2012年1月30日 星期一

China Finds a New Route to India


India's economy rarely opens the front door to China. But New Delhi shouldn't be too concerned that China has found a new point of entry.
Bloomberg News
Beyond Reliance, a host of Indian companies are in need of capital this year to fulfill expansion plans or repay debt. Above, a Reliance shop in Mumbai.
Reliance Communications Ltd. opened a window this week. India's second-largest mobile phone carrier by number of subscribers was under pressure to refinance $1.18 billion of foreign-currency convertible bonds. In the current market, that looked like a stiff challenge, as lenders in the U.S. and Europe struggle with their deteriorating economies.
Enter a consortium of Chinese banks to bail out the Indian company with a loan paying just 5%. The deal gives the banks the sort of exposure to India's fast-growing communications space that Chinese companies couldn't get otherwise. New Delhi routinely blocks Chinese business seeking a piece of India's strategic industries such as telecommunications, technology or energy. The government typically cites quality-control issues or national security, though political posturing is perhaps a more likely cause.
Yet the Reliance loan deal puts the Chinese banks in a strong position over a prominent Indian business. It might also help China Inc. get more leverage in the Indian economy.
Still, politics shouldn't cloud the positives for India. The deal is a savior for Reliance, whose share price is nearly 87% below the conversion price set on the bonds four years ago. Moreover, the loan means China, through its state-owned banks, now has a significant stake in the success of an Indian telecommunications giant.
Beyond Reliance, a host of Indian companies are in need of capital this year to fulfill expansion plans or repay debt. But traditional funding channels are drying up, local markets are jittery and interest rates are by no means cheap. Under those circumstances, more Chinese money may find a warm welcome in India.

China Construction Starts Slowed in 2011


SHANGHAI—Growth in new construction starts in China last year decelerated sharply compared with a year earlier, another sign of distress in the country's real-estate sector amid the government's reluctance to relax its two-year-long sector-tightening campaign.
Growth in property investment and sales slowed as well, hurt by tightened credit and administrative curbs on home purchases, and analysts predict the downward trend will continue in the coming months. The risk of a hard landing for China's economy also remains, they said.
A worker pours cement at a construction site for new houses in Huaxi village, Jiangsu province.
In terms of floor area, property construction starts increased 16% to 1.9 billion square meters in 2011, a growth rate down sharply from 42% in 2010, data released Tuesday by the National Bureau of Statistics showed.
Property development investment in China increased 28% to 6.17 trillion yuan ($978.43 billion) in 2011. But growth was down from 33% in 2010.
"Construction starts may have been up last year, but I expect that to fall around 10% this year because of the central government's lowered target for public-housing starts and diminished investment from private-property developers," said Johnson Hu, a CIMB-GK Securities analyst.
China plans to start building seven million public-housing units in 2012, down from 2011's 10 million units.
The Shanghai municipal government set new price guidelines on homes that qualify for preferential transaction tax treatment, widening a tax benefit for many home buyers in the city as developers struggle with falling sales there.
Shanghai will raise the price ceiling on homes that qualify as "private ordinary homes" in a move that could spur sales, following a similar step by Beijing's municipal government in November.
Shanghai Mayor Han Zheng said Monday that the upper limit of the transaction value of an "ordinary home" in the city center—within the city's inner ring road—will be raised to 3.3 million yuan ($523,000) from 2.45 million yuan.
"We have to admit that property prices in Shanghai are too high," the mayor said. "High property prices not only affect consumers, they show that there is a deviation from the principle of sustainable growth in the property market and from our priority of end-user demand."
Chinese property developers have reduced their appetite for land purchases amid the tightened credit environment and weaker sales, resulting in some failed land auctions in certain cities. Some local governments, which rely on land sales for revenue, have subsequently lowered prices to attract more bids.
Property sales, meanwhile, rose 12% to 5.912 trillion yuan in 2011, as growth slowed slightly from 13% in 2010. In December, sales fell for the third consecutive month on a year-to-year basis.
In major Chinese cities, home sales and prices declined last year, which analysts attribute to more strictly implemented property restrictions. In Beijing, for instance, house prices fell 11% in 2011 while sales of private homes there dropped 14%, the city's Mayor, Guo Jinlong, said.
The statistics bureau will issue its December data on property prices in 70 Chinese cities Wednesday.
Overall, "there is some deceleration but it's not catastrophic," said Rosealea Yao, an analyst at Dragonomics Research. "Property sales are at low levels but are stabilizing. On a sequential basis, the market should be bottoming out."
She added that prices should continue to correct modestly in the coming quarters.

2012年1月23日 星期一

China Sees Drop in Property Prices


SHANGHAI—Property prices in 70 Chinese cities in a government survey fell in December from the previous month, marking the third straight decline after developers cut prices to boost sales amid Beijing's campaign to cool the property market.
Prices still rose compared with a year earlier, though at a slower rate than in November.
Property developers are becoming more cautious and expect further price falls this year as the government has indicated it doesn't plan to relax its tight grip on credit and home purchases.
"The government is determined to have prices fall in this tightening cycle, even though 'stabilizing prices' is the phrase most frequently used," said Oscar Choi, an analyst at Citigroup. "The officials we spoke to are wary that the kind of housing bubble that appeared in Japan and Spain could occur here, and want money to flow back into the real economy."
However, as a slowdown in the economy increases concerns about a hard landing in the sector, some analysts expect the government to signal a policy shift later this year, to ensure stability when the next leaders of the Chinese Communist Party are promoted in the fall.
"At the National People's Congress meetings in March, local officials will be lobbying aggressively for relief. Once prices have come down, we expect Beijing to start gradually easing some of the property-market restrictions imposed in the past year in order to encourage first-time buyers into the market," Standard Chartered economists said in a note.
The National Bureau of Statistics said Wednesday that average prices of newly built homes in 52 of 70 large and medium-size Chinese cities it surveyed fell in December on a sequential basis, up from 49 cities in November.
On a year-to-year basis, prices of such homes fell in nine of the 70 cities in December, up from four cities in November.
Prices of newly built homes in major cities such as Beijing, Shanghai, Shenzhen and Guangzhou were marginally lower compared with November, the statistics bureau's statement said.
Wenzhou, a coastal city known for wealthy entrepreneurs and property speculation that was hit by a credit crunch last year, posted the largest sequential and annual slide in December, with prices falling 1.9% from a month earlier and 6.9% from a year earlier.
Based on Dow Jones Newswires' calculations, prices in the 70 cities covered by the city decreased by 0.22% on average in December from a month earlier, compared with a 0.17% decrease in November and a 0.13% increase in October. Prices rose 1.6% on average in December from a year earlier, moderating from a 2.3% increase in November.
Evergrande Real Estate Group Ltd. said Monday it is targeting contracted sales of 80 billion yuan ($12.67 billion) this year, a more conservative target compared with previous years, after taking into account the state of the broader economy.
Hit by tightened credit channels and administrative curbs on home purchases, growth in property construction starts, investment and sales in China slowed in 2011. The slowdown in the sector has also hurt local governments, which rely on land sales for revenue.
Separately, foreign direct investment into China fell for the second straight month in December, in a possible sign of weakening sentiment toward the Chinese economy, though the full-year figure still showed gains.
Actual foreign direct investment in December slid 12.7% from a year earlier to $12.2 billion, the Ministry of Commerce said, compared with a 9.8% drop year-to-year in November. The November drop was the first year-to-year decline since March 2010.
Sluggish economic growth in the U.S. and euro-zone debt problems have been factors holding back the investment appetite of Western companies.
Concern over China's own growth prospects was another possible factor behind the drop in FDI in the final months of last year.
For the 2011 full year, however, investment was up 9.7% at $116 billion. China attracted investment of $105.7 billion in 2010, up 17.4% from the previous year.
Ministry spokesman Shen Danyang expressed optimism about the outlook this year, telling reporters that FDI will maintain relatively fast growth and that China remains a fairly attractive investment destination.
—Yajun Zhang contributed to this article.

China Shops Around for Oil, Wary of Iran, Arab Spring


BEIJING—China signed billions of dollars in deals with key U.S. allies during its premier's visit to the Persian Gulf, forging ahead with long-term efforts to rely less on its traditional oil suppliers, including Iran—even as it publicly brushes aside U.S. and European pressure to cut its Iranian imports.
Premier Wen Jiabao on Thursday wrapped up his trip to Saudi Arabia, the United Arab Emirates and Qatar. Though Mr. Wen didn't visit Iran, his trip came as China faces questions over its apparent support for Tehran.
Mr. Wen defended Beijing's deep-seated energy ties with Iran on Wednesday but in an acknowledgment of concerns in the region said China opposed Iran's nuclear-weapons program which Saudi Arabia and others view as an imminent threat to regional security. "We are deeply concerned about the situation in the Persian Gulf and the Middle East," he said during a news conference in Doha.
China has in the past few years seen the risks of relying too much on any one country or region for oil, which has prompted it to reach out to emerging suppliers in Africa and Latin America, which along with smaller Mideast exporters are making up more and more of China's total crude imports.
These concerns have intensified as Iran—its No. 3 outside supplier after Saudi Arabia and Angola—comes under increasing pressure from the West just as the spread of Arab Spring uprisings threatens to further disrupt supply across the region.
The overall share of Chinese imports from its top three suppliers has dropped slowly but steadily since 2009, according to China customs data, even as overall crude imports surged roughly 14% from 2009 to November 2011, the latest data available. Imports from Venezuela doubled during the period, while crude imports from Kazakhstan, Iraq and the U.A.E. grew rapidly as well.
Wen Jiabao with Sheik Sultan bin Mohammed al-Qasimi in Sharjah, the United Arab Emirates, Wednesday.
China's diversification program has a long way to go, and it's unlikely to dig too deeply into the 11% share of its oil that still comes from Iran. However, any move by China to significantly curtail Iranian imports could drive up global prices as Beijing seeks to make up for the shortfall on short notice.
For China's part, its supplies from Libya have been the only sizable disruptions caused by the Arab Spring. But any turmoil among its major sources of crude such as Saudi Arabia, or for that matter, Iran, would be of great concern for Beijing, underscoring its need to reduce it heavy reliance on oil from the region.
Tehran has threatened to blockade the Strait of Hormuz, a critical oil-transit channel, in response to the U.S.-led sanctions. Meanwhile, Sudan and South Sudan have been locked in an oil-transit dispute, which threatens to cause major disruptions in its China shipments. Sudan supplied 5% of China's oil imports in the first 11 months of last year.
"China is making good progress toward diversifying its oil supply," said Gordon Kwan, a Hong Kong-based energy analyst at Mirae Asset Securities. "If they were to concentrate on just one or two countries that just accidentally went out of production, [global] oil prices could easily double."
Last week as part of Mr. Wen's trip, China Petrochemical Corp., known as Sinopec Group, and state-owned giant Saudi Arabian Oil Co. signed a deal to build a 400,000-barrel-a-day refinery at Yanbu, on the Red Sea coast. The project is valued at approximately $8.5 billion. Analysts expect much of the Yanbu refinery product will be sold to the Saudi market instead of being shipped to China as a way to build favor with the Saudis, which China hopes will foster deeper inroads into the country's energy supplies. Sinopec joined the project afterConocoPhillips last year pulled out.
Experts said Mr. Wen likely pressed Saudi Arabia for reassurances that it was willing to increase its own production in the event of an Iranian shortfall. China's Foreign Ministry has declined to say whether Mr. Wen made this request. At a daily press briefing on Thursday, Foreign Ministry spokesman Liu Weimin accused the U.S. of escalating tensions with Iran.
Separately on Thursday, China National Petroleum Corp., another of China's major energy companies, said it reached a deal with Qatar Petroleum International and Royal Dutch ShellPLC to build a refining facility in the eastern Chinese city of Taizhou. It is the latest in a string of refineries set up in China through joint ventures with partners from energy-rich countries that often come with supply agreements. CNPC and Russia's OAO Rosneft plan to open a large refinery in the eastern city of Tianjin.
Besides diversifying its oil suppliers, China is increasing the ways overseas oil reaches China. Mr. Wen on Wednesday said China opposed Iran's threats to blockade the Strait of Hormuz. Beijing also fears transit disruptions in the Strait of Malacca, near Singapore, and a major potential chokepoint where the U.S. Navy has a strong presence.
China Petroleum Engineering & Construction Corp., a subsidiary of CNPC, is building a pipeline to bypass the Strait of Hormuz. The pipeline is expected to begin operation later this year. CNPC is also operating a separate oil pipeline from eastern Russia to the Chinese refining hub of Daqing.
Beijing, in a bid to bypass the Strait of Malacca, is also building with its southwestern neighbor Myanmar an oil pipeline that connects southwestern China with the Bay of Bengal.
Write to Brian Spegele at brian.spegele@wsj.com

Chinese See New Year as Golden


Chinese consumers are loading up on gold ahead of the Lunar New Year. The WSJ's Deborah Kan speaks to Ken Brown in Hong Kong.
SHANGHAI—The year of the dragon is breathing new life into gold prices.
The Chinese have been loading up like never before on gold ahead of the Lunar New Year, which falls on Jan. 23 this year. It is a time of gift-giving that takes place during family dinners, with the older generation giving money to younger members. And as the Chinese have gotten richer, gold—in the form of jewelry, coins and even bars—is becoming the gift of choice.
In preparation for the festivities, China imported a record amount of gold in November, the most recent month for which data are available.
Shipments from Hong Kong to mainland China, which analysts use as a proxy for all imports, totaled 102 tons, a 20% increase from October and a nearly sixfold increase from November 2010.
The data reassured gold bulls that the 6% increase in prices so far this year could be more than a short-term rebound from the metal's 10% drop in the final days of 2011. Spot, or physically traded, gold on the Shanghai Gold Exchange rose 0.8% to 339.18 yuan per gram, or $1,670.95 an ounce.
The import figures are "impressive," said Anne-Laure Tremblay, a precious-metals analyst at BNP Paribas, adding that the Chinese demand appears to be supporting prices globally.
That also is what the spot, or cash, market in China is indicating. Last week, prices on the benchmark spot contract here were as much as $21 an ounce more than prices on a similar contract representing actual gold changing hands in London.
While this price gap can be very volatile, many analysts interpret consistently higher prices in Shanghai as a gauge of strong Chinese demand. Gold in Shanghai hasn't traded below the London price since Nov. 30, when the discount was $22.
Xinhua/Zuma Press
Gold decorations for the Chinese Lunar New Year of the dragon in Yinchuan, China
China's consumption of gold jewelry jumped 16% last year to a record 514 metric tons, according to metals consultancy GFMS. Meanwhile, India, the world's largest gold consumer, saw jewelry demand slip.
As in other parts of the world, the Chinese are increasingly blurring the lines between retail gold demand, which is usually thought of as people purchasing jewelry to wear, and investment demand in the form of bars, coins or shares in exchange-traded funds.
Ma Bowen, a sales manager at a gold store in Yu Garden, a shopping area brimming with gold merchants near the eponymous park, estimates he sold 20% to 30% more gold last year. Alluding to worries about inflation, he says he is seeing an influx of younger shoppers among the crowds that throng gold shops steps away from a lavishly landscaped territory with pavilions, ponds and rock gardens.
Many of those shoppers are buying gold bars "to get their hands on something that's physically valuable and may appreciate in the long run," he said.
Inflation in China is running at 4.1% as the country continues a robust growth trajectory, with gross domestic product increasing at a 8.9% annualized rate in the fourth quarter.
The yuan, though, also strengthened against the dollar last year, which made gold more affordable for Chinese buyers.
Grace Zhang, a 29-year-old manager at a pharmaceutical company, said she has no regrets about buying gold bars when prices were rallying last year, even though that investment is in the red now.
"Gold is relatively an easy investment for me as it isn't as complicated and risky as other asset classes, such as stocks or bonds," Ms. Zhang said. "As long as I know where gold prices are heading, I'd know roughly how good or bad my investment is."
Some say China's enthusiasm could wane, and other factors could weigh on gold prices.
Still, Andrey Kryuchenkov, a commodity analyst at VTB Capital, said he is "reluctant" to write off higher import volumes and anecdotal evidence of more buying by consumers as just a seasonal phenomenon.
The turnaround in gold prices "wouldn't be justified without some real fundamental backing, and every year China gets more important in that picture," Mr. Kryuchenkov said.
Write to Rhiannon Hoyle at rhiannon.hoyle@dowjones.com and Yue Li atyue.li@dowjones.com