business newsChina: Domestic Manufacturing Likely Hasn't Hit Bottom; Germany Strengthens Ties
By
Alex Brokaw
Aug 31, 2012 4:30 pm
Plus, solar companies report losses across the board.
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MINYANVILLE ORIGINAL Fear over China’s slowing growth pushed Japan’s Nikkei (^N225) average to close at a four-week low this Friday.
Chinese Manufacturing Hasn’t Bottomed Yet
Investors are anticipating China’s official manufacturing PMI for August, which will be released tomorrow. Expectations peg the index at 50.0 for the past month, only a slight contraction from 50.1 in July, both up from a 49.0 low in November.
The precursory HSBC China Manufacturing PMI signaled a further slump last week when it reported a nine-month low for August at 47.8, down from 49.3 in July. In regards to either numbers, this month is likely not the bottom for the beleaguered Chinese manufacturing sector.
Jintao Bolsters Support for EU During Merkel Visit
China announced plans on Thursday to buy more EU bonds despite the worsening European debt crisis, as German Chancellor Angela Merkel arrived in Beijing. Amid China’s show of support for the European Union – whose debt crisis has dragged Chinese exports down – a number of business agreements between Germany and China were confirmed.
These include China’s purchase of 50 Airbus (EAD.PA) A320-family planes for $4 billion – $10 billion less than a previous deal that fell through because of disagreements over emission standards – and multi-million dollar deals involving Chinese telecom manufacturer ZTE (000063.SZ) and Volkswagen (VOW3.DE).
Volkswagen, with German car manufacturers BMW (BMW.XE) and Daimler (DAI.XE), announced they’re confident in the Chinese auto market, despite China’s largest domestic car manufacturer by sales SAIC Motor Co. (600104.SS) warning of overstocked inventories and intensifying price pressure.
Solar Companies Report Lower Earnings in the Face of Tight Demand
China Sunergy (CSUN) expects a loss for the third quarter due to weak demand and oversupply. Low prices have led to the fifth quarterly loss in a row for the solar panel manufacturer, and shares are down 57% since last year. Sunergy now expects to ship between 400 megawatt ("MW") and 420 MW this year, verses earlier projections between 500 MW and 550 MW.
Yingli Green Energy (YGE) and JA Solar Holdings (JASO) cut their shipments forecasts as well, believing that Europe will put in place anti-dumping tariffs similar to those issued by the US this past May.
Europe is the Chinese solar sector’s largest importer, and an anti-dumping complaint filed by a group led by Germany’s SolarWorld (SWV.DE) in July might spell further trouble if tariffs are put in place. It’s estimated China’s top 10 listed solar companies have currently amounted a combined $17.5 billion in debt.
More Financial News from China This Week:
Chinese Manufacturing Hasn’t Bottomed Yet
Investors are anticipating China’s official manufacturing PMI for August, which will be released tomorrow. Expectations peg the index at 50.0 for the past month, only a slight contraction from 50.1 in July, both up from a 49.0 low in November.
The precursory HSBC China Manufacturing PMI signaled a further slump last week when it reported a nine-month low for August at 47.8, down from 49.3 in July. In regards to either numbers, this month is likely not the bottom for the beleaguered Chinese manufacturing sector.
Jintao Bolsters Support for EU During Merkel Visit
China announced plans on Thursday to buy more EU bonds despite the worsening European debt crisis, as German Chancellor Angela Merkel arrived in Beijing. Amid China’s show of support for the European Union – whose debt crisis has dragged Chinese exports down – a number of business agreements between Germany and China were confirmed.
These include China’s purchase of 50 Airbus (EAD.PA) A320-family planes for $4 billion – $10 billion less than a previous deal that fell through because of disagreements over emission standards – and multi-million dollar deals involving Chinese telecom manufacturer ZTE (000063.SZ) and Volkswagen (VOW3.DE).
Volkswagen, with German car manufacturers BMW (BMW.XE) and Daimler (DAI.XE), announced they’re confident in the Chinese auto market, despite China’s largest domestic car manufacturer by sales SAIC Motor Co. (600104.SS) warning of overstocked inventories and intensifying price pressure.
Solar Companies Report Lower Earnings in the Face of Tight Demand
China Sunergy (CSUN) expects a loss for the third quarter due to weak demand and oversupply. Low prices have led to the fifth quarterly loss in a row for the solar panel manufacturer, and shares are down 57% since last year. Sunergy now expects to ship between 400 megawatt ("MW") and 420 MW this year, verses earlier projections between 500 MW and 550 MW.
Yingli Green Energy (YGE) and JA Solar Holdings (JASO) cut their shipments forecasts as well, believing that Europe will put in place anti-dumping tariffs similar to those issued by the US this past May.
Europe is the Chinese solar sector’s largest importer, and an anti-dumping complaint filed by a group led by Germany’s SolarWorld (SWV.DE) in July might spell further trouble if tariffs are put in place. It’s estimated China’s top 10 listed solar companies have currently amounted a combined $17.5 billion in debt.
More Financial News from China This Week:
- Suntech Power Holdings (STP) faces criminal charges in Italy for illegal solar farm construction, adding to a list of several US law firms suing the world’s largest solar manufacturer for failure to disclose correct financial information and properly monitor business practices. Suntech has seen shares drop 40% in the past month.
- This week Ford (F) announced plans to launch its Lincoln brand in China within the next two years. This is in addition to the nearly $5 billion it has spent breaking into the Chinese auto market since 2006. Ford is playing catch-up to other automakers with larger stakes in the Chinese market, like General Motors (GM), and the 106-year-old company plans to open nine new plants in the Asia region: six in China, two in India, and one in Thailand, which will join Ford's Rayong plant southeast of Bangkok. The region is expected to fuel 60% industry growth by the end of the decade, and Ford is clearly carving out market share.
- Accounting for 23% of world reserves and 90% of world supply of rare-earth materials, China may begin building an 18,000-ton rare-earth stockpile in September. This speculation comes a week after China raised its export quota for rare materials by 2.7% this year. Baotou Steel Rare Earth (600111.SS) is China’s top processor of rare earth materials, which are vital in manufacturing complex products like computer chips. China came under criticism for hoarding these materials earlier this year.
- Chinese iron ore production dropped 10% this month to 115 million metric tons – versus 115 million metric tons a year ago -- as prices continue to fall and steel manufacturers increasingly favor cheaper imports.
- CNOOC Ltd. (CEO), a Hong Kong-based gas and oil producer, launched China’s largest takeover bid to date when it offered $15.1 billion for Canada’s Nexen Inc. (NXY) on Thursday.
- China Southern Airlines (ZNH), China’s largest airline by passenger number, reported an 85% decline in profit for the first half of the year, far beyond expectations.
- China pledge $200 million in credit and 300 police cars to Egypt during Egyptian President Mohammed Morsi’s official visit to Beijing earlier this week.
- Pig farmers in China have been forced to sell off hogs because of steep feed costs and low domestic demand. Prices should jump in about six months, when the effects of the sell-off hit and meat stocks fall. Pork is a major determinant of China’s food price cycle.
- The American Chamber of Commerce in Singapore has concluded a survey of 356 senior executives at US companies, and found 21% plan to move operations from China to other Southeast Asian countries in the next two years, as Chinese labor costs are rising.
- While the rest of the world counts down to September 12, the date that Apple (AAPL) is expected to release the iPhone 5, Chinese consumers can purchase a Goophone I5, which is an Android OS (GOOG) iPhone-clone available for sale in Hong Kong right now.
No positions in stocks mentioned.
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