China Cosco may raise as much as CNY27 billion selling assets to its parent. It plans to sell Cosco Logistics, valued at about CNY7 billion, to state-backed parent company China Ocean Shipping. The company is also considering selling other assets to China Ocean to raise as much as an additional CNY20 billion, but the final amount China Cosco will seek has not been decided. Shares in China Cosco fell after the logistics sale was announced, on concern that divesting the profitable unit would undermine earnings over the longer term, but on the other hand gains from asset sales may help China Cosco avoid a third straight annual deficit. “It’s not a good time to sell shipping assets because the value of such assets is difficult to determine right now given the industry environment,” said Davin Chunpong Wu, Transport Analyst at Credit Suisse. “China Cosco’s objective is obviously to return to profit this year.” Cosco Logistics recorded an operating profit of CNY388 million in the first six months of 2012, compared with a CNY1.3 billion loss at its main container shipping division and a loss of CNY3.4 billion from the dry-bulk fleet, according to a company statement. The shipping company said it will use gains from the logistics unit sale to boost operating results in 2013 and reduce the risk of its stock being suspended from trading in Shanghai. Analysts at Citigroup estimated that the division may fetch CNY6.4 billion to CNY9.1 billion, which would result in a gain of as much as CNY4.6 billion. China Cosco could also sell assets including its stake in China International Marine Containers, Citigroup said.

Chengdu has played an increasingly prominent role in cargo transport as the starting point of cargo lines to Shanghai, Guangzhou, Nanjing, Xuzhou, Ningbo, Lanzhou and Lianyungang. It is also home to one of 18 container stations. Covering more than 140 hectares, the station was put into use in early 2010. Built to have annual handling capacity of 26.26 million tons, it is said to be the largest in Asia. Logistics parks built around the station link to at least 55 cities. Improved logistics will help local businesses cut their shipping costs by some 30%, according to a local newspaper. Cargo rail links have been extended to Europe. In 2012, a freight route linking Chengdu and Duisburg in western Germany, opened to traffic. Local products can now be shipped to Germany within 16 days. Later that year, InterRail and China Railway International Multimodal Transport Co began a pilot route connecting Chengdu to Lodz, the third-largest city in Poland. Chengdu also boasts a well-developed road network with national-level expressways extending out to Shanxi and Yunnan provinces, the Tibet autonomous region and Chongqing. Thanks to Chengdu’s enhanced transport infrastructure and geographical location, some 50 modern logistics companies including UPS, DHL and Maersk had set up offices in the city by early March, the China Daily reports.

A brake failure caused a semi-trailer loaded with cement crashing into a car, a bus and a truck on an expressway in southern Fujian province, killing 11 and injuring 35 others. A second accident happened in northern Hebei province, where a truck loaded with stones crashed into a village temple fair in Fuping county. The truck rolled over, the stones fell off and hit villagers, killing six immediately. It says two more people died in hospital from their injuries. Road accidents involving heavy trucks are common in China, where overloading is routine and where drivers often ignore safety measures.

Airlines & airports

• Cathay Pacific Airways cancelled an order for eight Boeing 777-200 freighters as it revamps its fleet. Cathay will instead buy three Boeing 747-8 freighters worth USD1 billion at list prices. The firm will sell four Boeing 747-400 converted freighters to Boeing as part of the restructuring.
• Cargo throughput at airports in Shanghai, Beijing and Guangzhou accounted for over half of the total cargo volume handled by all Chinese airports in 2012, the Civil Aviation Administration of China (CAAC) said. Chinese airports handled 11.99 million tons in cargo traffic in 2012, up 3.6% on 2011.

Logistics industry

• China Grain and Logistics Corp will become a subsidiary of China National Cereals, Oils and Foodstuffs Corp. Zheng Yujie, Analyst with CI Consulting, said that “the takeover is an important step for the company’s whole industry chain strategies.”

Ports & sea transport

• China Ocean Shipping (Group) Co (Cosco) is confident of returning to profitability in 2013, President Ma Zehua has said in Beijing. Cosco said on January 25 it may report a large loss for 2012 – the second year of losses in a row. In 2011, Cosco lost CNY10.4 billion. If Cosco records another loss in 2013, it risks being delisted from the stock market.
• China Petroleum & Chemical Corp (Sinopec) and other fuel producers and traders are borrowing more than USD500 million to build storage facilities at Fujairah in the United Arab Emirates (UAE). It is the biggest oil port in the Persian Gulf region outside the Strait of Hormuz. Borrowers in the region are paying the lowest interest rates since 2010, according to data for 209 GCC loans compiled by Bloomberg. Investors are betting that demand for refined oil products in a region holding 48% of the world’s crude reserves will boost their profits from storing fuel in Fujairah, now one of the largest ports for refueling ships with bunker fuel.
• A rising number of shipping companies have been found moving cars overseas in containers without filing proper reports, which could lead to problems due to the dangers of car batteries and fuel, Shanghai maritime authorities said. Maritime supervisors this year have seized 36 such containers with more than 130 vehicles and fined the shipping companies. Most of the vehicles are used and will be sold in other countries, using Shanghai as a transshipment point. Authorities said the vehicles should be classified as dangerous goods if there is fuel left in the vehicles’ tanks.
• Nanjing Tanker would be suspended from the Shanghai stock exchange this year if it reported a net loss for 2012, which would be its third consecutive negative result. CSC Phoenix faces similar action by the Shenzhen bourse if it posts a net loss next year. The firms will be delisted if the losses continue for a fourth year. A profit warning had been issued for Nanjing Tanker but the firm’s 2012 annual results had not been released.
• China Shipping Development saw net profit drop 93.1% to CNY73.74 million. The firm, which operates dry cargo ships and oil tankers, only remained profitable as a result of a CNY469.14 million one-off tax gain. The firm’s pre-tax loss was CNY331.37 million, fueled by a CNY220.3 million loss from its tanker business, while dry bulk posted a CNY21.7 million pre-tax profit.

Agoria, the EU SME Center, BCECC, FCCC, AWEX, BIE & FIT are organizing an afternoon seminar on how to mitigate risks in China. Join the seminar and discover:

How to find a suitable business partner? Are they reliable? Learn about the main aspects of preliminary due diligence, including:
Legal due diligence on the legal status of the company – duly registered, having all licenses, company chop, etc. and,
Financial and operational check – creditworthiness letter, financial statements, capital verification report, on-site check, premises, etc.

How to manage contract terms and reduce risk? There is a misconception that contracts have no value in China and that personal relationship takes precedence in commercial transactions. For successful business and, more importantly, staying safe, you really need both and your sales/purchase contracts can significantly influence the course of your deals, and business achievements in China!

How to avoid common contractual errors which lead to loss of technology, know-how and competitiveness (also including terms and rights of employment contracts)
Practical and useful tips on how to protect your business

You will receive practical advice from the EU SME Center expert, the panelists, and have the opportunity to attend a one-on-one consultation session to discuss your individual questions (each for max 20 minutes) with the EU SME Center expert after the seminar.

Programme:

13:30 Registration
14:00 Welcome word by Agoria on behalf of all organizers
14:10 Presentation by the EU SME Center

• 
  How to find a suitable business partner?
• 
  How to manage contract terms and reduce risk?

14:55 Coffee break
15:10 Panel discussions by

• 
  Jan Kriekels, CEO, Jaga NV
• 
  Ghislain Gilliot, CEO, Simonis Plastic SA
• 
  Olivier du Roy, ex Country Manager China, Solvay

moderated by Professor Johan Erauw (– also for the Q&A) of Ugent University
16:20 Q&A
16:50 Reaction with possible suggestions by EU SME Center
17:05 End + Networking Cocktail
17:05 In parallel – one-on-one consultation sessions

Interested to join the seminar? Thanks to register only via the link in Dutch or the link in French.

As the number of one-on-one sessions with the EU SME Center Expert is limited, it will be on first come first served basis. Please send us your one-on-one consultation session request together with your event registration.