Business

Shanghai’s banking regulator yesterday emphasized the importance of the 40 percent down-payment rule for second homes in a bid to prevent real estate speculation.

Also over the weekend, the Shanghai Housing Guarantee and Administration Bureau said it has ordered real estate developers to register their sales plans with the local industry watchdog to prevent them holding the properties for higher profits.

Banks in Shanghai must strictly comply with the down-payment requirement on second homes, the Shanghai Bureau of the China Banking Regulatory Commission said.

“Banks are banned from bypassing the rules under the excuse that they can’t get clients’ credit records due to lack of access to the central bank’s individual credit database,” the local banking regulator said.

The regulator also highlighted irregular practices such as banks claiming credit records couldn’t be obtained because it was hard to investigate applicants’ property deals outside Shanghai.

Banks also can’t use their own definition of what constitutes a second home, the regulator said.

In 2007, the authorities asked banks to take at least 40-percent down payment with an interest rate at least 10 percent higher than the benchmark rate on second homes to drive out speculation in the then red-hot real estate market.

However, when the market lost steam from the second half of last year, many banks ignored the rule on interest rates and some even ignored the down-payment requirements.

The Shanghai branch of the Bank of Communication sticks to the down-payment requirement but offers clients a discount on interest rates, according to an unnamed credit officer.

“In principle, we offer a 25 percent discount on the interest on second homes while applicants can even get a 30 percent discount, the highest discount, if they apply for a credit card,” the officer said. “We were told of the notice last week and we are still awaiting superiors’ order.”

The loose credit practices, together with policies to boost a healthy real estate industry issued last year against the fallout from the global financial crisis, have fuelled property transactions in Shanghai and other major cities.

New-home sales in Shanghai, excluding those related to urban redevelopment, jumped nearly 70 percent to 8.7 million square meters during the first half of this year. That compares with 8.9 million square meters sold in the whole of 2008, according to Shanghai Uwin Real Estate Information Services Co.

In the existing-home market, meanwhile, 138,400 units were sold, an increase of 9.3 percent compared with last year’s total, according to Century 21 China Real Estate research.

The average price of new properties rose to 13,918 yuan (US$2,038) per square meter between January and June in the city, up 2.8 percent compared with the average price last year.

And existing properties were sold at 11,793 yuan per square meter during the same period, up 9.1 percent from last year’s average, Liu Haisheng, director of the Shanghai Housing Guarantee and Administration Bureau, told a municipal conference on Friday.

The bureau’s new policy, effective from July 1, is designed to prohibit real estate developers from holding their properties for higher profits.

During market booms, some developers would deliberately slow their sales process to reap more profit as prices continued to rise.

The bureau said it would require developers to launch property sales under certain timelines or their credit record might be affected.

(Shanghai Daily July 20, 2009)

China Three Gorges Project Corporation (CTGPC) confirmed Tuesday that, despite a decrease in water inflow, it generated nearly five billion kilowatt/hour of electricity more in January-June period of this year than in the first half of last year.

It produced 32.23 billion kw/hour of power in the first half of this year, though the water inflow volume monitored at the massive Three Gorges reservoir was 126 billion cubic meters, a decline of 3.6 percent from an average of the past years, and the power generation was 4.72 billion kw/hour more than power output for January-June period last year, said the company in a statement.

Additionally, 32.34 million tons of cargo were transported via the Three Gorges Project in the first half of the year, a rise of 4.6 percent from the volume handled in the same period last year.

The corporation has kept the water level in the Three Gorges Reservoir at a mark of 145 meters since early June as the Yangtze River has been in a flood season.

Launched in 1993, the Three Gorges Project is a multifunctional hydroelectric facility built near Yichang in central China’s Hubei Province to tame the unruly Yangtze River and fuel China’s economic development with clean and cheap energy. Its other functions include flood control and shipping.

The project has completed most of its main projects, including a 185-meter-high dam, a five-tier ship lock and 32 generators, 26 of which are on the river banks and were put into operation by October last year — with installed capacity totaling 18.2 million kw.

Unfinished works of the Three Gorges Project include an underground power station where six generators will be installed and a ship lift. Both the underground power station and the ship lift are being built on the southern side of the Yangtze.

As of April 7, the world’s largest hydroelectric project had generated 300 billion kw/h of electricity since its first generator was put into operation in July 2003. The amount is equivalent to 8.8 percent of the national consumption last year.

(Xinhua News Agency July 7, 2009)

China Pacific Insurance (Group) Co., Ltd. (CPIC) said it planned to restart its H-share issue in a statement released Friday.

According to a statement on the website of Shanghai Stock Exchange, the company has decided to float no more than 1 billion shares on the Hong Kong market.

The company’s stock price on mainland’s Shanghai bourse has gained 3.7 percent to 28.92 yuan (US$4.25) at the moment.

(Xinhua News Agency July 17, 2009)

China Petrochemical Corporation (Sinopec Group), the country’s largest oil refinery, announced Tuesday that the Chinese government has approved the feasibility study report on the expansion of the joint venture between its listed subsidiary China Petroleum and Chemical Corporation (Sinopec) and Ludwigshafen-headquartered BASF in east China’s Nanjing city.

Sinopec and BASF will jointly invest approximately 1.4 billion U.S. dollars to expand the BASF-YPC Co. Ltd., (BYC) to produce downstream specialty chemicals for the Chinese market, serving multiple industries such as construction, electronics, pharmaceutical, automotive and chemical manufacturing.

The investment includes the expansion of the existing steam cracker and three existing plants as well as construction of 10 new chemical plants.

The expansion will become operational by 2011, according to the Sinopec Group.

The expansion project conforms with China’s revitalization plan for the petrochemical industry, fosters the integration of BYC, broadens the portfolio of downstream products in Nanjing and meets the increasing demand in China’s eastern region, said Wang Tianpu, President of Sinopec.

Yangzi-BASF Styrenics Co., Ltd. (YBS), another joint venture in Nanjing between the two partners, is being merged into BYC to further increase synergies in Nanjing operations. YBS produces styrene monomer, polystyrene and expandable polystyrene.

Founded in 2000, BYC is a 50-50 joint venture between BASF and Sinopec, with a total investment of 2.9 billion U.S. dollars in the first phase. The joint venture started commercial production in 2005.

(Xinhua News Agency July 7, 2009)

The Industrial and Commercial Bank of China, the world’s largest bank by market value, said it offered 110 billion yuan (US$16.1 billion) in new loans to help finance trade, at a time when its Western peers shied away from such lending because of the global financial crisis.

The bank’s outstanding loans used to fund flows of exports and imports reached 365.7 billion yuan at the end of June, up 42.7 percent from the level at the start of this year, it said in a statement yesterday.

The World Trade Organization has forecast a 10 percent fall in global trade volume in 2009, partly because of a big drop in the availability of financing to back trade.

To help fill the gap, China has relaxed rules to make it easier for banks to grant loans in support of goods shipments in and out of the country.

ICBC said its ratio of bad loans for trade finance stood at 0.2 percent at the end of June, lower than its overall non-performing loan ratio.

(Shanghai Daily July 17, 2009)

China’s three major oil companies are thinking of participating in Iraq’s second auction of oil and gas fields later this year, in a move to get a better foothold in the country’s oil industry.

China National Petroleum Corp (CNPC) and China Petrochemical Corp (Sinopec) may continue to bid in the second auction, as they “cannot neglect the rich oil and gas reserves in Iraq”, said a source close to the situation.

Fu Chengyu, president of China National Offshore Oil Corp (CNOOC), said last Saturday that the company might take part in the second round of bidding, without elaborating.

“Domestic oil companies won’t miss this unprecedented opportunity,” said the source. “But they all realize that it requires painstaking negotiations to succeed.”

“Just like in the first bidding round, they may choose to form consortia with foreign companies in the second round to reduce risks,” he added, asking not to be named.

Iraq last Tuesday made its first auction of major oil contracts since the US-led invasion. China’s three oil majors all took part in the bidding, but only CNPC, which teamed up with BP, won a contract to develop the Rumaila oilfield.

The CNPC-BP contract was also the only one to be awarded in the first auction, as there were some differences between the Iraqi government and oil majors over payment terms.

After the first auction, Iraq said it would move up the date for the second round of tenders, which is reported to be at the end of this year.

“Domestic companies can never find bigger opportunities in other places than in Iraq, which has the third largest proved oil reserves in the world,” said Lin Boqiang, professor, Xiamen University.

“What can help them is that some Chinese companies have already had some experience working in the country,” he said.

Last year, CNPC signed a service agreement to help Iraqi partners develop the Al-Ahdab oilfield, 180 km southeast of Baghdad.

CNPC will “use advanced technologies” to increase the oilfield’s manufacturing capacity to 25,000 barrels per day within three years, and to 115,000 barrels per day within six years, the company has said.

(China Daily July 7, 2009)

China Merchants Bank opened its representative office in London yesterday as it made its first step to tap the European market.

“We are glad to pick London as our headquarters for the European market,” said Ma Weihua, president of the bank, in a statement yesterday. “London has advantages as a leading international financial hub and it is the best option for us to enter Europe.”

The sixth biggest bank in China is riding on rising trade and investment between the country and the United Kingdom. The bilateral trade surged 50 percent last year to about US$60 billion. China is the UK’s biggest Asian trade partner.

The bank opened its New York branch last year and became the first Chinese bank to receive a banking license in the United States since the adoption of the Foreign Bank Supervision Enhancement Act 1991.

Ma said the New York branch and the London office will help CMB to test the waters in the global banking market.

CMB had earlier acquired a small lender, Wing Lung Bank, in Hong Kong.

(Shanghai Daily July 17, 2009)

Workers would begin construction on China’s first 10 million-kw-level wind power station in mid-July in the far northwestern city of Jiuquan, Gansu Province, a local official said Sunday.

The would-be largest wind power station was designed to have an installed capacity of 5.16 million kw by the end of 2010, 12.71 million kw by the end of 2015 and 20 million kw by the end of 2020, said Wu Shengxue,deputy head of the Jiuquan Municipal Development and Reform Commission.

“The installed capacity will eventually reach 40 million kw,” he said. “Total costs on the project are predicted to exceed 120 billion yuan (17.6 billion U.S. dollars).”

“It will become another landmark project in China’s ‘Western Development’ strategy after the Qinghai-Tibet Railway and several West-to-East transmission projects of natural gas, petroleum and electricity,” he said.

As a support for the wind power station construction, local authorities would launch other projects to manufacture air blowers, turbine blades and other equipment, he said.

The government of the remote Gansu Province aims to build “Three Gorges on the Land” with its abundant resources of wind power, Wu said. Under its blueprint, the 2020 installed capacity could surpass the current capacity of 18.2 million kw enjoyed by the Three Gorges Dam, the world’s largest hydropower station by total capacity.

In Jiuquan, an area of about 10,000 square km could be developed for wind power generation with a capacity of at least 40 million kw, Wu said.

To date, six wind farms are in operation in the city with a total installed capacity of 660,000 kw, he said.

“By the end of this year, the installed capacity in the city is expected to exceed 1 million kw,” he added.

(Xinhua News Agency July 6, 2009)

The China Securities Regulatory Commission 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 was approved and Shanghai Chaori was denied, said a CSRC statement on its Website without giving reasons for the decisions.

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 (US$24.26 billion).

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.

(Shanghai Daily via Xinhua July 17, 2009)

The intense work pressure and the high performance targets seem to be slowly taking the sheen off the high-profile fund managing business in the country, especially at a time when the capital markets have slowly emerged from hibernation.

The deaths of two top fund managers recently from health complications have trained the spotlight on the health hazards associated with the profession.

Industry sources admitted that the huge workload and the pressure on achieving better financial results have increased the stress levels for fund managers and forced many of them to push themselves beyond their limits.

Yang Jun, 44, president of Everyoung Capital Management Company and a doyen of the private fund management industry, died of liver cancer on June 22. A couple of weeks later Sun Yanqun, 41, chief investment officer at JP Morgan Asset Management’s China fund venture, passed away from a digestive tract hemorrhage-induced shock.

Though no fingers are being pointed, industry insiders are of the view that the two fund managers paid the price for intense overwork over a prolonged period of time.

Though Sun had been suffering from stomach-related problems for some years, the extreme professional stress proved fatal, according to a long-time colleague at the fund venture between JP Morgan Asset Management and Shanghai International Trust.

“I usually work at least 60-70 hours a week and travel for work every half a month, which is quite common for fund managers,” said a leading Beijing-based fund manager.

“Unlike others, there is no weekend for me, as I have to keep myself abreast with market developments and take investment decisions that can maximize returns for the fund and investors,” he said.

Highlighting the long work hours, an investment officer with a Shenzhen-based fund said he often got research notes from analysts late in the night. This in turn ensured that he had to spend long hours way into the night to analyze the gist of the reports to plan investment decisions.