Sept. 22, 2006 – BBC NEWS

Strong debut for China Merchants

China Merchants Bank made a strong debut on the Hong Kong stock market, with its shares gaining as much as 30% on their original sale price.

The Shenzen-based lender, China’s sixth-biggest bank, raised $2.4bn ($1.27bn) from the share offering.

China’s surging economy, which grew at 10.9% in the first half of 2006, is creating huge demand for bank services.

However, there are fears that banks have been overvalued, with questions raised over levels of bad debt.

China Merchants’ shares opened at $1.39, compared with their $1.09 sale price.

Demand for the shares in the initial public offering was very strong, with retail investors asking for 266 times the number of equity on offer, while institutional investors ordered 53 times those on sale.

Overvalued?

Two of China’s biggest banks, Bank of China, and China Construction Bank, have also made successful Hong Kong stock market debuts this year.

The Industrial and Commercial Bank of China is poised for a $19bn listing in Hong Kong this October.

The initial public offering could be the world’s largest since Japanese telecoms giant NTT DoCoMo’s $18.4bn listing in 1998.

Chinese state-owned banks have been raising billions of dollars as the country opens the banking market to foreign competitors under its terms of joining the World Trade Organization.

Some investors, especially in the US, have flagged up concerns about a lack of transparency – especially over the bad debts on the banks’ balance sheets, the results of widespread lending to uneconomic state-owned enterprises.

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Source: CNNMoney.com

The gap between imports and exports narrowed slightly in July despite a jump in imports from China, an increase that made that nation the No. 1 source of U.S. imports.

The gap was $59.2 billion in July, down from the revised $59.4 billion in June, according to the Commerce Department. Economists surveyed by Briefing.com had forecast a $59 billion trade deficit.

The U.S. trade gap narrowed despite a jump in Chinese imports in July.

The trade gap with China rose 12.5 percent from June levels and 21.6 percent from the year-earlier period to $23.8 billion. Chinese imports moved ahead of those from Canada with this report.

Chinese goods shipped here had only narrowly trailed Canadian imports in the June report, and in July they were well ahead, $28.6 billion compared to $24.5 billion.

The Canadian imports have rarely become a major trade issue here because of far greater balance in goods across the border. In fact, Canada is the largest market for U.S. exports, buying $18.8 billion in U.S.-made goods in the July report, for a gap of only $5.7 billion.

China, despite its size and rapid growth, bought only $4.8 billion of U.S. goods in July.

The only better market for U.S. goods are the nations of the European Union as a group, which bought $18.9 billion in U.S. exports while selling $31.9 billion in exports to the United States as a group. But no European country by itself was anywhere near the level of Chinese goods shipped here.

The trade gap of goods to and from China now accounts for 40.2 percent of the nation’s overall trade gap, up from 35.6 percent in June and 29 percent a year ago.

The trade gap also is drawing greater attention due to concerns about the safety of Chinese imports. Toymaker Mattel (Charts, Fortune 500) has had three major recalls of Chinese-made toys since Aug. 1, and Congress is holding hearings Wednesday and next week on the issue.

In addition, Walt Disney Co. (Charts, Fortune 500) has announced a testing program for toys it licenses coming in from China, as has retailer Toys R Us.

There have also been recalls in recent months of Chinese-produced toothpaste, seafood, animal feed, tires and car fuses, all due to concerns about the safety of the products.

Higher oil prices also put pressure on the U.S. trade gap, as the average price of a barrel of imported oil in the month was up 7.6 percent to $65.56, the highest average price since August 2006.

But a drop in the volume of oil exports meant that the part of the trade gap attributed to petroleum increased only 2.3 percent from June. That was more than balanced off by a 3 percent drop in the gap attributed to non-petroleum trade.

In fact the part of the trade gap attributed to petroleum – $24 billion – is only slightly ahead of the part of the gap attributed to trade of goods with China.

Source: People’s Daily Online

China will vigorously promote energy conservation and emissions reduction to tackle climate change and promote sustainable development, Vice Premier Zeng Peiyan said on Tuesday.

“In order to ease the conflict between economic development and environmental protection, China will stick to the concept of human-oriented and scientific development,” Zeng told the opening ceremony of an international forum of Nobel laureates and world-renowned economists.

China would pay more attention to “the expansion of domestic demand, the development of primary and tertiary industries, innovation and technological progress”, he said.

The government would adjust the development mode mainly through energy conservation and emissions reduction, Zeng said, adding it would actively promote the use of renewable energy such as hydropower, wind energy, biomass energy and solar energy and the development of nuclear power.

“The proportion of renewable energy in overall energy consumption should rise from the current eight percent to 15 percent in 2020,” he said.

Thermal power and iron and steel industries with high energy consumption and pollution would be eliminated at a faster speed, while energy-efficient buildings and environmental-friendly light bulbs would become dominant, Zeng said, calling for development of the recycling economy and efficient use of the energy resources.

Forest coverage would be increased from 18.2 percent in 2005 to 20 percent in 2010, he said, adding frontier technologies such as hydrogen fuel cell and carbon absorption would be developed to support environmental protection.

A resource tax and pricing system, a user-pays mechanism for mineral resources and an environment compensation system should be established with improved laws and regulations to build an energy-saving and environment-friendly society, he added.

Nine Nobel laureates and five world-renowned scientists, including Robert Mundell, Edmund Phelps, Richard Schrock and Thomas Schelling, are meeting from Sept. 11 to 14 to discuss energy efficiency with 600 Chinese scientists, officials and experts.

They are expected to give more than 50 lectures on topics such as solar energy and its market development, global warming and the reduction in greenhouse gases in Beijing.

Source: Rednet.cn

China Securities Regulatory Commission on Friday approved the yuan-denominated A-share listing plan of the China Construction Bank (CCB), one of the nation’s four big state-owned commercial banks.

The approval will make CCB to lead the return of the giant red-chip companies, including China Mobile, the world’s largest handset operator by the number of subscribers, and Petro China, the nation’s largest oil producer, to the mainland stock exchanges.

Red chips are mainland firms incorporate outside the mainland and listed in Hong Kong.

The bank, Chinese partner of the American Bank, said it plans to issue no more than 9 billion shares, less than 3.85 percent of the expanded capital after the initial public offering.

The CCB is expected to raise some 60 billion yuan (8 billion U.S. dollars) if the initial public offering is priced at the closing price of 6.84 HK dollars per share in Hong Kong on Friday. It said all the money will be used to boost its capital adequacy ratio.

The size of CCB’s IPO is set to overtake 46.6 billion yuan of the Industrial and Commercial Bank of China (ICBC) in October last year to become the biggest ever domestic share listing.

The bank may start trading of its A-shares on the Shanghai Stock Exchange before October 1, a source with its research department told Xinhua on condition of anonymity.

Earnings per share with the CCB in the first half of 2007 was 0.15 yuan, compared with 0.12 yuan of the ICBC and Bank of China.

Its non-performing loans ratio stood at 2.95 percent at the end of June, lower than the 3.29 percent half a year ago.
Editor: Gao Ying

Source: China View

China can still maintain robust economic growth even if the subprime credit crisis slowed down the U.S. economic growth, according to the Deutsche Bank AG.

“China’s economic growth rate would be less than one percentage point lower if that of the U.S. slowed down by one percentage point,” said Ma Jun, chief economist for Greater China at Deutsche Bank AG in Kong Kong, said on Tuesday.

China’s economy can still easily grow more than 10 percent if the U.S. economic growth rate slowed to 0.7 percent in the second half of 2007, Ma noted.

China’s economy expanded by 11.5 percent during the Jan.-June period compared with the same period last year.

“The U.S economic downturn also has limited impact on the profitability of the listed firms on China’s equity markets as a whole,” Ma said, adding it can only seriously affect eight percent of the total stock market capitalization in the country.

“Although another major correction of the U.S. stock markets may prompt the H-shares in Hong Kong to slump in the short term, but the robust corporate profit earnings and sufficient liquidity can help them recover more quickly than any other emerging markets even in case of big correction.”

“We don’t have big worries that the U.S. subprime credit crisis can affect the Chinese economy greatly as well as its stock markets in the middle term,” Ma added.

Source: China View

The New York Stock Exchange (NYSE) has been given green light to open a representative office in Beijing, the Chinese securities regulator announced Tuesday.

The approval, the first after China’s rules allowing overseas bourses to set up offices came into effect on July 1, will enable the NYSE to woo more initial public offerings in the fastest-growing major economy.

Before the approval only Hong Kong Exchanges and Clearing Limited established a representative office in Beijing in 2003 in accordance with the Closer Economic Partnership Arrangement between the Chinese mainland and Hong Kong.

China’s nod given to the NYSE to open Beijing office indicates its active efforts in materializing the fruits of its first strategic economic dialogue with the United States held in December last year, the China Securities Regulatory Commission (CSRC) said.

On May 20 China unveiled the management rules that give green light to the establishment of representative offices of overseas stock exchanges in the country.

The NYSE can only do non-operating activities including liaison,promotion and research and is required to submit reports to the CSRC on the work of its Beijing office as well as on the information of its listed Chinese firms and members.

China has always been taking a gradual, mutually beneficial andopen approach in developing its capital market, and the approval is a voluntary opening-up initiative on the Chinese side, an unnamed senior official with the CSRC said.

The establishment of representative offices by overseas bourseswill help perfect the basic systems of the nation’s capital marketby offering us an insight into the securities markets and money-raising channels in foreign countries, the official stated.

The CSRC added that several other major foreign bourses have also filed applications for establishing offices in China.

Source: China View

China’s Ministry of Finance said on Wednesday it would use all the forex purchased with returns from a 600 billion-yuan (67.79 billion U.S. dollars) special treasury bond sale to finance the China Investment Co. Ltd.

The ministry began to sell the 10-year bonds at a coupon of 4.3 percent in the inter-bank market on Wednesday, said a statement of the ministry.

The bond sale was in the first tranche of 1.55 trillion yuan basket of special treasury bonds, the rest of which would be sold with a maturity of 15 years or longer, said an official with the ministry.

He said the ministry could adopt open-market operations to purchase forex through bond sales by selling the bonds to commercial banks which would later sell them to the central bank.

According to the official, the central bank would sell an amount of forex equivalent to 600 million yuan in order to buy the special treasury bonds from commercial banks.

The bond sale would “help curb excess liquidity, coordinate financial and monetary policies, reduce the size of forex reserves and increase returns on the reserves,” he said.

Market observers held that the interest rate for the 35 billion yuan of central bank bills issued on Tuesday was fairly high at 3.3165 percent, raising the cost for the central bank to call back excessive liquidity, and this month was a peak period for maturing central bank bills.

They said the central bank very likely would replace maturing bills with the newly issued bonds, which would have little impact on market liquidity.

The government plans to launch a state forex investment company to make better use of the country’s huge foreign exchange reserve. The forex investment company, still in preparation, made its first investment in non-voting shares, valued at three billion U.S. dollars, in the U.S. private equity firm, the Blackstone Group.

China’s legislature approved the special issuance of 1.55 trillion yuan treasury bonds for the investment company in June.

A spokesman for the Ministry of Finance said the issuance of the bonds would not directly affect money supply in the market.

China’s forex reserve had reached 1.33 trillion U.S. dollars by the end of June. CPI reached a 10-year high of 5.6 percent in July.

Chinese share prices ended their weeklong surge on Wednesday, with the benchmark Shanghai Composite Index closing at 5,109.43 points, down 85.26 points or 1.64 percent, from the previous close.

China’s currency, the yuan, on Wednesday hit a new high against the U.S. dollar for the second consecutive day after more than one month of downward adjustment, according to the Chinese Foreign Exchange Trading System.

The central parity rate of the yuan stood at 7.5505 yuan to one U.S. dollar on Wednesday, gaining 40 basis points from Tuesday’s reference rate of 7.5545 to the greenback. The accumulative appreciation since July 21, 2005, when China discontinued yuan’s peg to the greenback, had reached 9.557 percent.

The bond sale could mean that the planned state investment company, which had been called “state forex investment company”, would start operation soon.

Liang Hong, chief economist with Goldman Sachs (Asia) China, said the special issuance would not have direct impact on market liquidity and interest rates.

The central bank had raised interest rates four times this year to help control fast credit growth and curb the hovering risks of inflation