Week in Review - June 30 to July 4 (中国经济--大家一起来讨论)
Economy
Chinese authorities plan to more closely monitor foreign capital flowing to and from China. The State Administration of Foreign Exchange (SAFE), the Ministry of Commerce and China Customs jointly issued a new settlement inspection regime June 2 requiring verifiable evidence for foreign currency exchanges. A trial period starts July 14 for the new policy, which is aimed at preventing businesses from doctoring invoices with inflated figures in schemes to import foreign currency that can exchanged for what has been a strengthening yuan. The move was not expected and gave speculators fair warning that the government will use policy measures -- not just monetary policy tools -- to curb hot money and inflation, according to Sherman Chan, an economist for Moody''s Economy.com. Meanwhile, a SAFE official discounted a popular view that China''s influx of hot money between 2003 and this past April totaled US＄ 1.75 trillion.
The nation''s purchasing manager index (PMI) continued sliding in June, settling at 52, the China Federation of Logistics. Under conventional wisdom, a PMI below 50 suggests overall weakening in the manufacturing sector. Affected by worsening trade conditions, the country''s recently launched export contract index also fell, reaching 50.2 in June. This decline coincided with slower profit growth among industrial companies during the first five months of 2008, analysts said.
The National Development and Reform Commission (NDRC) and the Civil Aviation Administration announced hikes in aviation fuel surcharges for domestic passenger routes as of July 1. The move was in line with nationwide price increases for oil products announced June 19. The passenger fuel surcharge for routes of less than 800 kilometers was lifted to 80 yuan from 60 yuan, while the surcharge for flights above 800 kilometers increased to 150 yuan from 100 yuan. Meanwhile, NDRC and the Ministry of Railways announced higher cargo prices for freight trains, effective July 1.
Residential reconstruction following the May 12 earthquake in Sichuan Province is expected to cost up to 435 billion yuan, according to the provincial housing and construction authority. Funds would come from the central and local governments, aid from unaffected provinces, private donations and earthquake victims themselves. Meanwhile, companies severely affected by the disaster have been exempted from the 2008 enterprise income tax, the State Council decided.
Industries and Companies
China''s new steel giant Hebei Iron & Steel Group, created when Tangshan Iron & Steel Group merged with Handan Iron & Steel Group, was inaugurated June 30. With an annual capacity of more than 31 million tons, the new company immediately overtook Shanghai-based Baosteel Group to become the country''s No. 1 steelmaker by output. Hebei Steel expects to expand capacity to 50 million tons by 2010. The move is seen as Hebei Province''s first major step toward steel industry integration.
Several lenders have offered to give sewing machine manufacturer China Feiyue Group another two years to repay debts. But the Taizhou-based company''s assets remain frozen by court order after several private lenders sued the company. To help the distressed company, the local government offered additional help by buying a plot of land from Feiyue for 300 million yuan. Local officials said saving Feiyue would require reshuffling assets or selling overseas assets. However, such steps could not be taken until after the company signs lender agreements and the court unfreezes its assets.
The popular Chinese online video provider Youku.com has received a US＄ 30 million injection from several shareholders. Youku also signed an agreement with Western Technology Investment for a US＄ 10 million equipment loan. Youku said the company will focus on expanding its sales and marketing network over the next two years. Although the company has yet to receive a video operating license from government regulators, Youku and its major rivals in the online video business have continued to expand. Youku said it expects to get government approval “in the next few weeks.”
Gansu-based Jiuquan Iron and Steel Group (Jiugang) has been approved for a joint venture with a subsidiary of the Kazakhstan-based Eurasian Industrial Association (EIA). The joint venture is expected to start with 8 billion yuan in registered capital. Jiugang would hold a 51 percent stake and its Kazakh partner the remainder. Industry insiders think the deal should help Jiugang secure raw materials and move deeper into the central Asian market.
Finance
Even an editorial from the official Xinhua news agency could not prevent China''s stock market from continuing its slide. On the evening of July 1, Xinhua ran a 4,600-character editorial that said “stock markets can realize stable, healthy development at a time when the basic economic conditions for our nation are forecast to continue rising.” Investors did not react enthusiastically, and the Shanghai Composite Index closed lower July 2. Overall A-share market capitalization has declined nearly 50 percent since the beginning of the year.
China''s futures traders are getting a chance to handle more commodities as the country''s third futures market -- Zhengzhou Commodity Futures Exchange -- prepares to open shop. The exchange only needs to pass a regulatory review before it can launch commodities trading, including rice. But Zhengzhou is not alone. The Shanghai Futures Exchange wants to begin steel trading, while an exchange in Dalian has its eye on adding live hogs.
The Ministry of Finance released June 28 a guide for corporate internal controls that should take effect in July 2009. The new policy guidelines will be applied to all domestic public companies. Companies may hire accounting firms to review their internal controls. Deloitte said a recent survey of 126 listed companies showed Chinese managers are frugal about internal controls spending, adding that the new policy will raise operational costs.
The nation''s Social Security Fund council reported a 43 percent rate of return on investment for 2007. Market analysts do not expect the fund''s 2008 investment earnings to beat last year''s results, however, due to a sharp decline in A-share market capitalization since January.
From: caijing.com
