- Greece Aims to Sell Bond to Chinese Banks
- Before Heading to China…
- Master Kong Net Profit Up 60% In Q3 2009
- Struggling Adidas sees long-term growth ahead
- China's credit card debt continues to expand: central bank
- Chinese banks increase overseas loan activity
- Garlic beats gold as China's hot new asset
Monday, November 30, 2009
Have You Heard...
Greece Aims to Sell Bond to Chinese Banks
Source: The Wall Street Journal by Costas ParisThe Greek government is trying to sell at least EUR25 billion ($16.7 billion) worth of bonds to Chinese banks as part of its efforts to refinance the country's massive public debt, a person familiar with the situation said Friday.
"Greece has been in touch with Chinese banks," the person, with direct knowledge of the situation, told Dow Jones Newswires. "They are looking for a deal where the banks will bid to buy at least EUR25 billion in Greek bond issuance next year. It's still at a very early stage."
The person said the Greeks are also looking for a commitment from the Chinese to also buy "some bonds" in the secondary market.
A massive investment from the cash-rich Chinese could be seen as a vote of confidence for Athens, which is straining euro-zone fiscal limits and facing worries that ratings agencies might further downgrade its sovereign debt.
The government forecasts its budget deficit will hit 12.7% of gross domestic product this year--the highest in the euro zone and double its forecasts from just two months ago. It aims to cut the deficit to 9.4% of GDP next year with EUR7.8 billion of spending cuts and new taxes but says it will take three to four years to get below the European Union ceiling of 3%.
"If the downgrades of the country's credit ratings continue, we will find ourselves in the terrifying position of not drawing liquidity from the European Central Bank due to the risk that (Greek) bonds may not be accepted," Greek Central Bank Gov. George Provopoulos said this week.
Greece's bonds are rated A by Standard and Poor's, six levels below Germany's AAA. Ireland, another EU member in deep financial trouble, has an AA rating.
The country's debt spreads have blown out, with the 10-year Greek government bond yielding 208 basis points more than the corresponding German bund, the widest spread within the euro zone. Athens plans to issue around EUR60 billion in bonds next year.
In addition to directly buying Greek bonds, Chinese banks purchasing debt in the secondary market could also ease some of the strain on Athens.
"If the Chinese go into the secondary Greek bond market, it will make it more liquid, shave some points from the spread, bring down interest rates and make it easier for the Greeks on their future issuance," said Mark Chandler, chief global currency strategist for Brown Brothers Harriman.
"It's a good strategy by Athens," he said. "They are getting heat from everywhere and at this point they have few alternatives but to go where the money is. But there is no guarantee it will work."
Asked whether Greece is negotiating with China to sell bonds, a government spokesman said, "It may be true, and if it is true, we do not want to comment. But even if it isn't true we wouldn't want to comment on it."
Greek financial Web site Axiaplus.gr said Monday that Prime Minister George Papandreou has been personally involved in secret talks with the Bank of China and two other unnamed Chinese lenders and that U.S. investment banks Goldman Sachs and JP Morgan were also party to the talks.
"It's a good strategy by Athens," he said. "They are getting heat from everywhere and at this point they have few alternatives but to go where the money is. But there is no guarantee it will work."
Asked whether Greece is negotiating with China to sell bonds, a government spokesman said, "It may be true, and if it is true, we do not want to comment. But even if it isn't true we wouldn't want to comment on it."
Greek financial Web site Axiaplus.gr said Monday that Prime Minister George Papandreou has been personally involved in secret talks with the Bank of China and two other unnamed Chinese lenders and that U.S. investment banks Goldman Sachs and JP Morgan were also party to the talks.
A Bank of China official declined comment on whether the bank is considering a purchase of Greek bonds. Goldman and JP Morgan also declined to comment.
The person familiar with the matter told Dow Jones that Greece will try to sweeten any deal on the bonds with extra incentives on future Chinese investments in the country.
China's Cosco Pacific invested more than $5 billion last year to run the cargo business in the port of Piraeus, one of the biggest in the Mediterranean Sea. "Cosco is looking for at least one more sizable investment," the person said without elaborating.
A Cosco spokesman said he's not aware of any upcoming investment projects in Greece.
The person familiar with the matter told Dow Jones that Greece will try to sweeten any deal on the bonds with extra incentives on future Chinese investments in the country.
China's Cosco Pacific invested more than $5 billion last year to run the cargo business in the port of Piraeus, one of the biggest in the Mediterranean Sea. "Cosco is looking for at least one more sizable investment," the person said without elaborating.
A Cosco spokesman said he's not aware of any upcoming investment projects in Greece.
Before Heading to China…
Source: The Wall Street Journal by Garry D. Bruton, David Ahlstrom and Lu yuanIf you're an executive under pressure to move business to China, think carefully before committing to a strategy.
Considering that China has undergone rapid and sustained economic growth over the past 30 years and today is the largest recipient of foreign direct investment in the world, it isn't surprising that many companies feel the need not only to respond to competition from Chinese-made products but also to enter and compete in the Chinese market itself.
The problem is, some businesses are rushing in without a realistic understanding of the opportunities presented by China and the trade-offs inherent in pursuing them.
While China has many strengths, its economic picture isn't as rosy as some might believe. For example, China may be one of the world's largest economies, but it remains a poor, developing nation in terms of per-capita income, ranked around 100th globally last year.
The high-value exports coming from China are typically manufactured by Western-owned factories, not Chinese organizations, and the low labor costs that have driven much of China's economic growth are rising steadily amid labor shortages in the country's developed coastal region.
For these and other reasons, companies need to consider carefully what they hope to accomplish in China before making a big investment. Is the strategic goal to gain a competitive advantage by using China's low-cost labor to reduce expenses, or is the goal to be closer to multinational customers operating in Asia? Is the main priority to compete in China's domestic market or simply to source finished products from China?
To help companies think about a possible move into China, here is a closer look at four potential strategies.
Establish a Presence in China to Improve Supply-Chain Performance
Some companies want to incorporate China into their manufacturing and sourcing platforms to improve the performance of their global supply chains.
These companies are drawn to China not chiefly by its lower labor costs or the opportunity to compete in the local market. Rather, they hope to benefit mainly by delivering products faster to Western customers operating nearby or by reaching a size in the region that allows them to achieve economies of scale. These companies aren't typically committed to remaining in China: If their customers locate to another geographic region, they will, too.
The vast majority of China's export manufacturing comes from its coastal region of the Pearl River Delta (including Hong Kong), the Yangtze River Delta (Shanghai area), and Zhe Jiang province and the Bohai region (Tianjin and Beijing area). Western managers should be aware that locating operations outside these regions could raise their costs—because transportation expenses remain high in China—and require far greater training of staff.
Move Manufacturing to China to Take Advantage of Lower Labor Costs
Some companies are driven to establish manufacturing plants in China because they want to take advantage of the country's cheap labor and duty-free zones. The minimum wage in China is less than $1 an hour, compared with $7.25 an hour in the U.S. This strategy may be of particular interest during an economic slump when businesses are being pushed to cut spending. Like the first strategy, the companies taking this approach seek only to source products from China, not to compete in the local market itself. Many U.S. and European furniture makers have pursued this strategy to keep their costs low.
There is a trade-off, however, between employee skills and lower wages. A university degree doesn't necessarily mean the same thing in China as it does in the U.S. For example, while China graduates more than 300,000 engineers a year, less than 10% are able to work at international engineering standards. Thus, while salary costs in China often are lower, the skill level and the resulting quality and productivity levels are likely to be considerably lower for many vocations as well.
Compete in Local Chinese Market Based on the Strength of Brand
Some international companies see great long-term potential in China and want to compete in the domestic market. They decide to rely on their global network—often the power of their brand—to gain a competitive edge rather than competing on price. Take Procter & Gamble Co., a major supplier of consumer goods in China. P&G relies on the fact that Chinese consumers perceive its products to be high quality, and thus value for the money. In general, international brands are welcomed by Chinese consumers because of their reliability.
However, Chinese consumers have lower incomes and live in tighter living spaces, so Western companies may need to reduce the size of the products they sell there. Moreover, China's local markets are diverse in lifestyle, regulation and infrastructure. For this reason, Western companies selling goods or services in China may need to develop multiple marketing and distribution strategies, one for each region of the country they enter.
Compete in Local Chinese Market Based on Strength of Cheap Labor
Some companies seek to both make and sell products in China, using the country's cheap labor as a source of competitive advantage. These companies tend to become insiders in the Chinese market, designing products and services specifically for Chinese locals. Yum! Brands Inc., for example, sells unique dishes such as snails that appeal to local tastes.
Managers pursuing this strategy should be aware that competition is intense in most local Chinese markets. Heavy government involvement in the economy has resulted in overinvestment and overcapacity in some industries. At the same time, Chinese companies tend to overdiversify, meaning they will often keep a given business unit going rather than restructuring it. All of this leads to many industries having product prices below what seems reasonable.
The bottom line is that multinational companies need to take a more nuanced view of China before determining whether and how to exploit the opportunities available there. Optimism is a good thing, but making decisions based on realistic information is better.
Master Kong Net Profit Up 60% In Q3 2009
Source: By ChinaRetailNews.comTingyi (Cayman Islands) Holding Corporation, which owns the Master Kong brand, has published its financial results for the third quarter of 2009 stating that its net profit increased by 60%, a record-high growth for an individual quarter.
According to the report released by the company, its revenue in the third quarter of 2009 increased by 16.29% year-on-year to USD1.537 billion. Of the total revenue, USD594 million was from its instant noodle business and USD888 million was from its beverage business.
Frank Lin, the CFO of Master Kong, told local media that the company has become the largest instant noodle provider in the Chinese market. His statement was supported by the statistics published in September 2009 by ACNielsen, a U.S. market research company, which said Master Kong's instant noodle products topped the Chinese market with a market share of 54.2%.
Lin said that with a continuing focus on instant noodles, beverages, and cake products, Master Kong aims to improve its performance in mainland China.
Lin also revealed that, with the completion of the second-phase project of Master Kong's plant in North China, the company's instant noodle production capacity will be increased by 20% in 2010 to an annual capacity of five billion packets.
Struggling Adidas sees long-term growth ahead
Source: By Wang Xiaotian (China Daily)Xiao Li, 23, a salesperson at an Adidas outlet in Chaoyang District, Beijing, is enjoying her new leisure time but worried about when the situation could change for the worse.
"Recently, a shoe inventory of 17 pairs needed at least two months to be sold, if we were lucky enough," she said.
But she added there is little opportunity to offer discounts without the brand holder's permission.
"They need to preserve the brand's image and fame," Xiao said.
"In China, the company continued to experience higher than usual inventory levels caused by over-optimistic sales forecasts made prior to the Beijing Olympic Games," said Li Ling, public relations manager for Adidas China.
But the company is confident inventories will be back to normal levels by the end of the second quarter of 2010, she added.
Adidas suffered a record decline in global sales in the third quarter, with its Asian business sliding relentlessly as inventories remained high and retailers demonstrated a lack of confidence in the company's products.
Sales decline
In the first nine months of 2009, sales for the Adidas Group in Asia decreased 9 percent, mainly as a result of declines in Japan and China, and only slightly better than the company's 11 percent slump in sales in North America. The company declined to discuss the country-by-country financial figures for Asia.
"The forecasts in 2008 were a major factor. The loss of control of their franchises is another big problem for the company's business management," said Zhang Qing, CEO of Key Solution, a leading Chinese sports consulting firm in Beijing.
Since last year, the main retail agents of Adidas China have closed around 100 outlets nationwide. Belle Group, the biggest sales agent for Adidas China, closed about 50 Adidas outlets, while Daphne shut down 20 to 30 franchise shops.
"When faced with challenges, franchisers often act in their own interests. As a multinational company, Adidas relies heavily on big franchises, while domestic counterparts such as Li Ning and Anta always maintain tight control over their outlets," Zhang added.
A management drain also had an effect on the sporting goods giant. During the second half of 2008, Zheng Jie, general manager of Reebok China, a division of Adidas Group, took the position of executive vice president of China's well-known brand Anta.
Since last year, the main retail agents of Adidas China have closed around 100 outlets nationwide. Belle Group, the biggest sales agent for Adidas China, closed about 50 Adidas outlets, while Daphne shut down 20 to 30 franchise shops.
"When faced with challenges, franchisers often act in their own interests. As a multinational company, Adidas relies heavily on big franchises, while domestic counterparts such as Li Ning and Anta always maintain tight control over their outlets," Zhang added.
A management drain also had an effect on the sporting goods giant. During the second half of 2008, Zheng Jie, general manager of Reebok China, a division of Adidas Group, took the position of executive vice president of China's well-known brand Anta.
A senior sales executive of Adidas China also jumped ship to Anta to take the role of sales director this year, according to China Business News.
Li said that, despite the gloomy situation, China continues to be a highly attractive, long-term market for Adidas Group.
"We see long term potential based on the increasing sports participation and style consciousness of consumers and also an expansion into lower-tier cities." Li said.
"We expect franchise store numbers to increase. Meanwhile, retail remains an important part of our China strategy. In the years to come, we will further optimize and expand our portfolio of controlled space throughout China," Li said.
During the third quarter of 2009, Adidas Group sales declined 7 percent to 2.89 billion euros (29.5 billion yuan) on a currency-neutral basis, creating a record of consecutive negative growth for the first three quarters. Gross profits decreased by 3.7 percent.
Li said that, despite the gloomy situation, China continues to be a highly attractive, long-term market for Adidas Group.
"We see long term potential based on the increasing sports participation and style consciousness of consumers and also an expansion into lower-tier cities." Li said.
"We expect franchise store numbers to increase. Meanwhile, retail remains an important part of our China strategy. In the years to come, we will further optimize and expand our portfolio of controlled space throughout China," Li said.
During the third quarter of 2009, Adidas Group sales declined 7 percent to 2.89 billion euros (29.5 billion yuan) on a currency-neutral basis, creating a record of consecutive negative growth for the first three quarters. Gross profits decreased by 3.7 percent.
Revenues for the Adidas segment decreased 6 percent, while the Reebok segment decreased 12 percent against the previous year. Third-quarter revenues for the Taylor-Made Adidas golf segment decreased 12 percent on a currency-neutral basis.
"This was mainly due to the challenging macroeconomic environment and the non-recurrence of sales related to several new product launches in the prior year period," wrote the company in its third quarter report.
Meanwhile, the company experienced a decrease in inventories of 8 percent and in net borrowing of 12 percent, compared with the previous year.
Herbert Hainer, global CEO of Adidas, admitted consumer and retailer sentiment still hovered between fear and optimism for the group, but said he was cautiously optimistic about the situation in 2010 in light of the forthcoming FIFA World Cup, tighter control of inventories, a better financial position and a leaner organization.
"World Cup events usually provide a great harvest for Adidas historically," Zhang said.
"This was mainly due to the challenging macroeconomic environment and the non-recurrence of sales related to several new product launches in the prior year period," wrote the company in its third quarter report.
Meanwhile, the company experienced a decrease in inventories of 8 percent and in net borrowing of 12 percent, compared with the previous year.
Herbert Hainer, global CEO of Adidas, admitted consumer and retailer sentiment still hovered between fear and optimism for the group, but said he was cautiously optimistic about the situation in 2010 in light of the forthcoming FIFA World Cup, tighter control of inventories, a better financial position and a leaner organization.
"World Cup events usually provide a great harvest for Adidas historically," Zhang said.
China's credit card debt continues to expand: central bank
Source: (Xinhua)Credit card debt at least six months overdue in China rose 126.5 percent year-on-year in the first three quarters of 2009 to 7.43 billion yuan ($1.09 billion), the People's Bank of China, the central bank, said Monday.
Debt overdue by six months or more accounted for 3.4 percent of the total outstanding credit card debt at the end of the third quarter, up 0.3 percentage points from the end of the second quarter.
The bank warned of potential risks of increasing overdue credit card debt as banks expanded credit card business.
By the end of Sept 30, China's banks had issued 175 million credit cards, up 33.3 percent from the same period last year.
In the second quarter of 2009, credit card debt at least six months overdue rose 131.3 percent from a year earlier to 5.77 billion yuan.
In the first quarter of 2009, credit card debt at least six months overdue rose 133.1 percent from a year earlier to 4.97 billion yuan.
Chinese banks increase overseas loan activity
Source: (China Daily/Agencies)Foster's Group Ltd, Australia's biggest brewer, never borrowed from China until this year, when Bank of China helped arrange $500 million in loans to refinance debt.
Chinese lenders are "injecting large amounts of liquidity", said Peter Kopanidis, group treasurer at Melbourne-based Foster's.
The combination of the world's fastest-growing economy and "a very different deposit base" is helping Bank of China "contribute more at a time when some banks may be capital-constrained", he said.
Industrial & Commercial Bank of China (ICBC) and Bank of China underwrote $25.6 billion of syndicated loans in the Asia-Pacific region outside Japan this year, or 14.5 percent of the total, up from 4.9 percent a year earlier, data compiled by Bloomberg show.
They're providing capital as Western banks from New York-based Citigroup Inc to Royal Bank of Scotland Group Plc in Edinburgh retrench after global financial institutions took $1.7 trillion of write-downs and losses since the start of 2007.
China's banks boosted overseas syndicated loans to $4.9 billion in the first 10 months of this year, up from $3 billion in the same period of 2008. In fact, their growth in the market is the biggest of any nation, Bloomberg data showed. Meanwhile, the US and European banks' Asia-Pacific share slumped to 14.3 percent, down from 30 percent in 2008.
Lending encouraged
They're providing capital as Western banks from New York-based Citigroup Inc to Royal Bank of Scotland Group Plc in Edinburgh retrench after global financial institutions took $1.7 trillion of write-downs and losses since the start of 2007.
China's banks boosted overseas syndicated loans to $4.9 billion in the first 10 months of this year, up from $3 billion in the same period of 2008. In fact, their growth in the market is the biggest of any nation, Bloomberg data showed. Meanwhile, the US and European banks' Asia-Pacific share slumped to 14.3 percent, down from 30 percent in 2008.
Lending encouraged
In the United States, about $111 billion of leveraged loans, or those made to speculative grade borrowers, have been made in 2009, down from $804.9 billion in the comparable period of 2007.
The State Administration of Foreign Exchange in Beijing is encouraging lenders to make yuan-denominated loans overseas to reduce exposure to consumers amid concerns that too much cash may cause the nation's stock and real estate markets to overheat.
The Shanghai Composite Index of stocks has climbed about 82 percent this year, compared with 21 percent for the Standard & Poor's 500 Index.
The Banking Regulatory Commission told city banks last month to avoid the "blind" pursuit of size after domestic lending surged to a record 8.9 trillion yuan in the first 10 months of 2009, up from 3.7 trillion in the same period a year earlier.
China may need to rein in credit growth to stem inflationary pressures and reduce banks' risks of future bad loans, the Paris-based Organization for Economic Cooperation and Development stated in a recent report.
"We are seeing signs of potential asset bubbles" in Asia, said Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd.
'Over-allocated'
The Shanghai Composite Index of stocks has climbed about 82 percent this year, compared with 21 percent for the Standard & Poor's 500 Index.
The Banking Regulatory Commission told city banks last month to avoid the "blind" pursuit of size after domestic lending surged to a record 8.9 trillion yuan in the first 10 months of 2009, up from 3.7 trillion in the same period a year earlier.
China may need to rein in credit growth to stem inflationary pressures and reduce banks' risks of future bad loans, the Paris-based Organization for Economic Cooperation and Development stated in a recent report.
"We are seeing signs of potential asset bubbles" in Asia, said Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd.
'Over-allocated'
Offering credit to companies outside China is also a way for the nation to invest its $2.27 trillion of reserves without buying treasuries.
China's holdings of US government debt swelled to $798.9 billion in September, up from less than $100 billion in 2002, according to the US Treasury Department.
China, the biggest lender to the United States, is "shouldering its responsibilities" to restore stable global growth, Premier Wen Jiabao said on Nov 12.
"Chinese banks have an incentive to lend offshore," said Viktor Hjort, a Hong Kong-based credit strategist for Morgan Stanley, an adviser on global takeovers. "China is sitting on large dollar reserves over-allocated to US Treasuries that it wants to reduce."
Seven Chinese banks made syndicated loans abroad in the first 10 months of this year, compared with three in the same period of 2008, Bloomberg data showed.
A syndicated loan is when a group of lenders or financial institutions provide a credit facility to a borrower.
Global integration
China, the biggest lender to the United States, is "shouldering its responsibilities" to restore stable global growth, Premier Wen Jiabao said on Nov 12.
"Chinese banks have an incentive to lend offshore," said Viktor Hjort, a Hong Kong-based credit strategist for Morgan Stanley, an adviser on global takeovers. "China is sitting on large dollar reserves over-allocated to US Treasuries that it wants to reduce."
Seven Chinese banks made syndicated loans abroad in the first 10 months of this year, compared with three in the same period of 2008, Bloomberg data showed.
A syndicated loan is when a group of lenders or financial institutions provide a credit facility to a borrower.
Global integration
Beijing-based ICBC, the world's most profitable bank, loaned $790 million to borrowers ranging from Australian supermarket chain Woolworths Ltd to Dutch commodities trader Trafigura Beheer BV and the Dubai Civil Aviation Authority, the data showed.
"China's economy is more and more integrated into the global economy, and through this crisis we saw demand from Europe and the US decline but demand from the emerging markets, particularly Asia and Africa, rise," ICBC Chairman Jiang Jianqing said.
Royal Bank of Scotland, which is selling or shutting businesses in two-thirds of the 54 countries in which it operates after posting the biggest loss in British corporate history last year, has made $2.1 billion syndicated loans in Asia-Pacific excluding Japan this year, down from $7.8 billion in the same period of 2008, Bloomberg data show.
Citigroup has made $11.6 billion US leveraged loans this year, down from about $25 billion in 2008 and $103 billion in 2007, Bloomberg data show.
'Long haul'
Royal Bank of Scotland, which is selling or shutting businesses in two-thirds of the 54 countries in which it operates after posting the biggest loss in British corporate history last year, has made $2.1 billion syndicated loans in Asia-Pacific excluding Japan this year, down from $7.8 billion in the same period of 2008, Bloomberg data show.
Citigroup has made $11.6 billion US leveraged loans this year, down from about $25 billion in 2008 and $103 billion in 2007, Bloomberg data show.
'Long haul'
Australia's APA Group, whose roots stretch back to 1841 when gas lamps first lit the streets of Sydney and which now transports more than half of Australia's natural gas, never borrowed from a lender in Asia until Bank of China offered cash, according to Chief Financial Officer Peter Fredricson.
"They've got the liquidity, but they also want to show they're here for the long haul," Fredricson said after Bank of China contributed to the company's A$1.03 billion ($953 million) of loans in September.
"What we all need to understand is that China is a huge and growing economy on the world scene, so we should expect to see them more," Fredricson said.
Deposits at ICBC, Bank of China, China Construction Bank and Bank of Communications - China's four largest publicly traded banks -- grew by 4.3 trillion yuan to 26.2 trillion yuan in the first half of 2009, up from 18 trillion yuan in June 2007, according to Bloomberg data.
Capital base
"What we all need to understand is that China is a huge and growing economy on the world scene, so we should expect to see them more," Fredricson said.
Deposits at ICBC, Bank of China, China Construction Bank and Bank of Communications - China's four largest publicly traded banks -- grew by 4.3 trillion yuan to 26.2 trillion yuan in the first half of 2009, up from 18 trillion yuan in June 2007, according to Bloomberg data.
Capital base
"Our funding sources and capital base at this moment are even stronger than some of the foreign banks," said Andy Lee, head of credit for Beijing-based Agricultural Bank of China's Hong Kong branch.
"China's economy is growing, and many foreign companies would like some mainland foothold. We can provide the introductions and connections," Lee said.
China's economy grew 8.9 percent in the third quarter from a year earlier, the fastest pace in a year, as stimulus spending and record lending growth helped the nation lead the world out of recession.
The median projection of economists surveyed by Bloomberg News is for GDP to increase more than 10 percent in the final three months of 2009.
Chinese households' savings as a percentage of income rose to 37.5 percent last year, up from 27.5 percent in 2000, according to Stephen Roach, chairman of Morgan Stanley Asia Ltd in Hong Kong. The rate of US household savings was 3.3 percent in September, the US Commerce Department reported.
"Borrowers see these huge hoards of cash available at relatively decent prices and it makes sense to knock on their doors," said Amit Khattar, Singapore-based head of non-Japan Asia loan syndication at Credit Suisse Group AG, Switzerland's largest bank.
"But that doesn't mean the doors are open for everybody, at least not yet," Khattar said.
Standard Bank Group Ltd worked on four transactions this year involving Chinese banks and foreign borrowers that haven't come to fruition, said Les Collett, head of Asia-Pacific loan syndication in Hong Kong for Africa's largest lender.
"While Chinese lending has really taken off in the last 18 months, they prefer not to go in too long too early," he said.
China's economy grew 8.9 percent in the third quarter from a year earlier, the fastest pace in a year, as stimulus spending and record lending growth helped the nation lead the world out of recession.
The median projection of economists surveyed by Bloomberg News is for GDP to increase more than 10 percent in the final three months of 2009.
Chinese households' savings as a percentage of income rose to 37.5 percent last year, up from 27.5 percent in 2000, according to Stephen Roach, chairman of Morgan Stanley Asia Ltd in Hong Kong. The rate of US household savings was 3.3 percent in September, the US Commerce Department reported.
"Borrowers see these huge hoards of cash available at relatively decent prices and it makes sense to knock on their doors," said Amit Khattar, Singapore-based head of non-Japan Asia loan syndication at Credit Suisse Group AG, Switzerland's largest bank.
"But that doesn't mean the doors are open for everybody, at least not yet," Khattar said.
Standard Bank Group Ltd worked on four transactions this year involving Chinese banks and foreign borrowers that haven't come to fruition, said Les Collett, head of Asia-Pacific loan syndication in Hong Kong for Africa's largest lender.
"While Chinese lending has really taken off in the last 18 months, they prefer not to go in too long too early," he said.
Garlic beats gold as China's hot new asset
Source: By Ju Chuanjiang and Zhao Ruixue in Shandong and Li Xiang in Beijing (China Daily)Shao Mingqing was a jobless young man from Shandong province with only a junior high school diploma when his luck turned around a few months ago with the skyrocketing price of garlic.
The 22-year-old Shao now drives an 180,000-yuan Toyota he bought with the money he made on the garlic market.
Shao's face was lit up with joy when he talked about his recent success.
"I borrowed some money and decided to buy 100 tons of garlic at the price of 3.2 yuan per kilogram (kg) in September," Shao said. "I made a profit of 400,000 yuan from selling it at the price of 7.2 yuan a month later."
Shao isn't the only one who has made a tidy fortune out of garlic, which has exceeded gold and stocks as the country's best performing asset this year.
The 22-year-old Shao now drives an 180,000-yuan Toyota he bought with the money he made on the garlic market.
Shao's face was lit up with joy when he talked about his recent success.
"I borrowed some money and decided to buy 100 tons of garlic at the price of 3.2 yuan per kilogram (kg) in September," Shao said. "I made a profit of 400,000 yuan from selling it at the price of 7.2 yuan a month later."
Shao isn't the only one who has made a tidy fortune out of garlic, which has exceeded gold and stocks as the country's best performing asset this year.
Garlic trading has created a handful of new millionaires overnight in Jinxiang county, Shandong province, China's largest garlic producing area.
"What we made was just some petty profits. There are people who made hundreds of millions of yuan from it," said Han Yunzhe, a garlic trader who bought a 300 sq m house with his earnings from garlic trading.
Garlic prices in Jinxiang county have skyrocketed more than 50 times since last October, when the wholesale market price hit a low of 0.15 yuan per kg. Now garlic is traded for more than 8 yuan per kg on the market.
The soaring garlic prices are creating a frenzied mood among market speculators as they seek new opportunities to buy and store as much garlic as possible, betting the price will surge to a new high in coming days.
Rich coal mine bosses, according to some media reports, have also joined the garlic market, hoping to reap huge profits.
Some real estate speculators, who have earned big money in China's overheated property market, also are gambling on garlic, according to media reports.
Price drivers
Experts said one trigger of the sharp rise in garlic prices might stem from the idea that garlic can help prevent infection by the H1N1 virus, although there is no scientific evidence to support the idea.
But the root factor is the extremely low price of garlic last year, which resulted in a sharp reduction in garlic production, others said.
Garlic farmers in Shandong province retreated from garlic planting as the selling price of garlic dropped to 0.08 yuan per kg last year.
"The reduction in garlic production plus public panic over the H1N1 flu have caused garlic prices to shoot up," said Nie Binghua, director of the Shandong Economic Management Institute.
But Nie noted that the high price is unlikely to affect the overall economy, because garlic is not a crop that will affect food security.
Production of garlic in Shandong province dropped by 40 percent this year. And in 2008, the country reduced total garlic planting areas by 50 percent, giving speculators a reason to believe that there might be a sharp shortage of garlic in the near future.
"The fact that supply can't keep up with demand caused soaring garlic prices," said Liu Zhangjian, governor of Jinxiang county.
Liu said he worries that surging prices will persuade too many farmers to plant the crop at the same time, which might cause excess supply and a nosedive in prices next year that would eventually hurt the interests of farmers.
"As the main garlic production area, the local government does not want the price to be volatile," Liu said.
China is the world's largest garlic exporter, followed by Argentina and Spain, and is meeting three-fourths of the world's garlic demand. China now has more than 1,200 storage houses and 700 garlic processing and export companies.
China exported 1.52 million tons of garlic last year, 70 percent of which was produced in Jinxiang. Garlic has been a pillar industry in Jinxiang, which once produced 1 million tons of garlic a year.
Less for farmers
But unlike market speculators who have pocketed huge profits in recent months, the benefits to garlic farmers from surging prices are much smaller.
Zhang Yuanjin, a garlic farmer in Jinxiang county, sold his crops at the price of only 0.6 yuan per kg in July this year, because Zhang, like many farmers, could not obtain sufficient market information. Unlike some garlic traders, he also did not own big storage houses.
"The price jumped to 1.4 yuan immediately after I sold mine," he said.
Zhang made only 9,000 yuan this year by selling the garlic he grew last year. Still, his earnings were three times more than last year, he said.
He said he would not grow more garlic next year because of the rising cost of garlic seeds and fear of a price nosedive in the market next year.
Most garlic brokers, however, said they believe the price will stay high for the next two years. They base their optimism on speculative market expectations among garlic traders and rising demand from abroad, they said.
Shandong province exported $88.6 million worth of garlic in September, a 109 percent increase from the same period last year, according to the Shandong Provincial Commerce Department.
The export price jumped to $1,000 per ton from last year's price of $200 to $300 per ton.
Industry insiders estimated that the garlic price will hit a new high by the end of this year.
Industry insiders estimated that the garlic price will hit a new high by the end of this year.
Insiders said demand from home and abroad will be boosted during the upcoming Christmas and Chinese New Year holidays, since garlic is a popular seasoning and important raw material for processing many foods.
But experts cautioned against over-reacting to the surging price of garlic.
"The garlic market is cyclical. Price rises are short-term, and they will fall again before long," Yi Xianrong, a researcher with the Chinese Academy of Social Sciences, was quoted by Reuters as saying.
Experts estimated that garlic price volatility is likely to be a three-year cycle, and that the future price of garlic will fall back to the normal level at between 1.4 yuan to 2 yuan per kg.
Other experts said the speculation driving skyrocketing prices cannot be sustained.
Jerry Lou, a Morgan Stanley China strategist, said that speculators, financed by abundant liquidity sloshing around the country, had moved into the relatively small garlic market and manipulated prices.
Lou described the tools of the trade used by garlic speculators.
"You need a warehouse, a lot of cash and a few trucks. That's how it works," Lou was quoted by the Financial Times as saying.
"Basically, what you do is try to arrest as much supply as possible. Then you bid up the price. Moving garlic from one warehouse to the other, you make millions of dollars," Lou said.
Saturday, November 28, 2009
China Offers Specific Carbon Targets
Source: The Wall Street Journal by Shai OsterBEIJING -- China unveiled targets to slow its carbon emissions and said Premier Wen Jiabao would attend the global climate-change summit in Copenhagen next month, a day after Washington laid out concrete U.S. emission targets for the first time and announced that President Barack Obama would join the meeting.
But China's widely expected offer falls short of a cap on emissions. The Chinese State Council, or cabinet, said Thursday that China would aim to cut carbon intensity -- the amount of carbon-dioxide emissions per unit of gross domestic product -- by a range of 40% to 45% by 2020.
The move would be a "binding goal" incorporated into the country's mid- and long-term development plans, the cabinet said.
China and the U.S. are the world's largest emitters of greenhouse gases and have wrangled for years over who should shoulder more of the burden of cutting emissions.
At Copenhagen, Mr. Obama intends to propose that the U.S. cut its greenhouse-gas emissions by 17% below 2005 levels by 2020, and by 83% by 2050. It marks the first time the Obama administration has formally offered specific commitments.
The Chinese targets will add to the momentum to achieve some kind of agreement at the Copenhagen summit. But because they are only a pledge to cut relative levels of emissions -- not a promise to cap or cut back total greenhouse gasses from current levels -- some observers feel they won't be enough to get more than a political commitment from the meeting instead of a binding international treaty.
Still, the Chinese move is significant, representing the first time that China has spelled out its goals for slowing carbon emissions.
The United Nation's top climate negotiator, Yvo de Boer, said in a statement he welcomes both the U.S. and the Chinese moves. "The U.S. commitment to specific, midterm emission-cut targets and China's commitment to specific action on energy efficiency can unlock two of the last doors to a comprehensive agreement," he said.
"This is a significant announcement at a very important point in time. But China could do more," said Ailun Yang of Greenpeace China. "Given the urgency and magnitude of the climate-change crisis, China needs stronger measures to tackle climate change." Ms. Yang added that "if they had announced 45% to 50% then we could say they were ambitious."
The WWF also welcomed China's announcement. "A 40% to 45% reduction in China's carbon intensity from business-as-usual projections is far from trivial," said Kim Carstensen, the leader of WWF's global climate initiative.
China's top climate envoy said the Chinese targets were a domestic voluntary action rather than an international one. But "Chinese people stick to their word," Xie Zhenhua, deputy head of the powerful National Development and Reform Commission, the former state planning agency, told a news conference.
Mr. Xie said that China now expects "real action" by the West on funding and technical support before the Copenhagen meeting. So far, such support had failed to materialize, he said.
China has proposed that developed nations contribute 1% of gross domestic product to subsidize efforts by poorer nations to cut carbon-dioxide emissions. That translates to more than $140 billion for the U.S. alone. U.S. officials have dismissed the Chinese proposal as "untethered from reality."
Some observers say the low end of the new Chinese target is just an extension of energy policies already in place. China has a goal of cutting its energy intensity -- measured as energy used per unit of GDP -- by 20% to 2010 from 2006, a goal that Mr. Xie said is achievable. China's energy-efficiency goals are also motivated by energy security concerns. But burning less coal -- the source of 80% of China's electricity -- means less carbon is released into the air.
Even a 40% drop could be hard to reach because many of the easy gains have already been achieved, warns Zou Ji, the China representative of the World Resources Institute. "The future is harder, the potential gains will become smaller and smaller," Mr. Zou said.
In addition, measuring carbon intensity poses a huge statistical and scientific challenge for China. For example, it is hard to determine how much carbon is absorbed by increasing China's forest coverage to create carbon sinks.
"My feeling is that even if we set up this goal, it will not be easy to reach," Mr. Zou said. "We will need to do very hard work. I'm not so optimistic we can reach that. But we can try."
A Chinese foreign ministry statement said Mr. Wen would attend the Copenhagen meetings, which run from Dec. 7 to 18. Mr. Obama will show up on Dec. 9.
Source article: http://online.wsj.com/article/SB125922198898365091.html
Taiwan Economy Shrinks at Slowest Pace in Year in Third Quarter
Source: Bloomberg News By Janet Ong and Yu-huay SunTaiwan’s economy shrank at the slowest pace in a year in the third quarter as rising Chinese demand for the island’s electronics signaled it may soon emerge from a yearlong recession.
Gross domestic product contracted 1.29 percent from a year earlier, the statistics bureau said yesterday in Taipei, after shrinking a revised 6.85 percent in the second quarter. The median estimate of 17 economists surveyed by Bloomberg News was for a 2.6 percent contraction.
Signs of a recovery have prompted employers to start hiring, with Taiwan’s unemployment rate falling in October for the first time in more than a year, and companies including Taiwan Semiconductor Manufacturing Corp. forecasting better sales. The benchmark Taiex index has climbed 69 percent in 2009 as investors bet the island’s economy is past the worst.
“Third-quarter GDP is better-than-expected, but it hasn’t reached the levels before the economic crisis,” said Cheng Cheng-mount, an economist at Citigroup Inc. “I expect a peak by the first quarter as the comparison will be with a low base.”
Taiwan is dependent on a revival of overseas sales, which account for more than two-thirds of the economy, to recover from its recession. Export orders, an indication of shipments in the next one to three months, climbed in October for the first time in 13 months, led by demand from China and Hong Kong.
Deadly Storm
Third-quarter GDP was reduced by the island’s deadliest storm in 50 years, which struck in August, causing NT$110 billion of damage. The statistics bureau said Aug. 20 that Typhoon Morakot would reduce growth by between 0.6 and 0.7 percentage point in the three months ended Sept. 30 and between 0.1 and 0.2 percentage point in the fourth quarter.
The statistics bureau yesterday revised its forecast decline in full-year GDP to 2.53 percent from an earlier estimate of 4.04 percent. The bureau raised its 2010 economic growth forecast to 4.39 percent from 3.92 percent.
Consumer prices for the year will likely fall 0.73 percent, from an earlier forecast drop of 0.68 percent, the bureau said.
The easing of the island’s economic slump comes as China and South Korea lead a regional rebound.
China’s economy grew 8.9 percent in the third quarter, the fastest pace in a year, spurring sales for Taiwan electronics makers including Quanta Computer Inc., the world’s largest maker of notebook computers. South Korea’s economy expanded 2.9 percent in the third quarter, the fastest pace in seven years.
Government Spending
Governments worldwide have pledged about $2 trillion in stimulus to counter the global recession.
President Ma Ying-jeou’s administration plans NT$858.5 ($26.6 billion) of spending over four years, or about 6 percent of GDP, on infrastructure, consumer grants and tax cuts to revive the economy.
Yesterday’s GDP figure was released after the close of trading on the stock exchange. The Taiex index fell 0.2 percent to 7,739.16. The local currency was little changed at NT$32.244 versus the U.S. dollar as of its 4 p.m. close in Taipei, according to Taipei Forex Inc.
“This is definitely positive news for stocks,” said Robyn Hsu, who helps manage $3 billion at Capital Investment Trust Corp. “While the Taiex will probably rise tomorrow, the improvement in GDP is not unexpected, so I wouldn’t see any dramatic, sensational surge in Taiwan shares.”
Interest Rates
The central bank in September kept the benchmark interest rate unchanged at a record-low 1.25 percent to help the island recover from its first recession since 2001. Governor Perng Fai- nan has cut rates by 2.125 percentage points since late September last year.
Consumer prices fell for a ninth month in October as retailers discounted products to attract customers, providing scope for the central bank to maintain rates at a record low.
Taiwan’s exports to China, its biggest overseas market, rose 10.6 percent in October from a year earlier, after increasing 2.1 percent in September. Total exports fell 4.7 percent last month, after a 12.7 percent slump in September.
The island’s exports in 2009 may fall 20.33 percent from a year earlier, and imports may decline 27.74 percent, the statistics bureau said yesterday.
Taiwan’s electronics producers send parts to China that are re-exported as finished computers, televisions and mobile phones to consumers in the U.S. and Europe.
Taiwan Semiconductor, the world’s largest custom chipmaker, reported third-quarter sales rose 21.2 percent from the previous quarter to NT$89.9 billion, boosted by overseas demand.
The signing of a financial accord between China and Taiwan may boost investors’ confidence as it will pave the way for increased cross-strait trade and services cooperation, said Tony Phoo, a Taipei-based economist at Standard Chartered Plc.
China and Taiwan on Nov. 16 signed three memorandums of understanding to ease access to each other’s banks, securities and insurance industries as cross-strait relations reached their warmest in 60 years.
Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=aUEVDTA44Fk4
China Court Hears Tainted Milk Suit
Source: The Wall Street Journal by Associated PressBEIJING -- A court is hearing the country's first civil lawsuit by a man whose child was sickened in China's vast tainted milk scandal, state media reported Saturday.
At least six children died last year after drinking contaminated baby formula and more than 300,000 were sickened in one of the country's worst food safety crises.
Parents and lawyers have reported pressure from government officials not to pursue lawsuits over the tainted milk, so the start of the trial Friday was seen as a breakthrough.
"It's a little progress," said Beijing-based lawyer Xu Zhiyong, who told The Associated Press on Saturday that he attended the trial.
He said courts across China have accepted just six such lawsuits, including Friday's. Mr. Xu said he and other lawyers are representing about 200 cases, but other families have dropped lawsuits after reaching compensation deals. Mr. Xu has criticized the deals, saying the payout was not enough.
Friday's trial brings "a ray of hope" for the rule of law in China, he and another lawyer, Peng Jian, wrote on Mr. Xu's blog Friday.
The China Daily report said Ma Xuexin of central Henan province sued Sanlu Group Co., the dairy company at the heart of the scandal, for compensation after his 20-month-old boy fell sick.
The report said the trial will continue Dec. 9 at the Shunyi District People's Court in Beijing after Judge Zhang Nan asked both sides for more evidence.
A man answering the phone at the court Saturday said he knew nothing about the trial.
China on Tuesday executed a dairy farmer and a milk salesman for their roles in the scheme to boost profits by lacing milk powder with the industrial chemical melamine. Nineteen other people have been convicted and received lesser sentences.
Melamine can cause kidney stones and kidney failure.
Mr. Ma told the court his son suffered from a kidney stone after consuming milk powder made by the now-defunct Sanlu, which was one of China's biggest dairies before the scandal.
Sanlu and a local Longhua supermarket that sold the packets, however, told the court they should not be held responsible because the government already has set up a compensation plan for victims, the China Daily reported.
Families were offered a one-time payout – ranging from 2,000 yuan ($293) to 200,000 yuan ($29,000), depending on the severity of the case – to not pursue lawsuits related to the scandal, lawyers said.
Source article: http://online.wsj.com/article/SB125939928658667885.html
Lenovo's U-turn
Source: Shanghai DailyPERSONAL computer maker Lenovo Group yesterday said it is joining the race to develop products that link phones and PCs by buying back a mobile phone business that it sold last year.
Lenovo, the world's fourth-largest PC maker, sold its mobile unit to focus on computers but said the technologies are now converging, creating a "significant growth opportunity."
The company said it paid US$200 million in cash and stock to acquire its former mobile phone assets from a group of Hong Kong and other investors.
Source article: http://www.shanghaidaily.com/article/?id=420965&type=Business
Watsons to roll out 500 more stores
Source: Shanghai DailyThe A.S. Watson Group, a wholly owned subsidiary of Hutchison Whampoa Ltd, will accelerate the expansion of Watsons stores in the mainland, senior company executives said today in Shanghai.
The group will open another 500 Watsons stores in the next two years to tap China's fast growing market for health and beauty products. The total number of Watsons store will reach 1,000 by then and cover 100 cities in the China's mainland.
"China will become the world's biggest market for health and beauty products," said Martin So, chief executive officer of health and beauty Asia at the A.S. Watson Group. "China is a strategic market for Watsons stores and its weight will grow stronger with the country's fast growing economy."
Entering the Chinese mainland 20 years ago, Watsons Your Personal Store has become the largest health and beauty retailer in China, with a network of 500 outlets in 80 cities at the moment.
"We are now expanding at a pace of opening five new stores each week, equal to opening one store every working day," said Christian Nothhaft, managing director of Watsons stores Chinese head office.
He said the sales in Watsons stores in China grew at a rate of more than 25 percent in the first three quarters, much faster than in other Asian markets including Japan and South Korea.
Source article: http://www.china.org.cn/business/2009-11/25/content_18952012.htm
Taobao: launching Consumer Electronics Retail Website Next Year
Source: CCFATaobao is usually regarded as a Chinese version of eBay and Amazon mixture. Earlier this year, Taobao launched a search engine, allowing users to search on the internet of its selling goods. Recently, Alibaba has transferred an online classified information platform from China Yahoo to Taobao. Alibaba has also closed Yahoo’s social network, blog and photo sharing services. It then switches to create for Taobao social-networking sites like Facebook.
It is said that Taobao will launch a dedicated consumer electronics retail site. It is expected that the site will be on-line early next year. This will be Taobao’s first step entering the professional product selling plantform.
The trading volume on Taobao is increasing rapidly. In the first half of this year, consumers spent by Taobao 11.8 billion Dollars, up by nearly double. While the sales on Taobao increase, Yahoo has continued to decline. According to the data of CR Nelson, from January to October, Taobao in China's website traffic ranking rises from No. 10 to No. 8, while Yahoo China fell from 17 to 19.
It is said that Taobao will launch a dedicated consumer electronics retail site. It is expected that the site will be on-line early next year. This will be Taobao’s first step entering the professional product selling plantform.
The trading volume on Taobao is increasing rapidly. In the first half of this year, consumers spent by Taobao 11.8 billion Dollars, up by nearly double. While the sales on Taobao increase, Yahoo has continued to decline. According to the data of CR Nelson, from January to October, Taobao in China's website traffic ranking rises from No. 10 to No. 8, while Yahoo China fell from 17 to 19.
Source article: http://www.chinaretail.org/shownews.asp?id=1244
Friday, November 27, 2009
China Gives Safety Approval to GMO Rice
Source: ReutersChina, the world's largest rice producer and consumer, has approved a locally-developed strain of genetically-modified rice, paving the way for large-scale production in 2 to 3 years, Chinese scientists said on Friday.
The Ministry of Agriculture's Biosafety Committee has issued biosafety certificates to Bt rice, a pest-resistant genetically modified strain, two committee members told Reuters.
Along with GM phytase corn approval announced last week, this is China's first two approvals for grains, although it already permits GM papaya, cotton and tomatoes.
But the strains still need to undergo registration and production trials before commercial production can begin in restricted areas, which may take 2-3 years, the scientists said.
The scientists declined to be identified as the Chinese government has not officially published the information. Officials at the Agricultural Ministry's biosafety office declined to comment.
China is the world's top producer of rice, growing 59.5 million tonnes in the 12 months to October, but it exports only around 50,000 tonnes a month as most is consumed domestically. Exports of GM rice would be likely to face tough scrutiny abroad.
The European Union's executive body, the European Commission, said in July that China needed to tighten export controls on rice products, such as baby food, because shipments might contain traces of the Bt-63 strain, which is not authorised in the EU.
While China is not yet growing GM rice commercially, there are numerous field trials going on around the country.
Bt rice, developed by Huazhong Agricultural University, would help reduce the use of pesticide by 80 percent while raising yields by as much as 8 percent, said Huang Jikun, the chief scientist with the Chinese Academy of Sciences.
"We believe more genetically-modified technology will be used in agriculture production in future to increase production and reduce inputs," said Huang.
Phytase corn, developed by the Chinese Academy of Agricultural Science, will help animals such as pigs digest more of the phosphorus in corn, enhancing growth and reducing environmental phosphorus pollution via animal waste and fertiliser runoff.
Investment Firms Buy Into Sina
Source: The Wall Street JournalHONG KONG – Three investment firms, including Sequoia Capital, are joining Sina Corp.'s management to invest $180 million in the company as they attempt to reinvigorate China's largest internet portal, according to people familiar with the situation.
Sequoia Capital, FountainVest Partners, and Citic Capital Holdings Ltd. are backing the Sina management team's purchase of new shares that will give the group a 9.4% stake in the company, according to the people. Sina's management, led by chief executive Charles Chao, will put in around $50 million and the three investment firms will provide the remaining roughly $130 million, one person said, with each taking stakes of a similar size.
In September, Sina said it was planning to sell the new shares to its management in a "private equity placement" to fund acquisitions and its working capital needs. Since that announcement, Sina has been hammering out terms with the investor group to provide the financing.
The investment agreement, which was completed this week, according to one person, comes as Sina dropped a plan to acquire assets from Focus Media Holding Ltd. The deal would have given Sina access to a huge network of television screens playing advertisements in office buildings across China.
Sina's management is building a stake in the company with the aim of showing investors its confidence in the future prospects of the business. The deal represents a "management buy-in," giving the management a bigger stake in the company's future and greater say over its operations. Sina's management ranks have turned over several times since its founding and although the management isn't taking over the company, they will have more of their personal wealth tied up in the business and a greater incentive to stay on-board.
The new investors are betting the management can engineer a turnaround in Sina's business. Sina was an early mover in China's competitive internet market, but has failed to keep pace with competitors in recent years.
Unlike some competing portals like Sohu.com Inc. and Tencent Holdings Ltd., it never moved into online games, which has proven to be highly profitable and also resilient during an economic downturn. Sina's heavy exposure to the highly cyclical online advertising has hurt its performance since the onset of the global financial crisis.
Still, Sina's internet portal remains a valuable franchise that has wide recognition among Chinese internet users. Sina earns advertising revenue from its main news portal supported by its own in-house news gathering operation and portals for consumers shopping for apartments and automobiles. In its third quarter results, the company said it is now seeing signs of a strong recovery in online advertising.
Sina combined its real-estate portal with part of E-House (China) Holdings Ltd. to form China Real Estate Information Corp., which raised $231 million in an October listing on Nasdaq. Sina owns a 33.4% stake in China Real Estate Information.
Sequoia Capital is one of the pioneering U.S. venture capital firms that grew up alongside California's Silicon Valley. Its China investing team is led by Neil Shen, a former entrepreneur and banker.
FountainVest was founded in 2007 by chief executive Frank Tang and the former China investment team of Singapore's Temasek Holdings Pte. Ltd. Mr. Tang raised US$950 million last year from investors including Temasek, Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan.
Citic Capital is an alternative investment management firm that manages over $2 billion and is owned by affiliates of Chinese state-owned conglomerate Citic Group and China Investment Corp., the sovereign wealth fund.
Hackers milk Chinese online bonanza
Source: By Wang Xing (China Daily)The craze in online games among Chinese netizens is fueling an increasingly lucrative market for computer hackers, security firms have said.
"There is a huge underground market and major revenue comes from selling game accounts or virtual items stolen from hijacked computers," said Zhang Yumu, vice-president of Beijing Rising International Software Co, one of the largest domestic security firms.
A recent report by State broadcaster CCTV said that Trojan horse attacks, which allow hackers remote access to a targeted computer system, are making up a market that is expected to be worth 10 billion yuan ($1.4 billion) this year.
The CCTV report, aired on Wednesday, cited a hacker saying he could get hundreds of thousands of yuan every month by hacking into computers and stealing the user's personal information and game account.
The hacker would then log into the game account and transfer all the valuable virtual items such as weapons and clothes and sell them through online sites, according to the report.
The hijacked computer's accounts were later sold for other uses, such as participating in online attacks and piling up false traffic data.
Trojan horse attacks have became a major online threat in China in the past few years, accounting for more than 95 percent of all the online attacks in the country, according to figures from online security firms.
Zhang from Rising said the number of Trojan horse attacks surged 10 times last year in China and the number is expected to further increase 60 percent this year.
But he does not think the whole market turnover is as high as 10 billion yuan, estimating that the real market value is about 100 million to 1 billion yuan.
"The rise of the attacks increased in line with the rise of online games in China," he said, noting that over 95 percent of the revenue of the Trojan horse attackers came from selling online game accounts and virtual items.
Sales revenue of China's online game market grew 76 percent in 2008 to 18.3 billion yuan, according to government figures, making it one of the few industries that was not impacted by the world's economic slowdown.
Online gamers in China grew 22 percent to 49 million last year.
The number is expected to grow to 94 million by 2013, with industry sales revenue hitting 39 billion yuan.
Tie Jun, an engineer from Kingsoft, one of China's largest security firms, said online games companies in the country had not shown great interest in the past in prohibiting the trade of game accounts and virtual items in the underground market.
But with joint efforts from online gaming and security firms recently, the growth of Trojan horse attacks is seeing signs of slowing down, he said.
Hyundai mulls new China unit
Source: (China Daily/Agencies)Hyundai Motor Co, South Korea's biggest automaker, plans to build a third plant in China to meet demand in the world's largest automobile market so far this year.
The new factory, which may cost about $800 million, is expected to be completed by the end of 2011, Noh Jae-man, president of the Seoul-based company's Chinese venture, said yesterday in Hong Kong. The factory, with an annual capacity of 300,000 vehicles, will build cars larger than subcompacts, he said without elaborating.
Hyundai aims to boost sales in China by 18 percent next year as its fuel-efficient vehicles win market share, and as economic growth and government incentives spur industrywide demand.
Nissan Motor Co, Ford Motor Co and Volkswagen AG have also announced expansion plans in China as sales in the United States, Europe and Japan slow.
"China is the main battlefield for every automaker in the world," said Stephen Ahn, head of research at LIG Investment & Securities Co in Seoul. "Increasing capacity in the country is a common issue for all carmakers."
Hyundai expects to sell about 670,000 vehicles in China next year, compared with a 570,000 target this year, Noh said.
Affiliate Kia Motors Corp, South Korea's second-biggest automaker, aims to sell about 330,000, he said. That would be a 43 percent jump from this year's goal.
The two automakers expect their combined China sales to rise 83 percent this year to 800,000 vehicles, with Kia selling 230,000, the companies said on Nov 12.
Overall car sales in China may increase 15 percent next year, Noh said. Industrywide passenger-car demand rose 45 percent to 8.19 million in the first 10 months of this year as the government cut vehicle taxes and introduced subsidies in rural areas.
"We hope the government extends the tax incentive to next year," Noh said.
Hyundai fell 1.6 percent to close at 98,400 won in Seoul, compared with the key Kospi index's 0.8 percent drop. The stock has climbed 149 percent this year.
Beijing Hyundai Motor Co, the South Korean carmaker's 50-50 venture with Beijing Automotive Industry Holdings Co, plans to boost capacity in its two existing plants to 600,000 vehicles a year in early 2010, it said in September.
Kia, which also operates two factories in China, plans to have capacity to make 430,000 vehicles a year by 2011.
Hyundai operates factories in South Korea, China, India, the Czech Republic and the US. The automaker plans to add more in Brazil and Russia.
Hyundai may consider building another plant in India as it will reach the limit of its current manufacturing capacity over the next two to three years, Oles Gadacz, a spokesman for the automaker, said yesterday. He didn't elaborate.
The company is operating two plants in India now, with an annual capacity of 600,000 units.
Mannings Opens Its First Store In Tianjin
Source: China Retail NewsMannings, the health and beauty chain brand of Hong Kong Dairy Farm Group, has opened its first store in Tianjin.
Located on the first floor of Tianjin's Milenio Jili department store, the new Mannings store covers a business area of 300 square meters. It stocks skin care products, cosmetics, personal care commodities, fashion products, food, and drinks. Many popular cosmetics brands, including Vichy, L'Oreal, and OLAY, are available in this store. Like Mannings stores in Hong Kong, the Tianjin Mannings store focuses on personal care commodities and health food.
Wholly-owned by the one of Asia's major retailers, Hong Kong Dairy Farm Group, Mannings has over 200 chain stores in Hong Kong. Since its entry in mainland China in 2004, it has opened over 100 outlets in 21 mainland cities, including Beijing, Shanghai, Tianjin, Chongqing, Guangzhou, Chengdu, Shenzhen, Suzhou, Wuxi, Ningbo, and Yangzhou.
Mainland banks bankroll aircraft purchases
Source: By Lu Haoting (China Daily)Chinese banks are expected to become an important source of capital financing for airplane purchases globally in the coming years as they fill a void left by the exit of many US and European banks, a senior executive from Boeing's financing arm said yesterday.
The current global financial crisis has allowed China's healthy and active banking community to step into the spotlight to become more active in the global aircraft lending arena, said Foster Arata, Boeing Capital Corporation's vice-president and senior managing director for Asia Pacific and Greater China Region.
Boeing Capital, which provides customer financing support, is a wholly owned subsidiary of US aircraft manufacturing giant Boeing.
"Unlike Western banks, Chinese banks have been less affected by the global economic downturn and they are in a much stronger position at this point," Arata said.
"Right now, there are fewer banks in this market competition and it gives Chinese banks a greater access to the market and also enables them to charge a higher premium to good credit airlines," Arata said.
US banks were a major source of global aviation financing from the 1960s to the 1980s, while Japanese banks covered major financing in the 1980s and European lenders played an increasing role since the 1990s. But in the last 18 months, there has been an emergence of "a very strong and new generation of lenders, specifically from China", Arata said.
Last week, China Construction Bank and CDB Leasing Co, of which China Development Bank (CDB) is a major shareholder, signed agreements with Boeing to increase their regional and international aviation financing reach.
CDB Leasing's agreement with Boeing includes an intention to offer up to 25 billion yuan for financing and leasing Boeing aircraft over the next 24 months. Boeing Capital will facilitate connecting the leasing company with new and promising opportunities.
Boeing signed similar agreements with the Bank of China, the Industrial and Commercial Bank of China (ICBC), CDB and the Export-Import Bank of China last year.
Boeing's European rival Airbus also signed an agreement for cooperation on aircraft financing and leasing with ICBC in June this year.
China has the potential to become a significant operator in aviation financing globally, Laurence Barron, Airbus China president, told China Daily in an earlier interview.
"While in other parts of the world the financing community is struggling and there is a lack of liquidity in the market, Chinese banks have come through the financial crisis pretty strongly and they are all interested in doing more in the area of aircraft financing and leasing," Barron said.
Boeing in September forecast a global market for 29,000 new commercial airplanes worth $3.2 trillion over the next 20 years, while China is expected to require 3,770 new planes valued at $410 billion over the next two decades, making it the world's second-largest aircraft market after the US.
Thursday, November 26, 2009
Have You Heard...
- Girl, 14, on fast track to Peking University
- China Limits Speculation in Forex Deals
- 'Lifting' the economy
- Buffett-Backed BYD 9-Month Profit Jumps 201% on China Sales
- Airport to be built near China's last matriarchal society
- Browser War: China's 360, Kingsoft Cease Tech Security Cooperation
- Baidu to boost market share with new services
- Mainland carmakers pursue tie-ups in Taiwan
- Shell opens lubricants blending plant in China
Girl, 14, on fast track to Peking University
Source: By Cao Li (China Daily)SHANGHAI: A 14-year-old female student from Jiangsu province is poised to step from the textbooks into the history books after she was tipped to enroll at one of China's top universities, thanks to a pilot program aimed at improving the country's university entrance system.
Hong Xinge, from Tianyi High School in Wuxi, is believed to be the youngest of 90 students nationwide to receive nominations from their headmasters to attend Peking University.
She submitted her application on Wednesday.
The next step for the prodigy will be an interview at the world-renowned institution.
The 90 students selected to take part in the pilot program come from 10 provinces around China, as well as the cities of Beijing, Tianjin and Chongqing.
Students who do well in the interview will stand a much better chance of getting into the university because they will not need to score as high as others in the university entrance exam.
The reform of the university entrance process being piloted by Peking University offers a backdoor into the university for exceptional students who might not necessarily do well in the entrance exam. The reform is aimed at ensuring quality students are not overlooked simply because of their performance in the national university entrance exam.
A teacher surnamed Zhou, who helped Hong with her application, said: "Hong Xinge has not only high grades, but also a good personality."
She is extremely good at teaching herself, Zhou added.
Schoolmaster Shen Maode told Yangtze Evening News on Tuesday that Hong scored well in international proficiency tests. She earned a 7.5 in the IELTS test, a 106 on the TOEFL test and got a maximum score in her United States SATs.
Hong excels at Chinese and English and, at her tender age, is already working on her first novel. Classmates pointed out that she is an all-rounder, having won awards for long-distance running and Latin dancing, the paper said.
Hong told the paper she hopes to study finance at Peking University and eventually start her own business.
Zhou said: "She is an excellent student and may not have a problem entering Peking University even without this recommendation."
The experiment at Peking University gives qualified high school headmasters the chance to recommend exceptional students. On Nov 16, the university released a list of 39 high school headmasters nationwide authorized to take part.
While some education analysts hailed the pilot project as reform that might greatly improve the university entrance system, some have said it might lead to fewer opportunities for students from less respected high schools that have not been invited to take part.
A survey conducted by leading Chinese web portal sina.com showed 10,046 out of 14,227 people surveyed were against the new idea. Most said the recommendations were unfair on other students.
Xue Yong, a Peking University alumni who is now an assistant professor at Suffolk University, told Qianjiang Evening News the experiment could be dangerous if it is abused.
But Qu Jun, former deputy director of Shanghai municipal education commission and now a legislator, said the experiment represents much needed change to the existing university entrance system, which has been criticized for years.
"We have been talking about reform for years," he said. "We won't know if it works or not if we never start."
Tang Shengchang, headmaster of Shanghai High School, said the pilot program may lead to additional reforms.
He urged the public to be patient and wait to see whether the idea works.
"It will take time for us to recognize students who are creative and talented in certain subjects but who may not be able to enter top schools because of the harsh entrance examination," Tang said.
China Limits Speculation in Forex Deals
Source: By James T. Areddy and Denis McMahonSHANGHAI -- China's foreign-exchange regulator tightened existing rules governing cross-border money transfers by individuals, in its latest effort to crack down on speculative capital flows even as pressure mounts on authorities to loosen control over the currency.
The latest measures from the State Administration of Foreign Exchange are designed to ensure individuals don't act as proxies in elaborate foreign-exchange deals that circumvent existing limits. In a statement, posted on its Web site Wednesday but dated Nov. 19, the agency said it is limiting the number of bank accounts owned by individuals that can be used in certain foreign-exchange transactions.
The measures are meant to address "unusual foreign-capital flows using individual [accounts] to enter the country, to strike at the foreign-exchange black market and underground banks and to protect the order of the foreign-exchange market environment," SAFE said in a separate statement.
The new move doesn't relate directly to the yuan's exchange rate -- an increasingly hot international issue lately -- and is a technical measure that closes a loophole in existing rules that permit some foreign-exchange dealing with yuan by Chinese people. But it reinforces Beijing's intention to maintain controls over capital flows.
Chinese officials have in recent months grown more vocal about "hot money" flowing into the country. China's economy is growing faster than all other major economies and pressure from Washington and other foreign capitals is mounting for Beijing to permit the yuan to resume appreciating against the dollar. So far there is no sign Beijing will loosen its grip on the exchange rate.
Reinforcing that, state media on Wednesday quoted Vice Foreign Minister Zhang Zhijun as saying ahead of a meeting with European monetary officials this weekend that Beijing will continue to adjust the exchange-rate system as suits its needs. "China will increase the flexibility of the [yuan] exchange rate at a controllable level in the future," Mr. Zhang was quoted as saying, "based on the market demand and with reference to a basket of currencies."
Capital outflows from China are also presenting issues for regulators. For instance, cash from mainland China is playing an important role in pushing up property prices in the city of Hong Kong, which uses its own currency.
SAFE's statements Wednesday said the new measures bar transfers of money from one source into five or more bank accounts owned by individuals onshore in China within a short period. Likewise, five or more individuals in China can't simultaneously send money to an individual offshore account within a period of a few days.
The measures appear aimed at stopping people from circumventing current limits on the amount of foreign exchange they can buy or sell.
Existing rules, which aren't changed by the latest move, let individuals send up to $50,000 worth of yuan out of the country each year, or bring in that much. Similarly, under existing policy, Hong Kong residents are allowed to transfer foreign exchange worth 20,000 yuan (about $3,000) into a mainland China bank account each day.
Spreading those quotas among several people -- in effect forming a syndicate -- could sidestep the official limits on cross-border money flows, although SAFE didn't specifically mention that method in its statements.
SAFE's allotments for currency movements are meant to make it easier for individuals to pay for education and travel abroad. It has the broader impact of choking off black-market foreign-exchange activity in China and possibly relieving some of the relentless demand to hold yuan by unlocking sources of true demand from some Chinese to own U.S. dollars and other foreign currencies.
Source article: http://online.wsj.com/article/SB125917644264364373.html
'Lifting' the economy
Source: Global Times By Guo LuLi Fuling is a 28-year-old security guard in a Trust-mart supermarket in Guangzhou. In the last three weeks, he was required to work three hours extra each shift due to the supermarket's increasing shoplifting cases, brought on by lax security and the recession.
"I was not given more pay for the overtime. In fact the supermarket has laid off five people in the past three months," Li said.
"We have paid security guards the agreed salaries according to their contracts, but we've had to cut back on the number of security personnel due to budget restrictions," said Zhang Wei, security manager of the supermarket.
According to Zhang, Trust-mart has experienced more retail theft this year, but has still reduced security spending.
But Trust-mart is not the only supermarkets suffering from an uptick in shoplifting.
According to the Global Retail Theft Barometer survey, released in middle November, global retail theft reached $115 billion worldwide this year.
During the same period, total losses caused by retail theft in China rose to 6.8 billion yuan ($1 billion), up by 3.9 percent from last year.
The survey was conducted by the UK-based Center for Retail Research and the British company Checkpoint Systems, covering 1,069 corporations all over the world. More than 100 retailers in major cities like Shanghai, Beijing, Guangdong and Hong Kong in China were included in the survey this year.
Although retail sales continued their growth in the second half of this year, almost 14 percent retailers of the 110 stores in China have experienced an increase in shoplifting.
Compared with other countries in the world, China has a much lower retail theft rate, about 1.06 percent of total retail sales, while other countries in the Asia Pacific region has an average of 1.24 percent.
The report warned that retail theft has therefore become more than a moral problem, and everyone involved in the retail sector – manufacturers, retailers, employees and consumers – has to bear some of the responsibility.
Lifters' favorites
According to the survey, thieves tend to focus on small but easily-hidden, valuable, brand name items that are popular and easily to resell. These items included electronic equipment (Playstations, DVD players, iPods or MP3 players), clothes, cosmetics, alcohol, and fresh food, which are also the best-sale for most retails.
Other commonly-stolen products are cell phones and watches. In China, shoes came in as one of the most frequently stolen products.
Shoplifting often occurred in convenience stores, small food shops and clothes shops, where only two or three people handle security.
In well-protected large supermarkets like Carrefour and Walmart, shoplifting cases are reduced by specially-designed alarm systems, overhead closed-circuit TV (CCTV) and other tools.
"But you have no way to protect all items. There are always lifters who can make 'smart' steals. They may tear off the labels somewhere the CCTV does not cover. After all, everybody is walking around in the large supermarket, and you can't follow them every minute," said Li Fuling, the security guard in the Trust-mart.
Poor security spending
"Retailers attribute one third of the increase in shoplifting to the economic recession," noted Professor Joshua Bamfield, Director of the Centre for Retail Research and author of the study. "Many have also noted a change in the type of offender and in the type of products stolen."
Security spending has decreased almost everywhere in the post-recession period.
In China, security spending was 1.26 billion yuan ($ 185 million), which represented 0.18 percent of retail sales, much lower than the global average of 0.31 percent, and almost the lowest among all the regions surveyed.
The report further warned that in the Asia-Pacific region, 34.2 percent of the top 50 most-stolen product lines remained unprotected.
"The recession makes loss prevention a more difficult task, but also more important," Per Levin, president from Checkpoint Systems, noted in the report.
"While 5.8 million theft incidents were stopped and nearly $6 billion in stolen merchandise was recovered in 2009, it was not enough to keep losses from spiking," said Per Levin.
Source article: http://business.globaltimes.cn/comment/2009-11/487736.html
Buffett-Backed BYD 9-Month Profit Jumps 201% on China Sales
Source: Bloomberg NewsBYD Co., the Chinese automaker backed by Warren Buffett, boosted nine-month profit 201 percent after its F3 compact became the nation’s bestselling car.
Net income rose to 2.34 billion yuan ($343 million) from 778 million yuan a year earlier, the Shenzhen-based company said today in a Hong Kong stock exchange statement. Sales increased 39 percent to 26.4 billion yuan.
BYD more than doubled nine-month vehicle sales as the F3 helped it lure customers from Honda Motor Co. and Toyota Motor Corp. in the world’s biggest auto market so far this year. The gain offset slumping demand for mobile-phone batteries, BYD’s traditional focus, as consumers worldwide pared spending on electronics amid the global recession.
The automaker fell 0.5 percent to HK$66.15 in Hong Kong trading today. It has jumped about eight-fold since MidAmerican Energy Holdings Co., a unit of Buffett’s Berkshire Hathaway Inc., agreed to buy a HK$1.8 billion stake last year.
BYD sold 290,951 vehicles in the first nine months, outpacing a 42 percent jump in nationwide passenger-vehicle sales. The company has surpassed Honda’s and Toyota’s local ventures to become the sixth-biggest automaker in China with a 5.58 percent share of the market.
Source article: http://www.bloomberg.com/apps/news?pid=20601089&sid=aQqszI7PuPmQ
Airport to be built near China's last matriarchal society
Source: (Xinhua)Construction of an airport near China's last matriarchal society in southwestern Yunnan province has started, local authorities said Wednesday.
A 10.5-km road linking to the construction site of Lugu Lake Airport, in Ninglang Yi autonomous county of Lijiang, a famous tourist destination, has been built up, said a spokesman with the provincial civil aviation department.
The airport is located 65 km north of the county seat and 35 km from Lugu Lake. It will cover 1.77 sq km with a terminal building of 4,000 sq m, at a cost of 837 million yuan ($122.6), the spokesman said.
The airport will boost local tourism and promote the social and economic development of the area, the spokesman said.
With their wood-frame houses scattered around the 60-sq-km Lugu Lake separating Yunnan and Sichuan provinces, the Mosuo ethnic minority has a population of about 40,000.
Unlike the majority of China's ethnic groups who follow a strong patrilineal tradition, they have preserved their ancient matriarchal system and the tradition of "walking marriage."
Unlike the majority of China's ethnic groups who follow a strong patrilineal tradition, they have preserved their ancient matriarchal system and the tradition of "walking marriage."
After puberty, a Mosuo girl is free to receive men. But they can only visit at night and must go to their own homes in the morning. Any children born from these relationships are raised by the mother's family.
If either member of such a couple tires of the relationship, they will move on to a new partner.
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