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    1. A China More Just, Gao Zhisheng
    2.Officially Sanctioned Crime in China, He Qinglian
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    Losing the New China, Ethan Gutmann
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    Nine Commentaries on The Communist Party, the Epochtimes
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    Reporters Without Borders said in it’s 2005 special report titled “Xinhua: the world’s biggest propaganda agency”, that “Xinhua remains the voice of the sole party”, “particularly during the SARS epidemic, Xinhua has for last few months been putting out news reports embarrassing to the government, but they are designed to fool the international community, since they are not published in Chinese.”
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Archive for the ‘Stock’ Category

Investors Run Into Trouble With China Deals

Posted by Author on July 13, 2010


By Ellen Sheng, Via The Wall Street Journal, July 12, 2010-

Investors are posting losses on a number of private investments in Chinese companies, as projections that seemed like sure winners three or four years ago run into trouble.

These investors purchased bonds and bonds convertible into stock ahead of expected initial public offerings and rich stock-market valuations.

The market for private offerings of high-risk, high-yield debt and convertible bonds in Asia took off in 2006 and 2007, backed by strong demand from hedge funds. Deal watchers say the reasons behind the stumbles vary, but together they show that investments in China and other parts of Asia might be riskier than default figures suggest.

Losses can be tough to track because many such deals aren’t reported and involve investors that generally keep their cards close to their vests, such as hedge funds and private-equity firms.

Liquidator firm Borrelli Walsh says more than half of 11 Chinese companies listed in Singapore that sold convertible bonds from 2005 to 2008 are now unable to repay their debts. Their ranks include China Milk Products Group, Delong Holdings and Celestial NutriFoods, which have all disclosed their problems to Singapore Exchange officials.

The troubled companies together issued at least $700 million in convertible debt, according to Dealogic.

Investors aren’t willing to convert bonds into stock because the current share price is below the conversion price for the bonds and would saddle them with a loss. Some of those companies are involved in payment talks with bondholders.

Another example is China Sun Bio-Chem Technology Group, which was delisted by the Singapore Exchange this year after PricewaterhouseCoopers couldn’t verify the existence of bank and trade-receivable balances totaling 929 million yuan (about $137 million at current exchange rates). The company has since been trying to repay investors in its $100 million convertible bond, which was handled by J.P. Morgan Chase in 2006…….(more details from The Wall Street Journal)

Posted in Business, China, Economy, Investment, News, Stock, World | 1 Comment »

China central bank only has $3.2 billion capital, needs an infusion

Posted by Author on September 8, 2008


By KEITH BRADSHER, The New York Times, US, September 4, 2008 –

HONG KONG — China’s central bank is in a bind.

It has been on a buying binge in the United States over the last seven years, snapping up roughly $1 trillion worth of Treasury bonds and mortgage-backed debt issued by Fannie Mae and Freddie Mac.

Those investments have been declining sharply in value when converted from dollars into the strong yuan, casting a spotlight on the central bank’s tiny capital base. The bank’s capital, just $3.2 billion, has not grown during the buying spree, despite private warnings from the International Monetary Fund.

Now the central bank needs an infusion of capital. Central banks can, of course, print more money, but that would stoke inflation. Instead, the People’s Bank of China has begun discussions with the finance ministry on ways to shore up its capital, said three people familiar with the discussions who insisted on anonymity because the subject is delicate in China.

The central bank’s predicament has several repercussions. For one, it makes it less likely that China will allow the yuan to continue rising against the dollar, say central banking experts. This could heighten trade tensions with the United States. The Bush administration and many Democrats in Congress have sought a stronger yuan to reduce the competitiveness of Chinese exports and trim the American trade deficit.

The central bank has been the main advocate within China for a stronger yuan. But it now finds itself increasingly beholden to the finance ministry, which has tended to oppose a stronger yuan. As the yuan slips in value, China’s exports gain an edge over the goods of other countries.

The two bureaucracies have been ferocious rivals. Accepting an injection of capital from the finance ministry could reduce the independence of the central bank, said Eswar S. Prasad, the former division chief for China at the International Monetary Fund.

“Central banks hate doing that because it puts them more under the thumb of the finance ministry,” he said.

Mr. Prasad said that during his trips to Beijing on behalf of the I.M.F., he had repeatedly cautioned China over the enormous scale of its holdings of American bonds, emphasizing that it left China vulnerable to losses from either a strengthening of the yuan or from a rise in American interest rates. When interest rates rise, the prices of bonds fall.

Officials at the central bank declined to comment, while finance ministry officials did not respond to calls or questions via fax seeking comment. Data in a study by the Bank of International Settlements based in Basel, Switzerland, sometimes called the central bank for central banks, shows that many central banks had small capital bases relative to foreign reserves at the end of 2002, though few were as low as the People’s Bank of China.

Given the poor performance of foreign bonds, the Chinese government could decide to shift some of its foreign exchange reserves into global stock markets.

The central bank started making modest purchases of foreign stocks last winter, but has kept almost all of its reserves in bonds, like other central banks.

The finance ministry, however, has pushed for investments in overseas stocks. Last year, it wrested control of the $200 billion China Investment Corporation, which had been bankrolled by the central bank. That corporation’s most publicized move, a $3 billion investment in the Blackstone Group in May of last year, has lost more than 43 percent of its value.

The central bank’s difficulties do not, by themselves, pose a threat to the economy, economists agree. The government has ample resources and is running a budget surplus. Most likely, the finance ministry would simply transfer bonds of other Chinese government agencies to the bank to increase its capital. But even in a country that strongly discourages criticism of its economic policies, hints of dissatisfaction are appearing over China’s foreign investments.

For instance, a Chinese blogger complained last month, “It is as if China has made a gift to the United States Navy of 200 brand new aircraft carriers.”

Bankers estimate that $1 trillion of China’s total foreign exchange reserves of $1.8 trillion are in American securities. With aircraft carriers costing up to $5 billion apiece, $1 trillion would, in theory, buy 200 of them.

By buying United States bonds, the Chinese government has been investing a large chunk of the country’s savings in assets earning just 3 percent annually in dollars. And those low returns turn into real declines of about 10 percent a year after factoring in inflation and the yuan’s appreciation against the dollar.

The yuan has risen 21 percent against the dollar since China stopped pegging its currency to the dollar in July 2005.

The actual declines in value of the central bank’s various investments are a carefully guarded state secret.

Still China finds itself hemmed in. If it were to curtail its purchases of dollar-denominated securities drastically, the dollar would likely fall and American interest rates could soar. (…… more details from The New York Times)

Posted in China, currency, Economy, Investment, News, Politics, Stock, USA, World | Comments Off on China central bank only has $3.2 billion capital, needs an infusion

China No. 1 Blogger Arrested Over Stock Investment Messaging Services

Posted by Author on July 14, 2007


By Geoff Dyer in Shanghai, The Financial Times, UK, July 12 2007-

China’s proliferation of unregulated investment advice companies and private “hedge funds” could be under threat after the arrest of a blogger whose online stock tips made his site one of the country’s most popular.

Wang Xiujie, 35, was arrested in the north-eastern city of Changchun after an investigation into his unauthorised investment consulting business, Xinhua news agency reported. No charges have yet been filed.

The popularity of Mr Wang’s blog turned him into one of the phenomena of China’s recent stock market frenzy, in which millions of new investors opened share trading accounts. His blog is one of many unlicensed investment advice and fund management operations to have sprung up over the past 18 months and which have begun to attract the attention of regulators.

Mr Wang set up his stock-tip site in 2005 under the name Daitou Dage 777 – which means “senior big brother” and is the name of a famous kung fu character. The site claims to have received more than 33m hits and local media in May branded it China’s most popular blog, eclipsing that of a popular actress.

Mr Wang, who claims to have been a stockbroker in the 1990s, also used personal messaging services to deliver share tips. Chinese media reports have said he made Rmb10m ($1.3m) for his investment advice.

As part of the explosion in informal investment companies, many investment “studios” have sprung up to offer stock tips for a fee to new investors. Meanwhile, hundreds of private investment funds – referred to as hedge funds in China – have been established to trade clients’ money.

Some of these unlicensed funds are run by professional investors, others by relative newcomers investing their friends’ and families’ savings. By some estimates, private funds now have $50bn under management – roughly a third of the formal sector.

Government officials have been debating for months which of these activities to clamp down on and which to allow.

Neither the China Securities and Regulatory Commission, the stock market regulator, nor Jilin province police would comment on Mr Wang’s arrest.

Lawyers said it was unclear whether his detention was part of a broader regulatory move against informal investment companies.

Song Yixin, a partner at Wenda law firm in Shanghai, said the case “could be viewed as a benchmark in the industry, with the government using it as a warning to other unlicensed activities”.

Copyright The Financial Times Limited 2007

– original report: Chinese blogger held over stock tips

Posted in Asia, Blog, Blogger, Changchun, China, City resident, Economy, Internet, Investment, Jilin, Law, Life, NE China, News, People, Social, Stock, World | 2 Comments »

China review: A Hong Kong Listing Loses Its Luster

Posted by Author on July 3, 2007


BusinessWeek, July 2, 2007-

A rejuvenated Shanghai market and mainland authorities that are keen to have local companies list at home are the culprits

The marriage between mainland enterprises and the Hong Kong Stock Exchange was one of necessity. With domestic markets held back by an overhang of state-owned non-tradable shares – and, for a year, off limits while the authorities tended to the problem – China had little alternative but to raise capital overseas. Hong Kong’s mature and well-governed market was the obvious choice.

Since the first H-share listed in 1993, US$190 billion has been raised by mainland enterprises in Hong Kong, 55% of the total. By the end of 2006, the 367 H-share, red chip and non-H-share private companies on the main and GEM boards accounted for half the total US$1.7 trillion market capitalization. They were also responsible for 60% of daily turnover.

Last year was a tour de force with a record US$44 billion raised in new funds, 91% of it by mainland enterprises. Leading the way was Industrial and Commercial Bank of China (ICBC), a dual listing with Shanghai that went for a world record US$21.9 billion.

Sadly for Hong Kong, this will not become an annual event.

“The total amount of capital raised through IPOs will be less than last year, there is no ICBC now,” said Lawrence Fok, head of business development at Hong Kong Exchanges and Clearing. “However, there has been quite a lot of secondary fund raising in the market – people are looking for opportunities in relation to economic growth in China.”

Yet Hong Kong must also contend with a rejuvenated Shanghai market and central authorities that are keen to have local companies list at home.

Accountancy firm PricewaterhouseCoopers has predicted that funds raised in the Shanghai and Shenzhen A-share markets will rise by about 50% to more than US$25 billion in 2007, while Hong Kong slips 56% from last year’s total.

END OF THE PARTY?

What’s more, bankers told media sources in April that Beijing had introduced an unofficial policy banning mainland companies from issuing shares in Hong Kong unless they planned to raise more than US$1 billion or were willing to do a joint listing in the mainland.

“It’s not been officially confirmed but it’s a clear understanding,” said Ashley Alder, head of Herbert Smith’s corporate practice in Asia, formerly executive director for corporate finance at the Securities and Futures Commission (SFC).

“There are clear policy reasons and pressures in China to improve the quality of the Shanghai market in all kinds of dimensions and one of those dimensions is to bring in quality companies.”

Facing the prospect of fewer mainland listings, the Hong Kong Stock Exchange is making efforts to be more geographically inclusive – it has already amended its 2007-09 strategic plan to include “the rest of Asia,” and marketing trips are being made to unfamiliar places.

“We have been to Vietnam because we have heard that some of the companies are seeking funding overseas,” said Fok. “We have also been to Kazakhstan, Thailand, Malaysia and South Korea. We have introduced our market to places we would not have thought doing so a year ago, such as Russia.”

In the past, the stock exchange’s attention has been so single-mindedly focused on China that insufficient information has been passed to other potential share-issuers, according to Jamie Allen, secretary-general of the Asian Corporate Governance Association.

“The exchange has not spent a lot of time marketing itself around the world and, as a result, there is a misconception that Hong Kong is not open for listings beyond the six approved jurisdictions – Hong Kong, China, Bermuda, the Caymans, Australia and Canada,” he said.

It is also argued that, having lived off a diet of mainland IPOs for so long, the exchange is not in the best of shape.

“Hong Kong has become too dependent on these big IPOs,” said Ben Simpfendorfer, a Hong Kong-based economist with Royal Bank of Scotland. “They make things look good when in fact there are still problems. Hong Kong doesn’t have a developed bond market, it doesn’t attract hedge funds and, unlike Singapore, it has no large private wealth industry.”

Singapore, which leads the region in currency trading, was also cited as the one to watch by Bank of East Asia Chairman David Li at the unveiling of the action agenda that came out of the summit on Hong Kong’s development within the context of China’s 11th Five-Year Plan.

Li, who convened the summit’s working group on financial services, also warned that Hong Kong was too dependent on IPOs, bemoaning its lack of a commodities futures market.

As far as financial services are concerned, the action agenda calls on Beijing to use Hong Kong as a testing ground for renminbi convertibility and as a location for a Chinese currency futures and options market, measures that would build on the already approved sale of renminbi-denominated bonds in the territory.

COOPERATIVE EFFORTS

Another provision in the agenda is closer integration with the mainland markets.

Working Groups have been set up, tasked with finding ways to facilitate A- and H-share dual listings as well as ironing out differences in secondary market procedures and information disclosure.

A breakthrough was also made recently on enforcement, as the SFC struck a deal with the China Securities Regulatory Commission (CSRC) that will enable it to request assistance from its mainland counterpart in obtaining information in China. What’s more, the CSRC can pursue court action if the required information is not surrendered.

“This has been an ongoing problem,” said Allen. “Hong Kong authorities cannot just go into China and investigate cases, compel witnesses to come forward. This more proactive agreement to help one another is a big step forward.”

original report from BusinessWeek.com

Posted in Asia, China, Commentary, East China, Economy, Hong kong, News, Report, Shandong, Stock | Comments Off on China review: A Hong Kong Listing Loses Its Luster

A Tsunami Is Due for China Stocks

Posted by Author on June 23, 2007


By Dan Dorfman, New York Sun, June 22, 2007-

It’s tough to say no to a combination of the world’s fastest growing economy and a rampaging stock market. But that’s precisely what money manager Leonard Mohr is saying to China, whose gross domestic product growth is barreling along at a sizzling 10%-plus, and whose stock market, as measured by the Shanghai Composite Index, is up 56% this year following a 130% surge in 2006.

“It’s tempting as hell, but I’m out of China,” Mr. Mohr, a principal of Los Angeles-based MCR Associates, told me. “The Chinese market is not just an accident waiting to happen, but a giant accident waiting to happen,” he said. “A tsunami is on the way — not if, but when. It’s almost as certain as death and taxes.

“Given the enormous speculation,” he added, “it wouldn’t shock me to see this market drop 20% or so in a matter of days in response to some bad news.”

Sharing his view is no less a figure than a former Federal Reserve Board chief, Alan Greenspan, who recently generated global headlines with his admonition that “the rally in Chinese stocks is ‘clearly unsustainable'” and that “there’s going to be a dramatic correction at some point.”

What “at some point” means, of course, is open to serious question. Is it in days, weeks, months, or, maybe, years? There’s no doubt the Fed skipper will be right, as no market ever goes straight up without running afoul of a significant decline. It should be pointed out, though, that his highly publicized 1996 pronouncement about “irrational exuberance” in the American markets was made three years before the peak.

– original report from New York Sun : A Tsunami Is Due for Chinese Stocks

Posted in Asia, China, Commentary, East China, Economy, Opinion, Report, shanghai, Stock | Comments Off on A Tsunami Is Due for China Stocks

Commentary: What’s the Chinese Translation of “Asset Bubble”?

Posted by Author on June 13, 2007


by James Pressler, Northern Trust, published on fxstreet.com, Wed, 13 Jun 2007 –

To say that the Shanghai Stock Exchange has been a bumpy ride over the past few months would be an understatement. Over the past six months there have been eleven sessions where the index has changed by over 4% in one day (five gains and six losses). Before 2007, it took 28 months to accumulate 11 days of 4%+ changes. And incidentally, since mid-2006 the market has absolutely exploded, having grown by 173.3% since June 2006 and by a staggering 91.4% in 2007 alone. Not too bad for an index that was on a steady decline from 2001 to 2005.

When any stock market gets this “exuberant”, it is only natural that people start debating whether or not it qualifies as a stock market bubble, what the repercussions of a correction could be, and who would be impacted the most by a sudden, sharp decline in value. There are the masses of defenders of the Chinese miracle who insist that this market is justified by economic fundamentals. These analysts are willing to say things like “the market is unique,” and other fine quotables that are disturbingly similar to comments made about the NASDAQ prior to its spectacular collapse in 2000. The skeptics and naysayers are a small minority, but occasionally someone points out that the Shanghai market is at about 44 times last year’s earnings. While this ratio is not as high as the run-ups witnessed in the NASDAQ in late 1999 and the Nikkei of the late 1980s, it is getting closer every week.

Our concern is not specifically about what the supposed fair value of Chinese stocks should be or how long such gains can be sustained, but what possible scenarios could unfold when, not if, the bubble bursts. We believe that a correction is inevitable not just because of the P/E ratios (which in and of itself would seem like a valid reason), but because of the rising market volatility that resembles a market driven more by speculation than by fundamentals. Looking back at the rise and fall of the NASDAQ in the span between 1994 and end-2000, the behavior is similar. In 1994, the average weekly change in the NASDAQ Composite was a mere 0.05%, with a standard deviation of 1.71. Using the standard deviation as a representation of volatility, it suggests that 1994 was not a particularly exciting year for that index. However, by the end of 1999 – shortly before disaster struck – the weekly average change was up to 1.25%, and the standard deviation was 3.32. The NASDAQ was very excited, very turbulent, and doomed to fall. Comparatively, the Shanghai index had a weekly average change in 2001 of 0.57% with a deviation of 2.03, and these had increased to 1.84% and 3.48, respectively, by the end of last week.

To understand the repercussions of a prolonged dive in the Shanghai index, the makeup of its investors should be understood. The Shanghai market, which is for domestic investors, is estimated to have a capitalization of about $2 trillion, with $1.2 trillion held by individual investors who are believed to account for 80% of market turnover on particularly active trading days. These people and their families, representing as much as 170 million people, are mostly members of the growing middle class that has developed over the past 15 years of profound growth. China does not have the broad exposure that the US had to the NASDAQ due to retirement plans and stock options, but the rapid increase in individual investors is similar to what the US experienced in the late 1990s. Furthermore, while exact figures are virtually impossible to collect, there is a growing body of anecdotal evidence suggesting these individuals are taking out debt through various means in order to make a few extra yuan on the domestic stock markets.

While it is nice to see the Chinese people learning about the joys of leveraging, the lessons of wealth destruction and negative net worth would be painful for these people to endure.

With all of this risk exposure and potential for significant wealth destruction, there is little doubt that the Beijing government is fully aware of the potential for social unrest if the market takes a significant dive over any extended period of time. It is understood that the government is willing to take measures to ease any prolonged decline in share prices, such as tightening the limit on one-day share price falls. However, it is not clear what steps Beijing will take to cool off the market. A wealth of possibilities exist, including a further increase in transaction fees, limits on speculative investments or perhaps even a capital gains tax. The risk that Beijing faces is trying to implement such regulations without also triggering a panic. Last week’s increase in the share-trading stamp tax from 0.1% to 0.3% triggered a one-day fall of 8.3%, but the market recovered most of those losses over the remainder of the week as traders returned to their exuberant ways. We believe that the government will only take small steps to keep a lid on the local market while it rises. However, once the bubble bursts we expect Beijing to be behind the curve in its responses, and there will be some short-term social unrest at the very minimum.

The impact on Chinese consumption patterns could be significant, and would be in direct proportion to the amount that the market falls. Of more significance, however, will be the effect on neighboring countries with close ties to the Chinese economy – particularly India. Throughout South and Southeastern Asia, local economies have provided plenty of the goods and services that feed into China’s rapid rates of growth, and exporters have benefited substantially. If a crisis in the Shanghai markets lasted for more than a couple of days, or was even perceived as having a significant impact on China’s outlook for the next year or two, the repercussions would be felt from India to Korea. Most every exporting economy in the region depends on Chinese consumption as a significant market for goods, and weaker demand would weigh heavily on their near-term outlooks. Furthermore, a significant bump in the road now will likely dampen the confidence of foreign investors looking to enter Southeastern Asia in general and China in particular, which would have an impact on investment inflows for this year and next.

There will always be those who try and justify a rise in asset prices with reasoning based on the economy’s “unique nature”, a “new paradigm” of development or a particular set of circumstances that sets this case off from the rest. While this may be true, we say that this “new economy” looks a lot like the last “new economy” that formed the NASDAQ bubble of 2000 – and the results were neither new nor unique.

original article from fxstreet.com

Posted in China, City resident, Commentary, East China, Economy, News, shanghai, Social, Stock, World | 1 Comment »

China Investors Vent Anger Online Over Stock Drop

Posted by Author on June 6, 2007


Joan Feng, AFP, published on iAfrica.com, Wed, 06 Jun 2007-

The Chinese Internet has turned into a cyber-inferno of invective and slander as furious investors have let off virtual steam against the government after near-historic drops in share prices.

In recent days, stock forums and chat rooms have been flooded with fuming postings from retail investors, with their main focus last week’s government move to cool the booming market by tripling a tax on share trading.

Stock punters, many of whom poured in with little experience in share trading but high hopes of cashing in on the spectacular run-up that began last year, were horrified to see some of their profits disappear so quickly.

Biggest fall in 3 months

In the five days following the hike, the key Shanghai index slumped 16 percent, including an 8.26-percent plunge on Monday, the biggest one-day fall in over three months, as the market experienced near unprecedented volatility.

“Stock indices in Shanghai and Shenzhen plunged like raindrops while the state’s tax revenues come rolling in,” reads a satirical poem spread across online forums and chat rooms.

“No one ever cared during the five-year bearish market, but officials were annoyed by the sudden bull run.”

Government in the dogbox

Further angering investors was the government’s handling of the tax hike announcement.

The finance ministry released a statement overnight Tuesday last week ahead of an immediate stamp duty hike at the start of trading on Wednesday.

In China, the government often releases market-sensitive information over the weekend to give investors time to digest the latest change and cushion any potential impact on the market.

Three influential state-run newspapers also only a week earlier had cited officials from both the finance ministry and the tax administration as denying any such move was on the cards.

“The news about the increase of stamp duty came out stealthily,” said a post on online stock investment community Guba.com.cn.

A ‘credibility crisis’

“Either officials have misled the three major securities newspapers or the three newspapers misled the nation’s stock investors. Anyway, the result is the nation’s investors were misled.

“If officials from the tax administration lied to China’s stock investors, then who can we believe? It’s a credibility crisis!”

Some even considered the increase of tax as breaching people’s political rights.

“The abrupt increase of stamp duty did not go through any legal procedure at all… which indeed has set a dangerous precedent and is a typical case of bad governance,” said another post on club.kdnet.net, a popular bbs website.

A safe way to express anger

Yu Hai, a sociologist at Shanghai’s prestigious Fudan University, said the internet anger was part of an emerging phenomenon in China, where the nation’s communist rulers work extremely hard to prevent citizens expressing dissent.

“China’s internet has become a main channel for ordinary people to speak out,” Yu said. “There’s no other place that sees such active expressions of public opinion with such wide participation.”

China’s traditional media, such as newspapers and television, are strictly under the thumb of the government censors, while public protests are routinely quashed, often with the use of force.

But the internet has emerged as a relatively safe way to publicly express criticism of the government, and authorities are well aware of the power of this new forum, according to Yu.

“Millions of people are losing money in the stock market and their voices on the internet certainly affect policy-making,” Yu said.

“It could either delay or weaken more similar cooling polices by securities regulators, should they be mulling any.” (AFP)

original report from iAfrica.com

Posted in Businessman, China, Dissident, Economy, Internet, Internet User, Life, News, People, Politics, Social, Speech, Stock | Comments Off on China Investors Vent Anger Online Over Stock Drop