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business daily November 16, 2012
GREATER CHINA
Xi heads new Chinese leade Politburo Standing Committee cut to seven members
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PICC Group eyes US$4 bln in HK IPO Chinese state-owned insurer PICC Group started meeting institutional investors in Hong Kong yesterday to gauge demand for a listing worth up to US$4 billion, braving a slump in equity deals with the city’s largest IPO in two years. People’s Insurance Company of China Group (PICC), one of the country’s largest insurers, will offer 6.9 billion new shares in the IPO, equivalent to a 16.7 percent stake in the company, said a source with direct knowledge of the plans who was not authorised to speak publicly on the matter and declined to be named. IPO issuance in Hong Kong has plunged more than 80 percent so far this year, with volumes likely to shrink to their lowest since 2008 as investors shun new deals because of volatility caused by Europe’s debt troubles. “It is definitely not the best time to come to market, but capital has been a pressing issue for the group for some time,” said Stanley Tsai, an insurance analyst in Hong Kong. “The group will need capital urgently to support its growth ambitions, particularly on the life side.” “The company will have to price the IPO at a considerable discount to peers in order to generate enough interest from institutional investors,” he added. The IPO would be the biggest in Hong Kong since the US$20.5 billion listing of AIA Group Ltd in October 2010. The company will start taking orders from investors during a roadshow due to start on November 22, with pricing of the IPO expected on November 29, the source said.
hina’s ruling Communist Party unveiled an older, conservative new leadership line-up yesterday that appears unlikely to take the drastic action needed to tackle pressing issues like social unrest, environmental degradation and corruption. New party chief Xi Jinping, premier-in-waiting Li Keqiang and vice-premier in charge of economic affairs Wang Qishan, all expectedly named to the elite decision-making Politburo Standing Committee, are considered cautious reformers. The other four members have the reputation of being conservative. “We’re not going to see any political reform because too many people in the system see it as a slippery slope to extinction,” said David Shambaugh, director of the China Policy Program at George Washington University’s Elliott School of International Affairs. “They see it entirely through the prism of the Soviet Union, the Arab Spring and the Colour Revolutions in Central Asia, so they’re not going to go there.” Mr Wang, the most reform-minded in the line-up, has been given the role of fighting widespread graft.
KEY POINTS Seven-member leadership team unveiled Xi Jinping to head party, Li Keqiang his deputy Xi to also take over as head of military Corruption a major challenge, Xi says in speech
Esprit founder doubles stake, shares jump One of the founders of Esprit Holdings Ltd, Hong Kong billionaire Michael Ying, has doubled his stake in the ailing retailer to become its secondbiggest shareholder, a surprise move that fuelled hopes he could help turn the company around. Since stepping down as chairman six years ago, Mr Ying has steadily been selling his shares as the fashion retailer’s fortunes have soured. His decision to buy back into the company pushed shares 33 percent higher yesterday, before closing 22 percent higher at HK$12.96, in their sharpest rise in three months. Under Mr Ying’s leadership, the company that was founded in 1971 rose to become the world’s fifth-largest fashion retailer and had a market value of about US$12 billion. It now has a market value of US$2.7 billion and ranks 21st among global apparel retailers. Esprit is in the midst of a US$2.3 billion restructuring that has been overshadowed by a management reshuffle and lingering uncertainty in the euro zone. “It is short-term positive news to Esprit. Investors were caught by surprise by his move and that also recalled the glorious moments of the company when Ying was in charge,” said Steve Chow, analyst at Kingsway Group Research. Ying has increased his holding in Esprit to 10.33 percent, which includes a 5.99 percent stake and a rights issue, as of November 7, according to a Hong Kong stock exchange filing. He bought 23.2 million shares at an average price of HK$11.669.
Xi Jinping led the new Politburo Standing Committee onto the stage at the Great Hall of the Peopl
One source said an informal poll was held within the 25-member Politburo to choose the seven members from among 10 candidates. Two of them who had strong reform credentials – Guangdong party boss Wang Yang and party organisation head Li Yuanchao – failed to make it to the standing committee along with the lone woman candidate Liu Yandong.
Leadership ‘divided’ The source, who has ties to the leadership, told Reuters on condition of anonymity that Wang Yang and Li Yuanchao, both allies of departing President Hu Jintao, did not make it to the standing committee because party
elders felt they were too liberal. However, all three are in the Politburo, a group that ranks below the standing committee. “The leadership is divided,” said JeanPierre Cabestan, a Chinese politics expert at Hong Kong Baptist University, adding however that the new leadership would finditeasiertomakeprogressoneconomic reform rather than political change. “It’s easier for them to move to a new growth model. I think they agree upon that and that won’t be the hardest task. But I see a lot of political paralysis.” Even for China, this is an older line-up, with an average age of 63.4 compared with 62.1 five years ago. Except for Mr Xi and his deputy Li Keqiang, all the others in the standing
Li takes economic mantle As economy forecast to grow the least in 23 years
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hina’s premier-designate is famed for running a province that saw three fatal conflagrations and an enduring HIV blood scandal on his watch. The nation may be hoping his luck has changed. Li Keqiang, appointed to the Politburo Standing Committee yesterday and set to replace Premier Wen Jiabao, is an award-winning economist and English speaker who has championed rapid urbanisation to establish China’s middle-class. Slated to take over the nation’s cabinet in March, Mr Li, 57, will inherit an economy forecast to grow the least in 23 years in 2013, according to Pacific Investment Management Co. To arrest the slowdown and address a widening income gap that’s fed social unrest, the incoming team will have to roll back state enterprises and speed a shift to market-set prices for everything from loans to raw materials, according to the World Bank.
Mr Li’s association with the bank’s “China 2030” report this year may be the strongest sign he’s ready to rejuvenate the reform agenda unleashed by Deng Xiaoping three decades ago. “The 2030 report is a very important base of policy recommendations, and it was endorsed by Li Keqiang,” said Ding Shuang, senior economist for China at Citigroup Inc. in Hong Kong, who previously worked at the country’s central bank. “China’s economy has reached such a point that the leaders are being pressed to take more ambitious steps. On the flip side, vested interests are more entrenched,” making the changes tougher to enact, he said. One signal of the sensitivity of the policy overhaul is a delay in publishing the Chinese version of the 448-page document co-written by the Washington-based lender and the Development Research Centre of China’s State Council.
The DRC wanted a postponement until after the Communist Party Congress, according to Yukon Huang, a former World Bank country head for China and an adviser on the project. “China 2030” is likely to be released in Chinese next month, according to a spokeswoman at the World Bank in Beijing.
Li ‘unwavering’ At stake for Mr Li and incoming Communist Party General Secretary Xi Jinping is steering China away from the so-called middle-income trap, where growth slows because of a failure by developing countries to implement reforms to financial, legal and government institutions needed to create a wealthy middle class. Of 101 middle-income economies in 1960, only 13 became high-income societies by 2008, the World Bank estimates. Mr Li gave the “China 2030” project