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  1. #1
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    [EN] China’s Next Five Years — Squeezing the People to Feed the State


    To fend off a debt crisis, China needs to shore up state-owned companies’ weakened foundations

    Nathaniel Taplin
    Oct. 11, 2017

    China achieved its economic miracle by unleashing the entrepreneurial private sector. With President Xi Jinping poised to further consolidate power at the Communist Party’s twice-a-decade leadership shuffle kicking off Oct. 18, the narrative of the next five years is becoming clear.

    The state is pushing back.

    The logic is straightforward. Nominally communist China relies on its vibrant private sector for growth, but state-owned companies are indispensable tools for political patronage, social control and economic policy. Any financial rot in the state sector could weigh on the economy and weaken the Communist Party’s grip.

    With private business already commanding around 70% of the economy, Mr. Xi and his allies have decided to strengthen key state-controlled companies by boosting their market power and easing their debt burdens.

    For investors, the implications are significant: higher global goods prices because state-owned companies are notoriously inefficient, and a smaller chance of the long-feared Chinese debt crisis. Corporate debt, which is largely in the state-owned sector, ticked down as a percentage of GDP in the second quarter, according to J.P. Morgan—the first decline since 2011. The trade-off is slower Chinese growth. Chinese banks, whose shares are currently on a tear, will need to keep subsidizing bloated state enterprises. And those enterprises’ need for a deep pool of capital inside China means a free-floating yuan will remain a distant dream.

    Overburdened Giants

    State-owned businesses have been struggling because of their unique role. They benefit from cheap bank loans but give lots in return: Some still run hospitals and schools. Nearly all support more people than they need. PetroChina—the listed arm of the flagship state-owned China National Petroleum Co. (CNPC)—had seven times as many employees as Exxon Mobil last year, yet produced only marginally more oil and less gas. Little wonder its return on equity in the 12 months to June was a dismal 1.7%, against nearly 7% for Exxon.



    CNPC does have one ace card: It is one of only three significant upstream oil companies in China, all state-owned. Prices are regulated, but CNPC’s dominance often allows it to strong-arm customers and the bureaucracy.

    Most SOEs, with less clout, have found themselves fighting nimbler private rivals over a slower-growing pie in recent years. Their margins have cratered in keys sectors such as steel, flooded by private capital during the boom years. The aggregate return on assets for the state-owned industrial sector, as high as 6% in 2007, now is barely 3%—not only well below the 7% average for all industrial companies but the average bank lending rate of 5%. SOE debt has mushroomed to threaten the entire financial system. A bond-market plunge in April 2016 was triggered by defaults at big state-owned coal and steel companies.

    Re-Stated

    There are two ways to deal with the debt. The government could pay it off, or the companies could, either through higher returns or by selling assets to the private sector.

    Mr. Xi, apparently believing private companies already have too much influence, has opted to boost the market power of remaining key SOEs.

    Mergers between state-owned giants like Baosteel and Wuhan Steel and, more recently, power and coal behemoths Guodian and Shenhua are the most obvious result. China’s much-ballyhooed industrial “capacity cuts” are another. Forced steel-mill closures this year, a big factor behind higher global prices, have primarily affected privately owned mills.

    Remaining state companies may enjoy fatter profits from the higher prices for basic goods, but they mean higher costs for downstream industries where the private sector is stronger. The average profit margin for state-owned industrial companies was 6.3% in August, up from 3.8% in early 2016. For private companies it was stuck at 5.7%, nearly exactly where it was a year ago.

    China’s private sector remains dynamic, and profits in some areas—like tech—are growing rapidly. But the state is encroaching even on the internet giants, such as when it recently cajoled the likes of Tencent and Alibaba into purchasing 13% of struggling state telecom company China Unicom for $4 billion. State media lauds such “mixed ownership reform” as a way to boost efficiency at state enterprises, but these deals look more like a new type of tax on successful private companies.

    For investors, the tilt back toward the state means that innovative privately owned tech and consumer companies may continue to outperform—but probably less so than in the past. Hulking state-owned titans, enjoying newly privileged market positions, may reward investors more reliably: The state-dominated Shanghai stock market has roundly outperformed the technology-and-consumer-focused Shenzhen market this year.

    Deng Xiaoping, the grandfather of China’s economic reforms, famously said that it was acceptable to let “some people get rich first.” The people are far richer than they were three decades ago. Now it’s the state’s turn once again.

    https://www.wsj.com/articles/chinas-...ate-1507714384

  2. #2
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    China’s Global Buying Spree Hits Hurdles

    Despite their ‘unlimited checkbook,’ firms with ties to China are at a disadvantage in global M&A deals

    Julie Steinberg and Ben Dummett
    Sept. 10, 2017

    Chinese companies are finding it harder to buy and invest in businesses abroad—even if they are willing to pay top dollar for such deals.

    Political, regulatory and other hurdles to Chinese cross-border acquisitions are mounting in the U.S., Europe and even Japan, making some sellers wary of striking deals with firms that have strong ties to mainland China. At the same time, China has been reeling in some of its biggest deal makers on mounting concerns about capital leaving the country and high debt levels posing a risk to its economy.

    Together, the constraints are limiting the prospects of Chinese companies that still have the resources and ability to expand overseas, and dampening an already lackluster environment for global mergers and acquisitions this year. The setback for Chinese firms also comes after they emerged in recent years as credible bidders for U.S. companies.

    “In some ways they were the perfect buyer because they seemed to have a long-term view and an unlimited checkbook,” said Scott Barshay, global head of mergers and acquisitions for law firm Paul Weiss Rifkind Wharton & Garrison LLP in New York. Their purchases “definitely drove up asset prices,” he added.

    So far this year, Chinese companies have announced $113 billion in cross-border deals, down nearly a third from the same period a year earlier, according to Dealogic.

    These days, simply being Chinese can be disadvantage in some deal negotiations.

    Earlier this summer, Inner Mongolia Yili Industrial Group, China’s largest dairy company, bid more than $900 million for Stonyfield Farm Inc., a Londonderry, N.H. yogurt maker, according to people familiar with the matter.

    Stonyfield’s owner, European packaged-food giant Danone SA, instead sold the business for $875 million to French dairy company Lactalis, which won in part because Danone and its advisers felt there was too much regulatory uncertainty associated with a Chinese buyer, people familiar with the matter said. Danone was under pressure from the U.S. Department of Justice to divest Stonyfield quickly as a condition of a separate acquisition it had made.

    In Japan, Toshiba Corp. has spent months seeking a buyer for its large memory-chip division. It initially spurned a high bid from Hon Hai Precision Industry Co. —better known as Foxconn Technology Group—after Japanese government officials expressed concerns about the risk of Toshiba’s chip technology being leaked to China, where Taiwan-headquartered Foxconn has vast electronics manufacturing operations. The deal talks aren’t dead, however, and Toshiba is still weighing multiple offers, including one from Foxconn.

    The Chinese government recently formalized rules limiting the types of transactions companies can pursue, restricting overseas investments in industries such as property, hotels and entertainment. Companies were largely following those rules for months before they were codified. Acquisitions that are core to companies’ main businesses are generally permitted and are continuing, say bankers.

    Still, the guidelines, designed to stem outlandish deals and capital flight, have sharply slowed the pace of Chinese deals following a record 2016 in which state-owned and private corporations announced over $220 billion of acquisitions abroad.

    China National Chemical Corp. last year announced a $43 billion takeover of agro-giant Syngenta AG , China’s biggest foreign deal to date. That deal was delayed several times due to antitrust concerns from the European Commission and closed months after had been expected.

    China-U.S. merger and acquisition activity has fallen more precipitously. There have been 86 announced Chinese deals into the U.S. so far this year worth $9.9 billion, down from 118 deals worth $33 billion in the same period last year.

    One reason: the Committee on Foreign Investment in the U.S., a multiagency body that screens deals for national security concerns, has been toughening its scrutiny of Chinese deals and taking longer to approve them.

    In an unusual move earlier this month, Chinese government-backed Canyon Bridge Capital Partners Inc. and Portland, Ore.-based Lattice Semiconductor Corp. said they would ask President Donald Trump to approve a deal they say CFIUS has indicated it will recommend blocking or suspending. The companies have so far tried three times to get approval since Lattice agreed to be bought by Canyon Bridge last year.

    Canyon Bridge is currently considering a bid for Imagination Technologies Group PLC, a British-based chip designer, according to a person familiar with the matter. But another possible CFIUS review has led the Chinese firm to consider submitting a bid that leaves out Imagination’s U.S. operations, the person added.

    The increased regulatory pressure has also made some investment bankers more cautious. Banks including Goldman Sachs Group Inc., UBS Group AG and Bank of America Corp. have been asking some of their Chinese clients to provide more details about their ownership and sources of funding before working with them on deals, according to people familiar with the matter.

    Chinese buyers also are now less sought after because sellers have more bidders from other countries to choose from this year, said Chris Ventresca, J.P. Morgan Chase & Co.’s global co-head of mergers and acquisitions.

    In Europe, China’s Legend Holdings Corp. , the biggest shareholder of computer-maker Lenovo Group Ltd. , earlier this year submitted a competitive bid for Spain’s Allfunds Bank SA., a fund distribution company, said a person familiar with the matter.

    The sellers—including Banco Santander SA and Italy’s Intesa Sanpaolo SpA—chose a joint offer from Hellman & Friedman, a San Francisco private-equity firm, and Singapore’s sovereign-wealth fund GIC Pte Ltd. The decision in part reflected concerns over Legend’s ability to win Chinese approval to fund the transaction, according to the person familiar with the matter.

    Legend continues to pursue deals in Europe. Earlier this month, it reached a deal to acquire a nearly 90% stake in Banque Internationale à Luxembourg SA, Luxembourg’s oldest privately owned bank, for €1.48 billion ($1.76 billion).

    Because it is getting harder for Chinese buyers to clinch—and close—deals in markets they sought out last year, some are looking for acquisitions in countries where they feel more welcome—including Hong Kong, Singapore, Brazil, the Philippines and India.

    Israel is an emerging hot spot, bankers say. Itamar Har-Even, co-founder of Ion Pacific, a Hong Kong-based investment bank, said some Israeli targets offer intellectual property Chinese firms are seeking at reasonable valuations. The number of China-Israel deals his firm is advising on is triple that of last year, he added.

    One indicator of rising Chinese interest: The lavish breakfast buffet at the Royal Beach Tel Aviv hotel, which last year added spring rolls and egg noodles to cater to the growing number of Chinese deal makers flocking to the five-star hotel, said a hotel spokesman. The hotel in recent months also added Chinese-language satellite channels, and now avoids placing Chinese guests on floors they consider unlucky, he said.

    https://www.wsj.com/articles/chinas-...les-1505048031

  3. #3
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    A new study finds China's foreign aid is about taking care of business -- its own



    Eva Dou
    Oct. 11, 2017

    BEIJING—When Ghana sought to build a hydroelectric dam in the early 2000s, it failed to get World Bank backing. Then China stepped forward.

    The Bui Dam was built through China’s brand of foreign aid: roughly half of the $600 million cost came as aid-like financing on favorable terms; the other half, commercial loans to be repaid with the proceeds from cocoa production.

    China’s blurring of charity and business was examined in a new study from AidData, a research center based at the College of William and Mary in Virginia, which tallied 4,400 Chinese foreign-development projects from 2000 to 2014. AidData estimates one-fifth of the $362.1 billion took the form of Chinese government grants or other aid. Another one-fifth was too murky to determine whether it was aid or business. The remaining transactions were mostly commercial in nature.



    China’s hybrid development model is playing a growing role, as Beijing begins its enormous “Belt and Road” infrastructure push across Asia, the Middle East and Africa. At $1 trillion, its projected cost is more than seven times that of America’s Marshall Plan for Europe’s post-World War II reconstruction, in today’s dollars.

    Beijing’s ambition has funded pricey projects that might otherwise draw few backers, such as the Gwadar port in Pakistan and a data center in Djibouti, home to China’s first overseas naval base. But China has drawn criticism for financing authoritarian regimes and countries with unsustainable debt, such as Venezuela.

    China has cast Belt and Road as a humanitarian effort, as well as a means to forge trade routes and strategic alliances. In May, China said it would spend 60 billion yuan ($9.1 billion) on assistance to Belt and Road countries in the next three years, including on emergency food aid and poverty alleviation.

    The U.S. and other Organization for Economic Cooperation and Development countries define foreign aid, or “official development assistance,” as transactions that are at least 25% grant.

    But for China, development assistance generally also lands business for its companies—a dual role that Beijing views as a win-win rather than a conflict, says Evan Ellis, a U.S. Army War College professor who studies China’s engagement in South America.

    The Chinese don’t just give loans,” he said. “They are almost all tied to using Chinese companies as subcontractors.”

    China’s commerce ministry and the Export-Import Bank of China didn’t immediately reply to requests for comment. China has said its foreign assistance is based on mutual benefit and noninterference in the internal affairs of the recipient countries.

    The U.S. and other member countries of the Organization for Economic Cooperation and Development, a Paris-based research body, agreed in 1978 to restrict the practice of requiring aid recipients to purchase goods and services, and to limit how aid can be mixed with commercial financing, said Brad Parks, AidData’s executive director. China isn’t a member of the OECD, so isn’t bound by the agreement.

    “This practice has raised serious alarm among countries that do not blend their development finance and trade finance,” said Mr. Parks.

    The U.S. Export-Import Bank warned in its annual competitiveness report this summer that the agreement may suffer from China’s use of “mixed credits,” which combine regular export credits with aid or aid-like loans.

    The result is financing packages that countries adhering to the OECD agreement can’t match, the report said.

    Deborah Brautigam, director of the China Africa Research Initiative at the Johns Hopkins University School of Advanced International Studies, said the U.S. had used foreign aid to boost exports for many years before unlinking the two areas.

    “We know these tricks,” said Ms. Brautigam. “These are all the same tricks that we had used.”

    Defenders of China’s development model say countries gain valuable infrastructure that otherwise might not have been funded.

    When Ghana sought to build its first dam in the 1960s, the U.S. and World Bank mobilized for the project, fearing in those Cold War days that the mineral-rich area would fall under Soviet sway. But by the early 2000s, public opinion in the West had turned against dam-building, making the World Bank reluctant to take on new projects like Ghana’s second dam, said Julian Kirchherr, an assistant professor in sustainable development at Utrecht University in the Netherlands.

    China’s Sinohydro Corp. completed Ghana’s Bui Dam in 2013. In August, the Ghana Cocoa Board told the country’s parliament it was in financial distress due to obligations that including servicing the Bui Dam loan.

    —Xiao Xiao and Yang Jie contributed to this article.

    https://www.wsj.com/articles/when-it...ess-1507694463

  4. #4
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    Benefits of foreign degrees diminish in China

    Lemon market.

    Liu Yuanju
    2017/9/14

    Recently, a media outlet randomly interviewed 50 returnees in Hangzhou, East China's Zhejiang Province, and found most of them were not satisfied with their salaries.

    The starting monthly salaries of nearly 40 percent of the returnees ranged from 6,000 yuan ($919) to 8,000 yuan, which is similar to those of domestic colleges' graduates in Hangzhou. Generally, returnees have had an increasingly small advantage over domestic university graduates in terms of job hunting.

    However, returnees spent a lot of money to study abroad. Tuition plus living expenses can reach as high as 300,000 yuan annually, and it gets more expensive every year.

    On the one hand, they face high costs, on the other are non-competitive salaries. It seems that studying abroad no longer pays off. There are profound social changes behind this situation, as well as a plausible explanation from an economic perspective.

    In 2007, there were 144,000 Chinese studying abroad, of whom 44,000 returned. By 2016, the number of those studying overseas had risen to 540,000, with 430,000 returnees.

    In just nine years, the number of Chinese studying abroad quadrupled. More surprisingly, 10 times as many chose to return. In economics, the supply-demand relationship is the most basic price mechanism. The larger the supply, the lower the price.

    Many hiring managers in China are unfamiliar with most universities abroad, and as a result, foreign degrees don't necessarily lead to jobs back home. Also, as more and more Chinese study abroad, each individual's aptitude is difficult to measure.

    A similar situation has emerged among Chinese college students. Before the nation increased enrollments, the number of students who were able to go to college was limited, so those people were regarded as talented and qualified. But with more bachelor's degrees being awarded, many companies found that many graduates were not unusually competent. Therefore, they sought other indicators to judge applicants, such as whether they had undergraduate degrees from China's so-called Project 211 and Project 985 universities.

    Certainly, the quality of a school itself is always the best or at least the most trusted indicator, and it's not possible for hiring managers to evaluate every college in the world. Students who went to lesser-known overseas colleges will find that it's tough for hiring managers to judge their qualifications. So the reputation of a school will be increasingly important.

    As a result, returnees face a job market much like that for secondhand cars. George A. Akerlof, a winner of the Nobel Prize in economics, once published an article related to "lemon markets" that discussed just this issue.

    In the paper, he noted that in the secondhand car market, vehicles have been repaired and repainted, and in many cases their odometers have been tampered with and accidents have been concealed. The seller knows everything, while buyers rarely get the whole picture. This is a classic case of asymmetric information.

    When you can't evaluate the quality of goods or services, you will be inclined to spend less to obtain them. When companies can't evaluate the quality of an overseas degree, they will usually offer lower salaries. As the number of returnees has increased and the students' quality has varied widely, the starting salaries have naturally declined.

    In reality, Chinese companies can use some simple and feasible methods to evaluate returnees. For example, for those who went abroad after they obtained undergraduate degrees in China, the domestic university experience can be used as a gauge. The first degree is closely related to the college entrance examination results, which reflect a person's IQ and diligence. It also puts students back to the 985/211 line, which is more familiar in China.

    In term of those students who went abroad right after high school, they may have avoided the domestic college entrance examination. In this situation, hiring managers will use their own judgment in evaluating the applicants.

    However, applying domestic standards means there's increasingly less benefit to studying abroad. In theory, when it comes to familiarizing Chinese hiring managers with foreign schools, the establishment of a unified and credible university ranking would be very helpful. But there's still the question of how to create such a list and win hiring managers' acceptance of it.

    For many people, then, it's better to study hard and attend one of China's 211/985 universities, which can easily be evaluated by companies here.

    http://www.globaltimes.cn/content/1066443.shtml
    Última edição por 5ms; 11-10-2017 às 14:32.

  5. #5
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    Middle class fall prey to Beijing’s manipulation of the property market

    Hook, line and sinker. Could this process go on forever? Will people ever learn not to take the bait?

    Andy Xie
    19 October, 2016

    Beijing is talking about tightening the property market again, the latest of many similar episodes over the past decade. It will leave the same impression: that the government is holding property prices down and, if it changes its mind, prices will go up again. This is the foundation of China’s vast property bubble: any dip is not natural and is a buying opportunity.

    Starting from the middle of 2015, following a year-long slump that looked like the first stage in the bursting of a big bubble, the property market began to heat up again. The driving force was shadow banks funding down payments.

    After the stock market crashed, the shadow banks that supplied leverage there were looking for other demand. Down-payment financing in tier-one cities became a hot market. Like ordinary speculators, the shadow banks believed prices would never fall in the three tier-one cities (Beijing, Shanghai and Shenzhen). Hence, why would down-payment loans be risky?

    As the market began to heat up, land kings appeared in these cities. Some developers were paying more for the land than the completed properties were going for. This phenomenon of “dough costing more than the bread” poured oil on the fire. People were led to believe that the bread’s price would surely catch up. By this spring, property sales were rising by over 50 per cent in value.

    In a bubble, there are often urban legends about how buyers show up with bags of cash. Unfortunately, the real story has to do with debt. As the market exploded, the banks joined the game in a roundabout way, allowing so-called consumption loans to be used for down payments. It’s hard to believe that the banks that provided both consumption loans and mortgages to the same individual or family did not know the real story.

    China’s household debt has risen from 5.6 trillion yuan to 31.1 trillion yuan (HK$35.8 trillion) between August 2008 and 2016, according to official statistics.

    To get a fuller picture, we should add the debt incurred in the shadow banking system. Take the rise since August last year. On the books, household loans have increased by 5.4 trillion yuan. If the shadow banking system extended loans of 2 trillion yuan, the increase would be 7.4 trillion yuan. This compares with the 10.5 trillion yuan in new residential property sales, of which 78 per cent were contracted for future delivery and often not paid in full. These numbers suggest the current surge in sales could be 100 per cent debt-financed.

    When the market frenzy followed, greed took over from fear

    Current prices are exceptionally high. In tier-one cities, a working couple could buy just 1 square metre with their annual take-home pay. The 20 per cent down payment is equivalent to 10-20 years’ income. This relative price – that is, price per sq m to disposable income – is already much higher than Japan’s was at its peak, a quarter of a century ago, when it introduced 100-year mortgages.

    Fear of renminbi devaluation was the initial spark for this round of speculation. It is not a coincidence that the market took off just when the government cracked down on underground currency exchanges to slow capital flight. While money couldn’t leave, the devaluation expectation remained. Property became a hedge. When the market frenzy followed, greed took over from fear.

    The government is trying to take advantage of the bubble. By holding down demand in tier-one cities through purchase restrictions, the hope is that the speculative fire would shift to the tier-three and tier-four cities, where huge inventories remain. The speculation has indeed spread to tier-two cities but it is unlikely to take hold in tier-three and tier-four cities. The supply there is just too massive. The current stock of 7 billion square metres of properties under construction, of which 4.8 billion sq m is residential, is mostly in these cities.

    By marketing the downturn as a consequence of the government crackdown, the bubble is sustained

    Some argue that China’s household debt, likely to reach 50 per cent of GDP this year, is still low. Hence, the government could encourage the household sector to leverage up to absorb the property inventory. This is fantasy. The current level is already over 100 per cent of household disposable income, similar to the level in developed countries. If the current growth rate continues, the debt will double in less than four years. The current trajectory will hit a wall pretty soon.

    Further, when the markets in Japan and Hong Kong blew up, their household debt was 50 per cent of GDP. The speed of growth, not just the level, matters. China’s property ownership is over 80 per cent. The debt is likely to be concentrated in a subset of the population, as it was in Hong Kong in 1997.

    When a bubble reaches its limit, it will burst. By marketing the downturn as a consequence of the government crackdown, the bubble is sustained. This is the reason China’s property bubble has lasted so long. While government power can stretch a bubble further, it can’t keep it going forever. What’s beyond 100 per cent financing? At some point, the debasing of the currency through lowering the credit standards will eventually take down the real exchange rate. Unless China changes, the renminbi is in for a lot more trouble.

    At the property market wobbles, a new theory is emerging that the government wants the stock market to go up, because it is holding down the property market. Nothing about that makes sense. China’s stock market, though down by nearly half, remains the most expensive in the world. Government funds of over 2 trillion yuan have kept the market from crashing. People who get into the market will become another bunch of sacrificial lambs.

    In the past 12 years, anything that has set a trap for the credulous masses has gained popularity and eventually government support. Such a system doesn’t favour the rise of the middle class. When people make money from hard labour, they are enticed into a game and lose it. How could the middle class ever prosper?

    People’s losses are one form of forced savings that are absorbed by investment. But, weak consumption depresses returns on investment. To keep investment going, the economy needs more bubbles to subsidise investment. This is why China is stuck with bubble- and investment-led growth: fixed asset investment rose to 83 per cent of GDP in 2015 from 54 per cent in 2008 and 33 per cent in 2000.

    Could this process go on forever? Will people ever learn not to take the bait? The recent trend of 100 per cent financing may signal the end is near. When people borrow 100 per cent to gamble, they may not intend to pay it back if the bet doesn’t work out. Dead pigs are not scared of boiling water, as they say. The juice in China’s property bubble may be gone already. The puppet masters may already be in the boiling water; it does, after all, take a little while to feel the pain.

    http://www.scmp.com/comment/insight-...roperty-market

  6. #6
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    Six Reasons Why China Matters

    Everyone knows China’s important. Here’s why.

    Justin Lahart
    Oct. 11, 2017

    The course China’s leaders set for their country over the next five years will have a major bearing on global markets and the economy. China is more than merely big—the opening of its economy, the development of its financial markets and the rising wealth of its citizens have integrated it into the rest of the world like never before. Growth, inflation, jobs, financial markets—China will touch them all. In six charts, here is why investors need to watch China carefully.

    The biggest fear coming out of China is debt. China’s growth over the past decade has been driven​by borrowing that has pushed up the country’s debt-to-GDP level ​to worrisome levels. Nearly every analysis of risks to the global economy includes a debt crisis in China, which is no surprise because the country’s debt has risen as fast as it did for other countries that had debt crises.




    The China Price

    The China price—the price of imports from China—has exerted a powerful influence on the U.S., challenging domestic manufacturers while helping to drive inflation lower. Rising wages in China may push prices higher, making U.S. manufacturers more competitive but pushing up prices for consumers.




    What a Healthy China Means

    A healthy China matters a lot to the world. Without strong Chinese growth, global gross domestic product would have increased by a third less over the past five years.



    (continua)

  7. #7
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    Raising the Stakes

    Breakneck growth has raised Chinese incomes, not just giving people a place at the global economy’s table but a stake in it performing well.




    Trade Off

    A flipside of U.S. trade deficits with China is that China has amassed over $1.5 trillion in U.S. securities. A recurrent worry: What would happen if China sold?




    The Chinese Customer

    Industries from mining to technology to autos are increasingly dependent on Chinese customers. The number of private vehicles in China has risen tenfold in the past decade making it the world’s biggest car market.



    https://www.wsj.com/articles/six-rea...ers-1507742854

  8. #8
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    The flow of Chinese money into assets around the world is coming to an end



    Aaron Back
    Oct. 12, 2017

    China’s seemingly insatiable demand for foreign assets has driven up prices for everything from U.S. Treasury bonds to global companies to luxury real estate. Now, a combination of market forces and capital controls are choking off the flow of Chinese cash. Asset markets around the world will have to adjust.

    As Chinese exports boomed starting in the early 2000s and foreign investment flooded into the country, the central bank recycled these inflows into foreign government bonds, mostly Treasurys, to keep the yuan from rising. The buying persisted for over a decade, driving bond prices up and driving yields down globally.

    China moved to invest in other asset classes, buying stakes in Morgan Stanley and U.K. utility Thames Water via government fund China Investment Corp.

    The form of China’s foreign buying shifted in 2014, when the U.S. began exiting quantitative easing and China’s growth slowed. Ordinary Chinese feared that the yuan, which had steadily risen for years, would fall as growth slowed. Both individuals and companies rushed to get money out of China, snapping up trophy assets and luxury real estate around the world.

    This was the start of the era when Anbang Insurance Group, a Chinese insurer with murky ownership, paid nearly $2 billion for the Waldorf Astoria in New York and bid $14 billion for Starwood Hotels & Resorts before walking away from the deal. In February 2016, China National Chemical Corp. agreed to buy Swiss pesticide maker Syngenta for $43 billion, the largest foreign takeover by a Chinese company.

    The China bid, or at least the expectation of one, sent prices of luxury properties soaring, fueled real estate bubbles from Vancouver to Sydney and pushed up prices of companies seen as desirable for Chinese buyers.

    Alarmed by the outflow, Beijing began to tighten capital controls in 2015 and 2016, but the deal-making persisted until this year when the government cracked down on money transfers by individuals and discouraged companies from pursuing “irrational” deals abroad. So far this year, outbound mergers and acquisitions by Chinese companies are down 27% from the same period a year earlier, according to Dealogic.



    “The short bubble of China bids is over,” says one M&A banker who has advised on Chinese acquisitions.

    Now, pretty much the only thing the Chinese government encourages its companies to buy abroad are high-tech companies such as computer chip makers. But these strategic assets are precisely the kind that Western governments increasingly don’t want to fall into Chinese hands.

    In real estate there is no way to say for sure how much Chinese buying drove up prices, but governments from Canada to Australia have moved to control foreign buying to rein in property bubbles.

    Nor is China set to return as a big buyer of U.S. Treasurys. Indeed, if the Federal Reserve keeps tightening, China could be a seller of bonds as it fends off depreciation pressure on the yuan.

    In the years ahead, financial markets around the world will have to live without the ever-present China bid. Whether China was a savvy investor or the dumb money, asset prices will likely be lower.

    https://www.wsj.com/articles/say-goo...bid-1507800602

  9. #9
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    China's Government Has More Money Than You Can Imagine


    FT


    Business Insider



    Kenneth Rapoza
    Oct 10, 2017

    Every time you hear an financial pundit on Fox Business News, CNBC or Bloomberg talk about global liquidity being part of the core central banks handing out free dollars and donuts to investment banks for the past 8 years is missing one substantial sidebar: China. The Chinese have more money than God. Their central bank has more money in its foreign currency reserves than the entire economies of Brazil, Mexico and Russia produce annually.

    And in September, for the eighth month in a row, despite Beijing alone dishing out $26.6 billion per month in 2016, for a total of $320 billion, which is what Brazil has in its central bank reserves, the People's Bank of China (PBoC) has ... even more money than it did in August.

    Forex reserves rose by a whopping $17 billion in September to reach a total of $3.109 trillion, following a $10.5 billion increase in August, the PBoC said over the weekend. To put that into perspective, in August, China added more money to its bank savings account than what Venezuela has in its central bank. Then doubled it in September. China can buy Venezuela in cash if it wanted it, and still have trillions of gold coins and dollar bills and euros available to prop up its own currency.

    Economists polled by Reuters expected reserves to rise by just $8 billion. This is the first time in three years that the PBoC accumulated reserves for 8 consecutive months. The consistent rise has led some analysts to believe the PBoC will buy more foreign currency this year than it dishes out to the market in the form of bailouts, currency support and special bank loans.

    Also in the PBoC data, outbound non-financial investment dropped 42% in January-August from a year earlier as authorities crack down on what they call “irrational” overseas projects by Chinese individuals and corporations. The State Council said in August that China will cap overseas investment primarily in real estate and Hollywood assets.

    https://www.forbes.com/sites/kenrapo...u-can-imagine/

    Imprensa alugada jamais decepciona
    Última edição por 5ms; 12-10-2017 às 10:51.

  10. #10
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Posts
    18,473
    China’s insurance regulator bars HNA’s life insurance arm from financing the group’s global acquisition spree

    Xie Yu
    11 October, 2017

    China’s regulator has barred five insurers, including the HNA Group’s Bohai Life Insurance unit, from providing “financial aid in any form” to their parents, in the latest move to cut off funding for some of the country’s most active asset buyers.

    ...


    The move adds to the crackdown since June by the government on four companies that are China’s most aggressive overseas acquirers, out of concern that their leverage-fuelled shopping spree is building up risks, particularly to the domestic market that has been used as source of financing. HNA, which grew out of a regional airline, has spent an estimated US$50 billion over two years, acquiring assets from Hilton hotels to Hong Kong’s most expensive residential land parcels to a stake in Deutsche Bank AG.

    ...

    Much of HNA’s acquisition was funded by debt, underscored by HNA’s disclosure that its total debt had doubled to almost 718 billion yuan (US$109 billion) in the 18 months ended June, compared with the end of 2015.

    At least some of the funding for the shopping spree may have come from insurance units, which redirect premium payments from policy holders into war chests for acquisitions.

    The debt-to-asset ratio at Bohai Capital, which controls Bohai Life Insurance, reached 87.6 per cent, with short-term borrowing of about 34 billion yuan, according to its latest filing. Rating agency Moody’s in September had warned that “Bohai’s high leverage, reliance on short-term financing and high debt-funded growth represent a risk.”

    ...

    “It’s not a death sentence yet -- we may find more after the 19th Party Congress,” Kaiyuan Capital’s Silver said, referring to the ruling Communist Party’s conclave next week, which picks the country’s leadership ranks for the next fie years.

    ...

    http://www.scmp.com/business/compani...surers-funding

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