By Joel Backaler, Author of “China Goes West”
On a recent trip to London, I was shocked at how much evidence of corporate China was all around me. As I rode in a black cab, I remembered that Geely, a Chinese firm that acquired Volvo in 2010, had bought iconic British cab producer Manganese Bronze in 2013. Arriving at Heathrow, I recalled that China’s sovereign wealth fund, the China Investment Corporation, owns 10% of the firm that operates the international airport. In line at the gate, I stared at a giant display for a laptop by Lenovo, the Chinese firm that made headlines in 2005 for acquiring IBM’s ThinkPad brand.
In only a few short years, Chinese companies have gone West in a big way. However, many questions remain about what drives Chinese firms to expand beyond the boundaries of the Middle Kingdom, and what the ultimate costs and benefits of their global investments will be. Continue reading »
With the benefit of hindsight it is always easy to identify the signs of an impending crisis.
Today it seems perfectly obvious that high-profile loss-making pet food websites will eventually go bust and that giving mortgages to people who cannot pay them back is not a sustainable business model.
Along with such leading indicators of looming disaster I would add another – the conversion of bearish commentators and economists into newly-minted optimists. Continue reading »
By Stephen Green, Standard Chartered Bank
Dangerous things can lurk in the shadows of a financial system. We know this because when the US banking system almost burnt down in 2008, the stuff in the shadows was the fire’s accelerant. The highly-leveraged, off-balance sheet vehicles loaded with securitised debt meant made the banking crisis were far worse than it would have otherwise been.
Knowing the problems that lurked in the US, the idea of shadow banking in China freaks people out. The sector seems to have grown fast, in an economy already known for its tendency for asset bubbles and bad lending. We have spent time poking around in the shadows. We believe that much of the fear is misplaced. Continue reading »
The ingenuity of Chinese netizens seeking to commemorate the 1989 Tiananmen massacre in defiance of the country’s “Great Firewall” of censorship is reaching new heights.
Armed with little but the remarkable flexibility of Chinese characters, the more daring among 618m internet users are finding an endless string of linguistic ruses to outfox – at least temporarily – the world’s most formidable forces of online control to get their messages out. Continue reading »
It is the monetary equivalent of what Chairman Mao called “bombarding the headquarters”. China’s renminbi is rapidly displacing the US dollar as a trading currency not only in Asia and Europe but now also in the US home market.
The value of renminbi payments between the US and the rest of the world rose by 327 per cent in April this year from the same month a year ago (see chart) as more US corporations switched to using the Chinese currency to pay for imports from China, according to data from SWIFT, the international currency settlement firm. Continue reading »
Andrew Collier, Orient Capital Research
A decade ago, when China was struggling to clean up its banking system, regulators pulled a rabbit out of a hat. They set up a series of “bad banks” – called Asset Management Companies (AMC) – and took Rmb 1.4tn ($125bn) of debt off the hands of the four State Banks in Beijing. It was a big success, leading to the listing of the “Big Four” banks in Hong Kong and a healthier financial system.
Now, they’re trying to pull the same trick again – this time across the country.
Regulators have quietly given approval for local governments to set up their own AMCs. As in Beijing ten years ago, these local AMCs would take non-performing loans (NPLs) from local banks, governments and other financial institutions and sell or restructure them. So far, four Provinces have signed on, but once the experiment gets rolling, it’s likely there will be one for each Province across China. Continue reading »
By Gavin Bowring, Asean Confidential
It might seem odd to think of Cambodia as a haven of political stability. Labour unrest in Cambodia’s garment factories turned violent in January this year, while the country’s opposition party, the Cambodia National Rescue Party (CNRP), has boycotted Parliament for six straight months in protest of last year’s “flawed” general elections.
Nevertheless, in the space of a week, Cambodia has seen thousands of Chinese residents in Vietnam fleeing across the border as a result of escalating tension between China and its southern neighbour, Vietnam. Meanwhile, the recent military coup in Thailand led to implicit suggestions by the lawyer of former prime minister Thaksin Shinawatra that Cambodia might be willing to host his “government-in-exile”, though these suggestions have been denied by Cambodian Prime Minister Hun Sen. Continue reading »
For Chinese, Africa is the new El Dorado. An estimated 1m Chinese have moved to Africa in the last two decades in pursuit of a more prosperous life. They are opening shops, buying land, and exploiting mines. But how welcome are the Chinese in Africa? And is their arrival a force for good?
Looking for answers to these timely questions, Howard French, a former Shanghai bureau chief of the New York Times, undertook a grand voyage through the African continent. He met with a diverse array of Chinese merchants, entrepreneurs and business men and asked them about their practices, methods, and outcomes. Continue reading »
By Ben Aris of bne
The shouting match between west and east continues but the Russian stock market is up sharply this week, as President Vladimir Putin travels to China where he is expected to sign a string of big investment deals. Continue reading »
To see how China is managing its growing clout over trade and investment around the world, it might help to take a look at how an economic hegemon evolved in the past – Britain’s colonists in eighteenth and nineteenth-century India.
In reality, China is still in the East India Company stage of global economic strategy – opportunistic and pragmatic rather than ideological and intellectually coherent. (It is something of an irony that the one-party autocracy of China is proving itself eclectic while the open-market democracy of the US has been doctrinaire.) And while there are some signs that China’s economic statecraft is moving towards the transparent and plurilateral, most of its policies towards other emerging markets are opaque and self-interested. Continue reading »
The torrent of bad news for Chinese property developers shows no sign of letting up.
Unsold floor space continued to surge in April. Two small developers are reported to be slipping into financial distress. The total net profits of 117 domestically-listed developers posted a 27 per cent decline in the first quarter to Rmb9.65bn. The bearishness of investment bank analysts, meanwhile, is plumbing new depths. Continue reading »
By Michael Pettis of Peking University
Recently a number of economists, most of them foreign, have called for China to devalue the renminbi, arguing that the more than 30 per cent revaluation since 2005 has left it with an overvalued currency. This, they claim, has hurt Chinese exports and is holding back economic growth.
They are probably wrong about growth and almost certainly wrong about their evaluation of China’s currency regime. The policies of the People’s Bank of China (PBoC) reflect a domestic debate that is as much political as it is economic. Continue reading »
By Gavin Bowring of Asean Confidential in Astana, Kazakhstan
One of the biggest talking points on the sidelines of the recent Asia Development Bank (ADB) Annual Meeting in Astana, Kazakhstan, was China’s proposal to effectively create its own “ADB”, a regional infrastructure finance lender known as the Asian Infrastructure Investment Bank (AIIB), with start-up capital of US$50bn, the majority of which would come from China.
The initiative’s political undertones have become somewhat awkward. Although discussions with the EU, Malaysia, Singapore, and Australia on AIIB’s creation have been underway for a year, neither Japan, India, nor the United States have yet been invited. This stems in part from China’s frustration over their dominance of the ADB bureaucracy, despite China having become a major capital provider to the organization. Continue reading »
It’s a common trick to make yourself look bigger than you are to win a fight. Rather rarer is for one of the world’s largest and fastest-growing economies frantically and consistently to try to hide its size. China, the 500kg panda in the global economic room, is trying an increasingly unconvincing tactic of squeezing itself into a corner and hoping no-one notices it is there.
Continue reading »
China’s factories suffered a fourth consecutive month of contracting activity in April, according to a private survey on Monday, suggesting a GDP growth slowdown in the world’s second largest economy is extending into the second quarter of the year.
Outside China, the slowdown threatens to exacerbate the impact on several vulnerable emerging market economies (check out the ranking here). Inside China, the softening economy is fostering a yawning divergence in fortunes – with some regions, sectors and people feeling it far worse than others. Continue reading »