Top news of the week
Economic growth on track, August data shows
Economic data released on Friday showed that the Chinese economy remained solidly on the growth track, as industrial output, fixed-asset investment and retail sales all expanded year over year in August. Industrial activities accelerated in August, as output grew by 12.3% over the year-ago period, compared to a 10.8% growth in July. This is the highest year-over-year increase in 12 months. Fixed-asset investment and retail sales also grew by 33.6% and 15.4% year over year, at a pace faster than in July.
Investors are delighted by the August bank lending numbers. While significantly lower than the monthly average from January to July, which was widely anticipated, bank loans totaled CNY410 billion (£36 billion), CNY55 billion higher than the July low and also higher than the market expectation. This could indicate that the government's priority remains economic growth and that it is not keen to drastically cut credit supply in the coming months. Earlier attempts by bank regulators to contain explosive loan growth had sparked investor concern about monetary tightening, which sent the stock market tumbling down by nearly 20% from its recent peak.
Pricing environment still looks benign for the moment. Retail and wholesale price indexes remained negative in August, for the seventh consecutive month. However, recent increases in prices for food, water and electricity could bring the consumer price index back to the positive territory before the end of the year.
Exports remain a drag on growth, down by 23.4% in August compared to the year-ago period, which is worse than the 23% contraction recorded in July. Exports have been falling over the past 10 months, and accumulative trade surplus year to date is nearly 20% lower than the same period in 2008. Obviously, China faces a pressing task to restructure its economy in order to reduce its dependence on external demand.
Market recap
This week's stockmarket performance was boosted by strong August
economic data, as well as by public reassurance made by the Chinese
premier that the accommodating monetary and fiscal policies will remain
in place. Stock indexes ended the week at the highest levels seen in
three weeks. The Shanghai Composite Index surged 4.5% to 2,990, while
the Shenzhen Composite Index climbed 5% to 12,096.
Macro and industry updates
China to offer yuan-denominated sovereign debt in HK
China plans to offer sovereign debt in the Chinese yuan outside of the mainland market. While at CNY 6 billion (£530 million), the amount to be raised is not particularly large, this move marks another major step China has taken to make the yuan an international currency. Other efforts include currency swap agreements with a number of countries and trade settlement in Chinese yuan.
August auto sales at record high
Passenger car sales rose to 858,300 in August, up by 90% from the August of 2008 and by 3.1% from this July. In the first eight months, more than 6.2 million passenger cars have already been sold, only slightly lower than the full-year sales in units for 2008. Year to date, overall sales of automotives, which also include heavy trucks, buses and other vehicles, totaled 8.3 million units. As a sign of confidence in the market, GM's joint venture in China this week said it plans to import $600 million worth of complete vehicles, parts and equipment from General Motors.
Chinese automakers bid for Volvo and Saab
Hong Kong-listed Chinese carmaker Geely confirmed its intention to acquire Volvo this week, making it the first open bidder for the unit. Meanwhile, Beijing Automotive said it will join Koenigsegg to buy Saab by helping to provide part of the funding needed for the purchase. Beijing Automotive previously sought to buy Opel, but its offer was turned down by General Motors.
IPO and M&A
Here are the major initial public offerings and mergers and acquisitions involving Chinese companies:
