Highlights from the last week of business news in China: A-share action, laws under review and the National Audit Office’s latest findings
A-share action
It’s been a big week for IPOs. Cosco’s shares almost doubled in their trading debut in Shanghai, closing up 93% from their opening price at US$2.15 apiece. More A-share action is on the way with PetroChina’s planned Shanghai listing. It wants to offer 4 billion A-shares and raise nearly US$6 billion, just short of the record US$6.1 billion raised by ICBC’s listing last year. Both Cosco and PetroChina are also listed in Hong Kong. Other heavyweights like China Mobile and China Construction Bank have also announced A-share IPOs that would be within striking distance of the ICBC record, while a number of smaller IPOs are also in the works. Also this week, Fosun International, the mainland’s largest privately held conglomerate (its main businesses are steel, property and pharmaceuticals), has started its IPO roadshow. It plans to raise up to US$1.4 billion by listing in Hong Kong.
Laws under review
China’s highest law-making body, the Standing Committee of the National People’s Congress, is currently holding its 28th session. A number of draft laws and amendments are up for review, the biggest of which is probably the anti-monopoly draft law. The latest draft requires all cases of foreigners buying Chinese companies to be checked for national security issues before approval by the Ministry of Commerce, whereas currently only deals worth US$100 million or more were subject to Mofcom approval.
Another draft law being mooted on taxes on savings interest could have an impact on the markets. The proposed law would allow China’s cabinet, the State Council, to suspend or reduce the eight-year-long tax on interest gained in personal savings accounts. If taxes were cut on savings interest, retail investors who have been withdrawing from their accounts to put into the stock market may reconsider taking that risk, thus possibly calming the volatile A-share markets.
The energy conservation law could be amended to make construction projects required to meet energy-saving standards, and for existing structures to be open to regular inspections. Beijing’s five-year-plan for energy conservation calls for a 4% drop in energy use each year until 2010, though consumption dropped only 1.23% last year.
Watching out for the bottom line
The National Audit Office is presenting its findings to the Standing Committee of the National People’s Congress this week. According to the auditor-general, Li Jinhua, nicknamed “Iron Face” for his perceived incorruptibility, almost US$4.57 billion of government funds was misused last year, implicating 56 central government departments. Li also said that under new rules, local governments would have to pay for misused social security funds. Li’s team has been following the money rigorously since Shanghai’s since-ousted party boss Chen Liangyu was found to have abused US$420 million of the city’s social security funds last year.
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