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POWERFUL COMBINATION: A power farm in Yumen, northwest China's Gansu Province combines both wind and solar power generation. Its 9-megawatt photovoltaic facility is expected to generate electricity in early December (NIE JIANJIANG) |
Numbers of the Week
379.7 billion kwh
China's electricity consumption totaled 379.7 billion kilowatt hours in October, growing 11.35 percent from a year ago, said the National Energy Administration.
$11.3 billion
China increased its holdings of U.S. Treasury securities by $11.3 billion in September, bringing its total portfolio to $1.1483 trillion, said the U.S. Treasury Department.
TO THE POINT: In a bid to foster value for investors, the China Securities Regulatory Commission orders listed firms to improve investor's dividends. China's exporters face some serious headwinds as overseas markets turn bearish. The once-feverish auto market continues tapering off due to withdrawal of favorable policies. New yuan-denominated loans stage a comeback, a signal that policymakers are easing their monetary stance on a selective basis. Chinese airlines disappoint with tepid profit growth.
The China Securities Regulatory Commission (CSRC), on November 9 issued a circular, requiring listed companies to distribute more cash dividends to shareholders in an effort to protect investors' interests.
The regulation would first apply to companies pursuing initial public offerings (IPOs), said Guo Shuqing, who recently took over as CSRC Chairman.
Detailed disclosure of dividend policies and schemes will be a requisite part of all IPO prospectuses in order to enhance transparency of share listing, according to the circular. Those schemes cannot be changed once they are established.
Moreover, the CSRC said it is conducting research and trying to improve the dividend tax policy in order to make the listed companies more willing to repay investors.
"Dividend is an important part of investor returns, and also a deciding factor for share prices," said the commission. "Stiff efforts will be made to tighten supervision over implementation of the new dividend policy."
In China, dividend issuance was mandated only for bonds, not stocks, and the payout decision for stocks is left largely to the discretion of company management.
Data of the CSRC showed China's public firms handed out a total of 500.6 billion yuan ($78.83 billion) in cash dividend in 2010, up from 342.3 billion yuan ($50.91 billion) in 2008. The amount, however, remains far from what investors receive in developed countries.
"The new policy will help boost investor confidence and encourage long-term value investment," said Wang Jianhui, chief economist with the Chongqing-based Southwest Securities Co. Ltd. "But the problem is the CSRC did not clarify what will happen if companies disobeyed the rules."
China's foreign trade sector steers a rosy path of growth, though clouds are already gathering over its future prospects.
In the first 10 months of 2011, China's exports totaled $1.55 trillion, growing 22 percent year on year, while imports climbed 26.9 percent to reach $1.43 trillion, said the General Administration of Customs. The trade surplus stood at $124 billion, shrinking 15.4 percent from a year ago.
In October alone, exports went up 15.9 percent to $157.49 billion. The growth rate was the lowest in eight months. Imports amounted to $140.46 billion, up 28.7 percent. The trade surplus dropped 36.5 percent from the previous year to $17.03 billion.
The import buoyancy was attributable to the resilience of the Chinese economy, strong domestic demands and policy incentives to encourage imports, said Zhang Yansheng, Director of the Institute of Foreign Economics Research under the National Development and Reform Commission.
Lu Ting, an economist with the Bank of America Merrill Lynch, warned there was a growing risk of a break-up of the eurozone, which could trigger a sudden collapse in the global financial system.
"If that happens, China's export growth could slump," Lu said.
Liu Ligang, an economist with the Australia and New Zealand Banking Group, also held a gloomy review, saying China's exports could slide to single-digit growth in the coming two months.
"Moreover, a significant decline in exports would affect many industries and fan the unemployment problem," he said.
The auto market has yet to leave the industry downturn behind as subsidy withdrawal pours cold water on buyer interest.
Auto sales across the nation totaled 1.52 million units in October, representing a slight drop of 1.07 percent year on year, said the China Association of Automobile Manufacturers (CAAM). Output in October stood at 1.57 million units, increasing 1.72 percent.
The October figure brought the sales for the first 10 months to 15.16 million units, growing 3.15 percent from a year earlier. The output from January to October amounted to 150.34 million units, up 2.66 percent.
The CAAM expected the market weakness to continue through the rest of the year as the government rolled back some policy incentives, dealing a blow to market demands.
The Ministry of Finance adjusted its two-year-old subsidy policy for fuel-saving vehicles, making more than 70 percent of the original 427 models ineligible for subsidies, effective October 1.
"An increasing number of global auto makers are now making low-end, small-engine cars in China, and that means intensifying competition for Chinese manufacturers," said Dong Yang, Secretary General of the CAAM.
"The sales decline will even accelerate in November as tightening monetary policies may also restrain vehicle purchases among smaller business owners," said Rao Da, Secretary General of the China Passenger Car Association.
CAAM expects vehicle sales in 2011 to grow 5 percent, down from its original forecast of 10-15 percent.
Bank lending regains momentum in China as the country fine-tunes its monetary policy to prevent a deeper economic downturn.
New loans denominated in the yuan totaled 586.8 billion yuan ($92.7 billion) in October, an increase of 17.5 billion yuan ($2.76 billion) from a year ago, said the People's Bank of China, the central bank. The figure also represented a sharp leap from 470 billion yuan ($70.02 billion) in September.
The broad money supply (M2), which covers cash in circulation and all deposits, went up 12.9 percent year on year to 81.68 trillion yuan ($12.86 trillion) at the end of October. The growth rate was slightly down from September's 13 percent and well below the government's target ceiling of 16 percent for the entire year.
E Yongjian, a financial researcher with the Bank of Communications, said the lending rebound reflected vibrant domestic demands for credit, and it means policymakers may already be reopening the lending tap targeting smaller businesses.
"The central bank will rely more on open market operations to flexibly adjust liquidity, and a cut in the reserve requirement ratio is also likely to happen in the fourth quarter," he added.
"This is a meaningful pickup in new loans which suggests selective easing has already started," said Qu Hongbin, a Hong Kong-based economist with the HSBC. "This should help stabilize growth with small and medium-sized enterprises and increase credit support for ongoing infrastructure projects."
China's airline giants generated lackluster returns in the third quarter due to weakening demand for air traffic.
Air China, the country's biggest airline, raked in 3.8 billion yuan ($598.43 million) in net profits during the July-to-September period, decreasing 26.46 percent year on year. The carrier attributed the poor performance to a slump in cargo transport of international routes, as well as soaring operating costs.
China Southern Airlines generated 3.13 billion yuan ($492.91 million) of net profits for the third quarter, up barely 3 percent year on year.
China Eastern Airlines reported 3.3 billion yuan ($519.69 million) in net profits, a modest increase of 4.85 percent. "The market continues to reel from fragile global economy, high crude oil prices and after-effect of the devastating Japan earthquake," said Luo Zhuping, secretary of the board of the company.
"The third quarter is traditionally a peak season for air traffic, but the market was dragged down in part by domestic economic slowdown," said Li Lei, an analyst with the China Securities Co. Ltd.
Air China, in particular, received a heavy blow due to lower contribution from its associate airline—Hong Kong-based Cathy Pacific, said Li.
"China would remain a bright spot in the global aviation industry, but pressures are amounting on Chinese companies because of costs inflation and intensifying competition from high-speed railways," said Kong Dong, Chairman of Air China. | 
