Jun 1

June 2 (Bloomberg) — China’s benchmark stock index rose to a 10-month high, led by commodity producers, as raw-material prices climbed on signs the global recession is abating.

China Shenhua Energy Co., the nation’s largest coal producer, rose 1 percent as crude oil advanced after U.S. reports on personal income, manufacturing and construction beat economists’ forecasts. Jiangxi Copper Co., the country’s biggest producer of the metal, added 2.1 after the metal jumped to a seven-month high.

“Investors are now more willing to buy stocks as there are increasing signs that point to economic recovery at home and abroad,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 10.97, or 0.4 percent, to 2,732.25 as of 9:56 a.m. local time, set for the highest close since Aug. 4. The index has rallied 50 percent this year after plunging 65 percent in 2008. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, gained 0.7 percent to 2,876.99.

Shenhua rose 1 percent to 27.26 yuan. China Coal Energy Co., the nation’s second-largest coal producer, added 0.8 percent to 12.23 yuan. Jiangxi Copper climbed 2.1 percent to 31.70 yuan.

Crude oil yesterday advanced 3.4 percent to $68.58 a barrel in New York, the highest settlement since Nov. 4. Copper rose 5.5 percent to $2.319 a pound, the biggest gain since April 3.

Indexes of energy and material stocks are the top gainers among the 10 industry groups on the CSI 300 this year, surging 80 percent and 69 percent, respectively. The gains outstrip the 52 percent rally by crude oil and the 64 percent advance by copper in 2009, as investors bet Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus package will reverse a slump in China’s economy.

Developers Gain

China Vanke Co., the nation’s biggest listed property developer, rose 2.8 percent to 10.44 yuan. Poly Real Estate Group Co., the No. 2, added 2.6 percent to 23.18 yuan.

New home sales in Shanghai reached a 21-month high in May, the Shanghai Daily reported, citing data from real-estate agency E-House (China) Holdings Ltd.

–Zhang Shidong, John Liu. Editors: Richard Frost, Linus Chua

To contact the reporter on this story: John Liu in Shanghai at jliu42@bloomberg.net

Last Updated: June 1, 2009 22:02 EDT

Jun 1

June 2 (Bloomberg) — General Motors Corp. and China FAW Group Corp. will push ahead with plans to form a commercial- vehicle venture in the country, even after GM filed for bankruptcy protection.

GM’s China operations will be injected into the ‘new’ GM, so there won’t be any disruptions in its activities, GM China President Kevin Wale told reporters in Shanghai today. The carmaker will also likely need a new China plant as it bids to double sales to 2 million vehicles a year within five years, he added.

Detroit-based GM, the largest overseas automaker in China, has boosted sales in the country this year as government subsidies spur demand for its minivans. Still, that has failed to offset the impact of plunging U.S. sales, which forced the carmaker to file for bankruptcy protection yesterday.

Shanghai General Motors Co., a joint venture between GM and SAIC Motor Corp., China’s largest domestic automaker, boosted sales 50 percent last month to 56,011 vehicles.

For Related News and Information: Company News:GM US <Equity> CN <GO> Top transport news: TRNT <GO> GM in Bankruptcy: EXTRA <GO> Top Stories: TOP<GO>

Last Updated: June 1, 2009 22:10 EDT

Jun 1

June 2 (Bloomberg) — China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”

Yu said he is scheduled to meet Geithner today at the Grand Hyatt Hotel in Beijing.

China is the biggest foreign holder of U.S. Treasuries with $768 billion at the end of the first quarter. Premier Wen Jiabao in March called for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.

“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”

China is concerned that the U.S.’s spending and planned record fiscal deficit will eventually lead to inflation and a loss of confidence in the dollar, undermining the value of China’s Treasury holdings, Yu said.

Climbing Deficit

The deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion shortfall, according to the Congressional Budget Office.

The Obama administration aims to narrow the gap to “roughly” 3 percent of gross domestic product from a projected 12.9 percent this year, Geithner said yesterday during a two-day visit to the Chinese capital. He added that China’s investments in U.S. financial assets are very safe, and that the Obama administration is committed to a strong dollar.

“We are going to have to bring our fiscal deficit down to a level that is sustainable over the medium term,” Geithner said yesterday.

The U.S. should take China’s interests into consideration “so that your own interest can be protected,” Yu said. “You should not try to inflate away your debt burden.” China could still diversify some of its Treasury holdings into euros or commodities, Yu added.

‘Buy Cheap’

“Yes, some people say the euro is very weak,” Yu said. “Okay, weak is good, we’ll buy very cheap.”

The best outcome for China would still be to negotiate with the U.S. and reach agreement on its Treasury holdings, Yu said. “The borrower should keep their promises,” he added. “The U.S. should be a responsible country.”

U.S. government securities have tumbled 4.3 percent this year, the worst performance since Merrill Lynch & Co. began tracking returns in 1978, as so-called bond vigilantes drove up yields to punish President Barack Obama for increasing the budget shortfall.

Concerns about international investors have grown as the U.S. Dollar Index weakened 8.6 percent since February and Obama and Federal Reserve Chairman Ben S. Bernanke committed $12.8 trillion to thaw frozen credit markets and snap the longest U.S. economic slump since the 1930s.

Demand for Debt

Goldman Sachs Group Inc., one of the 16 primary dealers required to bid at the Treasury’s debt auctions, estimates that the U.S. may borrow a record $3.25 trillion this fiscal year ending Sept. 30, almost four times the $892 billion in 2008.

Still, for all the hand-wringing over the dollar’s slide, the expanding U.S. deficit and the nation’s AAA credit rating, the bond market shows international demand for American financial assets is as high as ever.

The Federal Reserve’s holdings of Treasuries on behalf of central banks and institutions from China to Norway rose by $68.8 billion, or 3.3 percent, in May, the third most on record, data compiled by Bloomberg show. The Treasury said bidding from foreigners was above average at its $101 billion of note auctions last week.

–Kevin Hamlin, Dune Lawrence. Editors: David Tweed, Paul Panckhurst.

To contact the reporter on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net;

Jun 1

BEIJING, June 1 — U.S. Treasury Secretary Timothy F. Geithner on Monday sought to reassure China, America’s biggest creditor, that its hundreds of billions of dollars of holdings in U.S. government debt remain safe, even as investors dumped Treasurys amid signs that the global recession is easing.

In recent months, Chinese officials have worried publicly that massive U.S. spending could undermine the value of Treasury securities. Geithner, on a two-day visit to China, responded Monday by pledging to reduce the U.S. budget deficit and gradually eliminate “the extraordinary government support” the Obama administration has put in place.

“The United States is committed to a strong and stable international financial system,” Geithner said in a speech at Peking University, where he studied Chinese as an undergraduate in the 1980s. “The Obama administration fully recognizes that the United States has a special responsibility to play in this regard, and we fully appreciate that exercising this special responsibility begins at home.”

China is by far the largest purchaser of U.S. Treasurys, and about 82 percent of its $2 trillion of foreign reserves are estimated to be in dollars. In March, Chinese Prime Minister Wen Jiabao said he was “concerned about the safety of our assets,” and since then other high-level Chinese officials have been pushing for alternatives to the dollar as a reserve currency.

Such comments have made investors around the world nervous about whether there will continue to be sufficient demand for U.S. debt at a time when the federal government needs to sell record amounts of it to finance itself. Under President Obama’s budget, the U.S. government would have to borrow more than $4 trillion over the next five years.

So far, the government has had no trouble finding buyers. Central banks around the world continue to snap up Treasurys. The Federal Reserve has also said it will buy up to $300 billion in long-term Treasury notes to help keep consumer borrowing costs down.

But as the economy recovers, investors could abandon the safety of U.S. Treasurys for the bigger returns — and risks — of the stock market. That would make it more expensive for the U.S. government to borrow money.

Yesterday’s sell-off stemmed from better-than-expected economic data on U.S. and Chinese manufacturing and U.S. personal income. Treasury prices plummeted, boosting yields on 10-year bonds by the highest margin in eight months.

Meanwhile, improving global economic conditions have sparked fears of inflation. Some economists and investors warn that government spending and the Federal Reserve’s creation of up to $1 trillion in new money to thaw credit markets could cause prices to rise in a few years, leading investors to offload Treasurys.

Geithner’s remarks on the need for fiscal discipline were designed to allay fears of inflation.

In meetings with Chinese government officials and in his public remarks, the Treasury secretary was careful to characterize China as a partner rather than a country that needs to be lectured. He called for a greater role for China in international financial institutions and for China to continue to collaborate with the United States to lead the world out of recession.

“The world is going through an exceptionally challenging period now, and I think the world has a huge stake in our two countries working closely together to lay a foundation for recovery,” Geithner said in introductory remarks during a meeting with Vice Premier Wang Qishan.

Jun 1

BEIJING (AFP) – Twenty years ago, they were young and eager, and thought their bold demonstrations in the heart of Beijing would change China.

Now entering middle age, many of the former Tiananmen protesters still believe they can make a difference, but now it is by using their skills as businessmen to contribute to China’s economy, and avoiding any confrontation with the state.

“There are some internal strengths that have propelled our success, be it ideology or be it personal character or experience,” said one of them, a senior executive who asked not to be named to avoid repercussions for his business.

“I think the government has benefited tremendously. As a matter of fact, a lot of middle-level or senior-level people have implemented a lot of change over the last 10 to 20 years.”

The Tiananmen generation has developed in different ways after the shock dealt on June 4, 1989 when the Chinese government sent tanks and soldiers to crush seven weeks of pro-democracy protests, killing hundreds if not thousands.

A large majority has integrated into society as a whole, but some have stayed on the sidelines, remaining true to the ideals of democracy and transparency advocated during the 1989 protests.

But even this minority does not necessarily reject the values of those that have now turned into pillars of society.

“If they can manage being a successful merchant and are willing to accept certain conditions, I totally understand,” said Wu’er Kaixi, a former student leader who is now a Taiwan-based investment banker.

“Being a dissident is not a job for hundreds of thousands of people to fill. Being successful is a task for the whole generation.”

Many former members of the Tiananmen movement readily admit that the China they spoke up against in 1989 is very different from today’s society, even if they also point out flaws.

“People are better off, not only economically, but also politically. Twenty years ago, there was no way of monitoring the government. Today government efficiency is much better than before,” said the business executive.

“The change I’d like to see is probably more political freedom and freedom of the press. Those eventually will help China release its brain power. If you have errors, but can’t talk about them, you can’t see things clearly.”

In the months and years after the 1989 crackdown, leaders of the student movement went on the run from a vindictive regime, and many fled abroad.

But as China’s economy picked up in the 1990s at a faster speed than anyone had imagined, a growing number were tempted to return home and throw in their lot with the nation’s authoritarian, market-loving rulers.

“The pull, of course, is that the intellectuals, including the students, from a material point of view have a much better life now,” said Perry Link, the US-based co-editor of “The Tiananmen Papers,” a collection of allegedly secret documents from 1989.

The government, eager to reverse a brain drain sapping China of talent, has welcomed them back, but the former students know that they are virtually sworn to silence about the momentous events of 20 years ago.

“Even if they lived through the years, people are reluctant to speak about it with each other, just because it’s a radioactive thing politically that could hurt them,” said Link, who teaches at the University of California, Riverside.

“Some are making the peace with the current regime on the surface, but underneath they are still remembering.”

Despite all the perks associated with the membership of China’s new business elite, many carry painful memories from two decades ago and criticise the government for not facing up to the truth.

“The government made some serious mistakes in dealing with this event. It was totally wrong. You can’t justify that. It was just wrong,” said the protester-turned-executive.

“No matter how long it takes, justice will be served to history. It doesn’t matter if it takes 20 years, 50 years or even 200 years. But the sooner, the better.”

May 24

May 25 (Bloomberg) — China may resume allowing intitial public offerings on the nation’s stock exchanges next month, the National Business Daily newspaper reported today without citing anyone. Thirty-two companies are waiting to sell a combined 14.3 billion shares in initial offerings, the Shanghai-based newspaper reported.

Last Updated: May 24, 2009

May 24

May 25 (Bloomberg) — China is stuck in a “dollar trap” and has little choice but to buy U.S. Treasuries, the only market big enough to support its purchases, the Financial Times reported, citing unidentified officials.

China has diversified its reserves recently and has added to gold stocks and taken stakes in listed companies worldwide, the FT said. Chinese outbound foreign investment almost doubled last year to $52.2 billion, the newspaper said.

May 24

Reporting from Washington — The Obama administration has appealed to China to provide training and even military equipment to help Pakistan counter a growing militant threat, U.S. officials said.

The proposal is part of a broad push by Washington to enlist key allies of Pakistan in an effort to stabilize the country. The U.S. is seeking to persuade Islamabad to step up its efforts against militants, while supporting the fragile civilian government and its tottering economy.

Richard C. Holbrooke, the administration’s special representative for Pakistan and Afghanistan, has visited China and Saudi Arabia, another key ally, in recent weeks as part of the effort.

The American appeal to China underscores the importance of Beijing in security issues. Washington considers China to be the most influential country for dealing with isolated, militaristic North Korea. Beijing also plays a crucial role in the international effort to pressure Iran over its nuclear ambitions.

China traditionally has been reluctant to intervene in the affairs of other countries. However, Chinese officials are concerned about the militant threat to its west, fearing it could destabilize the region and threaten China’s growing economic presence in Pakistan.

A senior U.S. official acknowledged that China was hesitant to get more deeply involved, but said, “You can see that they’re thinking about it.” He spoke on condition of anonymity because of the diplomatic sensitivity of the subject.

U.S. officials believe China is skilled at counterinsurgency, a holdover of the knowledge gained during the country’s lengthy civil war that ended with a communist victory in 1949. And with its strong military ties to Pakistan, U.S. officials hope China could help craft a more sophisticated strategy than Islamabad’s heavy-handed approach.

The Pakistani military has used artillery and aircraft against Taliban extremists in the Swat Valley and surrounding areas in its ongoing offensive. “They’re very focused on hardware,” the senior U.S. official said of the Pakistanis. But the fighting has forced more than 2 million civilians to flee, United Nations officials estimate, threatening a humanitarian crisis.

The tide of displaced people could set off a backlash against the anti-militant effort among ordinary Pakistanis, many of whom already see the fight as driven by American, rather than Pakistani, interests.

China’s strategic alliance with Islamabad reaches back to the 1960s. Beijing has sold Pakistan billions of dollars worth of military equipment, including missiles, warships, and tanks.

China also maintains a huge economic presence in Pakistan. China’s ambassador, Luo Zhaohui, said in a speech this month that there are 10,000 Chinese engineers and technicians working in the country.

But Beijing is increasingly concerned about the Pakistani insurgency, in part because Muslim separatists from the northwestern Chinese region inhabited by Uighurs have trained in Pakistani camps and then returned to China.

Officials in Beijing also are concerned because of recurrent kidnappings and killings of Chinese workers in Pakistan. China has repeatedly pressed the Pakistani government to better protect its citizens.

Analysts say the Pakistani government launched an attack on militants controlling the Red Mosque in Islamabad in 2007 in part because of pressure from China after several of its citizens were briefly kidnapped by militants. More than 100 people died in the assault, and Islamic militants say it represented a turning point in their struggle against the government.

Pakistani officials in Washington acknowledged a lengthy alliance with China.

“Pakistan and China have a time-tested bilateral relationship and Chinese support and cooperation have been crucial for Pakistan at many difficult times in our history,” said Husain Haqqani, Pakistan’s ambassador to the U.S. “At this moment too, we continue to look to China as a trusted friend and partner while laying the foundations of a more enduring strategic relationship with the U.S.”

Chinese officials did not immediately respond to requests for comment.

Stephen Cohen, a South Asia specialist at the Brookings Institution, said China and Saudi Arabia wield more influence with Pakistan than does the United States. As a consultant to the U.S. government, Cohen has urged American officials to try to enlist Beijing’s help.

“China can be a positive influence,” he said. But he added that there may be divisions within the Chinese government, and that the Chinese military, despite close ties to the Pakistani army, may be reluctant to intervene.

Holbrooke, the U.S. envoy, visited China on April 16, and officials of both countries said then that they had agreed to work together on Afghanistan and Pakistan.

“We came here to share views on the situation in Afghanistan and Pakistan because we share a common danger, a common challenge and a common goal,” Holbrooke said at the time.

Lisa Curtis, a former congressional analyst now at the Heritage Foundation, a think tank, said it would be difficult to persuade China to assume any military role. But she said the Chinese are concerned about the spillover effects of the Pakistani insurgency.

“The Chinese may try to deal with this privately,” she said. “They won’t want to make any public statements that might embarrass the Pakistanis.”

May 24

May 25 (Bloomberg) — The following companies may have unusual price changes in China trading. Stock symbols are in parentheses, and share prices are as of the close of May 22.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 13.02, or 0.5 percent, to 2,597.60. The CSI 300 Index fell 0.3 percent to 2,740.68.

Bank of China Ltd. (601988 CH): The country’s third-largest bank will increase its stake in its Hong Kong unit at an “appropriate time,” Caijing magazine reported on its Web site, citing Chairman Xiao Gang. Bank of China will not privatize the Hong Kong unit because of its status as a currency-issuing bank on the island, Xiao was cited as saying by Caijing. The stock added 0.3 percent to 3.53 yuan.

PetroChina Co. (601857 CH): The nation’s biggest oil company said it offered to pay S$1.47 billion ($1 billion) for a 45.5 percent stake in oil refiner Singapore Petroleum Co. to help expand its international business. The shares lost 2.4 percent to 12.86 yuan.

Shanghai Construction Co. (600170 CH): The company said won a 723.6 million yuan ($106 million) contract to build a data center for China Life Insurance Co. The stock fell 1.2 percent to 13.16 yuan.

Shanghai Electric Group Co. (601727 CH): China’s largest maker of power equipment said it has canceled the sale of a 36 percent stake in Shanghai Topsolar Green Energy Co., because buyer Yancheng Dongtou New Energy Equipment Co. hadn’t made the second payment of 97 million yuan. The shares added 0.8 percent to 10.59 yuan.

Shanxi Coking Co. (600740 CH): The largest publicly traded coke producer in China expects to return to profit this year because China’s stimulus spending is boosting coke prices, General Manager Yang Qingmin said. The shares lost 2.6 percent to 7.93 yuan.

Shanxi Taigang Stainless Steel Co. (000825 CH): China’s biggest stainless steel producer said prices may decline further this year. The stock fell 2.2 percent to 6.72 yuan.

Weichai Power Co. (000338 CH): The maker of high-speed heavy-duty diesel engines said its biggest shareholder, Weichai Group Holdings Ltd., agreed to form a joint venture. The shares rose 2 percent to 35.91 yuan.

ZTE Corp. (000063 CH): China’s second-biggest phone- equipment maker said it reached a $10 billion financing agreement with the Export-Import Bank of China to support its overseas expansion. The shares fell 0.7 percent to 35.38 yuan.

To contact the reporter on this story: John Liu in Shanghai at

May 24

ORLANDO, Fla. – The Cleveland Cavaliers have signed an agreement with an investment group from China to become minority owners of the NBA franchise and its arena, a partnership that could impact superstar LeBron James’ future with the team.

The Asian conglomerate, which includes JianHua Huang, a Chinese businessman who has brokered sponsorship deals with the New York Yankees and other sports franchises in the U.S., could acquire up to 15 percent of Cavaliers Operating Company, the entity that owns the team and operates Quicken Loans Arena.

The deal, completed by the sides in recent days, must be approved by the league’s board of governors.

Team president Len Komoroski said Sunday the group approached Cavs principal owner Dan Gilbert about the partnership and called the business venture “an exciting new opportunity.”

Gilbert’s role in overseeing the organization and 20,000-seat arena will not be affected by the new partners.

Citing multiple unnamed sources, the Cleveland Plain Dealer first reported the sides had a tentative deal in place. But in recent days, paperwork was completed between Gilbert and the consortium. It will now be sent to the league office for approval.

With an eye on spreading the game on a global scale, the NBA has been quietly pushing for an international group to become involved in ownership on a minority level. And with a huge fan base already in China — mainly because of Houston All-Star Yao Ming — the league has entered into several ventures with the nation to develop players and build arenas to NBA specifications.

Huang and others in the group attended Games 1 and 2 of the Eastern Conference finals in Cleveland. On Friday, they sat courtside and watched James hit a game-winning 3-pointer in the final second to give the Cavaliers a 96-95 win and even the best-of-seven series which resumed Sunday night.

If approved, the deal would provide marketing opportunities for the Cavaliers and James, who is eligible to become a free agent in the summer of 2010. The 24-year-old MVP, who is already among the league’s most popular players in Asia, has stated he wants to become the first billionaire athlete. His brand overseas could be enhanced by playing for a team with Chinese business partners.

There has been ongoing speculation that James will leave Cleveland to play in a larger market like New York or Los Angeles because of the vast business opportunities. But James — and his corporate sponsors like Nike — have broader goals and may be able to attain them by tapping into China’s colossal consumer marketplace without him ever leaving Cleveland.

James has never given any indication he wants to leave the Cavaliers, who drafted the Akron, Ohio, native with the No. 1 overall pick in 2003. He won a gold medal with the U.S. team last summer at the Beijing Games and has made four trips to China, including one with the Cavs during the preseason two years ago.

“It’s a big market,” James said before Game 3. “They love the game of basketball. I’ve been over there the last four or five summers. It should be good. It should be fun.”

Gilbert has been approached by outside investors in the past, but his original business group has mostly remained intact since he bought the Cavaliers and the rights to operate their arena for $375 million from former majority owner Gordon Gund in 2004.

Gilbert purchased the team with several other investors, including longtime business partner David Katzman, R&B superstar Usher and others. Gund maintained partial ownership.

However, in the past two years, Katzman has decided to focus on other business interests and the Chinese group would essentially take over his percentage of the Cavs.

 

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