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Market Watch
Business> Market Watch
UPDATED: August 26, 2008 No.35 AUG.28, 2008
MARKET WATCH No.35, 2008
 
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Numbers of the Week

80 billion yuan

Sichuan Province has outlined more than 300 projects, involving a total investment of more than 80 billion yuan ($11.7 billion), to revitalize its tourism industry hard-hit by the earthquake on May 12.

3.51 billion yuan

China's Ministry of Finance on August 19 announced the earmarking of 3.51 billion yuan ($513.53 million) this year to support the development of domestic small and medium-sized enterprises.

TO THE POINT: Foreign investment banks are increasingly looking to China's vibrant merger and acquisition deals. To cope with domestic headaches such as power shortages and soaring international iron ore prices, the Chinese Government raised the on-grid coal-fired power prices and coke export tariff rates. Recent vehicle tax rate hikes may not be instrumental in depressing the sales of large-capacity cars. China Unicom is gearing up to challenge the dominance of China Mobile by pumping huge investments into developing a 3G network. 

By HU YUE

Chinese Redemption

For global investment banks that are overwhelmed by the simmering U.S. subprime loan debacle, China's merger and acquisition (M&A) market seems to be their last straw to clutch at. Companies that provide advisory services for M&A deals in China have done much better here than they have been doing in the United States.

China has seen more M&As in the last few years. According to Thomson Reuters Corp., the total value of the country's M&A deals in the first seven months of the year was $113.6 billion, surpassing the $112.1 billion recorded during the entire previous year.

Analysts said the vibrant Chinese market has served as a cushion for some investment banks amid subprime loan fears that have penetrated the entire financial sector. One of the biggest beneficiaries is UBS AG. The company suffered a dizzying loss of $328 million in the second quarter of this year. But it topped all of its peers in terms of profits in the Asia-Pacific area, largely because of its deep involvement in Chinese M&As, said Li Yi, President of UBS China, in an interview with the 21st Century Business Herald.

"The Chinese M&A market has diversified our profit sources and in part offset losses in the United States," he was quoted as saying.

J.P. Morgan is also gathering momentum from China. It has participated in the country's 10 biggest M&A deals so far this year, as advisor to either bidders or targets. It recently advised Sinosteel Corp. on its successful purchase of Australian iron ore miner Midwest Corp.

Gu Hong, General Manager of the M&A Department at J.P. Morgan Asia-Pacific, told the 21st Century Business Herald that deep-pocketed Chinese companies would increasingly look overseas for investments in the second half of this year, offering hope for international investment banks that are roiled by the subprime crisis.

Help for Power Plants

The National Development and Reform Commission (NDRC) increased the price of coal-generated electricity that grid operators must pay power-generating companies by 0.02 yuan ($0.0029). The new price took effect on August 20.

Analysts said the increase is intended to mitigate cost pressures for generators and ease domestic power shortages.

The government raised its power prices by 4.7 percent in July in an effort to help the country's coal-fired power plants, which have suffered huge losses because of surging coal prices.

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