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Jebsen Group opens new department in mainland

International luxury products distribution company Jebsen Group said on Tuesday that it recently launched a new department for nutrition and health in the Chinese mainland.

The new business focuses on distributing herbal nutrition and heath improvement products, amid a rising demand for health-related products and concerns over the safety of ingredients used in these products. It is also a move to add more brands and products to the Hong Kong-based company's distribution-and-marketing portfolio.

China's crude imports from Iran decline 28% in July

China's imports of Iranian crude fell to their lowest level in three months in July as US and European Union sanctions targeting Teheran's oil sales went into effect.

Purchases dropped 28 percent compared with the previous month to 456,000 barrels a day, according to Bloomberg calculations from data e-mailed by the Beijing-based General Administration of Customs on Tuesday. China bought about 635,000 barrels a day of crude from Iran in June, the most in 11 months.

July was the first full month for the newest US and EU sanctions aimed at curbing Iran's nuclear program. China, the Middle East nation's largest oil customer, was granted a 180-day exemption from the US penalties after it "significantly reduced" its purchases, Secretary of State Hillary Clinton said on June 28.

"Given the prior month's big increase, this could just be short term month-to-month volatility," Gordon Kwan, the Hong Kong-based head of regional energy research at Mirae Asset Securities Ltd, said on Tuesday.

PICC rises most in nine months on profit surge

PICC Property & Casualty Co, China's biggest non-life insurer, rose the most in almost nine months in Hong Kong after reporting a 24 percent jump in profits on higher underwriting revenue and investment income.

The stock increased 7.3 percent, the most since Dec 1, to HK$9.44 ($1.22) at the close of trading, as the benchmark Hang Seng Index was little changed. Its first-half net income climbed to 6.53 billion yuan ($1 billion), from 5.3 billion yuan a year earlier, the Beijing-based insurer said in a statement to the Hong Kong Stock Exchange on Monday.

Premium growth and controls on claims and expenses helped Chairman Wu Yan offset the impact of stock market declines on PICC's equity holdings.

"The strong earnings mainly came from a stable combined ratio and higher interest income," Nomura International Hong Kong Ltd analysts, led by David Chung, wrote in a note on Monday. "While these are reasons for the share price to react positively to the result, we continue to see the upcoming listing of the parent, PICC Group, to be a key overhang."

Noble will target US agriculture assets

Noble Group Ltd, Asia's biggest publicly traded commodity supplier, will target agricultural assets in the US as it seeks to meet demand from China and sees potential for deals across its units.

"It's hard to be the supplier and partner of choice for China in the grain space, and especially in the corn space, without having significant origination assets in the US," CEO Yusuf Alireza said on Tuesday. "Over the medium term, that's an investment we're looking to make."

Noble announced deals worth at least $2 billion in the past three years as it built its sugar operations in Brazil and energy assets in the United States and Australia. The Hong Kong-based company last month said it was time to build the agriculture unit after shelving plans to sell shares in the business.

"We're seeing a consolidation process in the agriculture sector and that's going to arise very significant opportunities," said Alireza. Noble is considering different options, including acquisitions and potential partnerships with US companies, he said.

Natural gas prices may rise 80% to bolster shale

Natural gas prices in China may rise 80 percent from current levels as the government stimulates domestic production from shale to reduce its energy imports, according to Bank of America Merrill Lynch.

Gas may rise to as much as 2.6 yuan per cubic meter, equivalent to $11.4 per million British thermal units, by 2016 as the government revises its pricing formula for the fuel, Bank of America said in a report e-mailed on Tuesday.

Higher import costs and delays in signing a deal for supplies from Russia have pushed China to develop alternative plans for meeting gas demand, according to Merrill. The government's target of as much as 100 billion cubic meters of domestic annual shale-gas production by 2020 may account for as much as 28 percent of the nation's total gas consumption and "crowd out" the need for incremental imports, it said.

"We are moderately optimistic about the future of shale gas in China, given abundant resources, a strong balance sheet for the oil sector in China, and high interest in the private sector to invest in resources," Thomas Wong, a Hong Kong-based research analyst at Merrill, said in the report.

HNA signs deal to launch Fuzhou Airlines

HNA Group, China's fourth-largest airline group, signed a cooperative agreement with the Fuzhou government, in Fujian province, on Friday to introduce Fuzhou Airlines as part of its domestic expansion plan.

The agreement focuses on using joint efforts to obtain operating approvals from the Civil Aviation Administration of China, investing in the construction of Fuzhou Airport and in the shipping industry and establishing industrial funds, among other tasks.

After Air China established Dalian Airlines last year, other large carriers in China, including China Eastern and China Southern, are all expanding their domestic and regional presence through subsidiary operations.

Analysts say that cooperation between local governments and airline companies is mutually beneficial. On the one hand, an airline establishment can be a stimulus for a local economy; on the other hand, the government's capital injection can ease financial pressures on companies and put them in a more favorable position to obtain approval from the Civil Aviation Administration of China.

Nation's catering industry faces tough times

China's restaurants are failing at a 15 percent rate every month, the worst performance since the SARS outbreak in 2003, according to the China Cuisine Association.

Beijing's year-on-year catering revenue growth rate dropped to 9.4 percent in May, significantly lower than last year's 16.7 percent, according to CCA data. In Shanghai, the industry's growth rate fell into the single digits for the first time in years.

The low profit margins are mainly due to rising costs, with restaurant rents, labor costs and food ingredients prices increasing at annual rates of between 8 and 10 percent.

China's fast-food chains in first-tier cities performed better and kept profit margins at 15 percent, but many have postponed expansion plans.

Western fast-food chains were also affected. Operating profits in China fell 4 percent compared to last year due to the high inflation, according to Yum.

Incentives introduced to boost FAW sales

The local government in Changchun, Jilin province, has introduced incentives to boost the sale of the loss-making automaker China FAW Group Corp.

The subsidies range from 3,500 yuan to 7,000 yuan ($550 to $1,100) per car, the company said on Monday. The incentives are aimed at people with registered residences in Changchun.

The policy covers the purchase of the Oley, Besturn B50/B70/B90 and Besturn SUV models. The highest subsidy is 7,000 yuan and is offered on the company's Besturn SUV.

The initiative, which started on July 1 and will end in June 2013, will mainly benefit Changchun residents.

However, as FAW said in a news release, the gross profit margins for the car models are quite thin. Though sales are expected to grow as a result of the incentives, the policy may not have a significant effect on its overall revenue.

The policy also encourages the local government to purchase FAW cars as public service vehicles. FAW will be required to offer a 10 to 15 percent discount on market prices when selling the vehicles to the local government.

China Mobile to offer cloud storage service

China Mobile Ltd, the world's biggest mobile operator by users, plans to offer a cloud storage service to Chinese users by the end of the year.

The Mcloud service, which is similar to Apple Inc's iCloud service, is now being tested, the company said.

The carrier plans to provide users with up to 16 gigabytes of storage space for free, while Apple offers 5 gigabytes.

Shen Hongqun, deputy general manager of the data business department at China Mobile, described Mcloud as a "digital information bank" for users of mobile web devices.

"In the past, people deposited valuables in banks. Now, as we enter a digital period, we have new demands for keeping our information safe, such as messages, files and photos," Shen said.

The Mcloud will help users manage nine major categories of personal information including audio, video, calendars and location information.

Rural wealth gap in China nears UN warning level

China's rural wealth gap is approaching a warning level set by the United Nations, Xinhua News Agency said on Tuesday.

The Gini coefficient in rural areas was 0.3949 last year, Xinhua said, citing a survey by Central China Normal University's Center for China Rural Studies. The index ranges from 0 to 1, and 0.4 is used as a predictor for disturbances.

Including urban areas, China's Gini coefficient is probably "well above" 0.4, Xinhua said, citing Deng Dacai, the institute's deputy chief. The government hasn't released a Gini figure including both rural and urban areas since 2000, when it was 0.412, Xinhua said.

China Daily - Agencies

(China Daily 08/22/2012 page14)