Home > Week in Review > May 5 to 9
May 5 to 9
05-09 22:19 Caijing Magazine
Real estate, power company, oil refining joint venture, PPI, agricultural trade deficit, credit direction guide and more.
Industries and Companies
In real estate news, four industrial plots in Beijing were to be offered in public bids May 5-19, while another six plots were slated for transactions May 8-19. However, developers reacted coolly to the bidding. Since October, China’s market for undeveloped land has experienced a downturn due to stricter land-control measures and tighter credit, as well as a shorter capital chain for many developers who speculatively expanded their land holdings last year. Staffers at the Beijing land center expect the market to revive in May after more plots are added to the bidding process. Beijing planned to offer nearly 60 plots covering 6.2 million square meters in the second quarter.
Beijing Pengrun Real Estate Development Co. Ltd., controlled by Huang Guangyu, one of China’s wealthiest businessmen, decided to launch a back-door listing through a publicly listed shell company called Beijing Centergate Technologies (Holding) Co. Ltd. Pressured by China’s sluggish real estate market and tightening credit, developers hungry for financing have increasingly chosen back-door listings as an alternative to initial public offerings to shirk off the complicated approval procedure. Also, it was reported that developer Beijing Huayuan Property Co. Ltd. would soon launch a back-door listing through the shell company Hubei Xingfu Industry Co. Ltd. (SSE: 600743).
Guodian Power Development Co. Ltd., one of China’s major electricity and heat suppliers, has been approved by securities regulators to issue six-year bonds with attached warrants worth up to 3.99 billion yuan. The bonds would have a face value of 100 yuan, with coupon rates ranging from 1 percent to 2 percent. The company said capital raised through the bonds would be used to pay off short-term loans and finance investments in several power plants. An industry insider told Caijing the bond issuance should help GD Power expand its business and improve the company’s debt structure.
China’s largest oil producer CNPC and Japan’s Nippon Oil Corp. agreed to create an oil refining joint venture. Bloomberg News cited Nippon . president Shinji Nishio as saying that the two companies are considering turning Nippon’s Osaka refinery into a jointly owned refinery. The venture would be set up in April 2009 with daily refining capacity of 115,000 barrels. Nippon would hold 52 percent and oversee refinery operations and management, while CNPC would hold the remaining 49 percent while managing crude procurement and product sales for the refinery. Since Japan’s falling oil demand has led to a growing surplus of refining capacity, the venture aims to export its output to China and other Asian countries.
Finance and Economy
China’s producer price index grew 8.1 percent in April, climbing slightly higher than March’s 8 percent, the National Bureau of Statistics said May 9. The consumer price index (CPI), to be released next week, could reach a new high of 8.5 percent for April compared with 8.3 percent in March, investment bank Goldman Sachs forecast in a research report. Although prices of agricultural products tend to stabilize CPI, inflation could be driven up by prices for other foodstuffs and non-food goods. Meanwhile, industrial enterprise profits may begin falling as a portion of gross domestic product for the first time in six years, said Liang Hong, the bank’s chief China economist. Growth in corporate profits could slow significantly due to shrinking external demand tied to the U.S. economic slowdown and China’s deteriorating trade conditions, she added.
China’s agricultural trade deficit reached US＄ 3.7 billion in the first quarter, reversing a US＄ 460 million surplus for the same period last year. Responding to an international food crisis, the Ministry of Finance moved to discourage exports by calling off export tax rebates for 84 kinds of agricultural goods in December and launching export quotas in January for three kinds of staples.
The People’s Bank of China, Shanghai Branch released a credit direction guide May 5. By categorizing companies into four groups for differentiated loan policies, the central bank aims to support agriculture and high-tech industries while tightening the money bag for companies in high energy-consuming and polluting sectors. It also proposed a pan-Yangtze River Delta credit union to promote capital flow in the area.
China, Japan, South Korea and 10 ASEAN countries pledged to inject US＄ 80 billion into a mutual foreign exchange reserve fund to avoid foreign exchange shortages during a potential financial crisis. China, Japan and South Korea will together contribute 80 percent of the total, said a joint statement by the finance ministers of the ASEAN 10+3 countries.
The Ministry of Finance started auctioning book-entry treasury bonds worth 28 billion yuan on May 7. It was the sixth batch of bonds offered this year. The 30-year, fixed-rate bonds will be traded on the secondary market as of May 16.
China’s first generation of market-driven mutual funds have been born. Two new large RMB denominated funds are rising and seeking investors. Both are different from standard funds initiated by local governments. CDH Investment and Hony Capital, PE firms that used to raise money overseas, will establish their first RMB funds with expected offerings each scaling 5 billion yuan.
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