Archive for ‘China alert’

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09/07/2015

How India Could Be Hit by Chinese Stock Slide – India Real Time – WSJ

The dive in Chinese markets on Wednesday may have rattled investors across the globe, but prospectors in India need not panic: any trickle down impact of the crisis on the South Asian nation will be limited to certain sectors.

The Shanghai Composite index has lost around a third of its value over the past month and concern is growing that Beijing’s failure to prop up its equity markets means it will be unable to push through its broader agenda of liberalizing the economy to mitigate the country’s slowing growth.

India’s metals companies are likely to be affected the most as China is the world’s biggest importer of steel and iron ore. Any further slowdown in China’s economy will bring down global prices, hurting Indian firms’ profitability.

 

Meanwhile, luxury-car manufacturers are also likely to take a hit. Tata Motors 500570.BY +1.62%’ share price has already lost about 8% in the past two trading sessions on concerns that the problems in China could further worsen the slowdown in demand for its Jaguar Land Rover luxury cars there, which is now the single-largest market for JLR.

But long-term effects are expected to be minimal. India’s benchmark S&P BSE Sensex index has gained about 5% during the past month.

Though India’s benchmark index fell 1.7% yesterday, analysts and fund managers attribute it to a domino effect from China that won’t last. India’s improving domestic fundamentals are capable of thwarting a similar meltdown.

“India is relatively better off among the emerging markets as we don’t have too many negatives compared to other countries,” said Deven Choksey, managing director of Mumbai-based brokerage K.R. Choksey Shares and Securities.

He said investors will give preference to the ongoing reform process in India and key legislation such as the Land Acquisition Bill and the Goods and Services Tax Bill, rather than global events.

Analysts said upcoming corporate earnings will also matter more to Indian stock prices than the Chinese turmoil. Though corporate earnings are expected to take some time to improve, analysts are confident that a sharp recovery in profits is likely from the second half of this financial year. The January-March period was the worst earnings season in the past two years.

“Both (China and India) can’t be compared and, in fact, the developments in China will only serve to reinforce confidence in India and India’s market structure,” said Aashish Somaiyaa, chief executive of Motilal Oswal Asset Management Co.

In fact, foreign investors, who own about 43% of the publicly-traded shares of companies in the Sensex, have invested about $600 million already in July, after pulling out nearly $1.8 billion in the previous two months.

And domestic investors have not lost faith in the Indian story as they have poured in nearly $2.4 billion into stocks since May.

“Whenever there is a correction in [the] Indian market, we are getting more enquiries,” said Nandkumar Surti, chief executive of J.P. Morgan Asset Management India Pvt. Ltd.

via How India Could Be Hit by Chinese Stock Slide – India Real Time – WSJ.

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08/07/2015

Greece and China expose limits of ‘whatever it takes’ | Reuters

For a world so confident that central banks can solve almost all economic ills, the dramas unfolding in Greece and China are sobering.

“Whatever it takes,” Mario Draghi‘s 2012 assertion about what the ECB would do to save the euro, best captures the all-powerful, self-aware central bank activism that’s cosseted world markets since the banking and credit collapse hit eight years ago.

From the United States to Europe and Asia, financial markets have been cowed, then calmed and are now coddled by the limitless power of central banks to print new money to ward off systemic shocks and deflation.

But even if you believe central banks will do whatever it takes – to save the euro, stop the recession, create jobs, boost inflation, prop up the stock market and so on – it doesn’t necessarily mean it will always work.

Draghi himself merely pleaded for faith on that score three years ago when he added, “Believe me, it will be enough.”

Critically, given the direction of events in Athens, his celebrated epigraph was preceded by “Within our mandate…”

And so the prospect of the European Central Bank potentially presiding over, some say precipitating, the first national exit from a supposedly unbreakable currency union will inspire a rethink of the limits of Draghi’s phrase for all central banks.

Of course, the ECB does not want to push Greece out of the euro. But ‘whatever it takes’ may just not be enough to preserve the integrity of the 19-nation bloc if the ECB’s mandate prevents it from endlessly funneling emergency funding to insolvent Greek banks.

And as long as the Greek government is at loggerheads with its creditors, the central bank can’t wave a magic wand of monetary support without breaking its own rules.

The ECB continues to insist it will do all in its power to prevent contagion to other euro zone markets and there’s little doubt it will make good on that. But the problems stemming from a Greek exit are not of financial seepage but of political contagion to other euro electorates tiring of austerity. And that sort of contagion is beyond ECB control.

via Greece and China expose limits of ‘whatever it takes’ | Reuters.

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08/07/2015

China Stock Tumble Scarier Than Greek Debt Crisis – China Real Time Report – WSJ

China’s stock plunge is scarier than Greece, writes Morgan Stanley Investment Management’s Ruchir Sharma:

The continuing crisis is viewed, locally and globally, as a test of China’s control over the economy. The “Beijing put”—a perception that Chinese economy and markets are backstopped by the government—is under threat. That perception has underpinned the widespread belief that Chinese growth won’t fall much below 7%, because that is the government’s desired target and Beijing is omnipotent.

…

But if Beijing can’t stop the market’s tumble, there could be a sudden shift in the perception of exactly how far economic growth might fall under the weight of too much debt. If that floor crumbles and the Chinese economy spirals downward, it will make the drama surrounding Greece feel like a sideshow. China has been the largest contributor to global growth this decade; Greece’s economy is about the size as that of Bangladesh or Vietnam.

via China Stock Tumble Scarier Than Greek Debt Crisis – China Real Time Report – WSJ.

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06/07/2015

Narendra Modi’s Visit to Central Asia: What to Know – India Real Time – WSJ

India is starting to latch onto the need to forge diplomatic relationships with other countries beyond simple exchange of embassies. However, in the two months of rest between PM Modi’s globe trotting, China formed or reinforced relationship with 28 countries:

  • May:  E U; Japan; Belarus; India; Ireland; Vietnam; Brazil; Colombia, Peru, Chile.
  • June:  Pakistan, Senegal; French Polynesia;  Angola; Sri Lanka; Georgia; Myanmar, Maldives; Uzbekistan; Australia; Czech Republic; Poland; Belgium; USA; Brazil; France.

Some of these were when senior foreign politicians visited China, others when senior Chinese politicians visits abroad.

In 2014, China wooed 167 nations – https://chindia-alert.org/2014/12/31/chinese-diplomacy-2014/ and over 100 in 2013 – https://chindia-alert.org/2013/12/31/who-did-china-woo-in-2013/.  So far 62 in 2015.  Someone in the higher eschelons of Chnese government must have read and espouse Dale Carnegie’s book!

“Less than two months after returning from a journey that took him to China, South Korea and Mongolia, Indian Prime Minister Narendra Modi begins another whirlwind overseas tour on Monday in which he is slated to visit five Central Asian countries, attend two multilateral summits in Russia and talk about issues ranging from trade to yoga to terrorism.

In a series of short trips, Mr. Modi will touch down in Uzbekistan, Kazakhstan, Turkmenistan, Kyrgyzstan and Tajikistan, covering a cluster of strategically-positioned, resource-rich nations not far from India’s borders where China has established robust trade and investment ties. In between, he’ll visit Russia for the annual Brics summit.

Mr. Modi’s main focus is going to be energy: Turkmenistan’s natural gas reserves, for instance, and Kazakhstan’s oil and uranium. In recent years, India’s plans to invest in Kazakhstan’s oil projects have been waylaid by proposals from China, which has a major presence in the country’s oil and gas production.

Efforts to ramp-up the flow of these resources to India have also been complicated by the region’s security risks and geopolitics. A long-pending project with Turkmenistan, for instance, involves constructing a gas pipeline from that country over Taliban-hit Afghanistan and across India’s rival neighbor Pakistan, to India.

The Indian government is looking to kickstart work on the pipeline. In April, during a visit by India’s foreign minister, Sushma Swaraj, Turkmenistan pledged to begin construction of it this year, India said. Ahead of Mr. Modi’s departure, Navtej Sarna, an Indian official, said on Friday that the government “will have to explore how we can move this project forward very quickly,” though he didn’t elaborate on how much progress Mr. Modi and his team were expected to make.

It’s not just the pipeline. Mr. Modi is hoping to push other infrastructure projects too that would connect Central Asia to India – regions that are not far apart on the map but have remained inadequately linked by roads, railways and ports, diminishing opportunities for trade and investment.

A North-South transport corridor that would help move cargo through a more straightforward and cheaper route between Russia and Central Asia on the one hand and India on the other has been in the offing for years. While some infrastructure has been built, big gaps remain. Mr. Modi is hoping to recruit more partners to help fill them.

One crucial link country in this plan is Iran, which has been off limits because of Western sanctions aimed at driving Tehran to end its nuclear program. As Iran and its U.S.-led opponents moved toward a deal this year that would end the deadlock, India in May sought to reinvigorate a port project in Iran’s eastern Chabahar region. Once completed, the port would become a central part of the planned corridor.

These questions of connectivity are important for India’s trade prospects, but they also have a geopolitical  significance. China has in recent months stepped up its diplomatic outreach for its new “Silk Road” belt connecting it to Central Asia and Europe. On a visit to Islamabad in April, Chinese President Xi Jinping unveiled a $46 billion economic corridor that would cut across Pakistan and a disputed territory governed by Pakistan that India also claims. Indian officials have objected to the initiative, both publicly and in meetings with Chinese officials.

At the same time, Mr. Modi is looking to forge closer economic ties with China. This week, he will meet Chinese leaders during the Brics summit in the Russian city of Ufa, where the leaders will discuss, among other regional and global issues, their recently-formed bank. The New Development Bank as it is called is headquartered in Shanghai and will have an Indian banker as its first head. Mr. Modi will also participate in a meeting of the Shanghai Cooperation Organization, a security grouping led by China and Russia, which India is likely to join shortly as a full member.”

via Narendra Modi’s Visit to Central Asia: What to Know – India Real Time – WSJ.

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06/07/2015

Rivals Pakistan, India to start process of joining China security bloc | Reuters

Nuclear-armed rivals Pakistan and India will start the process of joining a security bloc led by China and Russia at a summit in Russia later this week, a senior Chinese diplomat said on Monday, the first time the grouping has expanded since it was set up in 2001.

Photo

The Shanghai Cooperation Organisation (SCO) groups China, Russia and the former Soviet republics of Tajikistan, Uzbekistan, Kazakhstan and Kyrgyzstan, while India, Pakistan, Iran, Afghanistan and Mongolia are observers.

“As the influence of the SCO’s development has expanded, more and more countries in the region have brought up joining the SCO,” Chinese Vice Foreign Minister Cheng Guoping told a news briefing.”India and Pakistan’s admission to the SCO will play an important role in the SCO’s development. It will play a constructive role in pushing for the improvement of their bilateral relations.”

India and Pakistan have fought three wars since 1947, two of them over the divided Muslim-majority region of Kashmir which they both claim in full but rule in part. Pakistan also believes India is supporting separatists in resource-rich Baluchistan province, as well as militants fighting the state.

India applied to join the regional security grouping last year and SCO foreign ministers gave a positive recommendation when they met in June. “We await further developments,” said Sujata Mehta, a senior foreign ministry official.

Prime Minister Narendra Modi will be in Moscow for a summit of the BRICS group of emerging markets and both he and his Pakistani counterpart, Nawaz Sharif, will attend a special SCO “outreach” session as part of the gathering.

Pakistan’s application is being considered, said foreign ministry spokesman Qazi Khalilullah. “We hope they will support us for full membership,” he added.

The grouping was originally formed to fight threats posed by radical Islam and drug trafficking from neighboring Afghanistan.

Cheng said the summit, to be attended by Chinese President Xi Jinping, would also discuss security in Afghanistan.

Beijing says separatist groups in the far western region of Xinjiang, home to the Muslim Uighur minority, seek to form their own state, called East Turkestan, and have links with militants in Central Asia, as well as Pakistan and Afghanistan.

China says Uighur militants, operating as the East Turkestan Islamic Movement (ETIM), have also been working with Islamic State.

“It can be said that ETIM certainly has links with the Islamic State, and has participated in relevant terrorist activities. China is paying close attention to this, and will have security cooperation with relevant countries,” Cheng said.

via Rivals Pakistan, India to start process of joining China security bloc | Reuters.

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02/07/2015

China National Security Law Aims to Create ‘Garrison State,’ Experts Say – China Real Time Report – WSJ

China has adopted a sweeping national-security law that the government says is needed to counter emerging threats but that critics say may be used to quash dissent and exclude foreign investment. As WSJ’s Chun Han Wong reports:

Its passage marked the latest signpost in Beijing’s intensifying crackdown on activism and dissent during the past two years, featuring repression of civil-society groups, heightened monitoring of social media, and sharpened warnings against the spread of Western ideas and influences.

The new legislation forms the centerpiece of a series of proposed security laws, including draft laws on counterterrorism and the management of foreign nonprofit groups. Together, experts said, the laws underpin a push by President Xi Jinping to consolidate his and Beijing’s power and promote a notion of rule of law that doesn’t undermine the Communist Party’s authority.

These laws “reflect the party’s determination to create a garrison state,” said Jerome Cohen, a veteran China legal scholar at New York University. The national security law, he said, is “an ideological platform that guides domestic and foreign policies.”

via China National Security Law Aims to Create ‘Garrison State,’ Experts Say – China Real Time Report – WSJ.

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01/07/2015

China’s Communist Party: Still Big, and Getting Bigger – China Real Time Report – WSJ

Quality over quantity. Less is more.

Those have been the watchwords of the Chinese Communist Party ever since its top leaders declared in early 2013 that its membership would be controlled in a bid to improve the organization’s “vigor and vitality.”

Two years later, the upper echelons of Chinese leadership appear to have come face to face with a realization that’s true all the world over: slimming down is hard to do.

In a communique released Tuesday, the Organization Department of the Communist Party’s Central Committee said that the party boasted 87.793 million members as of the end of 2014. The figure – which exceeds the entire population of Germany – represents a net increase of 1.1 million from a year earlier.

China is in the midst of a sweeping anti-graft campaign under President Xi Jinping, with announcements of corrupt officials’ investigation and ouster from the party a near-weekly occurrence. Along with that crackdown has come a steady stream of warnings for party members to rein in behavior ranging from their mahjong playing to the use of terms like “dude” or “boss” when addressing their superiors.

At its heart is the pursuit of the party’s survival. Xi and other top leaders have made a point of reminding cadres that the Chinese Communist Party must avoid the same pitfalls that brought about the demise of the former Soviet Union – particularly disloyalty to Communist ideals – with some Chinese scholars warning that the Soviet collapse came when the ranks of its Communist Party had swollen to an unwieldy 19 million, or nearly 10% of the Soviet Union’s adult population.

The membership of the Chinese Communist Party currently stands at about 7.8% of China’s adult population.

Yet despite a vow by China’s Politburo leaders to limit the party’s size and purge “unqualified members,” statistics released by the Organization Department show that membership has actually grown over each of the past four years, albeit at an increasingly slower rate.

via China’s Communist Party: Still Big, and Getting Bigger – China Real Time Report – WSJ.

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01/07/2015

Foreign Brands Losing Luster in China – China Real Time Report – WSJ

Move over Western brands, Chinese companies are taking over.

China’s 1.34 billion-plus consumers are filling their shopping baskets with Chinese-branded toothpaste, laundry detergent, juice, cookies and more, according to a new study from consultancy Bain & Co.

Local Chinese companies have become more competitive and are leveraging their strength in smaller cities, where growth rates are higher than in top cities like Beijing and Shanghai, according to the study, which looked at the shopping habits of 40,000 consumers.

The result is that foreign brands are losing market share in large consumer goods categories–such as personal care, home care and packaged foods– all across China, from its biggest to smallest cities, Bain said. And sales growth, which is dwindling as China’s economy slows, is going primarily to Chinese companies, such as fabric-softener maker Guangzhou Liby Enterprise and juicer Tian Di No. 1 Beverage, it said.

While that’s good news for Chinese brands, it’s nothing to cheer about for global companies, which have been banking on Chinese shoppers to boost their sales. China’s economy is also slowing, meaning that the days of easy money in China are over and tireless boardroom references to “China’s emerging middle class” as the saving grace may soon be put to rest.

Some companies, like Best Buy Co. and Home Depot Inc., have either exited or are rethinking their goals in China. Best Buy Co. sold all its remaining stores in China last year, citing online competition.

But there’s still growth for many foreign brands. Foreign makers of beer, chewing gum and hair conditioner are still gaining traction and market share from Chinese companies, according to Bain.

Below are charts from Bain & Co and Kantar Worldpanel showing how Chinese companies are standing up against foreign rivals at retail and in consumer products.

via Foreign Brands Losing Luster in China – China Real Time Report – WSJ.

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25/06/2015

China says economic losses from drug abuse hit $81 billion a year | Reuters

China on Wednesday gave its first-ever assessment of the scourge of drug abuse, saying it caused annual economic losses of 500 billion yuan ($80.54 billion) and as many as 49,000 deaths last year.

China has intensified a crackdown on drugs as the rise of a new urban class with greater disposable income has fueled a surge in the numbers of drug addicts.

In its fight on drug abuse, the government arrested a string of celebrities, including the son of Hong Kong kungfu movie star Jackie Chan. Jaycee Chan, 32, was released in February, after serving a six-month jail sentence on drug charges.

China has more than 14 million drug users, Liu Yuejin, assistant minister of public security, told a news conference.

“The direct economic losses caused by drug use in the entire country have hit 500 billion yuan annually,” Liu said.

Drug abuse had killed at least 49,000 registered users by the end of 2014 and fueled a rise in crimes such as murder, abduction and rape, Liu added.

China’s share of synthetic drug users eclipsed heroin users for the first time last year, according to an annual report on the drug situation.

By the end of 2014, China had about 1.2 million users of methamphetamine, up almost 41 percent from a year earlier.

Two major overseas drug sources for China are southeast Asia’s “Golden Triangle,” where the borders of Myanmar, Thailand and Laos meet, and south Asia’s “Golden Crescent“, which includes Afghanistan and Pakistan, Liu said.

Heroin and methamphetamine are being smuggled into China’s southwestern province of Yunnan and region of Guangxi, which both border Southeast Asia, Liu added.

To fight this situation, China was strengthening law enforcement cooperation with Afghanistan, Pakistan, Myanmar and other countries, he said.

via China says economic losses from drug abuse hit $81 billion a year | Reuters.

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25/06/2015

Indian and Chinese Car Makers Out-Earn U.S. Rivals – India Real Time – WSJ

U.S. auto makers’ ability to finance costly technology and emissions requirements from earnings will be tested by a broader group of strong competitors that for the first time include more profitable Indian and Chinese car makers.

Top auto makers in China and India earned 37.5% more profit excluding preferred dividends in fiscal 2014 than their U.S. counterparts, joining European and Japanese auto companies in out-earning the Detroit Three, said AlixPartners LLP, a New York-based consulting firm with a global automotive practice. Its 2015 automotive outlook, released on Tuesday, shows emerging Asian auto makers last year generated margins that were about double those of General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV’s Chrysler unit.

The emergence of Asian powerhouses—notably India’s Tata Motors Ltd. and China’s SAIC Motor Corp. and Great Wall Motor Co.—represents the latest dent in Detroit’s once-global dominance. Over the past 15 years, U.S. auto makers went from delivering more than 60% of world-wide car-company profit to delivering about 17%, the consulting firm said.

The trend raises questions about the global competitiveness of GM, Ford and Fiat Chrysler on the eve of labor negotiations with the United Auto Workers union and amid an aggressive push by Fiat Chrysler Chief Executive Sergio Marchionne for industry consolidation. The U.S. market is on pace for 17 million light-vehicle sales in 2015, the best year in more than a decade, but Detroit needs better returns to develop self-driving cars and electric powertrains and to combat new entrants like Google Inc. and Tesla Motors Inc.

via Indian and Chinese Car Makers Out-Earn U.S. Rivals – India Real Time – WSJ.

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