Finance Markets

July 13, 2006

Shanghai index drops nearly 5 percent

Permalink: Shanghai index drops nearly 5 percent

Filed under: Equities, Economy, China, Asia, Japan

Most Asian equities markets saw substantial losses on Thursday. The exception was Manila’s composite index, which added 1.3 percent to 2,261.57.

The Shanghai composite index in China, by contrast, dropped 4.8 percent to 1,655.8 on the news that China’s largest bank, Industrial & Commercial Bank of China, and Daqin Railways both plan to float initial public offerings later in the year. The ICBC IPO will take place on the same day it lists in Hong Kong. Investors worried that the market will be inundated with new paper from the IPOs. Also helping Shanghai lower was a report that the Chinese central bank will raise interest rates once again. Despite today’s losses, however, Shanghai is still 43 percent higher than it was when the year began.

Elsewhere, the Hang Seng index in Hong Kong dropped 1.3 percent to 16,305.48 on the rumors of an interest rate hike in China. The weighted index in Taipei was down 1 percent to 6,567.60 on worries about earnings in the technology sector there.

In Tokyo, the Nikkei 225 dropped 1 percent to 15,097.95 and the Topix index was down 0.8 percent to 1,551.03 as the semiconductors and consumer electronics sectors saw declines.

Advantest declined by 2.9 percent to ¥11,420, while NEC Electronics was down 3.4 percent to ¥3,450 on a downgrade from Credit Suisse. Tokyo Electron dropped 4.5 percent to ¥7,470.

Among consumer electronics companies, Sony fell 1.2 percent to ¥4,930, Canon dropped 1.9 percent to ¥5,620, and Matsushita Electric Industrial, maker of the Panasonic brand, declined by 3.1 percent to ¥2,225.

The consumer finance sector in Tokyo saw gains after recent losses. Takefuji added 4.8 percent to ¥6,120 when a Canadian investment group added to its holdings in the Japanese lender.

March 27, 2006

Higher domestic oil product prices in China

Permalink: Higher domestic oil product prices in China

Filed under: Commodities, Oil, Economy, China

China announced Sunday that it has raised prices for its domestic oil products to make up losses created by the difference in prices between crude oil and oil products. China’s refineries lost a reported Rmb30 billion last year, and the lack of enthusiasm on the part of refiners to supply the domestic market due to low prices led to spot shortages last summer. The government had been reluctant to pass on the cost of the increasing use of imported oil due to the effect it would have on farmers and other groups that are dependent on the use of oil products.

Refinery gasoline prices were raised by Rmb300 ($37.36) per tonne, while diesel prices went up by Rmb250. These increases are said to be too small to completely cover the increase in prices of oil globally, but are still expected to give some help to domestic refiners such as Sinopec. Distributors’ margins, however, will decrease, as pump prices will only be allowed to rise by Rmb 250 per tonne for gasoline and by Rmb 150 per tonne for diesel.

At the same time as the price increases were announced, the Chinese government also said that new subsidies will be put in place for farmers, urban transport companies, some disadvantages groups, and public-good industries. No details on how or when the subsidies would be put into operation were announced, however.

In another move to help make up losses from imported oil, the Chinese government said last week that tariffs will be introduced on industrial fuels. Additionally, the tax on large cars went up from 8 percent to 20 percent.

August 22, 2005

China makes bid on PetroKazakhstan

Permalink: China makes bid on PetroKazakhstan

Filed under: Oil, China, Politics
China makes bid on PetroKazakhstan

State-owned Chinese oil company CNPC launched on Monday a bid of $4.18 billion for PetroKazakhstan.

Acquisition of the company would give China access to PetroKazakhstan’s 150,000 barrels per day of oil production, only a small fraction of China’s daily consumption.

Still, it is considered a strategic investment for China, which is the second-largest consumer of oil in the world.

If CNPC’s bid is successful, it would mark the first acquisition for China of a foreign-listed oil company.

CNPC might have competition for PetroKazakhstan, however, as Indian oil company, Oil and National Gas Corporation Ltd. (ONGC), has said that it is preparing a counter-bid.

Analysts said that the CNPC bid was high for an asset that is already considered to be past its prime, but it is considered likely that if ONGC makes a bid, it will be larger than that CNPC has made.

News of the Chinese bid sent shares of PetroKazakhstan up by 19 percent to $54.06 on the New York Stock Exchange in morning trade while shares in PetroChina, a unit of CNPC, gained less than 1 percent, to $82.38 on the NYSE.

August 10, 2005

China reveal renminbi basket of currencies

Permalink: China reveal renminbi basket of currencies

Filed under: Forex, China
China reveal renminbi basket of currencies

For the first time since China revalued its currency in July, it has announced which currencies are in the basket it uses to determine the value of the renminbi.

The biggest surprise is that the Taiwan dollar is not one of those currencies.

The major world currencies used to value the renminbi include the US dollar, the euro, the Japanese yen, and the South Korean won.

Those were chosen, according to the governor of the People’s Bank of China, because they are currently China’s dominant trading partners.

The other currencies included in the basket are the UK pound, the Thai baht, and the Russian rouble.

China’s currency had been valued at 8.28 to the dollar for the past ten years, but on July 21 China revalued to 8.11 to the dollar, about 2.1 percent stronger than it had been. Since then restrictions on its movement has kept it close to that value.

The renminbi closed at 8.1062 to the dollar on Wednesday.

In a separate announcement, the People’s Bank of China said that it would begin allowing non-banking firms to trade on its onshore foreign exchange market.

The bank also said that it was going to begin offering foreign exchange forwards on China’s domestic interbank market.

August 2, 2005

CNOOC abandons Unocal bid

Permalink: CNOOC abandons Unocal bid

Filed under: Oil, Companies, US, China
CNOOC abandons Unocal bid

CNOOC has withdrawn its bid for Unocal, citing “unprecedented political opposition” as its reason for not upping its bid to challenge Chevron’s bid to take over the California-based oil company.

The withdrawal of its bid on Tuesday came a day after Institutional Shareholder Services, a shareholder advisory firm, backed Chevron’s bid, saying that the CNOOC offer wasn’t large enough to compensate for the political uncertainties it carried with it.

ISS said that the six months minimum that it would take to close the CNOOC offer, should it have been accepted, would have reduced the value of its offer by 5 percent. This assessment did not take into consideration extra political interference in the acceptance process, which was likely to occur during the process of government approval of any deal.

A provision of the energy bill just passed by Congress contained a provision that would have delayed an acquisition of Unocal by CNOOC by at least 120 days.

After the announcement of CNOOC’s withdrawal of its bid for Unocal, Unocal shares were down in the New York Stock Exchange, but CNOOC’s shares had gained almost 6 percent in late morning trading.

July 28, 2005

Unocal and Chevron face investors

Permalink: Unocal and Chevron face investors

Filed under: Oil, Companies, US, China
Unocal and Chevron face investors

Unocal and Chevron began an effort on Thursday to convince shareholders that Chevron’s lower bid for the California-based Unocal is the best thing for both companies and shareholders.

Unocal argued that while CNOOC’s bid is higher, Chevron’s bid is superior because of the inevitable delays that would accompany an acceptance of the Chinese oil company’s bid.

It said that an acceptance of the CNOOC bid would lead to delays in the approval process as well as only limited possibilities for the recovery of damages if the deal were to fall through.

Even so, Unocal did not completely rule out acceptance of CNOOC’s offer if it were to include compensation for the increased risks and complexities inherent in its offer.

Speculation is high that CNOOC will indeed make a higher offer for Unocal. It is believed, however, that CNOOC is waiting until after the US Congress begins its August recess this Friday before deciding whether to raise its bid in any way.

CNOOC’s current offer stands at $67 per share, but it has the approval of its board of directors to raise the bid to $69 per share if necessary.

July 27, 2005

Yen loses ground as China curbs renminbi strength

Permalink: Yen loses ground as China curbs renminbi strength

Filed under: Forex, USD, Euro, China, Yen
Yen loses ground as China curbs renminbi strength

The yen lost ground to the US dollar again on Wednesday as investors adjusted to the fact that China would not be allowing the renminbi to get any stronger in the near term.

Since the revaluation of the Chinese currency last week, the People’s Bank of China has been seeing to it that renminbi does not move any more than 0.3 percent up or down from its midpoint in the previous day’s trade.

Beijing is concerned that it does not attract any more capital to an already overheating economy by making it currency too attractive to speculators.

By midday in New York, the dollar was unchanged in relation to the yen to stand at ¥112.15, while the euro gained 0.3 percent against the yen to ¥135.30. Meanwhile, the euro ended 0.2 percent higher in relation to the dollar at $1.2050.

The euro had fallen against the dollar earlier in the day as data out of the US showed that durable goods orders had gone up by 1.4 percent in June, much better than the decrease of 0.5 percent that had been expected.

However, the euro’s decline in reaction to that data spurred central banks to begin buying euros. Sterling gained 0.15 percent in relation to the dollar to $1.7444, but was down just a bit against the euro to £0.6910.

In Australia, news that inflation had grown at a slower rate than had been expected sent the Australian dollar down for the third day in succession.

Consumer prices were up 0.6 percent for the quarter, less than the expected rise of 0.8 percent. The Australian currency fell to $0.7559, a decline of 0.3 percent.

Consumers in China push fast food expansion

Permalink: Consumers in China push fast food expansion

Filed under: Companies, Countries & Regions, US, China
Consumers in China push fast food expansion

According to a United States Department of Agriculture report dated July 14 and released on Wednesday, the demand for frozen French fries in China will grow by 20 percent per year for the next five years as Western-style fast food restaurants expand in that Asian nation.

Additionally, French fries are becoming more popular on hotel menus in China, the report says. China will import 83,000 tonnes of frozen French fries in 2005, significantly higher than the 69,548 tonnes that were imported last year.

While China is increasing its own production of frozen French fries, it has not been able to keep up with the demand, said to be in excess of 100,000 tonnes. More than two-thirds of that amount are imported. Leading the expansion of the foreign presence in the fast-food sector in China, are Kentucky Fried Chicken, with 1,200 restaurants there at the end of 2004 and expectations of double digit growth.

McDonald’s has around 600 restaurants in China and is planning an aggressive campaign of expansion. According to the USDA report, the only factor that might slow down the exploding demand for French fries in China is a recent report from the World Health Organization that found the presence of a carcinogen, acrylamide, in both French fries and potato chips.

July 25, 2005

Outcome of Unocal vote uncertain as CNOOC bid remains

Permalink: Outcome of Unocal vote uncertain as CNOOC bid remains

Filed under: Oil, Companies, US, China

According to a timeline filed with the US Securities and Exchange Commission on Monday, Unocal was close to accepting CNOOC’s takeover bid despite its political risks until Chevron came through with a rise in its own bid for the California-based oil company.

The filing shows that Unocal’s chief executive, Chuck Williamson, told Chevron on July 17 that it was inclined to reverse course and support CNOOC’s bid unless Chevron would raise its bid.

That notification came after CNOOC’s chairman declined a request from Williamson to raise their bid after Williamson had told CNOOC that an increase in its bid would likely result in Unocal’s support for that bid.

The filing is part of a revised proxy statement filed by Unocal in advance of a scheduled shareholder vote on August 10 concerning the Chevron bid.

Even though Unocal is backing the Chevron bid, the outcome of the vote is uncertain, especially since the release on Sunday of a letter from the head of an asset management company that holds over 1 million Unocal shares.

That letter demanded that Unocal consider the CNOOC bid and warning that shareholder damages could run in the billions of dollars if it does not do so.

July 22, 2005

People’s Bank of China carefully controls renminbi strengthening

Permalink: People’s Bank of China carefully controls renminbi strengthening

Filed under: Forex, China, Asia, Yen

After China’s revaluation of the renminbi to Rmb8.11 to the dollar on Thursday, it slipped ever so slightly on Friday to Rmb8.1111 to the US dollar.

However, the People’s Bank of China intervened to stop the Chinese currency from strengthening from its opening point.

At least one analyst saw this as the proper thing to do, saying that to let it rise right away would encourage speculators.

Most analysts expect the renminbi to strengthen to between 7.9 and 7.95 to the US dollar by the end of this year and to between 7.5 and 7.75 by the end of 2006, although the Bank of America expects to see it remain around Rmb8.11 until the end of the year and at 7.89 by the middle of 2006.

Malaysia also limited the movement of the ringgit, which it also removed from its peg to the dollar on Thursday, allowing it to rise by only 0.7 percent. It rose to M$3.775 in relation to the US dollar.

In other Asian currencies, the South Korean won gained 1.5 percent on the US dollar to Won 1,020, while the Taiwan dollar was up 1.3 percent to T$31.54 against the US dollar. Both those countries also moved to limit gains.

The yen, which was higher on Thursday on the news of the renminbi’s revaluation, lost value on Friday when it became clear that China was limiting its currency’s rise.

Still, the yen ended the week 0.7 percent higher in relation to the euro, at ¥134.06, and it was 1 percent higher in relation to the US dollar at ¥111.06 as well as having gained 1.7 percent in relation to sterling for the week, to ¥198.30.

Sterling had a bad week, losing 0.6 percent to $1.7408 in relation to the US dollar, falling 1 percent to £0.6935 in relation to the euro, and declining by 2.8 percent against the Australian dollar to near an 8-year low of A$2.2729.

The euro gained 0.4 percent in relation to the US dollar over the week , to $1.2074.

The Australian dollar also performed well against the greenback, rising by 2.3 percent to $0.7658.

July 20, 2005

Unocal endorses Chevron bid

Permalink: Unocal endorses Chevron bid

Filed under: Oil, Companies, US, China
Unocal endorses Chevron bid

US oil company Unocal has endorsed Chevron’s bid to buy the California-based company over a higher bid from Chinese company CNOOC.

Conventional wisdom is that Unocal is sticking with the Chevron deal at least partly because of concerns that the US government would not approve a deal with CNOOC.

The move by the Unocal board came after Chevron raised its bid from $60 per share to $63.01 per share, or $17 billion dollars.

This sets the stage for CNOOC to raise its from its current $67 dollars per share in an effort to get Unocal to change its mind.

CNOOC had been “comfortable” with its current bid of $18.5 billion, as CNOOC had expected Chevron to raise its bid by more than it did.

There is some concern that if it raises its bid, CNOOC would be eliminating any advantage to shareholders, and especially to minority shareholders, that the deal might bring. One fund has already sold its stake in the company as a result of these worries.

July 15, 2005

Senators assured renminbi revaluation will occur by August

Permalink: Senators assured renminbi revaluation will occur by August

Filed under: Forex, US, China
Senators assured renminbi revaluation will occur by August

The co-sponsors of a bill that would impose a tariff of 27.5 percent on Chinese imports if that nation’s currency is not revalued have agreed to postpone a vote on the measure after they received assurances from the Bush administration that the renminbi will be revalued in August before the Chinese president visits Washington, DC, in September.

Senators Charles Schumer said that he and bill co-sponsor Lindsey Graham believe that the administration believes that the revaluation will take place because of the bill they introduced.

The Senators were given information in a June meeting with Treasury Secretary John Snow and Federal Reserve chairman Alan Greenspan that they took as an assurance that the revaluation would take place in August, although a Treasury Department spokesman said that the Treasury secretary did not give any time frame to the revaluation and that trying to fit it into a time-frame was counterproductive.

At the June meeting, Mr. Snow and Mr. Greenspan argued that the legislation proposed by Mr. Schumer and Mr. Graham was not a helpful tactic in trying to get the Chinese to revalue their currency because the pressure such a bill would put on China would make it politically difficult for them to move on revaluation.

Mr. Schumer is reported to have said that if China does not revalue, the proposed legislation on tariffs has enough support to pass.

July 13, 2005

CNOOC prepares increased bid for Unocal

Permalink: CNOOC prepares increased bid for Unocal

Filed under: Oil, US, China
CNOOC prepares increased bid for Unocal

CNOOC’s board of directors not only agreed unanimously to changes to its bid for US oil company Unocal on Wednesday night, it also gave management the right to raise its bid if it became necessary.

The changes were made to make the deal more attractive to Unocal and also to reduce the risk that US regulators will stop the deal.

One measure that was adopted was the setting aside of $2 billion in an escrow account as compensation to Unocal in the event that the deal falls through.

The decisions came as Unocal’s board of directors prepared to meet on Thursday to decide whether to pull their approval for Chevron’s bid for the California-based company in favor of the CNOOC bid.

Meanwhile, at a hearing before the Armed Services Committee in Washington, critics of the CNOOC bid voiced concerns that China would gain political influence in every region of the world where Unilocal operates if the Chinese company’s bid is successful.

James Woolsey, former director of the Central Intelligence Agency warned that the US could be headed for a confrontation with China, citing recent persecution of religious groups in China in his remarks.

CNOOC, directors of the company, and its advisors on the bid for Unocal, JP Morgan and Goldman Sachs, all declined comment on the criticisms.

July 11, 2005

China increases foreign investment allowance

Permalink: China increases foreign investment allowance

Filed under: Markets, China
China increases foreign investment allowance

Officials in China said on Monday that they will lift the amount of money foreign investors can put into its stock market to a total of $10 billion.

This is more than twice the current limit of $4 billion allowed under the Qualified Foreign Institutional Investors program.

No time frame for the new limit was announced, however.

The move is an effort to reinvigorate China’s markets. In the first quarter of 2005 only 1 percent of funds raised by companies in China came from stocks and bonds.

News of the change, although not a surprise, sent Shanghai’s composite index down 0.6 percent to an eight-year low.

This decline put the market down 20 percent on the year so far, on top of a 15 percent retreat in 2004.

One analyst said that while the increase in the amount of money foreign investors can put into the Chinese markets is a positive move, he pointed out that this does not mean that foreign investors will actually invest more money in the markets there.

Meanwhile, the China Securities Regulatory Commission, which regulates China’s market announced that it would suspend IPOs for the time being to lessen fears of a glut of new issues on the market.

July 5, 2005

Chevron increases political pressure on Unocal bid

Permalink: Chevron increases political pressure on Unocal bid

Filed under: Oil, Companies, US, China
Chevron increases political pressure on Unocal bid

Chevron is calling on the United States government to reconsider its policy on the takeover of US-owned companies by foreign investors in the wake of CNOOC’s bid for Unocal.

The vice-chairman of Chevron has called loans by the Chinese government to CNOOC state subsidies and CNOOC’s bid a government attempt to purchase a company for a price higher than its commercial value.

Beijing, meanwhile, has criticized attempts by the US House of Representatives to block CNOOC’s bid by asking that the bid only be reviewed by the Bush administration if Unocal agrees to accept it.

China’s foreign minister called CNOOC’s bid for Unocal a “normal commercial activity” that should not be subject to political interference.

CNOOC, which is getting a loan of US$7 billion from its parent company, insists that the loans are not subsidized by the Chinese government.

Chevron’s position is that the loans amount to government subsidies because CNOOC is a state-owned company and because the loans are low- or no-interest in nature.

Meanwhile, Chevron once again said that it’s offer for Unocal is superior and that it expects that it will prevail in a stockholder vote on August 10.

July 1, 2005

Chevron continues poilitical obstruction of rival bid

Permalink: Chevron continues poilitical obstruction of rival bid

Filed under: Oil, Companies, US, China
Chevron continues poilitical obstruction of rival bid

Chevron said on Thursday that China National Offshore Oil Corporation’s bid for Unocal should be referred to the World Trade Organization.

Chevron claimed this is because CNOOC is trying to buy what Chevron called a “critical resource” with funds subsidized by the Chinese government. It characterized the bid as a government trying to enter into a commercial venture.

Chevron is trying to make a case that the money to be used by CNOOC to buy Unocal is a subsidy because the financing provided by the Chinese government is low- or no-interest. CNOOC insists that its bid is completely commercial in nature.

It is unlikely that the issue will be taken up by the WTO because it does not have rules concerning mergers across national borders. Chevron’s efforts, however, will likely cause more heat in the controversy over the CNOOC bid.

And, in fact, in Washington, DC, on Thursday, the US House of Representatives voted 328 - 91 to block CNOOC’s bid for Unocal by denying the Bush administration money to look into the deal.

Under the provision, the Treasury Department would be barred from using federal funds to recommend approval of the CNOOC’s bid.

There is no guarantee that the measure will pass and be signed, but it signals a growing opposition to the deal in Washington.

Meanwhile, a Chevron official also claimed once again that his company’s bid for Unocal is superior even though it is lower because it could be closed sooner and carried no security risks or long regulatory delays.

June 23, 2005

Greenspan warns against Chinese import tariffs

Permalink: Greenspan warns against Chinese import tariffs

Filed under: Economy, US, China
Greenspan warns against Chinese import tariffs

In testimony before the US Senate finance committee on Thursday, Federal Reserve chairman Alan Greenspan said that trade sanctions against China would not benefit the United States.

On the contrary, Mr. Greenspan said that the tariffs recently proposed against China would not preserve US jobs because less imports from China would only mean more imports from other low-cost markets in Asia and Latin America.

He also insisted that higher tariffs would threaten worldwide growth in livings standards and that the United States would not be exempt from this threat.

In a related issue, Mr. Greenspan said that revaluation of China’s currency would help China, but he contradicted the idea that a revaluation would do anything to stimulate manufacturing and jobs in the US.

John Snow, the US Treasury secretary who has been pushing for Chinese revaluation also reiterated the administration’s call for China to revalue his currency as he also spoke before the committee.

The current hearings are addressing concerns about increasing exports out of China and China’s growing interest in US investments.

This is especially relevant after Wednesday’s launch by China National Offshore Oil Corporation of a bid of nearly $20 billion for US oil company Unocal.

June 22, 2005

Steel companies issue warnings on output

Permalink: Steel companies issue warnings on output

Filed under: Commodities, Economy, China
Steel companies issue warnings on output

At a time when most commodities are at or near record high prices, the worldwide steel sector is beset by profit warnings and falling prices.

The American Iron and Steel Institute has released data showing that declining demand resulted in a drop in United States steel shipments of 7.6 percent from March to April.

On Monday Nucor, the biggest steel producer in the United States, issued a warning that second quarter profits will fall below expectations due to decreases in prices and demand.

Meanwhile, the International Iron and Steel Institute released data on Tuesday showing that Chinese steel production in May was 297 tonnes, which was 37.5 percent higher than last year at the same time.

That caused one analyst to express concern that higher steel production in China might decrease that nation’s demand for imported steel and that it might even resume steel exports to Europe.

Other analysts, however, believe that strict controls in China will hold down that nations’ capacity to produce steel, lessening the chances that it would turn to exporting that commodity.

Still, share values in Europe have been falling, with Corus down 4 percent, Arcelor falling 1.9 percent, and ThyssenKrupp losing 1.5 percent.

June 21, 2005

Hyundai targets increased Beijing demand

Permalink: Hyundai targets increased Beijing demand

Filed under: Companies, China, South Korea
Hyundai expands on US market presence

South Korea’s Hyundai Motor signed a preliminary agreement on Tuesday with China’s Guangzhou Motor Group to form a joint venture to make commercial vehicles.

Hyundai’s new partner already makes vehicles in China with Honda and Toyota.

The project is worth $1.24 billion and is intended to meet what Hyundai said is an “explosive” demand for commercial vehicles in China, especially in taking account of expected increased demand for the Beijing Olympic games in 2008.

It forecast that by 2010, demand for trucks and buses will reach 3.5 million units per year.

The project, scheduled to begin production in 2007, is expected to have a capacity to produce 200,000 units each year by 2011. Each party to the venture will make an initial investment of $430 million.

Hyundai is already a top seller in China, but it hopes with this project to increase its total vehicle production in china to 1 million units per year.

That would take its Chinese production to one-fifth of its total output.

In the first quarter of 2005, Beijing Hyundai Motor, Hyundai’s passenger car joint venture, was the top seller of passenger vehicles in China, with 56,100 units sold in the quarter.

June 17, 2005

China considers equity purchase plan

Permalink: China considers equity purchase plan

Filed under: Markets, China
China considers equity purchase plan

China’s State Council will soon decide on how to institute a plan to put together a multi-billion dollar fund for the purpose of purchasing equities.

A senior Chinese official said Friday that the fund, resembling a plan that Hong Kong used to rescue its stock market during the 1998 Asian financial crisis, would not be to bail out the market but instead to restore confidence in it.

The official pointed out that Hong Kong made a large profit when it sold the shares it had bought after that crisis had eased.

The fund is one of several measures put together by the People’s Bank of China with the goal of pumping new life into China’s markets.

Recent declines in the markets at Shanghai and Shenzhen as well as investor discontent over plans to reduce government holdings in listed companies have produced new interest in the plan, which has been in the discussion stages for more than a year.

The Shanghai composite index declined by 15 percent last year and is down sharply this year even though China’s economy is strong.

While many analysts see the plan as crucial to China’s markets, share prices are down over uncertainty about how the plan willwork and fears that the market will be flooded with new shares.

In addition to purchasing shares, the People’s Bank of China will also loan money to brokerages. While the government acknowledges the risks of making the loans in terms of making the brokerages dependent, it justifies the loans by citing the liquidity problems of brokers. The China Securities Industry Association says that losses of 114 of 130 brokerages in 2004 stood at Rmb15 billion ($1.8 billion).

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