China’s growth obsession fosters collateral fraud 1 Jun 2017 A Reuters report lays bare how loans are often backed by fake holdings of land or metals. It’s not surprising: the system deliberately enables corner-cutting to boost economic activity. But a lack of trust in asset values could prove traumatic if prices start to fall.
Bain’s bad debt foray into China will tempt others 1 Jun 2017 The U.S. private equity firm bought $200 mln of bad loans. That's a drop in an ocean of distressed Chinese debt, but it signals Beijing’s willingness to open up the market. As regulators push banks to clean up balance sheets, expect more overseas investors sniffing around.
Ant Financial hands Chinese banks an easy win 31 May 2017 The fintech group has capped account sizes for its $167 bln money market fund, seen as a response to regulatory concern. The move won't stem shadow banking risk much, but banks will benefit from less competition in wealth management. Financial disruption in China has its limits.
China puts currency market forces on notice 26 May 2017 It may tweak the way the yuan is priced each day, effectively giving policymakers more control over its value. In reality, the daily price-fixing is only a small part of how China manages its currency. It’s another step back from reform and suggests mounting economic worries.
ChemChina creates new strain of LBO funding 26 May 2017 The chemicals giant is refinancing the debt backing its $44 bln purchase of Switzerland’s Syngenta. This involves less equity than a typical leveraged buyout, and $18 bln of perpetual bonds sold to three Chinese entities. This is M&A finance cross-bred with government policy.
Condom boom and two-child policy make odd couple 26 May 2017 A Chinese drugmaker and a buyout firm are buying the world's No. 2 condom-maker for $600 mln. The rich price could pay off, as Chinese couples invest more in safer sex. But this also highlights the difficulties Beijing faces in convincing the middle class to have more children.
Sovereign downgrade will keep Beijing on its toes 24 May 2017 Moody’s has downgraded China for the first time since 1989, now ranking it below Taiwan. It is mostly symbolic as foreign debt ownership is minimal and local corporate ratings follow their own logic. But the public reprimand will check Beijing's ambition to attract funds onshore.
Geely grabs a new growth engine on the cheap 24 May 2017 The Chinese carmaker is set to buy 49.9 pct of Proton. Reversing the Malaysian marque’s long decline won’t be easy, especially as a back-seat driver. But it is unlikely to cost much upfront. The Volvo owner’s latest bit of bargain-hunting could help it rev up in Southeast Asia.
China’s noodle master has to get nimbler 23 May 2017 A profit rebound at Hong Kong-listed Tingyi is less than meets the eye. Rising ingredient costs are squeezing the firm, which works with Starbucks and Pepsi, and it relies too much on instant noodles and soft drinks. As China’s tastes get healthier, Tingyi needs to adapt faster.
HNA sees Value in connecting East and West 23 May 2017 The deal-hungry Chinese conglomerate reportedly wants to buy into Value Partners. The $2 bln fund manager trades on a lofty percentage of assets under management, thanks partly to high fees. Still, if HNA wants to link Chinese investors with the wider world, this could be handy.
Hong Kong fights losing battle with property boom 22 May 2017 The territory is trying yet again to cool a red-hot real estate market. New curbs will make home loans less profitable for banks and increase down payments for borrowers. An acute land shortage and Chinese buyers' desire to diversify away from the yuan will limit the impact.
Alibaba’s $6bln buyback disrupts financial reality 18 May 2017 Repurchasing shares will offset dilution from paying staff in equity, the Chinese e-commerce giant says. Only, buybacks don’t do that as they leave companies with less cash. Alibaba is replacing one pretence – that investors should ignore stock-based compensation – with another.
Chinese courier tagged as fragile by investors 18 May 2017 ZTO is an important player in a hot sector, Chinese e-commerce. And earnings are growing nearly 50 pct annually. Yet the shares have traded poorly since last year's New York flotation. Blame a pricey IPO, fierce competition, rising costs, and a shifting business model.
China’s confused market strategy reveals old flaws 17 May 2017 Top regulators rattled investors earlier this year with tough talk on financial risks. Now officials are trying to prop up stocks to provide a happy backdrop for showpiece political events. Even creating a proposed super-regulator cannot resolve such conflicting policy goals.
Viewsroom: CEO presidency needs boardroom pushback 17 May 2017 Donald Trump’s promise to run the government like a business is proving difficult but Congress could act like strong independent directors to rein in his wayward management. China’s ambitious Silk Road project could leave its people holding the bag. Plus: job cuts at Ford.
Jack Ma’s buy-and-pay supremacy looks less certain 17 May 2017 The billionaire controls Alibaba and Ant, China's dominant e-commerce and payments outfits worth more than $350 bln. But users are increasingly turning to Tencent's messaging app WeChat to fulfill both functions. The shift is a significant threat to the core of Ma's empire.
Chinese taxpayers have most to fear on Silk Road 16 May 2017 President Xi pledged $124 bln at an international summit to build a modern version of the ancient trading route. Huge global infrastructure spending will burnish Beijing's standing. But the hype could backfire if citizens of the People's Republic fail to reap tangible benefits.
WannaCry exposes glitch in tech business model 15 May 2017 Britain’s health service was among users of Microsoft Windows hit by a virus because they hadn’t installed an update. This is, in theory, the user’s fault. But when customers are big, or the result of their negligence is grave, it’s the company that’s likely to end up bearing the cost.
Chinese yogurt bid warrants dollop of skepticism 14 May 2017 Mainland dairy giant Yili is prepping a gut-busting $850 mln bid for Danone's Stonyfield business. The price is tempting, but many Chinese U.S. purchases have soured. And Yili was recently thwarted by regulators at home. Danone has bigger interests to consider here than cash.
China’s dealmakers edge out Trump in first round 12 May 2017 American cattlemen and financiers will get more access to mainland markets in exchange for chicken imports and a potential opening for Chinese banks. It's a good start but Beijing didn't give up much. U.S. negotiators will have to push harder if they want a better bargain.