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News and Updates

Chinalco Buys 12 Percent of Rio Tinto

The Aluminum Corporation of China (Chinalco) reports it has completed its acquisition of a 12 percent stake in London-listed Rio Tinto.

The US$14.05 billion deal, announced by the company through the London Stock Exchange on February 1, represents the largest overseas investment by a Chinese company.

“Our strategic investment in Rio Tinto is a result of our optimism about the prospects in the rapidly growing mining industry and also about the value of Rio Tinto and ability of its management to realize value for its shareholders,” said Lu Youqing, vice-general manager of Chinalco at a press conference in Beijing.

The acquisition was conducted by the wholly owned Singapore subsidiary of Chinalco in cooperation with US-based Alcoa.

The acquisition reflects Chinalco’s global strategy and will be beneficial to the joint development of Chinalco and the global mining conglomerates involved, Lu said. He asserted that the deal will make it possible better to meet the demand for mineral resources in the global market. 

Established in 1873, the Anglo-Australian Rio Tinto Is the world’s third largest mining company.

Chinalco, with assets of 200 billion yuan (US$28 billion), is the world’s second largest alumina producer.

London Stock Exchange Opens Beijing Representative Office

The London Stock Exchange (LSE) opened a representative office in Beijing on January 18 with the goal of attracting listings of rapidly growing Chinese companies.

The LSE is the gateway for Chinese companies wanting to get into the euro zone and the market is cost-effective, said Clara Furse, the LSE's chief executive officer.

Strict listing requirements would help Chinese companies improve their corporate governance and management, Furse added.

Chinese companies could seek partners in Europe and other regions of the world through the LSE, said Jiang Nan, representative of the LSE's Beijing office.

Seventeen Chinese companies raised US$1.9 billion through London listings in 2007. Sixty-eight Chinese firms in 20 sectors, including manufacturing, services, and clean technology, have listed on the bourse.

The LSE does not focus on any special sector. We have an open mind," said Furse. She added that several Chinese companies were preparing for LSE listings.

Two US rivals—the New York Stock Exchange (NYSE) and NASDAQ—opened Beijing offices in December 2007.

Stock exchanges in Japan, Singapore and the Republic of Korea have also gained regulatory approval to open China offices.

Fixed Phone Users Fall by 6.8 Million

China's two major fixed-line operators lost subscribers to mobile rivals who cut service fees and unveiled promotions for free incoming calls in 2007.

China Telecom, the nation's largest fixed-line operator, saw the number of fixed lines fall by 2.71 million in 2007. Its smaller rival China Netcom lost 4.11 million. 

China Telecom also blamed its reduction in service promotions to low-end customers for its loss of subscribers.

However, it's a different story for mobile operators as they reported huge subscriber growth during the same time.

China Mobile, the nation's largest mobile operator, saw subscribers increase by more than 68 million to 369 million in 2007. Meanwhile, its rival China Unicom added 18 million, lifting its total handset users to 160 million.

China Netcom Establishes Outpost in Tokyo

China Netcom Japan Operation Limited, a subsidiary company of China Netcom Corporation was established on January 21 in Tokyo.

The subsidiary, entirely owned by China Netcom, will engage in all-around cooperation with Japanese operators to promote the development of electronic communications and Internet services between China and Japan, according to an official with the company.

The establishment of the subsidiary, part of China Netcom's global strategy, is to assist the company's international plan in the long run and to set up an outpost for the company's operation in Japan, said Zhao Jidong, a senior vice-chairman with China Netcom.

The 2008 Beijing Olympics will boost demand for digital transmission and communication in Japan, and China Netcom's new subsidiary is aimed at keeping Japanese customers satisfied, Zhao said.

The Japanese subsidiary is China Netcom's fourth branch outside the Chinese mainland, following those in Hong Kong, the United States and Europe.

More Kinds of Financial Derivatives Coming

China is to launch a growth enterprise board, private equities and stock index futures in 2008, said a senior official on January 23.

Preparations for the growth enterprise board and stock index futures have been completed, and we are only waiting for the go-ahead," said Cheng Siwei, vice-chairman of the Standing Committee of the National People's Congress (NPC), China's top legislature.

Cheng told a forum on private equity in Beijing that Chinese policy-makers have reached a consensus on the necessity of launching the country's own private equities.

Private equities will help suck up the surplus liquidity in the market. They have a role to play in countering acquisition and merger bids from foreign investors, stimulating acquisitions and mergers among domestic enterprises and even helping such activities by Chinese firms in the international market, he said.

US$8 Billion Spent Luxuries in 2007

The Chinese people spent US$8 billion on luxury goods in 2007, accounting for 18 percent of the global market as China became the second largest luxury consumer market after Japan, according to a recent report of the World Luxury Association.

tems purchased mainly included jewellery, clothing, leather items and perfume. 

Statistics reveal that by 2010, about 250 million Chinese consumers will be able to afford luxury items and that projected sales revenues will reach 200 billion yuan (US$28 billion). China is expected to surpass Japan when it consumes 32 percent of the world’s luxury goods by 2015.

About 250 million yuan (US$35 million) worth of goods were sold during the first Top Essence Exhibition in Shanghai in 2005; the figure doubled with the 2006 event.

Second Civil Airport for Beijing Agreed: Location Undecided

A second civil airport for Beijing will likely be built either in southern Beijing’s Daxing County or in Gu’an County, Hebei Province, according to the primary plan recently submitted by the General Administration of Civil Aviation, but an exact location remains undecided.

The location of the new airport, to be decided by the State Development (SDRC) and Reform Commission, will be chosen based on three factors: economics, airspace requirements and the airport layouts of other international metropolises, according to Zhang Baoguo, deputy director of the SDRC.

To handle the mounting number of air travellers in an opening and booming China, the construction of the new airport will start no later than 2010. The airport is projected to have a capacity of 60 million travellers a year, the same as the Beijing Capital International Airport after its new Terminal 3 opens in 2008; however, it will not be completed in one single swoop; instead, it will be built in several segments, as needed.

BMW Sells 36 Percent More Locally Made Cars

BMW Brilliance Automotive Corporation, the German premium car maker's Chinese venture, said on January 26 that it sold 36 percent more locally made vehicles in 2007.

Total sales of the BMW 3 Series and 5 Series reached a record 30,600 units on the Chinese mainland, from 22,500 units a year earlier, according to figures released by the company.

The 2007 figure included sales of the stretch 5 Series—luxury model specially made for the country's rich people—which soared by 61 percent year-on-year to 17,647 units.

BMW Brilliance was established in 2003 by BMW and Brilliance China Automotive Holdings Limited, the country's eighth largest automotive manufacturer in 2007. The joint venture produces the 3 Series and 5 Series in Shenyang in Northeast China.