Business

China’s Shenhua Group is expected to invest 36 billion yuan (5.27 billion U.S. dollars) over the five years to expand coal production capacity in Xinjiang Uygur Autonomous Region, a company executive said Saturday.

Shenhua’s President Zhang Yuzhuo said the company plans to increase its coal production capacity to more than 60 million tonnes in Xinjiang by 2014.

Shenhua’s coal output capacity in Xinjiang was 16.8 million tonnes last year, up from 10.47 million tonnes in 2005.

The money will also be used to facilitate coal conversion projects such as coal-to-oil projects, Zhang said.

Shenhua Group produced 281.25 million tonnes of coal nationwide in 2008, up 19.3 percent from a year earlier.

(Xinhua News Agency July 6, 2009)

Chinese share prices closed flat on Thursday despite strong economic figures in the first half year.

The benchmark Shanghai Composite Index lost 0.15 percent, or 4.81 points, to 3,183.74.

The Shenzhen Component Index edged up 0.02 percent, or 2.63 points, to 13,081.89.

Total turnover shrank slightly to 332.37 billion yuan (48.88 billion U.S. dollars) from 333.4 billion yuan on the previous trading day.

(Xinhua News Agency July 16, 2009)

China’s power generation rose 3.59 percent year on year in June, ending eight consecutive months of decline since October last year, the State Grid Corporation of China (SGCC) said Friday.

The increase demonstrated a strong rebound, compared to a 3.54-percent fall in May.

The country’s total power generation reached 309.33 billion kilowatts in June, according to the SGCC’s power dispatch center.

Analysts from both the SGCC and the China Electricity Council said the strong rebound was “within expectations,” as falls in previous months had been stabilized. The rebound was also in line with the improving economy.

They said the rebound was partly a result of increased industrial activity, while high temperatures in late June also boosted the electricity consumption.

It is the latest statistic that seems to suggest a recovering Chinese economy. The Purchasing Managers’ Index (PMI) released Wednesday stood at 53.2 percent in June, up 0.1 percentage points from May and the fourth consecutive month with a reading above 50, which suggests expansion.

China’s industrial output expanded 8.9 percent in May from a year earlier, the highest monthly growth rate since October last year. The June figure is expected to be announced in mid July.

Many provinces in north China have been hit by scorching heat since last Wednesday, with temperatures reaching at least 35 degrees Celsius, and in some regions hitting 40 degrees.

The above-average temperatures had pushed up electricity consumption. In Beijing, consumption peaked at an historic high of 12.56 million kilowatts at 4:06 p.m. on June 26.

(Xinhua News Agency July 3, 2009)

The stock market rally, which began early this year, has been propelling banks and other financial institutions to jump onto fund management bandwagon.

More than 10 newly established fund management companies have sought approval from the China Securities Regulatory Commission to market unit trusts to investors.

These fund management companies are different from the existing firms on account of their parentage. Most of the firms are owned, at least partly, by domestic or foreign banks. Similarly most of the fund management companies that are in operation now can trace their roots to stock brokerage or other investment businesses.

Among the new applicants is the newly established Shenzhen-based joint venture between China’s Ping An Securities and Singapore’s United Overseas Bank Ltd. The fund management venture of Western Securities and Bank of New York Mellon is another firm waiting for approval.

COFCO Ltd and Morley Fund Managers of Britain have also established a fund management company in Shanghai that has also sought a license.

Bank of Beijing is planning to set up a joint-venture fund management firm with Canada-based Bank of Nova Scotia. Huaxia Bank is planning a tie-up with Britain-based F

China is aiming for an installed solar power capacity of 2 gW by 2011, nearly a 15-fold jump from the 140 mW capacity it had at the end of last year, according to people familiar with the matter.

The National Energy Administration has decided to expand the country’s solar power capacity to 2 gW in the next two years, with a subsidized price for solar power of 1.09 yuan per kWh, the source said.

China is trying to catch up in a global race to find alternatives to fossil fuels. The country, which revised its 2020 target for solar power capacity from 1.8 gW to 20 gW in its new energy stimulus plan, added 40 mW in new capacity last year.

Six regions and provinces in Northwest China are the most suited for installing solar PV stations in terms of sunshine days. These are Inner Mongolia, Xinjiang Uygur autonomous region, Gansu, Ningxia, Qinghai and Shaanxi, said Shen Yanbo, an expert from the National Climate Center.

The government’s new policy would come as a boost for solar energy in the domestic market and create greater opportunities for companies involved in the entire solar supply chain, said Zhang Shuai, a new energy analyst with Sinolink Securities.

Top panel-makers, including Suntech, Yingli Green Energy and LDK Solar, are expected to benefit from the revised goal.

The solar industry has been hit hard since the end of last year due to freezing credit resulting from the financial crisis and an oversupply of solar panels that have cut prices sharply.

China is considering enhancing incentives at a time when European countries such as Germany and Spain, the largest solar markets, are pulling back on incentives, thereby slowing the market.

Although China has been the largest solar panels supplier in the last two years, it played an insignificant role in the domestic solar photovoltaic (PV) market. But new policies are spurring a change this year.

The government in March approved a subsidy of 20 yuan per watt for solar PV systems larger than 50 kW fixed on building roofs.

The subsidy, which could cover half the cost of installing the system, was popular among developers, attracting applications equivalent to the building of 1 gW of solar power, Reuters reported earlier.

For ground-mounted projects, the government is paying a feed-in tariff for the electricity generated, instead of a subsidy based on the projects’ capacity.

It has set a price of 1.09 yuan per kWh for a 10-mW solar PV power plant in Dunhuang, nearly three times the rate paid by coal-fired power plants.

“The subsidized price of 1.09 yuan is not ideal for solar panel players to make money from these projects,” said Li Junfeng, deputy director of the Energy Research institute under the National Development and Reform Commission. “The profitable price would be between 1.3 yuan per kWh and 1.5 yuan per kWh, depending on different producers.”

He said the government still needed to adjust the feed-in tariff if the domestic PV market had to develop faster.

Besides the subsidy component, some Chinese solar panel makers would be able to make money when the production cost comes down to 1 yuan per kWh within the next two years, company insiders said.

(China Daily July 3, 2009)

The China Securities Regulatory Commission (CSRC) approved a new initial public offering on Wednesday, the first such approval since last September.

The CSRC reviewed the applications for Shanghai Chaori Solar Energy Science and Technology Co. and Anhui Xinlong Electrical Co. on Wednesday. Anhui Xinlong got the approval and Shanghai Chaori was denied, according to a statement on the CSRC Web site. The statement did not give the reason for the denial.

Anhui Xinlong, an electric equipment manufacturer located in east China’s Anhui Province, plans to issue around 28 million shares and raise 165 million yuan (24.26 billion U.S dollars).

China resumed its A-share IPO in June after a nine-month suspension. Guilin Sanjin and Zhejiang Wanma became the first batch of enterprises to be listed. Three more companies are preparing for their first show on the A-share market.

As the CSRC suspended IPO approvals for more than nine months. About 400 enterprises are waiting to go public. It will take at least two years for the A-share market to list those companies, according to the CSRC.

(Xinhua News Agency July 16, 2009)

China secured access to vast oil deposits in west Kazakhstan yesterday after the energy-rich central Asian nation said it had completed the expansion of a major oil pipeline to its eastern neighbor.

The Kazakh company in charge of the project said the first test shipment had been successfully completed through the Kenkiyak-Kumkol pipeline. “The implementation of this project will have tremendous influence on the whole oil and gas industry, providing new opportunities for oil exports,” KazStroyService said.

The new link, which starts near the Kenkiyak field operated by China National Petroleum Corp, gives China better access to Kazakhstan’s oil provinces in the west.

The first phase of the pipeline, between central Kazakhstan and China’s Xinjiang Uygur Autonomous Region, was completed in 2006. The latest link expands the pipeline to Caspian Sea oil fields.

Chinese oil companies such as CNPC own stakes in several Kazakh oil producers, including CNPC-AktobeMunaiGaz, operator of Kenkiyak and Zhanazhol fields, and PetroKazakhstan, which operates the Kumkol group of fields.

Kazakhstan has stepped up contacts with China for fresh investment. China in April agreed to lend it US$10 billion in a “loan-for-oil” deal during Kazakh President Nursultan Nazarbayev’s visit.

As part of the deal, CNPC bought a stake in MangistauMunaigas, a company whose fields are also close to the starting point of the extended pipeline.

China and Kazakhstan agreed to build the 3,000-kilometer pipeline in 1997 and have said they would later double the capacity of the combined pipeline from the current 10 million tons a year. China is also building a pipeline to import up to 40 billion cubic meters of central Asian gas a year. The link originates in Turkmenistan and goes through Kazakhstan and Uzbekistan.

(Shanghai Daily July 2, 2009)

China Pacific Insurance (Group) Co Ltd, the country’s third-largest life insurer, is planning to relaunch its Hong Kong initial public offering in the second half, an investment-banking source told China Daily yesterday.

The insurer, which tried to raise around 30 billion yuan from the Hong Kong bourse last year, has been in discussions with several investment banks to kick off the plan again, said the source.

“They are trying to float the Hong Kong IPO within this year, but that still depends on the market situation and investors’ attitude about the pricing,” the source said.

According to Wang Xiaogang, senior analyst with Shanghai-based Orient Securities, the recent performance of China Pacific Insurance’s A shares indicates investors’ anticipation for the imminent IPO on the HK bourse.

“Floating shares will definitely help China Pacific better expand its business but is not likely to largely enhance its profitability,” Wang said.

According to an earlier report by Shanghai Securities News, the top management of China Pacific Insurance just held an internal meeting recently and has approved the Hong Kong IPO relaunch plan.

The insurer is also planning to have a board meeting in August to discuss the plan. Once the plan receives green light, it will still need approval from the industry regulator and the general meeting.

China Pacific Insurance said in a statement that premiums of its life insurance subsidiary reached 35.2 billion yuan in the first half of the year, while premiums from its asset insurance subsidiary were 18.6 billion yuan.

(China Daily July 16, 2009)

The fuel price hike would certainly pinch the pockets of consumers, but may not leave a lasting impact on the nation’s economic recovery, according to analysts and experts.

But for many like the 24-year-old fashion writer He Yi, it is time to tighten their purse strings. Gasoline, diesel and jet fuel prices went up by as much as 11 percent from yesterday, the third increase this year and second in June, to reflect recent price changes in the global oil market.

He should consider herself lucky, as she was one of the few who gassed up her car just before the price hike. She can also take cheer from the fact that her vehicle is a Japanese model, known for its lower fuel consumption. But she is still determined to use less air-conditioning when driving, despite the scorching heat in Beijing.

According a survey by the Chinese web portal Sina.com, more than 90 percent of the 180,000 respondents said they were determined to drive less in response to the price hike, while over 94 percent thought fuel prices are too high now.

Pump prices for 90 octane gasoline in Beijing was set at roughly 5.71 yuan a liter, or about $3.16 a gallon, the National Development and Reform Commission, the nation’s top economic planning agency, said in a statement on its website late on Monday. That compares with an average of $2.69 a gallon in the US, according to Bloomberg.

The government controls its retail fuel prices under a mechanism introduced in December that takes into account crude-oil costs, taxes and a profit margin for refiners. China may adjust fuel prices when crude-oil costs change more than 4 percent over 22 straight working days. Crude oil futures have risen 60 percent to more than $70 a barrel this year on signs of a global economic recovery that is spurring demand for fuel.

However, economists and analysts believe this round of price hike will not have any direct and obvious impact on the Chinese economy, which is largely fueled by coal.

“As China only needs oil to supply 20 percent of its energy consumption, costlier oil will not make things as bad as costlier coal,” said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. “However, the economy will be hurt if higher crude prices drive up coal prices,” Lin said.

In addition, China’s consumer prices fell for a fourth month in May, making it easier for the government to raise oil prices, said Niu Li, senior researcher at the State Information Center.

The price hike comes amid a surge in demand for automobiles in the world’s third-largest economy. Passenger car sales rose 47 percent in May to 829,100 units, the biggest jump since February 2006,

Chen Zheng, an auto industry analyst with China Securities Co, believed that Chinese people’s demand for cars would not be seriously dampened by this round of price hikes, as China’s car owners are largely social elite, who can afford to ignore moderate increases in gasoline prices. “But if oil prices continue to surge, I’m sure many people will stop buying new vehicles, especially the high-emission cars,” Chen said.

Sinopec, the nation’s biggest refiner, gained 0.7 percent to close at 10.66 yuan in Shanghai bourse yesterday, while its Hong Kong-listed shares rose 3.3 percent to HK$5.91.

(China Daily July 1, 2009)

The successful joint bid by BP and China National Petroleum Corp (CNPC) to develop an oilfield in Iraq has offered unique opportunities for the Chinese company to tap crude reserves in the oil-rich nation, analysts said yesterday.