Foreign banks launch second-hand property mortgages
The China Economic Times reported Wednesday that Bank of East Asia (BEA) and Standard Chartered have launched foreign-currency second-hand property mortgages on the mainland, making them the first foreign-funded banks to do so. The paper added that foreign-funded banks had an advantage over domestic competitors because they could offer more flexible services and more competitive interest rates. Chinese banks set the annual interest rate for residential property at 5.74%, and even higher for commercial property, while foreign funded banks’ generally set interest rates at 2.5% to 3%, the Times reported. Chinese banks also only offer 20-year mortgages, while some Hong Kong banks can offer 30-year mortgages. Golden-Keys Real Estate Consultancy vice-president Wang Bin said the younger generation in particular preferred second hand property, with people aged 25 to 35 accounting for 56% of the agency’s second-hand property buyers in 2006, of which more than 75% needed mortgages. “Since young consumers are more drawn to the flexible services and products foreign-funded banks offer, future competition will be fierce,” he said.

Auto consumption tax a failure
China’s auto consumption tax has not achieved its objective of boosting production and sales of small emission vehicles since its introduction on April 1 2006, Economic Information Daily reported, citing official statistics. According to figures released by <<>, sales of mini sedans with emissions at one liter or below, which are favored under the auto tax, decreased 7.16% year-on-year to 328,100 units, while sedan sales as a whole climbed 36.89%. The large-emission luxury vehicle segment was the fastest growing segment in 2006 with full-year sales of 150,000 units, accounting for 4% of total passenger vehicle sales. The three top luxury vehicle brands, Audi, BMW and Mercedes-Benz, sold 80,000, 36,000 and 21,100 units respectively, up 39%, 51% and 33%. The paper said price cuts had negated the effect of the consumption tax. For example, BMW trimmed 40,000 yuan (US$5000) from the price of its luxury model last year. Reduced customs taxes for imported vehicles, which took effect July 1 2006, also diminished the power of the auto consumption tax.

Foreign and Chinese Banks Compete Over Online Banking
Foreign and Chinese banks are looking to online banking to boost sales and trim costs, according to a report carried Wednesday in the China Securities Journal. After upgrading its online banking infrastructure, Agriculture Bank of China (ABC) is planning to unify its phone banking and client services in one client center and is seeking cooperation with large retailers to provide e-commerce services online. Industrial and Commercial Bank of China (ICBC) is aiming to link its sales of international debit credit cards with its phone banking and online banking services with the objective of developing online banking into its major transaction channel within the next five years. The Bank of East Asia said that foreign banks needed to develop online banking because it was unrealistic to compete with the superior retail networks belonging to Chinese banks. According to the Journal, providing personal desk services costs 3.06 yuan per transaction, against 0.83 yuan for ATM transaction and 0.49 yuan for online transaction.

Yuan appreciation to continue despite central parity rate fluctuations
International trade conflicts and internal economic growth have trapped the yuan in a long-term appreciation process, but two way fluctuations in the yuan central parity rate will complicate the trend, the Shanghai Securities Journal reported Wednesday. The central bank lifted the yuan central parity rate to 7.7349 to the dollar Wednesday from the midpoint of 7.7277 set on Tuesday, weakening the yuan against the dollar. A Bank of Communications forex analyst, Xie Yaoting, said fluctuations in the parity rate would lead to higher flexibility in the appreciation process. However, China Normal University deputy chief of the school of economy and finance Zhao Xijun said the yuan would continue to appreciate against the dollar in the long-term. “The yuan’s strong performance is closely associated with external pressure as well as China’s economy,” Zhao said. Xie added that the US Ministry of Commerce’s recent announcement to impose trade sanctions on China paper imports by levying tariffs of 10.9% to 20.4% was an additional stimulant of yuan appreciation. The yuan has appreciated 1% against the dollar since Chinese New Year.

CICC to launch subsidiaries
China’s first investment bank, the China International Capital Corporation (CICC), plans to launch securities and options subsidiaries to boost profits, China Business News reported. Market sources said recent State Administration for Industry and Commerce (SAIC) announcements that CICC Securities Ltd and CICC Options Ltd have been registered as company names show the reform is imminent. CICC is also in talks with stakeholders over a new share sale to fund the new structure. CICC is controlled by China Jianyin Investment, Morgan Stanley International, China National Investment & Guaranty, Government of Singapore Investment Corporation and Mingly Corporation, which hold 43.35%, 34.3%, 7.65%, 7.35% and 7.35% respectively. The newspaper said CICC hoped to boost the profitability of its securities and options trading businesses after it failed to tap profit from a growing capital market last year. With no full-scale securities trading certification, CICC ranked only 11th among securities firms with net capital of 2.29 billion yuan (US$293.59 million).

Mengniu to attack Bright Dairy in Shanghai
Shanghai Mengniu Dairy Ltd general manager Jiang Hong told China Business News the company would launch new fresh milk and yogurt products in Shanghai in the first half of 2007, intensifying competition with Bright Dairy, the city’s leading company in fresh milk sales. Mengniu is hoping a new production base at Maanshan, in eastern China, will help it make inroads into Shanghai’s lucrative fresh dairy market. Yili Dairy has also opened a fresh yogurt plant in Suzhou to expand into the market. Mengniu Dairy Industry Group is China's largest milk producer by sales revenue, but Guangdong Dairy Association deputy chairman Wang Dingmian said slowing growth in the UHT milk business meant the Mengniu and fellow giant Yili were expanding into high-end products, particularly fresh milk and yogurt, to generate growth. According to Bright Dairy’s 2006 fiscal report, the company retained its leading position in Shanghai last year with 8.14% year-on-year growth in revenues and a 24% year-on-year jump in its fresh yogurt business, but it is struggling to grow its business beyond eastern China

Warburg Pincus May Enter China’s Home Furniture Scene
Warburg Pincus Capital Partners, one of America’s largest private equity investment funds, has reached a preliminary agreement to acquire a stake in China RedStar Furniture Group, China Business News reported, citing a market source. Talks are ongoing, but an agreement is likely to be inked in due time, the source said, without detailing the size of the stake on offer or the likely value. RedStar chairman and CEO Che Jianxing confirmed the company was in talks with the overseas fund, but said no final agreement had been reached. Founded in 1986, RedStar now owns 33 branded hypermarket franchises in 20 cities include Beijing, Shanghai, Tianjin and Nanjing, totaling 25 million square meters of outlet space. It has formed alliances with international furniture retailers including IKEA, Wal-Mart, METRO and B&Q. The company reported 10.6 billion yuan (US$1.36 billion) in total sales volume in 2006 and plans to expand the total number of outlets to 40 by 2008.