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Monetary Policies Stress Cautious Credit, Investment Growth

    The Monetary Policy Commission of the People's Bank of China (PBOC) stressed the importance of cautious credit and investment growth at a meeting on the countries macroeconomic situation.

A statement from the PBOC said the commission stands for a prudent monetary policy that tightens money supply "moderately" to keep the economy stable.

"The country's economic situation is positive overall but there are problems," said the statements, citing structural problems, the imbalance in international payments and the heavy and wasteful consumption of energy and resources that have accompanied fast growth.

Stephen Roach, an economist with Morgan Stanley, agreed that the Chinese economy was "in excellent shape" but the structure of the economy is unbalanced. 

Answering a question about inflation, Roach said he was worried more about asset inflation than consumer prices inflation.

Top Priority Given to Energy Statistics             

     China will give top priority to energy statistics in the economic census in 2008, a senior statistician said on July 2.

"To help meet the country's targets for energy efficiency and emissions reductions, the State Council will strengthen energy statistics collection. The economic census for next year will centre on this segment, and the overall situation of energy consumption will be fully investigated," said Geng Qin, deputy director of the Department of Industry and Transport Statistics, National Bureau of Statistics.

China plans to trim per-unit-GDP energy consumption by 20 percent by 2010.

Corporate Bonds set to Take off in China

New regulations being drafted are expected to boost China's corporate

bond market.

The proposed regulation is seen as a landmark move towards the take-off of corporate bonds to allow more Chinese companies access to bond issuance in a bid to boost direct financing of

domestic companies.

According to the draft, the China Securities Regulatory Commission (CSRC) will supervise corporate bonds, while the National Development and Reform Commission will oversee corporate bonds issued by State-owned enterprises.

The CSRC will be able to approve issuance of bonds with maturities of longer than a year by Chinese listed companies. The draft says companies listed overseas as well as on the Shanghai and Shenzhen exchanges will be able to issue such bonds.

Analysts said the commission will encourage companies with net assets of no less than 1 billion yuan (US$130 million) to issue the bonds without bank guarantees.

The rule also said the corporate bonds would be registered with the China Securities Depository and Clearing Company Limited. to open the trading of corporate bonds at stock exchanges, instead of the inter-bank market.

New Mainland–HK Economic Agreement Signed

China's central government and the government of the Hong Kong Special Administrative Region (HKSAR) signed Supplement IV to the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) on June 29. The Supplement gives Hong Kong more access to the mainland market.

Under Supplement IV to the CEPA, the mainland will open 11 new service sectors to Hong Kong, including sports, environment and public utilities. The mainland has already opened 27 areas to Hong Kong, and the agreement promised more access to these areas such as banking, securities, tourism and insurance.

All the service liberalization measures will come into force on January 1, 2008. The mainland will work out and promulgate the necessary implementation rules and regulations as appropriate.

Under CEPA, signed in 2003, the mainland has agreed to give all products of Hong Kong origin tariff free treatment if they meet the CEPA rules of origin.

Strategic Oil Reserves Ready in a Year

The last two of the first four strategic oil reserve bases in China are expected to start operations within a year, according to two State-owned oil giants.

An official from China Petroleum & Chemical Corporation, known as the SINOPEC Group, said it would start to fill crude oil into a base at Huangdao of East China's Shandong Province by the end of 2007.

A source from China National Petroleum Corporation (CNPC), parent of Hong Kong- and New York-listed PetroChina, said a base under construction in the northeastern port city of Dalian will be filled with crude oil as early as the first half of 2008.

The bases will each be able to store more than three million tons of crude oil.

The first two bases, both located in East China's Zhejiang Province, are already operational with a capacity of 5 million tons each. They are operated by the SINOPEC Group and SINOCHEM, another Chinese energy supplier.

Polluters Must Pay More

    China plans to significantly increase charges on the release of pollutants and effluents, said Bi Jingquan, vice-minister of the National Development and Reform Commission.

The discharge cost for sewerage will be at least double the current level of 0.67 yuan (US$0.09) per ton, while the charge on sulfur dioxide emissions may also be doubled from the current 0.63 yuan (US$0.08) per ton, Bi told a forum held by the new China Center for Public Finance, at Peking University.

"There is a desperate need for the country to instill the principle that those creating pollution must pay for the costs," he said.

In its 2006–10 development plan, China will cut energy consumption per unit of gross domestic product by 20 percent. It will also cut the release of major pollutants by 10 percent.

Foreign Tour Operators Get Better Access

　 Foreign tour agencies will get better access to the China market, the country's tourism regulators said.

    Foreign tour agencies will be treated on par with domestic counterparts when it comes to registered capital, a China National Tourism Administration (CNTA) official said on July 5.

Currently, they are required to have a minimum of 2.5 million yuan (US$328,000) in registered capital, compared to 300,000 yuan for domestic tours and 1.5 million yuan (US$197,000) for outbound and inbound tours for Chinese counterparts.

The CNTA has also allowed foreign-funded travel agencies to set up subsidiaries in China starting July 1, four months ahead of the November 11 deadline set by the World Trade Organization (WTO ).

However, details of the two moves are yet to be released.

In May, there were 29 solely funded or joint-venture foreign tour operators, according to the CNTA.

Accounting Firm to Add 55 New Partners

PricewaterhouseCoopers (PwC), the world's largest accounting firm, announced it will admit 55 new partners in China to support growth that has surged by 30 percent annually over the past five years.

The 40 new partners from the mainland and 15 from Hong Kong will account for 10 percent of the company's new partners around the globe and will bring the total number in China to nearly 330.

"China is critical for PwC, not only because it's the fastest-growing market around the world but, more importantly, because of the role China is playing in capital markets," the company's Global CEO Samuel A. DiPiazza said during a press conference in Shanghai. 

PwC has invested US$200 million in China and has 12 offices across the nation. About 40 percent of the H-share companies from the mainland listed on the Hong Kong Stock Exchange are its clients.

Frank Lyn, PwC's China markets leader, said revenue growth has come mostly from auditing Chinese SOEs and initial public offerings (IPOs). Last year the accounting firm helped more than 20 companies with a total IPO value of $23 billion get  listed in Shanghai or Hong Kong.

Legislature Approves 1.55 Trillion Yuan of Treasury Bonds to Buy Forex

China's legislature adopted on June 29 a motion that authorizes the Ministry of Finance to issue 1.55 trillion yuan (US$201.5 billion) of special treasury bonds for purchasing foreign exchange.

At the 28th Session of the current Standing Committee of the National People's Congress, the legislature also approved raising the annual ceiling on treasury bond issuance for 2007 to 5.34 trillion yuan (US$694.2 billion).

The special treasury bonds will be used to purchase US$200 billion entrusted to the nation's new foreign exchange investment company as its operating capital. They will be issued in the form of negotiable book-entry T-bonds with a term of more than ten years. The coupon rate will be decided by the market, according to the motion.

At the same time, a "central finance foreign exchange management fund" will be established to examine the revenue and expenditure of the special treasury bonds and foreign exchange assets. China's foreign exchange reserves reached US$1.202 trillion, up US$135.7 billion from the end of 2006.

Boeing Signs US$500 Million in Contracts with Chinese Suppliers

US aviation giant Boeing announced agreements with Chinese suppliers for the production of commercial aircraft parts and components on June 29.

The contracts are valued at US$500 million and include the 747-8 inboard wing flaps with Xi'an Aircraft Industry (Group) Company Limited (XAC), and ailerons and spoilers with Chengdu Aircraft Industrial (Group) Company Limited (CAC), both affiliated with the China Aviation Industry Corporation I (AVIC I).

Also signed were contracts for composite parts with Hafei Aviation Industry Company Limited and composite panels for the vertical fin to be built by BHA Aero Composites Company Limited.

"These contracts demonstrate Boeing's commitment to continued expansion of industrial cooperation with China. China's outstanding technological capabilities and resources make these suppliers ideal partners for the Boeing 787 and the 747-8," said Carolyn Corvi, Boeing Commercial Airplanes vice-president and general manager of Airplane Programs.

Boeing's industrial cooperation with China began in the mid-1970s. There are now 4,200 Boeing aircraft flying worldwide with major parts built and assembled by Chinese suppliers. Since the 1980s, Boeing has purchased more than US$1 billion worth of aviation hardware from China.

Earnings of Overseas Banks Up

    Overseas banks earned a combined 3.05 billion yuan (US$402 million) in the first five months of 2007, a whopping 43-percent surge from a year earlier, from the People's Bank of China's statistics department said in a research report published in the China Securities Journal on July 4.

Overseas banks' combined profit from local-currency services more than doubled to 1.3 billion yuan in the first five months, the report said.

Overseas lenders' profit growth accelerated from an average 14 percent during the first five years since China became a member of the World Trade Organization in December 2001. China fully opened its banking sector to overseas banks in December 2006 as part of its WTO commitments.

China allowed 12 overseas banks to be locally incorporated at the end of May 2007. More are seeking access to China's US$2 trillion in household savings.