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China's new-home prices rose in the largest number of cities in 14 months in July after interest-rate cuts and incentives were adopted for first-time buyers, complicating the government's efforts to stimulate economic growth while curbing property speculation.

Prices climbed from a month earlier in 49 of the 70 cities tracked by the government, the National Bureau of Statistics said on its website on Saturday. That was the most since May last year and compared with 25 cities in June. Prices fell in nine cities and were unchanged in 12.

Buyers, buoyed by two interest rate cuts since June, have returned to the market even as the government pledges to maintain real estate curbs to make housing more affordable. The risk of a rebound in the property market may deter the People's Bank of China from reducing rates further or cutting banks' reserve requirement ratios to boost funds in the financial system and support lending after new credit slumped in July.

China Rongsheng rises on plan to stop purchase

China Rongsheng Heavy Industries Group Holdings Ltd rose in Hong Kong trading after saying it applied to withdraw a plan to buy a diesel engine maker for 2.15 billion yuan ($338 million) because of the European debt crisis.

The shares gained as much as 6.4 percent, headed for the biggest gain since Aug 7, after China's biggest privately owned shipmaker made the statement on Friday.

"If the withdrawal is successful, the investors will be happy and the cash pressure on Rongsheng will be relieved as there will be savings for Rongsheng," said UOB-Kay Hian Holdings Ltd analyst Lawrence Li.

China Rongsheng, which hasn't announced new shipbuilding contracts this year and is releasing interim results on Tuesday, said it expects a significant drop in its first-half profit. The stock advance on Monday pared Rongsheng's decline this year to 48 percent and the index gained 8.4 percent in the same period.

Junk bond premium jumps amid slowdown concerns

China's junk bond yield premium is climbing at its fastest pace this year on concern an extended slump in the world's second-biggest economy will cause a default.

The extra yield investors demand to hold five-year notes rated AA over similar-maturity sovereign debt had widened 15 basis points this month to 245 by Friday, poised for the biggest monthly increase of 2012, according to Chinabond data. US speculative-grade bonds yield 632 basis points more than Treasuries, Bank of America Merrill Lynch data show.

Chinese banks' bad debts rose in each of the last three quarters, the longest run of increases in eight years, and the nation's first bond default was averted in April when Shandong Helon Co paid off 400 million yuan ($63 million) of notes at a time when it had 957 million yuan in overdue loans. Premier Wen Jiabao said last week downward pressure on the economy remained "relatively large" and money-market rates are climbing as the central bank refrains from cutting lenders' reserve requirements.

PBOC 'has no plan' to cut bank ratio in short term

The People's Bank of China has no intention of cutting banks' reserve requirements in the short term, as suggested by a cash injection last week, according to a commentary in the central bank newspaper Financial News.

Reverse-repurchase operations have become the central bank's "very important and favored" monetary-adjustment instrument, according to an opinion piece. Using that tool instead of lowering the reserve requirement ratio can meet funding demands without pushing up property prices, it said.

The one-year interest-rate swap rate rose to its highest level in three months on Monday and Chinese mainland stocks fell on concern the central bank won't lower the ratio even after export growth almost stalled in July and new yuan loans slowed. The central bank has cut the ratio three times since November, most recently in May, and reduced interest rates in June and July.

OTC market attractive for small, medium-sized firms

Chinese securities companies are busy preparing applications for small and medium-sized unlisted firms that want to trade on the over-the-counter market.

Faced with the lackluster performance of the main board, the companies are hoping to get a piece of the OTC market.

Market watchers expect that an initial list with the names of the companies trading on the OTC market may be disclosed in September. Underwriters can submit the applications to the market supervisors in two weeks.

Meanwhile, public comments are being requested on draft regulations for unlisted companies prepared by the China Securities Regulatory Commission. The regulations are expected to be officially released by the end of the year.

Potential growth may slow later in decade

China's potential growth rate may slow by 1 percentage point in the second half of the decade as its labor force shrinks, according to a senior demographics adviser to the nation's leadership.

The annual rate will drop to 6.1 percent in 2016-20 from 7.2 percent in 2011-15 and actual 11.2 percent growth from 2006 to 2010, said Cai Fang, head of the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences.

Speaking at a forum in Beijing on Monday, Cai explained potential growth is commonly known as a speed limit, or the maximum pace at which an economy can expand without stoking inflation.

Cai said the size of China's labor force peaked in 2010, putting the country in a situation similar to that of late 20th-century Japan, where growth slowed once the workforce began shrinking.

Three of four major insurers report income growth

China's four major life insurers generated 511.16 billion yuan ($81 billion) worth of insurance income in the first seven months of 2012, according to corporate reports filed on Monday.

The four companies are China Life Insurance (Group) Co, Ping An Insurance (Group) Co of China Ltd, China Pacific Insurance (Group) Co Ltd, and New China Life Insurance Co Ltd.

China Life was the only one of the four not to see year-on-year growth in insurance income.

It reported a 5.57 percent drop in insurance income in the first seven months, down from 215.3 billion yuan in the same period last year to 203.3 billion yuan.

Ping An reported 143.7 billion yuan in income from January to July 2012, a 11 percent year-on-year growth; China Pacific Insurance reported 101.5 billion yuan, a 4.2 percent year-on-year growth, and New China Life Insurance reported 62.66 billion yuan, a 10 percent year-on-year growth.

Companies asked to publish social responsibility reports

The China Association of Public Companies has urged listed companies to publish corporate social responsibility reports.

The step will allow companies to publish timely operational information, centering on boosting investor returns and grow market confidence, the association said.

By the end of April, 586 companies listed on the A-share market had released 592 corporate social responsibility reports.

The figure increased 11.49 percent compared with a year earlier. However, those companies still only accounted for a quarter of all A-share companies. Among the 592 reports, 242 of them were mandatory.

Swap rate rises the most in 11 months

China's one-year interest-rate swap rate has risen the most in 11 months on signs the central bank won't lower lenders' reserve requirements as property prices rebound.

The People's Bank of China gauged demand on Monday for 14-day reverse-repurchase contracts, according to a trader required to bid at the sales. The resumption of 14-day contracts last week suggests the monetary authority has no intention of cutting reserve ratios in the short term, according to a commentary published on Saturday in the Financial News.

The one-year swap contract - the fixed cost needed to receive the floating seven-day repurchase rate - jumped 16 basis points to 3.07 percent as by 5:02 pm in Shanghai, the biggest increase since September, according to data compiled by Bloomberg.

Dongfeng begins export of key model to Venezuela

The domestic automaker Dongfeng has started exporting its independently developed Fengshen S30 model, marking a milestone in its overseas expansion strategy.

The first batch of 4,000 S30s for export were built at the Dongfeng's factory in Wuhan, Hubei province.

The shipment destined for Venezuela is the largest in the company's history. But it is not the first time the Dongfeng Fengshen has ventured overseas.

In 2010, a fleet of its cars began a promotional journey - a drive to "conquer five continents" starting from Shanghai. Overcoming extreme conditions along the way, they passed through 134 cities in 21 countries to complete a 51,000 km journey.

Philips manufacturing site to start production in 2013

Philips (China) Investment Co Ltd held a groundbreaking ceremony on Monday for its new LED Professional Lighting Solutions manufacturing facility in Chengdu, Sichuan province.

The site will start production in 2013, according to Tommy Leong, president of Philips Lighting Greater China.

As well as LED manufacture, Philips is going to set up a 10,000 square meter Lighting Application Center at the site, which it claims will be the largest of its type in Asia, and one of the most advanced in the world.

Leong said the company will use the center to showcase its latest lighting technologies, applications and solutions.

China Daily-Agencies

(China Daily 08/21/2012 page14)