China strives for faster retail growth

China strives for faster retail growth

China will strive for a higher growth rate for retail sales in 2010 with a bigger contribution to next year’s GDP increase, the Ministry of Commerce (MOC) said on Saturday.
Consumption was the key drive force for China’s economic recovery in 2009, said Jiang Zengwei, vice minister of commerce, at a forum in Beijing on the development and reform of China’s circulation industry.
The country’s economy grew 8.9 percent year on year in the third quarter this year, accelerating from 7.9 percent in the second quarter and 6.1 percent in the first quarter, according to the National Bureau of Statistics (NBS).
The MOC will take measures to boost both rural and urban consumption in 2010 to push up economic growth, said Jiang.
He said the MOC will expand the “old-for-new” program to encourage more consumers to buy new cars and home appliances on a basis of discount if they give up their old ones to sellers.
Credit consumption and sales promotion, especially those during holidays, will also be encouraged by the MOC, according to Jiang.
The country’s retail sales are predicted to increase 18.2 percent year on year in 2010, boosted by domestic consumption and income growth, according to a recent report by Beijing-based Renmin University of China.
The NBS data showed retail sales in October rose 16.2 percent year on year to 1.17 trillion yuan (US$171.3 billion).

HKs October visitor arrivals up 9 pct

HK’s October visitor arrivals up 9 pct

Hong Kong saw a 9 percent year- on-year rise in visitors in October to 2.762 million, the Hong Kong Tourism Board said Friday.
The figure brings the cumulative arrivals for this year’s first 10 months to 23.92 million, down 1.6 percent on the same period last year, said the board.
Mainland arrivals grew 22.8 percent in the month, especially during the extended National Day Golden Week holiday period.
Emerging markets also recorded substantial growth, including India, Russia and the Middle East, said the board.

Tougher crackdown on mobile phone porn

Tougher crackdown on mobile phone porn

China has vowed to step up its ongoing crackdown on mobile WAP sites offering pornography for mobile phone users, as such sites are taking measures to avoid supervision.
An official from the national office against pornographic and illegal publication told Xinhua Thursday that the office had ordered local authorities to “fully clean up” such WAP sites and shut down those with “serious violations”. Cases suspected of constituting a crime shall be handed over to police.
“The key to the clean-up is to cut off the interest chain, which involves both mobile service providers and WAP sites,” the official said.
The most difficult part in the crackdown is to discover mobile WAP sites spreading pornography, the official said.
“Most Internet supervisory bodies do not have equipment to watch over mobile WAP sites, and manual check using mobile phones is rather slow,” the official said.
The official added a large number of mobile porn sites were moving their servers to overseas to avoid supervision.
The crackdown started on Nov 16 and will last until the end of this year, with focuses on Shanghai, Beijing, Guangdong, Zhejiang and Anhui, where many WAP sites are registered.
China Mobile, the country’s largest wireless carrier, has suspended cooperation with 460 “business promotion partners” since the crackdown was launched.

To buy or not to buy: home buyers dilemma

To buy or not to buy: home buyers’ dilemma

Shou Zhenwei, a 28-year-old state-owned company employee in Beijing, paid 1.4 million yuan (205,000 U.S. dollars) for a two-bedroom apartment this month, realizing a long-cherished dream.
The price was 400,000 yuan higher than Shou’s budget at the beginning of the year, but he and his fiancee, Sun Hua felt they should buy quickly before prices went up further.
THE IMPOSSIBLE DREAM
Shou’s home outside Beijing’s northern second ring road is less than 70 square meters, which equates in value to more than 20,000 yuan per sq m for the second-hand apartment built two decades ago.
That works out at two months of Shou and Sun’s total gross income for each square meter.
“We have only worked for two years, so we don’t have much saved. We want to get married next year, so we had to borrow 600,000 yuan from parents and relatives for the downpayment,” Shou says.
Sun works in an export-oriented firm and sagging export demand resulted in smaller paychecks this year.
“I feel uncomfortable borrowing so much hard-earned money from parents and relatives, but we have no other alternative in the face of increasingly rising home prices,” Sun says.
The 4,700-yuan monthly installment going to the bank for the next 20 years is almost half of their combined income.
“We wanted to wait for prices to stabilize, but we worried that prices would climb even higher,” Sun says.
“Many of our young friends are borrowing money from parents for downpayments, working hard and cutting corners to buy homes. For those who come from rural areas and whose parents cannot give them much financial help, buying a home is an unattainable dream.”
The couple’s story is common as home prices have gone through the roof since they began to pick up in February.
Average prices of second-hand homes in Beijing have soared 49 percent since the beginning of the year to around 16,100 yuan per sq m at the start of this month, says Qin Rui, a senior analyst with Beijing-based 5i5j Real Estate Service.
“There are some bubbles in the home prices, as many home buyers find the prices in big cities too high,” Qin says.
HOME, LAND RATES RISE
Figures from the National Bureau of Statistics show home prices in 70 metropolitan areas, including Beijing and Shanghai, rose 3.9percent in October from a year earlier, the fifth consecutive monthly spike.
Chinese home prices and trading volume began to rebound after the Spring Festival, as many first-time buyers thought home prices had hit the bottom, says Chen Sheng, vice president of the China Index Academy, a private-sector research institute specializing in real estate.
“As the market saw a buying spree boosted by first-time home buyers, investors and those who traded up for better flats came in and have pushed prices nationwide even higher since May,” Chen says.
The surge on the back of the credit-driven stimulus package and lower loan rates took many developers by surprise, he says. The backlog of commercial homes in Shanghai was enough for eight months sales at the start of the year, but had since fallen below 10 weeks.
Experts assert a market rebound and reduced backlog prompted state-owned and private developers to buy more land. Massive lending this year also helped developers to buy them at sky rocketing prices.
This practice further shored up prices of existing and second-hand homes in nearby areas, and increased potential buyers’ concerns, Qin says.
After Guangzhou-based private-sector R&F Properties bought a site within the eastern third ring road of Beijing in May for 1.022 billion yuan, 242 percent above the opening bid, second-hand home prices rose 6.5 percent to 16,500 yuan per sq m in less than 10 days at nearby communities, 5i5j figures show.
Second-hand home prices in the area had surged to around 30,000yuan per sq m as of Thursday, Qin says.
Residents or travellers passing high-end residential buildings in Beijing at night often remark on the number of apartments with no lights on.
There are no occupancy figures at city or national levels, but some Chinese believe buying property is a better and more stable investment than buying shares. Some buy several apartments and wait for their properties to appreciate in value without renting them out, Qin says.
AFFORDABLE HOMES
Young couples like Shou and Sun have few options. They are not eligible for applying for affordable housing and the affordable homes are often far from the downtown areas.
In Beijing, only families with a total annual household income below 88,000 yuan are eligible to apply for affordable housing.
“We don’t qualify to buy an affordable home, and life is not easy after buying another home on installment. We have shortened our daily shopping lists and cut our budget for the wedding and honeymoon,” Shou says.
The government-subsidized affordable housing program is aimed at providing accommodation for 7.47 million low-income urban households from 2009 to 2011.
However, a survey by the National People’s Congress showed low-income home construction in 2009 was behind target with only 23.6 percent investment realized by the end of August.
Liu Yuanchun, vice president of the School of Economics of the Renmin University of China, would like to see the government step up efforts on low-rent apartment construction next year for urban dwellers.
“The government should endeavor to help more low-income urban families and young couples get access to affordable homes. This can help improve their living standards and is also conducive to the stable and long-term development of the property industry,” Qin says.
Shou says, “I hope young couples like us can qualify to buy affordable homes, and some affordable apartments can be located within the downtown areas. You see many Beijing communters living outside the fifth ring road going to work very early and dozing off on subways or buses.”
Next year Valentine’s Day is also the first day of the Chinese lunar year. Shou and Sun will buy each other a modest gift, and carry bigger gifts back to parents and relatives who lent them money for their home dream.

Real estate reflects falling morality

Real estate reflects falling morality

Yu Bin, head of macroeconomic research department of the Development Research Center, under the State Council, recently said China’s realty sector had become the country’s economic lifeline. If this is true, then it is dangerous and pathetic both, says an article in Qilu Evening News. Excerpts:
Economist Yu Bin has said that a steady real-estate market could prove fatal to China’s economy in the coming years.
This reminds us of what another famous economist, Yi Xianrong, said in 2004. Yi warned that the realty sector would one day threaten China’s overall economy. To back his statement, Yi said that skyrocketing housing prices had tied the interests of local governments and the people to the country’s economy.
In case the housing market faces problems, recession would hit people much earlier than they could imagine.
Regrettably, Yu Bin’s analysis now shows that Yi was right. Historically, it has been very risky to have the realty sector as a country’s pillar industry. Exorbitant housing prices will force people to tighten their belts, or squeeze money out of them and bring about irrational growth of the economy.
Housing prices are being raised not according to the law of demand and supply, but on speculation. Traditional human relations and moral standards have vanished into thin air, as is illustrated by the popular TV serial, Dwelling Narrowness.
The female protagonist, Guo Haizao, is a “professional” paramour. But apart from sympathy, which she should get, she also draws envious comments on the Internet. This reflects declining morality in society and the harsh reality of our times. The realty market is thriving on the same twisted morality principle: It doesn’t matter what you do as long as you make money. This is pathetic.

Couriers price hike threatens online business

Couriers’ price hike threatens online business

Several domestic private couriers recently adjusted prices of their express delivery services. Shentong Express, Shanghai Yuan Tong Express, Yunda Express and ZTO Express all published statements on their websites, announcing a hike in prices by one to two yuan per kg.
The price adjustment directly affects the profits of millions of online store owners, especially those who run their online business at Taobao.com — the biggest online commercial site in China — who largely rely on domestic logistics firms to deliver their goods, the National Business Daily (NBD) reported Wednesday.
Officials from the China Express Association will be holding a meeting with the Hangzhou-based e-commerce giant Taobao Thursday to discuss the issue, the NBD reported.
Price rise
Yunda Express was the first to announce the price rise. According to a statement published Nov 21 on its website, the company will be raising the basic charge by one yuan and additional charges by 0.5 yuan per each additional kg. For express delivery services covering remote areas, prices will be raised by two yuan for the basic charge and one to two yuan per each additional kg, the NBD said.

Several other domestic couriers also increased their prices of both intra-city and intercity delivery services by an average of 40 percent over the original prices.
An unnamed senior executive of a courier company told China Business News (CBN) that during his ten years working in the industry, it was the first time he has witnessed a price hike.
Prices for express delivery services provided by China Post and foreign logistics companies remain unchanged so far.
Reasons behind the price hike
Why have the private couriers launched the price hike?
According to statements posted on their websites, recent high commodity prices, increases of oil prices and higher labor costs are to blame. An unnamed staff member with the Shanghai-based Shentong Express told the NBD the recent oil price hike was the main reason which had greatly added to transport costs.
An unnamed employee with Shanghai Yuan Tong Express said the online business boom had made business in the courier service industry thriving, and logistics companies had to expand their networks to meet increasing needs. As the cost of labor, oil and other commodities increased, they had no choice but raise service charges to make ends meet.
The China Express Association said because the courier business expanded rapidly, logistics companies were too busy to get their business done and sometimes senior executives even had to help sort parcels. Moreover, about 80 percent of private courier firms were renting new warehouses, purchasing motors and hiring more delivery workers, which added to their expenditures, the Beijing Evening News reported.
According to an unnamed staff member working for a private delivery firm, raising prices will drive away some small businesses, which will to some extent release the working pressure, the paper said.
Impacts on online stores
The biggest victim in this round of price increases may be Taobao users, as the four big courier firms mentioned above have now covered 80 percent of Taobao’s delivery business.
Some online store owners have used “free shipping” to attract customers. Somer others, in order to offer prices that are much lower than conventional stores, have cut the price of their godds but squeezed profits from delivery fee differences between the amount they charge buyers and the amount they pay delivery companies.
It is also not cost-effective for those who buy cheap goods on the Internet as the delivery charge might be even higher than the goods themselves.
According to an online survey conducted by China’s Internet giant Tencent, 89 percent of net users said the price rise would affect their online purchases.
The NBD reported that officials of the China Express Association would meet with Taobao Thursday to discuss the operation between courier firms and Taobao. An unnamed member of the association said he hoped an agreement could be reached on building a united payment platform where delivery charges are based on the same standards.
A number of big online stores recently said they may build their own delivery channels to save costs, according to the Beijing Evening News.
But Taobao President Jonathan Lu told CBN the company had no plan to set up its own delivery arm yet.

Huaneng on the prowl for assets

Huaneng on the prowl for assets

Electricity producer Huaneng Power International Inc (Huaneng) is spending 8.625 billion yuan to acquire electricity, mining and port assets to expand its geographical coverage.
Beijing-based Huaneng plans to buy power, mining and port operators in Yunnan, Shandong and Fujian provinces from Shandong Electric Power Corp and Shandong Luneng Development Group Co, it said in a statement to the Hong Kong bourse.
The acquisition would help further strengthen the company’s position in the power market in Shandong province. It will also help the company to enter the market in Yunnan province, said the statement.
Moreover, the company can improve its portfolio through the acquisition of coal and harbor facilities, said the statement.
After the deal, Huaneng will obtain additional coal-fired generation capacity of 3,300 mW and an additional 716 mW of capacity under construction.
It will also get coal projects with geological reserves of 2.777 billion tons, two harbors with 10 docks and five vessels.
The move to have more coal assets in hand is in line with domestic power companies’ strategy to reduce costs. “With a foothold in coal production, the upstream of power generation business, companies can reduce their risks,” said Li Chaolin, a coal analyst.
“With more coal mine assets in hand, power companies can also have a stronger say when they bargain with coal producers for prices,” he said.
China’s major power firms have all quickened their pace in acquiring coal mine assets in northwestern China, especially in Inner Mongolia and Xinjiang Uygur autonomous regions, he said.

CICC named top underwriter for Chinas IPOs

CICC named top underwriter for China’s IPOs

China International Capital Corp (CICC) topped the rankings of the underwriters of China’s initial public offerings (IPOs) in 2009, making an estimated 1.23 billion yuan from fees, Bloomberg data showed.
The earning of the country’s largest investment bank was boosted by underwriting the China State Construction Engineering Corp’s 50.1 billion yuan IPO, the world’s second-largest in 2009. CICC also took two other heavyweight companies public, China Shipbuilding Co Ltd and China CNR Co Ltd, raising 14.7 billion yuan and 13.9 billion yuan respectively.
CITIC Securities, the top underwriter in 2008, fell to the No 2 spot in the ranking, making 855 million yuan from IPO deals totaling 28.7 billion yuan, according to Bloomberg data. The third slot went to Orient Securities, which earned 258 million yuan from IPO deals worth 11.9 bllion yuan.
IPOs are among the most lucrative advisory businesses for Chinese securities firms as China has witnessed an IPO boom since it reopened the market last June after a 10-month halt blamed on the widespread global credit crunch.
Chinese securities companies saw an exponential growth in their revenues from the IPO business, making a total of 4.76 billion yuan from underwriting fees, doubling the 2.35 billion yuan in 2008. But the earnings still lagged far behind the 7.61 billion yuan made during the pre-crisis period in 2007.
Last year, 43 Chinese securities firms helped 111 companies go public on the mainland’s A-share market, raising 202.2 billion yuan. The value of the IPO deals taken by the top 10 underwriters accounted for more than 70 percent of the total IPO values.
Market insiders said the IPOs of heavyweight companies will remain the target for large investment bank and securities companies such as CICC and CITIC Securities next year while small and medium securities companies will make start-up board ChiNext their primary focus.
Stock prices of listed securities companies soared sharply in the past two weeks, mainly stimulated by unconfirmed reports that China’s State Council has given the final nod for the introduction of index futures in 2010.
Analysts said Chinese securities companies would likely see a surge in revenues this year after the regulators announce a clear timetable for the launch of the index futures, margin trading and short selling.
“The new products will certainly boost the earnings and valuations of the brokerage stocks,” said Cheng Binbin, an analyst with Qilu Securities “It not only means strong profit growth for securities firms in the future but also a gradual transition toward a more risk-diversified business model.”
It is forecast that margin trading and short selling will likely contribute 9.41 to 14.3 billion yuan in revenues of securities companies in 2010 while index futures will contribute 5.76 to 6.34 billion yuan.
The net profit of China’s brokerage industry may reach 90 billion yuan in 2009, a year-on-year increase of 90 percent, according to an estimate by Guotai Junan Securities.
Meanwhile, foreign banks also grabbed a share of the lucrative pie of China’s booming capital market last year with Swiss bank UBS ranked the largest underwriter of Chinese overseas IPOs. The bank contracted $728 million in underwriting fees from Chinese companies that sought IPOs in the Hong Kong market, worth a total of $26 billion last year, Bloomberg data showed.
Mergers and acquisitions (M&As) made by the Chinese companies remained the traditional cash cow for foreign investment banks in 2009. Morgan Stanley was the No 1 financial advisor in M&A deals worth $20.9 billion on the Chinese mainland and Hong Kong, according to Bloomberg data.
The largest M&A deal in 2009 made by a Chinese company was the $7.5 billion acquisition of Swiss oil company Addax Petroleum by China’s largest oil refiner, Sinopec.

Geelys bid for Volvo expensive

Geely’s bid for Volvo expensive

A joint statement by Ford and Geely said that they have reached tentative agreement on the sale of Volvo of Sweden by the US automaker to its Chinese counterpart. The amount of the transaction wasn’t disclosed, but industry sources estimated that it would be around $2 billion.
That’s a lot of money for a perennial loss maker. Although Volvo has long enjoyed a reputation for making safe and solid cars, it has not generated enough sales in recent years to stay in the black.
This has raised the question whether Zhejiang-based Geely, one of the few private sector automakers in China, has committed to buying a dud.
The proposed acquisition must be ratified by the relevant Chinese authorities. The two companies said in the statement that, if approved, they expect to sign the formal agreement in the first quarter of 2010.
“Volvo will retain its leadership in safety and environmental technologies, and will be uniquely positioned as a world-leading premium brand to exploit opportunities in the fast-growing China market,” Geely said in the statement. The company also said that it intended to maintain Volvo much as it is, including “an independent management” at its Swedish headquarters.
If that’s the case, it is difficult to see what real benefits the Chinese company could expect from the proposed acquisition, other than a trophy to stroke the corporate ego.
Once a leader in auto safety technology, Volvo cars are no longer demonstrably safer than the many other brands from manufacturers in Germany, Japan, the US and other countries. Increasingly stringent government regulations have set the safety standards that all car manufacturers must comply with. There are, of course, minor variations. But on the whole, all cars on the roads are relatively safe, and most of the technology to make them so is not really proprietary.
In the past, Volvo cars were distinguished by their boxy designs which projected a sense of solidness that appealed particularly to intellectuals and environmentalists. In recent years, the company has overhauled its design approach in favor of more streamlined and rounded models to compete with the other brands in the premium league. Despite the company’s efforts, Volvo cars are seldom known for their design excellence, and sales suffered as a consequence.
Nobody doubts that Volvo produces competent cars that are actually pretty good. But they are too expensive to compete effectively in the overcrowded mid-priced market, and lack the allure and heritage to gain a foothold in the premium market, dominated by the likes of Mercedes, BMW and Lexus. In that stratospheric segment, to which Volvo aspires, even such marques as Jaguar and Range Rover, that are steeped in tradition and heraldry, are having a tough time staying afloat under the stewardship of their new owner, Indian Tata group, who earlier bought them from Ford.
With its knowledge of and distribution network in the domestic market, Geely presumably can help boost the sales of Volvo cars in China. But it will face the same competition, only tougher, in China as in the US or Europe. What’s more, the brand’s niche appeal will likely be robbed by Chinese motorists’ relatively low concern for safety and the environment.
Even in Shanghai, the nation’s most advanced city, few motorists and their passengers ever bother to wear safety belts on the road. If a car buyer in China is concerned about gas prices, he probably can’t afford a Volvo anyway.
While foreign car makers, GM’s Buick division in particular, are setting up design centers in China to create cars for the global marketplace, their Chinese counterparts are paying big money for failed foreign firms to teach them how to make cars.
Obviously, there is no shortage of design talents in China. It’s just a matter of management.
E-mail: jamesleung@chinadaily.com.cn

Shaolin Temple not to go public: abbot

Shaolin Temple not to go public: abbot

The abbot of China’s famed Shaolin Temple said Thursday that the temple will not be listed in the stock market.
In addition, Shaolin Temple will not become a shareholder or join in the business operation of the newly established tourism company in Dengfeng City of Henan Province, where the temple lies, Shi Yongxin said at a press conference.
The legal rights and interests of Shaolin Temple had been well protected according to Chinese laws of religious affairs and will not be affected by the new firm, he said.
Shi made the remarks four days after a joint venture was established between the Dengfeng city government and the Hong Kong-based China Travel International Investment Hong Kong Limited, a subsidiary of the state-owned China National Travel Service (HK) Group Corporation (HKCTS).
The new company had come under spotlight as earlier reports said the government of Dengfeng was trying to have the religious place listed in the stock market.
The rumors had sparked criticism on the Dengfeng government, as critics say the agreement would hurt the feelings of Shaolin monks and religious people.
Both the Dengfeng government and a senior HKCTS official had denied the reports earlier this month, saying the Shaolin Temple will not be managed by the new joint venture.
Shi said at the press conference that he welcomed HKCTS to do business in Dengfeng, but reaffirmed that Shaolin Temple will never participate in commercial operation of the joint venture as its core functions are to organize religious activities to meet the demand of religious followers.
The Shaolin Temple, built 1500 years ago during the Wei and Jin Dynasties, is famous for Buddhist teaching and Chinese martial arts, particularly Shaolin kungfu.
Shaolin, which has become a household name around the world, has developed business operations such as kungfu shows, film production and online sales under the leadership of Shi Yongxin.