Stocks rally on goverment assurances
China’s stocks climbed for a third day in a row Thursday after an official newspaper quoted the government as saying a capital gains tax was not planned, the Shanghai Securities News reported. China’s benchmark Shanghai Composite Index closed 3% higher at almost 3,891 points. The smaller Shenzhen index rose 2.9% to close at 12,696 points. The government said it would not impose a capital gains tax on stock trading because no current legislation allowed such an action. “China’s stock market is clearly dominated by retail investors, and we can’t understand them sitting in London or Singapore,” said a London-based analyst, who oversees a portfolio worth about US$125 billion. Wu Xiaoling, deputy governor of the central bank, said a bullish stock market was foreseeable in the future due to China’s booming economy, which grew more than 11% in the first quarter.

Trade surplus surges despite counter-policies
China’s trade surplus will probably continue to surge this year despite the central government’s efforts to slash tax rebates and levy export taxes, the Hong Kong-based Ta Kung Pao reported. China’s top planning body predicted the trade surplus would hit between US$250 billion and US$300 billion this year, up from US$177.5 billion last year. The US trade deficit with China roared to a record US$232.5 billion last year, accounting for 27.8% of its total. In the first quarter of this year, China’s trade surplus almost doubled year-on-year to US$46.4 billion and its forex reserves have reached US$1.2 trillion. In an effort to ease tension with the US and Europe the Chinese government last month imposed an export tax of between 5% and 10% on steel and between 10% and 15% on various metals such as refined lead, ferroalloy products, rare earth metals, and raw zinc and nickel.

Air passengers to grow 16% in 2007
China’s largest carrier – Southern Airlines – will serve 16% more passengers in 2007 owing to the nation’s fast economic expansion and boosting tourism sector, the Guangzhou-based Yangcheng Wanbao reported. Other airlines are expected to grow by the same amount. According to the General Administration of Civil Aviation, China’s airline companies are projected to carry 185 million passengers this year. The number of passengers also climbed 16% in 2006 to 160 million. It is estimated that there will be 1.5 billion domestic flights in China this year – an increase of 8% from last year – as the benefits from economic expansion make recreational activities more affordable for Chinese people.

Skoda Octavia unveiled
VW’s Skoda models – made in China – hit the road yesterday as the German automaker strives to recapture market share in the world’s second largest auto market, the Shanghai Business Journal reported. Shanghai VW has launched the Skoda Octavia – the new medium-sized sedan powered with Tiptronic six-speed transmission and VW's most advanced 1.8-liter TSI engine. The joint venture between German VW and Shanghai Automotive Industry Corp has priced the model between RMB139,900 and RMB185,900, depending on engine capacity. Shanghai VW expects to sell 40,000 Skodas this year. Analysts said the Skoda will improve Shanghai VW competitiveness and help it rival Toyota’s newly launched Corolla sedan.

Car sales up 23% in May
China’s auto market expanded 23% in May as 488,500 vehicles were sold following price cuts and the launch of new models, the China Auto News reported. One vehicle was sold every four seconds in China as South Korea’s Hyundai, Japan’s Toyota and other automakers offered discounts and produced more cars to attract consumers. Experts predicted China’s total sales would grow 15% in 2007 to 8.35 million vehicles. In the first five months, car sales surged 21% to 2.57 million vehicles.

Foreign banks gain “gold rush” permit
Five foreign banks have been admitted into the Shanghai Gold Exchange as the government attempts to turn China’s only bourse for precious metal trading into an influential global trading hub, the Shanghai Security News reported. The foreign banks are HSBC, Standard Chartered Bank, Scotiabank, UBS and Societe Generale. However, according to the China Business News, the foreign banks still need approval from the China Banking Regulatory Commission. China’s gold market is still relatively small, and is poorly integrated with international markets. The Shanghai Gold Exchange said it was considering cooperating with its Hong Kong counterpart to help both of the exchanges exert an influence in Europe and North America.

PetroChina to boost ethylene production
PetroChina – China’s largest oil producer – received government approval to double its ethylene capacity at Daqing petrochemical plant in northeastern China, the Economic Daily reported. Ethylene is a key ingredient in plastic water bottles and synthetic fibers. PetroChina plans to upgrade its ethylene capacity to 7 million tons by 2010 to meet growing demand for chemicals used to make plastics and yarn. It plans to carry out six ethylene projects in Daqing, Dushanzi, Fushun, Jilin and Lanzhou by 2010. As China’s oldest oilfield, Daqing may need to halve its output over the next half century due to reserve depletion. China made 9.41 million tons of ethylene last year, 2.63 million of which was made by PetroChina. Currently China imports half of its ethylene requirements.

Overseas investment approval process streamlined
In an effort to balance current foreign investment surpluses, the Chinese government plans to loosen approvals for state-owned firms to invest overseas, the China Business News reported. State-owned enterprises that plan to spend less than US$30 million on transnational resource exploration projects can lodge a direct application to the State Development and Reform Commission. Previously, to get a project approved the enterprise had to go through more a cumbersome procedure.