Growing Pains

Just as the SME (small and medium-sized enterprise) board was launched five years ago, the ChiNext, China's NASDAQ-style board, staged a wild swing on October 30, its first trading day, providing new but volatile opportunities for investors.

The buying rush was so overwhelming that regulators, eager to cool the fever, temporarily suspended share trading of all 28 newly listed companies at different points. Under rules created to rein in speculation, if a stock fluctuates beyond 20 percent from its opening price, it will be suspended from trading for 30 minutes.

Though an ensuing deep downturn eroded some of the gains, most shares closed more than 80-percent higher, creating fortunes for founders and initial investors in those companies, which include film producers, software makers and pharmaceutical companies.

The new market was aimed at funding technology and innovation-driven start-up companies, in line with the economic restructuring to rely less on labor-intensive manufacturing. Before the ChiNext opened, the companies had raised a combined 15.5 billion yuan ($2.27 billion) from their initial public offerings, far more than they had expected.

But some analysts warned investors of simmering risks. The overextended share prices are due for a sharp correction, they said. The average price-earnings ratio of ChiNext-listed companies stands at around 100, a clear sign that price bubbles are in the making. On November 3, 20 of the 28 firms dived by a daily limit of 10 percent as investors scrambled to sell in a panic.

Yi Xianrong, a senior economic researcher with the Chinese Academy of Social Sciences, said regulators are supposed to guard against speculation and defend market health.

Manufacturing Picks up

The Chinese economy is quickly getting back on the fast track of growth, thanks to China's solid manufacturing foundation.

The purchasing managers' index (PMI), a major indicator of manufacturing activities, rose to 55.2 percent in October, 0.9 percentage points higher than the previous month, the China Federation of Logistics and Purchasing said.

The PMI, which includes a package of forward-looking elements such as orders for future sales and inventories, has been staying above 50 for eight consecutive months. This is widely seen as a clear sign that the broader economic recovery is in progress.

The PMI sub-index for production climbed to 59.3 percent in October, up from 58 percent in September. The reading for new export orders rose to 54.5 percent from 53.3 percent last month, indicating a continued pick-up in external demand.

The continued rise in PMI bodes well for a bright outlook for future growth, said Zhang Liqun, a researcher with the Development Research Center under the State Council, in an interview with Xinhua News Agency. "Domestic demand will keep growing appreciably, pumping steam into the upward momentum," he said.

Bridging China

Airbus, a world-leading commercial airplane maker, said it will open its first logistics center in Asia early next year in north China's Tianjin Municipality, after signing a Memorandum of Understanding (MOU) with the local government on October 29.

"As Airbus deepens cooperation with its Chinese counterparts, the center will be built as the pivot for its supply chain management in China," said Laurence Barron, President of Airbus China, in a statement.

The logistics center is expected to coordinate the transport systems for all aircraft components flowing in and out of China, he said.

The center will begin operation at a temporary site in the Tianjin Port Bonded Area of the Binhai New Area in early 2010, before its permanent location is determined next March, according to the MOU.

Airbus now has six Chinese component suppliers, which are located across the country and handle their own logistics, he said. "The unified management can cut costs and raise business efficiency."

In addition, Airbus forecasts its procurement of components and materials in China to rise to $200 million by 2010, and $450 million by 2015.