04/28/2009    Source: Xinhua

Over 50 Chinese companies signed 28 trade and investment contracts worth about 5.7 billion U.S. dollars with U.S. firms on Tuesday at the end of the China-U.S. Trade and Investment Cooperation Forum.

The deals covering mainly the machinery, electronic products and green energy technology will help gain trade balance between the two countries, said a spokeswoman of the visiting Chinese delegation led by Chinese Commerce Minister Chen Deming.

These deals will also help upgrade the technology and the value of Chinese products since the Chinese companies are importing U.S. high-tech products and investing in the fields of green energy, she said.

“The economic recession is affecting both countries, and these deals come at a critical time and will help both countries get out of the difficult time,” an official of Illinois State government told Xinhua during the forum.

He said a stronger commercial bonds between the United States and China will also help world economy to go up quickly.

Speaking at the forum, the visiting Chinese minister said “we will continue to encourage Chinese companies to import more from the United States, and we will also welcome U.S. companies and trade-promotion agencies to be more active in China.”

He expressed the hope that the two sides will work more closely to strengthen economic ties between the two countries and make joint efforts to weather the current economic crisis.

04/26/2009  Source: www.chinaview.cn

The mainland-Taiwan relations have ushered into a “new era of peaceful development”, after experiencing “major historic breakthroughs” over the past 60 years, mainland top negotiator on cross-straits relations Chen Yunlin said here Sunday.

Chen, president of the mainland’s Association for Relations Across the Taiwan Straits (ARATS), made the remarks at the meeting on cross-straits relations with his Taiwan counterpart Chiang Pin-kung on Sunday morning.

Sunday’s talks would focus on regular cross-straits flights, joint efforts on cracking down on crime and financial cooperation and relevant agreements were expected to be signed in the afternoon, Chen said.

The two sides would also exchange views and try to reach consensus on mainland investment in Taiwan.

Chiang, chairman of the Taiwan-based Straits Exchange Foundation, said joint efforts on cracking down on crime would be conducive to safeguarding social security on both sides and improving cross-straits investment environment.

If the agreement on financial cooperation was signed, it would set a foundation for market entering threshold of the financial sector, Chiang said.

Regular flights would ease the current shortage of cross-straits flights by increasing the number of both flights and terminals, he said, indicating that the tickets might be cheaper.

“I believe that with the efforts of both sides, the talks will achieve satisfactory results,” said Chen.

Chen and Chiang started their talks at around 9 a.m. in Nanjing, capital of east China’s Jiangsu Province.

This was the third round of talks between them in less than a year.

04/24/2009  Source: www.chinaview.cn

U.S. dollar is still the preferred settlement currency at the ongoing Canton fair, where China’s currency, the RMB yuan, has been given green light to test the market in trade.

The second phase of the month-long fair, the largest export event in China, opened on Friday, five days after the first phase ended.

“We are worried European and American buyers would feel declined if we insisted on yuan settlement,” said a Beijing-based porcelain producer at the fair.

He said the company would not risk losing any potential buyers, as the export environment is gloomy amid the global financial crisis.

Xu Jianguo, manager of a Shanghai-based stainless-steel dishware exporter, echoed the opinion saying that European and American buyers favor dollar settlement, which made the trial of yuan settlement difficult to win across the fair.

Export deals were down almost 21 percent year on year to 13.03 billion U.S. dollars at the first phase of the 105th fair which lasted from April 15 to 19 in Guangzhou.

Mu Xinhai, a fair spokesman, attributed the sharp fall to shrinking “external demand, especially from developed countries.”

The Chinese government gave the green light to five major trade cities — Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan — touse the yuan as an option to settle international trade deals right before the fair.

“The yuan settlement can benefit manufacturers and traders at home and abroad by reducing their exposure to exchange-rate volatility, increasing liquidity in foreign trade and reducing consumer burdens,” said Xu Xiaonian, professor with the China Europe International Business School.

But the yuan has a long way to go to become a leading international currency, he said.

The Zhejiang Taibao Bottle Cork Co. is one of the Chinese exporters that dare to be a vanguard in trying the yuan settlement at the fair.

04/22/2009  Source: China Daily

Sales at China’s most famous trade fair have dropped 20 percent amid the global financial crisis, organizers said yesterday.

Transactions at the 105th China Import and Export Fair, or Canton Fair, totaled $13.03 billion, a 20.8-percent drop from the same phase of the 104th session last October, Mu Xinhai, deputy secretary-general of the fair, said.

Figures from the fair have long served as a gauge of China’s foreign trade.

A total of 82,520 foreign buyers were present during the fair’s first phase from last Wednesday to Sunday.

This was a 5.4-percent drop on the comparable period of the 104th session.

According to Mu, there was a decrease in the number of trade deals with the European Union (EU), Japan, Australia and the United States – China’s four key export partners.

This included a 38.6-percent decrease with the EU, 36.5 percent with Japan, 11.2 percent with Australia and 4.9 percent with the US.

But deals increased with some growing economies such as Argentina, India and ASEAN countries.

This included a 16.6-percent increase with Argentina, 9.7 percent with India and 4.5 percent with ASEAN countries.

Deals with Russia, Brazil and the Middle East dropped by 42.6 percent, 35.1 percent and 7.3 percent respectively.

“The business transactions to some extent speak for the fact that the negative influence of the global financial crisis is still haunting and its influence on China’s foreign trade will not vanish in the near future,” Mu said.

“The orders from the overseas buyers were more short-term and on a smaller scale than in any previous sessions.”

04/20/2009  Source: China Daily

Money will not be an issue for Chinese companies planning to shop overseas thanks to a policy allowing domestic commercial banks to offer loans for mergers and acquisitions (M&A).

China’s banking regulators lifted restrictions last December making it possible for Chinese commercial banks to help finance M&A activities of Chinese companies both at home and abroad.

As of the end of March, five Chinese commercial banks had issued a total of 7.6 billion yuan worth of new loans to support 10 different companies’ M&A deals within China, said Huang Yi, an official from China Banking Regulatory Commission (CBRC).

This figure doesn’t include lending for international acquisitions such as the $21 billion of syndicated loans the Aluminum Corporation of China (Chinalco) secured from four Chinese banks to support its investment in global mining company Rio Tinto.

On Feb 12, China’s State-controlled metal giant Chinalco signed a $19.5 billion deal with Australia’s Rio Tinto that will eventually double its stake in the world’s second largest mining company. This is by far the largest overseas investment by a Chinese company.

The loan arrangement includes a $19.5 billion loan for the transaction and $1.5 billion to finance ongoing working capital and other expenditures linked to the deal, Chinalco said.

The four banks that supported Chinalco’s acquisition include two State-controlled commercial banks – Bank of China and Agricultural Bank of China, China Development Bank and Export-Import Bank of China.

Based on their 2008 earnings report, Chinese commercial banks can provide a total of 900 billion yuan worth of loans for M&A activities. The CBRC regulations mean that a Chinese bank’s outstanding M&A loans cannot exceed 50 percent of its core capital.

In addition to securing funding for their acquisitions abroad, Chinese companies would also be able to get favorable interest rates for the loans, just as Chinalco did from the four Chinese banks.

According to loan documents filed with the US Securities and Exchange Commission, Chinalco would pay just 90 basis points, less than 1 percentage point over the benchmark six-month London Inter-Bank Offered Rate, known as the Libor.

The interest rate is considered highly competitive compared with the 345-point spread over Libor that BHP Billiton, the world’s largest mining company, recently agreed to pay on a five-year bond and the 390-point spread it paid on a 10-year bond.

One of the main purposes of allowing commercial banks to finance Chinese firms’ M&A activities is to support the Chinese government’s call for domestic companies to “go global”, an official from the CBRC said when announcing the new rules.

The global financial crisis could prove a great opportunity for Chinese companies to expand their presence abroad, according to some analysts.

The market value of the world’s mining and metal companies has dropped about 40 to 60 percent due to the global economic downturn, presenting a great chance for Chinese mining and metals firms to pursue overseas acquisitions, global consultancy firm Ernst & Young said in a report.

The largest domestic mobile phone operator China Mobile and insurance giant China Life both expressed interests in acquisition opportunities overseas as assets abroad became cheaper.

Homegrown carmakers such as Chery Automobile, Changan Auto and Shanghai Automotive Industry Corp, have been frequently mentioned as potential bidders of Ford’s struggling Volvo unit.

04/17/2009  Source: China Daily

Laurence D Fink is quite a busy man these days. He travels around the world frequently, trying to convince his clients, many of whom are institutional investors and sovereign funds, that this is the best time to buy distressed mortgage debt in the United States.

His trip to China is for the same reason.

“I am here to tell my clients that this is the best opportunity to invest in distressed mortgage debt,” the chief executive of BlackRock, one of the largest asset management firms in the world, told China Daily in Beijing yesterday.

Fink declined to disclose the names of clients he would be meeting with during his visit. But one thing is for sure. A year ago, when China Investment Corp (CIC) was inviting bidders to manage its overseas assets, over a hundred financial firms flew in to participate in the bidding.

But the financial world has been transformed over the last six months ever since Lehman Brothers went bankrupt and AIG collapsed, making BlackRock a more prominent force in the financial world.

Since it now faces fewer competitors, the opportunities for BlackRock are obvious. It has become more attractive to sovereign entities, given the highly possibility of it being selected by the US Treasury as one of the top five fund managers that will purchase troubled assets from US banks under the ‘public-private investment program (PPIP)’.

Under the PPIP, select fund managers would get government loans on favorable terms for purchasing these “distressed mortgage assets” if they can raise $500 million from investors within three months. Fink’s China visit now is aimed at raising money to buy these assets since the US is expected to announce the first batch of asset managers next month.

“The opportunity is unique, as the PPIP will help in the economic recovery process. Investing in the PPIP is safer than equity market investment,” Fink said.

But, is the housing market close to bottoming out? Fink certainly seems to think so.

“The growth rate in prices of secondary houses is the leading indicator of consumer sentiment. If we do not stabilize secondary house prices, we cannot stabilize the economy or the equity markets.”

Fink also said there could be a significant risk of inflation as soon as the economy starts to recover, possibly in six months.

“Economic recovery efforts in the United States and abroad have raised the specter of inflation, with signs that they are already feeding a recovery in prices for oil and other commodities,” he said.

“We are recommending to our clients worldwide to start to move some of their government treasury bonds and money market funds to inflation-protected notes.”

Fink was identified by the Financial Times as one of the 50 people who could frame a way forward from the economic crisis.

04/14/2009   Source: www.chinaview.cn

Europe’s largest auto maker Volkswagen AG said Tuesday its sales in China rose 9 percent year on year to a record monthly high in March, buoyed by the country’s overall strong demand for cars.

New vehicles sold in China totaled 112,466 units in March, the first month of this year that saw sales exceeding 100,000 units, said the Volkswagen Group China in a statement.

The group said its three major brands in China — Volkswagen, Audi and Skoda — all saw monthly record in sales in March.

It said sales of new vehicles in the first quarter increased 6 percent year on year to 284,143 units.

“The development of passenger car market in the first quarter has exceeded our expectations and we benefited successfully from the growth trend,” said Winfried Vahland, president of Volkswagen Group China, in the statement.

He said the company had raised its forecast for 2009 performance in China and would add 50,000 units to its annual production capacity.

China’s auto sales in March exceeded the United States, the world’s biggest auto market, for the third consecutive month, due to government stimulus policies and tumbling U.S. car sales.

Sales of domestically made motor vehicles set a new record of 1.11 million units in March, up 5 percent from a year earlier, according to the China Association of Automobile Manufacturers (CAAM).

On Jan. 20, China halved the purchase tax on passenger cars to 5 percent for models with engine displacements of less than 1.6 liters.