Economy

China tightens rules on military exports, technology
China has imposed new restrictions on exports of military goods and chemical and biological technology, in what appeared to be an effort to clear away an irritant in relations with Washington as President Jiang Zemin prepared to meet the U.S. President. (Dow Jones, 21 October)

China's producer price index falls 1.4%
China's producer price index fell 1.4% on year in September, as deflation eased slightly from the 1.7% decline in August. The index, which tracks the factory-gate prices of industrial products, is now down 2.9% for the first nine months of 2002 after falling 0.5% in the same period of 2001. Excess capacity and increasing competition from imported products are relentlessly pushing down prices in China. (WSJ, 22 October)

Mainland poised to overtake US in FDI stakes
China is poised to overtake the United States as the largest recipient of foreign direct investment in the world this year. FDI in China is forecast to reach a record USD 50 billion this year, up from USD 46.8 billion last year, while inflows to the US are expected to slump by two-thirds to USD 44 billion. According to Unctad, completed cross-border M&As between January and early September this year fell by 45% to about USD 250 billion. The decline was particularly drastic in the US where M&As account for the bulk of FDI. (SCMP, 26 October)

Regulator warns of danger in property
The People's Bank of China has warned banks not to engage in excessive property lending. "Surging prices and growing vacancy rates have increased the potential risks of the property sector," the PBOC said in a recent report. The PBOC's move follows a similar warning by the construction minister and recently reported concerns from Premier Zhu Rongji that a speculative bubble had emerged in certain regions. Average house prices rose 11.1% year on year in the first half, with rises in Beijing, Shanxi and Yunnan exceeding 25%. (SCMP, 26 October)

Finance

BoC governor to head reform body targeting big four banks
China's central bank governor Dai Xianglong has been appointed to head a new top-level task force charged with tackling reforms at the core of the mainland's banking sector - the big four commercial banks. Analysts see the move as a sign that Beijing is accelerating long-overdue banking reforms. The "big four" are burdened under the weight of problem loans and woefully under-capitalised by international standards. Failure to improve their asset quality and lower their non-performing loan ratios, now standing at 30% according to Beijing's estimate, could pose a systematic risk to the mainland's fragile financial sector. (SCMP, 19 October)

China's Central Bank boosts 2002 money supply growth forecast
China's central bank predicted money supply will expand faster than previously forecast this year, as people put more money in savings accounts. Broad money supply, or M2, which includes demand deposits, savings accounts and cash in circulation, will increase as much as 17% this year. Rising money supply has been paced by surging household savings, which rose 18% in September to CNY 8.41 trillion. (Bloomberg, 21 October)

Card network will increase access
A new national payment system will be linked to 70% of bank cards issued in China this year, allowing consumers to use ATMs of any bank branch across the country. Card users previously were confined to using ATMs of their own banks. The central bank expects interbank trading volume to grow significantly with the establishment of the system. (SCMP, 22 October)

Companies vie to manage funds
Competition is heating up among firms hoping to manage the first group of billions of yuan from China's social security funds. It is expected that about CNY 32 billion of the current 80 billion in social security funds will be managed by fund companies. Analysts believe the move will help China's stock market recover from a year-long slump. China's funds industry has grown from 5 funds in 1998 to 55 at present, including 50 closed-ended funds and 5 mutual funds. The funds are run by 15 fund management companies, which manage nearly CNY 90 billion and invest mostly in domestic stocks and bonds. CSRC officials blasted the industry for rigging share prices and bidding up initial public offerings. (Business Weekly, 22 October)

China: Bright spot in M&A upturn
China was Asia's most active market for M&As in the second quarter of 2002, with 155 transactions worth USD 11.9 billion announced. Mergers and acquisitions will be an area to watch as further reforms are introduced and as China remains at the forefront of Asia-Pacific and global innovations in M&A activity. (Business Weekly, 22 October)

China expected to approve three new fund JVs soon
The China Securities Regulatory Commission is expected to approve 3 new fund management JVs, a venture between Haitong Securities Co Ltd and Belgium-based Fortis Investment Management Group, a JV between China Merchants Securities Co Ltd and Netherlands-based ING Group and a JV between China's Huabao Trust & Investment Co Ltd and Societe Generale Asset Management SA. (Xinhua Financial News, 22 October)

Goldman downgrades mainland's mobile carriers
Goldman Sachs downgraded the investment rating of both mainland mobile carriers, China Mobile and China Unicom, to "under-performer" (equal to sell). "Recent rallies in stock prices provide an opportunity to exit an industry that we believe is facing a prolonged period of worsening fundamentals," Goldman told clients. (SCMP, 26 October)

Legal

Foreign monopoly curbs
China is setting up a far-reaching anti-trust regime designed to prevent foreign investors from achieving market dominance in any industry. Legal experts said the provisions would have significant implications for foreign expansion in China, especially in sectors where foreign penetration was high, such as consumer products and light industries. Under the rules, a transaction will be examined by a government-led hearing if it meets certain key criteria. Furthermore, prior approval from Moftec will be required for certain foreign M&A transactions. (SCMP, 23 October) http://biz.scmp.com/bizmain/ZZZT4R8QX6D.html

Business

U.S. telecom firms, China sign agreements ahead of Jiang visit
China signed agreements to buy USD 1.2 billion in telecommunications equipment from mainly U.S. companies, a gesture apparently timed to cool bilateral trade tensions ahead of a state visit to the U.S. by Chinese President Jiang Zemin. Motorola, Lucent Technologies and Nortel Networks have clinched deals for the construction of the second phase of a CDMA cellular network in China. Earlier, Exxon Mobil and China Petroleum & Chemical Corp. signed a pact advancing several JV projects, including a USD 3 billion refinery and petrochemical complex. (WSJ, 22 October)

China plans to more than double road network
China's road network will be extended to more than 4 million kilometres by the middle of this century -- a huge leap from its current distance of 1.7 million kilometres. And the quality of roads will be on a par with that of developed countries. (China Daily, 23 October)

Auto industry posts 35% growth in 1st three quarters
During the first nine months of this year, the industry's total output value grew by 34.8% year on year to CNY 231.2 billion. The growth rate was 20.2% percentage points and 7.1% percentage points higher than those of the first quarter and the first half of this year, respectively. The three auto giants, First Automotive Works Corp., Shanghai Auto Industry Group Corp. and Dongfeng Automobile Group, all recorded increases in profits, which totaled CNY 5.15 billion. (ChinaOnline, 23 October)

15% revenue rise keeps telecoms on target
Mainland telecoms carriers generated revenue of CNY 298.7 billion in the first nine months, a year-on-year rise of 15.4%. Meanwhile, a total of 5.53 million new mobile-phone users were added last month, taking China's total users to 190.39 million. The fixed-line market grew to 207 million, with 3.47 million new lines added in September. The Internet market showed an even faster growth rate over the past month, with 1.72 million subscribers added to reach a total of 45.04 million users. (SCMP, 23 October)

Tsingtao will use Anheuser cash to expand in US
Tsingtao Brewery, which purchased 45 smaller Chinese rivals in the past three years, may use some of a planned USD 182 million investment by Anheuser-Busch to buy breweries in the United States. Having Anheuser-Busch as its second-biggest owner after the city of Qingdao may help Tsingtao expand sales beyond Chinatown restaurants in the world's biggest beer market. (SCMP, 24 October)

Profits rise at industrial firms
From January to September, China's industrial firms made profits of CNY 380.1 billion, a year-on-year increase of 13.6%. The growth was faster than the 10% rise in the first eight months of this year, boosted by strong earnings from producers of chemicals, coal and transport equipment. (China Daily, 25 November)

Peugeot, Dongfeng to expand venture to raise market share
France's PSA Peugeot and China's Dongfeng Motor Corp. have set a goal of snaring 15% of China's fast-growing auto market, after clinching an agreement to expand their joint venture with a CNY 1 billion capital injection. The expanded joint venture will revive the Peugeot brand in China and expand the number of passenger vehicle models produced at the auto plant in central China. (Dow Jones, 25 October)

Energy

Power producers face tariff cuts
The earnings potential of independent power producers (IPP) in China is in doubt following a decision by Beijing to consider streamlining tariffs in the sector. Together with overall sector reform, bringing tariffs across the industry in line with one another would exert downward pressure on IPPs' tariffs and capacity utilisation over the next few years. Actual tariffs charged by IPPs, which are supported by private-sector capital, are 30% to 40% higher than those levied by State Power. (SCMP, 21 October)

China unveils breakup plans for State Power
China has launched its long-awaited reform plans to break up the State Power Corp of China into five power generation groups and two grid companies. The details of the reform plans will be announced next month, with the new power companies and groups and grid firms likely to be established by December. (China Daily, 24 November)

Beijing

FAW may relocate head office to Beijing
China's largest automaker, the FAW Group, is planing to relocate its headquarters from Changchun to Beijing as part of its campaign to cement its leading position and better tailor its strategic goals for China's flourishing auto market. The move marks its latest strategic reshuffle following its merger with Tianjin Automobile Industry Corp and its strategic tie-up with the Japanese auto giant Toyota. (China Daily, 22 October)

Agreement provides Beijing with direct export outlet
According to a new agreement Exporters and importers based in Beijing will be able to obtain customs and quarantine clearance for their shipping goods in Beijing, instead of at ports in Tianjin as they had to do previously. (People's Daily, 23 October)

Shanghai

Shanghai develops motor Formula one city
Shanghai will develop a 68 square kilometer motor city. The initial investment last year was CNY 10 billion, and another CNY 40 billion will be invested until 2007. This would make motor city the largest car manufacturing district in Asia, attracting all the major domestic and foreign manufacturers. Already, more than 90 domestic and foreign motor companies have spent around CNY 3.55 billion to set up in the area. When the motor city is ready, it will include component factories, manufacturing and assembly plants, research and development workshops, education facilities and tourist attractions. (Chinabiz, 18 October)

Massive mall is finally open
Nearly two years behind schedule, Super Brand Mall, the largest shopping center in Asia, held its official opening, although management admits it still hasn't signed up tenants for 20% of leasable space. Many of the stores that have signed up to open outlets still haven't opened their doors. To date, developers have invested USD 450 million in the 240'000-square-meter mall. (Shanghai Daily, 19 October)

Surging prices curbs demand in property market
The surging prices of Shanghai property projects have deterred local people from buying homes to live in or for investment purposes. The city's growth in housing loans in September declined CNY 744 million to CNY 3.9 billion, the first drop in three months. By the end of September, housing loans in the city's commercial banks were valued at CNY 95 billion, CNY 31 billion higher than at the beginning of the year and CNY 9.6 billion higher than the same period last year. (Shanghai Daily, 23 October)

Various

Beijing moves to reform civil service
Beijing has reshuffled key ministries in charge of foreign trade, communications and railways as part of preparations for the Communist Party congress. The changes also signal the start of a comprehensive reform of the civil service, modelled on the British system, sources say. Lu Fuyuan will replace Shi Guangsheng as party secretary of Moftec, putting him in line to replace Mr. Shi as Moftec minister. Lu has been Moftec's deputy party secretary and deputy minister since March. He worked for First Auto Works for 18 years. From 1990 to 1998, he worked at the Ministry of Machinery Industry, responsible for the car industry. From 1998 to March this year, he was the deputy minister of education. (SCMP, 21 October)

Brilliance Ex-Chairman Yang Rong arrested in China
Former Brilliance China Automotive Holdings Ltd. Chairman Yang Rong was arrested in Liaoning province for "suspected involvement in economic crimes,'' the company said in a statement. Yang, who was removed as chairman in June, was investigated by the government for possibly siphoning off money from the automaker. Brilliance's directors "believed that the suspected involvement of Mr. Yang in economic crimes was not related to the business or operation of the company''. (Bloomberg, 23 October)

China Investigates Ex-Chief Justice
The former chief justice of southern China's Guangdong province is being investigated for accepting massive bribes. Party investigators say Mai Chongkai also used his influence to help his son's business get large bank loans. Mai and his son are accused of collecting USD 1.4 million in bribes between 1989 and 1998. Mai is also accused of living a "morally degenerate" life. (AP, 23 October)

China establishes first national anti-piracy organization
China's first national anti-piracy organization, the Anti-Piracy Committee, was established under the authority of the Copyright Society of China and is composed of 82 members from anti-piracy organizations all over the country. (People's Daily, 26 October)