Regulators want to limit access to junkbonds, Chongqing and Shanghai come up with creative plans, illegal land appropriation fuels peasants anger in Jiangxi, Chinese officials accepted bribes from Siemens, direct links to Taiwan are established.
Finance & Economy
Securities
regulators plan on segregating the bond market to protect small investors. The
Shanghai Stock Exchange authorities are considering whether to set a
credit-rating limit to bar the sale of non-investment grade bonds to retail
investors. While all 40 corporate bonds currently on the market enjoy a credit
rating of A+ or above, the current rating system, co-funded by underwriters and
bond issuers, may lack independence and oversight. Also, risk is increasing for
investors as CBRC halted bond guarantees by commercial banks last
year.
Central Huijin to transfer
ownership in Guotai Jun’an Securities. Central Huijin Investment Company, the
government agent responsible for restructuring and injecting capital into
state-owned banks and securities firms, will transfer its ownership in Guotai
Jun’an Securities, as its three-year grace period to clean up multiple
ownerships of securities firms comes to an end. Shanghai International Group, a
government agency in charge of restructuring Shanghai-based financial assets,
will take over Central Huijin’s 21 percent
stake.
Postal Savings Bank of
China
ventures into the credit market. As part of its
transformation into a commercial bank, Postal Savings is trying to maximize its
footprint in rural China. The bank plans to launch
corporate lending as well as a mortgage business for pre-owned homes next year.
Already under way are several other pilot projects, including an urban consumer
credit business as well as consumer and business lending in rural areas.
Everbright moves into financial
holdings. State-owned Everbright Group is on track to become a
financial holding company, with government bank restructuring agent Central Huijin and a new general manager appointed by
China Construction Bank to run the show. This accompanies the segregation of
Everbright Group industrial assets from its financial assets.
Regionally, both
Chongqing and Shanghai announced creative plans to shore up
their local economies. Chongqing established the country’s first inland
free trade zone; and Shanghai and the Shanghai Leasing Trade Association announced a 30 billion
yuan plan for leasing, with a view to playing a role in the city’s large
development projects. So far leasing business has not had a role in local
projects.
The growth of China’s industrial value-added, a major weight in
calculating China’s GDP given
the China's adopted production approach,
decelerated to 5.4 percent in November, the slowest pace in a decade, as export
factories cut their production in response to fewer orders from abroad and
yet-to-be-activated domestic consumers.
Export shrank in November by 2.2 percent, a sharp drop
of 21.4 percentage points from October’s growth, explaining a lot about the
disappointing performance of the industrial value-added. Domestically, weakening
real estate and car markets have also dragged down upstream industries and
supplementary markets.
Worried by a sluggish outlook, factories are also in a
rush to clear inventories built up when they were still expecting prices to go
higher, avoiding new production.
Industry &
Companies
China's government announced December 17 a package
of measures aimed at stimulating the country's distressed property market by encouraging home
buying. The measures include tax cuts and a reduction in so-called lockup
periods for reselling homes. In addition, bank loan controls for buyers of
second homes would be relaxed. The government also called for financial
institutions to support builders of low-income housing and promote mergers and
acquisitions among property developers. However, industry analysts remain
cautious about whether the measures can effectively revive the sluggish
market.
The management teams of
China's major state-owned airlines have undergone a reshuffle,
which is seen as a move towards the restructuring of the distressed industry.
Under government guidance, China Eastern's chairman and chief executive, Li
Fenghua, will be replaced by China Southern's chairman Liu
Shaoyong. And Ma Xulun, deputy general manager of Air China's parent
company - China National Aviation Holding Company (CNAC), was appointed as
deputy party secretary of China Eastern. Meanwhile, Cao Jianxiong, general
manager of China Eastern Airlines will take office as deputy general manager of
CNAC. A senior industry source told Caijing that the reshuffle will pave the way
for the merger of China Eastern and a local carrier Shanghai
Airlines.
Despite continued troubles
facing the global shipbuilding industry, China's
inland waterway shipbuilding industry is seeing a
revival due to declining steel prices. According to a report on China
Association of the National Shipbuilding Industry's website, the order books at
China's shipbuilders are filling up
with ships for inland and coastal use. And some companies are even turning down
orders due to a lack of workers. Analysts believe that the global financial
crisis has had little impact on China's inland waterway shipbuilding
industry, and with the drop of steel prices, the industry will soon see a
rebound.
China’s leading appliance retailer Gome, whose chairman is under
investigation for alleged financial crimes, may sell shares to foreign investors
to shore up the company’s cash flows in a shaky market. Media reports said that
the company has held preliminary talks with several foreign investors over the
possible sale. Analysts said that outside investors will help Gome alleviate
current capital pressures. However, others expect the plan would be hindered by
Huang Guangyu, the majority stakeholder and company chairman who is currently
under investigation.
Engineering giant Siemens pleaded guilty in a corruption case and
agreed to pay a total of US$ 1.6 billion in fines to American and European
authorities. According to an announcement by the U.S. Department of Justice, the
company had admitted that it had bribed government officials to get contracts
for more than 290 projects around the world from the 1990s to 2007. The
corruption case also involves Siemens' divisions in China, which
were accused of using bribery to secure huge public contracts for urban subway
projects and medical and power transmission
equipment.
The National Development & Reform Commission (NDRC),
China’s top economic planner, decided that the ex-work price for gasoline should
be reduced to 5,580 yuan per ton from 6,480 yuan per ton, diesel from 4,970 yuan
per ton from 6,070 yuan per ton, and jet fuel from 7,450 yuan per ton to 5,050
yuan per ton, starting from December 19, 2008.
At the same time, the State Council, China’s
Cabinet said that starting from January 1, 2009, fuel consumption tax will be increased by 0.8
yuan per liter for gasoline and 0.7 yuan per liter for diesel, to 1 yuan per
liter and 0.8 yuan per liter respectively, replacing various fees related to
transportation and road tolls. By doing so, Beijing seeks to regulate the fee collection of
local governments as well as promoting a frugal pattern of energy
consumption.
Politics & Law
Disconnected for 59 years,
three direct links between the Chinese mainland and
Taiwan were established on December
15 – direct flights, shipping and postal services. Taiwanese hope that it will
be possible to ship electrical parts, vegetables, flowers and other products
directly to the mainland by ship. The Taiwanese government has begun to persuade
enterprises to set up their headquarters and research and development operations
in the mainland.
Meanwhile, a pair of pandas that the Chinese mainland has long
been promising to send to Taiwan is set to leave for the island
on December 23, a sign of warming cross-straits relations.
Illegal land
appropriation again provokes the wrath
of the people. On December 12, 300 villagers gathered in front of government
buildings in Geshan town in Zhangshu city, Jiangxi province, demanding justification for
an attempted land seizure for the expansion of wine factories. The Zhangshu
Party’s committee held an urgent meeting, and decided to postpone the land
appropriation. On December 13, the Geshan government destroyed the land
appropriation agreement which they had forced villagers to
sign.
In the wake of the tainted
milk powder scandal, the Ministry of Health published on its website a list of food additives considered to be
dangerous. Melamine, sudan red, sodium formaldehyde
sulfoxylate and other chemicals were included in the list.
