First views on the quake from economists and analysts we follow regularly. Here’s Deutsche Bank’s Jun Ma, greater China chief economist, and Moody’s Economy.com’s Sherman Chan, an economist who covers China for the research firm:

Macro view

Deutsche Bank: “At the macroeconomic level, our current view is that the impact is limited … The equity market may be hurt by the rising uncertainties related to earnings impact and liquidity flows.”

Moody’s Economy: “Although the earthquake has caused major disruption only to the Sichuan province, which represents a relatively modest share of the country’s GDP, the economic impact of the earthquake to China as a whole is likely less severe compared to the snowstorm. Nevertheless, the earthquake has shaken market confidence.”

Sector and company view

DB: Sichuan Expressway (107.HK) will see slower traffic growth, Dongfang Electric (1072.HK) has major production bases in Sichuan. China Telecom (728.HK) is the worst hit of the telcos, the affected area represents about 10% of its fixed line network. The quake will also affect 7% of China Mobile’s relay network. Sinopec (386.HK) has a Sichuan gas project under development that will account for about 7% of FY10 revenue. Insurance firms, property companies with Sichuan and Chongqing in their portfolios. Cement makers like Shui On Cement (983.HK) and Anhui Conch (914.HK) could benefit.

ME: “The most direct impact is the disruption to economic activity due to problems with transport, communications and power supplies. In relation to business operations, the most affected by the disaster will be the manufacturing, retail, transport and tourism sectors. However, China’s construction and engineering industries will be able to take advantage of the massive reconstruction of buildings and infrastructure in coming months.

Highlights from the last week of China business news.

A deal fails to take off
Another deal gone bad for Temasek. Its plan to buy a chunk of China Eastern Airlines, in partnership with portfolio company Singapore Airlines, fell apart at the last minute this week. This was cunningly engineered by China National Aviation Holding Company, owner of rival firm Air China (and also a 12.07% owner of China Eastern). The deal-busters came in with an offer of HK$5 per share, which looked a lot better to China Eastern shareholders than the Singaporeans’ HK$3.80. So more than a third of the shareholders voted against the SIA-Temasek buy-in on January 8 at a meeting in Hongqiao, and the deal was off. The acquisition was already looking shaky after Air China partner Cathay Pacific nearly put in a bid in December, but SIA-Temasek looked to be on safe ground because they had the blessings of the State Council. In the end, savvy business skills put the kibosh on the bureaucrats’ plans. The Singaporean sovereign wealth fund and flagship airline, for all their capital and political connections, couldn’t figure a way past determined local opposition. Is a Singaporean counter-bid in the offing? Unlikely, but let’s hope it is - just to add another twist to this unusually entertaining acquisition saga.

All aboard
Five hours by train from Shanghai to Beijing? Sign us up. And, apparently, sign China Development Bank and a Ping An Insurance-led consortium up too - for more than US$3 billion. Construction began on the Shanghai-Beijing high-speed railway this week, and the project attracted plenty of investor attention too. Ping An is leading a group of insurance companies to sink more than US$2 billion for 14% of the company that runs the railway, becoming the firm’s second-largest shareholder, behind the Ministry of Railways. China Development Bank, the policy lender that’s often saddled with funding unattractive, state-mandated projects but is supposed to be becoming more commercially oriented, could get a juicy reward if it succeeds in putting in US$1.37 billion into the project. The 1,318-km railway will be complete in five years and will surely be a hit with travelers weary of flight delays. Speaking of high-speed trains, whatever happened to the mainland-Hong Kong through-train scheme that caused such a stir when it was announced? We’re still waiting for that one to - forgive us - get back on track.

You can also get the weekly news by e-mail. Just subscribe here.

This is the seventh in a series of posts Alfred Romann will file on India.

The list of assets of Mularam Kharida, a driver in Delhi, includes but is not limited to:
- A 24-hour-a-day job as a driver (earning 3,500 rupees, or US$90, per month),
- Access to tourists that tip well,
- The ability to take said tourist to shops that tip him badly,
- A small parcel of land three hours from Delhi where the one-room home for his family of five is,
- Another piece of land in the same village where he is slowly building a new and bigger home,
- Four buffalo,
- One cow,
- His wife’s job as a kindergarten teacher in his home village (earning 1,200 rupees per month or US$30).

Mularam’s list of liabilities includes:
- About 9,000 rupees per month (US$220) in household expenses,
- School fees and expenses (uniforms and supplies) for his two dauthers, aged 18 and 16, and one son, aged 14.
- Lack of sleep (three full hours on a good night),
- Two daughters, aged 16 and 18, that will likely be married soon and require a “very expensive” dowry,
- Ongoing construction costs for his new home,
- Occasional and unexpected medical costs.

The list of things Mularam would like includes:
- Enough money to pay for his two daughters’ marriages/dowries (a few hundred thousand rupees),
- To finish his new home (another year or two),
- Constant electricity,
- A refrigerator (see above),
- Less work,
- For his entire body to hurt less,
- A few nights of uninterrupted sleep.
- Go overseas to work (”I work hard. In a few months pay for my daughter’s marriage. Pay for new house.”)

The list of things Mularam dislikes includes but is not limited to:
- People from Pakistan (”no good people”),
- The cheap three-wheeled taxis that populate the streets of India’s capital,
- People from Bangladesh,
- Coffee (tea with milk and sugar is better),
- People from Sri Lanka (”no good people),
- Chinese trinkets,
- People from the mountainous regions of the country (”no good people”),
- Beer (although rum in moderate doses is OK),
- Local tourists (they don’t tip well),
- Beggars (”Always drugs”),
- His brother in law,
- Mutton (other non-veg meals are fine).

This is not, of course, a comprehensive profile but it is not atypical of the millions of Indians that have, at best, seen marginal benefits from the country’s growth. This is the core of the customer base in the country. Of the 1.1 billion people in India, about 650 million live, more or less, like Mularam.

Ask not what your country can do for you … unless you’re a Chinese state-owned airline and it can secure you a plum route to New York before any of your American competitors can. Starting this December, China Eastern Airlines will have a four-times-a-week direct flight to New York’s John F. Kennedy International Airport, and is offering some mighty attractive fares for its first month of service - one travel agent sent us a promotion advertising a round-trip ticket at an unheard-of RMB2,888, or US$366 “between December 11th and January 10th”. (Just don’t bother trying to book a flight anytime near Christmas. Or New Year’s.)

The flights begin at about the same time an announcement is expected on which US airline will get the remaining flight between the US and China, which we wrote about last week. That route, still pending US Department of Transportation approval, would likely begin flying back in forth in March. China has not yet used up its allotment of flights to the US under its most recent bilateral agreement (under the agreement there is a certain number of flights allotted to airlines from each country), so expect more US routes for the big state-owned carriers in the future as traffic continues to ramp up.

China Eastern will be using its Airbus 340-600s on the route, which is about 14 hours either way. Compare that to the next-shortest/-cheapest Shanghai-New York flight I could find.

Before we all get too excited, just remember this is China Eastern we’re talking about here. Say what you will about American carriers, they will at least dare to explain to passengers the reasons for delays instead of say, making vague statements and breaking out the refreshment cart while the plane is still on the tarmac. China Eastern’s reputation for comfort and service is mixed at best.

Photo from scribeoflight’s Flickr page.

I spoke with some very excited gentlemen from Continental Airlines at a recent convention on business travel in Shanghai. The reason for the excitement: their proposed direct route from Shanghai to Newark, in consideration with three other bids from American carriers (Northwest wants a Shanghai-Detroit haul; United wants a “capital to capital” Beijing-Washington flight; American wants Shanghai-Dallas) is expected to be decided on next month. Though there will be a “rebuttal” period after the bid is announced, the winner could start service as soon as March.

The airlines aren’t waiting for a green light from the authorities in Beijing - that was already taken care of with a joint agreement between the US and Chinese governments. Right now the ball is in the US Department of Transportation’s court. This article highlights each carrier’s proposition. A running account of the story so far has been detailed on USA Today’s air travel blog.

Each airline seems to be badmouthing the others’ routes, in what one analyst calls “the best and most intense [route] competition I’ve ever seen”.

So which route makes the most sense (leaving aside the quality of the airlines, that is - I’d like to see Cathay Pacific get that flight as much as the next person, but that doesn’t look like it’s going to happen)? As a Shanghai resident I may be biased, but to me Shanghai to Newark would seem to be the elementary choice, for a couple of reasons.

First, it links the the business capitals of world’s largest economy and its fastest-growing challenger for the title. The “capital to capital” rationale seems more shamelessly symbolic and less sensical to me. I could be wrong, but does the traffic of US and Chinese government personnel back and forth from Beijing to Washington, DC really warrant an air route？ Detroit seems somewhat redundant when United already has daily service from Shanghai and Beijing to Chicago O’Hare. As for Dallas/Fort Worth, there is an argument about that hub’s connections to Latin America, but really, that route can wait. Let’s have a Shanghai-New York (effectively) connection first.
Second, it is just plain cool not having to fly over the Pacific or the Atlantic to get to the other side of the world. The Newark flight goes straight north, over Kamchatka in far eastern Russia (thank you for finally opening that airspace), over the North Pole and down through Hudson Bay in Canada, and shaves multiple hours off that flight. Counter-arguments/brighter ideas are welcome.

As I write these next words, I am sitting on an Air China flight from Shanghai bound for Beijing. The plane is sitting at the gate, it is already half an hour late, there is no indication of when it might take off.

“I apologize for the delay,” says Dragonair pilot John Campbell politely, but with an underlying touch of frustration (Air China is using a couple of rented Dragonair planes complete with cockpit crews on the Shanghai-Beijing route). “We have been negotiating with air traffic control. The reason for the delay is separation on the airway between Shanghai and Beijing. I will keep you advised of any developments.”

I presume “separation on the airway” means the gap between aircraft in the air corridors. Which is a jolly good thing. But how come New York’s airports and Heathrow, for instance, can handle so many flights simultaneously and China has trouble with a few aircraft an hour?

The fact is that delays are the rule on flights between China’s two major cities.

I don’t have any statistics, but my guess is that something over 80% of all flights on this route are late. This is plainly ridiculous, and one wonders how the system is going to be able to handle the avalanche of people that will be traveling within China in the months up to and through the 2008 Olympics. The system as it stands now would collapse.

What causes this consistency of delay? Is it the fundamental inefficiency of the state-run airlines? Partly. Is it the ultra cautious approach that is taken with regard to thunderstorms and other meteorological phenomena? Not entirely irrelevant.

But the key factor seems to be air traffic control. I don’t know what they are doing in the control tower, or what rules they are following, but it plays havoc with my business meeting plans. The military, ‘tis said, plays a role in air space management, and foreign airlines have been pushing for years for a more open skies approach – less restrictions, more air corridors.

It surely has to happen. If it doesn’t, when the high-speed trains start hurtling between Shanghai and Beijing, you’ll find me in a business carriage seat, by the window.

My flight, by the way, finally took off 45 minutes late.