China Offers Relief to Auto Buyers, FDI Rises

123jump.com Staff
15 Jan, 2009
New York City

Latest economic measures in China to support steel and auto industry failed to lift market sentiment in Hong Kong and Shanghai trading. Stocks in Hong Kong fell 3.4% and Shanghai had negative bias. China proposed to offer one time tax relief to small car buyers. Foreign investment rose 24% in 2008.

[R]6:00AM New York, 6:00PM Hong Kong - China’s FDI increases 23.6% to $92.4 billion in 2008. China unveils package for steel and auto industry.[/R]

Hong Kong shares fell led by financial stocks that saw HK$11 billion being shaved off the market in a two-day decline as investors fretted about a report by Morgan Stanley that the lender is likely to halve its dividend.

Auto stocks pared losses after China’s State Council unveiled broad measures to stimulate the auto and steel industries.

In Hong Kong trading Hang Seng Index fell 3.4% or 461.65 to 13,242.96, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, dropped 2.5% or 176.68 to 7,042.36. In Shanghai trading CSI 300 Index shed 0.02% or 0.37 to 1,954.87.

Daily turnover on main-board surged to HK$49.4 billion from HK$66.2 billion by mid-day yesterday.

China Unveils Package for Steel and Auto Industries

China’s State Council yesterday announced that it will lower the purchase tax on cars under 1.6 liters from 10% to 5% effective January 20 to December 31 to boost sales.

Government will also extend Rmb 5 billion for one time credit to farmers to either purchase new mini-vans under 1.3 liters or upgrade their 3-wheeled vehicles and low speed trucks to mini-trucks from March 1 to December 31.

Regulations that restrict car purchase will be reviewed.

Beijing is also deliberately supporting auto companies and major auto-part makers to expand through mergers and acquisitions.

An estimated Rmb10 billion will be set aside to support companies to upgrade technologies, develop new engines and use alternative energies.

According to the report, the government is planning supportive measures for the steel industry to increase domestic demand and adopt a flexible tax rebate policy.

Seed money will be injected to promote technological advancement in the sector.

China’s FDI Rises 23.6% to $92.4 billion

The Ministry of Commerce reported today that the country’s foreign direct investment climbed 23.6% to US$92.3 billion in 2008.

Separately, Xinhua News Agency reported that preliminary estimates show that GDP of Beijing gained 9% to Rmb1 trillion in 2008, with a per capita regional GDP of over US$8,000.

Beijing Municipality’s local fiscal revenue soared 23.1% to Rmb183.73 billion, while investments in fixed assets by the whole society topped Rmb390 billion.

The tertiary industry contributed 73% of the GDP.

Retail sales of consumer goods also gained 20% to Rmb450 billion and per capita disposable income of urban residents in Beijing increased 7% to Rmb 24,725 and the net income of the farmers gained 6.5% to Rmb 10,747.

Gainers & Losers

Angang Steel increased 4.9% and Maanshan Iron & Steel gained 4.2 % as China unveiled sweeping measures meant to help the industry grow and be competitive on the global markets.

BYD Company edged up 1.9% after China provided tax subsidy for the vehicle purchase.

HSBC fell 5.7% to HK$66 on a report by Morgan Stanley that the lender will be forced to halve its dividend on reduced earnings.

Standard Chartered also plunged 6.7% after its chairman for Asia operations Mervyn Davies, who restructured the bank during the Asian financial crises of 1997 to 1998, stepped down.

China Southern Airlines declined 2.3% after announcing that it will probably report a loss for 2008 and Air China shed 8.1%.

However Eastern Airlines gained 11% on speculation it might sell stakes in smaller regional carriers and was likely to delay new aircraft orders.