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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 96

China Business Intelligence No. 96

Samsung Economic Research Institute Beijing Office

Nov. 26, 2008

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I. Industry

China's automobile industry will likely focus on developing cars that are totally powered on electricity. Electric cars cost less to produce and operate, but the infrastructure to support them is underdeveloped. Electric cars from China are already more advanced than those from Europe and the United States. Chinese consumers, who are more sensitive to costs of ownership, are more open to electric cars despite the inconvenience of charging the batteries every day. While demand for electric cars is increasing, government measures to regulate their production is trailing. The delay is creating a risk of massive production of unauthorized electric cars.

II. Economy

CITIC Pacific announced in late October that it may suffer huge transactional losses from unauthorized leveraged foreign exchange contracts. The potential losses arising from a currency accumulator linked to the Australian dollar are now estimated to be HK$807 million. Along with the accelerating globalization of Chinese firms since 2000, offshore derivative trades have been used widely as a tool to diversify overseas investment risk. Given the growing risk of offshore derivative trades, it is all the more imperative to develop the domestic futures market in such a fashion as to complement the offshore market.

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