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China tightens land purchase rules

China is requiring a down payment for land purchases equal to 50 percent of a plot\’s price and prohibited the supply of land for villas as the government sought to increase affordable housing.
The down payment must be paid within a month of signing a contract for the land purchase, the Ministry of Land and Resources said in a statement on its Web site late yesterday. Buyers must also pay a deposit when taking part in land auctions that is equal to 20 percent of the minimum price for the land, according to the statement.
China\’s property prices rose at the fastest pace in almost two years in February, statistics bureau data showed yesterday, adding urgency to the government\’s efforts to rein in speculation and increase the amount of affordable housing.
Chinese officials are trying to reduce the risk of asset bubbles, resurgent inflation and bad loans for banks after flooding the world\’s fastest-growing economy with cash to drive a recovery. Premier Wen Jiabao warned of \”latent risk\” in the country\’s banks in his speech to the annual meeting of top legislature in Beijing last week.
Gemdale Corp, a Shenzhen-based developer, fell 1.2 percent to 13.60 yuan ($1.99) yesterday. China Vanke Co, the largest property builder in China, slid 0.4 percent to 9.44 yuan.
Residential and commercial real-estate prices in 70 cities climbed 10.7 percent from a year earlier, the statistics bureau said on its Web site yesterday. That topped a gain of 9.5 percent in January.
Curbing speculation
To cool speculation, the government in January re-imposed a tax on homes sold within five years of their purchase, after having cut the taxable period to two years in January 2009 to bolster a then-flagging market.

The land ministry said in its statement that not less than 70 percent of new land supply should be used for affordable housing and smaller apartments, and that plots for villa construction is \”strictly prohibited.\”
Developers have to submit to the land ministry the expected start and completion dates for housing projects and explain in writing any delays. Those that fail to comply will be barred from land auctions for at least a year, the statement said.
Shanghai, mainland China\’s financial hub, plans to implement more measures to control property prices, such as introducing a policy for the leasing of public housing, the city\’s Communist Party chief Yu Zhengsheng said March 7.

Steelmaker to increase coking coal imports

Maanshan Iron & Steel Co, the second-biggest Chinese steelmaker listed in Hong Kong, will increase coking coal imports this year, adding to rising global demand that\’s sent prices soaring.
The mill bought between 800,000 metric tons and 900,000 tons of the raw material from BHP Billiton Ltd, the biggest exporter, last year, Chairman Gu Jianguo said. \”Imports from BHP will likely be sustained,\” he said.
Coking coal imports by China, the world\’s largest steelmaking nation, surged five-fold last year after the government closed smaller unsafe mines. BHP last week won a 55 percent price increase from Japan\’s JFE Holdings Inc as the global economy picks up and Chinese purchases bolstered demand.
\”Our demand for imported coking coal will increase this year,\” said Gu. \”The exact import level will depend on domestic and overseas prices. If prices are low, everyone will be buying from that market.\”
Prices for coal bought from BHP are negotiated privately and don\’t follow benchmark contracts set between Japanese mills and the mining company, he said.
China will demand more high quality hard-coking coal in the future as it expands mills, Melbourne-based BHP Billiton said in a September slide presentation. Imports by China jumped to 34.4 million tons in 2009, Wu Xinchun, a consultant to the China Iron & Steel Association said Feb 5.

Carmakers to vie for repeat customers

After 8.6 million Chinese bought their first cars last year, General Motors Co, Volkswagen AG and Ford Motor Co are positioning themselves to compete for return customers.
The number of car models in China\’s showrooms quadrupled in the past six years, forcing companies to fight for attention by unveiling vehicles at the Imperial Ancestral Temple in Beijing and the Great Wall outside the capital – and by paying Olympic gold medalist Michael Phelps millions of dollars.
\”It is clear that brands are still in the forming process,\” said Joerg Mull, chief financial officer for Volkswagen AG\’s China unit. \”One of the keys for success in China in the long run is brand building and brand establishment.\”
About 83 percent of Chinese buyers last year purchased their first vehicle, said the State Information Center, a research arm of the government\’s National Development and Reform Commission.
At stake for China\’s more than 130 carmakers is winning loyal customers in world\’s largest automobile market.
Sales in the country surged 46 percent to 13.6 million last year, according to the China Association of Automobile Manufacturers. In the US, sales slumped 21 percent to 10.4 million, the fewest since 1982, according to Autodata Corp.
This year, sales in China may rise more than 10 percent to about 15 million vehicles, Chang Xiaocun, head of the Ministry of Commerce\’s market construction department, said. Customers choose from 221 models, more than double the total of 2008 and more than quadruple that of 2004, the manufacturers association said.
\”You\’ve got to create the right image, you\’ve got to market it aggressively,\” General Motors\’ China President Kevin Wale said after the company and Chinese partner SAIC Motor Corp launched their Buick Excelle XT in Shanghai.

\”As competition increases, you need to be more creative, more innovative in the way you get to your customers.\”
Car buyers in China tend to be younger than those in the US, Wale said, so the Internet is a key part of an automaker\’s marketing strategy. The average Buick customer in China is 28, married and a college graduate. His US counterpart is 66 and doesn\’t have a degree, General Motors China said.
China is the world\’s largest Web market with 396 million users last year, according to New York-based EMarketer Inc. That number will grow to 840 million, or 61 percent of the country\’s population, by 2013, EMarketer forecasted.
\”Chinese consumers are really Internet savvy,\” said Nigel Harris, general manager of Ford\’s venture with Chongqing Changan Automobile Co, which is increasing its marketing spending by more than 10 percent.
\”They talk to each other through the Internet. Word of mouth is really critical in this market.\”
Companies place ads on social networking sites and use billboards and posters that redirect 3G phones to websites when photographed, Harris said.
GM\’s partnership spent 10.99 million yuan ($1.61 million) on online advertising in December, the most among car companies, according to IResearch Consulting Group, a Beijing-based organization studying customer behavior in Internet media. Its \”more energetic\” campaign of Web videos, pop-ups and banners targets consumers 25 to 40 years old, Wale said.
FAW-Volkswagen Automobile Co, a joint venture involving Changchun-based China FAW Group Corp. and Volkswagen, of Wolfsburg, Germany, came in second, spending 10.81 million yuan.
Bloomberg News 

Sichuan to transfer gas to east China in May

A project aiming to transfer natural gas from southwestern Sichuan province to eastern China is set to be formally put into operation in May, a deputy to the National People\’s Congress with China Petrochemical Corporation (Sinopec) told China Daily on Wednesday.
The 1,660-km-long gas pipeline, built and operated by Sinopec with an investment of 62.7 billion yuan ($9.18 billion), is expected to supply 4 billion cubic meters of gas this year to the Yangtze River Delta region, one of the major powerhouses of China, said Zhou Yuan, a senior advisor with Sinopec.
The region includes Shanghai Municipality as well as Zhejiang and Jiangsu provinces.
The Puguang gas field in Sichuan, the source of the gas pipeline, has proven reserves of 489 billion cubic meters of gas, according to Zhou.

Payment guideline for bankers issued

China\’s banking regulator issued a guideline Wednesday requiring the country\’s commercial bank executives and employees\’ pay to be based on performance assessment in a move to align the pay system in the sector.
Under the guideline, at least 40 percent of bonuses for banks\’ top executives must be deferred for a minimum 3-year period. Banks will recover earlier payments and hold back the retained bonuses if executives cause heavy losses due to poor performance.

Assessments will cover the banks\’ business performance, social responsibility, and risk management such as capital adequacy, bad loans ratio and provision coverage ratio.
Bonuses to bank employees will be no higher than the level the year before if the bank does not meet any one of the above three requirements.
The guideline requires bonuses to executives to be no more than 3 times their base salary.
It also stated the base salary for bank employees should not exceed 35 percent of their total remuneration.

China expected to boost world tourism in 2010

Although the financial crisis of 2009 greatly affected all sectors of the travel industry, the World Travel Trends report released on Wednesday in Berlin predicted a slight recovery from some regions, including a strong boom commencing from China.
Rolf Freitag, the CEO of IPK International, a world travel research monitor that tracks the trends in outbound travel demand, told Xinhua on Wednesday: \”China is very dynamic and is finding its place in the world. This year\’s economic recovery will start from the East and then influence the West.\”
In 2010, IPK\’s travel research envisions that Chinese outbound travel will bolster a four-percent increase in tourism compared to Europe\’s stagnation and a five-percent decrease in the United States.
According to statistics presented at the 44th annual ITB Tourism Trade Show in Berlin on Wednesday, the tourism sector in Europe and North America has been hardest hit in the crisis, with a 19-percent decrease in 2009.

Professor Peter Greischel, who teaches Tourism Management at the University of Applied Sciences in Munich, told Xinhua: \”The figures appear realistic to me. I was, however, shocked by the U.S. statistics, which means it is still a depressed market.\”
These numbers do not bode well for hotel owners around the globe, who have seen a decreased revenue because of imminent price drops in 2009, nor for large airline companies, who were the most affected by less air travel, said Greischel.
Commenting on the Wednesday report, Austrian Airlines Account Manager Herbert Eckl said: \”I hope we will still get our budget this year.\”
Freitag said he believes that although \”it was unavoidable that tourism would become a victim of the financial crisis … a turnaround is on the horizon.\”
For the ITB travel trade fair, which has been held in Berlin in the past 44 years, the number of participating exhibitors has risen to 11,127 this year from 11,098 in 2009. This might be a sign that business remains at least steady in the tourism industry.
This year\’s ITB runs from March 10 to March 14 at the Berlin Exhibition Center.

China\’s retail sales up 17.9% Jan-Feb

China\’s retail sales increased by 17.9 percent in January and February over the same period last year, and totaled 2,505.2 billion yuan ($367 billion), the National Bureau of Statistics (NBS) announced today.
The increase was 2.7 percentage points higher than the same period last year.

Agricultural Bank plows ahead

Agricultural Bank of China (ABC) has seen a 26.3 percent surge in its net profit for 2009 as the country\’s third-largest lender reaped gains from the country\’s rapid credit expansion and reform of its rural operations, said its chairman Xiang Junbo.
That solid performance is now spurring the bank to even greater heights. ABC plans to increase its market share in major cities, strengthen corporate governance and expand its global footprint, Xiang said in an interview with China Daily.
The bank posted a net profit of 65 billion yuan in 2009, up 13.5 billion yuan from a year earlier. The capital adequacy and bad-loan ratio stood at 10.07 percent and 2.91 percent respectively by the end of last year, while the provision ratio for bad loans increased to 105.37 percent from 63.53 percent in 2008. The full year results are, however, still subject to audit.
With the key financial indicators in the black, ABC is now confident that its strategy to transform itself as a commercial lender has paid off, said Xiang.
\”The robust profit figures are largely the result of a thorough balance sheet cleanup,\” said the chairman, referring to the 800 billion yuan of bad assets written off in 2008.
\”We checked the quality of our assets in a prudent manner when we started the drive two years back,\” said Xiang, who was the deputy chief of the National Audit Office between 2002 and 2004.
The brisk credit expansion triggered by the nation\’s stimulus moves also helped buoy profit growth, Xiang said. ABC disbursed $152 billion worth of new loans last year.
Rural mission
Xiang exudes confidence when he speaks about the prospects for rural finance. Skeptics had earlier doubted whether ABC would be able to strike a balance between making profits and fulfilling social responsibilities like supporting farmers.
ABC, which focuses on serving the nation\’s 800 million farmers in rural areas, is also planning to shift its 2,048 county-level branches to a new rural finance unit. That in turn, would also help the bank to provide a clear picture of its profits from rural finance operations.
\”The core issue in China over the next five to 10 years would be the massive urbanization drive. Counties and towns on the fringes of large cities will slowly transform into satellite cities,\” said Xiang, who was also the former deputy governor of the central bank.
\”As part of this process, a great deal of resources would flow into rural areas. At that time, we will have an advantage over others with our extensive rural network,\” he said.
ABC has the largest retail network, with nearly 24,000 branches across the country, compared with the 17,000 branches owned by Industrial and Commercial Bank of China, the nation\’s biggest lender by assets.
But with the urbanization drive still in a nascent stage, Xiang said it would take several years to ensure sustained profits from the rural finance unit.
Balanced expansion
Besides cementing its presence in rural areas, the bank is also taking steps to further consolidate its position in key cities over the next three years.
\”We have inborn disadvantages when competing with other big lenders in cities, as the bank was originally started to serve farmers in rural areas,\” Xiang said.
ABC, which started tapping urban business in 1994, is facing fierce competition with the other big three State-run lenders in regions like the Pearl River Delta and Yangtze River Delta, but has outpaced rivals in the country\’s central and western areas, Xiang said.
\”ABC is the numero uno bank in terms of profitability in provinces such as Sichuan, Yunnan and Guangxi. However, in most provincial capital cities we still lag behind our peers,\” he said.
Overseas growth
Even as the bank makes the right moves in China, it would also take steps to spread its wings abroad. \” We will continue to expand our global footprint in the next two years, especially in South America and the Middle East,\” he said.

ABC has also sought permission to upgrade its representative offices in New York, Tokyo and London into full-fledged branches. It opened branches in Hong Kong, Singapore and representative offices in Seoul, Sydney and Frankfurt last year.
The bank, the only State-run lender yet to be listed, is still under technical preparation for its initial public offering. The chairman said the effective reform of the rural finance operations has provided further impetus to the initial public offering.
Agricultural Bank is also in negotiations with the National Social Security Fund as part of its plan to rope in strategic investors.  

Real estate prices rise at record pace

Further administrative curbs likely in property market, bank lending
Real estate prices in February rose at the fastest pace in almost two years, adding urgency to the government\’s efforts to rein in speculation and increase the amount of affordable housing.

Prices in 70 major cities rose 10.7 percent year-on-year in February, the National Bureau of Statistics said on Wednesday.
\”Despite the government\’s tightening policies, it will take some time for the sizzling property sector to cool down, as developers are still awash with cash from last year\’s sales boom,\” said Qin Xiaomei, chief researcher with property firm Jones Lang LaSalle Beijing.
Officials are trying to reduce the risk of asset bubbles, resurgent inflation and bad loans for banks after flooding the world\’s fastest-growing economy with cash to drive a recovery. Premier Wen Jiabao warned of \”latent risk\” in banks and pledged to crack down on property speculation in a speech to the country\’s annual parliamentary meeting in Beijing last week.
The latest numbers \”imply that there may be more upward pressure on inflation from the housing component,\” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd in Hong Kong.
\”Social consequences will be negative, making it more likely that policymakers will introduce further administrative curbs in the real-estate market and in lending overall.\”
To cool speculation, the government in January re-imposed a tax on homes sold within five years of their purchase, after having cut the taxable period to two years in January 2009 to bolster a then-flagging market.
But run-away prices appear to be gradually losing momentum. Though the year-on-year growth rate in February is 1.2 percentage points higher than January, the month-on-month increase is down 0.4 percentage points, according to the NBS.
\”We will not judge the trend by purely looking at the property price,\” said Grant Ji, director of Savills (Beijing), a UK-based real estate service provider. \”The falling property sales in February, in fact, are an important indicator of market adjustment.\”
Shenzhen-based China Vanke Co, the country\’s biggest developer by market value, said on March 4 that February property sales fell 35.4 percent to 2.51 billion yuan ($368 million) from a year earlier, the company\’s first sales decline since March 2008.
Guangzhou R&F Properties Co, the biggest developer in the city, said contracted sales fell 11 percent last month from a year earlier.
The sluggish transactions continued in March as customers take a wait-and-see attitude. Meanwhile, prices in some key cities also dropped. According to Shenzhen-based World Union, a real estate brokerage firm, the average price for new apartments in Shenzhen in the first week of March fell 14 percent month-on-month to 18,266 yuan per sq m, and in Shanghai the price dropped 10 percent to 18,549 yuan per sq m.
\”Unless it is an ideal apartment at a reasonable price, I will not buy a home at the moment,\” said Li Yan, a Beijing-based company executive. \”Given the central government\’s resolve to curb property prices, I don\’t believe they will climb like last year.\”
Bei Fu, associate director of corporate ratings at Standard &Poor\’s, said: \”Prices are likely to fall from mid-2010 as slower demand, higher supply and various government initiatives dampen market sentiment. However, we do not expect developers to find 2010 as severe as the downturn in 2008 or as volatile as 2009.\”
Bloomberg contributed to the story

CBRC to ensure lent enters real economy

China\’s banking regulator will work to ensure \”every cent\” lent out by the nation\’s financial institutions this year enters the real economy to help guard against inflation while maintaining growth, Chairman Liu Mingkang said.
This year \”will be extremely complex and full of uncertainties,\” Liu said in an interview with Xinhua news agency published late yesterday. \”Faced with inflation expectations, we will have to deal with the problems of ample liquidity while at the same time maintaining continuity and stability in our policies.\”
\”The government has the experience, awareness and tools to release a lot of signals at the right moment to adjust inflation expectations,\” Liu said. \”China\’s consumer and producer price indexes may rise slightly, but the chance of higher-than- moderate inflation is very small.\”
Wen warned last week of excessive property-price gains and \”latent risk\” in China\’s banks after a record 9.59 trillion yuan ($1.40 trillion) of loans were granted last year. The government has set a target for new bank loans this year of 7.5 trillion yuan.
Balanced, Steady
The China Banking Regulatory Commission (CBRC) will make sure that lending follows the government\’s industrial restructuring policies and is carried out in a balanced and steady manner, Liu said in the interview.

Banks will be required to \”reasonably control growth in lending\” this year and try to achieve a balanced and steady quarterly expansion of credit, Liu said. They must ensure they adhere to rules covering capital adequacy ratios, provisioning, leverage ratios, and guard against the excessive concentration of loans, he said.
He identified six major risks banks need to pay attention to this year, including lending that doesn\’t comply with the government\’s industrial restructuring policies, the illegal use of personal loans for investing in capital markets and credit to the real-estate industry.
Property is one of China\’s pillar industries and the commission will continue to support its development, Liu said. \”But real estate is also a high-risk industry, so the commission will take a cautious approach to property lending,\” he said.
Conservative, Prudent
The country has more than 50,000 real-estate developers so banks must be \”conservative\” and \”prudent\” in deciding the leverage they allow borrowers, pay close attention to the collateral they offer and blacklist those who have a record of irregularities, Liu said.
The commission is also watching lending procedures to local governments who use their land reserves as collateral for loans, he said.