China Everbright Bank, the nation’s 11th-largest lender by assets, planned to sell up to seven billion shares in an IPO in Shanghai to replenish capital. The bank is expected to raise nearly CNY20 billion, which would make it the second-largest share sale so far this year behind the Agricultural Bank of China (ABC). It will also be the last major state-owned bank to go public. Everbright Bank posted net income of CNY7.6 billion last year, a 4% increase from a year earlier. At the end of last year, it had CNY1.2 trillion in assets. Its capital adequacy ratio was 10.39% after the bank issued CNY3 billion worth of bonds and introduced eight domestic investors that helped it boost capital by nearly CNY11.5 billion last year. The bank’s non-performing loan ratio stood at 1.25% at the end of last year, before it sold CNY14 billion worth of bad debts to asset management companies early this year. The bank has more than 400 branches in China, relatively sound corporate governance, and is strong in wealth management. The China Securities Regulatory Commission (CSRC) reviewed the lender’s IPO application on July 26.

In the first six months of this year, some 673,000 mainland Chinese tourists visited Taiwan, up 105% from the same period last year, prompting Taiwanese authorities to predict that between 1.2 and 1.5 million mainland tourists will visit this year. Group travel to Taiwan has been opened up gradually, and by now residents from all provinces and regions of China, including Tibet and Xinjiang, are allowed to travel in groups to Taiwan. Individual trips are expected to be allowed soon. To cope with the influx of mainland tourists, the mainland side has agreed to increase the number of travel agencies dealing with cross-strait travel from 146 to 164, and would further expand the number of agencies to speed up application procedures for travel to Taiwan. The two sides have each expanded their weekly flights to 135, but that has failed to meet the growing demand for cross-strait flights, leading to an agreement in May to each increase the number by 50.

U.S. Secretary of State Hillary Rodham Clinton told regional counterparts at the ASEAN Regional Forum in Hanoi that the resolution of disputes over South China Sea islands was in the U.S. “national interest”, angering Chinese Foreign Minister Yang Jiechi. China and Vietnam claim the sea’s Spratly and Paracel archipelagos in their entirety, while the Philippines, Malaysia and Brunei claim the Spratlys in part. Taiwan’s claim mirrors Beijing’s. Yang and Clinton also met on the sidelines of the forum. Beijing is expected to view the unprecedented U.S. involvement as a provocation, coming after months of backroom pressure to block Vietnam’s attempts to internationalize the issue, particularly through ASEAN. Professor Jin Canrong, Associate Dean of Renmin University’s School of International Relations, said Clinton’s statement would not be welcomed by China’s leadership. Dr Carlyle Thayer, a Vietnam expert at the University of New South Wales in Sydney, said the fact so many participants raised the sovereignty issue and that the United States had come out strongly, represented a major development for the forum. “This is a diplomatic challenge to China,” he said.

Finance

• China’s overall insurance premiums rose 33.6% from a year ago to CNY799.9 billion in the first half of the year, the China Insurance Regulatory Commission (CIRC) said. The growth decelerated from the first quarter’s 38.6% rise but was still well up on the 6.5% increase in the first half of last year. Insurers made CNY75.52 billion from investment returns in the first six months, with the rate of return at 1.93%.
• Shanghai shelved plans to set up a yuan offshore center, leaving Hong Kong as the only offshore trading center. An offshore yuan trading center allows non-Chinese companies, institutions and residents to actively trade the currency and settle trade deals. Domestic firms and individuals conduct transactions in an onshore center. Hong Kong Financial Secretary John Tsang said that the offshore center in Hong Kong and the onshore center in Shanghai would serve as the two engines to drive the internationalization of the yuan.
• Total domestic assets in foreign currencies and yuan at Chinese financial institutions had risen 18.3% year on year to CNY87.2 trillion by the end of June. Combined liabilities had risen 18% from a year ago to CNY82.3 trillion by the end of June.
• Bank of East Asia (BEA) has received approval from the banking regulator to open its first village bank in China. Hong Kong’s third-largest lender will set up a rural branch in Fuping county, Shaanxi province, with registered capital of CNY20 million.
• Chinese banks made CNY1.12 trillion worth of new personal consumer loans in the first half of this year, CNY469 billion more than in the same period last year.

Foreign investment

• Shanghai Volkswagen General Manager Liu Jian and three executives died in a car accident in Jiuquan, Gansu province, where the car manufacturer was running a promotional campaign for dealers. Liu’s Tiguan SUV collided at a speed of 220 km/h with a truck and caught fire. Liu had replaced Chen Zhixin as General Manager in October, 2007.
• China’s combined investment in European Union countries amounted to USD4 billion so far. In the first half of this year, investment almost doubled to USD388 million from the same period last year.

Foreign trade

• Taiwan’s export orders recorded the slowest pace of year-on-year growth in eight months in June as exports rose 22.48%. The pace of Taiwan’s order growth has fallen steadily since peaking at 71.8% in January.
• Two JF-17 Thunder fighter jets, co-produced by China and Pakistan, have made their international debut at the Farnborough international air show. China plans to export the fighter jets but is still reliant on Russian engines. The total value of China’s arms exports in the 2005-9 period was USD2.73 billion, only about 2.3% of the world’s total. But China’s aircraft sales — worth up to USD815 million — are larger than any other of its weapon exports.
• The World Trade Organization (WTO) launched its annual World Trade Report 2010 in Shanghai, the first time it came to China to reveal its annual report. Pascal Lamy, WTO’s Director General, attended the event. The main topic of the report is “trade in natural resources.”

Macro-economy

• China should boost interest rates or allow the yuan to rise to help curb inflation pressures, the Asian Development Bank (ADB) said. China should speed up the process of returning economic policies to more normal settings to “avoid excess inflation or a hard landing”, the ADB added. The bank is forecasting 9.6% GDP growth in the country this year.
• The Central Committee of the Communist Party of China will meet in October to draw up the country’s 12th five-year plan covering the “key period” of 2011-2015. The plan will concentrate on transforming the country’s export-driven and heavy industry-focused “mode of economic growth” and continue to build a “moderately prosperous society” — one of the key goals of the last plan.
• Striking workers at an Omron plant in Guangzhou, which produces electronic automotive components, went back to work after the management agreed to their demand for higher pay.
• The Chinese government will push for consolidation in the vehicle, steel, cement, machinery, aluminum and rare-earth industries in the second half of the year through mergers, acquisitions and company restructuring, Minister of Industry and Information Technology Li Yizhong said.

Mergers & acquisitions

• Fertilizer maker China Bluechemical’s share price gained 4.3% after it bought an 80% stake in Huahe Chemical for CNY82 million. Huahe has approval to build a 520,000 ton-a-year urea plant in Hegang, Heilongjiang province, using coal as feedstock.

Petrochemicals

• China Petroleum and Chemical (Sinopec) posted a 5.64% year-on-year increase in oil and gas output to 182.62 million barrels of oil equivalent (BOE) in the first six months. Oil output edged up 0.05% to 149.19 million barrels, while gas output surged 40.73% to 5.67 billion cubic meters. Sales of refined fuel rose 18.1% to 68.15 million tons. Refinery throughput climbed 16.7%.
• Sino Oil & Gas Holdings plans to invest about USD100 million in the next three years to extract one billion cubic meters of natural gas trapped in coal seams in Shanxi province.

Real estate

• Prices of new homes in Shanghai stood below the CNY20,000 per square meter threshold for the sixth straight week as a result of sluggish sales of mid- to high-end residential projects. Real estate developers began offering some discounts on their projects, almost all located in outlying areas of the city, such as Jiading district. The current slack momentum among both developers and buyers will probably last until September as July and August are the traditional low months for housing sales.
• The Chinese government will back away from its tightening policies in the housing market within three months as the economy faces a bigger risk from a slowdown than inflation, says International Strategy & Investment Group. “The policy launched in April has totally demoralized home buyers and developers with no promise of lasting benefits,” Donald Straszheim, Senior Managing Director for China research at ISI, wrote to clients.
• Purchases of mainland residential properties by Hongkongers plunged 28% in the first half compared with the same period last year. About 7,900 to 8,900 mainland flats were acquired by Hongkongers in the first half of this year. The total number of home purchases by Hongkongers in Shenzhen fell to a 10-year low of 2,000 units to 2,200 units. Mainlanders’ investment in Hong Kong real estate has also been declining as banks tighten lending.
• Chinese investors spent approximately GBP170 million buying up newly built properties in central London in the 12 month period ending March 2010, driven by a weaker pound and tightened real estate policies at home, according to real estate agency Knight Frank.
• China plans to start implementing a property tax in two or three years on a trial basis, a source from the Ministry of Finance told China Daily. It has not been confirmed that the trials would start in 2012. The property tax is expected to boost the coffers of local governments and will also help curb realty speculation by increasing the holding costs.
• Developer China Greentown Holdings has signed an agreement with the Mayor of Shenyang, Chen Haibo, to build subsidized housing in the capital of Liaoning province. Most developers concentrate on high-end housing, which is more profitable. Greentown was developing subsidized housing with a total construction area of about 2.38 million square meters in several cities amounting to about 8% of the company’s total construction area.

Retail

• Gome Electrical Appliances Holding has signed a CNY6 billion contract with Japan’s Sharp Corp to distribute its liquid-crystal display televisions through its stores in the country. The contract, which runs to the end of the year, was the biggest deal for Sharp in China, Gome said.

Stock markets

• Foreign investors will be permitted to invest up to 10% of their Qualified Foreign Institutional Investor (QFII) quotas in China’s index futures market. A total of 89 firms got QFII quotas exceeding USD17.72 billion by the end of June. The 10% limit is expected to channel CNY12 billion into the index futures market and enable QFII investors to hedge risks and compete more effectively with local asset managers.
• Chinese companies raised CNY215.3 billion from IPOs in the first half of this year, the most in a decade. The first-half tally doesn’t include Agricultural Bank of China’s USD19.2 billion July sale in Shanghai and Hong Kong. Most of the IPOs in the first half were from companies selling shares on the small and medium-sized board and the ChiNext startup board, both based in Shenzhen.
• SouFun, a leading Chinese real estate website, is preparing a U.S. initial public offering (IPO) worth up to USD300 million in what could be the largest such listing by a Chinese web company this year. SouFun is 51% owned by Australia’s Telstra Corp. Venture capital firm IDG is also a shareholder. SouFun covers 104 cities and has 20 million registered users.
• China’s military supplier Jihua Group will launch an initial public offering (IPO) worth about CNY3.25 billion to fund production expansion. Beijing-based Jihua has a 75% share of the market for military and police uniforms, among other equipment. Jihua made an attributable net profit of CNY453 million last year, down slightly from CNY466 million in 2008.
• JP Morgan Chase expects the benchmark Shanghai Composite Index to rally 21% by the end of the year. The index rose nearly 6% last week in what may be the start of a new bull market. In a first positive sign, the index ended the trading day above the 2,500 level for three straight sessions last week.
• Shanghai-based budget carrier Spring Airlines aims to become the country’s first private airline to go public by listing shares on China’s stock market next year. The airline currently operates 20 Airbus A320 aircraft, and earned CNY160 million in the first six months of the year, more than doubling its profits from the same period last year.

Travel

• Hong Kong’s Chek Lap Kok Airport handled 24.5 million passengers in the first half, an increase of 9.3% year on year, while cargo surged 35.1% to 2 million tons.
• Track-laying has started for the 1,318 km Beijing-Shanghai high-speed railway. The CNY220.9-billion railway line is scheduled to start operation in 2012. The operating speed of the railway is expected to be 350 km/h. There will be 21 station along the line. Traveling time will be cut by more than half to less than five hours.
• Hong Kong Airlines has signed a draft agreement to buy 25 Airbus planes worth USD5.7 billion at catalogue prices. Delivery would begin in 2012, and the planes would be used on long-haul routes to Europe and North America. Hong Kong Airlines was established in 2006 and recently added long-haul services to Europe.
• Dunlop Aircraft Tyres (DAT), the world’s only specialist aircraft tire manufacturer, is considering to open its first overseas factory in China in about five years time. The company already has a distribution center in Jinjiang, Fujian province, which supports its customers across the whole of Asia.
• The Chinese government is considering subsidies and tax breaks to encourage Chinese airlines to re-route some of their international flights to underused airports in the northeast, easing the load on Beijing and Shanghai.

One-line news

• China Guangdong Nuclear Power Holding Corp will start work on a nuclear power plant in Guangxi later this month. The Chinese government gave the green light for the Fangchenggang Nuclear Power Station project on July 15. The new plant will have six pressurized water reactors with an installed capacity of about 1,000 megawatts each.
• The Three Gorges Dam passed a major test when peak floodwaters reached a record 70,000 cubic meters per second, more water than passed through that section of the Yangtze River during the catastrophic floods of 1954 and 1998. The dam proved its flood-control value by holding back 40% of the torrent behind its concrete wall, while officials only allowed 41,400 cubic meters per second to flow downstream.
• Floods this year have already exacted the highest death toll since 1998, when the highest water levels in five decades claimed 4,150 lives. Typhoon Chanthu hit southern China in the past weekend.
• Tang Jun, former President of Microsoft China, has been accused of falsifying his credentials, including a doctoral degree from the California Institute of Technology (Caltech), which he does not hold. He later joined  Shanda Interactive Entertainment and the New Huadu Industrial Group.
• Workplace accidents in China left 33,876 people dead in the first half of the year, an 11% year-on-year drop. This amounts to an average of 187 deaths every day in the first half of 2010.
• Chen Shaoji, former Chairman of the Guangdong provincial committee of the Chinese People’s Political Consultative Conference (CPPCC) was sentenced to death with a two-year reprieve for taking almost CNY30 million in bribes.
• Xiang Huaizhu, former Deputy Director of the Economic Crime Investigation Bureau of the Ministry of Public Security, was sentenced to 12 years in prison for taking nearly CNY2 million in bribes, including CNY1 million from disgraced former Gome Chairman Huang Guangyu.

After similar exercises in 2003 and 2006 (see http://ec.europa.eu/trade/creating-opportunities/trade-topics/intellectual-property/enforcement/ ), the European Commission recently launched a new survey regarding IPR protection and enforcement in third countries (relevant from a EU trade policy perspective), targeting in the first place EU companies established or operating in third countries. The survey can be accessed at  http://ec.europa.eu/yourvoice/ipm/forms/dispatch?form=IPRsurvey2010

The replies to this survey will be taken into account by DG Trade in reviewing its priorities in that area. In particular, combined with other sources of input, it will enable the Commission to update its list of “priority countries” (cf. IPR Enforcement Report 2009). In order to ensure representative conclusions, as many EU right holders as possible should participate in this survey. This information may be disseminated as broadly as possible. The survey will close on 31 October 2010.