Chinese Way of Doing Business: In Cash We Trust; Many experts say it is not a refusal to enter the 21st century as much as wariness, of the government toward its citizens and vice versa

April 30, 2013

Chinese Way of Doing Business: In Cash We Trust

By DAVID BARBOZA

SHANGHAI — Lin Lu remembers the day last December when a Chinese businessman showed up at the car dealership he works for in north China and paid for a new BMW 5 Series Gran Turismo — entirely in cash. “He drove here with two friends in a beat-up Honda,” Mr. Lin recalled. “One of his friends carried about $60,000 in a big white bag, and the buyer had the rest in a heavy black backpack.” Lugging nearly $130,000 in cash into a dealership might sound bizarre, but it’s not exactly uncommon in China, where hotel bills, jewelry purchases and even the lecture fees for visiting scholars are routinely settled with thick wads of renminbi, China’s currency. This is a country, after all, where home buyers make down payments with trunks filled with cash. And big-city law firms have been known to hire armored cars to deliver the cash needed to pay monthly salaries.

For all China’s modern trappings — the new superhighways, high-speed rail networks and soaring skyscrapers — analysts say this country still prefers to pay for things the old-fashioned way, with ledgers, bill-counting machines and cold, hard cash. Many experts say it is not a refusal to enter the 21st century as much as wariness, of the government toward its citizens and vice versa. Doing business in China takes a lot of cash because Chinese authorities refuse to print any bill larger than the 100-renminbi note. That’s equivalent to $16. Since 1988, the 100-renminbi note, graced by Mao Zedong’s visage, has been the largest note in circulation, even though the economy has grown fiftyfold. (The country’s national icon, Chairman Mao, appears on nearly every note: the 1-, 5-, 10-, 20, 50- and 100- renminbi note.) Read more of this post

Qianhai zone may become China’s Cayman Islands

Qianhai zone may become China’s Cayman Islands

Staff Reporter

2013-05-01

Many foreign private equity firms are interested in registering their companies in the Qianhai Special Financial Zone in Shenzhen, although most have no interest in actually operating there. This makes the zone akin to a Chinese version of the Cayman Islands tax haven, the Guangzhou-based 21st Century Business Herald reports.

At least two private equity firms have already registered in Qianhai, and several others are considering a move. The firms are less interested in actually operating within the zone but instead are seeking the tax breaks offered to businesses there, the report said. The zone is desirable because it enables the inflow of overseas-held renminbi, since firms registered in the zone can invest in China’s economy using assets they raise overseas. The zone will start to look something like the Cayman Islands if firms don’t actually rent offices or hire staff in Qianhai, effectively negating the government’s plans to boost the local economy, said one accountant.

Read more of this post

Economic revolution sprung from China’s grassroots rather than top-down approach

Economic revolution sprung from China’s grassroots: scholars

Staff Reporter

2013-05-01

China’s economic reforms, which begun under the late Deng Xiaoping more than 30 years ago, are often thought of as a top-down revolution presided over by the ruling Communist Party. The country’s rapid economic growth in the last three decades proves that the party’s plan was well-conceived and executed and the credit for China’s economic miracle thus accrues to them, says the Beijing-based Economic Observer.

This view has been challenged however by Nobel laureate Ronald Coase, an economist at the University of Chicago, and his coauthor Wang Ning. Coase and Wang have pointed to the vital role played in China’s economic reforms by people at the grassroots level. Read more of this post

Puffer-fish protests and Xi’s China dream; ordinary Chinese have been watching their unelected representatives gorge themselves on their tax renminbi for decades

April 30, 2013 6:19 pm

Puffer-fish protests and Xi’s China dream

By Patti Waldmeir in Shanghai

Officials are discovering the power of the middle-class Nimby, writes Patti Waldmeir

Something about the tale just did not add up: several hundred people turn up to protest because officials of a provincial city in China are eating swordfish, puffer fish and other forms of lethal seafood at the taxpayer’s expense?

Sure, there’s an austerity drive on in China: these days, bloated bureaucrats are not meant to be eating, drinking or being merry at public expense. But ordinary Chinese have been watching their unelected representatives gorge themselves on their tax renminbi for decades. Surely it takes more than another government anti-corruption campaign to rouse them to revolution? Read more of this post

Korea behind Japan in entrepreneurship; Only 11 of Korea’s top 50 richest businesspeople are self-made, the rest inherited their fortunes

2013-04-30 17:13

Korea behind Japan in entrepreneurship

By Na Jeong-ju
Only 11 of Korea’s top 50 richest businesspeople are self-made, the rest inherited their fortunes from their father or grandfather, a survey showed Tuesday.
In contrast, 34 of the 50 richest people in Japan earned their success through Their own means.  Read more of this post

North Dakota Has Way More Energy Than We Previously Thought, US Government says

US GOVERNMENT: North Dakota Has Way More Energy Than We Previously Thought

Rob Wile | Apr. 30, 2013, 3:58 PM | 2,905 | 15

The USGS just doubled the amount of oil it thinks can be recovered from North Dakota’s Bakken formation. According to its release, the agency now puts the figure at 7.38 billion barrels, compared with 3.65 in their 2008 estimate. They also tripled their gas estimates for the area — to 6.7 trillion cubic feet of undiscovered, technically recoverable gas and gas liquids. The revisions are almost entirely the result of adding a new section, Three Forks, to the estimates. Anne-Berry Wade told us hydraulic fracturing — fracking — in that section has allowed geologists to up their estimates for what is technically recoverable.  Here’s new Interior Secretary Sally Jewell’s comment:

These world-class formations contain even more energy resource potential than previously understood, which is important information as we continue to reduce our nation’s dependence on foreign sources of oil. We must develop our domestic energy resources armed with the best available science, and this unbiased, objective information will help private, nonprofit and government decision makers at all levels make informed decisions about the responsible development of these resources.

Peak oil: still dead.

S&P 500’s Best and Worst Months of May Since 1928

S&P 500’s Best and Worst Months of May Since 1928

TUESDAY, APRIL 30, 2013 AT 10:22AM

With the month of May beginning tomorrow, we wanted to highlight the best and worst S&P 500 performances during the month since 1928.  Overall, the S&P 500 has averaged a decline of 0.15% during the month, which is among the weaker average monthly performances of the year.

While investors debate the merits of sell in may and go away, we thought it was worth pointing out that May has increasingly become a volatile month in recent years.  As shown in the table below, two of the ten worst months of May going all the way back to 1928 have both occurred during the current bull market (2010 & 2012).  Furthermore, one of the ten best Mays of all time also came during the current bull market (2009).  In other words, three of the four Mays during the current bull market have qualified as one of the ten best or worst Mays of all time.  That leaves 2011 as the only year where May was not one of the ten best or worst Mays ever.  In that year, the S&P 500 declined 1.4%.  With the month of May averaging a decline of 2.64% during the current bull market, you can’t blame bulls for wanting to take the month off in 2013.

Lethal H7N9 bird flu virus batters China’s holiday travel bug; number of tourists to some eastern Chinese cities where the outbreak is concentrated has plunged by half

Bird flu virus batters China’s holiday travel bug

The number of tourists to some eastern Chinese cities where the outbreak is concentrated has plunged by half for some tour agencies over H7N9 fears. -ST 
Grace Ng

Wed, May 01, 2013
The Straits Times

Women wear face masks on a street in Shanghai on April 16, 2013 as China’s H7N9 bird flu virus spreads further afield. In spite of the deadly bird flu virus outbreak that has spread to new locations in China including south-eastern Fujian province and central Henan, Beijing housewife Xu Jia, 44, and her family decided to press on with their trip to Xiamen for the three-day Labour Day holiday which started on Tuesday. The family booked their trip to the scenic coastal city in Fujian earlier this month. Last Friday, news broke that one case of the H7N9 virus had surfaced in the province. Still, this has not stopped them from setting off two days ago. “We’re not concerned about the avian flu. There are just 100-odd cases across the whole country and there hasn’t been discovery of human-to-human transmission,” Ms Xu told The Straits Times. But her gung-ho attitude does not appear to be shared by many of her countrymen.

The number of tourists to some eastern Chinese cities – where the outbreak, which has sickened 124 people and killed 24, is concentrated – has plunged by half for some tour agencies over H7N9 fears. This is traditionally a peak tourism period, with tour prices rising as much as 30 per cent last year. Read more of this post

China Manufacturers Survive by Moving to Asian Neighbors

April 30, 2013, 4:00 p.m. ET

China Manufacturers Survive by Moving to Asian Neighbors

By KATHY CHU

SHENZHEN, China—In a corner of a sprawling factory in this coastal southern city, sewing machines that stitched blouses and shirts for Lever Style Inc.’s clients now gather dust. As the din on the factory floor has dropped, so, too, has the payroll. Over the past two years, Lever Style’s employee count in China has declined by one-third to 5,000 workers. The company in April began moving apparel production for Japanese retail chain Uniqlo to Vietnam, where wages can be half those in China. Lever Style also is testing a shift to India for U.S. department-store chain Nordstrom Inc. JWN +0.09% and moving production for other customers. It’s a matter of survival. After a decade of nearly 20% annual wage increases in China, Lever Style says it can no longer make money here. Read more of this post

Chinese President Xi follows in Mao’s footsteps on path to consolidate power

Xi follows in Mao’s footsteps on path to consolidate power

Monday, 29 April, 2013, 12:00am

Wang Xiangwei xiangwei.wang@scmp.com

The president’s push to clean up the party may employ old tactics, but there’s reason to hope he wants more than just another purge

“Look in the mirror, dress properly, take a bath and see a doctor.”

Such advice might strike the ears of most people as plain and harmless. But that kind of order coming from the president and party chief surely sends shivers down the spines of many of the Communist Party’s 80 million members. Most of them understood that when the Politburo announced Xi Jinping’s campaign rid the party of “formalism, bureaucratism and behaviour that suggests mediocrity, laziness, laxity and extravagance”, what it really meant was: “Clean up your act. Or we’ll clean it up for you.” The year-long campaign, unveiled on April 19, requires any officials from the county level or higher to “reflect on their own practices and correct any misbehaviour”, according to Xinhua. It aims is to improve the party’s bond with the people, as well as fight corruption. Read more of this post

China Affair With Cheap Diamonds Heats Mass Market

China Affair With Cheap Diamonds Heats Mass Market: Commodities

China’s burgeoning middle class is buying diamonds so quickly that the price of mass-market stones is rising faster around the world than for top-quality jewels affordable only to the super-rich. Prices for a 1-carat internally flawless “top white” diamond have gained about 7 percent in two years, while a stone of similar size and color with slight imperfections jumped 24 percent, according to consultant PolishedPrices.com data. “The Chinese consumer’s fascination with luxury goods has grown dramatically, along with their pockets,” said Angelito Tan, founding partner of Robert, Tan & Gao, a consulting firm on luxury market strategy with offices in Shanghai and Beijing.

The price jump in more flawed diamonds benefits producers such as Russia’s OAO Alrosa, the world’s biggest by volume with 30 percent of output in 2011, and De Beers, the largest by revenue. Chow Tai Fook Jewellery Group Ltd. (1929), a retailer with a $13.5 billion market value, said its average selling price dropped in the last six months as it sold more pieces. Even as shoppers go down market in China, the world’s second-largest diamond buyer since 2011, the gap to top-flight stones is still large: A flawless 1 carat “top white” round diamond would cost about $28,800, according to online retailer Blue Nile, while a benchmark middle-market SI1-category diamond of the same size and color would cost about $7,200. China’s market was initially fueled by a rich elite pursuing the best diamonds available. As the economy grew, a new wave of buyers emerged, opening the market to lower-quality stones that form the bedrock of U.S. and European demand.

Read more of this post

Negatively geared Australian property investors lost an astonishing $13.2 billion in 2010-11, up from $10.1 billion the year before

Negative geared investors lose $13 billion

May 1, 2013

Peter Martin

Negatively geared property investors lost an astonishing $13.2 billion in 2010-11, up from $10.1 billion the year before. The latest Tax Office statistics show the average loss per negatively geared investor was $10,950, up from $9130 the year before. The average loss for a high-income negatively geared investor earning more than $180,000 was $23,800. Higher interest rates and rising property prices during 2010-11 swelled the losses. The figures identify negative gearing as one of the key drains on personal tax collections with one in every seven Australian taxpayers now a property investor and one in every 10 negatively geared.

Read more of this post