This week’s column for Dealbook is up, a day later than normal even though I wrote it Monday. From Bubble to Muddling Through? looks at the latest economic data as well as moves against corruption:
Last week’s column also discussed the continuing signs of an impending crackdown on corruption. Investors who like the recent Chinese data may still want to be wary of any stocks that have exposure to China’s corruption economy, and specifically ones that rely on business from mistresses. Two weeks ago a sex tape scandal brought down a mid-level Chongqing official named Lei Zhengfu and last week Shan Zengde, an official in Shandong province, was detained after his written promise to his mistress to divorce his wife leaked online. One of Shan’s colleagues co-signed the pledge as a witness.
Those who believe that China’s technocrats have the knowledge and ability to muddle through this downturn and successfully guide a sustainable economic recovery should hope that the officials in Beijing are a lot smarter than the lascivious officials in the provinces who keep making the news.
I submitted the column before seeing Christina Larson’s The Mistress-Industrial Complex in Foreign Policy:
Li sees a connection between China’s modern concubine culture and its runaway graft: the “emperor psychology” of the unrestrained: “Absolute power corrupts absolutely. When officials have absolute power, they become bold to ignore the law and social norms and do everything they like.” This ultimately hurts the party: “It’s misleading to think that keeping a mistress is not a big problem — that it won’t affect the official’s main work, records, and achievements. Temptation brings temptation.”
Mistress problems continue in Chongqing, where official Wu Hong is the latest to become embroiled in sex scandal (South China Morning Post):
Authorities in the municipality’s Peiling district issued a brief statement on their official microblog account yesterday morning saying an investigation would be conducted into Wu Hong, who works for the district’s Urban Administrative and Law Enforcement Bureau, after pictures appeared online on Sunday showing him with a half-naked young woman in a hotel room.
There are a lot more mistress messes to come.
The South China Morning Post is also reporting that Sichuan deputy party secretary Li Chuncheng is under investigation for corruption:
Sichuan’s deputy party secretary has become the first senior official to be targeted in an anti-corruption drive launched by the new leadership.
Li Chuncheng, 56, who was named an alternate member of the Communist Party’s Central Committee last month, has been placed under investigation for breaching party discipline.
Duowei says Li is a trusted lieutenant of Zhou Yongkang 传周永康爱将四川省委副书记被双规_
One place corrupt officials need to avoid is Macau. The Wall Street Journal reports that China appears to be taking the corruption crackdown to the casinos and junkets:
In recent weeks, police in mainland China and Macau have detained people from at least three of Macau’s biggest junket operators, the middlemen who extend credit to high-roller players and collect the debts in China, according to people familiar with the situation. Some of the detentions have occurred in China and in other cases, the detainees have been moved there, these people say.
Junket and casino customer lists would be very useful to Wang Qishan and his investigators.
The Times also reports on a Macau crackdown in Bo Xilai investigators examine link with casino money laundering (paywalled):
Investigators from mainland China are understood to have secretly rounded-up a group of six men with alleged links to a money laundering operation in the world’s most lucrative gambling enclave, The Times has learnt.
A source with close links to the Macau police said that the men were being interrogated about a corruption case involving “a former senior Chinese official
Investors are spooked, as they should be, and Macau casinos shares dropped on the report of junket arrests (Bloomberg).
Investors also did not like the news of the SEC suit against Chinese accounting firms, as Chinese stocks traded in the US fell sharply Tuesday (Bloomberg). Delisting is certainly not imminent or a certainty, but this is a new China risk and I believe many portfolio managers will decide it is not worth it to own these shares.
Does the Chinese government actually prefer an outcome in which these firms have to delist and return to Shanghai or HK to relist?
Yesterday’s newsletter incorrectly linked to a 2011 cable cutting incident in the South China Sea. The PetroVietnam CEO now says Chinese ships cut cables ‘by accident’ (Bloomberg) but Vietnam is stepping up sea patrols (Reuters). Vietnam’s announcement, along with the statement by India’s naval chief that the Indian navy is prepared to deploy to South China Sea to protect oil interests (Reuters) dominate the front page of today’s 参考消息.
And just because “let them eat cake” seems appropriate these days, check out this politically correct Diaoyu Islands birthday cake I had for a birthday dinner with some of my Beijing friends last night. No one ate the flag.
Your support for Sinocism is still welcome.
BUSINESS AND ECONOMY
政治局会议传递经济政策六大信号 新华社——经济参考网 - 6 signals about economic policy from yesterday’s Politburo meeting
China Detains Some Involved in Illicit Sale of Wealth Management Products at Huaxia Bank-Caijing – In addition to the ex-employee, whom Huaxia bank has blamed for selling the wealth management products without permission and who was sacked later by the bank, authorities detained several others including the legal representative of Tongshang Guoyin Asset Management Company, manager of Zhongding, who issued the products.
China’s Huaxia may face liability for troubled wealth product sale | Reuters – “Currently, investors think Huaxia Bank must take the responsibility and no matter what we argue, they won’t listen to us. So we must let the police and judiciary decide the different responsibilities of all parties involved in this case,” Huaxia’s Shanghai division spokesman told Reuters.
华夏银行理财产品事件-财经网 – Caijing microsite on the Huaxia bank WMP scandal
万科11月销售再创年内新高 – record November sales for real estate developer Vanke, which is buying a lot more land for new projects// 不仅如此，
龙头房企业绩飘红透露出什么信号-中国金融新闻网 – 长远来看，人多地少、房少，仍是我国基本国情，
MNCs in China and PCAOB deregistration | China Accounting Blog | Paul Gillis – for MNCs, no reason to panic, but the future might be painful.
Chinese firms’ push into global market |Economy |chinadaily.com.cn- For instance, efforts will be made to improve the investment safeguards offered to Chinese companies by neighboring countries, while at home, there will be a fine-tuning of the legal and approval requirements needing to be met by firms looking to invest abroad. The government also plans to fund a network of public information organizations abroad, and establish investment agencies and associations at home, which could offer business advice to companies looking to invest internationally. They will be available to guide companies in the often-complex legal and regulatory conditions of key markets around the world, as well as working to promote the image of the country globally.
The Shift from East to West: Chinese Investment in North America – Our latest Infographic takes a closer look at China’s investment abroad, and where they really rank in the North American market. And you might be surprised by the findings…
China Emerging Globally: ENN $5 Billion Eco-City Case Study on December 11th « e8 Resources – On Tuesday, December 11th, E8 Resources and Emerging China are happy to have John Zhang Wenfu, Executive Director for Advanced Technology of CH2MHILL, speak about the importance and progress of Chinese companies’ emergence globally. The event will be held at glo London (Shanghai) from 7:00 p.m. to 9:00 p.m.
China Economic Watch | The Return of the RMB – Many of the very negative market expectations surrounding China’s economic slowdown may be changing. The change is now being reflected in foreign currency deposits and more broadly RMB appreciation expectations. It is still too early to tell if the trend has fully reversed itself with corporations continuing to increase foreign exchange deposits on October. However, if deposit growth falls in November and December this would suggest that expectations surrounding RMB appreciation are more entrenched, and thus reverting back to the trend of the past two years.
Invest in China…..Or Just Its Government – Dragonfly Capital | Dragonfly Capital – But what does ‘Invest in China’ really mean? Buying the FXI is not really buying the Chinese market. The ETF actually has a 57% weighting to Financial Stocks and its Top 10 Holdings, accounting for 61% of its total assets, include 5 banks, 4 energy companies and China Mobile. Looked at another way, this ETF contains the top 25 companies in China. Buying the FXI is not investing in China, it is investing in large cap state controlled entities in China.
Can U.S. and China Avert Accounting Armageddon? « Patrick Chovanec – the aviation success model is from a different era, when the Chinese side actually thought the US was more successful and could teach them things..unlikely to work this time, nor should the US be this patient or diplomatic on a a very black and white issue. China insists, reasonably, that foreign firms in China obey Chinese laws and regulations. The same standard needs to apply to Chinese firms who want the privilege of accessing the US capital markets. // The U.S. has to make a forceful, compelling argument that adopting international norms of openness and cooperation on securities fraud investigations will help China achieve its ambitions — but that until then, it’s “no fly” for unsafe stocks on U.S. markets.
China’s Stocks Drop to Lowest Since 2009, Led by Liquor Shares – Bloomberg – liquid corruption plays…if corruption crackdown coming these guys will see business hit..and new rules for official entertaining will hit hard if followed//
A primer on Chinese shadow banking | | MacroBusiness – ANZ has a note out with a quite useful description of Chinese shadow banking.
POLITICS AND LAW
Xi pledges to implement rule of law |Politics |chinadaily.com.cn- 空谈误国 as Xi knows, so…//Xi called on officials to respect and protect citizen’s rights, including human rights, and to reinforce public confidence in the law, as he delivered a speech marking the 30th anniversary of the current edition of the Constitution. He urged officials to work hard to let the people feel the sense of justice in every legal issue, and never allow unfair rulings to hurt people’s feelings.
Red Carpet Roll-Up: China’s New Do’s and Don’ts for Top Leaders – China Real Time Report – WSJ – The Communist Party’s powerful Politburo, in only its second meeting since a new group of leaders was chosen earlier this month, unveiled a lengthy list of “do’s and don’ts” for top leaders, saying the objective was to “genuinely win the confidence and support of the people.”
《人民日报》连发四论宣扬习近平“误国兴邦”论_多维新闻网 – 中国的复兴之路究竟有何深意？按照《人民日报》
全面新政蓄势待发 习李将烧“第三把火”_多维新闻网 – 报道援引专家的话说，
The nomenklatura: Vertical meets horizontal | The Economist – China’s power grid is a tangle of interlocking entities, overlapping vertical and horizontal lines of authority, and complex interplay between government, party and military bureaucracies. The arrangement borrows much from the Leninist model of the Soviets, who pioneered it for themselves and decades later helped adapt it to China.
Audio: Schieffer Series: China’s Leadership Transition and Looking Ahead at U.S. – China Relations | Center for Strategic and International Studies – This event was moderated by Bob Schieffer, Chief Washington Correspondent, CBS News. With panelists The Honorable Kurt Campbell, Assistant Secretary of State for East Asia and the Pacific; Richard McGregor, Washington Bureau Chief, Financial Times; Author, The Party: The Secret World of China’s Communist Rulers; and Christopher K. Johnson, Senior Adviser and Freeman Chair in China Studies, CSIS.
Former TV host accuses legislator of assault, graft|Society|chinadaily.com.
山西一人大代表被指有4老婆 10个小孩均上户口_新闻_腾讯网 – local Shanxi official exposed for having 4 wives, 10 kids…
兰州市长被曝戴价值20余万名表_网易新闻 – Netizen
No repeat of Chongqing: scholars – Globaltimes.cn- In order to prevent China from straying from its path of pursuing the rule of law, high-profile intellectuals and scholars called for a thorough reflection on the failed “Chongqing Model,” which was characterized by a gangster-style anti-crime campaign and revival of the Cultural Revolution’s ideology. Prominent figures such as Hu Deping, son of Hu Yaobang, late general secretary of the Communist Party of China and Li Zhuang, a former lawyer who claims to have been purged and framed by the Chongqing police during the municipality’s crackdown on crime, were among the 30 scholars and intellectuals attending a special roundtable held by the Beijing-based news magazine Caixin.
TECH AND MEDIA
Smartphone Makers Worried Over New China Requirements – China Real Time Report – WSJ – mandate that handset makers ensure preloaded apps and those made available through other means are in accordance with Chinese laws before the phones are licensed to be sold in China. To ensure the smartphones meet requirements, they say, new testing rounds would likely need to be put into place and companies would likely have to notify the Chinese government ahead of software updates.
WeChat Bests Weibo in Monetizing Social Media-Caijing – WeChat resumed verifying “public accounts” Nov. 22 to attract verified accounts from Sina Weibo (Weibo), China’s Twitter, and Tencent Weibo. Industry insiders think the move boosts the opening-up and commercialization of WeChat and casts doubt on Weibo’s commercial future as a social media platform.
SOCIETY, ART, SPORTS, CULTURE AND HISTORY
1942年大饥荒的真实记录-财经网 – Caijing slideshow of pictures from 1943 famine
A Merry Band of Rights Pranksters – NYTimes.com – BEIJING — They call themselves the Volunteers — a growing band of young Chinese who stage playful, but pointed, public protests for greater rights for women.
Not a Piece of Cake: Uighur-Han Relationship in Focus on China’s Internet | Tea Leaf Nation – The most talked-about snack on China’s social media right now is qiegao (切糕), a dense, sweet cake made with corn flour, dried fruits and nuts
An unbelievably expensive piece of Xinjiang nut cake and what it tells about the ethnic policy in China. | Offbeat China – This one piece of RMB 160,000 Xinjian nut cake soon swept China’s microblog-sphere. Everybody was talking about, and making fun, of it. Weibot 北京厨子, a popular Weibo celebrity, did a calculation: “A piece of Xinjiang nut cake about 1.6 square meters in size cost RMB 160,000, which means about RMB 100,000 per square meter. Every 1 square meter of Xinjiang nut cake can buy about 3 square meters of apartment in Beijing.”
Qi Baishi painting sells for $11.4 million in Beijing – Yahoo! News Philippines – A painting by famed Chinese artist Qi Baishi fetched 72 million yuan ($11.4 million) Monday at China’s Poly art house’s autumn auction, a source at the event said. Bidding for the work “Ode to the Motherland” began at 40 million yuan for the 1954 work that depicts a red crown crane watching a giant red sun setting over the ocean, the auction attendee, who asked not to be identified, said.
ENERGY, ENVIRONMENT AND HEALTH
Hong Kong Smuggled Ivory Seizures Jump – China Real Time Report – WSJ – Hong Kong customs officials seized 4.6 tons of ivory in the first 10 months of 2012, up nearly 25% from a year earlier, a government spokesman said. This year’s tally got a boost from a massive seizure made in late October, in which smugglers tried to camouflage the tusks, which were shipped from Kenya and Tanzania, by hiding them amid plastic scraps and beans
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