TO THE POINT: China's vehicle sales continue to pick up, putting the country on track to retain its position as the world's largest auto market this year. Chinese companies flock to U.S. stock markets in hope of hitting the jackpot with successful IPOs. China remains the largest foreign holder of U.S. Treasury securities, after adding $23.3 billion in October. State-owned enterprises harvest handsome profits. The newly established Guoxin Asset Management Co. will be engaged in accelerating state-owned assets restructuring. The aviation industry is getting back on the recovery track.

By HU YUE

Speeding Right Along

China's auto market remains bullish, dispelling worries over a possible slowdown.

Vehicle sales across the nation grew a robust 26.9 percent in November from a year ago to reach nearly 1.7 million units, said the China Association of Automobile Manufacturers (CAAM). The November figure brought sales in the first 11 months to 16.4 million units, compared with 13.65 million for the entire year in 2009.

The CAAM expects China to retain its crown as the world's largest auto market this year, with sales totaling 18 million units, beating the world record of 17 million set by the United States in 2005.

Buyers are heading for showrooms before the favorable tax policy expires at the end of this year, said Zhu Yiping, Associate Deputy Secretary General of the CAAM.

China allowed buyers to pay only a 7.5-percent tax for purchases of cars with small engine displacements (less than 1.6 liters) in 2010.

But it is likely that the incentive continues into next year as policymakers pin hopes on consumption as a source of growth, said Rao Da, Secretary General of the National Passenger Cars Association.

IPO Craze

Chinese companies are scrambling to list on the U.S. stock markets in a bid to replenish their capital.

The latest example is Beijing-based technology outsourcer iSoftStone that on December 14 debuted on the New York Stock Exchange (NYSE), raising $141 million from its sales of 10.83 million American depositary receipts. Before this, the Hangzhou-based Sky-Mobi, operator of China's largest mobile application store, on December 10 raised $58 million from its initial public offering (IPO) on Nasdaq.

By December 19, 40 Chinese companies, the largest number of companies since 2007's record of 37, had raised a total of $3.5 billion from their IPOs in the United States. Among the 40, 22 listed on the NYSE, 17 on Nasdaq and one on the American Stock Exchange.

"Given that the U.S. economy is not growing very fast, if it is growing at all, U.S. investors are naturally drawn to China," said Nick Einhorn, an analyst with Renaissance Capital, an IPO research and investment fund based in Greenwich, Connecticut.

"Chinese IPOs are here to stay. They are performing well because investors are looking for high-growth companies with strong margins and a clear business model."

Many capital-hungry Chinese companies chose the U.S. stock markets in part due to the much lower threshold for IPOs, said Li Daxiao, Director of the Yingda Securities Research Institute.

Loading U.S. Assets

China in October increased its holdings in U.S. Treasury securities for the fourth consecutive month by $23.3 billion to $906.8 billion, said the U.S. Department of Treasury.

China remains the largest foreign holder of U.S. Treasury securities, ahead of Japan, which increased its holdings by $12.8 billion in October to $877.4 billion. Total holdings of Treasury securities by all foreign countries amounted to $4.3 trillion, an increase of 1.1 percent from the previous month.

China resumed net purchases in July after two consecutive months of net sales, which should help dismiss worries that Washington's largest creditor was moving away from dollar assets.

Economists say there is a wide investor recognition of good values in the U.S. assets despite the sluggish economic recovery in the country.

For China, there are two ways to fend off risks about its asset safety—slow accumulation of foreign exchange reserves and diversifying government bonds from other countries, said Zhang Bin, a senior researcher at the Chinese Academy of Social Sciences.

Profitable SOEs

State-owned enterprises (SOEs) are faring well, reaping juicy returns so far this year.

In the first 11 months, SOEs raked in a combined profit of 1.81 trillion yuan ($272.2 billion), skyrocketing 43.1 percent from a year ago, said the Ministry of Finance. But on a month-to-month basis, the November profit dropped 2.6 percent from October.

Their revenues totaled 27.34 trillion yuan ($4.1 trillion), an increase of 32.5 percent year on year.

Meanwhile, the SOEs made progress in profitability as their profit-to-sales ratio came in at 6.6 percent, 0.5 percentage points higher than the previous year.

Despite a rosy picture, many sectors suffered a decline in profits, including the transportation, textile, petrochemicals and electronics industries.

Stimulating State Assets

China on December 22 officially inaugurated the Guoxin Asset Management Co., a state-owned assets management firm, in a move to accelerate state-owned assets restructuring and help turn small and unprofitable SOEs into money-making entities.

Xie Qihua, former Chairman of Baosteel Group, was appointed chairman of the new company, and Liu Dongsheng, a senior official of the State-owned Assets Supervision and Administration Commission, became general manager.

"Establishment of Guoxin is intended to beef up mergers and acquisitions of centrally administered SOEs," said Wang Yong, Minister of the SASAC. There are currently 122 central SOEs in China, down from 196 in 2003.

The new company has initially registered capital of 4.5 billion yuan ($676.7 million) and has become the third asset management company under the SASAC, which designated China Chengtong Group and State Development and Investment Corp. in 2005 to take over loss-making non-core businesses from central SOEs.

A number of smaller, less competitive central SOEs without clear-cut major business lines will be packaged into Guoxin, said Wang.

Aviation Slowdown

China's aviation sector is getting back on recovery track, though growth tapered off in November.

The industry generated a net profit of 1.55 billion yuan ($233.1 million) in November, a modest increase of 4.8 percent from a year ago, said the Civil Aviation Administration of China. The figure, however, represented a sharp drop from the 4.92 billion yuan ($741 million) in October.

November and December have always been off-peak seasons for airlines as the winter freeze dampens the demands of tourism, said Li Jian, an analyst at the China Securities Co. Ltd.

In November, passenger volume shrank 15 percent month on month to 20.78 million.

In addition, the National Development and Reform Commission on December 21 announced a 5-percent increase in aviation fuel, fuelling cost inflation for airlines.

"Despite near-term traffic headwinds, we reiterate our positive long-term optimistic view on traffic, which is expected to grow 15 percent in 2011 and 2012 due to sanguine expectations on China's economic growth, coupled with increased propensity to travel, as domestic consumption expands," said Goldman Sachs in a recent report.

Asia's Fortune

The 2010 Third Annual Conference of the Asia Fortune Forum was held on December 16-18 in Beijing, with the theme of a "sustainable share of Asia's fortune." The three-day event brought together hundreds of entrepreneurs and economists to discuss business innovation and the economic outlook of the region.

The Chinese economy has come to a critical stage of rebalancing, said Yao Jingyuan, chief economist at the National Bureau of Statistics. "The key is to wean off the reliance on investments, labor-intensive manufacturing and the real estate industry as a source of growth."

Zhuang Congsheng, Vice Chairman of the All-China Federation of Industry & Commerce, said it is necessary to foster the private enterprises providing 85 percent of the country's new jobs.