August 28, 2011

China Daily: Profits of China's industrial businesses up 28.3%

China's industrial enterprises reported a profit increase of 28.3 percent in the first seven months year-on-year to 2.8 trillion yuan.

China Daily: Terra Firma lands in China

One of Europe's largest private equity companies is set to enter the Chinese market.

Terra Firma Capital Partners Ltd, which is based in London and manages $30 billion of assets, received regulatory approval from the Chinese authorities earlier this month to open an office in Beijing.

The company, which is chaired by Guy Hands, one of the best-known figures in the private equity industry, is looking to make major investments in China, particularly in sectors such as social housing, agriculture and new energy.

Shi Bo, who will head the operations in Beijing as chief representative, said the company is looking for major investments between 300 million euros ($443 million) and 500 million euros.

China Daily: More cities get housing purchase limits

More than 20 second- and third-tier cities have decided to impose limits to cool prices.

WSJ – China Realtime Report: China’s hardliners take aim at a new target

Here comes the hard line again.

Back from their working break at the summer resort of Beidaihe—and with no major decisions about the economy materializing in the wake of the those meetings–the Chinese Communist Party leadership has evidently decided that it’s high time to reaffirm its control over society.

And this time, there’s a new target: the social media.

After weeks of taking jabs to the chin from an angry microblogging public, leading forces in the Party have decided to punch back. Politburo member Liu Qi visited the Beijing offices of Sina.com’s popular microblogging service Weibo earlier this week and impressed upon the staff there the need for “the Internet’s healthy development”—code words for staying away from topics which attack the rule of the Communist Party or hold officials up for public ridicule.

It’s not clear why the Party leadership took so long to issue this warning to Weibo. If there were previously any doubts in Beijing about the threat the service poses to the government’s ability to control public discourse, they would have been eviscerated weeks ago with the unprecedented outpouring of rage on the site over the July 23 high-speed train collision near the city of Wenzhou.

Of course, the Wenzhou accident illustrated how Weibo functions as a safety valve for some in society, and so refraining from interfering might have been seen as the smart choice, lest outrage at further media controls spill from cyberspace into the streets. Weibo also provides Party overseers with a good sense of what netizens are dissatisfied about—a pulse-taking when the conversation gets political.

The most likely explanation, however, is that the upper echelons simply could not agree on how to manage a situation where indignation at the authorities appeared so forcefully. Bogged down in Beidaihe trying to sort out a consensus on economic matters, leaders were probably wavering then over what could and should be done in the wake of the Wenzhou train tragedy.

WSJ – China Realtime Report: Latest threat to Chinese culture: Lady Gaga

China’s Communist Party, it seems, isn’t into threesomes — or Lady Gaga.

China’s Ministry of Culture last week released a list of 100 banned songs (in Chinese), its third such list.

Making unsurprising appearances on the list are recent hits like Katy Perry’s “Last Friday Night (T.G.I.F.),” an homage to a drunken night of partying featuring “skinny dipping in the dark” and a “ménage à trois.” Also featured are pop sensation Lady Gaga’s “Judas,” a song that pays tribute to the biblical apostle who betrayed Jesus and has also offended its fair share of those in the West, and “Hair,” in which she sings of hoping to “die living just as free as my hair,” a concept that doesn’t exactly dovetail which Beijing’s emphasis on social harmony.

But less obvious are Owl City’s syrupy “Honey and the Bee” (“I fell in love with you, like bees to honey”), a slew of seemingly innocuous songs by the U.K.’s Take That, or the 1999 Backstreet Boys hit “I Want It That Way.” Perhaps the government just got wind of the boy band’s ballad a few months ago, when a video was posted to YouTube featuring a trio singing it in Chinese.

Others who made the list include Britney Spears, Beyonce, Canada’s Simple Plan as well as several Taiwanese, Japanese, Hong Kong and Malaysian artists.

DealBook:Canada Halts Trading in Sino-Forest of China

Canada’s top securities regulator on Friday accused a Chinese forestry company of fraudulently inflating its revenue and exaggerating the extent of its timber holdings.
The regulator suspended trading for 15 days in shares of the company, Sino-Forest, which trades on the Toronto Stock Exchange. But its directive came amid some confusion. The Ontario Securities Commission at first took the very unusual step of ordering five directors and officers of Sino-Forest to resign — only to rescind that demand just hours later.

Wendy Dey, a spokeswoman for the regulator, said that the order against the executives, which included Allen T. Y. Chan, the chairman and chief executive of Sino-Forest, was reversed after the commission determined that it could not force their resignations without holding a hearing.

Chris Nicholls, a professor specializing in securities law at the University of Western Ontario, said that he could not recall the commission previously trying to remove corporate officials without a hearing. “But that’s probably because they can’t do it,” he added. “Clearly there was some mistake.”

Bloomberg: China to lock up more cash to tighten liquidity

China broadened the base of reserves it requires commercial lenders to deposit with the central bank to control liquidity and limit inflation, economists said.
Reserve requirements are being extended to customers’ margin deposits, a move that may drain 900 billion yuan ($140 billion) from the banking system over six months, Bank of America Merrill Lynch economist Lu Ting said in an e-mailed note on Aug. 26. Mizuho Securities Asia Ltd. cited similar information. A central bank press official declined to comment.

China has already raised reserve ratios to a record 21.5 percent for the biggest banks to counter the fastest inflation since 2008. London-based Capital Economics Ltd. said that the reported move may mean no further increases this year, after previously anticipating another 1 percentage point gain by the end of December.

“It’s not surprising to see such a move from the Chinese government, as it is facing a big trade surplus and inflation pressure,” said Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking group Ltd. “The move will further tighten liquidity,’” he said.

The Economist: Economist: China’s military power – Modernization in sheep’s clothing

The good news, as suggested by the Pentagon's latest annual report on China's military power, is that Chinese leaders are still eager to avoid confrontation with other powers and focus on beefing up the economy. The bad news, it hints, is that this might not last. With its rapidly improving military capability (described by the Pentagon in great detail), China has the wherewithal to challenge the security status quo in the Pacific as well as potential motives to do so.

The report is diplomatically couched—though from China's perspective, not nearly enough. It hints at considerable unease about long-term trends in China's military buildup. The last few months have seen some headline-grabbing aspects of this: an assertion by the Pentagon in December that China was making faster progress than expected on an aircraft-carrier-killing ballistic missile, the DF-21D; a new stealth fighter, the J-20, making its first test flight just as Robert Gates, then defence secretary, was visiting Beijing in January; and then this month the maiden launch of China's first aircraft carrier, a refitted Kuznetsov-class ship (as yet unnamed) from the former Soviet Union.

About these particular weapons, the Pentagon avoids sounding alarmed. Of the DF-21D missile, it says that it is still being developed. It does not repeat the claim made by Admiral Robert Willard of America’s Pacific Command in December that the missile has reached “initial operational capability”. The J-20, it says, is not expected to reach “effective operational capability” before 2018 (China, it says, has yet to master high-performance jet-engine production). China is likely to build “multiple” aircraft-carriers with support craft over the next decade. But it will take “several additional years” for China to achieve a “minimal level of combat capability” with them, says the report.

The Pentagon does say, however, that China is steadily closing its technological gap with modern armed forces. The country’s lack of transparency about this, it says, is fuelling concern in the region about China’s intentions, with some of its neighbours fearing that China’s growing military and economic weight is “beginning to produce a more assertive posture, particularly in the maritime domain”. A senior Pentagon official, Michael Schiffer, told reporters that China’s capabilities could “contribute to regional tensions and anxieties”.

The Economist: Mexico’s economy - The cartel problem

Mexico could be a giant if only it forced its moguls to compete.

Caixin: Ample reasons for another yuan growth spur

Inflation, political pressure and exports are some of the many factors behind a jump in the yuan's value in August.

The Diplomat's New Leader Forum: Understanding China

Much ink has been spilled over Chinese acquisition or indigenous production of military assets, not least in the Pentagon’s latest report on the country’s rapid military development.

The launch of China’s first aircraft carrier a couple of weeks ago was just the latest event to fuel speculation over the country’s objectives. The news followed the Chinese Anti-Ship Ballistic Missile DF-21D reaching initial operational capability last year and the first flight of the 5th generation J-20 stealth fighter, which took many Western analysts by surprise.

Still, despite the numerous one-off articles, there hasn’t until now been a place in English that brings together all the pieces of the puzzle. That is until the recent publication by the China Maritime Studies Institute of Chinese Aerospace Power: Evolving Maritime Roles. The volume, a collection of essays, offers a comprehensive overview of all the latest developments, and touches on the whole spectrum of the Chinese aerospace capabilities – from air-refuelling capabilities and space assets to airborne early warning and electronic warfare capabilities. The essays, from some of the most highly regarded analysts in the field, help provide a good understanding of the state of Chinese aerospace modernization. The book not only examines the technical feasibility of Chinese plans, as well as their strengths and weaknesses, but also delves deep into domestic Chinese debates about the weapons systems in question.

The volume manages to get to the core of the issue through open source analysis that compares and contrasts Chinese writings on the topic from a variety of official and unofficial sources, offering a far broader perspective than volumes focusing only on Western analysis. Indeed, Chinese Aerospace Power delves deeply into the Chinese system, examining inter-service rivalries and integration and training issues.

AP: China blog site shuts accounts in ‘rumor’ crackdown as government tightens Internet controls

China’s most popular microblogging site is cracking down on what it says is the spread of false rumors after the ruling Communist Party told Internet companies to tighten control over information online.

The move by Sina Corp. reflects the pressure on China’s Internet companies, most of which are privately owned, to take initiative to help Beijing enforce censorship or risk losing the right to operate profitable businesses in a fast-growing market.

Sina’s Weibo service has sent notices to its 200 million users denying two reports posted on the site, including one about the killing of a 19-year-old woman. It said the accounts of users who originated the reports were temporarily closed.

The move comes amid the ruling party’s most sweeping crackdown on dissent in years as it tries to prevent the rise of Middle East-style protests.

The party secretary for Beijing, Liu Qi, visited Sina’s headquarters last Monday and said Internet companies should block the spread of false and harmful information, according to a party newspaper. Liu gave no details of what the party wanted, but Sina issued a statement Thursday saying it would “put more effort into attacking all kinds of rumors.”

AP: China, France agree to discuss yuan flexibility

France and China have agreed to discuss how to work toward easing Beijing's controversial currency controls and making its yuan freely traded, the French finance minister said Friday.

The two governments agreed during a visit this week by President Nicolas Sarkozy to Beijing to work on the issue ahead of a Nov. 20 meeting in France of the Group of 20 major developed and emerging economies, Francois Baroin told reporters.

The United States, the European Union and other trading partners are pressing Beijing to ease controls on its yuan. They complain it is kept undervalued, giving China's exporters an unfair price advantage and swelling its trade surplus.

"We have discussed with our Chinese counterparts and friends the possibility of a path that could enable the yuan to become convertible, reflecting China's commercial and economic weight," Baroin said at a news conference.

Officials would work on "the best ways that will of course conform to the Chinese government's strategy and time line," he said.

Chinese officials say the yuan eventually will be allowed to trade freely and they are gradually expanding its use abroad, including for trade. But Beijing says it will decide the pace of any changes.

Politico: A political junkie's guide to Cheney's memoir

Since the book leaked, much of the coverage on Dick Cheney’s memoir has focused on the portions he devotes to national security and foreign affairs during his time as vice president.

But Cheney’s political career began well before 2000, and “In My Time” includes more than a few behind-the-scenes nuggets spanning his time in the Nixon, Ford and first Bush administrations, as well as his tenure as a member of Congress from Wyoming.

The book won’t be officially released until Tuesday, but POLITICO purchased a copy at a Washington bookstore on Friday and has since scoured its 565 pages for the revelations and observations that political and history aficionados will most appreciate.

Read more here: http://www.politico.com/news/stories/0811/62194.html

China's food chain lures private equity

Foreign firms, Including Carlyle, Blackstone and 3i, more than tripled investments in food, agriculture in 2010.

FT: Apple overtakes Lenovo in China sales

Apple’s sales in greater China have for the first time overtaken those of Lenovo, the world’s third-biggest personal computer maker by shipment volume, results from the two companies confirm.

Lenovo, which was the PC industry’s fastest-growing company for the seventh consecutive quarter, said on Thursday that its China sales rose 23.4 per cent from a year ago to $2.8bn, enabling it to consolidate its position as the PC market leader in China, said Yang Yuanqing, chief executive.

The Hill: Lawmakers criticize defense cuts after report on China's military buildup

Conservative lawmakers and analysts are seizing on the Pentagon’s finding that China is “closing the gap” with other militaries to criticize the Obama administration’s plans to pare U.S defense spending.

The critics say the president does not fully grasp the Asian giant’s global ambitions. The [Pentagon’s] China military power report acknowledges China's insatiable desire to become a 'world class economic and military power' as it advances toward transforming its military into a dominant regional force by 2020 and an unrivaled international power by 2050,” House Armed Services Readiness subcommittee Chairman Randy Forbes (R-Va.) said.

Forbes then turned his sights, in a veiled way, on plans to trim at least $350 billion from U.S. military budgets between 2013 and 2023. “There is no question that China is rapidly closing the technology gap and striving to challenge the United States' military prowess — there is a question, though, of whether the United States will simply cede its global and military leadership role to a nation with uncertain intentions, but known disregard for human rights, basic freedoms, and democratic institutions,” Forbes said in a statement.

Al Hunt: Changing Vietnam yearns for closer US embrace

Pham Binh Minh, whose father fought to force the U.S. out of Vietnam, is working fervently to elevate the interest and involvement of his country’s former enemy.

Vietnam wants a U.S. presence for economic reasons and as a balance to China, the regional superpower. Minh is the new foreign minister; his father was part of Ho Chi Minh’s Communist regime during the bitter conflict of the 1960s and 1970s; later, he was foreign minister when Vietnam clashed with China.

“One cannot imagine how fast the relationship between the United States and Vietnam has developed,” Minh, 52, says in an interview in Hanoi. “After 16 years of normalization, we’ve come to the stage where we’ve developed the relationship in nearly all aspects.”

While the U.S. hasn’t fully erased the pain of that war, the Vietnamese, who suffered far more, embrace their old adversary. Economic ties between the nations are growing; the U.S. is the largest importer of Vietnamese goods. There are regular military contacts, and this month the two countries signed the first defense pact regarding military medicine.

Last year, Vietnamese officers observed a U.S. military operation aboard a Navy destroyer, the USS John S. McCain, named after two admirals, the father and grandfather of Republican Senator John McCain of Arizona, who was a prisoner of war in Hanoi for six years.

Xinhua: Chinese gov't strongly rebuffs U.S. military report

The Chinese government reacted strongly on Friday to a Pentagon report that warned China's military modernization could destabilize the Asia-pacific region. The Chinese Defense Ministry says, the US military's annual assessment of China's armed forces , indulged in exaggeration and groundless suspicion. Beijing and Washington have sought to rein in their quarrels this year, and a recent visit to China by Vice President Joe Biden brought vows of cooperation and goodwill.

But military wariness between the two powers remains a source of tension. And the recent US Defense Department Report once again underlines this. The annual report, presented to the Congress on Wednesday, addressed the current and future course of military development of the Chinese People's Liberation Army, China's security and military strategy, and US-China military ties. Michael Schiffer, the deputy assistant secretary of defense for East Asia, says the United States is "uncertain about how China will use its growing capabilities."

Bloomberg: GM keeps top China overseas sales rank

General Motors Co. (GM) is sacrificing profit margins to maintain market share in China, cutting prices of low-cost minivans by as much as 15 percent to offset slowing sales in the world’s largest vehicle market.

Propping up minivan sales through sticker-price reductions is crucial for helping Detroit-based GM remain the top overseas automaker in China, ahead of Volkswagen AG, after the government ended stimulus programs and local authorities restricted purchases to curb highway congestion. “GM does not rely on the minibus for profit,” said Jenny Gu, a Shanghai-based analyst with industry researcher J.D. Power & Associates. “They only contribute volume.” Industry sales of the vehicles -- nicknamed “bread trucks” for their boxy shape -- fell more than 10 percent in the first seven months of this year, according to the China Association of Automobile Manufacturers.

Sales at GM minivan venture SAIC-GM-Wuling Automobile Co. declined 3 percent in the same period, according to the company. The venture dropped the price of its Wuling Sunshine minivan, China’s most-popular vehicle last year, to 28,000 yuan ($4,384) from 33,000 yuan earlier this year, according to GM.

January 30, 2011

Video: Chinese Broadcaster CCTV Tries to Pass Off ‘Top Gun’ Clip as Military Drill? - China Real Time Report - WSJ

China Real Time Report: Beijing has lately stepped up its campaign against the country’s “fake news” scourge, with the General Administration of Press and Publications putting pressure on news organizations to dismiss journalists suspected of doctoring their stories. Ironically, the latest example of alleged news fakery comes from China’s own state broadcaster, CCTV.

In a development that could further inflame Hollywood’s frustrations with unauthorized reproduction of its intellectual property in China, Chinese netizens are accusing CCTV of repurposing footage from the movie “Top Gun” for use in a news story about an air force training exercise.

As noted yesterday by the blog Ministry of Tofu, the alleged IPR violation, spotted by Internet user “Liu Yi,” took place during a November 23rd evening news broadcast. CCTV has removed the clip in question from its website, but a copy of the broadcast posted on Chinese video sites does reveal some striking similarities.

Managers get set for rise of the renminbi

FT reports: More fund houses are rolling out funds and share classes denominated in renminbi, or contemplating the idea, as they look to profit from the Chinese currency’s likely rise against the US dollar and its importance on the world stage. Indeed, while investment choices are still scarce, the sweep of renminbi-denominated investments on offer already ranges from bonds and funds to certificates of deposit, currency swaps and insurance products.

Some fund managers argue that renminbi-denominated share classes of traditional funds are a superior play on the appreciation of the renminbi as they offer the chance to register a currency gain as well as a return on underlying investments higher than the inflation rate.

Just this month, Pharo Management UK revealed plans to become the first hedge fund manager to create shares in an investment vehicle denominated in renminbi. Investors in Pharo’s flagship fund do not have to hold renminbi as the fund’s administrator can handle spot exchanges into the currency. This underscores the extent to which the future of the US dollar and the rising power of the renminbi – dubbed the redback – are becoming concerns for investors.

“We think you should set up a renminbi share class for the same reason you might create a share class in euros or sterling,” says Peter Fegelman, a senior manager with Pharo. “Investors are looking to hold non-US dollar currencies and we do believe the renminbi will appreciate.

Despite China’s illusive might, U.S. factories maintain edge

AP reports: U.S. factories are closing. American manufacturing jobs are reappearing overseas. China’s industrial might is growing each year.

And it might seem as if the United States doesn’t make world-class goods as well as some other nations.

“There’s no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products,” President Barack Obama said in his State of the Union address last week.

Yet America remains by far the No. 1 manufacturing country. It out-produces No. 2 China by more than 40 percent. U.S. manufacturers cranked out nearly $1.7 trillion in goods in 2009, according to the United Nations.

The story of American factories essentially boils down to this: They’ve managed to make more goods with fewer workers.

The United States has lost nearly 8 million factory jobs since manufacturing employment peaked at 19.6 million in mid-1979. U.S. manufacturers have ranked near the top of world rankings in productivity gains over the past three decades.

That higher productivity has meant a leaner manufacturing force that’s capitalized on efficiency.