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Asia Hedge Funds Survive In Year Of Pain For Global Industry

This about says it all as to why global wealth has flown East. “In Asia, there is less hot money than in Europe and the U.S.,” he said. “It’s a cultural thing. Asia is about safe money; Americans and Europeans are big borrowers.” Dec 16

American Power Grid: Worst in the developed world

Dan Collins CMR With the power going outLights Go Out (Briefly) at White House this week it makes one wonder what exactly is going on. Growing up in the U.S. the only power outages I remember were when my Dad didn’t pay the electric bill.

Chinese nuclear weapon growth stuns US, Russia

Want China Times The growth of China’s nuclear capabilities has threatened the United States and Russia with the potential of its intercontinental ballistic missiles (ICBMs), equipped on the country’s latest guided missile nuclear submarine Type 094, to strike US coastal regions, reports Sina’s military news

Chinese Global Property Investment Hits $15 Billion in 2014, Miami Newest Target

With the new 10 year visa, Chinese property investment in the U.S. is set to explode. Get ready to be priced out of homes in your area. World Property Journal According to a new report by Knight Frank, Chinese outward investment in overseas real estate

Concrete Facts

 

72 year old Former CPC Politburo member embezzled billions, raped hotel staff, killed wife, and had 29 regular lovers

In other news, Zhou Yongkang has recently signed an advertising deal for knockoff Chinese Viagra producer “Heng Da” Want China Times Former CPC Politburo Standing Committee member Zhou Yongkang has been accused of “committing adultery and engaging in transactions involving the exchange of power and

American money to support Chinese military presence on the African continent

Want China Times China is ready to help the African Union establish five rapid response forces, President Jacob Zuma of South Africa said after his visit to Beijing ended on Dec. 7. The plan, formulated in 2003, would be five contingents stationed in the northern,

Mobius Says China’s Bull Market Is Just Getting Started

Bloomberg By Weiyi Lim – Dec 11, 2014 Mark Mobius says the bull market in Chinese stocks is just getting started and he’s using the biggest price swings in five years to boost holdings. “We are buying more in China because we think this is

China slowdown isn’t disturbing: Expert

Peter Alexander, Managing Director at Z-Ben Advisors, is an actual expert who lives in China. He can tell you the real deal on the Shanghai markets.  

China to promote development of interbank forex market

BEIJING – China’s foreign exchange regulator announced on Wednesday that it will facilitate financial institutions to enter the interbank foreign exchange market. China’s State Administration of Foreign Exchange (SAFE) said the regulation would promote a market-oriented and more transparent interbank foreign exchange market. The advance-access

Beijing’s maritime encirclement strategy compared to Go

Alexander Vurving from the Honolulu-based Asia-Pacific Center for Security Studies takes the Chinese board game of weiqi or Go to describe the country’s grand strategy in the disputed South China Sea in an article written for the website of National Interest magazine on Dec. 8.

L.A. ON FIRE

In a separate announcement , American economists are thrilled with the fire as it is “sure to add to GDP in the 4th quarter”.  

Zuckerberg can’t speak Chinese and A/P’s mind games

The AP has published an article (below) which seems to be written by a child. She starts off the article assuming Zuckerberg’s curiosity about China must all revolve around his pursuit to get Facebook unblocked in China. She then goes on to interview exiled dissidents,

IEA Offical: Oil to be back at $100 in a few years

Reuters Stockholm December 5 As oil markets continue to crash, the International Energy Agency (IEA) chief economist Fatih Birol said on Friday that the next few years oil prices will rise to nearly $ 100 a barrel, about 40% higher than the current price. Birol

China’s gold reserves may be greater than official figure

Want China Times Taking advantage of the slump in international gold prices, the People’s Bank of China may have purchased large amounts of gold in a bid to diversify its reserves, thereby lowering its share of US government bonds, inside sources say, according to Shanghai’s

China’s motorist population tops 300 million

The number of motorists in China now exceeds 300 million, up from 200 million at
the end of 2010, the Ministry of Public Security reported. The number of automobile
motorists as of the end of November totaled 244 million, with motorcyclists
representing another 56 million motorists, the ministry said.

 

China’s Supply and Demand of Everything

By Gerard DeBenedetto
Former CEO at An Zhong (AZ)
Investment Management Shanghai

In the pre “Internet of Everything” days, getting the Pocket World in Figures from The Economist would save many weary Econ majors
from late night trips to the library. So with the arrival of my 2015 Edition, I began flipping through some macro data.

Of course China is big and growing (albeit at a slower rate), but what can comparative country data tell us? Plenty

If it grows from the ground, China owns it. China is the number one producer of crops such as rice, wheat, coarse grains, even meat, fruit and vegetables. Agricultural output measured in USD is more than the next five countries combined. Chinese farms are routinely chided for their inefficiency so any gains will lead to greater yields and perhaps lower prices. Of course, half the population lives on the farm and leadership has stressed the need for increased urbanization, but farm to city relocation should not materially effect crops.
If it is mined from the ground, China owns it. Again, China is the number one producer of precious and industrial metals alike, from gold, nickel and zinc to aluminum and lead. Increasingly China would like to use their currency to price these metals and as the currency continues to march up the global usage chart, RMB pricing is sure to follow.

Much of the commodity production is out of necessity to feed its people and economy. But aggregate numbers don’t tell the whole story. On a per capita basis or as a percentage of GDP, there are some fascinating risks and opportunities. One of the byproducts of growth is energy consumption and pollution. The controversial Three Gorges Dam, today boasts 22,500 MW, keeps the lights on from Chongqing to Wuhan and contributes to China’s rank as the global leader in energy production. Unfortunately this is still far from enough as demand continues to outpace supply and China still doesn’t rank in the top 50 on a per capita basis for energy consumption. This need for energy is precisely why the government is securing Middle Eastern oil and African pipelines.

Other measures of quality of life including the Global Peace Index and the Human Development Index is where China scores low as well as GDP per person. In each of these measures, China falls well out of the top 50. These are qualitative and relative measures that are not strictly growth driven and that are becoming increasingly important to urban Chinese.

Another byproduct of growth is health and air quality. China air quality ranks as the 20th poorest. No longer turning a blind eye, the government now tracks (and publishes) particle levels and implements automobile and factory restrictions from time to time. Pollution is a healthcare problem and as a percent of GDP, China ranks outside of the top 50 in spending. There are many healthcare issues from bribing emergency room doctors and “pay to play” foreign pharmaceutical company tactics, but this is an industry that will see tremendous growth for a long time.

There are some other interesting data points such as internet penetration and mobile broadband (China is outside the top 50 in both) where China is sure to continue to climb up the charts. Also interesting was R&D spending where China is already ranked 3rd in terms as a percentage of GDP.

While China looks to transition from pure top line growth to a more nuanced service growth it will be interesting to watch three data points from Pocket World in Figures: RMB as an asset class, Energy and Healthcare sectors and all things China internet..

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Putin Biographies selling like crazy in China, books on Obama nowhere to be found

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IMG_3783

 

Namibia in talks to allow PLA naval base at Walvis Bay

Want China Times
Lt Col Monica Sheya, a military spokesperson for Namibia, has confirmed that China hopes to build an overseas naval base at Walvis Bay in the next 10 years, according to a report in the local Namibian Times on Nov. 24.

High-level talks are being held between the militaries of the two countries regarding the construction of the naval base, Sheya told the paper. China wants to turn Walvis Bay into a maintenance and supply base for the PLA Navy. Beijing has claimed that it will not establish military bases on foreign soil as the United States does, but says it requires strategic points overseas in the future, the report said.

The PLA Navy’s 16th escort task force consisting of the Taihu, a Type 903 replenishment ship; Yancheng, a Type 054A guided-missile frigate and Luoyang, a Type 053H3 frigate, anchored in Walvis Bay earlier this year during a mission to the Gulf of Aden, the report said. A satellite tracking station at nearby Swakopmund makes Walvis Bay a very suitable base for future PLA naval operations in the region, Sheya said. Namibia is seen an important outpost for China to extend its influence around the coast of Africa.

The spokesperson said few details of the talks can be disclosed to the public at this time, though the country’s defense ministry will inform the public once a decision is made.

 

Microsoft to pay China $140 mln for ‘tax evasion’

SEATTLE (Reuters) – China has levied about $140 million in back taxes from
Microsoft Corp in the first major case concerning cross-border tax evasion
in the country, as regulators ramp up pressure on U.S. corporations doing
business there.

According to an article published by China’s Xinhua official news agency on
Sunday, an unnamed U.S. multinational must pay the Chinese government
840 million yuan ($137 million) in back taxes and interest, as well as more
than 100 million yuan in additional taxes a year in the future.

The article refers only to a company whose name starts with “M,” is one of
the world’s biggest 500 firms and which established a wholly-owned foreign
subsidiary in Beijing in 1995. Microsoft is the only company that fits that
description.

The Redmond, Washington-based company did not confirm the report, but also
did not deny that it was the company involved.

“In 2012 the tax authorities of China and the United States agreed to a
bilateral advanced pricing agreement with regards to Microsoft’s operations
in China,” said a Microsoft spokesman in an emailed statement. “China receives
tax revenue from Microsoft consistent with the terms of the agreed advanced
pricing agreement.”

An advanced pricing agreement sets the tax treatment of transfer pricing, or
methods of booking prices and sales between subsidiaries, which Microsoft uses
across the globe.

According to its fiscal 2014 annual report, Microsoft’s overall effective tax
rate was 21 percent – well below the standard U.S. corporate rate of 35 percent –
primarily because it channels earnings through “foreign regional operations
centers” in Ireland, Singapore, and Puerto Rico.

According to Xinhua, “M” reported losses for six years in China of more than
2 billion yuan while peers enjoyed profits and so the tax authorities concluded
its behavior was unreasonable. It said the U.S. company admitted to tax evasion
and its mainland subsidiary had agreed to pay the central government.

The tax payment is only the latest headache for Microsoft in China, where it is
already under investigation by anti-trust regulators.

 

Meet the “Dark Sword” China’s new Stealth killer drone

According to Duowei News, the drone is ready for its maiden flight after
completing its taxi tests in December last year.

Designed jointly by the Hongdu Aviation Industry Group and Shenyang
Aviation Corporation, the Lijian is quite similar to both the U.S. X-47B
and the European nEUROn.

http://theaviationist.com/2013/05/10/lijian-drone/

Sharp-Sword-460x340

 

Chinese government bans Windows. 15% of Windows OS to be replaced per year in China

Want China Times

China has decided to replace 15% of the Windows operating systems on its
government computers with domestic operating systems each year, hoping to
have made a significant impact by 2020, reports Duowei News, a media outlet
operated by overseas Chinese, citing the Chinese-language Beijing Times.

Ni Guangnan, a researcher from the Chinese Academy of Engineering, was cited
as the source of the report. The report is said to have won approval from the
leadership of the government who have instructed government organs to implement
it, the Beijing Times said. Sources said alternative operating systems have not
yet been finalized, however a timetable is in place for the large scale
replacement, which will extend to servers, chips and software.

The China Banking Regulatory Commission (CBRC) has informed banks to adopt
domestic operating systems, said Zhang Long, president of Yunnan Sipu Investment
Group, who developed the SPGnux OS.

The Windows 8 operating system has been banned by the Chinese government,
according to a notice on its official procurement website in May. The notice said
Windows 8 is no longer permitted to be installed on central government computers.
Windows 8 has a function that scans users’ computers regularly, which makes
monitoring of information easier. In other words, Windows systems exert a lot
of control over users’ PCs, Ni Guangnan said.

Cyber security has been an issue of contention between China and the US. China’s
Ministry of Industry and Information Technology said the smartphone dominance of
Google’s Android system was out of control in March 2013. Windows 8 was banned in
May 2014 and after Microsoft was investigated for monopolistic behavior, raising
tensions between the two. Duowei stated that these moves demonstrate China’s
elevation of cyber security to an issue of national security.

 

SH-H.K. Connect creating second largest equity mkt in the world

Number of companies with greater market cap

 

$20 million hoard found in Chinese official’s home: Report

CNBC
A minor Chinese official rose to infamy after anticorruption detectives discovered more than $20 million worth of renminbi in cash, 37 kilograms of gold bars and 68 property ownership documents in his family home, according to The New York Times’ Sinosphere blog. Ma Chaoqun was arrested with his brother in February, and five other family members also have been apprehended, the blog said. But the official’s mother, Zhang Guiying, said her son is honest and that the bounty belonged to her deceased husband, a doctor who accrued the wealth by dabbling in side business ventures. She told reporters in the port city of Qinhuangdao that her son was the victim of a vendetta plot, planned by his boss to prevent Ma Chaoqun from exposing an alleged embezzlement scheme.
Zhang said she packed the cash into more than 40 boxes after her husband died in 2012 and stored them in a closet in the family home. “My husband thought it was too much trouble going to the bank to get money,” Zhang said, according to Beijing tabloid The Mirror. “Some of the money hadn’t been touched for years and was growing moldy,” she said, according to The Beijing News.

 

Chinese Markets- 14NOV2014

chinese markets

market

 

The Russians Have Persuaded The Chinese To Bail Out Their Oil Industry

Yahoo

Last month Russian Finance Minister Anton Siluanov announced that Rosneft, Russia’s largest oil company, had requested 2 trillion roubles (then $49 billion) from the state’s National Wealth Fund (NWF) to help it meet its funding requirements. The request was refused but it left questions over how the oil company planned to meet its $30 billion in debt repayments due over the next year after the oil price collapse of recent months.

We now have the answer — a large part of it will be paid by China.

As part of the deal struck between China and Russia at the Asia-Pacific Economic Cooperation (APEC) Forum in Beijing, Rosneft has agreed to sell a 10% stake in a Siberian unit to state-owned China National Petroleum Corp. The news was seen as evidence of Moscow seeking to deepen ties with Beijing as Western sanctions over Ukraine have left it isolated from European and American markets.

It is the second such deal to have been struck this year after a $400 billion agreement was reached in May between state-owned gas companies Gazprom and CNPC (China National Petroleum Corporation).

Not only have the deals helped in part to sooth fears over Russia’s stagnating economy but they now also appear to have backstopped Russian companies that have been frozen out of international capital markets.

A combination of the oil price falling from $115 a barrel in June to below $82 on Wednesday and the collapsing rouble had compounded pressure over recent months. Rosneft’s $30 billion bill went from being worth around 1 trillion roubles in June to around 1.4 trillion as at Wednesday’s exchange rate, while lower oil prices squeezed its revenues.

The Russian business daily Vedomosti quotes Moody’s investor services as saying:
“Rosneft is set to repay $21 billion of debt, which expires between the fourth quarter of 2014 and the first quarter of 2015 [primarily] from its own reserves, which are worth more than $20 billion, and with the help of backup lines of credit from Russian banks of $6 billion.”

Draining the companies capital buffers in this way might seem foolhardy given that the company will still have around $9 billion worth of repayments outstanding and ongoing spending commitments. Here China’s role becomes clear. According to Moody’s, Rosneft “can get significant advances from Chinese state-owned CNPC on account of oil supplies” in 2015, and that should be sufficient to cover the remainder of its debt payments.

The deals have helped bind the corporate liabilities of the two countries together. In essence China is promising to provide the dollar credit line that Russian companies sorely need, and which the Russian state is increasingly withholding, in exchange for increased control over the commodity supplies that its growing economy will require.

However, unlike China’s state-backed firms, Russia’s quasi-state-owned national champion companies are not in as good health as they ought to be.

Rosneft’s third quarter profits were all but wiped out as falling oil prices and the cost of sanctions bit into its bottom line. In September the company pledged to cut up to 25% of the 4,000 staff based at its Moscow headquarters to reduce costs.

Igor Sechin, Rosneft president and close ally of Russian president Vladimir Putin, tried to dismiss fears over the firm on Wednesday saying the refusal of its request for state support was “neither critical nor dramatic” but was careful to leave the door open in case the state alters its position.

However, former finance minister Alexei Kudrin issued a warning to the company over applying for state funds.

“My advice to Rosneft is not to take from the Wellbeing Fund,” he said. “Even if the Wellbeing Fund became simply a source of anti-crisis financing instead of the principal insurance for the pension fund, that means that it will be judged that Rosneft is in crisis. That’s not in Rosneft’s interests.”

The Russian state has already burned through a large amount of its foreign currency reserves defending the rouble, so it may be unwilling to step in to cover corporate debt repayments, which are set to reach $140 billion in 2015.

With their access to Western capital markets blocked by sanctions it appears that Russian corporates will increasingly have to look towards trading partners in the east for support. The question now is whether Beijing will continue to view the deals it has struck as being to its own advantage — especially if commodity prices are set to remain at or below current levels.

 

Qatar to become Middle East clearing hub

(Reuters) – Qatar will become the Middle East’s first hub for clearing transactions
in the Chinese yuan, in a step that could over the long run help Gulf oil exporting countries reduce their dependence on the U.S. dollar. Industrial and Commercial Bank of China’s Doha branch has been appointed as the clearing bank for yuan deals in Qatar,
China’s central bank said on Tuesday.

 

South Korea unveils plans to become Yuan clearing hub

South Korea unveils plans to grow as global yuan hub
South Korea will launch direct trading between the yuan and the won in December and adopt a series of measures to make the country an international hub for growing yuan businesses, the government said on Friday.

 

Alipay in challenge to Union Pay

Reuters
Online threat to China’s UnionPay outweighs foreign card rivals

Chinese bank card operator UnionPay, which may soon have to defend
its near monopoly against Visa and MasterCard, faces a much bigger
threat from online payment providers such as Alipay, and is
upgrading its systems to meet the danger.

Shored up by a raft of protectionist measures, the state-backed
company has grown in just over a decade from an unknown name to
a true heavyweight, commanding 50.6 percent of all the global
cards in circulation in 2013, according to the Nilson Report
statistics newsletter.

China said last month it would open its credit card market to
foreign players following a World Trade Organization ruling in
2012 that it discriminated against U.S. card firms.

The prize for the foreign companies would be access to what is
projected to become the biggest card market in the world by
2020. Transactions were already around 32 trillion yuan
($5.22 trillion) in China in 2013, according to data from the
People’s Bank of China

 

Alibaba praised for helping raise Chinese spending

Consumption rose to 48.5 percent of GDP in the first nine months of 2014,
up from 45.9 percent a year earlier. Top leaders are praising Ali Baba
for unleashing the inner-sprendthrift of Chinese consumers.

 

Qatar Investment Authority joins forces with CITIC Group

Qatar’s sovereign wealth fund is displaying new prudence in its pivot to Asia.
The Qatar Investment Authority has announced it will join forces with China’s
CITIC Group to invest $10 billion in the country over five years.

The tie-up reflects the challenges of putting large sums to work on the
mainland compared with Qatar’s traditional hunting ground in Europe.
Creating value will be the tricky part.

The alliance with China’s top state-owned company is the latest move by the
Gulf fund as it ramps up its exposure to Asia. In October, Qatar bought a
near-20 percent in the Hong Kong operator of Sogo department stores for
$616 million. Earlier this year it picked up a stake in Chinese e-commerce
giant Alibaba and invested in new partner CITIC as the Chinese company
completed a backdoor listing on the Hong Kong stock exchange. Past investments
include stakes in Agricultural Bank of China (Agbank) and in privately-held
CITIC Capital.

 

Chinese, Canadian central banks agree to 200 bln yuan currency swap

BEIJING (Reuters) – The central banks of China and Canada have agreed to a currency swap worth 200 billion yuan ($32.67 billion) or C$30 billion, according to a Canadian government statement issued at a meeting of Asia Pacific nations on Saturday.

 

Japan’s new QE policy to boost China’s stock market: economy

The stars are aligning for Chinese equities in 2015. First you have
the H.K.-Shanghai Connect scheme which will allow foreigners to directly
invest in A-Shares in the Chinese market but you also have global QE and
in this case Japanese QE which will of course find its way to productive
enterprises which are growing…in China. The Mrs. Wantanabe’s of
Japan will continue to sell down their JGB holdings and invest in the
countries arch-rival…. China.

Want China Times

The Bank of Japan announced Oct. 31 that it will step up its purchase
of Japanese government bonds so that its holdings increase at an annual
pace of 80 trillion yen (US$706.1 billion), up from the original 60-70
trillion yen (US$529.5-617.8 billion).

The central bank also said it will triple its purchase of exchange-
traded funds (ETFs) and real-estate investment trusts (REITs). The
Government Pension Investment Fund will slash Japanese debt holdings to
35% from 60% and will double the amount of Chinese and overseas equities
in its investment portfolio to 50%.

All of these signal that Japan has embarked on another round of
quantitative easing (QE). Japan’s economy had stagnated for more than a
decade during the 1990s after the Japanese asset price bubble’s collapse.

In 2013, Japan launched a quantitative easing program, which helped
boost the economy and drive up the inflation rate. The Japanese government
raised the consumption tax rate from 5% to 8% in April and was expected to
hike the rate further to 10% in 2015, causing the country’s gross domestic
product in the second quarter of this year to shrink by nearly 2%.
The weak economic performance has continued in the third quarter.

These developments prompted the government to introduce the new round of
QE program to stimulate its economy. But the most important thing is to
spur domestic demand and investment. During the last two decades, from the
1990s to the present, Japan has experienced several sharp appreciations in
the yen, which has hurt Japanese enterprises’ competitiveness and its
overall national power and resulted in the return of massive Japanese
capital from major markets around the world.

That capital has ended up in the hands of a smaller number of Japanese
enterprises and the elderly. With the value of the yen rising, Japanese who
hold nearly US$20 trillion in personal wealth usually have little interest
in expanding their investment and lack the impetus to increase consumption.
At the same time, they are more willing to park their funds in banks and
buy national bonds to get high returns from the Japanese currency’s
appreciation. Therefore, the new round of QE program should aim to change
the debtor and creditor relationship between Japanese enterprises and
Japanese nationals through the yen’s depreciation and stimulate domestic
investment and consumption.

After the yen’s decline, interest rate swap markets for the yen and the
greenback are expected to do brisk business, which will greatly impact the
global financial markets, particularly the Chinese market. The yen’s
depreciation can also affect the international bulk commodity market,
resulting in huge fluctuations in their prices globally.

Given such a scenario, Chinese foreign trade companies’ costs and benefits
will be directly affected and they could be exposed to enormous risks
stemming from huge fluctuations in foreign exchange rates.

Some financial research companies predict that Japan’s QE monetary policy
will help boost China’s exports, economic growth and the stock market because
if the Japanese economy returns to the recovery track and its stocks start
rebounding, this will help drive its national consumption, restore
enterprises’ confidence in investment and raise Japanese demand for imports
from China.

A rising yen could also result in outflows of sizeable assets from Japan to
China’s assets and stock markets, giving rise to market liquidity.

 

Swarms of Chinese J-31′s will hand military control of Asian Airspace to China

If you think only the financial and governmental systems are the
ones in the U.S that are rotting think again. Military contracting
firms have been living high-off-the hog for way too long and have
fallen behind.

Want China Times
The J-31, China’s second fifth-generation stealth fighter designed by
Shenyang Aircraft Corporation, is capable of outperforming all US
fourth-generation fighters in aerial combat, according to a US fighter
pilot cited in our sister newspaper Want Daily.

With its appearance similar to the US F-22 and F-35 fighters, the J-31
was developed based on US technology stolen by Chinese spies, the pilot
claimed. He gave his view that all US fourth-generation fighters
including the AV-8, F-15 and F/A-18 would be unable to go head to head
against the J-31 in a dogfight. The plane will be the perfect fighter
for the People’s Liberation Army to carry out anti-access and area-denial
strategies in the Western Pacific, he said.

The Chinese fighter will also present a challenge to the F-35 in the
overseas export market, the pilot predicted. It may not be as advanced as
the F-35, but it is much cheaper than its US counterpart. Putting the J-31
on display during the Zhuhai Airshow may signal that China is trying to
attract attention from potential buyers, the pilot said. It will certainly
be more popular among developing nations, he added.

The key weakness of the J-31 and J-20 is that China is still unable to
design sufficiently powerful and reliable engines for them, however.
Until now, China has depended on purchasing engines from Russia. New
designs of Chinese aircraft are now replacing this dependency, though
they are still kept secret, the pilot said. What the United States should
worry about regarding the J-31 is quantity rather than quality, he added.
Though the US has better trained pilots, it will still find it difficult
to face a swarm of J-31s, he said.

J312-152046_copy1

 

Dan Collins on the Keiser Report