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Lenders' borrowing costs decline amid rich liquidity

Chinese banks' borrowing costs dropped, extending Wednesday's biggest decline in two weeks, as the central bank conducted reverse-repurchase operations to meet a month-end increase in demand for cash.

The People's Bank of China sold 50 billion yuan ($7.8 billion) of seven-day reverse-repo agreements at a yield of 3.35 percent on Thursday, according to a trader at a primary dealer required to bid at the auctions. The monetary authority sold 95 billion yuan of the contracts on July 24, when 50 billion yuan of three-month treasury deposits were also auctioned to commercial banks.

"There was enough cash coming into the system this week," said Kumar Rachapudi, an interest-rate strategist at Barclays Plc in Singapore. "We should see one or two more reserve- requirement cuts this year. We were expecting one in July, but think the PBOC right now prefers to fine-tune liquidity" using reverse repos.

Power use may rise 7% on policy impact

China's electricity consumption may increase 7 percent this year as government policies aimed at stabilizing economic growth take effect, according to the State Electricity Regulatory Commission.

Demand may rise to 5.1 trillion kilowatt-hours, according to a report on the regulator's website released on Wednesday. Power use should accelerate toward the end of the year, it said. The pace of growth compares with 5.5 percent in the first half and 11.7 percent in 2011, according to the National Energy Administration.

China's economy expanded at the slowest pace in more than three years in the second quarter and electricity output stagnated in June compared with a year earlier.

CDB to sell longest-dated 'dim sum' bonds

China Development Bank Corp, a State-owned lender to government projects, is marketing a sale of dim sum bonds in Hong Kong that have the longest-ever maturity, according to a person familiar with the matter and data compiled by Bloomberg.

The policy bank is offering the 20-year yuan-denominated notes to investors alongside a sale of three-year debt, said the person, asking not to be identified because the details are private. The 20-year securities are being marketed to yield about 4.35 percent while the three-year debt will yield about 3.05 percent, the person said.

Companies are selling longer-dated dim sum bonds in a market where more than 80 percent of debt, excluding certificates of deposit, has a tenor of three years or less, according to the Bloomberg-compiled data.

Solarworld-led group files anti-dumping case

Solarworld AG, Germany's biggest solar-panel maker, led a group of manufacturers asking the European Commission to investigate whether Chinese competitors dumped their products on the region's market.

The so-called EU ProSun group filed the anti-dumping complaint in Brussels after a similar request in the US resulted in duties on solar imports from China. The group has 25 members including companies from Italy and Spain, and Germany's Sovello GmbH, EU ProSun President Milan Nitzschke said on Thursday.

Stocks fall to lowest level since March 2009

China's stocks fell to the lowest level since March 2009, with the Shanghai Composite Index dropping 0.5 percent to 2,126 at the close.

"Market sentiment is pretty weak and it will take a while for investors to reverse their pessimistic expectations about the economy," said Wang Weijun, a strategist at Zheshang Securities Co in Shanghai.

The CSI 300 Index lost 0.5 percent to 2,347.49. The Bloomberg China-US 55 Index, the measure of the most-traded US-listed Chinese companies, retreated 0.3 percent in New York on Wednesday.

The Shanghai index has fallen 14 percent from this year's high on March 2 amid concern the economic slowdown is deepening. The gauge is valued at 9.5 times estimated profit, compared with the average of 17.5 since Bloomberg began compiling the data in 2006.

Vale counting on China rebound as profit sinks

Vale SA, the world's largest iron ore miner, is counting on a rebound in Chinese economic growth to boost sales after declining prices caused it to post its lowest quarterly profit in more than two years.

Net income slumped 59 percent in the second quarter to $2.66 billion from $6.45 billion a year earlier, Rio de Janeiro-based Vale said on Wednesday.

China, which accounted for about a third of Vale's sales, grew at 7.6 percent in the second quarter from a year ago, the slowest pace in three years. Vale expects the central government's economic stimulus measures and infrastructure projects to fuel recovery in coming quarters, increasing demand for iron ore and other metals.

Bank may help finance $5b Turkish refinery

China Development Bank Corp, a State lender for government projects, is in initial talks with Calik Holding AS, an Istanbul-based industrial and services group, to help finance a $5 billion refinery in southern Turkey.

The lender also expects to finance some Turkish government projects including roads and railways, Ma Jian, general manager of the bank's Inner Mongolia branch, in charge of business in Turkey, told reporters in Istanbul on Thursday.

"The refinery's finance needs are about $4 billion and we are in preliminary discussions to finance some part of it," he said.

China Development Bank's financing of Turkish government and privately run projects comes under a $3 billion accord signed between Turkey and China in February, Ma said.

Automaker sells its largest bonds as loans curbed

Beijing Automotive Group Co, which makes Mercedes-Benz-branded cars in China, sold its biggest bond as falling sales in the world's largest auto market make banks reluctant to lend to the industry.

The State-owned enterprise sold 1.6 billion yuan ($250.6 million) of seven-year bonds to yield 4.49 percent, according to a company statement. It offered five-year securities last year at 5.26 percent. Globally, the average yield on notes of the biggest automakers is 2.04 percent, according to Bank of America Merrill Lynch.

Sands China earnings decrease by 40%

Sands China Ltd, the Hong Kong-listed unit of billionaire Sheldon Adelson's Las Vegas company, reported a 40 percent drop in second-quarter profit on an impairment charge, lower winnings and opening costs.

Net income dropped to $160.5 million from $267.4 million a year earlier, according to Las Vegas Sands Corp on Thursday. Revenue increased to $1.48 billion from $1.21 billion a year earlier.

Sands China booked an exceptional loss of $100.8 million for the capital expenditure it spent on two plots of land in Macao.

VAT reform pilot may be launched in Beijing

Beijing may take the lead in the expansion of China's value-added tax pilot program by launching its VAT reform on Sept 1, a person close to the policy making process said on Thursday.

The State Council on Wednesday approved a plan to extend a pilot program to replace the business tax with VAT. The program, currently only operating in Shanghai, will be extended to eight other provincial-level regions - Beijing, Tianjin, Jiangsu, Zhejiang, Anhui, Fujian, Hubei and Guangdong - and the cities of Xiamen and Shenzhen.

The 10-region plan will commence on Aug 1 and conclude at the end of this year.

In addition to Beijing, regions such as Tianjin, Anhui and Jiangsu are better prepared to launch their local VAT reform programs this year, said Kenneth Leung, a partner of Tax & Business Advisory Services at Ernst & Young.

Sky Solar plans to build 20 power stations in Japan

Sky Solar Holdings Co, a Chinese solar power developer, plans to invest about 12 billion yen ($154 million) to build 20 solar power stations in Japan and tap government subsidies for renewable energy projects.

Sky Solar Japan, a unit of the Shanghai-based company, will begin construction of a 2 megawatt plant in Ibaraki Prefecture in central Japan next month, the company said in a statement on Wednesday. In October, it will start building a solar station that has about the same capacity in southwestern Kumamoto Prefecture, according to the statement.

The company plans to build 20 solar stations in Japan this year, each with a capacity of around 2 mW, it said. Site selection and associated works have already been completed for these projects and Sky Solar will invest 600 million yen in each, the company said.

Chinese reveal favorite sports in survey

Diving, swimming and table tennis are the sports of most interest to the Chinese, a survey shows.

A recent study conducted by Charm Communication Inc, an advertising agency in China, and Intage China Inc, a market research group, covered 13 cities and interviewed 1,300 Chinese.

The study showed 63 percent are very interested in the London Olympic Games. The events in which the Chinese are most interested are their favorite sports, sports in which Chinese have a traditional advantage, and events in which Chinese athletes could get medals.

The research also showed that 95 percent of those interviewed will watch the Games on TV, and 52 percent may get information about them through the Internet or mobile phone.

BASF slows hiring in China this year

BASF SE, the world's largest chemical maker, will slow hiring in China this year amid a deceleration that has kept growth in the region flat for the second consecutive quarter.

Sales in the Asia-Pacific region declined 1 percent in local currency terms, the Ludwigshafen, Germany-based company said on Thursday. The company's biggest Asian chemical complex Verbund site in Nanjing posted a "significant" decline in earnings, Chief Executive Officer Kurt Bock said. "The softness in the Asian markets came as a surprise to BASF," Bock said. "I don't see that China will swiftly come back to the old dynamic developement we have seen in 2011. It will probably take a little bit of time."

BASF has been counting on Asia to be one of the main growth drivers to help it achieve a goal of 115 billion euros ($139 billion) in revenue by 2020.

China Southern to fly A380 on overseas route

China Southern Airlines Co will fly its Airbus SAS A380s on the Guangzhou-Los Angeles route starting October, ending a yearlong wait to use the superjumbo for overseas services.

The double-decker will replace Boeing Co's 777 aircraft on the route, China's biggest airline by passenger numbers said in an e-mailed statement on Thursday. The carrier fills about 90 percent of the 777s used in the daily service, it said.

Since taking delivery of the first superjumbo in October, China Southern has used the plane only on domestic routes as it awaited regulatory approvals. The carrier has ordered a total of five A380s in a bid to challenge Air China Ltd and Cathay Pacific Airways Ltd on international routes.

China Daily - Agencies

(China Daily 07/27/2012 page14)