China Day Ahead: U.S. Files WTO Complaints; Lawmakers on Currency Policy

The U.S. will file two new complaints against China at the World Trade Organization as pressure grows on the Obama administration over trade with the world’s largest exporter of goods.

One of the cases concerns curbs on payment-processing companies operating in China, an issue the administration first considered in March. The second complaint is over dumping duties that China imposed on U.S.-made steel products.

The Obama administration “is fighting for the American jobs threatened by China’s actions, and insisting on the level playing field promised in our WTO commitments,” U.S. Trade Representative Ron Kirk said in a statement.

Lawmakers Complain

U.S. lawmakers faulted China’s currency policy as predatory as they disagreed on the need for legislation that would punish China for keeping its currency undervalued.

Representative Tim Ryan, an Ohio Democrat and co-sponsor of legislation letting companies seek duties on Chinese imports, said China is violating trade laws and the bill would give the U.S. tools to combat undervalued currencies.

“It’s now time for our country to have the guts to stand up and take a strong stand against China’s currency manipulation,” Ryan said today in testimony to the House Ways and Means Committee. Representative Dave Camp, top Republican on the panel, said he opposes the legislation.

Cnooc Bid

Cnooc Ltd., China’s largest offshore oil explorer, may bid $10.2 billion for BP Plc’s 60 percent stake in Argentina’s Pan American Energy LLC and will probably seek a partner in the acquisition, Citigroup Inc. said.

The estimate assumes Cnooc will pay a 10 percent premium over the value it paid earlier this year for 20 percent of Pan American because the BP stake would give it control of the company, Citigroup analysts Graham Cunningham and Tushar Bagla said in a report.

Caijing Retracts Sinochem Story

Caijing magazine retracted a report in which Sinochem Group Vice President Han Gensheng said that even a $10 billion bid for Potash Corp. of Saskatchewan Inc. would be too high, deputy editor Ma Ke said.

The interview with Han didn’t take place, Ma said, declining to comment further. The magazine had cited Han as saying a purchase doesn’t make financial sense, and that there are few companies that can compete with BHP Billiton Ltd., which offered $40 billion for the Canadian fertilizer producer.

A Sinochem spokesman, who declined to be identified because of company policy, said Han didn’t make the comments attributed to him by Caijing.

China Mobile Internet

China Mobile Ltd., the world’s biggest phone carrier by customers, plans to start an Internet-search engine next year, challenging Baidu Inc., as the slowing wireless market leads the company to data services for growth

“Because the penetration rate of mobile phones in China is very high, it’s very normal that we have a growth slowdown,” , Chairman Wang Jianzhou, 61, said in an interview yesterday at the World Economic Forum in Tianjin, China. “Many shareholders ask us ‘What will be your next source of growth?’ We think the next source of growth will be data.”

U.S. Yuan Jobs

China’s currency policy is the most important U.S. trade issue and raising the yuan’s value would help add 500,000 American jobs, said C. Fred Bergsten, director of the Peterson Institute for International Economics.

Most of those jobs would be in manufacturing with pay rates that would be higher than average U.S. wages, Bergsten said in testimony to the House Ways and Means Committee. The non-partisan institute is based in Washington.

Bain Gome Stake

Bain Capital LLC converted its 1.59 billion yuan ($236 million) bondholding in Gome Electrical Appliances Holdings Ltd. into a 9.98 percent equity stake, gaining votes at a shareholders’ meeting this month.

Gome, China’s second-biggest electronics retailer, will cancel the convertible bonds and issue 1.63 billion new shares to Bain on Sept. 22 at a conversion price of HK$1.108 each, according to a Gome Hong Kong stock exchange filing yesterday.

Petrobras Offer Unattractive

The planned share sale by Petroleo Brasileiro SA, the Brazilian company that had the smallest profit gain among the world’s largest oil producers last quarter, is “not very attractive,” according to China’s biggest fund manager.

Petrobras, as the state-owned driller is known, plans to raise as much as 129 billion reais ($75 billion) in the world’s largest offering as it seeks cash to develop offshore crude fields. The sale includes $42.5 billion in stock that Petrobras will use to buy 5 billion barrels of undeveloped offshore reserves from the government.

BYD L.A. Battery Farm

BYD Co., a Chinese car and battery maker backed by Warren Buffett, and the Los Angeles Department of Water & Power agreed to develop a system to store energy from the municipal utility’s Pine Tree wind farm.

The company and the utility will cooperate on a 5- to 10-megawatt battery unit at the 120-megawatt wind farm, Los Angeles Mayor Antonio Villaraigosa said in a statement on Sept. 13.

Solar Cell Survey

Prices for photovoltaic panels that convert sunlight into electricity may fall about 10 percent next year, less than analysts forecast, as European demand increases.

First-quarter prices will drop to an average of $1.65 a watt compared with $1.50 in the previous median estimate of five analysts surveyed by Bloomberg News. Analysts who contributed to the surveys included John Hardy at Gleacher & Co. in Connecticut and Sanjay Shrestha at Lazard Capital Markets. This year, contracts may average $1.80 to $1.85 a watt, they forecast.

China Alternative Forecast

China’s exponential development of wind and hydropower will still compose only a fraction of its power supply in 2020, said Liu Zhenya, chairman and chief executive officer of State Grid Corp. of China, the nation’s largest grid operator.

In the past decade, China’s solar power capacity has increased by 47 times and wind power by 21 times, Liu told the World Energy Congress today in Montreal.

Coal Demand Slows

Demand for power-plant coal may slow in China, the world’s biggest energy consumer, as electricity generation continues to be “depressed,” Daiwa Capital Markets Ltd. said in a note.

“Given that the third quarter is a peak season for hydropower generation, which has guaranteed dispatch, we expect weakness in thermal-power output in September given the double-whammy impact,” Dave Dai, a Hong-Kong based analyst for Daiwa, said in the note.

China Iraq Oil

Iraq plans to increase oil exports to India, China and other countries in Asia, State Oil Marketing Organization Director General Falah al-Amri said in Baghdad.

“Europe is an old market, and it has made plans to diversify away from oil to cleaner alternatives,” Amri said in a speech marking the 50th anniversary of the Organization of Petroleum Exporting Countries. “India and China are different. They are using tremendous amounts of oil.”

Cotton Crop Threatened

Rain in cotton-growing regions of China, the world’s largest producer and user, may hurt the quality of the crop, said Drew Lerner, the president of World Weather Inc.

There have been “pockets of heavy rain” this past week in the provinces of Jiangsu, Anhui and Zhejiang, Lerner said. While the weather was drier in the Yellow River Basin, there is more rainfall forecast for that region next week, he said. The rain may cause rotting in some of the unharvested cotton in open pods, or bolls, Lerner said.

MARKETS:

U.S. stocks advanced, propelling benchmark indexes to five-week highs, as speculation companies will be bought or return cash to shareholders raised investors’ optimism.

Travelers Cos. advanced 2.8 percent, the most in the Dow Jones Industrial Average, after boosting its forecast for stock buybacks. Novell Inc. rose 5.9 percent after the New York Post said the company reached an agreement to sell itself. McKesson Corp. helped lead gains among health-care companies after Lazard Capital Markets said it may rally. Time Warner Cable Inc. slumped 5 percent after saying it may lose customers.

The S&P 500 rose 0.4 percent to 1,125.07 at 4 p.m. in New York, the highest since Aug. 9. The index is up 10 percent from 2010’s low in July. The Dow advanced 46.24 points, or 0.4 percent, to 10,572.73.

THE FOLLOWING STOCKS MAY BE ACTIVE TODAY:

Banking stocks: China’s banking regulator may require the nation’s “systemically important” banks to boost their capital adequacy ratios to as high as 15 percent by 2012, a person with knowledge of the matter said. The China Banking Regulatory Commission is drafting a plan that would require lenders to have common equity equal to at least six percent of risk-weighted assets, the person said.

Industrial & Commercial Bank of China Ltd. (601398 CH), the nation’s biggest listed lender, fell 0.3 percent to 4.03 yuan. Agricultural Bank of China Ltd. (601288 CH), the nation’s third-largest, dropped 0.4 percent to 2.68 yuan.

Beiqi Foton Motor Co.: The automaker raised 2.5 billion yuan in a private placing of 138.4 million shares at 18.06 yuan each. The stock fell 2.8 percent to 21.57 yuan.

China Golden Development Holdings Ltd. (162 HK): The cruise ship operator turned retailer will buy a department store premises it’s leasing in Xi’an, China, from the landlord for $67.6 million. The stock fell 2.9 percent to 33 Hong Kong cents.

China Railway Group Ltd. (601390 CH): The company’s 51-percent-held, Shanghai-listed unit China Railway Erju Co. (600528 CH) won two contracts, one a 3.1 billion yuan ($459.7 million) order for work on the Chengdu to Chongqing rail line, the other a 2.9 billion yuan order for more railroad work in Sichuan province, according to an exchange filling. China Railway Group fell 0.9 percent to 4.25 yuan. Railway Erju dropped 2.2 percent to 8.81 yuan.

China Shenhua Energy Co. (601088 CH): The company’s August coal sales increased 20 percent to 25.1 million metric tons, as exports dropped 31 percent to 900,000 tons, it said in a Shanghai stock exchange filing. Its power generation rose 43 percent to 13.4 billion kilowatt hours, the statement said. The shares fell 2.2 percent to 23.18 yuan.

Ningxia Yinxing Energy Co. (000862 CH): The Chinese maker of industrial equipment will invest 1.5 billion yuan in wind and solar projects. The stock gained 10 percent to 16.24 yuan.

Rizhao Port Co. (600017 CH): The port operator cut the minimum price for its private stock offering to 3.94 yuan per share from 5.91 yuan per share, and increased the number of shares it may sell to 390 million from 260 million. The stock fell 2.1 percent to 6.52 yuan.

Shengli Oil & Gas Pipe Holdings Ltd. (1080 HK): The gas and oil pipe maker may buy a non-controlling stake in a company that makes petroleum equipment and provides related services. The stock gained 0.6 percent to HK$1.62.

Shenzhen Development Bank (000001 CH): The bank’s 379.58 million new shares sold to Ping An Insurance (Group) Co. in a private offering will become tradable Sept. 17, Shenzhen Development Bank said in an exchange filing. The bank declined 1.5 percent to 16.92 yuan.

EVENTS SCHEDULED FOR TODAY:

CLSA investor forum in Hong Kong
Latin America-China Investors Forum in Beijing
Auto forum in Chengdu
Hong Kong unemployment rate. 4:30 p.m.

BLOOMBERG TELEVISION GUESTS SCHEDULED FOR TODAY:

8:10   Robert Minikin, Standard Chartered, FX Strategist
9:40   Mark Prisk, UK Minister of State for Business, Innovation
       and Skills
12:10  Russell Napier, CLSA, Consultant Global Strategist

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