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Business Tianjin Magazine - Business English Magazine in China
Passenger-car sales jump 98% in November
Wednesday, 09 December 2009 16:53
Dec. 8 (Bloomberg) -- China’s passenger-car sales surged 98 percent last month, the most in at least five years, as government incentives spurred demand in an auto market poised to surpass the U.S. as the world’s biggest this year.
Sales of cars, sport-utility vehicles and minivans rose to 1.04 million last month, according to the China Association of Automobile Manufacturers. Total vehicle sales, which include trucks and buses, rose 96 percent to 1.34 million.
China’s passenger car sales have jumped more than 50 percent for five straight months, making the world’s most populous nation a bright spot after sales in the U.S., Japan and Europe tumbled. Car sales in India also rose the most in more than five years last month as the global economy rebounded from the recession that began last year.
“China is the best story most automakers have globally,” said Bill Russo, a senior advisor at Booz & Company, which advises automakers and investors. “The challenge going forward is how to really tap the trends.”
GM, Hyundai
General Motors Co.’s two main local ventures boosted sales 105 percent last month to 161,115 units, according to a Bloomberg calculation based on the association’s numbers. Beijing Hyundai Motor Co., a venture between Hyundai Motor Co. and Beijing Automotive Industry Holding Co., more than doubled sales to 55,576.
Volkswagen AG’s two ventures increased sales 58 percent to 130,525, according to the association. BYD Co., which is backed by Warren Buffett, climbed 133 percent to 50,650 units.
For the first 11 months, nationwide vehicle sales rose 42 percent to 12.2 million, with passenger-car sales surging 49.7 percent to 9.23 million.
Four trillion yuan of government spending and $1.3 trillion of new bank lending this year have helped revive growth in China, the world’s third-largest economy. Stimulus measures aimed at auto sales included cutting a 10 percent sales tax to 5 percent and 10 billion yuan of subsidies to help consumers buy and upgrade vehicles.
The Organization for Economic Cooperation and Development last month raised its forecast for economic growth in China this year to 8.3 percent from 7.7 percent. Growth will accelerate in 2010 to 10.2 percent, the OECD said in a report.
India, U.S.
India’s passenger car sales rose 61 percent last month to 133,687 units, the Society of Indian Automobile Manufacturers said in a statement in New Delhi today, as cheaper loan rates and economic expansion lifted demand for Maruti Suzuki India Ltd. hatchbacks and Tata Motors Ltd.’s Nano.
India’s economy expanded at the fastest pace in 1 1/2 years in the quarter ended September, helped by record-low interest rates and an economic stimulus.
China, Japan, and the U.S. are among countries that offered a mix of credits, tax breaks and subsidies to boost auto sales by getting consumers to trade in old cars for newer, more fuel- efficient models.
Industrywide sales in the U.S. totaled 746,928 units in November, compared with 746,789 a year earlier, according to Woodcliff Lake, New Jersey-based Autodata.
Economic meeting to guide direction
Monday, 07 December 2009 16:17
China is expected to fine-tune its macroeconomic policies, one year after it launched the massive $586-billion stimulus package to save the economy from the worst global financial crisis since the 1930s.
A government conference to lay the groundwork for the country's economic policies not only for 2010 but for the next five years may wrap up today, according to media reports.
Decisions made at the central economic conference, which began on Saturday, will influence policies next year, the last years of the 11th five-year plan (2006-2010), and guide directions in policy for the next five-year plan.
No details of the conference have been released.
But experts said a Nov 27 meeting could set the tone for the conference.
That meeting concluded with officials broadly stating that China will "maintain the continuity and stability of economic policies, and continue to implement the proactive fiscal policy and loose monetary policy".
The issues most likely to be high on the conference agenda include how the government will improve the quality of growth, speed up economic restructuring and boost domestic consumption.
China's gross domestic product (GDP) grew by 8.9 percent year-on-year in the third quarter and GDP growth for the year is expected to exceed 8 percent, government statistics showed.
To boost economic growth, the government must support policies that increase the income of residents, tackle healthcare reform and invest more in education, experts said.
The stimulus package has played the most important role in reviving the economy, but it also made the economic growth more reliant on investment, said Liu Manping, a researcher at a price monitoring institute under the National Development and Reform Commission, the country's top economic planning body.
"China should gradually and moderately adjust its macro policies to avoid any huge impact on economic growth," he said.
Jia Kang, director of the Research Institute for Fiscal Science at the Ministry of Finance, said that "the government may perhaps change its policies in the industrial sectors because of overcapacity and the increasingly ballooning property industry".
Fluctuating prices in the housing market may ease in the second quarter of next year if monetary policies are adjusted, said Wang Zhihao, an economist with Standard Chartered Bank.
During a visit to a number of low-income housing projects on Nov 28, Premier Wen Jiabao said the government should curb speculation in the housing market.
China slams foreign banks over derivatives losses
Friday, 04 December 2009 17:00
BEIJING — China has accused several foreign investment banks of "maliciously" selling derivative products to dozens of state-owned companies, which then booked more than 11 billion yuan in losses on the deals.
The losses were "closely associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions," said Li Wei, vice chairman of the State-Owned Assets Supervision and Administration Commission (SASAC).
"To some extent some international investment banks were the chief culprits and the root of ruin for the Chinese enterprises who encountered this financial derivatives Waterloo."
Li singled out Goldman Sachs, Merrill Lynch, Morgan Stanley and Citigroup in the article published in the latest edition of the Study Times, an official Communist Party newspaper.
He said 68 of the more than 130 companies controlled by SASAC bought derivatives to hedge against rising commodity prices and fluctuating exchange and interest rates.
These companies, including major airlines, incurred paper losses of 11.4 billion yuan (1.67 billion dollars) on the 125 billion yuan worth of derivative contracts bought by the end of October 2008, he said.
But Li said state-run firms should not "give up eating for fear of choking", noting derivatives offered opportunities to hedge against potential risk and companies will find it hard to compete with foreign rivals without them.
He urged these companies to comply with regulations and make sure any investments in derivative products were done to hedge risk rather than speculate in the market.
The regulatory watchdog said in September it would support state-owned companies that take legal action over the heavy losses.
The agency said at the time some firms had already notified foreign banks that they were considering legal action over contracts for oil-related structured options.
SASAC ordered state firms in March to reconsider their derivative investments overseas and back out of high-risk contracts after several Chinese firms reported huge losses.
State-owned carriers Air China, China Eastern and Shanghai Airlines reported losses of almost two billion dollars since last year on aviation fuel hedging contracts.
In August, Caijing magazine reported, citing an unnamed state enterprise executive, that only 31 state-owned firms were licensed to enter into such deals, while many more were apparently doing so.
Europe warns China on trade backlash threat
Friday, 27 November 2009 14:41
China could face a protectionist backlash next year because of a huge over- expansion of industrial capacity in recent months that may lead to a surge in cheap exports, a European business group said on Thursday.
The government’s massive stimulus measures to revive the economy have exacerbated the already serious problem of manufacturing overcapacity, the European Chamber of Commerce in China said in a report. Industries such as steel, cement and plastics were still “blindly expanding”, it said.
“By the second half of 2010, there will be far more dumping cases against China for unfair trading,” said Joerg Wuttke, chamber president. China’s over-capacity was putting “political pressure on our leaders ... We are really concerned about protectionism”.
A growing number of trade measures have been aimed at Chinese goods in recent months, including a decision by the US to place duties on China-made tyres and steel pipes.
The chamber’s report echoes recent official statements about the risks from the bank-led surge in investment this year. Last month, the State Council, China’s cabinet, announced it was taking steps to limit capacity increases in seven sectors amid fears that over-investment would generate non-performing loans and hamper recovery.
Although the primary focus of the stimulus has been infrastructure, the spill-over effect has been continued expansion in steel, aluminium, cement and chemicals. The wind-power equipment and oil refining sectors were also facing overcapacity, the European chamber said.
Mr Wuttke estimated overcapacity in China’s steel sector at 100m to 200m tonnes, or 15-30 per cent of total capacity. Much stemmed from some 150m tonnes of illegal or unauthorised capacity, equivalent to the steel industries of Japan and South Korea combined.
Overcapacity was potentially damaging not just because of the risk of bad loans, he said, but it also limited companies’ ability to invest in innovation and made it harder to enforce environmental rules.
Yu Yongding, one of China’s leading economists, has raised similar concerns. In a speech this week, he said there was evidence of waste in some of the spending and warned China could face “very large inflation pressure in the future”.
China Minsheng Banking makes weak HK debut
Thursday, 26 November 2009 16:49
HONG KONG (Dow Jones)--China Minsheng Banking Corp. (1988.HK), which had the largest initial public offering in Hong Kong so far this year, fell on its debut Thursday as it is viewed as expensive compared with bigger Chinese banks and because of concerns over the possible need for fundraising in the sector.
At 0400 GMT, Minsheng Bank was at HK$8.97, off its intraday low of HK$8.95 and 1.2% below its initial public offering price of HK$9.08. The benchmark Hang Seng Index was down 0.9% at 22,417.
The bank's Shanghai-listed A shares were down 3.6% at CNY8.06. The Shanghai Composite Index was down 1.0% at 3256.
Minsheng Bank earlier raised US$3.86 billion after pricing its IPO around the middle of an HK$8.50-HK$9.50 indicative range. Private-equity firm Hopu Investment Management Co. dropped its plan to buy into the IPO because of the pricing, which may have weighed on the bank's debut.
A Hong Kong-based fund manager said Minsheng Bank's H shares are trading at a valuation of around 3.5 times its book value. That is higher than many of the bank's bigger rivals. Bank of China Ltd. is trading at 2.0 times book value and China Construction Bank is trading at 2.7 times, according to data from Morgan Stanley.
Sandra Cai, an analyst at Samsung Securities, said Minsheng Bank's operating costs are also higher than its rivals, weighing on the lender's net profit outlook.
"We think cost savings will be difficult, given its current business focus is to enlarge market share through branch expansion, marketing, and an attractive incentive plan to motivate staff," Cai said.
Despite China's banking regulator saying it doesn't plan to increase banks' minimum capital requirement for now, speculation that it will do so continues to weigh on the sector.
At 0400 GMT, China Construction Bank fell 2.5% to HK$6.97 and Industrial & Commercial Bank of China Ltd. was down 2.1% at HK$6.66.
"We see capital pressure for the Chinese banking sector," said Morgan Stanley analyst Minyan Liu. "However, it's worth noting that the capital is mainly driven by the growth outlook over the long run. We see pressure, but not panic."
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