China Unveils Plans to Make Industries Competitive
Key industries are urged to upgrade technology and improve scale efficiency.
Key industries are urged to upgrade technology and improve scale efficiency.
This week, the Chinese government rounded off its ambitious stimulus plans with a series of new policies for the logistics industry, the tenth industry to receive preferential policies and funding support. The 10 "lucky" industries are automotives, steelmaking, textile, mechanical equipment, shipbuilding, IT and telecom, consumer electronics, refining, metals, and logistics.
We think the stimulus plans aim to reduce structural inefficiencies in the economy, which have become obvious as the Chinese economy slows down. One of the economic planning officials recently admitted that all of the 10 industries covered in the stimulus plan have problems of overcapacity to varying degrees. By encouraging technology upgrade and merger and acquisition activities in industries such as steelmaking and automotives, China is keen to help firms build scale efficiency and shore up long-term competitiveness.
Market Recap
Concerns about the effects of the deteriorating global economic crisis and the sharp decline in reported profits of public companies led to a significant correction in the stock market this week. The Shanghai Composite Index dropped by 8% to 2,083 this week, while the Shenzhen Composite Index declined by nearly 10% to 7,608.
Macroeconomic
Hong Kong Economy to Contract in 2009
Newly released statistics show that Hong Kong's GDP contracted by 2.5% year over year in the fourth quarter of 2008, the sharpest decline since 1999. Finance officials expect the economy to shrink by 2% to 3% in 2009, versus a 2.5% growth in 2008.
Technology
Netbooks Gaining Popularity in China
More than 300,000 netbooks were shipped in the fourth quarter of 2008 alone and some market researchers estimate the shipment will reach 2 million units in 2009. In addition, the world's first Internet card based on TD-HSDPA/EDGE dual mode just passed commercial testing, and netbooks embedded with this card are expected to be launched in March.
Basic Materials
Chinese Steelmaker Valin Bought 16.5% of Australian Miner Fortescue for $770 Million
Valin acquired a stake in Fortescue, Australia's third-largest iron ore miner, by purchasing 225 million new shares issued by Fortescue and buying 275 million existing Fortescue shares from U.S. hedge fund Harbinger.
Contributions from Lun Lu, Iris Tan, and Peter Liu.
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