China news / analysis in brief

Details:

• Two investment firms reportedly (WSJ subscription required) beat out Air China for a 65% stake in Shenzhen Airlines, based in the southern city of Shenzhen. Air China was hoping to expand its domestic business in southern China which is dominated by China Southern Airlines (ticker: ZNH). A successful bid by Air China would have been a direct challenge to China Southern. Air China, China Southern and China Eastern each dominate a region of the country and have until now refrained from competing against one another. The government is encouraging greater competition.

• Microsoft (ticker: MSFT) launched MSN China, a Chinese-language web portal. Microsoft has said the portal will offer more communication, information and content than available through MSN's Hotmail and Messenger. According to Microsoft's Michael Rawding: "Relative to the broad user base, mobile user base and Internet user base, the instant messaging market is still under-developed. We think that is an opportunity to explode. We expect to get similar kind of usage of the portal site".

• According to The Wall Street Journal, property sales in China showed signs of a slowdown (WSJ subscription required) a week before China is to impose a tax on certain property deals. China plans to levy a 5.5% tax on the value of residential property sold after June 1. The tax applies only when an apartment is sold fewer than two years after it was purchased. The transaction tax is proving successful at cooling China's home market. The tax follows administrative limits on the sale of unfinished apartments, crimps on lending and higher mortgage rates.

• The Chinese government reportedly began the bidding process for contracts related to Guangdong province's digital TV transition project. Guangdong province plans to complete the transition from analog to digital TV in all Guangdong urban areas this year and in rural areas by 2008. Guangdong has a radio and television audience of 10 million households.

• Fixed-line operator China Telecom (ticker: CHA) said it was seeking strategic partners to expand abroad and improve corporate governance. China Telecom and China Netcom (ticker: CN) are venturing into broadband and Web-based television (IPTV) to bolster income as fixed-line services are overtaken by wireless operations. According to CEO Wang, China Telecom has been testing an IPTV service in the southern province of Guangdong, and to date has 40,000 subscribers. China Telecom hopes that IPTV will account for a third of its sales in a decade. China It has yet to receive word on its application for a mobile phone license in China.

• Morgan Stanley's Discover card unit is joining China credit payment network, China UnionPay, to allow Discover cards to be accepted in China. Under terms of the agreement, Discover cards will be accepted at China UnionPay ATMs and point-of-sale terminals.

• WalMart (ticker: WMT) opened a new store in Beijing and is already hurting local retailers.