Economy/Resources - 61. page

On February 7, the Ministry of Industry and Information Technology and three other departments in China issued a “Guidance on Promoting the High-Quality Development of the Iron and Steel Industry, hereinafter referred to as the Guidance. It clearly encourages leading enterprises in the industry to implement mergers and reorganizations to build several world-class mega steel enterprise groups.

The Guidance makes concrete arrangements for steel industry mergers and reorganizations. One to two specialized pilot enterprises will be formed relying on the leading enterprises in stainless steel, special steel, seamless steel tubes, castings and other fields, respectively. It encourages cross-regional, cross-ownership mergers and reorganizations of steel enterprises to change the so called “small and scattered” situation in this industry in some regions, to enhance the endogenous power of enterprises’ development. The independent hot rolling and independent coking enterprises in Beijing, Tianjin, Hebei and surrounding areas will be led in an orderly manner to participate in the merger and reorganization of steel enterprises. The Guidance mentioned that those enterprises that have completed the mergers and reorganizations will be given capacity replacement policy support during their smelting project construction. The Guidance also encourages Chinese financial institutions actively to offer integrated financial services to those steel enterprises which implement mergers and reorganizations, layout adjustments, transformation and upgrading based on risk-controlled, commercially sustainable principles.

Li Xinchuang, chief engineer of the Metallurgical Industry Planning and Research Institute, said that the concentration in the domestic steel industry is still less than 40 percent. China’s steel industry has now ushered in an important window of mergers and reorganizations and a period of historic opportunity. Given the background that the output of the iron and steel industry has entered the peak platform area, it is the key to the healthy and high-quality development of the industry to intensify the merger and reorganization of iron and steel and improve the concentration of the industry.

Cross-regional and cross-ownership mergers and acquisitions 

Mergers and reorganizations are one of the key tasks of the steel industry this year. Peng Huagang, the Secretary-General of the State-owned Assets Supervision and Administration Commission, clearly stated at a press conference of the State Council Information Office in January this year that the restructuring and integration of steel and other fields will be steadily promoted and new central enterprise groups will be established in a timely manner in related fields.

Chen Derong, chairman of the China Iron and Steel Association and chairman of China Baowu, said that China’s steel industry has broken the “small and scattered” situation, where state-owned steel enterprises or private steel enterprises are promoting mergers and reorganizations. As a group of more than 50 million tons of ultra-large steel enterprises are rising, the concentration in the steel industry will be further enhanced.

Wang Guoqing, director of the Lange Steel Research Center, located in Beijing and established in 2005 as the No.1 steel information research center in China, told China Business News that, in the future, the merger and reorganizations mode in the steel industry will continue to change the effect of restructuring and will also be more prominent; the industrial concentration is to be effectively enhanced. Therefore, the iron and steel industry is bound to speed up its transformation and upgrading, speed up the pace of mergers and reorganizations, eliminate outdated iron and steel enterprises that do not meet environmental protection standards, vigorously develop a circular economy, and promote the overall development of the iron and steel industry.

The concentration in the steel industry continues to increase 

As early as in September 2016, the State Council issued the “Guiding Opinions on Promoting the Merger, Restructuring and Disposing of Zombie Enterprises in the Steel Industry,” which clearly stated that, by 2025, 60 percent to 70 percent of the output of China’s steel industry will be concentrated in about 10 large groups, of which there are three to four 80-million-ton steel groups, six to eight 40-million-ton steel groups plus some specialized steel groups.

Aiming toward this general goal, the steel industry mergers and reorganizations will be divided into three steps: the first step will focus on reducing production capacity by 2018 and clearing what should be cleared. At the same time, it will demonstrate the next merger and reorganization, such as the merger and reorganization of Baosteel and Wuhan Iron and Steel. The second step is to improve the merger and reorganization policy from 2018 to 2020. The third step is to promote the merger and reorganization of the steel industry on a large scale from 2020 to 2025.

Since 2021, the merger and reorganization of the steel industry has accelerated significantly. Anshan Iron and Steel merged with and reorganized Benxi Iron and Steel to form the second largest steel group in China and the third largest steel group in the world. This further promoted the formation of a new industrial development pattern; Baowu reorganized Kun Steel and signed an agreement with the Shandong Provincial State-owned Assets Supervision and Administration Commission to reorganize the Shan Steel Group. The reorganization of Baowu’s capacity scale is expected to reach 150 million tons.  Shasteel mixed reform Anyang Huacheng and five other enterprises. Puyang Steel reorganized Xing Steel, and so on.

At the same time, the level of the steel industry chain and the supply chain have been further improved. CITIC Special Steel has strengthened cooperation with upstream and downstream enterprises to enhance the overall competitive advantage of the industrial chain. Jiu Steel has accelerated the construction of a modern industrial system through a series of measures such as coordination to stabilize the chain, project extension, technology strengthening, and investment promotion.

According to the data released by the China Iron and Steel Association, the pace of mergers and reorganizations of Chinese iron and steel enterprises has accelerated, which has promoted the further improvement of industrial concentration. At the end of 2021, the steel output of the top 10 and top 20 enterprises in steel production accounted for 40.39 percent and 54.85 percent respectively. of the national steel output, , an increase of 2.99 and 3.26 percentage points over the same period of the previous year.

Source: China News Service, February 8, 2022
https://www.chinanews.com.cn/cj/2022/02-08/9670947.shtml

Epoch Times published an article  pointing out that a growing number of biotech, genomics, and med-tech firms that have ties to the Chinese Communist Party (CCP) are operating in the United States, raising security concerns about American citizens’ medical and genetic data.

The article listed several Chinese companies as examples:

• China’s Lepu Biopharma Co. 0pened its U.S. branch Innocube Bioscience, Inc. in Texas. Beijing’s sovereign wealth fund, the State Development and Investment Corporation (SDIC), heavily invests in Lepu.
• BeiGene, a Chinese pharmaceutical and research firm located in San Mateo, California, conducts research on targeted molecular agents related to gene sequencing. The company’s research center in China has received significant local government funding.
• The PLA-linked BGI Group purchased Complete Genomics, a California-based company that holds the genetic information of U.S. citizens. Several of China’s sovereign wealth funds have invested in the company.
• The Chinese firm WuXi Pharma Tech acquired U.S. genomic information company NextCODE Health in 2015.
• Also In 2015, IuXi Biologics, bought a stake in an American DNA testing company, 23andMe. WuXi Biologics now has locations in Massachusetts and New Jersey. Its drug plant in Delaware was built with a Chinese government grant.
• WuXi Advanced Therapies (WuXi ATU) announced the opening of a cell and gene therapy testing facility in the Philadelphia Navy Yard in November 2021.

The article also said that U.S. money has aided the CCP’s infiltration of the U.S. bio and medical industries. Last month, Chinese firm Andon Health Co. received a $1.28 billion contract from the U.S. Army Contracting Command to supply COVID-19 self-test kits. A subsidiary of Andon, iHealth Labs, signed a contract with the New York State Department of Health in December for $120 million worth of self-test kits.

Source: Epoch Times, February 7, 2022
https://www.theepochtimes.com/ccp-investment-in-us-biopharm-and-genomics-companies-raises-security-concerns_4259581.html

Jiemian News, the online news site under the Shanghai United Media Group, recently reported that in January, the sales of China’s top 100 real estate companies fell  by 40 percent year-over-year. The real estate market is still experiencing a low performance. In the meantime, top revenue segments are shrinking in size. According to data from the China Index Academy, in January, 2022, there were only 15 housing companies with sales exceeding RMB 10 billion (around US$1.57 billion), a decrease of 14 from the number in the same period last year. Only 22 housing companies had sales exceeding RMB 5 billion (around US$787 million), a decrease of 31 from the same period last year. The third camp (RMB 3 – 5 billion, US$472 – 787 million) fell the fastest. With only 20 left, with the average sales growth rate was at -33.8 percent. In January, the Chinese real estate market got off to a bad start with a sharp decline in supply and demand. In 29 key monitored cities, for the commercial housing market, supply decreased by 43 percent year-over-year, and sales decreased by 46 percent year-over-year. In the first-tier cities, the sales of commercial housing in Beijing and Guangzhou were sluggish, with a year-over-year drop of nearly half. And in Shenzhen, the decline was as high as 60 percent. Industry insiders expressed the belief that the intensified downward pressure on the market and the strong wait-and-see mood of home buyers are the main reasons for the decline in many cities. It is expected that the supply will shrink in February due to the Chinese New Year holiday and sales may continue to decline. A number of research institutions pointed out that the financing environment for housing companies in 2022 remains discouraging, and the debt repayment pressure on these companies will remain heavy in the short term.

Source: Jiemian News, February 7, 2022
https://www.jiemian.com/article/7078670.html

Chinese companies listed on China’s stock markets – either the Shanghai stock exchange or the Shenzhen stock exchange – are required to report their profits and losses from 2021 by the end of January. Thus, many companies with big losses submitted their information on January 28, the last trading day in January.

Suning.com Co had the largest loss, around 43.3 billion yuan (US $6.8 billion), more than the company’s market cap of 36.4 billion yuan. The company was on the Fortune 500 list in August 2021 and ranked number one among the Chinese retail companies.

The second largest loss was from China Fortune Land Development, a real estate developer, with an estimated loss of 33.1 to 39.1 billion yuan. Caixin reported that, by January 29, out of the 66 real estate companies which published their 2021 performance information, 30 reported a loss.

After the real estate companies, pig farming companies are the next group with the largest losses. Jiangxi Zhengbang Tech, ranked around 370 in Fortune’s China’s Top 500 companies. It estimated a 19 billion yuan loss for 2020.

Airlines are the next losing group. Air China estimated it had a 14.5 to 17 billion yuan loss, followed by China Southern Airlines and China Eastern Airlines. Each reported around a 12 billion yuan loss.

The electric utility companies are the next group due to the coal price increase in China. Shanghai Electric, Datang International Power Generation Company, Oceanwide Holdings, and Huaneng Power International all reported losses of over 10 billion yuan.

Source: Epoch Times, February 4, 2022
https://www.epochtimes.com/gb/22/2/4/n13555782.htm

A recent scholastic paper studied the responses of 1,907 female teachers regarding a questionnaire survey on the status of female teachers regarding work, life, marriage and childbirth.  According to The Paper, a Chinese news portal, two scholars at Beijing Normal University conducted the research,

The survey found that unmarried female teachers showed a lower willingness to have children, with 32.41 percent not wanting to have any children, 36.73 percent wanting only one child, 29.63 percent willing to have two children, and only 1.23 percent willing to have three children. Among the overall female teachers, including both married and unmarried, 18.77 percent do not want to have children, 38.96 percent are willing to have only one child, 38.91 percent are willing to have two children, and only 3.36 percent are willing to have three children.

The study concluded that for the average female teacher who did not want to have children, the most significant factors that would have changed her willingness to have children were having a higher income levels, a reduced workload and lower education costs for the children.

The questionnaire was distributed to female teachers in 13 provinces in China. 78.55 percent of the female teachers surveyed were married, 16.99 percent were unmarried, and 4.46 percent were divorced or widowed.

Source: The Paper, February 4, 2022
https://www.thepaper.cn/newsDetail_forward_1676229

United Daily News (UDN), one of the primary Taiwanese news groups, recently reported that, affected by the severe economic environment and the Covid epidemic, Mainland China’s economy had a sluggish start in January this year. The official and private Manufacturing Purchasing Managers’ Index (PMI) announced yesterday both fell from the previous month. The former was 50.1, approaching the break-even line, the latter was only 49.1, hitting a new low in 23 months. Analysts expressed the belief that after the Chinese New Year, the Mainland authorities need to increase fiscal and monetary policy support in a timely manner to ensure the realization of the goal of “maintaining stability” in the economy. According to data released by the Chinese National Bureau of Statistics, in January 2022, the manufacturing PMI was 50.1, narrowed by 0.2 percentage points, indicating that the economic expansion has slowed down. Also released on the same day by Caixin, the “Private Edition” PMI data that mainly reflects small and medium-sized enterprises in China showed that, in January 2022, the Caixin manufacturing PMI recorded 49.1, which was below the growth line of 50, and fell 1.8 percentage points from the previous month. This was the lowest since March 2020. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.

Source: UDN, January 31, 2022
https://udn.com/news/story/7333/6071883