Shadow Boxing With Risk at Chinese Banks

September 22, 2013, 2:51 p.m. ET

Heard on the Street: Shadow Boxing With Risk at Chinese Banks

AARON BACK

Chinese banks are bringing some holdings out of the shadows. But they might not be shining a harsh enough light on them. For some time, Chinese banks have used off-balance-sheet vehicles to lend to trusts, which are lightly regulated finance intermediaries. Now, new regulations are forcing them to take some of those instruments back onto their books as Chinese authorities look to rein in the “shadow-banking” sector. That led in the first half of this year to a surge on some bank balance sheets of credit extended to these trusts. Yet banks, especially smaller ones, may not be adequately reflecting, or preparing for, the risk that could be embedded in these holdings. The tangled web starts with wealth-management products, a kind of high-interest deposit banks offer clients. These were created to sidestep caps on rates for traditional deposits. Sometimes, banks guarantee the client’s principal in these products; when they don’t, the products don’t appear on bank balance sheets. Read more of this post

Wuhan has to repay about 100 million yuan every day in 2013 and 2014 as its debts soared on huge expenditures on infrastructure projects in the past years, the latest example showing the seriousness of China’s local government debt

Local debt levels raising alarm 
Monday, September 23, 2013
Wuhan has to repay about 100 million yuan (HK$126.7 million) every day in 2013 and 2014 as its debts soared on huge expenditures on infrastructure projects in the past years, the latest example showing the seriousness of China’s local government debt issue. Debts of the capital city of Hubei province reached 203.71 billion yuan as at June 30, 2012, China Business said, citing an investigation report by an official from the Ministry of Finance. Read more of this post

Hangzhou Bay Bridge provides lower returns than expected after five years; bridge’s operator is facing a huge capital shortfall of 850 million yuan (US$138.2 million)

Hangzhou Bay Bridge provides lower returns than expected

Staff Reporter

2013-09-23

The opening ceremony of the Hangzhou Bay Bridge held on May 1, 2008. (Photo/Xinhua)

After putting the 36 km Hangzhou Bay Bridge in east China’s Zhejiang province into service in 2008, the bridge’s operator is facing a huge capital shortfall of 850 million yuan (US$138.2 million), given that only 643 million yuan (US$104.5 million) in tolls was collected during the first half of this year, Guangzhou’s 21st Century Economic Report reports. Read more of this post

Investors Vs. Asset Managers: A Dysfunction at the Heart of China Private Equity

Investors Vs. Asset Managers: A Dysfunction at the Heart of China Private Equity

2013-09-23 17:47:35

Peter Fuhrman, Chairman and CEO China First Capital

Assuming the same level of risk, would you rather make $100 from investing $10 or from investing $50? Easy, right? Who wouldn’t choose to make ten times your money, rather than just double it? There is one group I know. Private equity firms active in China. At least some of them. They care more about the amount they can invest in a deal than the profits they stand to make. The illogic at work here is the direct result of some particular, not very appealing characteristics, of the PE industry in China. PE firms lately have more confidence in their ability to raise money than to invest it profitably by achieving a timely exit. To raise money, though, a PE firm needs first to spend most of what it already has. Result: a rush to get money out the door and parked in deals. Read more of this post

Reality check for ‘salaried man myth’: STX Group chairman’s troubles tarnish image of a business legend; In every country, there are legends in the business world who start their career from the bottom as salaried workers, and after decades of hard work become heads of conglomerate

Reality check for ‘salaried man myth’

STX Group chairman’s troubles tarnish image of a business legend

Sept 23,2013

In every country, there are legends in the business world who start their career from the bottom as salaried workers, and after decades of hard work become heads of conglomerates. Korea, too, has such legendary figures to share, although in most cases they don’t seem to have a happy ending. STX Group Chairman Kang Duk-soo, who has long been considered a successful entrepreneur who started out with nothing but achieved much, is about to lose his title as chief executive officer of the conglomerate’s flagship STX Offshore and Shipbuilding, which he has been steering for more than a decade.  Read more of this post

Yang Hyun-suk, who heads South Korean talent agency YG Entertainment maintained his top stance on the list of stock-rich celebrities this month

2013-09-23 10:16

YG Entertainment head remains richest celebrity in stocks

Yang Hyun-suk, who heads South Korean talent agency YG Entertainment Inc., maintained his top stance on the list of stock-rich celebrities this month, data showed Monday.
According to the data compiled by market researcher Chaebul.com, Yang saw the value of his shares reach 197.3 billion won (US$182.1 million) as of Sept. 16, becoming the richest shareholder among local celebrities. YG Entertainment has South Korean rapper Psy under its wing, who released the global-hit “Gangnam Style,” which has been viewed more than 1.77 billion times since it was uploaded on YouTube on July 15, 2012. Lee Soo-man, the chairman of SM Entertainment Co., ranked second with the value of his shares reaching 157.6 billion won, trailed by Bae Yong-joon, an actor widely known from the popular drama “Winter Sonata,” with 30.6 billion won. JYP Entertainment chief Park Jin-young saw the value of his shares reach 7.2 billion won, followed by actor Jang Dong-gun with 3.7 billion won. YG Entertainment, meanwhile, saw its operating profit jump 56.8 percent in the first half of 2013 from a year earlier, while that of SM Entertainment plunged 62.9 percent over the cited period. KeyEast Co., an entertainment agency founded by Bae, switched to a shortfall of 2.6 billion won over the cited period, compared to an operating profit of 1.5 billion won a year earlier. (Yonhap)

What K-pop needs to go global

What K-pop needs to go global

Korean companies should have faith in their singers that their music can stand up in any locale.

Sept 24,2013

To call Korean K-pop “Hallyu” (or “the Korean Wave”) might be a misnomer. A wave comes and goes; it comes in and goes out. That might be a metaphor for the many Korean singers that have gone to the United States in search of global stardom (a little about Psy later), crashed on the shore and returned home to Korea, somewhat less but humbler for at least trying.  Read more of this post

Korea’s total debt to GDP ratio hit a record high to 289.2% in 2Q, with debt growing much faster than economic output

2013-09-23 16:11

Debt-to-GDP ratio hits record high

By Kim Rahn
The nation’s total debt to gross domestic product (GDP) ratio hit a record high in the second quarters of this year, with debt growing much faster than economic output.
Data from the Bank of Korea showed Sunday that combined debt held by households, companies and the government was 3.74 quadrillion won ($3.45 trillion) as of the end of June. This is 289.8 percent of GDP for the last one year, larger than the previous record during the height of the global financial crisis of 285.2 percent in the second quarter of 2009.
The debt to GDP ratio was around 220 percent in 2003. But it rose to 236.5 percent at the end of 2006, to 245.9 percent in 2007 and 273.7 percent in 2008. Read more of this post

Amid skepticism about “hallyu” or the Korean wave, a 2003 Korean drama “Jewel in the Palace” continues on the airwaves a decade after its first airing in 2003

013-09-23 20:34

Hallyu drama celebrates 10 years

By Kim Ji-soo

Amid skepticism about “hallyu” or the Korean wave, a 2003 Korean drama “Jewel in the Palace” continues on the airwaves a decade after its first airing in 2003.

The broadcaster MBC has announced that it will put out special programs to mark the 10th anniversary of the epic drama about a female royal chef of the Joseon Kingdom (1392-1910). Starring actors Lee Young-ae and Ji Jin-hee, the drama was produced for $15 million. Since its first airing, it has achieved 57 percent viewer ratings in Korea, and has pulled in $40 million worldwide, becoming the definitive K-drama that catapulted Lee and Ji into global hallyu stars. It has also been made into a musical. Read more of this post

AmorePacific, Korea’s leading cosmetics firm, aims to join the league of the world’s top 10 global cosmetics firms by 2020, CEO Suh Kyung-bae said

2013-09-23 19:06

Amore aims to join global top 10

By Park Ji-won

AmorePacific, the nation’s leading cosmetics firm, aims to join the league of the world’s top 10 global cosmetics firms by 2020, CEO Suh Kyung-bae said. To that end, Suh plans to expand overseas sales by competing with global brands and develop it into a “Great Global Brand Company,” he added. “We expect that more than half of our products will be sold overseas in the near future. Our products are growing in popularity among Asian customers,” Suh said on the 68th anniversary of the company on Sept. 5. “If we keep providing what our customers want in beauty products, we expect the company will earn more than half of our revenue from the overseas market,” Suh said. Read more of this post

Zong Qinghou should rethink Wahaha management style; Hangzhou Wahaha Group — China’s leading beverage maker — operates like a “one-person company” and has never had a deputy CEO, with Zong Qinghou, the company’s founder, chairman and CEO handling every decision

Zong Qinghou should rethink Wahaha management style: insider

Staff Reporter

2013-09-23

Hangzhou Wahaha Group — China’s leading beverage maker — operates like a “one-person company” and has never had a deputy CEO, with Zong Qinghou, the company’s founder, chairman and CEO handling every decision. However, following reports that Zong was a victim of a knife attack, observers have begun to question whether the group would be able to continue operating smoothly if Zong were to stepped down, reports the Guangzhou-based Southern Metropolis Daily. The Chinese tycoon — the country’s second-richest man — was attacked near his home in Hangzhou in eastern China’s Zhejiang province on Sept. 13, sustaining minor wounds to his left hands. Local police later confirmed that Zong was attacked by a migrant worker surnamed Yang who was angry when Zong declined to offer him a job at his company. Read more of this post

Non-residents face hard and costly road to get around the hukou barrier in China

Non-residents face hard and costly road to get around the hukou barrier

Monday, 23 September, 2013, 12:00am

Zhang Hong hong.zhang@scmp.com

After working in Beijing for 10 years, Gao Feng, 36, a senior manager at a private technology company, nearly has it all: three flats, two luxury cars, a good job and a happy family. What could be missing? A Beijing hukou. Hukou refers to permanent residency status, and an urban hukou often affords its bearers a slew of benefits. For instance, in an effort to control property prices, the Beijing municipal government has set a rule that allows only permanent Beijing residents to buy a second home. To buy a first home, those without ahukou would need to show tax documents going back five years and proof of social security payments. Read more of this post

Growing logistics market in China struggles to contend with smuggling

Growing logistics market in China struggles to contend with smuggling

Xinhua

2013-09-22

China is struggling to combat illegal imports which smugglers conceal in mass freight as the country’s logistics industry booms. On Tuesday, police dumped a large batch of smuggled goods in a landfill in Nanning, capital of south China’s Guangxi Zhuang autonomous region. Around 200 tonnes of items were destroyed, including frozen chicken and beef. In the third quarter of this year, Nanning police have cracked a number of smuggling cases, featuring 2,700 kg of pork of questionable quality and 970 tonnes of other frozen goods. In recent years, smugglers have turned to disguising banned goods in large cargoes, which have become much more common as the logistics industry expands. Read more of this post

Brazil risks lost decade as it bungles infrastructure boost; Transport investment still lags far behind other large economies

September 22, 2013 2:22 pm

Brazil risks lost decade as it bungles infrastructure boost

By Joe Leahy in São Paulo

Transport investment still lags far behind other large economies

Officiating at a railway project last week in Rondonópolis in the Brazilian soya bean state of Mato Grosso, President Dilma Rousseff said the country was “two centuries” behind when it comes to building its rail network. A similar point, although to a lesser degree, could be made for the rest of the country’s transport and logistics networks. Brazil’s highway system lags behind probably by 50 to 60 years, the same for ports, urban transport and airports. The government is trying to fix this. But as shown by two landmark tender processes last week – one for highways and the other for oil exploration blocks – it needs to get moving or risk condemning Brazil to a lost decade in terms of higher potential economic growth. Who is responsible for this mess? Most countries, developing or developed, struggle with infrastructure construction and Brazil is no exception. Read more of this post