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CIMC buys stake in drilling platform designer
Analysts question company\’s move into \’unfamiliar\’ territory
China International Marine Containers (Group) Co (CIMC), the biggest container provider in China, will purchase a 75 percent stake in Friede Goldman United (F&G) from Russia\’s MNP Group for $75 million to strengthen its marine engineering sector, the company said yesterday.
"The purchase is good for the implementation of our marine engineering development strategy," a statement to the Shenzhen stock exchange said.
Founded in 1946, US firm F&G served as the marine engineering design department for Friede Goldman Halter, before the latter went bankrupt in 2002. F&G is a global designer of mobile marine drilling platforms and also designs and produces auxiliary equipment platforms.
From January to June 2009, F&G realized $33.7 million in revenue and a $15.2 million net profit.
CIMC also expects F&G\’s brand name and share of the platform design market to help improve its marketing capability and attract more new orders.
"CIMC has always been seeking opportunities to shift its focus from container manufacturing to industries with higher added value since the shipbuilding industry has languished due to the economic crisis," said Guo Yaling, an analyst at CITIC Securities.
Last November, CIMC announced plans to spend $1.7 billion to buy a controlling stake in Shandong-based Yantai Raffles Shipyard Ltd, China\’s biggest production base for offshore crude oil and natural gas drilling platforms.
"Actually we believe the purchase of F&G will solve Raffles\’ design bottleneck and accelerate the delivery of orders," the company said.
But CITIC Securities\’ Guo doubts whether it is a good idea to quickly enter a field Chinese companies are unfamiliar with. "These purchases have raised concerns over the company\’s cross-industry management. Few operational attempts by Chinese companies in marine engineering have proven successful. These speedy and aggressive moves are likely to put its ambitions at risk," he said.
CIMC has extended its key business from containers to the manufacturing of trailers, tanks and airport equipment. From January to September 2009, it reported revenue of 13.9 billion yuan, a 67.8 percent decline year on year. Meanwhile, its net profit hit 775.8 million yuan, a decrease of 54.4 percent compared with the same period a year earlier, due to a market decline in container sales.
CIMC\’s share price dropped 4.93 percent yesterday to close at 13.39 yuan.

Espanyol agrees 4 year sponsorship with Li Ning
Spanish BBV Primera Liga club Espanyol announced on Wednesday that it had reached an agreement to sign a four year sponsorship deal with the Chinese Li Ning Company Limited.
The two will sign the agreement in a ceremony on Friday, Feb. 26.
The agreement will make Espanyol the first European football club to sign with the Chinese sportswear producing giant.
The Li Ning company, one of the leading sports brand enterprises in China, has already signed many famous athletes, such as NBA stars Shaquille O\’ Neal, Berni Rodriguez and Baron Davis, tennis ace Ivan Ljubicic and world record holding pole-vaulter Yelena Isinbayeva.
The Chinese company also provided the sportswear for the Spanish Olympic squad at the Beijing Olympic Games and currently dresses the Spanish National Basketball team, which won last year\’s European Championships and the silver medal in the 2008 Olympics.
The official communique announcing the accord states that Espanyol\’s history and values have been vital in Li Ning\’s decision.

Doubts over Google spur interest in Baidu
Baidu Inc, owner of China\’s most popular Internet search engine, said its clients became more confident about the company after biggest rival Google Inc indicated it may end its operations in the country.
"What we have seen is that our customers\’ confidence in Baidu is certainly higher," CEO Robin Li said yesterday in response to an analyst\’s question on the potential effects of Google\’s possible exit from China. "We expect to benefit from that."
Baidu jumped as much as 10 percent in after-hours trading in the US after the company forecast first-quarter sales will rise more than analysts estimated. The shares have outperformed Chinese Internet stocks including Tencent Holdings Ltd and Alibaba.com Ltd this year on expectations that the Beijing-based company will gain sales from Google\’s customers in China, the world\’s biggest Internet market by user numbers.
"Because of the uncertainty over Google, people will be looking at their options," said Elinor Leung, who rates Baidu "buy" at CLSA Ltd in Hong Kong. Baidu will be one of the primary alternatives for Google\’s advertisers in China, she said.
Baidu\’s American depositary receipts, each of which represents one common share, jumped as much as $43.71 to $478.72 in extended trading after the company reported its earnings on Tuesday. Earlier they fell 1.9 percent to $435.01 in NASDAQ Stock Market trading.
First-quarter revenue will rise to between 1.2 billion yuan and 1.24 billion yuan in the period ending March 31, Baidu said on Tuesday in a statement. This compares with 1.13 billion yuan, the median of analysts\’ estimates compiled by Bloomberg. The forecast wasn\’t affected by projections of a possible "change in the competitive landscape", CEO Li said.
Baidu\’s fourth-quarter net income rose 48 percent to 427.9 million yuan, or 12.27 yuan per share, from 288.7 million yuan, or 8.31 yuan, a year earlier. That compared with the 403.1 million yuan median of analysts\’ estimates compiled by Bloomberg. Revenue increased 40 percent to 1.26 billion yuan, topping the median estimate of 1.23 billion yuan.
The shares have gained 13 percent through the NASDAQ since Google announced the review of its Chinese operations on Jan 12, compared with the 20 percent decline in the Hong Kong-listed shares of Tencent, China\’s biggest Internet company by value, and the 13 percent drop in Alibaba, operator of the biggest Chinese online commerce website.

Chang\’an in talks to become Peugeot\’s second partner
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Chang\’an now has two joint ventures – one with Suzuki and three-way deal with Ford and Mazda – and is reportedly now in final negotiations with France\’s top auto group. [China Daily]
PSA Peugeot-Citroen is in talks with Chang\’an Motor Corp, China\’s fourth-largest automaker, to form the French car company\’s second joint venture in China.
The deal is expected to close soon after the upcoming Spring Festival, recent media reports said.
Chang\’an Motor Corp has set a clear timetable for both sides to sign the contract but has not revealed details, Nanfang Daily reported.
PSA Peugeot-Citroen already has a partnership with Dongfeng Motor Corp, the third-biggest auto group in China.
Other foreign auto giants, including Volkswagen, General Motors, Toyota and Honda, each already have two joint ventures in the world\’s largest car market.
The top carmaker in France has been seeking a second partner in China since 2004.
When its previous potential partner Hafei, a micro van maker in northeast China, was taken over by Chang\’an Motor Corp last year, the company switched over to negotiate with parent company Chang\’an.
Media reports said that the new tie-up will probably be located in the southern city of Shenzhen, where Hafei has an existing plant.
Hafei opened the Shenzhen plant in 2004 with a designed annual capacity of 100,000 units. Two years later the facility started to build sedans but the products didn\’t sell well. Hafei shuttered the factory in June 2007 and the site has not resumed production.
PSA Peugeot-Citroen\’s joint venture with Dongfeng Motor Corp was established in 1992 in the central city of Wuhan, but the partnership has underperformed.
The automaker moved an all-time record high of 272,000 vehicles last year, a 52 percent annual increase, as it rode the record-setting market boom. Yet the French brands still trail far behind their counterparts.
US carmaker General Motors sold a total of 1.83 million vehicles last year. German auto giant Volkswagen had total sales of 1.4 million units. Sales by Japan\’s Toyota Motor reached 709,000 units.
A second tie-up could provide an opportunity for PSA Peugeot-Citroen to hit the accelerator in its localization process and greatly raise its sales volume in China, which became its second-largest market worldwide last year following only France.
The carmaker aims to raise its market share in China to 8 percent by 2016 from the current 3.6 percent.
Chang\’an Motor Corp could benefit from the deal as well.
Last year, Chang\’an Motor Corp acquired minivan makers Hafei and Changhe from Aviation Industry Corp of China and narrowed its production and sales gap with No 3 auto group Dongfeng Motor Corp. Its 2009 sales trailed Dongfeng by just 30,000 units.
As well, Chang\’an\’s top-selling models are micro vans, which have a lower profit margin than sedans or SUVs.
If its project with PSA Peugeot-Citroen comes to fruition, possible models produced by Chang\’an include the Peugeot 107 and 607 and the Citroen C1 and C6, as well as some SUVs, since the venture between Dongfeng and PSA Peugeot-Citroen already builds the 207, 307 and 408 as well as the C2, C4 and C5.

CNOOC shares fall on news of Purchase
CNOOC Ltd shares fell to their lowest in almost a week in Hong Kong trading after a newspaper said China\’s biggest offshore oil producer may spend as much as $2.5 billion on a stake in Tullow Oil Plc\’s Ugandan assets.
They dropped as much as 3.3 percent to HK$11.22, the lowest since Feb 2. The benchmark Hang Seng Index declined 0.7 percent. Oil in New York was at $71.44 a barrel in electronic trading, after gaining 81 percent in the past year.
A $2.5 billion bid would be the largest by CNOOC, the listed unit of State-owned China National Offshore Oil Corporation. The company has lagged behind domestic rivals PetroChina and Sinopec in overseas acquisitions since it paid $2.7 billion for a stake in a Nigerian oilfield in 2006.
Tullow is close to selling a stake in its Ugandan assets to CNOOC, London\’s Sunday Times reported, without saying how it got the information. Jiang Yongzhi, CNOOC\’s Beijing-based spokesman, said the company didn\’t comment on "market rumors".
CNOOC is "chasing higher asset prices", Gordon Kwan, head of regional energy research at Mirae Asset Securities, said by telephone from Hong Kong. "They could have bought this stake when oil was between $40 and $50 (a barrel) last year."
The deal with Tullow, which needs final approval from Ugandan President Yoweri Museveni, may include France\’s Total SA as an equal partner in the fields in the country\’s Lake Albert Basin, the Sunday Times said. Tullow spokesman George Cazenove declined to comment when contacted by Bloomberg News.
The UK explorer plans to produce at least 5,000 barrels a day of oil in Uganda in 2012.

Ford\’s China venture ends gas pedal review
A joint venture partner of Ford Motor Co. said Sunday it has resumed making buses in China after determining that the gas pedal assembly doesn\’t have the same problem that forced a recall of millions of Toyota vehicles.
Jiangling Motors Co. uses the same supplier, CTS Automotive of Elkhart, Indiana, that made pedal assembly parts for some Toyotas.
Jiangling makes a diesel-powered commercial bus, the Transit Classic, for the Chinese market. The vehicles went into production in December and only about 1,600 were made before assembly was stopped.
Ford has said there have been no reported problems with the Transit Classic, and that none of its other vehicles use gas pedal parts made by CTS.
Accelerators made by CTS are at the center of a large recall and halt in production by Toyota over fears that the gas pedals can become stuck and lead to uncontrolled acceleration.

Drink maker cries foul over toxic tests
Beverage producer Nongfu Spring, which had two of its products implicated in a recent arsenic scandal, questioned the original samples drawn for quality tests by authorities, saying the episode was manipulated.
"Even if the final test was accurate, it was absent of legitimacy I\’ve no idea where the sample products came from," said Zhong Shanshan, chairman of Nongfu Spring, clamoring for legislation on inspection and testing institutions in an interview with Xinhua News Agency.
Haikou\’s Industrial and Commercial Administration Bureau on Dec 1 recalled its previous statement of toxic arsenic contamination in fruit juice products made by Nongfu Spring and Taiwan-based Uni-President after a re-test conducted by the testing center of the Chinese Academy of Inspection and Quarantine confirmed these products were safe for consumption.
The bureau issued a warning on Nov 24 stating Nongfu Spring\’s mixed fruit and vegetable juice and its Shuirong C100 grapefruit juice made on June 27 and Aug 16, respectively, along with Uni-President\’s peach juice Peachate contained excess amounts of the toxic chemical arsenic after a test by the Hainan Entry-Exit Inspection and Quarantine Bureau.
All implicated products sold in the city of Haikou were pulled off the shelves immediately, which Nongfu Spring estimated will cause the company to lose over 1 billion yuan.
"We set up an investigation group on Dec 2 to start looking into the detailed law enforcement procedures of the local industrial and commercial watchdog," said Huang Chengmo, bureau chief of Hainan province\’s industrial and commercial watchdog, the superior counterpart of the bureau in Haikou city.
China\’s Food Safety Law stipulates that the health administration authorities, rather than the industrial and commercial watchdog, should be responsible for announcing food safety risk warning information.
Xinhua quoted Zhong as saying that the entire test procedure was "not legitimate and was masterminded", without elaborating who may have been behind the scenes.
According to a survey conducted by major portal Sina.com, more than 88 percent of about 124,000 respondents said that Haikou\’s industrial and commercial authorities should compensate the companies and make a public apology, while 86 percent said that those responsible "should be severely punished, even dismissed".

Tech firm spurns Aussie charges
Reports that a Chinese networking equipment maker was employing technicians in Australia with direct links to the People\’s Liberation Army and was under investigation by Australian security agencies were flatly denied by the company Tuesday.
Huawei Technologies spokesperson Ross Gan said the firm has not been contacted by the Australian Security Intelligence Organization. Gan did say that Huawei officials met with the ASIO in June for a routine briefing that the firm provides to all levels of government as well as to the networking equipment industry and customers.

Huawei is China\’s biggest telecommunications equipment maker. An Australian newspaper, without citing any of its sources, said the ASIO made the claim that Huawei is hiring employees connected to the PLA.
The Chinese networking firm reportedly dismissed "several dozen" of its Australian-born workforce, replacing them with Chinese nationals.
These Chinese nationals have allegedly been spotted meeting officials at Chinese embassies and consulates in Canberra, Sydney and Melbourne, according to the report.
The news comes at a time when four Shanghai-based employees of the Australian iron giant Rio Tinto are awaiting trial on charges of stealing trade secrets and being involved in briberies.
The Chinese government arrested the Rio Tinto employees in July and accused them of selling information that Chinese authorities believe put its steel makers at a disadvantage in iron ore price talks with the world\’s second largest iron ore supplier.
Founded by a former China\’s PLA official, Huawei has become one of the world\’s largest telecom operators in recent years.
The company announced earlier that its contract value reached $15.7 billion in the first half of this year, an increase of 28 percent over the same period of last year.
But most of the company\’s overseas expansions, especially to developed countries, have been stymied by security concerns.
Last year, the company\’s $2.2 billion joint bid with Bain Capital for the computer-gear maker 3Com Corp was withdrawn amid concerns from the US government that China would gain access to 3Com\’s anti-hacking technology used by the US Department of Defense.
Huawei employs 120 workers in Australia, 100 in Melbourne and the rest in Sydney.

Big LNG deal signals better Canberra ties
China\’s largest offshore oil producer signed a landmark deal on Wednesday to buy liquefied natural gas (LNG) from Australia for 20 years, a move analysts said underscores growing commercial ties between the two countries despite recent hiccups.
Under the contract, CNOOC will buy 3.6 million tons of LNG per year from British gas producer BG Group\’s Curtis LNG facility in Queensland in Australia.
It is the world\’s first purchase agreement for the supply of LNG from coal seam gas, and marks the first sale of LNG from coal seam gas to China, CNOOC said in a statement.
It is one of Australia\’s biggest single company-to-company LNG contracts. The deal is worth about $40 billion based on a crude oil price of $70 per barrel, BG Chief Executive Frank Chapman said after the signing ceremony.
The multi-billion-dollar deal suggests that Sino-Australian commercial ties have been largely unaffected by other tensions such as the Rio Tinto case, said analysts.
"Energy collaboration will be increasingly important in Sino-Australia commercial ties. The two countries, which have vital roles to play in global energy security, will undoubtedly strengthen cooperation in the area," said Huo Jianguo, researcher at the Trade Research Institute affiliated to the Ministry of Commerce.
Australia\’s Resources and Energy Minister Martin Ferguson concurred.
"Resources are the backbone of Australia\’s trading relationship with China. One-third of Australia\’s mineral exports go to China; and China is our second-largest trading partner for LNG.
"Australia\’s trading relationship with China is healthy and mutually beneficial," said Ferguson, adding that his country is committed to strengthening that relationship.
More than $26 billion of Chinese investment was approved in the Australian resources sector in 2008 and 2009, he said.
Under the latest agreement, CNOOC will acquire a 5 percent equity interest in the reserves and resources of certain BG Group tenements in the Surat Basin in Queensland.
CNOOC will become a 10 percent equity investor in the first of two liquefaction trains which will form the first phase of the Curtis project.
BG Group and CNOOC will also build two LNG ships in China.
Use of natural gas fits well with China\’s efforts to build an environmentally-friendly economy, said Liu Qi, deputy head of the National Energy Administration. China will see more natural gas imports as domestic production cannot keep pace with rapidly rising consumption, Liu said.
Natural gas accounted for around 3 percent in the country\’s total energy consumption last year; and the government plans to raise the proportion to 5 percent this year.
China imported 5.8 million tons of LNG in 2009, an increase of 67 percent from a year earlier, said Liu. The country has three LNG shipping terminals in Shanghai, and Fujian and Guangdong provinces.
Construction of several LNG terminals is also in the pipeline in coastal areas including Dalian, Zhuhai, and Jiangsu and Zhejiang provinces, said Liu.
As a leader in the domestic LNG market, CNOOC will import 8 million tons of LNG this year, said Fu Chengyu, president of the company.

Central SOEs reduced to 127

China New Era Group Corporation and China Energy Conservation Investment Corporation, two centrally-administered State-owned enterprises (SOEs), were approved by the State Council to restructure into one company, China\’s State-assets watchdog said in a statement posted on its website.

The number of SOEs under direct supervision of the State-owned Assets Supervision and Administration Commission (SASAC) has been reduced from 128 to 127, according to the statement.
The SASAC is aiming to reduce the number of centrally-administered SOEs to between 80 and 100 by 2010 through a policy of mergers and restructuring. It had responsibility for 196 when it was first established in 2003.