Archive for ‘Chindia Alert’

17/04/2014

Why China Needs to Let More Companies Go Bankrupt – China Real Time Report – WSJ

China needs to let more companies go bust.

That was the message from several executives at a real-estate conference in Shanghai on Thursday, as the latest string of loan defaults among real-estate developers and a small construction firm have some people talking about bankruptcy more freely.

It’s crazy that China hasn’t had a major bankruptcy in recent years, said Ronnie Chan, chairman of Hong Kong-listed property developer Hang Lung Group.

Although the country has a bankruptcy code somewhat similar to that in the U.S., it’s rarely used. Borrowers sometimes flee rather than try to work out problems under bankruptcy law, and there are few judges, administrators or lawyers who specialize in the field.

Last month, property developer Zhejiang Xingrun Real Estate Co. couldn’t repay nearly $600 million of loans. Local officials in Fenghua, the eastern city where the developer is based, are worried that a bankruptcy could hurt the city’s reputation and have said they’ve set up a task force to deal with the outstanding debt and remaining land assets.

On Wednesday, a Shenzhen-listed shipbuilder said property firm Nanjing Fudi Property Developing Co. has failed to repay 105.4 million yuan ($16.9 million) loan, including interest.

While China has seen developers default before, government officials have arranged bailouts for troubled firms that allow their underlying financial problems to fester. On Thursday, analysts argued that authorities have to be willing to address the other option: Let the companies go broke, and send a warning to markets, even if it leads to some financial turmoil in the near term.

Mr. Chan argues that real-estate firms declaring bankruptcy isn’t a social problem. “Another firm takes over the land or project, and no one has to be fired.”

Developers and government officials must be “forced to accept reality,” he said.

To be sure, the developer isn’t saying massive waves of bankruptcies are the way to go either. This is acceptable as long as not too many companies go broke at the same time and doesn’t result too much disruption, Mr. Chan added. In other words, they don’t want a “Lehman Brothers” moment.

“That’s why we prune trees,” said John Allen, chief executive officer of private investment firm Greater China Corporation in a later speech. “Bankruptcy is one of the healthiest things around. You want to get rid of the weak players.”

via Why China Needs to Let More Companies Go Bankrupt – China Real Time Report – WSJ.

Enhanced by Zemanta
17/04/2014

Non Residents Are Stakeholders in India’s Future Too – India Real Time – WSJ

Conversations in Mumbai are usually about the elections these days – be it at roadside food stalls or in the boardrooms of India’s financial capital.

The stakes, after all, are high: following a period of robust growth, the country’s economy has slowed considerably in the past few years – largely because of (depending on who you talk to) the global crisis, policy paralysis, corruption and such. Inflation too is a massive concern.

The need of the hour, most agree, is a secular, stable and investment-friendly government that helps create prosperity for India’s multitude, and not just for a few seen close to the powerful.

That in essence is also the main topic of discussion some 2000kms to the west of the city – for non-resident Indians in Dubai, a fast growing regional financial hub.

Back in the 70s and 80s, hordes of Indians left the country in search of better opportunities – many of whom came to the oil-producing Middle East countries. The tech boom of the 90s provided them another global opening, though by then economic reforms at home were also taking effect – helping drive growth and creating more and better-paying jobs in the next decade.

Many Indians still look abroad for livelihood, but have increasingly channelled a big chunk of their earnings back home in search of returns. And why not? Even global investors are happily betting on the country’s future.

India topped the global list for remittances in 2013 – receiving some $70 billion, according to a World Bank report last week, underscoring its importance as an important source of foreign exchange. To be sure, remittances last year were “more than the $65 billion earned from the country’s flagship software services exports,” the World Bank noted.

That the country has been among the leading recipients of remittances over the past few years is not surprising, given that some 25 million Indians (variously classified) live abroad and, in several cases, continue to have strong familial ties back home.

The importance of Indians living overseas and their contribution to the country has been recognised on various platforms – such as the Pravasi Bharatiya Divas, which has been held every year since 2003 to “mark the contribution of Overseas Indian community in the development of India,” according to the Ministry of Overseas Indian Affairs.

The ministry says these conventions facilitate the overseas Indian community to engage with the government and people for “mutually beneficial activities”. Simply put, Indians living overseas are increasingly participating more actively back home.

But they – the millions of NRIs – still can’t vote from foreign locations and choose a government of their liking in the country’s general elections.

via Non Residents Are Stakeholders in India’s Future Too – India Real Time – WSJ.

Enhanced by Zemanta
16/04/2014

A Green Group Sees Hope in ‘The End of China’s Coal Boom’ – NYTimes.com – NYTimes.com

A report from Greenpeace charts slowing growth in China’s coal use.

Through much of its history, Greenpeace has been big on what I call “woe is me, shame on you” messaging on the environment. As I explained at a TEDx event in Portland, Ore., over the weekend, fingerpointing (including Greenpeace’s) is appropriate in many instances, but doesn’t work well with human-driven global warming. The blame game too often ends up resembling a circular firing squad.

This is why “The End of China’s Coal Boom,” a valuable new report from Greenpeace’s East Asia office, is so refreshing and worth exploring. I was led to it by a Twitter item from the group’s outgoing director, Phil Radford, that focused on a telling graphic:

View image on Twitter

via A Green Group Sees Hope in ‘The End of China’s Coal Boom’ – NYTimes.com – NYTimes.com.

Enhanced by Zemanta
16/04/2014

India Signs Power Contracts for 700 Megawatts of Solar Capacity – Businessweek

India signed contracts to purchase solar power from companies building 700 megawatts of capacity awarded in a national auction.

English: Photovoltaic system with 19 Megawatts...

English: Photovoltaic system with 19 Megawatts peak near Thüngen/Bavaria Deutsch: Solarpark/photovoltaikanlage mit 19 Megawatt Spitzenleistung nahe Thüngen/Bayern (Photo credit: Wikipedia)

The government is waiting to sign purchase agreements for the remaining 50 megawatts from the auction in February, Tarun Kapoor, joint secretary at the Ministry of New and Renewable Energy, said today in an interview in New Delhi. The agreements, which lock in rates for the power generated for 25 years, bind developers to complete the plants within 13 months.

Two developers dropped out after winning bids, including St. Peters, Missouri-based SunEdison Inc. (SUNE:US), which said last week it gave up a 20-megawatt project because local equipment shortages and prices make it unviable. The other developer that Kapoor didn’t identify forfeited its project after failing to get permission from its parent to proceed, he said.

via India Signs Power Contracts for 700 Megawatts of Solar Capacity – Businessweek.

Enhanced by Zemanta
16/04/2014

Promises and more promises: India’s parties pitch their visions | India Insight

Campaign season in India means it’s also promise season, and political parties aren’t short on pledges for what they would do if they come to power after election results come out in May. From the Tamil Nadu-based MDMK party’s pledge to rename the country “The United States of India” to the Odisha-based BJD‘s promise to “guarantee” development projects, there are plenty of promises floating around to help parties capture, retain or regain power.

There has been plenty of coverage of the manifestos from the biggest national parties, Congress and the Bharatiya Janata Party, so here are some highlights from the others.

Lok Satta Party: This Andhra Pradesh-based party has promised to nationalise the sale of liquor and to limit the number of stores where people can buy it. Families of liquor “victims,“ meanwhile, would get pensions.

BJD: In power for more than 10 years, the Biju Janata Dal of Odisha has promised to guarantee primary infrastructure needs in the state. It will also make it mandatory for industry to provide shares in projects to people whose land they buy for their projects.

DMK: The former ally of the ruling Congress party will oppose reservation, the setting aside of government jobs for members of groups recognized by the government as disadvantaged, based on economic criteria. It would, however, support caste-based reservation in the private sector. It also proposes that only qualified Tamil people be appointed as India’s envoys to the nations where Tamils live in considerable numbers. The party has also included not “bashing” other parties in their pitch.

AIADMK: Tamil Nadu’s ruling party says it would stop the sale and privatisation of state-owned companies. To stabilise the rupee, the AIADMK says it would not encourage short-term capital flows and will support long-term foreign direct investment.

CPI-Marxist: This Leftist party favours the production of goods for mass consumption rather than “unsustainable” luxury goods. It also would enforce a code of conduct for all elected representatives against sexist language. CPI-M favours revising the India-U.S. nuclear deal and will seek removal of nuclear weapons from the U.S. military base in Diego Garcia in the Indian Ocean.

TMC: West Bengal’s ruling party, the Trinamool Congress, has promised it will provide a stipend and medical insurance to artists and folk performers. It has also promised to form a court to try human rights violations.

TRS: With the new state of Telangana to be carved out of Andhra Pradesh, the Telangana Rashtra Samiti says it will give a special “Telangana increment” to government employees to celebrate the state’s formation later this year.

JD(U): The Janata Dal (United) manifesto has promised legislation for the safety and security of migrant workers in India. It wants a commission to study the socio-economic condition of poor upper caste people to draft welfare measures for them.

MDMK: An ally of the BJP in Tamil Nadu, MDMK promises to rename the country “United States of India” to put emphasis on the federal structure. It wants to lift the ban on the LTTE, the Tamil separatists in Sri Lanka.

AAP: The Aam Aadmi Party, or common man party, is interested in animal welfare as well as human. It wants to protect the dignity of animals used in industries “for food, clothing and entertainment.” To encourage young people to join politics, it favours allowing 21-year-olds to run for office (the current minimum age is 25). Apart from laws to deal with violence against women, it promises long-term public education programmes to end the culture of gender-based discrimination. It has some provisions to regulate media as well.

BSP: The Bahujan Samaj Party of Uttar Pradesh, which counts millions of Dalits among its supporters, did not release any election pitch. “We do not release manifestos as we believe more in doing real development work for the people rather than making hollow claims which are never realised,” party chief and former UP Chief Minister Mayawati declared at a rally.

via Promises and more promises: India’s parties pitch their visions | India Insight.

Enhanced by Zemanta
15/04/2014

China in numbers: beans means trouble as commodity markets highlight rising credit risks | The Times

500,000 . . . is the total tonnage of soya bean cargoes on which Chinese importers have defaulted recently, unsettling markets already nervous about the world’s second biggest economy.

Soya bean meal is unloaded at Fangchenggang

Those defaults look alarming. Commodity markets can provide livid symptoms of an economic malaise and the numbers seem to offer evidence of rising credit risk in China. The country’s first corporate bond default earlier in the year merely sharpened sensitiv-ity to any sign of contagion.

Shipping industry sources in Singapore and Tokyo believe that there are six soya bean cargoes at Chinese ports that cannot be unloaded and the same number still at sea. Their total value is somewhere around £180 million, which makes this China’s highest-stakes soya bean default since 2004. This in a country that imports nearly two thirds of all the soya beans traded worldwide.

Explanations are focused on China’s tightening credit markets and the inability of soya bean buyers to secure the necessary letters of credit from banks. It does not take much of a leap to wonder what that type of credit contraction is having on an economy that has been fuelled lately by an epic creation of new credit.

As with other vulnerable sectors in China, the companies that process soya beans have been making losses: suddenly the banks are unprepared to take risks on them and the cargoes have been stranded.

The defaults have highlighted other market distortions that go far beyond the inability of an oilseed processor to turn a profit from a hill of beans. Trading companies have routinely used soya bean cargoes, in common with shipments of copper and other commodities, as collateral to secure cheap financing for potentially more lucrative deals and businesses. Because the interest payable on letters of credit is low and the payment terms generous, some have sold the product itself at a loss simply to get their hands on the cash.

The reality of these defaults, though, is that they are probably a good thing — or at least part of a well-intentioned plan. Beijing has been uncharacteristically relaxed about these defaults for the same reason that it has been uncharacteristically relaxed about internet giants such as Alibaba infuriating the banks by introducing innovative financial products. Beijing knows it has to reform the financial sector, realises that it will face huge resistance and is looking for leverage. Creating a series of micro crises forces China’s banks to become better at what they are supposed to do. Defaults (on soya beans and bonds) have been noisily paraded in state media to show the banks that they are expected to start pricing risk accurately and coldly.

via China in numbers: beans means trouble as commodity markets highlight rising credit risks | The Times.

Enhanced by Zemanta
15/04/2014

As Growth Slows in India, Rural Workers Have Fewer Incentives to Move to Cities – WSJ.com

As a teenager, Ram Singh left this remote rural village and moved to fast-growing New Delhi to chase the spoils of his country’s economic boom.

For 14 years, he toiled in tiny, primitive factories making everything from auto parts to components for light switches. His wages barely kept pace with the cost of living and eventually he gave up on city life.

Today, he is back on the farm, scratching out a living from a small plot of land near his birthplace where he grows corn, wheat, potatoes and mustard.

“Whenever someone leaves his village for the city, he thinks, ‘I will earn money,’” says Mr. Singh, who isn’t certain of his age but says he is around 30 years old. “Everyone has dreams, but it’s not always in their power to turn them into reality.”

Just a few years after India was hailed as a rising economic titan poised to rival China—even surpass it—growth in gross domestic product has slowed to a pace not seen in a decade. The Indian economy expanded at an annual rate of 4.7% in the last quarter of 2013. That may be sizzling by Western standards, but it is a serious comedown for a country whose GDP growth peaked at 11.4% in 2010. Inflation is high, workers aren’t finding jobs, and industrialization and urbanization are stalling.

via As Growth Slows in India, Rural Workers Have Fewer Incentives to Move to Cities – WSJ.com.

Enhanced by Zemanta
15/04/2014

How a Chinese Company Built 10 Homes in 24 Hours – China Real Time Report – WSJ

Chinese companies have been known to build major real-estate projects very quickly. Now, one company is taking it to a new extreme.

Suzhou-based construction-materials firm Winsun New Materials says it has built 10 200-square-meter homes using a gigantic 3-D printer that it spent 20 million yuan ($3.2 million) and 12 years developing.

Such 3-D printers have been around for several years and are commonly used to make models, prototypes, plane parts and even such small items as jewelry. The printing involves an additive process, where successive layers of material are stacked on top of one another to create a finished product.

Winsun’s 3-D printer is 6.6 meters (22 feet) tall, 10 meters wide and 150 meters long, the firm said, and the “ink” it uses is created from a combination of cement and glass fibers. In a nod to China’s green agenda, Winsun said in the future it plans to use scrap material left over from construction and mining sites to make its 3-D buildings.

Winsun says it estimates the cost of printing these homes is about half that of building them the traditional way. And although the technology seems efficient, it’s unlikely to be widely used to build homes any time soon because of regulatory hurdles, Mr. Chen said.

The Chinese firm isn’t the first to experiment with printing homes. Architects in Amsterdam are building a house with 13 rooms, with plans to print even the furniture. The Dutch architect in charge of the project said on the project’s website it would probably take less than three years to complete.

via How a Chinese Company Built 10 Homes in 24 Hours – China Real Time Report – WSJ.

Enhanced by Zemanta
15/04/2014

Massive China shoe factory strike rolls on as offer falls flat | Reuters

Thousands of workers at a giant Chinese shoe factory shrugged off an offer for improved social benefits on Tuesday, prolonging one of the largest strikes in China in recent years amid signs of increased labor activism as the economy slows.

Yue Yuen Industrial Holdings

Yue Yuen Industrial Holdings (Photo credit: Wikipedia)

The industrial unrest at Yue Yuen Industrial (Holdings), now stretching to around ten days and sparking sporadic scuffles with police, has centered on issues including unpaid social insurance, improper labor contracts and low wages. Workers have demanded improved social insurance payments, a pay rise and more equitable contracts.

“The factory has been tricking us for 10 years,” said a female worker inside a giant industrial campus in Gaobu town run by Yue Yuen in the southern factory hub of Dongguan in the Pearl River Delta. “The Gaobu government, labor bureau, social security bureau and the company were all tricking us together.”

A spokesman for Yue Yuen said the firm, which makes shoes for the likes of Nike, Adidas, Reebok, Asics and Converse with a market capitalization of some $5.59 billion, had agreed to an improved “social benefit plan” on Monday, while stressing the business impact had been “mild” so far.

“Basically, the terms that we announced yesterday was after a very thorough internal analysis and calculation and considering all the factors including the affordability from the factory perspective,” the spokesman told Reuters by phone.

via Massive China shoe factory strike rolls on as offer falls flat | Reuters.

Enhanced by Zemanta
11/04/2014

All you need to know about business in China | McKinsey & Company

A lot of people view China business as mysterious. Relax. Consumers behave pretty much the same everywhere. Competition is pretty much the same everywhere. You just need to ignore the hype and focus on the basic fact that in China today, there are six big trends (exhibit). That’s it. Six trends shape most of the country’s industries and drive much of China’s impact on the Western world. They are like tectonic plates moving underneath the surface. If you can understand them, the chaotic flurry of activity on the surface becomes a lot more understandable—and even predictable.

Coauthors Jeffrey Towson and Jonathan Woetzel discuss China’s six megatrends with Nick Leung, the managing partner of McKinsey’s Greater China office.

These trends move businesses on a daily basis. They’re revenue or cost drivers that show up in income statements. Deals, newspaper headlines, political statements, and the rising and falling wealth of companies are mostly manifestations of these six trends, which aren’t typically studied by economists and political analysts. In fact, we happen to think that Chinese politics or political economics are wildly overemphasized by some Westerners in China. So let’s tell a story about each of these megatrends, with some important caveats. They’re not necessarily good things. They’re not necessarily sustainable. For every one of them, we can argue a bull and a bear case. Most lead to profits or at least revenue. Some may be stable. Some lead to bubbles that may or may not collapse. We are only arguing that they are big, they are driving economic activity on a very large scale, and understanding them is critical to understanding China and where it’s headed.

via All you need to know about business in China | McKinsey & Company.

Enhanced by Zemanta
Follow

Get every new post delivered to your Inbox.

Join 420 other followers