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China Southern to fly Airbus SAS A380s to Paris

China Southern Airlines Co will fly Airbus SAS A380s on a Beijing-Paris route beginning in October, ending a yearlong wait to use superjumbos on international services from the Chinese capital.

The Paris route, which will require two A380s, will be operated with Air China Ltd, China Southern Chief Financial Officer Xu Jiebo said on Wednesday. The terms of the agreement with Air China are still being discussed, he said.

Air China, Beijing's biggest carrier, will stop flying its own planes to Paris, according to Citigroup Inc.

Using A380s on international routes may help China Southern narrow losses from the planes' operation, Citigroup analyst Vivian Tao wrote in a note to clients on Tuesday. China Southern has so far only used the aircraft domestically because of delays in getting regulatory approval for overseas routes.

Air China profit slumps 77% on higher fuel costs

Air China Ltd, the nation's biggest international carrier, said first-half profit slumped 77 percent because of slowing travel demand, higher fuel costs, and a loss from its stake in Cathay Pacific Airways Ltd.

Net income in the six months ended in June fell to 944.5 million ($149 million), under international accounting standards, from 4.06 billion yuan a year earlier, the Beijing-based carrier said in a filing to the Hong Kong Stock Exchange on Tuesday.

That compares with the 665 million-yuan median profit estimate of three analysts surveyed by Bloomberg News. Sales rose 5.4 percent to 47.6 billion yuan.

The carrier filled a lower percentage of seats in the first half than a year earlier as China's cooling growth and the eurozone debt crisis sapped travel demand. Air China also booked losses from investment, mainly on its 30 percent stake in Cathay, and the yuan's depreciation against the dollar.

China Life rises on new business value growth

China Life Insurance Co, the nation's biggest insurer, rose by the most in more than a month in Hong Kong trading after reporting an expansion in new business value.

The stock climbed 2 percent, the most since July 19, to HK$20.70 at the close of trading, extending this year's rally to 7.8 percent. New business value, which measures profitability of new policies sold, rose 2.5 percent to 12.5 billion yuan ($1.97 billion) in the first half, the company said in a statement to the Shanghai Stock Exchange on Tuesday.

The expansion was "driven primarily by the better than expected margin uplift", Barclays analysts, led by Mark Kellock, wrote in a report on Wednesday. "This suggests significant underlying product mix improvements."

With a profit decline "already in the price, the positive new business value growth and margin expansion, strong growth in book value and embedded value, and a much stronger solvency position are likely to be positively received by the market," Kellock said in the report.

Biggest bond sale in Beijing since 2009

Beijing State-owned Assets Operation & Management Center sold its biggest bond since March 2009, as China's regional authorities rolled out investment plans to stimulate the economy.

The local-government financing vehicle, involved in industries ranging from steel to electronics to real estate, sold 10 billion yuan ($1.6 billion) of five-year bonds to yield 4.78 percent on Tuesday, according to a person familiar who asked not to be identified because the result isn't public.

It offered similar-maturity securities at 5 percent in December. Companies pay an average of 2.9 percent for debt globally, Bank of America Index shows.

Local investment arms, known as LGFVs, sold a record 330 billion yuan of bonds in the first half and have since raised another 68 billion yuan, prospectuses show.

While two interest-rate cuts in June and July by the People's Bank of China helped lower their borrowing costs, yields started to climb in the past six weeks as falling capital inflows caused a cash squeeze.

Details set for VAT reform in Guangdong

A pilot program to replace business tax with value-added tax in certain sectors to avoid double taxation will be launched in Guangdong province on Nov 1.

The Guangdong pilot scheme will be similar to one in Shanghai, which includes the transport sector and six service industries, such as R&D and IT services. There will be two new tax rates of 11 percent and 6 percent, and a 3 percent VAT rate will be applied to smaller taxpayers with annual sales of less than 5 million yuan ($787,000).

An estimated 138,000 business-tax payers in the province, 120,000 of which are from the service sector, are expected to be included in the program. The tax reform will save local businesses several billion yuan, the provincial tax authorities said.

Guangdong is the largest provincial economy in China and a major export hub. Its pilot scheme will be a milestone in the process of China's tax reform, as well as a vital step to maintain steady economic development, experts said.

Wolters Kluwer to boost China workforce

Wolters Kluwer NV, Europe's largest tax and legal publisher, will expand its China workforce by 17 percent in the next six months to seize opportunities presented by the nation's reforms of the health and legal industries.

The publisher will add about 50 people, including sales staff and subject-matter experts such as physicians and legal scholars, to the 300 now in the country, Chief Executive Officer Nancy McKinstry said in an interview in Beijing on Wednesday. "The level of change around regulations, legal developments and medicine continues to increase rapidly," she said.

Wolters Kluwer is turning to faster-growing markets in Asia, such as China and India, to counter conditions in Europe that remain challenging, McKinstry said.

ABC profit gains 14% on loans, lower provisions

Agricultural Bank of China Ltd, the nation's third-largest lender by market value, posted a 14 percent increase in second-quarter profit as lending and fee-based services income rose and provisions for bad loans dropped. Net income rose to 37 billion yuan ($5.8 billion) from 32.6 billion yuan a year earlier, based on figures published by the Beijing-based lender on Wednesday. That compared with the 38.1 billion-yuan average estimate of 15 analysts surveyed by Bloomberg.

Agricultural Bank's profit growth, the strongest among China's four largest lenders for three straight years, may bolster capital and ease concern the company will need to raise funds as the world's second-largest economy slows.

Bank of China Ltd, the third-largest by assets, last week posted 5.3 percent profit growth, the slowest in three years.

Healthcare expenditure booms in China, report says

China's is expected to spend $1 trillion on healthcare in 2020, up from $357 billion last year, said a report conducted by the management-consulting firm McKinsey & Company Inc and released on Wednesday.

China remains one of the world's most attractive markets and to sellers of pharmaceuticals, medical products, consumer health products and similar things. The country's expenditures on healthcare more than doubled from 2006 to 2011, going from $156 billion to $357 billion, and coming close to being equal to 5 percent of the country's gross domestic product.

The report attributed the fast increase in China's medical spending to the continuation of the nation's economic and demographic trends, healthcare reforms and the policies laid out in the government's 12th Five-Year Plan (2011-15).

Lack of confidence in global economic outlook

Leaders from international corporations and US small-business owners expressed a lack of confidence in the near-term global economic outlook, a survey from NYSE Euronext showed on Tuesday.

The respondents said they are looking to 2013 and beyond for improvements in business and job creation prospects.

China is expected to see the greatest growth in 2013 according to 39 percent of CEOs and 34 percent of US small business owners. Forty-eight percent of the respondents rate the global economy as "poor", while 48 percent said it is "fair".

Meanwhile, 67 percent of public-company CEOs and 59 percent of US small business owners surveyed expect the global economy to grow in 2013.

The report was based on a survey among a diverse group of 340 CEOs from companies listed on the NYSE Euronext markets from 26 countries, and 285 US small business owners.

BMW's China partner first-half profit rises 42%

BMW's Chinese partner reported first-half profit that beat analysts' estimates, as it expanded dealerships to cater to demand for luxury vehicles that outpaced industry growth.

Net income at Brilliance China Automotive Holdings Ltd rose 42 percent to 1.33 billion yuan ($209 million) in the six months ended June 30, the company said in a statement to the Hong Kong Stock Exchange. That beat the 1.08 billion yuan average estimate of six analysts surveyed by Bloomberg. Sales fell 11 percent to 2.81 billion yuan.

Brilliance, which assembles BMW's 3- and 5-series sedans in China, is benefiting as rising incomes boost demand for premium-car sales in the world's largest vehicle market. Luxury-vehicle deliveries gained 24 percent in the first six months of this year, according to LMC Automotive data, outpacing the 7.1 percent gain in total passenger vehicle sales estimated by the nation's auto association.

China 'teapot' oil plant rates may rise to 45%

Chinese privately held oil refineries' run rates may rise in the first half of September as fuel demand increases, according to C1 Energy, a commodity researcher.

The so-called "teapot" plants in eastern China's Shandong province may boost processing to 45 percent of capacity next month from 38.6 percent on Aug 22, C1 Energy said. The run rates may stay above 40 percent next month, it said. The seasonal demand for diesel in September and October will spur production from facilities, according to C1.

Teapot refineries account for about a third of China's fuel-oil imports, which they use as a feedstock to produce gasoline and diesel. The plants increased their processing for a sixth week to the highest level in more than three months last week on anticipation that the government will increase gasoline and diesel prices next month, Oilchem.net said last week.

The teapot plants in Shandong province have a combined capacity of about 90 million tons a year, or 1.8 million barrels a day.

China Daily-Agencies

(China Daily 08/30/2012 page14)