TO THE POINT: China has recovered from the heavy snowfall that had paralyzed most of the southern part of the country since mid-January. Food prices, electricity supplies and telecommunications services were restored to normal after the Spring Festival on February 6-12. Rising grain prices have boosted revenue of state-owned grain companies, which last year helped them to record their first-ever profits since 1961. Chinese companies are busy with domestic and overseas acquisitions. The Aluminum Corp. of China (Chinalco) bought a 12-percent stake in Australia-based mining company Rio Tinto Plc., while home appliance giants Midea Electric Appliances Co. Ltd. and Changhong Electric Co. Ltd. were bidding for a controlling 24-percent stake in washing machine manufacturer Little Swan Group Co. Ltd. By LIU YUNYUN

Chinese Outbound Tourists Boom

The Chinese mainland is expected to record 21.6 million outbound tourists in the first half of 2008 with a year-on-year increase of 12.4 percent, according to a report issued by MasterCard Worldwide.

The Chinese mainland will lead the whole Asian-Pacific outbound travel market in the first six months this year, the report said.

According to the latest MasterCard Worldwide Index of Travel, Asian-Pacific outbound markets will continue to be buoyant with more individual and business journeys in the first half of 2008 despite the economic uncertainty in the global financial market.

The market will see 79.5 million outbound tourists in the next six months, with over one quarter from the Chinese mainland, the report said. It attributed the booming outbound travel market to the increasing number of middle-class Chinese.

The number of China’s middle-class families would rise to 100 million in 2016 from 35 million in 2006 in metropolises, such as Beijing, Shanghai and Guangzhou, it said.

China’s National Tourism Administra-tion said early January that it recorded 40.95 million outbound tourists in 2007.

MasterCard, one of the world largest credit bodies, issues the report twice a year with surveys on individual and business travel in 13 markets in Asia Pacific.

Chinalco Swooping Down

When the Australia-based diversified resources company BHP Billiton Ltd. was busy improving its offer to try to take over London-listed Rio Tinto, Chinalco swept in to announce a joint purchase with U.S.-based Alcoa Inc. of a 12-percent stake in Rio Tinto worth $14.05 billion. The purchase is the largest ever foreign investment by a Chinese company.

If BHP and Rio Tinto indeed join hands, they would forge a dominant position in the pricing power of iron ore and would pose a big threat to China-the world’s biggest importer of iron ore used to make steel.

Prior to the deal, rumors had circulated that China’s Baoshan Iron & Steel Co. Ltd. (Baosteel) would be a potential competitor to BHP to acquire Rio Tinto. But that proved not to be the case.

Analysts praised Chinalco’s tactic of remaining calm until the last minute in its purchase of the Rio Tinto stake.

Chinalco’s announcement came on February 1, five days before the last day that BHP would have had to issue another offer; otherwise, the company would have been restrained for six months from making a further offer.

Chinalco and Alcoa’s purchase forced BHP to raise its offer from three BHP shares for one Rio Tinto share, to 3.4 of BHP shares for one Rio Tinto share. Yet, Rio Tinto’s shareholders turned it down, contending that BHP’s latest offer still underestimated Rio Tinto’s true value.

Connecting the Villages

The Ministry of Information Industry said it planed to expand broadband services to more than 95 percent of the country’s villages this year.

Some of the central and eastern provinces will have all their villages covered by the service by the end of this year.

To date, 99.5 percent of the country’s villages have access to telephone links, and broadband connections cover 92 percent of all villages across the country.

In 2007, about 73 million people were added to the nation’s total netizen population, of whom about 40 percent live in rural areas. The number of rural Internet users rose to 52.62 million at the end of 2007, a year-on-year increase of 128 percent (see page 34). The impressive growth in rural areas has largely been due to government efforts and the robust demand for Internet access. The increase in the number of rural Internet users also shows the vast potential for further Internet expansion in the hinterland, while urban areas have almost reached a saturation point.

China has about 122 million broadband users, the highest of any country.

Grain Companies Start Making Profits

China’s state-owned grain-trading enterprises reaped unprecedented earnings in 2007, making it the first year since 1961 that those companies had made a profit.

The overall net profits of the companies reached a historic 167 million yuan ($23.26 million), while in 2006 they suffered losses of 2.97 billion yuan ($414 million), according to the State Administration of Grains.

This is believed to be a result of effective government measures backed by the minimum purchasing price schemes that protect the interests of both farmers and grain-trading companies. The scheme set a minimum purchase price for state-owned grain-trading companies and prohibited any prices lower then that amount. The big profits also were due to a substantial rise in grain prices last year. China’s consumer price index rose 4.8 percent in 2007, with the prices of grains, such as soybeans, reaching a record high.

Grain companies in 17 provinces, including Jiangsu, Shandong and Henan, earned good profits, while those in other areas trimmed their losses, according to the State Administration of Grains.

Despite the record profits, volatile price fluctuations are still a big problem in the industry. Moreover, limited access to bank loans, rising interest rates and lack of competence hamper the enterprises’ development.

Reshaping the Washing Machine Industry

Home-grown appliance manufacturers are seeking domestic acquisitions to become competitive on international markets.

Guangdong-based Midea Electric Appliances Co. Ltd. and Sichuan-based Changhong Electric Co. Ltd. announced separate bids for a controlling 24-percent stake in washing machine maker Little Swan Group Co. Ltd., based in Wuxi in Jiangsu Province.

Wuxi Guolian Development (Group) Co. Ltd., the holder of the stake up for sale, set several conditions for potential buyers: They must have been profitable for the past three consecutive years with registered capital of no less than 1 billion yuan ($140 million) or the equivalent denominated in another foreign currency. Their total book net assets must be valued at no less than 3 billion yuan ($418 million). And they must be a home appliance manufacturer.

Those conditions shut many investors out, leaving Midea Electric Appliances and Changhong Electric as the two main competitors.

The deal would be worth 1.9 billion yuan ($264 million) based on Little Swan’s closing price of 21.90 yuan ($3.04) on January 11. Little Swan shares have stopped trading until February 15.

Other current major players in the washing machine sector include Germany’s Siemens AG, South Korea’s Samsung Group and LG Group, Japan’s Sanyo Electric Co. Ltd., and China’s Haier Group and Royalstar Group.

Working for Private Enterprises

More than 200 million citizens of the country’s total 1.3 billion work in private companies in China, according to a report released on February 8 by the All-China Federation of Industry and Commerce.

China had about 5.39 million registered private companies by September last year, 8.2 percent more than those at the end of 2006, the report said. They account for 60 percent of the country’s GDP.

In the past three decades, private businesses boomed due to the reform and opening-up policy adopted in 1978.

Big private industrial companies with annual operating revenue of 500 million yuan ($685,000), reported strong performances last year, reaping 400 billion yuan ($54.79 billion) in profit in the first 11 months of 2007, a year-on-year increase of 50.9 percent, the report said.

Private companies also made big investments last year. In the first 11 months of 2007, their fixed asset investments totaled 5.67 trillion yuan ($790 billion), up 36 percent over the same period in 2006.

547 million Statistics from the Ministry of Information Industry indicate that the country’s total number of mobile phone users reached 547 million at the end of 2007, covering 41.6 percent of the country’s population. 42 % Bayerische Motoren Werke AG (BMW), the world’s largest luxury car maker, said its sales in China last year jumped 42 percent as economic growth spurred demand for its cars. BMW sold 51,588 vehicles, including 49,388 BMWs and 2,200 Mini-brand cars on the mainland, buoyed by the increasing number of affluent citizens.