Foreign firms’ path to A-share market eased

Chinese authorities are accelerating the process to allow overseas companies to float shares in the domestic A-share market as a way to ease the country’s mounting pressure of “hot money” inflows.

“The international board will be launched some time next year, hopefully,” Fang Haixing, director general of Shanghai’s financial services office, said at a financial forum in Shanghai on December 1.

Fang said that the approval procedures for overseas companies seeking listing on the board will be made simpler and faster than for domestic companies.

“We will not let companies feel that they have to endure unacceptable procedures,” he said.

Fang’s comments come after the central bank in Beijing called for a speedier launch of the international board, which could be used as a pool for hot-money hedging.

Ma Delun, deputy governor of the People’s Bank of China, said that the central bank hopes the international board will be launched as soon as possible, adding that market and industry demand for the board is real.

Zhou Xiaochuan, the central bank’s governor, recently put forward the idea of constructing a “pool” to accommodate inflowing speculative capital, or “hot money”, a move interpreted as a prelude to an array of policies to contain rising inflation and asset bubbles.

The launch of the international board is being widely watched because it could draw a string of multinational companies to the mainland fundraising pool.

The new board is considered a key step in making Shanghai an international financial center as well as broadening investment channels for China’s growing yuan savings.

Foxconn paves way for production base in central China

Foxconn Electronics, the Chinese manufacturer of gadgets like Apple’s iPad, on December 8 signed an agreement with the government of Hunan Province to set up production and research bases in the central China province.

It was the first move into Hunan by the world’s largest electronics contractor, which is based in south China’s Shenzhen, and part its strategy of moving production from coastal China to inland areas.

Jiang Haoliang, Foxconn’s head of high-technology integration, who signed the agreement, said 100,000 of the company’s 1 million employees were natives of Hunan.

“Foxconn values the quality of staff from the province,” he said.

According to the agreement, the proposed plants and research centers will be located in the provincial capital of Changsha and Hengyang City.

The company declined to disclose how many staff it planned to recruit in Hunan.

Jiang said the company would make hardware and software, and research new products in the integration of telecommunications and cable TV networks and the Internet.

The city governments have offered incentives such as land and tax reductions to support Foxconn’s business development, but officials declined to give details of the incentives.

Foxconn, part of Taiwan’s Hon Hai Precision Industry Co., announced earlier this year it would open plants in the inland provinces of Henan and Sichuan. It also has assembly plants in other inland provinces, including Hebei, Shanxi and Hubei. 

UBS sees resources sector leading China M&A

The agricultural sector, such as fertilizers and soft commodities, might also see more acquisitions, said Philip Partnow, UBS’s chief of China M&A and deputy head of investment banking.

“The outbound acquisition story is still at a very early stage in China,” said Partnow, who is based in Beijing. “I continue to believe that it’s going to be natural resources leading the charge.”

Most outbound acquisitions by China’s oil companies this year have been in riskier areas such as Africa or in locations with aging assets.

The 10 deals so far this year for China’s oil and gas companies have been worth $18.6 billion, already eclipsing the USD 15.8 billion in deals for all of 2009, according to Thomson Reuters data.

The bank has also become well known for its IPO underwriting prowess in Asia, having led the region’s league tables for the last five years in equity capital markets deals.

Unlike other foreign banks, UBS has a full securities license through its China joint venture, allowing the bank to underwrite and settle A-share stock offerings.

In Hong Kong, IPO activity has been brisk, with the Chinese territory seeing some mega deals this year, such as the listings of Agricultural Bank of China and AIA.

But over the past few months, some companies have scrapped IPOs in Hong Kong, such as the third-biggest Chinese wind company, Huaneng Renewables, which canceled its USD 1.3 billion IPO due to a weak Hong Kong market.

Partnow said that trend could continue over the next few months in Hong Kong and China since investors would still be trying to determine where the mainland’s macro policy is headed, having to balance economic growth and contain inflation.

“Given all of that uncertainty out there, the trading activity in the capital market is very choppy and that impacts the ability to get IPOs done.”

McDonald’s to expand in China with 200 new stores in next three years

McDonald’s announced on December 16 that it is planning its biggest expansion in China by raising its capital spending in China by 40 percent next year and opening 200 new stores in the next three years.

According to a Wednesday report of The Wall Street Journal, the fast-food company, which has entered the Chinese market for 20 years, is facing fierce competition from rivals such as Yum! Brands Inc.. KFC, owned by Yum! Brands Inc., has about 3,200 stores in China, while McDonald’s only has 1,100.

Besides expanding its presence by 40 percent in China, the company also decided to upgrade designs for new stores and remodel 80 percent of the existing stores. About half of the 200 new stores will be drive-through locations.

Kenneth Chan, McDonald’s chief executive of China, reportedly said on Wednesday that the company will “change the face of the brand to become a place where young consumers want to come and stay,” and the red and yellow decor will be changed into a more relaxed and European style design.

Meanwhile, the fast-food giant also planned to raise prices accordingly, in order to offset higher input costs.

The company said last Wednesday that McDonald’s global comparable sales for November were up 4.8 percent, which was weaker than expected, while comparable sales in Asia/Pacific, Middle East and Africa jumped 2.4 percent, driven by positive results in China and most other markets.