China will speed up its vetting of M&A deals in 2012, says commerce ministry official Shang Ming. The number of domestic and cross-border deals are rising quickly as a sluggish global economy pushes companies to find growth through M&A.
Profit growth for Chinese industrial companies is slowing, according to newly released data, with net income +24.4% in the first 11 months of 2011 to 4.66T yuan ($737B). This compares to a 25.3% gain in the first 10 months, and a 27% gain in the first three quarters.
Japan and China will promote direct trading of yen and yuan without using dollars, Japan said today, and will encourage the development of a market for the exchange to cut the cost for companies. It's part of a broad and innovative package of financial agreements designed to tighten ties between the two giants.
"The collapse in the real estate market has already occurred," says Steve Dickinson reporting from Qingdao, the only question is how the government will pick up the pieces. The only sales taking place are those at 30-50% discounts and work on uncompleted projects has slowed or stopped. Land sales - a key source of government revenue - are no longer getting a bid at any price.
Murmurs of further monetary ease from Beijing increase as tightened liquidity leads to a sharp jump in interbank lending rates. Adding to the thought are 2 consecutive months of capital outflows, something that has never happened before, says an HSBC economist. Last year on Christmas Day, the PBOC hiked interest rates.
Under discussion in Beijing is a plan to allow local governments to invest a portion of the nearly $312B in pension funds in the stock market. Current rules allow the money to only be parked in bank deposits or government paper. Give the Chinese credit - stocks in Shanghai are near 3 year lows. Governments typically only get interested in buying equities during (and likely at the end of) major bull markets.
China's growth momentum is "generally sound," says Premier Wen Jiabao, but the economy is facing several challenges. Additional comments suggest China is bracing for a prolonged downturn in the U.S. and eurozone by boosting domestic demand and focusing on emerging markets.
There's a bull market in planned analyst trips to China as suspicions grow it may be the next global crisis spot. With spotty official data, hedge funds are racing to get feet on the ground to complete the picture there. Are they late? Hugh Hendry - who chronicled China's empty skyscrapers and malls in 2009 - is up 52% this year in his "short China" credit fund. Shanghai's A share index is off nearly 25%.
The evidence is clear that China's spectacular real estate bubble has burst, with the only question being whether the bust will be of equal brilliance, writes Pat Chovanec. Thus far, the lack of leverage used by buyers (as opposed to highly leveraged developers) has kept the collapse in check. Its course promises to effect everything from miners in Australia and Brazil to lumber mills in Canada to equipment makers like CAT.
A remarkable study from Bloomberg finds China's debt dwarfs what are already high official figures, and the slowdown in credit creation engineered by Beijing this year is a myth. With cash flows for many infrastructure projects coming nowhere near enough to service the debt, entities are completely reliant on being able to roll over loans to stay above water: China's "treadmill to hell," as described by Jim Chanos months ago.
China's debt/GDP ratio of 20-30% isn't as attractive as it looks, writes Patrick Chovanec. Toss in contingent liabilities for the banks, local governments, and things like the railway system, and even optimists put the number at 90%. Pessimists put it at 200% or higher, Greek territory. Remember, Irish government finances were the envy of the world until its real estate boom went bust. In any case, "China's fiscal resources are not as limitless as they seem."
New Chinese home prices in November recorded monthly falls in 49 out of 70 cities monitored, up from 33 in October and the worst performance this year. Officials said last week they will continue to "unswervingly" implement real-estate curbs although "swinging wildly from boom to bust" always ends badly.
China's exporters will face "very severe" conditions in Q1 2012, says the country's Commerce Ministry. "The overall trade environment next year for China will be complicated, partly due to the economic uncertainties in the European countries."
The flash estimate for December's HSBC China PMI rises to 49 from the previous month's 47.7. "The growth momentum remains weak with additional downside risks from exports and the property market not yet fully filtering through," says HSBC's chief China economist. Beaten down Shanghai shares get a nice bounce from the number, but remain lower by 1.1% on the session.
Shanghai A shares fell again last night, -0.9%, the 6th consecutive drop. Rumors had floated about of another reserve ratio cut and stocks steepened their slide late in the afternoon when that didn't materialize. Stocks are off more than 6% in the 2 weeks since China initially lowered the RRR, and are near a 3 year low.
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