Livre des conneries chinoises

正太 – zheng\ tai\ – shotacon

 

 

Livre des conneries chinoises

打飞机 – da/ fei_ ji_ – masturbate

傻蛋 – sha) dan\ – idiot

他妈的 – ta ma de_ – damn it

阴茎 – yin_ jing_ – penis

阴道 – yin_ dao\ – vagina

阴道口 – yin_ dao\ kou – vulva

龟头 - gui_ tou/ - glans
撸过 - lu_ guo\ - masturbate

闷骚 - men_ sao_ - shutup/depressed, trouble/smell of urine/male animal

Libre des conneries chinoises

脑残- nao) can/ – shithead

便便 – bian_ bian_ – poopoo

屁 – pi\ – fart, nonsense

 

Libre des conneries chinoises

操蛋 – cao\ dan\ – fuck it

靠 – kao\ – crap

拉屎 la_ shi) – to shit

去死 – go to hell

方便 – go to the toilet

见鬼 – jian\ gui) – to hell with it

酱油男 – jiang\ you/ nan/ – soy sauce boy

Libre des conneries chinoises

傻屄 – sha) bi_ -stupid cunt

粗枝 – cu_ zhi_ – rough branch

大爷 – da\ ye/ – arrogant idler

莫屌 – mo\ diao) – penis/cool

蛋

June 29 2010

State Council – Local govts are ordered to retard use of financing platforms. Govt fin platforms that rely on govt fiscal rev to repay debt will be banned from borrowing further or guaranteeing payments. Drafting plans w National Energy Bureau and State Oceanic Admin on offshore pipelines.

MOF – Removing domestic steel subsidies.

Central Huijin – Sells $11.8B bonds next mo to fund Eximbank and Export & Credit Ins cap injections.

National Audit Office – warns about local govt debt.

Indonesia – Will allocate 75% of Donggi-Senoro LNG for exports, allowing Mitsubishi and PT Medco Energi Internasional. Senoro and Matindok fields, 2M ton LNG plant by 2014. Korea Gas, Kyushu Electric Power. Pertamina is involved.

NDRC – Will regulated CBM projs. Local govts can’t approve them.

HSBC – Approves HK$25B in SME loans guaranteed by govt.

ABC – Cheng Yu-tong (NWD) subscribes for HK$300M, China Life Ins, Chinese Estates Joseph Lau Luen-hung, (Henderson Land) Lee Shau-kee, Rabobank.

China Merchants – Won’t consider more equity fin before 2012.

Ping An, Shenzhen DB – Will merge its banking unit w SDB to get around insurer rule forbidding owning more than 1 lender. Newbridge Capital (TPG) will sell its shares in SDB.

China Glass – Reducing dep on construction sales by adding high-value products. Quality products make up 16% rev.

Baosteel – Will probably have to go w Big 3 ore prices up 20-40% to $147 per ton. Many mills pay $156 for 62% fines.

Angang Steel, Gindalbie, CDB – $1.2B loan proj for $2B Karara iron ore proj. Aquila Resources got a preliminary deal to fund $3.45B West Pilbara proj.

China Railway Minerals, RUSAL – 12.5% share stake sold.

RUSAL – Share offering to Li Ka-shing.

Agile Prop – Sales cut in half in May due to prop curbs. Selling at 7K yuan sm.

Opinion – Henry Cheng Kar-shun (New World): Govt subsidies needed for low-I homebuyers. Home Ownership Scheme flats.

May 21, 2010

Indicators – Substantial improvement in global IPO market, Asia playing lead role. East Asia GDP to grow 8.7% in 2010 (World Bank). Global fin markets remain strained, trade weak. Fiscal stimulus withdrawal, further structural reforms needed to promote long-term growth. SOE profits up 75% in Q1. Raw mats pressure, slowing govt inv, rising production costs in H2. Rising rice prices. Big 4 banks isue 1T yuan in Q1; but priv lending grew much faster. Trade deficit on vehicles and commodities. 97% of M&A was into developed resource industries in Aussie and Canada; Aussie 90%. Oil firm strategy of giving foreign SOEs and Western oil firms of participating in downstream in return for upstream rts. Intranet banking system shut down to rein in lending, capping lending through admin orders, OBS lending is up greatly, increase in credit-based fin products. Proj construction and bank credit issuance are cyclical and hard to scale back. Shift from window regulation monetary policy. Lending spree means inflation, excess capacity, rent-seeking, corruption. Land sale revs up 63% yoy to 1.59T yuan in 2009, res dev prices growing faster than land for biz and industrial dev. Govt inv only rose 9% in Q1, decline in growth rate for urban FAI. Central and local govts are slowing down expansion of construction projs. NDRC has limited pace of govt spending and inv. 21 provinces have set regional GDP targets of above 10%. Chen Changhua predicts 4-5T yuan loans issued to continue construction projs launched by stimulus. 180B yuan raised in local govt bond sales. Urban construction bond volume is expected to decline, more focus on flexible short- and medium-term state bonds. 13% of power and heat production was private, 9.6% finance, 7.8% communications and software, 6.6% enviro and infra man. Inflation 2.8% in Apr, prop price up 12.8%, lending was $113B and BTE.

State Council – Suspends 3rd mortgages. Residents who work for more than a yr in a city may get bank mortgage loans. Property taxes may be next. Old facilities to be shut down by 2012 ye; power, concrete, steel, coal, coking coal, leather, textile, paper. Small polluting furnaces will be phased out by 2010 ye. Steady in yuan ex rate mechanism.

SASAC – Most derivatives contracts still intact. Has concentrated on avoiding speculation outside of core biz.

SAFE – $428B outstanding external debt holdings; $266B external debts, $161B trade credit.

PBoC – Raises RRR for 3rd time. Removes 300B yuan from the system, pushes back IR increase until Jun. Forex reserves jumped $22.5B in Mar. due to hot money. Manu and mat costs jumped. Hoping for 22% reduction in new loans.

Central Huijin – Prepares to issue 50B yuan bonds in May, proceeds to capitalize Eximbank and Sinosure. Refused to buy CCB shares, turned over bank share divs to MOF. Rates would be lower than comm banks but higher than policy banks. Xie Ping has been its only president and now will work at CIC; voice for reform, capital injections, fin restructuring, public listing, corp gov, outspoken critic who failed to receive promotions.

CSRC – Criticism over stock inv restriction on fund company relatives. Not allowed to invest before reporting to fund company, not allowed to open trading accts except at certain firms. “rat accts” for relatives or friends. Includes futs exchanges, banks, ins firms, stock exchanges. Employees must report intentions of relatives to buy/sell stocks or derivatives, which has to be approved.

CBRC – Redefines 2nd home definition regardless of bank borrowing or paying off previous loans. 2nd home will be determined by housing registration office, not credit record. No direct loan issues to prop devs who flip land, didn’t sell apartments upon construction, or use bank loans for land purchase for other purchases. Hainan prices up 64%, Beijing 12.3%, Guangzhou 20.3%. Min downpayment of 50-60%. Provincial and municipal govts can limit apartment purchases to people. State Council is trying to increase supply for low-rent/cost apartments, seize idle land, 70% of total supply to be allocated to low-cost apartments by local govts. 11.5% CAR over next 3yrs, need to deduct loan growth from total cap. 30B yuan could replenish reserves, categorized as supp capital? 45% limit on div distribution of profits. Liu Mingkang wants banks to prepare provisions for risky loans, reassess projs which received loans last year and report to CBRC by June.

NDRC – Will raise gas and diesel prices by 4-4.5% to reflect higher oil prices.

MOHURD – Housing and Urban-Rural Development. Will tighten rules on housing presale and investigate hoarding. Devs can’t take deps for sales of uncompleted homes w/o proper approval, must disclose prices of all available homes to the public within 10d after receiving pre-sale approval. Will investigate high cancellation rates and abnormal prices. Local govts must also comply.

Shanghai – Tightens bidding process regulations for RE, will factore more the bidder’s ops and plans, must pay 50% dep within 10d of the contract. No extensions or installments will be allowed.

Costa Rica – Signs free trade agreement with Beijing.

UN CDM – Rejected 14 Chinese wind power applications for funding. Cut off CDM supp for 10 Chinese wind power projs before Copenhagen. Accusations for manipulations of power prices to qualify for CDM funding.

ABC – Is rural fin services div, halting reform? Policy vs comm ints. Rural areas have low margins, serves 800M farmers. ABC wanted the div to become set of agri supp institutions, which would have delinated policy and commercial entities. 9 underwriters: GS, MS, DB, Macquarie for H-shares and UBS fin advisor for H-shares. CIC, CITIC, Galaxy Secs, Guotai Junan A-shares. 800M yuan NPAs would be moved to an OBS account under MOF and Central Juijin.

ICBC – completes 97% stake in ACL Thai bank.

BoC – Wants to sell 40B convertibles, raise 20% of market cap in HK.

SPDB – Earnings up 5.6$ on higher loans and assets. 231B outstanding loans, CAR 10.34% through a private placement. China Mobile stake will raise CAR to 12% by 2012.

GDB – sells 15B yuan shares to replenish capital. C, China Life Ins, State Grid, and CITIC own 20% stakes. Hopes to pursue IPO to fin rapid expansion.

China Merchants – Earnings down 14%, boosted 73% in mortgage loans. NPLs down to 9.36B yuan, NPL ratio down to .83%.

China Merchants Securities – op rev 76%.

ChinaAMC, CITIC – largest fund manager. CITIC wants to sell stakes of 10% while retaining 49%. Want to avoid it becoming a JV with foreign firms. CSRC prefers domestic JVs only and done before Jul. Sale price would convert to 12B yuan. CSRC suspended new production applications in Jan, Apr 1 expanded to include new domestic MFs. CSRC is trying to enforce the rule that states no single stakeholder can control more than 49% of a domestic fund.

PTR, Sinopec, Daimler – Admits that Daimler offered bribes to former employee. Daimler bribed officials of at least 22 foreign govts btw 1998 to 2008. Petrochina vows to investigate.

CISA – Steel traders have been told to halt imports of low quality ore with less than 60% iron content. But low quality ore accts for most iron ore imports, and will push up ore prices. 100-200M tons imports will be affected. 70M ton reserve (20d).

RIO – 20 Chinese firms have been implicated in bribery cases. Hebei Jingye Steel, Tangshan Guofeng Steel, Shandong Rizhao Steel, Tianjin Rockchech Steel, Hebei Puyang Steel, Sinochem International, CNBM International.

Sino Iron, CITIC – 25yr mining rts to 2B tons of magnetite, option for 4B more at Capte Preston. CITIC owns it completely and has built ore dressing plant, pellet plant, slurry pipeline, port facilities, power station, desalination plant. $5.4B total, $1.2B overbudget, production delays, long approval process, higher labor costs, Aussie man team. Hua Dongyi kicked out the Aussies and brought in subordinates from CITIC Construction. Aussie govt was hostile to bringing in Chinese laborers from China Metallurgy Group, though caved in. Enviro regs. Cost of extracting is 40% above hematite higher quality costs by BHP and RIO. Refused to specify annual production costs at Sino Iron.

CNPC – Venezuela deal is worth 2.9B barrels, estimated reserve 8.7B brl, 20M tons pa. $1B to access the reserves.

CEC – Pilot to encourage major power consumers to buy electricity directly from plants face mounting difficulties from lack of market pricing system. State power grid operators would leave the power buying biz but charge for use of a grid. Transmission costs remain murky and the two SOEs refuse to disclose their actual costs.

Huaneng, Datang, Huadian, Guodian, China Power Inv – submit joint request for higher prices to SERC. Took heavy losses in Feb? Face high debt ratios.

Alibaba – Invests 5B yuan in Alipay (largest online payment net) to upgrade security, product dev and expand the client base.

Tencent – Makes final bid of $120M for ICQ against Digital Sky Technologies.

The9 – Record heavy losses on the end of its WoW ops, expansion costs, faces losses into the distant future. Blizzard has switched to Netease.

Opinion – Xiao Gang: 3 major gov crises (man dictatorship, fraud, embezzlement). Reforms at supervisory mechanisms, corp ethics, minority shareholder protection. Chinese need to be wary of market pressures of board of dirs. State supp keeps market happy about state banks. Too much short-termism. Shareholding model v family enterprise model (results connected to responsibilities). Indep directors are fail. Chen Changhua (Credit Suisse): specs don’t think govt has the minerals, 3-4yr risk, 50-100 times annual I to buy a home. 30% of property buyers are short-term specs. 20% of local govt rev will come from land-sales, which will not help action. Andy Xie: inflation could hit double digits faster than expected. Need to raise rates first, then move yuan. Yuan first would inflate the property bubble and inflation. Worse, a small appreciation would increase inflation and hot money while doing little to ease foreign pressure. Imported consumption goods aren’t big enough to affect CPI. Prop bubble bigger than US bubble rel to GDP? Chinese imports are mainly raw mats, equ, and components; appreciation won’t stop inflation. Appreciation wouldn’t be supported if it caused a hot money exit or dampened appreciation expectations. Up 5pp rates by 2011? Wouldn’t burst bubble (lol)? Need to keep RE int rates from declining further. Trade surplus due to distortions in domestic pricing rather than cheap yuan. Prop bubble suppresses C, prices for middle class goods and services are high and C is higher than expected, middle classes taxes are too high (45% marginal income tax! 17% VAT),

Education – Private Equity: has developed financing, regulation, inv, exiting. CCB International in Sept 09 raised 2.6B yuan through a HC industry inv fund. Tianjin Shipping Industry Fund and CITIC Mianyang PE Fund have also done recent capital raisings. NSSF has been authorized to engage in PE inv. High net worth individuals are accessing through wealth man channels. Local govts are creating guidance funds to attract PE fund registrations. Success however remains dep on governing policy, complicated supervision and control. NDRC approval can mean SOE financing access. Banks and ins funds are limited by regulation from inv in PE. Funds with more than 500M yuan of fin need to keep detailed record with local govts (who are responsible for regulatory oversight); thus most funds are below 100M yuan. Self-regulating? Big on ChiNext IPO scene. Offshore PE can used to establish domestic partnership enterprises. Foreign capital and domestic cap differentiation problem.

April 4, 2010 Notes

Indicators: New Loans drop to 600B yuan in Feb. Zhong Qinghou (Hangzhou Wahaha), Liu Yonghang (Hope Group), Zhang Jindong (Sunning Group), BYD (Wang Chuanfu), Li Jiacheng, Li Zhaoji. Consumer retail sales increase by 17.9% YTD. Exports up 45.7% yoy. Chinese SOE profits up 121% yoy. Fiscal rev up 32.9% yoy. FDI will hit $90B in 2010 according to MinComm. Govt wants more telecom, pharma and software inv. IATA announces Feb passenger traffic up 9.5%, 26.5% freight, should reach prerecession traffic in 2-3mo. Bulk of expansion due to invs restocking, which will slow in H2, causing slower growth dep on consumer and world trade growth. PMI above 50 for 13th straight mo at 55.1. OECD CPI rose 1.9% (ann) in Feb, slower than Jan growth. EZ inflation BTE at 1.5%, highest in 15mo, energy price increases. NDRC predicts 2-2.5% CPI in Q1, slight dip in Mar due to lower food prices and warmer weather. Pork prices fell on abundant supply and weak demand. Worries about rice prices over SW drought.  Chinese fiscal deficit soared to 3% GDP. CFLP warns of raw mat and energy inflation. US bond holdings by SAFE in decline according to US Treasury. 80% of securities market comes from retail invs. 16 SOEs hold 85% of RE asets, 86% of sales rev, 94% of net I. Steel prices rise on rising cost of iron ore, 150 yuan/ton jumps, speculation. RE devs moving to 2nd, 3rd, and 4th tier cities after SOEs were smacked down. SASAC is trying to restrict supply of land available for dev. Devs have prop reserves in lesser tiers which include regional hubs and provincial capitals. 2nd and 3rd tier reserves take up 81% of total reserves by 10 largest RE firms. 3rd tiers are trying to attract inv and drive up housing. Shijiazhuang City Comprehensive Proj in Hebei by China Metallurgical, 50B yuan. Devs are able to beat satelite checks by bribing MLR insiders.

NPC – Govt plans to continue moderate fiscal deficit, increase social spending by 8.8%. Next 5-6yrs?

CSRC – Futs coming in mid-Apr. Margin trials begin in Mar. Picks Guosen Sec, CITIC Sec, Everbright Sec, Haitong, Guangfa, Guotai Junan Sec. Qualifications include net cap of 5B yuan within past 6mo, good accting disclosure, inadequate tech support. Margin on Mar 31, futs on apr 16.

SASAC – Orders industrial SOEs to leave property market. 200 hotels may be affected and require As transfers of 100B yuan. Govt has been using economic value-added tests (subtract cap costs from after-tax op perofits). Approves State Grid’s request to buy two upstream manus of electrical equ (Xuji, Pinggao). Vertical integration? Fin needed to continue spinoffs?

SARFT, State Council, MIIT – Plans to integrate media networks by 2015.

MinFin – Vice Min warns that China is not ready to withdraw proactive fiscal policy.

MinComm – Chen Deming expects full export recovery in next 2-3yrs, but will continue tax rebates, export credit, and ins programs. Argues trade surplus can’t be used to appreciate yuan. Supports annual pricing system for iron ore. Vice Minister says yuan appreciation will not solve US trade deficit. Predicts trade deficit in Mar. “No corr btw appreciation and reduction of another’s trade deficit”. Believes exports may return to pre-financial crisis in 2-3yrs due to high U and low saving in DM, exports fell 16% in 2009 and domestic C rose 16.9%.

MIIT – Wants a long-term pricing system for iron ore.

NDRC – High inflation unlikely this year due to excess supply and increase food output. 12th Five-Year Plan prep includes urbanization, I redis, shifting to domestic C, low-carbon goals. Last plan missed services growth targets. Public service and pop resource goals were easily accomplished. R&D, hukou barriers, personal I, distribution remain problems. Yang Weimin proposes studying current plan’s shortcomings and establishing specific approaches and policies. Environmental goals remain nebulous and probably unattainable due to weak enforcement. Massive interest groups remain a barrier to reforms. 3rd party needed?

SAFE, PBoC – Yi Gang (vice-gov, head of SAFE) considers investing more forex in gold. 1054 tons, 5th. Produces 300 tons, consumes 400 tons annually.

PBoC – Dep gov Su Ning supports offshore market in HK and Shanghai. Monetary Policy Committee expanded by 2 academics. More influence in ex rate as ordered by State Council?

Yuan – Belarus agrees to use yuan in bilateral trade.

Shanghai – Ministry of Railways approves maglev line btw Shanghai and Hangzhou. Faces speed tradeoff btw noise and energy efficiency.

Chiang Mai – Activated on Mar 25, $120B pool.

IMF – Strauss-Kahn warns that EU will be left behind in 10-20yrs by US and Asia.

APPA – African Petroleum Producers Association. Hopes to increase oil production of members.

InterAmerican Dev Bank – Expect 80% of annual loans for next 3yrs to go to renewable projs as LatAm energy demand will rise 50% over next 20yrs. $1.5B?

France – Budget deficit at record high of 7.5% GDP, economy contract in 09, but Q409 showed signs of recovery. Predicts weak growth in H110.

Brazil – 2010 growth forecast to 5.7, up .5.

Hungary – Cuts rates by 25 to 5.50%.

ICBC – tenders 30.6% offer to Thai bank ACL, currently held by Thai MinFin. April 16 expiration. ICBC has a waiver from the ownership limit. ACL is a small lender. 129B yuan I, up 16%. Will issue 25B yuan convertibles to replenish capital and help CAR move above 12%.

CITIC – Will issue debt this year to rebuild capital. Last mo, shareholders agreed to 25B 15yr subs issue. New lending will be no higher yoy. CITIC has a low subs/total K level among stock-banks.

BoC – Lowers mortgage discount by half for 1st time buyers. Hopes to shore up capital base with 40B yuan convertibles. Applies for H-share plan, doesn’t plan on A-share issue. May need to retain earnings to supp capital, adjust risk assets by reducing risky business (requires full deduction from cap on bal sheets). Holds many foreign assets and hurt by weaker $. 27% 09 earnings yoy. Halved salaries in 09 due to new govt rules and performance-appraisal system based on corr btw salaries and profits and NPL ratios.

CCB – 15% 09 I, assets up 27%, outstanding loans reached 4.82T yuan, up 27%. NPLs fell 14% to 72B yuan, provision rate at 175%.

BankComm – Posts 09 profit 5.59%. 12% CAR, core CAR down 1.39pp to 8.15%. Total As up 23% to 3.31T yuan.

MS – Sells CICC stake for JV with China Fortune Sec. Faces stringent net cap reqs, compliance reqs which hinder biz dev, limited financing due to coordination issues btw Chinese and foreign stakeholders.

GS – refuses to relax compliance reqs.

China Merchants – Raise 17B yuan via rts issue to ease bal sheet pressure and weak CAR since buying Wing Lung Bank. ROE and net I have suffered due to spread tightening. A-shares and H-shares. Wing Lung would fill gaps in its network and satisfy a need for cross-border fin ops (against HSBC, BoC, Hang Seng).

Bank of Nanjing – 09 I grows 6%, hurt by low int margins and risky assets (which require a deduction of profits). NPLs grew to 8.19B yuan (wtf), up 1.55B yuan yoy. Total As reached 149B yuan, up 62%.

Hua Xia Bank, DB – Increases stake in Hua Xia.

China Life – Searching for architects after revised Ins Law in Oct 2009 allows insurers to inv in prop.

New China Life – signs MOU with Zurich Ins for business expansion and tech supp in Chinese markets.

Ping An, Shenzhen DB – Controlling stake deal delayed by regulators, already 4mo late. SDB is planning on a private placement to exploit an expected approval. Ping An wishes to become a fin holding firm. Ping an would acquire the stake through a private placement and a buyout of TPG’s stake. Regors worried about private placement plan and integration issues.

Citic Sec – 23% 09 I, lost market share. Brokerage fees up 46%, op revs up 24%, total As up 51% to 206B yuan, net capital dropped 10% due to cap injections into subs.

Everbright Sec – 106.7% 2009 I, op rev reached 5.59B yuan, mostly from growing brokerage biz and assets.

First Capital Sec, JPM – Securities JV in 2010 planned, 1B yuan capital, First Capital holds 2/3 stake.

China Mobile – Hopes to offer iPad and a 3G iPhone. Wireless music ops head missing, fled corruption charges.

China Mobile, SPDB – Takes a 20% stake in the bank. Bank will issue 2.2B shares at 18 yuan; 39.8B yuan raise which will help CAR. Mobile banking ROFL. Firm wants to expand mobile TV, handset rading material, Internet services. Hopes to forge partnerships with dozens of non-telecom firms willing to accept its tech standards. TD-CMMB mobile TV service JV with China Broadcasting Corp. Alliances w 14 manufacturers for TD-CMMB handsets. Multiplatform dev strategy in conj wih govt directive to merge Chinese media networks. 1st phase is linking broadcast and telecom networks. Controlling standards on multi-party, cooperative dev. Will take over the entire industry chain. Wants to expand agency fee model for wireless, allow business models for mobile phone to take diff path, expand “app store”. Iron out terminal adapters, content enrichment. 12580 platform to collect voice, Internet, WAP, SMS, MMS, location-based services. Mobile comm->mobile info. Fighting against Internet search profit model and voice search. Mobile Internet biz (ring tone music, videos, games, banking-payment services, electronic reading). The 30 local subs have been told to choose 3 segments to focus on for annual dev and assessment. 5 will be in charge of specific segment ops; e-reading by Zhejiang, mobile banking-payment by Hunan, gaming by Guangdong, mobile TV by Shanghai, mobile music by Sichuan. 500M yuan inv’d in mobile reading. Most provincial subs have stopped promoting SIM-card payment systems, while freezing online payment services.

China Unicom – Earnings down 84% in 09, rev down by 3.48%, GSM subscribers up 8.6%, increase to 335 cities, 3G subscribers 2.742M. Good growth in transfering from local phone to fixed broadband. Heavy startup costs for 3G biz. Hopes to add 10M new 3G subscribers in 10, ARPU above 100 yuan, slow decline of fixed lines, maintain steady growth of 2G.

SNDA – Will buyback $300M shares, 09 I up 47%, op earnings up 47%.

Taobao.com – cracks down on counterfeits.

Tencent – I up 85% yoy, rev 73.9% on diversity of businesses. Expects Internet value-added and online gaming to surge this year.

CISA – Refuses to surrender! Industry profit margin in 09 was 2.2%. Steel invs are up 32% yoy in Feb. Wants to coordinated with China Chamber of Commerce of metals, Minerals and Chemicals (CCCMC) to strengthen supervision of licensed iron ore traders and ban resale of imported iron ore; violations would result in revocation of import licneses. 112 firms have been designated as qualified importers. Reselling lower price iron ore on the spot market for huge profits. 10M tons illegally trade on the market every yr.

Jiangsu Shagang – BHP-Value talks pointless as steelmakers will have to accept the higher terms negotiated by Japan. Vale has 97% of global clients agreeing to quarterly price contracts.

Baosteel – Third largest global steel producer, Hebei I&S 2nd. Arcelor Mittal retains #1. Wuhan I&S 5th, Anshan I&S 6th, Sha Gang 7th, Pohang 4th. 09 earnings down 9.95%, rev 25.97%. Trying not to raise steel prices in face of rising ore costs.

Chalco, RIO – Agree to non-binding dev of Guinea iron ore mine, Chalco will get 47% share for 1.35B.

RIO – Trial to start in Shanghai at No. 1 Intermediate People’s Court. Uses Henry Kissinger (ugh) as an advisor to mend ties with China.

CNOOC – Established JV and 50% stake with Bridas Energy (Argentina) for $3.1B. Raises proven reserves by 318M bar and avg daily production by 46K bar. CNOOC only completed 1 international purchase in 09, been slower than PetroChina and Sinopec. Intracompany grumbling over slow pace. Worried about global protectionism, hopes to avoid large purchase but use cooperation and partnerships.

Sinopec – Buys Angolan deepwater asset stake 55% for $2.46. Includes buying a $779M loan. Block adds 102M bar to proven reserves, daily crude production will increase by 72.5Kbd, up 8.8%. Costs $7bar to produce. 09 earnings doubled. Entering E&P?

CNPC, Shell – Signs Sichuan NG JV deal for 30yr production-sharing. 4000 skm in Jinqiu block, will need 2yr of prospecting.

China Railways Group – Earns Indo coal contract worth $4.8B in South Sumatra w Bhakta Hill Pan Pacific Railway.

TM – Pays compensation for recalls.

MRK – Boosts Chinese inv by 300M yuan.

Opinion – Caixin Editors: Gradual yuan appreciation best for stable growth. Each pt of appreciation would hurt labor-intensive industries net profit by 1pp (avg profit margin 3-5pp). Models to evaluate a one-time rise oversimplify effects. A one-time may also be implemented badly, causing the market to expect an additional jump. Will be necessary to relax regulations to expedite dev of non-trade industries, improve U assistance, increase funding for training and re-employment. Ha Jiming (CIC): Not Japan. One-off appreciation would hurt economy, especially w/o rise in IRs to stem hot money into RE. Need ex rate, land, and household registration reforms to help urbanization. Lou Gang (MS China): Policy makers need to keep IR above CPI as Feb CPI goes above the 1yr dep rate of 2.25%. Zhu Baoliang (State Information Center): Believes IR hike unlikely, CPI will peak in Q2, but decline in H2. State Council still prefers moderately loose monetary policy. Private inv needs to be encouraged to maintain steady growth, external demand isn’t coming on like a tidal wave anytime soon. Private firms have decreased inv as expectations for returns declined (like in excess industrial capacity), and shifted to prop. Equal amts of FAs lie in RE and restricted industries; value of industrial output in restricted industries exceeds RE. Private inv would have more channels to flow through if restrictions were removed. Private firms employ 70% of urban residents, 85% of rural. 85% of new jobs in urban areas. Restricted industries face low production efficiency, decreasing competition. SMEs have been forced to inv in low-tech heavily polluting and energy-consuming projs. Value-added ROC of private firms is 50% higher than SOEs, 33% higher than firms in which the state holds a controlling stake, 24% higher in firms with a state stake. Industrial SMEs grew 18.7% in 09, SOEs 6.9%. Open up telecom, fin, petrochem, HC, edu, and others with state-owned monopolies; inv in these industries tends to be too low. Political reforms, reducing admin controls, maintaining supervisory discipline, enforcing laws. Andy Xie: Wages are rising due to labor shortage, rural schools are closing because they have no students. MNCs are depending on Chinese C for profits, which helps Chinese bargaining power. International confrontation won’t help, though china can weather US protectionism shocks.

Education – Wang Yi: Former banking regulator, vice gov of CDB. On trial for bribery (11.9M yuan). Li Tao (HK) gave Wang 5.38M yuan for help in obtaining highway construction loans for Li. Also received bribes to facilitate borrowing for a businessman. Movie star paid to accompany Wang for dept store opening, mortgage for news anchor were influenced? Pre-trial Detention System: Two issues, how and why defendants are detained or released before trial, confinement conds for detained suspects. US presumes innocence, will be tried before neutral judge, can be held for only 24hrs; 1st hearing, the judge reviews, notifies defendant of charges and rts, makes a decision about pretrial release (w possible conds). Detention is harsh and deprives an individual of liberty. False convictions are shunned (lol). Can use regular reporting by suspect or a “pretrial services agency”, custodian, restrictions on travel, injunctions against seeing witnesses or crime scene, monitoring tech, bail bond. Only 14% of released commit serious offenses. “clear and convincing evidence”. Detention is done at a facility not directly controlled by police, jail is run by a special agency, though not pleasant and often overcrowded. Lawyers have access to defendants, interrogations are sub to strict standards, rt to remain silent, speedy trial, habeas corpus against unlawful arrest or detention. Trade Surplus & FDI % of FX Reserves: Has declined from 77% in 2005 to 63% in 2009. IPO Market: Market doesn’t decide wehther shares should be issued or the prices. Futures Reform Restrictions: 500K yuan cap threshold, knowledge of stock index futs, low volume, settlement is not handled by comm banks, but banks not allowed to establish subs in futs or secs. 5 banks (ICBC, ABC, BoC, CCB, BankComm) will handle escrow ops. International Board restrictions: coordination btw Shanghai and HK cap markets, cross-border ETFs, China Dep Receipts, share issues by foreign firms, heavy forex restrictions means yuan needs more internationalization, int arb by foreign firms, heavy admin controls which lead to high PE ratios and heavy profits by firms, issuers, sec firms, and guarantors. Stern Hu: Court adjudicated comm espionage charges behind closed doors. Appeal by early Apr? Private steelmakers bribed the defendants? Du Shuanghua (Rizhao I&S) gave money to Wang for inving in HK stock market; ct refused to call Du to testify but admitted a sorta confession. Du is missing. Shangdong Laiwu Steel head (part of CISA) was also implicated. Some money went to intermediaries who handle ore imports for steelmakers? Bribery and graft from the Australian-Chinese iron ore/steel boom. 3rd parties helped expedite new relationship btw suppliers and steel firms, and pocketed a portion of the profit. Margin btw long-term contract prices and spot. Hu graduated from Peking U before joining CITIC and Hamersley Iron. Born in China. Li Zeyuan: bought Shenzhen Air in 05 with 2.7B borrowed yuan; was previously imprisoned 3 times for economic crimes. Jailed in Nov for using Shenzhen Air as a platform for fin fraud. Changed name in 04. Made friends with the President of Shenzhen Air, businessman Liu Wenbiao, chairman of New China Life Ins Guan Guoliang. Relied on Li Kun to run the firm, had contracts with Modern Group and Bright Oceans Group, blurry firms which helped fin the deal through his Shenzhen Huirun Inv. Bought from Guangdong Dev bank. Made friend with local and provincial govt leaders. Investigators discovered illegal lending. In 2005, he had failed to pay the 2nd installment of his takeover bid. Beat losing bid by 900M yuan (lol). Air China has injected 682M yuan and taken a controlling stake. Private invrs got hosed down to 24%. City of Shenzhen injected 348M yuan to boost its stake. Air China’s revenge for getting one-upped. Li Kun tried to rapidly expand As from 4.4B yuan to 24B, fleet from 27 -> 134 aircraft, 4K workers to 14K. Wanted to link 10 hubs in 6yrs, become a world-class carrier by 2015. Signed a deal with Ryanair and NW Leasing: Ryanair sells planes to NW, NW leases them to Shenzhen Airlines. But the planes weren’t delivered to Shenzhen, Li transferred 1B yuan to NW Leasing and sent the money abroad, even hoped to cancel out Shenzhen debt by arranging a NW BK. Air China eventually found out and called in the auditors who declared it insolvent. Phony leasing contracts were used to obtain bank loans which paid for Li’s initial borrowings. Inflated profits? Local govts provided free land, subsidies; Li hoped to turn the land into RE dev. RE rarely entered the books, but went to Shenzhen RE which was founded in 06. Profitable firm before takeover. Debt ratio went from 87% to 96% in 2yrs. Asked Shenzhen govt for guaranteed loans and subsidies to cover funding gaps. Tried to hit up Guangdong Province for subsidies in 08 after the Earthquake, loan rate discounts. Attempted private fin, foreign bonds, private placements.

November Caijing

Indicators – 65% of urban residents believe home prices were too high Q3, up 2.8pp qoq. 41% expect a rise in Q4, 16.2pp higher qoq. Probable home buyers jumped 1.3pp to 17%. Aug interbank bond issues down 34.1% mom as proportion of long bonds increased despite expectations that financing costs will increase later to inflation. Industrial profit slide slows due to improved perf since June. Rare Earth exports down 73.6% yoy YTD as China discourages outflow of strategic resources. Japan, EU, and US are major importers. PMI fell by 0.1pp to 55. Overseas orders and factory output have rebounded. Most new orders came from domestic demand. Face cost pressure from higher corn, iron, oil, and steel prices. Forex reserves hit $2.27T. Survey says Sept exports may have fallen 20.5% yoy, compared to a 23.4% fall in Aug. Outstanding foreign debt down 3.76% to $360B. 53% is short-term, the rest medium-long-term. Big Four contributed only 21.4% of new Sept loans, down 70% from H1. Most of the new lending came from postal banks, agri coops, policy banks; only 3% from jt-stock banks. Medium-sized banks have had lending restricted by tighter reg controls. Banks are selling loans as syndicateds. New loans were higher than expected by 10%. YTD cargo throughput up 106%. Iron ore inventories estimated at 100M tons. Exports fell 15.2% yoy, much better than expected; imports down 3.5%. Exports and imports grew by double digits mom. Iron ore imports were up 35.7%, prices down by 45.5%. Crude imports up 8.2% yoy, price down 48% yoy. Christmas orders and inventory restocking is fueling export recovery and will last through 4th quarter. CICC expects 2010 exports to grow 10% yoy. EU is China’s biggest trade partner YTD, US 2nd, Japan 3rd. Steel prices may rebound as price cutting by producers is probably over. Futures prices may take off. However domestic stocks have hit a new high of 11.9M tons as prime steel output soared in Aug to 52M tons. HK investors worried more aobut fin health than sheer size of land banks; 8 RE firms are trying to go public in HK this year. Power consumption in Sept rose 10% yoy, fastest pace of growth since Jun 2008. Power gen rose as well to record 344B kWh. Housing sales up YTD. RE inv rose 17.7% yoy. Prop sales rose 44.8% yoy YTD. Crude steel output up 28.7%, pig iron 27.7%, steel products 25.1%. Coal output up 12.7%, cement 25.1%, power output by 9.5%, Q3 GDP up 9.1%. New lending grew 278% mom by fin firms from 5.6% total lending in Aug to 17% (lol). YTD Urban Res disposable I up 9.3%yoy. 9mo retail sales up 15.1%yoy, Sept sales up by 15.5%. UFAI up 33.3%. Industrial output up 13.9%. Urban res dispoable income up 9.3%. PE Q3 fundraising down 87% as contributors became more selective after the GFC. Shanghai LCD imports grew 58% to 30M units in Sept as local manus see recovery in demand. Benchmark coal prices rose on winter C expectations; DPPC analyst suggests coal could rise higher as higher transport costs from western province dev. YTD 3G inv at 96.1B yuan. Petrochemical industry’s FAI up 11.5% yoy YTD. FAI for oil exploration and refining fell 14%. Petrochem output up 3.3% yoy in Sept, ending 9mo of decline. Nuclear power capacity could hit 70M KW by 2020. Q4 fiscal rev projected to rise in Q4 to 6.6T yuan, 8% yoy. Oct new lending by Big 4 slight up over Sept. 136B yuan.

RE – Shanghai office rents continue to drop as multinationals defer expansion plans.

Commodities – Grain output to increase slightly yoy, dispelling drought fears. 123M tons this autumn.

Premier – No, really, we’re not going to ignore western China. Shaanxi, Gansu, Qinghai, Ningxia Hui, Xinjiang Uyghur, Tibet, Sichuan, Yunnan, Guizhou, Chongqing muni, Guangxi.

Yuan Currency – 6B yuan bonds issued in HK, 1st sale of sovereigns outside the mainland. 2yrs (2.25), 3yrs (2.7), 5yrs (3.3%); available to a mix of retail and institutionals. Will provide a benchmark IR for overseas yuan bond issues by other institutions and price benchmark for yuan financial products, as the offshore yuan market develops. Shanghai plans yuan-Taiwan $ convertibility trial program.

ETFs – Funds develop overseas ETFs.

Trade – CISA complains that its steel pipe exports are shipped above cost. EU Court of Justice overrules dumping finding on Chinese ironing board manufacturer. Prepares trade investigation into unfair car subsidies by the US govt. Trade Rep and Vice Premier pledges to stand against protectionism. US pledged concessions on pork and wind power and China plans to lift the swine flu ban on pork while allowing wind-power equ for govt to not be made in China. China also pledged to fight Internet piracy and the US will stop accepting trade protection cases; both agreed to stop abusing mediation remedies such as filing WTO complaints. Chinese steelmakers urge India to withdraw steel import tariffs. Tariffs are said to be temporary. US ITC anti-dumping and countervailing investigation into seamless steel pipes.

Shenzhen SE – Will curb speculation on stock debuts. 30 min suspension if price rises/falls by 20% from opening price. 2nd suspension if by 50%. Best SSE 100 index funds Efunds SSE 100 EFT, Rongton SSE 100 Index Fund. Will curb intraday speculation on GEM.

SSE – International board rules won’t be released until after National Day holidays. IPO boom may be winding down due to poor MCC performance. Limits use of expected funds from larger-than-expected IPOs on GEM. Extra proceeds must go to core business, not wealth man products, stocks, or derivatives. International board will list 1-2 foreign firms next year. Will a redchip list next year? In 15yrs, 100 companies will probably list. Part of Shanghai’s conversion into a trading and financial center. Technicals issue include accting standard, market pricing, requirement to inv in china. Legal securities and corp framework may need to be restructured for foreign firms. Needs to avoid complex, tedious review and approval process.

SFE, DCE, ZCE – Domestic futures investors exited long positions at SFE, Dalian Commodity Ex, and Zhengzhou Commodity Ex.

CFFE – Chinese Fin Futures Ex is ready to launch stock index futures, 3yrs after formation.

HKSE – China Menswear fell, due to too-high initial price expectations. Peak Sport fell on its debut due to bearish market expectations.

NCE – Beijing Chaoyang district plans to establish an national coal exchange to trade 600-800M tons annually on spot and futures deals.

GEM – CIC warns that IPOs and openings on GEM will exceed reasonable ranges. 1st 10 firms to list will raise 6.9B yuan from IPOs, exceeding previous estimates. Avg PE ratio is 54, prices were set at upper limit of proposed ranges. Nanfang Ventilator, Bestway Marine Engineering Design, Ultrapower Software, Chongqing Lummy Pharma, Anhui Anke Biotech, Lepu Medical Tech (Beijing). 431 funds interested in GEM investments. 1st 10 firms to launch IPOs froze 784B yuan following their subscriptions. 128x subscribed, 434x is the avg. (ouch) 188 firms to list on GEM. First debut on Oct 30.

QFII – Restrictions on transfer of inv quotas are likely to discourage short-term inv in A-share market. Quotas have been raised $200M, but may not be transferred or sold. Foreign investors may shift to A-share index products or apply for a license (long arduous process).

QDII – Quotas will be expanded even further after E Fund and China Merchants were given $1B and $500M quotas.

SSF – PE inv units of SOE securities firms may be exempt from transferring 10% of holdings in newly listed firms to SSF.

MinFin – Approves proposal to exempt govt VC firms from requiring the transfer of 10% equity to national Social Security Fund.

MinComm – China is a victim of rising protectionism, Yu Jianhua (dir of Dept of Int Trade and Economic Affairs). Trade remedy cases have increased 120% by G20 countries. Expects trade surplus to drop in 2009 to $180-190B, down $100B yoy.

MinIndusIT – Regulations to encourage M&A among cement industry to curb excess capacity. 2.8B capacity, 1B excess. 3500 cement firms in China.

CBRC – Basic fin services will be available in 3yrs to all towns. 2945 towns w/o bank outlets, 708 with no fin services at all. Mostly in western China. Comm banks will be required to deduct from Tier 2 capital their crossholdings of bank subordinated acquired since July 1. Liu Mingkang warns about city comm banks overexpanding.

CIRC – Fines CIGNA, CMC Life for misleading sales tactics 100K yuan (oh, wow).

CSRC – Central govt should regulate PE and VC, which are currently subject to local govt rules. 2 securities firms’ sponsors had their licenses revoked for lying about career experience, third suspended for irregularities. Will monitor GEM trading to stop overspeculation and share price manipulation. Will not control IPO price setting. Will allow exchanges to determine timing of IPOs, suspensions and delistings (w/o authorization req by CSRC). Foreigners may apply for senior exec positions in securities firms.

NDRC – Raises min govt purchasing prices for wheat and high-quality rice in 2010. Corn output has hit record yields, keeping a lid on prices. Long-term grain supply strains from thin margins in planting and natural disasters. Grain brokers seem to be taking most of the benefits from higher prices. Govt involvement may hamper development of the market and add to local govt fin burden. Should shift from increasing output to growth in circulation and reducing production costs through agri infra investment. Bans industrial energy specil discounts on power pricing to retail or to industrial users. Will announce scheme for retail electricity price hikes in midNov and adjust on-grid prices. This will rebalance ints of power firms and transmission firms. On-grid power tariffs will be cut for power generators in coastal regions but raise them for the inland provinces.
On-grid tariffs are the prices that power distributors pay to power plants. State Grid and China Southern are only authroized buyers of power plant output and only sellers to supply end-users.

NEA – May cancel talks btw coal miners and power generators, and may let the market figure out how to pass power costs to customers.

National Audit Office – Investigates irregularities at loca govt inv firms linked to stimulus package.

WTO – Will allow China to screen media imports for inappropriate content as long as they don’t discriminate against US products, according to Beijing trade office. WTO has ruled otherwise, though China is appealing. Goods or distributed s services classification legal matter.

IMF – Fin Min urges speeding up quota reform. Create an auto adjustment mechanism to reflect evolving weight of each member.

Guernsey – Opens office in Shanghai, signs MoU on personnel exchange and business flows btw Guernsey and Shanghai.

Kazakhstan – Will import 6-7M tons of crude from Kazakhstan through the pipeline this year. Expansions of the pipeline will increase length and capacity.

Gazprom – Its NG pipeline in Central Asia will reach 40-50B cubic meters a yr by 2013.

Beijing – Housing supply down due to sales pickup and slowdown in housing starts. Housing stock will be cleared in five mo.

Guangzhou Port – Issues 1.3B in 1yrs to increase working cap and optimize debt structure.

Guangzhou Baiyun Airport – Cargo throughput grew 64%, passenger vol 13% yoy. In uptrend

Guangzhou – New home sale prices and volume hit 2007 marks. Fell during October holidays 80% yoy by floor area.

Guangzhou Prov Expressway Dev – 800M yuan bonds open for SSE trading. Will be used to supp working capital.

Shanghai Airport Authority – Ties its HK counterpart to manage Hongqiao Airport and increase retail income at the site. Smaller of the two main airports.

Wuhu Port Storage – May seek to list after buying rail transport and logistics As from Huainan Mining Industry.

PBoC – Yi Gang (Deputy Gov) “strength of lending isn’t a concern and will stabilize”. Unlikely to pull back on stimulus. New lending and money supply jumped in Aug. More moderately loose and boosting of domestic demand. BoC VP Zhu Min appted vice gov, may be groomed for IMF position, groomed in BoC and World Bank. 100B yuan auction of 1yrs flat, largest since July 9 resumption. Plans to set up national market for loan transfers to boost liquidity of credit assets. 3yrs to establish, will strengthen regulation of the loan transfer business, allow for institutions to diversify credit risk. Banks will not likely use it much initially as most I is still derived from net int I. Transaction costs remain high due to lack of unified rating criteria, different loan standards, mandatory non-disclosure agreements with clients which increases transaction costs. Launches CP trading system.

CIC – Purchases 11% of GDRs of KazMunaiGas Exploration Production for $939M. 2nd largest oil company in Kazakhstan. Chairman warns of small global asset price bubble. Invests $700M in a Mongolian mine ($500M convertible), $500M in expanding a Canadian coal mining firm in Mongolia. Invests $500M in SouthGobi convertibles, subs of Canadian Ivanhoe Mines. The 8% convertibles can be converted into 22% of SouthGobi; proceeds will fund construction of a railway btw China and the Ovoot Tolgoi coal mine in Mongolia. CIC may nominate 1 dir to 8-board.

Central Huijin – Boosts holdings in 3 major banks, may be trying to stabilize market ahead of ChiNext opening. Zhao Haiying named Deputy Gen Man by CIC. Previously head of strategic research and asset allocation.

Banking – Major banks agree with managed funds on sales commissions for distributing PE products. Confirms recent registration of PE products with securities regulators. Floating compensation is replaced with a fee structure. Securities firms will benefit from GEM investments as brokerage, i-banking, and direct inv divs benefit.

CDB – Buys Stockfly Sec. Loans $2B to Yunnan govt to help provincial firms secure overseas deals in SE Asia.

BoC – Upgrades IT systems in Hebei after 5yrs of delay.

CCB – Launches medical PE fund. Wants culture, aviation, and enviro funds as well. Will continue to lend to infrasturcture sector next year. Expects to hit 2009 earnings target, and will use profits to raise provisioning levels. Current NPL coverage is at 161%.

ABC – Moves its private banking, commercial bills, and CC divisions to Shanghai by 2012.

ICBC – Will spend 370M yuan in buying ACL Bank, a Thai lender. Expanding into SE Asia. May buy COSCO’s 20% stake in ICBC-CS JV fund. Standard Bank (20% stake) may buy 33% stake in Russian private inv bank Troika Dialog and create a trading platform across emarks. Opens first European retail banking outlet in London (Chinatown). Offers retail banking and overseas remittance; no mortgage or CC ops.

Bank of Ningbo – Issues 2.5B yuan subordinateds with mats up to 10yrs, to supplement tier 2 capital. CAR is falling to 10.8% this year.

CITIC Guoan Info – Unit of CITIC. Will not reach 1.7B yuan target from its warrants, due to share price slump.

Gaohua Securities – Wins As man license. Strategic partner with GS.

Guoyuan Sec, Hongyuan Sec, Northeast Sec – significant profit growth in Q3. 600-11000%. Growth from strong sales in securities brokerage ops and rising inv returns.

Guoyuan Sec – will issue 500M shares to raise 10B yuan (underwritten by Ping An, Galaxy). Proceeds to boost underwriting operations, improve brokerage network, fund securities purchases, build infra.

Western Sec – Mellon waiting for final JV approval from CBRC and CSRC; Mellon will hold 49% stake in the JV. Mellon hold a substantial share of the currency markets.

HSBC – Rolls out personal unsecured loans for farmers and sel-employed in rural China. Liu Che Ning (formerly MS) named head of global banking in HK, will build client coverage and advisory biz in China.

Ping An – Holds lead on china Pacific after gaining leader status in July in prop premium I. China Life dominates life ins, PICC prop.

PICC – Opens as jt-stock entity after restructuring. 4th largest insurer by As. May list next year.

China Pacific Ins – Life ins premium growth will rise in 2009 as restructuring takes effect.

China Re – SOE. 10B yuan swing from yoy due to inv gains and cost controls. Hopes to make underwriting profitable by 2010.

Sino Life Ins, CDB Leasing, China Life, Mingsheng Fin Leasing – each bid several hundred million yuan for Shenzhen commercial sites.

Petrochina – New Huizhou, Guangdong, and Qinzhou refineries should ease shortgages of oil products in central and southern China. Refining capacity will rise by 110M tons per annum.

CNPC – Plans to invest 20B yuan to build an oil products reserve and logistics facility in Changzhou, Jiangsu. Includes a 1000km pipeline and a chemical material production base. Will likely adopt new NG pricing regime that will use weighted prices for imported and domestic gas. Prices at urban gas distribution centers would rise, ex-factory prices would rise also. Will allow for more NG imports and diversification of energy sources. Currently, consumers pay a capped ex-factory price and a fixed pipeline transmission cost, along with some fees.

CNPC, Gazprom – Signs gas export and refinery and retail distribution network agreement.

CNPC, KazMunaiGaz – Signs jt dev of Urikhtau NG field. Reserves of 40B cubic meters. Also finalized construction agreement over section II of phase II of the pipeline.

Sinopec – Withdraws from Eni consortium which won dev rts to Iraq’s Zubair. Eni, Occidental, and Kogas will invest $10B to boost output. DISREGARD THAT, still part of 2nd round of oilfield bidding despite difficulties over Addax deal. Addax had deals with the Kurds whom the Iraqis regard as illegitimate.

Nobel Oil – Russian oil firm plans to backdoor list in HK, stake owned by CIC. Kaisun Energy (coal mining and coke processing) has signed a MoU to buy out Nobel Holdings which controls Nobel Oil Group’s assets. CIC will own 45%, Oriental Patron Fin 5%, Russians the remainder.

Yanzhou Coal, Felix – Submits 3rd version of acquisition plan.

Yunnan Copper – Galaxy suggests rise in copper prices might help the firm’s profitability.

Zijin Mining – Fuijian mining conglomerate. Plans to allocate $1B to acquire overseas gold and copper mines in 2010.

Rare Earths – Chian suspends issuing prospecting licenses for rare earth, tungsten, antimony.

Sinogold – Merger with Eldorado Gold approved by Aussie Foreign Inv Review board. Eldorado will own 75%, Sino Gold the remainder.

Fortescue – Loan talks with the miner suspended over disagreements about risk settlement. Missed Sept 30 deadline over loans talks, but will continue to pursue talks.

Cazaly – Seeks A$100M from Chinese steelmakers to develop iron ore project.

Minmetals – Plans to acquire stake in Hunan Nonferrous Metals. State Council approves merger with Changsha Research Institute of Mining & Metallurgy and Luzhong Mining Industry Group.

Wuhan I&S – Works with Aussie Dept Def to settle mining inv dispute with military over Western Plains investment.

Hebei I&S – Under capacity. An excess of iron ore supply in 2010 will happen as domestic steel output is restrained by fewer bank lons and declining steel demand. Steel inventories are approaching late 2008 level.

Baosteel – Parent of Baoshan I&S is operating at 85% capacity.

CISA – Will continue to press for unified iron ore prices regardless of source, quality, and ore grade.

Wuliangye – Share trading suspended due to failure to disclose losses on securities inv and overstated revenues.

Silver Base – Largest Wuliangye distributor. Denies it is linked to Wuliangye investigation or engaged in fictitious export transaction and smuggling.

Sinograin – SOE. Recently bought Sanhe Rice to expand in NE China as it tries to expand and become the biggest supplier in the country. Private players are being crushed. Sanhe will receive inv and marketing support, and try to become #1 rice processor in Beijing and Tianjin markets. Govt hopes to use Sinograin as a major grain reserve and control prices through product control. Sinograin also hopes to establish 6 trans-province logistics routes throughout the countries for 400M yuan inv. In 2007, NDRC released a plan to raise logistics organization levels and build trans-province routes for distributing grain. Grain processing was seen as a way to integrate the firm and overcome difficulties with sales. Sinograin has had to buy grain through open auctions, but volumes and prices fluctuated volatilely. Company already had a strong presence in processing white rice, flour, corn, vegetable oil, etc. In Feb, it inv 1.3B yuan in Sinograin Zhenjiang Grain and Oil Processing, Storage, and Logistics, which is a govt-backed project. Sinograin Northern Logistics was registered in June. By Aug, construction for oil processing facilities and R&D had begun. Vertical integration is the final goal. Competition has taken a hit: Yudeshun Rice Industry is a large rice processor, which faces lack of cap, inadequate storage facilities, and weak transports. It can’t compete with Sinograin’s ADB loans and developed rail transports. Private firms believe that Sinograin should stick to grain buying, storage, management, and policy-related ops. But Sinograin expansion allows govt to expand its control beyond buying and selling unprocessed grain to handle the market, and compete against foreigners like the Wilmar Group (Singapore). Should reserves be reduced and private enterprise be given more room to develop?

Gome – Buys back 1.3B yuan in convertibles. 3.27B remain.

Times Ltd, Lotte – HK retailer. Lotte Group bids for 72.3% stake over Wumart’s bid.

China Telecom – Smallest of the mobile operators. All new subscribers will receive free long-distance calls. Will delay for 1mo the introduction of nationwide caller-pay scheme for existing CDMA users due to slow progress of work.

China Unicom – Sells 3G iPhones in Oct. Prices set higher than expected.

ZTE – 2nd largest telecom equ maker. Signs 5yr contract with Unitech Wireless to build and maintain GSM networks in India.

General Tech Holding – State Council approves merger with Xinxing Corp.

NEC, SVA – Will stop its LCD line JV with SVA due to cash flow problems.

BOE – Considers building a 2nd 8G thin-film transistor LCD line to consolidate its position as a market leader. Faces Japanese, Korean, and Taiwanese competition fast expanding their mainland ops and partnering with domestic rivals. Will also be building 4.5G and 6G LCD lines. Sharp has allied with Electronic Tech Group, Electronics Panda Group, and Nanjing to build an 8G line in Nanjing. LG Display has allied with Guangzhou to build its 8G line. Samsung and Chi Mei have shown int in bring production facilities and technology to China due to low manu costs, preferential lending rates, and a huge potential market.

Xinjiang Goldwind Science and Tech – Hopes to become top five wind power equ-maker in 3yrs. Will list in HK for $1B. Concentrates R&D on offshore wind turbines, hopes to produce by 2012.

Hisense Kelon – Believes regulators will approve of white goods assets restructuring with its shareholder Qingdao Hisense AC. Both will merge As and man with CSRC approval.

MCC – Largest engineering and construction firm in China. Construction is concentrated in steel, property dev, mining, equ manu. Has raised 1.62T yuan this year from Shanghai and HK IPOs. Underwriters promoted it as an engineering services provider with strength in tech, integrating its prin divs and extending its industrial chain. Proceeds will go to resources project acquisitions overseas. Faces industry overcapacity.

Zhangjiang Hi-Tech Park Dev – Increases inv in wholly-owned subsidiary Haocheng VC by 48M yuan to help Haocheng buy a 0.4% stake in Shandong Buchang Pharma. Supporting its core business of deving industrial parks by investing in tech firms. Shenzhen China Euro Cap will be obliged to repurchase the stake if Buchang does not list by Dec 31, 2013 under a buyback provision. Buchang is integrating pharma assets from its parent Buchang Grp.

Gemdale – Pays 2.44B yuan for Shenzhen sites, largest transaction by area in Shenzhen this year.

Vanke, COFCO – buy suburban Beijing site for 3B yuan. Fangshan District.

Vanke – Sept sales up 27% yoy, and yearly sales will exceed 2008 sales total. Q3 I doubles yoy due to rising prop prices and sales.

Evergrande, Excellence, Fantasia Holding, Minfa Group, Xiamen Yuzhou – May reduce IPOs due to weak demand, fears of overvalued assets, high IPO prices.

China Merchants Prop – Q3 I grew 170-200% yoy thanks to forward-delivery property sales.

Beijing Urban Construction Inv & Dev – buys res plot in Fangshan Beijing for 1.5B yuan, 60% above asking price.

Runxing Weiye RE, Chongsha RE – bid 1.5B yuan, 181% above floor price for Tongzhou Beijing site.

Huayi Brothers – approved for GEM listing of 620M yuan. Actors will get shares and proceeds will fund film and TV drama productions.

Shanghai Media Group – Completes restructuring into Shanghai Radio & TV. First to emerge from media industry restructuring towards financial independence.

Education – Rural Credit Co-ops: Running loan programs at full capacity, 745B yuan in H1 to borrowers such as govt firms, securities inv platforms. CARs aren’t meeting regs (4.3% vs 8% reg min). Most local govt inv platforms have invested loans into infra projects w/o giving guarantees or repayment schedules. 710 credit untions have negative CARs and wrote 138B yuan in loans. Leveraged risk abounds, considerable operating risk. Loan loss provision ratios are expected to climb from 30% H1 to 70% 2010. 500B yuan bad assets currently on RCFI books. Many locl govts meddle in rural credit union affairs. Hebei Provincial Coop Assoc raised 39B yuan from 134 county-level unions and invested it in govt inv platforms; CBRC quickly issued a risk advisory to its credit issuers and ordered an immediate halt to fundraising. Rural credit unions have gone far beyond comm banks or rural coop banks; banks undergo stricter standards. Rural credit unions plan cap replenishment by tapping retained earnings and reinvesting in local firm invs. Most RCFIs don’t have satisfactory cap replenishment plans to match their credit explosion. CBRC worried about NPLs hurting RCFI ability to meet targets. Supposedly in H1, the RCFIs reduced NPLs and NPL ratios, while improving provision coverage ratio. ROA and asset I was stable. Poorly managed RCFIs have written loans at an incredible speed as comm banks started withdrawing credit from industries disfavored by the govt for high energy C and pollution. RCFIs drifted from agri, farmers, and rural areas to meet this demand. RE lending in the East has risen 50%, RCFI lending has risen 100%. Many RCFI loans also went into county projects, which are considered financially shaky. Projects can’t be halted as they might be abandoned and spread damage among provincial RCFIs. Many projects also have high debt ratios. Local govts may have trouble repaying loans due to falling land tax rev.

Opinion – Hu Shuli (Caijing): IMF needs to become global lender of last resort, change governing structure, not manage countries forex reserves. Developeds should transfer 5% of voting power to developings. US should concede veto power. China should adjust economic structure, reform currency, and improve communication w the developeds.  Guo Shuqing (CCB): Urges more outward direct inv in total overseas inv, raises limits from 6-7% to 20-40%. Yi Gang (PBoC): IMF should improve monitoring mechanisms of international cap markets to ensure stable ex rates. Wang Sicheng (NDRC): Curbing expansion of polysilicon production capacity may causes shortgages by 2012. Hua Ercheng (CCB): New loans will total 9.4T-10.4T yuan this year. H2 issuance will be down by 50% from 1st half, and will mostly go to construction projects. Many firms increased deposits as the Big 4 accounts. Andy Xie (Rosetta Stone): Total debt for financials in 2009 was $16.5T, 2008 $16.6T in Q2. Govt forced reduction in leverage which came from increasing equity base and government capital injections. Financials reported profit gains in H1 2009 despite global contraction. This was from trading income due to the rising markets. Trading gains are a form of I redistribution from the few to the masses who are tricked into being the last fool. Fin supervision has not changed globally and is actually worse with the suspension of M2M and the token gesture of regulating banker salaries. Need to make leverage transparent, so as to reveal bubbles quickly. Complex accounting rules and varying treatment of different institutions make this difficult. Basel II sets 8% capital as the standard for leverage, which allows 12x lev. OBS treatment can be used to amplify this. Industrial finance, hedge funds, mutual funds, PE firms, etc are even less regulated, and often become banks when purchasing securitizations and lending in the CP and wholesale markets. MMF buck-breaking created a demand for liquidity as their model collapsed and required govt to bail them out. Leverage in the economy causes asset prices to rise; shadow banking system was how it occured and rising collateral values allowed it to expand and lend more. Need principle-based, not just rule-based, regulatory agencies to take effective action. CFPA is being produced to regulate new fin products sold to consumers, in order to slow down future bubbles. US govt has failed to set a new example. Policymakers have blown opportunity to build a better fin system. Negative wealth effect has increased US savings. Increased savings could hit 10% in 2010 and have the trade deficit in 2010 after already being halved in 2009. Bullish on $. Stocks, commodities, and property values have skyrocked despite a synchronous global recession. OECD will stage a weak recovery, stimulus can’t cause realignment to occur faster. Bubble can last due to a large multipler effect in an economic boom that boosts asset returns. Tech bubbles can be extended by cutting costs and boosting profits, property bubble stimulates demand for consumption and boosts corp earnings, benefitting fin institutions, retailers, construction firms, and mat suppliers. Current bubble will only keep fin system from collapsing, won’t lead to substantial demand creation. Serial bubble making only creates a larger economic crisis later; Asian contagion began the current string. Malcolm Ridell (RiddellTseng): Stimulus, loosening restrictions on home purchases, land sales and dev, bank ordered lending to RE firms, permitted ins firms to invest in RE, etc. have driven up home sales and devs are buying land to replenish land banks. Before foreigners bought billions of dollar worth of properties, using little equity and much credit. Govt quashed speculation and dubious practices, and foreign inv became difficult. But foreign investors created offshore firms with complex legal and fin structures to own properties. Investors could avoid Chinese taxes and capital repatriation problems, and lev up through offshore debt. Those who didn’t get out in time own unwanted assets, own stakes in devs that didn’t go public, or own the offshore stakes which have no market while their firms debt begins to mature. Foreign investors may return as credit loosens, govt loosens restrictions on foreign inv and streamlines the inv process. They are directly investing though they face domestic competition, partnering with Chinese devs who either have little cash or equity or who are cash-rich and hostile to partners, purchase the shares in the offshore companies, refinancing offshore companies before their debt comes due. Chinese investors are investing overseas in foreign RE as well. Many millionaires want to buy homes in the US and residential brokers are going to China to showcase their properties. Govt is encouraging Chinese firms to establish offshore enterprises and to invest or buy overseas firms. Lin Yifu (World Bank): Advises China to transfer labor-intensive industries to Africa and build relationships that may lay the foundation for industrial upgrading. Ex rate not the main reason behind the trade imbalance, yuan may appreciate over long-term and not as fast as trading partners would like. Rise now would lead to declines in exports, rise in U and overcapacity, causing a deflationary spiral. Worried about asset bubbles, suggests monitoring fund flows and project approvals. Pettis: Exports and imports data was better than expected, though some October activity may have been pushed into Sept due to National Day. Commodities imports busted out big, up 23-30% on copper and iron ore imports. Metals inventories have doubled since year-begin (/HG up 500%!). Stockpiling will eventually have to end, speculation occuring in unreported copper stocks. 900K tons, lol. Govt worried aobut steel oversupply and is trying to close obsolete mills, encourage mergers, and reduce # of iron ore importers. Cement, plate glass, coal-chemicals, polysilicon, windpower equ also show severe overcapacity. Electrolytic aluminum, ships, soybean oil show overproduction. Govt policies transfer I from households to production. Undervalued currency, low IRs hurting depositors, large spread btw deposite and lending rates, sluggish wage growth due to lack of effective unionization, unraveling social safety nets, weak enviro regs, manu subsidies on lnad and energy. Chinese steel glut could kill margins around the world. Market share has been taken from the rest of the world through lower prices. Migrant workers means that manufacturers can reduce costs and adjust down the quality ladder. Expiration of global textile quotas means China can increase market penetration through its usual advantages and export tax subsidies and low-int loans from state banks. Total new loans are up 160% yoy for YTD. M2 up 29%. Zhou Zhongshu (Minmetals): Urges no ideological bias in overseas acquisitions.

Opinion – Zhu Hongren (MinIndusIT) – Industrial output growth not yet stable due to weak demand for exports, govt spending main driver of inv and C growth this year. Wang Dongzhi (XinAo Gas): NG prices to rise by 20-30% in 2010 under new regime, prices will reflect movements in the upstream more closely. Factory prices for gas up 20-30%, retail 10%. Zhang Wenkui (Dev Research Center, State Council): Fin restrictions should be eased to encourage domestic M&A, especially for SMEs; consolidation should allow room for smaller, innovative firms. Small firms need to be able to realize acq deals by issuing additional shares or through a share swap. Jim O’Neill (GS): GDP will grow 9.4% and 11.9% in 2010. CPI could rise 2.6% next year. Domestic demand will grow 13.3% yoy in 2009, 13.6% in 2010. Yu Hai Rong, Wang Zhen (Caijing): Exports dependent on forex rates, global trends, raw mats, customer payment risk. Appliance makers have seen improvements in exports, possibly due to restocking. Canton Fair traffic below pre-recession levels. Most orders coming from SE Asia and ME. Orders for machinery and electronics made up 86$ of all deals, brand names were more successful. Midea, Haier, TCL, Hisense Kelon, Gree Electronic Appliances. AC exports have decreased dramatically. China-ASEAN Free Trade Area in 2010 would lift duties on 93% of products, which will help demand. Motorcycle and autoparts makers face Indian and Italian competition due to yuan appreciation fears. Rising raw mats prices may hurt more than yuan appreciation. Many customers are buying on credit and exporters lack bargaining power. Li Qiyan (Caijing): Solar pricing. NDRC is preparing to set a lowball price benchmark for major solar power plants. Pricing is necessary for potential investors to calculate return expectations while driving power firm and industry supplier decisions. At 1.09 yuan per KWhr, the majority of photovoltaic enterprises won’t be able to achieve profitability. Solar energy firms want to use a system that sets prices according to costs, instead of using a low bid as the yardstick like the wind power prices. NDRC wants low prices to pressure upstream solar producers to cut costs of raw mats. Zhang Guobao introduced a system in 2003 to decide wind power prices through competition and tender benchmarks. July 2009, they switched to a fixed, regional benchmark system based on wind levels and construction reqs. Subsidies can help initially but as scale increases, market forces should determine price and guide development of the industry. Need a cost-based perspective. Zhang Boling (Caijing): CISA proposes a unified Chinese model that reduces the # of eligible importers and uses a fixed-price term for the year. Long-term price would fluctuate according to volumes, with large volume buyers enjoying lower prices. Ore suppliers would not be able to sell to Chinese firms at any other price. Wants done for 2010 price talks. This will eliminate diff btw long-term fixed prices and spot market prices for iron ore. FOB (free on board) price for iron ore is different among areas. Australian and Brazilian imports are purchased according to long-term fixed prices, spot is used for imports from other countries. Spot makes up 60% of trade, 159M tons of iron ore. Unifying the spot market may not be possible due to variety of mines from India, Peru, Ukraine, etc. BHP wants a price index system; BHP, RIO, Vale want a 30-35% hike in 2010-2011 to make up for 33% price cut over the past year. CISA points out that Chinese steel mills have suffered and steel production capacity is expected to fall. Excess ore output and falling steel production may lead to excess ore supplies in 2010. Steel industry inv will decrease as bank lending declines next year. Ore prices may rise rather than fall globally if business conds improve. Chinese govt is preparing to improve steel industry bargaining power by reducing # of importers and preventing suppliers from raising prices easily. Recent price hikes may have been a result of importer restrictions as they deprived steel firms of opportunities to buy ore at fixed, long-term prices; long-term prices have been lower than spot since early 2008. Mills with permission to buy at the fixed price have launched side-businesses working as spot market ore brokers for small and medium mills. This spot side market has made Chinese bargaining more difficult. Import quotas could be allocated to eligible steel firms; buyers would bid for ore paying FOB price + agent free; the practice would accelerate steel industry M&A. Overseas acqs have not helped controlling position much; positions in Australian firms involve holding less than 15% of shares.

September 24, 2009

Indicators – Gold output rose 13.4% yoy YTD. New bank branch apps rejected by CBRC because of low CAR. Inflation expected to begin to rise in Oct or Nov (Nomura), 2.5% in 2010, 3.5% in 2011. New loans in July totaled 356B yuan, down 77% from June. Might be a loan surge in Sept. The Big 4 represent half of outstanding loans, yet their new loans issuance shrank significantly in July. The only new loans seem to be consumer loans which made up 66% of new July credit. Personal loans may reflect returning RE purchases, though higher prop prices will hurt individual credit. Many Chinese banks may face a lack of liquidity as reserves decline and loan-deposit ratios rise. Avg cap reserves may fall below 11% for comm banks. Small banks have a 10% CAR requirement, and are trying to issue rts or subordinateds to supplement capital. Deposits in H1 seems to have come from loan proceeds; but increasing cash flow into the real economy, a reduction in new loans, and cap market adjustments means that sustained deposit growth is uncertain. CB fin through short-term notes and bonds may help liquidity. Syndication is on the rise as multiple weak banks join forces to issue  more loans. If the global ecnomy improves, these smaller banks credit may improve. CCB has lent 7.3T yuan in new loans for H1, while showing more caution earlier in increasing its loan-loss provision to 150%. Earnings are down though and the markets fear NPLs are in the future, despite hopes for a stable lending base. The increased lending served to decrease NPL ratios, along with settling old NPLs. CCB seems to have both decreased NPLs while recovering twice the decreased amt. China Merchant and CITIC have been hit hard by decreasing NIMs and an inability to cover the loss by increasing loans. NIMs will not recover in H2 as it is unlikely that a stable increase in int rev from borrowers is possible. May be worsened by potential IR increases to control inflation. Stock market may influence lending as greater equity inv will hurt deposit growth. Rising loan-loss provisions by regulators will also hurt short-term profits. Coal prices to remain flat this month. Car sales rose 29% YTD, and will hit 10M units sold by Oct. Tax cuts on cars with 1.6L engine and subsidies for rual buyers of small vehicles and motorcycles have juiced sales. Vehicle exports have plunged 50-59% this year. Outward inv rose 111% to a record $56B in 2008. Fin inv surged 741% to $14B, nonfin $41.9B. Most inv was by the SOEs (85%). Mostly in services, fin, mining, and transportation. Economists believe recovery accelerated in Aug with faster indus output growth and retail sales, and strong growth in inv, though inflation concerns are emerging. CPI is expected to have fallen in Aug. Oil products sales up in Aug by 3.2% yoy. Steel traders call for lower prices from steel mills. Q4 will be difficult part of yr for domestic mills as weak demand can’t absorb growing output and inventories. UBS predicts 8.5% growth in 2010. Exports should improve and fiscal policy will not be tightened. GDP will grow 9% in Q3, 10% in Q4. Apartment sales fell 10% in Beijing for Sept, mom. High prices are hurting demand. October sales will be a barometer for the market as inventory enters the market. Qinhuangdao coal price rises ahead of National Day. Thermal power plants increased inventories in preparation for power demand.

Strategic Oil Reserve – NDRC says the 3rd phase will hold 169M brls. Reserve will be finished in 2020. Facilities will be built in Hainan, Hebei, and Chonqing municipality. 1st phase is finished and hold 102M brls. 2nd phase construction begins next year and will take 4yrs to complete. In Gansu, Jiangsu, and Guangdong.

Derivatives – SASAC is responsible for overseeing derivatives trading, but its supervision is limited to govt SOEs conducting trades in oil-related structured options. SOEs generally lack credit lines on the international market and need Chinese comm bank help before signing contracts w foreign inv banks. COSCO lost Bs in yuan; most SOEs in I-E and forex also probably lost money in derivatives. China Railway, Eastern Air, Air China have also disclosed losses. Deficiencies in SOE corp gov and risk control complicates investigations. No public market price. OTC trading of interests has also occurred in secret. Only 31 licenses issued by CSRC for overseas commodity hedging.

Trade – Anti-dumping duties on styrene butadiene rubber from Russia, Japan, SK for 5 more yrs. 38% tax. Tengzhong’s bid for Hummer blocked by MinComm due to lack of detail. MinComm plans to develop service outsourcing and improve China’s inv environ via greater foreign investor participation in clean energy and power-saving tech. MinComm vows to support tire industry against US tariffs via improving industry structure and raising technological standards. Tire Q4 earnings are expected to plummet due to the tariffs, increased domestic supplies cutting prices, and stockpiling.

Yuan – 6B yuan treasuries will include a retail tranche of 2B yuan; 2yrs for individual investors, 5yrs for institutions.

SSE – Red chips wil be the first to list on SSE’s international board. Red chips are incorporated outside the mainland and listed in HK. Investors have been buoyed by govt proactive fiscal policy and moderately losse monetary policy.

SFE – Shanghai Futures Exchange. Widens trading band prior to Oct 1 to 7%, by 2pp.

Shenzhen SE – Completes test of GEM board for IPOs, stock trading, and settlements.

HKSE – 19 IPOs planned to raise HK$117B by yearend. Traders worry about a capital drain from other stocks.

GEM – Chongqing Lummy Pharma plans to issue 23M A-shares on the new exchange, to be used for 8 production lines. CSRC approves 6 more candidates including Beijing Toread.

QDII – No new products for 2009, though 2010 should see some entries. GEM is the current focus.

National People’s Congress – Wu Xiaoling (deputy dir of Fin and Econ Affairs Committee) wants to keep controls on lending and deposit rates.

MinFin – Issues 200B yuan local govt bonds as part of an effort to channel funds to less-developed regions, market did not eagerly take them.

SAFE – Raises quota for QFII program from $800M to $1B.

NDRC – SMEs will be encouraged to pursue foreign inv opportunities and set up trading entities and research opportunities overseas. Will also support small private VC firm via tax breaks and will encourage them to invest in SMEs (less than 2K employees, rev <300M yuan, A < 400M yuan). Refuses to interfere in power-coal negotiations. Players want electricity price reform. Proposal to institute market trading for coal and railway transport capacity, separate grid and transport by setting up distribution and transport businesses for the power grid and rail network separate from firms that market power, coal, and transport, standardize I by setting fees collected by local govts, transport links, and power distributors, while instituting a resources tax, system oversight by eliminating gradually planning targets and pricing approvals. Industry leaders want to raise prices. Coal trading is still separated into 2 markets; Key Order Contract Transactions (for coal), the other exchanges. KOCT accts for 60% of coal burned for electricity through fixed contracts signed at coal order conferences, which usually end in NDRC intervention. At the 2009 conference, the power firms proposed a decrease in coal prices, while coal firms demanded an increase. Coal and power markets are affected by market fragmentation via KOCE. Logistics links btw coal and power firms are enormous, management is laissez-faire, efficiency low. Railways transport is split into planned and market portions. Non-core subsidiaries affiliated with coal and power firms profit from insider status. Arbitrary changes are added before supplies reach downstream, increasing already high costs. Prices for non-liberalized power are set by govt, while electricity is distributed by plans. Power trading is handled by monopoly grids, which increases trading costs and reduces fairness. Need a nationwide coal exchange market based on short-term and long-term contracts. Intermediaries make up 30-60% of costs; railroad is a major bottleneck. Rail also has its unplanned and planned portions. Next round of reform would allow govt to check and ratify a basic price for railway coal transport. Railway affiliates and intermediaries would be solidated into a coal transportation sales firm, and its transport capacity would be traded on the national coal exchange market. Grids in change of transmission would leave power trading and instead charge for use of a grid. Power generation scheduling currently follows a planned quota, while grids buy capacity from power firms and sell it to consumers; the grids enjoy monopoly in this system. March liberalizations have resulted in problems. Lacks indpendent electricity transmission and distribution pricing.

SASAC – Investigating loss-making fuel option deals made by SOEs, who may recover losses from their trading partners. Only 31 firms are licensed to conduct cross-border futures trading. 1T yuan worth of derivatives were entered into by SOEs.

CSRC – 12 firms have listed in Aug, most of them on Shenzhen. Reviews Shenzhen Overseas Chinese Town Holding’s plan to pay for parent assets with 7.3B yuan worth of new shares. Reviews 7 firms that wish to list on the GEM board. Funds and brokerages have submitted plans for pilot REIT programs. Harvest Fund, Bosera Funds, CITIC, CIC.

CIRC – Drafts rules requiring insurers to seek reg approval for transfer or alteration of a stake in another firm above 5%, as opposed to 10% previously. Also, drops reqs for adequate solvency when an insurer seeks to pursue an IPO or refi. Insurers will have an 8% asset limit on PE operations.

National Audit Office – Investigating recent lending by major comm banks in an effort to trace loans issued as part of the 2008 stimulus. Regulator investigation began after 23% of total H1 new lending was extended in discounted bills financing, a short-term lending practice that allows firms to raise cash by surrendering receivables at a discount; once bills are cashed, banks can no longer monitor capital flow, allowing for divestment opportunities.

IMF – PBoC may pay its $50B IMF notes in yuan, instead of using $s to diversify channels for its forex reserves.

CIC – Stepping up purchases of commodities firms by buying $1.9B of Bumi debt (Indonesia’s biggest coal producer) and $850M for a 15% stake in Noble Group, a HK global commodity supplier. 12% coupon.

Shanghai – August housing loans at record high due to increase luxury prop transactions.

Yunnan – Creates mining trading platform to facilitate trade in minerals, exploration, and exploitation rts.

PBoC – Will sell 6B yuan in sovereign bonds in HK, first sale in an offshore market to help develop the HK bond market. Expects lending by Chinese banks to return to reasonable levels in H2, major tightening unlikely due to stronger-than-expected banking data. Urges IMF to reform governing quotas and add votes for developing countries.

BoC – Swiss subsidiary will issue yuan-denominated Swiss funds as a way for chinese investors to invest globally w/o currency risk.

Eximbank – Central Huijin injects funding into Eximbank and China Export & Credit Ins in order to make them more market-oriented.

Shenzhen DB – Prefers current IR controls rather than floating. Funds with Invesco Great Wall managed fund a PE fund product in Sept with an entry of 1M yuan and max of 200 potential investors.

Bocomm – approved to buy China Life CMG ins, becoming the first bank to tap the ins sector. Will own 51%, the other 49% will be owned by Commonwealth Bank of Aussie. Bocomm now works in the man fund, fin leasing, trust, and ins sectors as well as its core banking, inv banking, and ins services in HK. Gives low-int loans to transport sector for infra porjects.

Industrial Bank – wins approval from PBoC to issue 10B yuan subordinateds.

Bohai Bank – Issues 1.2B yuan 10yr subordinateds at 5.3% for 5yr before being callable. Standard Chartered owns a 19.99% stake.

CDB – PBoC grants permission to increase new lending ceiling for 2009 by 130B yuan to 580B yuan.

CCB – BAC still holding onto its 11% H-share stake. BAC is still not allowed to offer personal banking services though it may serve corp customers.

Hong Yuan Securities – Chairman Tang Shisheng will resign and may take up post of chairman of Founder Securities. Feng Rong, assistant to president of Jianyin Inv (subsidiary of Central Huijin) and former VP at Hong Yuan will replace him.

Galaxy Securities – Central Huijin will appoint new executives. Central Huijin vice gen man Chen Youan will beocme hairman of Galaxy and its parent Galaxy Fin Holdings. Galaxy chairman Li Ming and secretary Li Zhengqiang will return to the CSRC.

Everbright – Board approves 5.8yuan dividend for every 10 shares. 35.3% of distributable profit.

China Merchant Securities – Sets up PE unit to invesst in unlisteds.

Guoyan – Additional A-share issue approved. 10B yuan offering to supp cap and fund expansion.

Minsheng – President of Life Ins subsidiary resigns for personal reasons and may move to Sino Life Ins, which is part owned by Tokio Marine and Nichido Fire Ins.

Pacific Century – Expects AIG’s asset man biz it acquired to be profitable this year. Includes unaffiliated clients, some general accts, and affiliated assets under man. Richard Li owns this private inv firm with ints in infra, prop, satellite comm, and other inv in the region.

First Eastern – HK PE firm. Will set up yuan fund to invest in Northeastern SMEs.

CLSA, Guosheng – JV to begin in 2010 for domestic yuan fund.

Insurance – Life ins premium income up 2.2% YTD.

China Life Ins – Aug premium I down 12%.

PICC – Prepares for 4th restructuring in its 60yr history. Branching out into prop ins, life ins, and investments for IPO. Assets have tripled to 300B yuan and assets under man have 5x’d to 725B yuan under Wu Yan. Could’ve listed on SSE when its affiliate peaked on the HK bourse, but parent would not have been able to support developing its branches in the future. Firm was hamped by lack of open market capital access nor possible cash injections from the govt. Listing would also have diluted its stakes in its HK affiliate and may have had its affiliate taken over hostilely. Injecting other assets into it would have been possible, but its growth had limits and would’ve undervalued its nascent businesses. Hit hard by Sichuan earthquake. Overshadowed by China Life, Ping An, Pac Ins. Was able to boost lif ins by reforming its provincial life ins subsidiaries into PICC Life, while ensuring P&C received a stake in Life. Was able to pick up rural clients. May be hurt by high cap costs and heavy spending to build its sales force. Increased stakes in Asset Man, Life, and Health, while branching out into Credit Trust and Huawen. Huawen holds hundreds of billions of As and licenses for financial business including MFs and trusts. Owns shares of People’s Daily (yes, that one).
China Post – National post service. Launches life ins firm for its subsidiaries. 500M yuan.

Yangtze Power – Buys assets from SOE parent China Three Gorges Project; operates Three Gorges Dam.

Huadian Power, Yinxing Coal – buys 45% stake for 600M yuan, given priority in purchasing coal at market prices for 45% of miner’s output.

Trina – Obtains $300M loans from 5 Chinese banks to fund 500Mw solar photovoltaic project.

Shanghai Electric – Siemens injects 712M yuan into Power Generation Equ subsidiary. Large mechancial and electrical equ manufacturer.

CNPC – CDB extends $30B in credit lines to fund overseas expansion. Parent of PetroChina. May expand into deepwater exploration in 2015.

Petrochina – JV btw China Ocean Shipping and CNPC lost billions in unrealized losses from oil derivatives.

Venezuela – China will invest $16B in heavy-oil JV in Orinoco.

Galaxy Resources – Aussie firm. 4h largest lithium carbonate producer after signing a fin deal with a Chinese PE firm Creat Grp who gets a 19.9% stake worth A$26M and becomes largest stakeholder. A$130M in bank loans will also be arranged to help dev a spodumene extraction project and a lithium carbonate project.

CNCE (China National Chemical Engineering) – CSRC approves app to list 1.23B A-shares in a Shanghai IPO. Proceeds will supp working capital, buy equ, develop IT. Owned by Chemical Engineering Group Corp which is SOE.

CISA – spot and contract iron ore prices converging at $80 per ton.

Hebei Iron & Steel – Applies to CSRC to inject subsidiary assets from  Chende Xinxin Vanadium & Titanium and Handan I&S into another subsidiary Tangshan I&S.

Jien Nickel – Extends offer period for Canadian Royalties (mineral explorer).

Jinchuan – Metal producer. Expands output to 8K tons of cobalt, 130K tons of nickel. Plans overseas expansion.

Baosteel – Lowers steel product prices for Oct by 200-350 yuan per ton from Sept levels. Hot-rolled carbon, hot-rolled low-carbon, cold-rolled prepainted steel, steel plate.

Shougang – Expands steel capacity to 30M tons by 2012, comapred to 12M last year.

Railway Erju – Wins contracts to build 4 expressways worth 1.17B yuan in Sichuan, Fuijian, and Hunan.

China State Construction Engineering – Wins 1.9B yuan construction project in Guiyang. Largest home builder in China.

China Vanke – Largest RE dev by market cap. Sales rose 18.3% yoy in Aug. Shareholders aprove 11.2B yuan share offering. Will not seek to spend heavily on sites in top-tier cities. Will try not to bid up record prices for prime sites (translation: hell yeah we are).

COFCO, Vanke – Jointly win auction for 2.2B yuan for Beijing reisdential site in Fangshan district.

Glorious Property – Will raise $1.5B in an HK IPO on Oct 2, following a share offer with UBS, JPM, and DB underwriting. Shanghai Industrial, SOLI, NanFung Prop, and other QDII under China Southern Fund will be key investors. PE ratio of 19-24.7.

Country Garden – Issues $300M 5yr HY bonds at 11.75%, which will be used to repay $30M in loans from CITIC Ka Wah Bank and fin prop dev projects. 100% oversubscribed.

Shimao Prop – H1 earnings rose 30$, boosted by one-time gain from selling comm prop projects to subsidiary Shanghai Shimao, and strong prop sales.

Legend Holdings – Parent of Lenovo. Plans to inv 10B yuan over the next 5yrs into clean energy, new mats, enviro protection, fin services, high-tech. Will go public after its core ops have floated. Hony Capital may inv in Happigo Home Shopping.

COLI – considers takeover of Everbright assets held by appliance maker Shell Electric MFG.

Dalian Wanda – Files A-share listing app for 2010.

GOOG – President of Google China Lee Kai-Fu resigns to start own business. VP Liu Yun will take over. YEo Boon-Lock (director of Google’s Shanghai engineering office) takes over the engineering and R&D responsibilities. Lee rose from natural language and user interface divisions and has had stays at Silicon Graphics, AAPL and MSFT. Will invest 800M yuan over 4-5yrs w US VC firm WI Harper Grp, Lenovo chairman Liu Chuanzhi, Hon Hai Precision Industry chairman Terry Gou, etc. Enterprise will act as an angel investor, providing seed capital for startups and helping them with management expertise and analysis. May target Internet, wifi, e-commerce, search engines.

Alibaba – YHOO sells 57.5M shares, due to frosty relations. Fears about Alibaba stripping high-quality assets from YHOO China.

Tencent – ISP. Has no plans to list on A-shares currently, though expects to in the future.

SNDA – Gaming subsidiary plans to list on NASDAQ, issue 63M ADRs ($10-$12). Capital will go towards divesting the unit and allow parent to focus on developing online games platform.

Lenovo – Mobile unit launches first OPhone supporting China Mobile’s 3G service.

ChinaCache – Largest content delivery networks provider. Obtains $10M inv from INTC. Upgrade core capabilities and CDN tech.

Gome – Ex-chairman’s asset freeze extended.

Lianhua Supermarket – largest supermarket chain. Shareholders approved Hualian Supermarket purchase for 492M yuan.

Mengniu Dairy – H1 earnings rose 13.6% due to lower costs and an optimized product portfolio.

Wuliangye – Liquor producer. CSRC is investigating securities violation.

Huiyuan Juice – H1 profit dropped badly due to disruptions from failed takeover by KO. Op rev fell 32%. Will benefit in H2 from consolidated distribution network and a broader product line.

Wumart – In talks to buy Jiangsu Times retailer. 4th largest retailer.

Yashili – Carlyle Group and Fosun High Tech inject $100M funds in return for 23% stake.

Sinopharm – Top pharmaceutical distributor. Hopes to raise $1B from HK IPO this month. It is a JV btw Sinopharm Grp and Shanghai Fosun High-tech Grp.

ZTE – Leading telecom equ manu. Wins contract w HK’s mobile operator CSL for a nextgen mobile network tied to Long Term Evolution tech. (4G)

China Unicom – $1B share swap w Spain’s Telefonica as part of a strategic alliance. Telefonica also gets a seat on the board.

China Mobile – Will pursue listing on mainland, will not do Depository Receipts or A-shares. New users rise in Aug by 1.32M, due to handset subsidies. Target of 3M new 3G users may hard to attain.

NEC – cuts 25% of Beijing staff as part restructuring of Chinese subsidiaries.

Bestway – Marine engineering design as well as ship design. IPO planned of 20.5-28.7 yuan on GEM.

Beijing Toread – IPO range of 19-25 yuan per share. 35-45 PE? Outdoor sporting goods producer. Offering proceeds will fund expansion of sales network.

Opinion -Lee Kaifu(Innovation Workshop): Rebuilt GOOG market share from 16-31% after 2006 govt blockages. Liu Yun was once CEO for SK Telecom in China and bought convertibles in 2007 to get a stake in China Unicom. Is trying a 50M yuan incentive plan for SMEs to use search engine marketing.  Wu Xiaoling (National People’s Congress): MinComm should lower threshold for establishing leasing firms and offer equal accesss to Chinese firms. Currently, foreigner and JV leasing comapnies are approved by provincial branches of the ministry. Domestic leasing firms are still in trial phase.  SWS Research: As long as new lending doesn’t fall below 300B yuan a mo for the rest of 2009, then China will continue to grow. Banks in western China have already implemented credi restrictions. 50% of new loans were given to govt-related fin institutions. Platforms must now submit more than guarantee letters from local govts to get loans; hold land collateral? But some project inv went to stock and RE markets. Banks can only inspect funds flowing internally; funds in the borrower hands are hard to track. National Audit Office has increased observation and are tracing securities funding sources. Lending should enter phase of steady growth, restrictions are unlikely to rise drastically. IF funds outstanding for forex increase, pressure on current monetary pressure will increase. Those funds are up 77.8B yuan to 220.5B yoy. Investors are also adding to trusts and other banking products. 180 were launched in Jun, 135 July, 145 Aug. Monthly issue exceed last year’s total issue. Personal IRs will probably rise higher. Andrew Shang (HK Sec and Futs Comm): EU is the largest economy in the world at 30% GDP, though the euro is only in use in 16/27 of countries. Pretty remarkable despite being only 10yrs old and the first notes being issued 7yrs ago. Predecessor EEC was formed n 1957; transition was thus 45 years long and with many intermediate steps along the way. European Monetary System failed in the 80s, fighting speculators. Coordinating monetary and fiscal policies for stabilizing the currency or maintainng parity is hard as some country has to lose out during adjustments. Maastricht Treaty imposes restraints on members from running up more than 3% GDP debt. Vol of currency turnover is at 38% of total, unchanged since 2001. USD accounts for 64% of 6.4T offical reserves worldwide, $4.1T identified reserves. Euro accounts for 26.3%, pound 4.4%, yen 2.5% (ouch). Euro was a tool of political, not economic, integration (wat). Union of many currencies after internally fixed pegs among members and flexible rates individually against USD. Europe has a large, stable internal market and runs a small current acct deficit with the world, international bal sheet deficit of 10% GDP. Still a rivalry btw nationalized banking system. Asia only has trade integration at the moment, and even then…  Jiang Liping (Energy Research Institute, State Grid Corp): Intermittent nature of wind makes it difficult for state grid to use wind power on a large scale. Balance btw gen and C loads necessary, but this is difficult to adjust with coal power. Xia Bin (Fin Research Institute of State Council): China’s high growth and potential will put pressure on the yuan to appreciate, as neighbors wish to hold more of its currency. HK should be pushed to develop its offshore yuan market and widen the use of the currency in Asia (as reserves?). Expand crossborder trade, encourage domestic firms to use the yuan for outward inv and overseas acquisitions. Fan Junli (Caijing): Regulators have instituted changeds that allow securities firms to consolidate. 107 firms will merge. Local govts that control minor brokers will be hurt, though the industry will be strengthened in a step towards allowing foreign competition. Huatai, Guoxin, and GF are being encouraged to integrate and expand their territories, while large brokerages like CITIC and Huijin Family are limited by the 1 Participant, 1 Controller Rule. First consolidation wave in 1990s, followed by the emergence of the powerhouses in 2000-2001. 2001-2004 saw an overhaul of the industry which triggered further consolidation among the weaker firms. In 2008, more M&A among the smaller firms shrank the industry further. Only 70-80 are expected to survive this round. Regulators want to chip away at brokers protected by tight links to local govt fund-raising. Local govts also hold controlling stakes and don’t want to lose them. One Participant, One Controller Rule requires 2 or more securities firms controlled by a single firm or individual to not conduct overlapping brokerage business. During the 2004 overhual, Central Huijin took ints in 9 firms, giving tem the largest market share. It has now been buying some of CCB Invs’ brokers, allowing CCB Invs to reach the standard. Huijin is also transfering its broker stakes to UBS, Guotai, and Qilu, though it still controls Galaxy, Central Inv, Shenyin Wanguo, and CITIC Construction Inv Securities. China only allows foreign firms to offer inv banking except for China Euro Securities which is a JV with foreign backing and has a brokerage permit to operate in the Yangtze Delta and a inv advisory permit from CSRC. Huo Kan, Wang Jing, Yu Hairong (Caijing): NBS announced Aug 11 that industrial growth only increased 0.1pp mom; the markets dived the next day. The govt-led lending increase in inv has helped the economy in H1, despite exports being a drag. Urban FAI growth slowed further than expected. Halt of govt int in July hurt. 200B yuan remains to be allocated by the govt. New projects and planned inv for new projects also fell in Jul as hopefully the economy grows at a slower but steadier pace. Worries however about inflation with a global recovery mean that policymakers may tighten in mid October or in December. Consumption in July was stable and retail sales grew, though they are unlikely to replace govt spending quick enough to prop up economy. Trade declined by only 19.4% in July.  Andrew Sheng (Tsinghua U): Countries with a constant trade surplus should have an appreciating currency. Japan had to keep exporting capital in order to keep the yen down. Japanese were unable to promote their currency as a reserve currency despite offering cheap aid through yen loans due to the high volatility of the $-yen exchange rate; it was difficult to hedge and borrow. Seignorage and the services income that comes from being an international fin center would have supplemented its manufacturing exports. But to be a reserve currency, the yen must be stable, have low transaction costs, and high transparency. Yen was volatile and expensive to transact in. Being a yen exporter meant that a spreads btw Treasuries and Japanese deposits could be wiped out by any significant yen appreciation unless your earnings were in yen. Japanese exporters have preferred to export in yen and import in $s in order to protect their earnings in yen term and saving on import costs when the yen appreciated. Borrowers had to pay forec costs which made the yen more volatile. A yen appreciation causes both borrower and investors to buy yen to protect themselves from appreciation. It also helps if a wide variety of fin and real assets are available for purchase at attractive yields in liquid markets. Japanese asset bubble explosion has prevented that. Huang Yiping (Peking U): Diversify forex holdings away from $, increase outbound direct inv, widen the trading band of the yuan. Euro, yen, yuan or rupee will gain greater prominence as a reserve currency. Zhuang Jian (ADB): Predicts a steady economic recovery and sustainable Chinese growth for the next 2yrs. Wang Ziwu, Wen Xiu (Caijing): Hot money is flowing back into China at a record $170B in H1. Hot money increases China’s forex reserves. SAFE is concerned that it may start inflation. Hot money is derived by subtracting trade surplus, FDI, forex gains/losses from the forex reserves. $122B in hot money may have entered in Q2. Figures don’t exclude service trade, securities inv, and other inv that affects balance of payments numbers. Hot money piggybacks into the country through standard cap channels, service trade deals, and personal forex transactions. Stephen Green believes that $56B in unexplained outflows occured in Q1 and that $30B inflows occured in Q2, possibly up to $90B total in Q2. Expectations for yuan appreciation on the non-deliverable forward market remain dampened. Yua Hairong (Caijing): Exports have been buoyed by increases in shipping traffic, China becoming the world’s largest exporter, other positive indicators. Jiaozhu, Shangdong has posted a 5% increase yoy in exports for Q1, but Q2 saw a slump; Wang Jian (bureau chief at Foreign Enterprises Admin) explains that Q1 reflected unfinished 2008 orders while Q2 reflects new orders for 2009. Zhejiang shows similar slumps among 64% of exporters. Taiwanese Inv Enterprises Assoc of Dongguan has seen its membership shrink as members suspend ops. 2-3M migrants have left Dongguan and not returned. Foreign orders for labor-intensive goods have started to improve, but not so for machinery and electronics. Trade decline has narrowed but container production has halted. Overseas customers have been defaulting, making expansion unlikely. The State Council has tried to help SMEs by increasing export credit ins to offset payment risk associated with foreign trade. Low-tech firms are the hardest hit as bargainin power has been reduced and firms must upgrade tech. Local govts are offering to help by subsidizing costs associated with expanding trade through advertising and marketing. Liu Chuanzhi(Lenovo): Founder. New shareholding structure. China Oceanwide Holdings (Lu Zhiqiang) has paid 2.7B yuan for a 29% stake in Lenovo’s parent Legend, reducing the state’s take from 65-36%. Academy still holds the biggest stake, followed by an employee group. Lieu is still president. New shareholder supports Legend’s long-term vision. Didn’t prefer a SOE owner. Restructuring has given Legend better governance and for Liu’s successor, though succession remains a difficult issue. Management incentives issue still big. Also, the direct inv business. Future dev model might resemble Cheung Kong Holdings. Lu Zhiqiang (Oceanwide): Launched career in 1985 and has invested in RE, financing, energy, chemical engineering. As of 10B yuan. Friends with Liu Chuanzhi. Lenovo was a strategic investment. Appraised and reappraised Lenovo based on net A. Will Liu stay on? Employee stock ownership is still too low, Lenovo’s dev requires more new employees. Worries that incentive mechanism may become a problem. 8-1o yuan per share in the future? Ming Shuliang, Yu Ning (Caijing): 25yrs ago, Liu Chuanzhi accepted 200K yuan from CAS to establish Lenovo. Trying to shift from state ownership to private ownership, qualify for A-share listing. Doesn’t need govt approval for internal decisions. May need to dilute shares to resolve the incentives problem. Lu and LIu are members of the Taishan Association, a club for executives at top Chinese enterprises. President of Taisahn Evertrust Chairman Lin Rongqiang informed Lu that CAS was selling part of its Legend stake; Lu found Liu to discuss the matter. Liu had halped Lu in 2004 to finance land deals. Lu was able to lobby the Dept of the United Front Work CPCCC and All-China Federation of Indus and Comm to convince CAS to consider Lu. Part of a process to transition from the red hat of govt agency approval to private board of directors. Liu introduced a flexible bonus system to motivate employees, and to reduce state shareholdings and increasing employees holdings. MinFIn told him to fuck off, but CAS gave some away anyway. When Lenovo split from Legend subsidiary Digital China, Liu entered the VC market. Zhu Linan was put in charge of Legend investments and began investing in stock and established Hony Capital. Also launched Raycom RE Dev to invest in prop, and an autonomous fund for direct investment. Liu worries about employee turnover as most workers are still relatively new. Needed an investor with understanding with CAS and Legend, back Legend’s future strategic plans. Beijing U professor Zhou Qiren believes that the SASAC policy of “1 majority shareholder” is flawed and costly. CAS demanded reqs of registered cap and profitability. Was the price too low? Based on estimated NAV of state-owned assets and management costs? Legend is trying to increase direct inv ventures while reducing dependence on Lenovo. Core assets need to reach the scope of Lenovo’s total assets. Can Legend list on the H-shares and A-shares?

Education – Policy Banks: Exim Bank, ADB, CDB are used to promote and finance the construction of infra, promote exports, and safeguard food production. Now, they have been commercialized, though the ADB still caters to agriculture. Exim was once 1/10 the size of CDB but has expanded rapidly through providing foreigners with dev aid and preferential loans, distributing govt-backed loans to foreign nations, financing international engineering projects and the export of high-tech products, overseas expansion, and built a market-oriented division alongside its policy-directed functions. By 2008, the market division had completely covered losses from policy-lending and reported profits for the 1st time ever. NPAs are down 2B yuan to 7B. Its primary policy objective is the promotion of foreign trade and diplomacy by capitalizing domestic exporters and exporting credit to profitable foreign projects; yet its customer base is overwhelmingly private biz ints which it competes for against the Big 4. They can provide loans at half the Big 4 IRs. CB has planned to inject 200B yuan into Eximbank to help with restructuring. Regulators are worried about the effects of the trade collapse earlier this year on the bal sheet and its policy goal of supporting export financing. In Q2, its lending surged 130% yoy, raising concerns about CAR and a lack of recapitalization. Info about its cap structure/bal sheet is sketchy; NPL provisions are probably insufficient and reg standards would imply the bank is neg net cap. Eximbank gets its capital by issuing interbank bonds, receiving loans from the CB, and fiscal injections. Li Ruogu, Pres of Eximbank, believes that compliance with the 8% min cap req wil require a 40B yuan injection after loan loss provisions. A 200B injection by the CB would ease pressure from soaring forex reserves. Restructuring would imply a move away from the state policy bank model and establishing capital adequacy and an effective risk control framework.