THE CHINA CHALLENGE TO HIGH TECH, MORE IPOs IN TELECOM, BANKING, AND PROPERTY
By Ben Calmes
© Sinomania! 2007

First aired: March 21, 2007 00:07 (PST)

[THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.]

(BEGIN VIDEOTAPE)
ANNOUNCER: Hello and welcome to Sinomania! for the week of March 23, 2007!

The China challenge moves to high-tech and may have you rethinking long positions in companies like Boeing and Intel; IPO News: the China pipeline remains busy with new issues in banking, telecom, and property; And look for part 2 of this show, a special focus on the strategic shift revealed in this year's National People's Congress…

Hi-Tech Challenge In July 2009 Shandong Airlines will take delivery of the first of many 90 to 100-seat commercial jetliners made in China called ARJ21-700. The ARJ21-700 airplane is the result of years of collaboration with numerous foreign partners including General Electric, Rockwell Collins, and Embraer of Brazil. Commercial aircraft like the ARJ21 are considered regional aircraft and don't compete with the big planes manufactured only by two companies in the world: Boeing and Airbus. China's aeronautical industry is large and spread across the country with two dominant players: China Aviation Industry Corporation or AVIC I and AVIC II. Chinese companies supply parts including whole sections for Boeing and Airbus planes. China began producing American designed jets as far back as 1985 when McDonnell-Douglas MD-82s rolled off an assembly line in Shanghai. Soon a factory to build entire Airbus A320s will open outside Tianjin. A few weeks ago, Chinese aviation companies proposed to the State Council - the governing body of China's political system - state support for an ambitious project to domestically produce big commercial jet planes to satisfy the giant needs of China's airlines. The project has been given the go-ahead and up to 60 billion Yuan in seed money. If successful, Chinese airplanes could compete directly with Boeing and Airbus and turn the aviation industry on its head. The Chinese are not expecting production until 2020 at the very earliest but the implications are big as Chinese purchases of Boeing and Airbus planes has kept both companies aloft more than once over the past few years. Meanwhile Intel is not commenting on the recent approval by China's powerful National Development and Reform Commission for Intel to build a multi-billion dollar chip plant in the northeastern coastal city of Dalian. This facility would make state-of-the-art chips and has some semiconductor makers very nervous. Perhaps in response to Intel's plans, the government of Taiwan has lifted its restrictions and will allow the world's biggest chip maker, Taiwan Semiconductor, to use its highest technology for a new wafer plant in Shanghai. Add these developments to the growing sophistication of Chinese automakers and the major advances being made in China with stem-cell biotechnology and nanotechnology and you can see that the challenge from China soon may be not just in low-end manufactures but in the high-tech and high-price products dominated today but the most advanced economies in the world. IPO Report New listings: Citic 1616 Holdings, a unit of Hong Kong listed Citic Pacific, is to be spun off in a listing set for the first week of April. Pricing will be announced next week and the IPO is expected to raise up to $270 million US dollars and already has four key investors including Singapore's government investment arm. Citic 1616 is a telecom hub operator for international voice and data calls between China and Hong Kong and 50 other countries. More banking IPOs in the works: Jiangsu Bank, recently created from the merger of ten small commercial city banks in Jiangsu province north of Shanghai, is looking for partners and planning a listing for domestic and overseas investors. There are no further details at this time but the bank, controlled now at the provincial level, is talking to investors in Hong Kong. A bigger bank IPO in the offing is China Citic Bank, the seventh largest lender in China, is planning a Hong Kong and Shanghai joint listing that may raise up to $3 billion US dollars. A meeting is set for this week in Hong Kong. Another property play -- Country Garden Group a resort residential developer in fast-moving Guangdong province will stage an international roadshow very soon with an IPO as early as mid April. And New China Life Insurance has delayed its IPO to at least 2009. Beijing based New China Life is China's fourth largest insurance carrier and was expected to raise up to $1 billion US dollars in a domestic and Hong Kong listing but the company is being reorganized and there an investigation of tax evasion. The Shanghai Securities Exchange may increase its trading band and allow individual stocks of locally listed companies to rise and fall up to 20% with an unlimited number of trades per day. Currently no stock can go further than 10% on one trade per stock per day. Ultimately the Shanghai markets looks to use a "circuit-breaker" type system similar to other world exchanges. There are a number of new changes being floated including developing derivatives products and introducing market makers or specialists for poorly performing stocks. As always keep your eye on Shanghai.

Make sure to see part 2 of this week's show for a special report on this year's legislative session of the National People's Congress. Remember, investment decisions are up to the viewer.

I’ll see you next week!