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Business Tianjin Magazine - Business English Magazine in China
China considers extra $200bn for CIC sovereign wealth fund
Tuesday, 22 December 2009 15:23
China Investment Corp , the Chinese sovereign wealth fund, is expected to receive another injection of capital from the country's foreign exchange reserves in the coming months, according to government officials and people familiar with the fund.
While a final decision has yet to be made, these people said CIC would likely receive a similar amount to the initial $200bn (£124bn) it was given on its establishment in 2007.
Chinese media have also reported the government is considering a new capital injection of $200bn for the fund.
Any infusion would amount to an acknowledgement from Beijing that CIC has performed well during a time of global turmoil. It would also mark a turnround from a year ago when the fund was under attack for its early lossmaking investments in Morgan Stanley and US private equity firm Blackstone.
Bankers say that despite those hiccups the fund has managed its funds well through the crisis. It stayed mostly in cash last year before switching into highly liquid US dollar assets as the greenback bounced back in November 2008 and again in March this year.
As the global economy began to recover earlier this year, the fund was quick to make investments in commodities-related assets that benefit from a rebound in Chinese growth.
In recent months the fund has clinched a series of deals and has committed more than half of the funds it had available for offshore investments.
"Their performance has been very good by most measures and they have gotten through the Blackstone-Morgan Stanley debacle, which really hurt and constrained them in 2008," said one person who works closely with the fund.
China's foreign exchange reserves increased by $326bn to a total of $2,273bn in the first nine months of 2009. Beijing has repeatedly expressed its intention to gradually diversify away from low-yielding US government securities, which make up the bulk of the reserves.
Another factor influencing the decision to give CIC more money is the fact that China's largest banks are expected to raise roughly $50bn in new capital over the next couple of years to meet tighter regulatory requirements.
Since CIC holds controlling stakes in most of China's largest banks, the fund must provide much of this capital to avoid seeing its holdings diluted.
China eyes 8% GDP growth in 2010
Monday, 21 December 2009 15:48
China's government will aim for economic growth of about 8% next year, even as it faces a tougher time boosting domestic consumption as a driver of growth, its industry minister said on Monday.
The government has not yet officially announced its gross domestic growth target for next year, but 8% has been its official aim for the past several years.
"According to the economic growth target of about 8% decided by the central government, we target industrial output growth at about 11%," Li Yizhong, Minister of Industry and Information Technology, said in a work conference broadcast on the ministry's website.
Li said earlier that he expected industrial output to grow 11% this year as well. He added that exports would fall by about 17% this year.
Industrial production in the first 11 months was up 10.3% from the same period last year, with growth in November alone at 19.2%.
Next ChiNext firms triple their IPO sizes
Wednesday, 16 December 2009 15:55
SHANGHAI—The eight companies that make up the second batch of listings on China's new start-up board have tripled the amount they are seeking through initial public offerings, given the outsized gains in share prices of the firms that listed on ChiNext late October.
But analysts warned that the new stocks have unduly high valuations and said the securities regulator must decide whether to boost the number of IPOs as a way to clamp down on rampant speculation.
The eight companies said they will raise a total of 4.9 billion yuan ($717.6 million) from their IPOs, compared with the 1.6 billion yuan originally planned. Subscriptions begin Wednesday,
The companies have an average price/earnings ratio of 83.6, much higher than the average of around 50 among the 28 companies that first listed on the high-growth, high-risk board.
"The lofty price-to-earnings ratio has exceeded everyone's expectations and is a measure of how flush liquidity is," said Simon Wang, an analyst at Guoyuan Securities.
ChiNext, hosted by the Shenzhen Stock Exchange, was set up to help fill a funding void for the country's innovation-driven but cash-strapped small enterprises, many of which have largely been bypassed by China's recent lending boom.
The startup board opened Oct. 30, with the initial 28 companies gaining as much as 210% on their first trading day.
Boosting supply may be the most effective way to curb rampant speculation on ChiNext. That the regulator chose only eight companies for the second batch of IPOs shows it is being cautious but also is finding it difficult to find qualified candidates.
"Beijing is in a dilemma. If valuations on the ChiNext don't have the potential to jump higher, then investors will be less enthusiastic about it. But if valuations are too lofty, then the risk of a bubble heightens," Mr. Wang said.
The eight new ChiNext listings are Guangzhou Improve Medical Instruments Co., Wuxi Boton Belt Co., Hexin Flush Information Network Co., Beijing SuperMap Software Co., Beijing Cisri-Gaona Materials & Technology Co., Jiangsu Huasheng Tianlong Photoelectric Co., Jinlong Machinery & Electronic Co. and Hunan Zhongke Electric Co.
China regulator to review China First Heavy Industries' IPO
Monday, 14 December 2009 15:52
SHANGHAI -(Dow Jones)- The China Securities Regulatory Commission said Friday it will review China First Heavy Industries' initial public offering plan Wednesday.
China First Heavy Industries, the country's largest heavy machinery producer by output, said in a separate statement it plans to sell no more than 2 billion A shares, or 30.6% of its enlarged capital, ahead of a listing on the Shanghai Stock Exchange.
The company didn't say how much it plans to raise but said it will used CNY8.39 billion ($1.23 billion) of the proceeds to enlarge its capacity.
BOC International (China) Ltd. is the underwriter of the deal, said the company.
Consumer prices rise as China powers out of crisis
Friday, 11 December 2009 16:35
BEIJING — China said Friday it had ended an almost year-long bout of deflation in November while factory output picked up as the world's third-largest economy powered ahead following the global crisis.
The nation's consumer price index, the main gauge of inflation, rose 0.6 percent year on year in November, the first increase since January, official data showed.
"The mild rise in prices during economic recovery is actually conducive to economic growth and job creation," Sheng Laiyun, spokesman for the National Bureau of Statistics (NBS), told a news conference.
"Currently there is still no inflationary pressure."
The increase was due in part to Beijing's efforts to raise state-controlled prices for fuel, electricity and water to better reflect market forces.
Prices also likely rose last month because early snowstorms in northern and central China destroyed crops and disrupted transport, driving up the cost of food.
Analysts said the increase in consumer prices would stoke debate about when the government should start exiting stimulus measures.
"Higher housing costs and food prices are already having an impact on Chinese households and any further increase in inflation in the months ahead will likely put increasing pressure on Beijing to start tightening policy," said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada.
Ren Xianfang, a Beijing-based economist at IHS Global Insight, added: "We expect a gradual build up in inflation ... but it will be mild in the short term because of overcapacity" in the manufacturing sector.
China last year unveiled a four-trillion-yuan (586-billion-dollar) stimulus package along with big tax breaks to boost consumer spending as the global crisis hit its key export markets in the United States and Europe.
Beijing said this week it would maintain its pro-growth monetary policy for 2010 while also pushing on with efforts to stimulate domestic demand and boost exports.
Industrial output, which shows activity in the millions of factories and workshops around the country, expanded 19.2 percent in November from a year ago, up from 16.1 percent in October.
Exports fell 1.2 percent in November, the slowest decline in a year.
"The fast rebounding in industry means... the foundation of the national economic recovery is further consolidating," Sheng told reporters.
Jing Ulrich, an economist at JPMorgan, said the data "indicates continued economic recovery" in China.
"With the outlook for external demand improving, net exports should contribute positively to China GDP's growth in 2010," she said.
New lending rose to 294.8 billion yuan in November, up from 253.0 billion yuan in October, but down from the 516.7 billion yuan lent in September.
The NBS said retail sales, the main measure of consumer spending, rose by 15.8 percent in November compared with the same month a year earlier, down slightly from the 16.2 percent increase posted the previous month.
The government sees consumer spending as a key factor in boosting the economy.
Fixed-asset investment in urban areas rose 32.1 percent in the January to November period, after growing 33.1 percent in the first 10 months of the year.
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