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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (878)	6/19/2018 3:22:31 AM
From: elmatador	Respond to of 13784

China has made progress in tackling financial risks But the real test lies ahead Print edition \| LeadersJun 16th 2018 NEVER has China’s bond market had such a stormy spring. It has already set a record for defaults in the second quarter. The cost of credit for firms has shot up. Even the state-owned companies that invest in infrastructure, previously sacrosanct, are seen as risks. What has gone wrong? The answer is nothing at all. Defaults are progress for China, which needs to clear a backlog of accumulated debt. This year’s casualties amount to a mere 0.1% of the bond market. But that is still an improvement on the recent past, when investors assumed that the government would rescue any big firm in trouble. The real worry is not that the defaults will go too far, but that officials will lose their nerve. China needs to deleverage because, over the past decade, total debt has risen from 150% of GDP to nearly 300%. This is a cloud over the global economy: such a rapid increase often predicts financial trouble. Although it is far too early to relax, China has made headway in the past two years in stabilising its debt burden. Partly, that reflects a lucky rise in commodity prices, which has buoyed profits at struggling steel and coal firms. But the stockmarket crash of 2015 and the huge capital outflows in 2016 also persuaded President Xi Jinping that financial frailties were endangering national security and that the country needed a change in policy. Some government actions have been dramatic, notably the arrests of tycoons who made lavish investments abroad. Others have been bureaucratic, such as a merger of bank and insurance watchdogs in order to improve oversight. The most important, though, has been the start of a clean-up of the financial system. Banks have written off some 5trn yuan ($780bn) of bad loans, raised almost 1trn yuan in fresh capital and are on course to raise another 1trn yuan. That adds up to an infusion about three-quarters the size of America’s bank rescue after the financial crisis. Regulators are also reining in China’s once-booming world of shadow banking. Banks have been ordered to bring off-balance-sheet loans back onto their books (see Finance section). Asset growth in the banking sector fell by nearly half last year. Safe, not stagnant Two risks darken this picture. The first is that the government will backtrack. The first bond default in China did not come until 2014 and today’s failures are provoking cries of pain. Banks want an easing of strict new asset-management rules. Fitch, a rating agency, estimates that, if corporate debt stabilises, growth will slow to 4.4% by 2020 from nearly 7% last year. Milder slowdowns have scared the government off the path of prudence before. This time it must hold the line. The second, less obvious, risk is that China will revert to a stodgily inefficient banking system. Entrepreneurs have flourished over the past decade, thanks in part to easier access to credit. Amid the clean-up, the concern is that banks will again favour state-backed borrowers. Defaults have so far been concentrated in the private sector. If the government is to create a financial system that is safe without being sclerotic, it needs to change incentives. It should not bail-out state-owned firms (or, if that is too much, those in non-strategic sectors). It should let small, weak banks fail, because national lenders are less beholden to local interests. It should also distinguish between good and bad competition in finance. China is right to throttle undercapitalised shadow banks. But it also needs to allow for technology firms such as Tencent and Ant, Alibaba’s financial affiliate, to compete against banks, so long as all comply with the same regulations. That goes for foreign lenders, too. The task for China is not just to solve the problem of past excesses, but to lay the foundations for future growth. This article appeared in the Leaders section of the print edition under the headline "Xi, make me chaste"

To: robert b furman who wrote (878)	7/19/2018 3:52:04 AM
From: elmatador	Read Replies (1) \| Respond to of 13784

Always learning something new (well, at least for me) I ave been trying to put together an eco-system here in East Africa comprised of Investors local Internet Service Providers (ISP) Local Mobile Operators The investors want to invest in the ISPs' business to grow and then sell the company for several multiples. I sell the technology, and I make the case for the local big Mobile operators to buy in. The big mobile operators would expand their networks in areas that their cost base did not allow them to expand into After three months I report back to the investors saying: the local small ISPs are small and don't want to grow Some are happy to be small, get some capital to grow a bit Like these small enterprises that the owners only want to get enough to live a middle class life. The investor told me: It has to do with the level of ambition The term suck with me. I have had a higher level of ambition and I didn't know.

To: robert b furman who wrote (878)	7/28/2018 12:54:57 AM
From: elmatador	Read Replies (1) \| Respond to of 13784

Economist Richard Duncan cautions that China can’t possibly meet the demands on trade laid out by the Trump administration; warns of dire outcome for global economy Podcast: Deconstructing Trump’s tariffs, turning point in history and the end of globalisation “I don’t view this as a conflict between the US and China. It is not that simple, it’s not team USA versus team China. There are interests in the United States that have benefited enormously from this arrangement that now exists, in particular, the large US multinationals. They have been able to drive down their labour costs by moving their factories from Detroit and other US cities into China. Their wage costs have collapsed as a result of this move. The share of profits that are split between labour and capital have shifted.” Economist Richard Duncan cautions that China can’t possibly meet the demands on trade laid out by the Trump administration; warns of dire outcome for global economy PUBLISHED : Wednesday, 25 July, 2018, 12:39pm UPDATED : Thursday, 26 July, 2018, 6:1 The deepening trade dispute between the United States and China could mark a “turning point in history”, ending the system of global trade that brought low-cost goods to consumers and fuelled the rise of the Chinese mainland and other emerging markets in just a few decades, according to noted economist and author Richard Duncan. Bangkok-based Duncan believes the US$50 billion of Chinese products designated for 25 per cent tariffs by the Trump administration – in addition to a proposed 10 per cent tariff on an additional US$200 billion in Chinese goods – may represent the first steps in a policy shift by Washington that goes far beyond what many observers expect. “I am becoming concerned that they really do intend to put up trade tariffs on a very large scale against China and that perhaps there’s more to this strategy than just balancing trade. They may be intent on stopping China’s economic growth altogether, now that China has become so large they are becoming not only an economic competitor, but potentially a military threat to US global dominance. If that’s the case, this could be a turning point in history,” Duncan said in a new South China Morning Post business podcast. While it is too early to say how the trade talks between the two sides will play out, one concern is that escalating tariffs, beginning with the US$34 billion of Chinese products which went into effect on July 6, are about to become the norm, rather than the exception. Another is whether the trade policies are really designed to reverse the deindustrialisation of the US economy – a theme made prominent during Donald Trump’s presidential campaign. “Over the last 30 years the rapid economic rise of China has really transformed the world, but if the US starts putting tariffs on US$200 billion and US$500 billion of Chinese exports, then China’s economy could go into a very serious crisis,” Duncan said. Duncan, who now publishes independent research at his subscription video newsletter Macro Watch (richardduncaneconomics.com), said China’s growth could come to a “screeching halt”, resulting in millions of job losses, while a domino slowdown would also be felt among its major trading partners. Another outcome would be rising inflation, higher interest rates, and a global drag on asset prices ranging from stocks to real estate. “The impact would be global and we would see a drop in metal prices and that would be a blow to metal and mining companies. Also as commodity prices fell, the economies of the commodity-producing economies would go into recession,” he said. Duncan started his career in finance in Hong Kong in 1986, working as a research analyst for a local brokerage. His insights into the global economy were partly inspired by visits to factories in Guangdong province, where he witnessed first-hand the rapid industrial transformation underway at the time. “There were factories all along the Pearl River Delta full of 19-year-old women working for US$3 per day. It didn’t take long to realise that this was going to be very deflationary and very disruptive for the US economy if we had free trade with China because clearly this would result in the deindustrialisation of the US because how could it compete when it paid its workers roughly US$200 per day,” Duncan said. Duncan said his thoughts on global trade were also fuelled by his experience heading equity research departments for James Capel Securities and Salomon Brothers in Bangkok during the 1990s, a period that he credits as his education in “bubblenomics”. Duncan later worked as a financial sector specialist for the World Bank in Washington. In 2003, he laid out his theories on global trade in the international bestseller The Dollar Crisis, a book which he said “forecast the global economic crisis [of 2008] quite accurately”. Duncan, an American, said he does not side with Washington in this conflict. Instead he has been promoting an alternative path that takes advantage of low interest rates to help fund state-backed scientific research on a massive scale. “I don’t view this as a conflict between the US and China. It is not that simple, it’s not team USA versus team China. There are interests in the United States that have benefited enormously from this arrangement that now exists, in particular, the large US multinationals. They have been able to drive down their labour costs by moving their factories from Detroit and other US cities into China. Their wage costs have collapsed as a result of this move. The share of profits that are split between labour and capital have shifted.” Duncan thinks a moon shot, similar in nature to Nasa’s Apollo programme of the 1960s – this time in such areas as genetic engineering, biotechnology, nanotechnology and clean energy – is the best way forward. “It would be much better for the government to undertake at the government level a very aggressive investment programme … in new industries and new technologies,” Duncan said.