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Business Tianjin Magazine - Business English Magazine in China
China Rules U.S. Carmakers Are Guilty of Dumping
Friday, 06 May 2011 13:57
China has found some U.S.-made passenger cars benefited from unfair subsidies, damaging its carmakers, although Beijing side-stepped a potential trade row with the United States by not hitting them with duties.
That decision could ease fractious U.S.-China relations, already strained by tensions over the appreciation of the yuan and criticisms from the United States that Beijing is favoring giant state-owned enterprises by keeping borrowing costs low.
However, U.S. officials reacted frostily to the news and said Beijing may have violated World Trade Organization rules with the method it used to determine certain U.S. cars received subsidies and were sold in China at unfairly low prices.
"We are very disappointed (with those determinations), even though it appears that such duties will not be imposed immediately," said Carol Guthrie, a spokeswoman for the U.S. Trade Representative's office.
"The United States is closely reviewing the final determinations in these investigations, in particular their compliance with WTO rules," Guthrie said.
China's Commerce Ministry launched the investigation in November 2009 in an attempt to defend Chinese carmakers against U.S. competitors. U.S. exports of new and used passenger cars to China tripled to $3.4 billion in 2010 over 2009's figures.
"After an investigation, the Commerce Ministry's final decision is that U.S. firms that make sedans and sports utility vehicles of 2.5 liters and bigger engaged in dumping and were given subsidies," the ministry said in a statement.
"China's domestic car industry ... has suffered substantial damage. There's a causal link between the dumping and subsidies and the material damage."
But the Customs Tariff Commission of the State Council has agreed "not to impose anti-dumping duties and countervailing duties for now on the products that are being investigated," the ministry said, adding further details would be released later.
China's announcement came just days before the once-a-year Strategic and Economic Dialogue, which covers various economic and diplomatic issues between the United States and China. Trade disputes are likely to feature prominently.
China is an increasingly important export market for the U.S., worth $91.9 billion in 2010, a rise of 32.1 percent on 2009 levels. Total two-way trade was worth $456.8 billion.
The duties were expected to hit cars made by companies including General Motors Co, Chrysler and the U.S. units of German firms BMW and Daimler's Mercedes-Benz, which are fighting for a slice of China's booming car market -- the world's biggest ahead of the United States.
The commerce ministry's investigation centered on whether these companies had benefited from incentives and tax breaks granted by the U.S. federal government and the state of Michigan at the expense of China's carmakers.
China’s Property Stocks May Rebound; July Futures Advance
Tuesday, 29 June 2010 10:33
June 29 (Bloomberg) -- China’s property stocks, led by China Vanke Co., may rebound after a property consultant agency said Shanghai’s new home sales increased last week. China’s stock-index futures rose, signaling gains for equity benchmarks.
Futures on the CSI 300 Index expiring in July, the most active contract, added 0.1 percent to 2,742 as of 9:16 a.m. local time. TCL Corp., China’s biggest publicly traded consumer- electronics maker, may rise after saying it will receive as much as 210 million yuan in subsidies from the Shenzhen government. PetroChina Co. and Jiangxi Copper Co. may decline among commodity producers as oil and copper prices dropped.
“Valuations of property stocks are attractive now and home sales have shown signs of sustaining a rebound,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Given the two factors, property stocks deserve to rise.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 17.54, or 0.7 percent, to 2,535.28 yesterday. The CSI 300 Index fell 0.7 percent to 2,716.78. The Shanghai gauge has dropped 18 percent in the second quarter, adding to a 23 percent decline this year, on concern government measures to rein in housing prices and the European debt crisis will damp economic growth.
Shanghai’s new home sales gained 65 percent in the week ended June 27 from the previous week to 107,000 square meters as some property developers cut prices to promote sales, consultant Shanghai UWin Real Estate Information Services Co. said in an e- mailed statement.
Range Bound
Chinese stocks will probably stay “range-bound” pending clarity on policies and the economy, Shen Minggao, head of China research at Citigroup Inc., said in a report obtained today.
China’s exports face “strong headwinds” in the second half of the year from policy tightening measures and the European debt crisis, reducing prospects of a rebound in the stock market, Citigroup said.
“While low valuations are attractive in the near term, risks lurk in terms of earnings downgrades or policy reversal,” Shen said. “Macro policies remain directionless.”
Loan growth will slow to 18 percent by the end of the year from 21.5 percent in May, Shen said. This will be a drag on money supply growth and “weigh” on the stock market, he said.
Yunnan Yuntianhua Co. may rise after the company said it expects to report net income for the first half compared with a year earlier loss after sales and the prices for fiberglass increased during the period and production stabilized.
Time for a road trip? It's cheaper to fly
Tuesday, 07 December 2010 09:48
One of the widely recognized aspects of China's modernization process in recent years has been the fast development of the highway system. Twenty years ago, there were virtually no highway in China. Now China has 65,000 kilometers of highway and will exceeds that of the US in two or three years.
But I have a love-hate relationship with China's highway system after taking to the road many times. To drivers, China's highway system is probably the world's most expensive with "here toll, there toll, everywhere toll toll."
For example, transporting a large container from Guangdong Province to the Beijing-Tianjin area involves paying toll fees of somewhere between 4,000 to 6,000 yuan ($600-900), depending on tonnage. This actually makes transporting the same container from Chicago to Beijing-Tianjin area via sea freight shipment even cheaper. When moving things around the country is more expensive than moving things halfway around the globe, you know there got to be something wrong.
One doesn't have to drive on highways for long to notice that the system is obviously inefficient. Many highways in China don't see much traffic during the day.
While Chinese can feel proud that our country is the king of the highways, it is quite another feeling to consider that the steel, concrete and labor that go into highway construction will have to be ultimately paid by the vehicles that go through, and there just aren't enough of them. That means a high toll rate is inevitable.
Now I understand highways are expensive to build and the investment has to be recouped via toll collection. OK, you pay for what you get. But how much of the collected toll revenue goes toward paying back highway construction loans is very much in doubt. Has the whole thing become a scheme for meaningless job creation?
In China, collecting toll fees is a very well paid job, and in some cases pays better than a full professorship. I assume receiving cash and handing out a ticket doesn't need much education, right? It certainly can't be more stressful than migrant workers pouring concrete on the road under the sun.
And then there are those obvious wastes and excesses at the toll booths. China not only has the longest mileages of highway in the world, it also has the world's most beautiful and most expensive toll booths. Every time I drive by a toll booth and see a nice office building nearby for the so-called management staff, I can't help thinking of the AC/DC song "Highway to Hell!"
China's highway system is also Balkanized in a way that adversely affects inter-province commerce. Since the administration power of highway systems lies at the provincial level, each province builds its own road and its own toll booths. This has created bizarre situations at highway provincial borders where two respective toll booths belonging to each province lie literally within a few hundred meters of each other, each collecting its own money. The ensuring traffic jams don't matter as long as the cash registers ring.
Traffic jams caused by toll booth delays are notorious in China. According to traffic law, when the line of waiting traffic is over 200 meters long and when all lanes at the toll booth are not fully open, drivers have the right to pass free. I have certainly run into such situations many times, and I have never enjoyed such a free ride.
And then there are the real free riders, whose costs have to be ultimately paid by ordinary citizens. For people in military vehicles, ambulance, fire-engines, and other men and women putting their life on the line to protect us citizens, I have no grudge against them saving a few yuan on the road. But for those high-ranking government official free riders who proclaim they are citizens' civil servants, I say, "We hold these truths to be self-evident …"
A radio host in the US once said, "Thanks to the Interstate Highway System, it is now possible to travel across most of the country from coast to coast without seeing anything."
The statement is bitterly sarcastic. But it is indeed true that it is possible to travel across the country in the US without paying anything. Will this ever be possible in China?
China property prices rise more-than-estimated 12.4%
Thursday, 10 June 2010 17:36
June 10 (Bloomberg) -- China’s property prices rose at the second-fastest pace on record in May, showing little sign yet that the government crackdown on speculation will work to avert an asset-price bubble.
The 12.4 percent gain compared with a record 12.8 percent increase in April from a year earlier, the National Bureau of Statistics said in a statement its website. The data series, covering 70 cities, began in 2005. The value of sales slid 25 percent.
“So far the property tightening measures are mainly cooling transactions” rather than prices, said Xiong Peng, a Shanghai-based analyst at Bank of Communications Co., the nation’s fourth-largest lender by market value. “A property tax is the other shoe that has yet to drop.”
Officials may introduce a trial property tax after already tightening sales rules for developers, raising some down payment requirements and restricting loans for multiple-home buyers, according to state media. China’s benchmark stock index is down 21 percent this year on concern a slowdown in property sales and construction, along with Europe’s debt crisis, will damp the nation’s growth.
First Slowdown
Sales in Beijing, Shanghai and Shenzhen, the nation’s wealthiest cities, fell as much as 70 percent in May from the previous month and land sales for residential development projects in 70 Chinese cities fell 14 percent, the official Shanghai Securities News reported earlier this month.
An index tracking 34 real-estate companies has plunged about 28 percent this year, the worst performer among five subgroups of Shanghai’s stock benchmark.
Sales by China Vanke Co., the nation’s biggest publically traded property developer, dropped 20 percent in May from a year ago, and Guangzhou R&F Properties Co.’s contracted sales last month shrank 48 percent on year, according to the developers’ stock exchange filings.
Bank Loans
“These exceptionally low transaction volumes are partly a result of banks’ unwillingness to lend and also the result of buyers taking a step back” to wait and see what the government’s next measures may be, Michael Klibaner, head of research for Jones Lang LaSalle in China, said earlier this week.
Besides industry-specific measures such as requirements for larger down-payments for some homes, the government on May 2 raised banks’ reserve requirements for the third time this year to contain overheating risks after first-quarter economy expanded at the fastest pace in almost 3 years.
China’s housing market is “prone” to a bubble because of immigration to the nation’s cities and high savings, according to economists at Barclays Capital. Chinese savers lack the breadth of investment and financial options available in developed countries, and U.S. policy makers have pushed their counterparts to help develop more options.
“The government’s recent measures to cool the housing market focus on limiting investment and increasing the supply of public and low-cost housing,” Barclays economists Peng Wensheng and Chang Jian wrote in a June 7 report. “This represents a regime shift in housing policy” and more measures are likely to come, they wrote.
Prices May Tumble
Prices may tumble between 20 percent and 30 percent in coming quarters, according to the Barclays analysts’ projections. The impact on the economy will be cushioned by rising public housing construction, they wrote.
Investment in real estate rose 38 percent to 1.39 trillion yuan ($203 billion) in the first five months of this year, after a 36.2 percent gain in the January-April period, according to the statistics bureau.
Property investment accounts for about 10 percent of gross domestic product and construction work consumes half of the nation’s output of steel and 36 percent of the aluminum produced, JPMorgan estimates.
Besides industry-specific measures such as requirements for larger down-payments for some homes, the government on May 2 raised banks’ reserve requirements for the third time this year to contain overheating risks after first-quarter economy expanded at the fastest pace in almost 3 years.
Property Construction
Property sales by area rose 22.5 percent in the first five months to 302 million square meters (3.25 billion square feet), the statistics bureau said today. The pace is compared with an increase of 32.8 percent between January and April. The area under construction rose 72.4 percent from a year earlier to 615 million square meters, the statistics bureau said.
For the full year, property sales may shrink 30 percent from 2009, Jing Ulrich, Hong Kong-based chairwoman of China equities and commodities at JPMorgan Chase & Co., said before today’s release.
“China’s property market is one of the top concerns of global investors as transactions have tumbled,” Jing said. “About 50 sectors in China, especially the steel, cement and aluminum industries, are closely tied with property-market growth.”
China not ready to end support for property, CBRC’s Li says
Friday, 04 June 2010 17:00
June 4 (Bloomberg) -- It’s not yet time for China to reduce or stop policy support for the nation’s real estate industry, said Li Fuan, an official with the China Banking Regulatory Commission.
“Real estate in China is far from being at the end of its development and we are far from the point where we no longer need to support the industry, where we need to reduce or stop support,” Li, head of the commission’s banking innovation department, said at a forum in Beijing yesterday.
Concerns among investors that China will introduce a property tax and other policies to curb home prices fueled a 30 percent fall this year in an index tracking 34 real estate companies traded in Shanghai. China has already limited loans for third-home purchases and tightened down payment requirements, aiming to cool a market where growth in property prices topped 10 percent for three straight months.
Real estate “will be an important industry that continuously supports China’s economic growth for the next 10, 20, 30 and even 40 years,” Li said. The real estate industry needs as much as 60 more years of development before living standards nationwide can be brought to a “harmonious” and “well-off” level, he said.
Shanghai’s index of property stocks fell 0.12 percent as of the 11:30 a.m. mid-day break today, while China’s benchmark Shanghai Composite Index declined 0.2 percent. The benchmark has dropped 22 percent this year.
Property Prices
Property prices in 70 Chinese cities rose by a record 12.8 percent in April from a year earlier after climbing by 11.7 percent in March and 10.7 percent in February, according to government data. The price gains spurred concerns that a record $1.4 trillion of loans extended last year to combat the effects of the global financial crisis were causing asset bubbles.
Premier Wen Jiabao, in a speech to the country’s annual parliamentary meetings in March, pledged to crack down on property speculation.
China’s tax bureau yesterday announced minimum rates for pre-paid land taxes. The minimum rate for eastern China was set at 2 percent, the rate for western China was set at 1 percent and the rate for central and northeastern regions of the country was set at 1.5 percent, according to the State Administration of Taxation.
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