch an initial public offering in the second half of 2007.
FOREIGN TRADE
Trade surplus hits new record high
China's trade surplus hit US$14.6 billion in July, a third straight monthly record. For the first six months of the year, the surplus was US$61.45 billion, more than half the US$102 billion recorded in 2005. Exports rose 22.6% in July from a year earlier and imports increased by 19.7% to US$65.72 billion. Exports have risen about 25% in the first half of 2006 from a year earlier, while imports were up 21%.
Warning on economic nationalism
Restrictions on foreign investment and technology policies that favor local businesses could push China toward economic nationalism, warned US Department of Commerce Undersecretary of International Frade Franklin Lavin during a trip to China in August. Intense pressure on China to maintain rapid economic growth while fulfilling its commitments to widening market access could turn the government against reform, Lavin said.
Export tax rebates cut
China planned to reduce tax rebates on exports of resource-intensive and environmentally-harmful products, Caijing magazine reported in late July. Although the new policy was still unreleased, it was scheduled to take effect in September or October despite protests from domestic companies and traders. The move reflects Beijing's efforts to shift China's production base away from low-value-added exports.
US approves graphite deal
President George W. Bush approved a deal that would see 900 tonnes of bulk graphite exported from the US to China, saying the deal would not hurt his country's space launch industry. Chinese firms plan to use the graphite to make electrodes and moulds. As graphite can also be used to produce nozzles for rocket motors, the deal required a special US government review.
MACROECONOMICS
Hu speaks out
In a rare speech that touched on economic issues, President Hu Jintao called for tighter controls on China's fast-growing economy. Hu said the government must "control the scale of investment" in the second half of the year. He did not unveil any new measures beyond recent real estate and bank lending clampdowns. The timing of Hu's speech stresses Beijing's concern with second-quarter growth of 11.3%, the highest in 12 years.
Beijing gets tough on land use
The State Council said it would impose tighter controls on land supply to hold back rampant investment in new infrastructure and industrial projects. Higher compensation payments will go to farmers whose land is used for development projects and larger fees will also be imposed on land use transactions to prevent illegal use. Local officials will face stricter penalties for involvement in illegal land grabs.
Call for more foreign capital
Injections of foreign capital could spur reforms at state owned enterprises, said Ministry of Commerce researcher Wang Zhile. Wang, director of the Research Centre for Transnational Corporations, said "research shows that many state-owned enterprises that have just been approved to partner with transnationals have improved their competitiveness ? These enterprises lack the drive to self develop."
Provinces beat national growth rate
Three-quarters of China's provinces saw growth of 12% during the first half of the year, higher than the national average. Every province, region and municipality in China saw double-digit growth while 23 topped the 12% benchmark, according to figures released August 8 by the National Development and Reform Commission.
China's credit rating raised
Considering rosy growth prospects and banking sector improvements, Standard & Poor's raised China's credit rating at the end of July from "A-" to "A", the same rating as Chile, Greece and South Korea. It is the second upgrade in as many years and may reflect newfound faith in the country's ability to cool the economy.
More cooling measures sought
The National Development and Reform Commission (NDRC) renewed calls for curbs on capital spending and credit ahead of a meeting of more than 100 top central and regional economic officials. An NDRC report in early August warned that failure to curb fixed-asset investment and credit growth could threaten economic and social stability. It identified rapid fixed-asset investment growth, excessive liquidity and the nation's trade surplus as the three main problems. Urban fixed-asset investment grew 31.3% in the first half of this year, 4.2 points faster than last year and well above the government's projected 18%.
MEDIA, TECH & TELECOM
Lenovo back in black
The world's third-largest PC maker Lenovo bettered analysts' expectations for net profits in the three months to June, booking US$5 million despite writing off US$19 million of its planned restructuring costs. The company posted a loss in the previous quarter. Analysts expect Lenovo to feel increased pressure over the coming months following price cuts by rival Dell.
Foreign web investors targeted
The Ministry of Information Industry (MII) ordered domestic telecom companies to not lease or sell Internet licenses to foreign investors. It is part of a move to tighten regulations on foreigners operating internet services in China. The MII said some investors sidestep regulations by using shared or borrowed licenses as well as the domain names and trademarks of Chinese partners' to offer services.
PCCW ends buyout talks
Hong Kong's dominant phone operator PCCW announced it had ended buyout talks with Australia's Macquarie Bank and US 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% stake – strongly opposed the asset sale. PCCW chairman Richard Li Tzar-kai announced earlier he would sell his 22.7% stake in the company to former investment banker Francis Leung Pak-to for US$1.15 billion.
ENERGY
Power price easing possible
Price liberalization is being considered for oil, power and other resources in an attempt to curtail widespread waste, Bi Jingquan, a deputy minister at the National Development and Reform Commission, said. The government was "determined to make prices more dependent on market forces," Bi said. Beijing has been concerned that easing price controls could lead to job losses and potential social unrest, but it is thought that the need to peg back China's runaway growth has forced its hand.
Oil imports on the rise
Crude oil imports rose 17.6% to 492 million barrels in the first six months of the year, adding to concerns that runaway Chinese demand is pushing up global prices. However, China National Offshore Oil Corp Chairman Fu Chengyu told Bloomberg the country's oil imports had "stabilized" and may decline within three years. The International Energy Agency expects oil imports to rise to 4.4 million barrels a day in 2009 from the current 3.3 million.
Coal venture in pipeline
China Petrochemical, or Sinopec, was said to be on course to set up a US$2.63 billion coal-conversion joint venture with China National Coal Group, the country's second-largest coal producer by output, The project, which is to be based in Inner Mongolia and start operations around 2010, would supply power to eastern China. It will have an annual capacity of 4.2 million metric tons of methanol and three million tons of dimethyl ether (DME). The conversion of coal to DME is being encouraged as it is more efficient than diesel and produces fewer emissions.
Jet fuel price hikes continue
The National Development and Reform Commission raised domestic jet fuel prices by about 5% to US$725 a metric ton from July 21. The increase was in step with higher international prices, but was likely to increase losses at domestic airlines which had already lost US$322 million in the first half of 2006, largely due to two previous jet fuel price hikes since March.
Suntech to acquire MSK
Suntech Power, one of the world's largest solar-power companies, agreed to buy MSK of Japan for as much as US$300 million. It is the biggest acquisition by a Chinese company of a Japanese firm. The Wuxi-based, New York Stock Exchange-listed firm, which makes photovoltaic equipment, is currently aggressively expanding overseas. The acquisition will give it access to MSK's sales and marketing platform in a market that Suntech says is difficult for foreign companies to enter.
