China “shadow banking” growing fast, having risen nearly 70 per cent over the past two years and now total more than half the size of the world’s second-largest economy

China “shadow banking” growing fast

POSTED: 13 May 2013 7:36 PM

AFP/fl
China’s shadow banking activities have risen nearly 70 per cent over the past two years and now total more than half the size of the world’s second-largest economy.

BEIJING: China’s shadow banking activities have risen nearly 70 per cent over the past two years and now total more than half the size of the world’s second-largest economy, ratings agency Moody’s said on Monday. Shadow banking includes private lending, off-balance-sheet vehicles and trusts, and allows borrowers to circumvent banks’ formal underwriting standards, as well as official regulation. Such lending has surged 67 per cent since the end of 2010, Moody’s said in a report, reaching an estimated total of 29 trillion yuan (US$4.7 trillion) at the end of last year, or 55 per cent of China’s GDP. The rapid growth was partly due to some borrowers having difficulties obtaining regular bank loans, according to the report, and threatened the health of the banking system and the overall economy. “Shadow banking may encourage excessive financial leverage in the broad economy and add to credit bubble concerns,” Moody’s said. “Given the substantial scale and growth of shadow banking activities in China, we are doubtful of the banks’ ability to isolate themselves from a significant increase in defaults in the shadow banking domain.” China’s banking regulator has sought to rein in non-transparent lending activities and in March ordered banks to step up checks on wealth management products as part of a bid to boost risk control and openness. But Moody’s said: “The impact from shadow banking on banks will depend on the amount and timing of losses and how they are allocated, variables that are difficult to assess at this point, given the lack of transparency and fast-evolving nature of shadow banking in China.”

Give a man a coalmine, make him rich, and what does he do? He goes and tells everybody he’s not your mate. The costs of corruption will weigh on NSW for years to come. A decade of deals can hardly be unwound now

Mateship, it is obvious, can come at a high price

May 11, 2013, Michael West

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‘If he was me mate, he would have showed up.” Former union boss John Maitland tells the Independent Commission Against Corruption this week former New South Wales mining minister Ian Macdonald was not his mate because he didn’t show up at his farewell dinner. Crikey, that’s hurtful. Give a man a coalmine, make him rich, and what does he do? He goes and tells everybody he’s not your mate. It’s fair dinkum un-Australian! Granted, the union boss did concede in testimony before ICAC this week, that he and the minister may have had a ”close working friendship”. Yes, struck the deal over a magnum of pinot noir at Catalina Restaurant. Yes, there had been no tender – come on, it was only a ”training mine”. Yes, the training mine somehow become a real mine and found its way into a stockmarket company NuCoal. And yes, John’s $165,000 investment happened to turn into $14 million. After all that goodwill from Macca, one can only surmise that John attaches exceedingly rigorous performance hurdles to his mateships. In the same year that Macca approved the Hunter Valley licence for John, he also opened up tracts of land in the Bylong Valley. That’s the spot where, by sheer providence, Labor powerbroker Eddie Obeid had bought a property whose value was soon to rise fourfold. Eddie Obeid had stewardship of the mines portfolio in NSW from April 1999 to April 2003. Macca came later. A pall has been cast over any mining deal struck by the NSW government in the past 14 years, including those with mining leviathan Newcrest, which operates Cadia, the country’s largest gold mine, near Orange. Gold and Copper Resources – an explorer led by Brian Locke and backed by former Rio Tinto boss Leigh Clifford, founder of Barlow Jonker Jeremy Barlow, former Glencore and Xstrata chairman Willy Strothotte, and venture capitalist Mark Carnegie – is contesting the validity of Newcrest’s licences. They await judgment on the first of five court actions over the Cadia licences. It’s a mess, though there is the odd winner from ICAC: the Coalition, we in the media and, of course, Ian Macdonald’s dentist to name three (love that smile). But the costs of corruption will weigh on NSW for years to come. A decade of deals can hardly be unwound now.

‘All in the Family’: Earnings Management Through Non-Listed Subsidiaries

‘All in the Family’: Earnings Management Through Non-Listed Subsidiaries

Massimiliano Bonacchi University of Naples “Parthenope”; New York University (NYU) – Leonard N. Stern School of Business; City University of New York, CUNY Baruch College, Zicklin School of Business

Fabrizio Cipollini Universita di Firenze, Dipartimento di Statistica

Paul Zarowin New York University (NYU) – Department of Accounting, Taxation & Business Law

May 7, 2013

Abstract: 
We find evidence consistent with the hypothesis that non-listed subsidiaries engage in accrual and real earnings management when their listed parent is reporting small annual profits. Our evidence is important, because it shows that business groups manage earnings differently from single firms. In particular, to avoid reporting annual losses, the parent company drives earnings management of the subsidiary. Cross-sectional analysis reveals that Big4 auditors mitigate accrual earnings management at the subsidiary level, and that family-owned firms are more likely to use earning management through non-listed subsidiaries to avoid losses.

Extraordinary Acquirers

Extraordinary Acquirers

Alfred Yawson City University London – Sir John Cass Business School; University of Adelaide Business School

Huizhong Jodie Zhang University of Adelaide – Business School

May 3, 2013

Abstract: 
We examine acquirers that persistently generate positive announcement returns in takeovers (extraordinary acquirers). Extraordinary acquirers constitute 14.9 percent of US acquiring firms during the period 1990-2011. The probability of observing an extraordinary acquirer from a takeover announcement is 2.41%. Extraordinary acquirers prefer subsidiary targets and cash deals but avoid using stocks to finance acquisitions. Further, we find strong evidence that the attainment and preservation of extraordinary acquirer status depend on top management team tenure and tenure heterogeneity. Compensation heterogeneity does not change after the transaction suggesting top team members contribute more equally to the acquisition success. Further we show that extraordinary acquirers possess strong negotiation skills which enable them to appropriate a larger share of the synergy gain.

Everyone Will Be Debating The WSJ Story About The Fed Considering Ways To End QE

Everyone Will Be Debating The WSJ Story About The Fed Considering Ways To End QE

Joe Weisenthal | May 12, 2013, 7:22 PM | 2,992 | 16

Futures are down modestly in early Sunday trading, and one possibility for that is the story that came out after the bell on Friday in the Wall Street Journal from Fed whisperer Jon Hilsnerath titled Fed Maps Exit From Stimulus. The gist: The Fed is seriously thinking about how it might begin the QE wind-down process. Given the widespread belief that Fed stimulus is a major tailwind for the market, talk of QE wind-down is invariably something of a negative. In tonight’s “Closing Print” note, Mike O’Rourke from JonesTrading thinks the article’s existence is pretty significant.

He writes:

The WSJ’s Jon Hilsenrath published a story Friday evening titled “Fed Maps Exit From Stimulus – Timing of Wind-Down Is Uncertain, but Focus Is on Managing Unpredictable Market Expectations.”  We suspect the twitter taper caper on Thursday opened the window for the FOMC to provide some clarity as to where policy stands.  Here are some key questions.  Is this story important?  Can it be taken at face value and should markets move?  The answer is yes, yes and yes.  The WSJ placed the article prominently on the cover of the Saturday edition, so they believe they have an important story.  It is a Hilsenrath story, and in the post-recession QE era the Fed has used him to foreshadow almost every major monetary policy move. Finally, in a tape where QE is the dominant theme, any indication of policy slowing or reversing course is meaningful.  Read more of this post

The Ingenious Enterprise: Competing Amid Rising Complexity

The Ingenious Enterprise: Competing Amid Rising Complexity

by Martin Reeves and Jussi Lehtinen

MAY 07, 2013

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“Creating a great culture, finding the right people, managing them to do great things, and solving problems creatively and systematically are challenges faced by all organizations. What differentiates [organizations] is how they approach these challenges.”

Ray Dalio, Founder, President, and CIO, Bridgewater Associates

Business, at its heart, is about solving problems. Problem solving is performed both explicitly by analysts and computers and implicitly by your organization as a whole. And the way your organization is designed—the structure, processes, communication policies, incentives, training, and talent management you have in place—shapes the way your problems are approached and solved. Many organizations, however, lack explicit strategies for problem solving. This has come at little cost to these organizations historically, given that many of the problems they faced could be solved using straightforward, well-known methods. But today’s business environment, characterized by sharply rising complexity and hence increasingly complicated problems, is putting a rising premium on more sophisticated approaches to problem solving.

The rise in complexity—defined as the number of calculation steps required to reach a solution—is being driven by the rapid growth of three variables: data, interconnectedness, and the speed of change. Read more of this post

Graduate-turned-butcher shares experience with alma mater

Graduate-turned-butcher shares experience with alma mater

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Lu Buxuan (right) helps his brother Lu Buning in the family butcher’s shop.

Zhang Yue, China Daily/Asia News Network

Monday, May 13, 2013

CHINA – It was the first time in 24 years that Lu Buxuan was speaking at his alma mater, Peking University, and the scene was emotional. His career choice of selling pork for a living after graduation in 1989 – at a time when college education was accessible only to a few in the society – has brought him to public attention for the past decade. In April, Lu was invited to return to the university. This time as a speaker, providing advice to his juniors. “I am very excited to stand here,” Lu says. “I understand that only the elites of our society can stand here and give a speech to the students.” “I, on the other hand,” he choked, and his face turned red, “brought shame to my alma mater.” Lu graduated from Peking University in 1989, majoring in Chinese language and literature, and was assigned to a factory job in his hometown in Shaanxi province. “It was definitely not the job I liked. But most students were assigned jobs at that time.” Lu says his tough and stubborn personality made his career in the State-owned factory increasingly harder. “I didn’t talk much,” says 47-year-old Lu. “And because I was too quiet and did not cultivate good relationships with people around me, I was ostracized.” Lu quit his low-paying factory job in 1999 and was planning to start a small business of his own. Setting up a stall in a food market was one of the easiest options. Read more of this post

Richard Branson dresses as stewardess on charity flight

Branson dresses as stewardess on charity flight

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He spent the five-and-a-half hour flight pouring coffee or tea, serving meals, distributing goodies, entertaining as well as making in-flight announcements.

Virgin group founder Sir Richard Branson has finally made good on a bet he lost two years ago. The bet was made with AirAsia CEO Tony Fernandes on who had a better Formula 1 team at the 2010 Grand Prix in Abu Dhabi. The loser would have to dress as a female flight attendant on board the winner’s airline. Fernandes’ Lotus beat Branson’s Marussia Virgin by two spots in the final rankings. The flight took off from Perth, Australia, to Kuala Lumpur this morning (May 12). Tickets were priced at A$399 (S$494.61), with A$100 from each ticket sold donated to Australia’s Starlight Children’s Foundation. 10 per cent from all inflight sales will also be donated. “As an AirAsia X’s flight attendant, he has to comply with our grooming standards and that includes shaving his legs, donning high heels, putting on some makeup and slipping into the AirAsia’s famous red uniform,” Fernandes said. He added: “He will be committed to carry out the responsibilities of a flight attendant, including offering coffee, tea and other food and beverages to guests on the special 6-hour Perth to Kuala Lumpur flight.”

Japanese ‘latte’ artist creates 3D art on coffees

Japanese ‘latte’ artist creates 3D art on coffees

Forget your typical drawings of flowers and leaves on lattes, Japanese artist Kazuki Yamaoto brings latte art to a whole new level with 3D characters.

May 11, 2013

Forget your typical drawings of flowers and leaves on caffé lattes — art on coffee has gone 3D. According to an article on Kotaku, a Japanese “latte artist” named Kazuki Yamamoto, who is famous for drawing characters from games and anime with steam milk, has brought latte art to a whole new level — he does it in 3D now.

2014

China’s Data Manipulation In One Chart, And Why The Real Data Implies Weakest GDP Growth In Over 20 Years

China’s Data Manipulation In One Chart, And Why The Real Data Implies Weakest GDP Growth In Over 20 Years

Tyler Durden on 05/12/2013 13:31 -0400

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By definition, exports from country A have to equal imports from country B. Unless country A is China. Then, central planning magic happens, as can be seen in the chart below showing the misreporting of Chinese exports to HK compared to HK’s reported imports from China, which is just the latest nail in the coffin of Chinese economic data “integrity.” The issue, however, is that since China manipulates its data “upward”, as does the rest of the civilized, “unmanipulating” world, none of the ‘very serious people‘ have any incentive in calling China out – because suddenly all the world’s growth data may fall under the microscope, as perhaps it should – after all it was less than two years ago that we observed that the entire world was exporting over $300 billion more than it was importing (numbers which should net to zero), leading us to wonder if it was aliens that were importing all the excess Louis Vuitton bags… So for those actually interested, here is Sean Corrigan of Diapason breaking down the true numbers behind China’s economy, who using real export and import data ex-manipulation and fudging, that China’s reported 7.7% GDP would translate into a 5.5% Q1 GDP growth, the lowest rate of growth in 20 years! Read more of this post

In Taiwan, Lamenting a Lost Lead; Fostering innovation has become a mantra among corporate leaders and government officials because Taiwan’s huge consumer electronics industry has run into serious trouble.

May 12, 2013

In Taiwan, Lamenting a Lost Lead

By KEITH BRADSHER

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Jonney Shih, the chairman of Asustek Computer, at Asus’s headquarters on the outskirts of Taipei in April.

TAIPEI, Taiwan — Jonney Shih, the chairman of Asustek Computer, has epitomized the Taiwanese electronics engineer for a generation: a slender figure in rumpled, baggy trousers, he once helped Intel solve heat problems in its Pentium 4 microprocessors. So it has been a surprise over the last several years to see Mr. Shih, now 60, reinvent himself with snug-cut Italian suits, innovative designs for tablet and notebook computers and scathing criticisms of Taiwan’s test-obsessed, engineering-oriented educational system.

“I don’t think the Taiwanese got very good training to drive the mentality of innovation,” he said during an interview at Asus’s headquarters here on the outskirts of Taipei. (Mr. Shih also demonstrated his flexibility in the interview, assuming the lotus position while wearing a dark blue Armani suit with a sky-blue Armani tie.) Fostering innovation has become a mantra among corporate leaders and government officials alike in Taiwan this year because the island’s huge consumer electronics industry has run into serious trouble. Read more of this post

Jack Ma’s Last Speech as Alibaba CEO

Jack Ma’s Last Speech as Alibaba CEO

May 13, 2013

“Small businesses are where most of the Chinese dreams live”

After a couple of hours of music and extravaganza – including Ma himself singing – he gave his speech to the roaring stadium audience of over 20,000 employees, merchants, and guests. Below is our unofficial translation of Jack’s speech. I do hope it captured a large part of what he communicated:

Jack Ma: In the last ten years, there are many people who have paid a big price to live this dream. For our dream, we have walked ten years. I have been thinking, even if someone had removed 99 percent of Alibaba’s assets, we are still worthy. We have no regrets. We have our team, our partners, and friends. What is the thing that has made Alibaba what it is today? What is the thing that has made me what I am today? I have no reasons to succeed. Alibaba and Taobao have no reasons to succeed either. But today, we have walked so far and for so many years with so many aspirations for the future. I believe, it is trust that has made us walk this far.

When no one believes in the future, we chose to believe… we chose to trust.. that 10 years later, China will be better. We chose to believe that our colleagues will do better than myself. I believe, the younger generation of Chinese will do better than us. I’m very thankful that my colleagues have trusted me. It’s tough to be a CEO but being a CEO’s employee is even tougher. At times when trust was doubted, people actually bought things online, even when they haven’t even seen the items before. Over thousands of kilometers, through an unknown person, the goods fall safely into your hands. Today’s China has trust and belief. Everyday, there are 24 million transactions on Taobao signifying China’s trust. Read more of this post

Rivals brace for Alibaba push into overseas markets

Last updated: May 12, 2013 8:06 pm

Rivals brace for Alibaba push into overseas markets

By Kathrin Hille in Hangzhou

When the thin man in the silver-coloured windbreaker walks on to the stage, a roar goes through the crowd. Then he starts singing: “Friends, we have walked together all our lives, but those days are over,” and the audience goes crazy. But this is not a pop concert. The 40,000 in the Yellow Dragon Stadium in Hangzhou on Friday night were Alibaba Group employees and their family, and the man on stage was Jack Ma, saying farewell to the business he founded that has now grown into one of the world’s largest ecommerce companies. At 48, Mr Ma has handed the job of chief executive to Jonathan Lu, his trusted lieutenant and 13-year Alibaba veteran, and gone into semi-retirement as executive chairman. The change at the top comes as the group is preparing what could become one of the largest-ever internet initial public offerings. A listing in the US, expected at the end of this year or in early 2014, would allow Alibaba to buy back up to half of Yahoo’s 24 per cent stake in itself and raise $60bn or more from public investors.

Mr Lu inherits a formidable business. Alibaba operates the world’s largest online marketplace for trade between companies. It has also built an unrivalled online retail platform in China. Taobao.com, the group’s eBay-like consumer-to-consumer website, accounts for 90 per cent of China’s online retail transaction value in this segment. TMall, its business-to-consumer platform, accounts for half of online business-to-consumer sales in China by transaction value, according to McKinsey. Read more of this post

China Officials Seek Career Shortcut With Feng Shui

May 10, 2013

China Officials Seek Career Shortcut With Feng Shui

By DAN LEVIN

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In Hunan Province, a boulder was placed outside a government building to create better feng shui for superstitious civil servants.

ZOUMAJIE, China — Outraged peasants protesting land grabs. Jilted mistresses plotting revenge. Provincial investigators seeking out graft.

For top officials at the local land resources bureau beleaguered by these and other headaches, there could only be one explanation for the miasma of misfortune they believed was threatening their careers last year: the pair of ferocious stone lions that guarded the state-owned China Tobacco building across the street from their offices.

An official confided that the secret weapon the land bureau used was feng shui, the ancient practice of arranging objects and designing architecture to improve one’s health, prosperity and luck. For proof, he nodded toward a stone wall in the parking lot that was built to block the feline statues’ harmful qi, or energy.

“Our bureau wasn’t doing so well until we erected the barrier last year,” said the official, who gave only his last name, Chen. “Now things are a lot better.” Read more of this post

The Son also Rises: nepotism doesn’t disappear in China, it just gets a promotion

The Son also Rises: nepotism doesn’t disappear in China, it just gets a promotion

Monday, 13 May, 2013, 12:00am

News›China

CHINA BRIEFING

Wang Xiangwei xiangwei.wang@scmp.com

The history of graft in China has come full circle amid reports of children of powerful officials stepping into their parents’ shoes

Throughout Chinese history, the expression ya nei originally meant palace guards but later referred generally to children of government officials. In traditional Chinese opera and drama, they are immortalised as the worst of the worst – vile, violent and corrupt. Dressed in silk and drooped in gold, ya nei roamed the streets, beating people for no particular reason or kidnapping young girls and forcing them to become concubines. They usually escape punishment thanks to their powerful fathers and relatives. Today, such characters may go by a different name, guan er dai – the second-generation government officials, or princelings, particularly those of top mainland leaders. While they may no longer go around beating people or abducting girls, they invariably take advantage of their parents’ power and influence to enrich themselves or their families. Judging by the rising number of reports in state media, the guan er dai are now using their nepotistic connections for what is termed “riding a rocket” – being promoted rapidly through government or party ranks to fill positions that, usually, have been vacated by their parents. Read more of this post

Ancient Buddhist temple in China bogged down by fake monks and debt

Ancient Buddhist temple in China bogged down by fake monks and debt

Sunday, 12 May, 2013, 7:31pm

Patrick Boehler

A provincial city’s ambitious plans for turning an ancient Buddhist temple near Xian into the world capital of Buddhism and listing it on a stock exchange have stagnated, leaving the temple surrounded by fake monks and sham Buddha statues.

Famen Temple houses a Buddhist relic. Photo: AP[1]In an investigative report [2], the Guangzhou-based Southern Weekly documents how the project involving the 1,700-year-old Famen Temple in Shaanxi province – which boasts the ownership of Buddha’s finger bone – went horribly wrong.

Now, fake monks from Hubei province roam a nearby scenic park that opened in 2009 and that tourists and pilgrims mistaken as part of the temple. The impostors get commission for collecting donations to the Shaanxi Famen Charitable Foundation. But clueless visitors do not know the foundation is a front for the operating company of the park, Shaanxi Famen Temple Scenic Park Cultural Industrial Group, and is not related to the temple, the weekly reported last week. Read more of this post

European companies wrote off a record €350bn in bad debt last year, more than the annual GDP of Austria, Denmark or Finland.

May 12, 2013 11:03 pm

European groups write off record €350bn in bad debt

By Richard Milne, Nordic Correspondent

European companies wrote off a record €350bn in bad debt last year, more than the annual GDP of Austria, Denmark or Finland.

The amount of write offs increased 7 per cent in the past year and 27 out of the 31 countries surveyed by Intrum Justitia, a Swedish credit management company, saw either a worsening in credit conditions, or no change. The debt amounts to 3 per cent of all outstanding invoices in European companies.

“It is the highest level of bad debt losses so far, and the forecast is bleak. Three per cent of all receivables; think of the net profit margin of companies in Europe and that is a big part of it,” Lars Wollung, Intrum Justitia’s chief executive, told the Financial Times. Read more of this post

Valuable as Art, but Priceless as a Tool to Launder Money

May 12, 2013

Valuable as Art, but Priceless as a Tool to Launder Money

By PATRICIA COHEN

According to the air bill slapped on the crate that arrived at Kennedy International Airport from London, an unnamed painting worth $100 was inside. Only later did federal investigators discover that it was by the American artist Jean-Michel Basquiatand worth $8 million. This painting, known as “Hannibal” after a word scribbled on its surface, was brought into the United States in 2007 as part of a Brazilian embezzler’s elaborate effort to launder money, the authorities say. It was later seized at a Manhattan warehouse by federal investigators who are now preparing to return it to Brazil at the behest of law enforcement officials there. The painting’s seizure was a victory in the economy-rattling, billion-dollar fraud and money laundering case of Edemar Cid Ferreira, a former Brazilian banker who converted some of his loot into a 12,000-piece art collection. Read more of this post

Student Debt and the Crushing of the American Dream

MAY 12, 2013, 9:09 PM

Student Debt and the Crushing of the American Dream

By JOSEPH E. STIGLITZ

A CERTAIN drama has become familiar in the United States (and some other advanced industrialized countries): Bankers encourage people to borrow beyond their means, preying especially on those who are financially unsophisticated. They use their political influence to get favorable treatment of one form or another. Debts mount. Journalists record the human toll. Then comes bewilderment: How could we let this happen again? Officials promise to fix things. Something is done about the most egregious abuses. People move on, reassured that the crisis has abated, but suspecting that it will recur soon.

The crisis that is about to break out involves student debt and how we finance higher education. Like the housing crisis that preceded it, this crisis is intimately connected to America’s soaring inequality, and how, as Americans on the bottom rungs of the ladder strive to climb up, they are inevitably pulled down — some to a point even lower than where they began. Read more of this post

Coal barons see assets fade as prices slump in China; Heavy Industry’s Reverberating Slump

Coal barons see assets fade as prices slump in China

Staff Reporter

2013-05-12

The assets of Chinese coal mine owners are gradually diminishing as coal prices slump, a trend which has also resulted in their company’s stock prices declining, reports the Shenzhen-based New Fortune monthly. Many coal millionaires have attracted attention for the public flaunting of their wealth. A notable example was when Xing Libin, chairman of Liansheng Energy Group, spent 70 million yuan (US$11.3 million) to stage a lavish wedding party for his daughter in March last year. The wedding party caused a public outcry in Shanxi province, the largest coal-producing region in China where the average income is only 5,807 yuan (US$950) a year, said the report. The golden days for mine owners seem to be numbered as the government began streamlining the industry in 2008, and cut the number of firms from 2,200 to just 130 through incorporations and mergers, and brought 70% of them under the control of state enterprises. It was reported that private owners,whose mines were taken over by big state enterprises were compensated to the tune of 600 billion to 1 trillion yuan (US$97-$161 billion) in total. Many smaller business owners have little expertise outside of the coal industry. They are expected to quickly spend their newly gained wealth and fade from the nation’s business circles because they will likely not invest their wealth wisely, said the magazine. Only the big coal companies with advanced technology and abundant capital could survive in the reshaped industry, said the report.

Heavy Industry’s Reverberating Slump

By Yu Huapeng (于华鹏)  
Issue 617, April 29, 2013

After two days in Qingdao, Hong Daoqing (洪道清) failed to persuade Qingdao Iron & Steel Company to order any coking coal from him.
Just as he was feeling completely frustrated, Hong’s telephone rang with more bad news from Manager Ma at Laiwu Iron & Steel Company. Ma told him that his company had shut off four blast furnaces and the rest were just working at half capacity.  Read more of this post

Electric car development could be sidelined in China; Chinese carmakers have spent lots of money developing electric cars — development that may have been a waste of resources

Electric car development could be sidelined in China

Staff Reporter

2013-05-12

Carmakers could sideline electric cars to make way for the promotion of hybrid cars in China’s automobile industry, reports Guangzhou’s 21st Century Business Herald, citing executives at last week’s Shanghai International Car Show. At this year’s biennial show, only the venture between BYD and Daimler, Mercedes-Benz, Shanghai Volkswagen, and Dongfeng Nissan introduced pure electric cars, while the majority introduced new hybrid car models, according to the paper. According to official figures, carmakers sold 12,791 new-energy cars in China last year, including 11,375 electric cars, a rise of 98.8% from the previous year and 1,416 hybrid cards, up by 103.9% due to a low base last year. China’s electric car market is reportedly losing money, however, and its true scale is currently unknown, said independent automobile commentator Zhong Shi, adding that Chinese carmakers have spent lots of money developing electric cars — development that may have been a waste of resources. Read more of this post

Why the Chinese government is choosing to let its debt crisis continue to spiral out of control

Why the Chinese government is choosing to let its debt crisis continue to spiral out of control

By Gwynn Guilford @sinoceros 6 hours ago

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For around a year now, the Chinese government has been trying to curb “shadow banking,” as lending to local government investment proxies and other insolvent vehicles through difficult-to-trace channels is known. Shadow banking is now thought to be as big as 36 trillion yuan ($5.8 trillion), according to JP Morgan. There’s been more shaking this last week. The government rolled out two new policies directed in most part at limiting the creation of wealth management products (WMPs), which securitize a good deal of shadow banking financing, selling the products on to retail investors. As of the end of March, WMPs had securitized debt worth of 8.2 trillion yuan. Will this have more effect than the measures taken so far? Not necessarily, says Patrick Chovanec, chief strategist at Silvercrest Asset Management and expert on China’s economy. “[The government has been saying] ‘We need to crack down on risks in interbank and shadow lending.’ Obviously there’s a growing awareness of risks,” he tells Quartz. “But if you look at what has happened since [the new administration effectively took over] in October, there’s been a renewed credit boom to try to prop up investment. That’s what policy has been in practical terms with almost no control over expansion of shadow credit.” Read more of this post

Bullish yuan herd leaves China fundamentals in the dust

Bullish yuan herd leaves China fundamentals in the dust

Sun, May 12 2013

By Gabriel Wildau

SHANGHAI (Reuters) – Investors convinced China’s currency is once again a one-way bet upward should think again: signs of slowing economic growth could cut short the yuan’s rally. Investors and companies have been pouring funds into China in recent months, helping send the yuan to a series of record highs. But with evidence of a slowdown mounting, investors thinking of joining the rush into yuan would do well to remember 2011 and 2012, when fears of a Chinese hard landing sent the yuan, or renminbi, tumbling. Read more of this post

Hong Kong has world’s most expensive retail space; Rents were 50% higher than for similar districts such as upper Fifth Avenue in Manhattan and more than four times the rate in similar areas in London and Paris

Hong Kong has world’s most expensive retail space: report

12:06am EDT

By Ilaina Jonas

NEW YORK (Reuters) – There’s expensive and then there’s Hong Kong.

The Asian shopping haven in the first quarter kept its crown as having the world’s highest rent for prime retail properties, at nearly 50 percent more than for similar districts such as upper Fifth Avenue in Manhattan. Rents were more than four times the rate in similar areas in London and Paris, according to a report by global property advisor CBRE Group Inc. The 10 most expensive cities for retailers benefit from strong demand and modest new supply, a recipe for stable record-high prime rental rates, the report released on Sunday showed. In some markets, such as Hong Kong and London, the sky-high rents have prompted some newcomers to look nearby. For example, in London, Mayfair has benefited from those priced out of Bond Street. Annual retail rent in high-end shopping areas in Hong Kong averaged $4,328 per square foot (36,351 euros per square meter). Read more of this post

Indonesia to Big Chains: Share the Wealth; under the new rules, any convenience store or other retailer with more than 150 stores and any restaurant or café with more than 250 outlets will have to bring in additional Indonesian partners

May 12, 2013, 8:39 p.m. ET

Indonesia to Big Chains: Share the Wealth

By ERIC BELLMAN

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JAKARTA, Indonesia—A jump in the number of chain stores in Indonesia has triggered a backlash from regulators and owners of small shops, concerned that homegrown entrepreneurs could get elbowed out of the country’s economic growth. For decades, Torikin did a brisk business selling batteries, cigarettes, cold drinks and instant coffee from his cart in central Jakarta. Then a brightly lighted store sprouted in the vacant lot where he had been setting up shop. He had never heard of 7-Eleven or its Slurpee frozen drinks. But in the past year he has watched almost all of his customers defect to the chain store, with its wide selection and low prices. “There is no way I can compete,” says Mr. Torikin, who, like many Indonesians, uses only one name. “Office workers that bought cigarettes from me for years, now just walk right past me on the way to that store. They say ‘Hello,’ but they don’t buy anything.” Mr. Torikin says his sales plunged to around $5 a day from roughly $100. Now he is looking for a new spot to set up, far from a Western-style convenience store.

Hoping to protect and enrich small-shop owners like Mr. Torikin, Indonesia has been implementing rules to force large chains to share their success. The new rules could change expansion plans for such chains as KFC, Starbucks SBUX +1.18% and 7-Eleven. Read more of this post

Doubts come to surface about ‘the decade of Latin America’

May 12, 2013 12:58 pm

Doubts come to surface about ‘the decade of Latin America’

By John Paul Rathbone, Latin America Editor

First, in March, an Argentine Pope; then, last week, a Brazilian appointed to lead the World Trade Organisation. Latin America, long associated with default, dictatorships and disgrace, seems to be riding high and enjoying its growing global clout.

Since 2003, the region’s $6tn economy has almost doubled its share of world economic output to 8 per cent. At the same time, the middle class has grown by 50m people while inequality has shrunk – a unique feat. For some, the region is now enjoying what Sir Martin Sorrell, head of advertising group WPP, hailed in 2010 as “the decade of Latin America”.

But now, in the fourth year of its decade, Latin America, lulled by recent success, risks taking its eye off the reform ball and losing its way. Read more of this post

The lust for Latino lucre: How American firms are chasing the elusive Hispanic dollar

The lust for Latino lucre: How American firms are chasing the elusive Hispanic dollar

May 11th 2013 | LOS ANGELES |From the print edition

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ONE in six Americans is Hispanic. In politics, ignoring the Latino vote is suicidal, which is why the Republican Party is at last getting serious about immigration reform. In business, ignoring Latino tastes is equally daft, which is why American firms are at last getting serious about pursuing the Hispanic dollar. Read more of this post

All Signs Suggest The College Bubble Has Finally Burst

All Signs Suggest The College Bubble Has Finally Burst

Rob Wile | May 11, 2013, 7:04 PM | 5,492 | 17

This week, the Wall Street Journal’s Ruth Simon reported private colleges are now offering record financial assistance to keep classrooms full. Some schools are now seeing just 20% of the students they accepted actually enrolling, versus the usual rate of 33%. So they have increased the “tuition discount rate”— the price after grants and scholarships  —  to an all-time high of 45%. Meanwhile, the median sticker price increased just 3.9% last fall, the smallest gains in 12 years. And at public schools, the sticker price climbed just 4.8%, also a 12-year low. For the Washington Examiner’s Michael Barone, this makes it official: the college bubble has finally burst: Applicants are negotiating bigger discounts than they used to. Market competition has kicked in. What has happened is that in a recessionary and sluggish economy potential customers have been figuring out that a college diploma may not be a good investment — particularly if it entails six-figure college loan debt that cannot be discharged in bankruptcy. The Millennial Generation that voted so heavily for Barack Obama — 66 to 32 percent in 2008, 60 to 37 percent in 2012 — has had a hard time finding jobs, even with diplomas in hand. Especially if their degrees are in gender studies or similar fields beloved of academics. Moody’s Investors Service Managing Director John Nelson basically agrees, telling Simon,  “we have hit a tipping point on price.” It was a long time coming. Check out this chart from AEI’s Mark Perry showing the rising cost of tuition outpacing basically every other good in American society for nearly two decades: Barone goes a bit further than we would about the bust’s implications (he writes that administrators actively believed they were “above market forces” and could make investment decisions accordingly).

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Here’s Why Facebook Wants To Spend $1 Billion On Waze, According To Industry Sources Who Are Smarter Than We Are

Here’s Why Facebook Wants To Spend $1 Billion On Waze, According To Industry Sources Who Are Smarter Than We Are

Nicholas Carlson | May 12, 2013, 11:09 AM | 7,060 | 8

According to several reportsFacebook is in talks to buy an Israeli startup called Waze for $1 billion. Waze makes a “social” mapping app for smartphones. It was founded in 2009, and it has been backed by investors that include Horizons Ventures Hong Kong and Kleiner Perkins. Last July, when Waze hit 20 million users, this is how BI’s Alyson Shontell described the service: Waze relies on the community to give real-time traffic reports. If a user is on Waze while driving and hits traffic, a red line will appear behind the vehicle on Waze’s map to alert others in real time. Drivers can take pictures of accidents so other drivers will know why they’re not moving. They can also alert other drivers of upcoming speed traps. Why does Facebook want to buy a mapping app? We asked a few industry sources. Three came up with interesting answers. These sources asked to remain anonymous because they do business with Facebook, they wanted to be candid in their thoughts, and it’s just easier to talk to a reporter if they are allowed to be on background. We’ve presented lightly edited versions of those answers below.

Industry source #1:

Facebook is buying Waze because each of the major tech companies want to own a mapping service. MicrosoftGoogle, and Apple own one. Now, so would Facebook.   Waze is a crowdsourced map. Users turn on Waze and as they drive around, roads are drawn. They can tell traffic by how fast people are moving around on the roads via GPS.   Read more of this post

Cisco Tries Reinvention in Tough Time

Updated May 12, 2013, 7:58 p.m. ET

Cisco Tries Reinvention in Tough Time

By DREW FITZGERALD

Cisco Systems Inc. CSCO +1.30% shares tumbled this time last year after executives warned their biggest corporate customers were ordering less equipment. If history repeats itself this week, the networking giant will join a dreary but growing club.

A wide range of companies—from Cisco rival Juniper Networks Inc. JNPR +0.12% to tech juggernaut International Business Machines Corp. IBM +0.61% —have caught investors off guard in recent weeks as corporate belt-tightening saps their growth. Read more of this post

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