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The regulator said it began to probe the company on July 28 after receiving complaints. [Nan Shan/China Daily]

The China Securities Regulatory Commission (CSRC) yesterday said it was conducting a full investigation of liquor maker Wuliangye Yibin Co for incomplete and inaccurate information disclosure.

According to the CSRC, Wuliangye made the revenue of one subsidiary 1 billion yuan higher than actual figures in 2007 and did not correct the material mistake in its financial statement.

The company had about 55 million yuan of investment losses in 2007 and failed to report it. In addition, in 2000, the company borrowed 20 million yuan from a subsidiary for securities investment and lost about 5.2 million yuan. None of these details were incorporated in the financial statements, it said.

In 2000, the company used about 130 million yuan for securities investment. By the end of 2005, it had lost about 42 million yuan. The securities firm went bankrupt in 2007 and Wuliangye got about 4.58 million yuan as compensation.

Yet, the company didn’t accrue the impairment provision in the financial reports between 2006 and 2008, the CSRC said.

The CSRC said it began to probe the company on July 28 after receiving complaints. The regulator said it has discovered that the company had undisclosed material investment losses and also inaccurately disclosed revenue for 2007.

“Wuliangye violated the Security Law on accurate and complete information disclosure. The regulator will try to hunt out all the relevant facts and decide the administrative penalty,” an official with the CSRC said.

On Sept 9, the company said the CSRC was investigating it for suspected violations of the Security Law. On that day, its shares dived 6.22 percent to 22.60 yuan.

The company’s shares has since then been declining steadily. Its shares dropped about 4 percent yesterday to close at 21.60 yuan.

“Publicity, fairness and equality are the footstone of the securities market. Information disclosure is important for increasing the market transparency and protecting shareholders’ rights,” the official said.

The securities watchdog has been increasingly watching the information disclosure of listed companies. Since 2007, it has investigated about 49 cases of suspected violations on information disclosure and 16 cases have been handed over to the police, the CSRC said.

(China Daily September 24, 2009)

As the worst financial crisis since the 1930s continues, a call for international financial reform has been dominating headlines for more than a year.

More obstacles, including the coordination of reforms, have begun to emerge despite the resumption of economic growth.

Charles Dallara, managing director of the Institute of International Finance (IIF), says coordination was crucial to successful international financial reforms, one of the key issues to be discussed by the Group of 20 (G20) leaders here later this week.

“It is very difficult to coordinate, and yet it is central,” Dallara told Xinhua in an interview.

ECONOMIC SITUATION CHANGES

When the G20 leaders met in Washington last November, the world financial system was on the brink of a meltdown. Five months later in London, the leaders faced an ever-deepening global recession and the real risk of its worldwide spread.

Now, another five months have passed, and the leaders are gathering in Pittsburgh for their third meeting within a year. This at a time when the world economy has resumed growth, and global financial markets remain stable.

U.S. Federal Reserve Chairman Ben Bernanke announced last week that the recession was “very likely over.”

Now, the focus of the G20 meeting is how to get out of the financial mess and return the world’s economy to sustainable growth.

OPTION: EXIT STRATEGY

As the economy recovers, G20 leaders will pay more attention to the option of an “exit strategy,” former Undersecretary of the U.S. Treasury Department Tim Adams said.

Since the outbreak of the financial crisis, the world’s major economies have carried out a series of measures to save the market, including low interest rates, nationalization of banks and the implementation of easing policies.

Emerging signs of recovery are pulling central banks and governments out of market intervention. Analysts have pointed out that governments need to make sure their exits were well-timed because the basis of the recovery was not firm, and the credit situation had not shown obvious improvement.

In a report released on Monday, the International Monetary Fund (IMF) acknowledged various exit models for public sectors. The IMF stressed that restored confidence in financial institutions and market health should be a common goal.

AGENDA FOR FINANCIAL REFORM

There is no doubt that international financial reform will be on top of the agenda at the G20 summit.

Firstly, regulatory reform is a key issue. A lack of regulation is one of the causes behind the global financial crisis. The G20 summit that started here Thursday aims to tighten regulations in order to ensure that a similar crisis does not happen again.

Higher liquidity standards, capital ratio, leverage ratios and consumer financial protection are key regulatory issues among others.

However, as some experts proposed expanded regulation to cover the entire financial system, instead of single banks, others worried that such expansion may lead to higher costs, lower creativity and systematic fragility.

Secondly, restrictions on bankers’ bonuses also draw wide attention.

From the Europeans’ perspective, the G20 should restrict bankers’ bonuses, believed to be an effective way to reduce risk. In their view, bankers’ bonuses should be linked to the long-term performance of the financial institutions they manage.

Part of bankers’ bonuses, the Europeans argue, must be deferred over an appropriate period of time and can be canceled in case of a negative development in the bank’s performance. Stock options should also be prevented from being exercised for an appropriate period of time.

On the U.S. side, the Federal Reserve and the government propose to limit bankers’ income. However, the standards of both sides are different.

Thirdly, reform of the administration of international financial institutions, such as the quota reform of the IMF, is driven mainly by the emerging economies. Developing countries believe that the IMF’s quota-based governance was mismatched with that of the world economic powers because the developing world’s proportion has been increasing dramatically.

In an interview with Xinhua, He Jianxiong, executive director representing China at the IMF, said that major irrationality in the global financial system was reflected by the lack of clout of developing countries and rising market economies. This gave too much power to the developed world.

Developing countries and rising economies’ proportion of decision-making rights rose only five percent in the past 30 years, and the imbalance had been detrimental to the IMF’s judgment, He said.

Fourthly, the dollar’s status as the world’s key reserve currency is questionable. Many economists believe that the dollar is one of the major reasons behind the unstable world financial market.

Since the U.S. government is still implementing a quantitative easing monetary policy to pull the economy out of recession, many economists are more concerned about a plunge in the value of the dollar after the crisis.Some emerging economies such as China have called for an alternative reserve currency for the dollar.

Despite the focus on international financial reform, there are voices of caution.

Jaime Caruana, general manager of the Bank for International Settlements (BIS), warned Monday that the financial sector could not afford to slip into complacency because of market rebounds after the worst global downturn in decades.

The BIS chief said that banking reform should be an evolution, not a revolution.

GLOBAL COORDINATION ESSENTIAL

As the U.S. and world economies begin to recover, some experts say the political awareness of international financial reform was reduced, and that even the G20 was no longer needed. At this moment, global coordination was essential.

True, it is hard to reform the financial system on a global basis. However, the necessity remains.

“It is challenging to get 20 different countries to agree on very complex issues. However, I think it is good to continue this discussion at this level. Maybe they don’t need to meet three times a year. But I think we should keep the political leadership in a political class,” Tim Adams told Xinhua.

Adams, now managing director of the Lindsey Group, noted that it was challenging to get different participants with different experiences and different regimes to come to the table and agree on very complex issues.

As for the IMF, any reform aimed at giving more influence to developing nations would be regarded by developed countries as a threat to their acquired interests, He believed.

Higher and broader participation of developing countries was a major point in the international financial reform, and was also undoubtedly a sticky point, He said.

The IIF said that international coordination of reforms would be essential, given the global nature of financial markets. National authorities, the IIF added, should roll back uncoordinated emergency measures that had contributed to fragmentation of the global financial system.

Despite the G20’s commitment to global coordination at the London Summit, the strengthening of the international financial system is being put at risk because governments have been introducing regulatory measures with a decidedly national orientation and without close international coordination.

“Only the G20 has the authority to mobilize coordinated action to address this challenge to the global financial system,” the IIF said. “We would urge G20 leadership in commissioning a major effort to carry this forward, and the private sector stands ready to assist in such a crucial project.”

The G20 leaders may applaud the end of the recession, but they know that hard work to reshape the financial system still lies ahead.

Undoubtedly, there are uncertainties. But one thing is certain: Political awareness of coordination will determine the future of international financial reforms.

(Xinhua News Agency September 24, 2009)

People’s Insuance Company of China (PICC), the nation’s largest insurance conglomerate, has transformed from a solely state-owned company to a state-controlled shareholding insurer, the company said Thursday.

The new company is set up with a registration capital of 30.6 billion yuan (4.5 billion U.S. dollars).

(Xinhua News Agency September 24, 2009)

Wuliangye Yibin Co., one of China’s top liquor makers, was temporarily suspended from trading Thursday because it had violated disclosure rules, says a statement on the web site of the Shenzhen Stock Exchange Thursday.

The liquor maker did not properly disclose securities investment losses and was found to have discrepancies in its reported core business revenue, the China Securities Regulatory Commission (CSRC) said Wednesday.

The company lost 55 million yuan (8.05 million U.S. dollars) in investment in 2007 and failed to report it.

In 2000, the company used 130 million yuan for securities investment. By the end of 2005, it had shrank to about 87.62 million yuan. The securities firm went bankrupt in 2007 and Wuliangye received 4.59 million yuan as compensation. However, the company did not accrue the impairment provision in its reports between 2006 and 2008.

The company reported a core business revenue of 8.25 billion yuan in its annual performance report for 2007, compared with the actual 7.25 billion yuan, the CSRC said.

The CSRC said the investigation into the case started since July 28 and was still proceeding. The company’s shares would resume trading after the company issued a “relevant” announcement, the Shenzhen Stock Exchange said.

The share price of the company fell 4 percent on Wednesday to close at 21.60 yuan.

(Xinhua News Agency September 24, 2009)

Shanghai will start construction of its Hongqiao Business Park next year in an effort to create a major new engine for economic growth.

“Building the business park is a strategic move for Shanghai to become a global trade center by 2020 and a gateway to the Yangtze River Delta region for traders and investors,” Xue Quanrong, deputy director of the Shanghai Hongqiao Business Park Administrative Commission, told a news conference yesterday. “The park has strengths in its location, convenient transportation and urban planning.”

The local government has decided the park will have a 26.3-square-kilometer central zone bounded by the A20 Highway on the east, Huaxiang Road on the west and the A9 Highway and Beidi Road Highway on the southern and northern edges. The central area will be anchored by the nearly completed Hongqiao transport hub complex that’s connected to the Hongqiao Airport. Changning and Minhang districts will share the future business center, Xue said.

The distance between the park and major cities in the Yangtze River Delta region is no more than 300 kilometers, while modern air, road and rail links at the transportation hub put the park within easy reach.

Xue said the new zone will become a magnet for modern service industries, including logistics and exhibitions. It will also become home to the headquarters of many domestic and overseas businesses.

Xue said the commission will roll out favorable policies to attract companies. The incentives are still under study.

The new zone will also benefit from urban planning best practices and avoid becoming a void on nights and weekends.

“We will allocate a 2.1-square-kilometer area for building residential properties, along with other cultural and entertainment facilities, making the park a bustling area integrating work and life,” said Xue.

Initial construction will start next year on a 1.4-square-kilometer core commercial area adjacent to the transport hub and the airport. It will feature offices, hotels, entertainment facilities, shopping malls and exhibition sites and should be finished in two years.

Xue said the output of the core business area may exceed 10 billion yuan (US$1.46 billion) by 2015 and 15 billion yuan by 2020.

Media reports said earlier that the total output of the business park may eventually catch up with the Pudong New Area, which totaled 310 billion yuan last year.

A government administrative regulation is currently being drafted to guide future development of the business park. Its administrative commission will eventually comprise 30 government officials.

(Shanghai Daily September 24, 2009)

Despite the global downturn, the H1N1 flu epidemic and a fast-developing high-speed rail network, China’s domestic airline traffic is expected to expand fast, with an annual growth rate of 8.2 percent in the next 20 years, the Aviation Industry Corporation of China (AVIC) said.

The latest annual forecast released yesterday showed that China would need 3,796 new airplanes over the next two decades, including 2,922 jumbo jets and 874 regional jets.

The country’s passenger fleet will nearly quadruple to 4,233 by 2028, said Liao Quanwang, researcher and executive vice-president of AVIC Development Research Center.

The single-aisle planes with 150 seats, such as the B737, A320 and the future homemade C919, will still be the largest category, but its percentage in the whole fleet will decline from the current 67 percent to some 39 percent by 2028, he said.

“As some air routes already run flights every 30 minutes to handle the huge passenger traffic, we expect more 200-seat planes will be used on these routes to expand transport capacity,” he said.

But still, Wu Guanghui, chief designer of the C919 program and deputy general manager of the Shanghai-based Commercial Aviation Corporation , estimated that some 2,000 C919 planes would be needed in a period of 20 years after its take-off in 2016.

The estimation is based on a forecast that China will need 2,600 single-aisle jetliners in next 20 years, he said.

AVIC also forecast that China’s cargo fleet will expand to 583 freighters by 2028, up from the current fleet of 68 freighters.

(China Daily September 24, 2009)

Kunshan export processing zone (EPZ) in east China’s Jiangsu Province saw export volume up 9.3 percent during the first eight months this year, according to the General Administration of Customs (GAC) Wednesday.

The export volume of Kunshan EPZ, which covers 1.86 sq. km, stood at 16.53 billion U.S. dollars by September this year, GAC said.

The Zone is expected to produce 60 million laptops, 50 percent of the world’s total, and 15 million digital cameras, one eighth of the total this year, GAC told Xinhua.

The GAC’s statistics showed trade volume of Kunshan EPZ reached 23 billion U.S. dollars during the first eight months this year, up 2 percent year on year.

GAC defines EPZ as special supervision and administration zones of customs enjoying the most favorable treatment in policy, convenient customs service, simplified administrative procedures and sound facilities.

Kunshan EPZ was established on September 15, 2000 as China’s first EPZ. By now, 60 EPZs are in operation in China, according to the website of the China Free Trade Export Association.

(Xinhua News Agency September 24, 2009)

Visitors at the AVIC booth during the Aviation Expo/China 2009 in Beijing. [Zhang Wei/China Daily]

Aviation Industry Corporation of China (AVIC), China’s top aircraft manufacturer, announced cooperation plans with Safran and GE yesterday, aimed chiefly at boosting the country’s homemade jumbo jet program.

The C919, China’s largest domestically manufactured jetliner that is expected to take off in 2016, will source parts and components globally, but foreign suppliers are encouraged to enter into partnerships with Chinese manufacturers, Wu Guanghui, chief designer and deputy general manager of the Shanghai-based Commercial Aviation Corporation (COMAC), which is producing the jet, said yesterday.

“Priority will go to products designed and manufactured by foreign suppliers and their partners in China,” he said.

AVIC and France-based Safran Group yesterday signed a framework agreement during the ongoing Aviation Expo China 2009 in Beijing to extend their partnership. The expo started yesterday and ends Saturday.

The agreement includes establishing new facilities in China based on both sides’ existing assets, and cooperating on all aspects of a production line, from design, production, assembly, to support.

The short-term targets focus on producing landing and braking systems and nacelles (engine compartment) for the C919, according to a news release by Safran.

The subsidiaries of Safran and AVIC will together submit a joint proposal to COMAC for landing and braking systems on the C919, it said.

Meanwhile, AVIC, GE and Safran signed a memorandum of understanding (MOU) yesterday on setting up a joint venture that designs and manufactures engine nacelles and components for a full range of aircraft applications including the home-made jumbo jet C919.

The new joint venture is between AVIC Aircraft Corporation and Nexcelle – a nacelle joint venture company created by GE’s Middle River Aircraft Systems and Aircelle, a Safran group company.

AVIC Aircraft and Nexcelle will have equal stakes in the venture.

Both the dollar value and the location of the undertaking have not been disclosed.

Lorraine Bolsinger, president and CEO of GE Aviation Systems, told China Daily that the first target of the new joint venture would be the C919 project.

In the long run, “we plan to have the joint venture as a worldwide supplier to pursue new platforms to go beyond C919,” she said.

The engine nacelle technology is one of the fundamental elements in an aircraft’s performance, efficiency and environmental footprint.

Foreign aviation suppliers are competing for business opportunities arising from China’s plans to build a jumbo jet.

According to the COMAC website reports, a number of major global aviation suppliers have paid intensive visits to COMAC, after the latter issued the invitation for tender on July 10 for engines and airborne equipment to be used on the C919.

Last month, Goodrich Corporation and Xi’an Aircraft International Corporation (XAIC) under AVIC also signed agreements to form two joint-venture companies that will be involved in the manufacture of landing gear and nacelle components, in order to participate in the C919 project.

(China Daily September 24, 2009)

 

Copper drifted lower yesterday as investors looked past a weaker US dollar, worried that scant demand outside China would stall a run-up that has more than doubled the metal’s price this year.

The greenback’s slump to one-year lows against the euro, which makes commodities cheaper for holders of other currencies, helped copper post modest gains earlier in the session, before demand concerns weighed on sentiment.

“We are seeing early signs of demand picking up in the world outside China, but I won’t say that there is conclusive evidence that this is happening at a pace that is significant,” said Yingxi Yu, analyst at Barclays Capital.

“Our view is copper is well supported, but to drive the next leg of the rally, it’s going to take much more than China and the dollar.”

The dollar slid to a one-year low against a basket of currencies while Asian stocks touched a 13-month top ahead of the US Federal Reserve’s policy decision later in the day, with its post-meeting statement likely to take note of an improving economy.

Three-month copper on the London Metal Exchange MCU3 fell $78 to $6,192 a ton in early trade. LME copper rose as much as 3 percent on Tuesday before cutting gains to close at $6,270 a ton, up 1.3 percent.

Shanghai’s benchmark third month copper SCFc3 dropped 430 yuan to end at 48,220 yuan a ton.

China’s apparent copper demand fell 13.9 percent in August from July, following a slide in imports by the world’s top consumer of many base metals.

Analysts expected the drop in Chinese copper imports after record purchases in the first half, but had anticipated demand elsewhere would pick up fast enough to offset the slack.

LME copper stocks have climbed around 30 percent from early July to 331,775 tons on Tuesday, while inventories of the industrial metal surged to more than five-year highs at 104,248 tons in Shanghai last week.

Yu said Chinese copper imports were likely to fall further from August’s levels. “That’s potentially a downside risk to prices,” she said.

(Agenices via China Daily September 24, 2009)