A Memorandum of Understanding for establishing a Hindi Chair at the Guangdong University of Foreign Studies (GDUFS), was signed on Monday between the Indian Council for Cultural Relations (ICCR) and the University. This is the first Hindi Chair established by the ICCR in South China.
A number of Chinese universities including the prestigious Peking University, the Beijing Foreign Studies University as well colleges in different parts of China are teaching Hindi.
Lecturers say the language is gaining currency in China as many see it as a career-making proposition in view of rapid increase in India-China trade which touched $ 74 billion last year and is expected to cross $ 100 billion by 2015.
Hindi Day, being organised by the Indian Embassy in Beijing every year, attracts large number of Chinese Hindi enthusiasts from all over China.
Also, Indian expats in Beijing had set up a Sunday school called Gurukul to teach Hindi and Indian culture.
Headed by Lata Iyer, the school has four teachers which included Priya Sunderrajan, Manisha Bhakre, Krishna Dasgupta and Deepa Tulsidas.
The MoU, was signed by Indra Mani Pandey, Consul-General of India in Guangzhou and Zhong Weihe, President of GDUFS, an Indian embassy press release here said.
The ICCR has already established five chairs in China devoted to Hindi and spread of Indian culture including three chairs in Jinan University, Shenzhen University and Yunnan University in various fields of studies.
China opposes the comment, Liu said. U.S. State Department spokesman Mark Toner issued a statement yesterday encouraging China to publicly account for all those killed and “end the continued harassment of demonstration participants and their families.”
Yesterday, searches for “Shanghai Composite” were blocked from China’s most-used microblogging service after the stock index’s drop on the 23rd anniversary of the Tiananmen Square crackdown corresponded to the date of the event.China strictly prohibits references to the crackdown, in which hundreds of protesters were killed by troops, as part of the government’s censorship of websites, newspapers and television that bars criticism of the ruling Communist Party. This year, authorities are also trying to ensure a smooth leadership transition scheduled for later in 2012 and seeking stability after the suspension of Politburo member Bo Xilai.
The benchmark Shanghai Composite Index dropped by 64.89 (SHCOMP) points yesterday, matching the date on which Chinese authorities crushed student-led protests on June 4, 1989. Queries for “Shanghai Composite” on Sina Corp.’s Twitter-like Weibo service returned a message that said results can’t be displayed “in accordance with relevant laws, regulations and policies.”
“It’s difficult to orchestrate but the coincidence is just mind-boggling,” Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong, said in a phone interview yesterday.
Queries for “Shanghai Composite” on the website of Baidu Inc. (BIDU), China’s most-used Internet search engine, returned results that showed the index’s decline. Other websites including Sina’s financial news portal and that of China Finance Online Co. also carried stock market reports with the index’s drop in points.
“We didn’t see anything abnormal in the market,” said Chen Ji, spokesman for the Shanghai Stock Exchange. “We don’t have any further comment.”
Weibo Scrutiny
Sina’s Weibo service, with more than 300 million registered users, has been subject to increased scrutiny. The company, along with rival Tencent Holdings Ltd. (700), were ordered to disable the comment function on their microblog services for 72 hours in March after authorities detained six people accused of spreading rumors of a coup attempt in Beijing.
Cathy Peng, a Beijing-based spokeswoman for Sina, didn’t immediately answer calls to her office after normal work hours.
In December, China began requiring microblog users in cities including Beijing, Guangzhou and Shenzhen to register their real names. That rule will be expanded to other regions, Wang Chen, minister of the State Council Information Office, said in January.
The benchmark Shanghai Composite Index dropped by 64.89 (SHCOMP) points yesterday, matching the date on which Chinese authorities crushed student-led protests on June 4, 1989. Queries for “Shanghai Composite” on Sina Corp.’s Twitter-like Weibo service returned a message that said results can’t be displayed “in accordance with relevant laws, regulations and policies.”
“It’s difficult to orchestrate but the coincidence is just mind-boggling,” Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong, said in a phone interview yesterday.
Queries for “Shanghai Composite” on the website of Baidu Inc. (BIDU), China’s most-used Internet search engine, returned results that showed the index’s decline. Other websites including Sina’s financial news portal and that of China Finance Online Co. also carried stock market reports with the index’s drop in points.
“We didn’t see anything abnormal in the market,” said Chen Ji, spokesman for the Shanghai Stock Exchange. “We don’t have any further comment.”
Weibo Scrutiny
Sina’s Weibo service, with more than 300 million registered users, has been subject to increased scrutiny. The company, along with rival Tencent Holdings Ltd. (700), were ordered to disable the comment function on their microblog services for 72 hours in March after authorities detained six people accused of spreading rumors of a coup attempt in Beijing.
Cathy Peng, a Beijing-based spokeswoman for Sina, didn’t immediately answer calls to her office after normal work hours.
In December, China began requiring microblog users in cities including Beijing, Guangzhou and Shenzhen to register their real names. That rule will be expanded to other regions, Wang Chen, minister of the State Council Information Office, said in January.
"Indonesia looks like it has hit the sweet spot, whereas India is nursing a headache from its latest boom," says Frederic Neumann, Co-Head of Asian Economic Research at HSBC.
While the two economies aren't similar in terms of size, with India's population of 1.2 billion and Indonesia's at 240 million, the countries share many similarities, leading to comparisons. Both have a burgeoning consumer base and are democracies with an investment grade rating.
India's economy has hit a rough spot with the slowest pace of growth in three years with the government unable to deliver on economic reforms. On the other hand, Indonesia has won favor with investors over the past few years.
That's leading Neumann and others to call for Indonesia to be included in the lineup of top global emerging markets. "The term BRICs really misses out on some of the key developments of our time. Indonesia has solid public finances, strong growth, a burgeoning consumer market, and plenty of resources to keep the economy afloat for many years," says Neumann.
On the other hand, India, according to Goldman Sachs' Jim O'Neill, the man who coined the term in 2001, is the BRIC that has disappointed. Late last year O'Neill said that India's poor record on productivity, foreign direct investment (FDI) and policy reform had made it the most disappointing among the four biggest developing economies - Brazil, Russia, India and China.
For example, India's fiscal deficit target of 5.1 per cent is wider than those of its BRIC peers. Its forecast deficit is more than four times Brazil's estimated 2012 budget gap of 1.2 per cent of output.
"It is difficult to see how India can turn around in the short term. It could in the next couple of years, but that is an eternity from investors' point of view, " says Neumann.
He adds that investors have already voted with their feet taking money out of India. The latest evidence of this was in the month of April when offshore investors withdrew some USD 403 million out of Indian equities and bonds, according to Reuters data.
While it is difficult to estimate how much of India's loss has been Indonesia's gain, market watchers say many investors have been increasingly looking at Indonesia as an alternative to India.
"To a large extent investor interest has moved to Indonesia," Robert Prior-Wandesford, Director, Asian Economics at Credit Suisse told CNBC. "Indonesia's equity market is hugely better than that of India and in part at the cost of India."
While the Bombay Stock Exchange's Sensex was the worst performing major global index in 2011 falling almost 25 per cent, the Jakarta Composite Index gained over three percent.
Besides delivering better returns, Indonesia is also catching up with India when it comes to economic growth. India's gross domestic product (GDP) is expected to expand at just under 7 per cent in the current fiscal year, which began April 1, while Indonesia is expected to deliver 6 to 7 per cent growth over the next couple of years, say analysts.
Even on trade, Indonesia scores over India. According to brokerage CLSA's latest forecast Indonesia's current account deficit in 2012 will be just 0.8 per cent of GDP, while India's will come in at around 3.9 per cent.
Rajeev Malik, Senior Economist at CLSA, says in Indonesia's case, net Foreign Direct Investment (FDI) will offset the current account deficit. In India's case, he points out, an estimated net FDI inflow of USD 15-20 billion will be well short of the current account deficit.
"They are doing better although they are not as big an economy as India," he says.
Credit Suisse's Wandesford says Indonesia reminds him of India three to four years ago, when there was a huge euphoria over the growth opportunity it offered foreign investors and companies. "In 2005-2008 India could do no wrong, now it is Indonesia."
India, which was awarded an investment grade rating by Standard and Poor's in 2007 is now under threat of losing it, with the ratings agency last month downgrading its credit outlook to negative. By contrast, both Fitch and Moody's upgraded Indonesia to investment grade in December and January, respectively.
Size matters
But despite the growing pessimism around India, most experts feel that it is not time yet to write off a country of a billion-plus people, if on nothing else than its sheer size.
Some argue that while there is a case for Indonesia to join the BRICs, it shouldn't be at the cost of India as they both have different comparative advantages. While one is a commodity economy, the other is a services oriented one and an investor, for example, can't completely replicate his menu of Indian stocks in Indonesia, say analysts.
"BRIC investors have a 20-year horizon and India will finally deliver in the long term," says Neumann.
As the uncertainty about Greek political situation and probability of second time polls has darkened the outlook of stock markets. Meanwhile US Economic growth left steam as stimulus faded. Hiring was subdued after first quarter jump and earning season is already over. Markets will now start focusing on Macro Economic fundamentals and start reacting according to it.
In Asia, Markets were under performers compared to US since April, although Shanghai Index has started outperforming since few weeks as analysts betting on economy rebound.
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| Bank of China |
If we look at the policy action that was announced today that the People's Bank of China cut the amount of cash that banks must hold as reserves on Saturday, freeing an estimated 400 billion yuan ($63.5 billion) for lending to add to the roughly 800 billion injected in two previous 50 bps cuts since the government tilted its policy stance towards growth in October.
The move came after data on Friday showed the economy weakening, not recovering, from its slowest quarter of growth in three years. Industrial production growth slowed sharply in April and fixed asset investment — a key growth driver — hit its lowest level in nearly a decade, confounding economists expecting signs of a rebound in Q2 data.
Now question is the move should be taken as positive or may be more negative to the outlook of Chinese economic growth? If we see that more liquidity to flow in as a positive indicator but will it be sufficient to lift the industrial production and growth or it is still conservative step than what actually needed to boost economy as Inflation fear dampening the developing economies to free up capital.
As both anecdotal, local and hard evidence of China's slowing (and potential hard landing) arrive day after day, it is clear that China's two main pillars of strength (drivers of growth), construction and exports, are weakening. As Societe Generale's Cross Asset Research group points out, China is entering the danger zone and warns that given China's local government debt burden and large ongoing deficits, a large-scale stimulus plan similar to 2008 is very unlikely, especially given a belief that Beijing has lost some control of monetary policy to the shadow banking system. In a comprehensive presentation, the French bank identifies four critical themes which provide significant stress (and opportunity): China's economic rebalancing efforts, a rapidly aging population and healthcare costs, wage inflation and concomitant automation, and pollution and energy efficiency. Their trade preferences bias to the benefits and costs of these themes being short infrastructure/mining names and long automation/energy efficiency names.
They detail their concerns about the Chinese economic outlook (weakening exports, housing bubble about to burst, local government's debt burden, and large shadow banking system), and show that China has no choice but to transition to a more consumption-driven economy leading to waning growth for infrastructure-related capital goods and greater demand for consumer-related manufacturing. Overall they see a hard-landing becoming more likely.
Weakness Has Emerged In The Property Market
And The Chinese Financing System And Construction Industry Links Have Become Increasingly Complex
Conclusion – The situation in China is worrying to say the least. Short-term indicators are weakening as past monetary tightening starts to bite and the export model is threatened once again by the risk of recession in Europe and the US. Data from the real estate industry show a significant deterioration, with a clear break in the confidence that real estate prices always go up. The debt burden of local governments and large ongoing deficits should prevent a large stimulus plan similar to that of 2008. Monetary easing could bring some relief, although we believe that Beijing lost some control of the financing system through the shadow banking.
With the Dow rallying more than 400 points and gold trading up over $30, near the $1,750 level, today King World News has released the eagerly anticipated interview with legendary investor Marc Faber, author of the Gloom Boom and Doom Report. Faber warned KWN that the Chinese economy may crash and noted this will have a huge impact on various economies and markets, "Well if we define a bubble as a period of excessive growth and artificially low interest rates, then China had a huge bubble. Usually bubbles are not deflated by a soft landing, but by a hard landing and this concerns me, actually, much more than the European situation."
Marc Faber continues:
"The European situation is basically hopeless, but it will lead to money printing. In China, if the economy slows down meaningfully or if there is a crash, it will have a huge impact on the demand from China for raw materials, for commodities. It will impact Australia, Africa, the Middle-East and Latin America.
If these countries are faced with declining commodity prices, especially industrial commodities such as copper, nickel, oil and so forth, then they will buy less from China and we will have a vicious spiral on the downside.
I'm sure the economy (of China) is softer than official statistics would suggest and probably the government will start to print money at some point. So maybe stocks will rebound here because of money printing, but again, it won't help the economy….
When asked about a sputter or collapse in the Chinese economy, Faber stated, "I live in Asia and all I can say is I observe a meaningful slowdown in business activity recently and increasing corporate earnings that disappoint."
When asked if he was aware of capital flight out of China, Faber replied, "There's a huge capital flight, there's no question about this."
When asked why the Chinese are panicking to move their money out of China, Faber responded, "That is a very good question because, you see, the bullish analysts will tell you will tell you, 'Oh, if the Chinese economy slows down they are going to print money and lower interest rates and ease monetary conditions.'
But if that happens, then obviously capital flight will increase, especially if, unlike all of the expectations, the Yuan or the Chinese RMB begins to weaken rather than to strengthen against the US dollar. So that could actually accelerate the decline or let's say capital outflows and declining asset values in China.
Faber had this to say about the situation in the West, "Well, as you know we have some deflationists, they think the whole debt bubble will collapse and I believe that will eventually be the case. But between now and then there will be QE3, 4, 5, 6 and so forth and in Europe they will print money."
Customers at an Apple Store in the Chinese city of Kunming berated staff and demanded refunds on Friday after the shop was revealed to be an elaborate fake, sparking a media and Internet frenzy.
Long a target of counterfeiters and unauthorized resellers, Apple was alerted to the near flawless fake shop by an American blogger living in the southwestern city, more than 1,000 miles (1,600 km) from the nearest genuine Apple stores in Beijing and Shanghai.
"When I heard the news I rushed here immediately to get the receipt, I am so upset," a customer surnamed Wang told Reuters, near tears. "With a store this big, it looks so believable who would have thought it was fake?"
Wang, a petite, 23-year-old office worker who would not give her first name, spent 14,000 yuan ($2,170) last month buying a Macbook Pro 13-inch and a 3G iPhone from the Kunming store. She wasn't issued a receipt at the time, with staff telling her to come back later.
"Where's my receipt, you promised me my receipt last month!" Wang shouted at employees, before being whisked away to an upstairs room.
Staff were also angry at the unwanted attention after more than 1,000 media outlets picked up the story and pictures of the store from the BirdAbroad blog.
"The media is painting us to be a fake store but we don't sell fakes, all our products are real, you can check it yourself," said one employee, who didn't want to give his name.
"There is no Chinese law that says I can't decorate my shop the way I want to decorate it."
Unwanted Attention
While upset at the coverage and unwilling to be fully identified, staff were cooperative when Reuters visited the store, answering questions and allowing the shop to be filmed.
Another employee, surnamed Yang, said business had been affected, with customers demanding they prove the authenticity of their products.
Apple has declined to comment on the fake store or others like it dotted around China. The Cupertino, California-based firm has just four genuine Apple Stores in Beijing and Shanghai and none in Kunming.
With about 3.2 million inhabitants, Kunming, the capital of the mountainous southwestern province of Yunnan, is small by Chinese standards and not well known in the West.
Located not far the borders of Laos, Vietnam and Myanmar, the city's fast-growing industrial and manufacturing base is emblematic of China's ascent on the world stage.
The fake Apple Store is situated along a crowded pedestrian-only shopping street, its black Apple logo gleaming.
Source: BirdAbroad
Inside, with its Apple posters on the walls and iPads and Macbook computers displayed on wooden tables, the store looks every bit like Apple Stores found all over the world but for some slightly shoddy workmanship and one or two errant details.
Not all customers were bothered by the revelations that the store was not the genuine article.
"As long as their products are real it's okay—after all, you enter a store not to look at anything except their products," said Hu Junkai, 18. "If the products you buy are real why do you care whether the store is a copy?"
Wang was not convinced.
"The biggest thing I'm upset about is that I spent so much money at this store and I don't even know whether it is real or not," she said.
"What can I do? They aren't going to give me a refund."
Until 1990, Japan was the most successful large economy in the world. Almost nobody predicted what would happen to it in the succeeding decades. Today, people are yet more in awe of the achievements of China. Is it conceivable that this colossus could learn that spectacular success is a precursor of surprising failure? The answer is: yes.
Japan's gross domestic product per head (at purchasing power parity) jumped from a fifth of US levels in 1950 to 90 per cent in 1990. But this spectacular convergence went into reverse: by 2010, Japan's GDP per head had fallen to 76 per cent of US levels. China's GDP per head jumped from 3 per cent of US levels in 1978, when Deng Xiaoping's "reform and opening up" began, to a fifth of US levels today. Is this going to continue as spectacularly over the next few decades or could China, too, surprise on the downside?
It is easy to make the optimistic case. First, China has a proved record of success, with an average rate of economic growth of 10 per cent between 1979 and 2010. Second, China is a long way from the living standards of the high-income countries. Relative to the US, its GDP per head is where Japan's was in 1950, before a quarter century of further rapid growth. If China matched Japan's performance, its GDP per head would be 70 per cent of US levels by 2035 and its economy would be bigger than those of the US and European Union, combined.
Yet counter-arguments do exist. One is that China's size is a disadvantage: in particular, it makes its rise far more dramatic for the demand for resources than anything that has gone before. Another is that the political effects of such a transformation might be disruptive for a country run by a Communist party. It is also possible, however, to advance purely economic arguments for the idea that growth might slow more abruptly than most assume.
Such arguments rest on two features of China's situation. The first is that it is a middle-income country. Economists increasingly recognise a "middle-income trap". Thus, sustaining rapid increases in productivity and managing huge structural shifts as the economy becomes more sophisticated is hard. Japan, South Korea, Taiwan, Hong Kong and Singapore are almost the only economies to have managed this feat over the past 60 years.
Happily, China has close cultural and economic similarities with these east Asian successes. Unhappily, China shares with these economies a model of investment-led growth that is both a strength and a weakness. Moreover, China's version of this model is extreme. For this reason, it is arguable that the model will cause difficulties even before it did in the arguably less distorted case of Japan.
Premier Wen Jiabao has himself described the economy as "unstable, unbalanced, unco-ordinated and ultimately unsustainable". The nature of the challenge was made evident to me during discussions of the 12th five year plan at the China Development Forum 2011 in Beijing in March. This new plan calls for a sharp change in the pace and structure of economic growth. In particular, growth is forecast to decline to just 7 per cent a year. More important, the economy is expected to rebalance from investment, towards consumption and, partly as a result, from manufacturing towards services.
The question is whether these shifts can be managed smoothly. Michael Pettis of Peking University's Guanghua School of Management has argued that they cannot be. His argument rests on the view that in the investment-led growth model, repression of household incomes plays a central role by subsidising that investment. Removing that repression – a necessary condition for faster growth of consumption – risks causing a sharp slowdown in output and a still bigger slowdown in investment. Growth is driven as much by subsidised expansion of capacity as by the profitable matching of supply to final demand. This will end with a bump.
Investment has indeed grown far faster than GDP. From 2000 to 2010, growth of gross fixed investment averaged 13.3 per cent, while growth of private consumption averaged 7.8 per cent. Over the same period the share of private consumption in GDP collapsed from 46 per cent to a mere 34 per cent, while the share of fixed investment rose from 34 per cent to 46 per cent. (See charts.)
Professor Pettis argues that suppression of wages, huge expansions of cheap credit and a repressed exchange rate were all ways of transferring incomes from households to business and so from consumption to investment. Dwight Perkins of Harvard argued at the China Development Forum that the "incremental capital output ratio" – the amount of capital needed for an extra unit of GDP – rose from 3.7 to one in the 1990s to 4.25 to one in the 2000s. This also suggests that returns have been falling at the margin.
If this pattern of growth is to reverse, as the government wishes, the growth of investment must fall well below that of GDP. This is what happened in Japan in the 1990s, with dire results. The thesis advanced by Prof Pettis is that a forced investment strategy will normally end with such a bump. The question is when. In China, it might be earlier in the growth process than in Japan because investment is so high. Much of the investment now undertaken would be unprofitable without the artificial support provided, he argues. One indicator, he suggests, is rapid growth of credit. George Magnus of UBS also noted in the FT of May 3 2011 that the credit-intensity of Chinese growth has increased sharply. This, too, is reminiscent of Japan as late as the 1980s, when the attempt to sustain growth in investment-led domestic demand led to a ruinous credit expansion.
As growth slows, the demand for investment is sure to shrink. At growth of 7 per cent, the needed rate of investment could fall by up to 15 per cent of GDP. But the attempt to shift income to households could force a yet bigger decline. From being an growth engine, investment could become a source of stagnation.
The optimistic view is that China's growth potential is so great that it can manage the planned transition with ease. The pessimistic view is that it is hard for a country investing half of GDP to decelerate smoothly. I expect the transition to slower economic growth and greater reliance on consumption to be quite bumpy. The Chinese government is skilled. But it cannot walk on water. The water it is going to have to walk on over the next decade is going to be choppy. Watch out for the waves.
For anyone who was hoping that China would be the marginal source of liquidity in QE3 absentia (or until it actually does come, which it will), manifested by a halt to monetary tightening and a relapse into that good old methadone state of loose monetary policy, it may be time to pull those SHCOMP limit bids. China Daily just announced tha "the People's Bank of China is likely to increase the interest rates banks must pay on deposits and the amount of money banks are required to hold in reserve to sop up the excess liquidity now found in the economy and slow inflation, said analysts. The changes in monetary policy may happen before the National Bureau of Statistics makes an expected announcement this week saying that the consumer price index (CPI), an indicator of inflation, hit a record high in May, they said."As a reminder, yesterday Goldman predicted a multi-year high inflation of 5.5% in May courtesy of the biggest drought in 50 years and surging food prices: it turns out that the PBoC, far more responsible that our own central planning charlatans, will not stand for that.
From the article:
"The CPI's increase of 5.3 percent in April over where it had been a year before was obviously exorbitant," said Li Daokui, an adviser to the People's Bank of China and professor at Tsinghua University.
"The central government should and probably will curb this continuously rising inflation by raising interest rates. It would be reasonable to raise China's interest rates by at least 0.75 percentage points this year."
Lu Zhengwei, a senior economist with Industrial Bank, said he predicts the one-year benchmark interest rate for deposits may go from the current 3.25 percent to between 3.75 and 4 percent. After that, the government will raise the reserve requirement ratio for banks more frequently, he said.
An anonymous analyst with China International Capital Co Ltd said the rise in interest rates will occur in June, before the government's expected news about a large increase in the May CPI. The analyst predicted interest rates will go up one further time – probably in the third quarter.
"China's monetary policy in the short-term won't be loose," he said. "The People's Bank of China will continue to tighten it until at least the end of the third quarter, to check fast rises in inflation through adjusting interest rates and the reserve requirement ratio."
If interest rates are raised, that will be the third time that has happened this year. The two previous monetary measures put into effect in 2011 came roughly two months apart from each other. One was enacted on February 8, the last day of China's Spring Festival holidays, and the other on April 5, the last day of the Qingming (Tomb-sweeping) holiday.
A glance at the calendar raises worries that a similar decision will be made on Monday, the last day of the Duanwu (Dragon Boat) Festival holiday.
Li Huiyong, chief macro-economy analyst with Shenyin & Wanguo Securities, predicted that China's May CPI may jump by 5.2 percent above what it was last year, and in June and July will rise to between 5.6 percent and 5.7 percent above what it was during those months in 2010. "The increase to more than 5 percent may last until October."
Credit Agricole Corporate and Investment Bank agreed in a research note saying the CPI will peak at around 6 percent this year, making it impossible to reach the government's target of a 4 percent average increase for the entire year.
"The rises in interest rates have been difficult to impose fast enough to keep up with the CPI's pace, making increases in interest rates an indispensable means of limiting inflation," said Li.
Ushi, China's professional social network clone of LinkedIn, hopes to have 10 million users in two years and to raise USD 5 million in its next round of fundraising.
Ushi, which means outstanding professionals in Chinese, is the dominant professional-social networking site in China with more than 300,000 users. Its website is similar to LinkedIn and has features that allow users to add connections, introduce contacts and send messages.
"We're aiming to ultimately serve a very large portion of China's 40 million Internet users who are white collar or entrepreneurs. Call it 10 million in two years," Dominic Penaloza told Reuters.
Launched late last year, Ushi is backed by Milestone Capital, Richmond Management, Li & Fung private equity and Simon Murray & Co. The firm is hoping to raise USD 5 million in its next round of fundraising due to close at end of June.
Even as the peanut gallery debates whether or not the dollar is the reserve currency of choice for the world, China continues to diversify away from the USD. After last week's news that Beijing had not had enough of Portuguese bonds, in a repeat of the same scenario from January 2011, and was preparing to bid up Eurozone bonds across the curve (aka double down) we now learn that China, or rather third-party London-domiciled banks doing its bidding, is now the actor behind "massive Japanese bond buying" seen over the past month. Per Reuters: "Foreign investors have flocked to Japanese government bonds in the past five weeks, finance ministry data shows and market sources say China was among the main buyers, although a large part of buying was made through banks in London." That said, even Reuters appears unable to get its story straight: "Foreigners bought a net 4.696 trillion yen ($57.7 billion) of Japanese bonds in the five weeks to May 20, a record amount of purchases for any five consecutive weeks since data began to be compiled in its current form in 2005. One source said China appears to be buying the four to five-year sector after having sold a large amount of short-term bills earlier in the month. But other sources said foreign investors, including China, were buying long-dated bonds with less than one year left to maturity, effectively the same as buying short-term bills." Wherever in the curve China is focusing, the fact that it continues to actively buy JGBs after 5 consecutive months of declines in its UST purchases is sending a very clear political message to the US. One that certainly got some airplay when the Treasury once again declined to brand China an FX manipulator, despite rhetoric out of very brave Geithner at the first possible opportunity this week, that China is precisely that.
One likely trigger for the shift to the short-term yen market is the fall in yields for dollar government bills since April.
The foreign binge on Japanese government bonds started in the week of April 18-22, shortly after a squeeze in U.S. bills pushed U.S. bill yields lower.
A new deposit insurance rule sparked a torrent of buying in government bills, pushing the U.S. three-month T-bill yield as low as 0.01 percent in early May and below Japanese government bill yields.
The yield spread between the two countries widened to around 0.09 percentage point in early May although it has since come back to around 0.05 percent.
Then came a sharp fall in the euro, which may have also prompted investors to move funds to the yen.
"As the euro started to suffer from debt problems again, some reserve managers could have shifted some of their euro-denominated to assets to the yen," said Makoto Noji, senior strategist at SMBC Nikko Securities.
This was similar to last year when China's foray in the short-term yen market coincided with worries about Greece's ability to pay back debt.
But China quickly moved out of that position, selling a large amount of yen bills in August to take profits after the yen rose. Market players said at that the time China was unlikely to keep a large amount of funds in the yen because yields were low.
Slowly China is realizing the joy of an interlinked fiat world: at best it can rotate out of one insolvent regime into another. The bottom line is that all regimes are insolvent. So the only question is whether or rather when, just like back in April 2009 China dropped the bomb that over the past 6 years it had accumulated secretly 454 tons of gold, will China announce that while it has been rotating in and out of paper, the ultimate source of its $3 trillion in USD reserves will be non-dilutable commodities which handily double up as currencies.
A few weeks ago, Obama administration try to warn China over its policy to let the Yuan rise and criticized its foreign policies but China was not manipulating Yuan to gain unfair trade advantage,according to a statement from US department of Treasury on Friday. Department also, supported that Chinese government should let the Yuan rise faster pace to tame inflation.
Treasury department said China did not meet the U.S legal definition of currency manipulator due to allowing its currency to rise faster pace known as the yuan or renminbi since June 2010 and recent Chinese statements that it would continue to promote exchange rate flexibility.
But a number of factors, including China's continued rapid accumulation of dollar reserves and a projected widening of its current account surplus, "all indicate that the real effective exchange rate of the renminbi remains substantially undervalued," the department said.
"Treasury's view ... is that progress thus far is insufficient and that more rapid progress is needed," the department said in the report.
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| Chinese Yuan |
The yuan closed at 6.4917 to the dollar on Friday, little changed on the day, but up 5.15 percent since it was loosened from a peg to the dollar in June 2010.
Treasury's decision came as no surprise, even though the U.S. trade gap with China hit a record $273 billion in 2010.
President Barack Obama's Democratic administration has declined to name China as a currency manipulator in five consecutive reports now, following the pattern set by the Republican administration of former President George W. Bush.
Many U.S. lawmakers and import-sensitive manufacturers, such as steel and textiles, claim that China's currency is undervalued by as much as 40 percent, giving Chinese companies an unfair price advantage in international trade.
But Erin Ennis, vice president of the U.S.-China Business Council, which represents roughly 230 American companies that do business in China, said Treasury made the right call.
"While USCBC has advocated repeatedly that China should allow its exchange rate to better reflect market forces, designating China as a 'manipulator' would achieve nothing," Ennis said.
Congress has threatened for years to pass legislation to pressure China to revalue its currency, but so far no bill has reached the president's desk.
Commerce Secretary Gary Locke, tapped to be the next U.S. envoy to China, told the Senate Foreign Relations Committee on Thursday that a more flexible Chinese currency was key to U.S.-China economic rebalancing.
"We are seeing movement on the currency," he said, referring to a roughly 5 percent increase since China slightly loosened the yuan peg to the dollar in June 2010.
"We believe it should float more and faster," Locke said.
By preventing the yuan from rising more rapidly, China imposes an unfair burden on other emerging economies with more flexible exchange rates and eliminates a tool it could be using to counter domestic inflation, Treasury said.
Derek Scissors, a research fellow with the Heritage Foundation, said he agreed with Treasury's decision not to cite China because it should be focused on other Chinese policies that are much more damaging to the United States.
However, the department has turned the report into a "minor joke" by repeatedly delaying its release, he said.
"It is no longer ever issued when scheduled because that time is always wrong for some reason. ... At this point no one should take the report seriously," Scissors said.
Altogether, Treasury reviewed the exchange rate practices of 10 major trading partners in the semi-annual report. It concluded none was manipulating their currency to gain an unfair trade advantage or to prevent an effective balance of payments adjustment.
( Source: Reuters )
According to the data from World Gold Council, China's demand of gold rose 21% YoY to 142.9 tons and outpaced India, the largest market of gold bars and coins in the first quarter of 2011.Chinese investors bought 93.5 tonnes of gold between January and March in the form of coins, bars and medallions, a 55 per cent increase from the previous quarter and more than double the level of a year earlier according to the data. The rise in Chinese gold consumption has been stimulated by the deregulation of the country’s gold market, which has led to an increase in the number of banks importing gold and the number of specialist shops that sell it.
Some investors are betting on improved economic conditions in the West and interest rate hike. They are considering to cut the exposure in Gold.While, some fund managers considering to move away from gold and accumulating diamond and gem set jewelry.
For Example, George Soros’s hedge fund sold almost all its holdings in the largest gold exchange-traded fund, SPDR Gold Shares, in the first quarter, according to a regulatory filing this week.
"Gold no longer satisfies status demand, you need bling, you need something shiny, you need diamonds, " says Eddie Tam who runs the hedge fund CAI Global.The fund, which returned 48 percent last year has increased its exposure to two high-performing Hong Kong listed jewelry stocks - Look Fuk whose shares have surged 261 percent over one year and Chow Sang Sang, which is up 80 percent over the same period.
"The strong gold and diamond prices of late as well as the mounting inflationary pressures bode well for Hong Kong jewelers in terms of both revenue and margins."
Jewelry chains enjoy a 10 percent profit margin on gold, but hedge fund manager Tam says they can make 3 to 5 times more on gem set jewelry.
So far, the bulk of jewelry chains’ revenues still come from gold. A spokesman for Chow Sang Sang told CNBC, 55 percent of their sales come from gold and just 35 percent from non-gold jewelry. The rest comes from watches.
But Tam expects this product mix to change, with diamonds and gem set jewelery set to grow as advertising campaigns try and influence more Chinese men to buy diamond engagement rings.
According to De Beers, diamond sales grew 25 percent in China in 2010 and the country is now tied with Japan as the second-biggest consumer of diamonds, with the U.S. taking the top spot. Tam says China's demand for diamonds is about to go non-linear because of income growth and will soon hit high double-digit percentage increases, if not triple digits.
Despite being bullish, Bank of China says investors need to be wary of two risks. For one, same store sales may drop if China experiences a major slowdown caused by a downturn in the property sector. And two, both companies have large inventories of gold and diamonds that could decline in value if jewelry prices drop.
( Source: Financial Times, CNBC )
What are the lessons to be learned from Chinese tech companies ? Investors should not go blind behind the words like China, Social Media , e commerce etc. According to Francis Gaskins, president of IPO Desktop, investors need to be cautious when it comes to investing in Chinese internet companies listing in the U.S.
As we have seen an example of Chinese Social Networking Site Renren Inc ( NYSE: RENN ), that after initial aggressive response from investors, now company stock has been slipped to below its issue price of $ 14. Investors realized that company is overvalued in terms of pricing of the stock, as it was valued 78 times of its 2010 sales. Lesson from Renren Inc is investors might look at Chinese tech companies as trading point of view and rather than subscribing for IPO. Investors might consider to trade the stock after tracking its movement for couple of days after listing.
In fact, out of the eleven China-based stocks to list recently on the Nasdaq or New York Stock Exchange, Gaskins says 10 are trading below their IPO price.
“The average opening premium is 18 percent for the first day, but from the first day’s high on average they are down 24 percent - that is a total disaster.”
Gaskins believes many Chinese IPOs fail in the U.S. because they are overpriced based on financials or priced for uninformed retail investors who do not question the value of what they are paying for.
“Most of the retail investors buy on emotion and a cursory look at the industry and recent yearly financials.”
He recommends investors look closely at a company’s sequential growth (quarter over quarter) rather than the growth over the previous year before making an investment decision. Gaskins says this is important, particularly when it comes to Chinese internet and technology ventures, which operate in a “fiercely” competitive space and often fail to produce sustainable growth.
“Quarterly sequential growth is very important because it's like an airplane taking off. Often in the growth of tech companies, recent top-line revenue and bottom-line profit growth momentum means there's a good chance of future earnings increases, which is what it's all about,” he explained.
NetQin Mobile, a latecomer to the mobile security space, which listed on NYSE on May 5th, is one such example. The firm, which had “erratic” quarterly financials and posted yearly growth of just 21 percent in 2010, saw its stock price sink 15 percent on its first day of trading.
“If the upward momentum (in earnings) is there going into the IPO, then investors are more likely to believe future projections of growth. If the momentum starts to flat-line, then investors normally want out of the deal,” Gaskins added.
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| China Shengda Packaging Group Inc |
China Shengda Packaging Group Inc. (NASDAQ: CPGI) has announced that it has launched a website in English to provide on time and reliable information to the investors in the US. The message behind it was Launching a website in English helping a stock to move higher around 25%.
( PR NEWSWIRE )China Shengda Packaging Group Inc. (NASDAQ: CPGI) ("China Shengda Packaging" or the "Company"), a leading Chinese paper packaging manufacturer, today announced that it has launched a new English corporate website under the domain name of www.cnpti.com.
The new website is designed to strengthen China Shengda Packaging's communications with investors, customers and business partners, and can be accessed at http://www.cnpti.com . The website's investor relations section will provide investors with timely and reliable information in order to maintain transparency and consistency. The website provides key information on China Shengda Packaging, including corporate overview, corporate history, management team, product and operations, R&D information, corporate news, and investor information, including access to SEC filings, investor presentations, corporate profile and press releases.
"We are delighted to launch our new website and express our dedication to the investor community and customers," stated Mr.Daliang Teng, Chief Executive Officer of China Shengda Packaging. "We will use the website as a platform to provide consistent communication and create an active dialogue with our stakeholders. We view the site as part of our commitment to becoming a strong and mature U.S. publicly traded company."
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| Renren Inc |
Chinese Facebook Clone to list in US this week expected on May 4 wednesday with a price band of $12 to $14. Investors are betting on listing gains.
When investors see words China and company's IPO together, most of them are blindly get in to those scripts ignoring risks involved if any. It was true if we look at the initial offerings of Internet search engine Baidu Inc and online video hosting site Youku.com. as they have logged triple digit percentage gain after listings. Investors are expecting same response for another upcoming chinese offering this week Renren Inc, a social networking site. Most of the investors are lured by the words of "Chinese" and "Social Networking".
The reason behind the appetite for this offering among the investors is because it is related to hot sector U.S. Facebook, the biggest social network company in the world and has a market value of somewhere around $70 billion, based on a share sale currently being contemplated, making it worth more than companies such as Boeing Co.
The demand for Renren shares was clear on Friday when the company raised the expected price range of its IPO by 30 percent to $12 to $14 per share.
"Appetite to invest in China right now is so strong that some investors are willing to ignore factors that they wouldn't in other markets," said Mark Natkin, managing director of Marbridge Consulting, a Beijing-based company that advises investors on China's Internet and telecommunications sectors.
Renren's IPO filings do raise a handful of very serious questions.
1) Renren doesn't really seem sure how many users it has.
According to its April 27 revised IPO filing, the Chinese Facebook clone's monthly unique log-in user base grew by only 5 million, or 19 percent, in the first quarter of 2011 - not the 7 million, or 29 percent, it reported in its first filing only 12 days earlier.
Some investors and analysts brush off such red flags -- after all China is the biggest Internet market in the world and it is growing rapidly.
Others say the opaque information is a big problem. "If you can't validate the numbers or the company proves it doesn't have a good handle on the numbers, then you've got to be concerned," said Gary Rieschel, founder of Qiming Venture Partners, which is an investor in Renren rival Kaixin001.
2) Another possible risk for investors is the government tight regulations as we see a case from Google Inc. last year.
Chinese authorities keep extremely close tabs on Internet companies, arguing that this is necessary to maintain social harmony. This led to a big bust up between Google Inc and the Chinese government last year that ended with Google curtailing its operations in the country.
Renren says in the risk factors section of its IPO prospectus that this means a prohibition against posting content that, among other things, "impairs the national dignity of China" or is "superstitious."
The prospectus doesn't mention the recent Middle Eastern uprisings, which led to a crackdown on the use of certain words on the Internet in China, but it does say Renren may not post content that is "socially destabilizing."
If Renren fails to comply, the company says that its websites could be shut down. Clearly that could put it out of business.
Whether a social network page posting is objectionable is determined by the Chinese authorities. Renren is also required to monitor advertisements on its websites, some of which are subject to special government review before they are posted.
Renren must even guard against providing services that may lead to its users finding themselves in "emotionally charged situations."
3) Material Weakness
The company also said in its filings that while it hasn't conducted a comprehensive review, it found a "material weakness" and a "significant deficiency" in its internal financial controls: Renren doesn't have enough people with knowledge of U.S. generally accepted accounting principles. It also lacks a formal policy for investing surplus cash and managing its treasury
4) Functions
That's not unusual for Chinese IPO companies. Neither is the fact that 87 percent of Renren's leased floor area did not have the proper title documents. But it all paints a picture of a company that is far from risk free.
Still, it isn't difficult to find people who will give it the benefit of the doubt.
"Given the investors it has who have board seats and who work closely with it, you would expect any major issues to have turned up by now," said Nick Einhorn, an analyst at Connecticut-based IPO research and investment house Renaissance Capital.
Renren's investors include private equity firm General Atlantic and venture capital firm DCM.
Renren may also face some heat over intellectual property questions. When social networking website Kaixin001.com started taking off, Renren founder and CEO Joseph Chen launched a matching site with a similar color scheme and layout under the name Kaixin.com. Kaixin001.com won a lawsuit that ultimately resulted in Chen changing the name of another of his social
networking sites to Renren, and merging Kaixin.com into Renren.
Sources have told Reuters that Kaixin001 is also planning a U.S. IPO. Renren in its IPO filings also said that its social networking platform may be subject to patent infringement claims, and mentions Facebook as one of the potential claimants.
Still, while Renren has posted losses in each of the past two years, it could still be a dream growth stock. Its net revenue grew more than fivefold to $76.54 million in 2010 from $13.78 million in 2008.
But there will be some who, after reading the prospectus, may wonder whether the risks outweigh the rewards.
Source: Reuters
Tags: Facebook, Renren,IPO,Social networking, Baidu, Youku
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| Beijing China |
The World Bank on Thursday raised its forecast of China's economic growth in 2011 for the second time in as many months and said it was too early for Beijing to halt policy tightening, not least because of inflationary risks.
In its latest quarterly update of the world's second-largest economy, the bank slashed its projection of China's 2011 current account surplus to 3.6 percent of gross domestic product comfortably below the 4 percent ceiling mooted by U.S. Treasury Secretary Timothy Geithner for G20 countries.
Following stronger-than-expected outcomes in the past two quarters, GDP is now likely to expand 9.3 percent in 2011, slower than last year's 10.3 percent clip but still a "healthy" rate, the World Bank said.
It had forecast 9.0 percent in a regional survey in March and 8.7 percent in its previous China update last November.
The bank, which pencilled in GDP growth of 8.7 percent for 2012, said there were risks both ways to its forecasts, although the report accentuated the downside dangers.
As a result, flexibility in both monetary and fiscal policy was key.
"The macro stance needs to be normalized fully to address macro risks including on inflation and the property market," the report said.
The bank raised its forecast of year-average consumer price inflation this year to 5.0 percent. Just last month it had projected 4.7 percent; in November it was expecting 3.3 percent.
Nevertheless, the bank said inflation, which rose to a 32-month high of 5.4 percent in the year to March, was unlikely to climb further as food price increases were slowing.
The higher global commodity prices that have helped fuel Chinese inflation prompted the World Bank to scale back its forecast of China's 2011 current account surplus to $264 billion from $356 billion in November.
That would reduce the surplus to 3.6 percent of GDP from 5.1 percent in 2010 and 10.1 percent as recently as 2007.
The World Bank said strong domestic demand and relative price changes has reduced the relative importance of external trade for China. The share of exports in GDP, for example, fell to 29 percent last year from a peak of 39 percent in 2006.
The yuan's real exchange rate has also risen more than commonly assumed if measured against the broadest measure of inflation — China's GDP deflator — instead of the narrower consumer price index.
By this gauge, the currency rose 6.6 percent a year on average against the dollar between 2005 and 2010 and by 5.5 percent a year against a basket of currencies of China's trading partners, the bank calculated.
"It is not fully clear what the main reasons are behind these rapid relative price increases and whether they will be sustained. Nonetheless, they have been a major factor in China's catch-up in recent years," the report said.
The global financial crisis had also contributed to the partial external rebalancing by sapping demand for Chinese exports and prompting a massive stimulus by Beijing that boosted home-grown demand.
Whether these trends are sustained will depend on China's policies and global developments, the bank added.
To our readers, here is some interesting development from china, which holds $1.154 trillion of US government debt(Biggest foreign buyer of US treasury). Read our previous story here.
Questions have started raising about higher returns from US treasury according to a researcher from China. Zhang Jianhua, a head of research at the People's Bank of China, said worries that the heavily indebted U.S. government may not repay its debt could drive Treasury yields higher and cause U.S. debt prices to fluctuate. and China wants that its investments will be protected from this. But price volatility aside, Zhang was otherwise confident that demand for U.S. Treasurys would stay healthy due to lack of investment alternatives, if nothing else.
Treasury prices spiked last week, when a report from S&P showed that it will cut AAA rating if US will continue budget deficit. this statement had a little impact on Treasury purchases by foreign central banks and continued to grow.
Due in part to its size, the U.S. Treasury market is deemed to be among the safest in the world as it allows investors to buy and sell without prices swinging too much.
But the gigantic-and-growing market is also a sign of poor U.S. fiscal health. U.S. government debt is expected to hit its $14.3 trillion ceiling as early as May.
( Source: Reuters, CNBC )
Questions have started raising about higher returns from US treasury according to a researcher from China. Zhang Jianhua, a head of research at the People's Bank of China, said worries that the heavily indebted U.S. government may not repay its debt could drive Treasury yields higher and cause U.S. debt prices to fluctuate. and China wants that its investments will be protected from this. But price volatility aside, Zhang was otherwise confident that demand for U.S. Treasurys would stay healthy due to lack of investment alternatives, if nothing else.
Treasury prices spiked last week, when a report from S&P showed that it will cut AAA rating if US will continue budget deficit. this statement had a little impact on Treasury purchases by foreign central banks and continued to grow.
Due in part to its size, the U.S. Treasury market is deemed to be among the safest in the world as it allows investors to buy and sell without prices swinging too much.
But the gigantic-and-growing market is also a sign of poor U.S. fiscal health. U.S. government debt is expected to hit its $14.3 trillion ceiling as early as May.
( Source: Reuters, CNBC )
