Happy Valley project

22 glulam arches with size ranging from 18m to 23m in span and 17m to 20m in height were started to be installed last week in Chengdu, Sichuan Province. Served as the entrance hallway of Happy Valley, an amusement park invested by local company, this seven story high glulam facility is considered to be the first glulam project in Southwest China and probably the biggest one so far in China in terms of the total consumption of glulam material. As one of the major accomplishments that APA China mission achieved last October, the project has been built with glulam arches which were all manufactured, treated and fabricated in Pacific Northwest of US. All the glulam arches have been installed by local Chinese crews with supervision provided by US supervisor. The installation work is expected to be completed mid-August.

 

Wood Frame Construction Used in Sichuan Earthquake Relief Aid

On July 14th, the first school built with wood frame construction technology after May 12 Sichuan earthquake in Sichuan was open to public. Nanba Senior High School, with 26 single story wood frame construction temporary facilities, has the capacity of accommodating 1,600 students. Donated by Chinese Language Education Foundation and designed as five-year education facility, the school was constructed by Mindi Wood Construction Company, one of the first wood frame builders in Southwest China.

Market Intelligence (Source: Global Insight)
China Pledges to Deepen Economic Reform This Year
In a document released recently, China's State Council has called on the deepening of reform in nine major fronts of the national economy, ranging from fiscal, taxation, and financial systems to the state-owned enterprises (SOEs) and the factor market. On taxation, the State Council said that the government would push ahead with the reform of resource tax, personal income tax, value-added tax (VAT), and environmental protection tax this year. It also pledged to accelerate the reform of SOEs, withdrawing the state from insignificant industries and concentrating state-owned assets in key industries of national interests. The reform of such monopolized industries as railways, salt, telecom, power, and utilities have also been put on top of the agenda. On the land market, the State Council said that it would establish a filing system that may facilitate the transfer of contracted land in rural areas, although it also made a note on "upholding the strictest arable-land protection system" that will curtail further losses of arable land to urban development. In terms of the labour market, the government will "actively and yet steadily push ahead with the household registry [hukou] reform", modifying hukou migration policies and allowing "qualified rural residents" to obtain urban hukou.

 

Significance: With China's reform entering its 30th anniversary this year, the State Council's recent statement is meant to restate the government's commitment for further reform at a time when many of the reforms have reached a standstill. Many of the reforms mentioned in the statement have been long overdue, such as the taxation reform, land reform, and the deregulation of monopolized industries.

 

Growth of China's Energy-Intensive Industries Restrained in H1
Growth of energy-intensive industries in China was successfully restrained during the first half of 2008, with steel, non-ferrous metal and another four major energy-intensive industries reporting 14.5% year-on-year (y/y) growth in industrial added value-5.6 percentage points lower than the corresponding period of last year, according to the Ministry of Industry and Information Technology in a statement released yesterday. The steel industry grew 14.6% y/y, which was 10.4 percentage points lower than the gain recorded during the same period last year. Other industries reporting significant deceleration include the chemical industry, non-ferrous metal and construction materials, which rose by 14.2%, 14.3%, and 21.0% respectively in y/y terms-a deceleration of 4.9, 4.8 and 3.4 percentage points respectively. Exports of energy and resource-intensive products also declined significantly, with steel down by 20.2% y/y and coking coal by 7.5%.

 

Significance: With the six major energy-intensive industries accounting for 30% of China's industrial output, the slowdown of these sectors as a result of state macro-control has contributed to the slower growth in industrial added-value during the first half of the year. Nevertheless, the share of energy-intensive industries in China's economy remains high despite the clampdown on such industries, and a rebound of output is highly likely if the government is forced to relax control out of concern for growth.

Policy Adjustments Proposed as China's Economic Growth Slows - The financial and economic committee of the National People's Congress (NPC), China's top legislature, released a report on July 23 proposing a comprehensive package of adjustments of China's foreign trade, real estate, taxation and agricultural policies to mitigate the downside risk of the Chinese economy. China's economic growth slowed to 10.4% on the year during the first half, from the 12.2% gain reported during the same period last year, as export growth continued to moderate. On foreign trade, the report recommends that the government should postpone the unveiling of new adjustments of processing trade policies, noting that the introduction of more restrictive processing trade policies over the past two years were badly timed. In particular, the report suggests that policy support should be given to certain labour-intensive industries where China has distinct advantages, such as textiles and toys. On real estate, the report believes that there might be a sudden reversal in the real estate market, given the slower price increase, sharp decline in transaction volumes and yet continued high growth in real estate investment. As such, the report suggests that the government should adjust the "pace and strength of policy changes" so as to mitigate the fiscal and financial risks associated with the possible collapse of housing prices. On taxation, the report recommends a further increase in personal income tax threshold, a reduction of the tax rate for interest income, an expansion of tax deductions for innovative firms and the adoption of a new value-added tax (VAT) system with broader input VAT deductions.

 

Significance: Many of the policy adjustments proposed by the NPC are very likely to be adopted, particularly the policy support for textiles and toy industries. Indeed, there have been reports over the last couple of months suggesting a high probability for the Chinese government to reverse some of export tax rebate cuts imposed on these industries over the past two years. Most recently, top Chinese government leaders paid a string of visits to coastal regions which are the engines of Chinese exports, reflecting growing fear about a protracted slowdown triggered by an export downturn.

Bank of China Expects Inflation to Have Moderated During June
A new report from the international markets department of the Bank of China has indicated that it is expecting the rate of consumer price index (CPI) growth for June to fall slightly, estimating a 7.3% increase compared with June 2007 and down from the 7.7% year-on-year (y/y) rate seen at the end of May. The Bank based this figure on relatively stable food prices for the past month, though did add that as a result of the recent fuel price increase it has revised its year-end estimate for CPI up to 7.2% from 6.8%. The Bank also estimated second-quarter GDP growth at 10.2%, and expressed some caution that eventually the fuel price increase could feed back into consumer prices towards the end of the year.

 

Significance: It appears that expectations that consumer price inflation in China would moderate through the second half of the year were correct, although many observers-including the Bank of China and think-tanks in Beijing-are not thoroughly convinced that this inflationary cycle is over. The impact of increased fuel prices on the supply side of the economy could eventually lead to price increases in consumer sectors-something that has been hinted at by retail suppliers-not to mention that world food and domestic food prices could continue to climb later in the year.