China changes basis of resources tax

From volume based to value based.

The Ministry of Finance announced the coal resources tax will change from volume based to value based from the beginning of December.

According to a research note from Maybank Kim Eng, the level is ~2-10%.

In fact, the report noted, the government will also reduce some other levies on coal, such as “resources compensation fee”.

Maybank Kim Eng said that if incorporating all the taxes or levy changes on coal mines, it expects the net tax could be smaller. It also thinks the news is neutral to the Chinese IPPs.

Here's more from Maybank Kim Eng:

Construction of the Russia-China gas pipeline (Russia portion) started in Sep 14’.

The China portion may start construction in 1H15 and be completed in 2018.

Layout will be from Heilongjiang, passing through Jilin, Inner Mongolia, Liaoning, Hebei, Tianjin, Shandong, Jiangsu and finally ending in Shanghai.

Our comments: The annual capacity of the pipeline will be 38b cubic metres.

With more import gas supply, we think it could enhance the revenue growth of Chinese gas distributors after 2018.

We believe China Gas will benefit the most on the back of having the largest exposure to the Northeast.