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Upbeat HSBC index reading shows signs of growth in manufacturing Beijing’s policy measures cited as major factor Manufacturing activity in China expanded in November, according to a report by HSBC. The data indicate signs of a recovery of the world’s second largest economy. The preliminary HSBC China Manufacturing Purchasing Managers Index, which was released on 22 November, rose from 49.5 in October to 50.4 in November – the first sign of expansion in 13 months. Qu Hongbin, chief China economist at HSBC, wrote in a note accompanying the results that the reading “confirms that economic recovery continues to gain momentum towards the year end.” In the past year, China’s manufacturing sector has been hit by a slowdown in demand for Chinese exports from the United States, the euro zone and Japan. Analysts have cited measures introduced by China’s policymakers to boost growth as reasons behind the sector’s improved performance. In the past few months, the central bank has relaxed lending, approved infrastructure projects and have also cut interest rates twice since June. Qu cautioned that the recovery is still in its early stages and that global economic growth remains fragile. “This calls for a continuation of policy easing to strengthen the recovery,” he said in the report. Beijing is likely to continue to loosen its monetary policy Ping An, PetroChina to anchor PICC’s IPO China’s second-largest insurance company Ping An and oil and gas company PetroChina have been named as anchor investors of the HK$27.8 billion initial public offering of state-owned People’s Insurance Company of China, set to be Hong Kong’s biggest IPO in more than two years. Ping An will subscribe to around HK$778 million worth of PICC shares while PetroChina has pledged around HK$1.16 billion, according to The Standard. The two companies add to the deal’s list of investors drawn by PICC’s growth prospects and presence of “cornerstone” investors such as American International Group. Shares held by cornerstone investors have a lock-up period during which they cannot be sold, but there is no such condition for anchor investors. PICC, China’s largest non-life insurer, has already attracted around HK$3.6 billion in subscriptions through margin orders from local retail investors, an amount which indicates a 1.6 times oversubscription of its HK$1.39 billion retail target. although it could shift to a more neutral stance later next year, Citigroup economist Ding Shuang told Dow Jones Newswires. The results of the HSBC report will be confirmed in the index’s final reading on 3 December, two days after the official China Federation of Logistics and Purchasing index is released. The HSBC index has shown weaker readings than the official one since mid-2011, which analysts say is because the bank puts more weight on smaller, private-sector companies. Adding to the recent signs of recovery, additional data found that industrial profits in China rose 21 percent in October from a year earlier. Dah Sing Financial Holdings is expected to invest in the offering while PICC, according to Reuters, will also issue about 30 billion yen worth of shares in Japan. The group offered 6.55 billion shares under the international offering and 344.9 million shares for local retail investors at a price range of HK$3.42 to 4.03 per share, the company said in a prospectus issued with the Hong Kong stock exchange. The offering is the biggest in Hong Kong since AIA, the Asian life insurance arm of AIG, raised HK$17.9 billion in October 2010. Tycoon quits as insider trading scandal settled Tycoon Zhang Zhirong abruptly resigned as chairman of shipbuilding empire Rongsheng Heavy Industries and real estate company Glorious Property Holdings last month after a settlement was reached with regulators in the United States over insider trading by another company he controlled. The Hong Kong-based Zhang left both businesses about five weeks after Well Advantage, another company he controlled, agreed with the U.S. Securities and Exchange Commission to pay US$14 million as part of the insidertrading probe. The SEC said traders at Well Advantage made more than US$7 million in illegal profits by acting on prior information of an acquisition deal between Chinese stateowned oil firm CNOOC and Canada’s Nexen. Rongsheng said Zhang was stepping down as chairman “to devote more time to his personal endeavours,” according to a statement posted on the Hong Kong stock exchange. Zhang also announced that he was stepping down as chairman of Glorious properties. Zhang was replaced at Rongsheng by its chief executive officer, Chen Qiang, and at Glorious by CEO Chen Lixiong. December 2012 11
CCB chairman defends Mainland bank standards Wang Hongzhang, chairman of China Construction Bank, defended the nation’s accounting standards amid concerns that banks were under-reporting bad loans. Wang told the Financial Times that when regulators demanded accuracy and transparency from the country’s financial institutions, it strictly complied with rules. CCB, China’s second biggest bank by assets, has under-performed the stock market by a wide margin this year. New yuan lending slumps to yearlong low point New yuan-denominated lending dropped to its lowest monthly point in a year in October, down by 14 percent year-on-year. Lenders extended 505.2 billion yuan worth of new loans, which fell below the 590 billion yuan the market had expected, according to data released by the People’s Bank of China on 12 November. National statistics office revamps GDP calculations China will revise its gross domestic product accounting methods in line with international standards, the National Bureau of Statistics said. China’s current methods are derived from the 1993 version of the United Nations System of National Accounts, which was revised in 2008. The bureau told Xinhua it would change its system to reflect the revisions. E&Y names winners of entrepreneurship awards Ernst & Young has announced the two winners of the E&Y Entrepreneur of the Year 2012 China awards. Ma Weihua, executive director, president and CEO of China Merchants Bank, won the award for the Mainland region and Michael Wu, chairman and managing director of Hong Kong Maxim’s Group, was presented with the award for the Hong Kong and Macau region. Correction A news item in the November issue of A Plus incorrectly described a new charge relating to certain Hong Kong real estate transactions. It is a buyer stamp duty, not a property tax. 12 December 2012 NEWS GREATER CHINA U.S. regulator completes first round of observations PCAOB hails development as breakthrough The Public Company Accounting Oversight Board in the United States has completed a round of observations of inspections of Chinese audits. The PCAOB also expects talks between Chinese and U.S. officials on access to audit documents to take place by the end of the year. James Doty, chairman of the PCAOB, said that the talks could lead to a significant breakthrough. “The fact that it is a serious discussion with decisionmakers who are aware of the complexities of the issues on both sides is new,” Reuters quoted Doty as saying. According to Doty, the first of the PCAOB observations took place in late October, but there is still no deal allowing accounting regulators from the U.S. to do joint inspections with the Chinese. Officials from China’s Ministry of Finance and the China Securities Regulatory Commission are expected to travel to Washington before the end of the year to discuss the release of audit documents to the U.S. “These are very serious, significant steps for them to take, given where we started,” Doty said. The U.S. Securities and Exchange Commission will also be involved in the talks. In October, the PCAOB reached an agreement with Chinese authorities allowing it to inspect the audits of U.S.-listed companies from China to address numerous corporate scandals. Before an agreement was reached, the PCAOB and the SEC had been negotiating for months with Chinese counterparts. China had previously resisted, citing sovereignty concerns. BDO Li Xin to absorb 350 PKF staff The BDO group has announced that a significant part of PKF China will join BDO Li Xin before the end of this year. About 350 PKF partners and staff will join the local BDO firm in China. The move reinforces BDO Li Xin’s position as the largest Chinese owner-managed CPA firm and makes the merged firm the market leader in serving state-owned enterprises in China. Martin van Roekel, the worldwide chief executive officer of BDO, said he believes that the addition of PKF contributes to the firm’s future growth in the Mainland. “I visited the impressive new BDO Li Xin office in Beijing,” he said. “The new partners all expressed their positive agreement with the merger.” In welcoming the merger, Jiandi Zhu, managing partner of BDO in China, said he expected the “combined expertise of our partners and staff with stateowned enterprises as well as with listed companies – including H-share businesses – will build upon our approach as well as our position in these market segments.” The move follows the long-expected merger agreement between BDO and PKF in the United Kingdom as well as a merger of the two firms on the Australian east coast.
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