NEWSROUNDUP

economics

China’s central bank said that stabilizing economic growth will become a bigger priority, reflecting policy makers’ growing concern over the country’s significantly slower second-quarter growth rate of 7.6%. China’s consumer price inflation in July fell for the fourth consecutive month; consumer prices rose just 1.8% yearon-year, compared with 2.2% in June, providing more room for policy makers to potentially ease monetary and fiscal policy in the second half. The producer price index fell 2.9% year-on-year, its fifth consecutive monthly decline. The purchasing managers’ index decreased 0.1 points from the previous month to 50.1 in July. Although a reading above 50 indicates expansion, the dip points to a cooling of the nation’s industrial growth. Many analysts believe that further stimulus measures could lead to a manufacturing rebound in the second half of the year.

trade

Disheartening Chinese trade figures fueled concerns about the economy and raised the prospect of aggressive government easing later this year. Exports rose just 1% year-on-year in July, well below the median estimate of 8% predicted by economists. Imports, meanwhile, grew by 4.7% year-on-year in July, down from 11.3% in June and short of the expected 7% gain. The country’s trade surplus came in at US$25.1 billion, down from US$31.5 billion a year earlier. In domestic trade, profits at major industrial enterprises in China declined 1.7% from the previous year to US$73.97 billion in June, up from a 5.3% decline in May.

Politics and society

Chinese Communist Party (CCP) members assembled in the seaside resort town of Beidaihe, where officials discussed how to fill the seats of the of the 25-member Politburo as well as the Politburo Standing Committee, China’s top governing body, during the country’s political transition this year. Xi Jinping, the man widely expected to succeed China’s current president Hu Jintao, was among those who arrived in the town. The final composition of the governing bodies is set to be announced during the CCP’s 18th National Congress sometime this fall. Meanwhile, Gu Kailai, wife of former Chinese Politburo member and Chongqing Party Secretary Bo Xilai, received a suspended death sentence in Anhui court for the murder of British businessman Neil Heywood. The decision will likely allow Gu to avoid execution, lawyers said.

investment

Chinese regulators approved Hanlong Mining’s US$1.3 billion bid to take over Australian iron ore developer Sundance Resources. Hanlong, which already has a 17% stake in Sundance, offered to buy the company in order to gain full ownership of the US$4.7 billion Mbalam iron ore project bordering the republics of Congo and Cameroon. Meanwhile, with other efforts to expand internationally close to fruition, China Youngman Automobile Group is set to complete a US$12 million deal to acquire a 75% stake in Germany’s Viseon Bus.

energy

State-backed China National Offshore Oil Corporation sought a US national security review for its US$15 billion proposed buyout of Canadian oil producer Nexen in hopes of a smooth completion of the deal. Beijing announced new gasoline and diesel price hikes in response to rising global crude costs. The ceiling price at which gasoline can be sold to consumers increased to RMB390 (US$61) per metric ton while the ceiling on diesel increased to RMB370 (US$58) per metric ton.

markets, Banking and finance

China recorded a deficit in its capital and current account of US$71.4 billion in the second quarter, a major decline from the US$56.1 billion surplus in the first quarter, as Chinese investors chose to increase their holdings of foreign currencies amid global uncertainty. Meanwhile, the China Securities Regulatory Commission slashed transaction fees for stocks and futures trades for the third time since April, in a move to boost the nation’s languishing equities markets. By contrast, China’s property market saw the price of new homes rise in July by the largest margin in more than a year.

consumer

Passenger car sales in China increased 11% in July, amid a slowing economy and a typically weak month for the auto industry. Fashion retailer Esprit Holdings saw its shares jump on the announcement that it has appointed a senior executive from Inditex, parent company of Zara, to be its new chief executive. Meanwhile, DreamWorks Animation is set to partner with Shanghai Media Group to develop a US$3.1 billion entertainment district in Shanghai. Analysts say the partnership will escalate DreamWorks’ rivalry with the Walt Disney Company, as both companies compete for a stronger foothold in China.

tension in asia

Tensions between Japan and its neighbors flared as the region commemorated the 67th anniversary of the end of World War II. Japan angered China by detaining 14 activists who were attempting to demonstrate on the disputed Senkaku/ Diaoyu islands. An invitation by the Philippines for companies to bid for opportunities to explore oil and gas reserves in areas of the South China Sea claimed by China received only bids from domestic firms, as international oil majors chose to stay out of the bidding. Helios Petroleum and Gas bid on two blocks, while a group of investors including Philex Petroleum submitted a bid for another.

us-china relations

The White House imposed sanctions on Bank of Kunlun, a subsidiary of state-owned China National Petroleum Corporation, drawing protests from Beijing as the US stepped up efforts to undermine Iran’s nuclear ambitions. The US also denounced China’s decision to establish a military outpost on a disputed island in the South China Sea, saying the move could elevate tensions in the region. Officials in China met with a senior US diplomat to protest American accusations that China’s recent actions have hindered diplomatic efforts to resolve disputes in the South China Sea. Separately, Chinese state media criticized US Secretary of State Hillary Clinton on her visit to Africa, during which she took a thinly-veiled swipe at China.