China Extends Resource Tax

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
08 Jul, 2010
New York City

Stocks in China fell after resource tax was extended to cover mines across China. Hong Kong stocks rallied tacking gains in the U.S. Chongqing Iron & Steel said first half output surged 24.7%. Dongfeng Auto sales in the first-half soared 56%.

[R]5:00 PM Hong Kong, China – Stocks in China fell after resource tax was extended to cover mines across China. Hong Kong stocks rallied tacking gains in the U.S. Chongqing Iron & Steel said first half output surged 24.7%. Dongfeng Auto sales in the first-half soared 56%. Huadian Power first-half electricity output expanded 25% from a year ago.[/R]

Stocks in China fell after the government extended a tax on oil, gas and coal extraction at all mines across the nation to develop resources rich inland provinces.

Stocks in Hong Kong however gained after IMF raised its growth forecast for global growth and on the sharpest increase in U.S. retail sales in in the first five months since 2006.

Hang Seng Index gained 0.97% or 193.49 to close at 20,050.56. The CSI 300 Index lost 0.18% or 4.56 to close at 2,575.92.

China announced today that it will extend the reach of the resource tax to the entire country keeping the benchmark rate at 5%.

“The benchmark rate for the tax will be set at 5% and will vary with commodities but it is not clear when the scope of the levy will be extended beyond the western province of Xinjiang,” said Du Ying, Vice Chairman of the National Development and Reform Commission in Beijing today.

China bought a net of 735.2 billion yen of Japanese bonds in May, according to data released by the Ministry of Finance in Japan.

The purchases this year exceeded sales by 1.28 trillion yen, since January. This year’s purchases are nearly five times as much for the whole of 2005, which was one of the best years for bond purchase by China, according to the data released by the ministry.

Cnooc Ltd, China’s biggest offshore energy explorer, confirmed it is in final negotiations with Tullow Oil Plc to develop three oil blocks in Lake Alberta basin in Uganda.

Tullow, the U.K. explorer with most licenses in Africa, had earlier agreed to buy Heritage Oil Plc’s interest in two oil blocks in Uganda. The approval, delayed by tax issues, will clear the way for Tullow to rope in Cnooc and Total SA to help develop blocks 1, 2 and 3A in Lake Albert basin.

Countries in Central Asia such as Kazakhstan and Uzbekistan, that have some of the largest reserves of rare metals like tungsten and chromium look favorably on investment from China because of closer political ties, Eleanor Wu, an Ernst & Young partner on transaction advisory services said in an interview in Beijing.

President Hu Jintao has visited Central Asia in June, signing gas and nuclear agreements and also promising cooperation in port construction and transport infrastructure. He had also promised billions of dollars in aid, in exchange for energy and commodity supplies.

The number of air travelers in China is expected to more than double to 700 million a year by the year 2020 as economic growth spurs travel, according to China’s aviation regulator.

“This year number of passengers is expected to exceed 266 million and the number may reach 700 million by the year 2020,” said Liu Shaocheng, Director of Policy Research at a conference in Beijing today.

Shanghai Movers

Aluminum Corporation of China Limited rose 0.6% to 8.89 yuan.

Anhui Heli Co., Ltd added 6.0% to 13.08 yuan after the machinery maker said first-half net income may increase 28 fold to 33 fold from a year earlier on increased production and sales.

Anhui Jianghuai Automobile Co., Ltd advanced 4.7% to 6.84 yuan after the light-truck exporter said its sales of heavy trucks in June rose 110% from a year earlier to 2,368 units.

China Merchants Bank Co., Ltd, the lender, rose 0.4% to 13.21 yuan.

Chongqing Iron & Steel Company Limited fell 1.3% to 3.78 yuan after the company announced that it produced 1.75 million tons of steel products in the first half of this year, reflecting an increase of 24.71% from a year go period.

Dongfeng Automobile Co Ltd rose 3.3% to 4.69 yuan after the company announced that it sold 148,380 autos in the first half of this year, reflecting an increase of 56.36% from a year ago.

Huadian Power International Corporation Limited dropped 1.0% to 3.65 yuan after the company said that it generated 62.52 million megawatt hours of electricity in the first half of 2010, up 25% year on year.

HK Movers

China Petroleum & Chemical Corporation fell 0.9% to HK$6.18.