Yuan breaks 7 mark against US dollar

(Xinhua)
Updated: 2008-04-10 09:51

 

China’s currency, the yuan, was set to trade at 6.992 yuan against the US dollar on Thursday, breaching the 7-yuan mark for the first time since the government unpegged it from the dollar in 2005.

Following an overnight fall of the dollar, the central parity rate of the yuan, or renminbi, gained 105 basis points to 6.992 yuan against the dollar on Thursday, according to the China Foreign Exchange Trading System.

Shen Minggao, an economist at Citigroup in Beijing, said that like many economists, he was not surprised to see the yuan to break the 7-yuan mark.

“It was quite natural,” he said, citing the dollar’s fall against other major currencies, especially the euro, since the second half of last year along with an unfolding US credit crisis plaguing the US economy.

The yuan has gained 4.47 percent this year based on Thursday’s trading price, or 15.99 percent since the new currency regime was imposed in July 2005.

The yuan’s gain amounted to 18.27 percent from 8.2765 yuan against the dollar before the new currency regime was adopted.

Zhuang Jian, a senior economist with the Asian Development Bank mission in China, also believed a weaker US dollar was the most direct factor behind the accelerated appreciation of the yuan.

The value of Chinese currency stayed above eight to the dollar for many years before the 2005 regime reform. The yuan broke the 8-yuan threshold on May 15, 2006.

Zhuang said the breakthrough was an indication of the country’s efforts to shift from a heavy reliance on exports and investment as well as to go after a more balanced trade structure.

The quickened pace had prompted many overseas banks to raise their forecast of the yuan’s 2008 annual gain against the dollar. Last month the Standard Chartered Bank revised its prediction from 9 percent to 15 percent.

However, economists agreed that the fast pace registered in the first quarter would probably not continue throughout the year.

“We do expect continued appreciation going forward, but not quite at the breakneck pace of the first quarter,” the Switzerland-based UBS Investment Bank said in a report released on Wednesday.

The bank said the “stabilization of the US dollar in 2008″ and “greater signs of stress in the export sector” due to the US and global slowing would help moderate the pace.

Some economists even expected that the yuan may not unilaterally rise against the dollar for the rest of the year.

Shen Minggao said the appreciation pressure on the yuan would ease and the yuan may even depreciate against the dollar, once the dollar became stronger.

Tan Yaling, a research analyst with the Bank of China, also expected the dollar to rebound in the second half, and said the 2008 US presidential election could be a plus to making the dollar stronger.

She continued to anticipate that the yuan would continue to appreciate in the first half, but would report falls against the dollar from time to time in the second half as the dollar rebounded.

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US should ease hi-tech export bar

By Xin Zhiming (China Daily)
Updated: 2008-01-10 09:55

A top Chinese official yesterday said the United States should make its export policy more open to help balance the Sino-US trade gap.

The strict regulation on hi-tech exports from the US is one of the reasons for the country’s trade deficit with China, Wang Chao, assistant minister of commerce, said at the US-China Clean Energy Dialogue. Expanded hi-tech exports from the US will ease the gap, he added.

Yao Wenping, vice-president of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME), agreed. “Every year, many Chinese enterprises want to import hi-tech materials and equipment from the US, but encounter obstacles.”

The US complains about the huge trade deficit with China – in the first 11 months of 2007, it amounted to $142.22 billion. This has put pressure on China to take various measures, such as appreciating the yuan, to narrow the gap.

China has taken a series of measures, such as reducing and abolishing its export tax rebates for many products, to dampen exports and encourage imports.

Analysts said if the US is more open in its hi-tech export policy, things will improve. The US, instead, alleges that China might have “dual uses” for some hi-tech products and made a new rule in June that expanded licensing requirements for a longer list of items.

Analysts say the US overreacted since many of the products that China wants are simply for civilian purposes.

Clean energy could be a field where the US can make more efforts to ease its export controls to help balance Sino-US trade and promote healthy economic and trade exchanges between the two sides, said CCCME’s Yao. “Products in this field are purely for civilian use.”

Every year Chinese enterprises import huge amounts of solar-energy materials, equipment and technologies from the US, she said.

China’s solar photovoltaic companies have grown fast in recent years. There are 50 to 60 such firms, mostly privately owned, said Yao.

Yao estimated that this year, the value of clean-energy technology procurement and cooperation between Chinese and US firms could amount to $10 billion if “they did not encounter obstacles”. It could be even higher.

She said China is ready to introduce more clean-energy technologies and products from the US. In the upcoming China Import and Export Fair to be held in April, the organizers are planning to open a special area for exhibiting new clean-energy technologies and equipment from the US.

A US delegation led by David Bohigian, US assistant secretary of commerce, is now visiting Beijing. It is composed of some 17 US energy enterprises and is scheduled to meet China’s National Development and Reform Commission officials today before they leave for Guangzhou in Guangdong Province and Hong Kong.

 

China agrees to open up financial service industry

(Xinhua)
Updated: 2007-12-13 16:30

BEIJING — China and the United States have agreed upon specific steps for foreign companies to enter China’s financial service industry following two-day high-level economic dialogues.

China said it would complete a study of foreign equity participation in the banking sector by the end of 2008 and make relevant policy recommendations.

Foreign-invested companies including banks will be allowed to issue RMB denominated stocks and bonds, while mutual funds administered by Chinese banks will be allowed to invest in the US stock market, according to a statement from the US government.

This has created new opportunities for US firms in a variety of securities business, said the statement.

But China will resume licensing of new joint-venture securities companies and allow foreign securities firms to expand their operations in China to include brokerage, proprietary trading and fund management.

Several foreign firms, including some US firms, are already in advanced stages of establishing new joint ventures, says the statement, without elaborating.

Shortly before the dialogue, China raised the quota for qualified foreign institutional investors, which allow foreign mutual funds to invest in China’s domestic stock market, from 10 billion US dollars to 30 billion US dollars.

U.S. Treasury Secretary Henry Paulson called this progress “moderate”, affirming that opening China’s financial markets to foreign competition strengthens the financial backbone of the Chinese economy. “It’s critical to China’s goals of spreading the benefits of growth to all Chinese people,” he said.

A statement from the Chinese side said the policies should be carried out in accordance with relevant prudential regulations.

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China, US work out new tasks after SED

(Xinhua)
Updated: 2007-12-13 16:07

US Treasury Secretary Henry Paulson shakes hands with Chinese Vice-Premier Wu Yi (L) during the opening of The Third Strategic Economic Dialogue in Xianghe, near Beijing, December 12, 2007.  [Agencies] 

– Further intensify dialogue and exchanges in the areas of product and consumer safety, including food, feed, and drug and medical products, through new and existing bilateral cooperation mechanisms.

– Conduct extensive cooperation over a ten-year period to address energy and the environment, advance technological innovation, adoption of highly-efficient, clean energy technology and technology in addressing climate change, and promote the sustainability of natural resources. A working group will be started in order to start planning as soon as possible.

– Meet early next year and work together to jointly promote the negotiation in the WTO on the reduction or, as appropriate, the elimination of tariffs and non-tariff barriers to environmental goods and services to achieve results as soon as possible, recognizing the urgency of environmental challenges.

– Expand cooperation on development of a detailed plan to gradually reduce the sulfur content in fuels to 50 ppm or lower and introduce corresponding advanced vehicle pollution control technology, for incorporation into China’s 12th Five Year Plan (2011-2015).

– Strengthen cooperation on construction and management of strategic oil stocks through the exchanges of information and technologies, as well as training, including cooperation with the International Energy Agency.

– Begin a high-level exchange of investment policies, practices, and climates. Intensify ongoing discussions regarding the prospects for negotiating a Bilateral Investment Treaty.

– Continue consultations in a cooperative manner on China achieving market economy status. Continue cooperation through the High Technology and Strategic Trade Working Group under the Joint Commission on Commerce and Trade by positively implementing “Guidelines for U.S.-China High  Technology and Strategic Trade Development” and taking appropriate  constructive measures and working out an action plan to expand and facilitate bilateral high-tech and strategic trade. Relevant departments of the two sides have agreed to meet or hold a digital video conference (DVC) in the field of rules of origin.

– Explore the scope of respective international obligations on transparency. Continue to exchange information on reviewing and responding to comments received during the rulemaking process. Establish a communication mechanism to exchange information regularly on the conditions, procedures and timeframes for granting administrative licenses in areas of the Chinese market of interest to the United States and areas of the  U.S. market to China.

                                                                                                                        source from Chinadaily

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Yuan gains vs greenback after US interest rate cut

By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-11-01 13:05

China’s currency rose to a new record against the greenback on Thursday after the US Federal Reserve cut the key interest rate the previous day.

Before Thursday’s trading started, the People’s Bank of China (PBOC) set the yuan central parity rate at 7.4552 relative to the US dollar. The new midpoint marked an appreciation of 0.6 percent in the past seven trading days and a 4.6 percent rise since the beginning of the year.

The hefty rise of 140 basis points over the previous session came after the Fed slashed the federal funds rate, an overnight lending rate between banks, by 25 basis points on Wednesday to prevent a slowdown in the economy.

“The rate cut further reduces the appeal of dollars and will facilitate the capital flow to emerging markets, including China,” Professor Guo Tianyong of the Central University of Finance and Economics (CUFE) told chinadaily.com.cn Thursday morning.

The weakening dollar makes China’s yuan and other world major currencies face rising pressure for appreciation.

However, China’s exchange rate formation system is still a managed floating one, Guo said, adding that the central bank has to take various factors into consideration when deciding whether to allow a faster appreciation in the coming days.

In addition to the exchange rate pressure, China faces other fallouts from the Fed move. Before Wednesday, there was wild speculation in China that the PBOC was mulling a sixth interest rate hike this year to keep the world’s fastest growing major economy from overheating.

The country’s gross domestic product grew 11.5 percent year-on-year in the third quarter, while inflation jumped 6.2 percent in September, the National Bureau of Statistics said last week.

However, “the Fed move increases the difficulty for the central bank [to raise interest rates],” said Professor Song Guoqing of Peking University. Song anticipates another rate increase this year.

Guo of CUFE shared Song’s view, saying the pressure on the central bank is growing.

But Guo deemed that the central bank has the room to raise rates, as there is still a difference between benchmark interest rates in China and the United States.

The current one-year deposit rate in China stands at 3.87 percent while the US federal funds rate is 4.50 percent after Wednesday’s cut.

Moreover, the interest spread is not the major concern for the central bank, Guo said, adding that the domestic inflationary level and asset prices are more important factors to decide policy changes.

The US rate cut also gave rise to mounting worries in China about increasing liquidity, which has pushed up housing and equity prices in the country.

Guo downplayed those concerns, saying the interest spread is not the major target of outside capital. “Whether the liquidity will increase depends mainly on the expectation of rising prices in the housing and equity market, and the renminbi appreciation.”

Zuo Xiaolei, chief economist of Galaxy Securities pointed to the pressure of increasing liquidity as capital inflow might increase, and is urging the PBOC to tighten the curb on potential hot money influx.

The Fed should have been more cautious when deciding on the rate cut, said the female economist, citing inflation and red-hot crude oil prices in the global market.

“It [the Fed] should not just consider Wall Street,” Zuo said. “All factors should be taken into account.”

In an online vote on the Wall Street Journal website, by 14:29 Thursday (Beijing Time) only 33 percent of those surveyed thought the Fed had made the right move, while 49 percent believed the rate should be left unchanged.

 

CPI edges down, inflation pressure remains

(Xinhua)
2007-10-18 19:11

China’s consumer price index, a major barometer for inflation, eased slightly to 6.2 percent in September after surging up to an 11-year monthly high of 6.5 percent in August, Zhu Zhixin, deputy director of the National Development and Reform Commission (NDRC), said on Thursday.

The delegate to the ongoing 17th National Congress of the Communist Party of China ruled out the possibility of sweeping price hikes in the future, but predicted that the prices for farm produce which triggered CPI drastic rise and sparked inflation concern would continue to maintain at high level.

Despite the slight drop in September, consumer prices still grew up 4.1 percent year-on-year over the first nine months compared with 3.9 percent from January to August. About 86 percent of the rise, or 3.5 percentage points, was generated by food price hikes, Zhu said.

Refusing to disclose the GDP growth for the first three quarters which is yet to be released by the National Bureau of Statistics later this month, Zhu said it is too early to say China ’s economy has turned overheated as the short supply of pork didn’ t trigger “comprehensive, lasting and big price hikes”.

He predicted that the prices of grain crops will stabilize gradually as the summer grain crops harvest has surged 1.45 billion kilograms from the previous year to 115.35 billion kilograms this year while early rice output rose slightly to 31.95 billion kilograms.

Currently, most of the country’s industrial consumables remain in surplus. Latest figures from the NDRC revealed that the average price of pork in Chinese shops has dropped 11 percent from its peak in August after the central and local governments earmarked a total 14.6 billion yuan (1.9 billion U.S. dollars) this year to encourage farmers to raise pigs and boost pork supplies.

But Zhu warned against blind optimism, saying that the possibilities of an overheated economy remain while preventing the excess growth of consumer prices should be taken as a major task of macro-economic control.

On the sidelines of the Party congress, Zhou Xiaochuan, president of the People’s Bank of China, subordinated inflation prevention to employment expansion as the second priority of China ’s macro-economic control and the recalibration of monetary policies.

He said that the central bank would continue to adopt a prudent monetary policy to facilitate more coordinated economic development and support consumption expansion

Justin Yifu Lin, an economist with the Beijing University, said that the inflation in China remained low compared with the world’s average as the core CPI excluding food and energy products went up only 0.8 percent year-on-year in the first nine months.

“I am fully confident of the potential of China’s economy. It’s fully possible for China to maintain an annual GDP rise of nine percent in next 10 to 20 years,” he said.

(China Daily)

 

Hot money influx is ‘cooling down’

July 13 – The influx of speculative money from overseas, or hot money, into China’s stock market is showing signs of slowdown thanks to recent cooling-down measures by the government, analysts said.

The increase in foreign exchange reserves not attributed to trade surplus or foreign direct investment declined from $73 billion in the first quarter to $48 billion in the second quarter, according to data from investment bank Lehman Brothers and CEIC, an international financial information provider.

China registered a rise in foreign exchange reserves of $131 billion in the second quarter. Despite its high percentage in annualized terms, the actual amount is less than the $136 billion that China earned in the first quarter.

The change “suggests that hot money inflows may be slowing,” Sun Mingchun, vice-president and Asia economist of Lehman Brothers Asia Ltd, told China Daily yesterday. He attributed it to strict checks by the government on illegal capital inflows and slow trading in the equity market since the rise in the stamp tax on stock transactions in early June. The hot money may now go to Hong Kong or other markets to seek better investment returns, Sun said.

In another development, the State Administration of Foreign Exchange (SAFE) repeated its call yesterday to control illegal capital inflows, or money going into the stock or real estate markets betting on the yuan’s appreciation, under the pretext of trade payment or direct investment. “The regulatory authorities will continuously strengthen monitoring and administration of cross-border flows of funds, and block the inflow of foreign capital on fictitious trade claims,” said a statement posted on the SAFE website yesterday.

Sun of Lehman Brothers said that the government should publish the results of the investigations and penalize companies violating the regulations, “to prevent more companies from following suit”.

 

COSCO jumps 83% in Shanghai debut

(Reuters)
Updated: 2007-06-26 17:25 Shares in China COSCO Holdings more than doubled as they listed in Shanghai on Tuesday, after the shipping giant’s $2 billion domestic initial public offer (IPO) attracted a record 1.629 trillion yuan ($214 billion) in subscriptions.The A shares in the world’s fifth-biggest container ship operator opened at 15.52 yuan on the Shanghai Stock Exchange, up 83 percent from their IPO price and in line with market expectations.

The shares then climbed further in a hectic first hour of trade to as high as 17.15 yuan, slightly more than double the IPO price.

The shares of COSCO were traded at 16.38 yuan when the market closed in Shanghai at 3:00 pm.

The strong debut contrasted sharply with a weak overall Shanghai market, where the main index tumbled more than 3 percent in morning trade because of expectations for an interest rate hike and concern about heavy new supplies of shares.

“People are attracted by China COSCO’s growth story,” said Zheng Weigang, analyst at Shanghai Securities. “At 18 yuan it probably wouldn’t look too expensive.”

The firm, 51 percent owned by China Ocean Shipping (Group) Co., will use the IPO proceeds to buy a majority stake in sister company COSCO Logistics and pay for 12 new ships, consolidating its position as China’s top ocean shipping firm.

In addition, China COSCO is considering a possible purchase of more than 400 bulk carriers from its parent group, which could make it the owner of the world’s largest dry-bulk shipping fleet.

Niu Yuming, shipping analyst at Haitong Securities, said the shares would jump to 25 yuan apiece by the end of this year if that purchase went ahead.

The price of 17.15 yuan left China COSCO’s A shares at a 54 percent premium to the HK$11.40 last close of its Hong Kong-listed H shares. That compared to a 32 percent premium for its closest competitor, China Shipping Development.

China COSCO’s $2 billion offer was the seventh-largest IPO on the mainland’s Shanghai and Shenzhen stock exchanges. It sold 1.784 billion A shares, equivalent to 20 percent of its expanded share capital.

The company, which competes with global leaders such as Moeller-Maersk and Evergreen, attracted the most subscriptions from retail and institutional investors of any IPO on China’s domestic stock market.
The 17.15 yuan share price valued China COSCO at 39 times analysts’ forecasts for earnings per share this year of 0.443 yuan under international accounting standards, according to Reuters Research. Analysts see 2008 earnings per share rising to 0.573 yuan.

A 2007 price-earnings ratio of 39 times is far above an average of about 24 times for major global shipping firms and 15 times for global leader A.P. Moeller-Maersk.

The domestic shares of many Chinese companies command such premiums because of strong industry growth prospects and an imbalance of demand for equity over supply inside the country.

 

Chinese banks offer high salaries for their staff

Chinanews, Beijing, June 25 – Chinese listed banks provide relatively higher salaries than their counterparts in Western countries to their working staff, while their contributions, in terms of profit, account for only one-fifth of those of their Western counterparts, according to a report released by the Ernst & Young accounting firm last Thursday, the Beijing Morning Post reported.

 After China CITIC Bank went public in April, this year, there are about 11 commercial banks that have been listed in the mainland and Hong Kong securities markets so far. The assets of these banks account for over 55% of the total banking assets in China. These banks have boosted the development of Chinese banking industry after going public.

The capital adequacy ratio among these banks has improved substantially. Many banks have the least capital amount as required by the central government. The bad loan ratio for these banks has been lowered to less than 4%, some even below 2%. When the business performance of Chinese listed banks has caught up with international standards, the salaries for staff working in these banks have also increased substantially.

Before these banks went public one year ago, human resources costs accounted for 40% of the whole operational costs in banks. Now, related ratio has risen to 50%. The report attributes the high rise in salaries to the intense competition among listed banks, which forces the banks to offer high salaries to attract competent staff membersto stay in their companies.

 

China to adjust export refund policy

Chinanews, Beijing, June 21 – Starting from July 1, China will implement a new export refund policy for about 2,800 types of goods. These goods make up 37% of the total number of goods that are subject to tax by the China Customs office. Of all these goods, 553 are regarded as high energy-consumption, high polluting, and high resource-consumption goods, most of them being mineral and chemical goods. Starting from next month, the tax refund rate for 2,268 types of goods will be reduced. These goods are regarded as ones that will easily cause trade friction. The goods include clothes, shoes, hats, bags, suitcases, toys, some types of stone materials, porcelain products, some kinds of iron and steel products, motorbikes, mechanical goods with low values, furniture, and fiber goods. Ten types of goods will be exempted from export tax, including peanuts, nuts, oil paintings, wooden carved boards, stamps, and stamp tax receipts. China adjusts the export tax policy in order to curb the soaring export trade volume and reduce the ever-increasing trade surplus. With the new tax policy, the costs of many export goods will rise. Therefore fewer goods will be exported as a result of the new policy, said an official from the Ministry of Finance.