Amid Probe, Chinese Moguls Vanish; Prominent Executives are Being Detained, Associates Say, in Sign of New Round of Political Infighting

Updated September 25, 2013, 8:41 p.m. ET

Amid Probe, Chinese Moguls Vanish

Prominent Executives are Being Detained, Associates Say, in Sign of New Round of Political Infighting

JAMES T. AREDDY

Li Chuncheng, ousted Sichuan deputy party chief, had ties to many of the business tycoons; At nearly three times the size of the Pentagon, the New Century Global Center in Chengdu, China, has claimed the title of world’s largest building. WSJ’s Deborah Kan and James T. Areddy discuss what makes the center more than just a building as well as the mysterious disappearance of its owner.

CHENGDU, China—When the government of this southwestern city needed a landmark for a new district, billionaire developer Deng Hong picked up the land cheap five years ago and erected a building almost three times the size of the Pentagon. Nearby, Wu Bing paved a motorway, while Liu Han put up schools. He Yan wired a jail with information technology and Wang Junlin’s winery funded government charities. Now, over the past several months, all of those tycoons have disappeared from view. Their absences come amid an alleged corruption scandal that may broadside the economic vitality of this gateway to China’s rugged west and indicate a fresh front in Chinese political infighting. Read more of this post

China Running Out of Room to Restructure Economy

China Running Out of Room to Restructure Economy

If we accept the argument that China must, and will, rebalance its economy by reducing its reliance on investment, what happens if it proves politically impossible to cut investment rates sharply? Gross domestic product growth rates would remain very high, but debt levels would also grow unsustainably. At some point, China will reach its debt capacity limits and no longer be able to fund investment. At this point, the country would fall into the self-reinforcing process of chaotic adjustment that characterized the U.S. in the early 1930s or Brazil in the mid-1980s. As investment falls and GDP growth grinds to a halt, rising financial distress causes businesses to fire workers. Unemployment causes consumption growth to drop, and GDP growth falls even further, resulting in more distress. Read more of this post

Shanghai’s Free-Trade Zone Is Destined to Disappoint; The new commercial oasis is an experiment in how little reform Beijing can get away with—not how much

September 25, 2013, 12:51 p.m. ET

Shanghai’s Free-Trade Zone Is Destined to Disappoint

The new commercial oasis is an experiment in how little reform Beijing can get away with—not how much.

JOSEPH STERNBERG

When it comes to the triumph of China hope over China experience, it’s hard to match the current wave of enthusiasm over the impending opening of the Shanghai Free Trade Zone. This project, first announced in August and still shrouded in mystery on the alleged eve of its launch, is supposed to herald a new era in the country’s economic evolution away from export manufacturing and toward service consumption. Authorities may even allow access to banned social-media websites such as Facebook and Twitter in the 29-square-kilometer zone. Read more of this post

Wenzhou woes are warning for all to see; even the loan shark market is stretched, and the nationwide liquidity shortage in June made the situation much worse

Wenzhou woes are warning for all to see
Thursday, September 26, 2013
Data show that among 70 major Chinese cities, 69 saw home prices rise in August year-on-year. In first-tier cities – Beijing, Shanghai, Guangzhou and Shenzhen – prices jumped 18 to 20 percent, and in second-tier cities, 7 to 10 percent. Where did prices fall? Wenzhou, Zhejiang province. Known as the birthplace of China’s private economy, Wenzhou boasts numerous entrepreneurs making electrical equipment, chemicals, medicine, building materials and textiles. With their wealth, some of the businessmen turned to speculation. Data show that home prices in Wenzhou peaked in early 2011, and since then, have plunged 26 percent. The city faces three major woes. Debts have soared at local firms amid the economic slowdown in America and Europe. Secondly, even the loan shark market is stretched, and the nationwide liquidity shortage in June made the situation much worse. Third, the property market bubble burst, and it is China’s only city permitted to float policies to boost home purchases. Even Wang Shi, chairman of the mainland’s largest developer, Vanke, has warned the nation’s property bubble is similar to that of Japan in the 1980s. Will anybody listen to him? Dr Check and/or The Standard bear no responsibility for any decision made based on this column.

Tibetan caterpillar fungus fortune nearing exhaustion

Tibetan caterpillar fungus fortune nearing exhaustion

Xinhua

2013-09-26

The caterpillar fungus, a cash cow for Tibetans, may die out in China in two decades, as a result of overexploitation on the Qinghai-Tibet Plateau, experts have warned. When the harvest season ended this summer, many unlucky diggers found their fungus incomes were not even enough to cover their costs — mainly a fee that varies from 5,000-50,000 yuan (US$820 – US$8,200) levied by local authorities according to the acreage where they were allowed to dig. Read more of this post

Pursuing Graft Cases at Higher Levels, Chinese Leader Risks Unsettling Elites; “Xi Jinping must do something to show that he has command over those interests — that they are not independent kingdoms. Otherwise, no one will follow him”

September 25, 2013

Pursuing Graft Cases at Higher Levels, Chinese Leader Risks Unsettling Elites

By CHRIS BUCKLEY

HONG KONG — Shortly before his retirement late last year, Zhou Yongkang, the longtime chief of China’s domestic security apparatus, visited an office of the state oil company where he had started his ascent in the Communist Party hierarchy. He spoke of his undimmed devotion to the company, China National Petroleum Corporation, and to his fellow oilmen. “Oil is a word that stays in an oilman’s heart for his whole life,” Mr. Zhou said in his valedictory. A year later, senior officials associated with the oil conglomerate, including longtime allies of Mr. Zhou’s, are enmeshed in spreading corruption inquiries, presenting China’s new leader, Xi Jinping, with one of his biggest tests so far: How far and high is he willing to go to clean up China’s political elite? Read more of this post

Fonterra to launch self-branded infant formula in China

Fonterra to launch self-branded infant formula in China

By Ding Yining | September 26, 2013, Thursday |  PRINT EDITION

The world’s largest dairy producer Fonterra will launch its self branded infant formula in China later this year, undeterred by a recent botulism scare, as it taps the huge demand for imported formula in the country. The launch would start around the end of this year, an official with Fonterra China confirmed with Shanghai Daily yesterday, although no other details were provided. Fonterra CEO Theo Spierings said its Anmum brand of infant milk formula will be available in 70 Chinese cities in two to three years, Reuters reported yesterday. Read more of this post

China’s wealthiest families score $720 billion in undeclared “gray income”

China’s wealthiest families score $720 billion in undeclared “gray income”

By Lily Kuo @lilkuo September 25, 2013

The undeclared “gray” income earned by China’s richest families has reached staggering levels, and is contributing to massive income inequality that is far worse than official statistics, according to research by the state-backed China Society of Economic Reform. CSER researcher Wang Xiaolu, writing in Caixin magazine, said gray income reached 6.2 trillion renminbi (about $1 trillion) in 2011, or about 12% of GDP, based on a survey of 5,344 families in urban areas that was completed in 2012. Read more of this post

China to boost domestic formula brands

September 25, 2013 12:11 pm

China to boost domestic formula brands

By Lucy Hornby in Beijing

China is set to unveil subsidies and other support for five of its dairy companies to develop infant formula brands to compete against the foreign brands that currently dominate the premium end of Asia’s largest formula market. If successful, the policy, expected to be announced on Saturday, could create new competition for companies such as Nestlé,Danone and Abbott Laboratories. Read more of this post

China corruption trials risk erosion of party legitimacy

September 25, 2013 1:57 pm

China corruption trials risk erosion of party legitimacy

By Jamil Anderlini in Beijing

The criminal trials of two of China’s most notorious businesswomen have opened in Beijing and northern China just days after Bo Xilai, disgraced Communist party leader, was handed a life sentence for corruption and abuse of power. Gong Aiai, a former vice-president of a rural bank, is accused of buying fake identification to purchase dozens of properties in Beijing, while Ding Yuxin allegedly paid huge bribes to China’s former railway minister in exchange for billions of renminbi worth of contracts. Read more of this post

Break up of State oil monopoly? Industry experts suggested that China should establish a separate and independent company to operate the oil wholesale business and manage the supply to retailers, to break up the de facto monopoly of the three state-owned large oil companies

Break up of State oil monopoly?

2013-09-26 02:08:33 GMT2013-09-26 10:08:33(Beijing Time)  China Daily

As part of the efforts to dismantle the SOE’s monopoly in the petroleum sector, China should separate the oil wholesale business away from the three major State-owned industrial enterprises, experts suggested. Song Qiong / Xinhua

Industry experts suggested that China should establish a separate and independent company to operate the oil wholesale business and manage the supply to retailers, to break up the de facto monopoly of the three State-owned large oil companies, especially the two onshore oil giants. A major portion of China’s oil stations are run by Sinopec Ltd and PetroChina Co Ltd, and although oil stations owned by foreign companies and private investors do exist, they have a marginal significance in terms of market share. Read more of this post

Iron ore seen sliding as new supplies hit

September 25, 2013 11:00 am

Iron ore seen sliding as new supplies hit

By Neil Hume, Commodities Editor

Iron ore has defied the pessimists. The price of the key steelmaking raw material has averaged $136 per tonne this year – the second -highest level on record – as Chinahas imported vast quantities of the commodity. But with a wave of new supply about to hit the market are the good times about to end? Prices have already begun to drift lower as new supply from Australia has come on stream and shipments from Brazil have picked up. Benchmark iron ore has slipped from its August high of nearly $143 to $132. Read more of this post

Jim Chanos Threw Down A Big Investment Theme Going Into 2014: Short companies that are dependent on China’s appetite for iron ore.

If You Listened Closely Yesterday, Jim Chanos Threw Down A Big Investment Theme Going Into 2014

LINETTE LOPEZ SEP. 25, 2013, 6:30 PM 6,289 3

Between the upper cuts and jabs Jim Chanos and Jim O’Neill threw out at yesterday’s Bloomberg Markets 50 conference, Chanos blew you all a kiss. Actually, it was better than a kiss. It was an investment theme for 2014. Bloomberg put together O’Neill — a known China bull, and the man who coined the term BRIC at Goldman Sachs —  and Chanos — CEO of hedge fund Kynikos Associates, and the loudest China bear on the planet — to see what kind of sparks would fly. It was fun, you should read about it. Anyway, if you listened closely to their discussion (watch it here), Tom Keene asked Chanos to give him a “concrete example of a concrete company” he couldn’t stand. Chanos answered: “I would say anybody that’s in the business of mining iron ore right now where supply is about to come on in late 2013 and 2014 whether demand holds up or not it’s going to be a difficult market for those people.” That statement immediately brings to mind two of Chanos’ short positions, both of which are companies that are dependent on China’s appetite for iron ore. Read more of this post