Chinese Venture Fundraising Hurt by Fears Over Economy

July 31, 2013, 5:42 a.m. ET

Chinese Venture Fundraising Hurt by Fears Over Economy

Economic Concerns Outweigh Renewed IPO Activity

SONJA CHEUNG

Venture capital fundraising in China slumped to a two-year low in the second quarter as concerns about the country’s slowing economy outweighed renewed activity in initial public offerings, according to data from Dow Jones VentureSource. IPOs of Beijing-based e-commerce company LightInTheBoxHolding Co. in the U.S., and of car dealership China Harmony AutoHolding Ltd. in Hong Kong in early June, failed to reignite interest in those investing in mainland VC funds, despite proof that fund managers are finding it slightly easier to off-load investments. Read more of this post

The world must learn to deal with failure; Regulators lack the wherewithal to try and eliminate the risk of collapse

July 30, 2013 4:11 pm

The world must learn to deal with the reality of failure

By John Kay

Regulators lack the wherewithal to try and eliminate the risk of collapse

Last week, the Financial Stability Boardidentified nine international insurance companies as GSifis. For those uninitiated in the acronyms beloved of the regulatory community, a GSifi is a global systemically important financial institution. Finding GSifis in the insurance sector is a solution in search of a problem. Having invented the concept of GSifi to describe too-big-to-fail banks, the world’s financial regulators are on the hunt for other businesses which can be treated in a similar way. Read more of this post

7-Eleven wizard, 80, to take on U.S.; With 50,000 global outlets, time said ripe to expand convenience store chain where it was born

7-Eleven wizard, 80, to take on U.S.

With 50,000 global outlets, time said ripe to expand convenience store chain where it was born

BY YUKI YAMAGUCHI

BLOOMBERG

JUL 30, 2013

Over the past 39 years, Toshifumi Suzuki has expanded 7-Eleven to 50,000 outlets, more than any other retail chain. Now, at the age of 80, he says he has no interest in retiring. He’s got too much work to do. “I’m not thinking about it at all yet,” said Suzuki, chief executive of Japan’s Seven & I Holdings Co., global owner of the home of the Slurpee. High on Suzuki’s to-do list is a renewed focus on the U.S., where the chain was founded 86 years ago when a Dallas ice maker began selling eggs, bread and milk. Suzuki opened Japan’s first 7-Eleven in Tokyo’s bayside Toyosu district in 1974 and built the brand into Japan’s biggest convenience store chain. Then in 1991, after 7-Eleven brand owner Southland Corp. filed for bankruptcy, he turned around and bought the mother company. Read more of this post

Luxottica Has Its Eyes on Brazil and Asia; Andrea Guerra, head of Luxottica Group, on leadership, listening, and competing for customers

July 30, 2013, 9:58 p.m. ET

Luxottica Has Its Eyes on Brazil and Asia

MANUELA MESCO

Andrea Guerra, head of Luxottica Group, on leadership, listening, and competing for customers.

The overall global luxury market may be cooling, but for sunglasses and eyewear in emerging markets, the future looks hot. That’s good news for Luxottica S.p.A.,LUX.MI +0.73% the world’s largest eyewear group. The Italian company, which owns iconic brands like Ray-Ban and holds licenses to produce eyewear for designer labels such as Burberry, Chanel and Armani, logged €7 billion ($9.29 billion) in sales last year and recently reported a 7% year-on-year increase for second-quarter revenue. Andrea Guerra, the company’s chief executive since 2004, has spearheaded an acquisition drive intended to establish Luxottica in new markets around the globe. Last year alone, it made four acquisitions, including Grupo Tecnol Ltda, a leading eyewear maker in Brazil, as well as retail chains in Spain, Portugal and Italy. Read more of this post

Korean President Park Geun-hye is backpedaling on her pledge to uproot unfair business practices by conglomerates and improve their corporate governance structure by limiting the power of owners

2013-07-29 17:54

President backpedals on chaebol reform

By Na Jeong-ju
President Park Geun-hye is backpedaling on her pledge to uproot unfair business practices by  conglomerates and improve their corporate governance structure by limiting the power of owners, critics say.
The administration has become soft-handed on inter-affiliate deals that have been abused by chaebol owners to expand their business empires. Tax officials have hinted at reducing the scope of audits into conglomerates.
The finance ministry is moving to ease business regulations in order to draw more investment from chaebol firms and create more jobs. These changes are in stark contrast to Park’s presidential campaign pledge — she vowed to achieve “economic democratization” by toughening punishment for violations committed by big businesses and ensuring fair competition between large and small firms. Read more of this post

What It Means When Charlatans Have Access to Our Leaders

07.30.2013 18:01

Closer Look: What It Means When Charlatans Have Access to Our Leaders

Government and business elites can preach materialism all they want, but when they take advice from frauds they’re showing how little faith they have

By staff reporter Wang Xiaoxiao

ang Lin with photos of some of the people he has advised

The name of a qigong master, Wang Lin, has become an Internet buzzword because he has high-powered followers and the public wonders why.

Wang, a 61-year-old native of the eastern province of Jiangxi, made his name in the late 1990s when qigong – an ancient admixture of breathing exercises and meditation – was a national fad, although he was able to keep a low profile. He claimed some unusual abilities: he said he treated various heads of state for their diseases and showed visitors how he could make a snake appear in an empty pot. Wang has garnered a circle of followers, and is continually referenced and visited by various celebrities and officials. Read more of this post

Private Investigators Tracking Fraud Face Risks in China

July 30, 2013, 7:30 p.m. ET

Private Investigators Face Risks in China

Detention of British Gumshoe Highlights Danger

JAMES T. AREDDY

SHANGHAI—The police detention this month of a British private investigator here amid a pharmaceutical bribery probe highlights the growing risks for private gumshoes tracking fraud in the world’s No. 2 economy. Shanghai police detained a prominent commercial sleuth, Briton Peter Humphrey of ChinaWhys Co., according to the British government. Authorities won’t say why he is being held, and he isn’t reachable. In China, a detained person isn’t necessarily a criminal suspect. Mr. Humphrey’s detention comes as Chinese officials investigate bribery allegations against U.K. drug maker GlaxoSmithKline PLC. GSK.LN -0.03% Glaxo is a longtime client of Mr. Humphrey, according to people familiar with the situation. It isn’t clear whether Glaxo is a current client. Glaxo has said Mr. Humphrey isn’t an employee and declined further comment. Read more of this post

Why is China auditing local government debt again?

Why is China auditing local government debt again?

by China Seminar on July 29, 2013

Here is what the FT says:

China will conduct an urgent audit of all government debt, underlining concerns over rising financial risks in the world’s second-biggest economy.

The National Audit Office said in a one-line statement on Sunday that it had been instructed by the state council, China’s cabinet, to come up with a tally of how much money is owed by all levels of government from villages up to central authorities.

So why do we ask the question in the title? Because this would be the third audit report on local government debt, only one month after the last report was published, and it comes much earlier than everyone expected, including the National Audit Office (NAO) itself. Two audits have been done on this subject so far. The first audit covering more than 3000 local governments was conducted from March to May in 2011 and the report was published in June 2011. Thesecond audit was done on a much smaller scale as it only included 36 local governments. It was done during November 2012 to February 2013 and a report was published on June 10^th, just a month ago. According to the information provided by the People’s Daily, the official newspaper of the Party (in Chinese, for English see the FT report), the third round of the audit was required by the State Council and it will start immediately on August 1^st. The NAO has called off other projects to focus on this one and many auditors were asked to cancel their holidays.  Read more of this post

China Stocks World’s Worst Losing $748 Billion on Slump

China Stocks World’s Worst Losing $748 Billion on Slump

Four years after China’s growth helped lead the global economy out of a recession and won the admiration of luminaries from billionaire George Soros to Nobel laureate Joseph Stiglitz, the nation’s stock market has lost more money for investors than any other in the world.

The Shanghai Composite Index (SHCOMP), which doubled in 10 months through August 2009 as the government poured $652 billion of stimulus into building roads, railways and housing, has tumbled 43 percent from its high, destroying $748 billion in market value. Only Greece’s ASE Index (ASE) has fallen more in percentage terms. The Standard & Poor’s 500 Index, the benchmark gauge of American equity, erased all of the losses from the worst recession since the Great Depression and has gained 68 percent since the China peak, reaching a record this month. Read more of this post

Jakarta Ramadan bazaar feels the pinch of rising costs, which force them to raise prices

Jakarta Ramadan bazaar feels the pinch

Wednesday, July 31, 2013 – 03:00

Wahyudi Soeriaatmadja

The Straits Times

JAKARTA – For an entire month, Bendungan Hilir in central Jakarta transforms into the capital’s largest Ramadan food bazaar, with some 100 food stalls offering a wide range of food and drinks, from grilled fish to sticky rice treats and sweet porridge. The Benhil bazaar, as residents call it, has been around since the 1990s but stallholders say they are feeling the impact of rising costs, which force them to raise prices, as well as greater competition from bazaars nearby. Read more of this post

UBS Has Relationship With 80% of Asia’s Billionaires

UBS Has Relationship With 80% of Asia’s Billionaires

UBS AG (UBSN), the Swiss lender that’s shrinking its investment banking business to focus on wealth management, said it has a business relationship with as many as eight out of 10 billionaires in Asia. “We have a penetration of one in two billionaires in the world,” Chief Executive Officer Sergio Ermotti told analysts and reporters on a call after second-quarter earnings today. “In Asia, this was much deeper.” The Zurich-based bank has a relationship with as many as 80 percent of the billionaires in Asia, a UBS official said in an e-mail following the call. UBS is targeting affluent clients in emerging markets as indebted economies and a crackdown on offshore tax evasion cloud European growth prospects. Switzerland’s largest bank, ranked No. 1 globally by client assets by Scorpio Partnership, is boosting business with ultra-wealthy families with at least 50 million francs ($54 million) of investable assets. Read more of this post

Oil drillers in North Dakota’s Bakken shale fields are allowing nearly a third of the natural gas they drill to burn off into the air, with a value of more than $100 million per month

Bakken flaring burns more than $100 million a month

3:31pm EDT

By Ernest Scheyder

NEW YORK (Reuters) – Oil drillers in North Dakota’s Bakken shale fields are allowing nearly a third of the natural gas they drill to burn off into the air, with a value of more than $100 million per month, according to a study to be released on Monday. Remote well locations, combined with historically low natural gas prices and the extensive time needed to develop pipeline networks, have fueled the controversial practice, commonly known as flaring. While oil can be stored in tanks indefinitely after drilling, natural gas must be immediately piped to a processing facility. Flaring has tripled in the past three years, according to the report from Ceres, a nonprofit group that tracks environmental records of public companies. Read more of this post

Asia’s Rice Glut Expected to Worsen

Updated July 30, 2013, 6:48 p.m. ET

Asia’s Rice Glut Expected to Worsen

Good Harvests Loom, on Top of Already Burgeoning Supply

SAMEER C. MOHINDRU and WARANGKANA CHOMCHUEN

BANGKOK—Asia is awash in rice, as favorable weather and government support for farmers combine to produce a bumper crop. The glut is driving down prices for big rice importers in Africa and China. But consumers in some of the biggest rice-producing nations, including Thailand and India, are paying higher prices as surplus supplies sit in government warehouses. Asia’s surplus will have little impact in the U.S., which produces different varieties of rice. When traveling by train from New Delhi to neighboring states, a common sight in the countryside is rice piled high on wooden plinths, protected only by plastic tarps. In Thailand, the government has considered using a warehouse at the city’s old airport to store rice because other storage facilities are full. Read more of this post

The collapse of a cartel in the potash market slams producer stocks—and is another blow to commodities bulls; How a determined China broke up a global fertilizer cartel

Updated July 30, 2013, 10:19 p.m. ET

Russian Potash Producer Signals End to Global Cartel

Uralkali Pulls Out of Sales Partnership With Belarus

ALISTAIR MACDONALD And LUKAS I. ALPERT

The collapse of a cartel in the potash market slams producer stocks—and is another blow to commodities bulls. Tatyana Shumsky reports.

MOSCOW—A cartel that effectively set prices for one of the world’s most important agricultural commodities tottered Tuesday, sending markets into disarray while perhaps promising lower food prices around the globe. The upheaval began here, after Russian potash producer UralkaliURALL -14.62% said it was pulling out of its sales partnership with Belarus, the linchpin of one of two groups in a global cartel commanding two-thirds of a nearly $22 billion market for the fertilizer ingredient. The announcement sent potash-mining stocks into a tailspin around the world after Uralkali predicted the move would slash prices by 25% to about $300 a metric ton by the end of year. Read more of this post

What Are Banks Doing in Energy and Aluminum Anyway?

What Are Banks Doing in Energy and Aluminum Anyway?

The largest U.S. banks are accused of causing problems in markets ranging from energy to aluminum. Regardless of whether they’re guilty of market-rigging, as critics say, the charges raise another question: Why are the banks active in these businesses in the first place?

Part of the answer is a point we’ve stressed before: They’re among the country’s most subsidized enterprises. The Federal Deposit Insurance Corp. and the Federal Reserve, both backed by taxpayers, provide an explicit subsidy by ensuring that banks can borrow money in times of market turmoil. Banks that are big and connected enough to bring down the economy enjoy an added implicit subsidy: Creditors will lend to them at low rates on the assumption that the government won’t let them fail. Read more of this post

Bad loans trigger new debt crisis in China’s Wenzhou

Bad loans trigger new debt crisis in Wenzhou

Staff Reporter

2013-07-30

The city government in Wenzhou in eastern China’s Zhejiang province has seen its finances deteriorate and is facing an economic crisis due to local businesses taking on bad loans, reports Beijing’s Economic Observer. The private lending crisis in Wenzhou, which erased a sizable amount of local residents’ savings, has begun to impact the official financial system, with banks reporting a surge in bad loan ratios, the paper said. The non-performing loan ratio at local banks climbed from 0.37% in June 2011 to a high of 4.01% in March, while 6,458 loan disputes, involving 24.2 billion yuan (US$9.3 billion) were reported last year. Read more of this post

China Is Set to Suffer the Skyscraper Curse

China Is Set to Suffer the Skyscraper Curse

Auditors seeking to head off a Chinese crash are rushing to scrutinize the debt-swollen books of the country’s local governments. Economists are poring over statistics, bond spreads, electricity gauges and stock valuations. They might all have more luck if they got their noses out of the books and looked up.

On July 20, the Broad Group broke ground on Sky City on the outskirts of the south-central city of Changsha. The skyscraper will rise 838 meters (2,749 feet) into the heavens to become the world’s tallest building. If that weren’t feat enough, the project aims to wrap up construction in 90 days and at almost half the cost of Dubai’s Burj Khalifa, which it would top. Read more of this post

China Cities May Tighten Property Curbs as Slowdown Lifts Target

China Cities May Tighten Property Curbs as Slowdown Lifts Target

Chinese cities seeking to cap home-price gains below income growth may need to tighten property curbs as the nation’s slowing economic expansion makes their targets more difficult to meet. Hangzhou, the capital city of the eastern province of Zhejiang, will tighten approvals of pre-sale permits in the second half and may raise down payments for second homes to make sure its price-control target is met, according to a July 27 report by Today Morning Express, a Chinese-language newspaper affiliated with the provincial government. Read more of this post

China should probe foreign luxury carmakers over prices: Xinhua

China should probe foreign luxury carmakers over prices: Xinhua

Monday, Jul 29, 2013

Reuters

SHANGHAI – Foreign carmakers are reaping exorbitant profits selling imported luxury cars in China and should face an anti-trust investigation, the official Xinhua News Agency said, in what may amount to a shot across the bow of foreign auto firms. Xinhua said that in the wake of investigations into how foreign companies in other sectors price their goods, the question of imported cars had become a contentious topic. Foreign milk formula makers and pharmaceutical companies have come under intense regulatory scrutiny in recent weeks, especially over pricing. Separately, Chinese police have accused British drugmaker GlaxoSmithKline of bribery. Read more of this post

The Near-Zero Interest Rate Trap; If long-term rates rise to normal levels, banks holding government bonds would be de-capitalized—a disaster

July 29, 2013, 7:04 p.m. ET

Ronald McKinnon: The Near-Zero Interest Rate Trap

If long-term rates rise to normal levels, banks holding government bonds would be de-capitalized—a disaster.

RONALD I. MCKINNON

The conventional critique of the Federal Reserve’s policies of near-zero interest rates and massive monetary expansion is that they risk kindling excess aggregate demand and high inflation. Yet inflation world-wide remains low, and some major trading partners of the United States, such as Japan and now China, are worried about deflation. China’s Producer Price Index fell 2.7% in June, the 16th consecutive monthly decline. Read more of this post

Tycoon “Superman” Li Ka-Shing’s ParknShop struggles to turn subleasing business profitable

ParknShop struggles to turn subleasing business profitable

Staff Reporter

2013-07-30

Speculation is intensifying over the intention of Hong Kong-based Hutchison Whampoa, one of the largest companies listed on the Hong Kong stock exchange, to sell its supermarket chain Taste International ParknShop. The chain has posted worse-than-expected results in both Hong Kong and mainland China, according to the Chinese-language New Express Daily. Chen Xianming, a senior analyst at Taiping Securities, feels Hutchison Whampoa’s business development has matured, with lower marginal profits. If the company does seek to sell ParknShop, it should be seen as a positive move given the fierce competition the conglomerate faces in mainland China. Read more of this post

China risks following Japan into economic coma

China risks following Japan into economic coma

5:14pm EDT

By Wayne Arnold

HONG KONG (Reuters) – After decades of emulating Japan’s export-driven economic miracle, China appears in danger of following it into the same kind of economic coma that Japan is trying to wake up from 20 years later.

China is struggling to wean itself off a habit picked up from its more advanced neighbor: relying for growth on exports and credit-fuelled investment. That has left its economy lopsided, economists say, with massive over investment in property and industries rapidly losing their cost advantage, from mining and electronics to cars and textiles. Wages are rising, the return on investments falling. Read more of this post

60-70% of honey in China’s Jinan is fake

60-70% of honey in Jinan is fake

by Neil Thomas on July 29, 2013

The front cover of today’s Jinan Times is dominated by an exposé of the Shandong honey industry, with a headline proclaiming “60-70% of honey on the market is adulterated,” leading into a detailedfeature article on pages two and three. The report claims that the production of counterfeit honey in China is an open secret to industry insiders, and so journalists from the Jinan Times went undercover to investigate. If you enjoy eating honey, as the Chinese have since ancient times, then you will not like what these reporters found. Read more of this post

The billionaire prince who says Saudi Arabia is in far bigger trouble than the other royals admit

The billionaire prince who says Saudi Arabia is in far bigger trouble than the other royals admit

By Steve LeVine 6 hours ago

Saudi Arabia, home to the world’s largest reserves of cheap-to-drill oil, describes itself as a painstaking economic planner. It plots to keep current oil prices stable even while diversifying for harder economic days ahead. These practices have, among other things, resulted in the accumulation of $700 billion in official foreign reserves.

This self-depiction has always aroused suspicion since outsiders typically see little more than what the Saudis wish them to. But now a 14-page screed by one of the nation’s most prominent billionaire princes suggests internal dissent on whether the kingdom is planning painstakingly enough. Alwaleed bin Talal, a jet-setting nephew of King Abdullah who owns stakes in Apple, Citigroup and Twitter, says that Saudi Arabia faces a dire threat. Read more of this post

Financial advisers who put their clients into Australian LM’s frozen funds stand to collect millions in commission before their clients see any return

LM frozen funds: commissions before client earnings

July 30, 2013 – 12:24PM

Michael West

The financial advisers who put their clients into LM Investment Management’s frozen funds stand to collect millions in commission before their clients see any return. The latest administrators report for LM Investment Management shows commissions of $10 million are subject to claims by financial advisers. However, the actual investors themselves have not been deemed by the LM group administrators to be creditors. Rather, their savings rank behind the fees of the very people who put them into these dud investments in the first place. Business Day revealed yesterday LM founder Peter Drake had taken at least $46 million in loans before his mortgage fund empire collapsed earlier this year. These have not been repaid and Drake appears headed for bankruptcy. In light of the loans to Drake and the feeding frenzy by the administrators and their lawyers, the prospective returns for investors in the LM suite of funds is diminishing with every week that passes. Since the collapse in March this year, the administrators FTI Consulting have charged $2.4 million in fees, or $130,000 a week. Disbursements came to another $2 million. Read more of this post

China: Citizens united; Civil activists pose a growing threat to the Communist party as they link up

July 29, 2013 5:36 pm

China: Citizens united

By Kathrin Hille

Civil activists pose a growing threat to the Communist party as they link up, writes Kathrin Hille

When the Chinese police arrested rights lawyer Xu Zhiyong on July 16, they charged him with “gathering a crowd to disturb order in a public place”.

As Mr Xu had been under house arrest since April, the charge triggered an outcry. But in the eyes of China’s ruling Communist party, the softly spoken but stubborn lawyer is still a threat, even while confined to his Beijing home. Over the past year, Mr Xu has worked to link activists who were each running individual campaigns, marshalling them into a broader movement called “citizenry” to foster a sense of rights and responsibilities across a range of public issues. It is the virtual equivalent of a crowd in the street. Read more of this post

How India has Punctured its Gas Balloon; Even as gas takes off in the US as a cleaner and cheaper fuel, India is heading in the opposite direction with policy flip-flops and failed promises strewn along the way

How India has Punctured its Gas Balloon

by Cuckoo Paul | Jul 30, 2013

Even as gas takes off in the US as a cleaner and cheaper fuel, India is heading in the opposite direction with policy flip-flops and failed promises strewn along the way

From his office in central London, Christof Ruhl, chief economist and vice president at British Petroleum (BP), analyses energy demand-supply data from around the world to produce one of the most widely consumed reports of the oil industry: BP’s statistical review of world energy. This year, Ruhl says, he was amazed by the unprecedented shifts in energy preference in countries the world over. Read more of this post