Huaxi village is a microcosm of China’s predicament. Like China itself, Huaxi can no longer rely entirely on its struggling steel mills, real estate projects. So the village’s autocratic leaders build a hotel taller than the Chrysler Building in the middle of nowhere but many of those staying there are villagers who pay their way with subsidies from the authorities

Last updated: June 9, 2013 7:28 pm

Economy: Out of proportion

By Jamil Anderlini

A model village that is proving to be a microcosm of the nation

Dizzying heights: Huaxi village has built a hotel taller than the Chrysler Building but many of those staying there are villagers who pay their way with subsidies from the authorities

On a clear day, you can see the 72-storey Longwish Hotel from more than 20km away, rearing up above the lush paddy fields of Huaxi village in southern Jiangsu province.

The ostentatious skyscraper, with 826 rooms, cuts an incongruous sight in a village of only 2,100 people; it is even crowned with a giant golden ball holding a revolving restaurant staffed by elegant waitresses from North Korea. Taller than New York’s Chrysler Building and the Shard in London, Longwish was completed in 2011 at a cost of more than Rmb3bn ($490m). The only problem is that it is hard to fill so many rooms. During a quiet lunchtime, the North Korean waitresses perform traditional dances for a handful of inattentive locals who now live in the hotel with the help of subsidies from the village authorities. Read more of this post

Beijing’s New War on the Constitution; Xi Jinping and other ‘neo-Dengists’ are re-asserting the Party’s position above the law

June 9, 2013, 2:04 p.m. ET

Beijing’s New War on the Constitution

Xi Jinping and other ‘neo-Dengists’ are re-asserting the Party’s position above the law.

By MINXIN PEI

The weekend’s meeting between U.S. President Barack Obama and Chinese President Xi Jinping naturally focused attention on nettlesome security issues, such as cyber espionage and North Korea, that have highlighted the fragility of U.S.-China relations in recent months. But the California summit, however useful it was, is a less important event than the ongoing ideological battle in Beijing that concerns where Mr. Xi plans to take China and what his much-touted “China dream” is really about.

Little noticed by the outside world, the Chinese propaganda machine has, since mid-May, launched a ferocious campaign against the idea of constitutional rule. Nearly all the most important official newspapers, such as the People’s Daily, the People’s Liberation Army Daily, and Party Construction (a journal published by the party’s Department of Propaganda) , have carried lengthy articles denouncing the idea of constitutional rule as bourgeois and subversive. In the Chinese context, “constitutional rule” means no more than placing the Communist Party under the rule of the existing Chinese constitution. But even such a modest proposal seems too radical. The party’s message in response is becoming clear: The Communist Party is above the constitution. Read more of this post

China’s Leaders Face Test of Growth Resolve After May Slowdown

China’s Leaders Face Test of Growth Resolve After May Slowdown

China’s new leaders face a test of their resolve to forgo short-term stimulus for slower, more-sustainable growth after May trade, inflation and lending data trailed estimates, signaling weaker global and domestic demand.

Industrial production rose a less-than-forecast 9.2 percent from a year earlier and factory-gate prices fell for a 15th month, National Bureau of Statistics data showed yesterday in Beijing. Export gains were at a 10-month low and imports dropped after a crackdown on fake trade invoices while fixed-asset investment growth moderated and new yuan loans declined. Read more of this post

China is moving to stem a surge in credit that could produce a wave of bad debts and financial failures, but it risks slowing the world’s second-largest economy

Updated June 9, 2013, 8:15 p.m. ET

Slower China Credit Is Risk to Growth

Government’s Measures to Stem a Previous Surge in Borrowing Could Hamper Economic Expansion

By BOB DAVIS

BEIJING—China is moving to stem a surge in credit that could produce a wave of bad debts and financial failures, but it risks slowing the world’s second-largest economy.

Total social financing, China’s widest measure of credit, fell by about one-third to 1.19 trillion yuan ($194 billion) in May from April, the second month of substantial decline, the People’s Bank of China said Sunday. And new bank loans, a subset of total social financing, also have fallen substantially in the past two months.

Total social financing consists of all manner of financing including banks, trusts, financing companies, trade credit, corporate bonds, certain kinds of interbank lending and informal lending by individuals, among other kinds of credit. Read more of this post

No Easy Solution for World’s Traffic Woes, Experts Find

No Easy Solution for World’s Traffic Woes, Experts Find

By Nivell Rayda on 11:13 am June 9, 2013.
Leipzig, Germany. Faced with budget constraints due to the global financial and economic slowdown, funding infrastructure is a major issue for governments around the world, requiring decision makers and academics to find innovative funding sources and solutions.

Speaking at a three-day summit held by the International Transport Forum in Leipzig, Dave Wetzel, chairman of the Professional Land Reform Group in the United Kingdom, said that the key was to get money from those benefiting most from infrastructure and transportation projects — land owners instead of people using the various modes of transportation. Read more of this post

If there were a large rise in bond yields, investors would not be cushioned by high bond coupons as they were in 1994, when coupons of 8% were common, compared with 2% or lower

June 7, 2013 6:31 pm

Why bonds aren’t heading for a repeat of 1994

By Jim Leaviss

A more open Fed has given up the power to shock, says Jim Leaviss

Like many bond investors, I  remember 1994  well. I was working on the gilt desk at the Bank of England, and having seen only steadily falling yields in my career,it felt like carnage. But you might be surprised at how modest the losses for bond investors actually were that year. Although the benchmark US interest rate went from 3 per cent to 5.5 per cent, the US Treasury Bond index saw losses of just 3.2 per cent. These were recouped in spades in 1995, when Treasuries returned 18.6 per cent. Many investors see strong parallels between the situation in the US back then, and today. After years of fantastic returns for bond investors, could the Federal Reserve be thinking of raising rates, or exiting itsquantitative easing programme? However, the situation today is different. On the negative side, if there were a large rise in bond yields, investors would not be cushioned by high bond coupons as they were in 1994, when coupons of 8 per cent were common, compared with 2 per cent, or lower, today. So total returns for today’s bonds for the same rise in yields would be much less. Read more of this post

Emerging market companies are getting three times as much funding from the bond markets as they are from bank syndicates, the biggest gap in at least a decade

June 9, 2013 7:08 pm

EM groups look to bonds rather than banks

By Michael Stothard in London

Emerging market companies are getting three times as much funding from the bond markets as they are from bank syndicates, the biggest gap in at least a decade, as regulatory changes prompt structural shifts in global corporate funding.

Companies based in Asia, Africa and Latin America borrowed half as much from banks in the second quarter compared with the same period last year, while marketborrowing has risen by two-thirds, according to Dealogic. Read more of this post

Emerging market jolt puts deficit countries at risk

Emerging market jolt puts deficit countries at risk

Fri, Jun 7 2013

By Natsuko Waki and Sujata Rao

LONDON, June 7 (Reuters) – Major developing countries with big foreign financing needs are acutely vulnerable to the risk of a sudden stop in investment flows which has unnerved emerging markets in recent weeks.

Emerging economies such as South Africa, Indonesia, India, Turkey and Poland are on the front line as investors reconsider exposure to markets which have attracted trillions of dollars of cheap money printed by developed world central banks.

Waves of stimulus cash have barrelled into emerging bonds rather than equities, leaving countries with heavy financing needs – especially in local currency debt – vulnerable to any abrupt withdrawal. Read more of this post

These CDO Names Don’t Cry ‘Wolf’? The CDO comeback is déjà vu for some investors burned by collateralized debt obligations that blew up during the financial crisis

Updated June 9, 2013, 7:49 p.m. ET

These CDO Names Don’t Cry ‘Wolf’

By JEANNETTE NEUMANN

The CDO comeback is déjà vu for some investors burned by collateralized debt obligations that blew up during the financial crisis. But history probably won’t repeat itself in one peculiar way. Creators of the deals are showing little interest in bestowing them with the sort of aspirational, exuberant, mythological, over-the-top and sometimes inexplicable names common before the crisis hit.

Creative License: Names of some CDOs sold to investors before the credit crisis hit

Bonifacius LTD.: “Bonifacius” means “good fate” in Latin

Empyrean Finance: “The highest heaven or heavenly sphere,” according to Merriam-Webster

Pampelonne CDO II LTD.: Refers to a swanky beach in the Mediterranean resort of Saint-Tropez

Sunrise CDO I LTD.: Got the nickname “Sunset” because of losses

Zohar III LTD.: “Zohar” means “brightness” and is the definitive work of Kabbalah Read more of this post