JWC Bimonthly E-Newsletter No.99
Octo.1st , 2012 by JWC
Advance notice: JWC Newsletter No.100will e-mail to you from Dec.1st , 2012.
Raymond LI arrived in Shanghai work and live for 75days after vacation 5 days in Hawaii
JWC Shanghai message Sept.26, according to climate changing, Raymond LI arrived in Shanghai this day work and live for 75 days. Wherever in this world he is and all communication keep smoothly in order to deal with business affairs, it means the telephone at area code in Vancouver and in Shanghai in different counties all can reach to him and all long distance fees exempt by client.
Vancouver phone is 604-288-8355 ,free charge of telephone within China at 950-4033-5755 can reach to JWC
BASIS POINT-China needs liberalised floating interest rate - BOC exec
(The following item was previously published by Basis Point, Thomson Reuters publication)
HONG KONG, Sept 12 (Reuters Basis Point) - China's syndicated loan market needs a liberalised floating rate as its lending interest rate, instead of the relatively fixed PBOC rate, says Tang Maoheng, chief product specialist at Bank of China's headquarters in Beijing.
Shibor, or the Shanghai Interbank Offered Rate, is currently the best candidate as a liberalised lending rate to respond to the widening gap between China's borrowing base rate and lending base rate, Tang said on Wednesday at the Asia Pacific Loan Market Association's China Loan Market Conference in Beijing.
The People's Bank of China has cut its lending interest rate twice this year in June and July (25bp and 31bp respectively), while lowering the lending floor to 30% below the benchmark. At the same time, it also raised the borrowing interest rate ceiling to 10% above the PBOC rate, which Tang said "squeezed banks' profitability from pure interest rate margins".
"Now that the lending floor has been lowered, borrowers' demand on pricing has changed as well. We must make reforms on the lending interest rate to adjust to the changes," he said.
A floating interest rate such as Shibor can also help improve China's secondary loan market, where existing deals have no repricing basis, Tang said.
He said the China Banking Association, where he serves as the deputy secretary of its Loan Syndication and Trading Association, is working on a master plan of the secondary loan market which could be launched as soon as the market establishes a floating interest rate.
"PBOC rate is a highly regulated interest rate. Banks need a more liberalised rate for syndicated loans, which are highly marketised products. And Shibor is the only option for now," Tang said.
According to Thomson Reuters LPC, only one loan syndicated onshore in China this year used Shibor as a lending base rate. Yieh Phui (China) Technomaterial Co Ltd, in July, offered a margin of 115% of the PBOC rate or 275bp over three-month Shibor on a Rmb tranche of its US$54m three-year deal led by BNP Paribas. Lenders will paid the higher of the two offered margins. In the event that 275bp over Shibor is lower than 100% of the PBOC rate, the margin will be set at 100% of the PBOC rate.
Last year, Toyota Motor Finance (China)'s Rmb800m three-year revolving credit also used Shibor as a lending base rate, at a margin of 230bp over Shibor. The deal was led by China Citic Bank .
China Moves to prop up growth with help for exporters
China said on Wednesday it will pay export tax rebates faster and grant more loans to exporters, as well as increase export credit insurance to small companies, in the latest move to prop up growth in the world’s second-largest economy.
Growth in the world’s second-biggest economy has slowed for six straight quarters, and is at risk of missing this year’s target of 7.5 per cent, as demand slows at home and abroad.
“China will speed up the issuing of export rebates to make sure companies get tax rebates adequately and promptly,” the State Council said on its website, after a regular weekly meeting of China’s cabinet chaired by Premier Wen Jiabao.
Speeding up rebate payments will be of help particularly to smaller firms, which sometimes wait up to three months for money to be refunded. Such a measure also avoids irritating trade partners, which might protest at any changes in actual rebate levels that could make exports more competitive.
“Speeding up export rebates will be greatly helpful for companies’ cash flow and improve their operational environment,” said Long Guoqiang, a trade researcher with the Development Research Centre of the State Council.
Beijing will widen the range of export credit insurance, especially for small-scale enterprises and increase loans to exporters, it said.
It will also cut red tape to quicken customs clearance for exporters and encourage companies to sell to emerging countries.
The State Council added that it would encourage imports, particularly of machinery and technology, to help balance trade.
Chinese imports dropped 2.6 per cent on year in August, coming in far below expectations and raising worries of sharply weakening domestic demand. August exports grew 2.7 per cent year-on-year, again below expectations of 3 per cent.
Wen said on Tuesday that if needed the government could utilise a 100 billion yuan ($15.79-billion U.S.) fiscal stability fund to boost growth. Last month he said the government would launch new measures to stabilise export growth in the third quarter.
Mr. Wen’s comments came after China’s President Hu Jintao warned at the weekend that the world economy was hampered by “destabilising factors and uncertainties” and that the 2008/09 financial crisis was far from over.
Hu promised China would do all it can to foster a global recovery by rebalancing its economy.
China’s economy expan
Canada-China trade agreement to protect investors: Harper
As China begins rolling out what amounts to a mini-stimulus package, Ottawa and Beijing have inked an agreement intended to better protect Canadian businesses that might want to capitalize on such opportunities.
And with Ottawa in the midst of evaluating a proposed $15.1-billion takeover of Calgary-based oil and gas producer Nexen Inc. by China’s state-owned China National Offshore Oil Corp., Prime Minister Stephen Harper said he used a Sunday meeting with Chinese President Hu Jintao to nudge him on the issue of greater reciprocity in terms of market access for Canadian investors, who remain locked out of key sectors that Beijing considers “strategic.”
“We did not discuss today, the Chinese side did not raise the issue of the Nexen takeover. I think they understand that that is subject to a Canadian legal process on which, as prime minister, I’m severely restricted in my ability to comment,” Mr. Harper told a press conference that followed the conclusion of the Asia-Pacific Economic Cooperation summit in the Russian port city of Vladivostok. Mr. Harper and Mr. Hu held a one-on-one meeting on the sidelines of APEC.
“However, I did raise with them issues of the relative flows of our trade and investment between Canada and China and the significant imbalance that exists in both. And we had a good and robust discussion on that question.”
It’s unclear how much the Foreign Investment Protection and Promotion Agreement signed on Sunday will help. While the deal was initially announced in February while Mr. Harper was in Beijing, full details have not yet been made public.
A summary of the agreement posted on the website of the Ministry of Foreign Affairs and International Trade says the pact aims to protect investors against “discriminatory and wholly arbitrary practices, [and] to provide adequate and prompt compensation in the event of an expropriation.” It commits the countries to establishing a mechanism for resolving disputes between foreign investors and either government.
What’s not certain is how much an extra piece of paper will help in the real world of Chinese business, where the law is often spottily applied and foreign investors often find themselves with little recourse.
China had $10.9-billion of foreign direct investment in Canada at the end of 2011, according to Statistics Canada. Chinese figures put the amount of Canadian foreign direct investment in China at approximately $8.3-billion.
Mr. Harper defended against criticisms that the investment accord offered no protections to Chinese workers, who often work almost non-stop for pay well below Canadian levels – or include any environmental standards.
"In terms of the Foreign Investment Protection and Promotion Agreement, [it] is an instrument focused precisely on that, and I’m not aware of any such agreements with Canada or with any other countries that try and include other broader issues but those things, as I say, are part of our relationship and dialogue with the Chinese at every opportunity," Mr. Harper said, adding that he raised human rights and consular cases during his discussion with Mr. Hu.
The timing of the agreement could prove fortuitous for Canadian businesses. The Chinese government’s top planning agency – the National Development and Reform Commission – last week approved $154-billion worth of new infrastructure projects around the country, including new airports, highways and subway lines, in what was seen as a bid to boost an economy that has shown signs of stalling.
While Beijing avoided referring to the new spending as a stimulus package, its introduction was seen as proof the government is increasingly worried about the direction of the country’s economy.
New figures released Sunday added to concerns that China – one of the last functioning engines of global growth – may be on the verge of a substantial slowdown. Data from the National Bureau of Statistics showed value-added industrial output 8.9 per cent in August from a year earlier, down from a 9.2-per-cent increase in July, and the slowest growth since the depths of the financial crisis of 2008 and 2009.
Economists blamed the deceleration on swelling inventories at factories around the country, as well as weak domestic demand.
Meanwhile, inflation has begun to creep upwards again, with the Consumer Price Index rising 2 per cent compared to last August, up from 1.8 per cent in July. Food prices were the main driver last month, rising 3.4 per cent compared to a year earlier.
In comments distributed Sunday over the official Xinhua newswire, Liu Yuanchun, deputy head of the School of Economics at Renmin University of China, predicted tough days ahead for the world’s second-largest economy.
“China’s economy is still in the trough and this situation is likely to go on longer than expected,” Prof. Liu was quoted as saying. “Even if we see a recovery in the fourth quarter, it will be a mild one.”
The APEC summit wrapped up Sunday with a final communiqué that expressed concerns about the state of the world economy, growing protectionism and global food security.
The 23 member economies – who collectively account for 54 per cent of global economic output – agreed to slash import duties on green technologies and promised to continue liberalizing trade in the region in order to counter the effects of Europe’s debt crisis.
"The financial markets remain fragile, while high public deficits and debts in some advanced economies are creating strong headwinds to economic recovery globally. The events in Europe are adversely affecting growth in the region," the leaders’ statement said.
"In such circumstances, we are resolved to work collectively to support growth and foster financial stability, and restore confidence."
China approves $157 billion infrastructure spending
China has given the green light for 60 infrastructure projects worth more than $150 billion as it looks to energize an economy mired in its worst slowdown in three years, fuelling hopes the world's growth engine may get a lift from the fourth quarter.
Shares and steel futures contract prices jumped on the plans to build highways, ports and airport runways which are among the most ambitious unveiled in China this year.
The move signals the government's growing intent to bolster economic growth as the country's once-a-decade leadership change looms, analysts said.
China's powerful economic planning body, the National Development and Reform Commission, announced approvals for projects that analysts estimate total more than 1 trillion yuan ($157 billion), roughly a quarter of the total size of the massive stimulus package unleashed in response to the global financial crisis in 2008.
The announcement comes just before a deluge of Chinese economic data due on Sunday that could confirm investors' worst fears that a downswing in the world's second-biggest economy has stretched into a seventh straight quarter.
"Apart from the large sizes of the projects, the announcements for these new projects were all made in two days, which is very intense," said Zhang Zhiwei, an economist at Nomura in Hong Kong.
"It signals a change in policy stance, which is now much more proactive," he said.
China's economy may be boosted by the increased spending in the last quarter of 2012.
Crucially, the projects are endorsed by Beijing and are likely to proceed. This is in contrast to pledges from nearly a dozen local governments in the last two months to spend around 7 trillion yuan to pump prime the economy, plans that economists say will not materialize due to funding shortages.
China steel futures jumped and its stock market rallied by the most in eight months on the news.
Shanghai-listed Sany Heavy Industry (600031.SS), Shenzhen-listed Zoomlion 000157.SZ and Taiyuan Heavy (600169.SS) all surged 10 percent. Japanese construction equipment makers also got a boost, with shares of Komatsu Ltd (6301.T) rising 6.6 percent in Tokyo and Hitachi Construction Machinery Co Ltd (6305.T) up 4.7 percent. .SS .T
In early U.S. trading on Friday, shares of Caterpillar Inc (CAT.N), the world's largest heavy equipment maker, rose 2.6 percent, and shares of rivals Joy Global Inc (JOY.N) and CNH Global NV (CNH.N) rose as well.
Investment is a mainstay of China's economic prowess, accounting for 54.2 percent of the country's 9.3 percent expansion in its economy last year.
FAST-TRACK SPENDING
To avert a prolonged recession, Beijing launched a 4 trillion yuan ($630 billion) stimulus in 2008/09. But the experience saddled the world's No. 2 economy with a pile of bad debt, forcing China to proceed with care on spending this time.
China has not unveiled any large-scale new government stimulus this year, despite mounting evidence the economy needs more prodding to regather momentum, as policymakers fret that a surge in prices could stoke social unrest at a politically sensitive time.
Instead, most spending increases are a result of fast-tracking infrastructure projects that are already in the pipeline.
Analysts have also urged caution. Ratings agency Standard & Poor's said last month that China could afford to deliver fiscal stimulus, but risked making bad investments.
Still, pressure is building on Beijing to do more. Analysts say China must act soon if it wishes to cut interest rates as inflation looks set to rebound on soaring global grain prices. Worse, local pork prices have started rising too.
Gathering price pressures come even as China's economic downturn deepens, forcing Beijing into a policy quandary: hold its fire on monetary policy and risk a sharper cooldown, or lower rates and risk an inflation spike.
Concentrating policymakers' minds, Sunday's data is expected to show that annual factory output growth was the weakest in more than three years in August, according to a Reuters poll, while consumer inflation quickened.
Analysts have steadily cut their 2012 GDP growth forecasts to converge with Beijing's target of 7.5 percent, which would be the worst in at least 13 years. Predictions for a recovery have also been pushed out from the first quarter to the fourth.
For 2012, Goldman Sachs reduced its GDP forecast to 7.6 percent from 7.9 percent. Its forecast for 2013 GDP growth was also trimmed to 8 percent from 8.5 percent earlier.
CONSTRUCTION BOOST
The last time China stepped up project approvals was in May, when the Chinese media reported Beijing as saying it may bring forward 2013 investments to support the economy. The total size of investment brought forward in May was not available.
Although the latest approved projects were only announced Wednesday and Thursday, the commission's website showed approvals were made as early as May, and ran through to August. here
The size and location of projects also mean they likely overlap with spending plans announced by local governments in recent months. At more than 1 trillion yuan, the total cost represents around 2.1 percent of China's economy.
Among projects approved is an expansion of a 172-km (107 miles) rail track across three provinces between Gantang and Wuwei, in western China, for 3.77 billion yuan. The project got the go-ahead in June.
Analysts at Nomura estimated the average construction time for projects at around four years.
Details about how projects would be paid for were sketchy.
There would be a combination of private and corporate investment and government funding, although Ting Lu, an analyst at Bank of America-Merrill Lynch in Hong Kong, said the bulk of financing would come from loans from state-owned banks or bond sales.