BizChina

Northeast China's Heilongjiang Province announced Thursday it would provide 250 million yuan (US$36.6 million) in subsidies to support dairy farmers whose business was hurt by last year's adulterated milk scandal.

Dairy farmers can get 500 yuan for each dairy cow they raise that can be bred, said Jin Jibin, deputy Secretary-general of the Heilongjiang government. He didn't say when the subsidies would be given.

"The priority is to stabilize the breeding of dairy cows, protect the interests of farmers and boost their confidence to continue raising cows," he said.

With 2.2 million dairy cows, the province produces one sixth of China's milk. But 75 percent of the farmers are losing money because consumer confidence hasn't recovered from the scandal, which resulted from the addition of the industrial chemical melamine to raise the apparent protein content of the milk.

"The entire dairy market is in depression although milk from Heilongjiang is melamine-free. I'm on the verge of bankruptcy because the milk price is dropping while the feed price is rising, " said Zhao Hongxing, who raised 14 cows. "I hope to get the subsidies as soon as possible."

The government will also provide funding to allow students to buy milk at half-price, another measure to boost dairy consumption, Jin said.

Chinese stock index down 20090422

Chinese shares fell 2.94 percent on Wednesday on profit taking, said market dealers.

The benchmark Shanghai Composite Index fell 2.94 percent to close at 2,461.35 points. The Shenzhen Component Index dropped 4.06 percent to 9.249.08 points.

20090421 Chinese stock index

Chinese shares fell 0.85 percent on Tuesday dragged down by financial, coal and metal stocks.

Market performance was also affected by a Wall Street overnight plunge, analysts said.

The benchmark Shanghai Composite Index fell 0.85 percent to close at 2,535.83 points. The Shenzhen Component Index dropped 1.56 percent to 9.640.90 points.

Losses outnumbered gains by 431 to 358 in Shanghai and 406 to 275 in Shenzhen.

Combined turnover was 243.76 billion yuan (35.67 billion U.S. dollars), compared with the previous trading day's 222 billion yuan.

On Wall Street, major indexes fell sharply Monday, as investors questioned banks' seemingly better-than-expected first quarter profit reports, and sold financial stocks to lock in profits from a strong six-week rally.

The Dow Jones industrial average lost 3.56 percent to 7,841.73,while the broader Standard & Poor's 500 index fell 4.28 percent to832.39.

Financial stocks led the fall as investors' confidence was affected by Wall Street worries about the health of the banking industry. Southwest Securities dropped 4.47 percent to 14.53 yuan. Shanghai-based Bank of Communication closed at 6.78 yuan, down 2.45 percent.

Coal shares fell across the board. The industry has been faced with increasing pressure of price drops amid market digest of steel stock piles.

Stocks of Xishan Coal and Electricity Power Co. based in coal-rich Shanxi Province was down 4.84 percent to end at 21.65 yuan. Shanxi Guoyang New Energy Co., another coal producer in the region, lost 5.33 percent to 20.42 yuan.

Stocks for nonferrous metal dropped on profit taking. Shares of Inner Mongolia Baotou Steel Rare-earth Hi-tech fell 5.39 percent to 19.5 yuan. Jiangxi Copper Company, a major copper producer in China, was down 3.54 percent to end at 24.5 yuan.

International car makers attending a media day for Auto Shanghai 2009 said yesterday they're optimistic that gains in China will help offset the downturn they're facing in other parts of the world.

With the launch of new models ranging from low-priced compacts to luxury vehicles and new energy concepts, several auto giants expressed confidence about market growth in China this year as a result of the government's economic stimulus efforts and special incentives for the industry.

"The government policies have been to the point and are working quite effectively," said Ying Tongyue, chairman of Chery Automobile Co Ltd, the nation's leading homegrown vehicle maker.

"Chinese consumers are gaining more confidence, and the robust sales performance may extend to the rest of the year."

Yin said Chery forecasts that China sales will rise 15 percent this year to 419,000 units.

China's passenger car sales rebounded 10 percent to hit a monthly high of 1.1 million in March, outpacing sales in the United States for the third straight month. Last year, China's vehicle sales posted their slowest growth in a decade at 6.7 percent due to the financial crisis.

The pick-up in China underlines the country's importance to most international car makers as they strive to ride out the global recession.

Kevin Wale, president and managing director of General Motors, also noted that the government stimulus effort - backed by 4 trillion yuan (US$585 billion) in spending - has been swift and effective.

"I think the market will continue to grow," he said. "I don't know whether the growth will be stronger than the first quarter, but we still expect the market to grow like 5 to 10 percent for the rest of the year."

General Motors Corp, which brought 37 vehicles and concept cars to the auto show, announced earlier it would double sales to 2 million units within five years by introducing 30 models.

Japan's Honda Motor estimated its China sales would increase 10 percent to 520,000 units this year.

The Chinese government launched incentives in mid-January, halving the tax on vehicles with engine displacements of 1.6-liter or below to 5 percent and offered 5 billion yuan in subsidies to rural residents to help spur the demand.

 

A Hong Kong-based energy firm has located its regional headquarters in the ancient Chinese capital of Xi'an, one of the latest overseas companies to seek opportunities in western China amid the global financial crisis.

Eco Service Management Company Ltd., a wholly-owned subsidiary of the Hong Kong and China Gas Company Limited (Towngas), set up its regional headquarters at a high-tech zone on the outskirts of Xi'an last week, said Song Haiyang, spokesman of the high-tech zone.

"It was the first overseas company to locate regional headquarters in Xi'an," Song said Monday.

Alfred Chan, managing director of Towngas, said he and his colleagues were impressed with the infrastructure in Xi'an and services offered at the high-tech zone.

Chan said Eco Service would handle all the business of its parent company, the Hong Kong-registered Eco Environmental Protection Investment Company, in China's interior regions, including the exploitation and use of coal bed methane and natural gas, coal-based energy and chemical engineering.

Prior to the establishment of the Xi'an branch, Eco Service had reached energy investment agreements with partners in Shaanxi, Guangdong and Jiangsu provinces as well as Inner Mongolia Autonomous Region, with a combined value of 15 billion yuan (2.15 billion U.S. dollars), said Chan.

The company plans to invest another 15 billion yuan in the interior regions in the coming five years, he said.

While the global financial crisis has shut down many foreign-funded businesses along China's southern and eastern coasts since last year, a growing number of investors are moving westward to seek opportunities.

Last month, ABB, a leading power and automation technology group, announced the opening of a new engineering center in southwest China's Chongqing municipality.

Tobias Becker, head of the Process Automation Division for ABB North Asia Region and ABB China, said the center would "consolidate the strategic importance of Chongqing" in the company's overall business deployment.

"China has more leeway for investors in time of the financial crisis, given its huge market demand and vast expanse of territory," said leading economist Hu Angang. "When the east gets dark, the west offers some light."

China's decade-long policy to foster development in its western regions was beginning to pay off, said Prof. Yin Xingmin with the Shanghai-based Fudan University. "Expansion of fixed asset investment has improved infrastructure and narrowed the gap between China's east and west."

As a result, several western provinces and regions were expecting to outpace the national economic growth this year, he said. "The northwestern Shaanxi Province, for example, is aiming at a 13-percent growth rate this year, compared with the 8-percentprojected national GDP growth."

Shaanxi vice governor Zhao Yongzheng said the confidence was fueled by the growing number of investment projects, including 42 energy projects with a combined value of 42.8 billion yuan a year, 27 equipment manufacturing projects valued at 7.4 billion yuan a year, 10 high-tech projects of 1.3 billion yuan and 37 infrastructure construction projects with 40.8 billion yuan of annual investment.

Some observers, however, warn that western China should not be too optimistic. "The western regions generally lack the economic capacity and competitiveness to tackle the financial crisis," said Du Ying, deputy head of the National Development and Reform Commission (NDRC). "They will need more efforts and longer time to shake off the impact."

Compared with wealthier eastern provinces, the fledgling, singular and very often resource-based economies of western regions were more fragile in the global downturn, said Shi Ying, deputy head of the Shaanxi Provincial Academy of Social Sciences. "Some businesses are already feeling the chill."

He cited the Fast Group, the province's leading auto equipment producer and exporter, which reported an 80-percent drop in orders in the first quarter.

Lack of orders and falling prices on the international market had caused many resource-based companies in western China to cut production, or even close down, he said.

"Nearly all the western provinces and regions need to transform from resource-based and singular economies to more sustainable and diversified patterns," said Shi.

While Shaanxi was fostering high-tech industries, its western neighbors Gansu and Xinjiang were exploiting wind power hoping to parallel the Yangtze's Three Gorges Dam in terms of power generating capacities, he said.

"The impact of the financial crisis on western China is sometimes indirect and gradual," said NDRC's deputy head Du Ying. "The western regions need to overhaul their industries and expand cooperation with the eastern provinces to solve their common problems."