Chinese Women Aren’t Taking Buffett’s Advice on Gold; “It’s almost Mother’s Day. My mother bluntly told me to buy her gold.”

Chinese Women Aren’t Taking Buffett’s Advice on Gold

On Sunday afternoon, a microblogger in Beijing logged into Sina Weibo, China’s leading social media platform, to gossip about the “auntie” next door. It’s a broad term of respect for an older woman, and his followers understood precisely what he meant when he tweeted, “The auntie next door used all of her retirement savings to buy gold. When asked what she’d do if prices keep dropping, she replied that if everyone kept buying gold, the price wouldn’t drop…”

This might strike a conservative investor as reckless. But in China, where gold has long been a national obsession, a mid-April record crash in global gold prices has been seen as an unprecedented buying opportunity. According to reports in China, Chinese have purchased 300 tons of gold worth more than $16 billion since the crash. Read more of this post

SocGen: Nearly Every Company We Met ‘Admitted’ That Chinese Trade Is About More Than Moving Goods + Chart of the Day: China Exports to Taiwan

SocGen: Nearly Every Company We Met ‘Admitted’ That Chinese Trade Is About More Than Moving Goods

Sam Ro | May 8, 2013, 8:48 AM | 2,044 | 

The better-than-expected Chinese trade data has everyone crying foul. Nomura’s Zhiwei Zhang, Bank of America Merrill Lynch‘s Weijun Hu and Ting Lu, and Societe Generale’s Wei Yao have all pointed to discrepancies between China’s numbers and the numbers of its trading partners. Furthermore, all point to companies using inflated bills as a way to circumvent strict Chinese capital controls and move money in and out of the mainland. “In 1Q13, China’s export data were heavily distorted due to over-reporting by exporters who might bring in hot money through fake exports and arbitrage the differential between CNH/USD and CNY/USD by moving goods in and out of HK,” said BAML’s Hu and Lu. SocGen’s Yao is actually having a hard time finding people who aren’t engaged in this practice. “As for reasons, our observation from the trips to the mainland led us to believe that there is indeed a large amount of speculative capital flows,” wrote Yao in a note to clients. “Nearly all corporates we met admitted that they were conducting some forms of interest rate arbitrage on the expectation of further yuan appreciation.”

CHART OF THE DAY: It Doesn’t Take A Genius To See Something Fishy In China’s Trade Data

Sam Ro | May 8, 2013, 7:29 AM | 4,509 | 4

Earlier today, China published its official April trade figures. And while the numbers for both imports and exports were much stronger than expected, experts have been left scratching their heads over the unusual discrepancies. For one thing, exports surged 14.7% year-over-year even as exports to the U.S. fell by 0.7%. Exports to the EU fell by 6.4%. In a note to clients, Nomura’s Zhiwei Zhang attributed it to companies trying to get around strict Chinese capital controls. “We believe exports to destinations like Hong Kong, a major financial hub, are likely being over-invoiced in an attempt to circumvent capital controls and bring foreign capital into China,” said Zhang who pointed out that exports to Hong Kong surged by 57.2%. Societe Generale’s Wei Yao agrees with Zhang.  “As for reasons, our observation from the trips to the mainland led us to believe that there is indeed a large amount of speculative capital flows,” wrote Yao in a note to clients. “Nearly all corporates we met admitted that they were conducting some forms of interest rate arbitrage on the expectation of further yuan appreciation.” But Hong Kong wasn’t the only discrepancy. Yao noted a whopper in the Taiwan numbers. “Head-scratching discrepancies in bilateral data comparison persisted on both sides of the ledger,” she wrote. “Compared with the data from Taiwan – the only economy besides China that has published the complete set of April data – growth of mainland exports to Taiwan was 57.7 ppt faster based on China’s data (+49.2% yoy vs. -2.7% yoy) and that of mainland’s imports from Taiwan was 58.6ppt faster (+55.7% yoy vs. -2.9% yoy)! The gaps narrowed only marginally from March.” No wonder people question the reliability of the data.

Beijing Puzzles Over Urban Growth; Government Entertains Debate on How to Manage Population Gains as It Seeks Lift From Bigger Cities

Updated May 8, 2013, 7:55 p.m. ET

Beijing Puzzles Over Urban Growth

Government Entertains Debate on How to Manage Population Gains as It Seeks Lift From Bigger Cities

By BOB DAVIS

BEIJING—China’s new leaders are counting on urbanization to remake the economy but have tried to limit the flow to the country’s largest cities, fearing that a surge in migration could turn them into Latin American-style slums. Some urbanization specialists inside and outside China argue that the fear is largely misplaced. The problem with Beijing, Shanghai and other Chinese megacities, they say, is that they aren’t even more densely packed—or better planned. Adding more people to Beijing, for example—on top of the 18 million or so who already live here—would encourage better public transportation, boost land prices so high that factories would move away, and attract talented people with fresh ideas, according to these specialists. Imagine, say, Manhattan or Tokyo. “We have to let the market play a bigger role in the development of cities and dismantle barriers” to urban growth, said He Fan, a senior economist at the Chinese Academy of Social Sciences, the government’s most prestigious think tank. “People prefer to move to larger cities because there is more opportunity there.” Angel Gurría, secretary-general of the Organization for Economic Cooperation and Development, is another big-city booster. “When you see the situation in the large urban conglomerations, you say, ‘Let’s stop the growth,’ ” he said during an interview in Beijing. “But you probably don’t want to stop the growth [because] a well-organized, predictable process of urbanization allows for a much better allocation of resources.” Urban planners talk about “agglomeration” effects—the idea that cities gain by having people more tightly packed. That’s because travel by car becomes impractical and is replaced by public transportation. Also, old-line industries are forced to relocate because of rising prices, and lightly polluting service industries take their place. The influx of people brings an energy to a city that helps create new businesses and investment. Read more of this post

Yen’s Slide No Panacea For Japan Inc.

May 7, 2013, 10:59 p.m. ET

Yen’s Slide No Panacea For Japan Inc.

By AARON BACK

Japanese Prime Minister Shinzo Abe has weakened the yen and sent stocks soaring. Boosting long-term earnings growth for Japanese companies will be more difficult. Increasing domestic consumption is an important objective of Mr. Abe’s plan. But much depends on the impact of a weaker yen on Japan’s export-focused businesses. In the current fiscal year, companies on the main Tokyo stock exchange could see profits jump 30% to 40% year-over-year if the yen averages between 100 and 115 to the dollar, saysCitigroup C +2.45% . The yen’s slide has two main effects on corporate earnings. First, revenue earned overseas is immediately worth more in yen terms. Nomura’s survey of large Japanese nonfinancial companies that have reported earnings for the three months ended March 31 shows profits up 7.7% on the previous year. That is down from a 33.2% jump in the previous quarter, though some major companies haven’t reported yet. The second benefit is that Japanese companies should become more competitive as the cheaper yen means foreigners pay less for the country’s exports. While this should boost sales volumes, not all exporters will be able to take advantage.

Take Canon 7751.TO -0.29% . Revenue from its imaging business fell 1.8% year-over-year in the three months to March 31. The fall would have been 14% but for the effect of the weakening yen. But Canon faces fundamental problems that can’t be fixed by currency movements. The company’s core digital-camera business is in decline because amateur photographers can now snap photos with increasingly high-resolution smartphones. In addition, because Canon mainly competes with other Japanese camera makers like Nikon 7731.TO -0.14% and Olympus, 7733.TO -1.10%its rivals will also benefit from the yen’s slide. Read more of this post

Mao Zedong’s granddaughter and her husband appear on the latest rich list as survey suggests that who, not what, you know is still important

Mao Zedong granddaughter on rich list, prompting debate

Thursday, 09 May, 2013, 12:00am

Cary Huang in Beijing cary.huang@scmp.com

Mao Zedong’s granddaughter and her husband appear on the latest rich list as survey suggests that who, not what, you know is still important

The addition of the granddaughter of Mao Zedong to a list of the richest Chinese – along with a survey suggesting that graduates from well-connected families tend to find better jobs – has triggered fresh debate about political connections and personal wealth.

With family assets estimated at 5 billion yuan (HK$6.25 billion), Kong Dongmei , granddaughter of the late leader, and husband Chen Dongsheng are 242nd on the 2013 New Fortune 500 Rich List [1], media reports said yesterday. Read more of this post

HK vs Beijing: A Battle to Become Art Capital of China

May 8, 2013

A Battle to Become Art Capital of China

By KEVIN HOLDEN PLATT

BEIJING — The sometimes-tense relationship between Hong Kong and Beijing appears set to move to another front: the world of art.

With the National Art Museum of China — or Namoc — planning to open in a new building in 2017, and Hong Kong projected to open its M+ museum in a new cultural district about the same time, the cities could emerge as twin titans of contemporary Chinese culture.

Namoc attracted some of the world’s leading architects, including Zaha Hadid, Frank Gehry and Jean Nouvel, to its design contest for the new museum in Olympic park in Beijing. Xie Xiaofan, a deputy director at Namoc, informally announced at theE.U.-China High Level Cultural Forum in November that Mr. Nouvel’s design had been selected, although the decision is subject to the approval of China’s new leadership. Read more of this post

Brazil has plenty of entrepreneurs but many lack ambition when it comes to expanding companies

May 8, 2013 7:27 pm

A spirit for enterprise

By Joe Leahy

When Linda Rottenberg moved to Latin America in the 1990s, she was surprised to find there was no word for “entrepreneur” in the local Spanish or Portuguese. Ms Rottenberg, president of Endeavor, a global non-governmental organisation that supports entrepreneurship, says every university student she met wanted to work for the government. Over the years, however, with the opening of the region’s economies and the rise of its stock markets, that attitude has changed so much that a Portuguese word for entrepreneur has emerged: empreendedor. “One of my favourite days was when the editor of a Portuguese dictionary told me he was adding the word for ‘entrepreneur’,” Ms Rottenberg said recently, before the Global Entrepreneurship Conference, a summit for service providers in the field, which was held in Rio de Janeiro.

Few people, particularly the participants milling around the conference, would question the existence of a Brazilian entrepreneurial spirit. On the global stage, there is Brazil’s most prominent entrepreneur, Jorge Paulo Lemann, who is teaming up with Warren Buffett to buy Heinz. Or Embraer, the world’s third-largest commercial aircraft maker, which continues to practise “intrapreneurship” by taking risks on new products and investing in fresh business lines. At home, there are businessmen such as Andre Esteves, who is building BTG Pactual, the country’s biggest independent investment bank, or Peixe Urbano, the collective buying platform that is Brazil’s version of Groupon. The idea of the entrepreneur has become such a celebrated part of Brazilian culture that one of the main characters in Avenida Brasil, a popular soap opera, was an entrepreneur selling hair products developed in her shop in a favela.

But in a country dominated by huge companies, some state run and most recipients of state credit, how much is this idea of the great Brazilian entrepreneur myth or reality? Rather than patting itself on the back, should Brazil, facing increasing doubts over its international competitiveness, be doing much more to foster entrepreneurship? “You need more Embraers, you need more Brazilian companies participating in higher value-added production chains,” says Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Centre for Scholars in Washington. Read more of this post

Norges, the world’s largest sovereign wealth fund, is fleeing out of inflation-linked bonds in a sign of how many large investors are souring on the asset class

May 8, 2013 4:44 pm

Norway’s oil fund dumps inflation-linked bonds

By Richard Milne in Oslo and Robin Wigglesworth in London

The world’s largest sovereign wealth fund is fleeing out of inflation-linked bonds in a sign of how many large investors are souring on the asset class. Norway’s oil fund has cut its holdings of inflation-linked bonds by 73 per cent in the past year and almost halved them in the first three months of this year alone. Yngve Slyngstad, head of the oil fund, told the Financial Times that, in theory, inflation-linked debt was one of the ways investors could hedge the risk of negative real yields in government bond portfolios. But he added that the oil fund was in fact reducing its exposure to inflation-linked bonds sharply because it had concluded that it was not a big enough market. Read more of this post

University endowments trim holdings in US Treasuries from as much as 30 per cent in 2008-09 to zero in some cases, fearing they could be caught flat-footed by a reversal of the Federal Reserve’s low interest-rate policy

May 8, 2013 7:34 pm

University endowments trim holdings in US Treasuries

By Henny Sender in New York

Some of the smartest money in America is getting out of US government debt. Many university endowments have scaled back their holdings of Treasury securities from as much as 30 per cent in 2008-09 to zero in some cases, say people familiar with their investment strategies. The sell-off reflects a big change in the way fund managers view US government debt. The traditional attraction of Treasuries for US investors was that they were certain to be repaid. But with interest rates at such low levels, investors worry that bond prices could fall dramatically. “Treasuries were a core holding,” said one university fund manager. “Now everyone is holding less than 5 per cent.” The fear on campuses is that universities, which profited in recent years from the rally in Treasury prices, could be caught flat-footed by a reversal of the Federal Reserve’s low interest-rate policy. “If you think you can change allocations quarter by quarter, and you believe rates will be low for longer, and you think you can make a quick switch, then maybe it is OK,” the university fund manager said. “But that isn’t the way we invest. Today government bonds should come with a warning about interest rate risk.” Princeton’s $17bn endowment has converted its Treasury holdings to cash, according to published reports. Duke’s $5.5bn endowment has also shifted from Treasuries to US stocks with high dividends and emerging market equities, a person familiar with the university fund said. Last week, Cornell’s $5bn endowment decided to reduce its investments in Treasury securities to just over 3 per cent of assets. As of June last year, Yale’s $19bn endowment had only 4 per cent of its holdings in Treasuries. “Yale is not particularly attracted to fixed income assets as they have the lowest expected returns of the seven asset classes that make up the endowment,” the university’s fund said in its annual report. According to one survey of 831 US universities, the average endowment lost 0.3 per cent in the fiscal year ending June 2012, with gains on holdings of government debt offsetting losses elsewhere in their portfolios. By contrast, endowments earned an average return of 19.2 per cent in the year to June 2011.

China may not overtake America this century after all; world’s tallest tower in Changsha should have been built by now when officials announced said last year the great edifice would be erected in 3 months

China may not overtake America this century after all

Doubts are growing about whether China can pass the US to become the world’s biggest economy this century amid warnings that the country’s 30-year miracle is nearing exhaustion.

China’s catch-up spurt has a few more years to run in the Western hinterlands perhaps, but when the full story comes out we may find that nationwide growth has already fallen below 7pc. Photo: Getty

By Ambrose Evans-Pritchard

3:21PM BST 08 May 2013

The world’s tallest tower should have been built by now. Officials said last year that the great edifice with 220 floors would be erected in three months flat in China’s inland city of Changsha by March, snatching the crown from Dubai’s Burj Khalifa. The deadline has come and gone, yet the wasteland sits untouched. It now looks as if the fin d’époque project – using prefab blocs – may never be approved. Even China knows its limits. Read more of this post

The US will match China on the cost of manufacturing by 2015. Companies in both countries must adapt

The parity puzzle

Thursday, May 9, 2013

The US will match China on the cost of manufacturing by 2015. Companies in both countries must adapt, write Ivo Naumann and Steve Maurer

Ivo Naumann and Steve Maurer are managing directors at AlixPartners, a global business advisory firm. Naumann heads the firm’s activities in mainland China, and Maurer leads the firm’s manufacturing practice for the Americas.

It happens regularly in virtually every segment of every industry: A newcomer arrives, offers an advantage that competitors in the segment can’t match and rapidly begins to build both its business and market share.

What often follows, however, is also predictable: The market adapts, the advantage diminishes and the newcomer finds that it is in a vulnerable, rather than valued, situation. Read more of this post

U.S. taxpayers employ more low-wage workers than Wal-Mart, McDonald’s combined

Study: U.S. taxpayers employ more low-wage workers than Wal-Mart, McDonald’s combined

By Jim Tankersley and Marjorie Censer, Published: May 8

Federal taxpayers employ more low-wage workers than Wal-Mart and McDonald’s combined, a new study calculates.

The report from a public policy organization Demos, set to be released Wednesday, estimates that taxpayer dollars fund nearly 2 million private-sector jobs that pay $24,000 a year — about $12 an hour — or less. Those workers owe their incomes to government contracts, Medicare and Medicaid spending, and federal infrastructure funds, among other public sources. In contrast, Demos estimates that about 1.4 million workers earn that amount or less at Wal-Mart and McDonald’s, which are two of the largest employers of low-wage workers.

The findings highlight inequality within the government contracting industry; as chief executives of major contractors rake in millions, many contract employees are struggling to get by, according to the report from Demos, which advocates for worker-friendly policies. It is a situation that could be worsened by the budget pressures of sequestration, which is pushing the federal government to spend fewer dollars and pursue lower-priced contracts. Read more of this post

Huawei founder gives first ever interview

Huawei founder gives first ever interview

May 9, 2013 – 2:21PM

Tom Pullar-Strecker

The founder and president of Chinese technology giant Huawei, Ren Zhengfei, has used a visit to New Zealand to speak to the media for the first time in his career.

Ren, 68, had never previously consented to media interviews inside or outside of China, but this morning fielded questions from a handful of journalists at Wellington’s Museum Hotel on topics ranging from his personal view of China’s human rights record to a rumour he will soon retire.

Responding to speculation about Huawei’s relations with the Chinese government, he said they were no different to those that might exist between a New Zealand firm and the New Zealand government.

His visit follows a trade trip to China by Prime Minister John Key and a large entourage last month to celebrate the fifth anniversary of the countries’ free-trade agreement, during which relations between the governments appeared to hit a new high. Read more of this post

Kuroda stimulus policies backfire as mortgage costs rise

Kuroda stimulus policies backfire as mortgage costs rise

BY YUMI IKEDA

BLOOMBERG

MAY 9, 2013

Bank of Japan Gov. Haruhiko Kuroda’s stimulus policies are backfiring in the housing market, where mortgage rates are rising even as the central bank floods the financial system with cash. Fixed 35-year home-loan costs rose to 1.81 percent this month, the first increase since February and up from an all-time low of 1.8 percent in April, according to data compiled by the Japan Housing Finance Agency. The BOJ’s April 4 announcement that it would double bond buying to generate 2 percent inflation unleashed the highest government-debt volatility in a decade and pushed 10-year yields up by five basis points. The benchmark lending rate for large corporations, known as the prime rate, increased five basis points from its record low to 1.2 percent on April 10, despite the BOJ’s aim of stoking the economy through cheaper funding.

“It makes little economic sense for rates to decline when the BOJ says it will raise consumer prices,” said Toru Suehiro, a market economist at Mizuho Securities Co. “Yields are higher than before the monetary easing to reflect the volatility risk, and lending rates have risen because they are set based on bond yields.” Read more of this post

Meltdown of company triggers suicides in India; Failing to repay investors’ money after the Saradha Group meltdown, an agent and a director of two different deposit mobilising companies committed suicide

Meltdown of company triggers suicides in India

Thu, May 09, 2013
The States Man/Asia News Network

Indian activists of the Congress party shout slogans against the arrested Chairman of Saradha group, Sudipta Sen, outside the court in Kolkata on April 25, 2013.

Failing to repay investors’ money after the Saradha Group meltdown, an agent and a director of two different deposit mobilising companies committed suicide. Ten persons have committed suicide in the state so far following the multi-million dollar scam.

Indrajit Roy, one of the directors of Hello India, a chit fund company, committed suicide by hanging himself from the ceiling of a room in his residence off 14 Brindaban Mallick Lane at Amherst Street today. Read more of this post