The HSBC flash China manufacturing purchasing managers index (PMI) for May recovered to 49.7 from April’s final reading of 48.1, but it is still below the 50-point level that separates growth in activity from contraction, indicating that manufacturers actually experienced a slight drop in business. Indices that measure output, domestic, and foreign demand all improved substantially to rise above the 50-point mark. New export orders showed the biggest turnaround, climbing 3.4 points to 52.7, a level not seen in nearly three-and-a-half years. “The improvement was broad-based, with both new orders and new export orders back in expansionary territory,” said Qu Hongbin, Chief Economist for China at HSBC. “Disinflationary pressures also eased over the month, and output prices increased for the first time since November 2013.” Of the 11 sub-indices in the survey, all but those for employment and stocks of finished goods rose from April. In the case of employment, the index fell over a point to stand well under 50, the 13th consecutive month that jobs have been lost in the manufacturing sector. Any marked weakening in the labor market would raise alarm bells for China’s government, which regards healthy employment levels as a top policy priority and an important condition for social stability. Premier Li Keqiang said in March that it is all right if economic growth comes in slightly below the government’s 7.5% target, as long as the job market holds up, the South China Morning Post reports.

China’s Bright Food Group Co has struck a deal to buy a controlling 56% of Israel’s largest food company, dairy firm Tnuva, from private equity house Apax. Bright Food did not disclose the sum, but Israel’s Mivtach Shamir Holdings, another major shareholder in Tnuva, said the deal valued all of the dairy company at about USD2.5 billion, up from USD1 billion when Apax and Mivtach took control in 2008. The deal will give the Chinese firm access to new cheese products and the Israeli firm’s technological know-how in dairy production. Best known for its cottage cheese, Tel Aviv-based Tnuva had 2013 revenue of USD2.05 billion from the sale of a range of cheeses, as well as milk, yoghurt, meat and eggs. The Chinese cheese market
will be worth CNY2.7 billion this year, doubling to CNY5.3 billion by 2018, according to consultancy Euromonitor. Tnuva owns seven of the 10 best-known food brands in Israel’s supermarkets, according to Apax. Tnuva was formed more than 80 years ago as an agricultural cooperative of 620 farming communities, which were also the company’s suppliers of raw milk and produce. The cooperative sold the stake in Tnuva to Apax in 2007 at a price that valued the company at USD1.03 billion. Bright Food also operates tea, dairy and rice farms. It was established in 2006.

China signed a 30-year contract with Russia to buy natural gas from eastern Siberia. The deal, said to be worth USD400 billion, was the culmination of more than a decade of negotiations. Russian state gas exporter Gazprom will start supplying gas to China National Petroleum Corp (CNPC) in 2018 via a new eastern pipeline linking the two countries. Annual supply volumes will grow gradually until they reach 38 billion cubic meters, CNPC said. That is equivalent to about a quarter of China’s current annual demand. The signing of the deal in Shanghai between the two companies was witnessed by Chinese President Xi Jinping and his Russian counterpart Vladimir Putin. The agreement was clinched just hours before Putin ended a two-day visit to Shanghai, where he attended the CICA regional security summit. “This is the biggest contract in the history of the gas sector of the former USSR,” Reuters quoted Putin as saying. “Our Chinese friends are difficult, hard negotiators,” Putin said, noting that talks went on until 4 a.m. “Both sides were in the end pleased by the compromise reached on price and other terms,” Putin said. Russia will invest USD55 billion in fulfilling the contract while China will invest at least USD20 billion, Putin told Russian reporters in Shanghai. Gazprom CEO Alexei Miller declined to say at what price the deal was struck, but insiders said Gazprom refused to go below USD350 per 1,000 cu m. That compares to a price range of USD350-USD380 most European utilities pay under discounted long-term contracts signed in the last two years. According to Analyst Zhou Xizhou of IHS Energy the price appeared to be closer to the level Russia wanted, but in exchange, a requirement for prepayment was dropped. China’s gas consumption rose 13.9% last year to 167.6 billion cubic meters. More than 30% of its gas was imported. The estimated Russian import price is 17% cheaper than liquefied natural gas (LNG) imports bought in Shanghai, said a research note by Nomura head of regional energy research, Gordon Kwan.

Besides the gas deal, CNPC signed a contract with Novatek for LNG purchases and with Rosneft for crude oil supplies for their joint venture refinery in Tianjin. China Petrochemical Corp (Sinopec) entered into a strategic cooperation agreement with Russia’s Sibur Holding, a gas processing and petrochemicals company. The two companies will establish a joint venture for a butadiene nitrile rubber plant at the Shanghai Chemical Industry Park. Sinopec’s share in the joint venture will be 74.9% and Sibur’s will be 25.1%. Russia-based miner En+ Group and Shenhua Group Corp reached an agreement on coal exploration in the Zashulanskoye project near the Russia-China border. China’s State Nuclear Power Technology Corp has plans to cooperate with Rosatom State Atomic Energy Corp for establishing floating nuclear power plants, an area where Russia has technology and experience.

China will increasingly manage its troubled property sector at a local level as it seeks to avoid sparking either an abrupt slowdown that undermines the economy or another surge in prices. After increasing at double-digit rates for most of last year, home prices started cooling in late 2013 as a sustained campaign to clamp down on speculative investment and easy credit gained traction. Annual growth in average new home prices slowed to an 11-month low in April. Existing home prices dropped from a month earlier in 22 of 70 cities in April, compared with 14 in March. Property sales dropped 6.9% in the January-April period from a year earlier in terms of floor space, and fell 7.8% in terms of value. Authorities know a severe property crunch could worsen a build-up of debt, but also that a blanket easing of restrictions could set off another round of credit-fueled house price rises. “There is no sign that the central government will relax property controls on a nationwide scale even though the economy is slowing,” said Zhao Xijun, Deputy Dean of the Finance and Securities Institute at Renmin University in Beijing. “The pressure is mainly on local governments, because some of their debts are maturing and they need to repay.” The economists expect restrictions on property introduced over the past five years to largely remain in place, particularly in major cities, but with some local authorities relaxing the measures to support the local real estate market. In 2012, the central government forced some local governments to retract plans to ease controls on real estate, but there has been no such response this year, the South China Morning Post reports.

The top-50 Chinese brands posted a 13% rise in their brand value, with healthcare, and food and dairy being the two fastest growing sectors. The total value of brands in the BrandZ Top 100 Most Valuable Chinese Brands 2014 report hit USD379.8 billion, market research firm Millward Brown said. The study found that 45 Chinese state-owned enterprises (SOEs) comprised 71% of the domestic list’s total value, though the value of private brands is rising faster. Tencent, China’s largest internet company by market capitalization, almost doubled its value to USD54 billion and rose to No 14 globally and No 2 in China. The global Top-100 brands include 11 Chinese companies.