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China’s air transport industry has entered a stage of slower growth, registering single-digit total air traffic (RTKs, including passenger and cargo traffic) of growth in 2011 according to CAAC. China’s aviation industry experienced double-digit traffic growth from 2004 through 2010, according to CAAC, with 2010 clearly a banner year of recovery for China, after the downturn in 2008/09. 2011's volumes have been well below expectation, particularly since the middle of the year.

In the wider Asia Pacific region, the Association of Asia Pacific Airlines (AAPA) has noted that Asian carriers are bracing themselves for another tough year in 2012 as the outlook is impacted by the “unresolved concerns about the Eurozone debt crisis and wider uncertainty about the global economic outlook for 2012”. However, the association noted the region’s airlines are faring better than airlines in other regions and that they are still “relatively well placed” to benefit from future growth opportunities.

The longer-term outlook is also “positive as evidenced by fleet expansion plans and the establishment of new business ventures,” AAPA said. The association has previously noted that airline margins have been “squeezed” in 2011, due to sharply higher fuel prices, echoing similar comments made by IATA.
CAAC reports USD7.2 billion industry profit in 2011

CAAC director general Li Jiaxiang this week stated China’s aviation growth is being impacted by the global economic crisis, but noted, as quoted by China Daily, that "the growth speed is still the highest in the world, and so is the industry's total profit, estimated at CNY45.6 billion (USD7.2 billion) for 2011, which accounts for more than half of the profits of the global air transport industry”. He added 2011 would mark the “second consecutive year that China ranks the world's number one in terms of net profit”.

Deputy director general Li Jun noted the country’s high-speed rail network had claimed some of the passenger traffic from airlines and the limited airspace set aside for civil aviation has also restricted the growth of passenger transport. International growth is also being impacted by global economic concerns and rising oil prices, Mr Li said.
Chinese airlines handle 290 mill pax in 2011

According to CAAC, Chinese carriers will handle 290 million passengers in FY2011, an 8.2% year-on-year increase. A 2% decline in cargo volumes to 5.5 million tones is forecast. In FY2012, passenger growth of 10% is expected, for full year passenger traffic of 320 million. Cargo growth of 4.7% is expected to 5.8 million tonnes.

CAAC profit and traffic forecasts: FY2011 and FY2012

* FY2011:
o Profit: CNY45.6 billion (USD7.1 billion), +5.1% year-on-year;
o Passenger numbers: 290 million, +8.2%;
o Total traffic (RTKs): 57.4 billion, +6.6%;
o Passenger load factor (11 months to Nov-2011): 72.3%;
o Cargo volume: 5.5 million tons, -2%;
o Number of airports with annual passenger numbers exceeding 10 million: 21;
* FY2012:
o Passenger numbers: 320 million, +10%;
o Cargo volume: 5.8 million tons, +4.7%;
o Investment in fixed assets: CNY158.5 billion (USD24.8 billion);
o Infrastructure investment: CNY75.0 billion (USD11.7 billion).

CAAC in Oct-2011 cut its official air traffic forecast for 2011 as international passenger and cargo volumes weakened amid deteriorating global economic conditions. China's passenger growth forecast was cut from 13% to 8% this year to 288 million passengers (ie 13.4 million fewer passengers than previously anticipated but up from 267 million passengers in 2010). Forecasts now indicate growth of 8.2% in 2011, for 2 million more passengers than previously forecast. While the air cargo growth forecast in Oct-2011 was dramatically slashed from growth of 11.5% to flat in 2011, the actual freight result has failed to even meet this revised growth, with a 2% cargo decline anticipated. China's long-term growth forecasts remain unchanged, with an increase to 450 million passengers still expected by 2015, despite the impact of high-speed rail.

CAAC passenger numbers and growth forecast: 2003 to 2030F

CAAC freight traffic (million tonnes) and growth forecast: 2003 to 2015F

China’s commercial fleet reaches 1745 aircraft; fleet additions to be limited to no more than 150 aircraft in 2012

China's commercial transport fleet reached a total of 1745 aircraft, with the addition of 148 aircraft in 2011. According to Mr Li, China took delivery of 805 aircraft between 2008 and 2011, which is 149 short from its forecast. Like 2011, when Chinese airlines were requested to delay the delivery of 60 new aircraft, Mr Li said that “control (on the importing of planes) will continue next year, and not more than 150 planes would be added to the fleet in 2012”. CAAC is, however, encouraging airlines to acquire more widebody aircraft to replace the current single-aisle aircraft on high-density domestic sectors, especially between Beijing, Shanghai and Guangzhou.

In terms of infrastructure development, the “original plan of building 60 new airports during the 12th Five-Year Plan period (2011-2015) will be extended to 70 in order to encourage the development of local air transport," Mr Li said. China has 180 airports at the end of 2011, up from 175 in 2010.

CAAC operational highlights for the nation’s aviation industry in 2011:

* Number of carriers: 46 (including 11 freighter carriers), three more than 2010;
* Number of airports: 180, five more than 2010;
* Number of aircraft: 1745 aircraft, 148 more than 2010;
* General aviation flight hours: 455,000 hours, +16.3% year-on-year;
* Fixed asset investments: CNY69.0 billion (USD10.8 billion) including CNY46.0 billion (USD7.2 billion) in airport construction and CNY1800 million (USD281 million) in air traffic control construction;
* Number of pilots: 27,569 including 25,853 Chinese nationals and 3293 foreign pilots;
* Number of aviation employees: 1.2 million;
* Bilateral agreements: Signed one new bilateral air transport agreement in 2011, bringing China’s number of bilateral agreements to 114 nations and regions.

Meanwhile, on-time performance (OTP) has greatly improved in China over the past year. The country’s flight punctuality rate reached nearly 77% in the first 11 months of 2011, up 1.9 ppts year-on-year. The CAAC will continue to improve flight punctuality, and strive to raise the OTP rate by 2 ppts in 2012.

CAAC separately reported a 13.8% increase in passenger numbers to 23.7 million in Nov-2011, with a 3.1% decline in cargo volumes to 485,900 tonnes. Passenger load factors improved 2.6 ppts to 80.2%.

CAAC domestic passenger growth vs international passenger growth: Jan-2010 to Nov-2011

CAAC passenger numbers growth vs cargo volume growth: Jan-2010 to Nov-2011

 

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Korea regained its status as the world's leading shipbuilding nation in 2011 by beating its archrival China and securing deals for large, value-added vessels, data showed Tuesday.

According to London-based market researcher Clarkson Research Services, Korean shipbuilders won a combined 13.55 million compensated gross tons (CGTs) in new orders last year, while Chinese shipbuilders clinched a total of 9.2 million CTGs.

Last year, Korea accounted for 48.2 percent of a total of 28.11 million CGTs worth of deals globally placed, compared with a 31.2 percent share a year earlier, according to the data.

In terms of order value, Korean shipbuilders outpaced their Chinese rivals as well. South Korean shipbuilders won deals valued at a combined $48.16 billion last year, higher than the comparable figure of $19.2 billion for Chinese shipyards, the research institute said.

Last year, Korean shipbuilders focused on high-priced vessels such as liquefied natural gas (LNG) carriers and offshore facilities.

But Korean shipyards' order backlogs were smaller than those of Chinese rivals. Korean shipbuilders' order backlogs came to 37.66 million CGTs, far lower than 44.99 million CGTs for Chinese shipbuilders, according to Clarkson.

In 2003, South Korea became the world's top shipbuilding nation by outstripping Japan in three key categories -- shipbuilding volume, order backlogs and new orders.

Chinese rivals outpaced South Korean shipyards in the number of new orders received and order backlogs in 2009 and 2010 as Chinese shipbuilders gobbled up new orders at cheap prices, while their South Korean counterparts have continued to focus on high-priced vessels and offshore facilities. (Yonhap)

 

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The machinery maker Shandong Heavy Industry Group sealed a deal Tuesday to take a 75 percent stake in the debt-laden Italian luxury yacht maker Ferretti, the latest in a series of Chinese acquisitions of European brands.

Chinese companies have been taking advantage of Europe’s financial woes by picking up assets relatively inexpensively, acquiring top brands as a shortcut to global success.

The deal for the Italian company also reflected the growing demand for luxury in mainland China, where new marinas are sprinkled along the southern coast.

“China is one of the most rapidly developing countries for the yachting sector and has great potential,” the companies said in a statement released at a signing ceremony in Jinan, in eastern China.

The Ferretti Group chairman, Norberto Ferretti, said the deal would help his company tap the global yacht market, estimated at €7 billion, or $9 billion, “and meet growing Chinese demand for luxury goods for the coming 5 to 10 years.”

Ferretti’s management team, headquarters and production bases will remain in Italy, the companies said. Shandong Heavy said it planned to build yachts in China for the domestic market.

“China offers an opportunity to our companies, especially when our economy is not going well,” said Anton Francesco Albertoni, head of the Italian marine industry association, Ucina.

Italy has long dominated the yachting industry, which contributes €3.36 billion to the country’s economy annually.

“Chinese are learning fast and well,” Mr. Albertoni said. “They love their marinas and golf clubs.”

Shandong Heavy will seek a separate share listing for Ferretti in Hong Kong in three to five years, the chairman, Tan Xuguang, said.

Under the deal, Ferretti’s roughly €580 million of existing loans will be reduced to €116 million. In addition, Ferretti will receive a new €80 million revolving credit facility, said John Davison, global head of strategic investment at Royal Bank of Scotland, one of Ferretti’s main creditors.

Shandong Heavy will make a €178 million equity investment for its 75 percent stake in the business. There will also be a €100 million capital increase, Mr. Ferretti said.

Lenders will receive the remaining 25 percent stake in Ferretti through an additional €25 million equity injection, with Royal Bank of Scotland and Strategic Value Partners each receiving half.

Founded in 1968, Ferretti was saddled with €1.2 billion of debt in 2007 after the company’s leveraged buyout by Candover Partners.

The company defaulted on its debt in January 2009 during the economic downturn.

Ferretti’s lenders agreed in April 2009 to write down the debt to €560 million in return for a 53 percent stake from Candover, which lost its investment in the firm.

Shandong Heavy makes construction machinery, power systems, commercial vehicles and automobile parts. It is the parent of the diesel engine maker Weichai Power, whose shares are listed in Hong Kong and Shenzhen. Shandong Heavy had operating income of 107.6 billion renminbi, or $17 billion, in 2010.

Ferretti, which owns the Pershing, Riva and Ferretti Yachts brands, ranked first in the 2011 Global Order Book, the benchmark annual report on the nautical industry by the magazine ShowBoat International.

The 2008 crisis hit the yacht industry hard, prompting many companies to seek partners in cash-rich emerging countries, a trend that is likely to continue as the euro zone’s debt crisis shows no signs of abating. In China, yacht imports increased threefold from 2009 to 2010.

“The opening of new marinas, yachting facilities and yachting events in China, especially on the southern coast, is actually fueling demand for yachts,” said Olivier Burlot, managing director of the international yacht brokerage firm Simpson Marine, based in Hong Kong.

Other Chinese companies that have made big acquisitions overseas include the automaker Geely, which bought Volvo from Ford Motor in 2010, and Lenovo Group, which bought the personal computer unit of I.B.M. in 2004.

Last month, China’s Three Gorges Corp. purchased the Portuguese government’s stake in the utility Energias de Portugal for €2.7 billion.

 

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The scale of accumulative outbound direct investment (ODI) for 2011-15 will reach the level of the nation's foreign direct investment (FDI), a statement from the Ministry of Commerce said Wednesday.

China's ODI from 2011 to 2015 is expected to register double-digit annual growth to reach US$560 billion.

The government will accelerate promoting "overseas investment" during the 12th Five-Year Plan (2011-15) period, according to the statement.

"The annual growth rate (from 2011 to 2015) for the nation's ODI on average will remain around 17 percent, and the accumulative volume in the five years is expected to reach US$560 billion, equivalent to that of China's FDI during the same period," it said.

ODI growth has remained robust despite the global financial crisis.

ODI surged 21.7 percent year-on-year to US$68.81 billion in 2010, growing for the ninth straight year and recording an average annual growth rate of 49.9 percent. China overtook Japan and the United Kingdom that year to become the world's fifth-largest overseas investing nation.

From January to November of 2011, ODI in the non-financial sector grew by 5.2 percent year-on-year to US$50 billion, said the ministry. By the end of November accumulative investment reached US$312 billion.

In the statement the ministry said the government will guide and encourage local companies to enhance cooperation and invest abroad in manufacturing, energy, culture and engineering.

And China will also promote investment in the service sector, including finance, architecture, tourism, education and telecoms.

By the end of 2010, Chinese enterprises established 16,000 overseas companies in 178 countries, covering all economic sectors and focusing on six industries, including business service, banking, retail and wholesale, mining, manufacturing, and transport, according to the ministry.

ODI will play a more dominant role in the future, said Professor Chong Tai-leung of the Chinese University of Hong Kong's Institute of Global Economics and Finance in a China Daily report.

"I predict that ODI, rather than FDI, will be dominant in the future as more mainland firms are taking excess cash outside the country to invest in various economic projects overseas," he said .

"More ODI means that capital is invested outside the country, so that the ODI will not help boost domestic economic growth very much.

"But ODI can help mainland corporations to expand their business footprint through technology and management skills."

FDI growth

The FDI outlook is less promising. From 2011 to 2015, China's annual FDI is expected to reach, on average, US$120 billion, with improved quality and diversification, the statement said.

During 11 months of 2011, China's FDI surged by 13 percent year-on-year to US$103.8 billion, close to the level of 2010, although the FDI in November fell by 9.76 percent from a year earlier.

China has been the most attractive FDI destination among developing countries for 19 years up to and including 2010, according to the ministry.

During the first 11 months of 2011, capital inflow to China from 10 Asian nations and regions including Japan, Thailand and Singapore soared 17.98 percent to US$89.58 billion while that from the EU inched up a negligible 0.29 percent. FDI from the US plunged by 23.05 percent year-on-year to US$2.74 billion in the first 11 months, compared with a 14.11 percent rise to US$3.56 billion in the same period of 2010.

China will encourage foreign enterprises to invest in agriculture, high-end manufacturing, high-tech, new energy and services, the statement said.

According to the ministry's statement, China's foreign trade will expand at an annual rate of 10 percent to reach US$4.8 trillion by 2015.

 

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As much as 300 billion yuan ($47.6 billion) is expected to be raised through IPOs on the Shanghai and Shenzhen stock exchanges this year, the accounting firm PricewaterhouseCoopers (PwC) said in a report on Wednesday.

The firm forecast Shanghai A shares will attract about 40 IPOs. And the Shenzhen SME Board and ChiNext, an exchange where shares mainly of high-tech companies are traded, will attract about 260 IPOs in 2012. PwC predicted those deals will raise 270 billion yuan to 300 billion yuan.

Analysts: IPOs to remain common in 2012

China managed to keep its lead position in the global IPO market in 2011 as measured by the IPOs held on and the money raised by its exchanges in Shanghai and Shenzhen.

Even so, the Chinese market is being hampered by the global economy, whose recovery has been slowed by high unemployment in the United States and the European debt crises.

"Many Chinese companies are preparing for IPOs and waiting for the right time to go public," said Frank Lyn, PwC China Markets Leader.

According to Lyn, IPOs will remain common on the Shenzhen SME Board and ChiNext in 2012, and will most often originate from companies in the industrial-products, retail, consumer goods and services, information-technology and financial-services businesses.

Looking back on 2011, the Shanghai and Shenzhen stock exchanges had 282 IPOs, 19 percent fewer than the year before, and raised 286.1 billion yuan, 41 percent less than 2010.

"The China capital market is facing some uncertainties and the IPO market activities were not as active in 2011 as in the previous year, due to the impact of global economic uncertainty," said Jean Sun, PwC China Assurance Partner. "But it is rational that the IPO market cooled down after a blowout in 2010."

In 2011, the Shanghai A-share market attracted 39 IPOs, an increase of 39 percent from the year before, and raised 105.1 billion yuan, a decrease of 44 percent from the year before.

"This once again reflects that small and medium-sized enterprises were very active and are becoming the main driving force in the IPO market," said Lyn.

The Shenzhen SME Board had 115 IPOs in 2011 and raised 101.9 billion yuan, less than in 2010. ChiNext ended 2011 with 128 IPOs, an increase of 9 percent from the year before, and raised 79.1 billion yuan, a decrease of 18 percent.

In 2011, manufacturers of industrial products had the most new listings on the Shanghai A-share market, with 54 percent; on the Shenzhen SME Board, with 48 percent; and on ChiNext, with 39 percent. Also sources of many IPOs were retailers and companies dealing in consumer goods, services and information technology.

 

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Datong, China: A street lamp is seen in front of the Datong second coal-fired power plant at night. Photograph: Jason Lee/Reuters

China tripled its solar energy generating capacity last year and notched up major increases in wind and hydropower, government figures showed this week, but officials are still struggling to cap the growth in coal burning, which is the biggest source of carbon dioxide emissions in the world.

The latest evidence of China's promotion of renewable energy has been welcomed by climate activists, but they warn that the benefits are being wiped out by the surge in coal consumption.

After burning an extra 95m tonnes last year, China will soon account for half the coal burned on the planet.

This has alarmed state planners concerned about the impact of air pollution and climate change, but their efforts to cap the nation's energy consumption are said to have run into resistance from local governments who fear restrictions on economic growth.

At a key policymaking meeting in Beijing this week, Liu Tienan – the director of the National Energy Administration – called for energy use to be kept below 4.1bn tonnes of coal equivalent per year by 2015.

If the proposal is accepted, this would be the first time China has set such a ceiling. Until now, Beijing has only set goals for energy and carbon intensity, which are relative to economic growth and so fluctuate according to GDP figures.

But the proposed figure remains the subject of fierce discussion as it was based on an assumption that China's economy will grow at 7.5% per annum up until 2015, by which time the government is supposed to bring down energy intensity (units of energy per unit of GDP) by 16%.

However, provincial governments are projecting a combined economic growth rate of more than 9%, which means they will face a fuel shortfall unless the energy target are raised or they fail to reach their goals.

The negotiations are held behind closed doors and are likely to last several more months, but it is believed that the provinces are arguing for a higher target of between 4.25 and 5 bn tonnes.

As well as being distant from the current reality of a slowing economy – the forecast for the first six months of this year is for no more than 7.5% growth – this prospect horrifies environmentalists.

"If it goes up to 5bn tonnes, it would be a disaster; China would effectively be promoting high-energy, high-carbon growth," said Li Yan of Greenpeace.

If accepted, an energy cap would immediately become one of the most important industrial targets in the world because it would largely determine how large a mountain of coal China burns and, as a result, how much CO2 it emits.

Depending on how it was structured, such a target could also help or hinder the development of the renewable energy industry.

China continued to make rapid progress in this field last year, according to figures published on the website of the National Energy Administration.

They show a rise of 47GW in wind power generating capacity, and the completion of an extra 12.6 gigawatts of hydropower, with almost twice that amount also likely to come on line this year. The UK has 75GW of energy capacity, of all types.

The most spectacular growth, however, was in photovoltaic power generation, which rose threefold to 3GW, the administration noted.

Yet coal continues to account for close to 70% of the nation's power supply. The government is trying to bring this proportion down below 65%, but it is not making progress fast enough.

Yang Fuqiang of the US-headquartered NGO National Resources Defence Council, said Chinese energy consumption rose almost threefold from 2000 to reach 3.2bn tonnes of coal equivalent in 2010. On current trends it will rise to almost 5bn tonnes by 2020.

"We must do something about this," said Yang, a former government official. China uses too much coal. It's the source of carbon emissions and pollution."

Yang wants the government to change its proposed energy cap into a coal cap, which would allow provincial authorities to grow faster if they used more renewable energy or gas.

The debate is expected to continued for several more months with targets for the provinces unlikely to be released before the summer.

 

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China's central bank said Friday that the country's foreign exchange reserves as of the end of the fourth quarter last year topped 3.18 trillion U.S. dollars, down 20.6 billion U.S. dollars from the previous quarter.

The net quarterly decrease was a rare case in recent years in the country, which is currently the largest holder of foreign exchange reserves around the world.

In breakdown, foreign exchange reserves increased by 72.1 billion U.S. dollars in October, but decreased by 52.9 billion U.S. dollars and 39.76 billion U.S. dollars respectively in November and December, according to data from the People's Bank of China (PBOC), the central bank.

However, on a year-on-year basis, the nation's foreign exchange reserves still expanded from 2.85 trillion U.S. dollars by the end of 2010.

The PBOC data released Friday also showed the country's yuan funds outstanding for foreign exchanges fell to 25.36 trillion yuan (4 trillion U.S. dollars) in December, down 100.3 billion yuan from November. The December data also marked the third monthly decline.

 

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Apple Botches Up iPhone 4S China Debut
Apple Inc (NASDAQ: APPL) halted debut sales of its iPhone 4S in Beijing and Shanghai as a chaos was seen in a Beijing store after customers waiting in line overnight were told all handsets had been sold out. Apple said sales were much quicker than expected and it made the decision for public order reasons.

Sinopec's Ethylene Output Tops 10m Tons
Sinopec Corp (NYSE: SNP, SHA: 600028, HKG: 0386) said its ethylene production has for the first time cracked the 10 million ton mark to total 10.04 million tons in 2011, up 9.2% from the year before. It has become the world's fourth bigger producer of the chemical.

Hainan Airlines Revenue Jump 35% in 2011
HNA Group, China's fourth largest carrier and the parent of Hainan Airlines Co (SHA: 600221), said its revenue rose 35% to ¥64.7 billion in 2011 and it had ¥201.46 billion in assets, including a 350-aircraft fleet, as of the end of 2011. Hainan Airline's passenger traffic amounted to 38.8 million during the past year.

Datang Power Generation Rises 14% in 2011
Datang International Power Generation Co (SHA: 601991, HKG: 0991), one of the big five electricity producers in China, said it generated 203.72 billion kW hours of power in 2011, up 14% form the year before.

Jiangxi Copper Output Exceeds 1m Tons
Jiangxi Copper Corp, China's biggest copper producer and the parent of Jiangxi Copper Co (SHA: 600362, HKG: 0358), said its output reached 1.05 million tons and revenue totaled ¥134.5 billion in 2011.

Zhongjin Gold's Parent Increases Stake
Zhongjin Gold Corp (SHA: 600489) said its parent group has increased its holdings by 0.2 of a percentage point to 49.6% after buying four million shares on the Shanghai Stock Exchange.

Yuexiu Property Sales Volume Up 12% in 2011
Yuexiu Property Co (HKG: 0123), a Guangzhou-based developer, said it sold 608,400m2 in floor space valued at ¥9.05 billion in 2011, up 12% and 2.2% respectively from the year before.

 

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Chinese firms conducted 207 mergers and acquisitions (M&A) overseas in 2011, a record high and up 10 percent from 2010, international accounting firm PricewaterhouseCoopers (PwC) said in a recent report.

The total value of those overseas M&A transactions rose 12 percent year-on-year to 42.9 billion U.S. dollars in 2011, PwC said.

Of the transactions, 16 were worth more than 1 billion U.S. dollars, up from 12 in 2010 and including 14 deals in the natural resources and energy sectors, the report said.

Chinese companies recorded strong growth in both overseas and domestic M&A activities as well as large-value private equity investment deals in 2011, the report also noted.

A total of 5,364 M&A transactions were disclosed to have been conducted by Chinese enterprises in 2011, a record high and 5 percent more than the previous year, according to the report.

 

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China's tobacco industry paid 752.96billion yuan (119 billion U.S. dollars) in taxes in 2011, up 22.5 percent year-on-year, an official said Wednesday.

Also, the industry handed over 600.12 billion yuan in profits to the government last year, representing a 22.8-percent rise from one year earlier, Jiang Chengkang, head of the State Tobacco Monopoly Administration, said at a national work conference.

Jiang said the tobacco industry is turning greener. Energy consumption per 10,000 yuan of value-added fell 19.7 percent year-on-year to 29.4 kg of standard coal in 2011.

The industry's chemical oxygen demand (COD) and sulfur dioxide emissions decreased 11.7 percent and 29.8 percent, respectively, to 2,751 tonnes and 5,688 tonnes, Jiang said.