03/11/2010 Source: Agencies

China’s phone giant, China Mobile, said Wednesday it will pay US$5.8 billion for a 20 percent stake in Shanghai Pudong Development Bank as part of its bid to enter the wireless banking market.

Hong Kong-listed China Mobile, the largest phone operator by value, said it will work with the Shanghai bank on products that would let customers pay bills or transfer money via mobile phones.

“Mobile handsets have transformed from a simple tool for communications to a valuable device for communications, entertainment and online shopping,” China Mobile said in a statement.

“Mobile e-Commerce will become one of the major means that people make their spending in the coming time,” it says.

China Mobile Chairman Wang Jianzhou told a news conference in Hong Kong on Wednesday that the deal is an “extension of our core telecom business. We see big growth potential in the profitability of the mobile financial business,” said an AFP report Wednesday.

Telecom operators in Japan and South Korea have already struck agreements with banks to offer payment services via cell-phones as a way to generate additional revenue.

Wednesday’s deal would see Shanghai Pudong issue 2.2 billion new shares.

03/08/2010 Source: Xinhua

Forced urban housing demolition, which caused several deaths and injuries last year and snowballed into a major controversy, will be strictly supervised thanks to a proposal to better protect the rights of property owners, a senior official has said.

But forced relocation will be used if necessary so that the self-interests of a handful of people will not hurt the interests of the majority, said Zhang Qiong, deputy director of the State Council Legislative Affairs Office.

Zhang, a member of the Chinese People’s Political Consultative Conference National Committee, made the remarks in an interview with China Daily about the proposed amendment to the regulation on urban housing demolition.

In January, Zhang’s office published a draft revision to the Regulations on Property Requisition, which has long been criticized for neglecting the rights of property owners, to solicit public opinion.

The draft amendment stipulates that no violence, threat or other illegal means be used in forced relocation, such as cutting off electricity, water, heating or gas.

Zhang said the office has received over 60,000 responses, most of them suggesting that the proposed revision is more in accordance with the Constitution and the Property Law.

Responding to a common public suggestion that demolition should not proceed unless all residents agree to move, Zhang said “it is not realistic”.

“Take the rebuilding of dangerous and old houses, for example. Most people living in such poor conditions would like to move out, yet there are always one or two who would take this opportunity to ask for very high prices and refuse to be relocated”, Zhang said.

“In such cases, we tend to consider the interest of most people and use forced relocation.”

According to the draft, dangerous and old houses will be rebuilt only after 90 percent of residents give their consent. The current rule gives the government the final say.

“China is undergoing rapid urbanization, and needs a lot of land,” Zhang said. “As we have to ensure preservation of arable land, the use of urban land is inevitable.”

Zhang acknowledged that another major public concern was a clause in the amendment, which says: “To demolish housing for constructions of non-public interest, the constructors – such as real-estate developers – need to seek permission of related government departments.”

Ma Guangyuan, a researcher at the Chinese Academy of Social Sciences, said this stipulation should be deleted as both the Constitution and the draft revision itself stipulate that the government can only intervene in relocation cases “for public interest”.

The draft revision, which emphasizes public interest, will be watered down by this single item that authorizes the government to permit demolitions for non-public interests, such as real-estate developers, Ma said.

In response, Zhang said the government will not back down as “a lot of disputes and conflicts have already arisen from demolishing housing for non-public interest. More problems will arise if the government leaves it to the developers and residents themselves”.

“Besides, it is very difficult to differentiate public interest from non-public interest,” Zhang said, admitting that balancing different interests is “complicated and difficult”.

“The basic idea of the amendment is that efficiency should give way to people’s rights, and we set strict limits and conditions for forced relocation ,” he said.

03/04/2010 Source: People’s Daily

Toyota did not offer any form of compensation for the RAV4 models recently involved in the recall in China over accelerator pedal problems, said Xu Yiming, head of Toyota Motor (China) Investment Co., Ltd. PR department. Consumers in Wuhan questioned the company’s different attitudes in China and the U.S.

In the US, the company provides door-to-door service to consumers involved in the recall. When drivers take their recalled vehicles to the factory themselves, the company offers transportation reimbursements and a loaner car of the same model.

Sun, a Toyota RAV4 user who had just had his car fixed, said although he did not pay for the repairs, it had cost him time and gas so Toyota should be responsible for his loss.

On some online forums, many RAV4 owners are discussing the possibility of filing a class action suit in China against Toyota.

Users of other models of Toyota also expressed their concern.

Ms. Ma bought a Toyota Corolla last October. Corolla models are recalled in the U.S., but not in China. Local Toyota dealers didn’t respond to her question why Chinese consumers were not treated equally.

“Driving my Corolla, I have the feeling of riding a time bomb,” Ma said.

An employee with a Toyota dealer noted that around 800 RAV4s have been sold in Wuhan since May 2009. “Wuhan has around 2,000 RAV4s on the road.”

According to a survey conducted by a portal website, 71.5 percent of netizens surveyed said that they would never buy Toyota cars, and 64.2 percent believed that the Toyota recall crisis has had grave impact on Japanese automakers.

02/24/2010 Source: People’s Daily

According to Tianjin Municipal People’s Government Financial Affairs Office, PPF Group N.V. (herein referred to as “PPF Group”), the principal holding company of the largest investment group in Central and Eastern Europe, has received approval from the China Banking Regulatory Commission to establish consumer finance company named Home Credit Consumer Finance (China) in Tianjin. This is the first foreign consumer finance company in China.

Czech’s PPF Group, the shareholder of the approved preparatory consumer finance company, is involved in consumer finance, insurance, retail banking and other areas with assets of more than 11 billion euros, which has the world’s leading management system, professional management team and advanced management concepts.

The Home Credit Group, affiliated by PPF Group, is a consumer finance business specialist with more than 10 years of consumer finance industry experience and a huge customer base, which has succeeded in research and development of a unique business model and back-office system, leading in consumer finance market in Central and Eastern Europe, Central Asia and the Far East.

Home Credit Consumer Finance (China) owns registered capital of 30 million euros, and will carry out related businesses in two phases of consumer loans and consumer finance, and obtain customers through the cooperation with retailers to distribute loan products and provide personal consumption loans for customer groups. Industry insiders claim that this will boost household consumption and play an active role in promoting economic growth.

02/11/2009 Source: People’s Daily

China’s insurers will benefit more than banks as “accelerating” inflation pushes bond yields higher and lending growth slows, according to Morgan Stanley.

“We don’t think there’s a massive inflation problem in China, but we’re definitely in a period of accelerating inflation,” said Jonathan Garner, Morgan Stanley’s emerging markets strategist. “The insurance companies tend to be more positively levered to inflation than the banks.”

China’s benchmark Shanghai Composite Index has fallen 9.5 this year on concern increases in consumer prices and asset bubbles will spur the central bank to increase borrowing costs.

People’s Bank of China Governor Zhou Xiaochuan said on Tuesday. China needs to monitor inflation as analysts forecast consumer prices rose in January by the most since 2008.

“We need to closely watch” the inflation rate, Zhou told reporters in Sydney on Tuesday after a meeting of central bankers. “Right now the inflation rate has started to go up, but the level is still relatively low.”

Consumer prices probably advanced 2.1 percent in January from a year earlier, a third straight gain, according to the median estimate of a Bloomberg News survey.

Slowing loan growth

Insurers tend to be able to “reset” the policy premiums and benefit from rising bond yields, while banks have problems with loan growth in “this sort of environment”, Garner said.

Still, China’s banks probably made more new loans in January than the previous three months combined as lenders anticipated a credit clampdown by policymakers seeking to stem inflation pressures.

New bank lending totaled 1.38 trillion yuan last month, according to the median estimate of 16 economists in a Bloomberg News survey ahead of a government report scheduled for this week.

China Life Insurance Co, the nation’s largest insurer, and Industrial & Commercial Bank of China Ltd have declined 14 percent this year in Hong Kong trading, compared with a 10 percent drop in the MSCI China Index.

01/28/2010 Source: Xinhua

China’s $300 billion sovereign wealth fund is considering new investments in resource-related companies after bets on commodities producers from the US to Kazakhstan paid off in 2009.

China Investment Corp (CIC) increased spending on energy and mineral assets last year to profit as the global economy recovers. The Beijing-based fund avoided the worst of the credit crunch in its first full year in 2008 and may have had a return of more than 10 percent in 2009, said London-based Jan Randolph, director of sovereign risk, analysis and forecasting at IHS Global Insight.

“They have timed the upside well both in market terms, but also to fit in with the longer-term diversification strategy,” Randolph said.

CIC has had “early” talks for direct investments in Brazil, the world’s second-biggest iron-ore exporter, and Mexico, the No 2 silver producer, Chairman Lou Jiwei said at the Asian Financial Forum in Hong Kong on Jan 20. Lou pumped about $10 billion into commodity-related companies in the second half of 2009, according to data compiled by Bloomberg.

With China’s reserves at $2.4 trillion and swelling by an average of $37.8 billion a month last year, CIC has asked the government for another $200 billion, the Economic Observer reported on Nov 21, citing a person it didn’t identify.

Canadian venture

In July, CIC bought 17.2 percent of Teck Resources Ltd, Canada’s largest base-metals producer, for $1.5 billion. It acquired an 11 percent stake in a unit of Kazakhstan’s state-run energy company in late September, two weeks before purchasing 45 percent of Nobel Oil Group of Russia.

In November, it announced investments in US power producer AES Corp and GCL-Poly Energy Holdings Ltd, China’s biggest poly-silicon producer.

AES closed at $13.31 in New York trading on Dec 31, giving CIC a paper profit of 7 percent, while GCL-Poly shares had risen 30 percent from the fund’s HK$1.79 purchase price.

CIC’s early investments also recovered some losses last year, with shares of Blackstone Group LP doubling and Morgan Stanley’s stock surging 85 percent.

Those returns may encourage CIC to be “more aggressive”, according to Zhang Zhiming, director of asset allocation research at HSBC Holdings Plc in Hong Kong.

“Most investors do momentum investing and CIC is no exception,” he said. “They are sticking to a double-diversification principle. First, buy a bit of everything and be geographically spread out. And timing-wise, to be also spread out to avoid major ups and downs.”

China Investment Corp will likely expand the scope of its investments this year into “all categories”, including US and European markets that it largely shunned in 2009 during the crisis, Zhang said. The fund may invest in a US infrastructure project, Lou said, without giving details. It may put money in US high-speed railways, the Shanghai Securities News reported on Jan 13, citing a person it didn’t identify.

CIC was created in September 2007, funded by a $200 billion chunk of the nation’s foreign reserves. The $2.4 trillion in reserves – equivalent to the annual output of India and Australia combined – have increased about 60 percent since CIC was founded, driven by current account surpluses and foreign direct investments.

A CIC press official said she was unaware of the request for $200 billion in extra funds reported by the Economic Observer. The company’s top executives weren’t available for interviews for this story.

“CIC will soon become one of the top three sovereign wealth funds in the world with this extra capital, and one of the most aggressive in 2010 to 2015,” said IHS’s Randolph.

01/25/2010 Source: Global Times

The Bank of China (BOC) announced Friday it plans to float up to 40 billion yuan ($5.86 billion) in convertible bonds on the yuan-dominated A share market, in a bid to supplement its capital.

The issuance is to satisfy higher standards for the capital adequacy ratio (CAR) of commercial banks required by regulatory bodies from both home and abroad after the financial crisis, the BOC said in a statement on its website.

The CAR has been raised from 8 to 10 percent for small-and medium-sized banks and 11 percent for large banks, Wang Zhaoxing, vice chairman of the China Banking Regu-latory Commission (CBRC), wrote in an article published in December in China Finance, a semimonthly magazine run by the central bank. Wang’s article is widely considered an official announcement.

The weighted average CAR and core CAR of the country’s commercial banks reached 11.4 percent and 9 percent respectively by the end of the third quarter of 2009, conforming to the regulatory requirements, the CBRC said in December.

But commercial banks, including the BOC, generally reported declines in both the CAR and core CAR, as a result of last year’s unprecedented credit growth that saw net loans nearly double from 2008.

By the end of September last year, the CAR of the BOC dropped to 11.63 percent from 13.89 percent during the same period in 2008, and the core CAR also declined to 9.37 percent from 11.04 percent, according to data from the BOC’s quarterly reports.

The BOC is also one of seven Chinese banks that will run a trial implementation of the New Basel Capital Accord this year. The calculation of the CAR differs according to the accord, and the banks’ CAR will likely drop after applying the new calculation method.

Banks have to raise adequate capital for this year’s lending, said Lu Zhengwei, a senior economist at the Industrial Bank. Net loans issued this year are expected to reach 7.5 trillion yuan ($1.10 trillion), Liu Mingkang, chairman of the CBRC, forecast Wednesday. The figure, which lags the unprecedented credit growth last year, saw an annual growth of 16-18 percent.

Lu pointed out that Chinese banks now have no choice but to raise the CAR on orders of the regulatory body, as the main services offered by banks – deposits and loans – will naturally consume capital, while intermediary services that exhaust less capital are considered a cause of the crisis.

Converting profits into capital is also a solution, “but shareholders are not always willing to invest while not gaining rewards,” Lu said.

The face value of the bonds is planned to be 100 yuan ($14.65), with a coupon rate of up to 3 percent. The BOC is also likely to issue H-share bonds, the bank said. The convertible issuance plan will be reviewed at a general meeting of stockholders expected in March.

The BOC has issued 40 billion yuan worth of second bonds, part of an issuance plan of 120 billion yuan ($17.57 billion) approved in March 2009 and aimed at increasing capital.