Up, Up and Away

The loss-making China Eastern Airlines Corp., one of the country's four major airlines, is gearing up to regain its lost ground in the southwest border province of Yunnan.

The airline on May 31 inked a strategic agreement with the Yunnan Provincial Government to forge a joint venture carrier targeting the lucrative local aviation market. China Eastern will hold a controlling 65-percent stake in the new carrier, while the provincial government will hold the remainder, the company said in a statement, without providing financial details. Its Yunnan branch will be the backbone of the venture, it added.

The depth of the airline's financial distress has pushed it to search for new sources of growth, a move that analysts believe will create a win-win situation. China Eastern hopes to gain a solid foothold in the popular southwest tourism destination, while the mountainous province wants a stronger air bridge to the outside world.

According to the agreement, the venture will expand annual passenger volume to 8 million by 2010, boosting China Eastern's market share in the province to 50 percent from its current 40 percent.

Industry insiders say a closer relationship with the local government will give China Eastern an advantage over competitors, though it will still face cutthroat competition in the crowded Yunnan market.

Autos, Appliances Afloat

NDRC released on June 3 a detailed program for subsidized auto and home appliance replacements.

According to the program, consumers can trade in their used small and mid-sized trucks and certain types of mid-sized passenger cars for new ones, and receive subsidies ranging from 3,000 yuan ($439) to 6,000 yuan ($878) for each new vehicle.

Home appliance replacement is limited to five kinds of products-TV sets, refrigerators, washing machines, air-conditioners and computers-in a pilot program in nine municipalities and provinces including Beijing and Shanghai. Consumers receive a 10-percent discount when they purchase new appliances.

The government allocated 7 billion yuan ($1.02 billion) in subsidy funds to support the program, which is expected to shore up consumption and help revive the languishing economy.

Where Is the Stock Market Going?

China's stock markets seem to be gaining momentum, but in a mixed mood of wariness and caution.

Among the many positive factors shoring up the markets, liquidity abundance is no doubt a crucial one. The easing monetary environment has set the stage for a stock euphoria and investors are pulling their cash from the sidelines into the markets as the valuations become attractive again.

According to a recent report by the Shanghai-based Shenyin & Wanguo Securities Co. Ltd., the Shanghai A-share market absorbed a net cash inflow of 52 billion yuan ($7.6 billion) in May. In addition, the number of newly opened stock accounts and mutual fund accounts is also picking up, in a reflection of warming investor sentiment, the report said. The benchmark Shanghai Composite Index hit a 10-month high of 2,778 points on June 3, making it one of the best performers globally.

But the strong rebound raises an important question-is the market heading for a sustainable rally or just another wide swing for the worse?

Analysts believe the impending resumption of IPO (initial public offering) will be a tough test for market liquidity. Meanwhile, an array of uncertainties will continue to hang over the prospects for listed companies at a time when investors are looking for reassurance that their corporate performance will improve, they said.

There is likely to be a sharp correction before an upward trend becomes entrenched, said Xiao Yanming, a senior researcher with the Jiangsu Province-based Guolian Securities Co. Ltd., in an interview with 21st Century Business Herald.

Manufacturing Forum

The Third China Manufacturing Forum (CMF) will be held on July 25-27 in Baotou, Inner Mongolia Autonomous Region, the Asian Manufacturing Association (AMA) recently announced.

The forum will bring together a number of domestic and overseas business leaders and experts to discuss a series of significant issues, including integration of industrialization and information in manufacturing, green manufacturing, and new energy and new technologies, according to the announcement.

China's manufacturing industry has largely emerged unscathed from the financial storm, but still must forge competitiveness in energy saving and high technology for future growth, AMA President Chen Jiagui said in a statement.