Business briefs..
Mind You own Business
Business briefs June 15th
Real estate prices in Shanghai are continuing to trend down, defying
gravity in a puzzling way in that they don't just plummet. There is a
vast amount of new residential stock coming onto the market and prices
in the first quarter were down by an average of 3.7 per cent compared
with the same period last year, according to an official city report.
Good news or bad, depending on whether you are landlord or tenant, but
another indication of the deflationary forces currently at work in
Shanghai.
The occupancy rate of hotels in Shanghai averaged 52.4 percent in the
first quarter of this year, with the average room rate down 15 percent
from the same period last year.
The sickly China B-share markets are looking somewhat better these days,
and one of the reasons is the increasingly strong signs that more
non-state enterprises will be given the chance to raise money through
this route. It's still not as attractive as an A-share listing of
course, if for no other reason than currency risk. If you, as a Chinese
company, float foreign currency B-shares, you are taking a risk that the
RMB is not going to be devalued. If it is, that's an added burden in
terms of repayments. A directive from the China Securities Regulatory
Commission (CSRC) said that: "Those companies that apply to offer B
shares can include state enterprises, collectives and other types of
firms." This includes, by implication, private companies, which is where
a large part of China's growth is going to come from over the next
decade.
More on private enterprise: the Shanghai Foreign Investment Commission
said the city had decided to open the private company sector and allow
foreign firms to do joint venture deals with them. Under a police
established in 1992, private companies with at least RMB500 thousand registered capital
and one million RMB annual turnover could cooperate with foreign
companies, but this resulted in only 400 ventures with foreign
investors. It didn't say how the rules will be relaxed, but local high
technology companies are particularly eager for foreign capital. For the
record, there were 94,705 private companies in Shanghai at the end of
last year, 36 percent more than a year previously. Registered capital of
the companies stood at 60.37 billion yuan.
It's been a long story, but the engines on the first MD-90 passenger jet
produced here under a U.S. JV arrangement have been attached at the
Shanghai Aircraft Factory. Full testing follows. The first aircraft is expected
to be delivered within a year.
The problem with the housing loan market in China has always been this:
if Mr Wang takes out a loan from the bank to buy an apartment and then
doesn't keep up the repayments, can the bank foreclose, throw him out of
the apartment and re-possess it? Answer: no, culturally unacceptable at
this point. So, why should banks loan money for housing? And now the
proof of this is in: it is reported that 20,000 home buyers in Shanghai
have fallen behind on their mortgage payments and the Shanghai branch of
the China Construction Bank is hiring special people to collect the
loans. Special, as in large and treatening, no doubt.
The two biggest markets for automobiles in China are, no prizes for
guessing, Beijing and Shanghai. But Beijing is way ahead in private
car sales due to lower prices, more room on roads and less parking
hassles. At the end of last year, there were 183,166 privately-owned
vehicles in Beijing against (it says here) only 8,760 in Shanghai.
Shanghai is introducing a stored-value travel card that can be used on
all forms of public transport in the city, along the lines of Hong
Kong's Octopus system. testing on the card begins at the end of this
year.
The Shanghai Library is going online in a big way. The digital library
can be found at http://www.digilib.sh.cn. Also worth checking out for a
nmore official view on developments: the web edition of Jiefang Daily
(http://www.jfdaily.com.cn) and in English at http://www.jfdaily.com.
Currency moves: from June 10, all foreign banks are banned from doing
inward remittances of renminbi All renminbi denominated accounts outside
China are also to be closed. This all rolls back a slight liberalisation
last year under which foreign banks could buy renminbi from offshore
Bank of China branches.
Bank rates: China bank rates were lowered by one percent on June 10, the
first rate shift of this year. That's one of things pushing more money
into the stock market. Headline on an official magazine in Shanghai this
week: "What China needs is a bull stock market". Quite right. But
sustainable, please.
Chinese car purchasers will be able to buy a new GM Buick with a
downpayment of just 80,000 RMB, or about 20 percent of the purchase
price. GM has already set up 24 sales service centers across the
country, and will have 50 by end-year.
Cola wars continued: Coke and Pepsi are the heavy-weights, but are about
to be joined by a third and serious domestic challenger - Future Cola,
produced by the wonderfully-named Wahaha Group in Hangzhou. Coke
produces and sells two million tons a year in the China market, Pepsi
about one million tons. Wahaha is planning to do one million tons as
well. No sign of Virgin Cola here yet.
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