TO THE POINT: The mainland stock market surged the day after Ping An Insurance's shareholders passed the company's refinancing plan. But the market was still fragile as many continued to believe it was on a downward track. The World Bank forecasted that China's gross domestic product would grow 9.6 percent in 2008, or 1.6 percentage points higher than the government's target. Amid surging crude oil prices in the international market, the Chinese Government vowed to stabilize domestic refined oil prices. Lastly, China Minmetals Corp. has set up a joint venture steel mill in India to take advantage of India's fast-growing steel industry. By LIU YUNYUN

Ping An: One More Hurdle

Ping An Insurance (Group) Co. of China Ltd. (Ping An) passed its refinancing plan at its March 5 shareholder meeting. But the securities watchdog said it would strictly investigate Ping An's plan and make proper decision at a later date.

Ping An, one of the leading insurers on the mainland, intends to issue 1.2 billion A shares on the mainland as well as 41.2 billion yuan ($5.8 billion) worth of convertible bonds attached with warrant. When news of the refinancing broke in January, angry mainland investors slashed Ping An's share price in half from its peak of 140 yuan ($21).

On March 6, the day after the shareholders approved the plan, Ping An's share price in the mainland market reached the upper limit of 10 percent ending at 73.8 yuan ($10.4), showing signs that investor confidence has recovered.

Fan Fuchun, Vice Chairman of China Securities Regulatory Commission (CSRC), said the CSRC hadn't yet received Ping An's refinancing plan. "We will carry out the approval procedure in a legal and strict manner, and make the right decision whether to approve it or not," said Fan.

Ma Mingzhe, Chairman of Board of Directors of Ping An, said if the plan was approved, Ping An would choose an appropriate time to issue new shares and would take market capability into full consideration.

Experts said the CSRC would most likely approve Ping An's plan because under the modern corporate system, the supervisory department must respect the decision of a listed company with a majority of its shareholders signing off on the plan.

Neighbors Helping Neighbors

To cash in on the fast-growing Indian steel industry, the state-owned metals trader China Minmetals Corp., together with Xinxing Pipes Group, has set up a joint venture with three Indian counterparts.

Construction of the new facility began in India on February 28. The facility will have an annual production capacity of 2.5 million tons of steel and 6 million tons of iron ore pellets, according to a statement on the China Minmetals website. The Chinese partners will own a 55-percent stake, while the Indian side will hold the rest.

Currently, India is the third largest source of Chinese iron ore imports, following Australia and Brazil, and 80 percent of Indian iron ore exports go to China. To avoid rising iron ore export duties, Chinese companies are seeking to produce iron and steel locally to meet the local demand, instead of importing iron ore and exporting steel.

According to Xu Siwei, Vice President of China Minmetals, it was the first-ever Chinese investment in India's steel industry, and a milestone for China's steel industry to expand in overseas markets.

"China Minmetals began a strategic transformation in 2000," said Xu. "Our goal is to go outside of the country, making use of foreign resources to produce the most demanded iron and steel products in the local country by applying Chinese technologies."

Keeping Oil Prices Stable

Despite crude oil price surges in the international market, the Chinese Government urged major refined oil producers to control the oil price and strictly prohibited arbitrary price rises.

In China the price of crude oil is set by the international market, but the refined oil price is still under government price controls. As a result, some petroleum companies prefer to export refined oil instead of fulfilling domestic demand.

Amid calls by refiners to raise prices, the National Development and Reform Commission and the Ministry of Commerce maintained their firm stance and ordered refiners to follow state-regulated prices and restricted willful price hikes.

Analysts contended that the government wants to continue to curb rising inflationary pressure through keeping the prices stable. Currently, the food sector has been the major culprit of the surging growth rate of the consumer price index. If oil prices rise, the overall economy would be affected severely.

Decision makers were reportedly working to close the gap between the comparatively lower prices of refined oil and the soaring global prices. "The government is waiting for the right timing," said Lin Boqiang, an energy professor at Xiamen University.

Rural Banks Encouraged to Go Public

The government has encouraged rural commercial banks to seek financing in the capital market, according to Liu Mingkang, Chairman of China Banking Regulatory Commission (CBRC).

Liu said, "Since the start of reforms in 2003, rural commercial banks have been on the track to sound development, and are basically well positioned to transform themselves into to modern rural financial institutions." Rural commercial banks have been continuously progressing in management capability, risk control ability and credit support to agricultural development.

At the end of last year, the CBRC approved Zhangjiagang Rural Commercial Bank's initial public offering (IPO) application, offering hopes for its counterparts to follow suit.

The CBRC is requiring the rural banking institutions to keep a capital adequacy ratio of at least 8 percent and an average non-performing loan ratio of less than 10 percent by 2010.

Zang Jingfan, Director of Cooperation Department under CBRC, said, "Currently, rural commercial banks in Beijing, Shanghai and Shenzhen have qualified for IPO," added Zang.

World Bank Optimistic

"China is likely to grow robustly in 2008 and is well positioned to stimulate demand if needed," according to the latest quarterly update issued by the World Bank in February.

The World Bank has projected a 9.6-percent growth in gross domestic product (GDP) for 2008, 1.6 percentage points higher than the Chinese Government's target of 8 percent set at the First Session of the 11th National People's Congress on March 5.

However, the World Bank's estimate is less than what many experts at financial institutions say, many of who predict GDP growth to top 10 percent.

"The slowdown in the global economy should affect China's exports and investments in the tradable sector," explained David Dollar, Country Director for the World Bank in China.

The U.S. subprime mortgage crisis has hurt economies in the United States and Europe, dragging down the overall global economy. People fear a global economy recession would hamper China's exports, which are considered one of the three major drivers of China's GDP growth.

In spite of export decline, the World Bank is still optimistic about Chinese economic growth prospects.

Dollar claimed the momentum of domestic demand should remain robust and a modest global slowdown could contribute to a rebalancing of the economy.

Consumption's contribution to GDP growth has been increasing. High employment growth, escalating individual income and the upgrading of the consumption structure will further guide the economy. Moreover, the Beijing 2008 Olympic Games will help boost the domestic sales market.

In 2008, fixed assets investment will also be on solid ground for further growth. With a rapid increase in corporate sales revenues and profits, companies are highly motivated to invest.

The World Bank also cautioned against continuous inflationary pressures and external influences. "Overall price pressures should ease in 2008 as some factors behind high food prices taper off. But there are risks, including from international food prices and wage cost pressures, and inflation concerns call for a relatively tight monetary policy," said Louis Kuijs, senior World Bank economist and main author of the quarterly report.

NUMBERS OF THE WEEK 10.1trillion yuan The registered capital of China's private sector ballooned to 10.1 trillion yuan ($1.42 trillion) in 2007, an increase of 22.7 percent year on year. Registered capital of private companies reached 9.4 trillion yuan ($1.32 trillion) and self-employed households took the rest of the share. 97% vs. 3% Geng Liang, Chairman of Shanghai Securities Exchange, disclosed that 97 percent of institutional investors (including securities companies, mutual fund companies, insurers and qualified foreign institutional investors) made profits in 2007, while only 3 percent suffered losses. He also said 70 percent of retail investors secured profits last year.