Articles on this Page
- 12/29/13--16:23: _The latent danger i...
- 12/30/13--14:28: _Chinese local govt ...
- 01/01/14--11:39: _The political rot i...
- 01/01/14--21:00: _Chinese manufacturi...
- 01/02/14--14:54: _Mao’s proletariat p...
- 01/02/14--19:55: _China non-manufactu...
- 01/05/14--11:34: _The Middle Kingdom’...
- 01/05/14--20:36: _Weighing up China's...
- 01/06/14--11:37: _Goldman bear change...
- 01/06/14--11:55: _Rankin urges 'humbl...
- 01/06/14--12:08: _Paper tiger: China'...
- 01/06/14--12:42: _The international e...
- 01/07/14--04:44: _China allows more p...
- 01/07/14--11:32: _Australia's brave n...
- 01/07/14--18:57: _China doubled US in...
- 01/08/14--12:18: _China's shock and o...
- 01/08/14--17:47: _China misses 2013 i...
- 01/08/14--21:09: _China worries hurt ...
- 01/09/14--12:12: _China’s prison of r...
- 01/09/14--13:57: _China's Fosun buys ...
- 12/29/13--16:23: The latent danger in Abe's amnesia
- 12/30/13--14:28: Chinese local govt debt soars
- 01/01/14--11:39: The political rot in Mao’s sugar-coated legacy
- 01/01/14--21:00: Chinese manufacturing slips in Dec
- 01/02/14--14:54: Mao’s proletariat paradise lost
- 01/02/14--19:55: China non-manufacturing PMI falls in Dec
- 01/05/14--11:34: The Middle Kingdom’s Australian frontier
- 01/05/14--20:36: Weighing up China's invested interests
- 01/06/14--11:37: Goldman bear changes China tune
- 01/06/14--11:55: Rankin urges 'humble' Asian policy
- 01/06/14--12:08: Paper tiger: China's potential debt disaster
- 01/06/14--12:42: The international economy in 2014
- 01/07/14--04:44: China allows more private banks
- 01/07/14--11:32: Australia's brave new world for Chinese investors
- 01/07/14--18:57: China doubled US investment in 2013
- 01/08/14--12:18: China's shock and ore at the Australian way
- 01/08/14--17:47: China misses 2013 inflation target
- 01/08/14--21:09: China worries hurt Aust iron ore miners
- 01/09/14--12:12: China’s prison of resource security
- 01/09/14--13:57: China's Fosun buys Portuguese insurer in privatisation
Japanese Prime Minister Shinzo Abe has chosen the first anniversary of his rise to power to visit the controversial Yasukuni Shrine that honours war dead, including 14 convicted Class-A war criminals. The visit has invited sharp criticism from Koreans, Chinese and even Americans.
It could not have come at a worse time. The relationship between these countries is already at rock bottom over territorial disputes in the East China Sea and ill-feeling over the issue of Korean ‘comfort women’, who were forced into sexual slavery by Japan during WWII.
Even Japan’s staunchest ally, the United States, is not happy with Abe’s provocative act. In a statement, the American embassy in Tokyo said: “The United States is disappointed that Japan’s leadership has taken an action that will exacerbate tensions with Japan’s neighbours.”
Strobe Talbott, president of the Brookings Institute and a former US deputy secretary of state, said via Twitter: “Abe’s visit to Yasukuni shrine doesn’t just offend Chinese. War museum on premises is in-your-face apologia for aggression and Pearl Harbour.”
The convicted war criminals honoured at Yasukuni shrine include Tojo Hideki, the wartime prime minister who was behind the Pearl Harbour attack, and Akira Muto, who was responsible for the infamous Rape of Nanking.
The shrine is widely regarded in China and Korea as a symbol of Japanese militarism. Emperor Hirohito stopped going to Yasukuni ever since convicted war criminals were enshrined there in 1978. This tradition has been followed by his son, the reigning monarch Akihito.
Abe’s decision to pay homage to the shrine has reopened one of the most contentious and longest running history wars in East Asia. Ian Buruma, a noted British scholar, considers Japanese prime ministerial visits to Yasukuni shrine akin to German chancellors paying their respects to an Adolf Hitler memorial.
Unlike Germany, Japan never went through a vigorous de-Nazification campaign after the war. Some Japanese – including senior political and military figures – still regard the verdicts of the International Military Tribunal for the Far East – which was chaired by former Australian High Court justice Sir William Webb – as illegitimate.
The head of Japan’s air force, General Toshio Tamogami, was sacked in 2008 after he defended Japan’s aggression as “the Greater East Asia War” – a term used by right-wingers to describe the country’s attack against the Allies as a war of liberation against Western colonialism.
Some wartime Japanese leaders – including Prime Minister Abe’s grandfather Nobusuke Kishi, who served as a cabinet minister in the Hideki Tojo government – not only escaped military justice but, at least in Kishi’s case, went on to become prime minister.
“It would be difficult even now to imagine an accused war criminal, as Mr Kishi has been, assuming the leadership of either of the Germanies,” said Kishi’s New York Times obituary in 1987.
Even the conservative German newspaper Sueddeutsche Zeitung describes Abe’s visit as “calculated provocation”.
The testaments of Japan’s lack of self-examination are especially telling when compared with the profound soul-searching that Germany underwent, and these actions serve to undermine Japan’s otherwise impeccable record as a peace-loving and responsible member of the international community.
Article Nine of Japan’s pacifist constitution explicitly renounces war as an instrument of the state, and an overwhelming number of Japanese citizens’ support the pacifist policy. However, Abe regards the pacifist constitution as an unwanted legacy of the days of the American occupation and an obstacle preventing Japanese remilitarisation.
The force and sincerity of former Japanese Prime Minister Tomiichi Murayama’s heartfelt apology in 1995 – in which he expressed his “profound remorse for these acts of aggression, colonial rule and the like, which caused such unbearable suffering and sorrow for so many people” – has also been undermined by Prime Minister Abe’s action.
It is not surprising that a Pew survey found only 2 per cent of Koreans and 6 per cent of Chinese have accepted Japan’s apology. Korean and Chinese presidents have both refused to meet with Prime Minister Abe at a time when dialogue is needed to reduce the heightened tension in the region.
Abe’s decision to visit the controversial shrine at this critical junction is a highly provocative act. James Fallows of The Atlantic wrote: “In short, there is almost nothing a Japanese prime minister could have done that would have inflamed tempers more along the Japan-China-South Korea-US axis than to make this visit. And yet he went ahead.”
Japan has to come to terms with its past and reaffirm Prime Minister Murayama’s historic apology to the victims of the country’s aggression. Convicted war criminals have no place at a shrine that honours Japan’s fallen soldiers.
China has announced the results of a long-awaited debt audit, revealing that liabilities carried by local governments ballooned to 17.9 trillion yuan ($A3.3 trillion) as of the end of June.
The figure, released by the National Audit Office in a statement on its website, compared with 10.7 trillion yuan as of the end of 2010 – an increase of 67 per cent.
Concerns have grown at the amount of debt in the country and its potential impact on the world's second-largest economy, and Beijing embarked on the audit in late July.
Disquiet centres on borrowing by local authorities, which have long used debt to fuel growth in their regions, often by pursuing projects that are not economically viable or sustainable.
China's debt problem is considered to be a serious potential drag on its economy unless steps are taken to rein it in.
The local government debt burden was generally in line with economist estimates, if slightly higher, including one made in early October by Bank of America Merrill Lynch of 17.2 trillion yuan.
"We believe the markets and the Chinese government should be alarmed by the rapidly rising leverage, but we do not believe China is on the brink of a debt crisis, especially if the new leaders can take decisive measures to arrest its rising leverage," Lu Ting, economist at Bank of America Merrill Lynch in Hong Kong, said in a note on Monday.
Lu cited the central government's "very low" ratio of debt to gross domestic product (GDP) at 21 per cent.
Since almost all government debt is denominated in China's own currency and owned domestically, "the People's Bank of China (central bank) can prevent a public debt crisis with its unlimited capability for liquidity supply", he said.
He added that China is protected by a trove of national savings which include $US3.5 trillion in foreign exchange reserves, its central and local governments' own solid assets, and the country's still-high economic and fiscal revenue growth.
The National Audit Office also said that direct government liabilities at both central and local level came to 20.7 trillion yuan as of the end of June.
That figure amounts to 40 per cent of China's GDP, according to economists Liu Li-Gang and Zhou Hao at ANZ Bank.
But if contingent liabilities are included, the amount would exceed 30 trillion yuan, they said, adding the total would be equal to as much as 55 per cent of GDP.
While we were celebrating Christmas, many in China celebrated the 120th anniversary of Mao Zedong’s birth. He was born on Boxing Day in 1893, and given that Chinese epochs are traditionally measured in 60-year time periods, the 120th anniversary carries a similar significance as the way in which Western societies make a big deal about centenaries.
However the national celebration was relatively muted compared to the public trumpeting of Mao’s achievements a couple of decades ago. To be sure, the state-run international newspaper Global Times went on the offensive and called attempts to denigrate Mao’s achievements and standing as “childish wishful thinking”. But the words from senior officials were more measured.
According to reports carried in the official news agency Xinhua, President Xi Jinping attempted to strike a balance, cautioning that “Revolutionary leaders are not gods, but human beings. We cannot worship them like gods or refuse to allow people to point out and correct their errors just because they are great.”
Even so, Xi proclaimed that “Mao is a great figure who changed the face of the nation and led the Chinese people to a new destiny”, and “neither can we totally repudiate them and erase their historical feats just because they made mistakes”.
Mao ruled China for 27 terrible years and died in 1976. The official Chinese Communist Party verdict delivered in 1989 that he was “70 per cent correct and 30 per cent wrong” doesn’t quite capture the horror and tragedy of his time in power. True, he proclaimed the modern People’s Republic of China in 1949 after a successful revolutionary war against Chiang Kai-shek, who fled to Taiwan.
Mao’s role in the founding of the People’s Republic of China – or mainland China – is truly great from a political point of view. But his ill-guided and sometimes vengeful economic and social policies in the 1950s and 1960s led to the deaths of between 40 million and 70 million of his countrymen. If that only constitutes “30 per cent wrong” then the official history – always written by the victors – is very kind to him indeed.
China’s modern leaders are well aware of the horrible consequences of the Mao years – materially and morally – and every leader since Deng Xiaoping from 1978 onwards has implicitly rejected ‘Maoism’ and driven the country forward. But the official histories, as well as Chinse textbooks and domestic media outlets, acknowledge that Mao made terrible mistakes, without offering precise details as to what these were or of the human cost of such mistakes. Any mention of the true death toll during the Mao years is generally prohibited in China (which is why this episode of The Simpsons was predictably censored in China).
It is obviously a profoundly awkward truth for a Party obsessed with its own legitimacy that the policies adopted by its (and the country’s) founder led to the greatest unnatural loss of life in human history.
One can hardly blame the horrors of the Mao years on China’s leaders since Deng, who have all conscientiously ensured that his mistakes have never been repeated. China, a materially different place now to the 1950s and 1960s, has clearly moved on. So does it really matter that its official histories continue to sugar-coat the reality of those tumultuous years?
A sizeable number of people would say no: history, by definition, is the past – and it serves no good purpose to dredge up details of such a terrible past. Better to look ahead and forward to better times.
But others, including this author, would subscribe to a different line of argument. It is not about beating up on the modern day CCP, or getting the CCP to beat itself up unnecessarily about its own terrible history. But if China’s current leaders were to openly recognise the true extent of the horror of the Mao years – and allow official histories to accurately detail the achievements and failings of those years – they could help to strengthen, rather than de-legitimise, the Party’s hold on power.
How can a Party’s horrendous past help it survive into the future? Take a piece of recent politics that was deeply damaging to the current vanguard of the CCP. The country knows that a power struggle was behind the demise of former Chongqing chief Bo Xilai, despite his conviction for what is, relatively, low-level corruption.
The political reason Bo’s opponents gave for his demise (including President Xi) is that Bo was returning to a ‘neo-Maoist’ approach to politics and economics: authority based on individual charisma and myth creation; putting the Chongqing coercive apparatus above the rule of law for the sake of ‘results’; adopting ‘New Left’ or neo-Maoist economic policies which allow an even stronger hand for the state in the name of reducing inequality; using old revolutionary songs and slogans to create a frenzy of nationalism and patriotism, etc.
For the established vanguard of China’s leaders, these were all traits that led to the disastrous policies of the Mao years during noble sounding periods such as the ‘Great Leap Forward’ and the ‘Cultural Revolution’. Yet the direct connection between such policies on the one hand and the true extent of the suffering inflicted on the population on the other is vastly underappreciated in contemporary China.
Chinese citizens are continually told what Mao did that was “70 per cent correct” but told little about what the other 30 per cent was all about. This means that official fear and condemnation of Bo’s ‘Neo-Maoism’ is widely seen as unjustified, issued by uninspiring officials feathering their own nests, and motivated by petty political power plays.
As a quietly-spoken Chinese student, born in the 1990s at Sydney University, said to me earlier in the year, Bo has the “purity of Mao, unlike the leaders today who don’t care about the people”. Read any number of blog sites and it will be obvious that such sentiments are common amongst Chinese citizens discussing Bo Xilai. Few understand why the country’s leaders were genuinely afraid of him – partially because Chinese citizens with a rose-coloured view of the revolutionary past are not allowed to know the true extent and reasons for Mao’s disasters.
If Mao is “70 per cent correct” and Bo is channelling the great leader, then Bo must be doing more good than bad – or so such reasoning goes. Even in celebrating the 120th anniversary of Mao, the revolutionary leader’s supporters contrast Mao’s “uprightness” and “love of the people” with today’s leaders, who are “corrupt” and “self-serving”. Perhaps revealing the truth about the tens of millions who died because of Mao’s policies might cause some overdue reassessment.
More broadly, Mao oversaw a period when the ruthless devotion to personal power, ideological purity and perpetual socialist revolution – and rejection of institutionalised power, pragmatism (based on ‘what works’) and gradual evolution of political and economic policy – created a disastrous legacy. Today’s CCP openly proclaim that it needs to openly commit itself to the latter principles that were so foreign to Mao’s time if it is to remain in power.
Yet without adequate explanation of why it is rejecting the approach of the Party’s founder, a significant number of citizens remain seduced by the falsehood of what they believe to be a purer and grander period in the PRC’s history.
We know that today’s CCP has no intention to return to the Party of Mao. It is no bad thing – for the country or Party – to honestly tell the Chinese people why.
Dr John Lee is the Michael Hintze Fellow and adjunct associate professor at the Centre for International Security Studies, Sydney University. He is also a non-resident senior scholar at the Hudson Institute in Washington DC and a director of the Kokoda Foundation in Canberra.
By a staff reporter, with AAP
Activity in the Chinese manufacturing sector has fallen in line with expectations to a three-month low in December, according to a private survey.
The HSBC China manufacturing PMI fell to 50.5, in line with Bloomberg forecasts.
A reading above 50 indicates the sector is expanding, while a print below 50 indicates contraction.
In November, the index printed at 50.8, while the index stayed in expansionary territory for the fifth consecutive month in December.
HSBC chief economist for China Hongbin Qu said the moderation of the index was mainly due to slower output growth.
"However, the final PMI sustained the fifth above-50 reading in a row thanks to a steady increase of new orders.
"The recovering momentum since August 2013 is continuing into 2014, in our view.
"With inflation still benign, we expect the current monetary and fiscal policy to remain in place to support growth."
Yesterday, official figures showed the purchasing managers' index (PMI) for December was at 51.0, down from November's 51.4, according to the National Bureau of Statistics.
Peking University is one of the most prestigious institutions of higher education in China, dating back to the 19th century when the last Manchu dynasty decided to set up a higher education institution modelled after Western universities.
It is not an exaggeration to say that most school children in China crave a place at Peking University. Needless to say, competition for a much sought-after place is fierce. However, your chance of admission is much better if you come from the right background.
Nearly one in three Peking University students come from families of the communist party cadres, the highest proportion since 1952, according to a comprehensive survey of student admission data between 1952 and 2002.
Back in 1952, children of party cadres only made up one in ten admitted students at the university. In comparison, the proportion of students from farming backgrounds has been in decline since 1972, from 30 per cent to only 15 per cent in the late 1990s.
These admission statistics shine a light on China’s worsening social mobility, which is one of the most important contributing factors behind China’s growing chasm between haves and have nots. So just how bad is the problem?
Miles Corak from University of Ottawa has the latest answer from his international comparative study of the elasticity of inter-generational income, which is economist’s parlance for measuring the impact of your dad’s income on yours.
In Australia the impact is 26 per cent, so there is an advantage of being born into a high-income family, but not that significant and we compare well with Scandinavian countries such as Denmark and Norway, which are known for their social equality.
Though the United States maintains a national myth that anyone can get ahead, the reality is that the US has one of the lowest social mobility rates among OECD countries and comparable to class ridden Britain. Over there, the children of the higher income dad will earn 47 per cent more.
Then comes the shocker: the nominally communist China has one of the worst socially mobility rates of the 23 countries surveyed, including basket cases of socially inequitable countries like Brazil and Argentina. In China, children of the higher income family will earn 60 per cent more.
So what happened to Mao’s classless proletariat paradise?
David Dollar, senior fellow at the Brookings Institute, and a former US Treasury representative in Beijing explains why.
The first issue is China’s hukou registration system, which operates more or less like an economic apartheid system that separates the population into urban and rural residents (China must end its economic apartheid, December 17.) Hukou makes it difficult for people to move around, especially from countryside to cities. If you were born into a farming family, a relatively low income occupation, it limits your opportunities significantly. Many good jobs in Beijing and Shanghai specify local hukou registration.
Secondly, China’s educational resources are skewed toward major urban centres. Shanghai schools stood out on recent tests as among the best in the world. Famous British private schools like Harrow even boast campuses in Beijing.
In China, schools are usually locally funded, which means prosperous areas can afford to lavish more resources on education while poor and especially rural areas lack the necessary resources.
Thirdly, the country’s growing corruption is hurting social mobility and generating widespread resentment. It is easier for elite families to pass on status and income to their children.
For example, many of China’s top leaders send their children to exclusive schools such as Harvard and Oxford for education. President’s Xi Jinping’s daughter is an undergraduate at Harvard and the son of the disgraced former senior party leader Bo Xilai went Harrow (Winston Churchill’s old school), Oxford, Harvard and Columbia law school.
Chinese princelings are also hogging senior positions in the commercial world. Former premier Li Peng’s daughter runs the largest state-owned electricity company and his colleague Zhu Rongji’s son is in charge of the country’s largest domestic investment bank.
China’s low social mobility is ironic given the party still pays lip services to communist ideology. It is not only unjust but also hurting the legitimacy and efficiency of a market economy. China’s ability to innovate is hampered if a large part of its population is not able to utilise their talents.
There is a glimpse of light after the bold reform package announced at the Third Plenum of the recent party congress. Beijing understands the need to address the growing chasm between the poor and rich and boost the social mobility of the bottom half.
Translating words into actions is a different proposition altogether.
Dow Jones Newswires, with a staff reporter
Activity in China's non-manufacturing sector fell in December but remained in expansionary territory, official data showed.
China's official non-manufacturing purchasing managers' index fell to 54.6 in December from 56.0 in November, according to a statement earlier today from the China Federation of Logistics and Purchasing.
A PMI reading above 50 indicates an expansion, while a reading below 50 indicates contraction.
Start to prepare for a new era in the Australian Chinese relationship. For the last couple of decades every time we thought of China we have tended to examine trends in demand for iron ore, coal and gas. The enormous demand by Chinese for these base commodities has underpinned government revenue and that of our miners.
Chinese demand is not going to go away but all the signs are that in coal, and perhaps gas, the rate of demand growth will at best be subdued. Iron ore might be stronger, although there are big increases in global capacity on the horizon.
But well within five years, instead of simply looking at Chinese manufacturing, Australia will look at the tourist bookings. We are going to see a very big rise in Chinese tourism. The Boston Consulting Group (BCG) projects the number of Chinese travellers to Australia and New Zealand will soar from 910,000 trips in 2012 to 2.2 million in 2020 – just six years away.
This rise will cause almost a doubling of the ratio of Chinese travellers to inbound tourists from 16 to 28 per cent. And it doesn’t stop there.
BCG expects the number of inbound trips from China to Australia to grow at an incredible nine per cent per annum between 2012 and 2030. BCG is more bullish than the Australian Tourism Research Group which is forecasting a compounding growth rate of 6.4 per cent.
Growth rates of between six and nine per cent annually are going to require growth in infrastructure and I don’t think we are properly prepared for it.
The new China relationship goes even deeper because they are now aggressively buying our real estate, particularly in capital city markets of Melbourne and Sydney. Perhaps they understand the implications of the tourism boom better than we do. There are two other forces driving the Chinese to send money abroad. First they are being encouraged by the Chinese government to spend abroad but even more importantly, the prosecution and jailing of Bo Xilai and his supporters has created feeling of insecurity among many people in China. If such an important person can be brought down by the current leadership who else is vulnerable?
The understandable reaction is to make sure you have the ability to reside in a country like Australia. The combination of all these forces means we have a lot of activity ahead of us (Chinese buyers tower over Australian real estate, December 6).
Just before Christmas, as many of our corporate and political leaders were already heading off to the beach, Beijing quietly issued important new rules governing investment by mainland Chinese corporates in Australia.
Despite the mealy-mouthed title – “The Catalogue of Investment Projects Subject to Government Verifications” – these regulations are likely to have a significant impact on economic and political life in Australia in 2014 and beyond.
Under the previous legal regime (last updated in 2004), companies in China engaging in offshore investment required advance approval from the central authorities in Beijing for relatively small amounts. Typically, amounts less than $US10 million were the only ones given an automatic go-ahead.
This clearly did not restrict all overseas investment projects, and approvals for much higher amounts were ultimately forthcoming from Beijing. Nevertheless, the low financial thresholds requiring such central approval – combined with the number of agencies whose political buy-in was required – tended to be a real impediment to the deal-making ability of Chinese corporates abroad.
It would be overstating things to say that the process has now been completely streamlined. However, the new rule of thumb is that advance approval at the national level will now generally only be required where the investment to be made is greater than $US1 billion.
As a result, Chinese corporate management should now be able to react more quickly and be much more opportunistic about future offshore investment proposals in Australia and elsewhere in the world.
Any Chinese outbound investment in to Australia will, of course, still be subject to our own foreign investment regime, which provides its own delays and uncertainties. But new rules on China’s side should, in all likelihood, lead to wider participation in a range of deals in Australia by Chinese corporates.
The economic pressure for a new global wave of Chinese investment has long been building.
Despite the media hype, it is worth reiterating that there has been only a relatively small amount of foreign direct investment by China abroad.
Australia is the largest recipient of Chinese foreign direct investment to date, but we have still only witnessed a relatively modest amount. Best estimates (according to a report by KPMG / University of Sydney last year) put the figure at around $US50 billion, or less than 3 per cent of the total accumulated foreign investment this country.
By way of comparison, our traditional trading and investment partners such as Japan, the United Kingdom and the United States have much larger shares of foreign investment in Australia: 10 per cent, 14 per cent and 25 per cent respectively.
China is currently the world’s second largest economy. When exactly it will become the world’s largest economy depends on whom you believe: the OECD says 2016; Goldman Sachs, 2022; the World Bank, 2030.
It would nevertheless be a reasonable expectation that China will in time have a share of foreign investment in this country commensurate to the size of its economy.
What will it mean if China replaces the United States as the largest foreign investor in Australia? To what extent does the political character of the country matter? These are some of the questions that the new Abbott government will have to wrestle with.
Even while they gain increasing operational autonomy, Chinese corporate management (in both state-owned and notionally private companies) will still be very careful that their commercial activities remain consistent with the political goals of the leadership in Beijing.
When the Howard government left office, the amount of Chinese investment in Australia was negligible – less than 1 per cent. The global economic landscape has changed considerably since then. The current government has very few (if any) bonafide ‘China hands’ among its senior advisers that it can rely on for advice.
Huawei’s blocked investment in the NBN seems certain to be just the beginning of a much larger discussion about how the new commercial partnership between Australia and China should operate. Kevin Rudd may be gone, but China isn't going away any time soon.
Dan Ryan has spent more than 10 years in Greater China as a lawyer. He is the managing director of corporate advisory firm, Serica Services.
The head of Australian equities at Goldman Sachs Asset Management has changed his tune on the Chinese economy, largely abandoning his bearish tone of 12 months ago, according to The Australian.
Dion Hershan, one of Australia’s most prominent investment managers, said the latest data coming from China was cause for optimism, particularly for the resources sector.
"The country isn't without its concerns and its issues, but the underlying levels of demand remain very strong for a lot of commodity intensive industries," Mr Hershan told The Australian, adding his firm was “more relaxed” about the resources sector.
"For those industries, we are more optimistic than we were 12 months ago. It is not uniformly strong but it appears to us that inventory levels are at more manageable holding levels and underlying demand for things is strong."
The next major sign of how the Chinese economy is travelling will be the release of economic growth data next week. Growth for 2013 was expected to have slipped to 7.6 per cent, the lowest level since 1999.
Robert Rankin, co-head of corporate banking and securities for Deutsche Bank in London, says the Australian government needs to be more "humble" in its approach to Asian foreign policy, particularly with China, The Australian Financial Review reports.
"Our foreign policy can be more humble yet informed in terms of its engagement with the region," he told the newspaper.
Mr Rankin also urged the government to take a bold approach to policy reform, saying Australian needed to position itself strongly for and expected resurgence in worldwide growth.
“We were habitual reformers for 30 years leading up to 2010 but that reformist zeal was lost and we need a new period of reform. Hopefully this government will have the runway and the fortitude to do that,” Mr Rankin told the AFR.
China’s National Audit Office has finally released its country-wide survey of government liabilities just a day shy of 2014, assuaging concerns and stoking fear at the same time.
54,000 auditors undertook the largest audit of government debt last year. They examined 730,065 projects and checked nearly 2.5 million loan and quasi-loan agreements. Their forensic investigations covered mighty central government agencies like the Ministry of Finance as well as small towns in far-flung corners of the country.
The undertaking is by far the most ambitious and thorough investigation of China’s worrying debt problem, which many investors and commentators regard as a time bomb waiting to go off.
The results have shown an explosive increase in local government debt, averaging 19.97 per cent growth for the last three years. The collective debt of local governments increased nearly 3.9 trillion yuan ($A720 billion) to 10.6 trillion yuan by June 2013.
Chinese local governments also explicitly guaranteed 2.7 trillion yuan worth of debt. In addition, they are also expected to shoulder at least part of 4.3 trillion yuan liabilities incurred by other corporate and semi-government entities.
The total size of government debt including official debt, explicit and implicit loan guarantees amount to 19.6 trillion yuan, or about the third of China’s GDP. However, it is improbable that all of these officially guaranteed debts will turn sour, leaving local governments to pick up the tabs.
The audit office calculates that local governments are expected to cough up only a small percentage of these guaranteed amounts in the event of default: 19 per cent for the explicitly guaranteed loan and about 15 per cent for implicit debts.
The central government debt, which is far more transparent and less controversial, is about 9.7 trillion yuan, including explicitly and implicitly loan guarantees. The total debt level (both central government and local government) is about 54 per cent of China’s GDP, which is below the 60 per cent threshold set by the European Union for admitting new members under the Maastricht Treaty.
China’s debt picture looks much rosier if we accept the National Audit Office’s assumption that local governments only need to a pay small percent of their contingent liabilities, which include both explicit and implicit debt guarantees. The audit office estimates China’s total debt-to-GDP ratio is about 40 per cent.
Whatever the size of debt – be it 40 per cent or 54 per cent – the total amount is concerning, but not on the verge of implosion. The total debt level falls somewhere between the worst-case scenario of optimists and best-case scenario of pessimists.
Chinese stock markets posted modest gains on the news of the audit office’s report. Shanghai index increased 0.88 per cent and Shenzhen stock exchange was up by 1.53 per cent. The Chinese market is relatively comfortable with the overall debt level.
However, the biggest risk factor is the rapid growth rate of debt, which is outpacing both China’s economic growth and its increase in tax revenue.
Despite an official crackdown on the local debt binge since 2010 after China unleashed the 4 trillion yuan stimulus package – which is partly credited for saving Australia from a recession – local debt levels surged nearly 60 per cent in the last two and half years.
If such trend was allowed to grow unchecked, China’s local debt problem could very easily turn from a tamed beast into an unshackled monster.
During the same period, China’s GDP growth decelerated from the customary double digital growth to 7.6 per cent. Similarly, growth in tax revenue collection also slowed from 24.8 per cent in 2011 to a mere 7.5 per cent this year. China’s slowing economy casts further doubt on the ability of local governments to service their debts.
Apart from the worrying trend of rapid debt growth, certain local areas and industries of China are more heavily indebted than others. For example, the audit report reveals that three provinces, 99 cities, 195 counties and 3465 townships have a debt-to-GDP ratio of more than 100 per cent and are likely to experience hardship in repaying their debts.
The audit office is also expecting debtors, who have borrowed heavily to build China’s extensive highway system, to come under acute pressure as well. It must also be noted that Chinese local governments are also heavily dependent on land sales to service their debts. It is estimated that more than one third of the 9.3 trillion yuan local debt will be paid for by proceeds from land sales.
China’s total debt level is manageable at the moment and is still below the internationally accepted red line of a 60 per cent debt-to-GDP ratio. However, we don’t have to go back that far in history to know that such threshold is far from infallible during a crisis.
Ireland had a very respectable debt-to-GDP ratio of 25 per cent before the sub-prime crisis in 2007. However, when the global financial tsunami swept across the former Celtic tiger, the debt level soared, reaching 121.5 per cent in 2012. The country’s bank guarantee alone amounted to 40 per cent of GDP.
This is the first part of a series of articles exploring China’s burgeoning debt problem.
Let's start with the global economic outlook. A common view is that advanced economies are at last on the mend and will take over the running from emerging economies, which have provided much of world growth since 2008.
The US and the UK seem likely to do better this year, because both are shifting out of their strong budget contractions. Similar optimism surrounds Japan, although the promised structural changes (the 'third arrow' of Abenomics) are yet to materialise.
The European periphery can't recover without much more substantial debt forgiveness. This will hold back the rest of Europe, still wallowing under unresolved official and bank debt.
The growth profile of the emerging economies has been widely misread. They slowed to a sustainable pace in 2011 and since then have maintained steady expansion. Even at this slower pace, they are growing twice as fast as the advanced economies. The emerging and developing economies are now slightly larger than the advanced economies (measured in purchasing-power terms), so they will still be the dominant component of future global growth.
Thus the emerging economies are not passing the growth baton onto the advanced countries, and we'll still rely on emerging countries to keep the world growing. They are, of course, a mixed lot. India and Brazil have fallen back to their traditional disappointing growth rates. But the much touted slowing of China didn't eventuate. In 2011 China established a 'new normal' of around 7 per cent growth and is comfortably maintaining this. At this pace it will still double its income this decade.
Most advanced economies still need fiscal adjustment. Budgets remain in deficit and official debt exceeds conventional rules of thumb. There is, however, a chicken-and-egg problem here. The debt and deficits are largely a product of under-utilised capacity. UK GDP, for example, is 5 per cent below the 2007 peak and 12 per cent below the pre-crisis trend.
If GDP could be restored to full capacity, the budget problem would largely disappear. But budget stimulus would exacerbate the short term fiscal and debt position.
What is needed is a clearer differentiation between countries that need rescheduling (the European periphery); countries that have no choice but to undergo the hard slog of budget surpluses; those that can grow their way out of debt; and those that should be borrowing to fund growth-enhancing infrastructure.
Financial analysts will spend much of 2014 staring at their computer screens, trying to divine the profile of the Fed’s quantitative easing taper and then, further away, policy interest-rate rises and the eventual unwinding of QE.
This unwinding is not technically difficult, but financial markets have demonstrated a capacity to panic when they get confused, which happens often. Last May there was the 'taper tantrum', while in December the actual taper announcement was treated as positive news because it meant that the Fed thought things were going OK.
While talk of currency wars has muted, mainstream economists now (belatedly) accept that volatile capital flows are a problem for emerging economies. Emerging economies will just have to put up with the spillover of extreme monetary policy settings in advanced economies, but they will at least be able to take countermeasures without getting lectured by the international community. Capital flow management and intervention in foreign exchange markets are now accepted as legitimate policy actions in response to excessive inflows.
Some commentators still manage to get into a lather over international imbalances, but the issue has faded away. The main target, China, has now reduced its external surplus to 2 per cent of GDP and its exchange rate has appreciated by 15 per cent. Not much left to complain about.
On the trade front, the WTO showed a fragile pulse of life in Bali last month. But the main action for the moment is with the Trans-Pacific Partnership, where there is growing recognition that comprehensive agreements orchestrated by America may not be in everyone's interests. This could go either way. If the US Congress judges the outcome to be insufficiently biased in America's favour, all that effort could be wasted.
There is also increasing interest in an international approach to taxing multinational service providers (Google, Facebook etc), which can shift profits advantageously. This is a big task, but there is now an acceptance that action is needed.
Financial sector reform has produced voluminous new regulation and the task now is to implement it. Some aspects of global finance will be safer, with tighter capital and liquidity requirements and some restrictions on what banks can do. But the main responsibility still rests with domestic authorities. Where these are diligent and competent, finance will be safe. Where this is not so, banks (and the shadow banking sector) are still an accident waiting to happen – although the memory of 2008 is fresh enough to provide protection for the moment.
Originally published by The Lowy Institute publication The Interpreter. Republished with permission.
China's bank regulator says it will allow the creation of as many as five privately financed banks this year as part of reforms to open the state-controlled industry and support economic growth.
The China Banking Regulatory Commission also said on Tuesday it would look at lowering regulatory barriers to allow foreign banks more access to China.
Regulators promised last year to allow privately financed banks as part of reforms aimed at making China's economy more productive.
The state-owned banking industry lends mostly to government companies, and reform advocates say it has to do more to support credit-starved entrepreneurs who create most of China's new jobs and wealth.
The regulatory agency gave no details about what areas of banking private banks will be allowed to operate in.
Just about every PowerPoint presentation on investing in Australia for Chinese investors starts with slides on the Foreign Investment Review Board, says Andrew Michelmore, chief executive of the Chinese owned MMG, a Melbourne-headquartered international mining company.
FIRB is the favourite whipping boy for Chinese investors who decry discrimination and nativists who don’t like the idea of China buying up tracts of farmland or mines in this country.
Australia’s foreign investment process is often described as opaque, time-consuming and uncertain. But in fact, the biggest nemesis for Chinese investors who want to invest Australia is not FIRB but China’s own regulator—the National Reform and Development Commission (NDRC).
The Commission is one of the most powerful government agencies in Beijing, which has wide-ranging responsibilities from crafting the country’s economic strategy to setting the price for petrol. It is also one of the key regulators overseeing China’s fast growing overseas shopping program.
China has emerged recently as one of the most active investors in the world as cashed-up companies go abroad in search of resources, technology and markets. Beijing has ranked consistently as the third largest investor in Australia in the last few years, but still considerably behind traditional heavyweights like the United States and Britain.
China’s outbound investment approval harks back to the days when the country’s foreign reserves were scarce. Precious American dollars were jealously guarded and large deals needed approvals from top leaders.
For example, Sinosteel’s investment in the Channar iron ore project in Western Australia in partnership with Rio Tinto required the blessing from the highest echelon of Beijing’s political leadership.
Despite the fact that China’s foreign reserves have soared from a negligible level to a record of $3.7 trillion, more than triple those of any other country and bigger than the GDP of Germany, Beijing still maintains a close watch over how its companies invest overseas.
The outbound approval process, which is overseen by NDRC, the Ministry of Commerce and the central bank, has proven to be not only a time-consuming irritation but even fatal to completing some takeover deals.
Just like the FIRB guideline, the Commission’s criteria for assessing Chinese investment projects involve a mixture of industrial policy as well as commercial considerations. The Commission enjoys considerable discretion in the decision-making process and is often time-consuming—lasting between three and four months.
It is ironic considering that FIRB often needs to make a decision with 30 days—a statutorily mandated period. As far as time is concerned, FIRB is in fact much friendlier than the National Reform and Development Commission.
The interventionist approach by the Commission has cost Chinese investors some highly coveted opportunities to invest in premium mining assets both in Australia and abroad, most notably in Fortescue Metals Group—the third largest iron ore producer in the country behind Rio and BHP.
When Andrew Forrest was in desperate need to raise capital to create “the third force” in the iron ore industry, he went to China to look for cornerstone investors. Obnoxious officials at the Commission not only demanded a controlling stake in FMG but also anointed a state-owned enterprise to negotiate with Forrest.
The heavy-handed approach turned away Forrest, who sought money elsewhere. Chinese steel industry executives lamented the missed opportunity to invest in FMG at an early stage of its development.
NDRC only reluctantly allowed Hunan Valin, a provincial state-owned enterprise which is partly owned by ArcelorMittal (the largest steelmaker in the world) to invest in FMG many years later after its initial debacle.
Long-suffering directors and investors at Sundance Resources, an ASX-listed resources company with significant assets in Africa, can also recognise the visible hand of the Commission. It forced Sichuan Hanlong, Sundance’s Chinese suitor, to lower its takeover offer after the iron ore price collapsed from its record high.
As result of the heavy-handed approach by the NDRC, many companies have become reluctant to deal with Chinese suitors unless they are prepared to pay significant break-up fees in the event of unwelcome intervention from the Chinese regulator.
It is believed that when Chengdu Tianjin Industry Group launched a takeover bid for Talison Lithium, a Perth-based lithium producer, it had agreed to pay break-up fee in event of an obstruction from Chinese regulators.
More recently, Shuanghui, the largest Chinese pork processor, paid $275 million up-front break-up fee in order to secure the deal to buy Smithfield, the largest pork processor in the world, according to Li Junjie, one of China’s top M&A advisors.
This is about to change as Beijing changes its highly interventionist approval approach in favour of empowering companies to make their own decisions and bear the consequences for their investment decisions.
Chinese investors will only need to obtain advance approvals from the regulators if they want to invest in projects worth more than US$1 billion.
As suggested by Dan Ryan on Monday, “Chinese corporate management should now be able to react more quickly and be much more opportunistic about future offshore investment proposals in Australia and elsewhere in the world.”
China's investment in the United States doubled to $14 billion last year despite sometimes rocky political ties, with private firms leading the way, according to a study.
About half of the value consisted of Shuanghui International's takeover of pork producer Smithfield Foods, a $7.1 billion deal that marked the largest Chinese acquisition of a US company to date.
But the report by the Rhodium Group, a New York-based firm that scrutinises Chinese investment, found that Chinese companies accounted for 70,000 full-time jobs in the US.
The total value of investment hit a record high of $14b, with high-profile deals in real estate as well as Chinese investments in the General Motors Building and Chase Manhattan Plaza in New York.
Private firms and entrepreneurs dominated, accounting for 87 per cent of transactions and 76 per cent of the total value of Chinese investment, a contrast to the dominance of state firms until recently, the study said.
US politicians have raised concern about investments by several Chinese firms. Telecoms giant Huawei has largely dropped hopes of expansion in the world's largest economy after Congress said that its equipment could be used for spying.
The US has also raised intellectual property as a concern with China, accusing hackers in the emerging economy of waging a vast theft campaign of American companies' trade secrets.
But the Rhodium Group said that most deals that failed were not linked to politics. It predicted future growth in investment.
"With its large market, educated workforce and world-leading technology and brands, the United States has strong appeal to the next generation of Chinese outbound investors," it said.
CITIC Pacific’s Sino Iron project produced its much-awaited first shipment of iron ore concentrate in December last year, $US6 billion over budget and four years behind schedule.
Though the biggest Chinese mining project in Australia has barely started production, it has already been widely perceived as a failure. It has already claimed the scalp of Larry Yung, the former chairman of CITIC and a member of China’s red aristocracy, who has lost $2 billion as a result of his foreign exchange bets.
When Western Australian premier Colin Barnett and CITIC chairman Chang Zhenming shook hands at Cape Preston to celebrate CITIC’s first shipment, they spoke glowingly about the future of the project and the ever-growing bond between the two countries.
Prime Minister Tony Abbott also sent his congratulatory message. “This shipment is a vote of confidence in Australia and in our mining industry,” he said.
However, the Chinese seemed far more circumspect about their investment once they paid obligatory compliments to their hosts and offered a candid post-mortem assessment to a small group of invited Chinese reporters.
CITIC and its principal contractor, the Metallurgical Corporation of China (MCC), severely underestimated the cost of construction in Australia. The budget soared from $US1.75 billion in June 2007 to $US4.3 billion at the end of December 2011.
“We don’t understand the actual conditions of building large mining projects in Australia. We tried to apply our lessons learnt in China locally and severely underestimated the difficulty of the project. As a result, we went on a detour,” Chang told the People’s Daily.
One of MCC’s cardinal sins was to misjudge Australia’s tough immigration control. Chinese contractors thought they could bring in battalions of cheap and skilled Chinese construction workers. Despite its intensive lobbying in Canberra, MCC could only bring in a small contingent of qualified workers.
In fact, CITIC senior executives even had to take turns to cook as they could not bring in a Chinese chef.
At the peak of construction, CITIC employed 4,000 construction workers and Chinese workers accounted for less than 5 per cent of the total workforce. Chang was further shocked by high wages in Western Australia. He told bewildered Chinese reporters that a truck driver in WA earned $150,000 on average, or about 800,000 yuan (17 times China’s average urban salary).
Business Spectator understands CITIC Resources’ top man in Australia earns roughly the same salary as the truck driver that he employs.
Chinese workers are usually quite happy to put up with basic conditions and several workers often cramp into a single room. Based on that assumption, CITIC’s contractors thought $30 million would be enough to build living quarters for workers.
However, they ended up building a little resort town with gyms, swimming pool, shops and spacious air-conditioned accommodation quarters. The budget ballooned from $30 million to $300 million, said Zhang Jijing, chief executive of the CITIC Pacific Sino Iron project.
Generous Australian working conditions also caused Chinese contractors to scratch their heads, who are accustomed to ordering their workforce to slog away day and night to meet deadlines. Instead, they have to deal with workers who will only work nine days and then take five days off.
Zhang, chairman of CITIC Pacific Mining since May last year, also highlights some other unforeseen difficulties: crabs and sacred indigenous sites.
The company had to build a bridge at a cost of $US60 million to help the movements of crabs in a protected area. This probably wouldn’t surprise Australian miners, but for the Chinese who are used to much lower standard of environmental protection, it came as a rude awakening.
Negotiation with indigenous people is also a tough challenge for a company that has no experience in dealing with native title issues. “We must negotiate and remove every sacred site within the mining area with the local indigenous tribes. That took us an entire year and we didn’t think about that at all during the initial planning stage,” Zhang told Chinese reporters.
CITIC Pacific’s project in WA is without doubt one of the most expensive lessons for Chinese investors in Australia. The former president of BHP China, Clinton Dines, distils the $US6 billion tutorial succinctly.
“Firstly, that Chinese companies are not always equipped to be successful buyers, owners and operators of overseas projects,” he said, “Secondly, Chinese government thinking is gradually evolving towards the conclusion that security of supply does not necessarily require ownership of these assets.”
China's inflation rate was 2.6 per cent in 2013, official data shows - well below the 3.5 per cent target set by the government in the world's second-biggest economy.
The consumer price index (CPI) figure, a main gauge of inflation, was released by the National Bureau of Statistics and was unchanged from 2012.
For the month of December, inflation came in at 2.5 per cent compared with the same month the year before, slowing from the 3.0 per cent year-on-year figure registered in November.
The December result was the same as the median increase of 2.5 per cent predicted in a survey of 13 economists by Dow Jones Newswires.
The benign inflation data came as China's economy showed some signs of strength in the second half of last year after a growth slowdown during the first six months.
China's economy probably grew 7.6 per cent in 2013, according to a government report cited by state media last month, slightly above the country's official target and just below the figue of 7.7 per cent in 2012, the lowest in 13 years.
Worries about China continue to weigh on the nation's biggest iron ore miners, despite the release of record shipping figures.
Shares in Rio Tinto, BHP Billiton and Fortescue Metals Group are under pressure for the fourth straight day as concerns about a slowdown in China overshadow positive data released by the Port Hedland Port Authority on Wednesday.
Total exports at Port Hedland, in WA, totalled a record 29.9 million tonnes in December, an increase of 12 per cent on the same month in 2012.
The strong result came despite the closure of Australia's biggest iron ore port as Cyclone Christine swept across the Pilbara last month.
Ongoing buoyancy in the iron ore price has also failed to boost the sharemarket performance of the big mining houses as the steel making ingredient trades above $US133 per tonne.
Since January 1, Fortescue Metals shares have lost nine per cent of their value, while Rio has shed 4.5 per cent and BHP is 3.5 per cent lower.
Mid-cap iron players Atlas Iron and BC Iron haven't escaped unscathed, recording losses of 10 per cent and nine per cent, respectively, over the same period.
IG market analyst Evan Lucas said that despite the significant boost in shipments at Port Hedland, iron ore pricing in Australian dollar terms fell by more than three per cent in 2013. That compares to a 15 per cent fall in US dollar terms.
"We've seen the iron ore miners across the board from the start of the week in a downward stretch," Mr Lucas said.
"That's really surprising."
He said recent production numbers and forecasts suggest the iron ore miners will record good first half earnings in February.
Mr Lucas believes the current lacklustre performance is due to negative market sentiment.
Investors returning from the holidays are generally cautious about how economies in China and Asia are tracking.
"It's the market worrying about China – whether or not it's actually slowing down – and that's why you're seeing some negative movement," he said.
He expects the falls to subside on Friday or Monday.
CMC Markets analyst Ric Spooner said investors had recently focused on the vulnerabilities of local iron ore stocks.
"People are positioning for lacklustre or moderate growth in China," he said.
Rio, BHP, Fortescue, Atlas Iron and BC Iron are expected to release their quarterly production figures later this month.
At 1530 AEDT Rio Tinto shares were 13 cents lower at $65.22, BHP shares were 14 cents lower at $36.89 and Fortescue had shed three cents to $5.36.
CITIC Pacific executives had to put on brave faces at Cape Preston when they shipped their first shipload of iron ore concentrate last December. There are a lot of people in Beijing who are unhappy about the largest Chinese mining project in Australia.
Chang Zhenming, the chairman of CITIC, has tried to justify the project – which is $6 billion over the budget and four years behind schedule – citing tough local conditions and, interestingly, what the project means for China’s resource security.
“This will help us to break up oligopolies in the resource industry, increase our voice in the market place, thereby ensuring strategic resource security for our national economic development,” Chang told Chinese reporters.
CITIC estimates that once all of its six production lines start producing – which, based on their performance so far, is a long way off – they could dig up 24 million tonnes of iron ore every year. That’s about 10 to 15 per cent of Australia’s total iron ore exports to China.
However, the idea that Chinese ownership equates to resource security is a seriously flawed idea and a very expensive one at that.
Beijing’s heavy reliance on sourcing raw materials abroad fuels its deeply seated anxiety about resource security. The country imports 65 per cent of its iron ore and Australia’s “big three” – BHP, Rio Tinto and Fortescue – control 70 per cent of the global seaborne trade.
Chinese companies have rushed abroad to buy assets everywhere from Equatorial Guinea to the Pilbara in Australia. They have often done it in the name of resource security for China. Sometimes it is just a cynical plot to get generous financing deals from big state-owned policy banks like the China Development Bank, which has a bigger balance sheet than the World Bank.
The rush to buy abroad has been nothing but a disaster, apart from a few success stories. It will take decades for CITIC to make a profit on its $8 billion plus investment. Sino Steel’s $2 billion Midwest project has been mothballed since June 2011.
Billions of Chinese investments in magnetite projects in the Mid-west region are in purgatory due to infrastructure bottlenecks. Beijing has reportedly suspended further investment in magnetite projects in Western Australia.
What it clearly shows is that the Chinese are not good at owning, operating and building large scale mining projects and especially in Australia, which has vastly different labour, environmental and technological standards.
Even more importantly, Chinese ownership does not mean security of supply or even cheaper prices. In the event of hostility between China and the United States, it is very unlikely that Beijing will have any claim over its assets in Australia, which is treaty-bound to fight on the side of Washington.
Mark Thomason, a former defence department official at the Australian Strategic Policy Institute makes that point clear in a policy paper.
''As a recipient of substantial net foreign investment, we would seem to have greater leverage over the source countries than they have over us. After all, the assets are largely immobile and hence potentially subject to Australian government control,'' he said.
Zhang Huapiao, one of China’s top private equity investors who obtained his degree from the Australian National University said the idea of securing natural resources through ownership was “self-delusion” at the Mines and Money conference in London last December.
“When the world is at peace, supply is not a problem. However, when war breaks out, it is irrelevant who owns iron ore mines in Australia or oil fields in Africa, be it Chinese or Italians. It is meaningless,” he said.
Zhang, a former central banker and Credit Suisse executive, stipulates that it only makes sense for the Chinese to invest abroad when they have state-of-art exploration or extraction skills that no one else has.
“Otherwise, it is much cheaper and simpler to buy from international markets. It also saves you the troubles from dealing with governments, environmental groups, indigenous tribes and NGOs,” he said.
Securing natural resources through ownership is a stupid idea. China should rely on a well-functioning international market to solve its resource needs. Owning a few big mines will not make China more secure nor will it influence the commodities price.
By drumming on about natural resources security, China is also antagonising host countries like Australia about the non-commercial objectives of its investments. It is no surprise that Canberra does not like strategically motivated investment.
Both the Coalition and Labor governments have made it clear that Australia wants any investment from China to be purely based on commercial decisions. It is not only good politics but sound business advice too.
CITIC’s Chairman should drop his rhetoric about resource security and focus more on his due diligence before deciding to invest again in unfamiliar foreign places
Portugal says it has picked Chinese conglomerate Fosun to buy up to 80 per cent of the insurance arm of public bank Caixa Geral de Depositos, as part of an EU-IMF ordered privatisation drive.
Fosun will pay one billion euros ($A1.5 billion) for the unit, junior minister Manuel Rodrigues said after a cabinet meeting.
The insurance arm of the Caixa bank consists of several insurance companies which together make up about a third of the Portuguese insurance market.
Fosun, one of China's biggest conglomerates, beat out US investment fund Apollo Investment for the deal.
"Fosun was retained because of the better financial conditions and its strategic project that maintained the unity of the group," Rodrigues said.
Fosun also proposed to expand the Portuguese companies in Asia and Africa with a particular focus on China, the minister said.
The Portuguese government has pulled off several privatisations since it signed on to a painful 78-billion-euro bailout programme in May 2011 under the auspices of the European Union and International Monetary Fund.
With this latest divestment, the privatisation drive has raised 8.1 billion euros, the minister said.
National airline TAP and the cargo unit of the national railway are the next targets to be spun-off in the programme.