The Ministry of Finance reports China’s state-owned enterprises posted a 31.6% rise in 2007 total profits. They reached a record RMB1.62 trillion ($221.9 billion), from RMB1.23 trillion a year earlier.

The 119,000 state-owned enterprises paid a record RMB1.57 trillion in taxes last year, up 21.8%. Their sales revenues grew 20.1% to RMB18 trillion.
State-owned enterprises administered by the central government contributed 67.9% of the total profits, or RMB1.1 trillion, up 29.2%. Their sales revenues rose 19.1% to RMB11 trillion.

China has 152 centrally administered enterprises, all under the supervision of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council.

Although the number of such enterprises dropped to about 160 by the end of 2006 from more than 190 in 2002 due to economic restructuring, their total sales jumped 146% and profits increased by 219%.
Source: China View

Overall Chinese business conditions remain positive but results for the main indexes in the November Xinhua Finance/MNI China Business Sentiment Survey show conditions deteriorating across the board.

The growth of new orders has slowed to its lowest level ever, with production and corporate financial positions declining to record lowsl. Most of the indexes remain in positive territory but indicate that growth has slowed considerably since the booming conditions reflected in the survey earlier this year.

The overall business sentiment index for current conditions stood at 63.85 in November, the lowest result ever in the survey which began in Jaunary 2005. That result was down from 64.58 in October and from 75.67 in November last year.

The index was above 80 in the first three months of this year.

The index for new orders fell sharply to 60.36 in November, also its lowest level ever, from 73.39 in the previous month and 71.48 a year ago.

The financial position index fell to the lowest level in survey history at 60.00, down from 63.64 in the previous month and 71.72 for the same month in 2006.

Logan Wright, China analyst for Stone and McCarthy Research Associates, said, ‘A combination of cost pressures have been building throughout this year, in the form of higher input prices, higher interest rates, faster yuan appreciation, and declining sales prices; these effects are depressing both corporate financial positions and overall sentiment.’

The survey results suggest Chinese companies still expect better times ahead, with the indexes showing expectations for conditions in three months outperforming the current indexes in most categories, and with some improving from the previous months’ survey. Our illustration is of a low pressure system. Seemed appropriate.
Source: Forbes

Despite a spate of product recalls from China this year (heavily reported in the press who went for the story like a starving dingo at a dead rabbit) and growing scrutiny over the quality and safety of its goods, the Chinese export boom continues to accelerate. Maybe buyers do not believe all they read in newspapers. The following figures are according to trade statistics released last week.

China exported $878 billion worth of goods through the first nine months of this year, up 27% from its record shipments a year ago.

The Chinese trade surplus with the rest of the world ballooned to $187 billion through September of this year, up from $177.5 billion for all of 2006.

Even in categories where China was hit by high-profile recalls earlier this year, like food and toys, exports rose sharply, according to data compiled by the World Trade Atlas. Much, much more in the excellent report in the International Herald Tribune. Well worth reading.
Source: International Herald Tribune

The China Business News reports that, according to an investigation conducted by the Ministry of Commerce, 70% of overseas Chinese enterprises are ‘in the black’.

Statistics from a bulletin compiled by the Ministry of Commerce, the National Bureau of Statistics, and the State Administration of Foreign Exchange show that China’s outbound foreign direct investment (FDI) reached $21.16 billion in 2006.

Chen Lin, deputy director of the ministry’s foreign economic cooperation department said, ‘We expected the country’s outward investment to reach US$60 billion during the 11th Five-Year Program period (2006-10). Now we believe the actual figure will be much higher than that.’

Look at it in other figures. As of the end of 2006, more than 5,000 local investment entities had established nearly 10,000 overseas firms in 172 countries and regions. That is a measure of the outbound foreign direct investment involved.
Source: China Daily

The Asian Development Bank (ADB) has raised its growth forecasts for China as it expects exports, investment and consumer spending to fuel expansion in the world’s fourth-biggest economy.

The ADB is now expecting China’s gross domestic product to expand 11.2% this year, more than the growth forecast of 10% it made in March. It projects that GDP will grow 10.8% next year, more than its earlier estimate of 9.8%.

It is seriously beginning to sound like some of the lines from that jingoistic horror, Land of Hope and Glory. It runs: ‘Wider, still and wider, may thy bounds increase, God who made thee mighty, Make the mightier yet.’ God is probably not involved. Becoming the factory of the world probably is.

The ADB said in a report: ‘GDP growth accelerated in the People’s Republic of China from 11.1% in the first quarter of 2007 to 11.9% in the second quarter, fueled by a widening trade surplus, by galloping investment across the board, and by buoyant private consumption.’

China is struggling to cool economic growth by discouraging banks and consumers from lending and borrowing through a combination of rising interest rates and higher reserve requirements, or the amount of cash that banks have to deposit with the central bank.

Last week, the government raised its benchmark one-year lending rate for the fifth time this year.

The ADB said, ‘The authorities redoubled efforts to rein in investment and exports, such as increasing interest rates, banks’ reserve requirements, and taxes on some exports, but to date, these steps have had limited impact.’

For wider still and wider for China the bounds keep increasing.

The ADB said that in the first half of the year, China created 6.3 million jobs in urban areas, already 60% of the government’s urban employment goal for this year.

If success is inevitable, why not lie back and enjoy it? The main reason is that it makes other nations jealous.

China’s first-half trade surplus was $112.5 billion. As a result the U.S. has been pressing Beijing to allow the renminbi to strengthen against the dollar. It might happen but it would not change the situation enormously. The ADB expects China’s exports to grow 20% and imports 16% in the second half. This will result in a record full-year trade surplus of 300 billion U.S. dollars, up more than 60% from 2006. Which will boost its foreign currency reserves, which are estimated at $1.4 trillion some of which will be invested abroad.
Source: Forbes

Shares in Shanghai have now broken through a new ceiling to reach a record high. This breakthrough came through reports of good interim earnings, particularly by airline and coal companies.

The benchmark Shanghai Composite Index added 50.95 points, or 0.99%, to close at 5,218.83. Yesterday’s advance meant a cumulative monthly gain of 747.8 points in August. It finished at 4,471.83 on July 31. Which is fairly amazing.

China Securities Journal reported that 1,471 out of the 1,503 listed companies which had year-on-year comparable data, recorded a weighted average earnings per share of RMB0.19 for the first six months. Deducting new offerings, the figure was revised to RMB0.22, as against the RMB0.134 for the same period of last year.

Between January and June, the 1,471 listed companies realized RMB3.57 trillion in combined revenues, up 24.5%, and RMB468.7 billion in gross profits, up 66.78%.

The Shenzhen Composite Index, which tracks the smaller of the two mainland markets, rose 1.25 percent to 1,457.83.

There may be a bubble but, at the moment, it shows no sign of bursting.

Zhu Keming, an analyst with Huatai Securities said, ‘The rapid profit growth shown in the earnings reports enhanced investors’ confidence. The high valuation of the stocks also cast even higher requirements on the future performances of the companies.’

This is true but the mainland listed companies posted a 70% increase in net profit in the first half on average, maintaining the momentum shown from last year’s second-half report.

An online survey by Sina.com found that less than 20% of the punters thought the market would fall. More than 2,500 participated in the poll although, to be fair, these would tend to be small investors.

Wang Xingjun, an analyst with Donghai Securities summed it up when he said, ‘The risk awareness is quite weak in the market. Many investors don’t look at the price or cumulative growth or price-to-earnings ratio of a stock in trading, only focusing on whether it will go up or down.’

Indeed, it would be fair to say that many investors have no idea what cumulative growth or price-to-earnings mean.
Sources: Jongo News and TDC Trade.com

The combined business revenue of China’s top 500 companies accounted for 83.5% of the gross domestic product in 2006, almost six percentage points higher than the previous year.

The China Top 500 Enterprises 2007 list — issued by the China Enterprise Confederation and China Enterprise Directors Association — states the top 500 took in RMB17.49 trillion ($2.3 trillion) of business revenue last year, up 23.7% over 2005.

Sinopec, which has many interests mainly in petrochemical areas and one of its rigs is our illustration, stayed at the pole position with business revenue of RMB1.06 trillion, up 29% year-on-year.

Second to fifth rankings went to China National Petroleum Corporation, State Grid, Industrial and Commercial Bank of China and China Mobile.

A total of 349 enterprises, or nearly 70% of the total in the list, are state-owned or state-controlled. Their combined assets reached RMB14.9 trillion at the end of 2006, accounting for 85% of the total.

The number of private-owned enterprises in the list rose to 89, with RMB1.4 trillion in business revenue.
Source: China.org.cn

A survey conducted by leading global professional services firm Ernst & Young suggests China is the most attractive destination for foreign investment.

Between February and March 2007, the survey asked 809 managers from various industries in European, American and Asian firms about their investment preferences.

Almost half — 48% — of international investors named China as one of their top three preferred business locations in 2007, up from 41% in the 2006 survey. The attractions are low labor costs, more competitive rates and higher productivity. Those are all pretty obvious. But the country’s infrastructure, quality of research and development, workforce education and political stability were cited as major advantages.

However, the survey revealed that China, while topping the rankings for its favorable labor costs, still lags behind in quality of workforce — only 4% of those surveyed said it is the most attractive country in terms of labor skills.

In addition, only 4%% of respondents said China is the most attractive economy in terms of R&D availability and quality, as opposed to 43% for Europe and 27% for North America.

The survey ranked investment preferences on the basis of market and access, labor and productivity, fiscal, legal, environmental and regional issues.

India’s popularity appears to be increasing fast. While 11% of investors cited it among their top three preferences in 2004, it has risen to 26% in 2007.
Source: China View

In the first five months of this year China’s industrial-company profits swelled 42.1% which, to some extent, nullified government efforts to cool investment in the world’s fastest-growing major economy.

The National Bureau of Statistics said today in an e-mailed release that combined net income increased to RMB902.6 billion ($119 billion). Sales jumped 27.4% to RMB14.2 trillion.

Premier Wen Jiabao is trying to prevent a rebound in factory investment that would increase the risk of overcapacity. Besides curbs on bank lending, the government has ordered state companies to start paying dividends to trim the money available for investment.

Qu Hongbin, chief China economist at HSBC Holdings in Hong Kong, said, ‘The strong growth will fuel increased investment. Monetary tightening needs to be continued.’

The government announced the trial dividend program last month. China has also tightened project approvals, curbed land use, increased energy costs, and cut export rebates. The central bank has raised interest rates twice this year. More monetary tightening is likely.
Source: Shanghai Daily News

According to a survey by Hong Kong-based CLSA in May China’s manufacturing activity rose to the highest level in more than two years after a surge in bank lending.

CLSA said the Purchasing Managers’ Index (a new concept to the writer) climbed to 54.1 from 53.3 in April which is the highest since April 2005. Bloomberg News, which tends to get it right, said a reading above 50 reflects an expansion in manufacturing.

Jim Walker, CLSA’s chief economist, said, ‘Accelerated monetary tightening measures should be expected over the next six months as China fights to regain control of its overheating economy. China’s commercial banks continue to ignore pleas to restrain lending just as its local governments ignore pleas to restrain spending.’
Source: Shanghai Daily