Foreign Direct Investment

In the first six months of the year, the Chinese Government approved the establishment of 19,750 foreign-invested enterprises, a decline of 6.89 percent compared with the same period last year, according to the Ministry of Commerce (MOFCOM). The paid-in capital reached $28.43 billion, dropping 0.47 percent year on year.

During the first six months, the 10 countries and regions that invested the most in China were Hong Kong, the British Virgin Islands, Japan, South Korea, the United States, Germany, Taiwan, Singapore, the Cayman Islands and Samoa (see graph 1). Investment from these countries and regions accounted for 84.13 percent of the total overseas investment that China attracted in the first half.

Accommodation and Catering

From January through June, retail sales of the accommodation and catering industry reached 492.86 billion yuan, an increase of 65.4 billion yuan from the same period last year, said the MOFCOM (see graph 2). The figures accounted for 13.5 percent of total retail sales of consumer goods and pulled the latter up 2.03 percentage points. The industry's year-on-year sales growth--15.3 percent--was 2 percentage points higher than that of all consumer goods.

In the first six months, 536 foreign-invested enterprises were approved for establishment in the accommodation and catering industry, decreasing 4.5 percent from a year ago. The commitment and paid-in capital reached $1.43 trillion and $380 million, growing 15.6 percent and 48.6 percent, respectively, year on year. Of this total, 143 foreign-invested enterprises were in the accommodation sector and the other 393 were in the catering sector, with the paid-in capital accounting for $250 million and $130 million, respectively.

The MOFCOM predicted that the demand for accommodation and catering service in the second half will maintain an uptrend and sales can be close to 598 billion yuan. Retail sales of accommodation and catering in 2006 are expected to amount to 1.09 trillion yuan.

Power

China's electricity producers continued to close the demand-supply gap in the first half, meeting soaring consumption with increased supply, said a China Electricity Council (CEC) spokesman. According to the council, only four provinces (autonomous regions/municipalities) reported shortages this June, sharply down from 25 at the beginning of 2005.

CEC figures show electricity consumption in the first six months reached 1.31 trillion kwh, up 12.89 percent from the year-earlier period. The industrial sector consumed 983.1 billion kwh with demand of light and heavy industries rising 9.69 percent and 14.2 percent, respectively.

Four heavy industry sub-sectors saw significant rises in terms of electricity consumption. The increase for chemicals was 12.27 percent; building materials, 14.48 percent; ferrous metals, 15.65 percent and non-ferrous metals, 23.8 percent. Their consumption growth accounted for 50.1 percent of the overall growth of the industrial sector.

In the first half, 32.41 million kw of installed capacity was put into production and the generation of electricity stood at 1.27 trillion kwh, up 12 percent. Thermal power installed capacity accounted for 88.48 percent of the total additional capacity in the first half, and hydropower, 11.1 percent. However, CEC admitted too much coal-fired installed capacity was inappropriate for China's electricity supply structure.

The CEC predicted that electricity supply would remain tight in the third quarter, but the situation would ease after September. Installed capacity put into production would hit a record 75 million kw by the end of this year.

Total electricity consumption this year would rise 12 percent year on year, higher than the growth of the GDP, said the CEC.

Futures Market

China's futures turnover reached 1.7866 trillion yuan in July, surging 44.63 percent year on year, according to the China Futures Association.

Total business volume in the futures market exceeded 11.88 trillion yuan in the first seven months of this year, shooting up 57.01 percent over the same period last year.

The fastest futures trading growth came from corn, aluminum, beans and rubber, the association said.

Turnovers of Shanghai and Zhengzhou futures exchanges accounted for 65.95 percent and 14.63 percent of the nation's total, up 101.81 percent and 29.87 percent, respectively, year on year. Dalian Futures Exchange made up 19.42 percent of the nation's total turnover, down 22.94 percent year on year.

Stock Market

The total market value of shares already listed in the Chinese stock market shrank by more than 400 billion yuan after the country resumed domestic stock sale in June after a yearlong halt to carry out a state-share reform, reported by the Xinhua-run China Securities Journal.

On June 2, the eve of the first initial public offerings (IPO) this year, the total market value of shares listed on Shanghai and Shenzhen stock exchanges was 4.42 trillion yuan. But on June 5, the market value of the same shares dropped to 4,017.8 billion yuan.

Ten companies, including the Bank of China and Daqin Railway Co., had raised 40.6 billion yuan in IPO on the mainland market by the end of July, according to the newspaper.

The market has enjoyed a solid run since late last year and there have been periodic bursts of heavy profit taking, but the past month or so has seen several days of significant losses.

Industry regulations require investors to apply or subscribe to buy shares during an IPO by putting funds up front, which are frozen for four days.

Potential investors are then selected randomly in a computerized lottery. Unlucky investors who are unsuccessful in winning the right to buy new shares have their funds returned within four days.

Dealers attributed the recent index downturn to investors raising cash for the upcoming IPOs, with many of the newly listed stocks expected to do well and provide quick profits. But they remained concerned about emerging liquidity pressure, with Air China and the Industrial and Commercial Bank of China on the listing trail.

Within nine months, the market value of shares newly issued is expected to exceed 3.3 trillion yuan, almost the same size as the total capitalization before IPO resumption in June, according to a latest report released by Shenying & Wanguo Securities Institute.

Frequent refinancing and IPOs were blamed for contributing to the five-year stock index slump between 2001 and 2005.

The China Securities Regulatory Commission suspended refinancing of listed companies as well as IPOs throughout 2005.