The QDII scheme was launched in 2006 to allow Chinese banks and financial institutions the ability to invest overseas. This is seen as an effort to ease pressure brought about by increasing foreign reserves and the pressures over yuan appreciation.

But Mei Xinyu, assistant researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce argued those at this stage, it is not necessary to encourage domestic investors to jump into the international market. It is because the yields from the bullish Chinese A-share market are much higher than those of other major markets, despite warnings of stock bubbles, Mei said. Investors won’t prefer the overseas market if they find the domestic one is even more profitable, although investing in the former could be a wise decision in the future.

Mei said that in the long run, the Chinese investment in overseas securities will expand significantly and the restrictions will eventually be loosened.

Return of the Red Chips

Li Rongrong, Director of the State-owned Assets Supervision and Administration Commission (SASAC), stated in Hong Kong that red chips-referring to overseas-registered and overseas-listed Chinese companies-are increasingly returning to the mainland. Most of the red chips are considered solid performing companies. SASAC has prepared well enough that the red chips can be listed on the mainland stock market as soon as possible.

According to China Securities Journal, citing a reputable source, the State Council will soon approve five Hong Kong-listed Chinese companies for a return to the A-share market late this year. The first three would be China Mobile, Lenovo China and China National Offshore Oil Corp. China Mobile is reported to have chosen Goldman Sachs Gao Hua Securities Co. Ltd. to be its sponsor.

Two other major Chinese telecom companies-China Telecom and China Netcom-have both revealed that they will return to the yuan-denominated A-share market on the mainland.

Auto Sales Boom

Given the fact that most China’s 1.3 billion people don’t own a car yet, you might think selling cars would have huge potential. Indeed, the auto market in China is the second largest in the world.

According to the China Association of Automobile Manufacturers (CAAM), both sales and production reported growth of more than 20 percent in the first four months of 2007. Over 3 million automobiles were produced in China from January to April, of which 2,934,000 units were sold, growing 21.36 and 21.46 percent respectively year on year. The growth in the auto sector in the first four months was mainly due to new model releases and price-cut incentives by automakers.

The top three automakers in terms of sales during this period were Shanghai Automotive Industry Corp. (SAIC), First Automotive Works Corp. (FAW) and Dongfeng Motor Corp. In April, FAW had the most sales, followed by SAIC and Dongfeng.

In April, 116,200 domestic autos were sold, making up 28.22 percent of total car sales. Sales of Chinese automobiles were followed by Japanese, German and South Korean brands, with a market share of 26.88 percent, 20.44 percent and 14.07 percent respectively.

Auto imports are also increasing significantly, especially in the high-end auto market. In the first quarter of this year, China imported 59,100 vehicles, up 16.72 percent from the same period last year, according to CAAM. Among these, 28,000 were sedans, an increase of 30.93 percent.

China’s top 16 auto groups reported a 70-percent increase in first-quarter profits boosted by the brisk sales.

Continued Climb of the CPI

The National Bureau of Statistics said CPI rose 3 percent in April, down from 3.3 percent in March, barely meeting the government’s objective of maintaining the index around 3 percent.

The increase was mainly driven by food prices, which jumped 7.1 percent. Non-food items rose merely 1 percent.

In another indicator that inflation may be on the way, the producer price index rose 2.9 percent in April from 2.7 percent in March.