TO THE POINT: The Chinese stock market is maturing more than ever before amid stricter supervision from supervisory agencies. China's banking regulator will punish eight Chinese banks for negligence in overseeing several companies charged with the illicit use of bank loans. Asia's largest container line COSCO Holdings Co. reported the fourth largest initial public offering this year on the mainland A-share market, followed by the announcement that PetroChina will return to the mainland stock market this year. China and the United States will probably witness a widening trade gap as the U.S. side issued a policy forbidding the export of certain hi-tech products to China, ignoring China's effort to curb the trade surplus by slashing tax rebates. China is expected to sell special bonds to buy foreign reserves to fund its new foreign reserve investment company, due to open later this year.

By LIU YUNYUN

Just the Opposite

The Chinese Government has been striving to curb the swelling trade surplus with the United States, while the United States has ignored Beijing's efforts, instead moving to tighten controls over its hi-tech exports to China and further hurt the trade balance.

To further strike a balance in trade with the United States, China announced that it will eliminate or cut tax rebates for more than 2,800 export items from July 1 this year-the largest such move of its kind since China joined the WTO in 2001.

The items account for 37 percent of all export products, according to figures the Ministry of Finance released on June 19.

The export tax rebates for 553 products with high energy and resource consumption, such as fertilizer, cement and non-ferrous metals will be eliminated. Tax rebates for the rest of the affected items, supposed to be "easy to trigger trade friction," will be reduced to 5-11 percent from 8-17 percent, including garments, toys, steel products and motorcycles.

This effort will greatly increase the exporting cost of relevant Chinese products, making them less competitive in the international market. China hopes for the best to achieve a trade harmony with the United States and other countries at large.

On the contrary, the United States has further restricted its hi-tech exports to China, alleging China might have "dual uses" of such hi-tech products, according to a U.S. Department of Commerce ruling published on June 15.

According to the new rule, the licensing requirements are expanded to a list of items covering 20 categories, which the U.S. defined as those which "could contribute to China's military modernization."

Items subject to the rule include aircraft, avionic and inertial navigation systems, lasers, depleted uranium and certain telecommunications equipment for space communications or air defense.

China has been working to narrow the trade surplus with the United States through importing more hi-tech products from America, which have a huge competitive edge in the Chinese market.

"The new rule increases the costs for the Chinese companies involved in hi-tech trade and hurts their confidence in conducting trade with the United States," said Yao Shenhong, a spokesman for the Ministry of Commerce, responding to the U.S.'s new rule, adding it imposes irrational barriers to bilateral trade.

Stock Market at a Glance

The Chinese stock market performed soundly after the early June slump amid wide suspicion whether it would break the record high set on May 30.

Analysts have acknowledged that the stock market is currently in a correction period, and the benchmark Shanghai Composite Index fluctuated sharply on each trading day in the middle of June.

More companies are choosing to sell yuan-denominated shares to be traded in Shanghai and Shenzhen.

- COSCO reaped the fourth biggest sales

The Hong Kong-listed China COSCO Holdings Co., Asia's largest container line, sold 15 billion yuan worth of stock, priced at 8.48 yuan per share, in Shanghai on June 20, the fourth largest sales volume this year in China.

The company plans to spend 6 billion yuan of the proceeds on 12 new vessels, and will use 1.68 billion yuan to buy a 51-percent stake in COSCO Logistics from its parent COSCO Group, according to the share sale statement.

"The company needs to fund the expansion of its fleet and raising money on the Chinese mainland is very easy right now," said Ji Lijun, an analyst at Shanghai Securities Co. "The move is also in line with the government's directive to list more well-performed state-owned companies on the mainland stock market."

- PetroChina to be listed

As more state-owned companies have returned to the mainland stock market, PetroChina Co. is planning a big share sale this year and hopes to sell 4 billion shares in the A-share market.

PetroChina Group published its annual report on June 15, stating its total assets reached 1.3965 trillion yuan with aggregate profits hitting 185.7 billion yuan. It is one of the most profitable state-owned companies in China and will become the world's second largest oil company by market value after Exxon Mobil Corp., if the 4 billion shares are issued.

PetroChina said it will hold a stockholders meeting on August 10 and will discuss the feasibility of issuing the A shares.

It is the second state-owned company to have announced its return to the mainland, following China Construction Bank's confirmation a week before.

All About Bonds

The Ministry of Finance (MOF) plans to sell about $200-250 billion special bonds to fund the foreign reserve investment company set to be established this year. The special bonds are expected to be sold to banks and will be used to buy foreign currency. The plan will be considered at a meeting of the standing committee of the Chinese legislature scheduled for June 24-29.