CHINA'S RETAIL SALES INCREASED 13.6 PERCENT IN FIRST TWO MONTHS

March 14 (Bloomberg) -- China's retail sales climbed 13.6 percent in the first two months of 2005 as rising incomes spurred spending in the world's most-populous nation.

Sales rose to 1.03 trillion yuan ($124 billion), according to Beijing-based ** Mainland Marketing Research Co. (China), which releases monthly figures on behalf of the statistics bureau. The gain followed a 14.5 percent jump from a year earlier in December and compares with the median 13.8 percent increase forecast in a Bloomberg News survey of four economists.

Rising spending is prompting companies including McDonald's Corp. and Wumart Stores Inc. to expand in China, helping sustain economic growth amid a government clampdown on investment in industries including real estate, autos and steel. ** Premier Wen Jiabao said March 5 the government will lower taxes to help boost consumer spending this year.

For February alone, sales rose 15.8 percent after climbing 11.5 percent in January. Economists look at combined figures for the first two months of the year to allow for distortions caused by changes in the timing of the weeklong Lunar New Year holiday, which fell in February this year and January in 2004.

Retail sales of oil products surged 36 percent in the first two months of the year, today's statement said.

China's retail sales will probably rise by about 13 percent to more than 6 trillion yuan this year after reaching a record 5.4 trillion yuan in 2004, the statistics bureau said Jan. 25.

**McDonald's Corp., the world's biggest restaurant chain, relocated its China headquarters to Shanghai from Hong Kong in January to be nearer to its operations as it opens 100 new outlets on the mainland this year, expanding the number of stores by 16 percent. Wal-Mart Stores Inc., the world's largest retailer, plans to open between 12 and 15 stores this year, adding to its 40 outlets in major cities.

Wumart Stores Inc., Beijing's biggest supermarket chain by sales, said March 1 that it plans to double the number of new store openings to 200 this year. The company operates 33 supermarkets, six hypermarkets and 406 convenience stores and eight drug stores in Beijing, the nearby city of Tianjin, and Hebei, a province surrounding the capital.

Per-capita disposable incomes in China's town and cities, home to about a third of the nation's 1.3 billion people, rose 7.7 percent last year to 9,422 yuan, while incomes in rural areas rose 6.8 percent to 2,936 yuan.

The government is trying to narrow the gap between urban and rural incomes by boosting public spending in the countryside and scrapping agricultural taxes. Urban residents earned 3.2 times as much as rural residents last year, up from 1.9 times in 1978.

http://www.bloomberg.com/apps/news?pid=10000087&sid=aK6eBANdiz4k&refer=top_world_news#

2/13/05

Electrolux: China turns commercial battlefield for multinationals

China has emerged as the biggest hunting ground for the world's largest transnational corporations as it embraces globalization after becoming a World Trade (WTO) member three years ago.

According to China's Ministry of Commerce, among the 2004 Fortune Global 500, about 450 have made investments in China, 400 have established research centres here and many have moved in their regional headquarters.

These are business giants who are strong in the fields of computer science, telecommunications, electronics, chemical industry, automobiles, building and construction, medicine, banking and insurance.

In a special article, Beijing Today, an English newspaper, named the 2008 Olympics as the magic wand that has turned China into a commercial battlefield for the multinationals.

According to the Beijing Organising Committee for the Games of the XXIX Olympiad (BOCOG), about 180 billion yuan (RM90bil) will be spent on infrastructure construction, 142 key projects, and refurbishing nine million sq metres of housing areas just to prepare Beijing to host the Olympics.

To those with resources, capacity and capability, all these means almost unlimited business opportunities awaiting exploitation. In fact, a stream of foreign VVIPs including presidents, prime ministers and senior ministers has been waiting to do their PR with Chinese leaders.

Top industrial captains have also been knocking on China's doors daily. China had pledged to open up its banking, insurance, telecommunications, foreign and domestic trade, and tourism sectors step-by-step after joining the WTO.

Last year, China lifted restrictions on foreign insurers, opening key market segments like group insurance and annuities, and allowing foreign insurers to operate in all Chinese cities. Licenses for the importation of cars have been cancelled as a new policy is being set up.

Since last year, the Government has also allowed foreign banks to do renminbi transactions in 18 cities and foreign media groups to set up joint ventures with local partners to produce TV programs.

Some sensitive service sectors such as commercial wholesale and retail, construction and the flow of goods and materials have also been opened to the outside world since the end of last year.

While many of these multinationals have signed up as Olympics partners, others are here for the long haul. Among the giants are:

# the Nestle group, which has made direct investment of 1.2 billion Swiss francs (RM3.5bil) in the greater China region in the last 14 years. It operates 20 plants in China and has a research and development centre in Shanghai. Josef Mueller, CEO of Nestle (China), said the group was settling up a new dairy production base in Erguna, Inner Mongolia to produce high quality fresh milk.

# Electrolux (China), which has invested US$40mil in a new washing machine line to produce 500,000 units and is also expanding its refrigerator manufacturing to 1.3 million units. Don Gadsden, president of Electrolux Home Appliances Co Ltd, said, "China has unlimited market potential while we have limited human and capital resources to cover many fields." Electrolux has 2,000 outlets in China.

# Mitsubishi Heavy Industries, which aims to secure several of the 20 to 30 nuclear power plants to be established in China by 2020. Currently, it is looking at a light rail project between Beijing International airport and Dongzhimen to be completed before the 2008 Olympics.

# ThyssenKrupp AG, which has set up joint ventures and subsidiaries covering the steel, automotive parts, elevator, technology and services sectors in more than 10 cities including Shanghai, Dalian, Xuzhou, Changchun and Wuhan. In fiscal 2003-2004, its sales totaled one billion euros.

# ABB Power and Automation Technology Group: last year, it grossed sales of US$2bil from China.
The German firm has signed an order worth US$390mil to build a 1,100km-long 3,000 megawatts transmission link from the Three Gorges hydropower plant to Shanghai. The company hopes to gross revenue of US$4bil by 2008.

# Intel, which has 13 branches in China and also research centres in Beijing and Shanghai to develop local talents and localise technology efforts.

# Electicite de France: it is currently developing high-tech batteries for electric transportation but is eyeing nuclear power generation in the future. China in 2020 will need 1,000 gigawatts when the increase in electricity by other means would be difficult because of environment and pollution problems, leaving nuclear power the only viable answer.

# McDonald's, which operates 52 factories in China.

The survey noted that the small and medium-scale enterprises (SMEs) also have huge potential to attract foreign investments, as an enormous number of SMEs are rapidly becoming aware of the overseas market and are hungry for new technology and financial investments.

http://www.ukwhitegoods.co.uk/modules.php?name=News&file=article&sid=1144

From The Star Online
Posted on Sunday, February 13 @ 02:23:32 GMT by kwatt

3/9/05

CVRD Brazil Sees '05 World Iron Market 640 Million-650 Million Tons
Wednesday March 9, 2:03 PM EST
(Adds data, quotes from chief financial officer to story published at 1437 GMT)

BRASILIA -(Dow Jones)- The chief financial officer of the world's biggest iron ore miner said Wednesday that the global seaborne market for iron ore should grow from 600 million tons in 2004 to 640 million or 650 million tons in 2005, with about 80% of the annual growth coming from China.

"China, in our view, is not a bubble but a century-long phenomenon," said Fabio Barbosa, the CFO of Brazil's iron ore mining titan, Companhia Vale do Rio Doce SA (RIO), or CVRD.

China's fast-growing economy has caused global iron and steel demand to surge in recent years, pushing up prices around the world. But as producers increase output to meet demand, they become more vulnerable to a slowdown in China. If an unexpected slowdown occurs, it could lead to a supply glut and cause prices to plunge.

Speaking to reporters in Brasilia Wednesday, Barbosa said CVRD expects China to keep growing steadily this decade, expanding about 8% in 2005 and about 7% on average in coming years. He also suggested the nation has a great deal more room for per-capita steel-demand growth.

"(China) is similar to other Asian emerging markets that preceded it, but with the difference in the size of its market with 1.3 billion consumers," he said, adding that **China's per-capita steel consumption, at some 170 kilos per year, is still far below per-capita consumption in South Korea and Japan, at 600 and 700 kilos of steel per year, respectively.

China is becoming increasingly important to the world iron ore market. Barbosa said China bought 208 million tons on the seaborne market last year, or 30% of available supplies. He said he expects the country to buy even more this year, both in raw tons and as a percentage of total supply.

CVRD, for its part, plans to invest $1.7 billion this year to raise ferrous metals output. The miner produced about 210 million tons of iron ore last year, or a third of world supply, and expects to add 20 million tons to output this year, Barbosa said.

Almost 17% of the company's iron ore and pellets went to China over the first nine months of 2004. Another 11% went to Japan, 10% to Germany, 20% to the rest of Europe and 25% to clients in Brazil.

CVRD and Melbourne-based miners Rio Tinto (RTP) and BHP Billiton (BHP) produce most of the world's iron ore.

Thanks to three straight years of climbing iron ore prices, CVRD is flush with cash and actively investing in projects to produce copper at home and coal in China, Africa and Latin America. Earlier Wednesday, CVRD said Italian steel companies Ilva and Lucchini followed global titans such as Japan's Nippon Steel (5401.TO), South Korea's Posco (005490.SE), China's Shanghai Baosteel Group ( 600019.SH) and Luxembourg-based Arcelor (5786.FR) in accepting an unusually large 71.5% iron ore price hike this year.

Barbosa said the annual iron price hike should add about $3.5 billion to Brazilian exports this year, making iron ore the nation's largest single export product in terms of value.

** CVRD became the largest privately owned company in Latin America last month, when its total market capitalization grew to $39.9 billion, Barbosa said. Brazil's oil giant Petrobras (PBR) is larger but is controlled by the state.

Separately, Barbosa said CVRD hopes to have its credit rating upgraded to investment-grade status by global rating agencies this year, adding that executives will meet with top ratings agencies in late March and early April. CVRD may borrow up to $1 billion on global capital markets this year, although strong iron prices could help reduce financing needs, he said. A credit upgrade would significantly reduce debt-financing costs.

CVRD would be only the second company to receive an investment-grade rating in sub-investment grade Brazil. Brazil's beverage giant Companhia de Bebidas das Americas (ABV), or AmBev, earned investment grade status last year, but only after Belgium's Interbrew, now known as Inbev (INB.BT), acquired more than half its stock.

http://money.iwon.com/jsp/nw/nwdt_rt.jsp?cat=USMARKET&src=704&feed=dji§ion=news&news_id=dji-00099420050309&date=20050309&alias=/alias/money/cm/nw

3/14/05

UBS lobbies China for more foreign investment
By Florian Gimbel in Hong Kong

UBS is calling on the Chinese government to support the country's troubled equity markets by lifting the amount foreigners can invest in domestic equities and bonds. The Swiss banking giant, which is already the biggest broker of Chinese securities for foreign investors, has been lobbying Beijing to lift a limit of $800m (£415m) on the amount companies can invest under the Qualified Foreign Institutional Investor scheme (QFII).

"In the last few months, the regulator has become a little bit more lenient on the quotas," said Nicole Yuen, head of China equities at UBS. "QFII inflows are going to support other measures that the government is going to take."

Faced with an equity market that has halved over the past five years, Beijing has been seeking to prop up demand. For example, local insurers have been allowed to invest in domestic stocks, while commercial banks have been allowed to set up mutual fund operations.

But Chinese regulators have sought to limit the amount invested in domestic stock markets under the QFII scheme, amid worries it could be used by speculators to bet on a revaluation of the renminbi.

"The Chinese government is finding it hard to stem the inflow of foreign exchange, but the sums involved in QFII neither help nor hurt their efforts," said Ms Yen.

The Shanghai market is trading at a price-earnings multiple of 25-30 times, down from a peak of 60 times. "There are some liquid stocks and interesting sectors that we cannot access through Hong Kong-listed China shares," said Ms Yuen, pointing to companies such as Baosteel, China's biggest steelmaker, and China Yangtze Power, the company that runs the Three Gorges Dam.

3/9/05
Wednesday March 9, 10:50 AM EST
(Updates to include price hike for pellets)

Companhia Vale do Rio Doce SA or CVRD (NYSE: RIO)

SAO PAULO -(Dow Jones)- Brazil's mining titan Companhia Vale do Rio Doce SA (NYSE: RIO), or CVRD, said Wednesday that Italian steelmakers Ilva SpA and Lucchini SpA (LCH.YY) have agreed to pay 71.5% for iron ore fines, a type of low-grade ore, supplied by CVRD in 2005.

The Italian companies follow several of the world's biggest steel companies in agreeing to the unusually large annual price hike as iron and steel supplies remain tight across the globe. In recent weeks, CVRD has announced 71.5% price hike agreements with Japan's Nippon Steel (5401.TO), South Korea's Posco (005490.SE), China's Shanghai Baosteel Group (600019.SH) and Luxembourg-based steel titan Arcelor (5786.FR) among others.

The price hikes are good news for CVRD, the world's largest iron ore miner. CVRD and Australia-based mining companies Rio Tinto (RTP) and BHP Billiton (BHP) produce most of the world's iron, the principal ingredient in the steelmaking process. A multi-year economic boom in China and then growing economies elsewhere in the world have caused iron and steel demand to outpace supply in recent years.

In a statement, CVRD said Ilva and Lucchini agreed to pay 86.7% more this year for higher-quality pellets from CVRD's Southern mining system and 86.4% more for pellets from its mining system in Northern Brazil.

Russian steelmaker OAO Severstal (CHMF.RS) agreed to acquire a 62% stake in Lucchini last month.

3/13/05

China may restart steel futures

Steel futures may reappear on China's futures market for the first time in 11 years, a source with the Shanghai Futures Exchange (SHFE) said Friday. This follows China's largest steel maker Baosteel's agreement in February with two of the world's leading iron ore providers, Hamersley of Australia and Companhia Vale do Rio Doce (CVRD) of Brazil, on their 71.5-percent rise in ore prices.

"The SHFE is researching steel futures and has submitted applications to the China Securities Regulatory Commission," said Xiao Hui, an SHFE researcher.

The capacity of China's crude steel production has been estimated at 333 million tons in 2005, while its steel demand can hit 270 million tons, Xiao said. In 2004, the country produced nearly 30 percent of the world's steel. "To open steel futures can help protect China's pricing rights on international steel markets, given that China has become a big steel producer and consumer in the world," Xiao said.

In early 1994, futures exchanges in Shanghai, Tianjin, Chongqing and Beijing were approved to start wire rod futures, which were soon banned by regulators because of over-speculation.

3/13/05

CHINA TO BUY IRON ORE FROM INDIA

GUANGZHOU, China - Baosteel Group, China's largest steel maker, is considering an investment aimed at securing supply of iron ore in India, the second-largest supplier of the raw material to the country.

Baosteel, which controls listed Baoshan Iron and Steel Co. Ltd <600019.SS>, plans to open an office in New Delhi this month to conduct a feasibility study for an investment in a venture with an Indian partner, a Baosteel executive told Reuters.

Securing iron ore has become a priority for many Chinese steel mills, which must contend from April with a 71.5 percent increase in iron ore prices from top miners such that "We are considering if we can make an investment in India to get iron ore," said Yu Zhonghai, director of Baosteel's International Business Development Department. "We want to control more iron ore in the international market."

"If we decide to make the investment, we will definitely have a partner there," the executive said on the sidelines of a conference organized by the China Iron and Steel Association, adding that Baosteel was already buying iron ore from India.

China is the world's biggest steel producer and consumer, making about 300 million tonnes of crude steel annually. Baosteel, which has annual capacity of 20 million tonnes, has already invested in iron ore mining projects with CVRD in Brazil.

Yu did not name a prospective partner, but India, the world's third-largest iron ore producer, is home to such suppliers such as state-run National Mineral Development Corp., Kudremukh Iron Ore Co. Ltd. and Sesa Goa Ltd.

STEEL PLANT

In 2004, China imported 208 million tonnes from Rio Tinto and Brazil's CVRD. That made the Asian country China's number-two supplier, after Australia, which shipped 78.16 million tonnes. The third was Brazil, with 46.03 million tonnes.

But Indian officials said Baosteel might have to extend its mining investment downstream to include a steel plant. "Those who are willing to invest in India will also be required to set up a steel plant. The ore can be used only for captive purposes," an official for a major Indian trading house said.

"Acquisition of some mines will be possible, but not of big companies," said a senior official of a state-run mining firm, adding state governments normally give mining rights only to those companies using the raw material for making steel in India. "If they come with a proposal to set up a steel plant they can also get mines. But it will not be easy for them to export iron ore," he said.

South Korea's POSCO Ltd. <005490.KS>, the world's fifth-largest steel maker, last year announced a plan to set up alon with BHP Billiton a 10 million-tonne steel plant, a 30 million-tonne iron ore mine inl said there were some known iron ore deposits in the eastern states of Orissa and Jharkhand which had not yet been allotted to any company.

Baosteel's Yu said the steel maker was now buying Indian iron ore in the spot market, instead of signing long-term contracts. It got a few hundred thousand tonnes from India last year, he said, without elaborating. Asked about the 71.5 percent iron ore price increase, he said: "We were forced to accept it."

Despite being the world's top importers of iron ore, steel mills in China have failed to develop strong bargaining power, accepting the benchmark price set by Japan, the world's second-er iron ore companies, but that these mines would nlargest importer.