Despite a month-on-month slump of housing prices in May for the first time in almost two years, some leading domestic developers remain optimistic that inelastic demand from first-time buyers will revive transactions in second- and third-tier cities. He Miaoling, Vice President of Hong Kong-listed Evergrande Real Estate Group, said the property sector seems to have stabilized after some major shifts earlier this year, including the decline in May and the failure of some small developers. “Transactions were robust in June, especially in second- and third-tier cities. We’ve gotten a boost in confidence about sales,” He said. According to the China Real Estate Index System, an affiliate of SouFun Holdings, sales by area in 40 cities rose 13% month-on-month in the second week of June, with a year-on-year gain of 7%. Guangzhou-based Evergrande said sales rose 64.4% to CNY56.21 billion from January to May, more than half of the full-year sales target of CNY110 billion. Sales of Poly Real Estate Group posted a reversal from a 12% decline in April to a 10% gain in May, while China Vanke achieved more than 40% of its annual sales target during the first five months. The developers that have run into trouble didn’t react properly to the shifting market, which has become more competitive, according to He. He attributed Evergrande’s robust sales to the development of more market-oriented projects, especially in second- and third-tier cities. Xu Jiayin, Chairman of Evergrande, said prices in second- and third-tier cities will rise 5% in 2014 if GDP grows by 7.5%. According to the Ministry of Housing and Urban-Rural Development, there are about 80 million urban residents aged 24-28 who are potential homebuyers, the China Daily reports.

China’s Tianhe-2 supercomputer held onto its first-place ranking in the Top 500 charts, which measures the capacity of the world’s supercomputers. It performed at a sustained 33.86 petaflops, or quadrillions of calculations per second. But the computer is plagued by high operating costs and a lack of software. The electricity bill for the machine at the Sun Yat-sen University campus in Guangzhou runs between CNY400,000 and CNY600,000 a day, to be paid by the user. Tianhe-2 has been used for railway design, earthquake simulation, astrophysics and genetic studies, but so far investment has focused on hardware, forcing clients to write their own software to use it. “It is at the world’s frontier in terms of calculation capacity, but the function of the supercomputer is still way behind the ones in the U.S. and Japan,” said Chi Xuebin, Deputy Director of the Computer Network and Information Center under the Chinese Academy of Sciences (CAS). According to Professor Yuan Xuefeng, Director of the National Supercomputer Center that manages Tianhe-2 in Guangzhou, the machine takes one second to finish what 1.3 billion personal computers would need 1,000 years to complete. It has so far served 120 clients at 34% of its capacity.

Three companies that went public last week all jumped by the first-day trading limit as their low prices drew a huge demand from investors who were starved after a four-month drought of new shares. The shares of Feitian Technologies, Wuxi Xuelang Environmental Technology and Shandong Longda Meat Foodstuff all surged by the first-day trading limit of 44% on their trading debut on the Shenzhen Stock Exchange. “Below-average valuations contributed to the strong performances of the new listings,” said Yang Liu, Analyst at Qilu Securities. Feitian Technologies, a Beijing-based security hardware and solutions firm, rose to CNY47.71 from the offer price of CNY33.13 after the company priced its shares 16.6 times earnings, far below the industry average of 52 times. The other two companies also priced shares at valuations below the average level of their peers.

The 567 kilometer high-speed railway between Xian and Taiyuan, capitals of Shaanxi and Shanxi province respectively, will be put into operation on July 1. The section from Taiyuan to Datong is expected to be opened next June. With a total length of 859 km from Xian to Datong, the traveling time between the two cities will be cut from 16 hours to four. The railway will connect several famous tourist attractions, including the Yungang grottoes, Pingyao ancient city and Xian with its Qin terracotta warriors and horses, all listed as UNESCO World Heritage sites. The route also includes attractions like the 1,400-year-old Hanging Temple embedded horizontally 60 meters of Mount Heng and the Wooden Pagoda in Yingxian, the oldest, tallest wooden structure in China, dating back to the 11th century. Jinci Temple in Taiyuan, famed for the 43 sculptures in its Holy Mother Hall, is also a must to visit. The rail line is expected to promote the growth of tourism in Shanxi and Shaanxi provinces.

Finance

• China will launch a two-year trial in Shanghai, Beijing, Guangzhou and Wuhan on July 1 to allow retirees to use their homes as collateral for pensions from insurers, as the government moves to widen financial support for the rising ageing population. Reverse mortgage, a type of loan in which a homeowner can convert a portion of his property into cash, is common in developed markets. Insurance firms must have a history of at least five years and a registered capital of no less than CNY2 billion to take part in the program. The number of people aged above 60 has reached 202.43 million in China.
• Chinese lenders have raised a record amount of funds offshore so far this year, and that trend is set to continue as banks replenish capital to meet regulatory requirements, analysts said. Data from Dealogic showed that domestic lenders have raised USD14 billion offshore through bond issues, compared to about USD9 billion for the whole of last year.
• China may struggle to meet this year’s fiscal revenue target, Finance Minister Lou Jiwei warned. The central treasury received CNY2.9 trillion from January to May, a year-on-year increase of 6.3% and 0.7 percentage points lower than the budgeted target. This year’s budgeted growth in central fiscal revenue is 7%. But total national fiscal revenue has reached CNY6.12 trillion, an increase of 8.8% and higher than the 8% budgeted.
• Banks in China sold CNY68 trillion of wealth management products last year, 38% more than in 2012. The China Banking Association said in a report that by the end of December, there was an outstanding amount of CNY10.2 trillion on products that have not matured. Non-interest income at banks contributed 22.5% to total banking revenue last year, up from 19.5% in 2012, driven by fees from selling wealth-management products.
• The State Administration of Foreign Exchange (SAFE) said that it will introduce more foreign exchange derivatives on August 1 in a bid to offer instruments to better manage risk. Under new rules, banks will be allowed to offer diversified foreign exchange options and other products to help their clients better manage their overseas trading risk.
• China will designate a clearing bank in Sydney for overseas trading of the yuan, following London and Frankfurt as a location for a Chinese bank to clear transactions in yuan. The Chinese currency remained the seventh most used currency for global payments in May.
• China Construction Bank (CCB) has become the second major Chinese financial institution to buy a London property after agreeing to pay around GBP110 million for a Central London office building for its European headquarters. CCB bought 111 Old Broad Street, a recently refurbished seven-story property with a total area of 11,416 square meters, from Belgium’s KBC Group. CCB was newly selected to become the first Chinese bank to provide yuan clearing services in London and open its first branch in Europe.
• The People’s Bank of China (PBOC) has refrained from selling repurchase agreements for the first time in four months as banks’ hoarding of cash to meet regulatory requirements drove the benchmark money-market rate to a seven-week high. The central bank’s decision to halt the use of repurchase agreements resulted in a net CNY12 billion being added to the financial system last week via its open-market operations. It also auctioned CNY50 billion of three-month treasury deposits at 3.8%, the lowest rate since September 2012.
• Among 46 economies, the IMF said China was the 11th worst in “corporate income tax efficiency” from 2011 to 2012. Corporate income tax efficiency is defined as actual tax revenue compared to the potential revenue that could have been collected, given the tax base and tax rate. China’s tax efficiency was roughly 35%, meaning it failed to collect 65% of corporate taxes. A major reason was its high tax rate, which encouraged companies to shift their profits abroad, the IMF said.
• China has been included on a list of jurisdictions cooperating with the United States on the “Foreign Account Tax Compliance Act” (Fatca), a U.S. law that requires financial institutions around the world to provide information on U.S. taxpayers to the U.S. government to combat tax evasion. Inclusion of China in the listing removes the threat of blacklisting or penalties that had been hanging over Chinese financial institutions. It will also enable Beijing to obtain information on mainland Chinese taxpayers in the U.S.

Foreign investment

• Foreign-funded companies are urged to consider using professional mediators to help handle an increasing number of disputes involving Chinese employees, according to Guo Jun, Director of the Legal Affairs Department of the All-China Federation of Trade Unions (ACFTU). Last year, courts nationwide handled about 300,000 labor dispute cases, in addition to more than 1 million cases mediated by trade unions. Arbitration tribunals handled about 666,000 labor disputes, an increase of 23,000 from 2012.
• The Coca-Cola Co started construction of a new environmentally-friendly plant in Harbin, Heilongjiang province. The 200,000-square-meter plant, which is located in the New South Harbin Industrial City, will have 9 production lines for both sparkling and still beverages, including Coke, Sprite, Fanta, Minute Maid, and Ice Dew. Upon completion, the total investment will exceed USD100 million, with an annual production capacity of 1.2 million tons of beverages. Coca-Cola currently has one plant in Heilongjiang, which was established in 1995. Its capacity has been fully utilized.
• Canada’s Federal Court has slapped down a bid by about 1,500 rich would-be immigrants, most of them Chinese millionaires, to force the government to process their visa applications under the defunct Immigrant Investor Program, or pay them CAD5 million each. Justice Mary Gleason said that “would-be immigrants have no right to force the Minister of Immigration to set any particular quota for any economic immigration class. No one possesses a right to immigrate”. The applications of about 60,000 would-be immigrants have now been formally scrapped.

Foreign trade

• China should join negotiations on the Trans-Pacific Partnership (TPP) as soon as possible to reap the benefits, Ma Jun, Chief Research Economist of the People’s Bank of China (PBOC) said. This would add about 2 percentage points to annual economic growth, he added. The pact would link an area with about USD28 trillion in annual economic output, or 39% of the world total, and would be the biggest trade deal in U.S. history.
• Palm oil purchases by China, the world’s second-biggest buyer, may decline by about 11% this year as economic expansion slows and banks tighten lending to commodity importers. Imports may fall to 5.9 million tons in the 12 months to September 30 from a year earlier, according to the median of five researchers and traders in a survey. The top suppliers of palm oil to China are Indonesia and Malaysia.

Health

• Leading hospitals overseas are setting their sights on newly rich Chinese seeking quality medical services. Melissa Goodwin, International Department Director at the Mayo Clinic, a medical practice in the United States, visited China last month to woo patients. The number of Chinese patients increased more than 100% in the past two years. Last year, Mayo received nearly 200 Chinese patients, with 25% to 30% of them referred by agencies.
• An advanced and expensive treatment of tumors has begun clinical trials in Shanghai and is expected to reduce the number of Chinese patients who travel overseas for the procedure. The first trial of the proton and heavy ion treatment was performed on a 71-year-old man who suffered from prostate cancer. He received the treatment at the Shanghai Proton and Heavy Ion Center earlier this month. The Center went into operation in 2013 and is managed by the Shanghai Cancer Center, a hospital affiliated with Fudan University.
• Cancer remained the No 1 killer for Beijing residents for the seventh year in a row, with the rate of thyroid cancer rising the fastest, according to a report by the Beijing Health and Family Planning Commission. More than 40,000 Beijing permanent residents were diagnosed with cancer last year, according to Wang Ning, Deputy Director of the Beijing Cancer Control and Prevention Office. That translated into 110 new diagnoses a day last year, compared with an average of 63 cases a decade ago, Wang said.

IPR protection

• A national industrial design patent database has been completed in Wuxi, the only professional image search system in China that allows for access to industrial design data both in China and abroad. It had more than 4 million patents on industrial designs by the end of May. Images collected in the database now exceed 20 million.

Macro-economy

• With its perceived image of job security and decent pay, the civil service remains the preferred career option for university graduates, the Shanghai Statistics Bureau said. In a survey conducted last month of 2,173 graduates and postgraduates from 11 Shanghai universities, 34% said their first choice was a government position. On the factors affecting job selection, almost 77% of respondents said salary and benefits were their primary concern. Most said they were hoping for a starting salary of CNY5,300, though their actual average pay is likely to be nearer CNY4,400.
• An economic “hard landing” due to the recent property boom is unlikely, according to Chris Leung, Executive Director and Senior Economist of DBS Bank (HK). “Lots of Western economists insist on a pessimistic view of China because of bleak data so far this year. However, we believe there is no need to exaggerate risk. China’s growth rate has been gradually slowing for 12 quarters in a row. If this is not a soft landing, then what is it?” Leung stressed that deceleration is in line with the central government’s plans, calling it the cost of the structural reform it has vowed to carry out.
• The Chinese government will issue a document detailing the fees imposed on enterprises, the first such document since 1997. The list of approved fees is to help companies avoid paying fees illegally charged by individuals contending they are collecting official charges. The list will be published before the end of this year.

Petrochemicals

• China’s third-largest oil producer CNOOC has teamed up with privately-owned CNPC&TAFO Petro Corp to jointly develop the gas station business. Sinopec Group and PetroChina have up to now dominated the gas station market. By the end of 2013, Sinopec owned more than 30,500 gas stations in China, accounting for about 33% of the total number. PetroChina has more than 20,000 gas stations and CNOOC only 445. CNOOC is also facing competition from domestic players including Sinochem Group and foreign players such as Royal Dutch Shell.
• China National Petroleum Corp (CNPC) has appointed five outside Directors and established a board, as part of its long-term efforts to boost performance and check corruption. CNPC’s board now has eight members including Zhou Jiping, CNPC Chairman and Liao Yongyuan, General Manager. The establishment of a board is expected to speed up the company’s corporatization and internationalization process.
• Retail prices of gasoline and diesel have been hiked by CNY165 per metric ton and CNY160 per ton respectively from June 24. Under China’s new pricing regime, which came into effect last year, domestic fuel prices are adjusted when international crude prices reflect a change of more than CNY50 per ton for gasoline and diesel over a period of 10 working days.
• Legendary Chinese oil trader Yang Qinglong, who started China’s oil business with Iran in the 1990s, has died of cancer. Yang set up China’s state trader Zhuhai Zhenrong Corp around 1995 to import crude oil from Iran. By 2001, the company was supplying 16% of China’s crude imports, importing 11 million tons of Iranian crude or 220,000 barrels per day. It also exported refined petroleum products back to Iran. Yang retired in 2011 to become Zhenrong’s Adviser.
• Japanese shipbuilder Kawasaki Heavy Industries plans to construct gas carriers in China. “Our Chinese venture, Nacks, has built a variety of vessels so far, and LNG and LPG carriers are the only area that has yet to be handled,” Akio Murakami, Director of Kawasaki Heavy’s Shipbuilding and Offshore Division, said in Tokyo. Kawasaki Heavy, based in the western port city of Kobe, estimates costs at its Chinese facilities are as much as 20% lower than at South Korean yards.
• China Petrochemical Corp (Sinopec) will invest CNY4 billion this year and another CNY10 billion in 2015 in more than 1,000 projects as it strives to double its energy efficiency by 2025. “Raising efficiency is the key to saving energy and cutting emissions,” Chairman Fu Chengyu said at the 2014 China Summit on Caring for the Climate in Beijing. The company said that doubling its energy efficiency would be equivalent to saving 42 million metric tons of coal or planting 940 million trees.
• China National Petroleum Corp (CNPC) has approved the opening of its oil and gas pipeline facilities to third-party use. Chairman Zhou Jiping said this will increase the efficiency of the industry, as specified under the central government’s guidance on energy reform. Taking pipeline assets away from the total control of PetroChina will help boost the market, especially for small and mid-sized gas producers that don’t have pipelines, said an industry observer. PetroChina, the listed arm of CNPC, owns about 70% of the country’s crude pipelines and up to 90% of the natural gas pipelines.

Real estate

• Beijing has made nearly 1,880 affordable apartments available to buyers at CNY22,000 per square meter, almost 50% less than in neighboring blocks, but the government and homebuyers will have joint ownership of the properties. If the property is sold, co-owners will have to pay 30% of their profits to the government. The apartments attracted more than 120,000 prospective buyers, who had to draw lots. The Beijing government plans to offer nearly 50,000 such homes this year, with 11 projects having been unveiled and now inviting buyers to register.
• House prices in China remained “too high” in the second quarter of this year. In its quarterly survey, the People’s Bank of China (PBOC) found that 63% of respondents thought prices were prohibitively high. Half of those questioned said they thought prices would remain unchanged in the coming quarter, while 21% said they expected them to rise. The survey polled 20,000 households in 50 cities.
• Residents of Hohhot, the capital of Inner Mongolia, will no longer face curbs on the number of homes they can own as the city has revoked the restriction, becoming the first to do so. Non-local residents will also be allowed to buy homes. At the current pace of new home sales, inventories in Hohhot would last for more than 10 years. Zhang Dawei, Chief Analyst at Centaline Property, expects that “by the end of this year, it is possible that more than 30 cities around the country may follow the move by Hohhot in order to boost home sales.” He said the home-purchase curbs will remain in cities with a population of over 10 million.
• Chen Zhenggao was appointed Minister of Housing and Urban-rural Development by the Standing Committee of the National People’s Congress (NPC). Chen was Mayor and Party Secretary of Shenyang, the capital of Liaoning, when current Premier Li Keqiang was Party Secretary of the province between 2004 and 2007. Chen’s predecessor, Jiang Weixin, who had served as Minister since March 2008, reached the retirement age of 65.

Science & technology

• China has ambitious plans to touch down on Mars by 2020, likely with a rover, and to collect its own samples from the red planet 10 years after that, Ouyang Ziyuan, Chief Scientist of the country’s lunar project, said at the 22nd International Planetarium Society Conference in Beijing, attended by 35 member countries. China’s Mars probe program started in 2009 in a partnership with Russia. However, the Russian spacecraft Fobos-Grunt carrying the Chinese probe Yinghuo-1 crashed on November 9, 2011, after lift-off.
• The Ministry of Education denied media reports that about 600 undergraduate colleges will be converted into skills-based senior vocational schools. The Ministry is however classifying higher institutes, and some will be categorized as applied-technology oriented. China’s vocational education is receiving unprecedented attention from the central government. Vocational school graduates can more easily find work compared to college graduates.

Stock markets

• China Vanke Co is seeking a strategic partnership, according to a statement by Chairman Wang Shi in Hong Kong as the company’s H shares debuted on the main board of the stock exchange. China Vanke converted its B shares in Shenzhen to H shares and listed in Hong Kong by way of introduction without raising any new capital. The stock opened at HKD13.66, compared with the last trading price of HKD12.41 for its B shares on June 3.

Travel

• The number of Chinese tourists visiting South Korea reached a record high last year, when some 4.32 million trips were made. Chinese tourists are playing an increasingly significant role for the tourism market in South Korea, accounting for 35.5% of the country’s inbound tourism market. Both countries are further relaxing visa policies.
• Taiwan and the mainland are to hold talks on allowing mainland visitors to use Taiwan as a transit point to travel to other countries, a move that would significantly benefit Taiwan’s tourism sector. Tourism and airline officials said that if Taiwan became a transit point for mainland tourists, it would greatly benefit the direct-flight arrangements and make it more convenient for visitors.
• The number of train trips on the Beijing-Shanghai high-speed railway has surpassed 220 million since its debut three years ago. Daily average trips have more than doubled from 132,000 three years ago to 272,000 in the first half of this year, said the China Railway Corp.