China Day Ahead: U.S. Criticizes Climate Pledge; IMF's Currency Concerns

China is ignoring pledges made under a global-warming accord reached last year after a face-to-face meeting between President Barack Obama and Chinese Premier Wen Jiabao, the chief U.S. climate negotiator said.

Chinese officials have acted as though the agreement “never happened,” Todd Stern, U.S. special envoy for climate change, said in a speech at the University of Michigan Law School at Ann Arbor. China in December agreed to the Copenhagen Accord, a non-binding pact that aims to limit emissions blamed for global warming, he said.

Currency Race

Global finance chiefs warned a race to weaker exchange rates risks hurting the world economy even as they sought to downplay investor fears of a “currency war.”

As the International Monetary Fund’s annual meeting began in Washington, policy makers expressed concern that efforts to boost exports by embracing weaker currencies threatened to provoke protectionism and trade imbalances at a time when economic growth is already slowing. China was again the target of criticism as foreign officials called the yuan undervalued and pushed for its rise to be accelerated.

Yuan ‘More Than’ Undervalued

China’s yuan is “more than undervalued” and the euro is “too strong today” with an exchange rate of $1.40 to the euro, Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of euro-region finance ministers, told reporters in Washington.

Juncker said he’s “not happy” about the euro’s strength and that the U.S. dollar’s exchange rate isn’t in line with fundamentals.

Zhou on Yuan

China’s central bank Governor Zhou Xiaochuan resisted the calls from the U.S. and Europe for faster appreciation of the yuan, saying his country aims to avoid any “shock therapy” in its currency reform.

“China’s exchange-rate policy is based on the market supply and demand relation to move gradually to the equilibrium point,” said Zhou in Washington during a panel hosted by the British Broadcasting Corp. “We do that in a gradual way, rather than a shock therapy.”

Senate Yuan Bill

The U.S. Senate will consider legislation aimed at pushing China to raise the value of its currency in a lame-duck session, Rhode Island Democrat Jack Reed, a sponsor of the measure, said.

“I believe it’ll come up,” Reed said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” that aired this past weekend. “I don’t know if, given the other pending measures in the lame duck, that it can pass.”

Current Account Surplus

China plans to cut its current account surplus and proceed with foreign-exchange reform to help rebalance the global economy, central bank deputy governor Yi Gang said.

China aims to reduce the surplus to below 4 percent of its gross domestic product in the next three to five years, from 11 percent in 2007 and 5.8 percent in 2009, Yi said at a panel during an International Monetary Fund meeting in Washington. That would be the smallest surplus in its current account, the broadest measure of trade in goods and services, since 2004.

Press Conference Canceled

China canceled a press conference following this week’s summit with the European Union after EU officials rejected the country’s demand to bar some Chinese journalists, an EU official said.

The decision to cancel the Oct. 6 briefing was taken by Chinese authorities for diplomatic reasons, the EU official told reporters on condition of anonymity. The EU tried unsuccessfully to persuade the Chinese to go ahead with the briefing including all accredited journalists.

Hong Kong IPOs

Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd., expects initial public offerings on the bourse this year to exceed 2009 as more foreign firms list their shares in Asia.

“2010 will beat 2009,” Arculli, who heads the operator of Asia’s third-biggest stock market, said in an interview in Milan. About 60 companies raised HK$189.3 billion ($24.4 billion) in 2009, data compiled by Bloomberg show.

Moody’s on HSBC Units

Moody’s Investors Service said it put the Aa2 long-term foreign currency deposit ratings of Hongkong & Shanghai Banking Corp. and Hang Seng Bank Ltd. on review for a possible upgrade.

The review follows the announcement that Moody’s put Hong Kong’s Aa2 government bond ratings on review for a possible upgrade. The ratings of Hongkong & Shanghai Banking and Hang Seng are now constrained by Hong Kong’s ceiling, Moody’s said in an e-mailed statement.

Changan Auto Investment

Chongqing Changan Automobile Co. said it will invest 11.5 billion yuan in a passenger vehicle project in Beijing.

The project, pending board approval, may produce 500,000 vehicles and 500,000 engines a year, the company said in a statement to the Shenzhen stock exchange.

EU China Brick Duties

The European Union threatened to renew tariffs against China on bricks used in steelmaking for another five years to curb import competition for EU manufacturers.

The 27-nation EU said it would examine whether to reimpose the duties as high as 39.9 percent on imports from China of magnesia bricks, which steelmakers such as Tata Steel Ltd. use. The refractory product is used to line the vessels in which steel is melted.

Vestas Low-Speed Turbins

Vestas Wind Systems A/S, the world’s largest wind turbine- maker, is planning to counter competition from China by expanding into areas of lower wind speed with more efficient wind-machine blades.

“It’s about driving into new and lower wind speed markets, and keeping the technology edge when we’ve got a lot of very stiff Chinese competition for doing what we used to do,” Managing Director of Vestas Technology Research and Development Rob Sauven said in a London interview.

THE FOLLOWING STOCKS MAY BE ACTIVE TODAY:

Baoshan Iron & Steel Co. (600019 CH): China’s biggest publicly traded steelmaker said profit for the first nine months may have risen by between 170 percent and 190 percent from a year ago, more than earlier forecast. The shares added 2.4 percent to 6.79 yuan.

Citic Securities Co. (600030 CH): China’s largest securities company by market cap may benefit from a regulatory rule issued by Securities Association of China to set the floor for brokerage fees to guide companies away from price-cut and volume-based competition. The shares added 6.1 percent to 11.29 yuan.

China Vanke Co. (000002 CH): China’s largest listed developer said sales last month surged 160 percent from a year earlier to 14.2 billion yuan ($2.1 billion). Shares added 0.5 percent to 8.44 yuan.

Chongqing Changan Automobile Co. (000625 CH): The automaker said it will invest 11.5 billion yuan in a passenger vehicle project in Beijing that may produce 500,000 vehicles and 500,000 engines a year. The company also said vehicle sales last month rose to 149,008 units from 132,030 a year ago. The shares added 3.6 percent to 11.39 yuan.

Dongfeng Automobile Co. (600006 CH): The company said vehicle sales last month were 27,242 units, compared with 20,364 units a year ago. The shares rose 2.6 percent to 5.63 yuan.

Shenzhen Zhongjin Lingnan Nonfemet Co. (000060 CH): The lead and zinc miner said on Oct. 8 the company’s Australian subsidiary Perilya Ltd. signed an agreement to buy Canada’s Globestar Mining Corp. for C$184 million ($182 million) to gain

Sewco International Holdings Ltd. (209 HK): The toy and beverage maker said it canceled planned subscriptions by its controlling shareholder for new shares and convertible bonds, increasing the size of placements to outside investors. The stock was unchanged at HK$1.07.

Shanghai Electric Group Co. (601727 CH): The company signed a memorandum of understanding with Italy’s Impregilo SpA to build the world’s largest seawater desalination joint venture, Caijing reported on Oct. 8, citing a Shanghai Electric press release. The shares gained 3.9 percent to 8.57 yuan.

Shanghai Forte Land Co. (2337 HK): The real estate developer said provisional September real estate sales rose to 1.9 billion yuan ($284 million) from 729 million yuan a year earlier. The stock fell 1.3 percent to HK$2.25.

Tianjin FAW Xiali Automobile Co. (000927 CH): The automaker said sales last month rose to 21,281 units from 18,020 a year earlier. The shares added 7 percent to 8.54 yuan in Shenzhen trading.

Xi’an Aircraft International Co. (000768 CH): The aircraft components and aluminum materials maker may benefit from a regulation from State Council and Central Military Commission to reinforce quality management on military equipment. The shares added 1.8 percent to 12.8 yuan.

Xing Lin Medical Information Technology Co. (8130 HK): The medical information services provider will raise as much as HK$160 million placing as many as 1.6 billion shares at 10 Hong Kong cents each. Xing Lin will also issue HK$150 million of convertible bonds. The stock fell 1.4 percent to 20.5 Hong Kong cents.


BLOOMBERG TELEVISION GUESTS SCHEDULED FOR TODAY:

8:10 am   Timothy Moe, Goldman Sachs, Asia Regional Equity
          Strategist
9:10 am   Li Gang Liu, ANZ Head of China Economic Research
9:40 am   James Tien, Hong Kong businessman and political figure
10:10 am  Michael Pettis, MD, Shenyin Wanguo Securities
12:10 am  Dariusz Kowalcyzk, Credit Agricole Senior Economist &
          Strategist

To contact the editor responsible for this story: Bruce Grant at bruceg@bloomberg.net.

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