China Trade Information

In an effort to tap into the fast-growing data-delivery demand between Asia and Europe, Russian telecom operator TransTeleCom opened an office in Beijing yesterday, Russia’s first in the Asia-Pacific region.

“The office will play an essential role for us to implement the Eurasia Highway project, which is the shortest digital route interconnecting European and Asian telecommunication networks,” said Sergei Lipatov, president of TransTeleCom.

TransTeleCom, which was founded in 1997 to provide telecommunications services to Russian Railways, now operates the largest fiber-optic network in Russia, with more than 50,000 km of line laid along its railroads. The Russian company is now using its network in Russia to build the Eurasia Highway, a transcontinental route for data transit between Europe and Asia.

The company says the Eurasia Highway is much more protected from natural disasters such as earthquakes, compared to existing transit routes along the seabed of the Indian Ocean. It is counting on the route to account for more than 15 percent of the data-transit market between China and Europe, which it expects will quadruple to US$500 million by 2011.

“The new office will help us further develop ties with Chinese telecom operators for the Eurasia Highway,” said Lipatov. “The route, with Hong Kong as a key transit hub, needs the support of Chinese operators.”

The Russian company has worked with four Chinese telecom operators - China Unicom, China Netcom, China Tietong and China Telecom -since 2002 to build networks in China for the Eurasia Highway. It’s also considering similar cooperation with other Chinese telecom companies.

Earlier this year, TransTeleCom also established a joint project with Japan NTT Communications to build an underwater fiber-optic cable between Sakhalin and Hokkaido as part of the Eurasia Highway.

TransTeleCom expects its Beijing office to support the growing number of Russian companies in China.

China will need to acquire 2,467 new commercial jets in the next 20 years, with the domestic fleet seen at 2,810 commercial jets and 3,731 commercial aircraft by the end of 2026, China Aviation Industry Corp I (AVIC I), the country’s biggest aircraft maker, said.

It forecast passenger turnover in China to increase by 8.4 pct annually over the next 20 years to 1.2 trln passenger-kilometers by 2026, about five times the level in 2006.

Cargo turnover will grow even more rapidly during the period at 10.5 pct a year to 69 bln ton-kilometers, the company said.

China’s airlines will need 6,600 engines worth more than 65 bln usd over the next 20 years, according to Rolls-Royce.

It said that Chinese airlines are expected to buy more than 3,100 new airliners over the next two decades, with the average annual growth of passenger traffic expected to reach 8.8 pct per year.

The company added that annual growth figure for passenger numbers in the near term is likely to be much higher.

In a briefing at the Beijing Aviation Expo, Rolls-Royce also said that the wider Asia-Pacific market is expected to need 26,000 new engines over the next 20 years, 46 pct of which will be high-thrust engines able to power twin-aisle widebody aircraft.

‘Asia is the key market for new aircraft in the 400-plus seat category, with aircraft of this size expected to account for 55 pct of deliveries in the region,’ it said.

The company added that global demand over the next two decades will drive the purchase of 60,000 new commercial aircraft, providing a market opportunity for 132,000 engines with a value of 700 bln stg.

It said these engines will create an additional aftermarket and services business of around 550 bln usd over their in-service life.

Rolls Royce also said it is ready to launch its newest Trent engines on the Airbus A350 XWB, the Boeing 787 and Airbus A380.

The Trent 1000 engine, which has been cleared to power the Boeing 787 ‘Dreamliner’ later this year, will power Air China’s 15-strong fleet of 787s due to enter service next year.

Rolls Royce’s Trent 900, the launch engine for the Airbus A380 ‘Superjumbo,’ will begin commercial service with Singapore Airlines next month.

China Southern Airlines, currently the only mainland customer for the A380, has also chosen the Trent 900 engine, Rolls Royce said.

PetroChina (NYSE: PTR, HK: 0857) Changqing Oilfield Company (PCOC) produced 6.98 billion cubic meters of natural gas in the first eight months of this year, an increase of 1.78 billion cubic meters or 25.5 percent over the corresponding period of last year, according to CNPC’s China Petroleum Daily.

PCOC targets 10.7 billion cubic meters gas production in 2007, 2.7 billion cubic meters more than in 2006.

About 45 percent of gas produced by Changqing amounting to 21.38 billion cubic meters since 1997 has been used to fill the Shanxi-Beijing gas pipeline to supply Beijing.

Changqing Oilfield spans over the regions of Shaanxi, Gansu, Ningxia, Inner Mongolia and Shanxi and has proven gas reserve amounting to 1,300 billion cubic meters.

Ordos Basin where Changqing Oilfield situates is Chinese largest gas tank with 1,747.3 billion cubic meters of proven reserve.

Record-high international oil prices in the latter half of this year would neither bring huge gains to CNPC, parent company of PetroChina (NYSE: PTR, HK: 0857) nor mar Sinopec’s (NYSE: SNP, HK: 0386, SH: 600028) profits too much, since the crude oil of CNPC mainly supply its own refineries and Sinopec’s loss from surging cost will be offset by robust demand for petrochemicals, generally believed by Chinese market analysts.

Since crude export only takes a slight weight in its business, Chinese largest oil explorer CNPC would not pocket huge profits amid soaring international oil prices, said Liang Jianmin, an analyst with Capital Securities.

“Though cost has been increasing, the surging demand for petrochemicals would eventually benefit Sinopec,” said Guang Qingyou, an oil expert with Center for China Study under Tsinghua University.

Petrochemical industry in 2007 is expected to grow above 20 percent over 2006, based on a report recently released by China Petroleum and Chemical Industry Association.

Li Yi, an analyst with www.oilboss.cn, however, believed the high oil price would directly favor such upstream companies as CNPC and CNOOC.

The  Russian  Pipe  Industry Development  Fund  expects  to sign an agreement with China Iron & Steel Association  (CISA)  on  imports of pipes to Russia’s domestic market by the end  of September 2007, Alexander Deineko, the fund’s director, said at a press conference in Chelyabinsk on Tuesday.
    
“We  want  to  encourage  the  conclusion  of  an  agreement on parameters  of  the  presence  of  China’s  pipe products on the Russian market,” Deineko said.
    
“This  work  has  been  under  way  over the previous three or four months.  The  latest  trip to China was in late August. We hope that our Chinese counterparts will come here and we will sign an agreement by the end of September,” Deineko said.
    
If such an agreement is not signed, Russia is determined to reserve the right to impose restrictions on imports of pipe products from China,he said.