China will for the first time allow the U.S. securities watchdog to view audit papers of a Chinese firm to end a six year long dispute in a bid to restore faith in Chinese companies. The China Securities Regulatory Commission (CSRC) will hand over documents of a company being investigated by the U.S. Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board for possible accounting fraud. The move aims to improve market order and protect the credibility of Chinese companies listed overseas, an unidentified CSRC official said. Xie Kaicong, Vice President of Guosen Securities (Hong Kong) Brokerage, said: “The first ever move taken by the CSRC will help boost confidence of foreign investors, and restore the value of Chinese companies listed overseas.” The move is expected to reopen the U.S. stock market to Chinese firms, which has been nearly closed to new listings of Chinese companies for the past three years. At least 39 U.S.-listed Chinese firms have been charged with alleged fraud and 44 companies were delisted from the U.S. stock market for other violations including cheating.

China’s largest railway hub has opened in Hangzhou. The Hangzhou East Railway Station has five levels totaling 340,000 square meters or almost twice the size of the Great Hall of the People in Beijing. The main body of the station is 39.6 meters high. Hangzhou’s government spent CNY12 billion to build the station, which opened on July 1 after five years of construction. City officials expect the station to serve an average of 30,000 passengers a day. It connects to high-speed rail, ordinary rail, subway, maglev train, bus and water transport, allowing virtually seamless transfers between most modes of transportation. The station also has a tourist center and a highway passenger depot. The Grand Canal Wharf outside the railway station allows travelers to experience a Hangzhou-style water bus. The station is expected to ease traveling between Hangzhou and Ningbo, Beijing, Nanjing, Huzhou, Shanghai and other cities. “The citywide effect of the Hangzhou East Railway Station is huge, genuinely bringing Hangzhou into the high-speed rail era,” said Li Zhonghua, Vice President of the Zhejiang Provincial Railway Investment Group.

Only Beijing was worse than Shanghai for flight delays in the first six months of the year, according to a survey of 35 major airports around the world. Pudong International Airport had a punctuality rate of less than 30%, U.S.-based aviation data provider FlightStats said.  FlightStats record a delay if an aircraft fails to take off within 15 minutes of its scheduled time. The average of all 35 airports, including London’s Heathrow and JFK in New York, was 69.2% in June, compared to May’s 75%, the survey said. The survey results didn’t include the recent massive delays caused by the weather on China’s busiest domestic route, Shanghai-Beijing. Airlines are mainly responsible for 40% of flight delays, the Civil Aviation Administration of China (CAAC) said. Some 20 domestic flights with the lowest punctuality rates would be publicized every month, the CAAC added. “The Administration will focus on improving the operation of the Beijing-Shanghai route through 2015,” said Wang Liya, Director of the CAAC’s Air Traffic Management Bureau.

Last month, only 18.3% of the 22,019 flights departing from the Beijing Capital International Airport (PEK) were on time, FlightStats said, and 42% of them saw delays of 45 minutes or more. Shanghai Hongqiao International Airport – the second worst on the list – had its on-time rate drop to 24% from 38.9% six months ago. Its ranking remained unchanged. Hong Kong International Airport also reported a noticeable increase in flight delays and cancellations. Its ranking had dropped from 22nd in January to 29th in June. Serious delays were not limited to Beijing and Shanghai. None of China’s provincial airports surveyed by FlightStats – including Guangzhou, Kunming , Nanjing , Chengdu, Changsha and Urumqi – could manage to get half of their flights on time. Chinese airline performance was equally disappointing. China United Airlines had just 27% of its flights arriving on time. It was closely followed by Xiamen and Shanghai Airlines. Experts attribute the problem to excessive military control of the airspace and poor urban planning. “Nearly 80% of China’s airspace has been reserved for military use. In other countries, such as the U.S., the situation is exactly the opposite,” a senior executive of Hainan Airlines said. Zou Jianjun of the Civil Aviation Management Institute of China added that major cities tried to monopolize the aviation business by diverting travelers from nearby cities to their airports, creating congestion.

The fifth Strategic and Economic Dialogue (SED) between China and the United States was held in Washington last week. The annual event was led by Vice Premier Wang Yang and State Councillor Yang Jiechi on the Chinese side, and Secretary of State John Kerry and Treasury Secretary Jacob Lew for the U.S. All four officials are new to their roles, as both nations have undergone cabinet reshuffles. Former National Security Agency contractor Edward Snowden’s disclosures that the U.S. had been hacking into Chinese computer systems had put Washington in an awkward position, observers said. The U.S. side emphasized that it had not done any hacking to gain commercial secrets – an accusation leveled against China. China’s rise is good for the U.S. and the world, U.S. Vice President Joe Biden said at the opening of the meeting. “I’ve heard the U.S.-China relationship described as everything from the next Cold War to the new G2 and, the truth is, neither are accurate,” he said. The U.S. and Chinese economies are increasingly interconnected. Dialogue is better than confrontation and is important for both countries, Wang Yang added from the Chinese side. The most tangible outcome of the talks were initiatives to reduce greenhouse gas emissions and air pollution. The two sides agreed to cooperate on cutting emissions from vehicles and coal combustion, and to promote more efficient use of energy in buildings, transport and industry. U.S. President Obama met with Vice Premier Wang Yang and State Councillor Yang Jiechi after the meeting. China and the United States have also agreed to restart stalled negotiations on an investment treaty, with Beijing dropping previous efforts to protect certain sectors of its economy. They did not announce when the negotiations would begin.

Finance

• Hong Kong banks are nudging up the interest rates they pay on yuan deposits to fill the loss of yuan being sent back to the mainland. In order to compensate for a cash crunch across the border last month, many Chinese firms moved their offshore yuan deposits back to the mainland, suggesting a decline in such deposits in Hong Kong. Interest rates for yuan deposits climbed as high as 3.5% in Hong Kong, but they might fall to a normalized level of about 2% to 2.5% by the end of this month after the supply of onshore yuan liquidity stabilized, Kelvin Lau, Senior Economist at Standard Chartered Bank, said.
• Confidence among China’s bankcard owners fell for a third month in June as it was affected by the poor stock market performance and weakening sentiment due to the uncertain economic outlook, an industry report shows. The Bankcard Consumer Confidence Index dipped 0.87 from May and fell 1.11 from a year ago to 85.56 points, China UnionPay said.
• The People’s Bank of China (PBOC) is tightening rules on interbank bond market trading by ordering all transactions to be conducted through the National Interbank Funding Center as it seeks to boost transparency. Transactions including forward deals and repurchases could not be reversed or changed once agreed between the two parties, the PBOC said in a statement. Clearing agencies should not settle trades outside the interbank market, and alterations to bond ownership, such as inheritance, that were not related to trading, needed to be supported by legal documents explaining the nature of the transaction.
• A branch of the People’s Bank of China (PBOC) in Beihai, Guangxi, had to suspend operations after it was flooded by more than 1,000 people hoping to get interest-free loans. The bank said criminals had spread rumors that it would grant interest-free and subsidized loans to anyone who could show a credit report. Armed paramilitary police had to hold back the crowd.
• China’s big four banks extended an “unusually high” CNY170 billion in new yuan lending in the first week of this month. In June the banks may have extended combined new loans of CNY270 billion.
• Standard Chartered Hong Kong and Shenzhen International, a Hong Kong-listed operator of logistics facilities and toll roads, signed a one-year Qianhai cross-border bilateral loan agreement worth CNY100 million.
• Data released by the People’s Bank of China (PBOC) showed total social financing, a broad measure of liquidity conditions that includes bank loans and bond sales, fell to CNY1.04 trillion from CNY1.19 trillion in May. The decline was matched by slower growth in the money supply. Broad M2 money supply rose 14% year-on-year, the slowest pace in six months. “The figures show the credit crunch last month had crimped both lending growth and direct financing,” said Wang Jin, Analyst at Guotai Junan Securities in Shanghai.
• Zurich Insurance has raised HKD2.19 billion from selling about 3.1% of New China Life Insurance’s H shares, making it the first stake reduction in China’s third-biggest life insurer after its listing in 2011. The proceeds from the sale would be reinvested in Asia. After the share sale, Zurich, which first invested in New China Life in 2000, still owns 9.4% of the Chinese insurer.
• The People’s Bank of China (PBOC) might scrap the floor for lending rates by the end of the year, according to a draft plan. Banks are currently allowed to offer loans at rates of up to 70% of the benchmark rates set by the central bank. Under the new policy, rates can be set even lower, which in turn would lower the net interest margins of banks as they compete to undercut each other with cheap loans.

IPR protection

• The Anhui provincial intellectual property office recently announced that 1,719 invention patents from the province were granted in the first five months of the year, a year-on-year increase of 67.7%, the highest growth rate across China. In the same period, 8,383 invention patent applications were filed, ranking seventh nationwide, up 72.2%.

Macro-economy

• China’s inflation rebounded to a four-month high in June, largely due to a lower comparative base, the National Bureau of Statistics (NBS) said. The Consumer Price Index (CPI) rose 2.7% from a year earlier, up from May’s increase of 2.1%. The lower comparative base, or last June’s relatively weak inflation, was said to be the main reason for the rebound, and it was unlikely to become a hurdle for possible easing policies, analysts said. Prices were largely unchanged from May, and inflation outside food was low, Moody’s Analytics said. Food costs rose 4.9% year-on-year last month.
• 75% of Chinese employers said they were recruiting or replacing staff at senior levels this quarter and 74% planned to hire next quarter, in stark contrast to only 54% who expected to hire in the first quarter, according to the latest ‘Global Snapshot’ survey. This demonstrates a significant increase in hiring confidence for replacement and growth positions, as employers clearly defined their intentions and goals for the year. This quarter’s hiring champions are the automotive industry (92%), retail & luxury goods (91%), and health care (88%).
• China’s gross domestic product (GDP) rose by 7.5% in the three months to June 30. That compares with 7.7% growth in the first quarter. Last year, the Chinese economy grew by 7.8%, which was the lowest growth rate in more than a decade. “We don’t think 6.5% or 7% will be a big problem,” Finance Minister Lou Jiwei said. That is below Beijing’s official 7.5% goal for the year and would be the slowest since 1990. A 7% expectation for the full year would imply growth of about 6.4% in the second half of this year – far short of what most analysts believe is needed to create sufficient jobs to guarantee social stability.

Mergers & acquisitions

• Smithfield Foods CEO Larry Pope tried to relieve U.S. Senators’ concerns over a Chinese pork producer’s purchase of his company in a hearing of the Senate Committee on Agriculture, Nutrition and Forestry. “We must take a long-term view of what is happening because of the importance of our food supply, security and safety,” he said. The cornerstone of the transaction was growing Chinese demand. Without the opportunity to grow outside the United States, there is no opportunity, Pope said.

Petrochemicals

• China Petroleum and Chemical Corp (Sinopec) opened its first lubricant plant outside China. Sinopec Lubricant (Singapore) covers an area of 242,811 square meters. Besides functioning as its Asia Pacific regional hub, the Singapore plant will also be an important production, service and logistics center, enabling Sinopec to better serve the needs of its customers in South-east Asia, Australia and New Zealand. The plant has an initial production capacity of 100,000 tons of lubricant per year.

Real estate

• Developer CIFI Holdings has announced a USD156.5 million three-year syndicated loan to broaden its offshore platform and lower overall financing costs. CIFI said the syndicated loan was a dual-currency term facility of two tranches: a United States dollar tranche of USD75 million and a Hong Kong dollar tranche of HKD636 million. CIFI is expected to use the syndicated loan to acquire land.
• Individual Chinese investors are expected to invest a total of CNY1.1 trillion in overseas real estate investment, with the United States, Canada and Australia remaining primary choices, CB Richard Ellis predicted in a report. The firm made the projection based on assumptions that 5% of the investable assets of Chinese high-net-worth individuals, who have investment assets of more than CNY10 million, would be pumped into overseas real estate markets in the future.
• The main structure of the Shanghai Tower, a future city landmark looming over the Huangpu river, is set to be capped early next month. The CNY15 billion tower in the Lujiazui financial hub will reach a height of 632 meters to become the tallest building in Shanghai. Designed by U.S.-based Gensler Architects, it will go into official use in 2015.

Retail

• High-end jewelers in Hong Kong are shifting their focus to lower-priced gem-set products as the price of gold fluctuates and China’s anti-corruption drive hits sales. Chow Tai Fook saw 63% year-on-year revenue growth for the three months ending June 30 as consumers snapped up gold bangles, coins and bars. However, customers are opting for cheaper items than in the previous year. Mainland customers accounted for 78% of Chow Tai Fook’s total sales, with most of their purchases being mass luxury products that cost less than HKD100,000.
• French brand Alexandre Zouari Paris has agreed to pay HKD1,200 per square foot a month when its lease comes up for renewal at Hong Kong’s high-end IFC Mall in Central, setting a record for the shopping arcade in the core business district. The company will pay a monthly rent of HKD480,000 for its 400 square foot shop at the mall, owned by a consortium led by Sun Hung Kai Properties. Joe Lin, Senior Director of retail services at CBRE, said he believed the high-rent deals being cut by IFC were not only a record for Central but are also close to the levels commanded by shopping centers in Causeway Bay, the city’s most expensive retail district.

Stock markets

• The  China Securities Regulatory Commission (CSRC) plans to almost double the investment quota for the Qualified Foreign Institutional Investor scheme (QFII) to USD150 billion, up from the previous USD80 billion. The CSRC also said it will expand the trial Renminbi Qualified Foreign Institutional Investor (RQFII) program to Singapore, London and other unnamed cities. Currently, the program is limited to institutions in Hong Kong. China has granted QFII licenses to 22 foreign institutional investors so far this year, bringing the total number to 229 with a combined approved quota of USD43.5 billion.

Travel

• Building of a 123-kilometer undersea tunnel linking Dalian in Liaoning and Yantai in Shandong province is once again being considered. The trip between the two coastal cities would be covered in 40 minutes, down from about 6.5 to 8 hours by boat. The investment of CNY260 billion was projected to break even within 12 years. Daily traffic flow between Dalian and Yantai was expected to increase to more than 100,000 vehicles by 2015.
• Beijing is introducing air-conditioned commuter shuttle buses with reserved seats in September. Commuters will be able to reserve seats and buy tickets online, according to Beijing Public Transport Holdings. The service is aimed at providing white-collar workers with more comfortable transport at a higher price.

VIP visits

• Nigerian President Goodluck Jonathan and Chinese President Xi Jingping presided over the signing of accords between their governments to facilitate US$1.1 billion in low-interest loans to help fund airport terminals in four cities, roads, a light-rail line for its capital, a hydropower plant and oil and gas infrastructure in Nigeria. Jonathan, on a four-day trip to China, brought along about a dozen of his Ministers including those for petroleum resources, trade and transport, as well as several Governors, senior government officials and businesspeople.

One-line news

• Li Zhujiang, 59, Deputy Secretary General of the Standing Committee of the Guangdong People’s Congress, has been accused of abusing his power and taking “extremely huge” bribes when he was the head of the province’s maritime and fishery bureau from 2000 to 2009. He was removed from his post and expelled from the Communist Party. In Guizhou province, Wang Shujun, 43, Mayor of Anshun, is also under investigation for taking bribes of CNY9 million and two kilograms of gold.
• China has slashed the budget for its National Games by 78% amid slowing economic growth and a government campaign to rein in public spending. Spending on the 12th games, to be held from August 31 to September 12 in Liaoning, will be kept to a maximum of CNY800 million. Held every four years, the National Games are China’s premier sporting event and a crucial testing ground for future Olympic champions.
• Premier Li Keqiang was named head of three entities: the Leading Group for Western Region Development of the State Council, the Leading Group for the Revitalization of Old Industrial Bases in Northeast China of the State Council, and the Leading Group for the National Response to Climate Change and Energy Conservation.