China Netcom Removed from Hang Seng Index Constituent after Merger

The announced removal of China Netcom from the list of Hang Seng Index constituent stocks took effect after market close on October 6.

The merger between China Unicom and China Netcom, recently approved by their shareholders, was an ongoing Chinese mainland telecommunications restructuring that was expected to create one of the three integrated services providers.

The listing of China Netcom was withdrawn on October 15, subject to the expected approval of the merger in due court hearing, with the number of Hang Seng Index constituents dropping accordingly from 43 to 42, the Hang Seng Index Company said.

The changes to the Hang Seng family of indices, which had previously been scheduled for October 15, were moved forward to “facilitate the rebalancing activities performed by market participants and smooth the impact to portfolios tracking” the indices.

China Netcom was also removed from the Hang Seng China-Affiliated Corporations Index and the Hang Seng Composite Industry Index-Telecommunications constituents.

Among other changes, the stock was replaced by HKC Holdings as a constituent of the Hang Seng Composite Index, the Hang Seng Mainland Composite Index, the Hang Seng Free float Composite Index and the Hang Seng Mainland Free float Index.

China’s Foreign Debt Rises to 427 Billion USD through June

China’s outstanding foreign debt was at 427.43 billion USD through June, 14.4 percent higher than the second half of 2007, the State Administration of Foreign Exchange said on October 7.

The figure excluded the foreign debt of Hong Kong, Macao and Taiwan.

Of the total, medium- and long-term foreign debt stood at 162.07 billion USD, up 5.56 percent from the end of 2007.Short-term debt was at 265.37 billion USD, an increase of 20.57 percent.

China newly borrowed 19.51 billion USD of medium- and long-term foreign debt in the first half, up 26.91 percent from the same period last year.

The nation paid back 8.77 billion USD of principal on medium- and long-term debt in the first six months, down 20.28 percent from a year earlier.

In addition, it paid back 1.92 billion USD in interest on medium- and long-term debt, up 10.23 percent year-on-year.

Chinese Telecom Companies Ordered to Share and Co-build Infrastructure

Chinese government on October 6 ordered its three domestic telecom operators to share and co-build infrastructure to avoid repeat construction in the wake of industry restructuring.

The move would erode the competitive edge of China Mobile, the nation’s largest mobile operator, as its smaller rivals could access its wider network.

A circular jointly issued by the Ministry of Industry and Information Technology (MIIT) and the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council required China Mobile, China Telecom and China Unicom to promote the sharing and co-construction of infrastructure and avoid repeat building in the industry overhaul and the new round of network construction starting this month, according to the circular.

The existing telecom towers and lines must open to rivals. If conditions were not ready for sharing, operators should expand and adjust their technologies, said the circular.

If an operator planned to build telecom towers and lines, other operators should inform it in 10 working days if they had such facilities to share or plans to join the construction. They will be banned from building at the same sites and routes within three years if they show no need for co-construction, the two agencies said.

If conditions were appropriate, the operators should join together in building new base stations and transmission lines. They also should open the existing facilities to each other, the circular stated.

In the industry overhaul, China Telecom bought China Unicom’s code-division multiple access (CDMA) network and China Unicom merged with China Netcom. China Mobile took control of China Tietong Telecommunications Corp.

The restructuring allowed China Telecom, China Unicom, and China Mobile to all provide both fixed-line and wireless services.

The restructuring came as wireless operators enjoyed fast growth while fixed-line operators saw a slump in numbers of subscribers since last year.

China Sets New Standards for Dairy Industry

China’s State Council issued a series of quality control regulations for dairy products on October 9, on which it took effect. The move was prompted by the country’s contaminated milk scandal.

The regulations tighten control of how milk-yielding animals are bred, how raw milk is purchased and the production and sales of dairy food.

There will also be more severe punishment for people who violate safety standards and quality control departments that fail to fulfill duties. Relevant officials will also be punished if dairy food safety incidents occur. Law-breaking producers will be blacklisted and ousted publicly.

Health authorities under the State Council will now be responsible for setting up national safety standards for dairy foods. Those standards will limit pathogenic animalcule, pesticide residue, veterinary drug residue and other hazardous substances in dairy products. There will also be new hygiene requirements for dairy producers along with standardized national quality testing methods.

“Any non-food chemicals or hazardous substances are prohibited from being added into raw milk in its production, purchase, storage, transport and sales,” the State Council said.

Raw milk-purchasing stations will now need approval from local authorities to operate. The regulations state that stations should be run by dairy food producers, milk-yielding animal farms or milk farm cooperatives. Other organizations and individuals are banned from collecting raw milk

China’s Trade Surplus Falls 2.6% in 1st 9 Months

China’s trade surplus in the first three quarters shrank 2.6 percent, or 4.92 billion U.S. dollars, to 180.9 billion U.S. dollars from a year earlier, despite a jump in September.

The September surplus rose 22.59 percent year-on-year to 29.3 billion U.S. dollars, the third month of continuous gains.

“The surplus jumped mainly because imports posted a much bigger slow down than exports as commodities prices and shipping rates slumped,” said Li Jian, a Ministry of Commerce analyst.

September exports jumped 21.5 percent to 136.4 billion U.S. dollars, largely in line with the 21.1 percent growth in August, though lower than 26.9 percent in July, according to the General Administration of Customs.

Imports, however, decelerated, only rising 21.3 percent to 107.1 billion U.S. dollars, compared with 23.1 percent in August and 33.7 percent in July.

Li also attributed the higher monthly surplus to the slower advance in the Chinese currency against the greenback. The Yuan had remained almost steady against the U.S. dollar since July.

Exports increased 22.3 percent to 1.07 trillion U.S. dollars during the Jan.-Sept. period. Imports rose 29 percent to 893.1 billion U.S. dollars.

The growth of exports was an acceleration of 0.4 percentage points over the first half of the year, but was 4.8 percentage points lower than the same period last year.

“The export figures do not seem to be very discouraging at the moment,” said Zhang Yansheng, director of the International Economic Research Institute under the National Development and Reform Commission. “But the country’s exporters are in a very difficult situation right now.”

He foresaw a gloomy picture for exporters who were at the same time hit by slackening global demand and rising costs in the country.

China to Continue Opening-up Policy in Agricultural Sector

The Communist Party of China (CPC) reiterated on October 19 it would continue opening up the country’s agriculture sector.

In a document unveiled by the CPC Central Committee, the Party said it would encourage labor-intensive and technology-intensive exports and allow moderate imports that were in short supply in the domestic market.

The government would intensify its studies and information service on the international market, as well as strengthen supervision over customs quarantine, it said.

To better utilize foreign investment, the Party will encourage more foreign companies to invest in the agriculture sector and complete regulations in line with the World Trade Organization’s rules for foreign capital admittance to the market.

It would also create a safety measure for rules pertaining to foreign entities buying domestic agricultural companies, it said.

China will develop international agricultural cooperation under a coordinated plan while cultivate agricultural transnational enterprises, according to the document.

China would actively participate in making trade rules and standards for international agricultural products to promote a fair and rational trade order, the document said.

China’s Non-state Sector Continues to Expand

Non-state businesses on the Chinese mainland will pay 748.46 billion Yuan (109.47 billion U.S. dollars) in taxes this year, sources with the All-China Federation of Industry and Commerce said on October 22.

The prediction was made in a report compiled by the federation and was published by the Social Sciences Academic Press (China) on October 21.

It said that tax revenue generated by the non-state sector would be 122.883 billion Yuan, or 19.6 percent, higher than the 2007 level.

After 30 years of expansion, non-state businesses are now hurting as a result of the ongoing global financial crisis that was initially ignited by the U.S. sub-prime mortgage crunch.

It is reported that at least 67,000 smaller Chinese businesses are suffering from shrinking demand from abroad and mounting export costs.

Some private businesses have shifted their focus from developed eastern regions, where labor costs increased, to less-developed central and western areas, where development potentials are huge.

According to the report, it is imperative for the non-state sector to explore the same options. It also recommends those businesses achieve industrial upgrading and independent innovation, to establish their own brands and improve quality.