BMO (Bank of Montreal remembering that this is French speaking Canada) started in Montreal in1 817. There are 29 member banks in Guangzhou and therefore to be named top foreign exchange bank two years in succession is laudable.

CFETS, which is the interbank trading and foreign exchange division of China’s central bank, has recognized two BMO Capital Markets employees as ‘Excellent Traders of 2007.’

Regine Ou and Bofeng Jiang based in BMO’s Guangzhou office are among a total of 11 traders from 10 banks to receive the special award.

Jamie Thorsen, Global Head of Foreign Exchange Products & China Capital Markets for BMO Capital Markets, and seen in our illustration, said, ‘These are fantastic achievements and a testament to our growing capabilities in China as well as our excellence in foreign exchange. As the Guangzhou market continues to evolve into a more competitive arena, BMO is well positioned to continue providing high quality services and execution.’

BMO is a Canadian bank in China, with branches in Beijing, Guangzhou and Hong Kong. BMO also has a representative office in Shanghai and an Investment Banking Representative office in Beijing.

BMO’s long history in China dates back to the early 1800s — almost as soon as it was founded — when it completed its first foreign exchange transaction helping the United States finance its growing trade with China.
Source: Fox Business

National Australia Bank bought 20% in Union Trust and Investment Limited, making it the first foreign investment in China’s trust sector.

The investment by nabCapital, NAB’s capital markets and institutional banking division, makes the bank the third largest shareholder in UTI. Neither party revealed the price for the transaction.

nabCapital’s CEO John Hooper said, ‘With UTI’s focus on property this deal represents an opportunity for NAB to bring our expertise in structured financing to China’s burgeoning market.’

NAB is one of the largest listed financial institutions on the Australian Stock Exchange and has strong experience in structured property finance, which brings together property, finance, equity capital markets and cooperative finance.

John Hooper said, ‘Our cooperative venture will concentrate on developing new products, particularly in infrastructure and construction - two tremendous growth areas in China. The bank will have a chair on UTI’s board and several other top management members in charge of risk management.

John Hooper is still quite optimistic about the country’s real estate sector, but shows little interest in investing in China’s banking sector.

He said, ‘For the time being, we have no plan to buy a stake in China’s commercial banks’ although he added NAB would like to be a more ‘active’ investor in the banking sector.

One of the largest attractions of UTI, according to John Hooper, is the company is relatively small, with high growth potential and sound corporate governance.

According to Wang Xichao, UTI chairman, the partnership will help the company explore creative businesses in QDII, infrastructure trusts, pension products, REITs and real estate trust funds.

In 2006, the company was one of two trust companies approved by the central bank to run REITs, on a pilot basis.
Source: China Daily

Chinese Finance Minister Xie Xuren says China will maintain a ‘prudent’ fiscal policy to maintain stable and rapid economic growth as well as basically stable consumer prices.

In an article in the official People’s Daily, Minister Xie said the fiscal policy will be implemented along with a tight monetary policy to prevent economic overheating and widespread inflation.

In truth, there is nothing overly new in this.

When China concluded its three-day 2007 Central Economic Work Conference, which ran from December 3 to 5, 2007, the official communique said that China will maintain a ‘prudent’ fiscal policy for the coming year.

The conference said various monetary instruments would be used to regulate liquidity and to strictly control the size of loans and frequency of credit extension, so as to better regulate domestic demand and balance international payments.

The December conference said that with a prudent fiscal policy and a tight monetary policy, China will be able to achieve ‘the Two Prevents’ in the coming year: to prevent economic growth developing from rapid to overheating, and to prevent price rises evolving from structural to evident inflation.

In truth, China has been implementing a prudent monetary policy since 1997. From 1998 to 2002, the country increased money supply to counter deflationary pressure.

From 2003 to 2007, the monetary policy began to tighten in order to help address changes in economic development, including rapid growth in credit extension, investment and foreign exchange reserves.

Now Finance Minister Xie Xuren states the government plans to improve its consumption tax system adding that the government is also waiting for a suitable time to launch a planned new fuel tax. A new tax to protect the environment is also under consideration.

China’s annual legislative meeting, bringing thousands of delegates to deliberate the country’s economic and political issues, opens tomorrow, March 5, in Beijing.
Source: RTT News

China received $74.7 billion in foreign direct investment in the non-financial sectors last year, ahead of all developing countries for the 15th successive year.

The Ministry of Commerce said the figure reflects a year-on-year increase of 13.59%.

Total foreign direct investment (FDI) — including capital flows to the financial sectors such as banking, insurance and securities — was $82.7 billion in 2007, up 13.8 % from a year earlier.

Wang Zhile, director of the Multinational Enterprise Research Center affiliated to the Ministry of Commerce, said, ‘The growth is higher than my expectations. It shows China’s role as a crucial link for multinationals’ global manufacturing, purchasing and research.’

This year may well be a bit different.

Income tax rates for domestic and foreign companies were unified at 25% from the beginning of 2008. Prior to this, domestic companies paid 33% income tax while foreign companies, which benefited from tax waivers and incentives, paid an average of 15%.

The effect will be considerably muted by the fact that foreign companies registered before the new rates took effect will pay tax at the preferential rate for another five years.

It is true that foreign investors are also paying more for labor and material costs, such as oil, plastics and steel, and face tighter policies on polluting and resource-intensive industries. On the other hand, China has, by a considerable margin, a more attractive manufacturing climate — not using that in the weather sense — than any country in the west and this is likely to last for many more years. It is expected that China will continue to be a magnet for foreign development and investment as Beijing’s policies to woo foreign investors and open up continue.

Wang Zhile said, ‘The Chinese leadership assured foreign investors at the 17th Party congress late last year that China will stick to its reform and opening-up policies. It is taken as a good opportunity by many foreign investors.’
Source: China Daily

The official Shanghai Securities News reports, citing sources, that the China Development Bank, one of the country’s three policy banks, is planning to invest over RMB7 billion in Shenzhen Financial Leasing, taking a 90% stake in the latter.

The capital injection will make SFL the largest financial leasing firm in China.

Shenzhen Financial Leasing currently has registered capital of RMB716 million, with Hainan Airlines Group the largest current shareholder with a 21.66% stake.

Xi’an Aircraft Industry, the parent of Xi’an Aircraft International, also owns 18.16% of Shenzhen Financial Leasing.

In October 2007, State Grid, one of China’s two state-owned power transmission firms, said it was selling its 3.21%t stake in Shenzhen Financial Leasing for a minimum of RMB16.10 million.

State Grid said in a statement to the Shanghai United Assets and Equity Exchange that Shenzhen Financial Leasing reported a 2006 net profit of RMB11 million, compared with RMB1.26 million a year earlier.

In January 2007, China’s banking regulator issued new rules permitting qualified local and overseas-incorporated commercial banks to apply to set up directly-controlled lease finance companies. Leading domestic lenders including Industrial and Commercial Bank of China , China Construction Bank and Bank of Communications all of which have since established lease financing units.

China Development Bank has reportedly won central government approval to restructure itself into a commercial bank. The bank is expected to bring in strategic investors ahead of going public.
Source: Forbes

China’s central bank, the People’s Bank of China has said price levels will remain high throughout the first half of the year as the nation is facing an ‘increasing’ risk of inflation.

The bank said in its monetary policy report for the fourth quarter that structural supply shortfalls and rising international prices would hold domestic price levels at a high level for a period of time.

Growth of the consumer price index (CPI), a barometer of inflation, surged to an 11-year high of 7.1% last month.

Analysts said although raw agriculture prices went up substantially last month, it normally takes one or two months for the pressure to pass through to manufactured and processed food items, which will add pressure to inflation in the following months.

Food price rises may in turn spill over to other sectors, pushing up prices of other products and labor costs.

Ma Jun, chief economist of Deutsche Bank in China said, ‘The underlying inflationary pressure is even stronger than the January headline number is suggesting, and CPI inflation will likely make two more new highs to reach 7.8% in February and 8% in March.’

With a view to cushioning the impact of international commodity price rises, the central bank said it would further use more flexible exchange rate to reduce inflationary pressure.

The renminbi, has appreciated more than 13% since it was de-pegged from the dollar in July 2005. It climbed 6.9% against the US dollar in 2007.

The central bank report said most exporters had adapted better than expected to the stronger renminbi.
Source: China View

China Railway Construction plans to raise as much as RMB22.25 billion ($3.11 billion) in its Shanghai initial public offering after setting its price range.

It proposed a range of RMB8 to RMB9.08 for the offer price of its Shanghai sale, which will be followed by a Hong Kong float, the nation’s second-largest infrastructure contractor said yesterday.

The range will represent a price/earnings ratio of 26.92 to 30.56 based on its 2007 net profit.

Officially the company said, ‘As major IPOs on the Chinese mainland have all fixed their offer prices at the top of the indicated ranges since 2007, it should be no problem for China Railway Construction to follow suit.

Subscriptions for China Railways Construction’s IPO have opened and trading will start in the first 10 days of March.

The company has said it will use proceeds of the Shanghai sale to buy construction equipment, expand machinery production, develop the property sector, finance construction of a passenger rail line and repay bank loans, with a combined cost of RMB15.87 billion.

China Railway Construction, which has just won tenders to build rail projects in Libya, is China’s top rail builder by overseas contracts.
Source: China View

Taiwan and the mainland have taken a big step towards dismantling one of the biggest remaining barriers to cross-strait economic ties by reaching an initial agreement to allow Taiwanese banks to buy stakes in mainland banks through subsidiaries in Hong Kong.

Taiwanese companies are among the biggest foreign investors on the Chinese mainland, with more than $150 billion in assets but Taiwan law bans banks from investing in the mainland.

Banking regulators in Taipei and Beijing have now agreed that Fubon Bank, one of Taiwan’s largest lenders, can take a 20% stake in Xiamen Commercial Bank through Fubon’s Hong Kong subsidiary.

The Hong Kong Monetary Authority (HKMA), the territory’s central bank, will act as an intermediary for supervisory information. People close to the agreement said the Fubon investment would act as a ‘case study’ for future possible tie-ups.

It is not clear when the mainland will signal its final agreement although there is a suggestion it could come in late March.

Fubon bought Hong Kong-based International Bank of Asia in 2003, but has failed to get approval from Beijing for its subsidiary to acquire a stake in a mainland bank.

The illustration has  nothing to do with the story, although it is a role playing character called ‘Fubon’. Better looking than a bank any day.
Source: Financial Times

The million-dollar bonus has arrived in China’s financial services industry.

Fierce competition has forced companies to start offering Wall Street-type compensation, especially in the fund management industry.

Executives report a big increase in CVs received from US-based professionals with a China connection. Peter Alexander, head of fund management consultancy Z-Ben Advisors said, ‘There were several bonuses over a million dollars last year. Retaining assets is no longer the top priority, it is getting and retaining good people.’

The fund management industry has seen an explosion in assets under management from $40 billion in 2005 to around $450 billion by the end of 2007.

A senior executive at a Shanghai-based fund management company who asked not to be named said, ‘I personally know of at least half a dozen managers who made more than a million dollars.’

China has 60 approved asset management companies, almost half of which are joint ventures or have foreign shareholders.

Industry executives complain about the small number of people qualified to manage funds at local fund management companies — one executive said about 300 people had all the required regulatory qualifications.

Perhaps we will see a Chinese equivalent of Tom Wolfe’s The Bonfire of the Vanities. The bonuses are already at the level reached in that amazing novel.
Source: Financial Times

Chinese oil rig manufacturer Honghua Group plans to raise up to $480 million in a Hong Kong initial public offering. Honghua, which had pushed back its IPO in January due to poor market conditions,is offering 833.36 million shares, or 25% percent of its enlarged share capital.
If it happens as planned Honghua will be the first company to tap the Hong Kong market with an IPO since the Lunar New Year.

At the same time, China Railway Construction (one of its products is the illustration) is marketing its Hong Kong and Shanghai IPO, which is expected to raise a combined $4 billion in what would be the world’s biggest IPO this year.

Although the market is still down 14.6% this year, a successful Honghua or China Railway Construction listing would encourage other firms that had postponed IPOs to relaunch their deals.

A warning note was struck by Adam Tam, fund manager at Pacific Sun Investment Management, who said, ‘Market sentiment has not fully recovered yet. Fund-raising activities are still difficult, as investors are very selective.’

Other forthcoming IPOs include food and beverage producer Want Want Holdings, which is premarketing for a $1 billion IPO.

Chinese department store Maoye International is expected to relaunch its IPO after Goldman Sachs added UBS and HSBC as sponsors for a deal that was set to raise up to $905 million before it was pulled in January.
Source: Reuters