China - Economic Data & News 01 (May 08 - Oct 08)

[winston]

From Financial News:-

China's banks had total non-performing loans of 1.2 trillion yuan ($171 billion) by the end of March, with the non-performing loan ratio at 5.8 percent, down 0.38 percentage points from the beginning of the year

[winston]

China's Stocks Bow to Whims of Control Freaks: Michael R. Sesit
Commentary by Michael R. Sesit

May 16 (Bloomberg) -- The plunge in Chinese stocks over the past seven months and regulators' attempts to revive them make one wonder whether China's bourse is a government-directed casino housed within the confines of a communist state.

The short answer is yes.

The CSI 300 Index, which tracks 300 yuan-denominated so- called A shares that trade on the Shanghai and Shenzhen equity markets, soared almost sixfold from April 8, 2005 -- when the index began trading -- to its peak on Oct. 16, 2007. It then slumped more than 44 percent through April 21, 2008.

Behind the selloff were investor concerns about the government's tightening of monetary policy to damp a near 11- year-high inflation rate of 8.5 percent.

As recently as December, the government began maneuvering to buoy the market, when it tripled to $30 billion the amount that overseas institutions could invest in yuan-denominated stocks and bonds. In February, it ended a five-month freeze on the sale of new mutual funds.

When these failed, the government began taking steps to goose the market in earnest.

On Sunday, April 20, the China Securities Regulatory Commission, the country's market overseer, said shareholders selling more than 1 percent of a publicly traded company's stock within a month would have to execute the transaction in a block trade, instead of releasing the shares onto the open market.

Spooked by Supply

The intent was to make sure buyers were already lined up, which would slow the release of new shares onto a falling market and prevent investors from being spooked by sudden new supply.

On April 24, the government cut the tax on stock trading to 0.1 percent from 0.3 percent. The change came two days after the Shanghai Composite Index fell 51 percent from its October highs. The CSI 300 Index jumped 15 percent in two days and 23 percent in seven. The market has since shed 0.3 percent.

This is no way to run a railroad, or a financial market. Typical of most bureaucrats, Chinese regulators seem to feel a need to micromanage, which raises serious doubts about the government's commitment to free markets.

Last year, when the stock market was going gangbusters, regulators, exhibiting their distrust of market forces, decided to cool things by tripling the stamp duty and approving a laundry list of initial public offerings. Given that the CSI 300 Index is still off 33 percent from its October peak and down 26 percent so far this year, it wouldn't be surprising to see these guys come up with more market-support programs.

Borrow to Buy

If the steps taken so far don't do the trick, regulators may further restrict new share sales and allow investors to borrow money to purchase stocks, Cheng Weiqing, Beijing-based chief strategist at Citic Securities Co., said on April 26.

What's more, their motives are suspect. Regarded as overly concerned with maintaining face, Chinese officials are commonly believed to be eager to see the equity market rallying during the Olympic Games in August -- although there is no substantive economic or financial link between the two. It's not unlike their refusal to bow to international pressure to curtail the Olympic- torch relay.

This isn't to say that Western policy makers never seek to influence equity-market performance. The Federal Reserve and Bank of England follow stock markets because of their impact on consumer and business sentiment, and on the economy.

The links between China's equity market and its economy are far more tenuous. The market's so-called free float, or those shares that international investors can purchase, is $518 billion, according to Morgan Stanley Capital International. That equals 20 percent of the country's gross domestic product. By contrast, Wall Street's free float equals 98 percent of U.S. GDP, and the U.K. stock market's is 119 percent of Britain's economy.

[winston]

Chinese Quake Shows Change in Winds Across Asia: William Pesek

May 16 (Bloomberg) -- The focus in Asia is now on the 7.9- magnitude earthquake that killed untold thousands in China this week. It's worth pausing for a moment to consider how the country's biggest quake in 58 years offers a reason for optimism.

The contrast between China's impressive relief efforts and Myanmar's shameful failure to allow the rapid delivery of international aid after this month's cyclone is as huge as it is telling. China's response differs markedly from how the country dealt with a 1976 earthquake that killed 250,000 people in the northeastern city of Tangshan.

Back then, the government downplayed the severity of the disaster and declined offers for international help. That left poorly equipped soldiers to aid the city's devastated population. The episode led to the downfall of China's leaders, and memories of it are probably on the minds of President Hu Jintao and Premier Wen Jiabao.

The openness with which the government has addressed this week's quake is extraordinary. It has allowed reasonably free reporting and fewer-than-usual efforts to conceal the severity of the crisis. It shows how China has learned from the past.

China yesterday gave emergency rescue teams from Japan the go-ahead to aid earthquake-relief efforts, the first country from which it accepted such help. Say what you want about Japan-China relations -- this is big stuff.

Communist Party leaders used the old playbook in recent years when rural Chinese were killed by flooding on the Yangtze River and during the SARS epidemic in 2003. News reporting also was limited earlier in the year when freak snowstorms stranded thousands. The candor about the latest disaster contrasts with the media lockdown during Tibetan riots before the Beijing Olympics.

Signs of Thawing

The quake occurred at a time when Asian nations are redefining their relationships with one another. There are now signs of thawing among East Asia's three big economies -- China, Japan and South Korea -- as they attempt to join hands.

Such efforts start small -- like with a Japanese leader, Yasuo Fukuda, who is more interested in working with China than scoring points with Japanese nationalists. They begin with a Chinese president willing to visit Japan without lecturing officials in Tokyo, as Hu did this month. They begin with a new Korean leader willing to mend fences with vital neighbors.

Korean President Lee Myung Bak last month visited Tokyo, where he and Prime Minister Fukuda called for a ``new era of bilateral relations.'' In late May, Lee is expected to fly to Beijing for a summit with Chinese leaders. Fukuda, meanwhile, hasn't visited Tokyo's Yasukuni Shrine, which includes memorials to convicted war criminals and irks Asian neighbors who say it celebrates Japan's wartime aggression.

Lee's Visit

Of course, Lee shouldn't be offended if China postpones his visit to Beijing. Hu and Wen are understandably busy grappling with the aftermath of China's earthquake.

While the steps to reconciliation are modest and may prove fleeting, they are good signs for a region with much to discuss.

Pressing issues go beyond record oil and food prices, rising interest rates, earthquake relief in China, a calamitous cyclone in Myanmar, terrorism and pandemics.

Asia needs to boost efforts to reduce poverty, create free- trade zones, build regional bond markets, link stock trading, adopt standardized accounting, streamline immigration policies, tackle climate change and ease tensions with North Korea.

The region's leaders also should be thinking about how to bring home the trillions of dollars of savings parked in low- yielding U.S. Treasuries. Those funds could be used more productively in Asia supporting local entrepreneurs and improving roads, bridges, power systems, schools and hospitals.

The Big Three

It's almost impossible to do that when three of the region's biggest economies are barely speaking, as has been the case in recent years. If ever there was a time for Asia's powers to get together and keep history or disputes over tiny islands from scuttling the future, it's now.

China, Japan and Korea have never been closer economically. The same goes for East Asian trade with India, too. Without these large and influential economies working together, the odds of today's growth continuing get worse. And so, the signs of thawing in recent weeks are heartening.

Investors are now focused on the short-term implications of the earthquake. The affected region, Sichuan, plays a small role in China's overall economy. Still, economists such as Ting Lu of Merrill Lynch & Co. in Hong Kong expect China to put off interest-rate increases aimed at taming inflation, which surged to 8.5 percent last month.

The tragedy may make the government ``even more cautious in pursuing further macro tightening measures,'' says Denise Yam, an economist at Morgan Stanley in Hong Kong. ``Controls over bank lending could be eased earlier than expected.''

Yet over time, the events unfolding in China may usher in a sea change in China's willingness to open up to a curious world. As that phenomenon dovetails with efforts in Asia to reduce tensions, the region's economic and political prospects will become all the brighter.

Asia's status quo is poised for an overhaul.

[winston]

Apple Daily:-

Mainland enterprises have lost billions in their investments.

Figures on listed companies show 125 companies in the Shanghai and Shenzhen exchanges have incurred losses on investment returns of more than 54.1 billion yuan combined in the period from January to April.

[winston]

China Bank Regulator Favors Australia, Brazil Stocks
By Josephine Lau and Catherine Yang

May 28 (Bloomberg) -- China's overseas investment funds, under pressure from waning demand this year, may find better returns by diversifying into natural resources stocks in Australia and Brazil, an official at the banking regulator said.

``We see natural resources stocks, such as mining companies in Australia, Brazil and Latin America, as very promising bets,'' Li Fuan, who heads product innovation at the China Banking Regulatory Commission, said in an interview today. ``These industries do a lot of business with China, which provides a driver for future profit growth and a buffer against risk.''

Investors under China's so-called qualified domestic institutional investor program are being encouraged to tap rising commodities demand to shift away from Hong Kong, where QDII funds have put about half the money available to buy stocks abroad. Yinhua Fund Management Co.'s QDII fund raised just 3 percent of its $2 billion target this past month, after Hong Kong's Hang Seng Index fell 13 percent this year.

``Demand for commodities will continue to grow given China's and India's very strong demand on the one hand, and really restricted supply on the other,'' said Ronald Chan, who manages $2.5 billion in assets as Hong Kong-based chief investment officer at Fortis Investment Management. ``This gives QDII funds an investment alternative from the China story, since so far they've invested a lot in Hong Kong-listed Chinese companies.''

U.S. Assets

The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials has jumped 22 percent this year. This compares with a 17 percent drop in the Hang Seng China Enterprises Index, which tracks the Hong Kong-traded stocks of Chinese firms.

The global equities slump following the collapse of the U.S. subprime housing market also offers an ``opportune time'' for Chinese investors to put their money in the U.S. and U.K., where market valuations are ``already quite low,'' according to Li.

A total of $2.8 trillion was erased from stock markets worldwide in the first quarter as the U.S. economy slowed and the world's biggest banks and brokerages reported more than $200 billion in subprime-related losses and asset writedowns in the period.

``In the short term, this is a great time for China's QDII funds to buy into U.S. assets,'' said Diane Garnick, a New York- based investment strategist at Invesco Ltd., which manages more than $500 billion. ``In the long term, this will be a great diversification for QDII.''

Emerging Markets

Appreciation risk remains a concern, however, for Chinese investors looking at U.S. and U.K. assets, said Li, who oversees the QDII program at the banking regulator. The Chinese yuan, Asia's best-performing currency this month, has climbed 5 percent to 6.9484 per dollar this year.

``Emerging markets, especially those in Asia, look attractive for QDII because those currencies are also appreciating,'' he said.

Chinese banks will ``very soon'' offer overseas investment funds targeting markets including the U.S., Japan and Singapore, Li said in today's interview.

China's banking watchdog is currently in talks with regulators in Luxembourg and Australia and may allow the industry's QDII funds to invest in those markets by the end of this year, he said.

China's first four overseas funds, started in the fourth quarter, fell an average 13.5 percent this year, according to Bloomberg calculations.

Beijing-based Yinhua Fund raised 417 million yuan ($60 million) for an overseas investment fund this past month, the lowest subscription under the QDII program. By contrast, China's first four QDII funds received pledges in the fourth quarter for 2.5 times the combined $16 billion they were allowed to raise.

China's financial firms have sold $20 billion in overseas funds to date, of which banks have sold about $3 billion, Li said.

Chinese banks, whose QDII funds are currently allowed to invest in Hong Kong, Japan, Singapore, the U.K. and the U.S., have received a total quota of more than $15 billion to invest abroad.

[iam802]

China's forex reserves hit 1.76 trillion dollars: report
--

SHANGHAI (AFP) — China's foreign exchange reserves rose to 1.76 trillion dollars at the end of April, state media reported Monday, reaching a level higher than the rest of Northeast Asia's combined.

China's reserves, by far the largest in the world, expanded by another 74.5 billion dollars during April, the China Business News reported, equivalent to about 100 million dollars every hour.

At 1.76 trillion dollars, China's reserves are now larger than those of Japan, Taiwan, South Korea and Hong Kong combined.

The growth in reserves came amid rising official concern about a fresh surge in hot money -- or speculative inflows -- spurred by a strengthening yuan and a widening spread between falling US interest rates and rising Chinese rates.

The increase in reserves was roughly three times larger than the trade surplus and the value of incoming foreign direct investment -- the two traditional sources of reserve growth.

This led analysts to conclude that perhaps as much as 50 billion dollars entered the economy in the form of hot money.

"This (figure) seems to suggest the inflow of hot money is speeding up," the newspaper quoted Logan Wright, an analyst with Stone and McCarthy Research Associates, as saying.

[kennynah]

it was just reported that as of Apr08, china's reserves is at usd1.756trillion, the highest level in its history... this is not to suggest that she will start dumping money into USA

[blid2def]

China, Africa and Oil

Full article: http://www.cfr.org/publication/9557/ (Council on Foreign Relations)

Contents:
China, Africa, and Oil

Author:
Stephanie Hanson, News Editor

June 6, 2008
* China's Demand for Energy
* Sino-African Trade
* The Chinese Approach to Securing Africa's Oil
* Shifts in Chinese Foreign Policy
* Noninterference?
* Assessing the Benefits of Sino-African Ties

Extract of one section; read the full article (URL above) for the rest.

The Chinese Approach to Securing Africa's Oil

Because Nigeria and Angola, the continent's largest oil producers, have decades-long relationships with Western oil companies, China has developed a two-pronged strategy toward energy investments. First, it has pursued exploration and production deals in smaller, low-visibility countries such as Gabon, Equatorial Guinea, and the Republic of Congo. Second, it has gone after the largest oil producers by offering integrated packages of aid.

In Angola, which exported roughly 465,000 barrels of oil per day to China in the first six months of 2007, Beijing secured a major stake in future oil production in 2004 with a $2 billion package of loans and aid that includes funds for Chinese companies to build railroads, schools, roads, hospitals, bridges, and offices; lay a fiber-optic network; and train Angolan telecommunications workers. Elizabeth C. Economy, CFR's senior fellow and director for Asia studies, says China is following a very traditional path established by Europe, Japan, and the United States: offering poor countries comprehensive and exploitative trade deals combined with aid. The Chinese counter that they are giving African governments what they want: no-strings-attached investment and infrastructure.

Such aid deals have not always been successful, however. In Nigeria, Chinese state-owned CNPC's $2 billion investment in an oil refinery has fallen through, and in Angola, news reports suggest that work on the country's railroads has either halted or encountered serious delays. Analysts say China's most successful African energy investment has been in Sudan, which now sends 60 percent of its oil output to China.

Overall, China has not made the inroads into Africa's oil reserves that some media coverage has suggested; the energy consultancy Wood Mackenzie estimates Chinese companies hold under 2 percent of Africa's known oil reserves. Erica S. Downs of the Brookings Institution writes that "most of the African assets held by China's NOCs [national oil companies] are of a size and quality of little interest to international oil companies (IOCs). In fact, many of these assets were relinquished by the IOCs."

[winston]

As expected. And the timing is good, just before along week-end.

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China raises reserve-requirement ratio to record high of 17.5%.

China's central bank on Saturday ordered lenders to set aside more money as reserve, the fifth such move this year. It was the latest effort to enhance liquidity management in the banking sector.

The reserve-requirement ratio would be raised by 0.5 percentage points on June 15, and another 0.5%-pts on June 25, the People's Bank of China (PBOC) said on its website. This will bring the ratio to a record high of 17.5%. The PBOC also said that corporate financial institutions in the worst quake-hit areas, including Chengdu and Mianyang, would postpone carrying out the regulation. But it did not say how long the delay period would be.

'The rise, a further materialisation of the tight monetary policy, is aimed at strengthening liquidity management in the banking system,' the statement said. (BT)

[kennynah]

11 Jun 2008 12:33 GMT
Soaring imports shrink China's trade surplus, stoke inflation

BEIJING (XFN-ASIA) - Soaring imports caused China's trade surplus to shrink nearly 10 pct as rising global commodity prices stoked inflation in the domestic economy, official figures showed.

China's trade surplus stood at 20.2 bln usd in May, down 9.9 pct from 12 months ago, prompted mainly by a 40-pct spike in imports to 100.3 bln usd, according to customs data.

The steep increase in imports also reflected the rising cost of key commodities purchased by China, rather than necessarily a large increase in physical goods entering the country, analysts argued.

"The impact of prices is huge. Oil prices have roughly doubled from a year ago," Tang Xiaosheng, a Shanghai-based analyst with Guosen Securities, told Agence France-Presse.

However, imports have also expanded due to the need to rebuild parts of southwest China devastated by the May 12 earthquake, analysts said.

"Demand for foreign resources has surged, leading to a larger import bill," Sherman Chan, an economist with Moody's Economy.com, said in a research note.

"Given that the reconstruction work will take an extended period of time to complete, China's appetite for overseas commodities will remain strong in the near term," she said.

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