China Economic Review - Daily Briefs

China launches jumbo jet firm

China has launched a new state-run company that will build jumbo passenger jets in a bid to reduce its dependence on foreign technologies in the aviation sector, the South China Morning Post reported. The state-backed Commercial Aircraft Corp of China will be tasked with researching, developing, manufacturing and marketing a large passenger plane with at least 150 seats. Analysts were cited as saying that it could take years to realize this goal, but a success could eventually challenge aerospace giants Boeing and Airbus. The State-owned Assets Supervision and Administration Commission is the firm's largest shareholder, with an investment of around 32% of the company's total registered capital of US$2.7 billion.

CNPC to buy stake in Japanese oil refinery

China National Petroleum Corporation (CNPC) signed a letter of intent with Japanese oil refiner Nippon Oil to purchase a 49% stake in an Osaka oil refinery, the Financial Times reported. The venture, expected to begin operating in April 2009, marks CNPC's first investment in Japan. CNPC will provide crude oil for the plant and sell the output in China, while Nippon Oil will manage the facility. Nippon Oil, which faces surplus capacity as its domestic market shrinks, has been refining oil for CNPC subsidiary PetroChina on a contract basis since 2004. The letter of intent was signed last week during Chinese president Hu Jintao's five-day visit to Japan.

Hang Seng includes more mainland companies

Hong Kong's benchmark stock index has removed two Hong Kong-based companies from its makeup, with plans to replace them with two mainland-based firms, the Wall Street Journal reported. Telecom operator PCCW and infrastructure firm Cheung Kong Infrastructure Holdings were removed from the Hang Seng Index on Friday, while H-share companies Tencent and Aluminum Corp of China, or Chinalco, will be added to the index from June 10. The addition of the two "red chip" companies is viewed as a sign of mainland firms' increased importance to the Hong Kong bourse, and of the high expectations for the two companies' performance, the paper said.

China eyes farmland investments abroad

A proposal by China's Ministry of Agriculture will encourage Chinese companies to buy farmland abroad, especially in Africa and South America, to help guarantee food security, the Financial Times reported. The proposed plan would make supporting offshore land acquisition by domestic agricultural companies a central government policy. Beijing currently has similar policies to encourage outbound investment by banks, manufacturers and oil companies, but agricultural investment has been limited. Though China remains a net exporter of agricultural commodities, it is increasingly reliant on imports, as rising wealth has shifted dietary habits away from staple foods.

Vice Premier looks to rein in inflation

China's Vice Premier said the country should continue to use macroeconomic measures to control inflation and ensure that the economy does not overheat, the Wall Street Journal reported, citing comments from Wang Qishan that were made at a financial forum in Shanghai on Friday. In his most comprehensive remarks on the economy since his promotion to the post in March, Wang said the government must "prevent fast money-supply growth from becoming excessive and structural price increases from escalating to a severe overall inflation." Wang, formerly mayor of Beijing and head of China International Capital Corp, is in charge of China's financial sector. The producer price index rose 8.1% year-on-year in April, according to the National Bureau of Statistics.

World Bank economist: no post-Olympics recession

China will not face a recession after this summer's Olympic Games, said new World Bank chief economist Justin Lin in Beijing on Sunday, state media reported. While some countries that have hosted previous Olympics have faced an economic downturn in the aftermath of the Games, the size of China's economy will help ward off such a slump. China will also continue to be an attractive destination for investment given that it will host the World Expo and Asian Games in 2010, he said. China's continued investment in infrastructure and the upgrading of various industries will help ward off an economic slowdown, Lin said.

Rights groups urge China to pressure Myanmar on aid

Human rights groups have called on China to apply diplomatic pressure on Myanmar to accept diplomatic aid in the aftermath of the tropical storm Nargis, which has claimed tens of thousands of lives in the country. Since the cyclone struck on May 2, foreign governments and agencies have pledged US$57 million in aid, most of which has been resisted by Myanmar's ruling military junta, the Wall Street Journal reported. Human Rights Watch has urged China, India and the Association of Southeast Asian Nations to call for the lifting on aid restrictions.